Regulators on Thursday finalized a flurry of rules with sweeping implications for U.S. providers, including Medicare reimbursement rates for hospital outpatient sites and doctor’s offices and a controversial fix for underpayments in a drug discount program.
The CMS hiked Medicare payments for hospital outpatient departments and ambulatory surgery centers by 3.1% for 2024.
Physicians, however, will see their Medicare reimbursement fall by 3.4%.
Both hospitals and doctors slammed the final rates as insufficient, with doctors calling on Congress to soften the cuts as legislators have in the past.
Hospitals were also up in arms about the CMS’ solution to pay them back for years of underpayments in the 340B drug discount program — and the providers face new hurdles to comply with price transparency requirements.
Here are the biggest changes from the Medicare rules coming for providers in 2024.
Hospitals’ ‘inadequate’ 2024 pay bump
Regulators finalized a rate hike of 3.1% for hospitals and ambulatory surgery centers next year in the Outpatient Prospective Payment System, or OPPS. That’s higher than the 2.8% increase proposed in April.
The rate is based on a higher market basket update of 3.3% offset by a productivity adjustment reduction of 0.2%.
Analysts said the rate — which breaks down to about a 4.6% increase for for-profit hospitals and 3.2% for nonprofits, according to a J.P. Morgan analysis — is positive for hospital operators.
Hospitals were still not pleased. The American Hospital Association, the largest hospital lobby in the U.S., called the increase “inadequate” in light of “persistent financial headwinds facing the field” in a statement.
Hospitals have pointed to poor macroeconomic conditions like labor shortages and inflation in calling for more government aid. Many operators have reported rising costs this year, even as revenue increases.
The OPPS payment updates affect roughly 3,500 hospitals and 6,000 ambulatory surgery centers, according to the CMS.
CMS greenlights 340B fix
Regulators finalized their solution in OPPS to make hospitals whole for illegal payment cuts in the 340B drug discount program that occured from 2018 to 2022.
The CMS will pay each hospital in 340B a one-time lump sum, totaling $9 billion overall.
There’s a catch for hospitals, however. Regulators say the fix needs to be budget neutral, so they finalized a controversial plan first proposed in July to claw back about $7.8 billion from hospitals over the next 16 years.
The chief executive of the Federation of American Hospitals called the rule “extremely disappointing” in a statement, arguing the CMS isn’t allowed by statute to recoup funds.
“Congress was clear in framing the law ... The annually determined payment rate is final,” said FAH CEO Chip Kahn. “The law does not allow Medicare to go backwards.”
The CMS plans to reduce non-drug item and service payments to hospitals in the future by reducing the OPPS’ conversion factor by -0.5% beginning in 2026 — one year later than originally proposed. The CMS said this minimizes the offset’s financial impact on affected hospitals.
Affected 340B hospitals will not be allowed to bill beneficiaries for coinsurance on remedy payments, since the CMS is covering those costs, regulators said.
“HHS made a grievous mistake in choosing to claw back billions of dollars,” said AHA CEO Rick Pollack in a statement. “The AHA will continue to review this rule and consider all available options going forward.”
The 340B program requires drugmarkers to discount outpatient drugs for providers serving low-income communities. In 2018, the Trump administration slashed Medicare payments for drugs in the program, sparking a legal challenge from hospitals. The Supreme Court ruled in 2022 that the CMS did not have authority to lower the reimbursement, putting the government on the hook for repaying affected hospitals.
About 1,700 hospitals will receive the funds by Jan. 1, according to the CMS.
Price transparency
Hospitals have been required to post the prices of certain shoppable services in a machine-readable file online since 2021 under a federal price transparency rule.
However, compliance with the rule has been shoddy. Though the majority of hospitals have some required files posted, research has found that most are incomplete or illegible.
Now, the CMS is moving to standardize how data is posted.
Under new stipulations in OPPS, hospitals will have to display standard charge information that conforms to a CMS template, data specifications and data dictionary.
Hospitals will also have to provide clearer links to that information, and will be required to attest to its accuracy.
Regulators added new stipulations around enforcement as well. Notably, the CMS said it might publicize bad actors on its website, including compliance assessments and actions taken against specific hospitals.
These policies will kick in Jan. 1, but hospital compliance will be phased in over time, according to the CMS.
PFS payments: ‘Such thin gruel’
The CMS released the Physician Fee Schedule for 2024 on Thursday, which outlines how Medicare pays non-hospital clinicians.
Regulators landed on a PFS conversion factor of $32.74 for 2024, which represents a 3.4% decrease from 2023’s conversion factor. Doctors should see their Medicare payments decrease by 1.25% on average, regulators said.
According to a regulatory impact table in the rule, endocrinology and family medicine will see the biggest gain in payments (3%). The adjustments will reduce payments the most for interventional radiology (-4%) and nuclear medicine, physical therapy, radiology and vascular surgery (-3%).
“While the PFS cut is unfavorable, it’s in line with expectations, as the final rule closely mimics the proposal,” Jefferies analyst Brian Tanquilut wrote in a note on the rule.
Physician trade groups, including the American Medical Association, Medical Group Management Association and America’s Physician Groups, said the cuts would further pressure doctors as rising inflation and expenses spur many physicians to leave the field.
“This is a recipe for financial instability. Patients and physicians will wonder why such thin gruel is being served,” said AMA President Jesse Ehrenfeld in a statement.
Congress could step in to moderate or eliminate the proposed cuts, as they have in past years, Tanquilut said.
For example, the year-end omnibus package in 2022 reduced a 4.5% cut to physicians to 2%, following provider lobbying.
A controversial payment code
The final PFS also includes a payment code meant to account for resource costs associated with evaluation and management, or E/M, visits for primary care. The code, which is essentially an add-on payment for outpatient and office visits, has been a source of disagreement among doctor’s groups, as it will benefit primary care physicians at the expense of specialists.
Anesthesiologists, critical care and pain medicine physicians face a 3.27% cut to Medicare payments under the rule, mostly due to the new code, according to the American Society of Anesthesiologists.
“A critical, immediate fix that Congress can do is block the new G2211 payment code,” said ASA President Ronald Harter in a statement arguing it will create “instability and imbalance in the payment system.”
The code was originally proposed in 2021, but Congress suspended its use. Regulators on Thursday said they tweaked the policy in light of concerns over how it might redistribute payments, including reducing the E/M visits it can be attached to.
The PFS also allows Medicare to pay clinical practitioners for training caregivers to support patients with certain diseases, such as dementia. For the first time, Medicare will also pay for services involving community health workers, which the CMS said would help underserved populations.
In addition, marriage and family therapists and mental health counselors will be able to enroll in Medicare and bill for their services for the first time, starting in 2024.
