CMS Proposed Hospital Outpatient Prospective Payment System Rule Calls for Reduced Reimbursement in the 340B payment program

05The Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services (CMS) published the 2021 Hospital Outpatient Prospective Payment System (OPPS) proposed rule. Among notable changes, CMS proposes to pay Average Sales Price (ASP) minus 28.7 percent for 340B drugs, expand the prior authorization process to include two new categories of services reimbursed under the OPPS, and eliminating the Inpatient Only list.

340B Drugs and Biologics

CMS adopted a policy to pay average sales price (ASP) minus 22.5 percent for 340B-acquired drugs, including when furnished in non-excepted off-campus provider-based departments paid under the Physician Fee Schedule. In last year’s rule, CMS acknowledged the ongoing litigation relating to the lower payment amount, including a district court ruling that the agency exceeded statutory authority in adjusting the payment rate for 340B drugs.

CMS conducted a survey to gather data on hospital acquisition costs for 340B drugs following the court ruling that found that CMS acted beyond its statutory authority but also acknowledged that CMS might base the payment amount of average acquisition cost when survey data are available. In early August 2020, the U.S. Court of Appeals for the District of Columbia Circuit reversed the lower district court’s ruling and held that CMS in fact, reasonably interpreted the Medicare statute as authorizing the rate reductions under a “general adjustment authority” with the purpose “to reimburse hospitals for their acquisition costs accurately.”

Based on the results of this survey of hospital acquisition costs for 340B drugs, CMS is now proposing the pay for 340B drugs for CY 2021 and subsequent years at ASP minus 34.7 percent, plus an add-on of 6 percent of the ASP. This results in a net payment rate of ASP minus 28.7 percent for 340B drugs. Rural sole community hospitals, PPS-exempt cancer hospitals and children’s hospitals are exempt from this lower 340B reimbursement. Wholesale Acquisition Cost will be used for products without an ASP available.

Proposed HOPD and ASC Payment Updates

CMS proposes an increase of 2.6 percent for OPPS payment rates in CY 2021, which it estimates will result in a total of approximately $83.9 billion in payments to OPPS. CMS will continue the statutory 2 percentage point reduction for hospitals failing to meet the hospital outpatient departments (HOPDs) quality-reporting requirements.

CMS proposes an increase of 2.6 percent for ASC payment rates in CY 2021, which is consistent with CMS’ policy for CYs 2019 through 2023 to update the ASC payment system using the hospital market basket update. CMS estimates this will result in a total of approximately $5.45 billion in payments to ASC providers.

Elimination of the Inpatient Only List

The Inpatient Only (IPO) List was created to identify services that require inpatient care because of the invasive nature of the procedure, the need for postoperative recovery time or the underlying physical condition of the patient. CMS concluded that the list is not necessary to identify services that require inpatient care because of changes in medical practice, including new technologies and innovations. Beginning with 2021, CMS proposes to eliminate the IPO list over three calendar years, starting with the removal of 300 musculoskeletal-related services in 2021.

Hospital Star Ratings

CMS proposes a methodology to calculate the Overall Hospital Quality Star Rating utilizing data collected on hospital inpatient and outpatient measures that are publicly reported on a CMS website. CMS also proposes to update and simplify how the ratings are calculated, reduce the total number of measure groups and stratify the readmission measure group based on the proportion of dual-eligible patients.

Hospital Quality Reporting Programs

For the Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting (ASCQR) programs, CMS proposes to revise and codify previously finalized administrative procedures, clarify requirements, and expand the review and corrections process to further align and reduce the burden for the two programs.

Prior Authorization

In 2019, CMS finalized a proposal to establish a process through which hospitals must submit a prior authorization request for a provisional affirmation of coverage before a covered outpatient service is furnished to the beneficiary and before the claim is submitted for processing. The change applied to five categories of services: blepharoplasty, botulinum toxin injections, panniculectomy, rhinoplasty, and vein ablation.

This year, the agency proposes to expanded prior authorization requirements for two additional services: cervical fusion with disc removal and implanted spinal neurostimulators to curb unnecessary utilization. Services in these two categories would be subject to prior authorization for dates of service on or after July 1, 2021.

2-Midnight Rule

CMS proposes to continue a two-year exemption from Beneficiary and Family-Centered Care Quality Improvement Organizations referrals to Recovery Audit Contractors (RACs) and RAC reviews for “patient status” (that is, site-of-service) for procedures that are removed from the Inpatient Only List under the OPPS beginning on Jan. 1, 2021. The agency seeks comments on whether the two-year exemption period continues to be appropriate, or if a longer or shorter period may be more warranted.