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CMS Final Ruling on OPPS Provides Clarification, Prompts Questions

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Nearly a year to the day that the Bipartisan Budget Act of 2015 (BBA) promised to dramatically change how hospitals are reimbursed for outpatient procedures, last week CMS released the final rules, which offer guidance on interpreting the legislation.

Section 603 of the BBA requires that hospitals bill under the lower-reimbursing Medicare physician fee schedule (MPFS) in place of the outpatient prospective payment system (OPPS) for any off-campus location not providing services as of November 2, 2015. The shift will have a significant financial impact for hospitals, particularly those that are actively planning for an off-campus department.

In a follow-up to ECG’s previous blog posts covering the history, key changes, and anticipated impact of this law, this post describes the final rulings on the most significant changes, and discusses the questions and next steps hospitals should be considering.

What’s clearer?

The original legislation was unclear about several key changes to billing under OPPS (otherwise known as provider-based billing):

  • Definition of “on campus”
  • Ability of an organization to relocate an off-campus department
  • Future of potential expansions to off-campus departments
  • Status of freestanding emergency departments
  • Designation of remote facilities

The release of the final rules on November 1, 2016, provided greater clarity for hospitals, which should enable them to move forward with stalled or uncertain future plans. Key issues and concerns addressed in the final rules can be found below.

IssueConcernResolution
On Campus “On campus” was specified as being within 250 yards of the main campus. The primary concern was how to measure 250 yards:


  • Walking distance or straight line?
  • Building edge to building edge, or building core to building core?
The 250 yards measurement is from any point of the main facility to the on-campus facility, and the entire facility need not be within 250 yards.
Relocations Changing the address of a current OPPS-eligible facility would cause a loss of OPPS grandfathered status. CMS indicated it would provide additional guidance in the future specifying the potential reasons for a relocation, but noted that temporary or permanent relocations would be allowed for circumstances beyond the provider’s control, such as natural disasters.
Expansions Expanding service offerings of a current OPPS facility by adding new or complementary services would cause the loss of OPPS grandfathered status. While CMS did not provide additional clarity on the status of expanding clinic offerings, it did recognize the potential concerns raised by provider organizations. Before making a final recommendation, CMS plans to monitor service expansions and changes in current facilities in order to better understand the scope and impact of expansions.
Emergency Departments Services in a dedicated emergency room should be exempt from this ruling. CMS agreed, and finalized rules to exempt emergency departments from the restrictions imposed by the BBA.
Remote Facilities Off-campus departments should qualify for OPPS status if they lie within 250 yards of existing remote locations of the main hospital (such as a rehabilitation facility). While CMS did not directly address this concern, the language indicates that remote locations of a main hospital may be used to define outpatient departments if the outpatient facilities are within 250 yards of the remote locations.

What does the future hold?

While Section 603 of the BBA was an unwelcome surprise for many hospitals and health systems that rely on the higher reimbursements provided by OPPS billing to subsidize other areas of hospital operations, it is likely a sign that more changes are on the way. The Medicare Payment Advisory Commission (MEDPAC) has been vocal about the need to site-neutralize reimbursement, and this legislation demonstrates CMS’s first major step toward heeding that recommendation.

In the past, MEDPAC has made additional recommendations about reducing the use of evaluation and management (E&M) codes within hospitals and terminating any “grandfather” clauses that allow organizations to obtain higher reimbursements through a historical ruling. It is likely that MEDPAC’s recommendations to CMS will continue to support reductions in reimbursement variation across sites, situations, and services. Organizations will need to be cognizant of their past reliance on provider-based billing and recognize deficiencies that it may be concealing. Key questions hospital administrators should be asking themselves include:

  • Where is my organization using OPPS billing, and what would be the impact on the hospital’s bottom line of converting to the MPFS?
  • What are the threats to my organization if OPPS billing goes away entirely?
  • How can I better assess deficiencies that provider-based billing has been masking, potentially by evaluating my current compensation plans, patient access, payor contracts, and costs to operate more efficiently in a new reality?

Regardless of how the final ruling affects your organizational plans today, Section 603 of the BBA should be seen as a clear indicator of what is likely to come.

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