Medicare Payment and Reimbursement

Medicare’s hospital outpatient payment rate for 2024 improves marginally from the proposed rule

Arguably the biggest change to outpatient coverage next year will be the introduction of a new tier of behavioral healthcare services.

November 7, 2023 5:26 pm

The final rule setting Medicare’s 2024 payment rates and policies for hospital outpatient services and ambulatory surgical centers (ASCs) contained no major surprises and little to make hospitals optimistic about the government portion of their payer mix.

Here are five of the most important payment and coverage takeaways from the rule, which totals 1,672 pages in preprint form.

1. The outpatient payment rate

Base payments for items and services furnished in hospital outpatient settings and ASCs will increase by 3.1% after factoring in the usual 0.2-percentage-point “productivity” reduction. The update will drop by 2 percentage points for hospitals that fail to meet quality-reporting requirements.

The increase is up from 2.8% in the proposed rule earlier this year, stemming from changes in market basket inputs.

Budget neutrality adjustments will bring the base increase up to 3.2%, CMS wrote in the rule. For rural hospitals, tweaks to ambulatory payment classifications (APCs) and adjustments to the wage index will help bump up the estimated increase to 4.2%. Significant regional variation in the payment update is projected as well, based largely on the wage index (see the table on page 1587 of the rule).

Hospital advocates deemed the general update insufficient at a time of continued financial strain. For example, a report issued by the Medicare Payment Advisory Commission (MedPAC) earlier this year projected that the aggregate hospital margin on Medicare patients would be roughly -10% for 2023. Commercial payments are unlikely to make up for that deficit.

In comments on the proposed rule, stakeholders said the 2024 payment increase would not adequately cover heightened expenses. In response, CMS said its hands are tied based on statutory guidelines for calculating the market basket increase.

“Hospitals’ and health systems’ ability to continue caring for patients and providing essential services for their communities may be in jeopardy, which is why the AHA is urging Congress for additional support by the end of the year,” the American Hospital Association said in a written statement.

2. Notable ASC provisions

The market basket update for hospitals has applied to ASCs since 2019 and will continue to do so through at least 2025. CMS is assessing how that policy affects the migration of services to ASCs.

That migration could be aided by the addition of 11 procedures, including total shoulder arthroplasty, to the list of ASC covered procedures for 2024. Among other codes added to the list are those for certain jaw, ankle and knee surgeries (see the list on page 949 of the rule).

3. Changes to quality reporting

In the outpatient quality-reporting program, the COVID-19 Vaccination Coverage Among Healthcare Personnel measure is being updated to incorporate the CDC’s definition of up to date vaccination, including specified time frames. The change mirrors adjustments being made to the measure in other CMS quality-reporting programs.

The Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery voluntary measure is being updated to clarify which survey instruments can be used. Only three specified instruments will be considered valid for the purposes of outpatient quality reporting.

Appropriate Follow-up Interval for Normal Colonoscopy in Average-Risk Patients is being expanded to include patients ages 45 and older, in keeping with recently updated clinical guidelines.

As established in prior regulations, next year’s quality-reporting period also will align patient-encounter quarters for chart-abstracted measures with the calendar year.

Also previously established for 2024 were requirements for hospitals to report an electronic clinical quality measure on ST-segment elevation myocardial infarction and to resume their reporting of Outpatient and Ambulatory Surgery CAHPS Survey measures. In both cases, reporting has been in place on a voluntary basis for 2023.

In changes from the 2024 proposed rule, CMS has opted to retain the Left Without Being Seen measure and to continue to exclude a prior measure on procedure volume. With respect to the former measure, CMS wants to further investigate recently reported increases in the number of patients who leave the emergency department without undergoing an evaluation. With the latter, it is looking to continue to evaluate the measurement methodology.

4. Coverage of behavioral healthcare

For mental health services furnished remotely by hospital staff to beneficiaries in their homes, CMS is making technical coding refinements to allow for multiple units to be billed daily. In addition, a new, untimed code is being introduced for group psychotherapy. The hope is the changes will reduce administrative burden.

Requirements for an in-person visit within six months of an initial telehealth visit and 12 months of any subsequent visit are being delayed until 2025.

A new category of covered services for 2024 is the intensive outpatient program (IOP), which was established by 2022 year-end legislation. The new program is designed to be less intensive than the partial hospitalization program (PHP) but more so than standard outpatient behavioral health services. An IOP is for patients who are assessed to need at least nine hours of therapy per week but do not need inpatient-level care.

Principal-illness navigation codes are being introduced to cover care coordination, case management and discharge planning in PHPs and IOPs. A new APC for both programs will cover days with three or fewer services, while another will apply to days with four or more services.

5. Miscellaneous updates

Nurse practitioners, physician assistants and clinical nurse specialists will be allowed to supervise cardiac rehabilitation, intensive cardiac rehabilitation (ICR) and pulmonary rehabilitation services. As well, such services may be supervised virtually through telehealth hookups that have a video component. The latter provision currently is in place through 2024 only.

ICR services will be paid at the full outpatient rate when delivered at facilities that otherwise would be subject to site-neutral payment.

Biosimilars will be exempt from Medicare’s threshold packaging policy when their reference biologicals are separately paid. This exception “will remove the financial incentive to use a more expensive separately payable biologic and [will] preserve our policy intent to promote biosimilar use as a lower-cost alternative to higher-cost reference products,” CMS states in the rule.

CMS scrapped a proposed policy that would have packaged payment for biosimilars when the reference product is below the drug-packaging threshold. The policy is considered unnecessary since such a scenario has never occurred.


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