CMS finalizes hospital OPPS rule that phases out inpatient-only list, preserves 340B cuts

Hospital Bed
The latest hospital outpatient payment rule starts to phase out the inpatient-only list, which covers what procedures must be completed in a hospital. (iStock/Getty Images Plus/onurdongel)(Photo credit: iStock / Getty Images Plus / onurdongel)

The Trump administration finalized a key payment rule that will begin to phase out a list of 1,700 procedures that Medicare only pays for when they're performed in a hospital, part of a move to push more care to the outpatient setting.

In an announcement on Wednesday afternoon, the Centers for Medicare & Medicaid Services (CMS) released the final Outpatient Prospective Payment System rule that sets payment rates for hospital services starting on Jan. 1.

The rule “allows doctors and patients to make the best decisions about the most appropriate sites of care, based on what makes the most sense for the course of treatment and the patient without micromanagement from Washington,” said CMS Administrator Seema Verma in a statement. 

The inpatient-only list will be phased out within three years, starting with around 300 musculoskeletal-related services next year. 

Verma defended the decision on a call with reporters, saying that it could free up capacity for hospitals that are still fighting the COVID-19 pandemic and continue to perform surgeries.

"This will allow some of these surgeries to happen in a different setting," Verma said.

Hospital groups, however, charged that the change could imperil patient safety.

"The appropriate setting for procedures should be determined with a focus on patient safety and peer-reviewed evidence," the American Hospital Association said in comments to the rule. "However, CMS is proposing to remove certain procedures that do not have data to support the appropriateness of their performance in the outpatient setting."

Verma though said that it will be up to the doctor to decide the appropriate setting for a surgery.

"We trust doctors to do the right thing for these patients," she said.

She added that the private market is already doing this.

"Private insurers already pay for these services and they don’t restrict the site of care," Verma said.

The rule also updates how star ratings are calculated and preserves a 22.4% cut to the controversial 340B program.

CMS changed the criteria to add surgical procedures for the ambulatory surgery center covered procedures list. Under this revised criteria, CMS is adding 267 additional surgical procedures starting next year. 

The rule aims to increase the ambulatory surgery center and hospital payment rates by 2.4%.

Star ratings

Another key part of the rule is changing how the overall hospital star ratings are calculated.

The star rating summarizes how a hospital performs on a series of quality measures on several procedures such as heart attacks. CMS finalized a proposal to consolidate three measure groups: effectiveness of care, timeliness of care and efficient use of medical imaging into one measure group.

It also uses a simple average methodology to calculate the measure group scores instead of the Latent Variable Model used now.

But the agency declined to finalize a proposal that stratified the readmission measures “under a new methodology based on dually eligible patients, but it will continue to study the issue to find the best way to convey quality of care for this vulnerable population.”

Much to the chagrin of hospitals, the agency did include a 22.5% cut to 340B drug discount payments. The decision is part of a longstanding feud among hospitals and the Trump administration over a series of cuts to the program.

A federal appeals court ruled that CMS did have the authority to install the cuts earlier this year in a blow to the hospital industry.