United States: CMS Proposes Medicare OPPS, ASC Update for CY 2018

CMS has published its proposed rule to update Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) payment system rates and policies for calendar year (CY) 2018. In addition to proposing rate updates for the two payment systems, CMS solicits comments on a wide range of topics, including, among others:  deep OPPS reimbursement cuts for drugs obtained through the 340B drug discount program; a new OPPS drug administration packaging proposal along with a broader query regarding the need for packaging policy reforms; a proposal to allow total knee replacement procedures to be performed on an outpatient basis; and potential changes to the way CMS calculates the ASC payment update.  CMS will accept comments on the proposed rule until September 11, 2017.

With regard to OPPS payments, CMS proposes a 1.75% update for 2018, reflecting a 2.9% market basket increase, which is partly offset by a 0.75 percentage point reduction and a 0.4% multi-factor productivity (MFP) reduction. CMS expects that overall OPPS payments would increase by 2% ($897 million) compared to 2017 levels (although this estimate does not include the effects its 340B drug proposal, discussed below).  The update for hospitals that fail to meet the Hospital Outpatient Quality Reporting (OQR) Program reporting requirements is reduced by 2.0 percentage points.  Rate updates for individual procedures vary based on changes in ambulatory payment classification (APC) assignments and other proposed policies.

Other major provisions of the proposed rule include the following:  

  • CMS proposes to conditionally package payment for low-cost drug administration services, and seeks comments on whether it should conditionally or unconditionally package drug administration services add-on codes (along with other related topics). At the same time, CMS solicits comments on the appropriateness of its packaging policy in light of stakeholder concerns that this policy negatively impacts patient access.
  • The proposed rule would maintain the high cost/low cost threshold policy for packaged skin substitutes, but CMS is proposing to essentially grandfather skin substitute products that were assigned to the high cost group for CY 2017 even if they do not meet the 2018 thresholds while the agency considers reforms to this policy.
  • CMS proposes to remove total knee arthroplasty (CPT code 27447) and CPT code 55866 (Laparoscopy, surgical prostatectomy) from the inpatient-only list (IPO). This would allow, but not require, these procedures to be performed in the hospital outpatient setting. CMS also solicits comments on whether to remove total and partial hip arthroplasty procedures from the IPO list in the future. In addition, CMS seeks comments on whether these procedures should be added to the list of ASC covered surgical procedures.
  • CMS does not propose to create any new comprehensive APCs (C-APCs) or revise established C-APC policies.
  • The proposed rule would once again increase the threshold for separate payment for outpatient drugs, to cost-per-day that exceeds $120 in 2018 (up from $110 in 2017). While CMS would generally continue to reimburse nonpass-through, separately-payable drugs and biologicals at what it calls the "statutory default" rate of average sales price (ASP) plus 6%, CMS proposes to pay separately payable, non pass-through drugs (other than vaccines) purchased through the 340B drug pricing program at ASP minus 22.5%,
  • CMS proposes regulatory language to conform to a policy adopted last year to implement a reduction in reimbursement for film X-rays. CMS also proposes to implement a statutory requirement that CMS reduce the OPPS payment for the technical component of an X-ray taken using computed radiography technology. The reduction equals 7% during 2018 through 2022, with a 10% reduction applicable beginning in 2023.
  • CMS proposes to reinstate the moratorium on the enforcement of the direct supervision requirement for critical access hospitals and small rural hospitals having 100 or fewer beds for CYs 2018 and 2019.
  • The proposed rule addresses numerous other OPPS policies, including: changes to Hospital OQR Program measures; five applications for device pass-through payments; revisions to the clinical diagnostic laboratory test date of service policy; and payment rates for partial hospitalization program services furnished in hospital outpatient departments and community mental health centers.

With regard to ASC payments, CMS is proposing to increase rates by 1.9% for ASCs that meet ASC Quality Reporting (ASCQR) Program requirements. The proposed increase is based on a projected Consumer Price Index for All Urban Consumers (CPI-U) update of 2.3%, reduced by a 0.4 percentage point MFP adjustment.  CMS estimates that total payments to ASCs for CY 2018 would rise by approximately $155 million compared to CY 2017 payments under the proposed rule.  Notably, CMS is requesting recommendations for ASC payment system reforms to address the decline in ASC payment rates relative to OPPS payments rates over the past 10 years.  In particular, CMS seeks input on such issues as:

  • Whether to adopt an alternative update factor for ASC payments (e.g., the hospital market basket, the Medicare Economic Index, or other mechanism).
  • Data on ASC costs compared to hospital or physician office codes.
  • Whether CMS should collect ASC cost data to use in determining updates.

CMS also proposes updates to the ASCQR Program and revisions to the list of ASC covered surgical procedures.

Finally, CMS includes a "Request for Information on CMS Flexibilities and Efficiencies," as it has in other proposed Medicare payment rules this year. Specifically, CMS is seeking suggestions for ways the Administration can made improvements to the health care delivery system that reduce unnecessary burdens, increase quality of care, and lower costs.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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