January 18, 2019

Is It Time to Reevaluate Your Off-Campus Hospital Outpatient Department Strategy?

Historically, Medicare has paid a higher reimbursement rate for services performed within a Hospital Outpatient Department (HOPD) setting than for comparable services performed in a physician practice setting.  The original justification for higher payment to HOPDs was that their costs to provide services were higher than a typical physician practice.

To qualify as an HOPD, hospitals must meet several criteria:

  • Operate as a department of the main provider.
  • Provide proof of financial and clinical integration.
  • Post signage identifying it as a department of the main provider.
  • Notify beneficiaries about hospital outpatient billing practices.

To qualify as an on-campus HOPD, a facility must be located within 250 yards of the main hospital building.  A facility can qualify as an off-campus HOPD only if located within 35 miles of the main campus.

Like other value-based payment initiatives implemented over the last decade, the Centers for Medicare & Medicaid Services (CMS) has targeted discrepancies in payments made for the same service provided in different settings.  This price leveling between different settings is often referred to as “site neutrality.”

Recent Developments in Site Neutrality

Starting in 2017, CMS reduced reimbursement for non-excepted HOPD locations (i.e., off-campus HOPDs that commenced providing services after November 2, 2015) to 50% of the Hospital Outpatient Prospective Payment System (HOPPS) rate.  In 2018, CMS further reduced HOPD payments for these locations to 40% of the HOPPS reimbursement rate.

Now in 2019, CMS is expanding its payment reductions to include certain services furnished in any off-campus HOPD locations—not merely non-excepted locations.  CMS has reduced payment for Hospital Outpatient Clinic Visits (G0463)—the most common visit code for HOPDs—to 70% of the HOPPS rate in 2019, and 40% of the HOPPS rate in 2020.

This reduction only impacts the HOPPS rate paid to the hospital for facility services; the corresponding physician payment, paid under the Physician Fee Schedule, will not be impacted.  Implementing these payment reductions is another CMS step toward site-neutral payments.

In 2018, CMS reduced payment by 28.5% for certain drugs furnished at excepted HOPD locations where the hospital provider was participating in the 340B Discount Drug Program.  In 2019, CMS is extending the same payment reduction to applicable drugs furnished at non-excepted off-campus HOPD locations reimbursed under the Physician Fee Schedule.

CMS’ rationalization for the reduction extension is that providers are receiving a significant cost reduction to purchase 340B drugs, and the Medicare reimbursement should align more with the costs incurred.

Time to Act?

Now that 2019 has arrived, there may be uncertainties regarding these changes’ financial impact on an HOPD’s financial performance.  PYA’s experts can evaluate whether the additional reimbursement is still worth the expense and risks associated with the compliance, accreditation, and billing-related complexities associated with HOPDs in the face of expanding site-neutral payments.

For more information, or if your organization would like help to navigate the effect of the reimbursement reductions related to site-neutral payments and extension of the 340B reductions, contact a PYA executive below at (800) 270-9629.

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