Hospitals call on CMS to raise FY24 OPPS' 'unrealistic' 2.8% pay bump, be flexible on price transparency

The Centers for Medicare & Medicaid Services’ (CMS’) proposed 2.8% pay bump for outpatient facilities is in the firing line for providers, who broadly urged the agency to reconsider its annual update methodology in light of prior years’ limited increases and persistent high expenses.

In July, CMS released its calendar year 2024 Outpatient Prospective Payment System (OPPS) proposed rule. Headlining the proposal was a 3% hospital market basket increase and a 0.2 percentage point reduction reflecting required productivity adjustment as well as language locking in hospital price transparency requirements, among other updates.

In public comment letters submitted to the agency, groups including the American Hospital Association (AHA), America’s Essential Hospitals (AEH), the Association of American Medical Colleges (AAMC) and numerous state-level hospital associations each railed against the 2.8% increase as unrealistic and "insufficient."

AHA, for instance, wrote that the bump “does not capture either the unprecedented inflationary environment or the other persistent financial headwinds hospitals and health systems are experiencing.”

Comments from the Illinois Health and Hospital Association pointed to a two-year, 4.5% to 5% increase in labor costs alone among its hospital membership. AEH cited an industry analysis from Kaufman Hall that showed a 4% increase in year-over-year hospital expenses as of June that is “not expected to abate anytime soon.”

The groups urged CMS to—within the limits of its statutory authority—reassess the data and methodology used to determine the annual market basket update.

The agency could begin by divorcing the OPPS market basket update from that of the Inpatient Prospective Payment System (IPPS) or by relying on “alternative cost data sources, such as Medicare cost report data, [that are] a truer representation of hospital-reported cost increases to support providing a market basket update of at least 5%," AEH wrote.

The groups also called on CMS to reduce or waive the 0.2% productivity adjustment that, AHA wrote, “does not align with hospital and health systems’ public health emergency experiences related to actual losses in productivity during the COVID-19 pandemic.”

Some groups also urged CMS to use the same equitable adjustment authority to implement a retrospective adjustment to make good on market basket underestimates from previous years.

“We emphasize that this should be a one-time adjustment to account for the rapid increase in costs in CY 2022 attributable to the COVID-19 pandemic and inflation,” AEH wrote. “By adjusting the annual payment update to account for increasing hospital input costs, CMS can ensure hospitals can continue to provide high-quality care and meet the needs of their patients.”

Price transparency, essential medicine “buffer stock” supported, with caveats

Beyond the topline pay bump, the hospital groups were generally receptive to CMS’ continued focus on price transparency but offered their thoughts on fine-tuning the agency’s OPPS proposals.

Alongside a broad recommendation to collaborate with Congress to avoid any conflicting requirements, AHA said it was “concerned” that the standardized format for machine-readable files and short implementation timeline floated by CMS would bring new burdens on hospital staff. AHA also protested “superfluous and burdensome to produce” modifier and drug data fields included in the standardized format, while AEH petitioned for flexibility, recognition of “good faith efforts” and anonymity should a hospital be subject to enforcement.

Similarly, AHA and AAMC wrote favorably of CMS’ concurrent proposal to strengthen the medicine supply chain via separate payment under IPPS (and potentially OPPS) to establish and maintain a “buffer stock” of the products.

While both groups advised policymakers to pair the proposal with other investigations into the causes of such drug shortages and to expand the add-on payment to some internationally produced medications, AHA was more apprehensive about the “several potential unintended consequence[s] of the proposal.” These could include access inequalities for small independent hospitals unable to pay high upfront costs for medicines when establishing the buffer, difficulties making budget-neutral payments “from an already underfunded system” and increased reporting burden.  

Payers weigh in

Also among the over 1,800 public comments submitted on OPPS were those from America’s Health Insurance Plans (AHIP). Unlike the provider organizations, the payer lobbyist headlined its feedback with support for CMS’ moves to expand mental health care access with a new intensive outpatient program benefit and its proposals to advance digital quality measurement.

The former, AHIP said, is “a step in the right direction” that could be bolstered with better integration of behavioral care into the alternative payment model demonstrations.

“We encourage CMS to explore a behavioral health specific demonstration that could provide start-up funds for practices to implement the Collaborative Care Model, including measurement-based care, to advance adoption and improve outcomes,” AHIP wrote in its comments.

CMS’ quality- and quality-measurement-related proposals, meanwhile, will find stronger success should the agency expand its collaborations with the Office of the National Coordinator for Health IT (ONC) on interoperability and health systemwide data sharing, AHIP wrote. CMS and ONC should work to enable data sharing between providers and payers via application programming interfaces and to integrate data exchange for quality measurement into the Trusted Exchange Framework and Common Agreement.

Of continued concern to the payer group was CMS’ decision to introduce Medicare fee-for-service policies outside of the Medicare Advantage (MA) Rate Announcement cycle—in this case, reclassification of hospitals from urban to rural in the calculation of the rural wage index. The reclassifications in OPPS, as well as in IPPS, undermine the predictability MA plans rely on when making projections and, subsequently, bids.

“When FFS payments are increased after MA bids have been submitted, MA plans have limited mechanisms to account for any increased costs,” AHIP wrote. “It is critical that any changes to the FFS program that form the basis of the MA payment system are accurately factored into Medicare FFS rates to avoid fewer benefits and higher costs for the individuals and persons with disabilities who rely upon the MA program.”