Press release



The Centers for Medicare & Medicaid Services today issued an interim final rule with comment period revising payment policies for hospital outpatient services to Medicare beneficiaries. The rule modifies payments to hospitals in rural areas and payments for certain radiopharmaceuticals, drugs, and biologicals that were established in a final rule published in November. These changes reflect provisions in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (DIMA), which was signed by President Bush on December 8, 2003.

The new rule extends for two years special payments to small rural hospitals to ensure that they are paid at least as much under the outpatient prospective payment system (OPPS) as they had been paid under the prior cost-based methodology. These payments were first authorized for a period of two years by the Balanced Budget Refinement Act of 1999, and were scheduled to end for services on or after January 1, 2004. As required by the DIMA, the new rule also makes sole community hospitals in rural areas eligible for these payments. In all, more than 1,000 small rural hospitals and sole community hospitals in rural areas will benefit from these payments.

"These changes will help to strengthen and preserve access to care in rural areas by providing higher Medicare payments to many small, rural hospitals," Health and Human Services Secretary Tommy G. Thompson said. "We will continue to take appropriate steps to ensure that millions of Americans who live in rural communities have access to quality health care."

The rule also implements a number of statutorily required changes to the way Medicare pays for radiopharmaceuticals and drugs and biologicals in the hospital outpatient setting. Among these are:

  • Basing payment rates for radiopharmaceuticals and drugs and biologicals that are no longer eligible for pass-through payments on whether there is a single source or multiple sources of the product, and whether a multiple source product is classified as an innovator or non-innovator;
  • Establishing different payment rates for drugs with pass-through status in 2004 depending on the date of Food and Drug Administration approval. Drugs approved before April 1, 2003 will be paid at 85 percent of the average wholesale price (AWP), while those approved on or after April 1, 2003 will be paid at 95 percent of AWP.
  • Paying for brachytherapy sources on a cost basis.

The final rule will be published in the January 6, 2004 Federal Register. Comments will be accepted until March 8, 2004, and, if appropriate, a second rule responding to comments will be issued later in the year.