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CMS Medicare Fee-For-Service FY2020 Proposed Rules: Hospital Outpatient Department and End-Stage Renal Disease

This week, our In Focus section reviews the new Centers for Medicare & Medicaid Services (CMS) Medicare Fee-For-Service FY 2020 proposed rules. On July 29, 2019, CMS issued the Calendar Year (CY) 2020 proposed rules for the Physician Fee Schedule (PFS), the hospital outpatient department (HOPD) and ambulatory surgical center (ASC) prospective payment systems (PPS), and the End-Stage Renal Disease (ESRD) PPS. These proposed regulations include payment rate and policy changes for the upcoming calendar year. The comment deadline for all three of these proposed rules is September 27, 2019.

In addition, on July 11, 2019, CMS issued the FY 2020 proposed rule for the Home Health prospective payment system. This rule regulation includes annual payment changes and other proposed policy changes. The comment deadline for the Home Health proposed rule is September 9, 2019.

Overall, these four Medicare Part B proposed rules include favorable payment rate updates across each of the provider types impacted by these regulations. Among the most notable policy changes are proposals to: require price transparency, employ prior authorization for some procedures, and permit knee replacements in the ASCs setting in the hospital outpatient proposed rule; implement a new Medicare Part B benefit which provides coverage and reimbursement for opioid treatment centers, develop and implement a cost reporting process for ambulance suppliers and providers in the physician fee schedule proposed rule; and reintroduce a competitive bidding program for Durable Medical Equipment (DME) in the ESRD/DMEPOS proposed rule. In addition, across many of the regulations CMS demonstrated a continued interest in creating bundled payments.

This week we review the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule and the End-Stage Renal Disease (ESRD) and Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) proposed rule. Next week, on July 7, 2019, our In Focus will review the Physician Fee Schedule (PFS) proposed rule and the Medicare Home Health proposed rule.

2020 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule Highlights

Hospital outpatient and ambulatory surgical center payment provisions

CMS proposed to update the Hospital Outpatient Prospective Payment System (OPPS) payment rates by 2.7 percent, which is projected to increase OPPS payments to providers by more than $6 billion. This is a larger increase than the 1.35 percent update implemented for CY 2019.

CMS also proposed to update ASC payment rates by 2.7 percent, which is projected to increase ASC payments by $200 million. This increase is larger than the 2.1 percent update implemented in 2019.

Price transparency for hospitals

CMS proposed to implement the President’s executive order requiring each hospital to establish and update publicly a yearly list of the hospital’s standard charges for inpatient and outpatient items and services furnished. CMS solicits comments on how charges should be defined. As it applies to this provision, CMS proposed to define a hospital as any institution licensed by a state as a hospital, which would include acute care hospitals, critical access hospitals, long-term care hospitals, inpatient rehabilitation hospitals, inpatient psychiatric hospitals, and sole community hospitals. CMS proposed that hospitals must make their charges for all items and services available online in a machine-readable format. CMS also proposed that, for 70 services CMS selects and another 230 services the hospital may select (referred to as “shoppable items”), hospitals must provide charge data in a consumer-friendly format which enables patients to compare charges across hospitals. Hospitals would be held accountable for non-compliance with this requirement through application of civil monetary penalties of $300 per day.

Prior Authorization Requirements

In a departure from current Medicare FFS policy, CMS proposed to implement prior authorization requirements for certain outpatient services. As proposed, prior authorization would be required for five outpatient procedures: Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, Rhinoplasty, and Vein Ablation. CMS asserts that prior authorization policy for these services will be effective for controlling increases in volume in instances when these cases are not medically necessary. CMS proposed that providers must submit the prior authorization request to CMS, and CMS would have 10 business days to issue a decision. The five procedures for which prior authorization would be required specifically implicated 40 different procedures typically paid for under the OPPS. Prior authorization requirements would not apply to these five procedures in the inpatient setting.

ASC-covered procedures list modifications

CMS proposed to add total knee arthroplasty, knee mosaicplasty, and three coronary intervention procedures to the ASC-covered procedures list, which enables procedures to be conducted in ASCs. The coronary procedures include percutaneous transcatheter placement of intracoronary stents as well as drug-eluding stents, and percutaneous transluminal coronary angioplasty. In addition, CMS seeks comment on how the agency could redesign the role of the ASC-covered procedures list to improve physicians’ ability to determine the setting of care as appropriate for a given beneficiary.

340B Drugs

For drugs acquired through the 340B Program, CMS proposed to continue to pay an adjusted amount of the Average Sales Price (ASP) minus 22.5 percent in CY 2020 for certain separately payable drugs or biologicals acquired through the 340B Program. CMS is also seeking comment on alternative payment options and potential remedies for both CY 2020 payments and the ongoing legal dispute regarding CY 2018 and CY 2019 340B payments. CMS specifically requests comment of the alternative payment option of using average sales price (ASP) plus 3 percent for OPPS payment for 340B-acquired drugs.

Inpatient-only procedures list modifications

CMS proposed to remove total hip arthroplasty from the inpatient-only list, making it eligible to be paid by Medicare in both the hospital inpatient and outpatient settings. In addition, CMS proposed that procedures removed from the inpatient-only list will be excluded from CMS’ audit of short inpatient stays for the first year following exclusion. During this time period, these procedures will also not be subject to the 2-midnight rule, which requires that cases be in the hospital for at least two midnights in order to be deemed by auditors as an appropriate inpatient case.

Rural health policies

As in prior years, CMS proposed to apply the post-reclassification wage index changes proposed (and not finalized as of August 1, 2019) as a part of the FY 2020 Hospital Inpatient Prospective Payment System (IPPS) to OPPS payment rates and the OPPS copayment standardized amount. The inpatient policy proposal included increasing the wage index for hospitals with a wage index value below the 25th percentile, removing urban to rural hospital reclassifications from the calculation of the IPPS rural floor wage index value, and implementing a five-percent cap on any decrease in a hospital’s wage index from its final wage index for FY 2019. HMA’s summary of the FY 2020 IPPS proposed rule is available here.

CMS is also proposing to change the level of supervision of outpatient therapeutic services in hospitals and Critical Access Hospitals (CAHs) from direct supervision to general supervision, which means that a procedure must be furnished under a physician’s overall direction and control, but that physician’s presence is not required during the procedure.

Hospital outpatient device pass-through payments

Similar to CMS’s proposed modifications to the inpatient PPS new technology add-on payments (NTAP), CMS proposed to reduce the requirement that new technologies applying for outpatient PPS pass-through payments demonstrate “substantial clinical improvement” in order to yield the additional payment.

Organ Procurement and Transplant Center Regulations

In an effort to provide clarity to providers and improve accuracy of performance measurement for Organ Procurement Organizations (OPOs), CMS proposed to revise the definition of “expected donation rate” to match the definition set forth by the Scientific Registry of Transplant Recipients and to provide OPOs with additional time to comply with the change. CMS is also seeking public comment on potential revisions to the OPO Conditions for Coverage and transplant center Conditions of Participation, as well as the validity, reliability, and appropriateness of two potential outcome measures for OPOs.

Hospital outpatient and ambulatory surgical center quality reporting programs

Under the Hospital Outpatient Quality Reporting (OQR) program, CMS proposed removing one web-based measure for Calendar Year (CY) 2022 (External Beam Radiotherapy for Bone Metastases, OP-33) because the costs associated with the measure outweigh the benefit of its use. CMS also requested comment on the concept of integrating 4 patient safety measures used as a part of the ASC Quality Reporting Program (ASCQR) into the OQR. Under the ASCQR, CMS also requested input on the future use of these 4 patient safety measures in the ASCQR.

2020 End-Stage Renal Disease (ESRD) and Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) Proposed Rule Highlights

ESRD payment provisions

CMS proposed a 2 percent increase to the FY 2020 ESRD PPS bundled base rate, increasing the per dialysis treatment rate by $5 to $240.27. Including the base rate increase and the various payment adjustments, net payments will increase 1.6 percent for all ESRD facilities and 1.9 percent for hospital-based ESRD facilities. This increase accounts for standard annual updates to the wage index and outlier calculations. Updates made to the outlier calculations will likely increase payments for ESRD beneficiaries requiring higher resource utilization.

Changes to ESRD add-on payment adjustment policies

  • Transitional Drug Add-on Payment Adjustment (TDAPA): CMS proposed to exclude certain drugs approved by the FDA from being eligible for the TDAPA in an effort to reduce spending related to the TDAPA. Specifically, CMS proposed to exclude generic drugs from the TDAPA as well as drugs in the following FDA classifications: Type 3 (drugs with new dosage instructions), Type 5 (drugs with new formulations or other differences), Type 7 (drugs previously marketed but without an approved NDA), Type 8 (drugs that have transitioned to over-the-counter), and other combinations of FDA classification types. CMS also proposed to reduce the basis of TDAPA payment for calcimimetics from the average sales price (ASP) plus 6 percent to 100 percent of ASP. In addition, CMS proposed to no longer apply the TDAPA for a new renal dialysis drug or biological product if the ASP data they possess from the manufacturer does not represent a full calendar quarter of data and is more than two calendar quarters from the date payment.
  • New add-on for renal dialysis equipment and supplies: CMS proposed to create a new add-on payment for new renal and dialysis equipment and supplies, called the transitional add-on payment adjustment for new and innovative equipment and supplies (TPNIES). To be eligible for this add-on CMS proposed that the equipment and supplies must 1) possess FDA marketing authorization on or after January 1, 2020, 2) demonstrate substantial clinical improvement, 3) be commercially available, and 4) have an active application for a Healthcare Common Procedure Code System (HCPCS) code. CMS proposed that the payment made to providers for TPNIES would be based on 65 percent of the price established by the Medicare Administrative Contractor (MAC). Technologies approved for the TPNIES would be eligible for the add-on payments for two calendar years.
  • Termination of the erythropoiesis-stimulating agent (ESA) monitoring policy: CMS proposed to terminate the ESA add-on payments because ESAs are now bundled into the per treatment payment and the agency believes the incentive for overutilization are eliminated for these services.

ESRD quality incentive program

CMS proposed no changes to the ESRD quality incentive program for CY 2020 or 2021, but proposed several updates to the program for 2022 and 2023. Specifically, CMS proposed process improvements to enable new ESRD facilities to participate in the ESRD QIP sooner, converting certain clinical measures into a reporting measure, and codifying certain data submission requirements for ESRD facilities and requirements for the Extraordinary Circumstances Exception to reporting data.

Acute kidney injury (AKI) payment provisions

CMS proposed a two percent increase to the AKI PPS bundled base rate to $240.27, equal to the update to ESRD payment rates.

DMEPOS payment provisions

CMS proposed the reintroduction of competitive bidding into the DMEPOS for CY 2020. The agency asserts this proposal will improve the framework and basis for identifying comparable items and will improve the transparency and predictability of Medicare payments for new DMEPOS items. Specifically, CMS proposed to create a structure for comparing new and existing DMEPOS items. Items would be compared using five categories: physical components, mechanical components, electrical components, function and intended use, and additional attributes and features. CMS proposed that new items identified as similar to existing items, would be paid using the fee schedule amounts of the existing items. Payment rates for items identified as original would be determined either by assessing commercial pricing data or through technology assessments that evaluate the relative costs of the newer DMEPOS items. In addition, CMS proposed to make a one-time adjustment to the fee schedule amounts determined through technology assessments if the item’s price declined by 15 percent or more over 5 years. CMS did not propose a corresponding payment increase when payment amounts established through technology assessments prove too low over time.

DMEPOS conditions of payment

CMS proposed to streamline the requirements for ordering DMEPOS items and consolidate three existing DMEPOS item conditions-of-payment lists into one Master List of items that could be subject to face-to-face encounters and written orders and/or prior authorization requirements.

HMA continues to analyze these proposed rules and will provide more detailed analyses evaluating the impacts of key CMS Part B proposals in the coming weeks. For more information or questions about these proposed Part B rules and HMA’s Medicare Practice, please contact Mary Hsieh or Jon Blum.