On October 30, 2015, CMS issued its calendar year (CY) 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System final rule (collectively, OPPS rule).

In the final rule, CMS (1) updates payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs), and (2) finalizes changes/clarifications to its inpatient short hospital stay policy (the two-midnight rule), as CMS first addressed in the proposed OPPS rule.

OPPS Payment Updates for HOPDs, ASCs and CMHCs

 Outpatient Department Fee Schedule Update:  For CY 2016, the OPPS outpatient department fee schedule updated will be -0.3 percent, or a decrease of $133 million in total payments, compared to in CY 2015, excluding changes in enrollment, utilization, and case mix. CMS continues to apply the statutory 2.0 percentage point reduction to hospitals failing to meet hospital outpatient quality reporting requirements.    

Ambulatory Surgical Center (ASC) Payment Update: In CY 2016, payments to ASCs that meet the quality reporting requirements will increase by 0.3 percent, or an estimated increase of $128 million in total Medicare payments, compared to CY 2015. CMS also establishes a revised process of assigning ASC payment indicators for new and revised Category I and IIC CPT codes. CMS will exclude codes for services currently on the covered ancillary services list that are not ancillary and integral to a covered ASC surgical procedure.  Specifically, CMS is removing the SRS treatment services CPT codes from the list of ASC covered ancillary services.

Partial Hospitalization Program Per Diem Amounts:  CMS is updating payment rates for partial hospitalization program (PHP) services provided in hospital outpatient departments and CMHCs. For the purpose of stabilizing PHP per diem costs for both CMHC and hospital-based PHP services, CMS finalizes two methodologies for trimming aberrant costs found in the current rate-setting process. While CMS can use the calculated final CMHC PHP per diem costs for CY 2016, CMS is applying an equitable adjustment to the calculated final hospital-based PHP per diem costs, because level 2 days have a lower payment rate than level 1 days even though more services are provided for level 2 days.

Two-Midnight Rule

CMS is making certain changes/clarifications to its so-called “Two-Midnight Rule.”  These changes/clarifications include:  (i) retaining the two-midnight benchmark but providing for greater flexibility in determining when an inpatient admission that does not meet the benchmark should nevertheless be payable under the inpatient prospective payment system (IPPS); (ii) for stays for which the admitting physician expects the patient to need less than two midnights of hospital care (and the procedure is not on the inpatient-only list or otherwise excluded), permitting payment under the IPPS on a case-by-case basis based on the judgment of the admitting physician; and (iii) shifting enforcement of the Two-Midnight Rule from Medicare Administrative Contractors to Quality Improvement Organizations. CMS is not making any changes to its policy for stays longer than the two-midnight benchmark.

Quality Reporting Program Updates

Hospital Outpatient Quality Reporting Program:  Under the Hospital Outpatient Quality Reporting (OQR) Program, hospitals that do not meet the OQR Program requirements are subject to a 2.0 percentage point reduction to their hospital outpatient department (OPD) fee schedule increase factor. CMS made the following significant changes to the Hospital OQR Program in the OPPS final rule:

  • For CY 2017, CMS removes OP-15: Use of Brain Computed Tomography in the Emergency Department for Atraumatic Headache, because the measure fails to align with current clinical guidelines and practices.
  • CMS proposed to add two new measures to the program, OP-33: External Beam Radiotherapy for Bone Metastases for CY 2018 and OP-34: Emergency Department Transfer Communicated for CY 2019: CMS has decided only to adopt measure OP-33.
  • CMS is making several administrative changes to the Hospital OQR Program, which changes align the withdrawal deadline, reconsideration submission deadline and payment determination timeframes for consistency with the Ambulatory Surgical Center Quality Reporting (ASCQR) Program. These changes include (1) revising the deadline for withdrawing to August 31, (2) changing the reconsideration submission deadline to the first business day on or after March 17 and (3) shifting the quarters for payment determinations, which includes a one-time change in CY 2017 to cover only three quarters.

Ambulatory Surgical Center Quality Reporting Program: Under the ASCQR Program, ASCs that do not meet the ASCQR program requirements are subject to a 2.0 percentage point reduction to their annual payment update. While CMS is not adopting any new ASQR Program quality measures for CY 2018, CMS requests comment on the adoption of the Normothermia Outcome measure and the Unplanned Anterior Vitrectomy measure for inclusion in the program in the future. CMS made the following significant changes to the ASCQR Program in the OPPS final rule:

  • Beginning January 1, 2016, CMS will display program data by National Provider Identifier (NPI) when the data is submitted by the NPI or by CMS Certification Number (CCN) when the data is submitted by CCN.
  • Beginning in CY 2017, Indian Health Service (IHS) hospital OPDs will not be considered ASCs for purposes of the ASCQR Program.

Select Services Payment Updates

 Restructuring Ambulatory Payment Classifications (APCs):  For CY 2016, CMS is restructuring, reorganizing, and consolidating many of the APCs, resulting in fewer APCs overall for nine clinical APC families, which include various surgical and diagnostic procedures.  CMS is finalizing the restructuring of the nine clinical families with modifications for certain services and procedures.

Comprehensive APCs: A comprehensive APC (C-APC) provides for an encounter-level payment for a designated primary procedure(s) and generally, all adjunctive and secondary services provided in conjunction with the primary procedure. For CY 2016, CMS is adding nine new C-APCs to the 25 C-APCs implemented in CY 2015.           

Packaged Items and Services: For CY 2016, CMS is expanding the list of conditionally packaged ancillary services to include level 4 minor procedures, level 3 pathology and level 4 pathology. Level 3 and 4 pathology services will only be packaged when billed with a surgical service. CMS also is adding to the list of unconditionally packaged drugs that function as supplies when used in a surgical procedure.           

Chronic Care Management (CCM): CMS clarifies hospitals’ role in furnishing CCM services and defined scope of service elements for the hospital outpatient setting that are analogous to the scope of service elements finalized as requirements to bill for CCM services in the CY 2015 Medicare Physician Fee Schedule final rule with comment period. Further, for CY 2016 and subsequent years, hospitals furnishing and billing services described by CPT code 99490 under the OPPS are required to document in the hospital’s medical record the patient’s agreement to have the services provided or, alternatively, to have the patient’s agreement to have the CCM services provided documented in a beneficiary’s medical record that the hospital can access, as well as document that all elements of the CCMS services were explained and offered to the beneficiary.

Laboratory Services:  For CY 2016, CMS is revising the existing conditional laboratory packaging policy to package laboratory tests into the primary service so long as the test is reported on the same claim as the primary service. The policy continues to allow separate payment for laboratory tests provided to an outpatient if these tests are (1) the only services furnished and have a payment rate on the Clinical Laboratory Fee Schedule or (2) ordered for a different diagnosis by a different practitioner than the practitioner ordering the other hospital outpatient services.

Advanced Care Planning (ACP): For CY 2016, CMS conditionally packages CPT code 99497 (advance care planning) so that if provided with another OPPS covered service, payment will be packaged, but if furnished on its own, payment will be made separately.

OPPS Device Pass-Through Process:  In CY 2016, CMS will evaluate applications for new device pass-through payment through both the existing quarterly subregulatory process and through annual notice-and-comment rulemaking. All applications that are approved through the quarterly process will be automatically included in the next applicable OPPS annual rulemaking cycle, while providers that submit unapproved applications through the quarterly process will have the option of either submitting their application for comment in the next applicable OPPS rulemaking cycle or withdrawing their application from consideration. Beginning on January 1, 2016, CMS will only consider new device pass-through payment applications submitted within three years from the date of initial FDA approval or clearance, if applicable, or the date of market availability when there is documented proof of delay in marketability.

Skin Substitutes:  In CY 2016, CMS will continue using the high/low cost APC structure for skin substitute procedures, but will calculate the high/low cost threshold based on either mean unit cost or a per day cost. Furthermore, skin substitutes with pass-through payment status will be classified as high cost, while skin substitutes without pricing information will be classified as low cost until such information is made available to CMS.

Biosimilars:  In CY 2016, CMS will pay for biosimilars based on the average sales price (ASP) plus six percent, and will allow drug pass-through payments for biosimilars using the same amount. Coding and modifiers for biosimilars will be based on the policy established under the CY 2016 Medicare Physician Fee Schedule final rule.

Pathogen-Reduced Blood Products:  The HCPCS Workgroup established three new HCPCS P-codes (P9070, P9071 and P9072) for pathogen-reduced blood products. For CY 2016, CMS has created interim payment rates for these new P-codes based on a crosswalk to existing blood products and plans to use its current blood-specific CCR-methodology to determine payment rates for these three P-codes beginning in CY 2018.

The OPPS final rule will appear in the November 13, 2015 Federal Register; the factsheet can be found here. With regard to provisions open for comments, CMS must receive comments no later than 5 p.m. on December 29, 2015.

*Wendy Wright is admitted only in North Carolina. Her practice is supervised by principals of the firm admitted in the District of Columbia.