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CMS Releases CY 2020 Proposed Hospital Outpatient Payment Rule

On July 29, 2019, the Centers for Medicare & Medicaid Services issued the proposed CY 2020 Medicare Hospital Outpatient Prospective System and Ambulatory Surgical Center Payment System (Proposed Rule).

Following the efforts set forth in President Trump’s June 24, 2019 Executive Order, “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” CMS proposes to expand previous price transparency initiatives established under the Trump administration. Although the Proposed Rule includes several major changes that build on previous price transparency guidance, the Proposed Rule also includes significant payment updates for outpatient and physician services.

I. Hospitals Disclosing List of Standard Charges

CMS proposes to codify a set of requirements that further implement section 2718 of the Public Health Service Act. Under section 2718(e), hospitals must establish, update, and make public an annual list of standard charges for items and services, including for diagnosis-related groups established under section 1886(d) of the Social Security Act. The Proposed Rule would expand hospital charge display requirements in two ways, as described in the first two subsections below. 

A. Comprehensive Machine-Readable File that Makes Public All Standard Charge Information

Current law requires hospitals to make available a list of their current standard charges on the web in a machine-readable format that is consumer-friendly and updated at least annually. However, CMS has stated that the lack of uniformity among hospitals in complying with this requirement has left the public unable to meaningfully use, understand, and compare standard charge information across hospitals.

Under the Proposed Rule, CMS extends the current requirements and directs hospitals to make public their standard charges, including gross charges and payor-specific negotiated charges, for all hospital items and services. The disclosure would include: (i) a description of each item or service; (ii) the gross charge that applies to each individual item or service in the inpatient or outpatient setting; (iii) the corresponding payor-specific negotiated charge that identifies the payor by name; (iv) any codes used by the hospital for accounting or billing purposes; and (v) the revenue code.

B. Consumer-Friendly Display of Common “Shoppable” Services Derived from the Machine-Readable File

CMS proposes to define “shoppable service” as a service package that can be scheduled by a health care consumer in advance, such as those that are routinely provided in non-urgent situations. In furtherance of its consumer-friendly initiatives and to encourage consumers to make hospital-specific comparisons, CMS proposes requiring hospitals to disclose a list of the payor-specific negotiated charges for at least 300 “shoppable services,” comprised of 70 CMS-selected and 230 hospital-selected “shoppable services.” If a hospital does not provide one or more of the 70 CMS-selected “shoppable services,” the hospital must select additional “shoppable services” to reach a total disclosure of at least 300 “shoppable services.”

C. Monitoring and Enforcement of Requirements for Making Standard Charges Public

CMS proposes to monitor hospital compliance with the proposed transparency requirements, instead of relying solely on complaints made to CMS. Compliance will be monitored through multiple methods, one of which is by conducting audits of hospitals’ websites. Hospitals failing to make public their standard charges or comply with the form and manner provisions for “shoppable services” will be subject to civil monetary penalties of up to a maximum of $300 per day and publication of violations on the CMS website. 

D. Definition of Hospital

CMS proposes to update the definition of a “hospital” to include institutions that are licensed as hospitals under state or local law. The proposed definition expands the definition of “hospital” found in other sections of the Social Security Act, as the proposed definition encompasses any institution that is operating as a hospital under state or local law but which might not be considered a hospital for purposes of Medicare participation. For example, the proposed definition would include critical access hospitals, inpatient psychiatric facilities, sole community hospitals, and inpatient rehabilitation facilities, so long as the institutions are licensed as hospitals.

II. Updates Encouraging Site-Neutrality and Increasing Patient Choice

The Proposed Rule includes several initiatives designed to reduce payment differences between certain outpatient sites of service and to standardize charge masters, enabling more accurate service comparison by patients.

A. Method to Control Unnecessary Increases in the Volume of Clinic Visit Services in Off-Campus Provider-Based Departments (PBDs)

Historically, services provided in the hospital outpatient department setting received higher reimbursement than those same services provided in a physician clinic setting. Partly due to the reimbursement differential, the volume of a given service provided in the hospital outpatient setting was often greater than in a physician clinic. In CY 2019, CMS instituted a control on the increase in clinic visit services furnished in the hospital outpatient setting by capping payment for clinic visits provided in all off-campus PBDs at the physician fee schedule rate. The control was phased in over two years. The Proposed Rule allows for the completion of the phase-in by the end of CY 2020.

B. Updates to the Inpatient-Only (IPO) List 

CMS proposes establishing a one-year exemption from medical review by Beneficiary Family Centered Care-Quality Improvement Organizations (BFCC-QIOs) for procedures removed from the IPO list beginning in CY 2020 and subsequent years. BFCC-QIOs are CMS subgroups that conduct quality of care reviews, manage Medicare beneficiary complaints, and maintain authority to refer procedures to Recovery Audit Contractors (RACs) for review. Therefore, reviews of short-stay inpatient claims for any procedures removed from the IPO list in the past one-year period will not be counted against a provider or be eligible for referral to a RAC.

III. Updates to the Medicare Hospital Outpatient Prospective Payment System (OPPS) Payment Rates

For CY 2020, CMS proposes to increase the OPPS payment rates by 2.7 percent. CMS based the proposed increase on the proposed hospital inpatient market basket percentage increase of 3.2 percent for inpatient services paid under the hospital inpatient prospective payment system, less the proposed multifactor productivity adjustment of 0.5 percentage points. CMS estimates an increase of approximately $6 billion over CY 2019 payments, resulting in approximately $79 billion in total payments to OPPS providers for CY 2020.

CMS further proposes that facilities that do not meet the reporting requirements of the Hospital Outpatient Quality Reporting Program will continue to be subject to a 2 percent reduction in their annual payment update, by applying a reporting factor of 0.980 to the OPPS payments and copayments for all applicable services.

IV. Conclusion

The Proposed Rule’s focus on provider pricing and patient expense, if finalized, will have a significant effect on marketplace competition and provider choice. Stakeholders and others have the opportunity to submit comments to CMS through September 27, 2019.

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