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Fall 2020 - Innovation

Proposed Payment Rules and Court Rulings

Two court rulings and segments of the proposed OPPS/ASC and PFS rules may require action from providers to recover expenses caused by the COVID-19 pandemic.

SEVERAL PAYMENT rules, court rulings, executive orders and additional healthcare legislation, some relating to the COVID-19 pandemic, have been implemented, culminating with the delayed 2021 outpatient prospective payment system (OPPS)/ambulatory surgical center (ASC) and physician fee schedule (PFS) rules. Two court rulings and segments of the proposed OPPS/ASC and PFS rules may require action from providers to recover expenses caused by the COVID-19 pandemic. Indeed, to stabilize revenue and cut costs, it will be necessary for providers to work with specialty pharmacies concerning white bagging and negotiate with private insurers.

Focusing on Site of Care

Site-neutral payment, which reimburses hospital clinic visits at the same rate as physician offices and other ambulatory facilities, resulted in complaints and legal action, and a final decision has now been reached. The controversy began with the 2019 Medicare OPPS final rule by the Centers for Medicare and Medicaid Services (CMS) that made payments for clinic visits site-neutral, reducing the payment rate by 60 percent for evaluation and management services provided at off-campus provider-based departments (PBDs). Since clinic visits are the most common service billed under OPPS, a decreased payment rate for off-campus PBDs at 40 percent of OPPS rates, regardless of whether PBDs were grandfathered under Section 603 of the Bipartisan Budget Act of 2015, was anticipated to save $760 million. At the same time, patients benefited since their co-payments decreased. However, several lawsuits later, the federal appeals court ruled on July 20 that the U.S. Department of Health and Human Services (HHS) has the authority to cut Medicare payments to off-campus clinics to bring them in line with independent physician practices.

The objective behind the rule is to continue to give beneficiaries more affordable choices for where to obtain care to lower out-of-pocket expenses, including those for surgeries. According to CMS, this change allows hospitals and ASCs to operate with better flexibility and patients to have what they need to make informed decisions about where they receive care. The rule eliminates the inpatient-only list over three years to allow services to be provided in the hospital outpatient setting when appropriate and gradually expands the number of procedures Medicare will pay for in the hospital outpatient setting to more than 1,700 additional services, including approximately 300 musculoskeletal services (e.g., joint replacement procedures). Since services in ASCs are paid at a lower rate than hospital outpatient departments, an expanded number of procedures Medicare would pay for when performed in an ASC will give patients more choices about where they receive care and will ensure CMS does not favor one type of care setting over another. In 2021, 11 procedures that Medicare will pay for when provided in an ASC have been added, including total hip arthroplasty. Also in 2021, current restrictions for physician-owned hospitals are loosened.

These site-of-care changes have multiple implications on the supply chain and the provision of pharmacy services, and they become effective at the same time hospitals are trying to regain financial stability. In a descending cost pyramid, hospitals remain at the pinnacle as the most expensive sites, followed by outpatient locations, free-standing clinics and self-administration/treatment/telehealth at home. Due to the COVID-19 pandemic that forced patients away from hospitals, the move to alternate sites of care has become the norm.

2021 Proposal for Payment for Non-Opioid Alternatives

The SUPPORT Act requires the HHS Secretary to review payments under the OPPS for opioids and evidence-based non-opioid alternatives for pain management (including drugs and devices nerve blocks, surgical injections and neuromodulation) with a goal of ensuring there are not financial incentives to use opioids instead of non-opioid alternatives. Compliant with this, the 2021 proposed OPPS/ASC rule continues the existing policy of paying separately at ASP+6 percent for the cost of non-opioid pain management drugs that function as surgical supplies to perform surgical procedures when they are furnished in the ASC setting. It also continues to package payment for non-opioid pain management drugs that function as surgical supplies to perform surgical procedures in the hospital outpatient department setting for 2021 (with no separate line-item payment).

Decisions concerning how to respond to this continue to require a pairing of the SUPPORT Act, the 2021 payment rules and the site-of-care changes. Therefore, what providers may have chosen to do in a hospital setting may be at odds with these rules.

Payment Rate Changes for Certain Medicare Part B Drugs Purchased by Hospitals Through 340B

As a continuing commitment to lowering drug prices, CMS is proposing a change that would lower beneficiaries’ out-of-pocket drug costs for certain hospital outpatient drugs. This applies to status indicator [SI] K non-pass-through drugs paid for under Medicare Part B; SI G pass-through drugs are not affected. It’s important to remember that if a facility’s reimbursement decreases, the patient’s co-pay decreases by the same percentage.

On July 31, the U.S. Court of Appeals for the District of Columbia Circuit overturned a 2018 district court decision that found HHS exceeded its statutory authority when it reduced 2018 and 2019 Medicare payment rates for many hospitals in the 340B program by almost 30 percent. “We hold that HHS’s decision to lower drug reimbursement rates for 340B hospitals rests on a reasonable interpretation of the Medicare statute,” Chief Justice Sri Srinivasan said in the opinion for the court. The rationale by HHS to cut the rate for 340B hospitals was to close a payment gap between 340B and Medicare Part B. HHS argued that Medicare should not reimburse hospitals more than they paid to acquire the drugs.

The 2021 proposed OPPS/ASC rules outlined two options being considered for reimbursing drugs purchased under 340B: 1) maintaining the current average sales price (ASP) minus 22.5 percent with conditions and 2) implementing a new rate, based on this year’s hospital survey, of ASP minus 34.7 percent plus an overhead payment set at 6 percent of ASP for a net rate of ASP minus 28.7 percent. Exemptions will continue for rural sole community hospitals, certain cancer hospitals and children’s hospitals, but they will still be required to report the informational TB modifier.

These OPPS changes apply only to Medicare patients treated in an OPPS setting, and they are not a Health Resources and Services Administration rule change.

CMS Price Transparency Requirements

An executive order signed June 24, Improving Price and Quality Transparency in American Healthcare to Put Patients First, is designed to increase availability of meaningful price and quality information for patients with the belief that transparency in healthcare pricing is “critical to enabling patients to become active consumers so they can lead the drive toward value.” This new rule builds upon a 2015 rule that required hospitals to make public their standard charges upon request and subsequently online in a machine-readable format in 2019. New requirements imposed by the rule are that each hospital operating within the U.S. establish (and update) and make public a yearly list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups. The rule includes 1) definitions of hospital, standard charges and items and services; 2) requirements for making public a machine-readable file online that includes all standard charges for all hospital items and services; 3) requirements for making public payer-specific negotiated charges for a limited set of “shoppable” services that are displayed and packaged in a consumer-friendly manner; and 4) monitoring for and actions to address hospital noncompliance (including issuing a warning notice, requesting a corrective action plan and imposing civil monetary penalties), and a process for hospitals to appeal these penalties.

The goal of the rule is to create price pressure to lower healthcare costs by enabling consumers to more actively compare prices and proactively shop for care. Rather than perceiving transparency as an unwelcome burden, this rule presents opportunities for healthcare facilities to showcase services they provide and engage patients while meeting its requirements.

Details concerning transparency will be provided in the Winter 2021 issue of BioSupply Trends Quarterly.


Bonnie Kirschenbaum, MS, FASHP, FCSHP
Bonnie Kirschenbaum, MS, FASHP, FCSHP, is a freelance healthcare consultant with senior management experience in both the pharmaceutical industry and the pharmacy section of large corporate healthcare organizations and teaching hospitals. She has an interest in reimbursement issues and in using technology to solve them. Kirschenbaum is a recognized industry leader in forging effective alliances among hospitals, physicians, pharmaceutical companies and distributors and has written and spoken extensively in these areas.