Highlights

  • The Centers for Medicare & Medicaid Services (CMS) has published the Calendar Year (CY) 2022 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule.
  • Among notable changes, CMS will dramatically increase financial penalties for noncompliance under the hospital price transparency rules and will continue the payment rate of Average Sale Price (ASP) minus 22.5 percent for separately payable Section 340B drugs or biologicals. It also will halt the elimination of the Inpatient Only (IPO) list.
  • This Holland & Knight alert summarizes a number of key provisions in the Final Rule, which will go into effect on Jan. 1, 2022.

The Centers for Medicare & Medicaid Services (CMS) released the calendar year (CY) 2022 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule on Nov. 2, 2021, finalizing payment rates and policy changes affecting Medicare services furnished in hospital outpatient and ambulatory surgical center (ASC) settings for CY 2022.

To learn more about the OPPS and ASC Final Rule, review the following resources:

The policies will take effect on Jan. 1, 2022.

Key Takeaways

  • Despite pushback, CMS will dramatically increase financial penalties to as much as $5,500 per day, or over $2 million per year,for noncompliance under the hospital price transparency rules
  • CMS will continue the payment rate of Average Sale Price (ASP) minus 22.5 percent for separately payable drugs or biologicals acquired through Section 340B of the Public Health Service Act (340B Program)
  • CMS will halt the elimination of the Inpatient Only (IPO) list and remove the regulatory references to the elimination of the list – a huge win for hospitals that would have seen lower payments as a result of this policy
  • Updates were made to the Radiation Oncology Model, which will not be further delayed and will begin on Jan. 1, 2022.

Below is a summary of highlights of the Final Rule.

OPPS Payment Rates and Updates

CMS will update OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.0 percent. This update is based on the projected hospital market basket increase of 2.7 percent, reduced by 0.7 percent for the productivity adjustment. CMS anticipates that the CY 2022 update, along with changes in enrollment, utilization and case mix, will result in total payments of approximately $82.704 billion to hospital outpatient department (HOPD) providers. This would be an increase of approximately $10.757 billion from CY 2021. HOPDs failing to meet quality reporting requirements will continue to receive a 2.0 percent reduction in payments for OPPS services.

ASC Payment Rates and Updates

CMS will update the ASC rates for CY 2022 by 2.0 percent for ASCs meeting relevant quality-reporting requirements.

Hospital Outpatient Outlier Payments

OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures. CMS will continue estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2022, with an amount equal to less than 0.01 percent of outlier payments to be allocated specifically for community mental health centers for partial hospitalization program (PHP) outlier payments. CMS sets thresholds for outlier payments to when a hospital's cost of furnishing a service both exceeds 1.75 times the ambulatory payment classification (APC) payment amount and exceeds the APC payment amount plus $6,175. With the outlier payment calculated as 50 percent of the amount, the cost of furnishing the service exceeds 1.75 times the APC payment amount. CMS will continue its policy that if a CMHC's cost for partial hospitalization services, paid under APC 5853 (Partial Hospitalization for CMHCs), exceeds 3.40 times the payment rate for proposed APC 5853, then the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the proposed APC 5853 payment rate.

Cancer Hospital Payment Adjustment

CMS will continue to provide additional payments to cancer hospitals. The payment adjustments will be the additional payments needed to result in a payment-to-cost (PCR) equal to 0.89 for each cancer hospital.

Inpatient Only (IPO) List

CMS proposed to reverse course on the elimination of the IPO list and proposed to add back the 298 services removed in CY 2021 from the IPO list, explaining that more time is required to evaluate the implications for each service, particularly on patient safety. The agency sought stakeholder input on which services would be appropriate to remove in the future, along with supporting evidence.

Accordingly, CMS finalized its proposal to halt the IPO list's phased elimination and add back 293 of the 298 codes removed in CY 2021. Ultimately, CMS determined that five services met several of the criteria for removal: CPT codes 22630, 23472 and 27702, along with their corresponding anesthesia CPT codes 01638 and 01486.

CMS also finalized a proposal to codify the five longstanding criteria for determining when a service should be placed on the IPO list. As a result of this change, CMS has amended the implementing regulations to remove the reference to the elimination, through a three-year transition, of the list of services and procedures designated as requiring inpatient care.

ASC Covered Procedures List (CPL)

The agency finalized its proposal to withdraw procedures newly added to the ASC covered procedure list. Upon additional review, CMS will withdraw 258 of the 267 procedures newly added to the ASC covered procedure list.

Price Transparency Requirements: Public List of Standard Charges

The Hospital Price Transparency final rule became effective on Jan. 1, 2021. It requires each hospital to establish, update and make public a yearly list of the hospital's standard charges for items and services it provides. Due to the noncompliance with transparency requirements, CMS finalized its proposal to increase the civil monetary penalties (CMPs). Currently, penalties for noncompliance may not exceed $300 per day.

However, as of Jan. 1, 2022 (see display copy pages 1240-41), CMPs levied for noncompliance are as follows.

  • Maximum daily penalty for hospitals with bed counts of less than 30: $300 ($109,500 for the full calendar year)
  • Maximum daily penalty for hospitals with bed counts of 31-550: $310- $5,500 ($10 per bed)/($113,150 to $2,007,500 for the full calendar year)
  • Maximum daily penalty for hospitals with bed counts of more than 550: $5,500 ($2,007,500 for the full calendar year)

CMS also updated the regulation's prohibition of certain activities that present barriers to access to the machine-readable file that contains the hospital's charges for items and services, specifically requiring that the machine-readable file be accessible to automated searches and direct downloads.

Despite delays to other transparency proposals, CMS shows no signs of pulling back on the hospital price transparency rule, which has been in effect for almost a year. Notably, CMS sent 32 hospitals requests for a corrective action plan after they still did not comply with the price disclosure rule. According to CMS, of the 32 hospitals that received corrective action plan requests, which is the second step in CMS' compliance process, six hospitals are now in compliance with the rule after addressing the citations outlined in warning letters. Per this final rule, the next enforcement step if those hospitals remain non-compliant is to impose penalties on Jan. 1, 2022.

Two-Midnight Rule

CMS exempted procedures that are removed from the inpatient-only (IPO) list under the OPPS beginning on or after Jan. 1, 2022, from site-of-service claim denials, Beneficiary and Family-Centered Care Quality Improvement Organization (BFCC-QIO) referrals to recovery audit contractors (RAC) for persistent noncompliance with the two-midnight rule, and RAC reviews for "patient status" for a period of two years.

Wage Index Changes

CMS noted in the proposed rule that wage indexes continue to reflect several adjustments implemented in past years, including reclassification of hospitals to different geographic areas, rural floor provisions, an adjustment for occupational mix, an adjustment to the wage index based on commuting patterns of employees (i.e., the out-migration adjustment), and an adjustment to the wage index for certain low-wage index hospitals to help address disparities between low- and high-wage index hospitals. CMS finalized its proposal to use the FY 2022 Inpatient Prospective Payment System (IPPS) post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment rate for CY 2022 without modifications.

Payment for Biosimilars

CMS finalized its proposed payment policy for biosimilar products to make all biosimilars eligible for pass-through payment and not just the first biosimilar for a reference product. CMS also finalized its proposal to continue to pay non-pass-through biosimilars acquired under the 340B program at the biosimilar's ASP minus 22.5 percent of the biosimilar's, rather than the reference product's, ASP.

340B-Acquired Drugs and Biologicals

CMS finalized its proposal to pay ASP minus 22.5 percent for 340B-acquired drugs, including when furnished in nonexcepted off-campus provider-based departments paid under the Physician Fee Schedule (PFS). Rural sole community hospitals, children's hospitals, and PPS-exempt cancer hospitals continue to be excluded from this policy.

Relatedly, the U.S. Supreme Court announced in July 2021 that it accepted the American Hospital Association's petition for certiorari in American Hospital Association v. Becerra. At issue is CMS' nearly 30 percent cut to payments for specified covered outpatient drugs under the OPPS for certain hospitals participating in the 340B Program, which provider groups have been challenging in court since 2017. Provider groups have urged CMS to reverse the payment reductions as part of the CY 2022 OPPS rulemaking process. CMS' decision to continue the 340B payment cuts leaves open the possibility that the Supreme Court will ultimately decide whether CMS exceeded its authority to adjust the payment rates under the existing statutory framework.

Pass-Through Drugs, Biologicals and Radiopharmaceuticals

There are 25 drugs and biologicals whose pass-through payment status will expire during CY 2021 (table 37). Twenty-six drugs and biologicals will have pass-through payment status expire during CY 2022 (table 38). Forty-six drugs and biologicals will have pass-through payment status continue through CY 2022 (table 39). The 46 drugs and biologicals include 27 drugs and biologicals whose pass-through payment status will expire between Dec. 31, 2021, and Sept. 30, 2022, due to CMS using its equitable adjustment authority to provide up to four quarters of separate payment.

CMS received no transitional-payment applications for drugs or biologicals for CY 2022.

Non-Pass-Through Drugs, Biologicals and Radiopharmaceuticals

CMS finalized its proposed OPPS drug packaging threshold for CY 2022 at $130. Notably, the threshold did not increase from last year. The payment methodology for pass-through and non-pass-through separately payable drugs and biologics is finalized at ASP plus 6 percent, or wholesale acquisition cost minus 3 percent when ASP is unavailable.

Non-Opioid Pain Management Drugs and Biologicals

CMS modified its current policy to provide separate payment for non-opioid pain management drugs and biologicals that function as surgical supplies in the ASC setting when those products meet certain criteria. Beginning Jan. 1, 2022, such drugs and biologicals will be eligible for separate payment when they are U.S. Food and Drug Administration (FDA) approved, is FDA indicated for pain management or as an analgesic and has a per-day cost above the OPPS drug packaging threshold.

Beneficiary Coinsurance for Colorectal Cancer Screening Tests

Beginning Jan. 1, 2022, the coinsurance paid for planned colorectal cancer screening tests with additional procedures will be a percentage of the charge for the service — 20 percent for the calendar year 2022, 15 percent for calendar years 2023 through 2026, 10 percent for calendar years 2027 through 2029. The coinsurance requirement will be gradually reduced, and beginning Jan. 1, 2030, the addition will be zero percent.

Mental Health Services Composite Ambulatory Payment Classification (APC)

CMS finalized its proposal that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on a single date of service exceeds the maximum per diem payment rate for partial hospitalization services, those services would be paid through composite APC 8010, which CMS finalized to set at payment for APC 5863, the maximum partial hospitalization per diem payment rate.

Hospital Outpatient Quality Reporting (OQR) Program

CMS finalized its proposal to adopt three new measures:

  • OP-38, COVID-19 vaccination coverage among healthcare personnel measure (begins with CY 2024 payment determination and reporting to the Centers for Disease Control and Prevention (CDC) through the National Healthcare Safety Network system)
  • OP-39, Breast cancer screening recall rates (begins with CY 2023 payment determination)
  • OP-40, ST-Segment Elevation Myocardial Infarction (STEMI) electronic clinical quality measures (eCQM) (voluntary reporting during the CY 2023 reporting period and mandatory reporting for CY 2024 reporting period and beyond)

Potential Adoption of Future OQR Program Measures

CMS received comments on topics for the potential adoption of future OQR measures:

  • Respecified Patient-Reported Outcome-Based Performance Measure (PRO-PM): CMS clarified reporting thresholds and risk adjustment in response to comments on potential future adoption and inclusion of a respecified PRO-PM for elective primary total hip and knee arthroplasty
  • Future Efforts to Address Health Equity in the Outpatient Setting: CMS responded to validity concerns about indirect estimation using race and ethnicity data, saying that it will also consider the inclusion of factors such as sexual orientation, gender identity, language preference, tribal membership, disability status, socioeconomic status, education, social support, food security, transportation access and housing stability into consideration in future policy development

Advancing Health Equity in OQR Program by Stratifying Performance Results

In the proposed rule, CMS sought comment on stratifying performance results by dual Medicare-Medicaid eligibility in the outpatient setting for the following six priority measures in the Hospital OQR Program: 1) MRI Lumbar Spine for Low Back Pain (OP-8), 2) Abdomen CT – Use of Contract Material (OP-10), 3) Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac Low-Risk Surgery (OP-13), 4) Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy (OP-32), 5) Admissions and ED Visits for Patients Receiving Outpatient Chemotherapy (OP-35) and 6) Hospital Visits after Hospital Outpatient Surgery (OP-36). For more information about these measures, CMS refers readers to the Hospital Outpatient Quality Reporting Specifications Manual available on the QualityNet website.

CMS seeks feedback on other potential future measures stratified by dual eligibility status as a means of advancing health equity. CMS also noted that the agency appreciated the feedback provided by commenters regarding measuring health equity and that it will continue to take all concerns, comments, and suggestions into account in future policies.

Digital Quality Measures/Fast Healthcare Interoperability Resources RFI in Outpatient Quality Programs

In the proposed rule, CMS issued a request for information (RFI) to gather feedback on implementing digital quality measures (dQM). CMS proposed changes in four areas by 2025: 1) digital data standards, 2) redesign of quality measures to be self-contained tools; 3) better support around data aggregation and 4) alignment of measure requirements across CMS and other federal or private sector programs. CMS did not make any policy changes in the final rule. Instead, the agency committed to considering stakeholder input in future rulemaking as it continues to build upon its digital quality measures strategy.

CMS is also exploring opportunities to streamline and modernize quality data collection and reporting processes through Fast Healthcare Interoperability Resources (FHIR). In the Final Rule, CMS acknowledged requests for program incentives, flexibilities in reporting and technical assistance to transition to dQM.

ASC Quality Reporting Program

CMS finalized its proposal to adopt one new measure, the COVID-19 Vaccination of Health Care Personnel (NQF #0431), and make the reporting of six voluntary or suspended measures mandatory.

Radiation Oncology (RO) Model

The RO Model is designed to test whether making site-neutral, modality agnostic, prospective episode-based payments to HOPDs and physician group practices for radiotherapy episodes of care preserves or enhances the quality of care furnished to Medicare beneficiaries while reducing or maintaining Medicare spending. The RO model was initially designed to start on Jan. 1, 2021, but in response to the COVID-19 public health emergency (PHE), implementation was delayed by one year.

Subsequently, the Consolidated Appropriations Act (CAA) of 2021 included a provision that prohibited implementation of the RO Model before Jan. 1, 2022. The CAA provision supersedes the delayed start date established in the CY 2021 OPPS/ASC final rule.

Among other changes, the rule finalizes the following.

  • The model performance period will begin on Jan. 1, 2022, and end on Dec. 31, 2026. Further, no new RO episodes may start after Oct. 3, 2026, for all RO episodes to end by Dec. 31, 2026.
  • Participation will be based on selected geographic areas, representing approximately 30 percent of eligible episodes.
  • The model will use the site- and modality-neutral payment based on a 90-day episode of care for selected modalities.
  • The rule finalizes a reduction in the discount factors for the professional and technical component from 3.75 percent and 4.75 percent to 3.5 percent and 4.5 percent, respectively.
  • CMS revised the cancer inclusion criteria under the RO Model, removing liver cancer and brachytherapy.
  • Payment rates will be based on case-mix, historical experience and efficiency.
  • If a beneficiary switches from traditional Medicare to Medicare Advantage during an episode before treatment is complete, CMS would consider this an incomplete episode and radiotherapy services would be paid the traditional Medicare rate instead of being paid under the RO Model.
  • The RO Model qualifies as an Advanced Alternative Payment Model or Merit-Based Incentive.
  • CMS will exclude HOPDs participating in the Community Transformation track of the Community Health Access and Rural Transformation (CHART) Model from participation in the RO Model because these hospitals will receive future capitated payments. For the CHART Accountable Care Organization (ACO) Transformation track, CMS adopted the same policy regarding overlap between the RO Model and the Medicare Shared Savings Program (MSSP) ACOs.
  • CMS invoked its authority under the extreme and uncontrollable circumstances policy to make three requirements – quality and clinical data element reporting, engagement with an Agency for Healthcare Research and Quality (AHRQ)-listed safety organization, and peer review requirements – optional for performance year 1.

Comments on Temporary Policies to Address COVID

  • CMS solicited comments on whether it should continue to allow direct supervision via a two-way, audio/video communication technology for pulmonary rehabilitation, cardiac rehabilitation and intensive cardiac rehabilitation services. Commenters supported this change, and CMS will consider these comments for future rulemaking.
  • CMS solicited comments on whether to extend or make permanent the OPPS payment associated with specimen collection for COVID-19 tests after the COVID-19 PHE ends. Commenters supported making HCPCS code C9803 permanent. CMS also received comments requesting that CMS continue to pay for HCPCS code C9803 due to concerns regarding the unknown future role of COVID-19.
  • For devices, drugs and biologicals with pass-through status that would have expired between Dec. 31, 2021, and Sept. 30, 2022, CMS will use its equitable adjustment authority under Section 1833(t)(2)(E) to continue separate payment for the remainder of CY 2022.
  • Separately payable drugs and biologicals that are eligible for the one-time equitable adjustment would not be paid the reduced amount of ASP minus 22.5 percent when they are acquired under the 340B program and would generally continue to be paid ASP plus 6 percent for the duration of the time period during which the adjustment applies.