The list will be eliminated over the course of three years.

Federal officials unveiled the 2021 Outpatient Prospective Payment System (OPPS) Final Rule this week, and it heralds a long-awaited development in the initialization of the dissolution of the Medicare Inpatient-Only List.

Introduced approximately 20 years ago, the List designates surgeries and procedures that require inpatient hospital care to be reimbursed under Medicare. Yet as advancements in care and rehabilitation have accumulated, especially during recent years, providers have begun approving more and more services to be provided under outpatient status, prompting the Centers for Medicare & Medicaid Services (CMS) to take action.

The elimination of the Inpatient-Only (IPO) List will take place over a three-year transitional period, beginning with the removal of approximately 300 primarily musculoskeletal-related services, with the entire List completely phased out by 2024 (for a full list of the services being removed, refer to pages 709-727). This will make these services eligible to be paid by Medicare in the hospital outpatient setting when outpatient care is appropriate, federal officials said – but it won’t affect pay for the same procedures if performed in the hospital inpatient setting, when inpatient care is appropriate, as determined by the physician.

“Additionally, procedures removed from the … List may become subject to medical review activities related to the two-midnight rule. In the CY 2020 OPPS/ASC (Ambulatory Surgical Center) final rule, CMS finalized a two-year exemption from certain medical review activities related to the two-midnight rule for procedures newly removed from the IPO List,” CMS said in a press release. “In this Rule, we are finalizing a policy in which procedures removed from the IPO List beginning Jan. 1, 2021 will be indefinitely exempted from site-of-service claim denials under Medicare Part A, eligibility for Beneficiary and Family-Centered Care-Quality Improvement Organization (BFCC-QIO) referrals to Recovery Audit Contractors (RACs) for noncompliance with the two-midnight rule, and RAC reviews for “patient status” (that is, site-of-service).”

The exemption will last until CMS collects sufficient Medicare claims data indicating that each procedure is more commonly performed in the outpatient setting than the inpatient setting, officials explained, allowing providers “more time to become accustomed to the new ability to bill for Medicare payment of claims for services that were previously only paid on an inpatient basis.” Yet providers are still expected to bill in compliance with the two-midnight rule, CMS added, and the BFCC-QIOs will still have the opportunity to review such claims in order to provide education for practitioners and providers regarding compliance with the two-midnight rule – but claims identified as noncompliant will not be denied with respect to the site-of-service under Medicare Part A.

Other parts of the OPPS Final Rule include policies CMS said “would continue to give beneficiaries more affordable choices on where to obtain care, with the potential for lower out-of-pocket expenses.” A total of 11 procedures are being added to the ASC covered procedures list (CPL), including total hip arthroplasty, under the CMS standard review process.  

The Final Rule also features what CMS described as a first-ever effort to overhaul the methodology used to calculate the Overall Hospital Quality Star Rating, beginning in 2021.

“After seeking stakeholder input through multiple public venues on the current methodology used to calculate the Overall Star Rating and our proposal from the 2021 proposed rule, CMS is retaining certain aspects of the current methodology (e.g., annual refresh, what measures are included, standardization of measure scores, and the use of k-means clustering to assign a rating) and updating other aspects,” officials said.

Specifically, CMS said it would combine three existing process measure groups into one new “Timely and Effective Care” group as a result of measure removals (thus, the Overall Star Ratings will ultimately be made up of five groups – Mortality, Safety of Care, Readmissions, Patient Experience, and Timely and Effective Care). Other planned moves include, among others:

  • The intention to use a simple average methodology to calculate measure group scores, instead of the current statistical Latent Variable Model;
  • Standardization of measure group scores (that is, making varying scores directly comparable by putting them on a common scale); and
  • Alteration of the reporting threshold to receive an Overall Star Rating by requiring a hospital to report at least three measures for three measures groups (however, one of the groups must specifically be the Mortality or Safety of Care group).

CMS said it also will now include critical access hospitals (CAHs) in the Overall Star Rating, as well as Veterans Health Administration (VHA) hospitals.

The Final Rule also features a 2.4-percent update of OPPS payment rates for hospitals that meet applicable quality reporting requirements.

To learn more about the Final Rule and additional changes included therein – including updates to the Partial Hospitalization Program (PHP) rate setting, PHP per-diem rates, device pass-through applications, ASC payment rates, physician-owned hospital regulations, and more – go online to:

To view a fact sheet outlining major provisions of the Final Rule with comment period, go online to:

Programming Note: Register now to attend the exclusive RACmonitor webcast, “Master the 2021 Inpatient-Only List: Get Surgery Status Determinations Right,” led by Ronald Hirsch, MD, today, Thursday, Dec. 3, at 1:30 p.m. Eastern.

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