On November 2, 2023, the Centers for Medicare & Medicaid Services (CMS) released its finalized Outpatient Prospective Payment System (OPPS) for calendar year (CY) 2024.¹ The finalized payment update increases payments to outpatient facilities and finalizes changes to their hospital price transparency rule, among other provisions.² This Health Capital Topics article discusses the various OPPS changes and updates included in the final rule.

Payment Rate Updates

For CY 2024, CMS will increase OPPS payment rates to hospital outpatient departments (HOPDs) and ambulatory surgery centers (ASCs) that meet specific quality reporting criteria by 3.1% – higher than the proposed increase of 2.8%, but lower than the CY 2023 increase of 3.8%.³ For CY 2024, the ASC conversion factor is $53.514, and the HOPD conversion factor is $87.382.⁴ The finalized update is based on a projected hospital market basket percentage of 3.3% and a productivity adjustment of -0.2%.⁵

Hospital Price Transparency

As healthcare costs continue to rise, price transparency has become an increasing focus of regulatory rulemaking. In 2021, CMS implemented a final rule mandating all U.S. hospitals to publicly display prices.⁶ Hospitals were required to post on their website 300 shoppable services and their corresponding prices in a consumer-friendly manner.⁷ However, as of February 2023, just over two years after the final rule went into effect, only about 25% of hospitals were in compliance with all of the rule’s requirements.⁸ The final rule currently allows for fines up to $2 million for hospitals that do not post prices, but there is no mechanism through which CMS can audit hospitals to determine if they are posting accurate prices and data.⁹ To date, 14 hospitals have been fined a total of $4.6 million by CMS for noncompliance with the rule.¹⁰

In response to CMS’s problems enforcing meaningful performance, the CY 2024 OPPS final rule includes a number of provisions to streamline price transparency enforcement.¹¹ Starting in 2024, CMS will communicate directly with hospital leadership should price transparency performance be insufficient, and the agency will reserve the right to post any measures of enforcement online.¹² To improve public understanding, compliance, and the automated use of hospital information, CMS finalized changes to how hospitals must display their standard charges (i.e., the hospital’s regular rate for a given item or service).¹³ CMS Administrator Chiquita Brooks-LaSure stated that “[t]he final rule strengthens hospital price transparency by improving the standardization of hospital standard charges and enhancing CMS’ enforcement capabilities, thereby better enabling the American people to understand and meaningfully use hospital standard charges for items and services.”¹⁴

Rural Emergency Hospital Designation

Consistent with CMS’s overarching equity goals, the agency established the Rural Emergency Hospital (REH) provider type in 2023.¹⁵ Medicare-participating hospitals are eligible to convert to an REH if they are a rural or critical access hospital with no more than 50 beds.¹⁶ Converted REHs receive enhanced rates for services and a monthly fixed facility payment.¹⁷

In the CY 2024 OPPS final rule, CMS implemented a policy that Indian Health Service (IHS) and Tribal facilities that convert to REHs will receive payment under the same all-inclusive-rate that would apply to services performed by IHS and Tribal facilities that are not REHs.¹⁸ This approach is expected to bring stability to IHS and Tribal facilities that convert their statuses to REHs, and overall promote better access to the IHS and Tribal facilities.¹⁹

Intensive Outpatient Program

The OPPS final rule also included a policy to improve access to behavioral health. CMS originally established payment for Intensive Outpatient Program (IOP) services to resolve a gap in coverage which was faced by patients when they required more intensive care than outpatient therapy, but less care than an inpatient hospitalization would provide.²⁰ IOP services can be furnished in community mental health centers (CMHCs), hospital outpatient departments, federally qualified health centers (FQHCs), opioid treatment programs, and rural health clinics. ²¹

340B Payment

The 340B Drug Pricing Program allows hospitals and clinics that treat low-income, medically underserved patients to purchase certain “specified covered outpatient drugs” at discounted prices and then receive reimbursement under the OPPS at the same rate as all other providers.²² This results in a margin for these participants between the amount paid for the drug and the amount received, which enables covered entities to stretch scarce federal resources as far as possible, reaching more patients and providing more comprehensive services.²³

CMS must follow a statutory formula in setting the annual reimbursement rate for 340B drugs. From 2006 to 2018, the reimbursement rate for these outpatient drugs was the drug’s average sales price (ASP) plus 6%.²⁴ In the 2018 OPPS, however, CMS finalized a reduction to this reimbursement rate, specific to 340B participants only, of ASP minus 22.5%.²⁵ Hospitals and hospital associations subsequently sued CMS to challenge the cuts, and the U.S. Supreme Court unanimously found in June 2022 that CMS exceeded its authority in changing drug reimbursement rates for a subset of hospitals.²⁶

For CY 2024, consistent with CY 2023, CMS finalized their proposal to continue payment for 340B acquired biologicals and drugs at the default statutory rate, which is generally 6% added to the ASP.²⁷ The payment rate for 340B-acquired biologicals and drugs will not be different from the payment rate for biologicals and drugs that are not acquired through the 340B program.²⁸

CMS acknowledged in the OPPS final rule that, in accordance with the Supreme Court ruling, it issued a separate final rule outlining the remedy for the unlawful reduced payments made between 2018 and 2022. The remedy is comprised of two components:

1. The Department of Health & Human Services (HHS) will repay the 340B hospitals that were unlawfully underpaid between 2018 and 2022 via a single-lump sum payment in or around the beginning of CY 2024; and
2. HHS will recoup funding from hospitals that were overpaid between 2018 and 2022 by adjusting the OPPS conversion factor for those facilities by -0.5% beginning in CY 2026, continuing the adjustment until the amount has been offset in full. HHS anticipates the recoup to take a total of 16 years.²⁹

Stakeholder Comments

Stakeholders’ reactions to the 2024 OPPS final rule were somewhat mixed. The executive vice president of the American Hospital Association (AHA) stated that:

“The AHA is concerned that CMS has again finalized an inadequate update to hospital payments. Today's increase for outpatient hospitals of only 3.1% comes in spite of persistent financial headwinds facing the field. Most hospitals across the country continue to operate on negative or very thin margins that make providing care and investing in their workforce very challenging day to day.”³⁰

Further, “hospitals’ and health systems’ ability to continue caring for patients and providing essential services for their communities may be in jeopardy, which is why the AHA is urging Congress for additional support by the end of the year.”³¹ The Ambulatory Surgery Center Association’s (ASCA) Chief Executive Officer, Bill Prentice, expressed his appreciation for the final ruling, and stated the following: “We thank CMS for heeding our request to move additional surgical procedures—including total shoulder arthroplasty—onto the ASC payable list.”³² Prentice also said that “doing so benefits both Medicare beneficiaries, who now have a lower-cost choice for the care they need, and the Medicare program itself, which will save millions of dollars as volume moves to the high-quality surgery center site of service.”³³