United States: CMS Releases CY 2017 Final Rule Implementing Changes To Outpatient Prospective Payment System

Summary

The Centers for Medicare & Medicaid Services released the calendar year 2017 final rule implementing changes to the Medicare hospital Outpatient Prospective Payment System, or OPPS, including provisions implementing Section 603 of the Bipartisan Budget Act of 2015, a statutory change that affects payments to off-campus hospital outpatient departments established on or after November 2, 2015.

In Depth

On November 1, 2016, the Centers for Medicare & Medicaid Services (CMS) released the calendar year 2017 final rule implementing changes to the Medicare hospital Outpatient Prospective Payment System or OPPS (Final Rule), including provisions implementing Section 603 of the Bipartisan Budget Act of 2015, statutory change that affects payments to off-campus hospital outpatient departments established on or after November 2, 2015.

Under Section 603, effective January 1, 2017, most hospital off-campus provider-based departments (off-campus PBDs) that began furnishing services on or after November 2, 2015, (date of enactment of Section 603) will no longer be eligible to be paid under OPPS. How and how much they would be paid, and what other rules would apply to these entities and grandfathered facilities were left to CMS to determine. This much-anticipated Final Rule provides more clarity but also leaves some critical questions unresolved.

Section 603 does not apply to items and services furnished (1) by a dedicated emergency department (defined at 42 CFR 489.24(b)); (2) at "remote locations of a hospital" (i.e., a location where hospital inpatient services are furnished) and locations that are within 250 yards of a remote location of a hospital; and (3) at a location that was billing as an outpatient department of a hospital prior to November 2, 2015. Locations, items and services within the scope of these grandfathered exceptions are referred to by CMS as "excepted" locations, items and services.

The proposed rules to implement Section 603 that were released by CMS earlier this year generated significant concern from the hospital industry, as well as from US Congress, with many stakeholders strongly encouraging CMS to postpone implementation of Section 603, unless significant changes were made. McDermott's prior summary and analysis of the proposed rule is available, as is McDermott's article summarizing proposed legislative amendments to Section 603.

In the Final Rule, CMS retained many of the controversial aspects of the proposed rules, but made some favorable changes in response to stakeholder concerns, including establishing a new payment system for non-excepted services. Since the new payment system was not subject to prior comments, CMS is implementing the new payment system effective January 1, 2017, but the agency will take comments until December 31, 2016, in connection with refinements to the payment system for 2018 and future years.

Relocations and Service Expansions

Two of the most controversial elements of the proposed rule included CMS's proposals to limit relocations of excepted locations and to limit expansions of excepted services at excepted locations. Under the proposed rule, excepted locations that relocated would lose excepted status (and be subject to the non-OPPS alternative payment system). Similarly, excepted locations that added new services [according to groups of "clinical families of services" defined by ambulatory payment classification (APC)] would be unable to receive OPPS payments for such new services.

As to relocations, CMS in the Final Rule largely adhered to the proposed standard. Specifically, an off-campus PBD that relocates from the physical address that was listed on the hospital's Medicare enrollment form as of November 1, 2015, would be considered "new" and ineligible for continued excepted status. However, CMS will consider making exceptions limited to extraordinary circumstances outside a hospital's control, such as natural disasters, significant seismic building code requirements, or significant public health and public safety issues, that necessitate moving to a new building (either temporarily or permanently). Exceptions will be evaluated on a case-by-case basis by the appropriate CMS Regional Office. CMS says in the Final Rule that it expects these exceptions to be rare. CMS expects to release sub-regulatory guidance with more details regarding the exceptions request process.

The Final Rule does not incorporate an automated method for identifying the addresses associated with excepted locations or tracking changes in the addresses. CMS notes that it will instruct Medicare contractors to update their "systems" to identify all off-campus PBDs by address and the date the location was added to the hospital's enrollment record.

As to expansions of services, CMS decided not to limit expansions of services at excepted locations for 2017. As such, at least for the time being, there will be no limit on a grandfathered facility's ability to expand services beyond those furnished as of November 2, 2015.

The Final Rule does not discuss expansions of physical space, so it remains unclear how CMS may view physical expansions of excepted locations or whether guidance on such expansions will be included in the forthcoming sub-regulatory guidance addressing relocations. CMS also declined to provide relief for off-campus PBDs that were "mid-build" or "under development" as of November 2, 2015, and deferred to Congress to amend Section 603 to establish such an exception.

Change of Ownership

In the proposed rule, CMS proposed to permit continued OPPS payment for off-campus PBDs that undergo a change of ownership, so long as the change involves both the main hospital entity and the off-campus PBD and the new owner accepts assignment of the hospital's Medicare provider agreement. If the provider agreement is terminated, all excepted off-campus PBDs and the excepted items and services furnished by such off-campus PBD would no longer be protected. CMS finalized this proposal without modification.

Payment

In the proposed rule, CMS proposed to pay for services furnished by non-excepted off-campus PBDs during 2017 under the Medicare Physician Fee Schedule (MPFS) at the non-facility rate. CMS further stated that these payments would have to be made directly to the physicians furnishing the services, and that arrangements would have to be established with the hospital hosting the services to recover the technical portion of the service.

In the Final Rule, CMS opted not to implement this payment policy exactly as proposed. Instead, CMS will pay the hospital a rate that is approximately 50 percent of the OPPS rate, with some limited exceptions. Items and services that are currently paid under a methodology other than OPPS will continue to be paid at the currently applicable non-OPPS payment system or rate (e.g., drugs and biologicals that are separately payable will continue to be paid ASP+6%, and will not be subject to this reduction). Hospitals will use modifier "PN" to identify services at non-grandfathered entities. Payments under the new methodology will be subject to a geographic adjustment and the multiple procedure payment adjustment, but other OPPS payment adjustments (e.g., outlier payments, sole community hospital adjustments, cancer hospital adjustments) will not apply. Because of this new payment policy (and other technical adjustments to the calculations), CMS revised the payment impact of the Section 603 policies from a reduction in payment for 2017 from $330 million to $50 million.

Physicians furnishing professional services in non-excepted departments will continue to be paid separately at the MPFS facility rate for services for which they are permitted to bill.

340B Drug Pricing Program

CMS received comments regarding the impact of the Section 603 provisions on continued 340B Program eligibility for non-grandfathered entities. Because current 340B eligibility for these locations is, in part, tied to the reporting of costs and charges associated with services at the locations on the Medicare cost report, hospitals worried that CMS's proposed policy would adversely affect eligibility to furnish or prescribe 340B drugs at non-excepted locations. CMS provided some measure of reassurance by explicitly stating that services provided at non-grandfathered entities will remain reported on the hospital cost report, but deferred to the Health Resources and Services Administration (HRSA) for further questions regarding 340B eligibility.

Other Provisions

In the Final Rule, CMS addressed additional comments related to the scope and implementation of Section 603, including

  • CMS revised the date for determination of excepted versus non-excepted status as the date a location first furnished services payable under OPPS, rather than the date a location first billed for a service under OPPS;
  • CMS acknowledged inconsistent application of the definition and measurements under the 250 yard definition for "on-campus" locations, but deferred further guidance (and possible rulemaking) until a later date;
  • CMS confirmed that Section 603 applies only to services paid under OPPS (Social Security Act § 1833(t)); and
  • CMS confirmed that services performed at non-excepted locations will be subject to hospital outpatient supervision rules, but MPFS cost sharing rules.

As a result of this Final Rule, hospitals should closely examine their existing outpatient operations to identify any locations that may fall within the scope of the payment changes discussed above and closely evaluate their Medicare enrollment records to ensure that they are complete and correct. Hospitals undergoing transactions should also be mindful of the Final Rule and its impact on transaction structures and future payments.

This Final Rule may not be the final word on Section 603. Some hospitals that had off-campus outpatient projects underway, but not operational as of November 2, 2015, have urged Congress to loosen the grandfather rules and move the date, and the US House of Representatives responded with favorable legislation approved in June 2016. The hospital community undoubtedly will continue to push that legislation and may seek further relief in response to this Final Rule as well.

CMS Releases CY 2017 Final Rule Implementing Changes to Outpatient Prospective Payment System

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.