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CMS Proposed Rule Will Cut Medicare Spending by $760 Million

CMS recently released its proposed rule for changes to the Outpatient Prospective Payment System (OPPS) for FY19. In addition to a proposed 1.25 percent increase in hospital OPPS rates for FY19, CMS wants to reduce payment for hospital outpatient clinic visits at off-campus provider-based departments to 40 percent of the OPPS rate.


The “site-neutral” policy change will largely offset the OPPS rate increase by cutting payments by 1.2 percent, according to a CMS fact sheet. CMS estimated it would cut $760 million in FY19 Medicare spending. The clinic visit is the most commonly billed service under the OPPS. (“Medicare Proposes $760 Million 2019 Hospital Cut,” HFMA Compass, August 1, 2018)


CMS stated that it is proposing the payment cut for provider-based department clinics because of hospital purchases of physician practices. It claimed that the hospitals’ objective in these purchases is to earn higher payment rates by designating the practices as off-campus provider-based departments.


The industry has responded quickly.


  • America’s Essential Hospitals: “Today’s proposed rule for Medicare outpatient payments would make bad policies worse, impose draconian new cuts that jeopardize healthcare access for millions of vulnerable Americans, and undermine the foundation of support for our nation’s healthcare safety net.”


  • The American Hospital Association: “We will urge the agency to revise these punitive policies so that hospitals can continue to provide the highest quality health care.”


(Both quotes from “Medicare Proposes $760 Million 2019 Hospital Cut,” HFMA Compass, August 1, 2018)


In its fact sheet, CMS explained its rationale as follows:


“. . . changes that would encourage site-neutral payment between sites of services and make healthcare prices more transparent for patients so that they can be more informed about out-of-pocket costs. . . [the] proposed rule would further advance the agency’s priority of creating a patient-centered healthcare system by achieving greater price transparency, interoperability, and significant burden reduction so that hospitals and ambulatory surgical centers can operate with better flexibility and patients have what they need to become active healthcare consumers.” (CMS proposes Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System changes for 2019 (CMS-1695-P), CMS.gov, July 25, 2018)


A summary of other proposed changes follows:


  • Extension of 340B Medicare payment rate to 340 B drugs furnished in non-grandfathered provider-based departments
  • New drugs and biological products to be paid at the rate of the wholesale acquisition cost plus 3 percent (a 50 percent reduction)
  • Changes to the patient experience measures specific to three metrics related to pain communication
  • Changes to the Outpatient Quality Reporting program including removal of 10 measures
  • A 2 percent increase in ASC rates for CY19.


Included in the proposed rule was a CMS solicitation for comments on the following:


  • Whether providers and suppliers should be required to inform patients about charges and payment information for healthcare services and out-of-pocket costs
  • Suggested changes to encourage interoperability of electronic health records or other ways to share data between providers
  • Whether CMS should revise the Conditions of Participation to require interoperability


Comments on the proposed rule are due by Sept. 24, with a final rule expected by around Nov. 1.


Read the CMS fact sheet here.


Read the 2019 Hospital Outpatient Prospective Payment System (OPPS) proposed rule here.




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