CMS’s Proposed OPPS Rules Generate Confusion and Anxiety

CMS’s new proposed rules related to the Bipartisan Budget Act of 2015 would severely inhibit hospitals’ ability to expand and modify outpatient service offerings around the country. Issued on July 6, the regulations have yet to be finalized and comments are being requested; however, hospital planning executives are understandably fuming about the restrictive and complicated rules, which would compromise their ability to conduct provider-based billing at outpatient sites located more than 250 yards beyond the hospital walls. Of particular interest is the direct comment by CMS that Section 603 was designed to curb hospital acquisition of physician practices and the current practice of providing the same services under a higher-cost model of OPPS.

How Did This Happen?

As outlined in a previous ECG blog post, Congress passed Section 603 of the Balanced Budget Act 2015 on November 2, 2015. The law effectively requires off-campus, provider-based departments established after the enactment date to bill under the Medicare physician fee schedule (MPFS) starting January 1, 2017. As hospital executives well know, this fee schedule provides much lower reimbursement relative to the outpatient prospective payment system (OPPS) for a variety of services, including office visits and procedures. Facilities currently in the construction phase were planned and developed with the assumption that the OPPS would be available for years to come. For many of these facilities, flipping from the OPPS to the Medicare Physician Fee Schedule (MPFS) will likely mean operating in the red instead of in the black.

Do Exceptions Exist?

The original law did establish exceptions to the required transition, but the language was somewhat vague, leaving CMS to more thoroughly define the exceptions. CMS has now opted to define those exceptions narrowly, which will probably make it difficult for most new facilities to qualify for OPPS. The table below outlines some of the exceptions in the law, as well as the impact of the proposed new rules.

Exception Implications of Proposed New Rule

OPPS tableWhere to From Here?

Prior to the proposed rules being issued on July 6, hospital planning executives may have been holding out hope that the confusion surrounding the exceptions might have led to continued application of OPPS, and even expansion of it in the future. The proposed rules appear to dash those hopes. Although the hospital community will fight the rule, CMS may be unlikely to change its stance, given that a looser interpretation of the law might create even more uncertainty for hospitals. Allowing multiple exemptions would create a system under which hospitals would frequently explore opportunities to exploit loopholes that would enable them to continue to receive the advantages of the higher OPPS schedule. Years of legal wrangling would be sure to ensue.

Although the jury is not out yet on this rule, CMS is making a strong statement that it intends to significantly reduce utilization of outpatient services that could be provided at a similar cost to those in lower-cost settings in the future.

This entry was posted in Hospital Strategy, Legislative & Regulatory Issues and tagged , , by Len Henzke. Bookmark the permalink.

About Len Henzke

Len has consulted for 15 years to a variety of leading hospitals, health systems, and medical groups nationwide. He directs consulting engagements pertaining to a broad range of complex healthcare issues, including system and organizational strategic planning, hospital/medical group affiliations and transactions, physician organization development and design, and clinical service line planning. Throughout his career, he has advanced numerous engagements as a facilitator between hospital executives and physicians in designing creative and effective alignment vehicles to further mutual goals. In addition, he has designed dozens of physician compensation plans, including value-based plans that incorporate quality, efficiency, and other metrics, to help organizations succeed in the era of accountable care. Len possesses a bachelor of arts degree from The College of William & Mary and master of business administration and master of health administration degrees from the University of Washington.

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