News & Insights


July 30, 2018

Health Headlines – July 30, 2018

CMS Releases Proposed Rule for 2019 Hospital Outpatient Prospective Payment System, Includes Major Proposals on Site Neutrality – On July 25, 2018, CMS proposed a rule (Proposed Rule) revising factors for determining Medicare payment rates for the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgery Center (ASC) Payment System in calendar year 2019.

Although the increased focus on and promotion of site neutrality represents the most dramatic shift, the Proposed Rule also includes important proposed changes and Requests for Information (RFI) in areas such as price transparency, quality reporting programs, the Competitive Acquisition Program, and device pass-through applications, among others. Overall, CMS proposes to increase the OPPS payment rates by a fee schedule increase factor of 1.25 percent and to increase ASC payment rates by 2.0 percent.

The Proposed Rule is scheduled to be published in the Federal Register on July 31, 2018, but is available in its pre-publication format here. The CMS fact sheet is available here. Comments to the Proposed Rule must be submitted no later than September 24, 2018.

Proposed Changes Related to Site Neutrality

The Proposed Rule states CMS’s plan to reduce hospital outpatient department clinic visit payment rates to those in the Physician Fee Schedule (PFS)—even in departments excepted from Section 603 of the Bipartisan Budget Act of 2015. CMS proposes to apply PFS-equivalent payment rates for clinic visits at all off-campus provider-based departments (PBDs) under the OPPS. The proposed adjustment to the PFS-equivalent rate would reduce the OPPS payment rate for the clinic visit by the PFS relativity adjuster of 40 percent to an amount of $46 and a copayment of $9, in an apparent effort to reduce beneficiaries’ costs when visiting off-campus departments.

Other proposals intended to encourage site neutrality include:

  • Section 340B Drug Payment Policy Expansion. Separately payable outpatient drugs purchased through the 340B Drug Pricing Program that are furnished at excepted off-campus PBDs are currently paid differently than those furnished at non-excepted off-campus PBDs (Average Sales Price (ASP) minus 22.5 percent versus ASP plus 6 percent). CMS proposes to pay all off-campus PBDs the same way for separately payable 340B drugs. In short, all off-campus PBDs, whether excepted or not, would be paid the ASP minus 22.5 percent for separately payable 340B-acquired drugs.
  • New Clinical Families of Services Paid under PFS. CMS also proposes to limit reimbursement at expected PBDs by changing its payment policy for new service lines. CMS proposes to pay PFS rates, not OPPS rates, for new “clinical families of services” offered at excepted PBDs. A new clinical family of services would be one that the provider did not furnish or bill for between November 1, 2014 and November 1, 2015. CMS proposed similar rules in 2017, but never finalized them after receiving criticism from many stakeholders including MedPAC and hospital associations. Instead, CMS resolved to continue to monitor the issue before proposing new rules. Now, primarily out of its concern that hospitals will purchase physician practices to add to existing excepted off-campus PBDs, CMS proposes that, in 2019, Medicare will pay for services in new clinical families of services furnished at excepted off-campus PBDs under PFS, not OPPS rates.  However, the agency has not provided a robust claims analysis to demonstrate that hospital acquisition of physician practices has continued apace since enactment of Section 603 and therefore requires additional limitations on services at excepted PBDs.
  • Collecting Data on Services Furnished in Dedicated Emergency Departments and Outpatient Settings Generally: CMS also proposes to apply a new modifier for services furnished in dedicated emergency departments in order to “assess the extent to which OPPS services are shifting to off-campus provider-based emergency departments.”  Hospitals will be required to apply the claims modifier “ER” on each “claim line for outpatient hospital services” furnished in a dedicated off-campus emergency department beginning January 1, 2019.  Critical access hospitals are exempt from this requirement.  CMS began its recent spate of site-neutral policy changes after implementing the “PO” modifier for off-campus departments in 2015, and is signaling its possible move to curtail emergency department services.  Any such proposal would run headlong into the plain language of Section 603—affirmed previously by CMS—that “all” services furnished in a dedicated emergency department are exempt from Section 603 and shall remain reimbursed on the OPPS. The agency also is seeking feedback from stakeholders to determine if hospitals are unnecessarily shifting services to outpatient settings generally, and whether other services, in addition to clinic visits, should be reduced to PFS rates.
  • ASC Covered Procedures List Expansion. CMS proposes to expand the ASC Covered Procedures List (CPL), the list of surgical procedures that are not expected to pose a significant risk to beneficiary safety and not typically expected to require active medical monitoring and care at midnight following the procedure. CMS proposes to revise the definition of “surgery” to include more “surgery-like” procedures in the ASC payment system. CMS plans to use the Current Procedural Terminology (CPT) surgical range (10000-69999) merely “as a guide rather than a strict determinant as to whether a procedure is surgical.” For 2019, the updated definition would mean that certain procedures assigned CPT codes outside of, but still similar to, the current CPT surgical code range would be added to the CPL. For example, 12 cardiac catheterization codes would be added to the CPL. With this proposal, CMS seems to be furthering its mission of reducing differences in payments to ASCs and HOPDs.

Price Transparency

The Proposed Rule states that CMS is considering potential actions to compel providers and suppliers to help patients understand their potential liability for services and to enable patients to compare charges for similar services across providers and suppliers. To further CMS’s stated objective, the Proposed Rule contains an RFI for information on price transparency that seeks public comment from all providers and suppliers, including responses on the following questions:

  • How should CMS define “standard charges” in provider and supplier settings?
  • What types of information would be most beneficial to patients, and how can healthcare providers and suppliers best enable patients to use charge and cost information in their decision making?
  • Should providers and suppliers be required to inform patients about how much their out-of- pocket costs for a service will be before those patients are furnished that service?
  • Can CMS require providers and suppliers to provide patients with information on what Medicare pays for a particular service performed by that provider or supplier?
  • How does Medigap coverage affect patients’ understanding of their out-of-pocket costs before they receive care?

The Proposed Rule and related RFI on transparency is the latest signal from CMS that it expects providers and suppliers to do more in the area of transparency.  In the Proposed Rule, CMS indicated that it intends to continue efforts to improve transparency, citing to previous proposals, including those in the Hospital Inpatient Prospective Payment System Proposed Rule for FY 2019, released on April 24, 2018, and previously reported here.  

Quality Reporting Programs

The Proposed Rule would also update the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. The proposed changes include the elimination of a total of 15 measures that ASCs and hospital outpatient departments are currently required to report. CMS states that the proposed removals are aimed at enabling providers “to focus on tracking and reporting the measures that are most impactful on patient care.”

For the OQR Program, CMS is proposing to remove one quality measure beginning with the CY 2020 payment determination and nine quality measures beginning with the CY 2021 payment determination. CMS is also proposing to update the factors to be considered when removing measures from the OQR Program. 

For the ASCQR Program, CMS is proposing to remove one quality measure beginning with the CY 2020 payment determination and seven quality measures beginning with the CY 2021 payment determination. CMS is also proposing to update the factors to be considered when removing measures from the ASCQR program.

Competitive Acquisition Program (CAP)

CMS has also issued an RFI on how best to leverage Competitive Acquisition Program (CAP) authority for Part B drugs and a potential CMS Innovation Center Model. The RFI seeks public comment on potential parameters for a model, the types of Part B drugs and biologicals that should be included or excluded from a model, the role of private vendors chosen to negotiate and administer vendor-based payment arrangements with manufacturers under the model, the defined population of beneficiaries to address in a potential model and appropriate beneficiary protections, the possible inclusion of other payers, options for payments, and other design features of a proposed model.

Other Notable Proposed Changes

  • New Technology Ambulatory Payment Classifications. CMS also proposes that New Technology Ambulatory Payment Classifications (APCs), comprising low-volume technology procedures, would be paid under one of several alternative payment methodologies when they have under 100 claims annually. CMS hopes to promote “predictability” with the proposed policy. Specifically, CMS proposes to use up to four years of data to calculate the geometric mean, median, and the arithmetic mean and solicit feedback on which method should be used to establish payment for the new technology service for the upcoming year.
  • Device Intensive Policy. Device intensive procedures are procedures in which the device cost exceeds a certain threshold of the total cost of the procedure (currently 40 percent). CMS proposes to lower the device threshold to 30 percent. CMS states that this reduction will allow procedures that use relatively high-cost devices to be better recognized in the ASC setting.
  • Device Pass-through Applications. CMS reviewed seven device pass-through applications for the Proposed Rule but made no proposal to approve or deny any of the applications in the Proposed Rule. CMS is soliciting comments before making final determinations on the applications in final rulemaking.

Reporters, Lee Nutini, Atlanta, +1 404 572 3533,; John Whittaker, Sacramento, +1 916 321 4808,

Court Dismisses Claims Against Accreditation Agency that Revoked Accreditation for Failure to Follow Data Integrity and Security Protocols  – On July 20, 2018, the U.S. District Court for the District of Columbia dismissed claims against URAC Inc., a Washington, D.C.-based nonprofit healthcare accreditation agency (URAC) by BHM Healthcare Solutions Inc., a for-profit corporation headquartered in Florida (BHM) that “provides medical review services to health insurance plans, healthcare systems, and related administrators and management organizations.”  BHM sued URAC after having its accreditation revoked based on the determination that BHM did not maintain required data integrity, compliance with applicable laws and regulations, and quality standards.  The court ruled that “URAC’s determinations were the product of reasoned decision-making and a fair process.”

With respect to data integrity, URAC determined that independent medical reviewer decisions were subject to change without the reviewer’s knowledge or approval, contrary to BHM’s policy, which required that decisions could only be changed or edited by the system administrator following a strict protocol. 

BHM argued URAC should have consulted with BHM’s Chief Information Officer, instead of opting to speak with the “Compliance Officer and clinical specialists who are not subject matter experts on data integrity and security,” according to the judgment.  However, the Court ruled that URAC acted properly in reviewing a medical review services provider’s data security and wrote that “URAC’s determinations were the product of reasoned decision-making and a fair process.”

The case is BHM Healthcare Sols., Inc. v. URAC, Inc., 2018 BL 258480, D.D.C., No. 18-cv-01119, 7/20/18.  The July 20 opinion is available here.

Reporter, Ranee Adipat, Washington, D.C., +1 720 535 2322,

HHS Secretary Vows to Reform Privacy and Stark Law Policies – In a July 26, 2018 speech to the Heritage Foundation, HHS Secretary Alex Azar previewed the agency’s intent to provide new guidance to providers regarding the Federal Stark law and HIPAA, which he said “stand in the way of healthcare providers” and inhibit the transition to value-based care. Azar also addressed pricing of pharmaceuticals, privacy standards for patient records documenting substance use disorder and treatment, Medicaid work requirements, and the Affordable Care Act’s age rating band on health insurance policies.

Azar stated that he plans to extend a free-market approach to the pharmaceutical market, opining that the US lacks “a real market for prescription drugs.” He said HHS will take steps that “may be unexpected” to give private negotiators and consumers more power to bargain with pharmaceutical companies, highlighting the FDA’s announcement last week that it will investigate the price-reducing potential of importing medicines from foreign countries when the sole manufacturer of a drug without patent protection hikes prices.

Azar also promised to take on the enhanced privacy rule for substance use disorder patient records, codified at 42 C.F.R. Part 2, which prevents hospitals and physicians from sharing a patient’s medical record of addiction or addiction treatment with other providers. Azar explained that HIPAA and this enhanced privacy rule applying to addiction are impediments to coordinated efforts against the opioid epidemic.

Azar highlighted the agency’s support for work requirements in Medicaid-expansion States as a key aspect of revamping the program to “avoid work disincentives and income cliffs.” In reference to the Kentucky lawsuit in which a Federal district court judge blocked the State’s work requirements, Azar explained that the administration will “continue to litigate, and take any learnings from that piece of litigation—with which we disagree."

Azar previewed Medicare billing structure reform and admonished so-called Affordable Care Act price controls, particularly the age rating band that requires insurers to charge younger enrollees at least one-third of the premiums that they charge older enrollees. Azar blamed this provision for keeping younger people out of the ACA insurance market.  “Supporting legislation to undo those perverse incentives is a priority for this administration,” he said.

The full speech transcript can be found here.

Reporter, Carissa Meade, Los Angeles, + 1 213 443 4325,


11th Annual King & Spalding Medical Device Summit – Save the Date – King & Spalding, in conjunction with FDANews, will host the 11th Annual Medical Device Summit on September 6, 2018, in Chicago. Registration is now open. Subjects will include regulatory, reimbursement, enforcement, compliance, commercial, litigation, cybersecurity and other important topics for medical device manufacturers in the coming year. More information is available here.