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This course provides an overview of the prospective payment systems used in the Medicare program and as well as Medicare fee schedules. This course provides a general discussion and overview of Medicare reimbursement under the Inpatient Pro...
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News | Medicare Payment and Reimbursement

340B cuts, inpatient-only elimination lead hospitals' OPPS concerns

News | Medicare Payment and Reimbursement

340B cuts, inpatient-only elimination lead hospitals' OPPS concerns

  • A leading hospital concern regarding Outpatient Prospective Payment System policy change proposals was a $427 million cut to the 340B program.
  • Policies pushing patients to outpatient care could have a range of unintended consequences, hospitals said.
  • Revisions to overall star ratings for hospitals drew some support but did not eliminate calls for scrapping the approach.

Among the myriad Medicare outpatient policy changes proposed for 2021, hospitals have expressed the greatest concerns over cuts to the 340B discount drug program and elimination of the inpatient-only list of procedures.

Medicare’s Hospital Outpatient Prospective Payment System (OPPS) proposed rule for CY21 would add to $1.6 billion in 340B cuts that started in 2018. The new rate for drugs purchased would be average sales price (ASP) minus 28.7%, down from ASP minus 22%. CMS estimated the proposed change would cut another $427 million from payments to 340B hospitals.

“The 340B program enables safety net providers not only to mitigate high and rising drug prices, but to be good stewards of finite patient, program, and provider resources with a goal to improve the health of those we are privileged to serve,” wrote Peter Leibold, chief advocacy officer for the 150-hospital Ascension health system. “We invest all of our 340B savings — and far more — back into the community.”

In FY19, Ascension invested $2 billion in caring for persons living in poverty and to other community benefit programs, Leibold wrote.

Reflecting a common sentiment among responding hospitals, the University of California Health said CMS has “drastically underestimated the financial impact on hospitals.”

“The impact of proposing an additional 6.2% reduction would be an estimated $8 million loss per year to UC Health, at a time when UC Health hospitals, like so many other safety net providers, are already stretched thin,” wrote Carrie Byington, MD, executive vice president for the system.

CMS based the latest cut on a spring 2020 survey to 1,422 hospitals. However, only 7% responded using the detailed survey, while 55% responded using a quick survey option and the remaining 38% did not respond. The timing of the survey, which came amid competing priorities and massive furloughs during the pandemic, resulted in unreliable data, hospitals said.

“It is plainly almost certain that the timing and methodology of this survey has resulted in CMS obtaining incomplete and potentially inaccurate data,” Leibold wrote.

Changes designed to boost outpatient care

CMS proposed three major changes to encourage the shift of more procedures to outpatient settings:

  • Eliminating the inpatient-only (IPO) list over three years
  • Changing the way procedures are added to the ambulatory surgery center (ASC) covered procedures list (CPL)
  • Adding 270 surgery or surgery-like codes to the ASC-CPL

UnityPoint Health said the IPO list elimination would exacerbate “inequities perpetuated within the fee-for-service structure.” Currently, lesser costs from healthier patients balance greater costs from more complex patients. As procedures are removed from the IPO list, healthier patients are transitioned to outpatient settings, leaving more complex, costly patients in inpatient settings, wrote Cathy Simmons, JD, executive director of regulatory affairs for the 40-hospital system.

“These policies perpetuate a for-profit mentality and encourage more infrastructure builds to cater to younger, healthier and less costly patients, divert resources from existing inpatient settings, and lead to greater health care costs overall,” Simmons wrote.

Texas Health Resources highlighted unintended effects of the outpatient policy changes on various value-based payment (VBP) models.

“As lower acuity patients move to the outpatient setting, the risk profile of the remaining beneficiaries receiving inpatient care will be more complex,” wrote Barclay Berdan, CEO of Texas Health Resources.

The change in case and cost mix would need to be recognized in the inpatient target prices and benchmarks set under CMS’s VBP models.

“These changes do not reflect changes in provider performance, but rather coverage determinations that place participating providers at financial risk,” Berdan wrote. “Without adjustment, it will be extremely difficult for participants to avoid being harmed financially by these policy changes.”

Ascension warned that private health plans are likely to follow CMS’s lead in eliminating the IPO list.

“CMS might consider evaluating — in lieu of wholesale elimination of the IPO list — whether the OPPS rulemaking cycle could incorporate a process for soliciting nominations of service appropriate for removal from the IPO list removal, which could be vetted annually for stakeholder input,” Leibold wrote.

CMS had offered a two-year suspension of site-of-service reviews for procedures removed from the IPO list. In its comments, HFMA noted that once that period ends, the elimination of the IPO list could lead to “a de-facto site neutral payment policy.”

To avoid increased administrative burdens, HFMA recommended that CMS prohibit patient status reviews for any procedure that was on the IPO list as of CY20 and that is performed on an emergent basis. CMS also should use its existing IPO list criteria to maintain a “shadow IPO list.”

“Similar to the existing IPO list, the ‘shadow IPO list’ would be used to identify procedures that may be covered when performed in the outpatient setting, but are not subject to [contractor] review if they are performed in an inpatient setting, regardless of when they were removed from the IPO list,” HFMA wrote.

Other issues draw scrutiny

CMS proposed major changes to the methodology used to calculate a hospital’s overall star rating on the Hospital Compare website.

The Catholic Health Association, which includes 400 hospitals and health systems, supported changes that were designed to make the star-rating calculations easier for hospitals to predict and replicate based on their performance on the underlying quality measures. However, CMS needs better ways to account for “socioeconomic status in the quality measures that compose the Overall Star Rating.”

In contrast, the National Rural Health Association (NRHA) urged CMS to abandon the star-rating methodology.

“NRHA believes that reducing the complexity of hospital efficiency and quality into a star rating is not advantageous to the public or hospitals, especially in rural areas,” wrote Alan Morgan, CEO of NRHA. “CMS must adapt a system that provides information that is meaningful to patients making purchasing decisions and fair to hospitals providing high-quality, low-cost care to their patients.”

NRHA also raised concerns about CMS’s proposals to loosen restrictions on physician-owned hospitals (POHs). Specifically, CMS proposed changes that included allowing high-Medicaid facilities to request an exception to the prohibition on expansion of POHs more frequently than once every two years.

“By loosening restrictions on physician-owned hospitals, CMS may accelerate a trend that allows certain providers to benefit from influxes and wealthier, more affluent patients and forces sicker, less-affluent patients to seek care from community hospitals, which will threaten the financial viability of the health care safety net,” Morgan wrote.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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