2017 OPPS Final Rule Changes and 5 Steps for Successful Implementation

By Ricardo V. Clark, CPC, CPMA; Colleen O. Hall, CPC, CIRCC, CPMA; and Megan R. Sorensen, CPMA
| 6/20/2017
2017 OPPS final rule changes and 5 steps for successful implementation
In November 2016, the Centers for Medicare & Medicaid Services (CMS) published its Hospital Outpatient Prospective Payment System (OPPS) final rule for calendar year (CY) 2017, which went into effect as of Jan. 1, 2017. The rule’s changes will affect hospitals and other healthcare facilities both financially and operationally. Here is a list1 of changes in the final rule and five steps for successful implementation.

Changes in the 2017 OPPS Final Rule

Payment Rate Updates

For CY 2017, CMS increased the OPPS payment rates by 1.65 percent compared to CY 2016. CMS will continue to implement the statutory 2 percent reduction in payments for hospitals that fail to meet hospital outpatient quality reporting requirements. CMS will apply a reporting factor of 0.98 to the OPPS payments and copayments for all applicable services.

Rural Adjustment

CMS will continue with the adjustment rate of 7.1 percent of the OPPS payments to certain rural sole community hospitals and essential access community hospitals. This adjustment rate applies to all procedures and services paid under the OPPS. Exceptions can be found in the final rule.

Cancer Hospital Payment Adjustment

CMS will continue to provide additional payments to cancer hospitals. This adjustment is provided so that cancer hospitals’ payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for all other OPPS hospitals. CMS will use a target PCR of 0.91 to determine the cancer hospital payment adjustment in CY 2017.

Comprehensive Ambulatory Payment Classifications

Medicare defines a comprehensive ambulatory payment classification (C-APC) as a “classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service.”2 For CY 2017, CMS is finalizing 25 new C-APCs.

Device-Intensive Procedures

Beginning in 2017, Medicare will assign device-intensive status to all procedures that require implantation of devices with individual Healthcare Common Procedure Coding System code-level device offset of greater than 40 percent, regardless of ambulatory payment classification placement.

Outpatient Lab Tests

Medicare is discontinuing use of the “L1” modifier to identify unrelated laboratory tests on a claim. In addition, Medicare is expanding its laboratory packaging exclusion to apply to all laboratory tests designated as advanced diagnostic laboratory tests. The exclusion previously applied only to molecular pathology tests.

Packaging Policy

CMS is aligning its previously introduced (in 2014 and 2015) packaging logic for all conditional packaging status indicators. Packaging will occur at the claim level rather than on the date of service.

Payment Modifiers for X-ray Films

For CY 2017, CMS is reducing reimbursement by 20 percent for providers that perform X-rays using analog equipment. The reduction applies to both the Medicare Physician Fee Schedule (MPFS) – the applicable payment system for nonexcepted items and services furnished by off-campus outpatient provider-based departments (PBDs) – and OPPS. Beginning in CY 2018, Medicare will reduce its reimbursement by 7 percent for X-rays performed with computer radiography (cassette-based imaging technology), and the reduction will increase to 10 percent in CY 2023.

Payment for Items/Services Furnished by Off-Campus Departments

One of the biggest changes in the 2017 OPPS final rule is the change in payment for off-campus PBDs. As of Jan. 1, 2017, these PBDs will be reimbursed under the MPFS rather than the Medicare OPPS. This change is expected to significantly affect reimbursement for off-campus PBDs, as the payment under the MPFS is considerably lower than payment under OPPS. Some exceptions exist, so organizations are encouraged to review the final rule to confirm their status.

MPFS Conversion Factor Update

For CY 2017, the MPFS conversion factor has been updated to $35.89. CMS also made several coding and payment changes.

ASC Payment Update

Ambulatory surgical center (ASC) payment updates are determined by the percentage increase in the urban consumer price index (CPI-U) and the multifactor productivity (MFP) adjustment. For CY 2017, CMS projects an MFP-adjusted CPI-U update factor of 1.9 percent in the ASC payment rate. This will result in a CY 2017 ASC conversion factor of $45.03 for ASCs that meet quality reporting requirements. For those that do not meet the requirements, the MFP-adjusted CPI-U update factor of -0.01 percent will be applied, resulting in a conversion factor of $44.33 for those facilities.

Hospital Outpatient Quality Reporting Program

CMS is adding seven measures to the Hospital Outpatient Quality Reporting Program for 2017. In addition, CMS will display this data publicly on Medicare’s Hospital Compare website beginning with the CY 2018 payment determination.

ASC Quality Reporting Program

CMS is adding seven measures to the Ambulatory Surgical Center Quality Reporting Program. CMS will display this data on the Hospital Compare website beginning with the CY 2018 payment determination.

Hospital Value-Based Purchasing Program

Beginning with the FY 2018 program year, CMS will remove the pain management dimension of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey. This change was made in response to concerns that the Hospital Value-Based Purchasing Program’s pain management dimension had been creating incentives for hospital staff to prescribe higher numbers of opioids than necessary.

Medicare and Medicaid EHR Incentive Programs

CMS will extend into 2017 the 90-day reporting period for all new and returning eligible providers, eligible hospitals, and critical access hospitals (CAHs) that previously had demonstrated meaningful use in the EHR (electronic health record) Incentive Programs. In addition, CMS is finalizing its proposal to eliminate clinical decision support and computerized provider order entry objectives and measures for modified Stage 2 and Stage 3 meaningful use regulations for 2017 and subsequent years in an effort to reduce reporting burden. Exceptions and additional EHR Incentive Program rules can be found in the final rule.

Transplant Performance Thresholds

The threshold based on a transplant program’s outcomes in relation to the risk-adjusted national average will be changed from 1.5 to 1.85. This threshold establishes that a transplant program is out of compliance if the number of observed events divided by the number of expected events exceeds 1.85.

Organ Procurement Organizations Changes

For CY 2017, CMS is finalizing changes to the definition of “eligible death” and the aggregate donor yield metric in the organ procurement organizations (OPOs) conditions for coverage to better align with the definition and criteria set forth by the Organ Procurement and Transplantation Network and the Scientific Registry of Transplant Recipients. CMS also is finalizing revisions to its conditions of coverage that will reduce the amount of hard copy documentation that must travel with organs to facilities. In addition, it is changing the time requirement for organ transplant programs to notify CMS of their intent to request mitigating factors approval from 10 to 14 calendar days.

5 Steps for Successful Implementation

Healthcare organizations should have a well-planned approach to verify compliance with the new OPPS rules. Here are five steps for successful implementation.

Step one: Complete an assessment to determine which of the rules' requirements will have an impact on the organization and what changes will need to be made so the organization complies with the new rules.

Step two: Identify all essential stakeholders throughout the organization that will need to help prepare the organization for implementation of all applicable 2017 OPPS changes.

Step three: Conduct a financial assessment of how the OPPS changes will affect the organization financially, including effects on payment structures and reimbursement.

Step four: Develop a plan, and implement the required changes. All main stakeholders from relevant departments should work together to make sure all necessary changes have been made.

Step five: Validate that the appropriate changes have been made. During the validation phase, the organization should verify that claims submitted under the newly implemented processes comply with the new rules and that it is being appropriately reimbursed for relevant services.

1 This article provides a basic overview of the CY 2017 OPPS final rule changes. For more comprehensive information, visit https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1656-FC.html.
2 “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-Campus Provider-Based Department of a Hospital; Hospital Value-Based Purchasing (VBP) Program; Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-Based Department of a Hospital,” 81 Fed. Reg. 219, rel="noopener noreferrer" Nov. 14, 2016, p. 79576, https://www.gpo.gov/fdsys/pkg/FR-2016-11-14/pdf/2016-26515.pdf 


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Rick Clark
Colleen O. Hall
Megan Sorensen