Fact sheet

CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS-1717-P)

CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS-1717-P)

On July 29, 2019, the Centers for Medicare & Medicaid Services (CMS) proposed policies that follow directives in President Trump’s Executive Order, entitled “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” that lay the foundation for a patient-driven healthcare system by making prices for items and services provided by all hospitals in the United States more transparent for patients so that they can be more informed about what they might pay for hospital items and services.

The proposed changes also encourage site-neutral payment between certain Medicare sites of services.  Finally, the proposed rule proposes updates and policy changes under the Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System.

The proposed polices in the CY 2020 OPPS/ASC Payment System proposed rule would further advance the agency’s commitment to increasing price transparency, (including proposals for requirements that would apply to each hospital operating in the United States), strengthening Medicare, rethinking rural health, unleashing innovation, reducing provider burden, and strengthening program integrity so that hospitals and ambulatory surgical centers can operate with better flexibility and patients have what they need to become active healthcare consumers. 

This fact sheet discusses the major provisions of the proposed rule. The deadline for submitting comments on the proposed rule is September 27, 2019. The proposed rule (CMS-1717-P) can be downloaded from the Federal Register at:

Increasing Price Transparency of Hospital Standard Charges

On June 24, 2019, the President signed an Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First noting that it is the policy of the Federal Government to increase the availability of meaningful price and quality information for patients.  The Executive Order directed the Secretary of Health and Human Services (HHS) to propose a regulation, consistent with applicable law, to require hospitals to publicly post standard charge information[1]. We believe healthcare markets work more efficiently and provide consumers with higher-value healthcare if we promote policies that encourage choice and competition.[2]  In short, as articulated by the CMS Administrator, we believe that transparency in health care pricing is “critical to enabling patients to become active consumers so that they can lead the drive towards value.”[3]

This proposed rule implements Section 2718(e) of the Public Health Service Act and improves upon prior agency guidance that required hospitals to make public their standard charges upon request starting in 2015 (79 FR 50146) and subsequently online in a machine-readable format starting in 2019 (83 FR 41144)..  Section 2718 is entitled “Bringing Down the Cost of Health Care Coverage.”  Section 2718(e) requires each hospital operating within the United States to establish (and update) and make public a yearly list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.  In the proposed rule, we propose the following: (1) definitions of “hospital”, “standard charges”, and “items and services”; (2) requirements for making public a machine-readable file online that includes all standard charges for all hospital items and services; (3) requirements for making public payer-specific negotiated charges for a limited set of ‘shoppable’ services that are displayed and packaged in a consumer-friendly manner; and (4) monitoring for hospital noncompliance and actions to address hospital noncompliance (including issuing a warning notice, requesting a corrective action plan, and imposing civil monetary penalties), and a process for hospitals to appeal these penalties. 

Proposed Definition of ‘Hospital’
We propose to define ‘hospital’ as an institution in any State in which State or applicable local law provides for the licensing of hospitals and which is licensed as a hospital pursuant to such law, or is approved by the agency of such State or locality responsible for licensing hospitals as meeting the standards established for such licensing.  For purposes of this definition, a State would include each of the several States, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.  This proposal would include all Medicare-enrolled institutions that are licensed as hospitals (or approved as meeting licensing requirements) as well any non-Medicare enrolled institutions that are licensed as a hospital (or approved as meeting licensing requirements).  We propose that federally owned or operated institutions (for example, hospitals operated by an Indian Health Program, the US Department of Veterans Affairs, or the US Defense Department) which are not accessible to the general public, except in emergency situations, and already make their charges publicly available be deemed to have the requirements of Section 2718(e).

Proposed Definition of ‘Standard Charges’
We are proposing to define “standard charges” to mean the hospital’s gross charge and payer-specific negotiated charge for an item or service.  Hospitals would be required to make public all hospital standard charges for all items and services provided by the hospital in a digital and machine-readable file posted online.  Additionally, we propose that hospitals make public the payer-specific negotiated charge for a limited set of ‘shoppable’ services that are displayed and packaged in a consumer-friendly manner. 

Proposed Definition of Hospital ‘Items and Services’
We propose to define hospital “items and services” to include all items and services (including individual items and services and service packages) provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a charge.  Examples of these items and services would be supplies, procedures, room and board, use of the facility and other items (generally described as facilities fees), services of employed practitioners (generally described as professional charges), and any other items or services for which the hospital has established a charge.

Proposed Requirements for Making Public All Standard Charges for All Items and Services
We are proposing that hospitals make public their standard changes (both gross charges and payer-specific negotiated charges) for all items and services online in a machine-readable format.  We believe this information and format is most useful for developers who could use these data in consumer-friendly price transparency tools, or who may integrate the data into electronic medical records and shared decision making tools at the point of care. 

Proposed Requirements for Making Public Consumer-Friendly Standard Charges for a Limited Set of ‘Shoppable Services’
We are proposing requirements for hospitals to make public standard charge data for a limited set of “shoppable services” the hospital provides in a form and manner that is more consumer‑friendly.  We propose to define ‘shoppable service’ as a service that can be scheduled
by a health care consumer in advance.  We believe these proposed requirements will allow healthcare consumers to make apples-to-apples comparisons of payer-specific negotiated charges across healthcare settings.  Specifically, we propose that hospitals would do the following:

  • Display payer-specific negotiated charges for at least 300 shoppable services, including 70 CMS-selected shoppable services and 230 hospital-selected shoppable services.  If a hospital does not provide one or more of the 70 CMS selected shoppable services, the hospital must select additional shoppable services such that the total number of shoppable services is at least 300.
  • Include charges for services that the hospital customarily provides in conjunction with the primary service that is identified by a common billing code (e.g. Current Procedural Terminology (CPT)/ Healthcare Common Procedure Coding System (HCPCS)/ Diagnosis-Related Group (DRG).
  • Make sure that the charge information is displayed prominently on a publicly available webpage, clearly identifies the hospital (or hospital location), easily accessible and without barriers, and searchable.
  • Update the information at least annually.

Proposals for Monitoring and Enforcement
We are proposing regulations for monitoring and enforcement of hospitals’ compliance with these requirements. CMS would have the authority to monitor hospital compliance with Section 2718(e) of the Public Health Service Act, by evaluating complaints made by individuals or entities to CMS, reviewing individuals’ or entities’ analysis of noncompliance, and auditing hospitals’ websites. Should CMS conclude a hospital is noncompliant with one or more of the requirements to make public standard charges, CMS may assess a monetary penalty after providing a warning notice to the hospital, or after requesting a corrective action plan from the hospital if its noncompliance constitutes a material violation of one or more requirements.  If the hospital fails to respond to CMS’ request to submit a corrective action plan or comply with the requirements of a corrective action plan, CMS may impose a civil monetary penalty on the hospital not in excess of $300 per day, and publicize these penalties on a CMS website. We also propose to establish an appeals process for hospitals to request a hearing before an Administrative Law Judge (ALJ) of the civil monetary penalty.  Under this process, the Administrator of CMS, at his or her discretion, may review in whole or in part the ALJ’s decision.

Increasing Choices and Encouraging Site Neutrality

The proposed rule includes a number of policies that reduce payment differences between certain outpatient sites of service so that patients can benefit from high-quality care at lower costs, and are able to receive care that is provided safely and is clinically appropriate.

Method to Control for Unnecessary Increases in Utilization of Outpatient Services
As finalized in last year’s rule, CMS is completing the two-year phase-in of a method to reduce unnecessary utilization in outpatient services by addressing payments for clinic visits furnished in the off-campus hospital outpatient setting. Clinic visits are the most common service billed under the OPPS. Currently, CMS and beneficiaries often pay more for the same type of clinic visit in the hospital outpatient setting than in the physician office setting. This proposed change would result in lower copayments for beneficiaries and savings for the Medicare program and taxpayers estimated to be a total of $810 million for 2020. For example, for a clinic visit furnished in an excepted off-campus provider-based department, average beneficiary cost sharing is currently $16 in CY 2019, but would be $23 absent this policy. With the completion of the two-year phase-in, that cost sharing would be reduced to $9, saving beneficiaries an average of $14 each time they visit an off-campus department for a clinic visit in CY 2020.

Changes to the Inpatient Only List
CMS is proposing to remove Total Hip Arthroplasty from the Inpatient Only (IPO) list, making it eligible to be paid by Medicare in both the hospital inpatient and outpatient setting.  Additionally, CMS is proposing to establish a one-year exemption from medical review activities for procedures removed from the inpatient-only list beginning in CY 2020 and subsequent years. Specifically, we are proposing that Beneficiary Family Centered Care-Quality Improvement Organization (BFCC-QIO) reviews of short-stay inpatient claims for procedures that have been removed from the IPO list within the first-year will not be counted against a provider in the context of the 2-midnight rule. BFCC-QIOs will have the opportunity to review such claims in order to provide education to providers and practitioners regarding compliance with the 2-midnight rule. Furthermore, these procedures would also not be eligible for referral to the Recovery Audit Contractor (RAC) for a one-year period after their removal from the IPO list.

CMS believes that a 1-year postponement on QIO referral to RACs and RAC “patient status” review for procedures performed in the inpatient setting is an adequate amount of time to allow providers to gain experience with application of the 2-midnight rule to these procedures, and the documentation necessary for Part A payment for those patients for which the admitting physician determines that the procedures should be furnished in an inpatient setting. Furthermore, this one-year moratorium would allow providers time to update their billing systems and gain experience with respect to newly removed procedures eligible to be paid under either the IPPS or OPPS, while avoiding potential adverse site of service determinations.

ASC Covered Procedures List
The ASC Covered Procedures List (CPL) is a list of covered surgical procedures that are eligible for payment under Medicare when furnished in an ASC. Covered surgical procedures are those procedures that in part would not be expected to pose a significant risk to beneficiary safety and for which the beneficiary would not typically be expected to require active medical monitoring and care at midnight following the procedure. 

For CY 2020, CMS is proposing to add Total Knee Arthroplasty (TKA), Knee Mosaicplasty, and  three additional coronary intervention procedures to the ASC CPL. CMS is soliciting comment on whether there should be any additional limitations on the provision of TKA or other procedures in the ASC setting. Additionally, CMS is soliciting comments on how the agency could redesign the role of the ASC-CPL to improve physicians’ ability to determine the setting of care as appropriate for a given beneficiary situation.

High-Cost/Low-Cost Threshold for Packaged Skin Substitutes
CMS is proposing to continue our policy established in CY 2018 to assign skin substitutes to the low-cost or high-cost group. In addition, CMS presents several ideas on potential changes to how skin substitute products are paid under the OPPS, including seeking comments on establishing a single payment category. CMS solicits comments on these ideas and welcomes new ideas on how to pay for skin substitute products.

Device Pass-through Applications
There were seven device pass-through applications that were reviewed for the CY 2020 proposed rule. There were no proposals to approve or deny any of the applications in the CY 2020 proposed rule. CMS is soliciting comments before making final determinations on the applications in the final rule.

Rethinking Rural Health

Addressing Wage Index Disparities
For CY 2020, CMS is proposing to use the FY 2020 hospital Inpatient Prospective Payment System (IPPS) post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount.  Therefore, any adjustments for the FY 2020 IPPS post-reclassified wage index, including, but not limited to, any proposed policies finalized under the IPPS to address wage index disparities between low and high wage index value hospitals would be reflected in the final CY 2020 OPPS wage index beginning on January 1, 2020.   In the FY 2020 IPPS proposed rule, CMS proposed a number of policies to address wage index disparities between high and low wage index value hospitals.  To help address these wage index disparities, in the FY 2020 IPPS proposed rule, we proposed changes to the wage index calculation, including a methodology to increase the wage index for certain low wage index hospitals and to change how the statutory rural floor wage index values are calculated. In addition, CMS proposed to provide a transition for hospitals that experience significant decreases in their wage index values as a result of these proposed changes.

To address the disparities between high and low wage index hospitals, in the FY 2020 IPPS proposed rule, CMS proposed to increase the wage index for hospitals with a wage index value below the 25th percentile. These hospitals’ wage index would be increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals.  In the FY 2020 IPPS proposed rule, we stated that this proposed policy would be effective for at least 4 years, beginning in FY 2020, in order to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. In addition, in the FY 2020 IPPS proposed rule, CMS proposed to decrease the wage index for hospitals above the 75th percentile so that Medicare spending does not increase as a result of the proposal described above.  If CMS finalizes these policies in the FY 2020 IPPS final rule, these wage index policies would be reflected in the final OPPS wage index for at least 4 years starting in CY 2020.

In the FY 2020 IPPS proposed rule, CMS also proposed changes to the wage index “rural floor” calculation. Under the law, the IPPS wage index value for an urban hospital cannot be less than the wage index value applicable to hospitals located in rural areas in the state. This is known as the “rural floor” provision. It appears that hospitals in a limited number of States have used urban to rural hospital reclassifications to manipulate the rural floor wage index value. To address this, CMS proposed removing urban to rural hospital reclassifications from the calculation of the IPPS rural floor wage index value beginning in FY 2020. If CMS finalizes this policy in the FY 2020 IPPS final rule, this wage index policy would be reflected in the final OPPS wage index starting in CY 2020.

In addition, in the FY 2020 IPPS proposed rule, to mitigate payment decreases due to these proposals, CMS proposed a 5-percent cap on any decrease in a hospital’s wage index from its final wage index for FY 2019. That is, under this IPPS proposal a hospital’s final wage index for FY 2020 would not be less than 95 percent of its final wage index for FY 2019.  If CMS finalizes this policy in the FY 2020 IPPS final rule, this wage index policy would be reflected in the final OPPS wage index starting in CY 2020 (in other words, under the CY 2020 OPPS, a hospital’s final wage index for CY 2020 would not be less than 95 percent of its final wage index for CY 2019).

Changes in the Level of Supervision of Outpatient Therapeutic Services in Hospitals and Critical Access Hospitals (CAHs)
CMS is proposing to change the generally applicable minimum required level of supervision for hospital outpatient therapeutic services from direct supervision to general supervision for services furnished by all hospitals and CAHs. General supervision means that the procedure is furnished under the physician's overall direction and control, but that the physician's presence is not required during the performance of the procedure. This proposal would ensure a standard minimum level of supervision for each hospital service furnished incident to a physician’s service in accordance with the statute.

Unleashing Innovation
In the CY 2020 OPPS/ASC proposed rule, CMS is taking steps to unleash innovation in medical technology and remove obstacles for beneficiaries in accessing new, innovative technologies and treatments. For transformative devices that meet the FDA Breakthrough Device designation, CMS is proposing to alternative pathway to qualifying for device pass-through payment status, under which the “substantial clinical improvement” criterion would not apply. This is similar to a proposal made in the Inpatient Prospective Payment System (IPPS) proposed rule, where CMS also solicited public comment on how to revise the definition of “substantial clinical improvement” criterion for the device pass-through payment. This proposal and comment solicitation are aimed at ensuring that Medicare beneficiaries have timely access to new therapies, and reduce the uncertainty that innovators face regarding payment for these therapies.

Protecting Taxpayer Dollars
CMS is focused on establishing new ways to account for unnecessary increases in the volume of covered outpatient department services. Prior authorization has already proven to be an effective method for controlling improper payments and decreasing the volume of potentially improperly billed services for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). Recently, CMS has observed significant increases with regard to various outpatient department (OPD) services. CMS reviewed internal data, and developed a list of OPD services that have demonstrated an unnecessary increase in volume. CMS is proposing to implement a prior authorization requirement for Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, Rhinoplasty, and Vein Ablation to help ensure these services, which are often cosmetic, are only billed when medically necessary.

Meaningful Measures/Patients Over Paperwork
CMS is proposing changes to the Hospital Outpatient Quality Reporting (OQR) and Ambulatory Surgical Center Quality Reporting Programs to further meaningful measurement and reporting for quality of care in the outpatient surgical setting while limiting burden. CMS is requesting comment on utilizing a set of patient safety measures for both programs as this is an important area of clinical concern and would serve to increase program alignment.

Hospital Outpatient Quality Reporting (OQR) Program
The Hospital OQR Program is a pay-for-reporting quality program for the hospital outpatient department setting. The Hospital OQR Program requires hospital outpatient facilities to meet quality reporting requirements, or receive a reduction of 2.0 percentage points in their annual payment update if these requirements are not met.

In the CY 2020 OPPS/ASC Proposed Rule, CMS is proposing to remove one web-based measure for the CY 2022 Program Year from the Hospital OQR Program, External Beam Radiotherapy (EBRT) for Bone Metastases (OP-33). This removal is proposed on the basis that the costs associated with the measure outweigh the benefit of its continued use in the program; the complexity of reporting this measure places substantial administrative burden on hospitals.

CMS is requesting comment on potentially adding to the Hospital OQR Program in future rulemaking, four patient safety measures previously adopted for the Ambulatory Surgery Center (ASC) Quality Reporting: ASC 1-4 (including ASC-1: Patient Fall, ASC-2: Patient Burn, ASC-3: Wrong Site, Wrong Side, Wrong Procedure, Wrong Implant, and ASC-4: All-Cause Hospital Transfers/Admissions). 

Ambulatory Surgical Center Quality Reporting (ASCQR) Program
The ASCQR Program is a pay-for-reporting quality program for the ASC setting. The ASCQR Program requires ASCs to meet quality reporting requirements or receive a reduction of 2.0 percentage points in their annual fee schedule update if these requirements are not met.

CMS is not proposing to remove any measures in this rulemaking as our analysis of the current ASCQR Program measure set indicates that there are no measures that meet the measure removal factors following last year’s comprehensive removal initiative. CMS is proposing to adopt one claims-based measure beginning with the CY 2024 payment determination, ASC-19: Facility-Level 7-Day Hospital Visits after General Surgery Procedures Performed at Ambulatory Surgical Centers (NQF #3357).

CMS is also requesting comment on potential future updates to the submission method for certain patient safety measures for which data collection is suspended: ASC-1: Patient Fall, ASC-2: Patient Burn, ASC-3: Wrong Site, Wrong Side, Wrong Procedure, Wrong Implant, and ASC-4: All-Cause Hospital Transfers/Admissions. 

CY 2020 OPPS Payment Methodology for 340B Purchased Drugs
Section 340B of the Public Health Service Act (340B) allows participating hospitals and other providers to purchase certain covered outpatient drugs at discounted prices from manufacturers. In the CY 2018 OPPS/ASC final rule, CMS reexamined the appropriateness of the prior Average Sale Price (ASP) plus 6 percent payment methodology for drugs acquired through the 340B Program, given that 340B hospitals acquired these drugs at steep discounts.  Beginning January 1, 2018, Medicare paid an adjusted amount of ASP minus 22.5 percent for certain separately payable drugs or biologicals that are acquired through the 340B Program by a hospital paid under the OPPS that is not excepted from the payment adjustment policy. For CY 2020, CMS is proposing to continue to pay an adjusted amount of the ASP, minus 22.5 percent for certain separately payable drugs or biologicals that are acquired through the 340B Program. CMS also acknowledges the ongoing litigation pertaining to the 340B payment adjustment and solicits comment on alternative payment options for CY 2020 and potential remedies for CY 2018 and CY 2019 payments in the event of an adverse ruling on the 340B payment policy by the United States Court of Appeals.

Proposed Updates to OPPS Payment Rates
In accordance with Medicare law, CMS is proposing to update OPPS payment rates by 2.7 percent. This update is based on the projected hospital market basket increase of 3.2 percent minus a 0.5 percentage point adjustment for multi-factor productivity (MFP).

Partial Hospitalization Program (PHP) Rate Setting
The CY 2020 OPPS/ASC proposed rule updates Medicare payment rates for Partial Hospitalization Program (PHP) services furnished in hospital outpatient departments and Community Mental Health Centers (CMHCs). The PHPs are structured intensive outpatient programs consisting of a group of mental health services paid on a per diem basis under the OPPS, based on PHP per diem costs. 

Update to PHP Per Diem Rates
The CY 2020 OPPS/ASC proposed rule maintains the unified rate structure established in CY 2017, with a single PHP APC for each provider type for days with three or more services per day.  CMS proposed to use the CMHC and hospital-based PHP (HB PHP) geometric mean per diem costs, consistent with existing policy, but with a cost floor equal to the CY 2019 final geometric mean per diem costs.  

Proposed Updates to ASC Payment Rates
In the CY 2019 OPPS/ASC final rule with comment period, we finalized our proposal to apply the hospital market basket update to ASC payment system rates for an interim period of 5 years (CY 2019 through CY 2023).  CMS is not proposing any changes to its policy to use the hospital market basket update for ASC payment rates for CY 2020-2023.

Using the hospital market basket, CMS proposes to update ASC rates for CY 2020 by 2.7 percent for ASCs meeting relevant quality reporting requirements. This change is based on the projected hospital market basket increase of 3.2 percent minus a 0.5 percentage point adjustment for MFP. This change will also help to promote site-neutrality between hospitals and ASCs and encourage the migration of services from the hospital setting to the lower cost ASC setting.

Revision to the Organ Procurement Organization Conditions for Certification
Organ Procurement Organizations (OPOs) are currently required to meet two out of three outcome measures.  We are proposing to revise the definition of “expected donation rate” that is included in the second outcome measure to match the Scientific Registry of Transplant Recipient (SRTR) definition. CMS is proposing to make this change to clarify the regulatory standard so that we may properly enforce the second outcome measure, eliminate any provider confusion, and further support our goals of accurately and reliably measuring OPO performance.

To give OPOs adequate time to comply with the change to the definition of “expected donation rate,” we are also proposing to reduce the time period for the second outcome measure and calculate the expected donation rate using 12 out of the 24 months of data (from January 1, 2020 through December 31, 2020) for the 2022 recertification cycle only.

Potential Changes to the Organ Procurement Organization and Transplant Center Regulations: Request for Information
CMS is considering a comprehensive proposal that would update the OPO Conditions for Coverage (CfCs) and potentially update the transplant center Conditions of Participation (CoPs).  We are soliciting public comments regarding what revisions may be appropriate for the current OPO CfCs and the current transplant center CoPs.  In addition, we are seeking public comments on two potential outcome measures for OPOs. We are especially interested in public comments about the validity and reliability of these measures.  

[2]Azar, A. M., Mnuchin, S. T., and Acosta, A. “Reforming America’s Healthcare System Through Choice and Competition.” December 3, 2018. Available at:

[3] Bresnick J.  Verma: Price Transparency Rule a “First Step” for Consumerism. January 11, 2019.  Available at: