Overview
On July 10, the Centers for Medicare and Medicaid Services (CMS) released its annual Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule, which provides Medicare payment rates for hospital outpatient and ASC services.
The proposed payment policies would impact approximately 3,500 hospitals and about 6,100 ASCs. In addition to the proposed payment rates, this year’s rule includes several additional proposed policies that align with the goals of the Biden administration, including addressing health equity, improving transparency in the health care system, strengthening quality measurement and expanding access to maternal health and patient-centered care.
Stakeholders will have a 60-day comment period, which ends on Sept. 9. The final rule is expected to be published in early November. The immediate critical feedback from key stakeholder groups regarding the proposed rule indicates growing frustrations surrounding reimbursement rates, and a potential need for significant congressional reform.
2.6% Increase Seen as Inadequate
For calendar year (CY) 2025, CMS proposes updating OPPS payment rates for hospitals that meet the applicable quality reporting requirements by a net 2.6%. This update is based on the projected hospital market basket percentage increase of 3%, reduced by 0.4 percentage points for the productivity adjustment. CMS also proposes to update the ASC rates for CY 2025 by 2.6% for ASCs that meet relevant quality reporting requirements. This update is based on the proposed Inpatient Prospective Payment System (IPPS) market basket percentage increase of 3.0%, reduced by 0.4 percentage points for the productivity adjustment.
Additionally, the proposed rule would update Medicare payment rates for intensive outpatient program (IOP) services furnished in Hospital Outpatient Departments (HOPDs) and Community Mental Health Centers (CMHCs) and is proposing to maintain the existing rate structure, with two IOP ambulatory payment classifications (APCs) for each provider type: one for days with three services per day and one for days with four or more services per day.
In the aftermath of the proposed rule, hospitals were quick to express concerns over the proposed payment rates. The American Hospital Association (AHA) noted in a statement that the proposed payment rate update is inadequate and comes as several hospitals are operating on negative or extremely thin margins. AHA further emphasized that hospitals’ ability to continue caring for patients and provide essential services could be in jeopardy and urged CMS to provide additional support in the final rule. Other stakeholders have highlighted that CMS could correct its course by using better methods and data sources to better gauge hospitals’ true costs, which often include comprehensive labor expenses, adding that hospitals are facing financial pressures that are compounded by inflation, an aging demographic and labor shortages.
In comparison, for CY 2024, CMS finalized the OPPS and ASCs payment rates for hospitals that meet applicable quality reporting requirements by 3.1%. This update was based on the projected hospital market basket percentage increase of 3.3%, reduced by 0.2 percentage points for the productivity adjustment.
Women’s and Maternal Care Requirements
CMS also proposes comprehensive maternal health and safety requirements for hospitals, a first-of-its-kind initiative. Specifically, CMS is introducing new Conditions of Participation (CoPs) for hospitals and Critical Access Hospitals (CAHs) that offer obstetrical (OB) services. The proposed rule includes establishing new requirements for maternal quality assessment and performance improvement (QAPI), setting baseline standards for organization, staffing and delivery of care within obstetrical units as well as mandating annual staff training on evidence-based maternal health practices. Additionally, CMS proposes revisions to the emergency services CoP for hospitals and CAHs to enhance emergency readiness for maternal health care.
Further, CMS will revise the Discharge Planning CoP for all hospitals and CAHs to improve transfer protocols, ensuring safe transitions for maternal care patients. These proposals, informed by available evidence of maternal health outcomes, stakeholder input and requests for information in the FY 2023 IPPS/Long-Term Care Hospital Prospective Payment System (IPPS/LTCH PPS) and FY 2025 IPPS proposed rules, aim to ensure a consistent standard of high-quality maternity care. CMS is soliciting comments on whether the proposed requirements should apply to Rural Emergency Hospitals (REHs), reflecting a commitment to maternal health standards across diverse health care settings. Proposed provisions for OB services CoP include:
- Organization and Staffing — Hospitals and CAHs providing OB services must organize these services in line with nationally recognized standards. This includes proper integration with other departments, supervision by qualified professionals and maintaining a roster of practitioners with specific OB privileges.
- Delivery of Service — CMS is setting new standards requiring OB services to align with the facility’s needs and resources. Policies must ensure high medical practice standards and patient safety. Essential equipment for OB care, such as resuscitation tools, must be readily available, and protocols for emergencies must be in place.
- Staff Training — Hospitals and CAHs must develop policies to ensure staff receive ongoing training on evidence-based maternal care practices. This training should be informed by the facility’s Quality Assessment and Performance Improvement (QAPI) Program and documented in personnel records.
- Quality Assessment and Performance Improvement (QAPI) Program — CMS requires hospitals and CAHs with OB services to use their QAPI programs to assess and improve health outcomes and disparities among OB patients. This includes analyzing data, tracking outcomes, conducting improvement projects and incorporating data from Maternal Mortality Review Committees (MMRCs) if available.
- Emergency Preparedness — Hospitals and CAHs with emergency departments must maintain readiness to provide appropriate screening and stabilize treatments and transfers for emergency conditions, including those related to maternal health. This includes having necessary equipment, supplies and protocols, with staff receiving annual training on these procedures.
The Biden administration aims to combat the severe maternal mortality crisis in the United States, which has one of the highest rates of maternal deaths among wealthy nations. CMS highlights that nationwide, many hospitals are closing their unprofitable obstetrics wards. CMS’s attention to maternal health in their rulemaking initiatives builds on the White House Blueprint for Addressing the Maternal Health Crisis, where the Biden administration outlined plans to improve women’s health including setting standards that require hospitals to invest in maternity care. Hospitals that fail to meet these standards risk being excluded from Medicare and Medicaid programs.
Despite this effort, hospitals and advocacy groups argue that these new conditions are burdensome and could discourage more hospitals from offering obstetric services. Even though the AHA shares CMS’s goals of improving maternal health outcomes and reducing inequities, the AHA has expressed concerns about CMS’s reliance on CoP to implement these policies. The AHA advocates for a more collaborative and flexible approach.
Quality Reporting Provisions
CMS is also proposing several updates to Quality Reporting programs. Regarding the Hospital Outpatient Quality Reporting (OQR) and Rural Emergency Hospital Quality Reporting (REHQR) programs, CMS is proposing to adopt: (1) the Hospital Commitment to Health Equity (HCHE) measure starting with the CY 2025 reporting period/CY 2027 payment determination and (2) the Screening for Social Drivers of Health (SDOH) and Screen Positive Rate for SDOH measure beginning with voluntary reporting in 2025 followed by mandatory reporting beginning with the CY 2026 reporting period/CY 2028 payment determination. For the OQR program, CMS is also proposing to remove the MRI Lumbar Spine for Low Back Pain and Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac, Low-Risk Surgery measures.
The proposed rule also includes updates to the ASC Quality Reporting (ASCQR) program. CMS proposes to adopt the Facility Commitment to Health Equity (FCHE) measure starting with the CY 2025 reporting period/CY 2027 program determination, and the two SDOH measures similar to the OQR and REHQR programs. Notably, CMS is proposing to modify the immediate measure removal policy for measures adopted in the ASCQR Program to an immediate measure suspension policy. CMS proposes to modify this policy to provide that CMS would immediately suspend, instead of removing, the measures if it determines that reporting activities related to the measure raise patient concerns. CMS would notify the health care facility and public of the decision to suspend the measure, address the suspension, and propose to retain or modify it in the next payment cycle. The provision aims to increase transparency and ensure the public has a voice in the rulemaking process.
Lastly, CMS is proposing changes to the Star Quality rating programs and is seeking feedback on whether hospitals that performed in the bottom quartile should be eligible to receive the highest 5-star rating. CMS is considering modifying the Overall Hospital Quality Star Rating methodology, specifically the Safety of Care measure group. Since the COVID-19 pandemic, CMS has been increasing its efforts to emphasize the importance of patient safety for both patients and health care workers as safety gaps were illuminated during the pandemic. CMS is considering three options to modify the methodology: 1) reweighting the safety of care measure group; 2) a post-hoc policy-based adjustment of a 1-star reduction for poor performance on safety of care; and 3) reweighting the safety of care measure group combined with a policy-based star rating cap.
12-Month Continuous Eligibility for Children
CMS’s proposed rule would also update Medicaid and Children’s Health Insurance Program (CHIP) regulations to codify the requirement from the Consolidated Appropriations Act, 2023 (CAA), which mandates 12 months of continuous eligibility for children under 19 who are enrolled in Medicaid and CHIP. It proposes to eliminate previous options to apply continuous eligibility to select groups or limiting continuing eligibility to a time period of less than 12 months. CMS also proposes removing the option to terminate CHIP coverage for nonpayment of premiums during this period as an optional exception to continuous eligibility.
The proposed rule also covers Medicare hospital outpatient and ASC payments, reinforcing the CAA’s requirement for 12-month continuous eligibility for children in Medicaid and CHIP starting Jan. 1, 2024. The proposed rule aims to underscore the importance of continuous enrollment for maintaining access to care, as demonstrated during the COVID-19 pandemic. The proposed rule clarifies that CHIP coverage cannot be terminated for nonpayment of premiums within the 12-month period, with exceptions only for children who move out of state, voluntarily disenroll, pass away or were mistakenly granted eligibility due to error or fraud.
Addressing the Opioid Epidemic and Health Equity
The OPPS/ASC Proposed Rule also includes several additional initiatives in line with the Biden administration’s goals. Specifically, CMS is proposing to provide temporary additional payments to providers in HOPD and ASC settings that prescribe certain non-opioid treatments for pain relief from Jan. 1, 2025, through Dec. 31, 2027. The proposed rule would implement numerous statutory provisions, such as evidence requirements for medical devices and the Food and Drug Administration (FDA)-approved indications that meet the requirement. CMS aims to use the top five OPPS procedures by volume for each non-opioid drug or device to calculate the payment limitation, and the additional payment cannot exceed the estimated average of 18% of the OPPS payment for OPPS service or group of services where the non-opioid treatment is provided. Furthermore, CMS is proposing to assign a zero-dollar payment offset for the qualifying non-opioid products. The proposed rule indicates that seven drugs and one device qualify as non-opioid treatments for pain relief. CMS is soliciting feedback from stakeholders on additional products that may qualify for separate payment under the proposed provision.
To address health equity, CMS is proposing to narrow the definition of “custody” in Medicare’s payment exclusion rule and revise the special enrollment period (SEP) for formerly incarcerated individuals. Specifically, the definition of “custody” would no longer include individuals who are on parole, probation and home detention, removing the presumption that Medicare is prohibited from paying for health care services or items provided to this category. CMS also proposes altering the eligibility criteria for the special enrollment period (SEP) for formerly incarcerated individuals to also include individuals released from incarceration or on parole, probation or home detention. CMS is also seeking stakeholder feedback on how such policies should apply to individuals living in halfway houses.
Physician Fee Schedule Proposed Rule and Impacts on Telehealth
CMS also released its proposed rule for the CY 2025 Physician Fee Schedule (PFS) on the same day as the OPPS/ASC Payment System Proposed Rule. The proposed rule includes a 2.8% reduction in the conversion rate, lowering it from $33.29 in CY 2024 to $32.36 in CY 2025. This reflects the expiration of the 2.93% statutory payment increase for CY 2024, a 0.00% conversion factor update under the Medicare Access and Children’s Health Insurance Program Reauthorization Act, and a 0.05% budget-neutrality adjustment. The proposed rule also includes six new Merit Based Incentive Payment System (MIPS) Value Pathways (MVPs), including ophthalmology, dermatology, gastroenterology, pulmonology, urology and surgical care. Health care associations are criticizing the decrease in physician reimbursement in the proposed schedule and the lack of attention to underlying problems with the program.
Notably, CMS proposes extending certain telehealth waivers through 2025, including allowing providers to report their enrolled practice address instead of home addresses when performing services from home. Also, the proposal includes permitting federally qualified health centers (FQHCs) and rural health clinics to bill for telehealth services and allowing virtual supervision for residents in all teaching settings when services are provided virtually. Also for CY 2025, CMS plans to add several services to the Medicare Telehealth Services List on a provisional basis and is seeking input on expanding services under the primary care exception in future rulemaking. CMS will continue the suspension of frequency limitations for subsequent inpatient visits, nursing facility visits and critical care consultations.
CMS will continue to pay for audio-only services furnished to a beneficiary at home, if the physician is capable of offering audio-video communications, but the patient is not capable of or does not consent to the use of video technology. However, without congressional action, beginning Jan. 1, 2025, the statutory restrictions on geography and site of service and practitioner type, which existed prior to the COVID-19 Public Health Emergency, will go back into effect.
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