Breaking Down the CY 2024 Hospital Outpatient Proposed Reg (July 27, 2023) - McDermott+Consulting

Breaking Down the CY 2024 Hospital Outpatient Proposed Reg (July 27, 2023)

Breaking Down the CY 2024 Hospital Outpatient Proposed Reg

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July 27, 2023 – As most of you already know, the Centers for Medicare & Medicaid Services (CMS) recently released two Medicare payment regulations: the Calendar Year (CY) 2024 Physician Fee Schedule (PFS) proposed reg and the CY 2024 Outpatient Prospective Payment System (OPPS) proposed reg. Regs & Eggs focused on the PFS proposed reg last week, and now it’s the OPPS reg’s turn! To break down the major policies in the OPPS reg, I’m joined by my colleagues Deborah Godes and Leigh Feldman.

The OPPS is the Medicare payment system that reimburses the hospital itself for hospital outpatient services. Unlike physicians and other practitioners, who are expected to see a 3.36% cut to their Medicare payments in CY 2024 under the PFS, hospitals under the OPPS are projected to receive a 2.8% increase next year. Still, such an update may not be able to cover the rising costs of supplies, labor and other resources that are required to furnish services within a hospital.

The OPPS does have something in common with the PFS, however: it contains a plethora of proposals and policy issues to sort through. Our full summary of the reg can be found here, and a podcast featuring Leigh and Deborah discussing the reg is available here. We thought it would also be useful to highlight some key OPPS proposals in Regs & Eggs so that you can fully understand their potential implications.

Price Transparency

Up first is a proposal related to price transparency, which has been a key priority in both the Trump Administration and Biden Administration. Under the previous Administration, CMS established new hospital reporting requirements, mandating hospitals to post payer-specific negotiated rates for 300 “shoppable” services in a consumer-friendly way. Hospitals must also post available payer-specific negotiated rates for all services (including emergency services) in a “machine-readable format.” CMS has cited significant concerns regarding compliance, and has beefed up penalties for noncompliance as a result. If hospitals fail to comply, they could wind up being assessed a $300–$5,500 penalty per day, with a maximum annual penalty of $109,500–$2,007,500 (the penalty amount depends on the hospital’s bed count).

In the proposed reg, CMS doesn’t mandate that hospitals report anything new, but instead aims to tighten up its enforcement of existing requirements. First, the agency would direct hospitals to report all the required information in a standardized way through the use of a template (which is currently optional). The agency says this proposal comes in response to comments it has received in previous regs regarding the need to standardize the reporting. Making the data more uniform could help ease operational burdens, improve the public’s ability to make price comparisons, and better equip third-party data aggregators to develop consumer-friendly tools.

Second, CMS proposes to publicly display information about its compliance actions against hospitals. Currently, names of hospitals CMS deems noncompliant with the price transparency regulations are only publicly displayed if a civil monetary penalty is issued.

Inpatient Only List

Another policy area that has transcended Administrations is the “inpatient only list,” a list of procedures that CMS believes can only be performed in the hospital inpatient setting, and not in an outpatient setting. The previous Administration finalized a policy to completely eliminate the list over a three-year period, as more procedures (in its view) could be safely performed in outpatient hospital settings. That policy never was fully implemented, as the current Administration reversed course after the first year. Thus, there remains a keen interest in what services may be removed from the list (meaning that they can be performed in both the hospital inpatient and outpatient settings).

Interestingly, even though there were several requests from stakeholders, CMS does not propose in this year’s reg to remove any services from the list. We use the word “interestingly” because there is an inherent expectation that certain procedures each year can shift to a hospital outpatient setting as new technology and/or clinical protocols emerge.

ASC Services

Speaking of services that CMS will pay for if delivered in an outpatient setting, CMS also establishes new codes each year that can be performed in an ambulatory surgical center (ASC). Procedures that CMS believes are safe to be performed in an ASC are added to the ASC covered procedures list. While CMS proposes to add 26 dental codes to this list, the agency does not propose to add any other services.

Site Neutrality

If you search for a key buzzword in healthcare policy, we bet that “site neutrality” will show up in your search (you are welcome to hold us to that!) Both CMS and Congress have been very interested in exploring how to address the discrepancy in payment rates for services delivered in a physician’s office versus a hospital outpatient department.

While we won’t go into the whole history of this issue, CMS has, since 2019, been reducing OPPS payments to a rate equivalent to the PFS rate for clinic visits that are furnished at off-campus provider-based outpatient departments. The PFS-equivalent rate is 40% of the OPPS payment. Off-campus provider-based outpatient departments of rural sole community hospitals are exempt from this policy.

In this year’s reg, CMS proposes to continue its reimbursement policy for clinic visits delivered in off-campus provider-based outpatient departments at 40% of the OPPS payment rate. However, CMS proposes to increase payments for intensive cardiac rehabilitation services, allowing those services provided by off-campus provider-based outpatient departments to be paid at 100% of the OPPS rate (which is also 100% of the PFS rate). CMS seeks comments on whether there are other services for which the OPPS and PFS rates are the same such that their payments should similarly be increased when they are furnished in an off-campus provider-based department. This request suggests that CMS recognizes that its across-the-board site-neutral policy for clinic visits may have yielded some incongruous results.


New drugs, biologicals and radiopharmaceuticals can receive “pass-through” status for up to three years, meaning that they can receive separate reimbursement under the OPPS and are not “packaged” with the payment a hospital receives for providing the underlying service or procedure. Once they lose pass-through status, they become packaged with the overall OPPS payment. CMS packages several categories of non-pass-through drugs, biologicals and radiopharmaceuticals, regardless of the cost of the products. With respect to radiopharmaceuticals (which are used to diagnose certain medical problems or treat certain diseases), many stakeholders have requested that CMS continue to pay separately for these drugs even after they lose pass-through status. In their view, the packaged payment rate is often inadequate, especially in cases where the diagnostic radiopharmaceutical is high-cost and has low utilization.

CMS therefore seeks comment from stakeholders on five possible payment alternatives to the current policy. Based on the public comments that CMS receives, the agency reserves the right to finalize any of these alternatives (or a combination thereof) in the CY 2024 OPPS final reg. The five payment alternatives include the following:

  • Paying separately for diagnostic radiopharmaceuticals with per-day costs above the OPPS drug packaging threshold of $140
  • Establishing a specific per-day cost threshold that may be greater or less than the OPPS drug packaging threshold
  • Restructuring the ambulatory payment classification (APC), including by adding nuclear medicine APCs for services that utilize high-cost diagnostic radiopharmaceuticals
  • Creating specific payment policies for diagnostic radiopharmaceuticals used in clinical trials
  • Adopting codes that incorporate the disease state being diagnosed or a diagnostic indication of a particular class of diagnostic radiopharmaceuticals.

We will have to wait and see what comments CMS receives on these five payment alternatives, and which alternatives (if any) CMS decides to adopt.

Quality Programs

As with other quality programs in Medicare, performance on outpatient hospital and ASC quality programs has a significant impact on overall payments. A hospital or ASC must report certain quality measures under the Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting (ASCQR) Programs, respectively, or it will lose 2% of its OPPS payment. Remember, the OPPS payment update is 2.8%. Thus, hospitals and ASCs are at risk of losing most of that update if they don’t report.

In this year’s reg, CMS proposes modifications to three quality measures in the OQR and ASCQR, and proposes to add three new measures. CMS also proposes to remove the Left Without Being Seen measure from the OQR Program. This measure captures the percentage of patients who leave the emergency department (ED) without being treated (in many cases because patients felt they had to wait too long). As I have written about previously while I was at the American College of Emergency Physicians, ED overcrowding and “boarding” of patients have risen to crisis-level proportions. ED wait times are also extremely high, as boarding impacts all aspects of the ED’s patient-flow (if patients continue to fill ED beds as they wait to be admitted to the hospital, there is no place to put new patients who present to the ED).

Over the last couple of years, CMS has decreased the number of quality measures that track issues with ED overcrowding, boarding and wait times. Although CMS would maintain a boarding measure in the OQR (Median Time from ED Arrival to ED Departure for Discharged ED Patients), CMS proposes to remove an inpatient quality measure (ED-2, the Median Time from ED Arrival to ED Departure for Admitted Patients). With respect to the Left Without Being Seen measure, CMS believes that it does not provide sufficient detail to improve quality and, subsequently, patient outcomes.

CMS also proposes to codify the Rural Emergency Hospital Quality Reporting (REHQR) Program, the quality reporting program for this new facility type under Medicare. CMS would add four quality measures to the program, all of which have been previously endorsed by a consensus-based entity for use in the OQR Program. CMS also proposes policies for retaining, adding, modifying and removing measures from the REHQR Program, and seeks comments on other elements of the program.

Finally, CMS requests feedback on the quality measure topic areas of patient safety and sepsis, behavioral health (including mental health and suicide risk) and telehealth.

Intensive Outpatient Programs

In an attempt to improve access to behavioral health treatment, CMS proposes to pay for intensive outpatient services in hospital outpatient departments, federally qualified health centers, rural health clinics and opioid treatment programs. The Consolidated Appropriations Act, 2023, established Medicare coverage for intensive outpatient services beginning in CY 2024. These services are furnished under intensive outpatient programs, which are distinct and organized outpatient programs of psychiatric services provided for individuals who have an acute mental illness, including conditions such as depression, schizophrenia and substance use disorders. Besides proposing payment rates for these services, CMS also lays out physician certification requirements and coding and billing procedures.

340B Drugs

Last but definitely not least, we want to highlight proposals related to 340B drugs. The 340B program, enacted by Congress in 1992, allows safety-net hospitals to buy outpatient drugs at discounted prices. Payments under this program have grown significantly since its inception, as more providers qualify. In an effort to control spending and reduce duplicative payments, CMS implemented a controversial policy in the CY 2018 OPPS final reg that significantly cut Medicare OPPS payments for qualifying 340B drugs from the traditional average sales price (ASP) plus 6% to an adjusted amount of ASP minus 22.5%. Hospitals, led by several national hospital associations, immediately sued to invalidate this change, and on June 15, 2022, the Supreme Court of the United States ruled unanimously that the US Department of Health and Human Services may not vary payment rates for drugs and biologicals among groups of hospitals without having conducted a survey of hospitals’ acquisition costs.

As a result of this decision, CMS was compelled to restore payments to the original ASP plus 6%. CMS restored these payments in the CY 2023 OPPS final reg. In the CY 2024 OPPS proposed reg, CMS proposes to continue this statutory default rate of ASP plus 6%. CMS also proposes to use only a single modifier to identify separately payable drugs and biologicals acquired under the 340B program. Currently, 340B hospitals report the “JG” or “TB” modifiers to identify drugs and biologicals acquired through the 340B program. CMS states that “utilizing a single modifier will allow for greater simplicity,” while continuing to identify and exclude 340B-acquired drugs and biologicals from the definition of units for the purpose of Part B inflation rebate liability.

CMS also recently released a separate proposed reg, Hospital Outpatient Prospective Payment System: Remedy for 340B-Acquired Drugs Purchased in Cost Years 2018-2022, that would provide a remedy for the reduced 340B payments hospitals received from 2018 through September 27, 2022 (the date on which CMS restored reimbursement for 340B drugs to the full OPPS rate). In that proposed reg, CMS proposes to refund hospitals that had payments reduced with a one-time lump sum payment intended to account for the difference in what was paid to the hospitals and what should have been paid had the cut not been implemented. CMS estimates that the total remedy payments to 340B hospitals would be $9 billion. For our complete summary of the 340B remedy proposed reg, click here.


So, those are the major proposals in the CY 2024 OPPS proposed reg. Comments on the reg are due on September 11, 2023, and CMS will issue a final reg on or around November 1, 2023.

Before concluding, I want to note that I’m heading on vacation for the next couple of weeks, but Regs & Eggs will continue to be as hearty in my absence!

Until next week, this is Jeffrey (and Deborah and Leigh) saying, enjoy reading regs with your eggs.

For more information, please contact Jeffrey Davis. To access the full archive of Regs & Eggs, visit the American College of Emergency Physicians.

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