Moody's: CMS proposed changes to Medicare's outpatient prospective payment system could hurt hospitals

If finalized, the Centers for Medicare and Medicaid Services' proposed changes to outpatient services, including site neutral clinic visits, 340B policy changes and broadening the list of surgeries covered at ambulatory surgical centers, would generally be credit negative and hurt hospital margins. That's according to a new report from Moody's Investors Service.

CMS recently proposed changes to the Medicare hospital outpatient prospective payment system and ambulatory surgical center payment system.

Changes include no longer paying more for clinic visits in off-campus hospital or provider-based department clinics compared to a physician's office. CMS currently pays OPPS rates of roughly $116 for Medicare off-campus physician-based department clinic visits.

If they were paid the same rate as physician office rates, that rate would be about $46, which is 40 percent of the current rate. According to CMS, the site-neutral change would cut the copay paid by Medicare patients from $23 per visit to $9. With evaluation and management visits billed by CMS as the most common service billed under OPPS, site-neutral payments would save CMS about $610 million in hospital payments and Medicare patients would pay an estimated $150 million less in copayments a year.

"Over the years, hospitals have been actively acquiring independent physician practices and subsequently were able to benefit from the higher off-campus rates. Outpatient care is already less profitable than inpatient care and the proposed changes would further reduce hospital margins," Moody's said.

Proposed changes to the 340B policy could also impact certain hospitals. On January 1, CMS started lowering reimbursement for Part B drugs administered at hospital outpatient departments for facilities that participated in the 340B drug discount program.

According to Moody's, CMS lowered reimbursement for Part B drugs to the drug's average selling price, minus 22.5 percent from the ASP, plus 6 percent. CMS said this would save Medicare about about $1.6 billion.

"It is difficult to gauge the portion of Medicare Part B drugs that are currently infused in non-grandfathered, off-campus (provider-based departments) PBDs...similar to the initial 340B change, it would represent another headwind and could be a challenge for certain hospitals," Moody's said.

Finally, CMS has proposed adding some nonsurgical procedures to those covered at ambulatory surgical centers, which are located off-campus, but are not hospital outpatient surgery centers. The proposed change includes 12 cardiac catheterization codes that are generally performed in a cardiac catheterization lab in a hospital setting.

Safety concerns could ultimately affect which procedures are officially included. Physicians would likely be cautious about moving certain procedures out of a hospital setting. But Moody's does expect CMS to expand the list of approved procedures for ASCs over time.

Moving certain cardiac procedures to ASCs would likely be the hardest hit for hospitals. 

"In general, as more procedures move to ASCs, hospital revenues would be negatively affected. This would be particularly true of cardiovascular procedures, which typically represent a high margin service line for hospitals. Also, ASCs are often owned by for-profit investors or physicians that have joint ownership with hospitals. Even if the hospital owned an ASC, these procedures would be paid at a lower rate than if done in the hospital," Moody's said.

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com