CY 2024 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS 1786-P)
On July 13, 2023, the Centers for Medicare & Medicaid Services (CMS) proposed Medicare payment rates for hospital outpatient and Ambulatory Surgical Center (ASC) services. The Calendar Year (CY) 2024 Hospital Outpatient Prospective Payment System (OPPS) and ASC Payment System Proposed Rule is published annually and will have a 60-day comment period, which will end on September 11, 2023. The final rule will be issued in early November.
In addition to proposing payment rates, this year’s rule includes proposed policies that align with several key goals of the Administration, including promoting health equity, expanding access to behavioral health care, improving transparency in the health system, promoting safe, effective, and patient-centered care, and addressing medical product shortages. The proposed rule advances the Agency’s commitment to strengthening Medicare and uses the lessons learned from the COVID-19 PHE to inform the approach to quality measurement, focusing on changes that will help address health inequities. It also seeks comment on potential payment adjustments to hospitals for the additional costs of establishing and maintaining a buffer stock of essential medicines in order to help curtail shortages of these medicines in the future.
These proposed payment policies will affect approximately 3,500 hospitals and approximately 6,000 ASCs. The hospital price transparency proposed policies impact over 7,000 institutions that are licensed as hospitals. As with other rules, CMS is publishing this proposed rule to meet the legal requirements to update Medicare payment policies for OPPS hospitals and ASCs annually. This fact sheet discusses the major provisions of the proposed rule (CMS-1786-P), which can be downloaded at: https://www.federalregister.gov/public-inspection/2023-14768/medicare-program-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center-payment
Updates to OPPS and ASC payment rates
In accordance with Medicare law, CMS proposes updating OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.8%. This update is based on the projected hospital market basket percentage increase of 3.0%, reduced by a 0.2 percentage point for the productivity adjustment.
In the CY 2019 OPPS/ASC final rule with comment period, CMS finalized a proposal to apply the productivity-adjusted hospital market basket update to ASC payment system rates for an interim period of five years (CY 2019 through CY 2023). In this rule, we propose to continue to apply the productivity-adjusted hospital market basket update to ASC payment system rates for an additional two years. Using the hospital market basket update, CMS proposes a productivity-adjusted hospital market basket update factor to the ASC rates for CY 2024 of 2.8%. The update applies to ASCs meeting relevant quality reporting requirements. This update is based on the hospital market basket percentage increase of 3.0%, reduced by a 0.2 percentage point for the productivity adjustment.
ASC Rate Update Based on the Hospital Market Basket
In the CY 2019 OPPS/ASC final rule with comment period, we finalized a policy to apply the productivity-adjusted hospital market basket update to ASC payment system rates for an interim period of five years (CY 2019 through CY 2023), during which time we would assess whether there is a migration of the performance of procedures from the hospital setting to the ASC setting as a result of the use of a productivity‑adjusted hospital market basket update. However, the impact of the COVID-19 PHE on health care utilization, in particular in CY 2020, was tremendously profound, particularly for elective surgeries, because many beneficiaries avoided health care settings, when possible, to avoid possible infection from the SARS-CoV-2 virus. Therefore, for this CY 2024 OPPS/ASC proposed rule, we are proposing to extend the five-year interim period an additional two years — through CY 2024 and CY 2025. This will enable us to gather additional claims data further removed from the COVID-19 PHE to more accurately analyze whether the application of the hospital market basket update to the ASC payment system had an effect on the migration of services from the hospital setting to the ASC setting.
Potential Hospital Inpatient Prospective Payment System (IPPS) and OPPS Payment Adjustments for the Additional Costs of Establishing and Maintaining a Buffer Stock of Essential Medicines
Even before the COVID-19 pandemic, many hospitals reported drug shortages — from antibiotics used to treat severe bacterial infections to crash cart drugs necessary to stabilize and resuscitate critically ill adults. The frequency and severity of these supply disruptions has only been exacerbated over the last few years. CMS believes it is necessary to support practices that can help to curtail shortages of essential medicines in order to safeguard and improve the care hospitals are able to provide to patients.
CMS is seeking comment on separate payment under the IPPS for establishing and maintaining access to a buffer stock of essential medicines to foster a more reliable, resilient supply of these medicines. CMS is considering this potential separate IPPS payment for cost reporting periods beginning as early as January 1, 2024. An adjustment under the OPPS could be considered for future years.
Intensive Outpatient Program
In the CY 2024 OPPS/ASC proposed rule, CMS is proposing to establish the Intensive Outpatient Program (IOP) under Medicare. The proposed rule includes the scope of benefits, physician certification requirements, coding and billing, and payment rates under the IOP benefit. IOP services may be furnished in hospital outpatient departments, Community Mental Health Centers (CMHCs), Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs), if finalized. These proposals address one of the main gaps in behavioral health coverage in Medicare and promote access to needed behavioral health care.
Scope of Benefits for IOP
CMS is proposing to set forth the scope of benefits for IOP services as mandated by section 4124 of The Consolidated Appropriations Act (CAA), 2023. An IOP is a distinct and organized outpatient program of psychiatric services provided for individuals who have an acute mental illness or substance use disorder, consisting of a specified group of behavioral health services paid on a per diem basis under the OPPS or other applicable payment system when furnished in hospital outpatient departments, CMHCs, FQHCs and RHCs. CMS is proposing to base the per diem costs of items and services included in IOP that have been, and are, paid for by Medicare either as part of the PHP benefit or under the OPPS more generally.
Physician Certification and Plan of Treatment Requirements for IOP
As amended by section 4124(a) of the CAA, 2023, section 1861(ff)(1) of the Social Security Act (the Act) requires that a physician determine that each patient needs a minimum of nine hours of IOP services per week, and this determination must occur no less frequently than every other month. CMS is proposing to codify this requirement in regulation for IOP provided in all settings and is soliciting comments on the recertification period.
IOP Payment Rates and Policy in Hospital Outpatient Departments and CMHCs
CMS is proposing to establish two IOP Ambulatory Payment Classifications (APCs) for each provider type; one for days with three services per day and one for days with four or more services per day.
For CY 2024, CMS is proposing to calculate hospital-based and CMHC IOP payment rates for three services per day and four or more services per day based on cost per day using a broader set of OPPS data that includes PHP days and non-PHP days. While no Medicare IOP benefit currently exists, CMS believes using the broader OPPS data set would allow us to capture data from hospital claims that are not identified as IOP, but that include the service codes and intensity required for an IOP day.
RHCs and FQHCs
For CY 2024, CMS is proposing to make conforming regulatory text changes to applicable RHC and FQHC regulations related to the scope of IOP benefits and services, certification and plan of care requirements, and special payment rules for IOP services as mandated by section 4124 of the CAA, 2023. The scope of IOP benefits and certification and plan of care requirements will be the same for RHCs and FQHCs as described above for hospitals. CMS is proposing to pay for three IOP services/day and according to the statute, payment is based on the hospital rate. That is, RHCs would be paid the 3-services per day payment amount for hospital outpatient departments. For FQHCs, payment would be the lesser of a FQHC’s actual charges or the 3-services per day payment amount for hospital outpatient departments. For grandfathered tribal FQHCs, payment would be the Medicare outpatient per visit rate as established by the IHS when furnishing IOP services, and payment is based on the lesser of a grandfathered tribal FQHC’s actual charges or the Medicare outpatient per visit rate.
Opioid Treatment Program (OTP) Settings
In the CY 2024 Medicare OPPS/ASC Proposed Rule, CMS is proposing to extend IOP coverage to include OTPs. CMS proposes to establish a weekly payment adjustment via an
add-on code for IOP services furnished by OTPs for the treatment of opioid use disorder and to revise the definition of opioid use disorder treatment services to include IOP services. The payment adjustment would also be updated based on the Medicare Economic Index and receive the Geographic Adjustment Factor if finalized. CMS is proposing that Medicare would pay for IOP services provided by OTPs as long as each service is medically reasonable and necessary, and not duplicative of any service paid for under any bundled payments billed for an episode of care in a given week. In order for an OTP to receive the additional payment adjustment for IOP services, a physician must certify that the beneficiary requires a higher level of care intensity compared to existing OTP services, and the certification, plan of care, and all other applicable requirements are met. We believe that payment for IOP services provided by OTPs would improve continuity of care between different treatment settings and levels of care, expand access to treatment for Medicare beneficiaries with an opioid use disorder (OUD), and further promote health equity for racial/ethnic populations and older beneficiaries.
Partial Hospitalization Program
Partial Hospitalization Program (PHP) Rate Setting
The CY 2024 OPPS/ASC proposed rule proposes updates to Medicare payment rates for partial hospitalization program services furnished in hospital outpatient departments and CMHCs. The PHP is an intensive, structured outpatient program provided as an alternative to psychiatric hospitalization, consisting of a specified 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
CMS is proposing to expand the existing rate structure to include two PHP APCs for each provider type; one for days with three services per day and one for days with four or more services per day.
For CY 2024, CMS is proposing to calculate hospital-based and CMHC PHP payment rates for three services per day and four or more services per day based on cost per day using a broader OPPS data that includes PHP and non-PHP days, which is a change from the current methodology of using only PHP data. CMS believes using the broader OPPS data set would allow CMS to capture data from hospital claims that are not identified as PHP, but that include the service codes and intensity required for a PHP day.
Clarification about Substance Use Disorder (SUD) Treatment under PHP
CMS is clarifying in the CY 2024 proposed rule that Medicare covers PHP for the treatment of substance use disorders (SUD). Specifically, CMS is clarifying that, in general, notwithstanding the requirement that PHP services are provided in lieu of inpatient hospitalization, Medicare covers PHP for the treatment of SUD, and CMS considers services that are for the treatment of SUD and behavioral health generally to be consistent with the statutory and regulatory definitions of PHP services.
Changes to Community Mental Health Centers Conditions of Participation (CoPs)
The CAA, 2023 established coverage of IOP in CMHCs. The legislation extended Medicare coverage and payment of IOP services furnished by a CMHC beginning January 1, 2024, allowing coverage of both PHP and IOP services to be furnished by CMHCs. Additionally, the CAA, 2023 established a new Medicare benefit category for Mental Health Counselor (MHC) services and Marriage and Family Therapist (MFT) services furnished by and directly billed by MHCs and MFTs, respectively.
To implement these provisions of the CAA, 2023, CMS is proposing to modify the requirements for the CMHC to include IOP services throughout the CoP. Additionally, current CoPs require that a CMHC must provide at least 40% of its services to individuals who are not eligible for Medicare Part B. If a CMHC fails to meet this requirement, their Medicare enrollment will be denied or revoked. Therefore, CMS is soliciting comments on how the provision of the IOP services may impact the populations CMHCs serve as well as the potential impact on meeting the 40% requirement. CMS is also proposing to modify the CMHC CoPs for personnel qualifications for certain disciplines to revise the current definition of mental health counselors and add a definition of marriage and family therapists.
OPPS Payment for Remote Mental Health Services
CMS is proposing technical changes to reflect additional information provided by interested parties regarding how these services are furnished, including the creation of a new untimed code describing group psychotherapy. Interested parties indicated that the creation of this code would reduce administrative burden and increase access to group psychotherapy.
OPPS and ASC Payment for Dental Services
For CY 2024, CMS is proposing Medicare payment rates under the OPPS for approximately 229 dental codes to align with the dental payment provisions in the CY 2023 Physician Fee Schedule final rule by assigning them to clinical APCs. Assigning additional dental codes to clinical APCs would result in greater consistency in Medicare payment for different sites of service and helps ensure patient access to dental services performed in the hospital outpatient setting when payment and coverage requirements are met. The proposed APC assignments for the dental codes can be found in the CY 2024 OPPS Addendum B.
For CY 2024, to address patient access issues for dental services under anesthesia in the ASC setting, CMS is proposing to add 26 separately payable dental surgical procedures to the ASC Covered Procedures List (CPL) and 78 ancillary dental services to the list of covered ancillary services. The full list of procedures included in this proposal can be found in the CY 2024 ASC Addendum AA and BB. In particular, this proposal is expected to increase equitable access for individuals with disabilities and other complex, chronic conditions who normally require anesthesia for dental services.
Hospital Price Transparency
CMS’ hospital price transparency regulations lay the foundation for a patient-driven health care system by making hospital standard charges’ data available to the public and supports President Biden’s Executive Order on Promoting Competition.
To strengthen compliance and improve the public’s understanding and use of hospital information, CMS is proposing to modify the standard charge display requirements at 45 CFR 180.50. Additionally, CMS is proposing to update the enforcement provisions at 45 CFR 180.70 to streamline and improve the transparency of the enforcement process.
The proposed policies would further advance the agency’s commitment to increasing price transparency and hospital compliance. A separate fact sheet discusses the hospital price transparency proposed provisions of the CY 2024 Hospital OPPS and ASC PPS proposed rule.
Rural Emergency Hospitals (REH) — Payment for Indian Health Service (IHS) Facilities and Tribal Facilities
In the CY 2023 OPPS/ASC final rule with comment period, CMS finalized regulations establishing the Rural Emergency Hospital (REH) provider type. A hospital is eligible to convert to an REH if it was a critical access hospital or rural hospital, with not more than 50 beds, participating in Medicare as of the date of enactment of the Consolidated Appropriations Act (CAA), 2021. Eligible hospitals that convert to an REH receive an enhanced rate for REH services and a fixed monthly facility payment.
While some tribal and IHS hospitals have expressed interest in converting to an REH, they have expressed significant reservations about transitioning from their existing payment methodology under the All-Inclusive-Rate (AIR), published annually by the IHS in the Federal Register, to the REH payment methodology. CMS is proposing that IHS and tribal facilities that convert to REHs 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. The existing beneficiary coinsurance policies applicable to such services under the AIR would remain the same. CMS also is proposing that IHS and tribal facilities that convert to REHs would receive the REH monthly facility payment consistent with how this payment is applied to REHs that are not tribally or IHS operated. CMS expects this approach, if finalized, would bring further stability to IHS facilities that decide to convert to REHs and better promote access to tribal and IHS hospitals.
Seeking Comment on Payment for High-Cost Drugs and Services outside of the IHS AIR
Under current regulations, IHS hospitals are excluded from payment under the OPPS. Instead, IHS and tribal outpatient departments are paid the AIR for each encounter that provides outpatient services. On an annual basis, IHS calculates and publishes, in the Federal Register, calendar year reimbursement rates. These rates are often referred to as the AIR, Office of Management and Budget (OMB) rates, or encounter rates. The AIR is updated annually based on a review of yearly cost reports. For CY 2023, the outpatient AIR is $620 in the lower 48 states. IHS and tribally-owned facilities have continued to expand the breadth of services that they provide to their communities. Increasingly, this has meant providing higher-cost drugs along with more complex and expensive services. There are specialty facilities where the AIR might not be an adequate representation of the facility’s costs to provide services to Medicare beneficiaries. In this proposed rule, we are seeking comment on additional payment approaches that would enhance our ability to provide equitable payment for high-cost drugs and services provided by IHS and tribally-owned facilities.
OPPS Transitional Pass-Through Payment for Devices
For CY 2024, CMS received six complete applications for device pass-through payments by March 1, 2023, which was the last quarterly deadline for applications to be received in time to be included in the CY 2024 OPPS/ASC proposed rule. Discussions of these six applications are included in this proposed rule.
OPPS Payment for Drugs Acquired Through the 340B Program
Section 340B of the Public Health Service Act (340B) allows participating hospitals and other providers to purchase certain covered outpatient drugs from manufacturers at discounted prices. For CY 2024, consistent with our policy finalized for CY 2023, we propose to continue to pay the statutory default rate, which is generally ASP plus 6%, for 340B acquired drugs and biologicals. The payment for 340B acquired drugs and biologicals would not differ from the payment rate for drugs and biologicals not acquired through the 340B program. CMS issued a proposed rule on July 7, 2023 discussing the proposed remedy for payment for 340B acquired drugs for CYs 2018 to 2022 — including how those payments would impact OPPS payment policy in future calendar years. This is addressed in a separately proposed rule, available here: https://www.federalregister.gov/public-inspection/2023-14623/medicare-program-hospital-outpatient-prospective-payment-system-remedy-for-the-340b-acquired-drug
OPPS Comment Solicitation on Packaging Policy for Diagnostic Radiopharmaceuticals
CMS continues to believe that diagnostic radiopharmaceuticals are an integral component of many nuclear medicine and imaging procedures, and payment associated with diagnostic radiopharmaceuticals should be packaged into the payment for the imaging procedure in which they are used. However, we are soliciting comment on how the OPPS packaging policy for diagnostic radiopharmaceuticals may have impacted beneficiary access, including whether there are specific patient populations, or clinical disease states, for whom this issue is especially critical. CMS is also soliciting comment on various approaches for payment of diagnostic radiopharmaceuticals that would allow for enhanced beneficiary access, while also maintaining the principles of the outpatient prospective payment system.
Hospital Outpatient/ASC/REH Quality Reporting Programs
CMS is proposing changes to, as well as requesting comment on, the Hospital Outpatient Quality Reporting (OQR), Ambulatory Surgical Center Quality Reporting (ASCQR), and Rural Emergency Hospital Quality Reporting (REHQR) Programs to further meaningful measurement and reporting for quality of care in the outpatient setting.
Hospital Outpatient Quality Reporting (OQR) and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs
The Hospital OQR Program and ASCQR Programs are pay-for-reporting quality programs for the hospital outpatient department and ASC settings, respectively, that require hospitals and ASCs 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 2024 OPPS/ASC proposed rule, CMS is proposing to modify three measures within these programs: (1) the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) measure to align with the updated Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network measure specifications; (2) the Cataracts: Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery measure survey instrument to further standardize data collection and reduce facility burden; and (3) the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure to align with updated clinical guidelines.
In addition, CMS is proposing the adoption of two measures in these programs: (1) the Risk-Standardized Patient-Reported Outcomes Following Elective Primary Total Hip and/or Total Knee Arthroplasty measure to provide specific insight into the quality of care of a common procedure, and (2) the Hospital Outpatient /ASC Facility Volume Data on Selected Outpatient Surgical Procedures measures with modifications from the previously adopted version of the measures that were removed from the programs to increase measure granularity.
Further, CMS is proposing the adoption of an additional measure in the Hospital OQR Program — the adoption of the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults electronic clinical quality measure (eCQM) to promote patient safety. CMS is also proposing to remove the Left Without Being Seen measure, as it does not provide actionable information in sufficient detail to improve quality and, subsequently, patient outcomes. We are also soliciting requests for comments in the measure topic areas of patient safety and sepsis, behavioral health (including mental health and suicide risk), as well as telehealth.
Rural Emergency Hospital Quality Reporting (REHQR) Program
Section 125 of Division CC of the CAA, 2021 added section 1861(kkk) to the Social Security Act (the Act), which established a new Medicare provider type, Rural Emergency Hospitals (REHs). An REH is a facility that, in relevant part as of December 27, 2020, was a Critical Access Hospital (CAH) or a subsection (d) hospital with not more than 50 beds located in a county (or equivalent unit of local government) that is in a rural area (defined at section 1886(d)(2)(D) of the Act) or was a subsection (d) hospital with not more than 50 beds that was treated as being in a rural area (pursuant to section 1886(d)(8)(E) of the Act). An REH must submit quality measure data to the Secretary, and the Secretary shall establish procedures to make the data available to the public on a CMS website (section 1861(kkk)(7)(B) and (D) of the Act).
In the CY 2024 OPPS/ASC proposed rule, CMS is proposing the adoption and codification of several standard quality program reporting policies, as well as the adoption of four initial measures for the REHQR Program. The four proposed initial measures, consisting of three claims-based measures and one chart-abstracted measure, are: (1) Abdomen CT ‑ Use of Contrast Material; (2) Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients; (3) Facility 7‑Day Risk‑Standardized Hospital Visit Rate after Outpatient Colonoscopy; and (4) Risk-Standardized Hospital Visits Within seven Days After Hospital Outpatient Surgery. In addition, CMS is soliciting requests for comments on the use of eCQMs, care coordination measures, and a tiered approach for quality measures and reporting requirements to incentivize REH reporting.