CMS has published its proposed rule to update the Medicare Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System rates and policies for CY 2017. CMS proposes a 1.55% OPPS update, reflecting a 2.8% market basket increase, which is partially offset by a -0.5% multifactor productivity (MFP) adjustment and an additional 0.75% reduction (both mandated by the Affordable Care Act). CMS expects that overall OPPS payments due to the proposed changes in the rule would increase by 1.6%, or $671 million, compared with 2016 levels.  Hospitals that fail to meet the Hospital Outpatient Quality Reporting (OQR) Program reporting requirements are subject to an additional reduction of 2.0 percentage points.  The actual update for individual procedures can vary dramatically, however, based on changes in APC assignment and other policies in the proposed rule.  Other major provisions of the proposed rule include the following:  

  • CMS proposes to apply its conditional packaging policy at the claim level instead of based on the date of service. CMS expects this change would increase conditional packaging, since packaging would occur whenever a conditionally packaged item or service is reported on the same claim as a primary service regardless of the date of service. CMS also proposes revisions to packaging policies applicable to laboratory tests. In addition, CMS proposes to add 25 new comprehensive APCs (C-APCs), for a total of 62 C-APCs.
  • CMS proposes to assign device-intensive status to all procedures that require the implantation of a device and have an individual HCPCS code-level device offset of greater than 40% regardless of the APC assignment. That is, CMS would look to the HCPCS/CPT level rather than calculate the device offset at the APC level. CMS also proposes to base payment for very low-volume device-intensive APCs (fewer than 100 total claims) on the median cost rather than the geometric mean.
  • CMS proposes to once again increase the threshold for separate payment for outpatient drugs, to cost per day that exceeds $110 in 2017, up from $100 in 2016.
  • CMS proposes to require hospitals to use a modifier on claims for X-rays that are taken using film, which would result in a 20% payment reduction for the X-ray service.
  • CMS proposes removing six procedures from the inpatient only (IPO) list for 2017 (four spinal codes and two laryngoplasty codes). In addition, CMS solicits comments on whether total knee arthroplasty procedures should be removed from the IPO list (although CMS is not proposing making such as change for 2017).
  • CMS proposes a shorter reporting period under the Medicare Electronic Health Records Incentive Program, new Hospital OQR Program and ASC Quality Reporting Program measures, and removal of the pain management dimension from the Hospital Value-Based Purchasing program in order to “eliminate any potential financial pressure clinicians may feel to overprescribe pain medications.”
  • CMS proposes to implement Section 603 of the Bipartisan Budget Act of 2015, which establishes a site-neutral payment policy for certain newly-acquired, provider-based, off campus hospital outpatient departments (which CMS calls “provider-based departments” or PBDs). Effective for services provided on or after January 1, 2017, PBDs would be paid under the Medicare physician fee schedule (MPFS) in most cases, rather than the generally higher-paying OPPS. CMS proposes to pay physicians furnishing services in PBDs based on the professional claim and at the nonfacility rate for services which they are permitted to bill. Consistent with the statutory provision, CMS would provide for certain exceptions to its PBD policy, including grandfathering rules for PBDs that were billing under the OPPS for services furnished prior to November 2, 2015. CMS proposes restrictions on the ability of such grandfathered PBDs to relocate or expand services and still qualify for OPPS payments. CMS would also exempt items and services furnished in a hospital department within 250 yards of a remote location of the hospital; and services furnished by a dedicated emergency department. This would be a one-year transition policy; CMS is soliciting comments on how CMS might allow a non-excepted off-campus PBD to bill and be paid for non-excepted items and services under an applicable payment system other than the OPPS (which CMS expects would usually be the MPFS).
  • With regard to ASCs, CMS proposes an ASC update of 1.2%, reflecting a 1.7% inflation update, offset by a -0.5% MFP adjustment. ASCs that do not meet quality reporting requirements are subject to a 2% payment reduction.  CMS also proposes adding 8 procedures to the ASC list of covered surgical procedures.

CMS will accept comments on the proposed rule until September 6, 2016.