On July 10, 2024, 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 Medicare OPPS and ASC payment system for calendar year (CY) 2025. See the press release here and the fact sheet here.

This rule proposes to:

• apply a payment update of 2.6 percent for CY 2025,
• update payment rates for Partial Hospitalization Program and Intensive Outpatient Program,
• address maternal health crisis through new obstetrical services specific conditions of participation,
• update the hospital, ASC, and Rural Emergency Hospital quality reporting programs,
• continue pass-through payment for certain drugs, biologicals, and devices,
• implement payment for non-opioid pain management drugs and devices,
• pay separately for diagnostic radiopharmaceuticals that meet a cost threshold,
• provide an add-on payment for radiopharmaceuticals using Tc-99m derived from domestic Mo-99,
• revise incarceration definitions to allow for Medicare payment for services furnished to individuals on parole, probation, or home detention,
• change prior authorization timeframes for outpatient services that require prior authorization,
• add 20 surgical procedures to the Ambulatory Surgical Center Covered Procedures List,
• change payment policy for investigation device exemption studies and coverage with evidence development clinical trials,
• implement mandatory continuous eligiblity for children in Medicaid and CHIP,
• add exceptions to the Medicaid clinic services “four walls” requirement,
• clarify payment for telehealth outpatient therapy services, and
• provide add-on payment for high-cost drugs provided by Indian Health Service and tribal facilities.

This proposed rule is scheduled to be published in the Federal Register on July 22, 2024, and comments are due by September 9, 2024.

CMS PROPOSES 2.6 PERCENT INCREASE IN OUTPATIENT AND ASC PAYMENT RATES

CMS proposes an increase of 2.6 percent for OPPS payment rates in CY 2025, which is based on a market basket update of 3.0 percent reduced by a productivity adjustment of 0.4 percentage points.[1] The agency estimates this will result in a total of approximately $88.2 billion in payments to OPPS providers ($5.2 billion more than CY 2024). For CY 2025, CMS proposes an OPPS conversion factor of $89.379 for hospitals that meet quality reporting requirements.

CMS proposes an increase of 2.6 percent for ASC payment rates in CY 2025, which is consistent with CMS’ policy for CYs 2019 through 2024 to update the ASC payment system using the hospital market basket update.[2] CMS estimates this will result in a total of approximately $7.4 billion in payments to ASC suppliers ($202 million more than CY 2024). For CY 2025, CMS proposes an ASC conversion factor of $54.675 for ASCs that meet quality reporting requirements.

For CY 2025, CMS proposes to use the most current cost report and claims data available (CY 2023) to calculate CY 2025 OPPS and ASC payment rates.

In addition, CMS proposes to:

• continue the cancer hospital payment adjustment for CY 2025,
• keep outlier estimated payments at 1.0 percent of total OPPS payments for CY 2025,[3] and
• continue the OPPS labor-related share as 60 percent of the national OPPS payment.

CMS PROPOSES UPDATED RATES FOR PARTIAL HOSPITALIZATION PROGRAM AND INTENSIVE OUTPATIENT PROGRAMS

The Partial Hospital Program (PHP) is an intensive, structured outpatient program provided as an alternative to psychiatric hospitalization and consists of a specified group of mental health services paid on a per diem basis for a minimum of 20 hours of PHP services per week. CMS proposes to maintain the current methodology for calculating rates for these services, based on cost per day OPPS data including PHP and non-PHP days to capture data from hospital claims that are not identified as PHP but include service codes and intensity required for a PHP day.

In CY 2024, CMS established payment for Intensive Outpatient Programs (IOP) in various care settings with the goal of addressing gaps in behavioral health coverage, promoting access to necessary care, and improving treatment outcomes for beneficiaries. IOPs are distinct programs providing psychiatry services for individuals with acute mental illness or substance use disorder. This group of behavioral health services are paid on a per diem basis for a minimum of 9 hours of IOP services per week, and can be furnished in hospital outpatient departments, Community Mental Health Centers (CMHCs), Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs), and Opioid Treatment Programs (OTPs) for the treatment of opioid use disorder.

For CY 2025, CMS proposes to update payment rates for IOP services provided in hospital outpatient departments and CMHCs. CMS proposes to use the same rate structure established in CY 2024 that provides two APCs for each provider type. The first is for days with three services per day and the second for days with four or more services per day. CMS proposes to calculate rates for both of these APCs based on cost per day using CY 2023 OPPS claims data including PHP and non-PHP days.

CMS AIMS TO ADDRESS MATERNAL HEALTH

The United States faces both an alarmingly high national maternal mortality rate and concerning disparities within this mortality rate. In 2022, there were 22 maternal deaths per 100,000 live births, with this rate being two to four times higher for Native Hawaiian and Pacific Islander women, Black women, and American Indian/Alaska Native (AI/AN) women than for non-Hispanic White women and 60 percent higher for women in rural areas than those in urban settings.

To help address this issue, CMS proposes a number of conditions of participation (CoPs) for obstetrical (OB) services in hospitals and critical access hospitals (CAH). In addition, CMS proposes to revise the Quality Assessment and Performance Improvement (QAPI) Program for hospitals and CAHs that offer OB services and require staff trainings for these facilities to improve maternal care. The agency requests comment on whether these requirements should also be expanded to rural emergency hospitals (REHs).

CMS Proposes new Obstetrical Services Specific Conditions of Participation

The proposed CoPs specific to OB services would not reference any specific organization’s guidelines but would rather require that all standards set to satisfy the CoPs by impacted hospitals be based on evidence from nationally recognized sources. They would:

• Require that OB services be well organized and meet nationally recognized standards of practice for physical and behavioral health,
• Require that OB services be integrated with other departments at the facility and be organized in a way appropriate to the services offered by the facility,
• Require that an individual with the necessary education and training (either a registered nurse, certified nurse midwife, nurse practitioner, physician assistant, or a doctor of medicine or osteopathy) supervise OB patient care units,
• Require that the facility keep a roster of all OB practitioners detailing the privileges afforded to each practitioner, and that these privileges match the practitioners’ competencies,
• Require OB services to be consistent with the facility’s resources and needs,
• Require that labor and delivery room suites have a call-in-system, cardiac monitor, and fetal doppler or monitor, and
• Require protocols for patient health and safety events such as obstetrical emergencies, complications, and immediate post-delivery care.

CMS Proposes Revisions to QAPI Program

Existing COPs require hospitals to operate a QAPI program in which they collect data to evaluate the quality of care at their facility and conduct quality improvement activities. While the hospital does not need to transmit QAPI data to CMS, they do need to maintain the program. Given the health disparities in maternal mortality rates, CMS believes the data driven improvements that a well-run QAPI program facilitates are well suited to addressing the maternal health crisis. Accordingly, CMS proposes that hospitals and CAHs offering OB services would need to use the QAPI program to analyze and improve outcomes and disparities for OB patients. This analysis would need to be broken out by diverse subpopulations. Facilities would also be required to conduct at least one performance improvement project addressing maternal health disparities annually, to involve OB leadership in the QAPI, and, if applicable, to incorporate any Maternal Mortality Review Committee (MMRC) data and recommendations into their QAPI.

CMS Proposes New Staff Trainings for OB Services

CMS proposes that hospitals and CAHs offering OB services would be required to develop staff trainings to improve maternal care. The facility would need to document the staff required to complete the trainings and when this training was completed, and to be able to demonstrate that the staff are knowledgeable and competent in how to improve delivery and maternal care. Findings from the QAPI programs would also need to be incorporated into the trainings.

CMS Proposes New Standard within Emergency Services CoP

To improve care for all patients, including pregnant, birthing, and postpartum women receiving emergency services, CMS proposes a new standard, “Emergency Services Readiness,” within the Emergency Services CoPs. This standard would require facilities to have protocols and provisions consistent with nationally recognized and evidence-based guidelines to meet the emergency needs of patients, and to train staff these protocols and provisions annually. Hospitals provisions would be required to include the following[4]:

1. “drugs, blood and blood products, and biologicals commonly used in life-saving procedures;
2. equipment and supplies commonly used in life-saving procedures; and
3. a call-in-system for each patient in each emergency services treatment area.”

Hospitals would be given flexibility in identifying the provisions that would meet the needs of their patient population.

CMS PROPOSES QUALITY REPORTING PROGRAM CHANGES, INCLUDING THE ADOPTION OF HEALTH EQUITY MEASURES

The Hospital Outpatient Quality Reporting (OQR) Program and Ambulatory Surgical Center Quality Reporting (ASCQR) Program are quality programs that require hospitals and ambulatory surgical centers (ASCs) to meet reporting requirements to maintain their annual payment updates. To advance meaningful measurement and reporting for quality care, CMS proposes changes and requests comment on the OQR Program, ASCQR Program, and Rural Emergency Hospital Quality Reporting (REHQR) Programs. CMS also includes a proposal related to the Hybrid Hospital-Wide Readmission (HWR) and Hybrid Hospital-Wide Standardized Mortality (HWM) measures under the Hospital Inpatient Quality Reporting (IQR) Program.

CMS Proposes the Adoption of Health Equity Measures Across Quality Programs

CMS proposes to adopt three measures for the Hospital OQR, ASCQR, and REHQR Programs, aligned with CMS’s goal of advancing health equity:

1. Hospital Commitment to Health Equity (HCHE) measure for the Hospital OQR and REHQRP Programs and Facility Commitment to Health Equity (FCHE) measure for the ASCQR Program, beginning with the CY 2025 reporting period and impacting the CY 2027 payment /program determination. This measure uses five-attestation-based domains.
2. Screening for Social Drivers of Health (SDOH) measure, with voluntary reporting beginning with CY 2025 and mandatory reporting beginning with CY 2026, impacting the CY 2028 payment/program determination. The measure assesses the total number of patients screened for five specific health-related social needs (HRSNs).
3. Screen Positive Rate for SDOH measure, with voluntary reporting beginning with CY 2025 and mandatory reporting beginning with CY 2026, impacting the CY 2028 payment/program determination. The measure examines the number of beneficiaries who screened positive for each of the five specific social risk factors used in the Screening for SDOH measure.

Adoption of these measures is intended to align measures across CMS’s quality programs and incentivize quality reporting entities to identify and address health equity gaps.

Proposed Changes to Hospital OQR Program Quality Measures and Program

CMS proposes the following changes to the Hospital OQR measures, in addition to the health equity measures outlined above:

• Adoption of the Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery, Patient Reported Outcome-Based Performance measure, with voluntary reporting beginning with CY 2025 and mandatory reporting beginning with CY 2026, impacting the CY 2028 payment determination. The goal of this measure is to provide insight into the communication of recovery information and improve patient understanding of this information.
• Removal of the MRI Lumbar Spine for Low Back Pain measure beginning with the CY 2025 reporting period, impacting the CY 2027 payment determination, as recent studies have shown that performance on this measure did not improve patient outcomes.
• Removal of the Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac, Low-Risk Surgery measure beginning with the CY 2025 reporting period, impacting the CY 2027 payment determination, due to a lack of meaningful data.

CMS also proposes to modify the Hospital OQR Program’s immediate measure removal policy to an immediate suspension policy, which is used when continued use of a measure raises patient safety concerns. If an immediate suspension occurs, CMS will address the suspension and propose to retain, modify, or remove the measure in the next reasonable rulemaking opportunity. This change aligns measure suspension policies across the REHQRP, Hospital OQRP, and ASCQRP, and is intended to increase transparency and provide opportunity for public input before a measure is potentially removed.

Additionally, CMS proposes to require that Electronic Health Record (EHR) technology be certified to all available electronic clinical quality measures (eCQMs), to ensure hospitals can accurately capture and report the data needed for these measures.

CMS also proposes to include the Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients measure – Psychiatric/Mental Health Patients strata publicly on Care Compare. While this data is already available on data.medicare.gov, CMS believes that displaying this information on Care Compare will be useful to patients when choosing care locations, as well as for researchers and hospital staff aiming to address health disparities and improve timely access to care.

Proposed Changes to the ASCQR Program Quality Measures and Program

CMS does not propose changes to the quality measures set beyond the cross-program health equity measures but does propose to adopt the immediate measure suspension policy it proposes for the Hospital OQR Program for the ACSQR Program.

In a Request for Information (RFI), CMS seeks comment on the development of a specialty-focused reporting and minimum case number for required reporting framework. CMS is contemplating revising data reporting requirements for the ASCQR Program to require that ASCs report data to CMS only on quality measures generally applicable to all ASCQR Program individuals and relevant specialty-specific measures and is considering two frameworks: 1) a Specialty-Select framework, and 2) an alternative Specialty Threshold framework. Through these frameworks, CMS seeks to add case minimums for measure reporting for specialty measures, remove the zero case attestation requirement for specialty measures to decrease reporting burden, and confirm case counts using claims data to determine which specialty measures would be required for individual ASCs.

Under both frameworks, ASCs would be required to report on all specialty-specific, claims-based measures. For the Specialty Select Framework, ASCs would report on a specified number of remaining non-claims-based specialty measures as applicable to each ASC, and for the Specialty Threshold framework, ASCs would report on all non-claims-based specialty-specific measures for which the ASC reaches the case minimum threshold.

For the Specialty Select Framework, CMS requests feedback on how many non-claims-based specialty-specific measures ASCs should be required to report, whether there are any specialty-specific measures that should be developed and adopted, and how CMS can determine if an ASC meets the minimum case number for a given measure. For both frameworks, CMS seeks feedback on whether use of Medicare fee-for-service (FFS) claims would be sufficient for determining minimum case volumes, whether Medicare Advantage data should be included when determining case volume threshold, and if there are any processes or analyses CMS could conduct to determine case minimums.

Proposed Changes to the REHQR Program Measures and Program

In addition to the adoption of the cross-program health equity measures, CMS proposes to extend the reporting period for the Risk-Standardized Hospital Visits Within 7 Days After Hospital Outpatient Surgery measure from one to two years, beginning with the CY 2025 reporting period and impacting the CY 2027 program determination.

CMS also proposes to require REHs to report data under the REHQR after conversion to REH status, beginning on the first day of the quarter following the date that a hospital has been designated as converted to an REH.

Proposed Changes to the Hospital IQR Program

The Hospital IQR Program is a pay-for-reporting quality program that reduces payments to hospitals that do not meet program requirements. CMS proposes to continue voluntary reporting of care clinical data elements (CCDEs) and linking variables for both the Hybrid Hospital-Wide Readmission (HWR) and Hybrid Hospital-Wide Standardized Mortality (HWM) measures for the performance period of July 1, 2023, to June 30, 2024, which impacts the FY 2026 payment determination. For FY 2027 payment determination, submission of CCDEs and linking variables would be mandatory.

CMS Seeks Feedback on Modifications to the Safety of Care Measure Group Under the Overall Hospital Quality Star Rating to Advance Patient Safety

The Overall Hospital Quality Star Rating, a rating of between one and five stars, provides a summary of some existing hospital quality information on Medicare.gov based on publicly available quality measure results reported through CMS’s hospital quality measurement programs. Measures reported on Medicare.gov’s provider comparison tool and included in the Overall Hospital Quality Star Rating are organized as five groups: Safety of Care, Mortality, Readmission, Patient Experience, and Timely and Effective Care.

CMS seeks feedback on whether hospitals performing in the bottom quartile of the Safety of Care measure group should be eligible to receive a 5-star rating and potential modifications to the Safety of Care measure group in the Overall Hospital Quality Star Rating methodology to further emphasize patient safety. The three potential options are: 1) reweighting the Safety of Care measure group; 2) applying a policy-based adjustment that reduces the Star Rating of any hospital in the lowest Safety of Care quartile by one star; or 3) reweighting the Safety of Care measure group combined with a policy-based 4-star rating maximum for any hospital in the lowest Safety of Care quartile.

CMS TO CONTINUE EXISTING PASS-THROUGH PAYMENT POLICIES FOR DRUGS, BIOLOGICALS, AND DEVICES

Under current law,[5] CMS provides temporary additional payments or “transitional pass-through payments” for certain drugs and biological agents. Under the statute, transitional pass-through payments can be made for at least 2 years but not more than 3 years. The total projected amount of transitional pass-through payments for drugs, biologicals and devices for a given year is limited to a percentage below 2.0 percent of all payments estimated to be made under OPPS in the same year.[6]

CMS proposes to continue existing pass-through payment policies for drugs, biologicals, and radiopharmaceuticals in CY 2025 applying a rate of ASP plus 6 percent. CMS estimates that total spend for drugs and biologicals will be $10.2 million. In addition, CMS estimates that total spend for devices that are currently eligible for pass-through and will be through CY 2025 will be $614.8 million. The projected total amount of pass-through spending would be 0.71 percent of total projected OPPS payments for CY 2025.

CMS proposes to continue pass-through payment status for 57 drugs and biologicals through CY 2025.[7]CMS proposes to end pass-through payment status for 28 drugs and biologicals, which were initially approved for this special status between April 1, 2022, and January 1, 2023, in CY 2025.[8]

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. There are currently 13 device categories eligible for pass-through payments.[9] For CY 2025, 14 applications for device pass-through payment were submitted. Of these, 10 applications were for devices that received Breakthrough Device designation from the FDA. CMS seeks feedback on whether these devices meet the eligibility criteria for pass-through payment statues. CMS will publish final determinations for pass-through status in the CY 2025 OPPS/ASC final rule.

CMS OUTLINES PROPOSED ELIGIBLE PRODUCTS AND PAYMENT AMOUNTS FOR NON-OPIOID PAIN MANAGEMENT PAYMENT POLICY

Section 4135 (Access to Non-Opioid Treatments for Pain Relief) of the Consolidated Appropriations Act of 2023 (CAA, 2023)[10] provides for temporary separate payments for certain non-opioid treatments for pain relief in the HOPD and ASC settings from January 1, 2025, through December 31, 2027. In this proposed rule, CMS outlines the implementation of this statute.

Proposed Non-Opioid Treatments

Relying upon the statutory definition of non-opioid treatment for pain relief outlined in section 1833(t)(16)(G)(iv) of the Act, CMS proposes that the following seven drugs and one device qualify as non-opioid treatments for pain relief and will receive separate payments in HOPD and ASC settings starting in CY 2025:[11]

• Exparel (HCPCS code C9290, Injection, bupivacaine liposome, 1 mg),
• Omidria (HCPCS code J1097, Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic irrigation solution, 1 ml),
• Dextenza (HCPCS code J1096, Dexamethasone, lacrimal ophthalmic insert, 0.1 mg),
• Xaracoll (HCPCS code C9089, Bupivacaine, collagen-matrix implant, 1 mg),
• Zynrelef (HCPCS code C9088, Instillation, bupivacaine and meloxicam, 1 mg/0.03 mg),
• Ketorolac tromethamine injection (J1885, Injection, ketorolac tromethamine, per 15 mg), and
• ON-Q Pump (HCPCS code C98X4, Elastomeric infusion pump, non-opioid pain management delivery system, including catheter and other system component(s)).

CMS invites comments on drugs, biologicals, or medical devices eligible for separate payment. Final decisions on eligibility and payment will be made in the final rule based on feedback received.

Proposed Payment Amount and Payment Limitation

CMS proposes a payment methodology under Section 1833(t)(16)(G)(ii) of the Act for non-opioid treatments for pain relief, similar to transitional pass-through provisions in Sections 1833(t)(6)(D)(i) and (ii). For drugs or biological products, the payment would be calculated by subtracting the portion of the Medicare OPD fee schedule associated with the product, with a proposed zero-dollar offset for CY 2025. For medical devices, the payment would be based on the hospital’s adjusted charges minus the relevant portion of the fee schedule, also proposed to be zero dollars for CY 2025. This proposed initial zero-dollar offset is meant to account for the newness of these products and ensure access to opioid alternatives is not hindered by Medicare payment policies.

Consistent with statute[12], CMS also proposes a payment cap at 18 percent of the OPD fee schedule amount for the service with which the non-opioid treatment is provided, determined by the top five volume-based OPPS procedures associated with each non-opioid product. This payment limitation would apply to the total separate payment amount billed per date of service, rather than per HCPCS dosage unit, to ensure it accurately reflects total costs. Additionally, CMS proposes new status indicators (K1 for drugs and biologicals, H1 for devices) under the OPPS for these non-opioid products. CMS invites public comment on the methodology used to determine the payment limitation.

CMS PROPOSES TO PAY SEPARATELY FOR DIAGNOSTIC RADIOPHARMACEUTICALS THAT MEET COST THRESHOLD

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.

To address concerns regarding access for safety net hospitals and underserved communities, CMS proposes to pay separately for diagnostic radiopharmaceuticals with per day costs above $630[13], approximately twice the current volume-weighted average cost of diagnostic radiopharmaceuticals. CMS believes that this proposal would maintain beneficiary access without disincentivizing the use of clinically appropriate, high-cost, low-utilization agents.

Although CMS has the authority[14] to use Average Sales Price (ASP) methodology to determine the payment amount, CMS finds ASP data unusable for these purposes due to insufficient reporting by manufacturers. Instead, CMS proposes using mean unit cost (MUC) based on hospital claims data as a reasonable alternative, consistent with current practice for therapeutic radiopharmaceuticals. However, CMS seeks feedback on the use of ASP for payment determinations in future years.

CMS PROPOSES ADD-ON PAYMENT FOR RADIOPHARMACEUTICALS USING TC-99M DERIVED FROM DOMESTIC MO-99

Technetium-99m (Tc-99m) is the primary radioisotope used in diagnostic imaging, traditionally sourced from reactors outside the US using highly enriched uranium (HEU). Since CY 2013[15], an additional $10 payment has been provided for Tc-99m produced without HEU to support US initiatives to reduce domestic reliance on foreign reactors and promote the shift of medical radioisotope production to non-HEU sources. CY 2025 marks the final year of this add-on payment, following certification by the Secretaries of Energy and Health and Human Services that sufficient global non-HEU Tc-99m supply exists for US patient needs.

However, concerns persist about the domestic supply chain for molybdenum-99 (Mo-99), the precursor to Tc-99m, due to foreign government subsidies artificially lowering prices and disincentivizing US production investments. To address this, CMS proposes a new $10 add-on payment per dose beginning January 1, 2026, for radiopharmaceuticals that use Tc-99m derived from domestically produced Mo-99. This initiative aims to ensure equitable reimbursement for providers, reflecting the anticipated higher costs of domestically sourced products, and to safeguard continued beneficiary access to essential medical resources.

CMS PROPOSES REVISIONS TO INCARCERATION DEFINITIONS

Current definitions in the Medicare payment exclusion rule and eligibility requirements for the Special Enrollment Period (SEP) for formerly incarcerated individuals create potential barriers to access for individuals returning to the community following incarceration. To remove these barriers, CMS proposes to modify the definition of “Custody” within the payment exclusion rule and the eligibility requirements for the SEP.

CMS Proposes New Definition of “Custody”

Section 1862(a)(2) of the Social Security Act bars Medicare from paying for items or services for individuals with no obligation to pay for those items or services. Under this clause, known as the “no legal obligation to pay” payment exclusion, Medicare cannot cover items or services for individuals in the custody of penal authorities, as these individuals are assumed to have no legal obligation to pay for their care. The current definition of “custody,” at § 411.4(b) includes individuals “under supervised release, on medical furlough…required to live under home detention, or confined completely or partially in any way under a penal statute or rule,”[16] effectively prohibiting Medicare for paying for services for individuals on parole, probation, bail, or supervised release.

To increase access to care for individuals returning to community following incarceration, CMS proposes to remove “under supervised release,” “required to live under home detention” and “confined completely or partially in any way under a penal statute or rule” from the definition of custody at § 411.4(b). The proposal would also clarify that individuals “required to reside in mental health facilities” only includes those individuals required to reside in the facility under a penal statute or rule. These changes would mean that Medicare is no longer prohibited from paying for health care furnished to individuals on parole, probation, or home detention.

CMS seeks comments on any examples where these individuals would have legal obligation to pay for their health care already and situations where they receive services typically furnished by government agencies at no cost. CMS also seeks comment on how these policies should apply to individuals required to reside in halfway houses.

CMS Proposes New Eligibility Requirements for Special Enrollment Period Aimed at the Formerly Incarcerated

Due to authorities granted in the Consolidated Appropriations Act, 2021, formerly incarcerated individuals who are Medicare eligible but missed their enrollment for parts A and B due to being in custody of penal authorities are allowed to enroll via an SEP. The current SEP rules tie eligibility to the Medicare no legal obligation to pay payment exclusion. Even with the proposed changes to § 411.4(b), CMS believes that tying SEP eligibility to this payment exclusion is problematic as the payment exclusion includes a rebuttal presumption that does not fit within the context of enrollment. This can cause confusion and discourage eligible individuals from utilizing the SEP. Accordingly, CMS proposes to make the following change §§ 406.27(d) and 407.23(d), which describe SEP eligibility; instead of stating that “an SEP exists for Medicare eligible individuals who are released from the custody of penal authorities as described in § 411.4(b) of this subchapter,” state that the SEP is available “for Medicare eligible individuals who are no longer incarcerated.” The existing SEP requirements would remain in effect until January 1, 2025. From this point on, SEP eligibility would be available to individuals released from confinement in a jail, prison, or other penal institution or correctional facility.

CMS PROPOSES CHANGES TO PRIOR AUTHORIZATION TIMEFRAMES

For CY 2020, CMS established a nationwide prior authorization process and requirements for certain OPD services. Providers must submit to the Medicare Administrative Contractor (MAC) a prior authorization request for services included on the list of OPD services that require prior authorization. These services currently include blepharoplasty, rhinoplasty, botulinum toxin injections, panniculectomy, vein ablation, cervical fusion with disc removal, implanted spinal neurostimulators, and facet joint interventions.

In the CMS Interoperability and Prior Authorization final rule, CMS finalized for Medicare Advantage and other plans that response times of 7 calendar days for standard prior authorization requests. Even though Medicare wasn’t subject to this rule, CMS proposes to align the timeframe for prior authorization requests for FFS hospital outpatient services to 7-calendar days, instead of 10-business days, for standard reviews.

CMS PROPOSES 20 ADDITIONS TO ASC COVERED PROCEDURES LIST

CMS proposes to update the Ambulatory Surgical Center (ASC) Covered Procedures List (CPL) by adding 20 new medical and dental surgical procedures for CY 2025. This decision follows a thorough evaluation process to ensure these procedures can be safely performed in the ASC setting for typical Medicare beneficiaries. The proposed procedures were determined to meet safety standards and not require active medical monitoring beyond midnight following the procedure.

Proposed surgical procedures[17] for the ASC CPL for CY 2025 include:

• Autologous adipose-derived regenerative cell (ADRC) therapy for partial thickness rotator cuff tear,
• Transcatheter insertion and removal of permanent dual-chamber leadless pacemaker, and
• Various dental procedures, including coronectomy, excision of benign and malignant lesions, and removal of cysts or tumors.

Covered Ancillary Services

Covered ancillary services eligible for separate ASC payments include brachytherapy sources, certain implantable items, contractor-priced items, specific drugs and biologicals, certain radiology services, and non-opioid pain management drugs that function as a supply during surgery. The ASC payment system is aligned with the OPPS to ensure consistency, which means that if a service becomes packaged under OPPS, it will also be packaged under the ASC payment system. For CY 2025, CMS proposes to update the list of covered ancillary services with new CPT and HCPCS codes.[18]

Claims Processing Limitations for Covered Ancillary Procedures Performed with G0330

CMS maintains that HCPCS code G0330, used for dental rehabilitation requiring monitored anesthesia, must be billed with a covered ancillary procedure designated with payment indicator “D1.” This ensures that only evaluated and safe ancillary services are performed in the ASC setting with G0330. These ancillary procedures, when billed with other surgical procedures, will be packaged as per standard policy. Final decisions on coverage and payment remain with the Medicare Administrative Contractors (MACs).

CMS PROPOSES SINGLE BLENDED PAYMENT POLICY FOR IDE STUDIES AND CED CLINICAL TRIALS

In the CY 2023 OPPS/ASC final rule, CMS finalized a policy to make a single blended payment for devices and services in Category B Investigational Device Exemption (IDE) studies to preserve the scientific validity of these studies. This policy involves creating or revising HCPCS codes to describe Category B IDE studies, including both treatment and control arms, along with routine care items and services. The single blended payment rate considers the frequency of device use compared to the control group, averaging the payment for the device with zero payment for the control in a 1:1 ratio. CMS has clarified that this policy only applies to IDE studies with a control arm. Studies without a control arm would be paid using standard Medicare payment methodologies.

For CY 2025, CMS proposes to apply a similar payment methodology for drugs and devices covered under a Coverage with Evidence Development (CED) National Coverage Determination (NCD), which necessitates a payment adjustment to maintain the scientific validity of the study. This includes creating a single blended payment rate based on the trial protocol, accounting for the frequency of investigational device use versus control. Payments would be based on Average Sales Price (ASP) methodology or Wholesale Acquisition Cost (WAC) if ASP data is unavailable, with a payment hierarchy consistent with non-pass-through separately payable drugs in the OPPS.

The proposed policy aims to preserve the scientific integrity of clinical trials by preventing differences in Medicare payment methods from revealing patient group assignments. CMS will cover routine costs for approved clinical trials, with payment adjustments established only when necessary to prevent unblinding the trial. CMS seeks comments on potential scenarios where Medicare payment methodologies might interfere with the scientific validity of a trial.

CMS PROPOSES MANDATORY CONTINUOUS ELIGIBILITY FOR CHILDREN IN MEDICAID AND CHIP

In alignment with the Consolidated Appropriations Act, 2023 (CAA, 2023) and to ensure continuous eligibility (CE) in Medicaid and CHIP for children under 19, CMS proposes to make CE mandatory for all states. This change would remove previous state options to limit CE to younger age groups or shorter periods. Additionally, the CAA, 2023, aligns CHIP’s CE policy with Medicaid, removing the option for states to disenroll children for non-payment of premiums or enrollment fees during the CE period. States can still collect enrollment fees before initial enrollment or re-enrollment and can disenroll children with unpaid premiums at the end of the 12-month CE period, following required grace period protocols. This alignment ensures consistent coverage protections across both Medicaid and CHIP. The current Medicaid regulation includes exceptions that allow states to terminate coverage during a CE period if the child or representative requests it, if eligibility was erroneously granted due to agency error or fraud, or if the child is deceased. These exceptions remain unchanged to maintain program integrity.

CMS PROPOSES EXCEPTIONS TO THE MEDICAID CLINIC SERVICES “FOUR WALLS” REQUIREMENT

CMS has historically interpreted section 1905(a)(9) of the Act to limit Medicaid clinic services to those provided within the clinic, except for services provided to individuals who are unhoused. However, in this proposed rule, CMS proposes changes and additional exceptions to the “four walls” requirement to address similar healthcare access issues faced by other populations.

First, CMS proposes an exception for IHS and Tribal clinics, allowing them to provide services outside the clinic walls. This change is mandatory for all states that opt to cover Medicaid clinic services.

Second, CMS proposes creating an optional exception for clinics primarily organized to treat outpatients with behavioral health disorders, including mental health and substance use disorders. These clinics would be allowed to provide services outside the clinic walls, including non-behavioral health services. This exception is optional for states.

Third, CMS proposes an optional exception for clinics located in rural areas (excluding Rural Health Clinics), allowing them to offer services outside the clinic walls. This change aims to improve access to healthcare services for residents in rural areas who often lack access due to distance and transportation challenges. States can choose to adopt this exception to better serve their rural populations.

These exceptions are designed to remove barriers to accessing care for vulnerable populations, ensuring they receive necessary services regardless of their ability to visit a clinic in person.

CMS Requests Comment on Approach to Establishing “Rural” Definition

For clinics located in rural areas related to the above “four wall” requirement exceptions, CMS is seeking comment on the definition of rural. The four criteria for defining rural in this context include:

1. High Rates of Behavioral Health Diagnoses or Difficulty Accessing Behavioral Health Services
2. Issues Accessing Services Due to Lack of Transportation
3. Historical Mistrust of the Health Care System
4. High Rates of Poor Health Outcomes and Mortality

Specifically, CMS seeks comment on the following approaches to defining rural:

1. Federal Definitions: Adopt a commonly used federal definition from the Census Bureau, Office of Management and Budget (OMB), or the Federal Office of Rural Health Policy (FORHP).
2. State Adoption of Federal Definitions: Allow states to adopt a federal definition of rural used for programmatic purposes. States would specify the chosen federal definition in their state plan and justify how it best captures the rural population meeting the four criteria in the proposed rule.
3. State-Specific Definitions: Permit states to use a rural definition from a state agency involved in rural health policy. States would detail this definition in their state plan and explain its alignment with the criteria.
4. No Definition: Not define rural in the final rule, giving states the flexibility to choose any reasonable definition linked to the four criteria. States would publish their definition on a public website, allowing for flexibility but risking overly broad or narrow definitions.

CMS CLARIFIES PAYMENT FOR TELEHEALTH OUTPATIENT THERAPY SERVICES, DSMT AND MNT

During the COVID-19 public health emergency, outpatient therapy services, Diabetes Self-Management Training (DSMT), Medical Nutrition Therapy (MNT), and mental health services could all be furnished remotely to beneficiaries in their homes. CMS also expanded the range of practitioners that could serve as distant site practitioners for Medicare telehealth services and waived originating site requirements for Medicare telehealth services. CMS issued a separate waiver under Hospitals Without Walls to allow hospitals to bill for these services furnished by hospital staff remotely. CMS clarifies that it will continue to make payments for telehealth DSMT and MNT services from the HOPD setting to patients receiving care from their homes, just as it will continue to make payments for telehealth DSMT and MNT services from other outpatient settings under the Physician Fee Schedule. CMS states that outpatient therapy services, DSMT and MNT, will be available via telehealth regardless of the institutional setting so long as these practitioners continue to be distant site practitioners under Medicare telehealth services.

CMS PROPOSES ADD-ON PAYMENT FOR HIGH-COST DRUGS PROVIDED BY IHS AND TRIBAL FACILITIES

The CY 2000 OPPS final rule, which first implemented PPS for hospital outpatient services, exempts outpatient services provided by hospitals of the IHS. CMS paid for these services under separately established rates. IHS and tribal facilities have since been reimbursed under the All-Inclusive Rate (AIR), with separate rates for Alaska and the lower 48 states due to varying costs of living. These facilities have expanded their services over time, often providing essential higher-cost drugs and services. However, the AIR sometimes fails to cover the full cost of these drugs, threatening these facilities’ ability to offer such treatments.

CMS proposes to implement an add-on payment for high-cost drugs, defined as drugs covered under Medicare Part B with per-day costs that exceed two times the lower 48 states’ AIR. This payment, in addition to the AIR, would be the average sales price for the drug with no additional payment. If ASP pricing is not available, the add-on payment will be the Wholesale Acquisition Cost, and if that is unavailable, CMS proposes to pay 89.6 percent of the Average Wholesale Price (AWP). The proposal comes in response to agency concern over equity and beneficiary access, and it could help these facilities afford to provide expensive medications without compromising their financial stability. If finalized, this add-on payment would be effective January 1, 2025, permanently, with quarterly updates to the drug list. CMS requests comments on the proposal, including the specifics of qualifying drugs and appropriate payment amounts.

CMS Solicits comment on IHS and Tribally Operated Clinics’ Payment

The Tribal Technical Advisory Group (TTAG), which advises HHS on issues impacting American Indian and Alaskan Native (AI/AN) populations, includes representatives from IHS, national Indian health organizations, and urban Indian health organizations. In June 2020, the TTAG requested that CMS expand eligibility for payment at the IHS Medicare outpatient per visit rate/AIR to all IHS and tribally operated outpatient facilities. According to the TTAG, outpatient clinics are paid at different rates depending on whether they are a provider-based facility, a grandfathered or non-grandfathered tribal FQHC, or none of the above.

To address disparities in payment rates among different provider types, CMS seeks comments on the types and number of facilities eligible for the Medicare outpatient IHS AIR, whether these facilities would enroll as FQHCs or be categorized differently, and their operational costs relative to existing payment methodologies. CMS additionally requests feedback regarding why payment at the IHS AIR might be more suitable than rates under the FQHC PPS or other Medicare payment systems. The agency will use stakeholder input to inform future policy decisions.

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This Applied Policy® Summary was prepared by April Gutmann with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at agutmann@appliedpolicy.com or 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 $8,000.

[4] While CMS is not proposing this requirement for CAHs, they already have similar supply standards in an existing C0P

[5] Section 1833(t)(6) of the Social Security Act.

[6] Section 1833(t)(6)(E) of the Act

[7] See Table 64 on page 404 of the of the unpublished rule for a list of these drugs.

[8] See Table 63 on page 400 of the unpublished rule for a list of these drugs.

[9] See Table 42 on page 235 of the unpublished rule for list of devices with pass-through status expiring in 2024-2027

[10] Pub. L. 117-328

[11] See Table 84 on pages 592-593 and Table 85 on page 594 of the unpublished rule for a list of these products and their payment amounts.

[12] Section 1833(t)(16)(G)(iii) of the Act

[13] See Table 5 on pages 102-103 of the unpublished rule for a list of these products and their proposed status indicators.

[14] Section 1847A of the Act

[15] 77 FR 68323

[16] 42 CFR 411.4(b)

[17] For a full list of proposed additions, refer to Table 82 of the unpublished proposed rule.

[18] Refer to Table 75 of the unpublished proposed rule.