At the Margins

CMS hospital outpatient rule dropped this morning: 3 highlights you need to know.

by Eric Fontana and Kenna Hawes

CMS this morning released its final regulations for payments to hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs). CMS is adopting several key measures to curb surging HOPD spending amid modest rate updates for HOPDs and ASCs. Overall, HOPD rates will increase by 1.35% in 2019 while ASC services will rise by 2.1%, owing to a new rate update methodology. These updates will take effect on January 1, 2019.

We'll post additional details via our blog, "At the Margins," as we unpack specific components of the regulations across the next week. Make sure you join our webconference (register here) on November 15th as we unpack the key provisions and their strategic implications for your organization in greater detail.

Register Here

In the meantime, here are three highlights from the Final Rule that you need to know about:

1. CMS finalizes a large two-year graded payment reduction for off-campus HOPD clinic visits (G0463)

As expected, the agency has finalized its proposed 60% reduction for routine clinic visit G0463, but in a twist from the earlier proposed regulations, this reduction in payment will now be phased in over two years. 2019 will see a 30% payment reduction for clinic visit G0463 (at all off-campus HOPDs) with an additional 30% reduction set to kick in for 2020.

What you need to know about CMS' moves toward site-neutral payments so far

Some relevant background on this payment reduction: CMS is seeking to reduce HOPD reimbursement for services that can be performed in lower-cost settings. In CY 2017, CMS established a reduced payment rate for a small group of newer "non-excepted" off-campus HOPDs. To date, only this small number of facilities has received a reduced "site-neutral" rate (set at 40% of the HOPPS rate). However, starting in 2019, a larger number of HOPDs will be impacted by lower rates. Next year will start a two-year transition in which all off-campus HOPDs will receive lower payments for a specific routine clinic visit (G0463, hospital outpatient clinic visit for assessment and management of a patient). The scheduled rate reductions for G0463 provided by CMS, are as follows:

CMS believes these routine clinic visits could be suitably performed in a physician office setting, where (in 2018) the average reimbursed rate was 75% lower than the HOPPS rate. G0463 was an exceptionally high volume service, accounting for more than half of all codes billed at off-campus HOPDs in 2017.

Note that the two year phased payment reduction represents a softening of the proposed approach: CMS originally desired to implement the 60% reduction in payment rates for G0463 in 2019 alone. CMS expects to save around $300M (with $80M in beneficiary savings) on routine clinic visits across 2019 alone. Please note that CMS will not cut rates for expanded services at excepted off-campus HOPDs as proposed. It should also be noted that CMS is also concurrently focusing on payment reductions for E/M services as part of the Medicare Physician Fee Schedule (MPFS).

2. 340B acquired drugs will be reimbursed at ASP minus 22.5% for the second year running.

In January of this year, CMS reduced reimbursement 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 will continue to reimburse 340B-acquired drugs at ASP minus 22.5%. Starting in 2019, 115 340B-eligible "non-excepted" off-campus HOPDs (which are reimbursed at a lower rate under the MPFS) will also receive this lower rate for 340B drugs. Previously, a technical loophole preserved higher 340B reimbursement rates for these non-excepted facilities.

3. CMS seeks to shift cases to ASCs.

Last year, CMS publicly stated its interest in shifting surgical cases from higher-cost HOPDs to lower-cost ASCs, where clinically appropriate.

Starting in 2019, CMS has paved 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 has expanded 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 the future, and enables the addition of 12 cardiac catheterization procedures to the ASC List in 2019.

Second, CMS completed a comprehensive review of the newest procedures added to the ASC List, to ensure that the List continues to reflect best clinical practice.  

CMS will also be updating ASC payment rates to be more competitive with HOPD payment updates, starting in 2019. CMS will update ASCs by the hospital market basket (the same factor used to update HOPPS rates) instead of the lower Consumer Price Index for Urban Consumer. CMS expresses its hope that healthier ASC rate updates will give providers more financial incentive to perform surgeries in the ASC setting rather than in an HOPD (where appropriate). CMS also states that more competitive ASC rates could increase patient access to ASCs by prompting those facilities to open in markets that have few or no ASCs so far.

Learn more about the 2019 Outpatient Final Rule

To learn more about the rule, including recent price transparency regulations, updates to outpatient quality reporting, and new measures to address opioid misuse, register for our upcoming webconference on November 15th.

Register Here