On July 13th, the Centers for Medicare & Medicaid Services (CMS) issued the Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems proposed rule, which proposes updates to the OPPS and the Medicare ASC payment system for calendar year (CY) 2024. See the press release here. CMS has provided a rule overview fact sheet and a hospital price transparency and behavioral health fact sheet relating to proposals in this proposed rule.

This rule proposes to:

• apply a payment update of 2.8 percent for CY 2024,
• continue the rural sole community hospital site-neutral payment exemption,
• make several price transparency changes,
• establish payment for intensive outpatient programs,
• update the hospital and ASC quality reporting programs,
• continue pass-through payment for certain drugs, biologicals, and pharmaceuticals,
• continue non-opioid pain management drug and biological payment policies,
• continue 340B payment at average sales price plus 6 percent,
• add 9 services to the inpatient only (IPO) list,
• make rural emergency hospital policy changes for Indian Health Services and tribal facilities,
• make changes to community mental health centers’ conditions of participation,
• solicit comment on a potential payment adjustment to maintain access to essential medicines,
• solicit comment on packaging policies for diagnostic radiopharmaceuticals, and
• consider six applications for device pass-through payment.

This proposed rule is scheduled to be published in the Federal Register on July 31, 2023, and comments are due by September 11, 2023.

CMS PROPOSES 2.8 PERCENT INCREASE IN OUTPATIENT AND ASC PAYMENT RATES

CMS proposes an increase of 2.8 percent for OPPS payment rates in CY 2024, which is based on a market basket update of 3.0 percent reduced by a productivity adjustment of 0.2 percentage points.[1] The agency estimates this will result in a total of approximately $88.6 billion in payments to OPPS providers ($6.0 billion more than CY 2023). For CY 2024, CMS proposes an OPPS conversion factor of $87.488 for hospitals that meet quality reporting requirements.

CMS proposes an increase of 2.8 percent for ASC payment rates in CY 2024, which is consistent with CMS’s policy for CYs 2019 through 2023 to update the ASC payment system using the hospital market basket update.[2] CMS estimates this will result in a total of approximately $6.0 billion in payments to ASC suppliers ($170 million more than CY 2023). For CY 2024, CMS proposes an ASC conversion factor of $53.397 for ASCs that meet quality reporting requirements.

For CY 2024, CMS proposes to resume the agency’s typical process for using the most current cost report and claims data available (CY 2022) to calculate CY 2024 OPPS and ASC payment rates. In the CY 2023 OPPS/ASC final rule, CMS relied upon CY 2021 claims data and cost report data prior to the pandemic to set OPPS and ASC CY 2023 payment rates in response to impacts associated with the COVID-19 pandemic.

In addition, CMS proposes to:

• continue the cancer hospital payment adjustment for CY 2024,
• keep outlier estimated payments at 1.0 percent of total OPPS payments for CY 2024,[3]
• continue the OPPS labor-related share as 60 percent of the national OPPS payment, and
• assign 229 dental service HCPCS codes to various clinical Ambulatory Payment Classifications in order to establish payment rates under the OPPS, consistent with dental payment policies finalized in the CY 2023 Physician Fee Schedule final rule.[4]

CMS is considering including in the agency’s rulemaking impact analysis how OPPS and ASC policies would affect certain beneficiary populations to better support health equity advancement efforts. CMS seeks comment on how to structure an impact analysis to address rule policy impacts for different beneficiary groups. CMS also seeks comment on methods to build upon the agency’s efforts to establish an OPPS health equity framework under the agency’s existing statutory authority.

Hospital industry groups have expressed alarm about CMS’s proposed payment update. In a statement, the American Hospital Association said, “AHA is concerned that CMS is proposing an outpatient hospital payment update of only 2.8% in spite of persistent financial headwinds facing the hospital field. Most hospitals across the country continue to operate on negative or very thin margins that make providing care and investing in their workforce very challenging day to day.”[5]

Payment Impact Favors Rural Hospitals

The estimated increase in the total hospital outpatient department (OPD) payments is determined largely by the increase to the conversion factor. CMS also provides impact estimates for certain types of providers that account for all policy changes included in the final rule.[6]

Table 1. Estimated Impact of Proposed CY 2024 OPPS Changes for Hospitals[7]

Provider Type		Number of Hospitals	All Budget Neutral Changes[8]	All Changes[9]
ALL PROVIDERS		3,502	2.9	2.9
ALL HOSPITALS[10]		3,472	3.0	3.0
URBAN HOSPITALS		2,761	2.8	2.8
RURAL HOSPITALS		711	4.7	4.4
TEACHING STATUS
	Non-Teaching	2,186	3.6	3.5
	Minor	872	3.2	3.0
	Major	414	2.2	2.4
OWNERSHIP
	Voluntary	1,985	3.1	3.0
	Proprietary	1,047	3.5	3.4
	Government	440	2.7	2.8

ASC Impact Differs by Specialty Group

The estimated impact of proposed changes to the ASC payment system by specialty group ranges between negative 6 and positive 7 percent for CY 2024.[11] For example, CMS estimates that aggregate musculoskeletal procedure payments will increase by 7 percent for digestive system procedures, while aggregate nervous system procedure payments will decrease by 6 percent.

Table 2. Estimated Impact of Proposed CY 2023 Changes by ASC Surgical Specialty[12]

Surgical Specialty Group		Estimated CY 2023 ASC Payments (in Millions)	Estimated CY 2024 Percent Change
TOTAL		$6,309	3
	Eye	$1,880	6
	Nervous System	$1,274	-6
	Gastrointestinal	$1,188	3
	Musculoskeletal	$937	7
	Skin	$276	4
	Genitourinary	$225	6

CMS CONTINUES RURAL SOLE COMMUNITY HOSPITAL SITE-NEUTRAL PAYMENT EXEMPTION POLICY

For CY 2024, CMS proposes to continue exempting excepted off-campus provider-based departments (PBDs) of rural sole community hospitals (SCHs) from site neutral clinic visit payment reductions. CMS previously finalized this policy in the CY 2023 OPPS/ASC final rule. This means that CMS will pay the full OPPS payment rate, rather than the physician fee schedule-equivalent rate when a clinic visit (described by HCPCS code G0463) is provided in a rural SCH excepted off-campus PBD.

CMS PROPOSES SEVERAL PRICE TRANSPARENCY CHANGES

Under federal law, hospitals operating in the United States must establish, update, and make a public list available of their standard charges for items and services they provide. CMS proposes several price transparency requirements in CY 2024 to promote greater awareness about hospital service charges, promote agency enforcement capabilities, and reduce hospitals’ compliance burden through the provision of CMS form templates. If finalized, these changes would (1) define new terms, [13] (2) require hospitals to affirm the completeness and accuracy of publicly displayed standard charges, (3) require hospitals to display standard charge information using a CMS-provided template, and (4) implement new requirements to improve access to machine-readable files (MRFs).

With regards to the proposed template, CMS proposes to require hospitals to publicly display required standard charges data in a CMS template. This template would include a CSV “tall” or “wide” format or JSON schema.

Public Charge Information Accuracy and Completion Affirmation

CMS proposes to require hospitals to affirm the accuracy and completeness of standard charges included in an MRF. If finalized, this means that hospitals would need to add a statement to the MRF affirming that “to the best of its knowledge and belief, the hospital has included all applicable standard charge information in its MRF, in accordance with the requirements of § 180.50, and that the information displayed is true, accurate, and complete as of the date indicated in the file.”[14]

Public Standardization of Hospital Machine-Readable File Formats and Data Elements

CMS proposes to require hospitals to encode all standard charge information corresponding to a set of required data elements in the MRF and expand data elements that must be included in the MRF.  This information must conform to CMS template layout, data and other specifications relevant to hospital standard charge information encoding.

Under existing regulation,[15] hospitals must include all required data elements in a list of standard charges, “as applicable”. If finalized, CMS’s proposal would differentiate standard charge information, or data values, from data elements. This means that the term “as applicable” would no longer reference data elements but would qualify standard charge information encoded by a hospital in the MRF.

CMS also proposes to expand and revise the required list of data elements that must be encoded in the MRF.[16] This list would include most data elements suggested by a technical expert panel and recommended by MITRE[17] in a November 2022 report to CMS.[18] In the CY 2022 OPPS/ASC proposed rule,[19] CMS previously solicited comment on considerations for improving public MRF data standardization. In response to stakeholder comments, the HHS Health Federally Funded Research and Development Center, at the request of CMS, convened a technical expert panel to provide formal recommendations on improving MRF data standardization.

General Data Element Proposals

Specifically, CMS proposes the following general data element changes:

• Include the hospital name(s), license number, and location name(s) and address(es) under the single hospital license to which the list of standard charges apply. This means that hospitals must disclose within the MRF itself (instead of only on the website) the location to which its standard charges list applies.
• Include the file version and date of the most recent update to the standard charge information in the MRF. CMS believes this would ensure MRF file users that they are using the most recently available file.
• Consolidate standard charges into a single data element, including gross charge, payer-specific negotiated charge, de-identified minimum and maximum negotiated charge, and discounted cash price. If finalized, CMS would continue to require that hospitals publicly display the name of the third party payer and plan for payer-specific negotiated charges. CMS believes this is necessary to ensure hospitals will not be penalized for displaying information consistent with contracting practices.
• Require hospitals to indicate the contracting method used to determine the payer-specific negotiated charge. CMS solicits comment on the contracting types that should be considered as permitted values in the CMS template.
• Require hospitals to clarify whether the payer-specific standard charge is a dollar amount, percentage, or the algorithm in cases where the charge is based on an algorithm. CMS intends to provide technical instructions for the public display of standard charges expressed in these formats in the future.
• Include an ‘expected allowed amount’ data element that would be required for disclosure in situations where the payer-specific negotiated charge cannot be expressed as a dollar amount.This amount would be the average amount that a hospital estimates it would be paid for an item or service based on its contract with the third party payer. If finalized, hospitals must display this information alongside the percentage or algorithm as a dollar figure.

Hospital Item and Service Data Element Proposals

CMS proposes the following hospital item and service-related data element changes:

• Recast as a separate data element (but otherwise without change) the current required description of an item or service and whether the standard charge for this item or service is provided in connection with an inpatient or outpatient department visit.
• In situations where a standard charge is established for a drug, require hospitals to indicate the drug unit and measurement type as separate data elements.

Item and Service Billing Data Element Proposals

CMS proposes the following item and service billing-related data element changes:

• Specify data elements relevant to item or service billing. CMS believes may help to improve transparency and inform consumers’ understanding of standard charges that have been established for an item or service.
• Require hospitals to specify any relevant modifier(s) necessary to describe the standard charge for an item or service and the specific code type. If finalized, CMS would retain the existing requirement that the MRF include any code used by a hospital for the purposes of billing or accounting for an item or service.

Data Accessibility

CMS proposes several changes to improve data accessibility by requiring hospitals to include in their webpages .txt files with standardized fields that correspond to MRF information and include a webpage link in the footer on the hospital website labeled “Hospital Price Transparency” that links directly to a webpage from which the MRF may be accessed.

Agency Oversight Activities

CMS also proposes several additional activities the agency may use to assess and monitor hospital compliance and solicits comment on additional considerations that should be considered to improve compliance and better align these policies with other federal price transparency initiatives.

Specifically, if CMS determines that a hospital is noncompliant with standard charge publication requirements, the agency indicates it could take the following actions:

• Provide a written warning notice to a hospital of any specific violation.
• Request a corrective action plan if noncompliance is determined to be a material violation of regulatory requirements.
• Impose a civil monetary penalty on the noncompliant hospital and publicize the penalty on a CMS webpage if the hospital fails to respond to CMS requests to comply and submit a corrective action plan.

The agency indicates that these actions would generally, but not necessarily, occur in the above order.

CMS also proposes additional activities to enhance CMS oversight of hospital compliance:

• Provide that CMS may conduct comprehensive compliance reviews of hospitals’ public standard charges information.
• Require authorized hospital officials to submit to CMS a certification attesting to the accuracy and completeness of standard charges information posted in the MRF at any stage of the monitoring, assessment, or compliance phase.
• Require hospitals to submit additional documentation, such as contracting documentation or hospital licensure status, as necessary for CMS to assess hospital compliance.
• Require hospitals to submit an acknowledgement of the receipt of any noncompliant warning notice from CMS.
• In situations where CMS has taken action to address noncompliance of a hospital that is part of a part of a health system, the agency indicates it may inform health system leadership and work with the system’s leadership directly to address related deficiencies throughout the health system.
• Publicize on a CMS webpage information related to the agency’s assessment of a hospital’s compliance, including any compliance actions taken and their status and outcomes. If finalized, this could include any notifications that CMS sent to health system leadership.

Request for Information

CMS solicits public comment on how hospital price transparency (HTP) requirements can best align with other price transparency initiatives. Specifically, CMS is interested in feedback on the following questions:[20]

• How, if at all, and consistent with its underlying legal authority, could the HPT consumer-friendly requirements at § 180.60 be revised to align with other price transparency initiatives?
• How aware are consumers about healthcare pricing information available from hospitals? CMS solicits recommendations on raising consumer awareness.
• What elements of health pricing information do you think consumers find most valuable in advance of receiving care? How do consumers currently access this pricing information? What are consumers’ preferences for accessing this price information?
• Given the new requirements and authorities through Transparency in Coverage (TIC) final rules and the No Surprises Act (NSA), respectively, is there still benefit to requiring hospitals to display their standard charges in a “consumer-friendly” manner under the HPT regulations?
• Within the contours of the statutory authority conferred by section 2718(e) of the Public Health Service Act, should information in the hospital consumer-friendly display (including the information displayed in online price estimator tools) be revised to enhance alignment with price information provided under the TIC final rules and NSA regulations? If so, which data should be revised and how?
• How effective are hospital price estimator tools in providing consumers with actionable and personalized information? What is the minimum amount of personalized information that a consumer must provide for a price estimator tool to produce a personalized out-of-pocket estimate?
• How are third parties using MRF data to develop consumer-friendly pricing tools? What additional information is added by third parties to make standard charges consumer-friendly?
• Should CMS consider additional consumer-friendly requirements for future rulemaking, and to the extent agency authorities permit? For example, what types of pricing information might give consumers the ability to compare the cost of healthcare services across healthcare providers? Is there an industry standard set of healthcare services or service packages that healthcare providers could use as a benchmark when establishing prices for consumers?

CMS PROPOSES PAYMENT FOR INTENSIVE OUTPATIENT PROGRAMS TO PROMOTE HEALTH EQUITY AND CARE ACCESS

Beginning in CY 2024, CMS proposes to establish payment for Intensive Outpatient Programs (IOP) in various care settings to address gaps in behavioral health coverage, promote access to necessary care, and improve treatment outcomes for beneficiaries.

IOP services must meet certain criteria, including being reasonable and necessary for the diagnosis or active treatment of the individual’s condition, with the intention to improve or maintain the individual’s condition and prevent relapse or hospitalization. CMS proposes to define IOP services as a distinct and organized ambulatory treatment program offering less than 24 hours of daily care outside of a patient’s home or in an inpatient/residential setting.

Scope of Benefits for IOP

CMS proposes to define the scope of benefits for IOP services, as mandated by the Consolidated Appropriations Act, 2023[21]  (CAA 2023). IOP is described as a structured outpatient program for individuals with acute mental illness or substance use disorder, consisting of specific behavioral health services. These services would be paid on a per diem basis under the OPPS or other applicable payment system when provided in hospital outpatient departments, Community Mental Health Centers (CMHCs), Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs).

Physician Certification and Plan of Treatment Requirements for the IOP

The CAA 2023 requires a physician to determine that each patient needs a minimum of 9 hours of IOP services per week, at least every other month. CMS proposes to codify this requirement in the regulations for IOP across all settings and is seeking comments on the recertification period.

Payment Rates and Policy for Hospital Outpatient Departments and CMHCs

CMS proposes to establish two IOP Ambulatory Payment Classifications (APCs) for each provider type based on the number of services per day. Payment rates would be calculated using cost per day, utilizing a broader set of OPPS data that includes both Partial Hospitalization Program (PHP) days and non-PHP days.

RHCs and FQHCs

CMS proposes regulatory changes for RHCs and FQHCs to align with the scope of IOP benefits, certification requirements, and payment rules outlined in the CAA 2023. Payment for RHCs would be based on the 3-services per day payment amount for hospital outpatient departments, while FQHCs would be paid the lesser of their actual charges or the 3-services per day payment amount. Grandfathered tribal FQHCs would receive payment based on the Medicare outpatient per visit rate as established by the Indian Health Service (IHS).

Opioid Treatment Program (OTP) Settings

CMS proposes extending IOP coverage to OTPs for the treatment of opioid use disorder. These services are part of a distinct and organized intensive ambulatory treatment program for the treatment of Opioid Use Disorder (OUD) and provide less than 24-hour daily care, excluding home or inpatient/residential settings. The OTP intensive outpatient services must meet specific requirements, including physician certification, plan of treatment, and recertification, and a physician must certify that the patient needs a minimum of nine hours of services per week and requires a higher level of care intensity compared to other non-intensive outpatient OTP services. However, the OTP intensive outpatient services do not include FDA-approved opioid agonist or antagonist medications for OUD treatment or toxicology testing.

A weekly payment adjustment via an add-on code is proposed for IOP services furnished by OTPs, subject to certification, plan of care, and other applicable requirements. If finalized, the payment adjustment would be updated based on the Medicare Economic Index and receive the Geographic Adjustment Factor.

CMS PROPOSES TO ADD 26 DENTAL CODES TO THE ASC COVERED PROCEDURES LIST

In response to stakeholder feedback to the 2023 OPPS/ASC final rule with comment period, CMS proposes to add 26 dental surgical procedures to the ASC covered procedures list for CY 2024. This list includes covered surgical procedures provided in the ASC that are eligible for payment.

Table 3. Proposed Dental Codes to be Added to the ASC Covered Procedures List for CY 2024[22]

CY 2024 CPT/HCPCS/ CDT Code	CY 2024 Long Description
D4210	Gingivectomy or gingivoplasty – four or more contiguous teeth or tooth bounded spaces per quadrant
D4211	Gingivectomy or gingivoplasty – one to three contiguous teeth or tooth bounded spaces per quadrant
D4212	Gingivectomy or gingivoplasty to allow access for restorative procedure, per tooth
D4260	Osseous surgery (including elevation of a full thickness flap entry and closure) – four or more contiguous teeth or tooth bounded spaces per quadrant
D4263	Bone replacement graft – retained natural tooth – first site in quadrant
D4270	Pedicle soft tissue graft procedure
D4273	Autogenous connective tissue graft procedure (including donor and recipient surgical sites) first tooth, implant, or edentulous tooth position in graft
D7111	Extraction, coronal remnants – primary tooth
D7140	Extraction – erupted tooth or exposed root (elevation and/or forcep removal)
D7210	Surgical removal of an erupted tooth requiring removal of bone and/or sectioning of tooth and including elevation of mucoperiosteal flap if indicated
D7220	Removal of impacted tooth – soft tissue
D7230	Removal of impacted tooth – partially bony
D7240	Removal of impacted tooth – completely bony
D7241	Removal of impacted tooth – completely bony, with unusual surgical complications
D7250	Surgical removal of residual tooth roots (cutting procedure)
D7270	Tooth reimplantation and/or stabilization of accidentally evulsed or displaced tooth
D7310	Alveoloplasty in conjunction with extractions – four or more teeth or tooth spaces, per quadrant
D7311	Alveoloplasty in conjunction with extractions – one to three teeth or tooth spaces, per quadrant
D7472	Removal of torus palatinus
D7473	Removal of torus mandibularis
D7510	Incision and drainage of abscess-intraoral soft tissue
D7511	Incision and drainage of abscess – intraoral soft tissue – complicated (includes drainage of multiple fascial spaces)
D7520	Incision and drainage of abscess-extraoral soft tissue
D7550	Partial ostectomy/sequestrectomy for removal of non-vital bone
D7950	Osseous, osteoperiosteal, or cartilage graft of the mandible or maxilla – autogenous or nonautogenous, by report
G0330	Facility services for dental rehabilitation procedure(s) performed on a patient who requires monitored anesthesia (e.g., general, intravenous sedation (monitored anesthesia care) and use of an operating room

CMS PROPOSES QUALITY REPORTING PROGRAM CHANGES

To advance meaningful measurement and reporting for quality care, CMS proposes changes and requests comment on the Hospital Outpatient Quality Reporting Program (OQR), Ambulatory Surgical Center Quality Reporting (ASCQR), and Rural Emergency Hospital Quality Reporting (REHQR) Programs.

Hospital Outpatient Quality Reporting and Ambulatory Surgical Center Quality Reporting Programs

The Hospital Outpatient Quality Reporting (Hospital OQR) Program and Ambulatory Surgical Center Quality Reporting (ASCQR) Program are quality programs that require hospitals and ASCs to meet reporting requirements to maintain their annual payment updates. In the proposed rule for Calendar Year (CY) 2024, CMS makes several proposed modifications and additions to the measures within these programs. Additionally, CMS solicits comments in quality measure topic areas of patient safety, sepsis, behavioral health (including mental health and suicide risk), and telehealth.

Proposed Updates to Hospital OQR Program Quality Measures

• Modification of the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) measure to align with updated CDC National Healthcare Safety Network specifications.
• Modification of the Cataracts: Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery measure survey instrument to standardize data collection and reduce facility burden.
• Alignment of the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure with updated clinical guidelines.
• Adoption of the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults electronic clinical quality measure (eCQM) to promote patient safety.
• Removal of the Left Without Being Seen measure, as it does not provide sufficient actionable information to improve quality and patient outcomes.

Proposed Changes to the ASCQR Program Quality Measures

• Adoption of the Risk-Standardized Patient-Reported Outcomes Following Elective Primary Total Hip and/or Total Knee Arthroplasty measure to provide insight into the quality of care for common procedures.
• Adoption of the Hospital Outpatient /ASC Facility Volume Data on Selected Outpatient Surgical Procedures measures, with modifications, to increase measure granularity.

Rural Emergency Hospital Quality Reporting (REHQR) Program

CMS proposes the adoption and formalization of standard quality program reporting policies for the REH Quality Reporting (REHQR) Program.  To accomplish this, CMS proposes to codify the statutory authority for the REHQR Program. Secondly, CMS proposes an immediate removal policy for quality measures that raise potential patient safety concerns, based on a set of proposed factors to determine the conditions for measure removal. Finally, CMS proposes a sub-regulatory measure modification policy to incorporate non-substantive updates to measure specifications to allow for timely updates in response to scientific advances.

 For CY2024, CMS proposes four initial measures for the REHQR Program. These measures consist of a combination of claims-based measures and chart-abstracted measures, including:

• Abdomen CT Use of Contrast Material. This measure calculates the percentage of CT scans of the abdomen and abdominopelvic region performed with and without contrast out of all CT abdomen studies performed.
• Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients. This measure is a chart-abstracted evaluation of ED throughput time to assess the duration between a patient’s arrival to and departure from the Emergency Department (ED).
• Facility 7 Day Risk Standardized Hospital Visit Rate after Outpatient Colonoscopy. This measure is currently used in the Ambulatory Surgical Center Quality Reporting and Hospital Outpatient Quality Reporting programs. This measure informs patients of potential complications following an outpatient colonoscopy.
• Risk-Standardized Hospital Visits Within Seven Days After Hospital Outpatient Surgery. This measure aims to increase awareness of unplanned hospital visits that occur within 7 days after surgery to increase visibility into these outcomes and to incentivized improved quality of care.

Further, CMS seeks comment on the use of eCQMs, care coordination measures, and a tiered approach for quality measures and reporting requirements to incentivize reporting by REHs.

CMS TO CONTINUE EXISTING PASS-THROUGH POLICIES FOR CERTAIN DRUGS, BIOLOGICALS, AND RADIOPHARMACEUTICALS

Under current law,[23] CMS provides temporary additional payments or “transitional pass-through payments” for “new” drugs, devices and biological agents that were not paid for as a hospital outpatient department service as of December 31, 1996, and whose cost is “not insignificant” in relation to the OPPS payment for the procedures or services associated with the new drug, device, or biological. Under the statute, transitional pass-through payments can be made for at least two years but not more than three years.

CMS proposes to continue existing pass-through payment policies for drugs, biologicals, and radiopharmaceuticals in CY 2024 for 42 drugs and biologicals which were approved for pass-through payment status with effective dates beginning between April 1, 2022, and April 1, 2023.

CMS also proposes to end pass-through payment status in CY 2024 for 25 drugs and biologicals which were initially approved for pass-through payment status between April 1, 2021, and January 1, 2022.

CMS TO CONTINUE NON-OPIOID PAIN MANAGEMENT DRUG AND BIOLOGICAL POLICY

Under current law,[24] the Department of Health and Human Services (HHS) Secretary must review payments for opioids and evidence-based non-opioid alternatives for pain management (including drugs and devices, nerve blocks, surgical injections, and neuromodulation) with a goal of ensuring that there are not financial incentives to use opioids instead of non-opioid alternatives. In the CY 2022 OPPS/ASC final rule, CMS finalized its proposal that CMS would provide for separate payment for non-opioid pain management drugs and biologicals that function as supplies in the ASC setting when those products are approved by the Food and Drug Administration (FDA), have an FDA-approved indication for pain management or as an analgesic, and have a per-day cost above the OPPS drug packaging threshold, as determined by CMS.

Relying upon criteria finalized in the CY 2023 OPPS/ASC final rule, CMS reevaluated products that receive separate payment and proposes that the following four products will continue to receive separate payment for CY 2024:

• Exparel (HCPCS C9290, Injection, bupivacaine liposome, 1 mg),
• Dextenza (HCPCS code J1096, Dexamethasone, lacrimal ophthalmic insert, 0.1 mg),
• Omidria (HCPCS code J1097, Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic irrigation solution, 1 ml), and
• Xaracoll (HCPCS code C9089, Bupivacaine, collagen-matrix implant, 1 mg).

CMS is soliciting comments on additional drugs and biologicals that function as surgical supplies that may meet the relevant criteria, in addition to the following:

• The best way to evaluate the evidence required for medical devices to meet the definition of non-opioid treatment for pain relief,
• The payment methodology for a non-opioid treatment for pain relief that is a drug, biological, or medical device, and
• Potential methods to determine the outpatient department (OPD) service with which non-opioid treatments for pain relief are refurnished for calculating the payment limit of each treatment.

CMS TO CONTINUE 340B DRUG AND BIOLOGICAL PAYMENT POLICY

For CY 2024, CMS proposes to continue to pay average sales price (ASP) plus 6 percent for 340B acquired drugs and biologicals, consistent with the policy finalized in CY 2023. Previously, CMS finalized a policy in the CY 2018 OPPS/ASC final rule to reduce Medicare payment amounts for hospital outpatient drugs purchased under 340B Drug Pricing Program from ASP plus 6 percent to ASP-minus 22.5 percent. That policy prompted litigation, and on June 15, 2022, the Supreme Court unanimously held that absent a survey of hospitals’ acquisition costs, that HHS may not vary reimbursement rates only for 340B hospitals.^[25]

Following that decision and subsequent court rulings, on July 7, 2023, CMS issued a proposed rule “Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years (CY) 2018-2022”[26] to address prior 340B underpayments. In that rule, CMS proposes to make one-time lump sum payments in an amount equaling what would have been paid to impacted 340B covered entities but for CMS’s prior 340B payment policy during the relevant time period. CMS also proposes in that rule to apply these payments in a budget neutral manner, meaning that beginning in CY 2025, CMS would reduce the OPPS annual conversion factor by 0.5 percent to reduce payment for non-drug items and services for all hospitals paid under the OPPS, except for new hospitals that enrolled in Medicare after January 1, 2018, as a new provider. CMS anticipates that this policy will need to be implemented over 16 years to account for $7.8 billion offset.

In the CY 2023 OPPS/ASC final rule, CMS indicated that hospital-based 340B covered entities should continue to use the modifier they used previously (either “JG” or “TB”). However, CMS now proposes to utilize a single modifier to allow for greater simplicity while also continuing to identify and exclude 340B-acquired drugs and biologicals from the definition of units for the purpose of Part B inflation rebate liability. CMS proposes that all 340B covered entity hospitals paid under the OPPS would report the “TB” modifier beginning January 1, 2025, even if the hospital previously reported the “JG” modifier. If finalized, the “JG” modifier would remain effective through December 31, 2024.

CMS PROPOSES NINE NEWLY CREATED SERVICES FOR ADDITION TO THE INPATIENT ONLY LIST IN 2024

The IPO (Inpatient Only) list identifies specific medical procedures, services, and surgeries that are typically only performed on a hospital inpatient basis. While CMS does not propose to remove any procedures from the Inpatient Only (IPO) list for CY 2024, the agency proposes nine newly created services to be added to the IPO list effective January 1, 2024. Currently, these services are described by placeholder CPT codes X114T, 2X002, 2X003, 2X004, 619X1, 7X000, 7X001, 7X002, and 7X003. Upon clinical review, it was determined that these services require a hospital inpatient admission or stay and are not suitable for payment under the Outpatient Prospective Payment System (OPPS). Therefore, these services are proposed to be assigned to status indicator ‘C’ (Inpatient Only) for CY 2024.

Further, CMS proposes to reassign CPT code 0646T from status indicator “E1” (not payable by Medicare) to status indicator “C” for CY 2024.

Table 4. Proposed Additions to the Inpatient Only List for CY 2024[27]

CY 2024 CPT Code	CY 2024 Long Description
X114T	Revision (e.g., augmentation, division of tether), replacement, or removal of thoracolumbar or lumbar vertebral body tethering, including thoracoscopy, when performed
2X002	Anterior thoracic vertebral body tethering, including thoracoscopy, when performed; up to 7 vertebral segments
2X003	Anterior thoracic vertebral body tethering, including thoracoscopy, when performed; 8 or more vertebral segments
2X004	Revision (e.g., augmentation, division of tether), replacement, or removal of thoracic vertebral body tethering, including thoracoscopy, when performed
619X1	Insertion of skull-mounted cranial neurostimulator pulse generator or receiver, including craniectomy or craniotomy, when performed, with direct or inductive coupling, with connection to depth and/or cortical strip electrode array(s)
7X000	Ultrasound, intraoperative thoracic aorta (e.g., epiaortic), diagnostic
7X001	Intraoperative epicardial cardiac (e.g., echocardiography) ultrasound for congenital heart disease, diagnostic; including placement and manipulation of transducer, image acquisition, interpretation and report
7X002	placement, manipulation of transducer, and image acquisition only
7X003	interpretation and report only
0646T	Transcatheter tricuspid valve implantation (ttvi)/replacement with prosthetic valve, percutaneous approach, including right heart catheterization, temporary pacemaker insertion, and selective right ventricular or right atrial angiography, when performed

Additionally, CMS seeks public comment on whether certain medical services described by CPT codes 43775, 43644, 43645, and 44204 should be removed from the IPO (Inpatient Only) list. These codes represent various surgical procedures, including gastric restrictive procedures, gastric bypass, and colectomy. Specifically, CMS is requesting feedback on whether these CPT codes should be removed from the IPO list and if there is enough evidence to ensure the safe delivery of these procedures on Medicare patients in the outpatient setting.

CMS PROPOSES RURAL EMERGENCY HOSPITAL PAYMENT POLICY FOR INDIAN HEALTH SERVICE FACILITIES AND TRIBAL FACILITIES

Rural emergency hospitals (REHs) are healthcare facilities that have been transformed from either a critical access hospital (CAH) or a rural hospital with fewer than 50 beds. These hospitals are not equipped to offer acute care inpatient services, apart from skilled nursing facility services provided in a separate unit. The establishment of REHs as a new category of healthcare provider was authorized by the Consolidated Appropriations Act, 2021 (CAA 2021),[28] and implemented on January 1, 2023.

In response to concerns from Tribal and Indian Health Services (IHS) hospitals regarding financial impacts associated with conversion to REHs, CMS proposes to make payment for IHS and tribal hospitals that convert to REHs under the same All-Inclusive Rate (AIR) payment as IHS and tribal facilities that are not REHs. CMS also proposes that IHS and tribal hospitals that convert to REH facilities would receive the REH monthly payment consistent with how payment is applied for non-tribal and non-IHS facilities. This approach is intended to increase the number of rural tribal and IHS hospitals obtaining an REH designation, thereby improving access to healthcare in these communities and promoting health equity.

CMS also proposes amendments to facilitate payment for off-campus provider-based departments of IHS and tribally-operated REHs. Further, CMS proposes a formal definition to identify IHS or tribally-operated REHs based on their operation by the IHS or authorized tribal organizations.

CMS Proposes Technical Corrections to the Conditions of Participation for REHs

CMS proposes to correct some errors in the regulatory text defining the requirements for REH designation by updating the references to the specific sections of the Act. The correction involves changing the statutory citations in the text.

CMS Seeks Feedback on Enhanced Payment Approaches for IHS and Tribally Owned Facilities

Due to the expansion of the range of services, including high-cost drugs and complex services, provided to communities served by IHS and tribally-owned facilities, the AIR may no longer adequately represent their costs. Therefore, CMS seeks feedback on alternative payment approaches that can ensure equitable payment for these facilities’ high-cost drugs and services provided to Medicare beneficiaries.

CMS PROPOSES CHANGES TO COMMUNITY MENTAL HEALTH CENTERS CONDITIONS OF PARTICIPATION

The CAA 2023 expanded Medicare coverage for Intensive Outpatient Program (IOP) services provided by Community Mental Health Centers (CMHCs) starting from January 1, 2024. This legislation allows CMHCs to offer both Partial Hospitalization Program (PHP) and IOP services. Additionally, the CAA 2023 introduced a new Medicare benefit category for Mental Health Counselor (MHC) services and Marriage and Family Therapist (MFT) services directly billed by MHCs and MFTs respectively.

To implement these changes, CMS proposes modifications to the CMHC requirements. These proposed modifications include the addition of IOP services in the Conditions of Participation (CoP) for CMHCs. Specifically, CMS proposes to update the CoPs to allow CMHCs to receive payments for IOP services under Medicare Part B, establish requirements for the provision of IOP services in CMHCs, and include IOP services in the Medicare provider agreement. CMS also proposes to revise the personnel qualifications for certain disciplines, specifically by updating the definition of mental health counselors and adding a definition for marriage and family therapists.

CMS seeks feedback from stakeholders on the impact of introducing IOP services to CMHCs, including the potential increase in the number of clients served and their insurance status. Currently, CMHCs are required to provide at least 40 percent of their services to individuals not eligible for Medicare Part B. Failure to meet this requirement can result in denial or revocation of Medicare enrollment. Therefore, CMS seeks feedback on how the addition of IOP services may impact the populations served by CMHCs and their ability to meet the 40 percent requirement.

CMS PROPOSES TO CODIFY PHYSICIAN CERTIFICATION REQUIREMENTS UNDER THE PARTIAL HOSPITALIZATION PROGRAM

As mandated by the CAA 2023, under the Partial Hospitalization Program (PHP), physicians must determine that each patient needs a minimum of 20 hours of PHP services per week at least on a monthly basis. CMS proposes to codify this requirement as an additional physician certification requirement for PHP services. The proposed change aims to enhance patient care by ensuring that patients receive the appropriate level of PHP services based on the physician’s assessment of their needs. Further, CMS proposes to modify the regulation to align with the CAA 2023, by requiring an initial recertification after 18 days and subsequent recertifications no less frequently than every 30 days. This proposed revision aims to improve the delivery of PHP services and ultimately improve patient outcomes.

CMS SOLICITS COMMENT ON POTENTIAL PAYMENT ADJUSTMENT TO MAINTAIN ACCESS TO ESSENTIAL MEDICINES AND CRITICAL DEVICES

In response to continued, pervasive drug shortages, CMS solicits comment on a potential payment adjustment under both the hospital Inpatient Prospective Payment System (IPPS) and OPPS to facilitate continued access to a buffer stock of essential medicines. These medicines refer to 86 specific medicines identified by the HHS Office of the Assistant Secretary for Preparedness and Response “as either critical for minimum patient care in acute settings or important for acute care or important for acute care of respiratory illnesses/conditions, with no comparable alternative available.”[29]^,[30]

To mitigate adverse impacts associated with insufficient supply of essential medicines, CMS notes that hospitals can implement various procurement strategies to bolster available supply. However, CMS recognizes that the resources necessary to establish a “buffer stock” of these medicines require additional resource costs. Accordingly, CMS is considering making separate payment under the IPPS beginning on or after January 1, 2024, and under the OPPS for future years, to enable hospitals to establish and maintain access to a buffer stock of essential medicines.

However, CMS observes that there are challenges in qualifying additional resource costs necessary to establish and maintain essential medicines. To rectify this, CMS suggests initially basing IPPS payment on the IPPS shares of a hospital’s additional reasonable costs, consistent with how the agency provides a payment adjustment for National Institute for Occupational Safety & Health-approved surgical N95 respirators. CMS believes these costs could include those costs necessary to store essential medicines at the hospital or a hospital’s arrangement to have a distributor or manufacturer store these medicines. However, CMS indicates these costs would not include the costs of the essential medicine itself.

CMS suggests these IPPS payments could be provided biweekly as interim lump-sum payments (as determined by Medicare Administrative Contractors, or MACs), which would be reconciled at cost report settlement. The agency indicates that in future years, MACs could determine interim biweekly lump-sum payments based on information from a hospital’s prior year’s updated cost report.

To address these medicine shortages in the future, CMS seeks feedback on the efficacy of this policy as well as potential improvements and alternatives that can be considered to further improve drug supply chain resiliency:

• Are the 86 essential medicines prioritized in the report Essential Medicines Supply Chain and Manufacturing Resilience Assessment the appropriate initial list of essential medicines for this potential payment policy? How often should HHS consider updating the respective list used for establishing these potential additional payments?
• Should HHS consider expanding the list of essential medicines used in establishing these potential additional payments to include essential medicines used in the treatment of cancer?
• Is a 3-month supply the appropriate amount of supply for the buffer stock or should an alternative duration be used?
• In general, how much of a buffer stock of these essential medicines are hospitals currently maintaining across different hospital types and regions (whether directly, or contractually through distributors or other partners)? Are there unique circumstances for safety net hospitals that should be taken into consideration in any potential payment policy?
• What type of additional hospital resource costs are involved in establishing and maintaining access to a buffer stock of essential medicines?
• What flexibilities should exist for implementing buffer stock practices?
• What immediate impacts on the supply of essential medicines could be expected upon implementation of this potential policy? What steps, if any, would need to be taken to mitigate risks of possible demand-driven shortages as a result of implementation of such a policy?
• How should such a policy be considered for essential medicines that are currently in shortage, and thus potentially not appropriate for arranging to have buffer stock?

CMS is also considering expanding this payment policy to include critical medical devices once the FDA publishes its Critical Medical Device List. This list is intended to identify those medical devices that are critical to our nation’s public health, at all times for patients, workers, and the general public because of clinical need. CMS anticipates this list will be available by the end of 2023. Accordingly, CMS solicits comment on critical device storage and related considerations.

CMS SOLICITS COMMENT ON PACKAGING POLICIES FOR DIAGNOSTIC RADIOPHARMACEUTICALS

Under the OPPS, CMS has implemented packaging policies for various types of drugs, biologicals, and radiopharmaceuticals, regardless of their cost. These packaged products are referred to as “policy-packaged” items. Diagnostic radiopharmaceuticals, including contrast agents and stress agents, fall under this category and are packaged based on their use in diagnostic tests or procedures.

In response to concerns from stakeholders regarding the packaging policy for diagnostic radiopharmaceuticals, CMS solicits comment on potential modifications to this packaging policy to ensure equitable payment and beneficiary access. The agency also seeks feedback on alternative payment approaches, including paying separately for high-cost diagnostic radiopharmaceuticals, creating specific payment policies for clinical trials, and adopting indication-specific codes. Feedback received will be considered for potential implementation in the CY 2024 OPPS/ASC final rule with comment period.

CMS SOLICITS FEEDBACK ON SIX APPLICATIONS FOR DEVICE PASS-THROUGH PAYMENT

Transitional device pass-through payment allows beneficiaries to access innovative devices by allowing payment for these devices while necessary cost data is being collected to incorporate the devices into a procedure rate. A device is eligible for transitional for pass-through payments for at least two years but no more than three years.

For CY 2024, six applications for device pass-through payment were submitted. CMS will publish final determinations for pass-through status in the CY 2024 OPPS/ASC final rule.

Table 5. Applications for Device Pass-Through Status in CY 2024

Device	Manufacturer	FDA Break-Through
CavaClear Inferior Vena Cava (IVC) Filter Removal Laser Sheath	Phillips North America, LLC	X
CERAMENT® G	BONESUPPORT AB	X
Ambu® aScopeTM 5 Broncho HD	Ambu Inc.
CytoCore	Praxis Medical, LLC
EchoTipâ	Cook Medical
FLEX Vessel Prep™ System	Venture Med Group, Inc.

Table 6. Devices with Pass-Through Status Expiring in 2023 – 2025[31]

HCPCS Code	Description	Pass-Through Status Effective Date	Pass-Through Status Expiration Date
C1824[32]	Generator, cardiac contractility modulation (implantable)	1/1/2020	12/31/2023
C19822	Catheter, pressure-generating, one-way valve, intermittently occlusive	1/1/2020	12/31/2023
C18392	Iris Prosthesis	1/1/2020	12/31/2023
C17342	Orthopedic/device/drug matrix for opposing bone-to-bone or soft tissue-to bone (implantable)	1/1/2020	12/31/2023
C25962	Probe, image-guided, robotic, waterjet ablation	1/1/2020	12/31/2023
C1052	Hemostatic agent, gastrointestinal, topical	1/1/2021	12/31/2023
C1062	Intravertebral body fracture augmentation with implant (e.g., metal, polymer)	1/1/2021	12/31/2023
C1825	Generator, neurostimulator (implantable), nonrechargeable with carotid sinus baroreceptor stimulation lead(s)	1/1/2021	12/31/2023
C1761	Catheter, transluminal intravascular lithotripsy, coronary	7/1/2021	6/30/2024
C1831	Personalized, anterior and lateral interbody cage (implantable)	10/1/2021	9/30/2024
C1832	Autograft suspension, including cell processing and application, and all system components	1/1/2022	12/31/2024
C1833	Monitor, cardiac, including intracardiac lead and all system components (implantable)	1/1/2022	12/31/2024
C1826	Generator, neurostimulator (implantable), includes closed feedback loop leads and all implantable components, rechargeable battery and charging system	1/1/2023	12/31/2025
C1827	Generator, neurostimulator (implantable), nonrechargeable, with implantable stimulation lead and external paired stimulation controller	1/1/2023	12/31/2025
C1747	Endoscope, single-use (i.e. disposable), urinary tract, imaging/illumination device (insertable)	1/1/2023	12/31/2025

Consistent with prior years, CMS will set the pass-through payment percentage limit to 2.0 percent of the total projected OPPS spending for 2024. CMS estimates payments of $93.7 million for the first group of devices and $40.4 million for the second group of devices eligible for pass-through payment in CY 2024.

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This Applied Policy® Summary was prepared by the Applied Policy team of health policy experts. If you have any questions or need more information, please contact us at 202-558-5272.

[1] Hospitals that fail to meet hospital outpatient quality reporting requirements will have a 2.0 percentage point reduction to their update factor.

[2] ASCs that fail to meet ASC quality reporting requirements will have a 2.0 percentage point reduction to their update factor.

[3] CMS proposes an outlier fixed-dollar threshold of $8,350.

[4] See Table 53 on pages 448-453 of the unpublished rule for a list of these codes.

[5] https://www.aha.org/press-releases/2023-07-13-aha-statement-cy-2024-opps-proposed-rule

[6] Estimates do not include assumptions about changes in volume and service-mix.

[7] See Table 100, on pages 884-887 of the unpublished rule.

[8] Includes budget neutrality adjustments and a 2.8 percent OPD fee schedule update factor.

[9] Includes all budget neutral changes plus additional adjustments to the conversion factor resulting from changes in pass-through estimates, and estimated outlier payment adjustments.

[10] Excludes hospitals held harmless (cancer and children’s hospitals) and community mental health centers.

[11] Estimates do not include assumptions about changes in volume and service-mix.

[12] See Table 101, on page 897 of the unpublished rule.

[13] See pages 756 to 757 of the unpublished rule for additional details about these definitions. This includes “CMS template”, “Consumer-friendly expected allowed amount”, “encode”, and “Machine-readable file”.

[14] See page 757 of the unpublished rule.

[15] See 45 CFR 180.50(b)

[16] See Table 84, on pages 781 – 782 of the unpublished rule for a comparison of current and proposed data elements.

[17] MITR operates HHS’ Health Federally Funded Research and Development Center.

[18] https://mitre.app.box.com/v/MITRE-MRF-TEP/file/1244177570809

[19] 86 FR 42321

[20] See pages 807 – 808 of the unpublished rule.

[21] Pub. L. 117-328.

[22] See Table 61 for a list of the procedures on pages 515-516 of the unpublished rule.

[23] Section 1833(t)(6) of the Act.

[24] Section 1833(t)(22)(A) of the Social Security Act.

[25] Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022).

[26] 88 FR 44078.

[27] See Table 47, on page 427 of the unpublished rule.

[28] Pub. L. 116–260

[29] https://www.armiusa.org/wp-content/uploads/2022/07/ARMI_Essential-Medicines_Supply-Chain-Report_508.pdf

[30] https://aspr.hhs.gov/newsroom/Pages/Essential-Medicines-May22.aspx

[31] Table 28, CY 2024 OPPS/ASC Proposed Rule

[32] Device for which pass-through status was extended for a 1-year period by section (a)(2) of the Consolidated Appropriations Act, 2023 (CAA, 2023) (Pub. L. 117-328), titled Extension of Pass-Through Status Under the Medicare Program for Certain Devices Impacted by COVID-19.