CMS Pub. 100-04, ch. 4, § 10.6.2.2

The reduction to the annual update factor for failure to meet the quality reporting

requirements applies to most, but not all, services paid under the OPPS. The reduction of

payments does not apply to services paid under the OPPS if the payment amounts are not

calculated using the conversion factor to which the annual update factor applies (e.g.,

drugs and biologicals paid based on the average sales price (ASP) methodology, new

technology services paid at a fixed amount, and services paid at charges adjusted to cost).

The reduction also does not apply to hospital outpatient services paid through other fee

schedules or other mechanisms. Examples of these exceptions are services paid under the

physician fee schedule (e.g., physical therapy and diagnostic and screening

mammography), services paid at reasonable cost (e.g., influenza and pneumococcal

vaccines), and services paid under other fee schedules (e.g., clinical laboratory services

and durable medical equipment).

The specific services to which this policy applies can be identified by OPPS status

indicator. CMS will identify the status indicators of the HCPCS codes to which the

reduction applies each year in the change request that announces changes to the OPPS for

the forthcoming calendar year. Also, the status indicators for the services (identified by

HCPCS codes) to which the reduction applies can be found in the OPPS final rule for the

year of interest under “Hospital Outpatient Regulations and Notices” at

www.cms.hhs.gov/HospitalOutpatientPPS/. The services excluded from the payment

reduction may change each year if the method of calculating payment under the OPPS

changes.