CMS Releases 2021 Proposed OPPS and ASC Rule

  • Regulations
  • 10/6/2020
Doctor using laptop

CMS recently released the proposed OPPS and ASC rule. Read our high-level overview of the key provisions, which includes payment and policy updates.

Key insights

  • CMS proposes to reduce reimbursement, again, for 340B hospitals.
  • CMS proposes to lift restrictions on certain physician-owned hospitals.
  • CMS proposes to phase out the inpatient-only list over three years, including 266 services in 2021.
  • CMS proposes to add to the ASC-covered procedures list, which includes adding total hip arthroplasty.

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On August 4, 2020, the Centers for Medicare & Medicaid Services (CMS) released the proposed outpatient prospective payment system (OPPS) and ambulatory surgical payment (ASC) rule. We’ve provided a high-level overview of key provisions. To review the entire proposed rule, download the proposed 2021 OPPS rule (CMS-1736-P) from the Federal Register. 

OPPS overview

Payment updates

Annual update — CMS proposes a market basket update of 2.6% for 2021.

Conversion factor — CMS proposes a conversion factor of $83.697 in the calculation of the national unadjusted payment rates for certain items and services.

Budget neutrality adjustment — CMS proposes a wage index adjustment of 1.0017.

Sole community hospitals (SCH) — CMS makes no change, continuing its ongoing policy of a 7.1% payment adjustment for rural SCHs.

Wage index — The OPPS labor-related share remains at 60% of the national OPPS payment. CMS would continue to use the final FY 2021 IPPS post-reclassified wage index for urban and rural areas as the wage index under the OPPS. This would be used to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount for CY 2021. Also, CMS will include in the finalized rule the Office of Management and Budget (OMB) delineation and 5% cap it has proposed in other PPS rules.

Comprehensive ambulatory payment classification (C-APC) — CMS proposes two new C-APCs: C-APC 5378 (Level 8 Urology and Related Services) and C-APC 5465 (Level 5 Neurostimulator and Related Procedures). Adding these C-APCs would increase the total number of C-APCs to 69.

Ambulatory payment classification (APC) and new technology APCs — CMS reviews and recalibrates various APCs, along with making a variety of adjustments to new technology APCs.

Drug pass-through payments — Twenty-six drugs and biologicals will lose that status between March 31, 2021, and December 31, 2021, while 46 will retain their pass-through status.

Device pass-through payment applications — CMS received five device pass-through payment applications, two of which received preliminary approval through CMS’ quarterly review process. Those are CUSTOMFLEX® ARTIFICIALIRIS and EXALTTM Model D Single-Use Duodenoscope. CMS seeks comments on all.

340B program — CMS proposes to reduce 340B reimbursements again in 2021 and beyond. The proposed payment would be set at the average sales prices (ASP) minus 34.7%, plus an additional 6% of the product’s ASP. This equates to a net payment rate of ASP minus 28.7%. CMS describes the methodology as follows.

  • Uses the geometric mean of the survey data collected from hospitals
  • Volume-weights the average based upon utilization of the drug in the OPPS
  • Uses the highest-priced National Drug Code (NDC) when multiple NDCs are available for a single Health Care Common Procedures Coding System (HCPCS) code
  • Eliminates penny pricing from the average
  • Eliminates any data outside of three standard deviations from the mean when calculating the average discount of 34.7%.

CMS proposes to exempt rural sole community hospitals, PPS-exempt cancer hospitals, and children’s hospitals in 2021 and beyond. CMS indicates this policy, if finalized, would begin January 1, 2021, and any subsequent changes would go through formal notice and comment rulemaking. CMS states an alternative to the rule’s proposed cuts would be to continue the current policy of paying ASP minus 22.5%.

340B Important Note

Hospitals in the 340B program continue to see considerable pressure from the agency and pharmaceutical companies related to discounts. First, this proposed rule continues reimbursement cuts established by CMS in 2018 — the subject of a lawsuit — and increases those cuts. Second, in July, a federal appeals court ruled in favor of the federal government’s ability to reduce 340B payments. Third, pharmaceutical companies have begun placing restrictions related to contract pharmacy arrangements, essentially refusing to provide 340B discounted rates for certain (or all) drugs distributed.

Partial hospitalization program (PHP) — CMS proposes a hospital-based PHP geometric mean per diem cost of $243.94.

Cancer hospital payment — CMS proposes that a target payment-to-cost of 0.89 be used to determine the 2021 cancer hospital payment adjustment to be paid at cost report settlement.

Cancer-related OPPS packaging exclusion — CMS proposes to exclude cancer-related, protein-based Multianalyte Assays with Algorithmic Analyses (MAAAs) from the OPPS packaging policy and pay for them separately under the clinical laboratory fees schedule (CLFS).

Policy updates

Inpatient Only (IPO) List — CMS indicates they have considered various stakeholder comments requesting that they eliminate the IPO list, and the agency has re-evaluated the need to restrict payment for certain procedures in the hospital outpatient setting.

They agree with stakeholders that the physician’s clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, is best to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required. Therefore, CMS proposes to eliminate the IPO list over a period of three years.

For 2021, CMS proposes to remove musculoskeletal services from the IPO list. CMS indicates that of the 1,740 services on the IPO list, 266 are musculoskeletal. The full list will be eliminated by January 1, 2024. CMS seeks comments on other services to remove in the next two years, whether additional APCs should be created, and whether any of the 266 musculoskeletal services should be added to the ASC list.

Finally, CMS proposes to continue its policy of a two-year exemption from referral to the Recovery Audit Contractors for non-compliance with the two-midnight policy for those services moved off the IPO list.

Physician-owned hospitals — CMS proposes two changes related to physician-owned hospitals that are high Medicaid facilities. A ‘‘high Medicaid facility’’ refers to a hospital that:

  1. Is not the sole hospital in a county;
  2. With respect to each of the three most recent 12-month periods for which data are available, has an annual percent of total inpatient admissions under Medicaid that is estimated to be greater than such percent with respect to such admissions for any other hospital located in the county in which the hospital is located; and
  3. Does not discriminate against beneficiaries of federal health care programs and does not permit physicians who practice at the hospital to discriminate against such beneficiaries.

For these facilities, CMS proposes to:

  • Permit a high Medicaid facility to request an exception to the prohibition on expansion of facility capacity at any time, provided that it has not submitted another request for an exception that is still awaiting a CMS decision.
  • Remove the restriction capping expansion of operating rooms, procedure rooms, and beds for which the hospital is licensed at 200% of the hospital’s baseline number of operating rooms, procedure rooms, and beds. CMS also removes the restriction that the expansion occur only in facilities on the hospital’s main campus.

Supervision requirements — CMS proposes to permanently allow general supervision for all non-surgical extended duration therapy services (NSEDTS), including the initiation of the service, which had previously required direct supervisions.

While CMS does not believe it has the authority to make general supervision the default level of supervision for cardiac, pulmonary, or intensive cardiac rehabilitation, it does propose to allow for direct supervision to be provided using audio-video real-time communications technology. CMS does clarify that the virtual presence required for direct supervision is subject to the clinical judgement of the supervising physician.

Prior authorization — CMS proposes to add two new service categories to the prior authorization process. For service on or after July 1, 2021, the two categories are cervical fusion with disc removal and implanted spinal neurostimulators.

Star ratings — CMS proposes multiples changes with goals to address administrative burden and increase the “simplicity of the methodology, predictability of measure emphasis within the methodology over time, and comparability of ratings among hospitals.”

CMS proposes to include Veterans Health Administration (VHA) hospitals and critical access hospitals (CAHs). CMS indicates that because of the production timeline to calculate and distribute results in time for hospitals to preview the ratings in advance of public release, they will use the CY 2021 OPPS/ASC proposed rule to propose the methodology, even though it includes not only hospital outpatient measures, but also hospital inpatient measures. CMS seeks comments overall.

Outpatient quality program — No measures are added or removed.

ASC overview

Annual update — CMS proposes a 2.6% factor.

Conversion factor — CMS proposes a factor of $48.984 for 2021.

Office-based procedures — CMS proposes making six procedures as permanently office-based procedures and 11 as temporarily office-based for 2021.

Covered Procedures List (CPL) — CMS looks to add 11 procedures to the CPL, including total hip arthroplasty, transcervical uterine fibroid ablation, and intravascular lithotripsy procedures, among others. Further, CMS seeks comments on two alternatives to adding services to the CPL in the future. One alternative creates a nominations process for services to be reviewed and added. The second revises the criteria for addition, which would result in 270 procedures being added in 2021. CMS seeks comments.

Quality program — No measures are added or removed.

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Consider all of the ramifications of the proposed OPPS and ASC rule. If you need assistance, connect with CLA for further clarification on this rule and how it might impact your organization.

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