In the Calendar Year (CY) 2024 Medicare Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems Final Rule, the Centers for Medicare & Medicaid Services (CMS) increased OPPS and ASC payment rates by 3.1% for hospitals and ASCs that meet quality reporting requirements.

Below we highlight select policy updates from the Final Rule. The full Final Rule, released on November 2, 2023, is available here. Several important topics from the Final Rule (including price transparency, increased access to hospital outpatient behavioral health, and 340B updates) are addressed elsewhere in this [End-Of-Year Review].

1. Site neutrality / Intensive Cardiac Rehabilitation.

Under Section 603 of the Bipartisan Budget Act of 2015 (“Section 603”), Congress directed CMS to establish “site neutral” payment for services furnished in certain new off-campus hospital outpatient settings. To implement Section 603, CMS applied a 60% cut to OPPS payments for services furnished in off-campus hospital outpatient departments, except for certain sites “excepted” from Section 603. This first wave of hospital outpatient site neutrality took effect on January 1, 2017. In a second wave of site neutrality, in 2019 CMS extended its neutrality policy to outpatient clinic (E&M) visits furnished in “excepted” off-campus hospital outpatient departments (HCPCS code G0463).

In the Final Rule, CMS is continuing its policy of “site neutral” payments. However, in a significant update for hospitals that offer intensive cardiac rehabilitation services (“ICR”), CMS finalized its proposal to exempt hospital outpatient ICR services from site neutrality. ICR services (HCPCS codes G0422 and G0423) will be paid at 100% of the OPPS rate in any hospital outpatient setting.

2. Dental Services.

Although Medicare rarely pays for dental services, CMS has, in recent years, developed the position that some dental services are substantially related and integral to a medical service and may be paid for under Part A or Part B. As part of this effort, CMS finalized, in the CY 2024 Final Rule, payment rates under OPPS for over 240 dental codes, and added dental surgical procedures to the ASC Covered Procedures List and list of covered ancillary services. 

3. Quality Reporting.

Hospitals and ASCs must comply with quality reporting measures to avoid payment reductions. For CY 2024, CMS modified reporting measures related to COVID-19 vaccination, cataract surgery, and colonoscopy follow-up. CMS also adopted new measures regarding total hip and/or total knee arthroplasty and radiation doses and adopted separate quality measures specific to Rural Emergency Hospitals.

4. Inpatient Only List.

Medicare’s “Inpatient Only” (“IOP”) list identifies services that CMS has determined can only be safely furnished in an inpatient setting. In the Final Rule, CMS finalized its proposal to add to the IOP list 9 services for which codes were newly created by the AMA CPT Editorial Panel for CY 2024. CMS did not remove any service from the IOP. See Table 102 of the Final Rule for the list of new IOP services.

5. Drugs and Devices
   1. Transitional Pass-Through Payment for Medical Devices 

The CMS transitional pass-through payment policy for new devices aims to ensure adequate payment for innovative technology while necessary cost data is collected. Devices meeting certain criteria are eligible for this payment, including those in the FDA Breakthrough Device Program. In response to COVID-19's impact, CMS extended pass-through status for certain devices. For CY 2023, CMS returned to regular updates, but the Consolidated Appropriations Act, 2023 extended pass-through for five devices until December 31, 2023. For CY 2024, CMS evaluated six device applications for pass-through payments in its quarterly review, approving four, including two breakthrough devices. No changes were proposed to the qualification criteria for these payments.

        b. Drugs, biologicals and radiopharmaceuticals without pass-through payment status 

CMS finalized the drug packaging threshold as $135 per day, instead of the proposed $140 to determine if a drug is separately payable. For CY 2024, CMS calculated the per day cost of non-pass-through drugs and biologicals using CY 2022 claims to determine their packaging status. The change is not a result of a change in methodology but rather recalculating updated data. Biosimilars are excepted from the threshold packaging policy when their reference products are paid separately to avoid financial incentives. 

       c. Diagnostic Radiopharmaceuticals

In the CY 2024 proposed rule, CMS considered various recommendations to modify its packaging policy for diagnostic radiopharmaceuticals under the OPPS. Stakeholders had expressed concerns that the current bundled payment approach, which includes several categories of non-pass-through drugs and biologicals regardless of cost, often falls short, especially for high-cost, low-utilization diagnostic radiopharmaceuticals. Alternatives suggested included separate payments for diagnostic radiopharmaceuticals exceeding the $140 OPPS drug packaging threshold, restructuring APCs for high cost uses, and specific payment policies for those used in clinical trials. However, due to a lack of consensus among stakeholders and the issue's complexity, CMS decided not to implement any changes for the upcoming year, choosing to continue evaluating stakeholder feedback for future rulemaking.

       d. Request for Comments – Essential Medicine Stock 

Due to concerns over the supply chain, CMS intends to propose new hospital Conditions of Participation addressing hospital's processes for maintaining a supply of essential medicines. CMS considered policies for separate payment under the OPPS (as well as IPPS) for a hospital’s costs to establish and maintain access to a buffer stock of essential medicines. CMS did not adopt separate payment policies at this time, but CMS indicated that it will continue to consider feedback from interested parties, including potential payment policies.