On July 29, 2019, CMS published a proposed rule revising the factors for determining Medicare payment rates under the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgery Center (ASC) Payment System in calendar year 2020 (the Proposed Rule). The Proposed Rule covers a myriad of topics, the most significant of which includes added proposals for implementing price transparency, ongoing efforts to transition to site neutral payments, addressing disparities affecting rural health providers, and continuing to pay for drugs or biologics acquired through the 340B program at the average sales price minus 22.5 percent (despite recent litigation on this very issue). Additionally, CMS proposes to increase the OPPS payment rates by a fee schedule increase factor of 2.7 percent and to increase ASC payment rates by 2.7 percent.

Price Transparency of Hospital Standard Charges

CMS proposes new regulations (at 45 C.F.R. Part 180), which the agency describes as an effort to implement both a statutory requirement that hospitals make available a list of their current standard charges, as well as a recent Executive Order that instructed the agency to propose a price transparency regulation.

By way of background, section 2718(e) of the Public Health Service Act, enacted as part of the Patient Protection and Affordable Care Act, requires:

Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and servicesprovided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.

42 U.S.C. § 300gg-18(e) (emphasis added). The statute states that hospitals must make standard charges public “in accordance with guidelines developed by the Secretary.” Id. CMS did not issue any such guidelines until relatively recently in the FY 2019 Inpatient Prospective Payment System Final Rule. 83 Fed. Reg. 41144, 41686 (Aug. 17, 2018). Around that time, CMS published two FAQ documents that provided some guidance, available here and here, which described “standard charges” as the list price for a hospital’s services posted on the hospital’s chargemaster.

In the Proposed Rule, CMS proposes guidelines that takes price transparency even further by requiring hospitals to make public not only their gross charges for all items and services but also payer-specific negotiated charges. CMS begins by defining the many terms that comprise the statutory requirement in section 2718(e) of the Public Health Service Act:

• “Hospital” means an institution in any state that provides for the licensing of hospitals and which is licensed as a hospital pursuant to such law. This includes all Medicare-enrolled and non-Medicare-enrolled institutions that are licensed as hospitals (or approved as meeting licensing requirements).
• “Standard Charges” means both the hospital’s gross charge and payer-specific negotiated charge for an item or service.
• “Items and Services” means all items and services (including individual items and services and service packages) provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a charge.

Therefore, as proposed, CMS requires that hospitals make public their standard charges (both gross charges and payer-specific negotiated charges) for all items and services.

In fulfilling its price transparency obligations, hospitals must “make public” their standard charges, which CMS interprets as publishing online in a machine-readable format and, for “shoppable services,” in a consumer-friendly display derived from the machine-readable file. Note that a PDF file would not suffice, as the data must be machine-readable (e.g., .XML and .CSC formats). CMS further proposes standardized data elements of the machine-readable file to include, among other things, standardized identifying codes (like HCPCS or CPT codes), descriptions of each item or service, the corresponding gross charge, the corresponding payer-specific negotiated charge, and any code used for purposes of accounting or billing.

CMS also makes substantial proposals for hospitals to display a list of payer-specific negotiated charges for a set of “shoppable” services in a “consumer-friendly” format. This is a different format than the all-encompassing publication of standard charges for all items and services in a machine-readable file. Instead, hospitals must provide a consumer-friendly format for “shoppable” services, which is defined as a service that can be scheduled by a health care consumer in advance.

CMS provides a listing of 70 required “shoppable” services that hospitals must include, while allowing hospitals discretion to select another 230 “shoppable” services, for a total of 300 such services. CMS seeks comment on what constitutes a consumer-friendly format for hospitals to publish “shoppable” services but suggests that a consumer should be able to easily search for and find charges for the shoppable services based on the service description, identifying code, or by payer. CMS proposes that this information be displayed in a way that is understandable to a patient with plain-language descriptions of the services. Further, such information for consumers must be displayed prominently on the hospital’s website and, if requested by a patient, must be made available via a brochure, pamphlet, or some other paper format.

To enforce the above requirements, CMS proposes monitoring and enforcement provisions for non-compliant hospitals. If a hospital is non-compliant, CMS proposes first to require a hospital to submit a corrective action plan, and, second, if the hospital continues to be out of compliance, to impose a civil monetary penalty (CMP) for each day of non-compliance, not to exceed $300 per day. CMS plans to publicize these penalties on its website. Hospitals will have an opportunity to appeal the imposition of CMPs.

CMS seeks comments to its many proposals regarding price transparency, including, among others, on alternative definitions for types of standard charges. Although CMS proposes gross charges and payer-specific negotiated charges as “standard charges,” CMS seeks comments on whether other alternatives would be useful. Some examples that CMS mentions in the Proposed Rule include volume-driven negotiated charge; minimum, median, and maximum negotiated charge; all allowed charges; discounted cash price; and median cash price.

Site Neutrality Payment Reductions for Excepted Off-Campus Provider-Based Departments

The Proposed Rule announced CMS’s plan to further reduce payment on OPPS Medicare payment rates for so called “excepted” off-campus provider-based departments. CMS’ first effort to reduce these payments for the 2019 calendar year has proven to be controversial, and King & Spalding is representing a group of hospitals challenging that effort in litigation that is currently pending in federal court.

As background, under Section 603 of the Bipartisan Budget Act of 2015 (BBA), CMS reimburses hospitals for outpatient services provided at certain off-campus provider-based departments (PBDs) under the Medicare Physician Fee Schedule (PFS), commonly referred to as a “site neutral” payment policy. But, certain off-campus PBDs furnishing services to Medicare beneficiaries prior to November 2, 2015, were excepted by Congress from these payment reductions and continued to be paid the applicable (and higher) OPPS rate. In the 2019 OPPS rule, however, CMS finalized a policy to pay the lower site-neutral PFS payment rate for clinic visit services for all off-campus PBDs, even when provided in an excepted off-campus PBD. CMS planned to phase-in these payment reductions over a two-year period.

Under the Proposed Rule, CMS plans to continue with the final year of the phase-in by paying off-campus PBDs approximately 40 percent of the OPPS rate. For CY 2019, it was estimated that affected hospitals would receive $300 million less in Medicare funding and $610 million less in 2020 when the rate cut is fully implemented. 83 Fed. Reg. 58818, 59014, 59009 (Nov. 21, 2018).

Rural Health Wage Index

CMS is proposing to adopt the many changes to the Inpatient Prospective Payment System (IPPS) wage index as the wage index for the OPPS payment rate and copayment standardized amount. Specifically, in the FY 2020 IPPS proposed rule, CMS proposed to increase the wage index for hospitals below the 25th percentile by decreasing the wage index for hospitals above the 75th percentile. Additionally, CMS proposed to exclude the wage data of reclassified rural hospitals from the calculation of the rural floor. As finalized in the FY 2020 IPPS final rule, however, CMS modified its proposal slightly by no longer decreasing the wage index for hospitals above the 75th percentile. Instead, CMS opted to apply a budget-neutrality adjustment to the national standardized amount. CMS finalized the increase to the wage index for hospitals below the 25th percentile and the exclusion of wage data of reclassified rural hospitals from the calculation of the rural floor. In other words, one can expect that CMS will finalize such proposals in the CY 2020 OPPS final rule as specified in the FY 2020 IPPS final rule.

340B Purchased Drugs

CMS proposes to continue to pay for 340B-acquired drugs at the average sales price (ASP) minus 22.5 percent when furnished in nonexcepted off-campus PBDs paid under the PFS.

As background, in the 2018 OPPS final rule, CMS dramatically cut reimbursement for 340B drugs by paying under the OPPS system at ASP minus 22.5 percent, rather than ASP plus 6 percent. However, that payment cut applied only to excepted off-campus PBDs. Sections 1833(t)(1)(B)(v) and (t)(21) of the Act, as amended by BBA § 603, excluded nonexcepted off-campus PBDs from the OPPS and instead made payment “under the applicable payment system” under Medicare Part B. In other words, because nonexcepted off-campus outpatient PBDs were no longer payable under the OPPS, they were outside the scope of the OPPS payment cuts and could continue to be paid at ASP plus 6 percent. In the 2019 OPPS final rule, however, CMS finalized its proposal to apply the ASP minus 22.5 percent payment formula to nonexcepted off-campus PBDs.

CMS’ legal authority to cut 340B drug payments to nonexcepted off-campus PBDs was challenged in federal court and was found to be unlawful. The court concluded the Secretary exceeded his statutory authority by adjusting the Medicare payment rates for drugs acquired under the 340B Program to ASP minus 22.5 percent for that year. Nonetheless, CMS announces in the Proposed Rule that it will continue with its policy, stating it intends to appeal the court’s decision. CMS also explains it is taking steps to “craft an appropriate remedy” in the event it loses the issue on appeal. Therefore, CMS solicits comments on whether ASP plus 3 percent could be an appropriate payment amount for these drugs, both for CY 2020 and for purposes of determining the remedy for CYs 2018 and 2019.

Changes for Organ Procurement Organizations

Organ Procurement Organizations (OPOs) are responsible for procuring and preserving transplantable organs and transporting them to transplant centers and hospitals. The CMS Regional Office conducts recertification surveys of OPOs every four years based on a set of statutory and regulatory criteria. The regulations specify that OPOs are evaluated on outcome measures self-reported to the Organ Procurement and Transplantation Network, the Scientific Registry of Transplant Recipients, and the Department of Health & Human Services.

Recently, OPOs have been targeted for reforms in an Executive Order calling for changes to performance measures and data reporting requirements. Consistent with the reforms called for in the executive order, CMS proposes to revise the definition of “expected donation rate” that is included in one of the outcome measures to match the definition used by the Scientific Registry of Transplant Recipient (SRTR). The regulations require the OPO to meet two of the three following outcome measures:

1. The OPOs donation rate of eligible donors as a percentage of eligible deaths is no more than 1.5 standard deviations below the mean national donation rate of eligible donors as a percentage of eligible deaths, averaged over the 4 years of the re-certification cycle.
2. The observed donation rate is not significantly lower than the expected donation rate for 18 or more months of the 36 months of data used for re–recertification, as calculated by SRTR;
3. The OPO data reports, averaged over the 4 years of the re-certification cycle, must meet the rules and requirements of the most current OPTN aggregate donor yield measure.

SRTR’s expected donation rate is calculated as the rate expected for an OPO based on the national experience for OPOs serving similar eligible donor populations and DSAs, adjusted for the distributions of age, sex, race, and cause of death among eligible deaths. However, due to an oversight, CMS did not make a corresponding change to the definition of “expected donation rate” in its conditions for coverage. Therefore, CMS proposes to adopt SRTR’s definition prospectively and, for the 2022 recertification cycle, reduce the time period for the second outcome measure and calculate the expected donation rate using 12 out of the 24 months of data (from January 1, 2020 through December 31, 2020).

Additionally, CMS is considering a comprehensive proposal that would update the OPO Conditions for Coverage (CfCs) and potentially update the transplant center Conditions of Participation (CoPs). Therefore, CMS is soliciting public comments regarding what revisions may be appropriate for the current OPO CfCs and the current transplant center CoPs. Specifically, CMS seeks public input on the following questions:

• Do the current OPO outcome measures that are set forth at 42 C.F.R. § 486.318 accurately and reliably reflect an OPO’s performance? If not, please explain.

• What are the impacts or consequences of the current outcome measures on: (1) an OPO’s performance; and (2) the availability of transplantable organs?
• What impact, if any, do the certification and decertification processes for OPOs have on organ procurement and transplantation?
• Are there any potential, empirically based outcome measures, other than those currently at § 486.318, that could be used either in addition to, or instead of, the current outcome measures for OPOs? If recommending another outcome measure, what is the empirical evidence for that recommended measure?
• In addition to the outcome measures, are there other indicators of quality that could be used for OPOs in the CfCs? If recommending another quality indicator, why should that indicator be used in the OPOs CfCs and what is the supporting evidence for this indicator?
• Are there any transplant center CoPs that conflict with or should be harmonized with the OPOs CfCs? If yes, identify the specific requirements and how they would harmonize or otherwise modify the requirements.

CMS also solicits public comments on whether two potential OPO outcome measures would be valid measures and would be consistent with statutory requirements.

• The first potential measure would be the actual deceased donors as a percentage of inpatient deaths among patients 75 years of age or younger with a cause of death consistent with organ donation. This measure would account for: (1) geographic differences in the manner of deaths across the United States (for example, trauma deaths); (2) geographic differences in the age distribution of deaths; and (3) geographic differences in in-hospital versus out-of-hospital deaths.
• The second potential measure is the actual organs transplanted as a percentage of inpatient deaths among patients 75 years of age or younger with a cause of death consistent with organ donation. This measure also would reward efforts to maximize total organ procurement and efforts to improve placements of all procured organs.

Other Notable Proposed Changes

• Changes to the Inpatient Only List: CMS proposes to remove Total Hip Arthroplasty from the Inpatient Only (IPO) list, making it eligible to be paid by Medicare in both the hospital inpatient and outpatient setting. Additionally, CMS proposes to establish a one-year exemption from medical review activities for procedures removed from the inpatient-only list beginning in CY 2020 and subsequent years.
• Additions to the ASC Covered Procedures List (CPL): CMS is proposing to add Total Knee Arthroplasty (TKA), Knee Mosaicplasty, and three additional coronary intervention procedures to the ASC CPL. CMS solicits comments on whether there should be any additional limitations on the provision of TKA or other procedures in the ASC setting. Additionally, CMS solicits comments on how the agency could redesign the role of the ASC CPL to improve physicians’ ability to determine the setting of care as appropriate for a given beneficiary situation.
• Hospital Outpatient Quality Reporting Program (OQR) and Ambulatory Surgical Center Quality Reporting Program (ASCQR): CMS requests comment on adding to the OQR four patient safety measures, adopted as part of the ASCQR, and removing one web-based measure, External Beam Radiotherapy for Bone Metastases (OP-33). CMS proposes to adopt one claims-based measure for the ASCQR, ASC-19: Facility-Level 7-Day Hospital Visits after General Surgery Procedures Performed at Ambulatory Surgical Centers (NQF #3357).
• “Pass-through” Status for Innovative Devices: CMS proposes an alternative pathway to qualifying for device “pass-through” payment status for transformative devices that meet the FDA Breakthrough Device designation. Specifically, in situations where a new medical device is part of the Breakthrough Devices Program and has received FDA marketing authorization, CMS proposes an alternative outpatient pass-through pathway to facilitate access to this technology for Medicare beneficiaries beginning with applications received for pass-through payment on or after January 1, 2020, under which the “substantial clinical improvement” criterion would not apply.
• Prior authorization for Certain Outpatient Services: CMS proposes to implement a prior authorization requirement for Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, Rhinoplasty, and Vein Ablation. According to CMS, the goal of this policy is to ensure that these services, which are sometimes cosmetic, are only billed when medically necessary.

The Proposed Rule is available here. The CMS Fact Sheet discussing the Proposed Rule is available here, and the accompanying CMS Press Release is available here. Comments to the Proposed Rule must be submitted no later than September 27, 2019.