Highlights of the 2021 Outpatient Prospective Payment System and Ambulatory Surgery Center Updates

By Cari Greenwood, RHIA, CCS, CPC

This article provides a high-level overview of select major Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) changes for CY 2021.

Medicare’s Purpose

Medicare’s proposed policies for 2021 are consistent with the directives in President Trump’s Executive Order “Protecting and Improving Medicare for Our Nation’s Seniors,” which aims to empower patients with increased choice and lower the out-of-pocket costs for Medicare beneficiaries.

The changes in the final rule increase patient choice by making Medicare payment available for more services in different sites of service. The rule advances the commitment to strengthening Medicare and reducing provider burden so that hospitals and ambulatory surgical centers can operate with increased flexibility, while aiming to better equip patients as active healthcare consumers.

Inpatient Only (IPO) List

Because Medicare no longer believes it is necessary to have an IPO list in order to identify services that require inpatient care versus those that can be performed appropriately in a hospital outpatient setting, they will use the next three years as a transitional period to eliminate the inpatient only list with the list being completely phased out by 2024.

For CY 2021, Medicare is removing 298 procedures from the IPO list to make them eligible for payment by Medicare in the hospital outpatient setting when outpatient care is appropriate, in addition to the existing eligibility for payment in the hospital inpatient setting when inpatient care is appropriate, as determined by the physician.


Table 1 shows a sample of the procedures that are being removed from the IPO list for CY 2021. As you can see, there are procedures being removed across all code ranges, including the musculoskeletal section of CPT as well as their associated anesthesia procedures and some vascular and gastrointestinal procedures.

Table 1: Sample of Services Removed from the Inpatient Only List for CY 2021 (N=298)
CY 2021 CPT CodeCY 2021 Long DescriptorCY 2021 OPPS Status IndicatorCY 2021 OPPS APC Assignment
01140Anesthesia for interpelviabdominal (hindquarter) amputationNN/A
20838Replantation, foot, complete amputationJ15116
21343Open treatment of depressed frontal sinus fractureJ15165
22595Arthrodesis, posterior technique, atlas-axis (c1-c2)J15116
23920Disarticulation of shoulderJ15115
24900Amputation, arm through humerus; with primary closureJ15115
27137Revision of total hip arthroplasty; acetabular component only, with or without autograft or allograftJ15115
37617Ligation, major artery (e.g., post-traumatic, rupture); abdomenJ15183
44300Placement, enterostomy or cecostomy, tube open (e.g., for feeding or decompression) (separate procedure)J15302

Source: Centers for Medicare and Medicaid Services. “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs.” Final Rule. https://www.cms.gov/files/document/12220-opps-final-rule-cms-1736-fc.pdf.

Two-Midnight Rule

Removal of procedures from the IPO list has implications for application of the two-midnight rule. Any procedures removed from the list for 2021 are indefinitely exempted from denials based on patient status or place of service alone. Furthermore, these accounts are not eligible for referral to the recovery audit contractor (RAC) for noncompliance with the two-midnight rule, although the Beneficiary and Family-Centered Care-Quality Improvement Organization (BFCC-QIO) may review claims to provide education to practitioners regarding two-midnight compliance. This “grace” period allows providers time to update billing systems and gain experience with admissions for the newly removed procedures without incurring adverse site of service determinations.

Ambulatory Surgery Center (ASC) Covered Procedures List

For CY 2021, eleven procedures, including total hip arthroplasty (27130), are being added to the ambulatory surgery center’s covered procedures list via the standard review process. This is based on the general standards, which require that:

  • The procedure is separately paid under the OPPS.
  • The procedure would not be expected to pose a significant safety risk to a Medicare beneficiary when performed in an ASC.
  • Based on standard medical practice, the beneficiary would not typically be expected to require active medical monitoring and care at midnight following the procedure.

Table 2 shows the eleven procedures being added for 2021.

Table 2: Final Additions to the List of ASC Covered Surgical Procedures for CY 2021 Under Standard Review Process
CY 2021 CPT/ HCPCS CodeCY 2021 Long DescriptorFinal CY 2021 ASC Payment Indicator
0266TImplantation or replacement of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed)J8
0268TImplantation or replacement of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed)J8
0404TTranscervical uterine fibroid(s) ablation with ultrasound guidance, radiofrequencyG2
21365Open treatment of complicated (e.g., comminuted or involving cranial nerve foramina) fracture(s) of malar area, including zygomatic arch and malar tripod; with internal fixation and multiple surgical approachesG2
27130Arthroplasty, acetabular and proximal femoral prosthetic replacement (total hip arthroplasty), with or without autograft or allograftJ8
27412Autologous chondrocyte implantation, kneeG2
57282Colpopexy, vaginal; extra-peritoneal approach (sacrospinous, iliococcygeus)G2
57283Colpopexy, vaginal; intra-peritoneal approach (uterosacral, levator myorrhaphy)G2
57425Laparoscopy, surgical, colpopexy (suspension of vaginal apex)G2
C9764Revascularization, endovascular, open or percutaneous, any vessel(s); with intravascular lithotripsy, includes angioplasty within the same vessel (s), when performedG2
C9766Revascularization, endovascular, open or percutaneous, any vessel (s); with intravascular lithotripsy and atherectomy, includes angioplasty within the same vessel (s), when performedG2

Source: Centers for Medicare and Medicaid Services. “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs.” Final Rule. https://www.cms.gov/files/document/12220-opps-final-rule-cms-1736-fc.pdf.

To give patients more choice on where to receive care and ensure CMS payment policies do not favor one type of care setting over another, CMS also desired expanding the number of procedures that Medicare would pay for when performed in an ASC. To do so, CMS made revisions to the criteria for assigning a procedure to the ASC covered procedure list based on Medicare’s belief that ASCs are increasingly able to safely provide a greater range of services as medical practice continues to evolve and advance, and that physicians play an important role and should be able to exercise their clinical judgment in making site-of-service determinations.

Revisions include:

  • Adding procedures based on a nomination process under which external stakeholders may put forth procedures they feel are appropriate for inclusion on the list based on suggested parameters from Medicare. These procedures must meet the general standards for surgical procedures performed in an ASC, but the general exclusion criteria 1-5 (listed below) will be eliminated, as the general standards provide sufficient guardrails to ensure, along with appropriate patient selection and the complex medical judgment of the physician, that procedures can be performed safely on an ambulatory basis. CMS will select nominated procedures to propose and finalize during the annual rulemaking process.
  • Keep the general standard criteria while eliminating general exclusion criteria 1-5 to allow greater flexibility for physicians to divert patients who can be safely treated in the ASC setting away from hospitals and preserve hospital capacity for more acute patients.
General Exclusion Criteria 1-5

According to Section 42 C.F.R. § 416.166(c), covered surgical procedures do not include those surgical procedures that:

  1. Generally result in extensive blood loss
  2. Require major or prolonged invasion of body cavities
  3. Directly involve major blood vessels
  4. Are generally emergent or life-threatening in nature
  5. Commonly require systemic thrombolytic therapy

Under these revised criteria, CMS is adding an additional 267 procedures to the 2021 list of ASC covered procedures list.

340B Drug Payment Methodology

In the 2021 proposed rule, Medicare proposed the adoption of a payment rate of the average sale price minus 34.7% with a 6% add-on amount for overhead and handling costs for a net proposed rate of average sale price minus 28.7% for separately payable drugs or biologicals that are acquired through the 340B Program.

However, after public comment, Medicare has determined that in order to maintain consistent and reliable payment amid the COVID-19 public health emergency, it is appropriate to continue with the current Medicare payment policy of paying the average sale price minus 22.5% for 340B-acquired drugs, but they will consider and evaluate the appropriateness of using 340B hospital survey data to set future payment rates for 340B drugs.

Rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals will be exempted from this payment policy. They will continue to report modifier TB for 340B-acquired drugs and will continue to have a payment rate of the average sale price plus 6%.

OPPS and ASC Payment Updates

For CY 2021, Medicare is increasing the payment rates for both hospital OPPS and ASCs by 2.4%. In both settings, the increase is based on a projected hospital market basket increase of 2.4% minus a 0% adjustment for multifactor productivity. These increases only apply to hospitals and ASCs that meet applicable quality reporting requirements. CMS states that “the change will promote site neutrality and encourage migration of services to the lower cost ASC setting.”

Partial Hospitalization Program (PHP)

In regard to partial hospitalization programs, for 2021, CMS is maintaining the existing structure of a single PHP Ambulatory Payment Classification (APC) for each provider type for days with three or more services per day. CMS will continue to use the community mental health clinic and hospital-based PHP geometric mean per diem costs. The final CY 2021 hospital-based PHP geometric mean per diem costs are $136.14 for APC 5853 and $253.76 for APC 5863.

New Pass-Through Device Applications

For CY 2021, CMS evaluated applications for device pass-through payments for the five devices listed below. All devices were approved for pass-through status.

  • EXALT Model D Single-Use Duodenoscope
  • Hemospray Endoscopic Hemostat
  • Spine Jack Expansion Kit

Note: There were no devices with transitional pass-through payment expiring at the end of 2020.

Cancer-Related Protein Based MAAAs

Beginning in 2021, cancer-related protein-based Multianalyte Assays with Algorithmic Analyses, or MAAAs (CPT codes 81500, 81503, 81535, 81536, 81539 and 81490), which are not generally performed in the hospital outpatient department setting, are excluded from the OPPS packaging policy. The laboratory date of service (DOS) policy is being revised to add these tests to the laboratory DOS provisions. These changes require laboratories performing cancer‑related protein‑based MAAAs that meet the date of service requirements to bill Medicare directly for those tests instead of seeking payment from the hospital.

Prior Authorization

For 2021, CMS will require prior authorization for cervical fusion with disc removal and implanted spinal neurostimulators procedures. CMS’ indication for requiring prior authorization is the determination that there has been an unnecessary increase in the volume of these services. Note that the prior authorization process requirement does not go into effect until July 1, 2021.

Comprehensive APCs (C-APCs)

For CY 2021, Medicare created two new C-APCs by adding a level to two existing C-APC groups.

  • Based on claims data, CMS believes that it is appropriate to create an additional Neurostimulator and Related Procedures APC level between the current Level 2 and 3 APCs. Creating this APC allows for a smoother distribution of the costs between the different levels based on their resource costs and clinical characteristics. For 2021 OPPS, CMS has established a five-level APC structure for the Neurostimulator and Related Procedures series. In addition, CMS will assign CPT 0398T (Magnetic resonance image guided high intensity focused ultrasound) to this new Level 3 APC.
  • The change to the urology APC group creates an intermediate step between the Level 6 and Level 8 APCs to smooth out the transition of the cost between these levels. To lessen the large payment gaps on both a dollar and percentage basis between APCs 5376 and 5377, CMS is establishing APC 5378 (Level 8 Urology and Related Services) with status indicator ‘‘J1’’ for CY 2021.
Conversion Factors
  • OPPS: The 2021 OPPS conversion factor for hospitals meeting the outpatient quality reporting requirements is $82.797. With a 2% reduction for not reporting outpatient quality data, the conversion factor is $81.183.
  • ASC: The 2021 conversion factor for ASCs meeting the outpatient quality reporting requirements is $48.952. With a 2% reduction for not reporting outpatient quality data, the conversion factor is $47.996.

As with all updates, understanding the impact that the full scope of the changes will have on your organization will take additional research. For complete details regarding all of the changes resulting from publication of the 2021 OPPS and ASC Final Rule (e.g., payment rates), visit the resources below:

OPPS and ASC final rule for CY 2021


Medicare CY 2021 final rule OPPS addenda


Medicare CY 2021 final rule ASC addenda


Cari Greenwood is an independent coding educator.

Syndicated from https://journal.ahima.org/highlights-of-the-2021-outpatient-prospective-payment-system-and-ambulatory-surgery-center-updates/

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