CMS Releases CY 2020 Medicare OPPS and ASC Payment System Final Rule - McDermott+Consulting

CMS Releases CY 2020 Medicare OPPS and ASC Payment System Final Rule

For CY 2020, the Centers for Medicare & Medicaid Services (CMS) increased payment rates under the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment Systems by a factor of 2.6%. In continuation of an existing policy, hospitals and ASCs that fail to meet their respective quality reporting program requirements are subject to a 2.0% reduction in the CY 2020 Conversion Factor (CF).

Payment System

CY 2020 CF
(Full update)

CY 2020 CF
(Reduced update)







CMS will continue to apply the weight scalar in the calculation of ASC payment rates, which for CY 2020 is set at 0.8550, further increasing the divide between OPPS and ASC payment rates.

CMS estimates that total payments to OPPS and ASC providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization and case-mix) for CY 2020 will be approximately $79 billion and $4.96 billion, respectively. This represents an increase of approximately $6.3 billion and $230 million, respectively, from CY 2019 payment levels.

  • The final regulations are available here.
  • The accompanying CMS fact sheet is available here.

Key Takeaways

1. CMS applies prior authorization to five categories of services when performed in the hospital outpatient setting, laying the groundwork for expanded use of utilization management under Medicare fee-for-service.

2. Despite unfavorable court rulings, CMS continues to implement policies aimed at reducing incentives to establish physician services as facility services—including reduced payments for 340B drugs and site-neutral payments for all clinic visits.

3. CMS reduces supervision requirements (from direct to general) for all hospital outpatient therapeutic services in a nod to burden reduction.

4. CMS continues to expand the list of services payable in the hospital outpatient and ASC settings, removing 12 services from the inpatient-only list and adding 20 services to the ASC covered procedure list.

OPPS Major Final Policies

Price Transparency Changes Implementing Executive Order

Key Takeaway: Not addressed in the final rule. A forthcoming final rule is expected.

In July 2019, CMS proposed to require hospitals to publicly post standard charge information, including payer-specific negotiated charges for all items and services provided by the hospital. CMS did not address this proposal in the final rule and instead plans to summarize and respond to public comments on the proposed policies in a separate forthcoming final rule.


Prior Authorization Process for Certain Services

Key Takeaway: Medicare requires hospitals to seek prior authorization for five categories of services reimbursed under the OPPS. Hospitals demonstrating high levels of compliance with Medicare coverage, coding and payment rules will be exempt.

CMS finalized its proposal to establish a process through which hospitals must submit a prior authorization request for a provisional affirmation of coverage before a covered outpatient service is furnished to the beneficiary and before the claim is submitted for processing. This change will apply to the following five categories of services:

  • Blepharoplasty
  • Botulinum toxin injections
  • Panniculectomy
  • Rhinoplasty
  • Vein ablation.

The hospital’s prior authorization request must include all documentation necessary to show that the service meets applicable Medicare coverage, coding and payment rules, and the request must be submitted before the service is furnished to the beneficiary and before the claim is submitted. Claims submitted for services that require prior authorization that have not received a provisional affirmation of coverage from CMS or its contractors will be denied.

Provisional affirmation does not guarantee payment. A claim for services may still be denied based on either technical requirements that can only be evaluated after the claim has been submitted for formal processing, or information not available at the time the prior authorization request is received. Hospitals will have an opportunity to submit prior authorization requests for expedited review when a delay could seriously jeopardize the beneficiary’s life, health or ability to regain maximum function. While there is no formal appeal of a non-affirmation, there are no limits on the number of times a hospital may resubmit a non-affirmed request, and providers may also appeal any claim that is denied.

CMS may elect to exempt a provider from the prior authorization process upon a provider’s demonstration of compliance with Medicare coverage, coding and payment rules. The exemption would remain in effect until CMS elects to withdraw it. CMS will exempt providers that achieve a prior authorization provisional affirmation threshold of at least 90% during a semiannual assessment. Providers will be notified that they are exempt from the prior authorization process, or that a prior exemption is being withdrawn, within 60 days of the effective date of the exemption or withdrawal of exemption.

Because the prior authorization process applies only to claims paid under the OPPS, services provided outside of the hospital outpatient setting, such as in a physician office or ASC, will not be subject to the prior authorization process.


Wage Index Changes to Address Rural Disparities

Key Takeaway: FY 2020 Hospital Inpatient Prospective Payment System (IPPS) wage index changes finalized and adopted.

The Medicare wage index seeks to adjust hospital payments to account for how much labor costs vary in different areas of the United States. For FY 2020, CMS made a variety of changes to the method for calculating the wage index under the IPPS, many of which were intended to support rural providers by narrowing the gap between urban and rural wage index values. In the proposed OPPS update for CY 2020, CMS proposed to adopt those same changes and the updated wage index values under the OPPS as well.

CMS finalized this change, applying the updated wage index to the OPPS for 2020. The wage index value of an affected hospital will increase by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals. Based on the data for the final rule, the 25th percentile wage index value across all hospitals is 0.8457 for FY 2020. Hospitals with wage index values below 0.8457 will have their wage index adjusted. This policy will be effective for at least four years.


Site-Neutral Payments for Clinic Visits at Off-Campus Provider-Based Departments

Key Takeaway: All clinic visits provided by off-campus hospital outpatient departments will be paid at 40% of the OPPS rate effective January 1, 2020.

Beginning in 2019, CMS implemented a policy that reduced OPPS payments for clinic visits described by HCPCS code G0463 and furnished by off-campus provider-based outpatient departments that previously were excepted or grandfathered from site-neutral payment policies. In the 2019 rulemaking, CMS decided to phase-in the payment reduction over two years. For 2020 CMS proposed to implement the second portion of the payment reduction, a change that would reduce payments for these services by 40%.

This change is controversial and the subject of litigation. In September 2019, a federal district court sided with the hospital plaintiffs, ruling that CMS lacked statutory authority to implement the change.

Despite the ruling, effective January 1, 2020, clinic visits provided by all off-campus provider-based outpatient departments will be paid 40% of the OPPS rate, also known as the Physician Fee Schedule-equivalent payment rate. CMS continues to apply this policy in a non-budget-neutral fashion and estimates savings of about $800 million in CY 2020.

CMS acknowledged the district court decision but indicated that the agency is considering an appeal and does not believe it is appropriate to change the two-year phase-in of the policy at this time.


340B Payment Cuts

Key Takeaway: CMS maintained drastic cuts in Medicare payment for 340B drugs. No potential remedy before CY 2021.

The CY 2020 Medicare OPPS final rule provides no relief for hospitals that had Medicare payments for drugs purchased under the 340B drug discount program cut pursuant to a 2019 change. In 2018, CMS implemented a controversial change whereby Medicare pays for drugs covered and paid under the OPPS and purchased through the 340B Program at Average Sales Price (ASP) minus 22.5%, instead of the traditional ASP plus 6%. In 2019, CMS extended this policy by also paying ASP minus 22.5% for 340B-acquired drugs furnished by non-excepted off-campus provider-based departments.

In December 2018, a federal district court concluded that CMS exceeded its authority when it implemented this policy change. In May 2019, the court determined that the 2019 rule that extended the rate reduction to non-excepted (i.e., non-grandfathered) off-campus provider-based departments of a hospital also exceeded CMS’s authority, and remanded the two rules to CMS to determine an appropriate remedy. In July 2019—before CMS proposed a remedy—the court entered final judgment, allowing the government to cleanly appeal the court’s decision to the US Court of Appeals for the District of Columbia Circuit. The government filed an appeal on the same day.

In the proposed CY 2020 update, CMS proposed to continue the 2018–2019 payment reductions through 2020 for 340B-acquired drugs. CMS also suggested that it was considering, as an alternative, a payment rate of ASP plus 3%, and solicited comments.

For CY 2020, CMS finalized its proposal to maintain ASP minus 22.5% as the payment rate for drugs purchased under the 340B program. In a nod to the ongoing litigation and a potential adverse ruling on appeal, CMS said that it anticipates proposing a specific remedy in the CY 2021 OPPS/ASC proposed rule. The agency also indicated that it may use the comments received and/or 340B hospital survey data on drug acquisition costs in CYs 2018 and 2019 to develop a remedy and/or future payment rates.


Supervision Requirements for Hospital Outpatient Therapeutic Services

Key Takeaway: CMS reduced required level of supervision for hospital outpatient therapeutic services from direct to general supervision.

CMS finalized a change to the minimum required level of supervision for hospital outpatient therapeutic services from direct supervision to general supervision for services furnished by all hospitals and critical access hospitals. CMS stated that the direct supervision requirement for hospital outpatient therapeutic services placed additional burden on providers and reduced their flexibility to provide medical care. General supervision means that the procedure is furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the procedure.

In the proposed rule, CMS sought public comments on whether specific types of services, such as chemotherapy administration or radiation therapy, should be excepted from the change to the supervision requirements. CMS finalized the proposal to apply to all services, including chemotherapy and radiation therapy services.


Inpatient Only list

Key Takeaway: CMS removed 12 procedures from the inpatient only (IPO) list, including total hip arthroplasty

In addition to finalizing its proposal to remove total hip arthroplasty, CMS removed six spinal procedures and five anesthesia codes related to codes that had already been removed from the IPO list.

ASC Major Final Policies

ASC Covered Procedures List

Key Takeaway: CMS significantly expanded the ASC covered procedure list by adding 20 procedures.    

Additions to the ASC covered procedures list include total knee arthroplasty, knee mosaicplasty, six coronary intervention procedures, and 12 surgical procedures with new CPT and/or HCPCS codes for CY 2020.


For more information, contact Jessica Roth.