CMS Releases Rules on 2024 Payment under Hospital Outpatient and Ambulatory Surgical Center Payment Systems and Physician Fee Schedule, as well as Rule on Reimbursement for 340B Purchased Drugs

On November 2, 2023, the Centers for Medicare & Medicaid Services (“CMS”) released the final rules for the calendar year (“CY”) 2024 outpatient prospective payment system (“OPPS”) and ambulatory surgical center (“ASC”) payment system, 340B drug reimbursement, and CY 2024 physician fee schedule (“PFS”). In August 2023, just after the publication of the OPPS proposed rule, we circulated an alert summarizing key aspects of CMS’s proposals. Below is a quick summary of what CMS determined regarding each of the following topics in the OPPS/ASC and 340B final rules: A. OPPS Payments; B. Payment for 340B Drugs; C. New Public Reporting Requirements for Hospitals’ List of Charges and Other Data; D. Policies for Rural Emergency Hospitals; and E. Changes to the Medicare Code Editor. The PFS final rule also included a couple of Value-Based Changes concerning the Medicare Shared Savings Program and the Quality Payment Program. Please feel free to reach out if you have questions about any of these issues.

OPPS/ASC AND 340B DRUG REIMBURSEMENT FINAL RULES

A. NEW OPPS PAYMENTS

1. Conversion Factor Update. For CY 2024, CMS will adopt an overall increase factor of 3.1 percent to the OPPS conversion factor instead of the proposed 2.8 percent. As proposed, the 2.8 percent increase was the result of a 3.1 percent increase to the market basket percentage, which was based on the most recent estimate of the inpatient market basket calculation at the time, offset by a 0.3 percent decrease to the multifactor productivity adjustment. But based on more recent data that the agency had proposed to use if they became available, CMS finalized a 3.3 percent increase to the market basket percentage, offset by a 0.2 percent productivity adjustment to arrive at 3.1 percent.
2. Use of CY 2022 Claims Data and ASC Payment System Ratesetting. CMS will use CY 2022 claims data, which, in most cases, include cost report data from periods beginning in CY 2019, to set payment system rates for CY 2024. Consistent with its pre COVID 19 standard practice of using claims data from two CYs prior, CMS will use CY 2022 claims data. This is consistent with CMS’s approach in CY 2023 of using CY 2021 claims data. For CY 2022, however, CMS used CY 2019 claims data because it did not believe that the CY 2020 data were the best approximation of excepted outpatient hospital services due to the impacts of the COVID-19 pandemic on outpatient services. But here, as in CY 2023, CMS asserts that the effects of COVID-19 are “less pronounced” and has decided to use CY 2022 claims data.
3. No New Payment for Establishing and Maintaining Access to Essential Medicines. In this final rule, CMS decided not to adopt a policy concerning payment under the IPPS or OPPS for establishing and maintaining access to essential medicines. For some background, the Administration’s January 2021 Executive Order 14001 and July 2022 publication National Strategy for a Resilient Public Health Supply Chain emphasized the importance of strengthening medical supply chains and preventing persistent and increasing shortages of medical supplies. In response, in the OPPS proposed rule, CMS sought comments on a separate payment under the IPPS that would reimburse hospitals for establishing and maintaining access to a buffer stock of so-called “essential medicines,” that it said are critical for acute care of conditions, including respiratory conditions, and those that have no comparable alternative. CMS said that it is not finalizing any changes at this time because, while all commenters recognized the importance of addressing domestic drug shortages and medical supply chain issues, there was a lack of consensus among commenters about a potential Medicare payment policy. For example, CMS said that a majority of the commenters were concerned about the design changes needed to avoid making the current drug shortages worse. CMS stated that it would continue to seek feedback from interested parties on ways to address the additional costs hospitals face to address pharmaceutical shortages, and that it “intend[s] to propose new Conditions of Participation in forthcoming notice and comment rulemaking addressing hospital processes for pharmaceutical supply.”
4. Payment for Intensive Cardiac Rehabilitation Services, Group Therapy, and Dental Services as Well as Other Policy Changes. As CMS proposed, effective January 1, 2024, intensive cardiac rehabilitation services will be excluded from the 40 percent relativity adjuster policy so that payments at the non-excepted rate (i.e., payments for services provided in an off-campus site) will be 100 percent of the OPPS rate for cardiac rehabilitation services, the same rate as services provided in a physician’s office. Also, CMS will create a new, untimed health care common procedural coding system C-code for group therapy; delay in-person visit requirements for mental health services furnished remotely until January 1, 2025; and continue to pay for outpatient therapy services, diabetes self-management training, and medical nutrition therapy provided via telehealth through CY 2024. In addition, CMS will assign over 229 additional dental codes to clinical Ambulatory Payment Classifications for CY 2024 and package payments for dental services when they are performed with another covered dental or medical service. Finally, CMS finalized its proposal permitting supervision of pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services to be provided by not only a physician but also a physician assistant, nurse practitioner, or clinical nurse specialist, including services through audio-video real-time communications technology through December 31, 2024.

B. MEDICARE PAYMENT FOR 340B DRUGS

1. Remedy for 2018 through 2022 (340B Drug Reimbursement Final Rule. In light of the Supreme Court’s June 15, 2022, decision in American Hospital Association v. Becerra striking down a CMS rule providing payment for prescription drugs that hospitals purchased through the 340B program at average sales price (“ASP”) minus 22.5 percent, on November 2, 2023, CMS issued a final rule that would remedy its violation for CY 2018 through 2022. In this rule, CMS finalized its proposal to make a one-time lump-sum payment to affected 340B hospitals calculated as the difference between what they were paid for 340B drugs during the relevant time period and what they would have been paid had the 340B payment policy not applied, without interest. In the final rule, CMS provided the amounts that each hospital would be paid, with payments totaling $9.0 billion for 2018 through 2022. CMS stated that it is accounting for Medicare beneficiary cost-sharing in the lump-sum payments, and as a result, providers may not bill Medicare beneficiaries for that cost-sharing. CMS said that it plans to issue payment instructions to the Medicare contractors providing a 60-day window for the contractors to make the lump-sum payments to hospitals. CMS estimated that hospitals were paid $7.8 billion more for non-drug items and services during 2018 through 2022, as a result of the invalidated policy. CMS said that to preserve budget neutrality, CMS will reduce the OPPS conversion factor by 0.5 percent beginning in CY 2026 until that $7.8 billion is offset, which CMS estimates will take 16 years.
2. Going Forward (OPPS Final Rule). In addition, in the OPPS/ASC final rule also issued on November 2, 2023, CMS finalized its proposal to continue the policy from CY 2023 to pay 340B hospitals the statutory default payment rate for separately payable drugs and biologicals, generally ASP plus 6 percent. CMS also finalized its proposal to no longer require both 340B modifiers of JG and TB and instead, effective January 1, 2025, to permit 340B hospitals to report only the TB modifier.

C. NEW PUBLIC REPORTING REQUIREMENTS

1. New Requirements for Hospitals’ Public List of Charges. Under the CY 2020 hospital price transparency final rule implementing section 2718(e) of the Public Health Service Act, CMS adopted requirements for hospitals to make public their standard changes as a comprehensive machine-readable file (“MRF”) and in a consumer-friendly format. In this rule, CMS finalized its proposals to define several terms, such as “CMS template” and “machine-readable file”; to revise the standard charge information and data elements that hospitals must include in their MRFs; to require hospitals to use a template developed by CMS; and to improve the accessibility of hospital MRFs. In addition, CMS finalized its proposal to change its enforcement process by updating its methods to assess hospital compliance. Among other changes, CMS finalized its revision of the regulation on monitoring and assessment at 42 C.F.R. § 180.70 to indicate that CMS may conduct comprehensive compliance reviews of hospitals’ standard charges information posted on their websites and to require hospital officials to certify the accuracy and completeness of the standard charges information posted in their MRF. CMS’s finalized proposals will mostly become effective and enforced on January 1, 2024, but the regulation text will specify later dates by which hospitals must comply with some of these new requirements.
2. Hospital OQR Program. CMS made several changes, as proposed, to the Hospital Outpatient Quality Reporting (“OQR”) Program. First, CMS modified three previously adopted measures beginning in the CY 2024 reporting period/CY 2026 payment determination: (a) adding the term “up to date” to the COVID 19 vaccination coverage among health care personnel measure; (b) limiting the allowable survey instruments that a hospital outpatient department may use to assess changes in a patient’s visual function for the purposes of the cataracts visual function measure; and (c) modifying, based on recent changes to clinical guidelines, the appropriate follow-up interval for normal colonoscopy in average risk patients measure to begin colorectal cancer screening at age 45, not age 50. Second, CMS will report publicly available data regarding the median time for discharged emergency department (“ED”) patients overall and patients transferred from the ED. Third, CMS will continue to apply the reduction of the outpatient department fee schedule increase factor for hospitals that do not meet the Hospital OQR Program requirements for CY 2024. CMS, however, chose not to remove the “left without being seen” (“LWBS”) measure in CY 2024, as it had proposed. While CMS claimed in the proposed rule that this measure may be ineffective, the agency identified, based on its routine monitoring, a recent increase in LWBS rates and decided to continue investigating the LWBS measure to improve beneficiary care decision-making. Finally, CMS expressed its appreciation for the comments submitted on potential measurement topics for the Hospital OQR Program, including behavioral health and telehealth and stated that it would consider these comments in future rulemakings.

D. POLICIES FOR REHs

CMS finalized its proposals relating to REHs, including the Rural Emergency Hospital Quality Reporting (“REHQR”) Program. CMS codified in the regulation the Program’s statutory authority under section 125 of the Consolidated Appropriations Act of 2021 at 42 C.F.R. § 419.95(a). CMS also adopted four quality reporting measures: (1) abdomen computed tomography – use of contrast material; (2) median time from arrival to departure for ED patients; (3) seven-day hospital visit rate after outpatient colonoscopy; and (4) risk-standardized hospital visits within seven days after hospital outpatient surgery. CMS codified at 42 C.F.R. § 419.95(e)(1)-(3) its policy to retain quality measures adopted into the REHQR Program until the measures are removed, suspended, or replaced. Rather than adopting the proposed immediate measure removal policies, CMS adopted and codified at 42 C.F.R. § 419.95(e)(2) a policy for immediate measure suspension. As proposed, if CMS deems a quality measure to have potential patient safety concerns, CMS will immediately suspend the measure from the program and consider measure removal or reinstatement in the next rulemaking cycle. CMS also codified the proposed eight factors to assess whether to remove a measure. CMS will publish online the data that REHs submit for the REHQR Program after providing them an opportunity to review and correct them. CMS will also grant, to requesting REHs and at the agency’s discretion, quality data deadline extensions or waivers to REHs experiencing extraordinary circumstances beyond their control. In addition, CMS finalized its proposal that Indian Health Services (“IHS") and tribal hospitals that convert to REHs will be paid for hospital outpatient services under the same all-inclusive rate (“AIR”) rather than under OPPS that would apply had those services been performed by an IHS or tribal hospital that was not an REH.

E. CHANGING IPPS MCE

CMS adopted its proposal to revise how it updates or changes the Medicare Code Editor (“MCE”), which is a software program that detects and reports errors in the coding of Medicare claims data. CMS finalized its proposal to remove discussion of the MCE from the annual IPPS rulemakings, beginning with the federal fiscal year 2025 rulemaking, and to address future changes or updates to the MCE through instructions to Medicare contractors instead. This approach reflects CMS’s move away from notice-and-comment rulemaking even though the Supreme Court has confirmed that the requirements for notice and comment in Medicare are more onerous than under the Administrative Procedure Act. See Azar v. Allina Health Servs., 139 S. Ct. 1804, 1814 (2019). CMS also finalized its proposal to issue such instructions to contractors in connection with any April 1 or October 1 updates. In addition, consistent with the proposed rule, CMS explained that it continues to evaluate the purpose and function of the MCE and to seek comments on any concerns with the current edits in detecting errors or inaccuracies in the coded data.

PFS FINAL RULE

A. REDUCED CONVERSION FACTOR & TELEHEALTH CHANGES

In addition to the value-based care changes discussed below, the PFS final rule set the conversion factor at $32.7442, which reflects a 3.37% decrease from the $33.8872 rate in 2023. Beginning in CY 2024, CMS will reimburse for telehealth services provided to patients in their homes at the non-facility PFS rate. CMS will also permit providers who furnish such services to list their practice address instead of their home address on their Medicare enrollment and claims forms through the end of 2024.

B. VALUE-BASED CARE CHANGES

1. Medicare Shared Savings Program. The PFS final rule includes several key updates to the Medicare Shared Savings Program (“MSSP”). First, CMS finalized its proposal to establish a new Medicare Clinical Quality Measures (“Medicare CQMs”) as a new collective type for accountable care organizations (“ACOs”) for performance year 2024 and subsequent performance years. These Medicare CQMs would serve as a new collection type to help ACOs build the infrastructure, skills, knowledge, and expertise necessary to complete the all payer/all patient reporting requirements. The Medicare CQMs will require ACOs to report only on Medicare beneficiaries meeting ACO assignment criteria. Second, CMS finalized its proposal to revise the calculation of the health equity adjustment to include beneficiaries with partial-year low-income subsidy/dual-eligible enrollment, recognizing more beneficiaries as underserved. Third, CMS finalized its proposal to use historical data to establish the 40th percentile Merit-Based Incentive Payment System (“MIPS”) quality performance category score used for the quality performance standard. Fourth, beginning with the 2025 performance year, CMS finalized its proposal to modify the assignment methodology to better account for beneficiaries who receive primary care from nurse practitioners, physician assistants, and clinical nurse specialists over an expanded assignment window of 24 months. CMS stated that this would improve equity and access by assigning additional Medicare fee-for-service beneficiaries to ACOs, especially among more underserved populations. Lastly, CMS finalized its proposed additional refinements to the financial benchmarking methodology for ACOs in agreement periods beginning on January 1, 2024 and in subsequent years to (1) apply a symmetrical cap to risk score growth in an ACO’s regional service area, similar to the cap applied on an ACO’s risk score growth; (2) apply the same CMS-Hierarchical Condition Categories risk adjustment methodology to both the benchmark and performance years; and (3) further mitigate the impact of the negative regional adjustment on the benchmark. CMS acknowledged receiving feedback on potential future developments of the MSSP, including incorporating a new track that would offer a higher level of risk and potential reward than currently available under the ENHANCED track, refining the three-way blended benchmark update factor and the prior savings adjustment, and promoting ACO and community-based organization collaboration.
2. Quality Payment Program. The PFS final rule includes several key updates to the Quality Payment Program (“QPP”). First, CMS finalized five new MIPS Value Pathways (“MVPs”) focusing on the following topics: (1) women’s health; (2) quality care for the treatment of ear, nose, and throat disorders; (3) prevention and treatment of infectious disorders including Hepatitis C and HIV; (4) quality care in mental health and substance use disorders; and (5) rehabilitative support for musculoskeletal care. CMS also finalized its proposal to modify previously finalized MVPs (i.e., Promoting Wellness and Optimizing Chronic Disease Management) into a single consolidated primary care MVP that aligns with the adult core set from the Universal Foundation, a set of quality measures that CMS seeks to apply across value-based care programs. However, CMS declined to change the MIPS performance threshold from 75 to 82 points for the 2024 performance period, leaving the threshold at the less onerous 75 points. CMS also opted not to finalize its proposal to calculate APM participant determinations at the individual level rather than the entity level. Lastly, while CMS proposed to remove the MSSP certified electronic health record technology (CEHRT) threshold requirements for MSSP ACOs beginning with performance year 2024, CMS finalized this proposal with modification to delay the implementation until the 2025 performance year and for subsequent years.