Medicare Extends Site Neutral Policy in 2019 HOPD/ASC Payment Proposal; ASC Victories

A discussion related to approving hip and knee replacement surgeries for Medicare payment in ASCs dominated last year’s hospital outpatient department (HOPD) and ambulatory surgery center (ASC) payment proposal for Medicare. (Ultimately, CMS simply removed TKA from the inpatient only list.) The 2019 proposal, which was released on July 25, 2018, only addressed the anesthesia portion of TKA.

A new site neutral payment proposal that focuses on standard office visits (HCPCS code G0463) and potential new victories for ambulatory surgery centers (ASCs) have made the biggest headlines in the 2019 proposal. Under the 2019 proposal, the Ambulatory Surgery Center Association (ASCA) achieved most of its advocacy goals.

Stay tuned from a full analysis from the AAOS, which will go into far greater details. Click here to view the full 761-page proposed rule.

New Site Neutral Payment Proposal
TOA has been talking about the site neutral payment concept in these newsletters since 2012. CMS summarized the growing trend of hospital acquisitions in its 2019 rule proposal:

In the CY 2015 OPPS/ASC proposed rule (79 FR 41013), we stated that we continued to seek a better understanding of how the growing trend toward hospital acquisition of physicians’ offices and subsequent treatment of those locations as off-campus provider-based departments (PBDs) of hospitals affects payments under the PFS and the OPPS, as well as beneficiary cost-sharing obligations.

CMS summarized the site neutral proposal by indicating that “clinic visits,” which CMS described as “essentially check-ups,” would result in being paid the lower Physician Fee Schedule (PFS) for non-exempt services (instead of the higher hospital HOPD rate). Off-campus emergency departments are an example of a non-exempt service.

CMS’s background on the site neutral proposal, which begins on page 355, is lengthy. The summary of what the 2019 proposal would do can be found on page 370. This proposal focuses on HCPCS code G0463. And it appears that grandfathered entities would not be exempt from this code:

Therefore, given the unnecessary increases in the volume of clinic visits in hospital outpatient departments, for the CY 2019 OPPS, we are proposing to use our authority under section 1833(t)(2)(F) of the Act to apply an amount equal to the site-specific PFS payment rate for nonexcepted items and services furnished by a nonexcepted off-campus PBD (the PFS payment rate) for the clinic visit service, as described by HCPCS code G0463, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act (departments that bill the modifier “PO” on claim lines). Off-campus PBDs that are not excepted from section 603 (departments that bill the modifier “PN”) already receive a PFS-equivalent payment rate for the clinic visit. In CY 2019, for an individual Medicare beneficiary, the standard unadjusted Medicare OPPS proposed payment for the clinic visit is approximately $116, with approximately $23 being the average copayment. The proposed PFS equivalent rate for Medicare payment for a clinic visit would be approximately $46 and the copayment would be approximately $9. This would save beneficiaries an average of $14 per visit. Under this proposal, an excepted off-campus PBD would continue to bill HCPCS code G0463 with the “PO” modifier in CY 2019, but the payment rate for services described by HCPCS code G0463 when billed with modifier “PO” would now be equivalent to the payment rate for services described by HCPCS code G0463 when billed with modifier “PN”.

The following is a review of the history of site neutral payments:

  • Medicare typically pays hospitals a higher rate than physician offices for the same service. Site neutral is a concept in which a service that can be provided in any setting is paid at the lower physician rate, no matter the setting in which it is performed.
  • The Medicare Payment Advisory Commission (MedPAC) began talking about this concept over a decade ago.
  • Congress first implemented a site neutral payment policy with the November 2, 2015 Bipartisan Budget Act of 2015, which was signed into by then-President Obama. The law grandfathered in exiting off-campus provider-based HOPDs at the higher OPPS rate for certain services. However, any agreements with physicians for off-campus provider-based departments that went into effect after November 2, 2015 were paid the lower Physician Fee Schedule (PFS) beginning on January 1, 2017 for certain services. The hospital lobby strongly opposed this concept.

A February 6, 2015 New York Times article summarized the site neutral concept – click here to view.

Over the past few years, Medicare’s payment proposals focused on technical corrections to the 2015 law and did not expand the site neutral provision. However, the 2019 HOPD/ASC proposal does include the new site neutral payment proposal that affects clinic visits, and the American Hospital Association expressed its opposition to the 2019 proposal in the following statement:

With today’s proposed rule, CMS has once again showed a lack of understanding about the reality in which hospitals and health systems operate daily to serve the needs of their communities. CMS has misconstrued Congressional intent with its proposal to cut payments for hospital clinic services in certain outpatient departments. In 2015, Congress clearly intended to provide current off-campus hospital clinics with the existing outpatient payment rate in recognition of the critical role they play in their communities. But CMS’s proposal uns counter to this and will instead impede access to care for the most vulnerable patients.

Page 368 includes CMS’s commentary regarding why it is making this proposal:

While the changes required by the section 603 amendments to section 1833(t) of the Act address some of the concerns related to shifts in settings of care and overutilization in the hospital outpatient setting, the majority of hospital off-campus departments continue to receive full OPPS payment (including off-campus emergency departments and excepted off-campus departments of a hospital), which is often higher than the payment that would have been made if a similar service had been furnished in the physician office setting. Therefore, the current site-based payment creates an incentive for the misallocation of capital toward higher cost sites of care that could result in higher costs for providers, taxpayers, beneficiaries, and the Medicare program. Likewise, the differences in payment rates have unnecessarily shifted services away from the physician’s office to the higher paying hospital outpatient department. We believe that the higher payment that is made under the OPPS, as compared to payment under the PFS, is likely to be incentivizing providers to furnish care in the hospital outpatient setting rather than the physician office setting. In 2012, Medicare was paying approximately 80 percent more for a 15-minute office visit in a hospital outpatient department than in a freestanding physician office. Under current policy, Medicare still pays more using the G-code for a clinic visit than it would under the PFS.

CMS goes on to state:

We have heard that many off-campus departments converted from physicians’ offices to hospital outpatient departments, without a change in either the physical location or a change in the acuity of the patients seen. To the extent that similar services can be safely provided in more than one setting, we do not believe it is prudent for the Medicare program to pay more for these services in one setting than another. We believe the difference in payment for these services is a significant factor in the shift in services from the physician’s office to the hospital outpatient department, thus unnecessarily increasing hospital outpatient department volume and Medicare program and beneficiary expenditures.We consider the shift of services from the physician office to the hospital outpatient department unnecessary if the beneficiary can safely receive the same services in a lower cost setting but is instead receiving services in the higher paid setting due to payment incentives. We believe the increase in the volume of clinic visits is due to the payment incentive that exists to provide this service in the higher cost setting. Because these services could likely be safely provided in a lower cost setting, we believe that the growth in clinic visits paid under the OPPS is unnecessary. Further, we believe that capping the OPPS payment at the PFS-equivalent rate would be an effective method to control the volume of these unnecessary services because the payment differential that is driving the site-of-service decision will be removed. In particular, we believe this method of capping payment will control unnecessary volume increases as manifested both in terms of numbers of covered outpatient department services furnished and costs of those services.

Additional Cost Control Measures
CMS also asks for comments on other proposals to control costs, and some of these questions may forecast CMS’s future direction on these issues. Per CMS:

In addition, we are soliciting public comments on how to expand the application of the Secretary’s statutory authority under section 1833(t)(2)(F) of the Act to additional items and services paid under the OPPS that may represent unnecessary increases in OPD utilization.Therefore, we are seeking public comment on the following:

  • How might Medicare define the terms “unnecessary” and “increase” for services (other than the clinic visit) that can be performed in multiple settings of care? Should the method to control for unnecessary increases in the volume of covered OPD services include consideration of factors such as enrollment, severity of illness, and patient demographics?
  • While we are proposing to pay the PFS payment rate for clinic visits beginning in CY 2019, we also are interested in other methods to control for unnecessary increases in the volume of outpatient services. Prior authorization is a requirement that a health care provider obtain approval from the insurer prior to providing a given service in order for the insurer to cover the service. Private health insurance plans often require prior authorization for certain services. Should prior authorization be considered as a method for controlling overutilization of services?
  • For what reasons might it ever be appropriate to pay a higher OPPS rate for services that can be performed in lower cost settings?
  • Several private health plans use utilization management as a cost-containment strategy. How might Medicare use the authority at section 1833(t)(2)(F) of the Act to implement an evidence-based, clinical support process to assist physicians in evaluating the use of medical services based on medical necessity, appropriateness, and efficiency? Could utilization management help reduce the overuse of inappropriate or unnecessary services?
  • How should we account for providers that serve Medicare beneficiaries in provider shortage areas, which may include certain rural areas? With respect to rural providers, should there be exceptions from this policy, such as for providers who are at risk of hospital closure or that are sole community hospitals?
  • What impact on beneficiaries and the health care market would such a method to control for unnecessary increases in the volume of covered OPD services have?
  • What exceptions, if any, should be made if additional proposals to control for unnecessary increases in the volume of outpatient services are made?

Removal of Three Pain Communication Questions
In response to the opioid crisis, CMS is proposing to modify the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) patient experience of care survey measure by removing the three recently revised pain communication questions. This would go into effect with January 1, 2022 discharges.

Non-Opioid Pain Management Drugs
CMS is proposing to include a separate payment for non-opioid pain management drugs that serve as a “supply” when used in an ASC surgery. CMS provided commentary regarding HCPCS code C9290 (Exparel), which is the code that meets the proposed criteria.

In addition, CMS commented:

In addition, the President’s Commission on Combating Drug Addiction and the Opioid Crisis also recommended that CMS review its payment policies for certain drugs that function as a supply, specifically non-opioid pain management treatments. Drugs that function as a supply in surgical procedures or diagnostic tests are packaged under the OPPS and ASC payment systems. In response to this recommendation as well as stakeholder requests, for CY 2019, we are proposing to pay separately at ASP plus 6 percent for non-opioid pain management drugs that function as a supply when used in a covered surgical procedure performed in an ASC. Further, we are seeking feedback on whether other non-opioid alternatives for acute or chronic pain have evidence demonstrating that they lead to a decrease in opioid prescriptions and addiction and may, therefore, warrant separate payment under the OPPS and ASC payment systems.

New ASC Services for Medicare
The 2019 payment proposal did not witness the lengthy debate regarding the potential approval of THA and TKA for Medicare payment in ASCs. Instead, the focus in this proposal was on adding 12 new cardiac catheterization services for ASCs. The proposed list can be found on pages 423 and 440.

In addition, CMS included a list of the Medicare procedures that were added to ASCs over the past three years, and they can be found on page 443. (This includes a number of spine services.)

An anesthesia code related to arthroplasty was proposed to be removed from the IPO list (01402), and this would complement the removal of 27447 from the IPO list in 2018. Per CMS on page 349:

We also are proposing to remove the procedure described by CPT code 01402 from the IPO list. After reviewing the clinical characteristics of the procedure described by CPT code 01402, we believe that this procedure meets criteria 3 and 4. This procedure is typically billed with the procedure described by CPT code 27447 (Arthroplasty, knee, condyle and plateau; medical and lateral compartments with or without patella resurfacing (total knee arthroplasty)), which was removed from the IPO list for CY 2018 (82 FR 52526). We are seeking public comment on whether the procedure described by CPT code 01402 meets criteria 3 and 4 and whether the procedure meets any of the other five criteria for removal from the IPO list.

Per CMS, the criteria include:

  1. Most outpatient departments are equipped to provide the services to the Medicare population.
  2. The simplest procedure described by the code may be performed in most outpatient departments.
  3. The procedure is related to codes that we have already removed from the IPO list.
  4. A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis.
  5. A determination is made that the procedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list,

Lower Device Intensive Procedure Threshold Proposal
At the urging of the Ambulatory Surgery Center Association (ASCA), CMS is proposing to lower the ASC device-intensive procedure threshold from the current 40 percent to 30 percent. ASCA has advocated for a lower threshold. Per ASCA, orthopaedic procedures would receive the greatest benefit.

Finally: Progress for ASCs and the Market Basket Update
After many years of advocacy, ASCs would finally be aligned with the more generous hospital market basket update for the ASC’s annual payment update, and it will be for a five-year period (CY 2019 through CY 2023). In the past, ASCs were provided a smaller annual update that was tied to the inflation rate.

“We are grateful that CMS, after years of urging by ASCA, is proposing to measure inflation in ASCs by using the hospital market basket,” said ASCA CEO Bill Prentice. “ASCs use the same staff, services and supplies as hospital outpatient departments so it only makes sense to apply the same inflation rate for our yearly updates.”

ASCA created the following chart for the 2019 proposal:

However, it is important to keep in mind that the 2.8 percent increase for ASCs faces a .8 percent cut due to the Affordable Care Act’s productivity reduction provision (Congress thought that ASCs were so efficient that they should be “penalized”), which reduces the amount to a 2 percent “effective update.” It also does not include an additional payment reduction for ASCs due to Congress’ sequestration cuts from several years ago. The sequestration cuts are in effect until 2024. Also, remember that this 2.8 percent increase is an average of all specialties; each specialty will have a different payment update rate.

While this payment update would not align the overall ASC payment with HOPD payments (the same service is still paid far more in an HOPD setting), the delta between the two settings would stop increasing every year since the settings would receive the same annual update.

ASC Quality Reporting Program
CMS is proposing to remove eight ASC measures.

For CY 2020, CMS is proposing to remove:

  • ASC-8: Influenza Vaccination Coverage Among Healthcare Personnel.

For CMS 2021, CMS is proposing to remove:

  • ASC-1: Patient Burn.
  • ASC-2: Patient Fall.
  • ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant.
  • ASC-4: All-Cause Hospital Transfer/Admission.
  • ASC-9: Endoscopy/Polyp Surveillance Follow-up Interval for Normal Colonoscopy in Average Risk Patients.
  • ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use.
  • Voluntary measure ASC-11: Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.

In addition, CMS is proposing to remove several measures from the Hospital Outpatient Quality Reporting program.

Price Transparency Discussion Remains
CMS is continuing to ask for feedback on new pricing transparency requirements for hospitals. This issue first surfaced earlier this spring with the CY 2019 hospital inpatient payment proposal. Per CMS:

CMS is seeking comment through a Request for Information (RFI) within the proposed rule asking whether providers and suppliers can and should be required to inform patients about charges and payment information for healthcare services and out-of-pocket costs, what data elements the public would find most useful, and what other changes are needed to empower patients.