Skip to Main Content
Don't have an account? Create Account
Don't have an account? Create Account

OPPS Final Rule Continues 340B, Site-Neutral Cuts

The Medicare Outpatient Prospective Payment System (OPPS) final rule for calendar year (CY) 2021 continues cuts to hospitals in the 340B Drug Pricing Program and off-campus provider-based departments (PBDs), and updates the overall hospital star ratings methodology, effective Jan. 1, 2021.

In a statement, America’s Essential Hospitals strongly objected to CMS’ decision to continue payment cuts to 340B hospitals and called on the administration to rescind this damaging policy.

Payment Update

CMS will increase base payment rates under the OPPS by 2.4 percent for CY 2021. The agency will reduce payment rates an additional 2 percentage points for hospitals that fail to meet Hospital Outpatient Quality Reporting Program requirements.

340B Reimbursement Cuts

For a fourth year, CMS will continue Medicare Part B reimbursement cuts for separately payable drugs purchased through the 340B program. Since 2018, CMS has reimbursed 340B hospitals at 77.5 percent of average sales price (ASP) for most separately payable Part B drugs. In 2021, CMS will use this existing methodology to pay 340B hospitals at 77.5 percent of ASP.

CMS had proposed using data the agency collected through an average acquisition cost survey of 340B hospitals to reduce payments for 340B drugs by 34.7 percent of ASP, with a 6 percent of ASP add-on, resulting in a net reduction of 28.7 percent of ASP. CMS decided not to finalize what would have constituted a deeper cut to 340B hospitals due to a court decision upholding its 2018 policy. However, the agency will continue to evaluate whether it should use 340B hospital survey data to set payment rates in future years.

Site-Neutral Payment Cuts

Under Section 603 of the Bipartisan Budget Act of 2015, Congress instructed CMS to pay certain non-excepted, off-campus 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 in 2019). CMS does not address the payment rate or other policies for non-excepted, off-campus PBDs in the CY 2021 OPPS or PFS final rules, indicating the agency likely will continue to pay these PBDs at 40 percent of the OPPS payment rate.

However, CMS will continue the CY 2019 policy of paying for outpatient office visits (health care common procedure coding system code G0463) at excepted, off-campus PBDs at 40 percent of the OPPS payment rate. A July federal court of appeals decision upheld CMS’ authority to cut payments for clinic visits at excepted, off-campus PBDs.

Overall Hospital Star Ratings

In the OPPS final rule, CMS updates certain aspects of the overall hospital star rating methodology for public release beginning in CY 2021 and subsequent years.

The agency finalizes several methodology updates, including:

  • regrouping measures, as a result of CMS’ Meaningful Measures Initiative, by combining three existing process measure groups into one new Timely and Effective Care group (thus, the ratings would consist of five groups—Mortality, Safety of Care, Readmissions, Patient Experience, and Timely and Effective care);
  • changing the reporting thresholds to receive a star rating by requiring a hospital report at least three measures within at least three measure groups, one of which must be Mortality or Safety of Care;
  • using a simple average methodology to calculate measure group scores instead of the current statistical latent variable model; and
  • applying peer grouping based on number of measure groups where hospitals are grouped into whether they have three or more measures in three, four, or five measure groups.

CMS did not finalize its proposal to stratify the readmissions group scores using a hospital’s proportion of patients dually eligible for Medicare and Medicaid. The agency will continue to evaluate approaches for increasing the comparability of hospital star ratings. CMS previously announced it will not update the overall hospital quality star ratings in January 2021.

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.

As finalized, CMS will eliminate the IPO list (approximately, 1,700 services) over a three-year period transitional period, beginning in CY 2021, with the removal of 266 musculoskeletal-related services. CMS will complete the phasing out of the IPO list by CY 2024. The agency believes that physicians should use their clinical knowledge and judgment to appropriately determine whether a procedure can be performed in the hospital outpatient setting or whether inpatient care is required. In the future, CMS plans to provide information (for educational purposes only) on appropriate site of service selection to support physicians’ decision-making.

Hospital Reporting of COVID-19 Data

CMS also released an interim final rule with comment period that establishes new requirements in the hospital conditions of participation (CoPs). Hospitals currently report COVID-19 patient impact and supply data pursuant to a prior interim final rule that ties reporting to CoPs.

The new CoPs require that hospitals track current inventory supplies of any COVID-19-related therapeutics that have been distributed and delivered to the hospital and current usage rate. Additionally, hospitals must report the incidence of acute respiratory illness, including, but not limited to, seasonal influenza virus.

The applicability date for the new CoP requirements is the date of publication of the rule.

Prior Authorization

CMS finalized its proposal to require prior authorization for two additional categories of services, cervical fusion with disc removal and implanted spinal neurosimulators, beginning July 1, 2021. In the CY 2020 OPPS final rule, CMS finalized a policy to require prior authorization for five categories of cosmetic services: blepharoplasty, botulinum toxin injections, panniculectomy, rhinoplasty, and vein ablation. Under the prior authorization policy, a provider must submit a detailed prior authorization request with documentation demonstrating the service meets Medicare coverage, coding, and payment rules.

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.

Previous Next
Test Caption
Test Description goes like this