In 2018, CMS estimates that there will be a 1.4 percent increase in OPPS payments.


On Nov. 13, Medicare issued the Medicare Outpatient Prospective Payment System (OPPS) final rule changes for 2018. This left about six weeks for hospital finance leaders to review the rule, understand the implications for their organizations, and develop strategies to assess and address the key issues prior to the Jan. 1, 2018, implementation date. Accomplishing all of this in a short period of time requires that your team stay focused to ensure that the key changes are addressed appropriately.

Although not a complete list of all the issues organizations may need to address, these are the key actions to be completed before Jan. 1:

  • Understand the financial impact of the final rule on your organization.
  • Evaluate the impact of conditional packaging of drug administration services with a cost of $100 or less.
  • Assess the accuracy of HCPCS Codes and billing units for pass-through drugs with status indicator G.
  • Implement the modifier requirement for imaging services performed with computed radiography technology, if applicable.
  • If your organization is a 340B drug program hospital, implement the reporting requirements for separately payable drugs with status indicator K.

Understand the Estimated OPPS Financial Impact

In the OPPS final rule, the Centers for Medicaid & Medicare Services (CMS) estimates there will be a 1.4 percent increase in OPPS payments to all 3,878 OPPS facilities in aggregate. However, this does not mean every organization will realize this increase. For example, CMS estimates sole community rural hospitals will realize a 4.1 percent increase in OPPS payments, and major teaching hospitals will realize an estimated -0.9 percent decrease in OPPS payments for 2018.

To help organizations understand the potential impact of the 2018 OPPS final rule changes, CMS has provided the “2018 OPPS Final Rule OPPS Facility-Specific Impacts” document that details by provider number the estimated impact for each of the OPPS hospitals.

Selected Data on the OPPS Impact by Facility Type
Selected Data on the OPPS Impact by Facility Type

Although this estimate by CMS may not be 100 percent accurate due to factors such as volume variations, it is helpful in determining directionally the potential financial impact of the 2018 OPPS final rule changes so healthcare organizations can plan for 2018.

Low-Level Drug Administration Services Conditional Packaging

In 2015, CMS implemented conditional packaging of ancillary services with a geometric mean cost of $100 or less but excluded drug administration services from this conditional packaging. This meant lower-cost drug administration services such as subcutaneous or intramuscular injections assigned CPT Code 96372 and chemotherapy injections such as CPT Codes 96401 and 96402 would still be paid as status indicator S—significant separately payable service—even though their costs were below $100. If these services would have become conditionally packaged and assigned status indicator Q1—packaged if status indicator S, T (discounted separately payable service), or V (visit) is on the claim—in 2015, there would have been no payment for the services if there were any services with status indicators S, T, or V on the claim.

In 2018, CMS is partially removing the exception for low-level drug administration services and has assigned these services status indicator Q1. Exceptions will remain for low-level drug administration services that are described as add-on services such as CPT Code 96375- intravenous push, each additional sequential push of a new drug. Below are the status-indicator assignments for the low-level drug administration services in 2018.

Infusion therapy and chemotherapy services are areas that will most likely be impacted by this rule change. Although there are no operational changes required, it is important to understand the financial impact of these changes. When any of the conditionally packaged (status indicator Q1) services are provided in addition to a status indicator S drug administration service, the Q1 drug administration services will no longer be paid separately. You should perform an impact assessment that includes the following strategies:

Determine financial impact. Implement financial modeling of the 2017 Medicare outpatient payment versus 2018 Medicare outpatient payment for Medicare infusion therapy and chemotherapy services to determine financial impact of this change. This is particularly important in facilities with high-volume service levels in these areas.

Ensure that all services will continue to be charged for accurately. Clinical departments should not stop charging for services because they are “packaged” by Medicare.

Pass-Through Drug HCPCS Code Accuracy

Pass-through drugs, which are assigned status indicator G, are separately payable drugs under OPPS no matter what other status indicators are present on the Medicare outpatient claim. Whether the pass-through drugs are provided during an emergency department visit, clinic visit, ambulatory surgery procedure, or chemotherapy service, pass-through drugs are always paid separately if the correct HCPCS code and units of service are billed to Medicare.

Pass-through drugs are a special classification under OPPS for drugs that meet CMS criteria relative to efficacy and other parameters and maintain the pass-through status and separate payment provision for at least two years, but not more than three years. In the OPPS final rule, there are 50 pass-through drugs eligible for separate payment in 2018. Even if your organization has been diligent in maintaining drug HCPCS codes throughout the year, it is a good practice to review the list of pass-through drugs in the final rule with your pharmacy department to validate that the correct HCPCS codes and units of services are being billed.

Be aware that the HCPCS descriptors for pass-through drugs in the final rule may not include the full description of the HCPCS codes and sometimes exclude information such as mode of administration—intramuscular versus/or intravenous or billing units such as per 5 milligrams. Organizations should use the 2018 CMS HCPCS data files that have the complete descriptions or a current 2018 HCPCS book to perform this validation.

One of the successful approaches used by some institutions for review of drug HCPCS codes is to use Addendum B of the final rule and filter to a list of status indicator G items in the Addendum. This list is then compared with the institution’s chargemaster to identify any pass-through drugs used that need new or revised HCPCS codes. A review of status G HCPCS codes not placed on the chargemaster by the pharmacy department is also helpful to identify any chargemaster lines missing a status indicator G HCPCS code. If you have a commercial chargemaster maintenance software tool, it should have the capability to perform this analysis.

Billing Requirements for Computed Radiography Technology-Based Imaging Services

Effective Jan. 1, 2018, CMS is implementing a legislatively mandated 7 percent payment reduction for imaging services performed using computed radiography technology. Computed radiography technology is defined by CMS as cassette-based imaging that uses an imaging plate to create the image involved. CMS will require institutions to append an “FY” modifier to the CPT Codes for these services. It is important that institutions identify locations where this type of technology is being used and ensure that the applicable modifier is used in these locations.

Institutions should survey their facility to identify these locations and develop processes to ensure the modifiers are appropriately appended when required. Besides surveying the imaging department in their institutions, finance leaders should remember to include any other locations where this may apply, such as hospital-owned physician practices and clinics.

340B Drug Program Billing Requirements

In 2018, CMS will implement a significant payment reduction for separately payable (status indicator K) drugs purchased through the 340B Drug Discount Program and the Prime Vendor Program (PVP) under 340B. The reduction in payment is average sales price (ASP) less 22.5 percent. Because status indicator K drugs are currently paid at ASP plus 6 percent, this represents a substantial payment reduction for many hospitals. This reduction does not impact pass-through drugs (status indicator G) and vaccines (status indicators L or M). In addition, rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals that participate in the 340B program will be exempt from the payment reductions. Finally, this reduction only applies to OPPS hospitals, so critical access hospitals are also exempt from the payment reductions as well as modifier reporting requirements detailed below.

Assuming legal actions by various organizations opposed to this payment reduction are not successful in delaying implementation, hospitals participating in the 340B program will have to meet the following billing requirements on Jan. 1:

  • For rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals, a “TB” informational modifier must be appended to each status indicator K drug purchased through the 340B program and administered to a Medicare outpatient. There will be no payment for these institutions.
  • For all other OPPS hospitals, a “JG” modifier must be appended to each status indicator K drug purchased through the 340B program and administered to a Medicare outpatient.

CMS has indicated it will accept assignment of these modifiers on non-status indicator K drugs (status indicator N or G) to ease the administrative burden on hospitals; this will not result in any payment reductions.

Hospitals that participate in the 340B program should confirm they have processes in place to accurately append these modifiers as applicable by Jan. 1. Development of the appropriate workflows, training in the workflows, and testing prior to implementation should be initiated quickly to ensure compliance on Jan. 1.

340B hospitals should also understand the financial impact of the payment reductions on the bottom line. Claims-based financial modeling should be performed so that your organization understands and can proactively plan for the payment reductions in 2018.

With little time until the OPPS final rule goes into effect, finance leaders should act now to address the key issues that may impact their organizations, both financially and operationally. Realizing that not all of the key issues presented here may impact every healthcare organization, finance leaders should first address those issues that will have the most impact. If they wait until January to address them, they may find themselves having to spend extra time resolving issues that could have been avoided if they had taken proactive approaches earlier.


Mike Kovar is consulting director, McBee Associates Inc., and a member of HFMA’s Maryland Chapter.

Publication Date: Friday, December 01, 2017