What the Outpatient Prospective Payment System Is

The Outpatient Prospective Payment System (OPPS) is how Medicare pays hospitals for outpatient care — meaning any treatment you receive without staying overnight. Instead of paying based on what the hospital actually spent on your care, Medicare sets a fixed price ahead of time for each type of service. The hospital gets that amount whether the service costs them more or less.

OPPS applies to hospital outpatient departments only, not to doctor's offices, urgent care centers, or ambulatory surgery centers run by non-hospitals. If you go to a hospital's emergency room, get an imaging scan at the hospital's imaging center, or have same-day surgery at a hospital facility, OPPS is how that bill gets paid to the hospital.

The system has been in place since 2000. Medicare updates the payment rates every January, and those rates vary by geographic region — what Medicare pays for the same procedure in rural Montana differs from what it pays in New York City.

Key Takeaways

  • OPPS sets a fixed payment amount for each outpatient service before you receive care, so the hospital's bill to Medicare does not change based on how long the procedure takes or what complications arise.
  • The system covers only hospital outpatient departments; doctor's offices and independent surgery centers use different payment methods.
  • Medicare updates OPPS payment rates every January, and rates differ by region based on local wage and cost factors.
  • Your out-of-pocket cost (copay or coinsurance) is calculated from the OPPS rate, so knowing the rate can help you estimate what you will owe.
  • Hospitals must report what they charge you separately from what Medicare pays them, so your bill and the Medicare payment are two different numbers.

How OPPS Payment Rates Are Set

Medicare assigns every outpatient service a code called an Ambulatory Payment Classification (APC). Each APC has a fixed dollar amount attached to it. That amount is what Medicare will pay the hospital for that service, regardless of the actual cost to the hospital or how long the procedure takes.

The rates are based on historical data about what outpatient services cost, adjusted for inflation and regional differences. A procedure in a high-wage urban area gets a higher rate than the same procedure in a lower-wage rural area. Medicare publishes the full OPPS payment schedule every year, and hospitals can look up what they will be paid for any given service code.

Some procedures are bundled into a single APC payment, meaning multiple related services are paid as one lump sum. For example, if you have an outpatient imaging scan that requires contrast dye and a radiologist's interpretation, those might all roll into one APC payment rather than being paid separately.

What You Pay Out of Pocket Under OPPS

Your copay or coinsurance is calculated from the OPPS rate, not from what the hospital actually charges you. If the OPPS rate for a procedure is $500, you typically pay 20 percent coinsurance ($100), and Medicare pays the hospital $400. If the hospital's actual charge is $800, you still owe only $100 — the difference between the hospital's charge and the OPPS rate is written off.

However, if the hospital charges less than the OPPS rate, you pay coinsurance on the lower amount. Your out-of-pocket cost is always based on the smaller of the two: the OPPS rate or the hospital's actual charge.

Before you receive outpatient care, you can ask the hospital for an estimate of the OPPS rate for your procedure. The hospital should be able to tell you the APC code and the Medicare payment amount, which lets you calculate roughly what your coinsurance will be.

How OPPS Differs From Other Payment Methods

Inpatient hospital stays use a different system called Diagnosis-Related Groups (DRG), which pays a flat rate based on your diagnosis rather than the specific procedures you receive. Outpatient care uses OPPS, which pays based on the specific service code.

Doctor's offices and independent ambulatory surgery centers do not use OPPS. They use the Physician Fee Schedule, which is a different set of payment rates for the same procedures. This is why the same surgery can cost you different amounts depending on whether it happens at a hospital outpatient department or at an independent surgery center.

Medicare Advantage plans (Part C) may use OPPS rates as a starting point but can negotiate different amounts with hospitals. Your actual out-of-pocket cost under an Advantage plan depends on your plan's contract with the hospital, not directly on the OPPS rate.

When OPPS Rates Change and How to Find Them

Medicare updates OPPS payment rates every January 1st. The rates typically increase slightly to account for inflation, though the increase varies by service type and region. The Centers for Medicare & Medicaid Services (CMS) publishes the new rates in the Federal Register in November of the prior year, giving hospitals time to update their billing systems.

You can find the current OPPS rates on the CMS website under "Outpatient Prospective Payment System." The rates are organized by APC code, and each code includes the national base rate and a geographic adjustment factor for your region. If you know the APC code for your procedure, you can calculate the payment amount for your area.

Hospitals are required to provide you with a good-faith estimate of your costs before you receive outpatient care. That estimate should include the OPPS rate (or the hospital's charge, whichever is lower) and your expected coinsurance. If the actual bill differs significantly from the estimate, you can dispute it.

Why OPPS Matters for Your Bill

OPPS protects you from surprise bills in one important way: the hospital cannot charge you more than the OPPS rate plus your coinsurance, even if the procedure costs them more. The OPPS rate is a ceiling on what Medicare will pay, and you are responsible only for your share of that rate.

However, OPPS does not protect you from balance billing by non-hospital providers. If a radiologist or anesthesiologist who works at the hospital is out-of-network with your insurance, they can bill you for the difference between what they charge and what your insurance pays. That bill comes separately from the hospital's OPPS bill.

Understanding OPPS rates helps you estimate your costs before you go to the hospital. If you know the APC code and the rate for your region, you can calculate your coinsurance and plan accordingly. Ask the hospital's billing department for the APC code and the OPPS rate before your procedure.

Frequently Asked Questions

Can I negotiate the OPPS rate with the hospital?

No. OPPS rates are set by Medicare and do not change based on individual negotiations. However, if you are uninsured or paying out of pocket, the hospital may offer a discount below the OPPS rate. Always ask about financial assistance or cash-pay discounts before your procedure.

Does OPPS apply to my Medicare Advantage plan?

Medicare Advantage plans use OPPS rates as a reference point but can negotiate different amounts with hospitals. Your out-of-pocket cost depends on your plan's contract, not directly on the OPPS rate. Check your plan documents or call your plan to find out what you will owe for a specific procedure.

What if the hospital bills me more than the OPPS rate?

The hospital should write off any charge above the OPPS rate. If you receive a bill for more than the OPPS rate plus your coinsurance, contact the hospital's billing department and ask them to adjust the bill. You can also file a complaint with your state's insurance commissioner if the hospital refuses to correct it.

How do I find the APC code for my procedure?

Ask the hospital's billing or scheduling department for the APC code before your procedure. You can also search the CMS OPPS file by procedure name or CPT code. Once you have the APC code, you can look up the payment rate on the CMS website and calculate your expected coinsurance.

Does OPPS apply to emergency room visits?

Yes. Emergency room visits at hospitals are outpatient services and are paid under OPPS. However, if you are admitted to the hospital after the ER visit, your inpatient stay is paid under the DRG system instead. Your ER bill and your inpatient bill are separate.