CMS proposes site-neutral payments in OPPS rule aimed at boosting provider competition

CMS Administrator Seema Verma speaking at a podium at the Commonwealth Fund on July 25, 2018
CMS Administrator Seema Verma, speaking at the Commonwealth Club in California on Wednesday, advocated for site-neutral payments. (YouTube)

The Centers for Medicare & Medicaid Services (CMS) is proposing a new methodology aimed at leveling the playing field for physicians and ambulatory clinics and addressing concerns around provider consolidation.

The proposed rule (PDF), released on Wednesday, would institute site-neutral payments for clinic visits under Medicare, which CMS says “would help lay the foundation for a patient-driven healthcare system.”

The Outpatient Prospective Payment System (OPPS) payment rate would increase by 1.25% under the rule, bringing payments to OPPS providers to $74.6 billion—a nearly $5 billion increase from this year.

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Under the existing payment system, Medicare pays "substantially more" for clinic visits in a hospital-owned outpatient setting than a physician office, CMS Administrator Seema Verma said on a call with reporters. Site-neutral payments for clinic visits—the most common service billed under the OPPS program—would save patients $150 million per year in copayments, by dropping the average co-payment from $23 per visit to $9, she said.

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During a speech at the Commonwealth Club prior to the rule, Verma argued that the current reimbursement system has pushed hospitals to purchase providers in order to bill at a higher rate.

"When we pay more for services provided in a hospital setting than in an office setting, we are encouraging the consolidation of providers around hospital systems," she said. "When consolidation gets to the point where there is only one large competitor in a market, prices will go up and the competitive forces that encourage higher quality and lower costs will disappear."

The American Hosptial Association (AHA), which has long opposed site-netural payments, has previously said the policy would cause hospitals to run afoul of anti-kickback laws. 

The proposed rule would modify the Ambulatory Surgical Center (ASC) Payment System as well, by paying for some non-opioid pain management drugs used in ASCs separately. This proposal originated as a recommendation from the President’s Commission on Combating Drug Addiction and the Opioid Crisis.

It would also allow more procedures to be performed at ASCs and ensure that ASCs and outpatient departments receive comparable payment.

Verma told reporters that ASCs are currently paid 55% of what a hospital outpatient facility receives for certain services and allowing Medicare to pay for additional services "would help preserve competition."

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Finally, the rule proposes paying non-excepted, off-campus hospital departments average sales price minus 22.5% for drugs acquired through the 340B program. CMS began paying for 340B drugs furnished in hospitals under this methodology earlier this year; the agency says it has saved beneficiaries $320 million so far.

340B Health, which opposed last year's change, said it was "deeply disappointed" with the proposed rule.

"CMS now plans to make a bad rule worse by extending the cuts to drugs provided in certain off-campus hospital clinics, including facilities providing infusion therapy for cancer patients and other high-cost drug therapies to treat chronic and life-threatening conditions," the organization said in a statement.

Beyond the 340B program, CMS is also asking for comments about how it can leverage its authority under the Competitive Acquisition Program that would allow vendors to negotiate Part B drug prices.

"That model could modernize how Medicare pays for drugs and usher in a new era of accountability for manufacturers," Verma said.