OPPS 2017: The 4 Things Labs Need to Know

The Centers for Medicare and Medicaid Services (CMS) recently published final rules on reimbursement under the Medicare Hospital Outpatient Prospective Payment System (OPPS) for 2017. In case you do not have the time to read the 1,378-page final rule, here are some highlights:

At a Glance: 2017 Payment Rates

OPPS rates for 2017 are going up by 1.65% based on the following factors:

• Market basket update of +2.7%;
• Productivity adjustment of -0.3%;
• Update for ACA payment cuts of -0.75%.

Overall, CMS estimates that OPPS payments will increase by 1.7% during the year.

The rule also makes the following changes relevant to labs and pathology groups:

• Elimination of “-L1” Modifier for Unrelated Tests. The final rule eliminates the “-L1” modifier—which hospitals use to seek separate payment for “unrelated” tests. Impact: From now on, all lab tests listed on a claim with other hospital outpatient services will be bundled into the OPPS payment, even if ordered by a different provider for a different diagnosis.

• Expansion of Molecular Pathology Test Exception to ADLTs. The final rule expands the OPPS packaging exemption to all advanced diagnostic lab tests (ADLT) regardless of whether they are molecular pathology lab tests. The same rationale for excluding molecular pathology lab tests from bundled payments applies to all tests that meet ADLT criteria, according to CMS. Impact: To qualify for the exemption, the test must qualify as an ADLT under section 1834A(d)(5)(A) of the ACA.

• Packaging Based on Claim Rather than Date of Service. The final rule changes the rules for “Q1” and “Q2” conditional packaging indicators to ensure consistency in package indicator use. Impact: From now on, all packaging will occur at the claim level and not be based on the date of service. The change will principally affect packaging of lab tests covered by the OPPS provided during a hospital stay lasting longer than one day.

• Off-Campus Hospital Outpatient Department Payment Change. The part of the OPPS that has gotten the most attention are the provisions affecting services provided in off-campus hospital outpatient departments that recently began billing under the OPPS. From now on these services will be paid not under the OPPS but the physician fee schedule at rates of roughly 50% of the OPPS rates. Impact: The de facto 50% rate cut does not apply to services currently paid under the OPPS based on other Medicare fee schedules. And since OPPS lab rates are based on the CLFS, the new rules will not affect labs. However, the new “OPPS-lite” physician fee schedule will cover pathology services provided by entities that meet the criteria for being an off-campus hospital outpatient department that started billing under OPPS on or after Nov. 2, 2015.

More in depth coverage of the OPPS final rule will be provided in National Intelligence Report and Laboratory Industry Report.