On November 1, 2019, the Centers for Medicare & Medicaid Services (CMS) published its CY 2020 Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System final rule.  The final rule implements a number of significant changes to payment policies and rates for services furnished to Medicare beneficiaries in hospital outpatient departments and ambulatory surgical centers.

Updates to OPPS Payment Rates

In the final rule CMS increases Medicare OPPS payment rates by 2.6% in CY 2020 compared to CY 2019 for hospitals that meet applicable quality reporting requirements.  In the proposed rule published in the Federal Register on August 9, 2019, CMS proposed to increase payment rates by 2.7%.

CMS is also completing the two-year phase-in of the plan outlined in the 2018 Medicare Outpatient Prospective Payment System (OPPS) final rule to decrease Medicare payment rates for evaluation and management (E&M) services provided in hospital excepted off-campus provider-based departments to the equivalent payment rates for such services when furnished in hospital non-excepted off-campus provider-based departments and physician offices.

CMS acknowledges the ruling in American Hospital Association et al. v. Azar by the United States District Court for the District of Columbia vacating the payment reduction for CY 2019 as ultra vires and notes it is “working to ensure affected 2019 claims for clinic visits are paid consistent with the court’s order… The government has appeal rights, and is still evaluating the rulings and considering, at the time of this writing, whether to appeal from the final judgment.”  The recent Health Law Pulse summary of the United States District Court ruling may be found here.  On November 6, the American Hospital Association filed with the district court a Notice of Intent to File Motion to Enforce Judgment and Request for Briefing Schedule.

Updates to ASC Payment Rate

In the 2019 OPPS/ASC final rule with comment period, CMS finalized its proposal to apply the hospital market basket update to ASC payment system rate for an interim period of five years.  In the CY 2020 final rule, CMS finalizes an update to the ASC rates for CY 2020 of 2.6% for ASCs meeting the relevant quality reporting requirements.  This change is based on the projected hospital market basket increase of 3.0% minus a 0.4% adjustment for MFP.  CMS anticipates this change will help promote site-neutrality between hospitals and ASCs.

Inpatient Only List

The Medicare Inpatient Only (IPO) list refers to procedures and services that CMS has identified as typically only performed in inpatient settings and therefore not paid under OPPS.  Many services on the IPO list are surgical procedures that may be complex or require care and coordinated services provided in a hospital.  The final rule finalizes changes to the IPO list, removing total hip arthroplasty, six spinal surgical procedures, and certain anesthesia services from the list and thus making these procedures eligible to be paid by Medicare in both the hospital outpatient and inpatient setting, provided the services are medically necessary and the applicable coverage requirements are met.  In response to public comments, CMS is establishing a two-year exemption instead of the proposed one-year exemption for certain medical review activities relating to patient status for procedures removed from the IPO list beginning in CY 2020 and subsequent years.

ASC Covered Procedures List

The ASC Covered Procedures List (CPL) is a list of covered surgical procedures eligible for payment under Medicare when furnished in an ASC.  Covered surgical procedures are procedures that would not be expected to pose a significant risk to beneficiary safety and where the beneficiary would not typically need active medical monitoring and care at midnight after the procedure.  For CY 2020, CMS is adding Total Knee Arthroplasty, Knee Mosaicplasty, six additional coronary intervention procedures, and twelve procedures with new current procedural terminology codes to the ASC CPL.

Supervision Level for Outpatient Therapeutic Services in Hospitals and Critical Access Hospitals

Stakeholders have consistently requested CMS continue the non-enforcement of the direct supervision requirement for hospital outpatient services for critical access hospitals (CAH) and small rural hospitals, citing the difficulty in recruiting physicians and non-physician practitioners to practice in rural areas.  In addition, stakeholders emphasized the difficulty in providing direct supervision for critical specialty services due to the volume of emergency patients or lack of specialty expertise.  For CY 2020, CMS is changing the minimum required level of supervision from direct supervision to general supervision for all hospital outpatient therapeutic services provided by all hospitals and CAHs.  Under general supervision, the procedure is furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the procedure.  However, this change does not preclude a hospital from requiring greater supervision for certain services as it deems appropriate

Prior Authorization for Hospital Outpatient Department Services

To reduce unnecessary increases in the volume of covered outpatient department services, CMS will implement a prior authorization process for five categories of hospital outpatient department services beginning on July 1, 2020: (1) blepharoplasty, (2) botulinum toxin injections, (3) panniculectomy, (4) rhinoplasty, and (5) vein ablation.

CY 2020 OPPS Payment Methodology for 340B Program Drugs

Section 340B of the Public Health Service Act (340B) allows participating hospitals and other providers to purchase certain covered outpatient drugs from manufacturers at discounted prices.  For CY 2020, CMS is finalizing its proposal to continue paying an adjusted amount of average sales price minus 22.5% for separately payable drugs or biologicals that are acquired through the 340B Program.  In the final rule CMS acknowledges that the CY 2018 and 2019 OPPS payment policies for 340B-acquired drugs are subject to ongoing litigation, and the agency is currently appealing the decision in the United States Court of Appeals for the District of Columbia Circuit.  CMS solicited comments for a potential remedy for CY 2018 and 2019 in the event of an unfavorable decision.  CMS also intends to conduct a hospital survey to collect drug acquisition cost data for CY 2018 and 2019.  In the event the survey data is not used to devise a remedy, CMS intends to consider public input in proposing a remedy in the CY 2021 rulemaking.

Substantial Clinical Improvement Criterion

For transformative devices with an FDA Breakthrough Device designation, CMS is finalizing an alternative pathway to the substantial clinical improvement criterion to qualify for device pass-through payment status.  This new method will begin with determinations effective on or after January 1, 2020.  Device pass-through applications will still be submitted to CMS through the quarterly sub-regulatory process, but applications will be subject to notice-and-comment rulemaking in the next applicable OPPS annual rulemaking cycle.  All applications with preliminary approval upon quarterly review will be automatically included in the next OPPS annual rulemaking cycle, and applicants not yet approved will have the option of either being included in the next rulemaking cycle or withdrawing from consideration.  Applicants may submit new evidence for consideration, such as clinical trial results, during the public comment process for the proposed rule.  This is intended to allow applications approved during the quarterly review process to receive timely pass-through payment status while maintaining a transparent public review process.

The CMS fact sheet summarizing the final rule is available here.

The final rule is available here and is scheduled to be published in the Federal Register on November 12, 2019.

*Special thanks to Rachel Park, Law Clerk and District of Columbia license pending, for her assistance in preparing this post.