CMS Proposes Finalizing Payment Cuts for Off-Campus Hospital Clinic Visits

August 14, 2019

Last year, the Centers for Medicare & Medicaid Services (CMS) implemented a controversial payment cut to certain off-campus provider-based departments (PBDs) for the most commonly billed Outpatient Prospective Payment System code — Current Procedural Terminology code G0463, “hospital outpatient clinic visit” (Code).

In its recently released calendar year 2020 proposed rule regarding the Medicare hospital Outpatient Prospective Payment System (OPPS), CMS proposes to finalize this cut after a two-year phase-in that was adopted in the calendar year 2019 final rule. This new proposal will further cut payments to certain off-campus PBDs that bill for this code by another 30 percent of the applicable on-campus rate. In addition, CMS proposes continuing certain 340B payment cuts to certain other off-campus PBDs despite legal challenges to both of these policies. On the other hand, CMS proposes to reduce the burden on physician supervision requirements for PBDs.

To assist providers in navigating these proposed rules, here are four key concepts from the proposal that could affect off-campus PBDs in 2020.

1. Clinic Visits to Receive Reduced Rates for Excepted Off-Campus PBDs

As discussed in an Aug. 28, 2018, McGuireWoods legal alert titled “CMS Proposes More Payment Cuts for Hospital Off-Campus Provider-Based Departments,” CMS sought to reduce payments for the Code because it was “not prudent for the Medicare program to pay more for these services in one setting than another.” At the time, CMS believed the Code, which represented 49 percent of all claim lines (or 30 percent of total payments) that were either separately payable or conditionally packaged services furnished by non-excepted PBDs, could be provided for less in a non-hospital setting. Accordingly, CMS proposed, and thereafter finalized, its “relativity adjuster” from the Physician Fee Schedule to the Code in excepted PBDs. Effectively, implementation of this relativity adjuster policy reduced payment to 40 percent of the applicable OPPS on-campus rate. In finalizing its relativity adjuster policy last year, CMS decided to phase it in over a two-year period. Thus, in 2019, CMS paid excepted PBDs that furnished the Code 70 percent of the applicable on-campus OPPS rate.

Now, in its proposed 2020 rule, CMS intends to finalize its phase in of the relativity adjuster policy by implementing an additional 30 percent cut of the OPPS rate. This means that the Code, if furnished by an excepted PBD, will be paid 60 percent less than it would had the code been furnished on-campus.

Given the substantial impact of the relativity adjuster policy, CMS received numerous comments against the proposal, triggering multiple lawsuits. Challengers and critics believe CMS went beyond its statutory authority in proposing the relativity adjuster policy because Congress enacted the Bipartisan Budget Act of 2015 to cut new off-campus PBDs’ payment rates and grandfathered existing PBDs (known as excepted-PBDs) to continue to receive the full OPPS rate. In response, CMS cited its authority to implement its relativity adjuster policy under Section 1833(t)(2)(F) of the Social Security Act, which requires CMS to control unnecessary increases in the volume of outpatient hospital services. As it relates to payment for the Code, CMS said it would also apply its site-neutrality reduction, notwithstanding the grandfathering of certain PBDs that occurred under the Bipartisan Budget Act.

The relativity adjuster policy was implemented in calendar year 2019 and proposed for 2020 in a non-budget neutral manner to reduce overall payments to hospitals.

2. Solicitation for Comments on 340B Drugs at Non-excepted PBDs

CMS proposes to continue paying for 340B drugs provided at non-excepted, off-campus PBDs at a lower rate under the Physician Fee Schedule in an effort to treat non-excepted PBDs in the same manner as excepted PBDs. Effectively, CMS proposes to continue paying non-excepted PBDs the average sales price minus 22.5 percent instead of the typical Physician Fee Schedule payment rate, which is equal to the average sales price plus 5 percent. This lower rate for such locations is comparable to the amounts paid to hospitals, including excepted PBDs, again furthering CMS’ site-neutrality efforts to avoid further incentives where a hospital could effectively receive the reduced 340B rate from manufacturers and continue to bill the drug at the higher Physician Fee Schedule rate.

Despite continuing its current policy, CMS is soliciting comments on the appropriate payment amount for calendar years 2018, 2019 and 2020 for the OPPS and Physician Fee Schedule, if, given the lawsuits mentioned above, courts forbid this payment policy. Notably, the U.S. District Court for the District of Columbia ruled against this policy for hospitals in December 2018, explaining that CMS’ change to hospital 340B drug payment policy was outside its statutory authority. The district court extended its ruling earlier this year to non-excepted PBDs (paid under the Physician Fee Schedule, not the hospital payment policies). CMS is appealing the district court’s rulings but seeks clarification as to whether a rate of average sales price plus 3 percent would be appropriate if courts rule against CMS on appeal. CMS has also solicited other proposals on such payments if the policy is not continued. Accordingly, providers and counsel should continue to monitor lawsuits and court rulings on these proposed rules.

3. No Further Changes to 40 Percent Relativity Adjuster for Non-excepted PBDs

Beyond those discussed above, CMS is not proposing additional changes to the 40 percent relativity adjuster for non-excepted, off-campus PBDs. As we most recently discussed in a Health Care Law Monthly article, “Recent Reimbursement-Rate Trends for Hospital Off-Campus Provider-Based Departments,” CMS implemented Section 603 of the Bipartisan Budget Act’s “site-neutral” payment policies for newly acquired, developed or relocated PBDs through a relativity adjuster. Effectively, only excepted, off-campus PBDs — such as those facilities that billed as PBDs prior to Nov. 2, 2015 — continue to be paid under the OPPS. Non-excepted PBDs, including facilities that did not bill as PBDs prior to that date, are now reimbursed under the Physician Fee Schedule, which reimburses PBDs based on a relativity adjuster to the OPPS rate, as discussed above. Currently, non-excepted PBDs receive approximately 40 percent of the OPPS rates for non-excepted items and services.

CMS has also twice proposed to limit each hospital excepted PBD to except payment only for items or services offered by the facility before Nov. 2, 2015, when the Bipartisan Budget Act passed. Effectively, any services performed in 2015 at an excepted PBD that did not fit a clinical category would also be paid 40 percent of the applicable OPPS rate under the Physician Fee Schedule. CMS has not finalized this policy, despite proposing it a second time last year.

Lastly, despite previously soliciting comments and stating that it would continue to review updated data for future rate changes, CMS has not proposed to change its relativity adjuster nor proposed a limit on new services or items outside of clinical families the facility provided in 2015 in the 2020 OPPS and Physician Fee Schedule proposed rules. Hospitals should continue to follow future rulemaking to see if CMS returns to these policies.

4. Proposed Changes in the Level of Physician Supervision in PBDs

For all hospital PBDs (including on-campus and both excepted and non-excepted locations), CMS proposes to change the required level of physician supervision for hospital outpatient therapeutic services, from “direct supervision” to “general supervision.” This reduction to the required level of physician supervision means the supervising physician need not be “immediately available to furnish assistance and direction throughout the performance of the procedure” but, instead, the service must be “under the physician’s overall direction and control.” There need not be a general requirement that a physician is present.

CMS noted that it has not received any patient complaints or other indication that lesser amounts of physician supervision had any negative impact on quality of outpatient therapeutic services, during the nearly nine years that critical access and other small hospitals have been excused from this rule. Furthermore, hospitals will need to meet higher-level supervision standards when required for specific services, and CMS specifically asked the public whether to apply this proposal to service categories like chemotherapy administration or radiation therapy. Hospitals will continue to be required to maintain an organized medical staff, have a patient under the care of a physician and maintain certain conditions of participation requirements for physician direction.

This change appears favorable in that it gives hospitals flexibility regarding requirements for physician supervision — a welcome relief for hospitals, particularly in light of some of the payment cuts discussed above — but it could have a negative impact, as well. If it continues its site-neutrality approach, CMS could, in the future, argue that PBDs do not have the same costs to justify higher payment rates. In such case, policymakers may propose additional cuts like the relativity adjuster policy described above. In the meantime, if the rule is finalized, hospitals may find this flexibility helpful to ensure patient access at their PBDs.

Bottom Line

The calendar year 2020 OPPS proposed rule continues CMS’ recent payment changes and revisions to PBD billing that will affect providers through lower site-neutral payments. CMS appears committed to furthering site-neutrality payments and reducing government spending as it relates to hospitals, which CMS Secretary Seema Verma has referenced as the Trump administration’s efforts to cut government cost. If these proposals are finalized, hospitals will receive further cuts in certain off-campus locations’ payments. On the other hand, certain physician supervision requirements may be eased. Accordingly, providers should closely examine, review and continue to monitor these proposed rules, as well as other recent rules implemented by CMS, such as its “exact match” rule, to ensure compliance in the years to come for PBDs and hospitals.

For more information regarding the calendar year 2020 OPPS proposed rule, including the potential to submit comments to CMS before the Sept. 27 deadline, or to discuss the potential implications for PBDs and other providers, please consult one of the authors.