Hospitals have been adding services to their outpatient departments in recent years as a means of reducing utilization in costlier inpatient settings as they move to population-based payment models. Medicare’s Outpatient Prospective Payment System (OPPS) proposed rule issued this week might negatively affect this trend, according to finance experts.
The proposed rule would disqualify rebuilt or relocated off-campus outpatient facilities for hospital-level payment from Medicare. It results from an interpretation of the Bipartisan Budget Act of 2015, which required Medicare to reduce hospital outpatient rates to physician fee schedule rates at off-campus hospital outpatient departments (HOPDs).
CMS noted that without the restriction on OPPS payments to relocated HOPDs, hospitals could relocate HOPDs “to larger facilities, purchase additional physician practices, move these practices into the larger relocated facilities, and receive OPPS payment for services furnished by these physicians.” Such strategies would be counter to the law’s intent, CMS officials wrote in the rule. (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)
Expanding the types of services paid at OPPS rates at existing remote HOPDs would allow hospitals “to purchase additional physician practices and add those physicians to existing excepted off-campus PBDs [provider-based departments],” CMS officials wrote in the rule. (The rule will be published in the Federal Register on July 14 and will be available online at http://federalregister.gov/a/2016-16098)
CMS based its decision regarding the remote-HOPD payment provisions partly on a MedPAC report that concluded the payment difference between HOPDs and physician practices created a financial incentive for hospitals to purchase freestanding physician offices and convert them to HOPDs without changing their location or patient mix.
But finance experts think CMS exceeded the bounds of the MedPac recommendations, which were limited to specific services offered at HOPDs.
Although the Budget Act did not address specifically which rates would apply to off-campus HOPDs already under construction, CMS decided those facilities would qualify only for the lower physician rates. A Healthcare Financial Management executive noted, “This was an unexpectedly restrictive interpretation of the statute. For organizations that were mid-build, this is going to have a significantly negative financial impact.” (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)
Potential Negative Effects
In response to the proposed rule, finance experts noted its effect on population-based payment models such as the accountable care organization collaborative operated by Premier. Some of the ACOs in this collaborative have sought savings by shifting more patients from inpatient to outpatient settings.
One expert said, “At the micro level it may cost more to use an off-campus [HOPD] compared to a physician office, but when you look at it from a macro level, using them may help you reduce your overall spending if you’re avoiding the hospitalizations and readmissions. CMS is essentially removing an important tool from their toolbox.” (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)
Another impact of the payment policy change, according to some hospital finance experts, would be to further restrict access to the 340B program’s drug discounts for hospitals because those are unavailable only for drugs prescribed in specific types of hospitals and select outpatient clinics. (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)
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