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CY 2023 OPPS Final Rule Reverses 340B Cuts

The Medicare Outpatient Prospective Payment System (OPPS) final rule for calendar year (CY) 2023 reverses cuts to hospitals in the 340B Drug Pricing Program and delays developing a remedy for cuts to 340B hospitals that have been in place since 2018. The rule also covers rural emergency hospital (REH) payment and enrollment policies, site-neutral payment, and hospital quality star ratings, among other provisions. The policies in the rule are effective Jan. 1, 2023.

Payment Update

CMS will increase base payment rates under the OPPS by 3.8 percent for CY 2023, representing a market basket increase of 4.1, less a productivity adjustment of 0.3 percentage points. The agency will reduce payment rates by an additional 2 percentage points for hospitals that fail to meet Hospital Outpatient Quality Reporting Program (OQR) requirements. To avoid payment rates being skewed by data collected during the first year of the COVID-19 public health emergency, CMS used cost report data from CY 2019 instead of CY 2020, as well as claims data from CY 2021, in setting outpatient payment rates for CY 2023.

340B Reimbursement Cuts

Since 2018, CMS has reduced Part B reimbursement for separately payable drugs purchased through the 340B program to 77.5 percent of average sales price (ASP), instead of the statutory default payment rate of 106 percent. In response to a unanimous June 2022 Supreme Court decision invalidating CMS’ 2018 and 2019 Part B reimbursement cuts to 340B hospitals, CMS will revert to the full reimbursement rate of 106 percent of ASP for 340B hospitals in 2023.

To keep OPPS payments budget neutral, CMS will offset the increase in Part B drug spending by applying a budget neutrality reduction of -3.09 percent to the OPPS conversion factor, which will reduce payments for non-drug items and services. America’s Essential Hospitals had opposed CMS’ original proposal to achieve budget neutrality with a -4.20 percent conversion factor adjustment, and the association is pleased that CMS has decreased the budget neutrality offset, which would have resulted in a larger reduction in non-drug payments.

In the proposed rule, CMS sought comment on how to apply the Supreme Court’s decision in crafting a remedy for cuts from 2018 to 2022 and solicited public comments on remedies for these years. CMS acknowledged these comments in the final rule and stated that it will issue a separate proposed rule before the CY 2024 OPPS proposed rule that addresses the remedy for 2018 to 2022.

Site-Neutral Payment Cuts

Under Section 603 of the Bipartisan Budget Act of 2015 (BBA), Congress instructed CMS to pay certain non-excepted, off-campus provider-based departments (PBDs) under a payment system other than the OPPS. CMS determined these facilities should be paid under the Medicare Physician Fee Schedule (PFS) at a percentage of the OPPS payment rate, set at 40 percent since 2019. CMS does not address the payment rate or other policies for non-excepted, off-campus PBDs in the final rule, indicating the agency likely will continue to pay these PBDs at 40 percent of the OPPS payment rate.

In CY 2019, CMS began a policy of paying for outpatient clinic visits (health care common procedure coding system code G0463) at excepted, off-campus PBDs at 40 percent of the OPPS payment rate. CMS finalized its proposal to exempt off-campus PBDs of rural sole community hospitals from these cuts beginning in 2023 but intends to continue these cuts for other hospital types. CMS acknowledged the association’s request to extend the exemption to off-campus PBDs of essential hospitals but stated that to exempt essential hospitals, it first needs a definition for this group of hospitals. CMS says it will “monitor this issue and revisit any additional exemptions in future rulemaking as appropriate.”

Prior Authorization

In the CY 2020 OPPS final rule, CMS first instituted a policy to require prior authorization for certain categories of OPPS services, citing increased utilization for these services. For CY 2023, CMS finalized the addition of another category to the list of services requiring prior authorization: facet joint interventions. This category comprises 10 current procedural terminology codes covering facet joint injections, medial branch blocks, and facet joint nerve destruction. CMS changed the implementation date for prior authorization for facet joint interventions to July 1, 2023, instead of March 1, 2023, as originally proposed. CMS provides a list of the all the services subject to prior authorization.

Overall Hospital Quality Star Ratings

CMS will continue to include measures in the Overall Hospital Quality Star Ratings that might have been suppressed in the Hospital Value-Based Purchasing, Hospital-Acquired Condition Reduction, and Hospital Readmissions Reduction Programs but are still publicly reported. CMS intends to publish the Overall Hospital Quality Star Ratings in 2023. However, the agency will consider exercising its authority to suppress measures should the COVID-19 public health emergency substantially affect the underlying measure data.

Mental Health Services Furnished Remotely in Patients’ Homes

For CY 2023, CMS finalized its proposal to consider mental health services furnished remotely to beneficiaries in their homes as covered outpatient department services payable under the OPPS and to create OPPS-specific coding for these services. Further, the agency finalized its proposal that audio-only systems may be used in instances where the beneficiary is not capable of or does not consent to the use of two-way, audio/video technology.

Outpatient Quality Reporting Program

CMS finalized changes in the Hospital OQR Program, including changing one measure — Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (OP-31) — from mandatory to voluntary beginning with the CY 2027 payment determination. In response to CMS’ request for comment on future adoption of a volume indicator measure for the Hospital OQR Program, the agency will consider feedback received for future rulemaking.

Procedures Paid Only as Inpatient Services

CMS maintains a list of procedures usually performed only in the inpatient setting, reimbursed at inpatient rates, and not paid for under the OPPS. Each year, CMS reviews this inpatient-only (IPO) list for procedures that should be removed because they can be provided in the outpatient setting. For 2023, CMS finalized, with modification, the removal of 11 services from the IPO list.

Rural Emergency Hospitals

CMS finalized payment and coverage policies governing REHs — a new provider type established by the Consolidated Appropriations Act of 2021. Critical access hospitals (CAHs), along with rural hospitals with fewer than 50 beds that do not provide acute inpatient services, except for skilled nursing facility services provided in a separate unit, can apply to become an REH. REHs will provide exclusively emergency department services and observation care, as well as other outpatient services.

CMS finalized its proposal to pay REHs for all covered outpatient department services paid under the OPPS at a rate equal to the OPPS payment rate plus 5 percent. Beneficiaries will not be subject to cost-sharing on the 5 percent additional payment. REHs also will receive a monthly facility payment. CMS will allow REHs to provide other outpatient services not otherwise paid under the OPPS, such as clinical lab fee schedule services and post-hospital extended care services provided in a distinct unit or facility licensed as a skilled nursing facility. Payment for these services will be made under the respective fee schedule instead of the OPPS.

The rule covers enrollment procedures for REHs. Facilities converting from CAHs to REHs can submit form CMS-855A, the change of information application, instead of an initial enrollment application. CMS anticipates this will expedite the enrollment process.

Organ Procurement and Research  

CMS finalized with modification its policies related to organ procurement and research, including a new method of accounting for research organs. Furthermore, CMS did not address comments on an RFI on alternative methodologies to count organs in calculating Medicare’s share of organ acquisition costs for transplant hospitals and organ procurement organizations. However, the agency said that it will consider all comments in developing future organ acquisition related policies.

America’s Essential Hospitals is analyzing the final rule and will send members a detailed Action Update in the coming days.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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