Regulatory Bulletins

Bulletin 09 – 2020-12-04_CMS CY 2021 OPPS Final Rule Bulletin


CY 2021 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule (CMS-1736-FC)

Executive Summary of Final Rule

On December 2, 2020, the Centers for Medicare & Medicaid Services (CMS) released the Current Year (CY) 2021 Outpatient Prospective Payment System (OPPS) rule. The final rule aims at increasing patient choice by expanding Medicare payments to more services in different sites of service, allowing for greater range of service options. The final rule becomes effective January 1, 2021.

 In a corresponding fact sheet issued by CMS regarding the final rule, CMS has further noted that the finalized changes would advance the agency’s commitment to strengthening Medicare and reducing provider burden so that hospitals and ambulatory surgical centers can operate with increased flexibility and patients are better equipped to be active healthcare consumers. The following sections illustrate some of the most meaningful changes made by CMS with the final rule.

Increasing Beneficiary Choice Via Site Neutrality

In CY 2021 final rule, CMS sought to promote site neutrality and to increase affordable choices for the beneficiary, while also lowering out-of-pocket expenses. The final rule includes several changes under the umbrella of ‘site neutrality’ including the discontinuation of the Inpatient Only List over the course of three years, as well as an expansion of the number of procedures on the ASC Covered Procedures List (CPL).

Phased elimination of Inpatient Only List (IPO)

The intensely debated total phase out of the IPO has been confirmed and is slated to occur over a 3-year period, with targeted completion by CY 2024. CMS has already earmarked nearly 300 services for CY 2021 transition, making them eligible for payment as outpatient services if provided in an outpatient setting. [To view the list of final services that were removed from the IPO list for CY 2021, click here to access Table 48.]

 A few noteworthy points regarding this phase out include:

  • CMS reiterated that “the removal of a service from the IPO list does not require the service to be performed only on an outpatient basis”[1]
  • CMS repeatedly stated that “the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and on the general coverage rules”
  • Services removed from the IPO may become subject to the requirements of the “the 2-midnight benchmark, which provides that an inpatient admission is considered reasonable and necessary for purposes of Medicare Part A payment when the physician expects the patient to require hospital care that crosses at least 2 midnights and admits the patient to the hospital based upon that expectation, is applicable to services that have been removed from the IPO list,” and
  • Services transitioned from the IPO will be granted a “2-year exemption from site-of-service

claim denials, BFCC-QIO referrals to Recovery Audit Contractors (RACs), and RAC reviews for

“patient status””  

  • And most significantly, CMS in the final rule is granting “…an indefinite exemption from the specified medical review activities for procedures removed from the IPO list as a result of the elimination of that list.” These exemptions will last until CMS has enough claims data to support that the procedure is more commonly (and successfully) performed in an outpatient versus inpatient setting.

[For the list of CY2021 Inpatient only procedures, download the 2021 NFRM OPPS Addenda – Addendum E.-Final HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2021.]

Updates to ASC Covered List

In tandem with the nearly 300 procedures slated for transition off the IPO in 2021, CMS has indicated it has finalized the addition of eleven procedures to the ACS Covered Procedures List, including total hip arthroplasty (THA). CMS also intends to add at least 267 surgical procedures to the ASC Covered Procedures List, starting January 1, 2021. CMS has suggested the finalized rule is expected to help lower costs for Medicare beneficiaries by allowing certain services to be performed in a less-expensive setting than inpatient, and it has further asserted these revisions should also help hospitals facing coronavirus-related capacity constraints. [Download the Final ASC Covered Surgical Procedures for CY 2021.]

Adjustment to 340B Acquired Drugs Payment Methodology

Given the potential for hospitals to reap steep discounts from acquiring drugs through the 340B drug program, CMS reexamined the appropriateness of paying the average sale price (ASP) plus 6% for drugs acquired through the program. After their review, CMS determined to preserve the Public Health Services Act section 340B drug program, allowing participating hospitals and other providers to purchase certain covered outpatient drugs directly from manufacturers at a discounted price. However, it did resolve to adjust hospital reimbursements with an overall 22.5% cut to the overall discount payments. As opposed to the previous reimbursement of the ASP + 6%, the new payment methodology caps reimbursement at the average sales price minus 22.5%. Despite the significant adjustment to hospital reimbursements, CMS anticipates this will equate to nearly $300 million in drug cost savings for Medicare beneficiaries in 2021.

Other Meaningful Measures

Star Rating updates were also a focal point of the 2021 OPPS, with CMS indicating it would be taking steps to establish, update and simplify the Hospital Quality Star Rating methodology. Although some aspects of the current methodology have been preserved, there are a number of aspects that have been updated including a change to the process measurement groups, consolidating the overall measures into five (5) total groups: Mortality, Safety of Care, Readmissions, Patient Experience, and (NEW) Timely and Effective Care. A more simplified average methodology will be employed to measure these group scores, rather than the previous ‘latent variable model,’ and the measure group scores will be standardized to allow for better scale comparability.

 CMS expects that the changes made to the Star Rating system will continue to drive the “Patients Over Paperwork” initiative through a simplification of the methodology, which it believes will help hospitals better anticipate their overall star rating and how they compare to other like situated providers. CMS also expanded the Star Ratings to critical access hospitals (CAHs) and Veterans Health Administration (VHA) hospitals.

Payment Rate Updates

CMS finalized increases to both OPPS and ASC payment rates of 2.4% each.

 Specific to the OPPS rate adjustment, the Medicare payments rates were updated for Partial Hospitalization Program (PHP) services furnished in outpatient departments and community mental health centers (CMHC), with CMS continuing to utilize the CMHC and hospital-based geometric mean per diem cost, using the most recent data available per provider. CMS also approved five device pass-through applications that met criteria for transitional status.

 CMS also indicated the ASC payment rate increase would apply to ASCs meeting relevant quality reporting requirements, and it is intended to promote site-neutrality between hospitals and ASCs. The increase is also intended to create an incentive to continue encouraging the migration of services from an inpatient setting to a less-costly ASC setting.

Additional Procedures Requiring Prior Authorization

CMS has reasserted its position that requiring prior authorizations for certain procedures is an effective tool to ensure Medicare beneficiaries receive only medically necessary care. CMS also asserts that use of prior authorizations offers additional protections to the Medicare Trust Fund by lessening improper payments without adding administrative burden through new documentation requirements.

 Effective for dates of service on or after July 1, 2021, both Cervical Fusion with Disc Removal and Implanted Spinal Neurostimulators will require prior authorizations.

 In Summary

Overall, the updates and adjustments iterated by CMS in the 2021 OPPS/ASC Final Rule point to a desire to incentivize and influence the delivery of care provided to Medicare beneficiaries. Whether these changes have the intended benefits of increasing the value of the care provided or lessening the cost thereof remains to be seen by both the provider and beneficiary community.

In Summary

Overall, the updates and adjustments iterated by CMS in the 2021 OPPS/ASC Final Rule point to a desire to incentivize and influence the delivery of care provided to Medicare beneficiaries. Whether these changes have the intended benefits of increasing the value of the care provided or lessening the cost thereof remains to be seen by both the provider and beneficiary community.


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