Fact Sheets

FINAL 2012 POLICY, PAYMENT CHANGES FOR HOSPITAL OUTPATIENT DEPARTMENTS

OVERVIEW

On Nov. 1, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a final rule with comment period (final rule) that will update payment policies and rates for both hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) for calendar year (CY) 2012.  The final rule seeks to promote higher quality and more efficient services for Medicare beneficiaries.

CMS projects that total payments for services furnished to people with Medicare in HOPDs during CY 2012 under the Outpatient Prospective Payment System (OPPS) will be approximately $41.1 billion, while total projected CY 2012 payments under the ASC payment system will be approximately $3.5 billion.

OUTPATIENT PROSPECTIVE PAYMENT SYSTEM

Background

Since August 2000, Medicare has paid hospitals for most services furnished in their outpatient departments under the OPPS. Medicare currently pays more than 4,000 hospitals – which includes general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals – for outpatient services under the OPPS. Medicare also pays community mental health centers (CMHCs) under the OPPS for partial hospitalization program (PHP) services. The OPPS payments cover facility resources including equipment, supplies, and hospital staff but do not pay for the services of physicians and nonphysician practitioners who are paid separately under the Medicare Physician Fee Schedule (MPFS).

Services under the OPPS are classified into payment groups called Ambulatory Payment Classifications (APCs). Services in each APC are clinically similar and require the use of similar resources and a payment rate is established for each APC. The APC payment rates are adjusted for geographic cost differences, and payment rates and policies are updated annually through rulemaking. The final becomes effective Jan. 1 of the applicable year.

Beneficiaries generally share in the cost of services furnished under the OPPS by paying either a 20 percent coinsurance or, for certain services, a copayment which under the Medicare law may not exceed 40 percent of the total payment for the APC.  The statutory copayment is gradually being replaced by the 20 percent coinsurance as the composition of APC groups is updated in response to policy changes or new cost data. CMS estimates that the overall beneficiary share of the total payments for Medicare covered outpatient services will be about 21.8 percent in CY 2012.

Significant policy and payment decisions for CY 2012

Changes to payment rates under the OPPS in CY 2012

• Payment rate increase due to the market basket update and required adjustments:  The outpatient department fee schedule increase factor (also referred to as the market basket update) for CY 2012 will be 1.9 percent.  This reflects a hospital inpatient market basket percentage increase of 3.0 percent for hospital inpatient services paid under the Inpatient Prospective Payment System (IPPS) minus a productivity adjustment of 1.0 percentage points and minus a 0.1 percentage point adjustment as required by the Affordable Care Act of 2010. 

• Adjustment to cancer hospital payment rates:  Consistent with the Affordable Care Act, CMS is adjusting OPPS payments to certain cancer hospitals – those exempted by law from payment under the Inpatient Prospective Payment System ‑ for covered HOPD services provided in CY 2012.  If a cancer hospital has a payment-to-cost ratio (PCR) for CY 2012 that is below the target PCR as defined in the final rule, the cancer hospital will receive an additional payment so that final payment is equal to the target PCR.  The target PCR is defined as the weighted average PCR for other hospitals furnishing services under the OPPS determined from cost reports available at the time of this final rule.  The adjustment will result in an estimated increase in payments to cancer hospitals of 11.3 percent (approximately $71 million) compared to estimated payments that would have been made to these hospitals under the OPPS, including TOPs.  In addition, in response to comments, CMS will provide the CY 2012 payment adjustment to cancer hospitals in the form of an aggregate payment at cost report settlement, thereby avoiding the higher copayments for beneficiaries and budgetneutrality adjustment to non-cancer hospitals associated with providing the adjustment on a claims basis as was proposed. 

• Drugs and pharmacy overhead – For CY 2012, CMS will pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at the average sales price (ASP) plus 4 percent.  The payment rate of ASP plus 4 percent is based upon the cost of separately payable drugs and biologicals, calculated from hospital claims and cost reports, with an adjustment for pharmacy overhead cost that reflects the redistribution of approximately $240 million of the pharmacy overhead cost currently attributed to packaged drugs and biologicals (both coded and uncoded) to separately payable drugs and biologicals without pass-through status.

• Payment for partial hospitalization services - For CY 2012, CMS is updating the partial hospitalization program (PHP) APC per diem payment rates, two for community mental health centers (CMHCs), and two for hospital-based PHPs based on the median costs calculated using the most recent claims data for each provider type. The following chart displays the final CY 2012 median per diem costs for CMHC PHPs and hospital-based PHPs respectively:

Supervision requirements for outpatient therapeutic services:  CMS is establishing a process to consider requests for changes in the required level of supervision for outpatient therapeutic services.  CMS will refer requests to the Ambulatory Payment Classification (APC) Panel for an evaluation and recommendation as to whether a level of supervision other than direct supervision

may be appropriate.  The APC Panel is subject to the Federal Advisory Committee Act (FACA) rules, and is inclusive and well-balanced, incorporating several relevant areas of expertise including clinical, facility and coding perspectives.  CMS will add two small rural PPS hospital members and two CAH members to represent their interests to the Panel so that all hospitals subject to the supervision rules for payment of outpatient therapeutic services will be represented.  CAH representatives will not participate in deliberations about APC assignments under the OPPS, because CAHs are not paid under the OPPS.

Changes to Hospital Outpatient Quality Reporting Program:

• Quality measures to be reported – To allow CMS and hospitals to more effectively plan for future measurement requirements, CMS is adopting measures for two subsequent payment determinations.  Specifically, CMS is adding three quality measures to the current list of 23 measures to be reported by HOPDs, bringing to the total number of measures to 26 that are to be reported for purposes of the CY 2014 and CY 2015 payment determinations.  These new measures include:

• One chart abstracted measure about cardiac rehabilitation patient referral;
• One structural measure about the use of a safe surgery checklist; and
• One structural measure collecting hospital outpatient department volume for selected surgical procedures.

The complete list of existing and new measures for reporting for the CY 2012 through the CY 2015 payment determinations is attached as Appendix A.

• Validating hospital outpatient quality reportingdata –For the CY 2013 payment determination, CMS will continue to use the validation processes used for CY 2012, but will reduce the number of randomly selected hospitals from 800 to 450.   CMS will also select up to 50 additional hospitals based on targeting criteria which indicate possible data quality concerns.   For each selected hospital, CMS will randomly select up to 12 cases per quarter.   CMS will request the corresponding medical records for the cases, perform its own abstraction of the Hospital OQR chart-abstracted measures, and then compare the results with the measures reported by the hospital.   CMS will require hospitals to achieve a minimum 75 percent validation score based on this validation process to receive the full OPPS update in CY 2013.

AMBULATORY SURGICAL CENTERS

Background

There are approximately 5,000 Medicare-participating ASCs.   Since January 1, 2008, ASCs have been paid under a revised ASC payment system that generally aligns payment in ASCs and hospital outpatient settings by basing ASC payment rates on the APC relative weights for similar services.  Under the revised ASC payment system, CMS also adopted criteria that allowed for more procedures and services to be covered when furnished in an ASC.  

The revised ASC payment rates were established to reflect the same relativity of resource use among procedures as under the OPPS, taking into consideration the lower costs of surgical procedures performed in ASCs and maintaining budget neutrality in the payment system.  In general, the revised ASC payment rate for a covered surgical procedure is based on the APC relative payment weights for the same procedure under the OPPS. However, there are a few exceptions to this rule.   For example, for device-intensive procedures (assigned to a subset of the OPPS device-dependent APCs with a device offset percentage greater than 50 percent of the APC cost under the OPPS), ASCs receive the same payment for the device cost as under the OPPS. For ASC procedures that are predominantly performed in physicians’ offices, the ASC payment generally is capped at the lesser of the Medicare physician fee schedule non-facility practice expense relative value unit (PE RVU)-based amount or the payment amount under the standard ASC ratesetting methodology.

Significant policy and payment decisions for CY 2012

ASC payment rate updates:   The ASC payment system is updated annually by the consumer price index for all urban consumers (CPI-U), which CMS estimates to be 2.7 percent for CY 2012.  Beginning in CY 2011, the Affordable Care Act requires any annual update under the ASC payment system to be reduced by a productivity adjustment, which is 1.1 percent for CY 2012. Therefore, CMS will apply a 1.6 percent update to ASC payments for CY 2012.

ASC quality measure reporting:   The final rule implements a new quality reporting program for ASCs.   To allow CMS and ASCs to more effectively plan for future measurement requirements, the final rule adopts measures for three subsequent payment determinations.   Specifically, CMS is adopting five quality measures to be reported by ASCs beginning October 1, 2012 for CY 2014 payment determination.   These measures include four outcome and one surgical infection control measures to be reported by ASCs on Medicare claims using quality data codes. 

In addition, CMS is adding two structural measures: safe surgical checklist use and ASC facility volume data on selected ASC surgical procedures, beginning with reporting in CY 2013 for the CY 2015 payment determination and one NHSN infection control measure:  Influenza Vaccination Coverage among Healthcare Personnel, beginning with reporting in CY 2014 for the CY 2016 payment determinations, bringing the total number of measures to eight. 

The complete list of eight measures for ASC reporting in 2012 through 2014 for the CYs 2014 through 2016 payment determinations is attached as Appendix B.

HOSPITAL VALUE-BASED PURCHASING PROPOSALS FOR FY 2014

The final rule expands the HVBP program in FY 2014 by adding one new clinical practice measure to the clinical process domain, which was adopted for FY 2013.  The final rule also establishes the performance periods and performance standards for finalized outcomes measures.  Under the final rule, CMS will calculate FY 2014 incentive payments based on three areas: clinical processes of care, patient experiences, and outcomes.  CMS has also decided to suspend the effective dates of the HAC, AHRQ, and Medicare Spending per Beneficiary measures in the FY 2014 Hospital VBP Program because data on these measures will not have been made publicly available on Hospital Compare for at least one year prior to these dates.

In addition to the 12 clinical measures adopted in May, CMS is adding one new clinical practice measure to guard against infections from urinary catheters, which measures whether a urinary catheter inserted during surgery is removed on the first or second day after surgery.  CMS will weight the clinical process of care measures as 45 percent of the hospital’s total performance score.  CMS will retain the 30 percent weighting for the 8 Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) dimensions in the patient experience of care domain.

Measures based on patient outcomes

CMS intends to increase our focus on outcomes measures to improve treatment outcomes and patient safety.  In the FY 2014 Hospital VBP program, there will be three 30-day mortality measures in the outcome domain.  CMS has decided to weight the outcome domain at 25 percent of the total performance score to increase hospital focus on patient safety initiatives.

Scoring methods:

CMS will calculate a total performance score (TPS) for each hospital by combining the greater of its achievement or improvement points on each measure to determine a score for each domain, multiplying each domain score by the proposed domain weight and adding the weighted scores together.  In FY 2014, CMS will weight the clinical process of care measure set at 45 percent, the patient experience of care domain at 30 percent, and the outcomes domain at 25 percent.

Opportunity to review and correct data:

The Affordable Care Act provides hospitals with an opportunity to review and correct data to be made public under the Hospital VBP program.  To further enhance the FY 2013 program, this final rule outlines a portion of the review and correction process, which will allow hospitals an opportunity to review and correct chart-abstracted and HCAHPS data.   CMS believes this review and correction process will ensure hospitals’ ability to confirm the accuracy of data to be used for calculating the total performance score.

PHYSICIAN-OWNED HOSPITAL PROVISIONS IN THE AFFORDABLE CARE ACT

The physician self-referral law generally prohibits physicians from referring Medicare and Medicaid beneficiaries to entities with which they or an immediate family member have a financial relationship for certain designated health services, including inpatient and outpatient hospital services, unless an exception applies.   The Affordable Care Act narrowed two exceptions that permit physician ownership and investment interests in hospitals – the “whole hospital” exception and the “rural provider” exception – in part, by limiting the ability of existing physician-owned hospitals to expand their capacity.  However, the Affordable Care Act also requires CMS to create a process for certain physician-owned hospitals to apply for an exception to the prohibition on expansion of facility capacity.  The exception process adopted in the final rule that would allow a physician-owned hospital to expand its capacity closely mirrors the statutory criteria.

The final rule with comment period for the OPPS and the ASC payment system can be downloaded from:

http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1

It will appear in the Nov. 30, 2011, Federal Register.  CMS will accept comments on issues open for comment by Jan. 3, 2012, and will respond to them in the CY 2013 rule.

Additional information can be found on the CMS website at:

OPPS: www.cms.gov/HospitalOutpatientPPS/

ASC payment system:  www.cms.gov/ASCPayment/

APPENDIX A

* New measure for the CY 2012 payment determination.

** New measure for the CY 2013 payment determination.

*** Proposed new measure for the CY 2014 payment determination.

APPENDIX B

*Final new measure for the CY 2014 payment determination.

**Final new measure for the CY 2015 payment determination.

***Final new measure for CY 2016 payment determination.

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