Ringing in the New Year with New Medicare Payment Rates for Physicians, Hospitals and Ambulatory Surgery Centers

The Centers for Medicare and Medicaid Services’ (CMS) final rules¹ updating the Quality Reporting Program and Medicare payment rates for the Hospital Outpatient Prospective Payment System (OPPS), Ambulatory Surgical Center Payment System (ASC) and Physician Fee Schedule (PFS) (collectively, the “Final Rules”) became effective January 1, 2018, and will result in payment changes to hospitals, ASCs and physician groups. Last summer, we highlighted seven major takeaways from CMS’ proposed rules. Below is a summary of how the Final Rules will impact payment.

1. Non-excepted hospital off-campus provider-based departments will receive 20 percent less in 2018 than in 2017, rather than the proposed 50 percent cut.

CMS initially proposed to reduce payments for non-excepted services provided by hospital off-campus provider-based departments (HOPDs) by 50 percent over amounts received by HOPDs in 2017. The proposed reduction only applied to HOPDs that were not established before the 2015 Bipartisan Budget Act (November 2, 2015).

In the PFS Final Rule, CMS acknowledged that its proposed plan to use a single billing code to estimate the appropriate PFS Relativity Adjuster failed to adequately capture the large variation of services provided in HOPDs. Accordingly, CMS re-ran its code-based comparison to evaluate the 22 procedure codes most commonly billed by HOPDs and paid under OPPS against the 2016 facility and non-facility PFS rates. This calculation demonstrated that the applicable payment amount under PFS was 35 percent of the amount that would have been paid under OPPS. Based on CMS’ revaluation, the PFS Final Rule includes a 40 percent Relativity Adjuster, which will result in a 2018 payment decrease for HOPDs of 20 percent compared to 2017, rather than the proposed 50 percent cut. CMS estimates that these cuts will save Medicare Part B approximately $12 million in 2018.

2. Hospitals will receive approximately $5.8 billion more in outpatient procedure payments in 2018 than in 2017.

CMS initially projected that OPPS providers would receive $5.7 billion more in 2018 than they received in 2017. This estimate was based on an increased OPPS payment rate of 1.75 percent through a 2.9 percent market basket update, a 0.4 percent multifactor productivity adjustment reduction, and a 0.75 percent Affordable Care Act reduction.

In the OPPS Final Rule, CMS increases OPPS payments by a factor of 1.35 percent, rather than the proposed 1.75 percent. This final factor consists of a 2.7 percent market basket increase, a 0.6 percent multifactor productivity adjustment reduction, and a 0.75 percent Affordable Care Act reduction. Although the variables changed slightly in the OPPS Final Rule, the effect on hospitals did not materially change. CMS anticipates that the 2018 OPPS rates will result in $5.8 billion more paid to providers than they received in 2017.

3. Non-pass-through drugs purchased through the 340B program will be discounted by 22.5 percent as proposed.

CMS initially proposed to apply an average discount of 22.5 percent of the average sales price for non-pass-through separately payable drugs (other than vaccines and drugs on pass-through payment) that are purchased by hospitals that participate in the 340B program.

In the OPPS Final Rule, CMS confirmed that Medicare Part B will cover drugs sold by 340B-participating hospitals that are paid under OPPS and that are not excepted from the payment adjustment at the average sales price of the drug minus 22.5 percent. Biosimilar biological products not on pass-through payment status also will be paid at average sales price minus 22.5 percent, while biosimilars that are paid on a pass-through basis will continue to be paid at the average sales price plus 6 percent. CMS referenced the 2015 MedPAC Report to Congress to justify its plan and stated that this reduction is “the low bound of the estimate [of the differences in acquisition costs of 340B and non-340B acquired drugs] and keeps Medicare payments within the range where hospitals will not be underpaid for their acquisition costs of such drugs.” The American Hospital Association and other stakeholders filed a complaint in the U.S. District Court for the District of Columbia to challenge the 340B provisions to the OPPS Final Rule; however, this complaint was dismissed as moot because it was based on anticipated rather than concrete claims for reimbursement, thus lacking subject matter jurisdiction for the court.

4. Six procedures are removed from the inpatient-only list; one procedure is added.

CMS looks to five criteria when considering removing procedures from the inpatient-only list:

1. Most outpatient departments are equipped to provide the services.
2. The simplest procedure described by the procedure code proposed for elimination may be performed by most outpatient departments.
3. The procedure is related to previously removed codes.
4. Numerous hospitals are performing the procedure in outpatient settings.
5. The procedure can be performed safely in an ASC and is on CMS’ list of approved ASC procedures or is proposed for inclusion on that list.

In the OPPS Final Rule, CMS finalized its proposal to remove Current Procedural Terminology (CPT) codes 27447 (total knee arthroplasty) and 55866 (surgical laparoscopic prostatectomy) from the inpatient-only list, as both procedures were found to meet Criteria 1 and 2 set forth above. Regarding CPT code 27447, CMS reminded providers that removal from the inpatient-only list is not a blanket authorization to perform the procedure in outpatient settings. Physicians should continue to exercise their medical judgment and weigh several factors, including comorbidities, the expected length of stay (in accordance with the two-midnight rule), and the anticipated need for post-operative skilled nursing care. Notably, CMS prohibited Recovery Audit Contractors (RAC) from reviewing total knee arthroplasty procedures that are performed in the inpatient setting for two years to allow providers time to gain experience with determining the most appropriate setting to perform the procedures and to establish patient selection criteria to assist in the determination.

CMS also considered additional recommendations to add or remove procedures to or from the inpatient-only list. Four additional laparoscopic procedures (CPT codes 43772, 43773, 43774 and 43282) were found to meet removal Criterion 3. One procedure for treatment of patients who experience an acute, emergent myocardial infarction (CPT code 92941) was added to the inpatient-only list.

5. Seven new telehealth procedures will be paid under PFS; CMS will add appropriate CPT codes for remote patient monitoring.

When CMS considers paying for telehealth services under the PFS, several criteria must be met:

• The procedure must be furnished via an interactive telecommunications system.
• The procedure must be furnished by a physician or an authorized practitioner.
• The procedure must be furnished to an eligible patient.
• The patient must receive the services at a telehealth originating site.

CMS then pays a facility fee to the originating site and makes a separate payment to the distant site provider who furnishes the professional component of the service.

In the 2018 PFS Final Rule, CMS established the 2018 facility fee for originating sites to be the lesser of 80 percent of the actual charge or $25.76. Originating sites should continue to use Healthcare Common Procedure Coding System (HCPCS) code Q3014 (telehealth originating site facility fee). The PFS Final Rule also resulted in seven new telemedicine professional service codes that distant site providers may use to submit claims under PFS beginning on January 1, 2018:

• HCPCS G0296 – Counseling visit to discuss need for lung cancer screening using low-dose CT scan.
• CPT 90839 – Psychotherapy for crisis; first 60 minutes (listed separately in addition to code for primary service).
• CPT 90840 – Psychotherapy for crisis; each additional 30 minutes (listed separately in addition to code for primary service).
• CPT 90785 – Interactive complexity (to be used as an add-on for other telehealth codes).
• CPT 96160 – Administration of patient-focused health risk assessment instrument with scoring and documentation, per standardized instrument (to be used as an add-on for other telehealth codes).
• CPT 96161 – Administration of caregiver-focused health risk assessment instrument with scoring and documentation, per standardized instrument (to be used as an add-on for other telehealth codes).
• HCPCS G0506 – Comprehensive assessment and care planning for patients who require chronic care management system (listed separately in addition to primary monthly care management service).

Most professional claims are no longer required to apply a GT modifier for telehealth services. Rather, Place of Service code 02 should be used to indicate the service was provided via telehealth and that the provider certifies the aforementioned criteria have been met. However, distant site providers billing under Critical Access Hospital Method II and others submitting institutional claims should continue to use the GT modifier. CMS is considering adopting a uniform 95 modifier to identify all telehealth services and may propose its use in future rulemaking.

In the proposed PFS rule, CMS requested comments on whether to make separate payment for CPT codes that describe remote patient monitoring. These services are not generally considered Medicare telehealth services because there is not a direct interaction between a practitioner and a beneficiary. In the PFS Final Rule, CMS identified CPT 99091 (collection and interpretation of physiologic data digitally stored and/or transmitted by the patient and/or caregiver to the physician or other qualified health care professional that requires a minimum of 30 minutes of time) as a bundled code that is appropriate for separate payment. Practitioners must obtain advance beneficiary consent for remote patient monitoring services, must document such consent in the patient’s medical record, and must have had a face-to-face, Level 2‒5 evaluation and management visit with the patient within one year prior to using the code. CMS anticipates that coding changes may be necessary to describe the role of remote patient monitoring in contemporary practice, but separate billing for CPT 99091 should be seen as auspicious news to the mobile health community..

6. Six Hospital Patient Quality Reporting Program quality measures are eliminated from future consideration; one quality measure is delayed as proposed.

7. Three ASC Quality Reporting Program quality measures are eliminated from future reporting; one quality measure is delayed; two quality measures are added.