CMS Creates Reimbursement Quagmire for ASCs—2021 Year in Review

The In List is in again. For now.

But it could easily wind up on the Outs again, depending on its environs and In crowd contraction.

Should that occur, being Out would then be very In.

The opposite actually transpired this past summer, as the Centers for Medicare & Medicaid Services (CMS) proposed reversing a three-year phaseout of its inpatient-only (IPO) service list. Created in 2000, the list identifies 1,740 medical procedures that Medicare will cover only when performed in a hospital setting.

Late last year, CMS finalized its IPO phaseout plan, increasing hospital outpatient payments by 2.4 percent and removing 298 musculoskeletal-related procedures from the list as of Jan. 1 (2021). Joint replacements and spinal fusions were most impacted in the initial rollout, leaving up to $7.3 billion of inpatient revenue vulnerable to lower reimbursement, according to Advisory Board data.

Touted primarily as a cost-saving measure, the IPO list phaseout essentially hastens CMS’ effort to migrate more care to outpatient settings and give beneficiaries more affordable healthcare choices. “The CY 2021…final rule,” CMS noted last December, “…would further advance the agency’s commitment to strengthening Medicare and reducing provider burden so hospitals and ambulatory surgical centers can operate with increased flexibility, and patients are better equipped to be active healthcare consumers.”

Strengthening Medicare and injecting more flexibility into the U.S. healthcare system certainly are noble goals, but hospital and orthopedic groups have urged CMS to pursue those objectives without eliminating the IPO list. Some procedures, the groups argued, are just too dangerous to perform in an outpatient setting.

“AAOS supports the removal of certain procedures from the IPO for which there is evidence they can safely be performed in the outpatient setting, such as total shoulder arthroplasty and total ankle arthroplasty,” American Academy of Orthopaedic Surgeons (AAOS) past president Joseph A. Bosco III, M.D., told former CMS Administrator Seema Verma in an eight-page letter last fall. “We agree with the agency that with developments in the practice of medicine, these procedures can safely be done in the outpatient setting. The AAOS believes that determining the appropriate setting of care should be done through the lens of patient safety and peer-reviewed evidence, and that physicians are best qualified for leading this individualized decision-making process with their patients.”

“We are mainly concerned by the removal of certain procedures that do not have data to support the appropriateness of their performance in the outpatient setting,” Bosco continued. “Finalizing this policy as proposed will mean that complicated procedures from major trauma such as pelvic, acetabulum, hip, and fragility fractures and amputation that are mostly done with heavy inpatient monitoring, will be paid in the outpatient setting. AAOS experts believe that even with advances in medical practice, such procedures cannot be safely done in the outpatient setting currently.”

Orthopedic implant manufacturers echoed AAOS’ concerns, with Johnson & Johnson, Medtronic, Stryker Corp. and Zimmer Biomet Holdings Inc. opposing the IPO list elimination. Medtronic challenged the phaseout over a discrepancy between newly-removed procedures (2021) and previous procedure removal criteria. “We believe this serves as solid evidence that continuing down the path of eliminating the IPO list in its entirety, rather than removing individual procedures or groups of clinically similar procedures on an incremental basis, would present safety and quality risks to Medicare beneficiaries,” Medtronic noted in its public comment.

Stryker, meanwhile, reiterated AAOS’ concerns almost word for word, objecting to the lack of patient safety data for procedures performed in outpatient settings, and suggesting that doctors be consulted about surgeries that can safely be performed outside the hospital.

Such safety concerns from the medtech industry eventually convinced CMS to curb its three-year phaseout of the IPO list, a decision it finalized in its CY 2022 OPPS final rule, released Nov. 2. The reinstated list restores most of the 298 procedures omitted from the 2021 register, except for lumbar spine fusion, shoulder joint reconstruction, ankle reconstruction, and their corresponding anesthesia codes. CMS also codified past criteria for determining procedures that should be removed from the IPO list in the future.

CMS admitted eliminating the 298 codes from the IPO list rather quickly without assessing them against the institution’s “longstanding criteria” for removal. And while it agreed with the recommendation that physicians should help determine procedure location, the agency said it still reserves the right to make safety determinations for the broader Medicare population.

The American Hospital Association (AHA) lauded CMS’ reinstatement of the IPO list, calling it a “win for patients’ safety, health, and quality of care.” But the organization criticized the agency’s payment cuts to 340B hospitals; the final CY 2022 OPPS rule keeps rates at the average sales price, less 22.5 percent for qualified outpatient drugs.

“We remain disappointed that CMS will continue deep payment cuts to 340B hospitals, which threatens their ability to care for their patients and communities and goes against Congress’ intent in establishing the 340B program nearly 30 years ago,” AHA Executive Vice President Stacey Hughes said in a prepared statement. “Continuation of these cuts will undoubtedly exacerbate the strain on 340B hospitals, especially as the COVID-19 pandemic continues.”

AAOS is not completely satisfied with the final rule, either. A Sept. 15 letter from current President Daniel K. Guy, M.D., outlines the reservations the organization has about the outpatient payment system and IPO list reinstatement.

In his letter, Guy scolds CMS for its sudden change of heart, claiming the IPO list reinstatement potentially could endanger beneficiaries’ lives. “…this abrupt policy reversal has again made it extremely difficult for our surgeons and their patients to readjust their plans. We are especially concerned about the impact on our patients’ health outcomes and out-of-pocket financial responsibilities,” Guy wrote. “For example, since there are still five months left in this calendar year, we are not clear on adequate responses to the policy change in the next few months while CMS finalizes this proposal. Given the audit moratorium, should surgeons now admit all cases as inpatient, or should surgeons continue to take on the complex decision-making process on the setting of surgery?”

Guy recommended that CMS avoid making hasty “wide swings in complicated policy decisions” in the future, and be fully transparent with the decision-making process to enable stakeholders to prepare for the change. He also suggested the agency form technical expert panels comprised of physicians from any affected medtech sector(s) to help determine the outpatient suitability of specific procedures, its impact on Medicare beneficiaries, and overall healthcare services delivery.

Additionally, Guy urged CMS to set general criteria for procedure selection based on peer-reviewed evidence, patient factors including age, co-morbidities, social support, and “other factors relevant to positive patient outcomes.” Furthermore, the agency should consider roughly a half-dozen social factors when determining the best setting for musculoskeletal procedures, including: pain, depression, lives alone, prior hospitalization, functional status, high-risk medications, and health literacy.

By reinstating the IPO list, CMS essentially is assuring that inpatient procedures are largely performed only in hospital settings. In fact, procedures on the IPO list are exempt from Medicare’s two-midnight rule for inpatient billing, so they automatically qualify for the higher level of payment afforded to inpatient procedures.

Still, there is no guarantee that IPO list procedures will be forever remanded to hospital settings. In soliciting public comment on the inpatient list phaseout reversal, CMS also asked for feedback on the roster’s long-term future—specifically whether the list should be eliminated altogether or merely scaled back substantially over time.

“The IPO list contains several procedures with more than 50,000 in annual case volume, including joint replacement, spinal fusion, and cardiac catheterization,” a July Advisory Board blog stated. “CMS could still remove these from the IPO list in future rulemaking. In fact, providers should prepare for that scenario. Overall, the rule suggests CMS is likely to continue its broader site of care shift push, albeit in a slower and more measured way. Hospitals and health systems would be remiss to view this policy change as the end of the story.”

Consider it a prologue instead.