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2021 OPPS Proposed Rule: CMS Looks to Eliminate Inpatient-only List, Increase 340B Payment Cuts

Analysis  |  By Revenue Cycle Advisor  
   August 05, 2020

The proposed rule also introduces many new codes and status indicator changes that stakeholders need to carefully review carefully to provide comments to CMS.

A version of this article was first published August 4, 2020, by HCPro's Revenue Cycle Advisor, a sibling publication to HealthLeaders.

Facing the unprecedented COVID-19 public health emergency, CMS released the 2021 OPPS proposed rule later than ever before.

The rule, released August 4, is shorter than ever at 765 pages, says Jugna Shah, MPH, CHRI, president of Nimitt Consulting Inc., but it packs a punch, with CMS generally reinforcing its recent focus on continuing with site-neutral payment policies, lowering reimbursement for drugs purchased under the 340B program, and adding more services requiring outpatient hospital prior authorization. 

Shah notes two bright spots for providers, however, with a proposal for the elimination of the inpatient-only (IPO) list, which many providers have been requesting since inception of the OPPS, additional changes to physician supervision that will promote greater flexibility for providers, and separate payment under the Clinical Laboratory Fee Schedule for the payment of cancer-related protein-based MAAAs, instead of packaging these under OPPS.

The proposed rule also introduces many new codes and status indicator changes that stakeholders need to carefully review carefully to provide comments to CMS.

Eliminating the inpatient-only list

The biggest change in the rule may also be one of the last to take effect. CMS proposes eliminating the IPO list in a phased approach that would be completed by 2024. The IPO list is used to identify services covered upon inpatient admission and not as an outpatient paid for under the OPPS. It currently lists approximately 1,740 services.

CMS annually reviews the IPO list and solicits comments on procedures that can be removed when it’s determined they can be safely performed in an outpatient setting, among other criteria.

“We agree with past commenters that the physician should use his or her clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required for the beneficiary, subject to the general coverage rules requiring that any procedure be reasonable and necessary,” CMS writes in the rule.

“What CMS doesn’t articulate clearly is that the request to remove the IPO is almost as old as OPPS, says Shah. “It’s nice to see CMS finally recognize there are other mechanisms in place to help ensure beneficiaries receive high-quality, safe care in the most appropriate care setting.”

CMS notes that improvements in medical technology and treatments, along with updates and oversight of quality programs over the years, has made the IPO list unnecessary.

Acknowledging the significant number of procedures currently on the list and the work facilities will need to undertake to update billing systems, CMS proposes a staged approach to eliminating the list. It is also likely CMS needs time to thoughtfully assign all the procedures to APC payment rates. Beginning January 1, 2021, CMS proposes removing 266 services related to musculoskeletal procedures, identified in Table 31 of the proposed rule, from the IPO list, noting these are some of the services most frequently cited for removal by stakeholders.

The agency is soliciting comments on the general timeframe for the transition, which clinical families should be considered for removal in future years, and whether APCs should be created or restructured to allow for OPPS payment for services removed from the list. “This is definitely an opportunity for the provider community to weigh in on what it wants in terms of timing of the list’s removal, as well as the assignment of removed codes into properly paying APCs,” says Shah.

The removal of the IPO list will lead to services becoming subject to the 2-midnight rule, which is used to determine whether inpatient reimbursement is appropriate. CMS proposes to continue a two-year exemption from certain medical reviews related to procedures newly removed from the IPO list. The agency established this policy in last year’s OPPS final rule and it began in 2020.

Beneficiary Family Centered Care-Quality Improvement Organizations (BFCC-QIO) would continue to review short-stay inpatient claims for such procedures for medical necessity and to educate providers, but claims would not be denied patient on patient status alone. These procedures would also not be eligible for referral to Recovery Audit Contractors (RAC) for two years after removal from the IPO list.

340B drug reimbursement updates

While a lower court declared previous changes CMS made to reduce reimbursement for drugs purchased through the 340B drug discount program exceeded the agency’s authority, a reversal at the appeals court level last week has emboldened CMS to propose even steeper cuts in 2021.

Prior to 2018, CMS reimbursed hospitals at the average sales price (ASP) plus 6 percent for drugs acquired through the 340B drug discount program, which is intended to allow hospitals to purchase drugs from manufacturers at a discounted rate to accommodate uninsured and low-income patients.

Though the agency lacked detailed reimbursement information from hospitals and manufacturers on 340B drugs, it has consistently stated that paying hospitals the ASP minus 22.5 percent which started in 2018 was a conservative reduction and that the true reduction could even higher, says Shah. Stakeholders say the long-running litigation is expected to continue even after the latest ruling from the U.S. Appeals Court in Washington, D.C., that handed CMS a victory.

For 2021, CMS proposes reimbursing hospitals for 340B drugs at ASP minus 34.7 percent with a 6 percent add-on payment for overhead and handling, leading to a net rate of ASP minus 28.7 percent which is based on the results of a hospital survey conducted earlier this year.

“CMS goes through a very detailed explanation of how it arrived at this number, which is far lower of a reduction, if you can imagine, than what it would have been if the agency relied on the survey data alone without applying additional analytics and data trimming,” says Shah.

What is also unusual is that the agency is also soliciting comments on whether it should simply continue its current policy of paying ASP minus 22.5 percent, Shah says.

Rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals would continue to be excepted from either policy, receive ASP plus 6 percent, and continue to report informational modifier -TB (drug or biological acquired with 340B drug pricing program discount, reported for informational purposes) on 340B-acquired drugs.

Prior authorization expansion

While providers are likely still getting acquainted with CMS’ initial stab at prior authorization for OPPS services that were implemented July 1, the agency is proposing adding two new service categories in 2021: cervical fusion with disc removal and implanted spinal neurostimulators.

Again citing “unnecessary increases” in the volume of these services performed, CMS proposes to add these two service categories to the five already in effect:

  • Blepharoplasty
  • Botulinum toxin injections
  • Panniculectomy
  • Rhinoplasty
  • Vein ablation

Claims for insertion or replacement of spinal neurostimulators pulse generators or receivers increased by nearly 175 percent between 2007 and 2018, according to CMS, reflecting an increase of more than 10 percent annually. The rate of annual increase for all outpatient services was 2.8 percent. The agency noted similar, or larger, increases for several other services in these two categories.

“For both services categories, we researched possible causes for the increases in volume that would indicate the services are increasingly necessary, but we did not find any explanations that would cause us to believe the increases were necessary,” CMS writes in the rule. “We believe utilizing codes because of financial motivations, as opposed to medical necessity reasons, has resulted in an unnecessary increase in volume.”

If finalized, the new categories would require prior authorization as of July 1, 2021. See Table 53 in the proposed rule for a full list of services, identified by CPT code, that are included in the new categories.

Additional information

For more information on the 2021 OPPS proposed rule, see CMS’ fact sheet. Comments are due to CMS by October 5.

For coverage of the 2021 Medicare Physician Fee Schedule proposed rule, also released August 4, see Part B News.

To learn more about the proposed rule’s policies and what payment impact they could have at your facility, attend HCPro’s annual OPPS proposed rule webinar with Shah and Valerie A. Rinkle, MPA, lead regulatory specialist and an instructor for HCPro Medicare boot camps.

Revenue Cycle Advisor combines all of HCPro's Medicare regulatory and reimbursement resources into one handy and easy-to-access portal. News is not just repeated from other sources. It is analyzed by our Medicare experts so professionals can comprehend any new rule and regulatory updates thoroughly. Learn more.

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