On July 6, 2016, CMS released the Calendar Year (CY) 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.  In addition to significant proposals regarding provider-based status that are addressed in a detailed King & Spalding Client Alert, the Proposed Rule contains a number of updates to payment, quality, and performance policies.  Key aspects of these proposals are highlighted below.

Proposed Payment Policies

Overall, CMS estimates the Proposed Rule will result in a 1.6 percent payment increase for hospitals paid under OPPS in CY 2017.  Proposed total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2017 are anticipated to be approximately $63 billion, an increase of approximately $5.1 billion compared to estimated CY 2016 OPPS payments.

CMS’s proposed payment policies include the following:

• Comprehensive Ambulatory Payment Classifications (C-APCs) - For CY 2017, CMS is proposing 25 new C-APCs.  C-APCs are APCs that provide for an encounter-level payment for a designated primary procedure(s) and generally all adjunctive and secondary services provided in conjunction with the primary procedure.  Currently, there are 37 C-APCs, which mostly address procedures for the implantation of costly medical devices.  Many of the new proposed C-APCs involve major surgery APCs within the various C-APC clinical families, but CMS is also proposing three new clinical families to accommodate the new C-APCs.  These include (1) nerve procedures, (2) excision, biopsy, incision and drainage procedures, and (3) airway endoscopy procedures.

• Packaged Service Policies - The Proposed Rule contains proposed refinements to CMS’s packaged services policies.  Currently, many ancillary services are conditionally packaged.  However, for CY 2017, CMS is proposing the following three packaging refinements:
  • CMS proposes to align the packaging logic for all of the conditional packaging status indicators so that packaging would occur at the claim level (instead of based on the date of service);
  • CMS proposes to expand the molecular pathology laboratory test exception to include certain Advanced Diagnostic Laboratory Tests (ADLTs); and
  • In conjunction with its proposal to discontinue separate payment for “unrelated” laboratory tests, CMS proposes to discontinue the use of the “L1” modifier, which currently allows for separate payment of laboratory tests for use when (1) laboratory tests are the only services on the claim, or (2) when the laboratory test or tests are “unrelated” to the other services on the claim, meaning that the laboratory test was ordered by a different physician for a different diagnosis than the other services on the claim. 

• Device-Intensive Procedures - CMS also proposes the following two adjustments to its device-intensive procedure policies:
  • CMS is proposing to adjust the methodology for assigning device-intensive status.  Device-intensive APCs are APCs with a device offset more than 40 percent.  CMS proposes changing the device-intensive calculation methodology so that the device offset amount is calculated at the HCPCS code level rather than at the APC level so that device-intensive status is assigned to all device-intensive procedures that exceed the 40 percent threshold.
  • CMS is proposing that the payment rate for any device-intensive procedure that is assigned to an APC with fewer than 100 total claims for all procedures in the APC be based on the median cost instead of the geometric mean cost.

• Inpatient Only List - CMS proposes to remove six procedures (four spine procedures and two laryngoplasty procedures) from the Medicare Inpatient Only List.

• Partial Hospitalization Program (PHP) - CMS also proposes updates to PHP payments.  PHPs are intensive outpatient programs for mental health services paid on a per diem basis under the OPPS.  CMS proposes replacing the existing two-tiered APC structure for PHPs with a single APC by provider type for providing three or more services per day.  Additionally, CMS proposes to implement a Community Mental Health Center (CMHC) outlier payment cap to be applied at the provider level.  Under the proposal, an individual CMHC should receive no more than 8 percent of its CMHC total per diem payments in outlier payments in any given year. 

Quality and Performance Program Changes

CMS has proposed a number of updates to quality and performance provisions to reflect its focus on patient-centered outcomes and remove hardships placed on hospitals and providers as a result of previous rules.   Those changes include the following:

• Hospital Value Based Purchasing (VBP) Program - As a component of CMS’s efforts to address the nation’s opioid epidemic, CMS has proposed removing the pain management dimension of the Hospital Consumer Assessment of Health Providers and Systems (HCAHPS) survey beginning with the FY 2018 program year.  Stakeholders have expressed concern that these measures may pressure hospital staff to prescribe opioids to avoid negative scores. Therefore, CMS is removing this dimension as applied to the VBP program while continuing to assess these practices. 

• Changes in Hospital Outpatient Quality Reporting (OQR) Program - CMS proposes to modify its established set of measures for the OQR program by adding  seven new measures effective for CY 2020 and subsequent years.  There are two proposed claims-based measures, OP-35: Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy, which will capture incidents of preventable emergency room visits or inpatient admission following outpatient chemotherapy; and OP-36: Hospital Visits after Hospital Outpatient Surgery (NQF #2687), which is intended to capture unplanned and preventable hospital admissions following outpatient surgery.   CMS also proposes to add five measures, OP-37(a) – (e), based on the Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey, to solicit patient feedback regarding (1) outpatient facilities and staff; (2) communication about the procedure; (3) preparation for discharge and recovery; (4) overall rating of facility; and (5) the patient’s recommendation of the facility.  CMS notes that there is currently no standardized data available on the patient experience following outpatient surgeries or procedures, and is adding these measures to support the agency’s efforts to better capture patient-centered assessments as one component of the agency’s  2016 CMS Quality Strategy.  CMS also seeks comments regarding a future clinical quality measure that would address concerns with overlapping or concurrent prescribing of opioid drugs.

• Organ Transplant Centers Performance and Reporting Measures – CMS proposes to modify its transplant outcome measures for graft and organ survival one-year following receipt to better reflect the nationwide improvement in post-transplant outcomes.   Citing consistent research and innovation across transplant centers and the organ donation community as driving factors, the agency reports that post-transplant survival rates for transplant centers under the Medicare program are among the highest in the nation.  However, because the Conditions of Participation outcomes requirement is based on an individual transplant program’s outcomes in relation to the risk-adjusted national average, as national outcomes have improved, it has become much more difficult for an individual transplant program to meet the CMS outcomes standard.  CMS has expressed concern that transplant centers may not choose some available, viable organs out of concern that those organs could potentially lead to adverse effects – and thus a lower performance threshold than permissible for compliance with the program.  Therefore, CMS proposes to change its performance threshold for compliance from 1.5 to 1.85, which would bring the measure in parity for previous years.
  
  CMS is also proposing several procedural updates for facilities seeking approval or re-approval to participate in the Organ Transplant Program.  These include extending the due date from 10 days to 14 calendar days for programs to notify CMS of their intent to request mitigating factors approval, and clarifying that the time period for submission of the mitigating factors information is calculated in calendar days (that is, 120 calendar days), as well as a number of other technical corrections.

• Electronic Health Record (EHR) Incentive Program – CMS is proposing a number of updates to the Medicare EHR Incentive Program, including proposing a 90-day EHR reporting period for 2016, consistent with the reporting period provided in 2015.  CMS is also proposing to eliminate the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures for eligible hospitals and Critical Access Hospitals (CAHs), as well as to reduce the thresholds for a subset of the remaining objectives and measures in Modified Stage 2 for 2017 and Stage 3 for 2017 and 2018. CMS has not proposed these changes for hospitals and CAHs under the Medicaid EHR Incentive Program, citing the difficulty states may face in implementing these changes.
  
  CMS has also proposed that eligible providers, hospitals, and CAHs that have not successfully demonstrated Meaningful Use in a prior year (i.e., new participants) would be required to attest to Modified Stage 2 by October 1, 2017.  Returning participants will not be affected by this proposal.  Finally, CMS is proposing a hardship exception for the 2018 payment adjustment for eligible providers that have not demonstrated Meaningful Use but intend to do so in the 2017 EHR reporting period, as well as transition to the Merit-Based Incentive Payment System (MIPS) and report on measures specified for the advancing care information performance category under the MIPS as proposed in 2017.

Comments on the Proposed Rule are due by September 6, 2016.  The Proposed Rule is available here.  CMS’s fact sheet is available here.