On October 30, 2015, CMS issued its final rule with comment period(Final Rule) for the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for calendar year 2016, as well as updates to the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.  The Final Rule also finalized certain policies relating to the hospital inpatient prospective payment system (IPPS), including changes to the two-midnight rule.

CMS estimates that based on the Final Rule, total payments for CY 2016 to the estimated 4,000 facilities paid under the OPPS will decrease by a projected $133 million (0.4 percent) compared to CY 2015.  This impact is greater than the proposed rule’s estimated $43 million (0.2 percent) decrease in total OPPS payments.  Additionally, although the proposed rule estimated a payment increase to ASCs of 1.1 percent, under the Final Rule, CMS estimates that total payments to ASCs for CY 2016 will be approximately $4.221 billion, an increase of only 0.3 percent, or approximately $128 million, as compared to estimated CY 2015 Medicare payments. 

In the Final Rule, CMS has finalized a number of changes for CY 2016, including the following changes to OPPS and the ASC payment system:

  • An Outpatient Department (OPD) fee schedule increase factor of 1.7 percent (which is based on the final estimated hospital IPPS market basket percentage increase of 2.4 percent, less the final 0.5 percentage point multifactor productivity (MFP) adjustment, and less an additional 0.2 percentage point adjustment mandated by the Affordable Care Act);   
  • Reducing the CY 2016 conversion factor by 2.0 percent to account for an approximately $1 billion inflation in CY 2014 OPPS payments that resulted from excess packaged payment for laboratory tests that were projected to be packaged into OPPS payment rates, but continued to be paid separately in CY 2014; 
  • Requiring that laboratory tests be conditionally packaged  on a claim with an OPD service that is assigned a certain status indicator, irrespective of the date(s) of service, unless an exception applies or the laboratory test is “unrelated” to the other OPD service(s) on the claim;  
  • Setting a statutory default of average sales price plus 6 percent for payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status; 
  • Expanding the set of conditionally packaged ancillary services to include three new ambulatory payment classifications; 
  • Establishing for the Hospital OQR Program for the CY 2017 payment determination and subsequent years, the following requirements, among other changes: (1) removing the OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache measure, effective January 1, 2016; (2) revising from November 1 to August 31 the deadline for withdrawing from the Hospital OQR Program; (3) shifting to a new payment determination timeframe that will use only three quarters of data for the CY 2017 payment determination; (4) changing the timeframe in which data may be submitted for measures submitted via the CMS QualityNet website to January 1 through May 15; and (5) changing the deadline for submitting a reconsideration request to the first business day on or after March 17 of the payment year at issue;
  • Establishing for the Hospital OQR Program for the CY 2018 payment determination and subsequent years the following  requirements, among others:  (1) adding a new measure: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) with a modification to the proposed manner of data submission; and (2) shifting the quarters on which CMS bases payment determinations to again include four quarters of data;
  • Increasing payment rates under the ASC payment system by 0.3 percent for ASCs that meet the quality reporting requirements under the ASCQR Program; 
  • Establishing a revised process of assigning ASC payment indicators for new and revised Category I and III CPT codes that would be effective January 1; and
  • Setting the final ASC conversion factor of $44.177 for ASCs that meet the quality reporting requirements, based on the product of the CY 2015 conversion factor of $44.058 multiplied by the wage index budget neutrality adjustment of 0.9997 and the MFP-adjusted CPI–U payment update of 0.3 percent.

Under the Final Rule, CMS has also modified its prior “exceptions” policy under the two-midnight benchmark, which previously was limited to cases involving services designated by CMS as inpatient-only and those other exceptions published on the CMS website or in other sub-regulatory guidance.  CMS will now allow exceptions to the two-midnight benchmark to be determined on a case-by-case basis by the beneficiary’s responsible physician, subject to medical review.  CMS is careful to note that it expects that stays less than 24 hours would rarely fall into an exception. 

The Final Rule also finalized certain proposed changes from the FY 2015 IPPS Proposed Rule to the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.  Specifically, CMS has finalized revisions to the cost reporting rules requiring providers to include an appropriate claim for a specific item on their cost reports—either by affirmatively claiming reimbursement or expressly self-disallowing the cost by filing a cost report item under protest—in order to be eligible to potentially receive Medicare reimbursement and/or to be eligible to appeal their reimbursement (or lack thereof) to the Provider Reimbursement Review Board.  CMS has eliminated the duplicative requirement to do the same in order to meet the “dissatisfaction” requirement for Board jurisdiction.  CMS has also specified procedures for Board review of whether a provider’s cost report meets this substantive reimbursement requirement of an appropriate cost report claim for a specific item.

Any comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB with the “NI” comment indicator and on other areas indicated in the Final Rule must be received no later than 5 p.m. EST on December 29, 2015.

The CMS Fact Sheet on the Final Rule is available here.  An additional Fact Sheet on the Two-Midnight Rule is available here.  The Final Rule is scheduled to be published in the Federal Register on November 13, 2015.  Our Health Headlines article summarizing the proposed rule is available here.