CMS PROPOSES CHANGES TO POLICIES AND PAYMENT FOR OUTPATIENT SERVICES
CMS PROPOSES CHANGES TO POLICIES AND PAYMENT FOR OUTPATIENT SERVICES
NEW STEPS TO INCREASE VALUE IN HOSPITAL OUTPATIENT CARE, WITH MAJOR REVISION OF AMBULATORY SURGICAL CENTERS PAYMENTS
The Centers for Medicare & Medicaid Services (CMS) today issued a proposed rule for Medicare payment for hospital outpatient services in calendar year 2007 that would implement new steps to make payments more accurate and to promote higher quality and value in outpatient care. CMS also proposed a major revision of payments for ambulatory surgical centers (ASCs) that would better align payments for surgical procedures provided in ASCs and hospital outpatient departments. The proposed reforms are intended to address rapid and accelerating growth in hospital outpatient services.
“Outpatient services are increasingly important in the health care of our beneficiaries, and so we need to take steps to make sure our payment methods are keeping up,” said CMS Administrator Mark B. McClellan, M.D., Ph.D. “We are seeing very rapid growth and large variations in hospital outpatient services, and we need to take further steps to promote high quality, efficient care in the most appropriate settings. Our current payment systems for outpatient services must be improved, and we are seeking public input on the most effective way to address this challenge.”
Hospitals would receive $32.5 billion in CY 2007 under the proposed rule that would revise policies and payment rates under the outpatient prospective payment system (OPPS) for outpatient services provided to Medicare beneficiaries. The proposed rule would affect outpatient services furnished by general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals. The rule includes a 3.4 percent inflation update in Medicare payment rates for services paid under the OPPS for 2007. After taking into account other factors that affect the level of payments, CMS estimates that hospitals will receive an overall average increase of 3.0 percent in Medicare payments for outpatient department services in 2007 due to the changes in this proposed rule.
These statutory payment increases are projected to continue a trend of rapid growth in hospital outpatient expenditures. Between 2005 and 2006, hospital outpatient expenditures increased by nearly 12 percent, mainly due to growth in the volume and intensity of services. CMS projects that the expenditures under the OPPS in calendar year (CY) 2007 will be approximately 9.2 percent higher than the estimated CY 2006 expenditures. The current rate of growth in expenditures, due primarily to rapid growth in the intensity and utilization of services, is of great concern to CMS, because of its impact not only on taxpayers, but also on beneficiaries whose monthly premiums must pay for 25 percent of Part B expenditures. Under the OPPS, payments increase with the number and intensity of services provided, regardless of their impact on quality or patient health.
In order to promote greater value in Medicare hospital outpatient services, the rule proposes to tie payment rate increases to the reporting of quality measures beginning in 2007. In the approach proposed in the rule, hospitals that report quality measures for purposes of the update in the inpatient prospective payment system (IPPS) would receive a full update on outpatient payments as well. Those hospitals required to report quality measures for inpatient services in order to receive the full IPPS update, but fail to do so, would receive the OPPS update minus 2.0 percentage points. Because many of these inpatient measures involve the same hospital activities as in outpatient care – for example, appropriate administration of medications in the emergency department and surgical procedures to prevent complications – CMS anticipates that the collection and submission of performance data and public reporting of comparative information about hospital performance will encourage quality improvement for all hospital services. CMS also proposes to move to the use of additional quality measures that are specifically appropriate for hospital outpatient care, as such measures are developed.
In conjunction with the quality measurement proposal, CMS also solicits public comments on other, potentially more effective approaches to promote the use of high-quality services and avoid unnecessary costs, in light of continuing rapid growth in hospital outpatient expenditures.
“With continued rapid spending growth, and without clear evidence on the impact of many of the services we pay for, it’s time to take a closer look at the outpatient payment system,” added Dr. McClellan. “Doing nothing is not sustainable from the standpoint of Medicare costs and beneficiary premiums, and we want public input on the best approaches to promoting high-quality, affordable care.”
The proposed rule provides for further discussion and comment on the need to provide more transparency about quality and cost in the health care system, especially for outpatient services that are often available from multiple sources. The need for more information will become critically important given that CMS is also proposing to create a revised payment system for ASCs which provide an alternative setting for the delivery of many services performed in hospital outpatient departments.
“The major reforms we are proposing in payments for ambulatory surgical centers will provide for more appropriate payment for the broad range of services that ASCs can provide,” said Dr. McClellan. “Our goal is to help our beneficiaries get the outpatient care they need in the most appropriate setting, by eliminating payment differences that inappropriately favor one outpatient setting over another and that may add to Medicare costs.”
This proposed rule, issued in conjunction with the OPPS rule, includes major revisions in payments for services furnished by ASCs, as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The MMA requires that the revised payment system, which we expect will be implemented by 2008, be designed to pay more accurately for ASC services and to have aggregate expenditures in 2008 that will be the same as they would have been under the current system. The proposed revisions more closely align payments in the ASC and OPPS payment systems, to encourage the most efficient and appropriate choices of outpatient settings for ambulatory surgical procedures.
The proposed rule would allow payment to an ASC for any surgical procedure that does not pose a significant safety risk, greatly expanding the list of surgical procedures for which Medicare pays an ASC facility fee. CMS would specify those procedures excluded from payment of an ASC facility fee for safety reasons, such as those involving major blood vessels, major or prolonged invasion of body cavities, significant loss of blood, or procedures defined as inpatient-only services in the OPPS. In addition, payment would not be made to an ASC for procedures that would typically require active medical monitoring and care at or beyond midnight following the procedure.
CMS is proposing to adopt relative payment weights established under the OPPS to define the relativity in resource costs among different surgical procedures payable in an ASC. ASC payment rates would be set using the relative payment weight determined for a particular surgical procedure multiplied by a conversion factor that CMS would calculate so that expenditures for ASC services in CY 2008 under the revised payment system would not exceed Medicare expenditures if they were paid under the current system. To eliminate incentives to perform services in an ASC that could be safely performed in a physician office, payment for office-based surgical procedures would be capped at the lesser of the non-facility practice expense payment under Medicare’s Physician Fee Schedule or the ASC payment rate.
The proposed rule would also add 14 surgical procedures to the current list of Medicare approved ASC services for 2007 and implement a provision of the Deficit Reduction Act of 2005 (DRA) that caps payment for ASC procedures in 2007 at the lesser of the ASC rate or the OPPS rate for the procedure.
With respect to hospital outpatient services, the proposed rule includes steps to improve the accuracy of payment for services in outpatient clinics and emergency departments, and for critical care services. To match the levels of effort for physician services, the rule proposes to increase from three to five the number of payment levels for visits to a hospital clinic or emergency department, with payment rates established based on historical hospital claims data. As a result, the maximum payment for clinic visits would increase from $92 to $133, while the maximum payment for emergency department visits would increase from $244 to $345. During the rulemaking process, CMS plans to seek public input on guidance for hospitals about the proper use of the new codes.
CMS is also proposing to create a new set of HCPCS codes to describe hospital emergency visits provided in dedicated emergency departments (DEDs) that are subject to the requirements of the Emergency Medical Treatment and Labor Act (EMTALA) but do not meet the more prescriptive requirements consistent with the CPT definition of an emergency department. The new codes would enable CMS to gather data to determine the relative resource costs of the services provided in these entities, as distinct from emergent care furnished in a facility that is accessible 24 hours per day, 7 days per week. While gathering hospital cost data, CMS is proposing to pay for the new DED visit codes at the payment levels set for clinic visits.
The proposed rule would improve payments to hospitals for costs associated with administering drugs to beneficiaries in the outpatient department. Currently, there are six ambulatory payment classification (APC) groupings for most drug administration services. The hospital receives the same payment for each type of drug infusion, whether it takes an hour or five hours to administer. CMS is proposing to revise the APC payment structure for drug administration services, allowing hospitals to be paid separately for additional hours of infusion, in addition to their payment for the initial hour of infusion. Under the proposed policy, hospitals would be paid more accurately for complex and lengthy drug administration services, while also receiving more appropriate payments for individual services when provided alone.
Currently, the Medicare statute requires CMS to pay separately for drugs and biologicals that cost $50 or more per administration and to bundle those costing less than $50 per administration into payments for the procedures with which they are associated. Medicare has made an exception to the bundling policy for certain anti-nausea drugs often used by cancer patients to counteract side effects of treatment. CMS is proposing to pay separately for drugs, biologicals, and radiopharmaceuticals costing $55 or more per day, consistent with the previous $50 threshold but updated for inflation, as well as for the anti-nausea drugs. Payments for other drugs would continue to be bundled into payments for their associated procedures.
Another area of rapid growth in recent years has been the increase in outlier payments to Community Mental Health Centers (CMHCs) for services under the partial hospitalization benefit. These outlier payments compensate the CMHCs for unusually high cost cases. Since 2004, CMS has used a separate outlier threshold for CMHCs that would target payments to the most complex cases, and payment trends have stabilized. CMS is proposing to maintain the existing threshold for 2007.
Other proposals affecting payment for outpatient services include:
- Continuing to pay separately for brachytherapy sources, basing payment on the source-specific median costs for brachytherapy sources, as reflected in claims data. Payment would be on a per unit source basis rather than on a per day basis, to recognize the high variability of treatment costs.
- Reducing the payment rate for APCs with significant costs for implanted devices when a device is replaced without cost under warranty or recall and reducing the beneficiary coinsurance proportionately.
- Setting payment for acquisition and overhead costs of certain separately payable drugs and biologicals at the manufacturer’s average sales price (ASP) plus 5 percent.
The proposed rule also includes a proposal on hospital reporting of additional quality measures, based on additional measures endorsed by the privately-led Hospital Quality Alliance (HQA). If CMS were to adopt the proposal in the final rule, hospitals would, for the first time, be required to report consistent measures on patient satisfaction with hospital care to receive a full IPPS update. The survey instrument, from the HCAHPS® (Hospital Consumer Assessment of Healthcare Providers and Systems), which was developed jointly by the Agency for Healthcare Research and Quality and CMS, is designed to gather information about patient perspectives of the care that they have received during an inpatient stay. Also for the first time, hospitals would report risk-adjusted outcome measures to receive the full update, including 30-day mortality measures for patients hospitalized with an acute myocardial infarction, heart failure, or pneumonia. In addition, three new measures from the Surgical Care Improvement Project related to the process of care for surgical procedures are proposed. These data would be included with other quality data on the Hospital Compare Webpage after reporting begins in 2007.
“We appreciate the leadership of the Hospital Quality Alliance to help us move forward on providing more complete, valid information to the public on important aspects of the quality of hospital care,” said Dr. McClellan. “We look forward to continuing to work with the HQA to build on this progress toward a transparent, high-quality health care system.”
The proposed rule additionally contains a revision to the critical access hospital (CAH) conditions of participation that will allow CAHs to utilize a registered nurse that is on site at the CAH as one of the qualified medical personnel available to perform an emergency medical screening, if the nature of a patient’s request for medical care is within the scope of practice of a registered nurse and consistent with applicable State laws. This revision conforms to the recent changes made to EMTALA regulations and will align the emergency medical screening requirements in CAHs with those applicable to acute care hospitals.
Finally, the proposed rule would begin the transition from the current policies for administering Medicare fee-for-service claims (including hospital claims for outpatient services) using entities called fiscal intermediaries and carriers to the new Medicare Administrative Contractors (MACs), authorized by the MMA. Under the existing structure, for example, providers such as hospitals are permitted to choose the fiscal intermediaries that process both their inpatient claims under Medicare Part A and their outpatient claims under Part B. The proposed rule would require hospitals to file their claims with the intermediary with jurisdiction over the hospital’s geographic location until a MAC â which will handle not only hospital claims, but also Part B claims from physicians, laboratories and other suppliers â replaces the intermediary. CMS is proposing that all providers and suppliers generally be assigned to a MAC based on geographic location, but that a large qualified provider chain would be permitted to file all claims with the MAC with jurisdiction over the chain’s home office.
Comments on the OPPS proposals contained in the rule will be accepted until October 10, and a final rule will be published later this fall. The deadline for submission of comments on the revised ASC payment system scheduled for implementation in CY 2008 is extended for an additional 30 days.
For more information, see:
Fact sheets on the ASC Payment System and on the Quality Initiative can be found at: