ALERT

CMS Releases the 2019 OPPS and ASC Payment System

Final Rule
November 13, 2018

Miranda A Franco

HIGHLIGHTS:

The Centers for Medicare & Medicaid Services (CMS) has issued the Calendar Year (CY) 2019
Final Rule that updates payment rates and policy changes in the Hospital Outpatient Prospective
Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System.
Significant finalized policies include a proposal to expand Medicare reimbursement cuts for drugs
purchased through the 340B discount program to certain hospital off-campus provider-based
departments (PBDs), as well as a policy focusing on site-neutral payments for clinic visits at off-
campus PBDs. CMS is not finalizing its proposal regarding the expansion of clinical families of
services at excepted hospital outpatient departments.

The Centers for Medicare & Medicaid Services (CMS) on Nov. 2, 2018, issued the Calendar Year
(CY) 2019 Final Rule that updates payment rates and policy changes in the Hospital Outpatient
Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System. It is
scheduled to be published in the Nov. 21, 2018, issue of the Federal Register and will become
effective on Jan. 1, 2019.

Visit the CMS website for the OPPS and ASC Payment System Fact Sheet.

Among significant policies:

340B Drug Payment Policy Applied to Non-Excepted Off-Campus Provider-Based

Departments (PBDs): CMS finalized a proposal to expand Medicare reimbursement cuts for
drugs purchased through the 340B discount program to certain hospital off-campus departments,
focusing Medicare cuts on non-grandfathered hospital outpatient departments (HOPDs) – equal to
the 22.5 percent reductions (77.5 percent of Average Sales Price rather than 106 percent of
Average Sales Price). Critical Access Hospitals (CAHs), Rural Sole Community Hospitals (SCHs),
Children's Hospitals and PPS-Exempt Cancer Hospitals remain excluded from the payment
adjustment.
Site-Neutral Payments for Clinic Visits at Off-Campus PBDs: CMS finalized a policy to
"control unnecessary increases in the volume of covered HOPD services" by paying the Medicare
Physician Fee Schedule (MPFS)-equivalent for the clinic visit services when provided at an off-
campus PBD paid under the OPPS. This reduction in payment will now be phased in over two
years. CY 2019 will see a 30 percent payment reduction for clinic visit G0463 (at all off-campus
HOPDs), with an additional 30 percent reduction set for 2020. The American Hospital Association
(AHA) and other hospital groups are likely to bring forward another lawsuit on this issue, but it may
take years to see any resolution, not unlike what hospitals are facing with the 340B issue.
 Expansion of Clinical Families of Services at Excepted Off-Campus HOPDs: CMS is not
finalizing its proposal regarding "clinical families of services" but will continue to monitor the
expansion of services in excepted off-campus PBDs.
It is clear that CMS is interested in further payment equalization between HOPDs and physician
offices, increasing the likelihood of further reductions for off-campus HOPDs in the future.

Additional Highlights
HOPD Payment Updates: CMS finalized a 1.35 percent increase in the OPPS conversion factor
(CF), higher than the 1.25 percent increase in the proposed rule. CMS anticipates that the CY 2019
CF update, along with changes in enrollment, utilization and case-mix, will result in total payments of
approximately $74.1 billion to HOPD providers, an increase of approximately $5.8 billion from CY
2018 payment estimates. HOPDs failing to meet quality-reporting requirements will continue to
receive a 2.0 percent reduction in payments for OPPS services.

ASC Payment Updates: For ASCs meeting quality reporting requirements under the Ambulatory
Surgical Center Quality Reporting (ASCQR) program, CMS finalized a 2.1 percent increase (higher
than the 2.0 percent increase in the proposed rule), based on a projected Consumer Price Index for
All Urban Consumers (CPI-U) update of 2.9 percent minus the 0.8 percentage-point multifactor
productivity (MFP) adjustment required by the Affordable Care Act (ACA). CMS estimates that this
update will result in approximately $4.85 billion in total payments to ASCs. CMS states that more
competitive ASC rates could increase patient access to ASCs by prompting those facilities to open in
markets that have few or no ASCs so far.

Wholesale Acquisition Cost (WAC)-Based Payment for Part B Drugs: CMS finalized a proposal
(similar to the finalized policy in the MPFS) to reduce payment for Part B drugs and biologics that do
not report Average Sales Price (ASP), do not receive pass-through payment or are not acquired
through the 340B program to WAC plus 3 percent rather than WAC plus 6 percent. If WAC data is
not available for a drug or biological, CMS plans to continue its policy to pay separately payable
drugs and biological products at 95 percent of the average wholesale price (AWP).

Collecting Data on Services Furnished in Off-Campus Provider-Based Emergency

Departments:CMS agreed with the Medicare Payment Advisory Commission (MedPAC)
recommendation to develop data to assess the extent to which OPPS services are shifting to off-
campus provider-based emergency departments. As a result, CMS in the Proposed Rule announced
the implementation of a new claim-line modifier, "ER," that must be billed for outpatient hospital
services furnished in an off-campus, provider-based emergency department effective beginning Jan.
1, 2019. The ER modifier would identify items and services furnished by a provider-based off-
campus emergency department and would have to be reported with every claim line for outpatient
hospital services furnished in an off-campus provider-based emergency department. Critical Access
Hospitals are exempt from this requirement.

In the Final Rule, CMS noted that it was not a proposal open to public comment, but nonetheless, it
appreciated comments and would consider them in potential future policy development.

Apply 340B Drug Payment Policy to Non-Excepted Off-Campus PBDs: In last year's OPPS
final rule, CMS finalized its policy that separately payable, covered outpatient drugs and biologicals
(other than drugs on pass-through payment status and vaccines) acquired under the 340B program
would be paid at a formula determined by ASP minus 22.5 percent, rather than ASP plus 6 percent,
when furnished and billed by a PBD paid under the OPPS. In the Final Rule, CMS finalized a policy
to extend this provision to 340B-eligible, off-campus HOPDs that are reimbursed at a lower rate
under the MPFS. CMS exempts Rural Sole Community Hospitals, Children's Hospitals and PPS-
Exempt Cancer Hospitals from this payment adjustment.

Expansion of Clinical Families of Services at Excepted Off-Campus Departments of a

Provider: CMS did not finalize its proposal to reimburse at the MPFS rate (rather than at the OPPS
rate) for new items and services from 19 clinical families furnished at an excepted off-campus PBD
that were not furnished in a prior, baseline period. Under current regulations, excepted off-campus
PBDs can expand their service lines to furnish new items and services and be paid under OPPS
rates. CMS noted concerns that this could incentivize hospitals to purchase additional physician
practices and expand services furnished by their excepted off-campus PBDs to achieve greater
payment under OPPS – therefore undermining the intent of Section 603 of the Bipartisan Budget Act
of 2015. While CMS did not finalize its proposal, it stated that it would continue to monitor the
expansion of services to excepted off-campus PBDs. Notably, CMS has not finalized this policy over
several rulemaking cycles. It is most likely that future rules will continue to tackle this issue.

Site-Neutral Payments for Clinic Visits at Off-Campus PBDs: Last year, CMS found that one
procedure code accounted for more than 50 percent of all codes billed at off-campus HOPDs
(G0463: hospital outpatient clinic visit for assessment and management of a patient). In order to
encourage site-neutral payments across care sites, CMS is finalizing its proposal to pay off-campus
PBDs at the MPFS rate for hospital outpatient clinic visits, which use HCPCS code G0463.

CMS' finalized policy means providers who append modifier -PO (excepted service provided at an
off-campus, outpatient PBD of a hospital) will be paid a significantly lower rate for G0463 in 2019
than they have been paid previously. The reduction will be phased in over two years and is not
budget-neutral.The two years phased payment reduction represents a softening of the proposed
approach, because CMS originally desired to implement the 60 percent reduction in payment rates
for G0463 in 2019 alone. The new rate would lower the cost of clinic visits from the current $116 with
a $23 beneficiary copay to $81 with a $16 beneficiary copay (in 2019), then to a $46 payment and
$9 copay in 2020. CMS estimates this policy will lead to approximately $380 million in savings for
2019, with savings to beneficiaries accounting for approximately $80 million of that total. It should
also be noted that CMS is concurrently focusing on payment reductions for Evaluation and
Management (E/M) services as part of the MPFS. (See Holland & Knight alert, "CMS Releases the
2019 MPFS and QPP Final Rules," Nov. 7, 2018.)

Biosimilars: CMS finalized a policy to pay for biosimilars that don't have pass-through status but
are purchased under 340B at the average sales price minus 22.5 percent of the biosimilar's ASP,
rather than the ASP of the reference product.

Competitive Acquisition Program (CAP) Request for Information (RFI): CMS received
approximately 80 comments relating to the request for information issued in the CY 2019 OPPS/ASC
proposed rule that was considered and noted in the recent advance notice of proposed rulemaking
(ANPRM) for the International Pricing Index (IPI) model.

Payment for Non-Opioid Pain Management Therapy: CMS finalized its proposal to pay
separately at ASP plus 6 percent for non-opioid pain management drugs that function as a supply
and when used in a surgical procedure conducted in an ASC. This policy will not apply to hospital
outpatient departments, where the products will continue to be packaged in with the payment for the
procedure itself.

Changes to PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program: Following

additional analyses to assess measure performance using data from the Centers for Disease Control
and Prevention (CDC), as outlined in the Fiscal Year (FY) 2019 Inpatient Prospective Payment
Systems (IPPS)/Long-Term Care Hospital (LTCH) Final Rule, CMS is not finalizing the removal of
two National Healthcare Safety Network (NHSN) measures: Catheter-Associated Urinary Tract
Infection Outcome Measure (CAUTI) (NQF No. 0138) and Central Line-Associated Bloodstream
Infection Outcome Measure (CLABSI) (NQF No. 0139).

Changes for Inpatient Quality Reporting (IQR) Program: Questions on the Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS) related to pain communication will no
longer be included in a facility's quality rating in response to the opioid crisis. The questions will be
removed for discharges on or after Oct. 1, 2019, and will impact payment in FY 2021. Additionally,
CMS will not publicly report the three revised Communication about Pain questions.

Changes to Hospital Outpatient Quality Reporting (OQR): CMS finalized its proposal to remove
one measure from the program for the CY 2020 payment determination and seven measures for CY
2021.

CMS finalized its proposal to remove the Notice of Participation (NOP) form and OP-27: Influenza
Vaccination Coverage Among Healthcare Personal from the program for the CY 2020 payment
determination. In CY 2021, a total of seven measures will be removed. CMS did not finalize its
proposal to remove the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk
Patients (OP-29) and the Cataracts: Improvement in Patient's Visual Function within 90 Days
Following Cataract Surgery (OP-31) measures. CMS also finalized its proposal to extend the
performance period to three years for one measure related to hospital visit following colonoscopy
(OP-32). CMS also announced plans to change the frequency of the Hospital OQR Program
Specifications Manual release beginning with CY 2019.Rather than require its release every six
months, the release would occur every 12 months; this is different from the initial proposal of every
six to 12 months.

Changes to the Ambulatory Surgical Center Quality Reporting (ASCQR) Program: CMS
finalized its proposal to remove one measure from the program for the CY 2020 payment
determination and one measure for CY 2021. CMS did not finalize its proposal to remove six
measures: Patient Burns (ASC-1); Patient Falls (ASC-2); Wrong Site, Wrong Side, Wrong Patient,
Wrong Procedure, Wrong Implant (ASC-3); All-Cause Hospital Transfer/Admission (ASC-4);
Mammography Follow-Up Rates (ASC-9); and Thorax Computed Tomography (CT) Use of Contrast
Material (ASC-11) measures. For ASC 1-4, CMS will suspend data collection beginning with the CY
2021 payment determination until further rulemaking with the goal of updating these measures. CMS
also finalized its proposal to extend the performance period to three years for one measure related to
hospital visit following colonoscopy (ASC-12) and to update the factors CMS will consider when
removing measures from the program.

Changes to List of ASC Covered Surgical Procedures: Procedures must be listed on the ASC
Covered Procedures List (CPL) to be eligible for reimbursement in the ASC setting. CMS has
publicly stated its interest in shifting surgical cases from higher-cost HOPDs to lower-cost ASCs
where clinically appropriate. Accordingly, CMS has paved the way for the possible future expansion
of the CPL list by expanding the definition of "surgery" in the context of the list. CMS also finalized its
proposal to add 12 cardiac catheterization procedures to the list of ASC covered procedures and, in
response to comments, five other related procedures. CMS is not finalizing any changes to the ASC
CPL after conducting a review of all procedures added within the past three years to reassess
whether such procedures should continue to be on the ASC CPL.

Pass-Through Payment Status for Drugs: The pass-through payment status of 23 drugs and
biologicals will expire on Dec. 31, 2018, and pass-through payment status will continue for 45 drugs
and biologicals. Three additional drugs and biologicals that already have had three years of pass-
through will be extended by an additional two years as required by statute. A fourth will have its
HCPCS code (Q4172) expire in 2019, but CMS will extend pass-through payment on two of its three
successor codes (Q4195 and Q4196).

Payment for Chimeric Antigen Receptor (CAR) T-Cell Therapies: In the Proposed Rule, CMS
highlighted that two CAR T-cell therapies were approved by the U.S. Food and Drug Administration
(FDA) for transitional pass-through status, effective April 1, 2018. In the Final Rule, CMS is
advancing the proposal to continue pass-through payment status for HCPCS code Q2040 (which is
being deleted and replaced with HCPCS code Q2042, effective Jan. 1, 2019) and HCPCS code
Q2041 for CY 2019.

CMS also proposed four new HCPCS codes for CAR-T therapies. However, none of these new
HCPCS codes were proposed to be payable under the OPPS.

Despite stakeholder comments, CMS notes in the Final Rule that it does not believe payment under
the OPPS is necessary for procedures described by CPT codes 0537T (harvesting of blood-derived
T lymphocytes for development of genetically modified autologous CAR T-cells, per day), 0538T
(preparation of blood-derived T lymphocytes for transportation) and 0539T (receipt and preparation
of CAR-T cells for administration). CMS notes that the existing CAR T-cell therapies on the market
were approved as biologics and, therefore, provisions of the Medicare statute providing for payment
for biologicals apply. CMS assigned these codes a status indicator of "B" (codes not recognized by
OPPS). However, after consideration of public comments, CMS is assigning status indicator
"S" (Significant Procedure, Not Discounted When Multiple) to CPT code 0540T (CAR-T cell
administration, autologous) and assigning the code to Ambulatory Payment Classification(APC) 5694
for CY 2019.

Pass-Through Payment Status for Devices: This year, CMS received seven applications for
pass-through status and approved only one: an implantable system that stimulates a nerve in the
chest.

Comprehensive Ambulatory Payment Classifications (C-APCs) and New Technology APC

Payment for Low Volume Procedures: CMS finalized its proposal to create three new C-APCs:

C-APC 5163 (Level 3 ENT Procedures)

C-APC 5183 (Level 3 Vascular Procedures)
C-APC 5184 (Level 4 Vascular Procedures)
A new "Smoothing Methodology" for pricing extremely low-volume procedures (which CMS defines
as fewer than 100 claims a year under the hospital outpatient payment system) was also finalized.

Under this new methodology, CMS will use up to four years of claims data to set a payment amount
for both assigning the service to a New Technology APC but also for assigning the service to a
regular APC once it is no longer included in the New Technology APC. Services designated as New
Technology APCs will be excluded from bundling into C-APC procedures.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be
used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different
and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal
counsel.
Author

Miranda Franco is a senior policy advisor in Holland & Knight's Washington, D.C.,
office and a member of the firm's Public Policy & Regulation Group. She has more
than a decade of collective experience in health policy and government relations,
representing advocacy positions to policymakers, national physician specialty
societies, state medical societies, hospitals and other healthcare organizations.
202.469.5259 | Miranda.Franco@hklaw.com

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