More on Reimbursement

CMS boosts outpatient payment by 2.6% while making further cuts to 340B hospitals

Star ratings would add a Timely and Effective Care group and would include critical access hospitals and VA hospitals.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services is proposing a 2.6% payment increase for ambulatory surgical centers in an update to the Outpatient Prospective Payment System released Monday.

This proposed change would also help promote site neutrality between hospitals and ambulatory surgical centers and encourage the migration of services from the hospital setting to the lower-cost ASC setting, CMS said.

Under the proposed rule, 340B hospitals take another reimbursement hit as CMS has proposed a 28.7% cut to their drug payments. 

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CMS is proposing to adopt a rate of the average sales price-34.7%, with a 6% add-on amount for overhead and handling costs – for a net proposed rate of ASP-28.7% for separately payable drugs or biologicals that are acquired through the 340B Program. 

The agency is soliciting comment on an alternative proposal of continuing the current Medicare payment policy of paying ASP-22.5% for 340B-acquired drugs for 2021 and subsequent years. 

This proposed rate is based on the results of a 340B hospital survey of drug acquisition costs that was administered earlier this year, CMS said. 

Rural sole community hospitals, children's hospitals and PPS-exempt cancer hospitals would be excepted from either of the proposed 340B payment policies, and these hospitals would continue to be paid ASP+6%.


Hospitals have decried decisions by the Department of Health and Human Services and an appeals court to lower reimbursement for 340B drugs.

On Friday, July 31, a federal appeals court ruled that the Trump Administration and HHS had the legal authority to reduce payment for Medicare Part B drugs to 340B hospitals. The decision reversed a lower court ruling disallowing the 28.5% pay cut. 

The American Hospital Association, the Association of American Medical Colleges and America's Essential Hospitals said the 340B decision would hurt patients and hospitals that serve large numbers of Medicaid, Medicare and uninsured patients. The hospitals get the drugs for a discounted price, but get reimbursed at a higher rate.

The 340B hospitals, many of which operate on thin margins or in the red, were using the pay gap, estimated to be between 25% and 55%, to cover operational expenses.

When it came time to set the 2018 outpatient prospective payment system rates, HHS decided to address the 340B-Part B payment gap, which it said allowed 340B providers to generate significant profits.

Seeking to shrink those revenues, HHS imposed a 28.5% cut (from 106% of ASP to 77.5% of ASP) to the rates at which it would reimburse 340B hospitals. 


CMS proposes to eliminate the Inpatient Only (IPO) list over a three-year transitional period, with the list to be completely phased out by 2024, beginning with the removal of nearly 300 musculoskeletal-related services. This would make these procedures eligible to be paid by Medicare in the hospital outpatient setting when outpatient care is appropriate, in addition to the existing ability for payment in the hospital inpatient setting when inpatient care is appropriate, as determined by the physician. 

CMS is soliciting comment on whether three years is an appropriate time frame for transitioning to eliminate the IPO list.

Additionally, procedures removed from the IPO list will eventually become subject to the 2-midnight rule. 

CMS is proposing to expand the number of procedures that Medicare would pay for when performed in an ambulatory surgical center. For 2021, CMS is proposing to add 11 procedures to the ASC covered procedures list, including total hip arthroplasty. 

The proposed revised regulations add approximately 270 potential surgery or surgery-like procedures to the list.

When receiving care in an ASC rather than a hospital outpatient department, patients can potentially lower their out-of-pocket costs for certain services, CMS said. 

For example, for one of the most common cataract surgeries, on average, a Medicare beneficiary currently pays $101 if the procedure is done in a hospital outpatient department, compared to $51 if done in a surgery center. 

Since 2018, CMS has added 28 procedures to the list. 


CMS is proposing to establish, update, and simplify the methodology that would be used to calculate the Overall Hospital Quality Star Rating, beginning in 2021.  

After seeking stakeholder input through multiple public venues on the current methodology used to calculate the overall star rating, CMS is proposing to retain certain aspects of the current methodology and update other aspects, such as combining three existing process-measure groups into one new Timely and Effective Care group as a result of measure removals.

The overall star rating would then be made up of five groups: Mortality, Safety of Care, Readmissions, Patient Experience, and Timely and Effective Care.

CMS is proposing to include critical access hospitals in the overall star rating as well as Veterans Health Administration hospitals.


The Centers for Medicare and Medicaid Services proposed policies in the Outpatient Prospective Payment System proposed rule are consistent with the directives in President Trump's Executive Order, "Protecting and Improving Medicare for Our Nation's Seniors," CMS said.

The proposed changes build on existing efforts to increase patient choice by making Medicare payment available for more services in different sites of service and adopting policy changes under the Medicare Hospital OPPS and Ambulatory Surgical Center Payment System.

Twitter: @SusanJMorse
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