The Centers for Medicare & Medicaid Services (CMS) has released the calendar year (CY) 2024 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule (CMS-1786-P), which includes proposals to update payment rates, policies and regulations affecting Medicare services furnished in hospital outpatient and ASC settings beginning in CY 2024.

The Proposed Rule, released on July 13, 2023, includes new provisions to increase access to behavioral healthcare, including the creation of a new benefit category called the intensive outpatient program (IOP). This program would cover mental health services for Medicare beneficiaries who need frequent but less intensive care than what is provided at inpatient settings.

In addition, the rule proposes updated Medicare payment rates for the partial hospitalization program, which is an alternative to psychiatric hospitalization. CMS also proposed several changes to hospital transparency requirements.

The Proposed Rule is open for a 60-day comment period that will close on Sept. 11, 2023. The Final Rule with comment is expected to be issued in early November 2023.

To learn more about the OPPS and ASC Final Rule, review the following resources:

Key Proposals of Note

  • CMS proposes to broaden enforcement of the hospital price transparency requirements by requiring hospitals to use a template to submit charge information and by publicizing the enforcement actions it takes against hospitals.
  • CMS outlines plans to implement the IOP benefit.
  • CMS seeks comments from stakeholders on payment alternatives to its current bundling policy for diagnostic radiopharmaceuticals.
  • CMS proposes to continue to pay the statutory default rate, average sales price (ASP) plus 6 percent, for 340B-acquired drugs and biologicals.
  • CMS solicits feedback via several requests for information, including feedback on what evaluations of health equity should be included in the agency’s economic analysis of OPPS and ASC policies, and on establishing additional payments to hospitals for maintaining access to essential medicines.

OPPS Payment System Updates

For hospitals that meet the quality reporting requirements, CMS proposes updating OPPS payment rates by 2.8 percent, reflecting a 3 percent projected hospital market basket percentage increase, reduced by 0.2 percent for the productivity adjustment. CMS also proposes codifying the amounts of OPPS payment and cost-sharing for Part B drugs that are 1) subject to inflation-based rebates codified in the Inflation Reduction Act and 2) aligned with regulations in the CY 2024 Medicare Physician Fee Schedule (MPFS) proposed rule.

Cancer Hospital Payment Adjustment

CMS proposes to continue additional payments to cancer hospitals so that their payment-to-cost ratio (PCR) after additional payments is equal to the weighted average PCR for other OPPS hospitals. Section 16002(b) of the 21st Century Cures Act requires this weighted average PCR be reduced by 1 percent.

ASC Payment Update

CMS proposes to utilize the hospital market basket update of 3 percent, reduced by the productivity adjustment of 0.2 percentage point, resulting in a proposed productivity-adjusted hospital market basket update factor of 2.8 percent for ASCs meeting the quality reporting requirements. CMS proposes to apply a 2.8 percent productivity-adjusted hospital market basket update factor to the CY 2023 ASC conversion factor for ASCs meeting the quality reporting requirements to determine the CY 2024 ASC payment amounts. 

Ambulatory Payment Classification (APC) Group Policies

CMS identifies four clinical and five brachytherapy procedures for low-volume New Technology APCs, which are maintained until sufficient claims data is available to determine the most appropriate APC. Two of three New Technology APCs assigned in CY 2023 received revised classifications in the CY 2024 proposed rule. CMS also proposes an APC relative payment weight that represents the hospital cost of the services included in that APC relative to the hospital cost of the services included in APC 5012 for Clinic Visits and Related Services to address variation in payment due to assignment of APC group.

Payment for Devices

For CY 2024, CMS received six applications for device pass-through payments. CMS solicits public comment on these applications and will make final determinations on these applications in the CY 2024 OPPS/ASC final rule with comment period.

Payment for Drugs, Biologicals and Radiopharmaceuticals

  • Products with Pass-Through Status: CMS states that pass-through payment status will expire for 25 drugs and biologicals that received initial approval between April 2021 and January 2022. Conversely, 42 drugs and biologicals given approval between April 2022 and April 2023 will maintain their pass-through payment status beyond Dec. 31, 2024.
  • Products without Pass-Through Status: CMS proposes setting the threshold at $140 for determining separate payment classifications for drugs and biologicals, ensuring consistent packaging determinations. CMS proposes allowing biosimilars to be paid separately if their reference biologicals are also paid separately.
  • Single-Dose or Single-Use Drugs: The proposed MPFS CY 2024 rule requires hospital-based outpatient departments (HOPDs) and ASCs to report discarded amounts of specific single-dose or single-use package drugs.
  • Packaging Policy for Diagnostic Radiopharmaceuticals: CMS is soliciting comments on whether the current payment packaging policy for diagnostic radiopharmaceuticals has impacted beneficiary access, whether specific patient populations or diseases may be especially impacted, and what approaches for payment would allow for enhanced beneficiary access.
  • Pass-Through Spending for CY 2024: CMS seeks to cap pass-through payments for specific medical devices and pharmaceutical products at 2 percent of total projected OPPS payments.

340B Payment

CMS proposes to continue to pay the statutory default rate, ASP plus 6 percent, for 340B-acquired drugs and biologicals. CMS applied this same rate in the CY 2023 final rule following the U.S. Supreme Court’s unanimous decision holding that CMS could not vary rates between different groups of hospitals without previously conducting a survey of the hospitals’ acquisition costs.

CMS also proposes to use a single modifier to identify drugs and biologicals acquired through the 340B program. All 340B covered entity hospitals paid under the OPPS would be required to report the “TB” modifier effective Jan. 1, 2025.

CMS recently released a separate proposed rule, Hospital Outpatient Prospective Payment System: Remedy for 340B-Acquired Drugs Purchased in Cost Years 2018-2022, providing a remedy for the reduced 340B payments hospitals received from 2018 through Sept. 27, 2022, the date on which CMS restored reimbursement for 340B drugs to the full OPPS rate. (See the Holland & Knight alert, “CMS Proposes Returning $9 Billion to More Than 1,600 Hospitals,” July 11, 2023.)

Inpatient Only List

CMS established the Inpatient Only Procedures (IPO) list in 2000 to designate procedures that, because of their invasive nature, the expected recovery time and/or underlying patient condition, would not be paid if performed in an outpatient facility. The agency believed that performing certain procedures on an outpatient basis would not be safe or appropriate and, therefore, not reasonable and necessary under Medicare rules. CMS proposes adding nine services and corresponding CPT codes to the IPO list for CY 2024 and is soliciting comments on the appropriateness of adding these codes to the list.

Payment for Intensive Outpatient Program

Section 4124(b) of the Consolidated Appropriations Act of 2024 established coverage for IOP services effective Jan. 1, 2024. CMS proposes to implement this directive by establishing the Intensive Outpatient Program. CMS proposes to define the program as a distinct and organized intensive ambulatory treatment program offering less than 24 hours of daily care other than in an individual’s home or in an inpatient or residential setting.

CMS proposes that the scope of benefits for the intensive outpatient program would include individual and group therapy with physicians or psychologists, occupational therapy, services of social workers, trained psychiatric nurses and other staff trained to work with psychiatric patients, drugs and biologicals, family counseling, patient training and education, and diagnostic services. These services would be reimbursed on a per diem basis under the OPPS and would also be covered in the Rural Health Clinic (RHC) and Federally Qualified Health Center (FQHC) settings.

CMS further proposes that to qualify for IOP services, a physician must determine that each patient needs a minimum of nine hours of IOP services per week. This determination must be revisited monthly.

CMS also proposes extending coverage to the opioid treatment program (OTP) by establishing a weekly payment adjustment for IOP services furnished by OTPs. If finalized, this adjustment would be updated based on the Medicare Economic Index and receive the Geographic Adjustment Factor.

Updates to Partial Hospitalization Program

CMS proposes expanding the rate structure of the partial hospitalization program (PHP) to include an APC for three services a day and an APC for four services daily. In calculating these rates, CMS proposes to use the broader OPPS data set to capture claims not identified as PHP, but that include service codes and intensity required for a PHP day. According to CMS, this larger data set would expand the sample size to allow for more precise rate calculations.

OPPS Payment for Remote Mental Health Services

CMS proposes creating a single, untimed healthcare common procedure coding system (HCPCS) code that can be reported when a beneficiary receives multiple hours of group therapy per day. This proposal comes in response to stakeholders who have commented that the current HCPCS codes are administratively burdensome because providers are required to report and document each unit of time using multiple codes.

OPPS and ASC Payment for Dental Services

In the CY 2023 rule, CMS authorized Medicare coverage for dental procedures that are integral to other medically necessary services. In the CY 2024 Proposed Rule, CMS proposes to assign 229 dental codes to clinical APCs. The dental services that would be covered if this proposal is finalized are those services that are inextricably linked to other covered services, including but not limited to a dental or oral examination as part of a comprehensive workup prior to organ transplant and reconstruction of dental ridge following surgical removal of tumor.

Hospital Price Transparency Requirement

Under the hospital price transparency regulations, a hospital must make public its standard charges for all items and services it provides in a comprehensive machine-readable file, among other requirements. Hospitals currently have discretion as to how they choose to display the standard charges in the machine-readable file; however, CMS now proposes to require hospitals to display the required data using a CMS template, which would be offered as a CSV “wide” format, a CSV “tall” format, and a JavaScript object notation (JSON) schema. CMS also proposes that hospitals encode all standard charge information, as applicable, that corresponds to a set of required data elements, which would include (but are not limited to):

  • hospital name, license number, location name(s) and address(es) at which the public may obtain the items and services at the standard charge amount
  • a description of the item or service that corresponds to the standard charge established by the hospital, including a general description, whether the item or service is provided in connection with an inpatient admission or an outpatient department visit and, for drugs, the drug unit and type of measurement
  • any codes used by the hospital for purposes of accounting or billing for the item or service, including modifier(s) and code type(s)
  • for payer-specific negotiated charges, the payer and plan name (as specified in the contract), the type of contracting method used to establish the standard charge, whether the standard charge indicated should be interpreted by the user as a dollar amount, or if the standard charge is based on a percentage or algorithm, and what percentage or algorithm determines the dollar amount for the item or service. If the standard charge for an item or service is expressed as a percentage or algorithm, the hospital would be required to indicate a consumer-friendly expected allowed amount in dollars for the item or service.

Each hospital would also be required to affirm in its machine-readable file that the hospital, to the best of its knowledge and belief, has included all applicable standard charge information in accordance with the requirements of 45 C.F.R. Part 180 and that the information displayed is true, accurate, and complete as of the date indicated in the file. CMS also proposes hospitals include a footer at the bottom of the hospital’s homepage that links to the webpage that includes the machine-readable file and requires hospitals to ensure that a .txt file is included in the root folder of the publicly available website chosen by the hospital for posting its machine-readable file.

CMS also proposes several updates to its enforcement capabilities including:

  • CMS may require the submission of certification by an authorized hospital official as to the accuracy and completeness of the data in the machine-readable file and the submission of additional documentation as may be necessary to determine hospital compliance.
  • If a hospital receives a warning notice for noncompliance, CMS proposes to require the hospital to submit an acknowledgment of receipt of the warning notice in the form and manner and by the deadline specified in the notice of violation issued by CMS to the hospital.
  • In the event CMS takes action to address hospital noncompliance and the hospital is determined by CMS to be part of a health system, CMS may notify health system leadership of the action and may work with health system leadership to address similar deficiencies for hospitals across the health system.
  • CMS may publicize on the CMS website information related to 1) CMS’ assessment of a hospital’s compliance, 2) any compliance action taken against a hospital, the status of such compliance action and the outcome of such compliance action and 3) notifications sent to health system leadership.

In line with this, CMS issued a request for information (RFI) on evolving and aligning hospital price transparency with transparency in coverage rules and the No Surprises Act regulations.

Supervision by Nurse Practitioners, Physician Assistants and Clinical Nurse Specialists of Cardiac, Intensive Cardiac and Pulmonary Rehabilitation Services Furnished to Outpatients

CMS proposes to expand the practitioners who may supervise cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR), and pulmonary rehabilitation (PR) services to include nurse practitioners (NPs), physician assistants (PAs) and clinical nurse specialists (CNSs).

Hospital Outpatient Quality Reporting (OQR) Program

CMS proposes to:

  1. remove the Left Without Being Seen measure beginning with the CY 2024 reporting period/2026 payment determination
  2. modify the COVID–19 Vaccination Coverage Among Healthcare Personnel (HCP) measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  3. modify the Cataracts: Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery measure beginning with the voluntary CY 2024 reporting period
  4. modify the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure beginning with the CY 2024 reporting period/CY 2026 payment determination
  5. readopt with modification the Hospital Outpatient Volume Data on Selected Outpatient Procedures measure beginning with the voluntary CY 2025 reporting period and mandatory reporting beginning with the CY 2026 reporting period/CY 2028 payment determination
  6. adopt the Risk-Standardized Patient Reported Outcome-Based Performance Measure (PRO-PM) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) in the HOPD Setting (THA/TKA PRO-PM) beginning with the voluntary CYs 2025 and 2026 reporting periods, and mandatory reporting beginning with the CY 2027 reporting period/CY 2030 payment determination
  7. adopt the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level – Outpatient) measure, beginning with the voluntary CY 2025 reporting period and mandatory reporting beginning with the CY 2026 reporting period/CY 2028 payment determination
  8. amend multiple codified regulations to replace references to “QualityNet” with “CMS-designated information system” or “CMS website,” and to make other conforming technical edits, to accommodate recent and future systems requirements and mitigate confusion for program participants

CMS is also requesting public comment on 1) patient and workforce safety (including sepsis), 2) behavioral health (including suicide prevention) and 3) telehealth as potential future measurement topic areas in the Hospital OQR Program.

Request for Comment: Payment for High-Cost Drugs Provided by Indian Health Service and Tribally Owned Facilities

Currently, hospital outpatient services provided by Indian Health Services (IHS) facilities and tribally owned facilities are excluded from the OPPS and are paid instead under the separately established all-inclusive rate (AIR). While the AIR has worked well for most IHS/tribal facilities, it may not adequately cover the costs of providing high-cost specialty drugs and services. CMS is seeking comments on potential policies to provide separate payment to IHS/tribal facilities for high-cost drugs and services rather than the standard AIR.

Request for Comment: Health Equity

CMS seeks feedback on what evaluations of health equity should be included in its economic analysis of OPPS and ASC policies. To gain insight into how OPPS and ASC policies affect health equity, CMS is considering adding elements to its economic analysis that would detail how OPPS and ASC policies impact particular beneficiary populations that are typically underserved by the healthcare system. Currently, OPPS impacts are presented by provider type, rural versus urban area, geographic region, teaching status, and ownership type. CMS seeks comment about structuring an impact analysis that addresses how OPPS and ASC changes may impact beneficiaries of different groups. CMS requests input on what health equity questions should be examined, what categories or measures should be included (such as using the area deprivation index as a proxy for disparities related to geographic variation) and any other feedback on ways to continue building an OPPS health equity framework.

Request for Comment: Potential Payments for Cost of Maintaining Access to Essential Medicines

CMS seeks comments on establishing additional payments to hospitals for maintaining access to essential medicines. Citing the persistence and severity of shortages for critical medical products and the additional time, labor and resources required to navigate them, in this rule CMS describes how it could make payments to hospitals under the Inpatient Prospective Payment System (IPPS) for establishing and maintaining access to a buffer stock of essential medicines. “Essential medicines” would be defined as one of the 86 medicines prioritized in the report “Essential Medicines Supply Chain and Manufacturing Resilience Assessment.” Payment under the IPPS would not be budget neutral and could be made for cost-reporting periods beginning as early as Jan. 1, 2024. The payments would be in addition to payments for the essential medicines themselves, whether those payments are bundled with other items and services or separately paid. CMS is considering this potential separate IPPS payment for cost reporting periods beginning as early as Jan. 1, 2024. An adjustment under the OPPS could be considered for future years of rulemaking.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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