Some hospital advocates plan to push Congress to change the off-campus payment system after the upcoming election.


Nov. 4—Despite some tweaks, Medicare largely finalized payment changes it previously proposed for some outpatient departments, and those changes are drawing concerns from hospital advocates.

The Centers for Medicare & Medicaid Services (CMS) finalized policies this week to implement Section 603 of the Bipartisan Budget Act (BBA) of 2015. After Jan. 1, 2017, the legislation requires reducing payments under the Outpatient Prospective Payment System (OPPS) for new or relocated off-campus hospital outpatient departments (HOPDs) that started billing Medicare after November 2015. 

The payment changes contained in a final rule (with comment period) included some good news for hospitals, such as elimination of a proposal to limit OPPS payment for excepted off-campus HOPDs that expand into new service lines. Among the off-campus provider-based departments (PBDs) excepted from the cuts are those located within 250 yards of a remote location of a hospital facility, according to a CMS fact sheet.

Additionally, the rule finalized proposed limitations on relocation of excepted off-campus HOPDs but added flexibility to accommodate instances of extraordinary circumstances that are outside a hospital’s control, such as natural disasters.

Concerning Provisions

Among the elements of the payment rule that drew strong hospital concerns this week were provisions to allow exceptions for HOPD relocations on a “case by case” basis, as decided by a CMS regional office. However, CMS officials noted in the rule that they anticipate such relocation allowances will be “rare.”

“We appreciate the modifications CMS made to its proposal to allow existing hospital clinics to expand their services to meet the changing needs of their patients and communities without being penalized,” Tom Nickels, executive vice president for the American Hospital Association, said in a written statement. “However, we are alarmed that CMS continues to ignore the need for hospitals to modernize existing facilities so that they can provide the most up-to-date, high-quality services to their patients. We continue to be concerned that such ‘site-neutral’ policies and CMS’s implementation of them could impede patients’ access to care, especially in the most vulnerable communities.”

CMS also specified that Medicare will pay for services provided in non-excepted sites of service at 50 percent of the ambulatory payment classification (APC) rate, but that the reduction will not apply to separately payable drugs and other items that are billed under OPPS but not paid under APC rates.

The agency also rejected hospital advocates’ calls for delaying implementation of the payment changes for off-campus outpatient departments.

CMS issued an interim final rule with comment period (IFC) in conjunction with the OPPS final rule to establish new payment rates under the Medicare physician fee schedule for items and services provided by certain off-campus PBDs in CY17. The payment rates replaced a proposed payment system that would have kept hospitals from directly billing Medicare at all for non-excepted items and services provided in 2017.

“These new interim final rates being adopted in the IFC will permit hospitals to be paid for the furnishing of items and services that may no longer be paid under the OPPS, and we believe will reduce incentives for hospitals to acquire independent physician practices and convert the same service into more highly paid OPPS services,” CMS said in a release

Following release of the rules, Premier, a hospital quality improvement company, said the payment changes impose an “unacceptable level of complexity and uncertainty.”

“CMS’s implementation has just exacerbated an already bad situation,” Blair Childs, senior vice president for Premier, said in a written statement. “While we appreciate the fact that CMS has decided to allow existing [provider-based departments] to expand within the same family of services for now, we continue to believe that reforms are needed to this policy and that moving ahead on Jan. 1 is misguided.”

The Association of American Medical Colleges (AAMC) worried that the final rules will penalize hospitals that relocate their outpatient departments to better serve their communities. Such an outcome runs counter to the intent of Congress when it enacted the BBA and “severely limits access to care for some of the nation’s most vulnerable patients,” said Darrell Kirch, MD, president and CEO of AAMC.

The organization, which includes nearly 400 major teaching hospitals and health systems, plans to push Congress to allow more flexibility in off-campus HOPD payment during the post-election lame-duck session.

“Failure to act could mean teaching hospitals are not able to fulfil their patient care and training missions, which would prevent patients from receiving the care they need,” Kirch said in a written statement.

America’s Essential Hospitals (AEH), which represents 275 hospitals and health systems, hailed the tweaks by CMS but noted that the new flexibility “provides only partial relief.”

“The inevitable outcome of Section 603 remains: It will make new clinics in underserved communities economically unfeasible and perpetuate health care deserts—urban and rural pockets of limited access to care across the country,” Bruce Siegel, MD, president and CEO of AEH, said in a written statement.

Further changes to the rules that are needed to encourage the establishment of HOPDs in underserved communities, Siegel said, include an allowance for “unavoidable changes to a clinic's location or structure—including for many reasons less dramatic than a natural disaster,” Siegel said.

Payment Changes

The changes aim to curb Medicare’s previous practice of paying for services at a higher rate if the services are provided in an HOPD rather than in a physician’s office, according to CMS. The agency blamed such payments for incentivizing hospitals to acquire physician practices “in order to receive the higher rates.”

“This acquisition trend and difference in payment has been highlighted as a long-standing issue of concern by Congress, the Medicare Payment Advisory Commission, and the Department of Health and Human Services Office of Inspector General,” CMS officials wrote. “This difference in payment also increases costs for the Medicare program and raises the cost-sharing liability for beneficiaries.”

Hospitals, however, warned that off-campus outpatient facilities are integral to the ongoing movement toward population health and for improving access to care in less intensive settings. 

“The proposal was a short-sighted move on the part of Congress, focusing more on the siloes and settings of care rather than on the total cost,” Premier’s Childs said.

Other Provisions

The OPPS final rule contained numerous payment provisions, including a 1.7 percent increase in overall OPPS payments and a 1.9 percent increase in rates for ambulatory surgical centers in CY17.

The final rule also removed the pain management measure of the HCAHPS survey, as weighed by the Hospital Value-Based Purchasing program. The change was meant to “eliminate any financial pressure clinicians may feel to overprescribe medications,” CMS noted.

The agency also responded to hospital requests by allowing them to use a 90-day reporting period—instead of full-year reporting—for the Electronic Health Record (EHR) Incentive Program. Other changes to the EHR program include elimination of the clinical decision support and computerized order entry objectives and measures beginning in 2017.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Friday, November 04, 2016