October 14, 2016

Senate Letter Opposes Site Neutral Payment Policy

More than 40 U.S. senators cosigned an Oct. 3 bipartisan letter spearheaded by Sens. Rob Portman (R-OH) and Charles Schumer (D-NY) in opposition to key elements of a site neutral payment policy included in the Calendar Year (CY) 2017 Hospital Outpatient Prospective Payment System (HOPPS) proposed rule. The letter criticizes the Centers for Medicare and Medicaid Services (CMS) for implementing its site neutral payment policy in an overly restrictive manner that goes far beyond Congressional intent.

Congress enacted Section 603 of the Bipartisan Budget Act (BBA) of 2015 in an effort to combat complaints that the current reimbursement system provides too many incentives for hospitals to purchase independent physician practices. Under this legislation, CMS is required to reimburse “new off-campus” hospital outpatient departments, defined as entities that came into operation after Nov. 2, 2015, and are located within 250-yards from the main hospital campus, under a different Medicare part B payment system rather than the traditional HOPPS. CMS ultimately decided in the 2017 HOPPS proposed rule that services administered at “new” hospital outpatient departments (HOPD) would be reimbursed via the Medicare Physician Fee Schedule (MPFS).

Electing to pay HOPD services according to MPFS rates has numerous unintended consequences. While physicians will receive direct reimbursement for services delivered to patients in this setting, the principal drawback of utilizing the MPFS to reimburse HOPDs is the fact that hospitals will no longer receive important facility payments. This unfortunate reality will be in place at least until the end of 2017 when CMS estimates it can develop some form of facility payment for hospitals.

The regulation also stipulates that HOPDs in operation prior to Nov. 2, 2015, will continue to receive reimbursement through the HOPPS so long as they abide by new requirements pertaining to relocation, the types of services offered to patients, change in ownership and the 250-yard rule.

The letter is highly critical of CMS-imposed restrictions on existing HOPDs. For example, the senators criticized the prohibition on continued HOPPS payment for any grandfathered HOPD that expands or relocates from its initial physical address, regardless of the circumstances. HOPDs are often required to expand or change building locations for a variety of reasons, such as being situated on an earthquake fault line or in a vulnerable flood plain, expired leases or higher patient volumes due to population increases. If the CY 2017 HOPPS proposed rule is finalized, any expansion or change in physical address would result in previously grandfathered HOPDs now receiving reimbursement only through the MPFS.

HOPDs that elect to offer new patient services outside of what it initially offered on Nov. 2, 2015, will also lose their HOPPS grandfathered status. The senators highlighted the unfairness of CMS providing no exception for HOPDs that are interested in providing new services, including services stemming from technological or medical advancements.

The agency also ruled that, in order for an HOPD to retain its grandfather status, the entire hospital system must undergo a change in ownership. If only the HOPD undergoes a change in ownership, the entity will be required to begin billing for services under the MPFS. Finally, any HOPDs located more than 250 yards from the main hospital campus will also no longer qualify to bill under the HOPPS. Although silent on the change of ownership policy, this collection of senators views strict adherence to the 250-yard rule as overly restrictive and far beyond the initial intent of the HOPD reimbursement policy enacted through the Bipartisan Budget Act.

The American College of Radiology (ACR) applauds Sens. Portman and Schumer for their commitment to improving the existing site neutral payment policies. In addition, the College continues to educate Congress about the many pitfalls associated with reimbursing HOPD services using the MPFS. Over the past decade, both Congress and CMS have enacted a variety of policies reducing MPFS reimbursement. As a result, provider participation in this particular fee schedule is dangerously low and woefully inadequate to cover the cost of important hospital outpatient services regardless of whether these entities were in operation before or after Nov. 1, 2015.

The CY 2017 HOPPS final rule is expected to be released on or about Nov. 1, 2016. The ACR’s government relations office will continue to monitor any Congressional efforts to reverse this flawed payment policy.