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3 ways the 2018 Final Outpatient Payment Rule will impact your health system customers

December 19, 2017

    It's no secret that care is moving from inpatient to outpatient care settings at a rapid pace. The recently released Outpatient Prospective Payment System (OPPS) Final Rule illustrates 'CMS's intention to gradually shift more procedures to outpatient sites. The rule calls for a 1.4% year-over-year increase in hospital outpatient service payments—'a boost of about $5.8B—but that's hardly the big news.

    By now, you have likely heard about some of the potentially transformative changes in that Final Rule: CMS finalized a $1.6B cut to its 340B drug discount program, excluded total knee arthroplasty (TKA) from the inpatient-only (IPO) list, and also made sizeable cuts to HOPD (hospital outpatient department) reimbursement under its site-neutral program.

    Rather than focusing on the technicalities of those specific changes, we're focusing this post on 'on three of the most significant implications for your system customers—implications that require fundamental changes to the way they think about outpatient growth.

    But this challenge also offers opportunity, and we've identified several avenues for you to elevate the depth and breadth of support for your provider customers. While price pressures and quality expectations for all of your products and services are likely to increase, vendors who can help health systems optimize outpatient revenue growth opportunities will be particularly vital and valued partners.

    Implication #1: Every dollar counts; outpatient revenue capture has never been more important.

    The double-whammy of 340B drug discount program cuts plus accelerated outmigration of procedural care will only exacerbate the margin pressures your health system customers already feel nationwide. While there is no shortage of strategies for slowing cost growth (including continued vendor standardization and appropriate use requirements), many health system leaders are also using the OPPS final rule changes as a "call to arms" for improved outpatient revenue cycle operations.

    Long a focus in the inpatient arena, revenue cycle is now gaining traction in outpatient settings as well—especially as price increases remain paltry on an absolute basis (1.4%), and trend toward the negative when we factor in site-neutral payments and the outmigration of TKAs.

    In particular, 340B program changes—which reduce reimbursement for program-compliant drugs from average sales price (ASP) plus 6% to ASP minus 22.5%—necessitate major coding changes for Part B drugs and will likely spur significant new revenue cycle staff investments so providers can maximize revenue capture from Medicare and commercial payers alike. Progressive systems are already deploying such staff to secure prior authorizations and appeal payer denials of physician-administered outpatient specialty drugs.

    The OPPS Final Rule further intensifies the importance of revenue cycle optimization by upping the ante for diligent documentation, especially in regard to TKA site-of-care choices. Providers must demonstrate medical appropriateness for both outpatient procedures as well as short-stay inpatient procedures.

    In discussing the OPPS Final Rule implications, Advisory 'Board's hospital finance expert, Eric Fontana, notes that "Some providers had expressed concern that removal of TKA from the inpatient only list would make TKA a prime target for post-payment audits for inpatient medical necessity, and that providers would be at increased risk of denial under the two-midnight admission standard."

    Although CMS offered providers some reprieve by suspending Recovery Audit Contractors' (RAC) patient status review of inpatient TKA procedures for CY 2018, most provider organizations will want to have their TKA coding and documentation in order well ahead of the 'RACs' return.

    How you can help:

    • Enhance your revenue cycle management support. For pharmaceutical manufacturers, this may involve regulatory-compliant assistance with prior authorizations or insurance appeals; for staffing, technology, and outsourced services companies, this may include new tools to help providers analyze outpatient pharmacy or procedural economics so they can identify opportunities for improved revenue capture.
    • Think about innovative ways you can help educate provider stakeholders about best practices for high accuracy coding and data reporting in relation to your clinical products and services.

    Implication #2: Every patient counts; health systems must strengthen physician and consumer referral networks in order to capture outpatient market share.

    For years, health systems have not just faced reimbursement cuts in the form of outmigration (since outpatient procedures are historically reimbursed at lower rates than comparable inpatient procedures), but they've also struggled to compete effectively against more efficient and consumer-friendly ambulatory sites, many of which operate outside the health system's network.

    With Advisory Board analysts projecting that nearly half (48%) of all Medicare TKA procedures could be performed in outpatient settings, health systems are scrambling to find ways to capture more than their fair share of that outmigration. They simply cannot afford to lose those patients to more nimble outpatient competitors. And with other high-volume, high-dollar procedures also at risk of removal from inpatient-only status in the near future, health system leaders must invest in people, processes, and technologies that can help them strengthen physician networks and bolster consumer self-referrals.

    How you can help:

    • Support physician alignment initiatives designed to help health system and physician leaders improve cost and quality performance of the system's owned outpatient facilities. This may include supply chain efficiencies, care variation reduction initiatives, top-of-license staffing models, etc.
    • Develop medical technologies and the supporting clinical training to simplify surgeons' transitions to outpatient procedural environments.
    • Help health systems deliver more consumer-friendly outpatient experiences, leveraging tools that support price transparency, patient education and choice, as well as more streamlined scheduling, registration, and discharge processes.

    Imperative #3: Every site counts; health systems must invest in the right kinds of outpatient facilities to attract and retain the physicians and consumers necessary for growth.

    With CMS's site-neutral payment policies here to stay, health systems must strategically grow their outpatient portfolios to draw in both physicians and consumers. This growth must involve more than ASCs and imaging centers. It must embrace technology and deliver a seamless patient experience. It must offer surgeons the convenience and efficiency they crave. And it must help health systems rebase costs to align with the new economic realities that outmigration and site neutral payments create.

    As a result, we're likely to see continued investments in outpatient facilities, but these facilities will be testing grounds for a range of new design features, patient engagement technologies, staffing models, and clinical pathways.

    How you can help:

    • Challenge health system clients' conventional wisdom about what outpatient facilities can look like, enable, and represent.
    • Help your provider customers understand consumers' needs and decision-drivers, then guide system leaders to incorporate those insights into outpatient portfolio plans.
    • Design technology solutions that will help providers nimbly track and analyze patient data across multiple, fragmented care settings.

    Hear our latest Medicare reimbursement update

    Join us on Jan. 9 to hear a complete analysis of the changes in 2018 Medicare payment for cancer services, including 340B and site neutrality.

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