CMS has published a final rule updating Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rates and policies for calendar year (CY) 2018. In addition to rate updates, notable policy changes in the rule include a deep ($1.6 billion) OPPS reimbursement cut for drugs obtained through the 340B drug discount program, expanded OPPS drug administration packaging, and removal of total knee replacement procedures from the “inpatient only” list.

With regard to OPPS payments, the final rule provides a 1.35% update for 2018, reflecting a 2.7% market basket increase that is partly offset by both a 0.75 percentage point reduction and a 0.6% multi-factor productivity (MFP) reduction. The update for hospitals that fail to meet quality reporting requirements is reduced by 2.0% points. Payment changes for individual procedures and ambulatory payment classifications (APCs) vary. Under the new 340B discount drug policy CMS will reduce OPPS payment for separately payable, nonpass-through drugs and biologicals (other than vaccines) purchased through the 340B drug discount program from ASP plus 6% to ASP minus 22.5% (rural sole community hospitals, children’s hospitals, and certain cancer hospitals are excluded from this policy). CMS is redistributing the $1.6 billion in savings from this change by increasing by 3.2% conversion factor for non-drug items and services for 2018. CMS may revisit how the 340B drug savings should be applied in the future. Note that various hospitals and hospital associations have filed a lawsuit seeking to block this policy.

Other major provisions of the final rule include the following:

  • CMS will conditionally packaging payment for low-cost drug administration services.
  • CMS removed total knee arthroplasty (CPT code 27447) and CPT code 55866 (Laparoscopy, surgical prostatectomy) from the inpatient-only list (IPO). This allows – but does not require — these procedures to be performed in the hospital outpatient setting.
  • The final rule maintains the high cost/low cost threshold policy for packaged skin substitutes and allows certain products to remain in the high cost group for CY 2018 even if they do not meet the specified threshold. This is intended to promote stability while the agency considers reforms to this policy.
  • CMS again increased the threshold for separate payment for outpatient drugs to cost-per-day that exceeds $120 in 2018 (up from $110 in 2017).
  • The final rule codified a policy adopted last year to reduce reimbursement for film X-rays. CMS also implemented a statutory requirement to reduce the OPPS payment for the technical component of an X-ray taken using computed radiography technology. The reduction, triggered by reporting a new “FY” modifier, equals 7% during 2018 through 2022, with a 10% reduction applicable beginning in 2023.
  • CMS rejected all five applications it received for device pass-through payment status.
  • The final rule reinstates the moratorium on the enforcement of the direct supervision requirement for critical access hospitals and small rural hospitals having 100 or fewer beds for CYs 2018 and 2019.
  • The rule addresses numerous other OPPS policies, including: changes to Hospital Outpatient Quality Reporting (OQR) Program measures; revisions to the clinical diagnostic laboratory test date of service policy; and payment rates for partial hospitalization program services furnished in hospital outpatient departments and community mental health centers.

With regard to ASC payments, the final rule increases rates by 1.2% for ASCs that meet ASC Quality Reporting (ASCQR) Program requirements. This rate is based on a projected Consumer Price Index for All Urban Consumers (CPI-U) update of 1.7%, reduced by a 0.5 percentage point MFP adjustment. CMS acknowledged recommendations it received regarding its solicitation for an alternative update factor for ASC payments (e.g., the hospital market basket or the Medicare Economic Index). CMS stated that the “vast majority” of commenters supported using the hospital market basket for the ASC update; CMS will consider these recommendations for future policymaking. In the final rule, CMS adopted updates to the ASCQR Program and revisions to the list of ASC covered surgical procedures.