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OPPS Proposed Rule Continues 340B, Site-Neutral Cuts

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

In a statement, America’s Essential Hospitals strongly objected to CMS’ proposal to further cut payments to 340B hospitals cuts and called on the administration to rescind its damaging policy.

Payment Update

CMS will increase base payment rates under the OPPS by 2.6 percent for CY 2021 (representing a market basket increase of 3 percent, less a productivity adjustment of 0.4 percentage points). 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 proposes continued Medicare Part B reimbursement cuts for separately payable drugs purchased through the 340B program. Using data the agency collected through an average acquisition cost survey of 340B hospitals, CMS proposes to reduce payments for 340B drugs by 34.7 percent of average sales price (ASP), with a 6 percent of ASP add-on, resulting in a net reduction of 28.7 percent of ASP. Alternatively, CMS seeks comment on whether the agency instead should use its existing methodology to pay 340B hospitals at 77.5 percent of ASP. Since 2018, CMS reimbursed 340B hospitals at 77.5 percent for most separately payable Part B drugs.

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 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 proposed rules, indicating the agency likely will continue to pay these PBDs at 40 percent of the OPPS payment rate.

However, CMS indicates it 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 recent 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 rule, CMS proposes to retain and update certain aspects of the overall hospital star rating methodology for public release beginning in CY 2021 and subsequent years. Generally, the agency proposes to retain:

  • annual publication of the ratings, with modification that data is from a quarter within the prior year (instead of data from the same quarter as or quarter prior to ratings publication);
  • inclusion of measures publicly reported on Hospital Compare;
  • public display of measure group level information for which a hospital has at least three measures;
  • use of weighted average of measure group scores to calculate summary score; and
  • use of k-means clustering to assign hospitals to one of five star ratings.

The agency proposes several methodology updates, including:

  • regrouping measures, as a result of CMS’ Meaningful Measures Initiative, by combining three process measure groups into one: Timely and Effective Care;
  • stratifying the readmissions group scores using a hospital’s proportion of patients dually eligible for Medicare and Medicaid;
  • changing the reporting thresholds to receive a star rating to having at least three measures within at least three measure groups, one of which must be Mortality or Safety of Care; and
  • applying peer grouping based on number of measure groups.

Prior Authorization

CMS proposes 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.

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. CMS is proposing to begin eliminating the remaining 1,740 services on the IPO list over a three-year period, beginning in CY 2021, with the removal of 266 musculoskeletal-related services.

America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Action Update in the coming days. CMS is accepting comments on the proposed rule until Oct. 5.

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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