On November 1, 2022, CMS published a final rule to update the payment policies, payment rates, and other provisions for services furnished under the Medicare Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgery Center (ASC) Payment System in calendar year (CY) 2023 (the Final Rule). Among other key provisions, CMS finalized the following. CMS will now apply the average sales price (ASP) plus 6 percent rate to drugs and biologicals purchased through the 340B program following the Supreme Court’s June decision in American Hospital Association v. Becerra, but did not adopt a remedy for drug claims submitted during CYs 201-2022. CMS finalized its proposals regarding payment for Rural Emergency Hospitals, a new provider type eligible to participate in Medicare starting January 1, 2023. CMS made some changes to the inpatient-only list and explained its determinations on the pass-through payment applications for drugs, biologicals, and devices. CMS finalized its proposal to consider behavioral health services furnished remotely as covered outpatient services for which payment is made under the OPPS, a flexibility made previously available through the PHE-related Hospitals Without Walls policy.
Payment Rate Updates
In the Final Rule, CMS updated the OPPS conversion factor for hospitals and ASCs by 3.8 percent, which includes a market basket increase of 4.1 percent and a negative 0.3 productivity adjustment. CMS also finalized its adjustments to the OPPS payment rates by a 0.9998 wage index budget neutrality factor, which accounts for the change in policy regarding drugs purchased under the 340B program and the projected OPPS spending for the difference in pass-through spending. After all adjustments, the conversion factor for CY 2023 is $85.585 (the CY 2023 conversion factor from the Proposed Rule was $86.449).
OPPS Payment for Drugs Acquired Through the 340B Program
In the June 15, 2022 Supreme Court decision, American Hospital Association v. Becerra, a unanimous Court held that under the Medicare statute, HHS could not vary rates between different groups of hospitals without previously conducting a survey of hospitals’ acquisition costs. American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022). As a result, CMS will now apply the default rate – ASP plus 6 percent – to 340B acquired drugs and biologicals for CY 2023.
CMS will remove the increase to the conversion factor that was made in CY 2018 to implement the 340B policy in a budget neutral manner. CMS continues to evaluate and invite comment on the best way to apply the Court’s decision for CYs 2018-2022 when 340B hospitals received different rates. CMS will consider those comments for a separate rulemaking that will be published in advance of the CY 2024 OPPS/ASC proposed rule.
Rural Emergency Hospitals: Payment Policies, Provider Enrollment and Physician Self-Referral Update
Section 125 of the Consolidated Appropriations Act (CAA) created Rural Emergency Hospitals, or REHs. REHs are a new provider type that will be eligible to participate in the Medicare program starting January 1, 2023. REHs are facilities that convert from either a CAH or a rural hospital (or one treated as such through active reclassification from urban to rural status) with less than 50 beds, and that do not provide acute inpatient services except for skilled nursing facility services furnished in a distinct unit. In a proposed rule issued on July 6, 2022, CMS established the conditions of participation for REHs.
CMS finalized its proposal to pay REHs at a rate of 105 percent of the OPPS rate for covered outpatient services, and is codifying this policy in regulation at 42 C.F.R. § 419.92(a)(1). CMS also finalized its policy to permit REHs to provide outpatient services that are not otherwise paid under the OPPS, such as services paid under the clinical lab fee schedule. While these services would not be considered “REH services,” and thus not subject to the five percent payment increase, the REH would still be paid at the same rate the service would be paid if performed in a hospital outpatient department, provided the requirements for payment under the respective system are met.
REHs will also receive a monthly facility payment. This payment is determined by calculating the amount CMS paid to all Critical Access Hospitals (CAHs) in 2019, minus the estimated total that would have been paid to CAHs in 2019 if payment were made for inpatient hospital, outpatient hospital, or skilled nursing facility services under the applicable PPS. The difference is then divided by the number of CAHs enrolled in Medicare in 2019 to calculate the annual amount of this additional facility payment per REH for 2023. CMS finalized its proposal to use both amounts paid to CAHs from Medicare and from beneficiary co-payments in this calculation. In the Final Rule, CMS also revised its calculations set forth in the Proposed Rule, using updated assumptions about the percentage of total Medicare spending for CAHs in CY 2019. This results in the monthly facility payment (including copayments) being 57 percent of the estimated prospective payment for CAHs in 2019, as opposed to 72 percent. Using the revised calculation in the Final Rule, the REH monthly facility payment for CY 2023 will be $272,866.
For REHs to receive payments for services furnished to Medicare beneficiaries, providers and suppliers must enroll in the Medicare program. CMS finalized its proposal to update the existing Medicare provider enrollment regulations found at 42 C.F.R. § 424 subpart P, allowing facilities converting from a CAH to an REH to submit a change in information form (Form CMS 855-A) rather than an initial enrollment application.
In the Proposed Rule, CMS suggested updates to the physician self-referral law (the Stark Law) for the new REH provider type. Once an entity is enrolled as a REH, the Stark Law would prohibit a physician from making a referral for designated health services to the REH if the physician (or an immediate family member of the physician) has a financial relationship with the REH, unless an exception to the Stark Law’s referral prohibitions applies and all of its requirements are satisfied. CMS proposed to establish a new exception for ownership or investment interests in a REH to allow for non-abusive referrals between REHs and physicians. After reviewing a broad array of comments related to proposed REH policies, CMS was persuaded that the financial relationships permitted under the REH exception, as it was proposed, may present a risk of patient or program abuse. Ultimately, CMS opted not to finalize the REH Stark Law exception.
Payments for Off-Campus Provider-Based Departments (PBDs) of an REH
As discussed above, payment may be made to REHs for services that would otherwise be covered outpatient department (OPD) services. However, the statutory provision that allows for such payment was added by Section 603 of the Bipartisan Budget Act of 2015, which specifically excludes from the definition of “covered OPD services” applicable items and services furnished by an off-campus outpatient department of a provider. Although CMS proposed to define REH services as the covered OPD services furnished by an REH, REHs are not paid under the OPPS. Therefore, in the Final Rule, CMS stated that the relevant statutory provisions can reasonably be interpreted to mean that the creation of the REH provider type was not meant to change the existing scope and applicability of the Section 603 amendments. In other words, the exclusion of services furnished by nonexcepted off-campus PBDs from the definition of “covered OPD services” applies only to services furnished by the nonexcepted off-campus PBDs hospitals paid under the OPPS, not REHs.
Use of Claims Data for CY 2023 OPPS and ASC Payment System Rate Setting Due to the PHE
Typically, CMS uses the claims data from the two years prior to the year for which it sets OPPS and ASC rates. However, that would mean using parts of CY 2020 that include data from the start of the COVID-19 Public Health Emergency (PHE), which CMS believes would not provide the best overall approximation of expected outpatient hospital services. CMS finalized its proposed policy to use CY 2021 claims and the June 2020 Healthcare Cost Report Information System (HCRIS) extract in establishing the CY 2023 OPPS rates. CMS noted that while clinical and billing patterns had not quite returned to their pre-PHE levels, they have started to do so.
CMS also finalized its policy to continue to exclude claims data from HCPCS code C9803—COVID-19 specimen collection and services assigned to APC 580—for rate setting purposes.
Changes to the Inpatient Only List
The OPPS has maintained a list of services for which Medicare will only pay when they are performed in an inpatient setting—the Inpatient Only (IPO) list. Services on the IPO list include those which, as a result of their medical complexity and invasive nature, would not be safe or appropriate to perform as an outpatient service because they may result in major blood loss, temporary deficits of organ systems, or otherwise intensive or extensive post-op care. CMS has a five-factor analysis for removing procedures from the IPO list based around the ability of outpatient departments to safely perform the procedures.
For CY 2023, CMS had proposed to remove ten services from the IPO list and to add eight services to the IPO list. After consideration of public comments, CMS removed eight CPT codes from the IPO list and reassigned them to status indicator “J1” and APC 5165. CMS assigned CPT code 22632 the “N” status indicator. CMS did not finalize its earlier proposal to remove CPT code 16036 after agreeing with a stakeholder’s comment that the service would typically be performed in an inpatient setting. The eight services that CMS had proposed to add to the IPO list will be effective January 1, 2023.
Rural Sole Community Hospitals: Exemption to the Clinic Visit Payment Policy and Special Payment Treatment
Under existing policy, CMS uses the Physician Fee Schedule (PFS) to determine rates for clinic visit services that are provided at off-campus provider-based departments that are paid under the OPPS. For CY 2023, the PFS-equivalent rate is 40 percent of the OPPS payment rate (that is, 60 percent less than the proposed OPPS rate). CMS has finalized its proposal to exempt Rural Sole Community Hospitals (SCHs) from this policy and pay SCHs the full OPPS rate for clinic visits furnished in excepted off-campus provider-based departments.
Through the various Medicare payment systems, CMS has established a number of special payment provisions for rural providers to ensure access to high quality care for beneficiaries in rural areas. For example, rural SCHs are a hospital type that has received special payment treatment under the OPPS to account for their higher costs and the disproportionately harmful impact that payment reductions could have on them. Thus, for CY 2023, CMS is finalizing its proposal to continue the current policy of utilizing a 7.1 percent payment adjustment for rural SCHs.
Hospitals Without Walls Framework to End Following Conclusion of the PHE
CMS is finalizing its proposal to consider behavioral health services furnished remotely by clinical staff of hospital outpatient departments, including staff of CAHs, through the use of telehealth to beneficiaries in their homes, covered outpatient services for which payment can be made under the OPPS. Currently, this flexibility is available through the PHE-specific policy referred to as Hospitals Without Walls (HWW), but the emergency waivers that enable this flexibility will expire when the COVID-19 PHE ends. Thus, CMS is finalizing this policy through an alternate regulatory authority that does not rely upon the HWW framework.
Supporting Organ Procurement and Research
CMS had proposed to exclude research organs from the calculation of Medicare’s share of organ acquisition costs and require a cost offset with the goal of maintaining or lowering the cost of procuring and providing research organs to the research community. CMS is now finalizing that proposal to exclude research organs from the ratio used for calculating Medicare’s share of organ acquisition costs. CMS is modifying the requirement to offset costs by allowing providers to follow their own accounting practice of either adjusting costs, offsetting revenue, or establishing a non-reimbursable cost center.
CMS also finalized its proposal to cover as organ acquisition costs certain hospital costs that are typically incurred when a donor dies from cardiac death with the goal that this policy will increase organ procurement and increase equity in the transplant ecosystem.
OPPS Transitional Pass-through Payment for Drugs, Biologicals, and Devices
CMS provides for temporary additional payments or “transitional pass-through payments” for certain drugs, biologicals, and devices. The transitional pass-through payment serves to facilitate access to the benefits of new and innovative devices while the cost data for the devices is still being collected to better understand and incorporate the costs into the appropriate rates. CMS received eight pass-through device applications: aprevo™ Intervertebral Body Fusion Device, MicroTransponder® ViviStim® Paired Vagus Nerve Stimulation (VNS) System (Vivistim® System), The BrainScope TBI, NavSlim™ and NavPencil, SmartClip™, Evoke® Spinal Cord Stimulation (SCS) System, Pathfinder® Endoscope Overtube, and the Uretero1. CMS determined that four out of the eight devices qualified, or continued to qualify, for transitional device pass-through status as of January 1, 2023; the qualifying devices were Uretero1, Evoke, Vivistim, and aprevo. The four devices did not qualify as a result of failing to meet one or more of the eligibility criteria.
CMS finalized that it will not provide any additional quarters of separate payments, as it had done as a result of the COVID-19 PHE, for drugs, biologicals, or devices for those whose pass-through payment expires between December 31, 2022, and December 30, 2023.
CMS also finalized its policy to publicly post OPPS device applications for pass-through payment but changed its planned implementation date from January 1, 2023, to March 1, 2023. Accordingly, CMS will publicly post all OPPS device pass-through applications received on or after March 1, 2023, for the CY 2025 OPPS proposed rule.
OPPS Payment for Software as a Service
New algorithm-driven clinical software, including clinical decision support software, clinical risk modeling, and computer aided detection help providers improve patient outcomes and reduce program costs. CMS refers to this technology as software as a service (SaaS). CMS finalized its payment proposal for CY 2023 SaaS add-on codes with a modification in response to public comments. CMS originally proposed to not to recognize select CPT add-on codes and instead create separate codes for SaaS procedures under the OPPS. Commenters indicated doing so would be unnecessary and burdensome for hospitals. As a result, CMS will recognize SaaS CPT add-on codes and pay separately for them, but CMS will not create new codes to describe the add-ons as standalone services. For CY 2023, SaaS add-on codes would not be considered “certain services described by add-on codes” under 42 C.F.R. § 419.2(b)(18); instead, the SaaS CPT add-on codes will be assigned to same APC and have the same status indicator as their original standalone code. CMS continues to seek comments on appropriate payment policies for SaaS procedures.
Quality Reporting Measures
CMS finalized its proposal to update one existing Hospital Outpatient Quality Reporting (OQR) Program measure. Specifically, CMS is finalizing a policy of maintaining voluntary reporting of the “Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery” measure due to the ongoing COVID-19 PHE. Similarly, CMS finalized making the measure voluntary for the Ambulatory Surgical Center Quality Reporting (ASCQR) Program as well.
In the Proposed Rule, CMS also solicited comments on several measures under consideration for the Rural Emergency Hospital Quality Reporting (REHQR) Program. Specifically, CMS sought to implement quality reporting program measures that reflect the types of services and care delivered most frequently in that setting. Some measures under consideration were the Median Time to Transfer to Another Facility for Acute Coronary Intervention, Aspirin on Arrival, and Door to Diagnostic Evaluation by a Qualified Medical Professional measures. Some commenters stated that they did not support any of the proposed REH quality reporting measures due to the unique challenges associated with REHs and the types of services they provide. In the Final Rule, CMS acknowledged the variability in the services REHs provide, and thus the potential need for REH-specific measures. CMS noted that it will take such comments into consideration for future rulemaking.
The Final Rule is not expected to be published in the Federal Register until November 23, 2022, but the display copy is available here. CMS’s fact sheet is available here.
