CMS recently released its Calendar Year (CY) 2023 Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.  Of note, the rule:

  • Establishes updated payment rates for hospital outpatient and ASC services;
  • States CMS intent to reverse Medicare rate cuts for 340B drugs in response to the recent Supreme Court ruling;
  • Provides additional information on the payment structure for the new Rural Emergency Hospital (“REH”) designation;
  • Exempts Rural Sole Community Hospitals from certain site neutral payment provisions;
  • Changes the inpatient only and ASC covered procedures lists; and
  • Addresses provision of Behavioral Health Services via telehealth.

Key updates from the rule follow below. CMS is requesting comments by September 13, 2022.

OPPS and ASC Payment Rates

Under the proposed rule, outpatient hospital reimbursement will go up by 2.7%. CMS used the same data set used to set CY 2022 rates in light of the ongoing PHE. The increase is based on a projected hospital market basket percentage increase of 3.1%, reduced by 0.4% for the productivity adjustment.

Additionally, in keeping with the update to the 340B drug payments, as explained below, CMS expects to apply a budget neutrality adjustment of 0.9596 to the OPPS conversion factor, for a revised conversion factor of $83.279. This would reduce the proposed 2.7% payment increase.

The American Hospital Association has commented that even the proposed 2.7% increase, prior to the 340B-related adjustment, does not sufficiently address the inflationary environment and labor and supply cost pressures.

Payment for Drugs Acquired Through the 340B Program

Given the Supreme Court’s recent decision in American Hospital Association v. Becerra, CMS has committed to reversing Medicare reimbursement cuts for 340B drugs. CMS proposed that payment rates implemented in the final rule will reflect the ASP+6% rate to account for the Supreme Court’s decision, even though the proposed rule maintains the ASP-22.5% rate for now due to lack of time to implement these updates.

The proposed rule does not include a mechanism to repay providers for lost reimbursement under the prior framework found unconstitutional by the Supreme Court. Rather, CMS is still evaluating mechanisms for, and is requesting public comments on, the best way to craft any potential remedies affecting 340B drug reimbursement for CY 2018-2022. (Note: For providers that may still be repaying Medicare advanced loans received as a result of COVID-19, CMS will draw down against these outstanding amounts before issuing new funding.)

At the same time, to ensure budget neutrality under the OPPS of any recoveries, and after factoring in the updated payment methodology for drugs and biologicals purchased under the 340B Program, CMS expects the need to offset approximately $1.96 billion in payments by issuing a decrease the OPPS conversion factor of 0.9596. This is expected to detrimentally impact non-340B hospitals.

Rural Emergency Hospitals

CMS released proposed Conditions of Participation for REHs. These CoPs largely track those for Critical Access Hospitals and hospital emergency services. More information about the designation can be found here. Despite these clarifications, CMS left a number of questions open, many of which will seemingly be answered via state licensure processes. As of today, at least 3 states have passed licensure rules for REHs (Kansas, Nebraska, and South Dakota), and at least 2 states have proposed rules or established committees (Iowa and Texas). It is anticipated that additional states will consider the same now that federal rules have been proposed.

CMS also confirmed the payment framework for the REH venue. REHs will be eligible for:

  • OPPS+5% reimbursement for outpatient and emergency services; and
  • Monthly subsidy of $268,294 (annually $3,219,524).

CMS is also proposing to reimburse off-campus provider-based locations to an REH at the full OPPS+5% rate (categorically excluded from the non-excepted PB location rate of 40% of the OPPS). Additionally, the subsidy amount is expected to increase in subsequent years as the hospital market basket percentage increases.

The department also explained what they intend to cover as “REH services” for CY 2023. All services that are paid under the OPPS when furnished in an OPPS hospital, except for acute inpatient services, would be considered REH services unless further rulemaking provides otherwise. CMS also indicated that for post-hospital extended care services provided by an REH, the hospital will receive payment through the Skilled Nursing Facility Prospective Payment System.

CMS must also answer an important question. It is unclear which standard the agency plans to adopt for determining an eligible facility’s bed count. Under the rule, only CAHs or rural hospitals with less than 50 beds are eligible to convert to REH. For the latter category, CMS may follow its pre-existing standard for determination of bed count, which is similarly utilized for the determination of a provider-based rural health clinic’s all-inclusive rate within a hospital with fewer than 50 beds. Under that standard, CMS looks to staffed beds, as opposed to the number of licensed or certified beds, per the definition found in 42 CFR 412.105(b). The ability for many hospitals to convert to REH status will hinge on this determination, as many rural hospitals staff fewer beds than are officially licensed and/or certified.

(Note that Advis has established a method to evaluate the financial feasibility of converting to REH status. Please contact our offices with any interest in this service.)

Rural Sole Community Hospital Exemption to the Clinic Visit Payment Policy

CMS currently pays the PFS-equivalent payment rate, approximately 40% of the OPPS payment rate, for clinic visit services provided at excepted off-campus provider-based departments (billed with CPT G0463). Under the new rule, CMS is proposing to exempt Rural Sole Community Hospitals from this policy, allowing full OPPS reimbursement for these clinic visits.

Changes to the Inpatient Only List (IPO), ASC Covered Procedures List

CMS is proposing to remove 10 services from the IPO list after determining that these codes meet the current criteria for removal (CPTs 16036, 22632, 21141 21142, 21143, 21194, 21196, 21347, 21366, and 21422). Additionally, CMS is proposing the addition, a lymph node biopsy or excision procedure, to the ASC CPL.

Behavioral Health Services Furnished Remotely by Hospital Staff to Beneficiaries in their Homes

The rules propose behavioral health services furnished remotely by clinical staff of hospital outpatient departments, including staff of critical access hospitals, using telecommunications technology to beneficiaries in their homes, to be considered as covered outpatient services for which payment is made under the OPPS.

To receive payment for services furnished at beneficiaries’ homes, the patient must receive an in-person service within 6 months prior to the first-time hospital clinical staff provides the behavioral health services remotely, and that there must be an in-person service, without the use of communications technology, within 12 months of each behavioral health service furnished remotely by hospital clinical staff. The rule, does, however, permit exceptions.


In conclusion, this CMS proposed rule should benefit rural and 340B hospitals, although the payment increases to standard acute inpatient facilities may not be sufficient to combat current inflation and labor shortages.

CMS proposes additional updates throughout the rule, including changes to surgical N95 respirator acquisition, the partial hospitalization program, quality reporting, and quality star ratings. For more details on these components of the rule, and/or for any questions regarding the components summarized above, please contact Advis at 708-478-7030.

Published: July 20, 2022