Hospital Outpatient Prospective Payment System (HOPPS)

Definition: Hospital Outpatient Prospective Payment System (HOPPS) is a payment system that was established in August 2000 by government legislation to create prospectively set payment rates for designated hospital outpatient services. It is administered by the Centers for Medicare and Medicaid (CMS). The following services are covered under HOPPS¹:

• Designated hospital outpatient items and services
• Certain Medicare Part B services for hospital inpatients when Medicare can’t pay under Part A
• Community Mental Health Centers (CMHCs) partial hospitalization services and certain inpatient hospital services Medicare Part B pays
• Home Health Agency (HHA) hepatitis B shots and their administration, splints, casts, and antigens for patients not under a home health plan of care or for hospice patients for treatment of non-terminal illness or related conditions
• Comprehensive Outpatient Rehabilitation Facility (CORF) provided hepatitis B shots and their administration
• Initial Preventive Physical Examinations (IPPEs) within the first 12 months of Medicare Part B coverage

HOPPS was created to reduce beneficiary copayments in response to rapidly growing Medicare expenditures for outpatient services and large copayments being made by Medicare beneficiaries.^2,3 Under HOPPS, all covered outpatient services are divided into an ambulatory payment classification (APC) group. The services in each APC are clinically similar; require similar resources; and are generally paid at the same prospectively fixed rate based on a set of relative weights, a conversion factor, and adjustments for geographic factors.^4,5,6 CMS determines the services that are covered under the HOPPS payment program and then assigns each service to an applicable APC group using the CPT® or HCPCS code for the service.

How it relates to ACO/PCMH: The goal of HOPPS is to control costs, including beneficiary copayments, through prospectively determined bundled payments for specific services. ACOs and PCMHs are created to ensure coordination of high-quality care to the patients they serve, which includes making sure patients get the right care at the right time and avoid any unnecessary duplication of services. Services covered under the HOPPS program can also contribute to meeting quality metrics the organization is accountable for in ACO/PCMH models. For example, chronic care management (CCM) services are a covered service in the HOPPS system under APC group 5822 – Level 2 Health and Behavior Services. Through a health care practitioner’s identification of eligible patients and delivery of high-quality care through CCM, patients are able to achieve a better quality of life through continuous care and management of their conditions. Ultimately, health care costs are reduced through CCM services by helping to decrease emergency room visits and hospital stays. CMS recognizes pharmacists as clinical staff who can engage in CCM services under the general supervision of a qualified health care provider, and as members of the care team pharmacists can provide a variety of CCM services, including collecting structured data, maintaining and informing updates for the care plan, managing care, documenting CCM services, and providing support services to facilitate CCM.⁷ CCM services allow health care providers in outpatient departments to focus on individualized care, to coordinate appropriate outpatient services through close follow-up, and to be reimbursed for services provided.

From a quality measurement perspective, the HOPPS includes the Hospital Outpatient Quality Reporting Program, which requires acute, short-term hospitals to report quality data or incur a 2% reduction in their HOPPS payments.⁸

Involved organizations/oversight: Hospitals report codes on claims and CMS does the translation to APCs and payments. CMS reviews and revises the APCs and their relative weights annually. The review considers changes in medical practice, changes in technology, addition of new services, new cost data, and other relevant information. The Balanced Budget Refinement Act of 1999 requires CMS to consult with a panel of outside experts as part of this review.⁶

Resources:

1. The Medicare Learning Network. Medicare payment systems. https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/html/medicare-payment-systems.html
2. Rawson JV, Kassing P. HOPPS: evolution of a CMS process. J Am Coll Radiol. 2007;4(2):102–5.
3. Anumula N, Sanelli PC. Hospital outpatient prospective payment system. AJNR Am J Neuroradiol. 2012;33(4):616–7.
4. American College of Radiology. Hospital Outpatient Prospective Payment System. ACR: American College of Radiology. https://www.acr.org/Advocacy-and-Economics/Radiology-Economics/Medicare-Medicaid/HOPPS
5. Rawson J, Kassing P. Introduction to HOPPS. American College of Radiology. https://www.acr.org/-/media/ACR/Files/Advocacy/HOPPS/HOPPS-Webinar-Introduction.pdf
6. Medpac. Outpatient Hospital Services Payment System. Medpac. https://www.medpac.gov/wp-content/uploads/2021/11/medpac_payment_basics_21_opd_final_sec.pdf
7. Boyle JA, Homsted F, Wang F, et al. FAQ: Chronic Care Management. ASHP: Pharmacists advancing healthcare. https://www.ashp.org/-/media/assets/pharmacy-practice/resource-centers/ambulatory-care/chronic-care-management-faq.ashx
8. CMS. Hospital Outpatient Quality Reporting Program. CMS.gov. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalOutpatientQualityReportingProgram

Contributing Author:

Nnenna Emeghara, PharmD
PGY2 Ambulatory Care Pharmacy Resident, Franciscan Health

Last Updated 3/16/2022