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Final OPPS Rule Has Significant Financial Impact on Hospitals

CMS’s final rule for the Hospital Outpatient Prospective Payment System (OPPS) will increase overall 2018 hospital OPPS payment rates by 1.35 percent, according to a CMS fact sheet. However, hospitals are expected to see financial losses from Medicare payment changes related to drugs and knee replacements under the rule finalized this week.


According to the final rule, Medicare will cut the payment rate for Medicare Part B drugs purchased by hospitals through the 340B program. It will reduce the payment rate for non-pass-through drugs and biologicals (other than vaccines) purchased through the 340B program to the average sales price (ASP) minus 22.5 percent. The current standard is ASP plus 6 percent.


The change goes into effect at the beginning of 2018.


The 340B change will cut 2018 Medicare payments to 1,979 not-for-profit hospitals by 0.3 percent and to 493 government-run hospitals by 1.6 percent, while increasing payments to 1,293 for-profit hospitals by 2.7 percent, according to CMS. Additionally, hospitals that Medicare classifies as teaching hospitals or disproportionate share hospitals will have a 1.1 percent cut under the policy.


Hospitals have voiced concerns over the financial impacts, in part because the savings from the 340B program would be redistributed to all hospital types. Safety net hospitals pose the largest concern.


The American Hospital Association (AHA), America’s Essential Hospitals and the Association of American Medical Colleges said they were planning to file suit to reverse the policy changes.


The hospitals’ case would be bolstered by congressional intent in establishing the 340B program, which specifically defined the “covered entities” that were entitled to the drug discounts. The redistribution of the 340B discount savings among all hospitals appears to run counter to that legislative intent, said an attorney familiar with the issues.

“That really subverts Congress’s expressed intent to give the benefits of these discounts to very specifically defined hospitals within the 340B program,” he added.


Many members of the Senate and House of Representatives signed letters to CMS that underscored the intent and particularly highlighted the detrimental anticipated impacts of the new 340B policy on rural hospitals. (“Hospitals Take Hit on Drugs, Joint Replacements in Final OPPS Rule,” HFMA Weekly, November 3, 2017)


Also in the final rule, CMS removed total knee arthroplasty (TKA) and five other procedures from Medicare inpatient-only list of procedures. These procedures typically are provided only in the inpatient setting and not paid under OPPS. CMS will bar recovery audit contractors from conducting “site of service” reviews of TKA procedures for two years.


An investment advisory firm noted that the change could expose hospitals and device manufacturers to about a 30 percent payment cut.


So far, CMS has not added TKA to the list of surgical procedures that can be performed in an ambulatory surgery center. However, it is expected that CMS will do so as soon as the 2019 payment, with commercial insurers following suit.


AHA warned CMS in a comment letter that the TKA change could undermine the Comprehensive Care for Joint Replacement (CJR) and the Bundled Payments for Care Improvement (BPCI) programs.


To read the AHA comment letter, click here.



To read the CMS fact sheet, click here.



(Major source: (“Hospitals Take Hit on Drugs, Joint Replacements in Final OPPS Rule,” HFMA Weekly, November 3, 2017)




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