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Hospital Outpatient Prospective Payment System (OPPS) Final Rule CY 2021

Issue Brief

December 7, 2020


This final rule makes changes to hospital outpatient prospective payment system (OPPS), which governs payment policy in Medicare Part B for hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs). The final rule also includes updates to quality reporting requirements for HOPDs and ASCs. CMS updates these rules annually, so many of the policy changes outlined for 2021 build on existing policies.

Major Changes for CY 2021

  • Continuation of 340B Drug Pricing Program Reimbursement Cuts: CMS finalized cuts to reimbursement for Part B drugs purchased under the 340B program that were first rolled out in 2018. For 2021, CMS is maintaining its average sales price (ASP) minus 22.5% cut. CMS did not move forward with its proposal to impose a steeper rate cut, based on this year’s hospital survey, of ASP minus 34.7% plus an overhead payment set at 6% of ASP for a net rate of ASP minus 28.7%. Nevertheless, the 340B program supports medical access and critical patient care services for the most vulnerable populations and we will continue to push for full rescission of the Part B cuts. CMS will exempt rural sole community hospitals, certain cancer hospitals, and children’s hospitals from the rate cut, but will still require them to report the informational TB modifier.

The 340B cuts are the subject on ongoing litigation between CMS and hospitals – a lower court ruled in favor of hospitals, but the D.C. Circuit Court recently reversed that decision, finding that CMS had the authority to reduce 340B reimbursement. Although it is unclear whether hospitals will appeal to the U.S. Supreme Court, ASHP and other stakeholders will continue to aggressively pursue legislative and regulatory remedies to stop the cuts and reinstate full ASP + 6% reimbursement.

  • Hospital and Critical Access Hospital (CAH) COVID-19 Reporting: CMS added new COVID-19 reporting requirements related to therapeutic inventory and acute respiratory illnesses to the Medicare Conditions of Participation for hospitals and CAHs. This provision was not included in the proposed rule because CMS can waive certain notice-and-comment rulemaking requirements when responding to a PHE. Under the new requirements, “[a]ll participating hospitals and CAHs will now track their inventory supplies and usage rates in real time for those COVID-19-related therapeutics that have been distributed and delivered by HHS.” CMS expects plans to request, at minimum, “the hospital’s (or the CAH’s) current inventory supplies of any COVID-19-related therapeutics that have been distributed and delivered to the hospital (or CAH) under the authority and direction of the Secretary; and (2) the hospital’s (or the CAH’s) current usage rate for any COVID-19-related therapeutics that have been distributed and delivered to the CAH under the authority and direction of the Secretary.” These reporting requirements do not appear to extend to any product purchased directly by the hospital or CAH.

Hospitals and CAHs will also be required to report certain data elements related to acute respiratory illness, which CMS defines as “including, but not limited to, Seasonal Influenza Virus, Influenza-like illness, and Severe Acute Respiratory Infection.” For the period of the COVID-19 PHE, the HHS Secretary will establish the frequency and method of reporting, including the required data elements, such as “diagnoses, admissions, and counts of patients currently hospitalized who have diagnoses of Acute Respiratory Illnesses (including, but not limited to, Seasonal Influenza Virus, Influenza-like Illness, and Severe Acute Respiratory Infection). Although CMS does not specific exactly how data will be collected, CMS notes that it is aiming to reduce and burden on hospitals and anticipates that reporting the “data that will be requested by the Secretary would include reporting channel options similar to, if not the same as, those currently in place for COVID-19.” CMS indicated that it believes the reporting is critical to national response efforts and noted that it will enforce the requirements “to the greatest extent of the law.” ASHP anticipates that CMS will release additional information specific to the reporting requirements in the very near term.

  • Continuation of Site Neutral Cuts to Hospital Outpatient Departments: On the basis of site neutrality, CMS will continue implementing it reimbursement cuts at hospital outpatient departments (also known as provider-based departments) for hospital clinic visits (the most commonly billed code – G0463) by 60% to match the rate paid under the Physician Fee Schedule (PFS). The cuts had been the subject of litigation, with a federal appeals court recently finding in favor of CMS. Hospitals are considering whether to appeal that ruling the U.S. Supreme Court.

  • Elimination of Inpatient Only List: CMS finalized a proposal to eliminate the inpatient only list over three years in order to allow the services to be provided in the hospital outpatient setting when appropriate. In effect, this will allow hospitals to shift services that could previously only be provided to inpatients to hospital outpatient settings.

  • Star Rating Changes: CMS finalized a number of significant Star Ratings changes, designed to “update and simplify how the ratings are calculated, reduce the total number of measure groups, and stratify the Readmission measure group based on the proportion of dual-eligible patients.” Specifically, CMS will replace its current measure calculation process with a basic averaging methodology that calculates measure group scores with equal measure weightings. Additionally, the will expand the Star Ratings process to CAHs and Veterans’ Administration hospitals.

Applicability and Timing

In general, policy proposals adopted in the final rule become effective on January 1, 2021. While the new Administration may consider changes to some OPPS policies, these would have to be accomplished through rulemaking, which could not take place before the January 1st implementation date.

We strongly encourage members to submit any feedback, questions, or concerns to ASHP to Jillanne Schulte Wall at [email protected]. This information helps shape our ongoing advocacy around issues addressed in the OPPS final rule. ASHP will keep members updated regarding new information about hospital and CAH COVID-19 therapeutics inventory and acute respiratory illness reporting requirements, as well as the next steps in our advocacy to safeguard 340B.