PROPOSED 2012 POLICY, PAYMENT CHANGES FOR HOSPITAL OUTPATIENT DEPARTMENTS

OVERVIEW

On, July 1, 2011, 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) 2012.  The proposed 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 $41.9 billion, while total projected CY 2012 payments under the ASC payment system will be approximately $3.61 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 – 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. 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).

All services under the OPPS are classified into groups called Ambulatory Payment Classifications (APCs). Services in each APC are clinically similar and require the use of similar resources. 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 Nov. 1 each year and, unless otherwise specified, becomes effective Jan. 1 of the subsequent year.

Beneficiaries generally 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 total payments for Medicare covered outpatient services will be about 22.1 percent in CY 2012.

Significant Proposals for CY 2012

Proposed Changes to Payment Rates under the OPPS in CY 2012

• Projected payment rate increase due to the market basket update and required adjustments:   CMS is projecting an outpatient department fee schedule increase factor (sometimes called the market basket update) for CY 2012 of 1.5 percent.  This reflects a projected hospital inpatient market basket percentage increase of 2.8 percent for hospital inpatient services paid under the Inpatient Prospective Payment System (IPPS) minus a multifactor productivity adjustment estimated to be 1.2 percentage points and minus a 0.1 percentage point adjustment.  CMS notes that the proposed multifactor productivity adjustment and the 0.1 percentage point adjustment are needed to comply with certain provisions of the Affordable Care Act.

CMS is also proposing a 0.6 percent reduction to the payment rates for non-cancer OPPS hospitals to ensure that the proposed cancer hospital payment adjustment (as further explained below) would be budget neutral as required by the Affordable Care Act.   Finally, as a result of the proposed transition to full use of CMHC data for the CMHC PHP APC per diem payment rates, CMS is proposing a 0.2% estimated payment increase to all other hospitals in order to maintain OPPS budget neutrality.   Therefore, taking into account all adjustments, the projected increase in payment rates for services in HOPDs, other than those of cancer hospitals, is 1.1 percent for CY 2012.

• Adjustment to cancer hospital payment rates:   Consistent with the Affordable Care Act, CMS is proposing to adjust OPPS payments to cancer hospitals in CY 2012.  To the extent a cancer hospital has a   payment-to-cost ratio (PCR) that is below the weighted average PCR for other

hospital has a    payment-to-cost ratio (PCR) that is below the weighted average PCR for other hospitals furnishing services under the OPPS, the cancer hospital would receive a payment adjustment, for covered OPD services (except devices paid on pass-through) furnished on and January 1, 2012, that is equal to   the percentage difference between their individual PCR (without Transitional Outpatient Payments or TOPs) and the weighted average PCR of other hospitals furnishing services under the OPPS.  For a cancer hospital with an individual PCR above the weighted average PCR for other hospitals furnishing services under the OPPS, we are proposing a zero percent adjustment for covered OPD services furnished on and after January 1, 2012.  The proposed policy would increase payments to cancer hospitals by 38.8 percent compared to the payment that would have been made under the OPPS to these hospitals as a class in CY 2011, but does not represent the estimated net increase in payment to cancer hospitals for CY 2012.  After accounting for the TOPS payment that they would no longer receive as a result of increased payment under the OPPS as a result of the proposed cancer hospital adjustment, the estimated net increase in payment to cancer hospitals for CY 2012 would be approximately 9 percent.  The statute requires that any cancer hospital adjustment be applied in a budget neutral manner; consequently, CMS is also proposing an adjustment to non-cancer hospitals’ OPPS payments of 0.6 percent to make the additional payments to cancer hospitals budget neutral within the OPPS.

• Drugs and pharmacy overhead – For CY 2012, 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.  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, with an adjustment for pharmacy overhead cost that reflects the proposed redistribution of $215 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 proposing to update four separate partial hospitalization program (PHP) APC per diem payment rates for each PHP provider type using its own data; two for freestanding community mental health center (CMHC) PHPs, and two for hospital-based PHPs. This proposed payment approach supports continued access to the PHP benefit, including a more intensive level of care, while also providing appropriate payment based on the unique cost structures of CMHC PHPs and hospital-based PHPs. The following chart displays the proposed CY 2012 median per diem costs for CMHC PHPs and hospital-based PHPs respectively:

Proposal for Addressing Supervision Requirements for Outpatient Therapeutic Services:  CMS is proposing a process to consider requests for changes in the minimum required level of supervision for individual outpatient therapeutic services.  CMS would 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 would be inclusive and well-balanced, incorporating several relevant areas of expertise including clinical, facility and coding perspectives.  So that the APC Panel committee that considers supervision issues will have balanced membership, CMS is also proposing to add several (2 to 4) representatives of CAH interests to the Panel so that all types of hospitals subject to the supervision rules for payment of outpatient therapeutic services would be represented.  CAH representatives would not participate in deliberations about APC assignments under the OPPS, as these assignments do not affect CAHs.

Proposed Changes to Hospital Outpatient Quality Reporting Program:

• Proposed quality measures to be reported – To allow CMS and hospitals to more effectively plan for future measurement requirements, CMS is proposing measures for two subsequent payment determinations.   CMS is proposing to add 9 quality measures to the current list of 23 measures to be reported by HOPDs, bringing to the total number of measures to 32 that are to be reported for purposes of the CY 2014 payment determination.   These new measures include:

• Six chart abstracted measures;
• One healthcare associated infection measure to be reported to the National Health Safety Network;
• One measure about the use of a safe surgery checklist; and
• One measure collecting hospital outpatient department volume for selected surgical procedures.

CMS is proposing to add one measure ‑ influenza vaccination coverage among healthcare personnel ‑ to the list for reporting for the CY 2015 payment determination for a total of 33 measures.  

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

• Proposal for validating hospital outpatient quality reportingdata – Beginning with the CY 2011 payment determination, CMS implemented a Hospital OQR validation requirement to ensure that hospitals are accurately reporting chart-abstracted measure data.   For the CY 2013 payment determination, CMS is proposing to use the same processes as for CY 2012, while reducing the number of randomly selected hospitals from 800 to 450.   CMS is also proposing to select up to 50 additional hospitals based on targeting criteria which indicate possible data quality concerns.   For each selected hospital, CMS is proposing to randomly select up to 12 cases per quarter.   CMS is proposing to 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 is proposing to 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.   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 PE RVU-based amount or the payment amount under the standard ASC ratesetting methodology.

Significant Proposals 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 2.3 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.   CMS projects that the productivity adjustment for CY 2012 will be 1.4 percent, and therefore, CMS is proposing to apply a 0.9 percent update for CY 2012.

Proposed ASC quality measure reporting:   For the first time, CMS is proposing to implement a quality reporting program for ASCs.   To allow CMS and ASCs to more effectively plan for future measurement requirements, CMS is proposing measures for three subsequent payment determinations.   CMS is proposing to add 8 quality measures to be reported by ASCs beginning in CY 2012 for CY 2014 payment determination.   These measures include seven outcome and surgical infection control measures to be reported by ASCs on Medicare claims using quality data codes, and one healthcare-associated infection measure reported through the National Healthcare Safety Network.  For the CY 2015 payment determination, CMS also is proposing to add two structural measures, bringing to the total number of measures to 10 that are to be reported for purposes of the CY 2015 payment determination.  These new measures include safe surgical checklist use and ASC facility volume data on selected ASC surgical procedures.  CMS also is proposing to add one measure on influenza vaccination coverage among healthcare personnel for reporting beginning in CY 2013 for the CY 2016 payment determination. 

The complete list of proposed measures for ASC reporting in for the CYs 2014, 2015, and 2016 payment determinations is attached as Appendix B.

HOSPITAL VALUE-BASED PURCHASING PROPOSALS FOR FY 2014

CMS is proposing to expand the HVBP program in FY 2014 by retaining the FY 2013 clinical process and patient experience measures, adding one new clinical practice measure as well as proposing the performance periods and performance standards for finalized outcomes measures. 

CMS is proposing to calculate Fiscal Year 2014 payments based on four areas: clinical practices, patient experiences, outcomes and efficiency.   CMS is also proposing to add two new domains ‑ outcomes and efficiency ‑ to improve the HVBP program’s linkage to better patient outcomes and lower costs.  CMS believes that focusing on outcomes, cost and patient experience will be important drivers to improvement in patient safety and quality of care.

Clinical Process and Patient Experience Measures

In addition to the 12 clinical measures introduced in April, CMS is proposing one new clinical practice to guard against infections from urinary catheters.   According to the measure, a urinary catheter inserted during surgery should be removed on the first or second day after surgery.  CMS is also proposing to weight the clinical process of care measures as 20 percent of the hospital’s total performance score.   CMS proposes to retain the 30 percent weighting for the 8 Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) dimensions in the patient experience 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 2013 Hospital VBP final rule, CMS finalized 8 individual HAC measures, 2 AHRQ composite measures made up of 8 PSI and 6 IQI measures and 3 30-day mortality measures.   CMS is now proposing to weight the outcomes domain as 30 percent of the total performance score to increase hospital focus on patient safety initiatives.

Measures of Efficiency

The Affordable Care Act requires the HVBP program to include measures of efficiency, including Medicare Spending per Beneficiary measures, for Fiscal Year (FY) 2014 or a subsequent fiscal year.  In the FY 2012 IPPS/LTCH PPS NPRM, CMS proposed a Medicare Spending per Beneficiary measure.  In this proposed rule, CMS is proposing to weight the efficiency domain as 20 percent of the total performance score. 

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 is proposing to weight the clinical process of care measure set at 20 percent, the patient experience of care domain at 30 percent, outcomes at 30 percent and efficiency at 20 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 proposed 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 proposed exception process for expanding a physician-owned hospital’s facility capacity closely mirrors the statutory criteria.

CMS will accept comments on the proposed rule until Aug. 31, 2011, and will respond to comments in a final rule to be issued by Nov. 1, 2011.

For more information on the CY 2011 proposals for the OPPS and ASC payment system, please see:  http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1.

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.

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

APPENDIX B

*Proposed new measure for the CY 2014 payment determination.

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

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