Rumors had been swirling that the regulation's delay might be due to some high-impact proposals related to drug pricing, reimbursement for 340B providers, or further moves toward site-neutral payments. Whether or not those proposals actually caused the delay, the Proposed Rule includes all of these things. In the Proposed Rule, CMS has laid out bold new plans to curb surging HOPD spending amid a modest rate update of just 1.25% for HOPD and ASC services.
We'll cover all of the details in our August 7th webconference.
In the meantime, here are three important takeaways based on our initial scan of the proposal:
1. CMS proposes cuts in excess of $600M for off-campus HOPDs
Medicare payments in the hospital outpatient setting have surged in recent years, effectively doubling between 2006 and 2016. To counteract this trend, CMS is seeking to reduce HOPD reimbursement for services that can be performed in lower-cost settings.
CMS took the first step in CY 2017, establishing a reduced payment rate for a small group of newer "non-excepted" off-campus HOPDs. To date, this reduced rate (40% of the HOPPS rate in CY 2018) has affected only a small number of facilities. However, the impact would be felt more broadly in CY 2019 if this year's proposals are finalized, as CMS seeks apply these lower payment rates at previously excepted off-campus HOPDs through two key proposals:
- A 60% payment cut for routine clinic visits at excepted off-campus HOPDs.
This is not a surprising development, given a lengthy discussion on the topic in last year's Proposed Rule. In 2017, CMS conducted an analysis establishing that a single procedure code (G0463: hospital outpatient clinic visit for assessment and management of a patient) accounted for more than half of all codes billed at off-campus HOPDs. It further determined these routine clinic visits could be suitably performed in a physician office setting, where the average reimbursed rate is 75% lower than the HOPPS rate.
Accordingly, CMS is now proposing to reduce reimbursement of this code at all off-campus HOPDs, including those previously excepted from the site-neutral rate. Instead of paying $116 for each clinic visit under the G0463 code, CMS would pay $46. Medicare expects to spend $610M less on these routine clinic visits in CY 2019 if the proposal is finalized.
To put this in context, Medicare savings from readmissions penalties in FY 2019 are expected to be around $566 million, so this proposal to reduce G0463 payment would have an even bigger financial impact if finalized as proposed.
Bear in mind that these payment cuts are unlikely to be the end of the story. CMS is clearly interested in further payment equalization between HOPDs and physician offices, increasing the likelihood of further reductions for off-campus HOPDs in the future.
- A 60% payment cut for expanded services at excepted off-campus HOPDs.
CMS also proposes to eliminate facility-level "excepted status" and instead apply excepted status only to certain groups of services at facilities previously immune from HOPD payment reductions.
As proposed, CMS would pay the site-neutral rate to an otherwise excepted off-campus HOPD for any groups of services not previously offered between November 1, 2014, and November 1, 2015.
To illustrate how this policy would play out, let's say an off-campus HOPD that currently is excepted from site-neutral rates did not offer any services that CMS would classify as belonging to the "urology" clinical family within that 2014 to 2015 timeframe. As of January 1, 2019, this HOPD would receive the site-neutral payment rate—40% of the full HOPPS rate—for all procedures that fall into the "urology" clinical family.
Bear in mind that this proposal has been floated twice previously and not finalized, so it remains to be seen whether the change goes ahead. Numerous stakeholders have argued previously that the policy would be difficult to enforce, would limit uptake of innovative procedures and technologies, and would create unnecessary complications for providers' finance and planning teams and undue documentation burdens. CMS offers little assurance in the Proposed Rule that it has found solutions to these perceived problems.
2. CMS pursues lower payments for separately payable drugs.
Drug spending is expected to be the fastest growing cost category for health care over the next 10 years, so it's not surprising that CMS has turned its attention in this Proposed Rule to controlling Medicare payments for separately payable drugs. CMS has included one major proposal and one request for information from the public:
- A sustained rate cut for 340B drugs, and an expansion of that rate cut to non-excepted HOPDs.
In January of this year, CMS reduced the reimbursement rate by 28.5% for most separately payable drugs and biologicals acquired at a discount through the 340B program. This change is estimated to reduce drug related revenues for hospitals by $1.6B in in CY 2018.
In CY 2019, CMS is proposing to extend this provision to approximately 115 340B eligible off-campus HOPDs that are reimbursed at a lower rate under the MPFS. (Previously, these HOPDs were unaffected by 340B rate cuts due to a technicality in the earlier rule.)
- A request for feedback on a future model to innovate on Part B drug pricing.
For CY 2019 (and the foreseeable future), CMS will seek to continue its well-established practice of paying for most separately payable drugs and biologicals at average sales price (ASP) plus 6%. However, the Centers for Medicare and Medicaid Innovation (CMMI) is requesting stakeholder feedback on a pilot model to "test private market strategies and introduce competition" to acquire drugs at lower prices for Medicare beneficiaries.
CMMI appears to envision a drug purchasing plan that would allow providers to work with approved private vendors. Those vendors would be able to negotiate lower drug acquisition costs from manufacturers—an ability that, by statute, Medicare lacks.
CMMI is requesting feedback on topics ranging from whether patient outcomes should influence drug reimbursement to whether the model should be mandatory for manufacturers. We expect some provocative discussion to emerge through this request in the final rule.
3. CMS continues to facilitate procedure movement to lower cost outpatient settings.
In CY 2019, hospitals should expect a continued migration of services away from the inpatient setting. For hospital providers, removal of procedures from the Inpatient Only (IPO) list results in lower reimbursement rates and opens the doors to an increasingly competitive outpatient market.
This year, CMS proposes to remove two procedures from the IPO list: CPT code 31241 (sinus/nasal endoscopy) and 01402 (anesthesia for total knee arthroplasty). Code 01402 is often billed as part of a TKA procedure, and TKA itself was removed from the IPO list last year
CMS also proposes adding one code to the IPO list: CPT C9606 (PCI procedure furnished during acute myocardial infarction), which previously was unspecified as an IPO procedure but requires an acute care environment.
Perhaps the biggest surprise is that CMS did not discuss removing Total and Partial Hip Arthroplasty from the IPO list. This is an unexpected absence, as CMS had specifically call for comment on the topic in last year's proposal.
- CMS is seeking to open doors more broadly for ASCs.
Last year, CMS noted that it was interested in shifting surgical cases from the higher-cost HOPD setting to lower-cost ambulatory surgical centers (ASCs) where clinically appropriate. In this year's Proposed Rule, CMS paves the way for a possible future expansion of the ASC Covered Procedures List, which governs the surgical procedures that may be performed in ASCs for Medicare beneficiaries.
First, CMS proposes to expand the definition of "surgery" in the context of the list, with the aim of including more "surgery-like" services. This would expand the range of procedures that could be added to the ASC List in future.
Second, CMS proposes to add 12 cardiac catheterization procedures to the ASC List on the grounds that, although they involve blood vessels that can be considered major, these procedures generally require only a short recovery time and so are appropriate to perform in ASCs.
CMS's proposals around ASC covered procedures, as with the IPO list proposals, also contained a notable omission: CMS did not propose moving Total Knee Arthroplasty to the ASC list, even though it had discussed the possibility in last year's rule.
Webconference: Detailed analysis of the 2019 proposed rule
To learn more about the final rule, including including its big proposed changes proposed forto the outpatient quality rosters and its proposals to address the opioid misuse epidemic, register for our upcoming webconference on August 7th.