Medicare Reimbursement: CMS Finalizes Hospital Outpatient Prospective Payment Changes for 2018

With all of the PAMA commotion, the 2018 Medicare Hospital and Ambulatory Surgical Outpatient Prospective Payment System (OPPS) final rule has flown under the radar. In case you don't feel like reading all 1,133 pages, here's a summary of the three items you need to know if your lab provides tests to Medicare patients on an outpatient basis.

1. Revised Lab Date of Service Rules
For most labs, the most important part of the new HOPPS rule is CMS's new rules for calculating the date of service (DOS) for outpatient lab tests.

Current Rules: The DOS for outpatient lab services is normally the date the specimen is collected, as opposed to date of order, testing or analysis. Exception: The date the test is performed is the DOS if:

• The doctor orders the test at least 14 days after a patient is discharged from the hospital;

• The specimen is collected during a hospital surgical procedure;

• Collecting the sample at another time would be medically inappropriate;

• Test results don't guide treatment provided during the hospital stay; and

• The test is reasonable and necessary for treating an illness.

Practical Impact: This so-called "14-day rule" is a big deal because when it applies, the test must be paid separately under Part B. If the rule doesn't apply, the test is bundled into the payment for the hospital stay. All of this poses big problems for labs when testing takes place after tests are ordered and specimens collected but before the 14-day window closes, which is a very common scenario with molecular and genomic panel and cancer testing.

Change: Responding to concerns that the 14-day rule is overly confusing and chills hospitals from billing for tests provided by outside labs, CMS has carved out exceptions that would allow labs to bill Medicare directly under the CLFS for certain molecular pathology tests and advanced diagnostic laboratory tests (ADLTs—aka multianalyte algorithm assays (MAAAs)), i.e., advanced tests performed at a single lab that use a proprietary algorithm to analyze multiple markers, and molecular pathology tests. The exclusion will not lead to unbundling abuses, CMS reasons, because these tests "can legitimately be distinguished from the care the patient receives in the hospital."

What It Means: The problem will be figuring out exactly what qualifies as an ADLT. Part of the confusion is that there are different tests for ADLTs, one for PAMA and the other for the new DOS rules:

i. Under PAMA, tests are subject to separate reimbursement as ADLTs if:

• They are offered and furnished by a single lab; AND EITHER
  • Are approved by the FDA; or
  • Evaluate a patient's DNA, RNA or proteins; AND provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests; AND Use a unique algorithm that predicts the chance the patient will develop a condition or respond to a treatment condition or respond to a treatment.

ii. Under the DOS exemption, tests qualify as ADLTs exempt from the 14- day rule if:

• They are offered and furnished by a single lab; AND

• Evaluate a patient's DNA, RNA or proteins; AND provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests; AND Use a unique algorithm that predicts the chance the patient will develop a condition or respond to a treatment condition or respond to a treatment.

In other words, ADLTs that are FDA approved may meet the PAMA exemption for separate billing but not the HOPPS DOS exemption.

2. 2018 OPPS Payment Rates
After last year's 1.65% increase, CMS is hiking overall OPPS rates for 2018 by 1.35% based on the following factors:

• Market basket update of +2.7%;
• Productivity adjustment of -0.6%;
• Update for ACA payment cuts of -0.75%.

Overall, CMS estimates that OPPS payments will increase by 1.4% during CY 2018.

3. 2018 ASC Payment Rates
The final rule increases Ambulatory Surgical Center (ASC) payment rates an average of 1.2% based on:

• Consumer Price Index update factor of +1.7%; and
• Multi-factor productivity adjustment of -0.5%.

Overall, CMS estimates that ASC payments will increase by 3.0% during CY 2018.

Takeaway: The term "final rule" is a bit of a misnomer since CMS is legally required to take comments for 60 days after the rule's Nov. 1, 2017 publication.