Outpatient Prospective Payment System & Ambulatory Surgical Center (OPPS/ASC)
Model Summary
Outpatient Prospective Payment System & Ambulatory Surgical Center (OPPS/ASC)
Overview
The OPPS governs Medicare payment for approximately 3,500 hospital outpatient departments (HOPDs), while the ASC payment system covers approximately 6,100 ambulatory surgical centers. CMS updates both systems annually through a single rule, typically effective January 1 (calendar year basis). The rule also administers the Hospital Outpatient Quality Reporting (OQR) Program, prior authorization requirements, and policies affecting 340B hospitals, rural emergency hospitals, and site-of-service payment neutrality.
Payment Rate Update Trends (CY 2021-2025)
| Calendar Year | Market Basket | Productivity Adj. | Net OPPS/ASC Update |
|---|---|---|---|
| CY 2021 | 2.4% | 0.0% | 2.4% |
| CY 2022 | 2.7% | -0.7% | 2.0% |
| CY 2023 | 4.1% | -0.3% | 3.8% |
| CY 2024 | 3.3% | -0.2% | 3.1% |
| CY 2025 | 3.4% | -0.5% | 2.9% |
The net OPPS/ASC update ranged from 2.0% (CY 2022) to 3.8% (CY 2023), reflecting the post-COVID inflationary spike. The productivity adjustment returned after being zero in CY 2021 and has ranged from 0.2% to 0.7%.
Proposed vs. Final Comparison:
| Year | Proposed Update | Final Update | Delta |
|---|---|---|---|
| CY 2023 | 2.7% | 3.8% | +1.1 pp |
| CY 2024 | 2.8% | 3.1% | +0.3 pp |
| CY 2025 | 2.6% | 2.9% | +0.3 pp |
The market basket consistently increased between proposed and final rules, reflecting updated inflation data. Strategic leaders should anticipate final rates exceeding proposed rates by 0.3-1.0 percentage points.
340B Drug Program Payment — The Supreme Court Reversal
| Year | 340B Drug Payment Rate | Budget Neutrality Impact |
|---|---|---|
| CY 2018-2022 | ASP minus 22.5% | N/A |
| CY 2023+ | ASP plus 6% (default rate) | -3.09% to non-drug services |
The Supreme Court's June 2022 decision in AHA v. Becerra struck down CMS's authority to pay 340B hospitals at ASP minus 22.5%. CMS reverted to the default ASP plus 6% rate starting CY 2023, but applied a -3.09% budget neutrality offset to all non-drug OPPS services. CMS issued a separate remedy rule for the CY 2018-2022 underpayments.
Prior Authorization Requirements
| Year | Services Added |
|---|---|
| CY 2021 | Cervical Fusion with Disc Removal; Implanted Spinal Neurostimulators |
| CY 2023 | Facet Joint Interventions |
Cumulative prior authorization categories: Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, Rhinoplasty, Vein Ablation (pre-CY 2021), plus Cervical Fusion/Spinal Neurostimulators (CY 2021), plus Facet Joint Interventions (CY 2023).
Site-of-Service Policy Shifts
| Year | Policy Direction |
|---|---|
| CY 2021 | ~300 musculoskeletal services removed from Inpatient Only (IPO) list; 278 procedures added to ASC Covered Procedures List |
| CY 2022 | Reversed: ~298 services added back to IPO list; 255 ASC procedures removed |
| CY 2024 | +26 dental surgical procedures and 78 ancillary dental services added to ASC list |
The CY 2021 aggressive expansion of outpatient-eligible procedures was reversed in CY 2022, reflecting the policy shift between the Trump and Biden administrations on site neutrality.
Behavioral Health Expansion (CY 2023-2025)
A clear multi-year arc of behavioral health expansion:
- CY 2023: Remote behavioral health services from hospital staff to patients at home
- CY 2024: New Intensive Outpatient Program (IOP) benefit (minimum 9 hours/week); PHP expanded to cover substance use disorder
- CY 2025: Non-opioid pain management separate payments (Section 4135 of CAA 2023); temporary additional payments through December 2027
Rural Emergency Hospital (REH) — New Provider Type
Created in CY 2023 for Critical Access Hospitals and rural hospitals under 50 beds:
- Payment: OPPS rate + 5% for covered outpatient services
- Monthly facility payment provided
- CY 2024: IHS/Tribal facility REH conversion policy established
Outpatient Quality Reporting (OQR) Program
The quality reporting penalty remains constant at 2.0 percentage points reduction for non-compliance across all years. Key evolution:
- CY 2022: COVID-19 vaccination measure added
- CY 2024: Risk-standardized PRO for THA/TKA (voluntary through CY 2027, mandatory CY 2028)
- CY 2025: Four health equity/SDOH measures added; two imaging measures removed
IHS All-Inclusive Rate (AIR)
| Year | AIR Per Encounter (Lower 48) |
|---|---|
| CY 2023 | $620 |
| CY 2024 | $667 |
| CY 2025 | Add-on for drugs exceeding 2x AIR ($1,334 threshold) |