Taken together, changes in payment policies for off-campus provider-based departments and the 340B discount drug program could cost hospitals nearly $1 billion next year, one hospital advocate estimated.


July 27—A range of major hospital policy changes includes a $760 million cut as part of the 2019 Hospital Outpatient Prospective Payment System (OPPS) proposed rule.

The Centers for Medicare & Medicaid Services (CMS) proposed a 1.25 percent increase in hospital OPPS rates for CY19.

But the proposed change that garnered the most hospital attention focused on “site-neutral” payments—primarily, CMS’s proposal to reduce payment for hospital outpatient clinic visits provided at off-campus provider-based departments (PBDs) to 40 percent of the OPPS rate. The site-neutral policy change will “largely offset” the OPPS rate increase by cutting payments by 1.2 percent, according to a CMS fact sheet.

That cut would occur regardless of whether the PBD was grandfathered in under a previous rate cut that was authorized under Section 603 of the Bipartisan Budget Act of 2015. That legislation cut payments to off-campus PBDs—effective Jan. 1, 2017—to the amount paid to physician clinics for the same service. The law had exempted facilities billing under the hospital outpatient rate as of the date of the law’s enactment and emergency services furnished by off-campus emergency departments.

The clinic visit is the most commonly billed service under the OPPS, and CMS estimated the policy would cut $760 million in FY19 Medicare spending.

“Today’s proposed rule for Medicare outpatient payments would make bad policies worse, impose draconian new cuts that jeopardize healthcare access for millions of vulnerable Americans, and undermine the foundation of support for our nation’s healthcare safety net,” Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said in a written statement.

A related PBD change for grandfathered facilities also would cut rates to 40 percent of the OPPS rate for services that are from a clinical family from which the facility did not previously furnish services.

The PBD payment changes came in response to hospital purchases of physician practices in order to derive higher payment rates by designating them as off-campus PBDs, CMS stated.

“We will urge the agency to revise these punitive policies so that hospitals can continue to provide the highest quality health care,” Tom Nickels, executive vice president for the American Hospital Association (AHA), said in a written statement.

340B Cut

In another major cut, CMS would extend the recently lowered 340B Medicare payment rate—the average sale price (ASP) minus 22.5 percent—to 340B drugs furnished in non-grandfathered PBDs.

The proposed 340B Medicare payment change would continue to exempt rural sole-community hospitals, children’s hospitals, and certain cancer hospitals.

CMS also would cut Medicare payments for biosimilar drugs purchased under the 340B program to ASP minus 22.5 percent based on the biosimilar’s own ASP, rather than the ASP of the reference product.

Additionally, Medicare would pay for new drugs and biological products at the rate of the wholesale acquisition cost (WAC) plus 3 percent—down from WAC plus 6 percent—before ASP data are available.

“Inexplicably, the administration has decided to double down on its flawed policy by extending harmful cuts to safety net hospitals, many of which are teaching hospitals, that participate in the 340B Drug Pricing Program,” Darrell G. Kirch, MD, president and CEO of the Association of American Medical Colleges (AAMC), said in a written statement.

Kirch noted that bipartisan House legislation, which has nearly 200 cosponsors, would rescind 340B cuts that CMS began imposing on Jan. 1.

The AHA said the new 340B cuts exceed CMS’s statutory authority. AHA plans to refile its legal challenge to the earlier 340B cuts after an appeals court ruled July 17 that the lawsuit was premature. Nickels said that, taken together, the PBD and 340B policy changes “appear to result in close to $1 billion in unwarranted cuts to hospitals.”

Other Changes

The payment rule also would change patient experience measures included in the Hospital Inpatient Quality Reporting Program by removing three metrics related to pain communication. The proposed change followed concerns raised by some providers about pressure from patients seeking opioids who can also report clinician neglect of their preferences.

Another opioid-related change for CY19 would pay separately, at ASP plus 6 percent, for non-opioid pain management drugs “that function as a supply when used in a covered surgical procedure performed in an ASC [ambulatory surgical center].”

Among additional policy changes, CMS also proposed removing 10 measures from the Outpatient Quality Reporting (OQR) program, with one removed for CY20 and nine in CY21. Other changes to the OQR program—on which 2 percent of a hospital’s payment is based—include:

  • Extending the performance period from one to three years for the Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy
  • Updating the factors to be considered when removing measures from the program
  • Changing the frequency of the Hospital OQR Program Specifications Manual release beginning with CY19
  • Updating requirements related to participation status, including removal of the Notice of Participation form

CMS proposed a 2 percent increase in ASC rates for CY19.

Future Changes

CMS also sought comments through a request for information (RFI) on whether providers and suppliers should be required to inform patients about charges and payment information for healthcare services and out-of-pocket costs. The RFI asked what data the public would find most useful and what other changes are needed.

Another RFI sought feedback on changes to spur interoperability of electronic health records or other ways to share data between providers. Among the specific policies under consideration is revising the Conditions of Participation for providers in Medicare to require interoperability, in order to “increase electronic sharing of data by providers.”

CMS also sought feedback on a potential model to test “private-sector vendor-administered payment arrangements” for Part B drugs and biologicals, including high-cost therapies.

Comments on the proposed rule are due by Sept. 24, with a final rule expected by around Nov. 1. 


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

Publication Date: Sunday, July 29, 2018