Centers for Medicare and Medicaid Services (CMS) Proposes Hospital Outpatient Rule for 2008

On July 16, 2007, CMS published the proposed hospital outpatient rule for 2008. Comments will be accepted on the rule until September 14, 2007. The rule can be found at: http://www.cms.hhs.gov/HospitalOutpatientPPS/downloads/cms1392p.pdf.

The following are some of the highlights of the proposed rule

Issues of Specific Interest to ASH

Comparison of 2007 and Proposed 2008 Payment
Attached are charts showing the current and proposed 2008 HOPPS rates for procedural codes, blood product codes and drug administration codes. As you will note, there are improvements in payment for almost all the procedural codes of interest with very substantial increases for the bone marrow collection and transplant codes (38230, 38240 and 38241) due to a change in the APC assignment.

Blood Products
For 2008, CMS proposes to set the payment rates for blood and blood products at the adjusted median costs calculated using a simulated blood Cost to Charge Ratio (CCR) for each hospital that does report a blood cost center on the cost report.

Background: Over the past few years CMS has established various policies to ensure that payments for blood products are not subject to precipitous reductions in payment year to year based on the reported charge data. This has been a particular concern with some low volume products. In addition, CMS developed a special mechanism for calculating the costs of blood for hospitals that do not have a blood cost center since the use of the overall hospital CCR was disadvantageous to hospitals. Thus, CMS developed a special methodology which simulated a blood specific CCR for these hospitals which was used to convert charges to costs for blood products. For 2007, CMS continued the use of the simulated median cost methodology and provided a transition provision protecting reductions in payment from 2006 above 25 percent. Essentially, CMS set the 2007 median costs at the higher of the 2007 simulated median or 75 percent of the 2006 adjusted median costs.

Proposed Policy: For 2008, CMS proposes to set the payment rates for blood and blood products at the adjusted median costs calculated using a simulated blood CCR for each hospital that does report a blood cost center on the cost report. They note that hospital reporting of charge data for 2006 claims which is used to set the 2008 rates should be much improved since it is the first full year of reporting consistent with the blood billing guidelines issued in 2005. For 2008 they are not providing the transitional “floor” on payments that was provided in 2007. However, an analysis of the data indicates that the products whose payments would be reduced by greater than 5 percent in 2008 represent less than 1 percent of the volume of blood products provided.

Estimated Impact: The data indicates that payment is being increased for most blood products, particularly the high volume codes. For 25 of the 34 blood products, payment is increasing. And, for the 9 going down in payment, only two are being reduced by more than 10 percent and these represent very low volume services. It should also be noted that the highest volume codes are almost all going up substantially.

Reporting of Bone Marrow and Stem Cell Processing Services
After several years of effort on the part of ASH, AABB and ASBMT to convince CMS to recognize and utilize the CPT codes for bone marrow/stem cell processing, CMS proposes to recognize Codes 38207-38215 for 2008.

Background: Until now, CMS has not recognized the bone marrow/stem cell processing codes (38207-38215) established a number of years ago. Rather, CMS has used 3 “G” codes for reporting these services. Codes G0265 and G0266 are used for cryopreservation and thawing which is reimbursed under the clinical lab fee schedule. Code G0267, representing all the cell depletion activities, is reimbursed under HOPPS. Codes G0265 and G0266 are paid at a national rate of $14.11. Code G0267 is paid at the rate of $212.58.

Proposed Policy: After several years of effort on the part of ASH, AABB and ASBMT to convince CMS to recognize and utilize the CPT codes for bone marrow/stem cell processing, CMS proposes to recognize codes 38207-38215 for 2008. The proposed payment rate for Codes 38207-38209 (cryopreservation and thawing codes) is $54.69 (compared with $14.11 2007 rate) and $222.44 (compared with $212.58 2007 rate) for codes 38210-38215.

Estimated Impact: CMS notes that when charge data is received for the individual cell depletion codes in subsequent years, it will allow them to pay more appropriately in the future. That is, CMS will be able to distinguish between the costs of the various cell depletion activities which they cannot now do with charge data for G0267.

Part B Drugs
CMS proposes to reduce the payment for drugs paid for under HOPPS from 106 to 105 percent of ASP. This new policy would not apply to certain new drugs with transitional pass through status.

Proposed Policy: CMS has proposed several new policies related to payment for drugs in the hospital outpatient environment.

Separately Paid Drugs: Based on an analysis of the costs incurred by hospitals in providing drugs which are separately paid under HOPPS, CMS proposes to reduce the payment from 106 to 105 percent of ASP. This new policy would not apply to certain new drugs with transitional pass through status. CMS will package all drugs with a cost of less than $60.00 with the exception of some designated anti-emetic drugs which will be paid separately regardless of the cost.

IVIG Separate Payment: CMS will continue for the time being to provide a separate payment for IVIG preadministration related services. Hospitals will bill G0332 for this service.

Pharmacy Overhead: CMS will not provide a separate payment for pharmacy overhead as had been recommended by the APC advisory committee. CMS believes it is inconsistent with the current effort to increase the size of the package of services paid. However, for 2008 hospitals will be instructed to report a separate revenue line item for pharmacy overhead separate from the charge for the drug. This will allow the proper allocation of pharmacy costs to the costs of drugs.

Blood Transfusion
CMS does not support the APC Advisory Committees recommendation to identify when multiple units of blood or blood components are transfused and to trigger an additional discounted payment for the second and subsequent blood administration services on a single date of service.

Background: Currently, a single unit of CPT code 36430 (Transfusion, blood or blood components) is reported regardless of how many transfusions occur on a single date of service. (The blood product itself is paid based on the actual number of units provided.) The APC advisory committee recommended to CMS at the March 2007 meeting that CMS identify when multiple units of blood or blood components are transfused and to trigger an additional discounted payment for the second and subsequent blood administration services on a single date of service. In disagreeing with the APC Panel’s recommendation, CMS indicates that the current cost for the transfusion services reflects the historic reporting of all charges on the same date of service. CMS also notes that payment on a per encounter basis encourages the transfusion of only blood products that are necessary for the beneficiary’s treatment during the hospital outpatient encounter. CMS reminds hospitals that in billing code 36430, hospitals should include charges for the totality of all transfusion services provided on a single date of service.

Blood Clotting Factors
For 2008, CMS proposes to pay for blood clotting factors at 105 percent of ASP plus the furnishing fee established in the final physician fee schedule for 2008.

Background: Currently, blood clotting factors under HOPPS is paid on the basis of 106 percent of the average sales price (ASP) plus a fee for the furnishing fee.

Other Issues of Interest

Update
The proposed update in the APC payment rates is based on the market basket inflationary update for 2008, which is 3.3 percent.

Value Based Purchasing
In moving toward a system of value-based purchasing under HOPPS, CMS has set two goals – 1) To encourage the provision of high quality services leading to improved outcomes for Medicare beneficiaries through the quality data reporting program and 2) To initiate specific payment approaches to encourage the efficient delivery of services and control future growth of the volume of services.

Proposed Policy: CMS has proposed two policies under the rubric of value based purchasing.

Quality Measures: To receive the full APC payment update in 2009, hospitals will need to report 10 outpatient specific quality measures in 2008 or the APC payments will be reduced by two percentage points. These measures include five measures relating to patients transferred from the emergency department to another facility with acute myocardial infarction, one measure relating to the treatment of heart failure, two measures related to the timing and selection of antibiotic prophylaxis for preoperative care, one measure on the use of empiric antibiotic for community acquired pneumonia and one measure relating to diabetes care. These last five measures are also in the Physician Quality Reporting Initiative (PQRI) quality system for physicians. In addition, CMS is considering 30 additional quality measures for 2010 which would need to be reported on in 2009 for the full update to be received.

CMS notes that OPPS spending has been increasing about 10 percent a year since 2001. CMS believes that one means of encouraging greater efficiency is to expand the bundle or package of services into a single payment. However, CMS notes that the amount of packaging in the clinical APCs has decreased over the year as has the number of procedures grouped within an APC. In the past four years, the number of APCs increased by over 50 percent.

Change in Packaging: CMS is changing the composition of the APC payment packages that house CPT codes. The payment rates for these APCs are adjusted to reflect the codes assigned to them as a result of the proposed packaging policy.

Background: The OPPS is intended to encourage hospitals to deliver services in an efficient manner in part by providing a packaged payment for a given set of procedures and letting the hospital manage the services provided. Currently, medical-surgical supplies, low cost drugs, anesthesia are included in the package of services. Based on MedPAC’s recommendation to broaden the OPPS payment bundles, CMS is proposing to extend the current packaging approach to include additional services that would be paid through larger payment bundles as opposed to providing a separate payment for every individual procedure. Specifically, for 2008, CMS is proposing to package payment for the following categories of supportive ancillary services in into the primary procedure with which they are performed:

• Guidance services (e.g., ultrasound or CT guided services)
• Image processing services
• Intraoperative services
• Imaging supervision and interpretation services
• Diagnostic radiopharmaceuticals
• Contrast agents
• Observation services

For some APCs, the adjustment results in higher payment; for others, the adjustment could result in lower payment. Overall, the increase in packaging would have no net impact on hospitals overall. However, large urban hospitals would tend to lose modestly under this proposal while rural and smaller urban hospitals would be net winners.