Previewing the Final Hospital Outpatient Medicare Payment Reg - McDermott+Consulting

Previewing the Final Hospital Outpatient Medicare Payment Reg

Previewing the Final Hospital Outpatient Medicare Payment Reg

McDermottPlus is pleased to bring you Regs & Eggs, a weekly Regulatory Affairs blog by Jeffrey Davis.

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October 26, 2023 – Sharpen your pencils and locate your reading glasses: the final Medicare payment regulations for calendar year (CY) 2024 will be released within the next week.

In the last Regs & Eggs blog post, I discussed a major issue that we are all waiting on pins and needles to see in the final physician fee schedule (PFS) reg. This week, I want to preview the final hospital outpatient prospective payment system (OPPS) reg—and to help me do so, I’m bringing in my colleague, Deborah Godes.

Annual Update

Like the PFS, the first thing that most stakeholders will do once the CY 2024 OPPS final reg is released will be to check for the size of the payment update that hospitals will receive next year. The Centers for Medicare & Medicaid Services (CMS) had proposed a 2.8% increase to payments for hospital outpatient services in the CY 2024 OPPS proposed reg, and CMS may finalize a similar update. Stakeholders, including the American Hospital Association (AHA), had expressed deep concern in their proposed reg comments, noting that a 2.8% update would not come close to covering the increased costs of labor, supplies, equipment and other resources it takes to provide services. CMS will need to address this concern in the final reg.

340B Drugs

Along with the payment update, all eyes will be on the final 340B payment policies. In the wake of a 2022 Supreme Court decision that invalidated CMS’s reduction to 340B payments, CMS had proposed the policies (in the CY 2024 OPPS proposed reg and a separate proposed reg on remedy for 340B-acquired drugs purchased between 2018 and 2022). In the CY 2024 OPPS proposed reg, CMS specifically proposed:

  • Continuing the statutory payment rate for drugs under Medicare Part B of the Average Sales Price plus 6%
  • Using only a single modifier to identify separately payable drugs and biologicals acquired under the 340B program

In the other noted reg, CMS proposed:

  • Refunding hospitals that had payments reduced due to CMS’s invalidated policy 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
    • This 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)
  • Implementing the payment cuts remedy in a budget neutral manner
    • CMS proposed to reduce the OPPS conversion factor by 0.5% starting in CY 2025 to maintain budget neutrality. CMS estimates will take 16 years to recoup all of the additional payments that were made from 2018 through September 27, 2022

These proposals have major implications, particularly those related to the implementation of the payment cut remedy. We are not expecting CMS to address the 340B remedy proposed policies in the CY 2024 OPPS final reg; rather, we expect that they will be the focus of another final reg, which could be released at any time and is not bound to any specific timelines.

Price Transparency

In the CY 2024 OPPS proposed reg, CMS had proposed beefing up its enforcement of existing price transparency requirements, including mandating that hospitals publicly post payor-specific negotiated rates for 300 “shoppable” services in a consumer-friendly way and post available payor-specific negotiated rates for all services (including emergency services) in a “machine-readable format.”

Specifically, CMS proposed requiring hospitals to report all the information in a standardized way through the use of a template (which is currently optional). CMS also proposed publicly displaying information about its compliance actions against hospitals. In previous regs, CMS has cited significant concerns with hospitals’ compliance with the price transparency requirements—and while CMS isn’t going to institute any more requirements at this time, the agency seems eager to figure out a better way to enforce the ones that are now in place.

Site Neutrality

CMS had proposed continuing its current policy (in place since 2019) to reimburse clinic visits delivered in off-campus provider-based outpatient departments at 40% of the OPPS payment rate. However, CMS had proposed shielding intensive cardiac rehabilitation services from this reduction and sought comments as to whether it should exclude other services, as well. It is important to keep in mind that even if CMS does finalize the policy as proposed, it is unlikely that CMS would be able to shield any of the other services that commenters had recommended from the reduction in CY 2024. The request for feedback on additional services was merely a comment solicitation and not an actual proposal, and CMS typically does not have the legal authority to finalize a policy that was not proposed.


Now that we have stated that CMS typically doesn’t have the authority to finalize something that wasn’t proposed, here comes a tricky case. In the CY 2024 OPPS proposed reg, CMS had sought comment on possible alternatives to its current policy of packaging diagnostic radiopharmaceuticals once they lose pass-through status. As a reminder, 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. Based on previous concerns about the packaging policy of diagnostic radiopharmaceuticals, CMS solicited feedback on the following five alternative payment policies:

  • 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.

Interestingly (and here comes the tricky part), although CMS sought comment on these alternatives, the agency stated explicitly in the proposed reg that it reserved the right to finalize any of them (or a combination thereof) in the CY 2024 OPPS final reg. This statement gives CMS an incredible amount of flexibility to finalize any sort of radiopharmaceutical policy in the final reg.

Quality Programs

CMS may finalize proposed modifications to the Hospital Outpatient Quality Reporting and Ambulatory Surgical Center Quality Reporting programs. One proposal that garnered opposition from the emergency medicine community was the possible removal of the Left Without Being Seen measure from the Outpatient Quality Reporting 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). Over the last couple of years, CMS has decreased the number of quality measures that track issues with ED overcrowding, boarding and wait times, and stakeholders believe that CMS needs to keep metrics in place that monitor and evaluate these issues.

Speaking of emergency medicine, CMS will also likely finalize new measures that will be included in the Rural Emergency Hospital Quality Reporting Program, the quality reporting program for this new facility type under Medicare.

Intensive Outpatient Programs

Finally, last but not least, the Consolidated Appropriations Act, 2023, established Medicare coverage for intensive outpatient services beginning in CY 2024—and CMS will likely finalize payment rates for these services, as well as establish physician certification requirements and coding and billing procedures.

So, those are the major policies we are watching out for in the CY 2024 OPPS final reg. Since you read this blog post, you probably have already located your reading glasses (if you need them)—be sure to keep them handy in the coming days as the final regs are released!

Until next week, this is Jeffrey (and Deborah) 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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