CMS Releases 2024 Final Hospital Outpatient Rule

  • 12/6/2023
Two doctors speaking to businessman while walking down hallway.

Key insights

  • Centers for Medicare & Medicaid Services (CMS) finalizes a 3.3% update reduced by a required productivity adjustment of 0.2%, resulting in a 3.1% update.
  • CMS finalizes hospitals must conform their machine-readable files to a CMS template under a new price transparency requirement, and must also “affirm” that the information is “true, accurate and complete.”
  • CMS finalizes the implementation of a new behavioral health benefit called the Intensive Outpatient Program (IOP), to be provided in hospital outpatient departments (HOPDs), federally qualified health centers (FQHCs), rural health clinics (RHC), and community mental health clinics (CMHC) beginning 2024.
  • CMS includes total shoulder and ankle surgeries on the ambulatory surgical center (ASC) covered procedures list.

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Outpatient Prospective Payment System

Industry in Context

Hospitals are still recovering from impacts of the pandemic and wrestling with workforce issues and rising costs, but Congress and the Biden administration are still keying in on issues of concern. For example, price transparency continues to be on their minds.

On the other hand, hospitals were victorious in the U.S. Supreme Court in their 340B lawsuit. The downside is CMS believes budget neutrality applies and, therefore, will reduce reimbursements under the OPPS by 0.5% for some 16 years. See our blog for details.

In market-related news, hospital mergers and acquisitions continue. The Department of Justice and Federal Trade Commission removed two antitrust documents and released new proposed merger guidelines. These actions are aimed at concerns over ongoing health care consolidation. On top of that, industry incumbents continue to be buffeted by new, non-traditional competitors.

Annual update

In the final 2024 outpatient prospective payment system (OPPS) rule, CMS finalizes a 3.3% market basket increase minus a productivity adjustment of 0.2% for a 3.1% update. Based on this update, CMS estimates total payments for calendar year (CY) 2024 would be approximately $88.9 billion, an increase of some $6 billion compared to estimated CY 2023 OPPS payments.

The conversion factor is finalized at $87.382 in the calculation of the national unadjusted payment rates for items and services. CMS gets to this amount using:

  • The update of 3.1% for CY 2024
  • The required wage index budget neutrality adjustment of 0.9912
  • The 5% annual cap for individual hospital wage index reductions of 0.9997
  • The cancer hospital payment adjustment of 1.0005
  • The adjustment of 0.11% (or 0.27 less 0.16) of projected OPPS spending for the difference in pass-through spending

CMS finalizes using CY 2022 claims for the CY 2024 OPPS/ASC rate-setting process and the most recently available cost report data for 2024 rate setting.

Wage index

Overall, CMS finalizes that any policies and adjustments for the FY 2024 IPPS post-reclassified wage index will be reflected in the final CY 2024 OPPS wage index beginning on January 1, 2024, including, but not limited to:

  • Reclassification of hospitals to different geographic areas
  • Rural floor provisions
  • The imputed floor wage index adjustment in all-urban states
  • Adjustment for occupational mix
  • Out-migration adjustment
  • Low-wage index hospital adjustment
  • A 5% cap on any decrease to a hospital’s wage index from its wage index in the prior FY

Sole community hospitals (SCH)

For CY 2024, CMS continues using its 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.

Outlier payments

CMS finalizes the hospital outlier threshold when cost exceeds 1.75 times the Ambulatory Payment Classification (APC) payment amount plus $7,750.

Comprehensive APCs

CMS finalizes two new C-APCs: Level 2 Intraocular APC (APC 5492) and a new Level 2 Abdominal/Peritoneal/Biliary and Related Procedures APC (APC 5342). There are now 72 C-APCs.

340B Payment Background, Remedy

Beginning in 2018, CMS began reducing payments to certain 340B hospitals, primarily disproportionate share hospitals (DSH). The rationale was because these hospitals were not paying the full amount for drugs under the program, they should not be reimbursed the normal amount either. Hospitals sued the federal government. The case went to the U.S. Supreme Court where hospitals won. HHS recently released the final rule on how it will repay 340B hospitals some $9 billion along with budget neutrality impacts. Read our HI2 blog for your round-up on all things 340B..

340B drugs

CMS will pay for these drugs at the normal rate — generally, Average Sales Price +6%. This is in accordance with the U.S. Supreme Court decision where hospitals prevailed. See sidebar.

CMS also finalizes all 340B covered entity hospitals paid under the OPPS report the “TB” modifier effective January 1, 2025, even if the hospital previously reported the “JG” modifier.

Inpatient only (IPO) list

CMS finalizes the addition of 10 codes to the IPO list. See Table 103 in the final rule for the list of additions.

Dental codes

In the 2023 final OPPS rule, CMS first finalized a policy to pay for certain dental services “inextricably linked” to medical services. The agency now finalizes adding 243 dental codes to clinical APCs to enable them to be paid for under the OPPS when payment and coverage requirements are met.

CMS also finalizes packaged payments for dental services under the OPPS by assigning the dental codes describing those dental services to packaged status indicators.

Cardiac, pulmonary rehabilitation

CMS finalizes expanding the practitioners who may supervise cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR), and pulmonary rehabilitation (PR) services to include nurse practitioners (NPs), physician assistants (PAs), and clinical nurse specialists (CNSs). CMS also finalizes allowing the direct supervision requirement for CR, ICR, and PR to include virtual presence through audio-video real-time communications technology (excluding audio-only) through December 31, 2024.

Intensive outpatient programs

As required under the Consolidated Appropriations Act, 2023 (CAA, 2023), CMS finalizes coverage and implementation of intensive outpatient programs (IOP) beginning CY 2024. CMS states that in general the IOP are thought to be less intensive than existing partial hospitalization programs (PHP). CMS finalized IOP services may be furnished in HOPDs, CMHCs, FQHCs, and RHCs. CMS also finalizes establishing payment for intensive outpatient services provided by opioid treatment programs (OTPs) under the existing OTP benefit.

CMS finalizes covered IOP services would include:

  • Individual and group therapy with physicians or psychologists (or other mental health professionals as authorized under state law)
  • Occupational therapy
  • Services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients
  • Drugs and biologicals furnished for therapeutic purposes
  • Individualized activity therapies that are not primarily recreational or diversionary
  • Family counseling
  • Patient training and education
  • Diagnostic service
  • Other items and services as determined by HHS

CMS finalizes that appropriate physician certification and a plan of care are required. For the plan of care, CMS finalizes it will be akin to the partial hospitalization program (PHP) but reflective of the lower intensity level of the IOP (e.g., nine hours in IOP versus 20 hours in PHP).

CMS finalizes that IOP services are “a distinct and organized intensive ambulatory treatment program that offers less than 24-hour daily care other than in an individual's home or in an inpatient or residential setting and furnishes the services” as described in the statute. IOP services would not require that they are provided in lieu of inpatient hospitalization, which is a requirement of PHP.

CMS finalizes some service exclusions when those are separately paid for and covered. Those include physician services, physician assistant services, nurse practitioner and clinical nurse specialist services, qualified psychologist services, and services furnished to residents of a skilled nursing facility.


CMS finalizes that a minimum of nine therapeutic services per week be provided as evidenced in their plan of care and that the individual would benefit from a coordinated program of services and require more than isolated sessions of outpatient treatment.

In addition, eligible individuals would not require 24-hour care and would have an adequate support system outside the program. A mental health diagnosis would be needed: the individual would need to be judged not to be dangerous to self or others and would have the cognitive and emotional ability to participate in and tolerate the active treatment process. CMS clarifies that a mental health diagnosis includes substance use disorder and behavioral health diagnoses for IOP as well as under PHP.

CMS will amend Part B regulations to add a reference to “intensive outpatient services” to the list of covered services when furnished as hospital or CAH services incident to a physician’s professional services. CMS notes that intensive outpatient services that are not directly provided by a physician are not subject to the outpatient mental health treatment limitation.

Coding and billing

CMS indicates a new condition code, condition code 92, will be required beginning January 1, 2024, to identify intensive outpatient claims by hospitals and CMHCs. CMS notes it will continue to require hospitals and CMHC to report condition code 41 for PHP claims.

CMS finalizes that to qualify for payment for an IOP APC, at least one service must be from the PHP/IOP list. Specifically, CMS finalizes that to qualify for payment for the IOP APC (5851, 5852, 5861, or 5862) or the PHP APC (5853, 5854, 5863, or 5864) one service must be from the PHP/IOP list. See Table 99 in the final rule for list of PHP/IOP services, of which one must be included to qualify for IOP.

CMS solicited comments on whether caregiver, peer support workers, or discharge services/codes should be considered and included. Stakeholders responded positively and CMS finalizes inclusion of six CPT codes — five of which were finalized in the 2024 physician fee schedule rule — related to caregiver training services. CMS states reporting these codes will not count toward payment for a three-service or four-service day; however, they will be included in the costs associated with providing such services when calculating the PHP and IOP payment rates in future years.

Worth noting

CMS finalizes under the final 2024 physician fee schedule new caregiver training services and principal illness navigation codes which incorporate use of community health workers and peer support, as examples. This marks a new trajectory for Medicare reimbursing these services.

CMS also agreed to add principal illness navigation codes — G0023 and G0024 — which describe the broad range of services PHP and IOP staff provide to program participants each patient month. These include discharge and transition planning, care coordination, and case management services within PHPs and IOPs. CMS includes G0140 and G0146 specific to peer support, as well. CMS will not count PIN services in the evaluation of whether a PHP or IOP day receives the three-service or four-service day for payment; however, CMS will analyze utilization and cost data for these services and consider any payment changes in future rulemaking to better recognize such costs. See Table 98 in the final rule for a full list of PHP/IOP codes.

For payment, CMS finalizes setting IOP payment rates for three services/day and four services/day equal to the PHP payment rates.

CMS finalizes applying the four-service payment rate (that is, payment for PHP APCs 5854 for CMHCs and 5864 for hospitals, and IOP APCs 5852 for CMHCs and 5862 for hospitals) for days with four or more services. For days with three or fewer services, CMS finalizes to apply the three-service payment rate (that is, payment for PHP APCs 5853 for CMHCs and 5863 for hospitals, and IOP APCs 5851 for CMHCs and 5861 for hospitals).

Specific to FQHCs and RHCs, however, the CAA, 2023 requires the payment amount for intensive outpatient services furnished in FQHCs and RHCs to be equal to the payment amount that would have been paid for the same service furnished by a hospital outpatient department.

FQHCs and RHCs currently are paid either under the FQHC PPS or RHC all-inclusive rate (AIR). For RHC IOP services, CMS finalizes hospital-based IOP APC 5861 (three-service days) be applied as the payment rate for IOP services furnished in an RHC. For IOP services furnished in FQHCs, CMS finalizes the payment be based on the lesser of a FQHC’s actual charges or the rate determined for APC 5861. Both RHCs and FQHCs would need to report condition code 92 to identify intensive outpatient claims.

Additionally, for services provided through a Medicare Advantage (MA) organization, if the contract rate is lower than the amount Medicare would otherwise pay for FQHC services, FQHCs that contract with MA organizations would receive a wrap-around payment from Medicare to cover the difference. For RHCs and FQHCs, CMS clarifies the agency will permit a mental health visit or IOP services on the same day as a medical visit.

Opioid treatment programs

CMS finalizes payment under Part B for IOP services furnished by OTPs for the treatment of opioid use disorder for CY 2024 and subsequent years.

CMS finalizes that to qualify as “OTP intensive outpatient services,” a physician or other non-physician practitioner, as permitted by state law and scope of practice requirements, must certify the individual has need for such services for a minimum of nine hours per week and requires a higher level of care intensity compared to existing OTP services.

CMS finalizes payment for HCPCS code G0137 be based on the estimated payment rate of three services per day based on APC 5861 (Intensive Outpatient (1 – 3 services) for Hospital-based IOPs), which is $259.40, multiplied by three to reflect three days a week (for a weekly payment methodology), which results in a final payment rate of $778.20.

The final descriptor is: G0137 (Intensive outpatient services; minimum of nine services over a seven-contiguous-day period, which can include individual and group therapy with physicians or psychologists [or other mental health professionals to the extent authorized under state law]; occupational therapy requiring the skills of a qualified occupational therapist; services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients; drugs and biologicals furnished for therapeutic purposes, excluding opioid agonist and antagonist medications that are FDA-approved for use in treatment of OUD or opioid antagonist medications for the emergency treatment of known or suspected opioid overdose; individualized activity therapies that are not primarily recreational or diversionary; family counseling [the primary purpose of which is treatment of the individual’s condition]; patient training and education [to the extent that training and educational activities are closely and clearly related to individual’s care and treatment]; diagnostic services [not including toxicology testing]; provision of the services by a Medicare-enrolled OTP; list separately in addition to code for primary procedure, if applicable).

CMS finalizes using the CMHC PHP and IOP per diem rates as the physician fee schedule rates for PHP and IOP services furnished by nonexcepted off-campus provide-based departments.

Community mental health centers conditions of participation (CoPs)

The CAA, 2023 created coverage for IOP in CHMS. The law also established a new benefit category for marriage and family therapists (MFT) and mental health counselor (MHC) services. As such, CMS finalizes modifications to the requirements for the CMHC to include IOP services throughout the CoPs. CMS also finalizes modifying the CMHC CoPs for personnel qualifications to add a definition of MFT and revise the current definition of MHC. CMS is also finalizing the addition of MFTs and MHCs to the list of practitioners who can lead interdisciplinary team meetings when deemed necessary.

Price transparency

CMS is finalizing additional clarifications and requirements and is firming up its existing price transparency requirements for posting machine-readable files (MRF). These changes are to improve monitoring and enforcement capabilities by improving access to, and the usability of, hospital standard charge information and increase transparency to the public.

Price Transparency Compliance, Resources

As of September 2023, CMS had issued approximately 989 warning notices and 631 requests for CAPs since the initial regulation went into effect in January 2021. Approximately 346 hospitals were determined by CMS after a comprehensive compliance review to not require any compliance action and approximately 738 hospitals received a closure notice from CMS after having addressed deficiencies indicated in a prior warning notice or a request for a CAP following an initial comprehensive compliance review. CMS has imposed civil monetary penalties on four hospitals.

In the final rule, CMS defines four key terms:

  • CMS template — a CSV format or JSON schema that CMS makes available for purposes of compliance with the existing requirements
  • Encode — converting hospital standard charge information into a machine-readable format that complies with requirements
  • Estimated allowed amount — the average dollar amount the hospital has historically received from a third-party payer for an item or service
  • Machine-readable file — a single digital file in a machine-readable format

CMS requires each hospital to conform to the CMS template layout, data specifications, and data dictionary, and to meet any other specifications related to the encoding of the hospital’s standard charge information in its MRF.

Beginning July 1, 2024, CMS will require hospitals to affirm in the MRF that, to the best of its knowledge and belief, the hospital has included all applicable standard charge information in its MRF, in accordance with the requirements in statute, and that the information encoded is true, accurate, and complete as of the date indicated in the MRF. CMS also finalizes a new general requirement that, beginning January 1, 2024, each hospital must make a good faith effort to verify the standard charge information encoded in the MRF is true, accurate, and complete as of the date indicated in the MRF.

CMS finalizes additional data elements and more specificity in the MRF:

  • Hospital name(s), license number, and location name(s) and address(es) under the single hospital license to which the list of standard charges apply.
  • Date of last update to the MRF.
  • For standard changes, CMS allows hospitals to indicate plan(s) as categories (such as “all PPO plans”) when the established payer-specific negotiated charges are applicable to each plan in the indicated category rather than having to individually list each.
  • CMS also establishes “setting” as a separate data element; specifically, whether the item or service is provided in connection with an inpatient admission or an outpatient department visit.
  • CMS requires a new data element of a general description of items or services.
  • CMS also finalizes hospitals will need to indicate the contracting method they used to establish the payer-specific negotiated charge (e.g., base rate). CMS also finalizes hospitals indicate whether the payer-specific standard charge listed should be interpreted by the user as a dollar amount, percentage, or, if the standard charge is based on an algorithm, the algorithm that determines the dollar amount for the item or service.
  • CMS also finalizes when a hospital has established a payer-specific negotiated charge that can only be expressed as a percentage or algorithm, it must display alongside that percentage or algorithm a consumer-friendly “expected allowed amount” in dollars for that payer/plan for that item or service. This would begin January 1, 2025.
  • For drugs, CMS requires hospitals would be required to indicate the drug unit and type of measurement as separate data elements, beginning 2025.
  • CMS requires any relevant codes and modifier(s) needed to describe the established standard charge, and the code type(s).

CMS would also require a hospital’s website include a .txt file in the root folder that includes a standardized set of fields including the hospital location name that corresponds to the MRF, the source page URL that hosts the MRF, a direct link to the MRF (the MRF URL), and hospital point of contact information.

Second, the hospital must verify the public website includes a link in the footer on its website, including the homepage, labeled “price transparency” and links directly to the publicly available webpage that hosts the link to the MRF.

With respect to compliance warnings, CMS will require that a hospital submit an acknowledgement of receipt of the warning notice in the form and manner, and by the deadline, specified in the notice of violation issued by CMS to the hospital. In the event CMS takes an action to address hospital noncompliance and the hospital is determined by CMS to be part of a health system, CMS may notify the health system leadership of the action and may work with hospital system leadership to address similar deficiencies for hospitals across the health system.

CMS finalizes it may publicly post its assessment of a hospital’s compliance, any compliance actions taken against a hospital, the status of such compliance action(s), and the outcome of the compliance actions.

Rural Emergency Hospitals

For CY 2024, CMS finalizes that Indian Health Services (IHS) and tribal hospitals that convert to an REH would be paid for hospital outpatient services under the same AIR that would otherwise apply if these services were performed by an IHS or tribal hospital that is not an REH. Existing beneficiary coinsurance policies applicable to such services under the AIR would remain unchanged.

Rural Emergency Hospital Quality Reporting (REHQR) Program

For the REHQR measure set, CMS finalizes adopting four measures:

  1. Abdomen computed tomography (CT) — use of contrast material
  2. Median time from emergency department (ED) arrival to ED departure for discharged ED patients
  3. Facility seven-day risk-standardized hospital visit rate after outpatient colonoscopy
  4. Risk-standardized hospital visits within seven days after hospital outpatient surgery

Hospital Outpatient Quality Reporting Program

For the Hospital OQR Program measure set, CMS finalizes the following changes:

  • Modify the COVID–19 Vaccination Coverage Among Healthcare Personnel measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  • Modify the Cataracts: Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery measure beginning with the voluntary CY 2024 reporting period
  • Modify the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  • Adopt the Risk-Standardized Patient-Reported Outcome-Based Performance Measure Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty in the HOPD Setting beginning with the voluntary CYs 2025 – 2027 reporting periods, and mandatory reporting beginning with the CY 2028 reporting period/CY 2031 payment determination
  • Adopt the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography in Adults (Hospital Level — Outpatient) measure, beginning with the voluntary CY 2025 reporting period and mandatory reporting beginning with the CY 2027 reporting period/CY 2029 payment determination

Ambulatory surgical centers

Annual update

For CYs 2019 through 2023, CMS adopted a policy to update the ambulatory surgical center (ASC) payment system using the hospital market basket update. Considering the impact of the COVID-19 public health emergency on healthcare utilization, CMS finalizes an extension of its policy to update the ASC payment system using the hospital market basket update an additional two years — through CYs 2024 and 2025.

Therefore, for CY 2024, CMS adjusts the CY 2023 ASC conversion factor of $51.854 by a wage index budget neutrality factor of 1.0010 in addition to the productivity-adjusted hospital market basket update of 3.1%. This results in a final CY 2024 ASC conversion factor of $53.514.

Covered procedures list (CPL)

CMS finalizes the addition of 26 dental surgical procedures to the list for CY 2024 plus an additional 11 submitted by stakeholders. Of note, CPL now includes multiple new orthopedic procedures such as total shoulder and ankle reconstruction. See table 123 in final rule.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program

For the ASCQR Program measure set, CMS finalizes:

  • Modifying the COVID-19 Vaccination Coverage Among Health Care Personnel measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  • Modifying the Cataracts: Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery measure beginning with the voluntary CY 2024 reporting period
  • Modifying the Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  • Adopting the Risk-Standardized Patient-Reported Outcome-Based Performance Measure Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty in the ASC Setting beginning with the voluntary CYs 2025 – 2027 reporting periods, and mandatory reporting beginning with the CY 2028 reporting period/CY 2031 payment determination.

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