Medicare Increases Reimbursements for ASCs, Physicians and Home Health Agencies

January 2019

HIDA Government Affairs Update

By Linda Rouse O'Neill
Vice President, Government Affairs

The Centers for Medicare and Medicaid Services (CMS) recently released three final Medicare payment rules for calendar year 2019. These include the Hospital Outpatient Prospective Payment System (OPPS)/Ambulatory Surgery Center (ASC) Rule, the Physician Fee and Clinical Lab Rule and the Home Health Agencies Final Payment Rule. These rules wrap up the annual Medicare payment regulatory process as inpatient facilities and skilled nursing facilities already received their final updates as they are paid on the fiscal year (October 1, 2018 started the fiscal year 2019 payment cycle). CMS continues its focus on reducing regulatory burdens on providers as well as simplifying quality reporting requirements.

Of particular note are the changes and potential opportunities for the supply chain in the ASC and physician office markets. Additionally, CMS modified the definition of labs that must now report private payer rates. This is a win for the industry as it has been repeatedly pushing the agency on this issue as it impacts the data CMS uses to set clinical lab reimbursement. The new payment rules also contain key regulatory changes for how home health agencies are paid. Here is a look at these changes:

Hospital outpatient departments and ASCs 
The OPPS/ASC rule increases the annual payment rate for outpatient hospital departments by 1.35 percent. However, CMS is continuing to implement policies referred to as “site neutral” payments which aim to incentivize the use of lower cost settings for the same procedures. Specifically, CMS finalized payment rates for clinical visits in outpatient settings at the lower rate for provider-based departments which will result in lower copayments for beneficiaries and will save the Medicare program approximately $380 million in 2019. The policy would reduce the OPPS payment rate for clinic visits from $116 (with a $23 beneficiary copayment) to $81 (with a beneficiary copayment of $16).

ASCs will receive a 2.1 percent increase in its base Medicare payment. CMS has also finalized its proposal to add 12 cardiac catheterization codes to the ASC covered procedures list as well as 5 other codes.

As a result of the “site neutral” policies, some analysts comment that this increased competition will make ASCs attractive merger and acquisition (M&A) targets for hospitals. Indeed, a recent survey reveals that nearly one in five healthcare executives are interested in acquiring these providers. Whether this interest will turn into actual consolidation remains to be seen, as HIDA’s own research shows that 70 percent of ASC decision makers do not anticipate M&A within the next two years.

Physician offices
Under the Physician Fee Rule and Quality Payment Program Update, CMS is adjusting the Merit-Based Incentive Payment System (MIPS) to have an increased focus on cost-reduction. Specifically, the agency will increase the weight of the MIPS cost category to 15 percent while lowering the weight of the quality category to 45 percent.

The agency will also update its MIPS facility-based measurement option that will allow qualifying clinicians to use their hospital’s CMS value-based purchasing results rather than reporting separate MIPS cost and quality data. This appears to be in line with the administration’s promise to ease the impact of regulations on clinicians.

Home Health agencies
Included in the Home Health final rule was the Home Health Patient Drive Groupings Model (PDGM) which will determine payments using clinical characteristics to assign patients to a payment category in an effort to prioritize value-based payments. The PDGM is designed to reflect the focus on relying more heavily on clinical characteristics and other patient information to allow payments to more closely reflect patients’ needs. CMS believes that this new case-mix system will help Medicare move towards a more value-based payment system. It also finalizes the change in unit of payment under the home health PPS from 60-day episodes of care to 30-day periods of care to be implemented on January 1, 2020

Some industry experts believe the new model may drive how referrals are treated with agencies forming more collaborative relationships with institutional settings rather than community doctor offices. The reason behind this is that institutional settings have sicker patients and the model focuses on resources needs. However, experts also urge home health agencies to ensure a good balance of patients as the new payment model is required to be budget neutral.

If you would like to learn more about these payment rules, and the effect they have on your customers, please contact us: