CMS Releases Proposed CY 2023 Hospital Outpatient Rule

  • Regulations
  • 8/15/2022
African american male doctor talking to nurse at nurse station.

Key insights

  • CMS proposes a market basket of 3.1% reduced by the productivity adjustment of 0.4% resulting in a 2.7% update.
  • CMS proposes rural emergency hospitals will receive $3.2 million annually in facility payments.
  • CMS proposes 340B cuts but indicates it will return to ASP+6 in the final rule due to the U.S. Supreme Court’s recent ruling.
  • CMs proposes exempting sole community hospitals from site-neutral payment cuts

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On July 26, the Centers for Medicare & Medicaid Services (CMS) released its proposed Calendar Year (CY) 2023 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule. This rule includes regular payment updates and policies for the OPPS and ASC systems, but also details important payment and reimbursement aspects for the new Medicare designation, the Rural Emergency Hospital (REH). Comments will be accepted through September 13, 2022.

Table of Contents

  1. OPPS
    1. OPPS payment updates
    2. 340B payment policy
    3. Composite Ambulatory Payment Classification (C-APCs)
    4. Software as a Service payments
    5. HOPDs/ASCs to report discarded single-dose, single-use package drugs
    6. N95 masks
    7. Mental health services furnished remotely
    8. Supervision by nonphysician practitioners for diagnostic services
    9. Sole community hospitals site neutral exemption, payments
    10. Changes to inpatient only list (IPO)
    11. Prior authorizations
    12. Organ acquisition payment policies
  2. Hospital Outpatient Quality Reporting (OQR) program
  3. CMS seeks comments
  4. Rural emergency hospital (REH)
    1. Reimbursements
    2. Annual facility payment
    3. Enrollment
    4. Stark exemption
    5. Quality reporting program
  5. ASC payments

1. OPPS

OPPS payment updates

CMS proposes an update of 3.1% reduced by the productivity adjustment of 0.4% for a final rate of 2.7%. CMS estimates that total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for calendar year (CY) 2023 would be approximately $86.2 billion, an increase of approximately $6.2 billion compared to estimated CY 2022 OPPS payments.

For rate setting, CMS proposes to use CY 2021 claims data with cost reporting periods through CY 2019 (prior to the Public Health Emergency (PHE)) to set CY 2023 OPPS and ASC payment system rates.

CMS proposes the 2.7% increase to the CY 2022 conversion factor of $84.177, which results in a 2023 rate of $86.785 for the calculation of the national unadjusted payment rates. Overall, CMS indicates this reflects a proposed:

  • Wage index budget neutrality adjustment of approximately 1.0010
  • 5% annual cap for individual hospital wage index reductions adjustment of approximately 0.9995
  • Cancer hospital payment adjustment of 1.0000
  • Adjustment to account for the 0.01 percentage point of OPPS spending associated with the payment adjustment for domestic approved surgical N95 respirators
  • Adjustment of an increase of 0.34% point of projected OPPS spending for the difference in pass-through spending

340B payment policy

340B Policy and U.S. Supreme Court Decision

Review CLA's Health Care Innovation and Insight (HI²) 340B blost post for background information on the Court's ruling as well as practical implications for 340B hospitals.

The OPPS proposed rule provides an important opportunity to submit comments on how the agency should move forward.

Since 2019, CMS has applied a payment reduction to 340B reimbursements under the OPPS system. That reduction has been a negative 22.5% (as opposed to regular reimbursements at average sales price (ASP) +6%) and has been the subject of ongoing litigation. In July 2022, the U.S. Supreme Court ruled that CMS inappropriately cut 340B reimbursements.

CMS states the agency was well into the development of the CY 2023 proposed OPPS rule when the Supreme Court ruling came out. Therefore, it was not able to adjust the proposed rule, which is why it still contains language proposing 340B payments will again be reduced by a -22.5%. However, CMS says,

… in light of the Supreme Court’s recent decision in American Hospital Association, we fully anticipate reverting to our prior policy of paying for drugs at ASP+6 percent, regardless of whether they were acquired through the 340B program for CY 2023. We also fully expect that when we revert to paying for drugs acquired through the 340B program at ASP+6 percent, we will budget neutralize that increase consistent with the OPPS statute and our longstanding policy by making a corresponding decrease to the conversion factor to account for the increase in the payment rates for these drugs. As set forth above, to ensure budget neutrality under the OPPS, after applying this alternative payment methodology for drugs and biologicals purchased under the 340B Program, we currently estimate that we would apply an offset of approximately $1.96 billion to decrease the OPPS conversion factor, which would result in a budget neutrality adjustment of 0.9596 to the OPPS conversion factor, for a revised conversion factor of $83.279.

CMS is still evaluating how it will address the Supreme Court’s decision for other years that included the reduction (i.e., 2020 and on). Further, the agency seeks comments on budget neutrality and indicates those will be carefully considered.

Composite Ambulatory Payment Classification (C-APCs)

CMS proposes to add one C-APC in CY 2023: Proposed C-APC 5372 (Level 2 Urology and Related Services).

CMS also proposes that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on a single date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be paid through C-APC 8010 for CY 2023. In addition, CMS proposes to set the payment rate for C-APC 8010 at the same payment rate that it proposes for APC 5863 (the maximum partial hospitalization per diem payment rate for a hospital) and that the hospital continue to be paid the proposed payment rate for C-APC 8010.

Software as a Service (SaaS) payments

In 2018, CMS began reimbursing for the first SaaS procedure, Fractional Flow Reserve Derived from Computed Tomography (FFRCT), also known by the trade name HeartFlow, a noninvasive diagnostic service that allows physicians to measure coronary artery disease in a patient through the use of coronary CT scans. For CY 2023, CMS proposes to move HeartFlow (HCPCS 0503T) from New Technology APC 1511 to APC 5724 (Level 4 Diagnostic Tests and Related Services), a clinical APC.

Since HeartFlow, CMS has also begun paying for other SaaS procedures that use artificial intelligence algorithms. For example, retina/eye-related Current Procedural Terminology (CPT) code 92229 was assigned to APC 5793. In addition, the American Medical Association (AMA) has released additional CPT codes for SaaS. Those include standalone codes associated with other SaaS procedures, including CPT 0648T, CPT 0721T, and CPT 0723T. CMS has separately paid those under New Technology APCs under the OPPS.

While the AMA also released add-on codes to these CPT codes, CMS indicates that under its existing packaging policy, it would package payment for the add-on codes (CPT 0649T, 0722T, and 0724T) into the associated diagnostic imaging service. Instead of recognizing these CPT add-on codes, CMS proposes to establish HCPCS codes, specifically, C-codes, to describe the add-on codes as standalone services that would be billed with the associated imaging service.

Further, CMS discusses SaaS procedures and the difficulty they present for payment policies because of their uniqueness, making it a challenge to compare some SaaS procedures to existing medical services for purposes of determining clinical and resource similarity. CMS is, therefore, soliciting public comment on a payment approach that would broadly apply to SaaS procedures.

CMS solicits comments on:

  • How to identify services that should be separately recognized as an analysis distinct from both the underlying imaging test or the professional service paid under the Physician Fee Schedule (PFS)
  • How to identify costs associated with these kinds of services
  • How these services might be available and paid for in other settings (physician offices, for example)
  • How the agency should consider payment strategies for these services across settings of care

CMS also seeks comments on the specific payment approach it might use for these services under the OPPS as SaaS-type technology becomes more widespread across healthcare.

HOPD/ASCs to report discarded single-dose, single-use package drugs

CMS alerts readers that the 2023 proposed Physician Fee Schedule (PFS) rule contains policies related to Hospital Outpatient Departments (HOPDs) and ASCs. The proposed requirement is the result of language in the Infrastructure Investment and Jobs Act (Pub. L. 117– 9) enacted in November 2021 that requires manufacturers to provide a refund to CMS for certain discarded amounts from a refundable single-dose container or single-use package drug.

As such, CMS proposes that the JW modifier would be used to determine the total number of billing units of the HCPCS code (that is, the identifiable quantity associated with an HCPCS code, as established by CMS) of a refundable single-dose container or single-use package drug, if any, that were discarded for dates of service during a relevant quarter for the purpose of calculating the refund amount.

The CY 2023 PFS proposed rule also proposes to require HOPDs and ASCs to use a separate modifier, JZ, in cases where no billing units of such drugs were discarded and for which the JW modifier would be required if there were discarded amounts.

N95 masks

CMS proposes that payment reflect additional marginal resource costs in procuring domestically made approved N95 respirators. CMS proposes to provide these as biweekly interim lump-sum payments. Information will be collected via cost reports and apply to cost reporting periods beginning January 1, 2023.

Mental health services furnished remotely

As a continuation of existing policies under the PHE for CY 2023, CMS is proposing to consider mental health services furnished remotely by hospital staff using communications technology to beneficiaries in their homes as covered outpatient department services payable under the OPPS. CMS would also create OPPS-specific coding for these services.

CMS proposes an in-person service within six months prior to the initiation of the remote service is required with in-person service required every 12 months thereafter. Exceptions to the in-person visit requirement may be made based on beneficiary circumstances (with the reason documented in the patient’s medical record), and that more frequent visits are also allowed under the proposed policy, as driven by clinical needs on a case-by-case basis. CMS proposes that audio-only interactive telecommunications systems may be used to furnish these services in instances where the beneficiary is not capable of, or does not consent to, the use of two-way, audio/video (synchronous) technology.

CMS proposes creating three OPPS-specific codes (see recreated table 47) to describe these services and those code descriptors will specify that the beneficiary must be in their home and that there is no associated professional service billed under the PFS. CMS proposes that all hospital staff performing these services must be licensed to furnish these services consistent with all applicable state laws regarding scope of practice, and that hospital clinical staff be physically located in the hospital/HOPD when furnishing services remotely using communications technology. CMS notes that the proposal would also allow these services to be billed by Critical Access Hospitals (CAHs), even though CAHs are not paid under the OPPS.

With respect to payment, CMS proposes to use the PFS as proxy (see Table 48). CMS seeks specific comment on this proposal.

TABLE 47: C-Code Numbers and Proposed Long Descriptors
HCPCS Code Proposed Long Descriptor 
CXX78  Service for diagnosis, evaluation, or treatment of a mental health or substance use disorder, initial 15 – 29 minutes, provided remotely by hospital staff who are licensed to provide mental health services under applicable state law(s) when the patient is in their home and there is no associated professional service 
CXX79  Service for diagnosis, evaluation, or treatment of a mental health or substance use disorder, initial 30 – 60 minutes, provided remotely by hospital staff who are licensed to provide mental health services under applicable state law(s) when the patient is in their home and there is no associated professional service 
CXX80  Service for diagnosis, evaluation, or treatment of a mental health or substance use disorder, each additional 15 minutes, provided remotely by hospital staff who are licensed to provide mental health services under applicable state law(s) when the patient is in their home and there is no associated professional service (list separately in addition to code for primary service) 
TABLE 48: Proposed SI, APC, Assignment, Geometric Mean Cost, HCPCS Code CXX78 – CXX80
HCPCS Code Short Descriptor Proposed SI Proposed Proxy Service PFS Facility Rate Proposed APC APC GMC
CXX78 HOPD mntl hlt, 15 – 29 min S 96159 $19.52 5821 $30.48
CXX79 HOPD mntl hlt, 30 – 60 min  S 95158  $56.56  5822 $77.67 
CXX80  HOPD mntl hlt, ea addl  N N/A  N/A  N/A  N/A 

Supervision by nonphysician practitioners for diagnostic services

CMS proposes to revise existing supervision requirements to clarify that nurse practitioners, clinical nurse specialists, physician assistants, certified registered nurse anesthetists, and certified nurse midwives may provide general, direct, and personal supervision of outpatient diagnostic services to the extent that those professionals are authorized to do so under their scope of practice and applicable state law. This would apply to Prospective Payment Systems (PPS) and CAHs.

Sole community hospitals (SCH) site neutral exemption, payments

Additional rural hospitals that should be exempt from site neutral reduction for G0463

CMS seeks comments on whether other rural hospitals should be exempted from the site neutral payment cut for G0463. CMS specifically references those with under 100 beds. If you are a rural hospital and impacted by these payment reductions, this is an important opportunity to provide comment and reasoning for why an exemption is important.

CMS has an existing policy to pay for a clinic visit (G0463) at excepted off-campus provider-based departments (PBDs) a site neutral rate equivalent to the PFS, or roughly 40% of the regular OPPS rate. CMS proposes to now exempt excepted off-campus PBDs of rural SCHs from this policy because it believes that these visits are not driven by volume but by factors other than the payment differential for this service. CMS proposes to pay the OPPS payment rate, rather than the PFS-equivalent rate at SCHs. (As a reminder, CMS has already exempted SCH from its 340B payment reductions.)

CMS proposes to continue the current policy of a 7.1% payment adjustment for rural SCHs for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, applied in a budget neutral manner.

Changes to Inpatient Only (IPO) list

For 2023, CMS proposes removing 10 services from the IPO list, eight of which are maxillofacial procedures, while adding eight newly created CPT codes to the IPO list, six of which relate to hernias.

Prior authorizations

CMS proposes to add a new service category to the existing services requiring prior authorization. The category is “Facet Joint Interventions,” and includes facet joint injections, medial branch blocks, and facet joint nerve destruction. The requirement would begin March 1, 2023 and covers CPT codes 64490 – 64495 and 64633 – 64636.

Organ acquisition payment policies

CMS proposes to alter how an organ is counted as a Medicare usable organ for purposes of calculating Medicare’s share of organ acquisition costs by counting only organs transplanted into Medicare beneficiaries. CMS proposes to codify that Medicare does not share in the costs to procure organs used for research, except where explicitly required by law. CMS finally proposes to require donor community (not transplant) hospitals to bill the organ procurement organization their customary charges reduced to costs for services provided to deceased organ donors.

2. Hospital Outpatient Quality Reporting (OQR) program

CMS proposes the following to the OQR:

  • Add a data validation targeting criterion to existing four targeting criteria that reads: “Any hospital with a two-tailed confidence interval that is less than 75 percent, and that had less than four quarters of data due to receiving an ECE for one or more quarters,” beginning with the CY 2023 reporting period/CY 2025 payment determination
  • Align patient encounter quarters with the calendar year, beginning with the CY 2024 reporting period/CY 2026 payment determination
  • Change the Cataracts: Improvement in Patient's Visual Function within 90 Days Following Cataract Surgery (OP-31) measure from mandatory to voluntary beginning with the CY 2027 payment determination

CMS seeks comments on the future readoption of the Hospital Outpatient Volume on Selected Outpatient Surgical Procedures (OP-26) measure or another volume indicator in the Hospital OQR Program.

3. CMS seeks comments

CMS seeks comments on several other topics. Those are:

  • Pulmonary, cardiac, intensive cardiac rehab. CMS seeks comments on continuing to allow physician’s direct supervision of pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services to be fulfilled via audio/video real-time communications technology when use of such technology is indicated to reduce exposure risks for the beneficiary or health care provider. The agency seeks comments on safety and/or quality of care concerns regarding adopting this policy beyond the PHE and what policies CMS could adopt to address those concerns if the policy were extended post-PHE.
  • Substance use disorder (SUD) services, intensive outpatient programs. CMS seeks comments on whether certain mental health and SUD services described by existing CPT codes paid under the OPPS pose any gaps in coding that may be limiting access to needed levels of care for treatment for Medicare beneficiaries. CMS is interested in additional, detailed information about intensive outpatient program services, such as the settings of care in which these programs typically furnish services, the range of services typically offered, the range of practitioner types that typically furnish those services, and any other relevant information, especially to the extent it would inform its ability to verify that Medicare beneficiaries have access to this care.
  • Health care consolidation. CMS continues its focus on health care mergers, acquisitions, and overall consolidation in the industry. The agency solicits comments on the following questions:
    • What additional data that is already collected by form 855A (PECOS) would be helpful to release to the public and researchers, to help identify the impact of provider mergers, acquisitions, consolidations, and changes in ownership on the affordability and availability of medical care, and why?
    • Do commenters suggest that CMS release data on any mergers, acquisitions, consolidations, and changes in ownership that have taken place for any additional types of providers beyond nursing facilities and hospitals? If so, for which types of providers?
    • What additional information collected by CMS would be useful for the public or researchers who are studying the impacts of mergers, acquisitions, consolidations, or changes in ownership?
    • In 2016, CMS completed its initial round of Medicare enrollment revalidations and resumed regular revalidation cycles. Would data for transactions occurring before the 2016 CMS revalidation effort be useful for the public or researchers, even if such data may be less complete?

4. Rural emergency hospital (REH)

The REH is a new Medicare designation for small, rural hospitals. It was enacted under the Consolidated Appropriations Act, 2021 and signed into law on December 27, 2020. The statute sets January 1, 2023, as the earliest date an REH is effective. Keep in mind there are additional requirements before an REH can exist, including that the respective state has licensed the REH designation and then the REH is licensed/approved accordingly.

CLA knows rural hospitals. Read our original article on the REH, A Path Forward: CLA's Simulations on Rural Emergency Hospital Designation, cited by CMS along with our regulatory advisor on proposed REH CoP: CMS Cites CLA Study in Proposed Rural Emergency Hospital Rule

The REH was designed to financially stabilize rural CAHs or rural PPS hospitals with fewer than 50 beds that may otherwise have to close. CMS released its proposed REH Conditions of Participation (CoP) on July 6, 2022. Refer to CLA’s Regulatory Advisor covering those conditions and how CMS cited CLA’s REH simulations in its work. See CMS Cites CLA Study in Proposed Rural Emergency Hospital Rule.

The proposed REH CoPs rule was silent on how REHs would be paid, leaving those and other policies to be covered in the proposed 2023 OPPS rule. These OPPS proposals are detailed below.

REH reimbursements

In defining what an “REH service” includes, CMS takes a broad view:

… all covered outpatient department service … furnished by an REH that would be paid under the OPPS when provided in a hospital paid under the OPPS for outpatient services, provided that the REH meets the various applicable REH CoPs. In other words, all services that are paid under the OPPS when furnished in an OPPS hospital, with the exception of acute inpatient services, would be REH services when furnished in a REH. We note that this definition of REH services excludes services described in section 1833(t)(1)(B)(ii) of the Act, which cannot be considered REH services because they are inpatient services … [page 44777]

CMS proposes to pay for these services at the OPPS rate +5%, as set forth under statute, and will utilize the existing OPPS claims processing system with a flag to alert the payment is for the REH. CMS would not include the 5% add-on bump for beneficiary co-payments.

CMS specifically notes that REH services will not have any impact on OPPS budget neutrality and REH claims will not be used for OPPS rate setting purposes.

With respect to other services provided by an REH that are not covered under the OPPS, CMS proposes to allow those to be reimbursed under their respective fee schedule. In other words, as long as the REH meets the statutory requirements governing a provider type and the proposed REH CoPs and has services that do not meet the proposed definition of REH services for OPPS payment, those claims would still be paid for by Medicare but under the appropriate fee schedule and without the additional 5% bump. CMS specifically references the SNF Fee Schedule and Clinical Laboratory Fee Schedule as examples.

CMS proposes to also exempt REHs from existing site neutral payments related to “off-campus provider-based departments.”

REH annual facility payment

The underlying REH statute sets up an annual facility payment for REH conversions. The facility payment is equal to CAH payments in 2019 compared to what those payments would have been if paid under the OPPS system. This dollar amount is then divided by 12 and given in monthly installments to each REH.

CMS discusses this calculation in detail.

CAH 2019 Actual. In setting the facility payment, CMS interprets it should be based on a calendar year. CMS proposes to use CAH claims data with service dates in CY 2019 to calculate the actual Medicare spending for CAHs for CY 2019, including CAH claims data for inpatient hospital services, inpatient rehabilitation services, inpatient psychiatric services, outpatient hospital services, and skilled nursing services including both hospital-based and swing-bed services. This will include provider payment, coinsurance amounts, and deductible amounts for all of the claims.

CAH 2019 If Paid Under OPPS, IPPS, SNF. When using the statutory requirement to base the prospective amount on the total amount that would have been paid to CAHs for inpatient hospital services, outpatient hospital services, and skilled nursing services if paid under their respective PPS, CMS proposes to use claims data from the last nine months of FY 2019 and the first three months of FY 2020 to calculate payment data for CY 2019 for both inpatient hospital services and skilled nursing services and claims data from CY 2019 for outpatient hospital services. CMS proposes to use the Medicare payment and the beneficiary payment when setting the amount.

As it did in the proposed CoP rule, CMS again references CLA's simulations on how many REH conversions may occur. See page 44755 of the Vol. 87, No. 142, Tuesday, July 26m 2022 Federal Register.

To determine the prospective payment amount, CMS proposes to use various fee schedules, such as the IPPS, OPPS, and SNF PPS, among others — as well as to include services and items paid through other payment subsystems, such as Clinical Laboratory Improvement Amendments, PFS, ambulance services, parenteral and enteral nutrition services, durable medical equipment/prosthetics/orthotics/supplies, vaccines, and Medicare Part B drugs if those services and items are reported on an inpatient CAH claim, an outpatient CAH claim, or a skilled nursing CAH claim.

CMS also proposes to include other add-ons or supplemental payments, including IPPS new technology payments, outlier claims payments in both the IPPS and the OPPS, clotting factor payments, indirect medical education (IME) payments, Disproportionate Share Hospital (DSH) payments, uncompensated care payments, and low-volume hospital payments. For IME and DSH adjustments, CMS will estimate an aggregate amount of IME and DSH spending for all CAHs.

CMS indicates it will not include adjustments for various quality reporting programs — value-based purchasing program payments, hospital readmissions reduction program adjustments, and hospital-acquired condition reduction program — because it could find no sufficient way to model these out for CAHs. CMS will make several other adjustments, such as Medicare Advantage claims that are not a primary payer, device credits, and sequester reduction.

In determining SNF PPS payments, CMS uses that system since SNFs paid via the SNF PPS are required to conduct patient assessment within a certain number of days after admission and submit the data to the CMS Minimum Dataset database for payment calculation. Once a daily rate is determined, claim payment is calculated as the number of covered days multiplied by the daily rate and geographic adjustment factor.

In determining swing beds, CMS indicates the simplest prediction of Resource Utilization Guidelines (RUG) and Patient-Driven Payment Model (PDPM) rate is to use the average daily rate across all PPS-paid SNF claims. However, this prediction ignores the fact that the patient case-mix of CAH swing beds is different from that of PPS-paid SNFs. To address this, CMS created a predictive model of RUG/PDPM per-diem rates for CAH swing-bed claims, using PPS-paid claims, and relied on one assumption as the basis of the prediction: the per-diem rate varies by the clinical conditions and severity of the patient.

In order to gather that information, CMS used the three-day qualifying inpatient stay rule (i.e., patients must have a medically necessary three-day consecutive inpatient hospital stay for Medicare to cover the SNF benefit) to link a qualifying inpatient hospital claim to the CAH swing-bed claims. Because the SNF payment system changed in 2019 from RUGs to PDPM, CMS proposes to apply RUG PPS rules for claims with service dates between January 1, 2019, and September 30, 2019, and apply PDPM rules for those with service dates between October 1, 2019, and December 31, 2019.

When pulling all of these payments together, CMS proposes that the monthly REH facility payment would be $268,294 or an annual amount of $3,219,523.

CMS Proposal calculating monthly facility payment

Step 1: The total amount of Medicare spending for CAHs in CY 2019 minus the projected Medicare spending for CAHs in CY 2019 if inpatient hospital services, outpatient hospital services, and skilled nursing services had been paid on a prospective basis rather than at 101% of total cost and calculated according to the methodology described.

Total amount of Medicare spending for CAHs in CY 2019: $12.08 billion
Total projected amount of Medicare spending for CAHs if paid prospectively in CY 2019: $7.68 billion
Step 1 difference: $12.08 billion – $7.68 billion = $4.40 billion

Step 2: The difference in Step 1 would be divided by the number of CAHs enrolled in Medicare in CY 2019 to calculate the annual payment per individual REH. The annual payment amount would be divided by 12 to calculate the monthly REH facility payment. Each REH would receive the same facility payment.

Step 1 difference: $4,404,308,465
Number of Medicare CAHs in CY 2019: 1,368

REH monthly facility payment: ($4,404,308,465/1,368)/12 = $268,294 (or $3,219,528 annually)

CMS outlines its approach in the following steps and provides a detailed outline of the calculation.

CMS would also require that an REH receiving the additional monthly facility payments must maintain detailed information as to how the facility used the monthly facility payments and must make this information available upon request. CMS proposes that this requirement can be met using existing cost reporting requirements for outpatient hospital facilities that would include REHs. CMS believes this is appropriate because the cost reports track spending on outpatient hospital services as a part of overall provider spending. This information will show if a sufficient share of revenue to the REH, which includes the monthly facility payment, is being directed to outpatient care.

As such, for CY 2023, CMS does not propose to establish any new reporting or data collection requirements for REHs related to their use of the REH monthly facility payments. The agency states it will monitor this issue in CY 2023 to see if additional new reporting or data collection requirements are necessary in future rulemaking.

REH enrollment

CMS proposes that to convert to an REH, a hospital may submit a Form CMS 855A change of information application.

REH Stark exemption

CMS specifically addresses the Stark law since the REH is not technically a hospital like a PPS or CAH. CMS indicates the proposed REH exception follows the established construct of the existing exceptions for other specific providers (for example, rural hospitals or the whole hospital exemption) and would apply to all referrals and billing for designated health services furnished by an REH.

CMS believes that because all REHs would have been CAHs or small rural PPS hospitals prior to enrolling as an REH, it would be appropriate to include in the proposed REH exception program integrity requirements similar to those that apply to hospitals under the rural provider and whole hospital exceptions. However, CMS does not believe that all existing prohibitions on physician ownership should apply to REHs. Review the full proposed rule or consult with legal counsel for guidance.

CMS is considering additional requirements and seeks comments on requiring an REH to:

  • Submit an annual report to CMS containing a detailed description of the identity of each owner of or investor in the REH, as well as the nature and extent of all ownership and investment interests in the REH
  • Disclose on any public website for the REH and in public advertising for the REH that it is owned or invested in by physicians (or immediate family members of physicians)
  • Require that each physician with an ownership or investment interest in the REH who is a member of the REH’s medical staff to agree, as a condition of continued medical staff membership, to provide written disclosure of their ownership or investment interest in the REH to all patients whom the physician refers to the REH

Specific to ownership, CMS includes the following:

  • The physician’s (or immediate family member’s) ownership or investment interest must be in the entire REH and not merely in a distinct part or department of the REH, such as an imaging center, which could incentivize self-referral
  • An REH cannot directly or indirectly condition any ownership or investment interest held or to be held by a physician (or an immediate family member of a physician) on the physician making or influencing referrals to the REH or otherwise generating business for the REH
  • Prohibit an REH and the owners of or investors in the REH from directly or indirectly guaranteeing a loan, making a payment toward a loan, or otherwise subsidizing a loan for a physician (or an immediate family member of a physician) that is related to acquiring any ownership or investment interest in the REH; this includes groups of physician owners and investors as well
  • Require that ownership or investment returns are distributed to each owner of or investor in an REH in an amount that is directly proportional to the ownership or investment interest in the REH of such owner or investor
  • Require that any physician (or immediate family member of a physician) who has an ownership or investment interest in an REH does not directly or indirectly receive any guaranteed receipt of or right to purchase other business interests related to the REH, including the purchase or lease of any property under the control of any other owner of or investor in the REH or located near the premises of the REH
  • Require that an REH does not offer a physician (or an immediate family member of a physician) the opportunity to purchase or lease any property under the control of the REH or any other owner of or investor in the REH on more favorable terms than the terms offered to a person that is not a physician (or an immediate family member of a physician)

CMS does propose allowing existing compensation exemptions to apply to REHs. Those include exceptions for physician recruitment, obstetrical malpractice insurance subsidies, retention payments in underserved areas, and assistance to compensate a nonphysician practitioner. These are available to hospitals, federally qualified health centers, and rural health clinics, and CMS believes these are appropriate for REHs. CMS proposes these exceptions to permit an REH to provide remuneration to a physician if all requirements of the applicable exception are satisfied.

Again, Stark law requirements are complicated. Review the full proposed rule or consult with legal counsel for guidance.

Rural Emergency Hospital Quality Reporting Program (REHQRP)

CMS seeks comments on a variety of quality metrics already being reported on by rural PPS or CAHs and whether those are appropriate for an REH. CMS provides additional thoughts about future measures related to rural telehealth, mental health, and maternal health along with addressing the agency’s overarching goal of health equity. Refer to the proposed rule for full details.

5. ASC payments

For CY 2023, CMS proposes to utilize the hospital market basket update of 3.1% reduced by the productivity adjustment of 0.4% point, resulting in a productivity-adjusted hospital market basket update factor of 2.7% for ASCs meeting the quality reporting requirements.

CMS proposes to add one procedure to the list of ASC covered surgical procedures: a lymph node biopsy or excision (38531).

CMS proposes to adjust ASC payment policy for certain OPPS Complexity-Adjusted C-APCs since C-APCs are not paid for under the ASC system. CMS proposes to use the OPPS complexity-adjusted C-APC rate for each corresponding code combination to calculate the OPPS relative weight for each corresponding ASC payment system C code for procedures being performed together. For C codes that are not assigned device-intensive status, CMS proposes to multiply the OPPS relative weight by the ASC budget neutrality adjustment (or ASC weight scalar) to determine the ASC relative weight and then multiply the ASC relative weight by the ASC conversion factor to determine the ASC payment rate for each C code.

As it did for the hospital OPPS, CMS alerts ASC readers that the proposed 2023 PFS rule includes policies related to HOPDs and ASCs. The proposed requirement is the result of language in the Infrastructure Investment and Jobs Act (Pub. L. 117– 9) enacted in November 2021 that requires manufacturers to provide a refund to CMS for certain discarded amounts from a refundable single-dose container or single-use package drug.

With respect to the ASC Quality Reporting (ASCQR) program, CMS proposes to:

  • Update the Cataracts: Improvement in Patient’s Visual Function within 90 days Following Cataract Surgery (ASC-11) measure to be voluntary due to the ongoing COVID-19 PHE
  • Seek comment on reimplementing ASC-7, Volume on Selected ASC Surgical Procedures or another volume indicator measure along with interoperability and HER use in the ASCQR program

How we can help

There is a lot to unpack in the proposed OPPS rule, especially related to the REH designation. We are already assisting rural hospitals with modeling out the impact of a conversion. If you are interested in a similar discussion, reach out today. CLA’s industry-specialized health care team is happy to talk with you about that or any other hospital-related issue.

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