HAP Resource Center

Comment Letter: CMS, Outpatient Prospective Payment System, Calendar Year 2020

September 27, 2019

Seema Verma Administrator
Centers for Medicare & Medicaid Services
U.S. Department of Health and Human Services Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, DC 20201

RE: CMS-1717 -P, Medicare Program: Medicare Program: Proposed Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Price Transparency of Hospital Standard Charges; Proposed Revisions of Organ Procurement Organizations Conditions of Coverage; Proposed Prior Authorization Process and Requirements for Certain Covered Outpatient Department Services; Potential Changes to the Laboratory Date of Service Policy; Proposed Changes to Grandfathered Children’s Hospitals-Within- Hospitals; Proposed Rule, August 9, 2019

Dear Administrator Verma:

On behalf of The Hospital and Healthsystem Association of Pennsylvania (HAP), which represents approximately 240 member institutions, we appreciate the opportunity to comment about the Centers for Medicare & Medicaid Services’ (CMS) hospital outpatient prospective payment system proposed rule for calendar year 2020.

HAP has significant concerns relating to two specific proposals in the rule:

  • Price transparency provisions—While committed to ensuring patients have the information they need to make informed health care decisions, we believe this proposal is more likely to confuse than to help. The proposal also raises significant legal questions in addition to insurmountable operational and financial challenges related to the CMS policy and timeline for implementation.
  • Full Phase-in of site-neutral payment reductions—CMS should reverse its unlawful and harmful policy reducing payment for outpatient clinic visits in excepted PBDs, repay hospitals for the 2019 payment reduction; and not finalize the proposed 2020 policy.

HAP appreciates the opportunity to put forth a remedy for the nearly 30 percent reduction in reimbursement for certain 340B hospitals, which a district court judge ruled were unlawful in the attached comments.

The attached comment letter also addresses changes to:

  • Supervision for hospital outpatient therapeutic services
  • Prior authorization requirements
  • The inpatient-only list
  • Hospital outpatient quality reporting program

Thank you for your consideration of HAP’s comments about this proposed rule regarding outpatient payment and other provisions related to hospitals and the patients they serve in Pennsylvania.

If you have any questions, contact Kate Slatt, senior director, health care finance policy, at (717) 561-5317.




Jeffrey Bechtel
Senior Vice President, Heatlh Economics and Policy




HAP Comments—Outpatient Prospective Payment System
Proposed Rule for Calendar Year 2020


The Centers for Medicare & Medicaid Services (CMS) outpatient prospective payment system (OPPS) proposed rule would require that hospitals publicly post on the internet a machine- readable file containing both gross charges and “payor-specific negotiated charges” for all items and services. Also, it proposes to require hospitals to display, in an easy-to-understand format, negotiated charges and certain other information for 300 “shoppable” items and services.

We are deeply committed to that ensuring patients have the information they need to make informed health care decisions, including timely, accurate estimates of their out-of-pocket costs. The agency’s approach would confuse—not help—patients understand their potential out-of- pocket cost obligations; would severely disrupt contract negotiations between providers and health plans; and exceeds the Administration's legal authority. We urge CMS to abandon this proposal and instead convene providers, health plans, patients and other stakeholders regarding better approaches to meet patient needs.

In particular, we encourage CMS to take steps to facilitate the development and voluntary adoption of patient cost-estimator tools and resources by convening stakeholders to identify best practices, recommending standards for common features of cost-estimator tools, and developing solutions to common technical barriers.

The Proposed Disclosure of Payor-Specific Negotiated Charges is Unlawful

CMS lacks the legal authority to require hospitals to make public its payor-specific negotiated charges. Section 2718(e) of the Public Health Service Act (PHSA) does not provide CMS with authority to establish these requirements. CMS’ proposal is contrary to the plain language of the statute, as negotiated charges are not “standard charges.” By definition, a “standard charge” is not privately negotiated and does not contemplate different charges for different payors. “Standard charges” has long been understood to be a technical term that means a hospital’s usual or customary chargemaster charge.

CMS’ proposed definition also violates the Administrative Procedure Act (APA) because it is unreasonable. In general usage, “standard” means “usual, common or customary.”1 Payor- specific negotiated charges are not usual, common or customary. They vary year by year, payor by payor and even health plan by health plan. Indeed, CMS has defined “charges” to mean “the regular rates established by the provider for services rendered to both [Medicare] beneficiaries and to other paying patients. Charges should be . . . uniformly applied to all patients................................ The agency’s rationale for seeking to require that payor-specific negotiated charges be made public, undercuts the notion that those charges are standard: CMS wants payor-specific charges to be public precisely because those charges are not standard.3

CMS’ proposal would violate the First Amendment as well, by compelling the public disclosure of individual charges privately negotiated between hospitals and health plans. Government regulation of non-misleading commercial speech is unlawful unless it “directly advances” a “substantial” governmental interest, and is no “more extensive than is necessary to serve that interest.” 4

CMS’ stated interest in putting consumers “at the center of their health care” is unlikely to be served by the mandated disclosures. The agency’s own research makes clear that when it comes to price, patients are interested in their own out-of-pocket costs—not their health plan’s costs. CMS’ repeated admissions that the proposed disclosures are merely a “first step” or a “step towards” the rule’s stated goals make clear that the proposed rule does not “directly” and “materially” serve the stated interest. 5

Also, CMS’ proposal is much more extensive than necessary to serve the proffered interest. Because hospitals rely heavily on the confidentiality of health plan-negotiated charges to permit them to negotiate arm’s-length charges with other health plans, disclosure of prices negotiated with individual health plans would unduly burden hospitals’ ability to enter into competitive contracts; it goes well beyond the level of regulation necessary to promote the stated government interest. The charges negotiated between hospitals and health plans are confidential trade secrets.6 As such, requiring their public disclosure would infringe upon intellectual property rights recognized by Congress, and individual states.7

Mandating the public disclosure of trade secrets protected under both federal and state law would result in extreme harm to hospitals and health plans alike. The agency has failed to demonstrate that the proposed regulation is narrowly tailored or that its interests “cannot be protected adequately by more limited regulation of . . . commercial expression.”8

Disclosure of Payor-Specific Negotiated Charges Would Harm Consumers and Competition, and Impact Access to Care

Apart from its legal infirmities, the proposed disclosure threatens competition and the movement toward value-based care. The Federal Trade Commission (FTC) has warned numerous times against the disclosure of competitively sensitive information, such as payor- negotiated prices. Such disclosure can “facilitate collusion, raise prices and harm…patients….”9 That warning extends explicitly to contract terms with health plans.10 The FTC has urged that transparency be limited to “predicted out-of-pocket expenses, co-pays, and quality and performance comparisons of plans or providers.”11

At least one commercial health insurer warned that disclosure of payor-specific negotiated charges would “impair the movement to value-based care” and allow “[d]ominant health plans to seek and use that information to deter and punish hospitals that lower rates or enter into value-based arrangements with the dominant plan’s competitors.”12

If this rule is implemented as proposed, providers will be at even more of a competitive disadvantage with insurers than they are today. It would essentially take away any ability to negotiate and result in a “race to the bottom” from a reimbursement perspective. With one- third of Pennsylvania hospitals currently operating in the red, losing the ability to negotiate is something they simply cannot shoulder, and the end result will be that access to care for some of our most vulnerable citizens will be jeopardized. As one hospital stated, “This is the worst threat we are currently facing…and our community really needs us to be there for them because there is no one else.” Another said, “If all negotiated rates are public, they are ultimately going to compress toward a single rate, which may have the unintended consequence of driving this country to a single-payor system much faster than anyone expects.”

CMS Vastly Underestimated the Proposal’s Operational Challenges

In addition to our legal and public policy concerns articulated above, and the haste of policy implementation, we have significant operational concerns with this proposal. This proposal, if finalized, would pose excessive burdens on hospitals and health systems—far exceeding CMS estimate of 12 hours.

First and foremost, we are concerned about the disclosure of standard charges and payor- specific negotiated rates. Hospitals have many different payors and many different contract arrangements by product line within each payor.

This proposed rule is requiring hospitals to make what some in Pennsylvania have described as “impossible” operational changes in a very, very short timeframe. Specifically, providing information about all standard charges (gross charges and negotiated rates) for all items and services provided by a hospital in a machine-readable format requires an enormous amount of time and effort from many hospitals. It is crucial for CMS to understand how hospitals currently operate to fully appreciate the scope of this task. Hospitals have many different payors and many different contract arrangements by product line within each payor. For example, some Pennsylvania hospitals indicated to HAP that they would have more than 100 different payor- specific negotiated rates per procedure and item provided in the hospital to post and maintain. They program specific contract requirements by product into a system; however, this process often includes a series of internal steps and algorithms where multiple systems within the hospital are interfacing and doing calculations “behind the scenes” to display the “rate” that appears on a screen. There is much greater complexity and work involved to produce these rates in the format CMS is mandating than simply defining a few key parameters and printing an Excel spreadsheet.

Quote 1; “We’ll have to build all these tables and then try to maintain them… which is ridiculous because there’s no real one-to-one comparison of the rates and what a patient will actually pay out-of-pocket.”

Quote 2; “To have a linear, line-item approach to this just isn’t realistic based on how hospitals are set up.”

Additionally, in this rule, CMS required pricing information about both inpatient and outpatient services; any form of bundling charges, such as per diems or diagnosis-related group rates, and all information about ancillary services provided in the hospital setting. CMS should understand that there are reasons why prices for the same payor are sometimes different based upon whether they are done in an inpatient setting or an outpatient setting. Also, it is important to recognize that many hospitals simply do not have pricing information from their ancillary providers, so steps will have to be taken to determine: 1) whether they can get that pricing information, and 2) how to get it in the required format. There is risk that some independent physicians/specialist groups will not be willing to share it. Again, this will ultimately have a negative impact on access to care around some parts of Pennsylvania. These are just a few of the many operational challenges that exist under CMS requirements effective January 1, 2020.

The OPPS proposed rule makes certain assumptions about the level of effort and cost for hospitals to comply with the transparency requirements; specifically, CMS estimates that it would take hospitals 12 hours, translating to a cost of $1,017.24 to comply with these requirements. Every Pennsylvania hospitals reacted strongly against that assumption and stated that it was a gross underestimation of both time and cost. Member feedback:

  • “This is just not doable in twelve hours…and the cost will be much, much higher”
  • “Twelve hours might be enough time to come up with a list of shoppable services…but it wouldn’t even come close to what it would take to implement that.”
  • “Creating and maintaining this is going to create an explosion of administrative cost that has nothing to do with real patient care.”

Some Pennsylvania hospitals have made significant strides around advancing price transparency by building consumer-friendly tools. The number of services a consumer can “shop” for in the Commonwealth currently ranges from 57 to 150. However, that being said, they all noted that there was a significant amount of employee time and facility money needed to implement these tools. In the proposed rule, CMS is requiring 300 shoppable services to be posted online. Pennsylvania hospitals with experience in producing these type of tools advise:

  • “We will have to add full-time, dedicated staff just to work on this”
  • “It took five months, with four people working on it full-time to build a tool with 130 services…and even then, we eventually had to get a vendor to help us”
  • “There is an on-going cost to maintain these systems…it can be a per click cost or a flat fee – but it’s going to be a significant expense”

In summary, CMS’ proposed approach would not give patients the information they need to make informed health decisions, and would introduce significant additional burden and resource requirements into the health care system. For all of this effort, we anticipate that patients will not use this information; instead they will continue to contact hospitals and health systems directly for more accurate out-of-pocket cost estimates.

For the reasons noted above, and others, HAP urges CMS to abandon this misguided proposal that w ill impose significant burdens upon hospitals without achieving our shared goal of arming patients w ith useful information to be informed consumers about their health care services. We also are requesting that you take more time to work collectively with the American Hospital Association, and a representative group of hospital staff to drive meaningful pricing transparency in a way that gives consumers what they need without adding significant cost and administrative work to the existing health care system.


In the proposed rule, CMS is requesting comments about potential remedies for the nearly 30 percent reduction in reimbursement for certain 340B hospitals, which a district court judge ruled were unlawful. Specifically, the agency is seeking potential remedies for the calendar year (CY) 2018 and 2019 payments and for use in CY 2020 payments in the event that the agency receives an adverse ruling from the U.S. Court of Appeals.

We believe the remedy should be as follow s: Refund payments should be made to each affected 340 B hospital and calculated using the JG modifier, w hich identifies claims for 340 B drugs that were reduced under the 2018 and 2019 hospital OPPS ​rules, and others not adversely impacted by the reductions should be held harmless. This remedy would not disrupt the Medicare program and is consistent with those for past violations of law. Our detailed comments follow.

The Proper Remedy Is Straightforward and Easily AdministeredThere is a straightforward remedy that is easy to implement, will not be disruptive, does not require new rulemaking, and is comparable to those the courts and agency have adopted to correct other unlawful Medicare payment reductions. Specifically, the agency can recalculate the payments due to 340B hospitals based on the statutory rate of average sales price (ASP) plus 6 percent provided by the 2017 OPPS rule. Hospitals that already have received partial payment should receive a supplemental payment that equals the difference between the amount they received and the amount they are entitled to receive, including ASP plus 6 percent plus interest. Claims that have not yet been paid should be paid in the full amount, including ASP plus 6 percent.

While the claims will be for different total amounts, the percentage of the claim that the hospital was underpaid is identical in each case. These calculations should be on a hospital-by- hospital basis. Once the total amount that each hospital was paid is calculated, that amount can be multiplied by a single factor which will be uniform across hospitals to determine how much should have been paid and thus, how much the reimbursement was reduced. Each hospital can be compensated according to the amount that its reimbursements were reduced plus interest.

There Is Ample Precedent for Full Retroactive Adjustments that Are Not Budget Neutral.—There is ample authority for the Department of Health and Human Services (HHS) to remedy the underpayments caused by its unlawful rule, including: Cape Cod Hospital v. Sebelius, (D.C. Cir. 2011) (HHS corrected errors for the future and past claims for which hospitals had been underpaid), H. Lee Moffitt Cancer Ctr. & Res. Inst. Hosp., Inc. v. Azar, (D.D.C. 2018), (HHS may make a retroactive adjustment without applying the budget-neutrality requirement to cancer hospitals that received a statutorily mandated adjustment a year later than the law required); and Shands Jacksonville Medical Center v. Burwell, (D.D.C. 2015), (HHS compensated hospitals for three years of across-the-board cuts with a one-time, prospective increase of 0.6 percent).

The remedy need not be budget neutral. The authority the agency cites is not applicable because such expenditures would be required by a court decision in service of fixing a prior unlawful underpayment. Moreover, the agency does not consistently apply budget neutrality to fix its missteps and in other relevant instances. For example, HHS allows for retroactive correction of the wage index without any budget-neutrality adjustment when it made the error and it was not something a hospital could have known or corrected. In addition, budget neutrality does not apply to changes in enrollment or utilization for drugs when the average sales price increases.

There is no Basis for Paying Hospitals Less than the Statutory ASP plus Six Percent— The OPPS mandates HHS reimburse hospitals for covered outpatient drugs at ASP plus 6 percent. This was the methodology used from 2013 to 2017. HHS has now requested comment on adjusting the payment for 2018, 2019, and 2020 from ASP plus 6 percent to ASP plus 3 percent. Although the agency has some authority to deviate from this law, the agency is attempting to use a policy rationale that is inconsistent with the law itself and, therefore, it would be unlawful to reduce ASP to 3 percent.

New Patients Co-Pays are Not Required—Medicare reimburses hospitals 80 percent for covered outpatient services and the remaining 20 percent is collected from the patients or their insurance. Because HHS deviated from the lawful payment rate for 2018 and 2019 with a 30 percent reduction, in theory hospitals could collect from patients or their insurance companies for the difference between 20 percent of the lawful payment rate and the 20 percent copay that was actually collected. HHS has requested comment on the “most appropriate treatment of Medicare beneficiary cost-sharing responsibilities.”

Although the agency has raised the specter that a remedy would require patient copays to be adjusted retroactively, we do not believe that there is any law that would require hospitals to collect payments altered by the agency’s illegal act. Neither the False Claims nor anti-kickback statutes would apply since patients would not have been induced to seek services. Patients who reasonably believe that they have fully paid for hospital care provided months, or in some cases, years, ago should not have to make these payments if hospitals are willing to forego them. We urge HHS to state this clearly in the final rule.


In the CY 2019 OPPS proposed rule, CMS described “unnecessary” increases in the volume of hospital outpatient clinic visits in excepted off-campus provider-based departments (PBD) and, citing its authority under section 1833(t)(2)(F) of the Social Security Act (SSA), proposed to pay for clinic visits furnished in excepted off-campus PBDs at an amount that equals 40% of the OPPS rate. CMS further proposed to implement this proposal in a non-budget neutral manner, which the agency estimated would result in a CY 2019 reduction of $760 million in hospital payment under the OPPS.

Despite the many concerns and objections raised by HAP, the AHA, and other commenters, CMS’s CY 2019 OPPS final rule adopted the proposal to cut payments to excepted PBDs and make the cuts in a non-budget neutral manner. In a change from the proposed rule, however, the agency elected to phase in the payment reduction over two years – 50% in 2019 and the remaining 50% in 2020.

The AHA, three of its member hospitals and the Association of American Medical Colleges (AAMC) filed suit in January 2019 to challenge the new clinic visit payment policy. They alleged that hospitals with excepted off-campus PBDs faced imminent injury as a result of CMS’s unlawful decision to reduce clinic visit payment rates and to do so in a non-budget neutral manner.

The court recently found that the agency exceeded its statutory authority when it cut the payment rate for clinic services at excepted off-campus provider based clinics.

Despite ongoing legal action, in this rule, CMS proposes to implement the second phase of the payment cut for CY 2020.

HAP incorporates, by reference, all of the comments provided in the American Hospital Association’s response to the proposed ruled. We, therefore, urge CMS to:

  1. Immediately restore the higher payment rates for clinic visits furnished by excepted off-campus PBDs that existed before CMS adopted the unlaw ful payment cuts;
  2. Promptly repay hospitals the difference betw een the amounts they would have received under those higher rates and the amounts they were paid under the unlaw ful payment rates; and
  3. Abandon its proposed second phase of the payment cut in 2020.


The CY 2009 and 2010 OPPS/ambulatory surgical centers (ASC) payment rules imposed a new “direct supervision” policy for outpatient therapeutic services provided in hospitals, Critical Access Hospitals (CAH), and in provider-based departments of hospitals. The new policy required that a supervising physician be physically present in the outpatient department when Medicare beneficiaries received outpatient therapeutic services—a significant burden for CAH, and small, and rural hospitals that face challenges related to physician supply.

In addition to relief offered by CMS in 2009, and in 2010, CMS responded to hospital concerns by offering a moratorium on enforcement for CAHs and small and rural hospitals with 100 or fewer beds. The moratorium, in place for several years, expired December 31, 2016. The CY 2018 rule reinstated the moratorium for CY 2018 and CY 2019.

This year, CMS is proposing to change the minimum required level of supervision from direct to general supervision for all outpatient therapeutic services provided by all hospitals and CAHs. General supervision means that services are furnished under a physician’s direction and control, but does not require a physician’s actual presence during the delivery of the services.

HAP is pleased to see a proposal for a permanent fix and urges CMS to finalize the change from direct to general supervision for all outpatient therapeutic services provided by all hospitals and CAHs.


In an attempted to slow “unnecessary increases in the volume” of certain covered outpatient department services, often considered cosmetic, the rule proposes new prior authorization requirements for five categories of services:

  • Blepharoplasty
  • Botulinum toxin injections
  • Panniculectomy
  • Rhinoplasty
  • Vein ablation

Slated to begin with dates of service on or after July 1, 2020, the prior authorization process would require hospitals to obtain provisional affirmation before the medically necessary service is furnished or billed to Medicare. This same requirement does not exist in the proposed Physician Fee Schedule rule, nor does it apply to these service occurring in ASCs. Claims with services requiring authorization received without provisional affirmation will be denied. There is an expedited process available in cases of emergency and a process to resubmit a request for authorization with additional documentation in the event the initial request is denied. CMS also has included a provision that would allow it to exempt a provider from the prior authorization process if they achieve a prior authorization provision affirmation threshold of at least 90 percent during a semiannual assessment.

While HAP appreciates the agency’s desire to control excess utilization of cosmetic services, increasing the number of services requiring prior authorization w ill lead to additional time spent on paperw ork, rather than clinician time at the bedside. This is counter to CMS’ expressed goal of “Patients over Paperw ork.” HAP urges CMS to withdraw this proposal and to continue efforts to work with stakeholders to provide meaningful outreach and education related to billing Medicare for these service only w hen medically necessary, rather than implementing cumbersome, administrative, solutions.


CMS designates certain procedures that only can be performed in an inpatient setting for various reasons such as the acuity of the procedure, history of the patient, or post operative recovery time. The inpatient only (IPO) list is reviewed by CMS annually.

This year, CMS is proposing the removal of arthroplasty, acetabular and proximal femoral prosthetic replacement (total hip arthroplasty ((THA)) with or without autograft or allograft) from the inpatient-only list.

CMS also is seeking feedback on the potential removal of six additional procedures including two arthrodesis procedures and four laminectomy procedures.

HAP encourages CMS to keep THA on the IPO to ensure the safety of its beneficiaries as w ell as the integrity of existing programs. If CMS continues with finalizing the proposal to remove THAs, HAP encourages CMS to consider the follow ing adjustments for the bundled payment initiatives sure to be affected:

  • Incorporate risk-adjustment methodology in the comprehensive care for joint replacement model (CJR), and bundled payments for care improvement (BPCI) programs to ensure that actual performance can be accurately compared to historical performance based on the populations being served in each time period
  • Evaluate including outpatient THA in the CJR and BPCI programs for hospital outpatient departments only


Hospitals must report data regarding the quality of outpatient care to receive the full annual update to the OPPS payment rate—hospitals failing to report the data incur a reduction in their annual payment update factor of 2 percentage points.

In the CY 2020 proposed rule, CMS is proposing to remove OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases beginning with the CY 2022 payment determination, as the costs associated with the measure outweigh the benefit of its continued use in the program.

CMS also is seeking comments about potentially adopting four patient safety measures for the outpatient quality reporting program that were previously adopted for the ASC Quality Reporting Program including:

  • ASC-1: Patient burn
  • ASC-2: Patient fall
  • ASC-3: Wrong site, wrong side, wrong procedure, wrong implant
  • ASC-4: All-cause hospital transfer/readmission

HAP supports the removal of OP-33 but recommends that the effective date of removal be moved from October 2020 to January 1 , 2020 as the efforts to collect data for ten months far outw eighs the benefit. HAP also recommends that CMS refrain from adding the four patient safety measures at this time as recent experience by ASCs raised concerns relating to the accuracy of the data that is used to calculate performance for these measures. These measures have also recently lost their National Quality Forum endorsement.


1 See, e.g., https://www.dictionary.com/browse/standard.
2 Provider Reimbursement Manual, No 15-1, ch. 22, § 2202.4. (Emphasis added.)
3 See, e.g., 84 Fed. Reg. 39,175, 39,577 (Aug. 9, 2019).
4 Central Hudson Gas & Electric Corp. v. Public Service Comm’n of New York, 447 U.S. 557, 566 (1980). The agency has failed to identify a sufficient predicate to justify the application of Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626 (1985) to the facts presented here. But the regulation fails under either test. Even under Zauderer, a disclosure requirement cannot be “unjustified or unduly burdensome.” Id. at 651.
5 See id. at 39,574, 39,585, 39611.
6 See West Penn Allegheny Health Sys., Inc. v. UPMC, 2013 WL 121441532 (W.D. Pa. Sept. 16, 2013) (“[i]nformation regarding pricing and rates constitutes trade secret information”).
7 18 U.S.C. § 1836.
8 Central Hudson Gas & Electric Corp. v. Public Service Comm’n of New York, 447 U.S. 557, 570 (1980).
9 FTC Letter to the Hon. Nellie Pou, April 17, 2001.
10 FTC Letter to Hons Joe Hoppe and Melissa Hortman, June 29, 2015.
11 Id.
12 UnitedHealth Group Comments on Re: RIN 0955-AAOI, 21st Century Cures Act, Proposed Rule, June 3, 2019.



Topics: Federal Advocacy

Revision Date: 9/27/2019

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