On July 6, 2016, CMS published its Calendar Year (CY) 2017 Outpatient Prospective Payment System (OPPS) Proposed Rule. We provide a more detailed analysis of the significant proposals to our July 6 post below.

Reimbursement for new off-campus provider-based facilities

The CY 2017 OPPS Proposed Rule, if implemented as proposed, would significantly affect Medicare payments for outpatient services furnished in certain off-campus outpatient departments beginning January 1, 2017. We suggest that you consider the possible effects that these proposals, if implemented as proposed, would have on your organization and prepare comments to CMS.

The Proposed Rule would implement changes to Medicare OPPS payments adopted by Congress in Section 603 of the Bipartisan Budget Act of 2015. Section 603 amended the Medicare statutory provisions for prospective payment for hospital outpatient department services.  Section 603 provided that items and services furnished on or after January 1, 2017 in an “off-campus outpatient department of a provider” generally will not be paid under the Medicare OPPS but rather under another “applicable payment system” if the requirements for such payment are otherwise met (General Rule).  The legislation references the definition of “campus” in the provider-based status regulations and provides that an “off-campus outpatient department of a provider” means a department of a provider that is not located on a hospital’s campus or within 250 yards of a remote location of a hospital.  The General Rule does not apply to:  (i) items and services furnished in a “dedicated emergency department”; (ii) departments of a provider that were billing under OPPS with respect to covered outpatient department services furnished prior to November 2, 2015 (so-called “excepted provider-based departments” or “excepted PBDs”); and (iii) critical access hospitals and rural health clinics.  Congress provided that no administrative or judicial review is available for:  (i) items and services subject to the General Rule; (ii) the meaning and application of another “applicable payment system”; (iii) determinations that a department of a provider is off-campus; and (iv) information hospitals are required to provide for implementation.

CMS proposes to implement its Section 603 rulemaking requirements for items and services excepted from the legislation in new 42 CFR 419.48. This proposed regulation provides that items and services excepted from the General Rule are those that are furnished on or after January 1, 2017:  (i) in a dedicated emergency department (all emergency and non-emergency services would be excepted); or (ii) those that are furnished by an off-campus PBD that submitted a bill for a covered outpatient department service prior to November 2, 2015, at the same location that the department was furnishing services as of November 1, 2015, and in the same “clinical family of services” as the services that the department furnished prior to November 2, 2015.  CMS does not provide for any “under development” exception to the Section 603 General Rule in the Proposed Rule.

CMS does not expound on application of the definition of “campus” as included in the provider-based regulations. CMS explains in the preamble:  “We are not proposing to change the existing definition of “campus” located at Section 413.65(a)(2) of our regulations and believe hospitals can adequately determine whether their departments are on on-campus, including by using the current provider-based attestation process described in Section 413.65(b) to affirm their on-campus status.”  CMS does explain that off-campus PBDs located within 250 yards from a remote location of a hospital will be considered to be on-campus and thus not subject to Section 603.  CMS directs hospitals to “use surveyor reports or other appropriate documentation to ensure that their off-campus PBDs are within 250 yards (straight-line) from any point of a remote location for this purpose.” (emphasis added).

In the Proposed Rule, CMS states that in order for an excepted off-campus PBD to remain exempted from application of the General Rule in Section 603, the off-campus PBD would be limited to seeking payment under the OPPS for the provision of items and services it furnished prior to November 2, 2015. Specifically, items and services that are not part of a “clinical family of services” furnished and billed by the excepted off-campus PBD before November 2, 2015 would not be eligible for payment under OPPS beginning January 1, 2017.  Service types are defined by the 19 clinical families of hospital outpatient service types described in Table 21 in the Proposed Rule.  CMS proposes that if an excepted off-campus PBD furnished and billed for any specific service within one of the 19 clinical family of services prior to November 2, 2015, such clinical family of services would be excepted and eligible for OPPS payment.  If an excepted off-campus PBD provides services from a clinical family of services that the PBD did not furnish and bill for prior to November 2, 2015, these services would not paid under the OPPS.  CMS is not proposing to limit the volume of excepted items and services within a clinical family of services that an excepted off-campus PBD could furnish.

CMS describes that if a hospital with an excepted off-campus PBD is subject to a change of ownership and the new owner accepts assignment of the hospital’s Medicare provider agreement, the PBD would retain its excepted status. Conversely, if the new owner rejects assignment of the hospital’s provider agreement, the PBD would not retain its excepted PBD status.  CMS expressly states that “[i]ndividual off-campus PBDs cannot be transferred from one hospital to another and maintain excepted status.”

The Proposed Rule also provides that in order to remain excepted from the General Rule, an excepted off-campus PBD must remain in the same location that was listed on the hospital’s enrollment form as of November 1, 2015. If an excepted off-campus PBD moves from this physical address, it would no longer be excepted from the General Rule and thus would not be paid under the OPPS.  CMS explains that “[i]n the case of addresses with multiple units, such as a multi-office building, the unit number is considered part of the address; in other words, an excepted hospital PBD could not purchase and expand into other units in its building, and remain excepted.”

For PBDs that were not billing for covered OPPS services as of November 1, 2015, CMS explains that it would not pay hospitals at all for services furnished in these non-excepted off-campus PBDs during CY 2017 but will review how to pay hospitals for their services beginning in CY 2018. Physicians who furnish professional services in a non-excepted off-campus PBD would bill for their services using the non-facility Place of Service (POS) code.  This would create potential anti-fraud and abuse issue for hospitals if physicians do not remit payment to the hospital for their use of hospital facilities, staff, and equipment.

OPPS packaging policy and laboratory test payments

In the Proposed Rule, CMS would expand its OPPS “packaging” policy to any and all laboratory tests if they appear on a claim with other hospital outpatient services. At the same time, CMS proposes to include advanced diagnostic laboratory tests (ADLTs) in the molecular pathology test exclusion from the OPPS packaging policy. Further, CMS has proposed that all conditional packaging determinations be made at the claim level instead of by date of service. CMS invites public comments on all three proposals.

Brief Overview of Current OPPS Packaging Policy

As discussed in the Proposed Rule, packaging refers to CMS making payment bundles for multiple interrelated items and services “that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service,” instead of paying for each service separately. Most of the items currently packaged under OPPS reimbursement are listed in 42 CFR 419.2(b).

Under current OPPS payment policy, CMS “conditionally” packages certain clinical diagnostic laboratory tests that are listed on the Medicare Clinical Laboratory Fee Schedule (CLFS). Current conditional packaging permits laboratory tests that are (i) the only services provided to a beneficiary on a claim; (ii) “unrelated” laboratory tests, (iii) molecular pathology tests, or (iv) considered preventive services to be reimbursed under the CLFS rather than packaged as part of the hospital’s OPPS payment.

“Unrelated” Laboratory Test Exception and L1 Modifier – Discontinued

In the Proposed Rule, CMS would discontinue the unrelated laboratory tests exception and the use of the “L1” modifier, under which tests are paid separately from OPPS payments. Currently, CMS deems laboratory tests “unrelated” when they are (i) on the same claim as other hospital outpatient services but are ordered for a different diagnosis than the other hospital outpatient services, and (ii) are ordered by a different practitioner than the other services.

CMS describes in the Proposed Rule that a different diagnosis and a different ordering physician under the exception would not necessarily correlate with the relatedness of a laboratory test to the other hospital outpatient department services that a patient receives. “Most common laboratory tests evaluate the functioning of the human body as a physiologic system and therefore relate to other tests and interventions that a patient receives. . . . It is not uncommon for beneficiaries to have multiple diagnoses . . . related in some way.” CMS also described that multiple hospitals have reported that they are unable to determine whether labs are ordered by the same physician and for the same diagnosis as other services during a hospital outpatient department stay.

CMS anticipates that the unrelated laboratory tests payment changes will result in 0.03 percent increase in payments under the OPPS. The true reimbursement impact on providers is unclear, however, given that the policy changes would likely result in a corresponding reduction in reimbursement for unrelated tests under the CLFS.

Molecular Pathology Test Exception Expanded to Include ADLTs

In the Proposed Rule, CMS would expand the molecular pathology test exception to all laboratory tests designated as advanced diagnostic laboratory tests (ADLTs) as CMS discussed in the recent Medicare Clinical Diagnostic Laboratory Tests Payment System final rule. CMS explains in this Proposed Rule that ADLTs are like molecular pathology laboratory tests because both are relatively new tests that may have a different pattern of clinical use than more conventional laboratory tests, which may make them generally less tied to a primary service in the hospital outpatient department setting than the more common and routine laboratory tests that are packaged under OPPS. CMS has proposed to assign status indicator “A” for separate payment under the CLFS for designated ADLTs.

Medicare EHR Incentive Program changes

CMS has proposed a number of changes for eligible professionals (EPs), eligible hospitals and critical access hospitals (CAHs) attesting under the Medicare EHR Incentive Program. Most notably CMS has proposed to: (1) streamline the 2016 EHR reporting period for new meaningful use participants (i.e., EPs, eligible hospitals and CAHs that have not successfully demonstrated meaningful use in a prior year) and returning participants, to be any continuous 90-day period within CY 2016; (2) require that new participants attest to Modified Stage 2 objectives and measures rather than Stage 3 objectives; and (3) establish a significant hardship exception for new participants transitioning to the Merit-Based Incentive Payment System (MIPS) in 2017.

EHR Reporting Period

CMS has proposed a notable change to the EHR reporting period for CY 2016, streamlining the requirement and reporting period for all EPs, eligible hospitals and CAHs. As proposed, for the 2016 EHR reporting period, all EPs, eligible hospitals and CAHs may attest to meaningful use during any continuous 90-day period from January 1, 2016 through December 31, 2016.  The proposal is most significant for returning meaningful use participants.  Under the 2015 EHR Incentive Programs Final Rule, CMS defined the EHR reporting period for returning participants as the full CY 2016.  CMS envisions that the revised reporting period will enable EPs, eligible hospitals and CAHs to make any necessary system changes to their certified electronic health record technology (CEHRT) in line with the 2015 EHR Incentive Programs Final Rule and provide flexibility in transitioning to the MIPS.

Compliance with Modified Stage 2 for New Participants in 2017

For any EP or eligible hospital that is a new participant seeking to avoid the 2018 payment adjustment, or for any CAH seeking to avoid the FY 2017 payment adjustment, these EPs, eligible hospitals and CAHs must attest to the Modified Stage 2 objectives and measures. CMS understands that it may not be feasible for EPs, eligible hospitals and CAHs who are new participants to attest to Stage 3 objectives and measures in 2017.  CMS makes clear, however, that its proposal does not extend to returning participants who have demonstrated meaningful use in prior years.

Significant Hardship Exception for New Participants Transitioning to MIPS in 2017

CMS has proposed to allow certain EPs to apply for a significant hardship exception from the 2018 payment adjustment, but limits its proposal only to EPs who have not successfully demonstrated meaningful use in a prior year but (1) intend to attest to meaningful use for the 2017 EHR reporting period by October 1, 2017 to avoid the 2018 payment adjustment, and (2) intend to transition to MIPS and report on the advancing care information performance measure in 2017. CMS understands that the overlap in reporting under the EHR Incentive Program and MIPS may create a hardship for new participants.  In particular, while both the EHR Incentive Program and MIPS require use of CEHRT, the requirements and measures for meaningfully using the technology under each program is different.  To apply for a significant hardship exception, CMS explains that an EP must submit an application (including all necessary supporting documentation) to CMS by October 1, 2017, and must emphasize in the application why demonstrating meaningful use for the first time in 2017 and reporting on MIPS measures would result in a significant hardship.

Eliminating CDS and CPOE objectives and measures; reducing other thresholds

CMS has proposed to eliminate the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures for eligible hospitals and CAHs attesting under the EHR Incentive Program for 2017 and subsequent years. Based on attestation data received, CMS explains that most eligible hospitals and CAHs have successfully attested to the CDS and CPOE objectives and measures, and therefore these measures are no longer helpful in gauging performance.  CMS has also proposed to reduce a subset of existing thresholds to enable eligible hospitals and CAHs to focus on quality patient care, but intends to adopt more stringent measures in future rulemaking.

Inpatient only list removals

CMS has proposed to remove six CPT codes (four spine procedures and two laryngoplasty codes) from the inpatient only (IPO) list for CY 2017, because these codes are related to procedures previously removed from the IPO list. Specifically, CMS would remove CPT code 22840 (posterior non-segmental instrumentation), CPT code 22842 (posterior segmental instrumentation), CPT code 22845 (anterior instrumentation), CPT code 22858 (total disc arthroplasty, anterior approach), CPT code 31584 (laryngoplasty, with open reduction of fracture), and CPT code 31587 (laryngoplasty, cricoid split).

CMS also solicited public comment on the possible removal of CPT code 27447 (total knee arthroplasty) from the IPO list due to recent innovations that allow surgeons to perform the procedure on an outpatient basis. CMS clarified that removal of total knee arthroplasty from the IPO list would not prohibit the procedure being performed on an inpatient basis and would allow reimbursement from Medicare when the procedure is performed on an outpatient basis.

Proposed OPPS payment increase

CMS has proposed that, effective January 1, 2017, OPPS reimbursement rates would be increased by 1.55%. Based on this change, CMS estimates that it would pay approximately $63 billion to OPPS providers in CY 2017, an increase of approximately $5.1 billion from CY 2016.

Proposed ambulatory surgical center payment increase

CMS has proposed that, effective January 1, 2017, reimbursement rates for ambulatory surgical centers (ASCs) meeting the Ambulatory Surgical Center Quality Reporting Program’s quality reporting requirements would be increased by 1.2%. Based on this change, CMS estimates that it would pay approximately $4.42 billion to ASC providers in CY 2017, an increase of approximately $214 million from CY 2016.

The Proposed Rule will be published in the Federal Register on July 14. A pre-publication copy of the Proposed Rule is available here.  CMS’s fact sheet on the Proposed Rule is available here. Public comments must be submitted by September 6.