Fact Sheets






On July 1, 2009, the Centers for Medicare & Medicaid Services (CMS ) issued a proposed rule that would update payment policies and rates for both hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) for calendar year (CY) 2010.  The update to ASC rates constitutes the third year of a four-year transition to align these rates with those paid to HOPDs for similar services.    The proposed rule also seeks to promote higher quality, efficient services for Medicare beneficiaries by proposing improvements to the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) and establishing procedures to make the data collected through the HOP QDRP publicly available.


CMS  projects that total payments for services furnished to people with Medicare in HOPDs during CY 2010 under the Outpatient Prospective Payment System (OPPS) would be $31.5 billion, while total projected CY 2010 payments under the ASC payment system would be approximately $3.4 billion.






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 ‑‑ including 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, as well as and community mental health centers (CMHCs) for partial hospitalization 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).


All services under the OPPS are classified into groups called Ambulatory Payment Classifications (APCs).  Services in each APC are similar clinically and in terms of the resources they require.  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 rule is generally issued by November 1 each year and, unless otherwise specified, becomes effective January 1 of the subsequent year.


Beneficiaries share in the cost of services under the OPPS by paying either a 20 percent coinsurance rate or, for certain services, a copayment required under the Medicare law not to 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 proposed total payments for Medicare covered outpatient services would be about 23 percent in CY 2010.


Significant Proposals For Calendar Year 2010


CMS  projects that proposed CY 2010 payment rates under the OPPS would result in a 1.9 percent increase in Medicare payment for providers paid under the OPPS.


Proposals to Strengthen Ties between Payment and Quality:

  • Payment reduction for failure to report quality measures – As required by law,   the proposed rule includes a reduction to the projected CY 2010 annual payment update factor of two percentage points for most services furnished by hospitals that failed to meet the requirements of the HOP QDRP for the CY 2010 payment update.  The reduction would not apply to payments for separately payable pass-through drugs and biologicals and devices, separately payable non-pass-through drugs and non-implantable biologicals, separately payable therapeutic radiopharmaceuticals, and services assigned to New Technology APCs.
  • Quality measures to be reported – CMS is proposing to continue to require hospitals participating in HOP QDRP to report the existing 7 chart-abstracted emergency department and perioperative measures, and 4 existing claims-based imaging efficiency measures for the HOP QDRP for CY 2011 payment determination.
  • Quality measures under consideration for future years – CMS is also seeking public comment on potential quality measures for consideration for future OPPS updates, but is not proposing to add them to the quality measures for the CY 2011 update.  The potential measures relate to a number of areas including cancer care, emergency department throughput, diabetes, stroke and rehabilitation, osteoporosis, medication reconciliation, respiratory, immunization, health information technology, cataract surgery, overuse/appropriate use, imaging efficiency, and surgical care.
  • Validation of quality reporting – CMS is proposing to implement a new HOP QDRP validation requirement to ensure that hospitals are accurately reporting measures using chart-abstracted data.  Under this requirement, CMS would take a sample of actual patient records, determine how the HOP QDRP chart-abstracted measures should have been reported, and compare the results with the measures reported by the hospital.  CMS will begin validating hospital submitted data for purposes of the CY 2011 update, but the validation results will not affect a hospital’s OPPS payment until CY 2012.  This timeline will give hospitals sufficient advance notice to become familiar with the process.
  • Public reporting of quality data – CMS is proposing to establish procedures to make HOP QDRP quality data collected for quarters beginning with the third quarter of CY 2008 publicly available.


Proposed Payment Provisions:

  • Physician supervision requirements – CMS is proposing to revise or further define several current policies for the physician supervision of outpatient services.   First, CMS is proposing that nonphysician practitioners, specifically physician assistants, nurse practitioners, certified nurse specialists, and certified nurse-midwives, may directly supervise all hospital outpatient therapeutic services that they are able to personally perform within their state scope of practice and hospital-granted privileges.  Under current policy, only physicians may provide the direct supervision of these services.


In addition, CMS  is proposing to define “direct supervision” for on-campus hospital outpatient services to mean that the physician or nonphysician practitioner must be present in the hospital or on-campus provider-based department of the hospital and immediately available to furnish assistance and direction throughout the performance of the procedure, in contrast to the current definition which requires the physician to be present in the on-campus provider-based department.  For services furnished in an off-campus provider-based department, “direct supervision” would continue to mean that the physician or nonphysician practitioner must be present in the off-campus provider-based department and immediately available to furnish assistance and direction throughout the performance of the procedure.


CMS  is also proposing to require that all hospital outpatient diagnostic services furnished directly or under arrangement, whether provided in the hospital, in a provider-based department, or at a nonhospital location, follow the MPFS physician supervision requirements for individual tests.


  • Drugs and pharmacy overhead – CMS is proposing to 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 in CY 2010.  The proposed 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 (ASP minus 2 percent), with an adjustment for pharmacy overhead cost that reflects the redistribution of $150 million of the pharmacy overhead cost currently attributed to packaged drugs and biologicals to separately payable drugs and biologicals without pass-through status.
  • Pass-through implantable biologicals – CMS is proposing that, beginning in CY 2010, implantable biologicals that are surgically implanted (through a surgical incision or a natural orifice) and that are not receiving pass-through payment before January 1, 2010 be evaluated for pass-through status using the device category pass-through process rather than the drug and biological pass-through process.  Implantable biologicals that initially qualify for pass-through status beginning on or after January 1, 2010 would be paid at hospitals’ charges adjusted to cost under this proposal.
  • Drug and biological pass-through payment eligibility period – CMS is proposing to begin the two to three year pass-through payment eligibility period for a new drug or nonimplantable biological on the date of first sale of the drug or nonimplantable biological in the United States following approval by the Food and Drug Administration for those products that initially qualify for pass-through status beginning on or after January 1, 2010 .  Under current policy, the pass-through payment eligibility period begins on the same date that the first pass-through payment is made under the OPPS.
  • Partial hospitalization services, including services provided by CMHCs – CMS is proposing to continue paying two separate partial hospitalization program (PHP) rates:  one for days with three services ($148) and one for days with four or more services ($211).  CMS is also proposing to continue the CMHC multiple outlier threshold at 3.4 times the APC payment amount for higher intensity partial hospitalization days for CY 2010.
  • Kidney disease education – To implement a new benefit authorized by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS is proposing to establish payment to rural providers under the MPFS for kidney disease education services furnished on or after January 1, 2010 for Medicare beneficiaries diagnosed with Stage IV chronic kidney disease.
  • Pulmonary and cardiac rehabilitation – To implement additional benefits authorized by MIPPA, CMS is proposing to establish OPPS payment for pulmonary and intensive cardiac rehabilitation services furnished to beneficiaries with chronic obstructive pulmonary disease, cardiovascular disease, and related conditions, effective January 1, 2010.
  • Therapeutic radiopharmaceuticals – CMS is proposing to provide payment for separately payable therapeutic radiopharmaceuticals that have ASP information submitted through the existing ASP process at ASP plus 4 percent.  If ASP information is not available, CMS is proposing that payment would be based upon mean unit cost from hospital claims data.
  • Brachytherapy sources – CMS is proposing to pay for brachytherapy sources based on median unit costs, as calculated from claims data according to the standard OPPS ratesetting methodology.







There are approximately 5,000 Medicare-participating ASCs.  Since January 1, 2008 , ASCs have been paid under a revised ASC payment system that both aligns payment in ASCs and hospital outpatient settings by basing ASC payment rates on the APC relative weights for similar services and extends payment to more surgical services in ASCs.  To minimize the impact of the revised payment system, the ASC payment rates calculated under the standard ratesetting methodology are being phased in over four years.  CY 2010 is the third year of the transition.  In general, the revised ASC payment rate for a service is a percentage of the payment rate for the same service under the OPPS; however, there are a few exceptions.  For device-intensive services (assigned to a subset of the OPPS device-dependent APCs where device costs account for more than 50 percent of the total cost of the service), ASCs receive the same payment for the device cost as under the OPPS.  For new ASC services that are predominantly performed in physicians’ offices, the ASC payment is capped at the amount the physician is paid under the MPFS for practice expenses for providing the same service in an office.


In the CY 2008 final rule that revised the ASC payment system, CMS added approximately 800 procedures to the list of ASC procedures for which payment could be made.  Only those surgical procedures that would be expected to pose a significant safety risk to beneficiaries or that would be expected to require an overnight stay following the procedure are excluded from the ASC list.   These changes in payment policies for ASCs give patients broader access to surgical services in settings that are clinically appropriate.  


Significant Proposals For Calendar Year 2010:


Proposed ASC Payment Rate Updates:   The revised ASC payment rates were established to reflect the same relativity of resource use among services as under the OPPS, taking into consideration the lower costs of the services in ASCs and maintaining budget neutrality in the payment system.  By law, CY 2010 is the first year that CMS may provide an inflation update under the revised ASC payment system.  CMS projects the percentage increase in the Consumer Price Index for All Urban Consumers that would update the conversion factor to be 0.6 percent.


Proposed Changes to ASC Covered Surgical Procedures and Covered Ancillary Services:   CMS is proposing to add 28 surgical procedures to the list of procedures for which Medicare would pay when performed in an ASC.  These include 2 procedures for which the American Medical Association’s CPT (Current Procedural Terminology) Editorial Panel has created new codes and descriptors and 26 procedures that were previously excluded from payment under the ASC payment system.


CMS  is also proposing to newly designate six procedures as office-based procedures (subject to payment at the lesser of the national office practice expense payment to the physician or the national standard ASC rate) and to update the list of device-intensive procedures and covered ancillary services and their rates, consistent with proposals in the OPPS update.


CMS  will accept comments on the proposed rule until August 31, 2009, and will respond to comments in a final rule to be issued by November 1, 2009 .

For more information on the CY 2010 proposals for the OPPS and ASC payment system, please see the CMS  Web site at:  


ASC payment system:



# # #