Hospital Outpatient Prospective Payment System (HOPPS)

Definition: The 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 inpatient hospital services when Medicare cannot pay under Part A
• Community Mental Health Centers’ partial hospitalization services and certain inpatient hospital services Medicare Part B pays
• Home Health Agency 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–provided hepatitis B shots and their administration
• Initial Preventive Physical Examinations within the first 12 months of Medicare Part B coverage
• No patient coinsurance or deductible for preventative services that have a United States Preventative Services Task Force–recommended grade A or B status

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.^4–6 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 and pharmacists in these settings: 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 services, a service that pharmacists routinely provide, are a covered service in the HOPPS system under APC group 5822 – Level 2 Health and Behavior Services.

From a quality measurement perspective, the HOPPS includes the Hospital Outpatient Quality Reporting Program, which requires acute care, 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. Centers for Medicare & Medicaid Services. The Medicare Learning Network. Medicare payment systems. Baltimore, MD: CMS. Available at: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/html/medicare-payment-systems.html. Accessed August 13, 2024.
2. Rawson JV, Kassing P. HOPPS: Evolution of a CMS process. J Am Coll Radiol. 2007;4(2):102–105.
3. Anumula N, Sanelli PC. Hospital outpatient prospective payment system. AJNR Am J Neuroradiol. 2012;33(4):616–617.
4. American College of Radiology. Hospital Outpatient Prospective Payment System. Washington, DC: ACR. Available at: https://www.acr.org/Advocacy-and-Economics/Radiology-Economics/Medicare-Medicaid/HOPPS. Accessed August 13, 2024.
5. Rawson J, Kassing P. Introduction to HOPPS. Washington, DC: American College of Radiology. Available at: https://www.acr.org/-/media/ACR/Files/Advocacy/HOPPS/HOPPS-Webinar-Introduction.pdf. Accessed August 13, 2024.
6. Medpac. Outpatient Hospital Services Payment System. Washington, DC: Medpac. Available at: https://www.medpac.gov/wp-content/uploads/2021/11/medpac_payment_basics_21_opd_final_sec.pdf. Accessed August 13, 2024.
7. Boyle JA, Homsted F, Wang F, et al. FAQ: Chronic Care Management. Bethesda, MD: American Society of Health-System Pharmacists. Available at: https://www.ashp.org/-/media/assets/pharmacy-practice/resource-centers/ambulatory-care/chronic-care-management-faq.ashx. Accessed August 13, 2024.
8. Centers for Medicare & Medicaid Services. Hospital Outpatient Quality Reporting Program. Baltimore, MD: CMS. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalOutpatientQualityReportingProgram. Accessed August 13, 2024.

Contributing author:

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

Last Updated 8/13/2024 by Morgan P. Stewart, PharmD, BCACP, BC-ADM