Summary

The Centers for Medicare & Medicaid Services (CMS) released its 2019 Hospital Outpatient Prospective Payment System Final rule, which, among other things, expands “site-neutral” payments to additional hospital outpatient locations, signaling CMS’s continuing move towards harmonizing payment rates for similar services across Medicare providers and suppliers and across locations of service.  Beginning in 2019, CMS will initiate a two-year phase-in of a rate intended to approximate the rate paid by Medicare for physician office visits under the Medicare Physician Fee Schedule.

In Depth

On November 2, 2018, the Centers for Medicare & Medicaid Services (CMS) released its 2019 Hospital Outpatient Prospective Payment System (OPPS) Final Rule. The Final Rule, among other things, expands “site-neutral” payments to additional hospital outpatient locations, signaling CMS’s continuing move towards harmonizing payment rates for similar services across Medicare providers and suppliers and across locations of service. '

Specifically, CMS finalized a proposal to reduce payments for off-campus hospital outpatient evaluation and management clinic visits (HCPCS Code G0463, the most commonly billed code under OPPS) at off-campus outpatient locations that are not subject to the Section 603 site-neutral payment reductions. Beginning in 2019, CMS will initiate a two-year phase-in of a rate intended to approximate the rate paid by Medicare for physician office visits under the Medicare Physician Fee Schedule (MPFS). However, CMS opted not to finalize a proposal to further expand the scope of the Section 603 payment reductions to new categories of services (as defined by 19 “clinical families of services”) furnished at off-campus outpatient locations not currently subject to the Section 603 reductions. CMS also implemented a new data collection modifier to track services furnished at off-campus emergency departments, signaling potential future payment adjustments at such locations.

Expansion of Site-Neutral Payments to “Excepted” Locations

Effective January 1, 2019, CMS will begin a two-year phase-in of payment cuts for off-campus outpatient clinic visits at locations not previously subject to site-neutral payment reductions (i.e., “excepted” locations). Section 603 of the Bipartisan Budget Act of 2015 cut payments to off-campus hospital outpatient locations that first billed Medicare for services after November 1, 2015, to a rate that approximates the rates paid under the MPFS. CMS implemented the Section 603 payment cuts effective January 1, 2017, by paying rates equal to 40 percent of the otherwise applicable OPPS rate. Locations that were billing as an outpatient department of a hospital prior to November 2, 2015, were “excepted” or “grandfathered,” and the Section 603 payment reductions at present do not apply to items and services provided at these excepted locations.

Pursuant to the Final Rule, CMS will begin to phase in a payment reduction for HCPCS G0463 to the excepted locations, resulting in payment for HCPCS G0463 furnished at all off-campus hospital outpatient locations, regardless of excepted status, at rates below the current OPPS rate. The payment reduction for HCPCS G0463 at excepted locations will become effective January 1, 2019, but in a change from the policy as originally proposed, CMS will phase in the rate changes over two years to allow providers time to adjust to the payment changes. In Calendar Year (CY) 2019, Medicare will pay facilities previously excepted from the Section 603 payments 70 percent of the OPPS rate for the clinic visit; in CY 2020 and subsequent years, Medicare will pay the MPFS-estimated rate (i.e., 40 percent of the OPPS rate) for the HCPCS G0463 services. 

CMS is implementing the cuts in payments for HCPCS G0463 at expected locations under its authority to develop a method to control unnecessary increases in the volume of outpatient services, not under Section 603. The American Hospital Association has signaled an intent to sue CMS to block implementation of these cuts, challenging the agency’s use of this authority in this manner.

CMS estimates that the payment reductions will result in approximately $380 million in payment reductions and corresponding savings in CY 2019, with approximately $300 million of the savings accruing to Medicare, and approximately $80 million saved by Medicare beneficiaries in the form of reduced copayments.

Expansion of Section 603 Payment Reduction to New Clinical Families of Services

When CMS originally implemented the Section 603 payment reductions, CMS proposed to limit expansion of services at excepted facilities by imposing the payment reductions on any service not billed at the off-campus outpatient location between November 1, 2014, and November 1, 2015 (the baseline period). CMS identified 19 clinical families of services and proposed to limit the excepted protection only to those families of services furnished at the excepted location during the baseline period. Any new family of services furnished after the baseline period would not be excepted and therefore would be subject to the payment reduction. CMS ultimately decided not to move forward with this limit when it finalized the initial Section 603 policy.

In the 2019 proposed OPPS rule, however, the agency revisited this idea and proposed a slightly modified version. The payment cuts CMS proposed would have applied to new services added to excepted locations after the baseline period, resulting in potentially drastic and unexpected payment reductions at excepted locations. Under the proposed policy, excepted locations currently receiving reimbursement at the full OPPS rate for a new service added after the baseline period would be subject to an abrupt reduction in rates effective January 2019. This would be particularly challenging for hospitals operating excepted off-campus locations that added services after November 1, 2015. In the final rule, CMS once again opted not to impose the cuts to services furnished at excepted locations from new clinical families of services after the baseline period for 2019.

Though CMS again declined to finalize the expansion limits at this time, CMS put providers on notice that it is still considering implementing similar payment cuts in the future. CMS noted that it continues to be concerned about a potential shift of services from non-excepted off-campus locations to excepted off-campus locations given the higher payment rate. CMS also expressed continued concern over hospitals purchasing additional physician practices and adding those practices to existing excepted off-campus outpatient locations. CMS plans to continue to monitor the expansion of services in the excepted off-campus hospital outpatient locations. Therefore, hospitals operating excepted locations should proceed with caution in adding or expanding services from clinical families of services not provided during the baseline period.

Monitoring Off-Campus Provider-Based Emergency Departments

Finally, in an effort to assess the extent to which OPPS services are shifting to off-campus emergency departments and to evaluate future potential payment adjustments, CMS announced in this rulemaking that it is creating and requiring hospitals to report a HCPCS modifier (ER – Items and services furnished by an off-campus emergency department) with every claim (on the CMS-1450) for outpatient hospital services furnished in an off-campus emergency department, effective January 1, 2019.