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Inside CMS' 1,394-page outpatient final rule

By Heather Bell

November 3, 2021

CMS on Tuesday released the highly anticipated final rule for hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) for calendar year (CY) 2022.

Over the next few weeks, our team will analyze the 1,394-page rule, so be sure to join us on Thursday, December 2, for an hour-long webinar breaking down everything you need to know. In the meantime, we've pulled out the most notable policies coming your way on January 1—including fines of up to $2 million for price transparency non-compliance—and what they mean for providers.

Dec. 2 webinar: What the final outpatient and physician payment rules mean for health care

1. CMS restores IPO list—but does not reverse course on site of care shift

Perhaps the biggest change in this year's rule—and one that admittedly took a lot of us by surprise when CMS proposed it back in July—is CMS' decision to keep the Medicare Inpatient Only (IPO) list.

A bit of background: CMS for years has been trying to migrate more care to outpatient settings, steadily identifying a handful or more procedures that it would take off of the IPO list each year. Then, last year, CMS finalized a much more dramatic proposal—over strong opposition from the American Hospital Association—that would eliminate the entire IPO list by 2024. In CY 2021, CMS removed 298 services from the IPO list under that policy.

Now, CMS is not only abandoning that policy, but it is also reversing the 2021 list change, adding 293 of the 298 services removed in 2021 back to the IPO list beginning January 1, 2022. CMS conducted an additional review of 2021 OPPS claims data and applied its longstanding criteria for IPO list removal to those services. Ultimately, CMS determined five services met several of the criteria for removal: CPT codes 22630, 23472, and 27702, and their corresponding anesthesia CPT codes 01638 and 01486.

The agency also finalized its proposal to withdraw procedures newly added to the ambulatory surgical center (ASC) covered procedure list. Upon additional review, CMS will withdraw 255 of the 267 procedures newly added to the ASC covered procedure list—ensuring that those procedures will not be reimbursed in the ASC setting for Medicare patients next year.

Together, these policies are a major financial win for hospitals and health systems. They risked seeing lower payments per case as procedures moved to outpatient settings, as well as potentially losing considerable volume and market share as procedures shifted to freestanding facilities like ASCs.

But hospitals and health systems would be remiss to view this policy change as the end of the story on the site-of-care shift. In fact, CMS in the rule stated this policy change is a return to the agency's previous more measured approach of evaluating procedures and removing select codes each year. And our analysis shows some additional procedures are ripe for removal in the coming years: additional spinal fusion procedures, additional cardiac cath procedures, and vascular services procedures used to treat arterial disease.

The takeaway here is that providers should be preparing for more services to come off of the IPO list, albeit in a slower and more systematic way.

2. Higher penalties for hospital price transparency noncompliance are on the horizon

Despite pushback from hospitals, CMS finalized its proposal to increase financial penalties for hospital price transparency noncompliance, citing the agency's original concern over the high rate of noncompliance since the rules took effect January 1.

Under the final rule, CMS will impose financial penalties on a sliding scale based on hospital bed count. Smaller hospitals (those with 30 or fewer beds) will continue to face the current maximum penalty of $300 per day, or $109,500 per year, for noncompliance. But beginning January 1, 2022, larger hospitals (those with at least 550 beds) will face penalties as high as $2,007,500 if they are deemed noncompliant for the entire year.

This new upper threshold for noncompliance is likely to push leaders who have been on the sidelines to rethink their position—especially multi-hospital health systems, which face even more exposure since CMS will levy penalties against individual hospitals. While we've seen CMS delay other aspects of price transparency included in payer and surprise billing rules, CMS has shown no signs of easing up on the hospital price transparency rule.

In fact, on October 14 CMS sent 32 hospitals requests for corrective action plans after those hospitals failed to comply with warning letters sent earlier this year. Per CMS' final rule, the next enforcement step if those hospitals remain noncompliant is to begin imposing penalties—and depending on the bed count, those penalties will get significantly steeper on January 1, 2022.  

And while there are still some open questions around compliance, CMS clarified one aspect in the final rule: hospitals must ensure their machine-readable files are "easily accessible, without barriers," and available via a direct file download on a publicly available website.

3. CMS finalizes a 2% payment rate update

CMS' final rule will increase hospital outpatient and ambulatory surgical center payments by 2.0%. CMS estimates that total payments for outpatient providers will increase by approximately $5.91 billion compared with CY 2021, for a total of $82.1 billion in CY 2022. CMS estimates that total payments to ASCs will increase by $40 million compared with CY 2021, for a total of $5.41 billion.


As we saw in the inpatient proposed rule, CMS will use FY 2019 data instead of FY 2020 data to calculate payment rate changes for HOPDs and ASCs in light of the pandemic. That's because the agency expects CY 2022 outpatient service utilization to be more similar to utilization in CY 2019 than in CY 2020.

While payment rate increases are always welcome, the 2% increase is not even close to keeping pace with medical cost inflation. And it's important to note that many congressional issues that impact provider payment remain unresolved. For example, providers have no real visibility into the future of the 2% sequester cut, the MACRA patch, or telehealth reimbursement—all of which could be addressed, at least partially, in the end-of-the-year reconciliation package.

Other noteworthy proposals in the final rule

The final rule also included several proposals that have big implications for providers, including:

  • Maintaining the 340B payment rate of average sales price (ASP) minus 22.5%;
  • Updates to the Radiation Oncology Model, which will begin on January 1, 2022;
  • Pass-through payment status for three devices—and CMS will continue pass-through payments for 46 drugs and biologicals, including several that were set to expire;
  • Updates to OQR and ASCQR quality measures, including the adoption of a health care personnel Covid-19 vaccination measure.

We'll continue to provide additional commentary and analysis as we read through the final rule. Be sure to join our webinar on December 2 for a deep dive into the proposals.

Stay Up to Date: What the final outpatient and physician payment rules mean for health care

Thursday, December 2 | 3 p.m. ET

calendarThe final rules for both outpatient and physician reimbursement are due out by early November. Join Christopher Kerns and health policy expert Heather Bell as they talk through what made it into the final rules, including the biggest changes, surprises, and long-term implications for the entire industry.

Register now

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