Summary of the Proposed Hospital Outpatient Prospective Payment System (HOPPS) and Ambulatory Surgical Center (ASC) Payment Regulations for CY 2009 (CMS- 1404-P)
July 17, 2008 – The Centers for Medicare and Medicaid Services (CMS) has released a proposed rule for the hospital outpatient prospective payment system (HOPPS) and ambulatory surgical center (ASC) rates for 2009. ASH will be submitting comments before the September 2 deadline. Below, please see an in-depth analysis and summary of the proposed rule:
Hospital Outpatient Prospective Payment System (HOPPS) Proposals
Update
The rule provides for a 3 percent update for inflation based on changes in the hospital market basket of goods and services. However, those hospitals who failed to successfully report on seven quality measures in 2008, will receive a 2 percent reduction in their update. Including the update, APC changes and other changes in the rule, CMS estimates that payments for all hospitals will be increased by 3.6 percent in 2009.
Calculation of APC Rates
No major changes have been proposed for 2009 in the calculation of APC rates for 2009. CMS indicates it was able to use 52 million hospital outpatient claims for which some 90 million records were created at a HCPCS code level. This was out of a universe of some 100 million outpatient claims. Claims that were excluded from the calculation included claims with no services paid under HOPPS (e.g., clinical laboratory only), claims without a HCPCS code, or claims with costs or units that were statistically aberrant.
Impact on Services of Interest to the American Society of Hematology (ASH)
Charts showing the proposed changes in payment from 2008 to 2009 for services of interest to ASH are avaible online. Payments for most procedural services are generally increasing with the exception of one of the flow cytometry codes and for the combined bone marrow aspirate and biopsy code. Apheresis codes are increasing by 5.04 percent for codes 36511-36514 and by 3.64 percent for 36515-36516 and 36522 (photopheresis). The recently recognized bone marrow/stem cell processing codes (38207-38215) are all increasing by 3.05 percent for freezing and thawing and by 9.73 percent for all other codes. Note, this is based on 2007 charge data and likely does not include the effect of the effort to educate hospitals about the need to charge appropriately for these services. The payment for blood and blood products is mixed with some big increases and some big losses. However, it appears that the high volume blood codes, including P9016, P9021, P9035, and P9040, will all be increased modestly above the market basket for the average code. The blood product codes with big reductions appear to be for relatively low volume products.
The drug administration codes have a number of big swings in payment with some of the high volume codes proposed for substantial reductions. See discussion below on this issue.
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Charge Compression
Background
HOPPS weights are based on the estimated median costs of services within each APC. Since CMS does not know the actual costs of a given service, the hospital's cost to charge ratio (CCR) is applied to each charge on a claim and the data is ultimately aggregated to the nation. The CCR for each hospital is based on the annual hospital cost report. A criticism of the use of CCR is that there is a tendency on the part of hospitals to mark up the charge for less costly services to a higher degree than for very expensive services. If a uniform CCR is used, this results in an underestimate of the costs of very expense services, a phenomenon known as "charge compression." For example, suppose the standard cost to charge ratio for drugs is 0.33, meaning there is a threefold markup of charges over costs. If the hospital provides a $5,000 drug, it may be reluctant to markup the charges by the same degree to, say, $15,000 and may decide to charge only $7,500 for the drug. Applying the 0.33 CCR to the $7,500 would suggest that the cost is only $2,500 in effect compressing the cost estimate. To help analyze this long standing problem, which also impacts the inpatient prospective payment system (DRGs), CMS contracted with RTI, a consulting firm.
Proposals
RTI made a number of recommendations to improve hospital cost reporting and the allocation of costs. For CY 2009, CMS proposes to adopt several of the accounting recommendations including educational initiatives on reporting capital costs, additional costs centers for drugs to distinguish those with high overhead as opposed to low overhead costs, and clarifying instructions requiring hospitals to report all standard cost centers instead of giving them the option. CMS also invites comments on several of RTI's suggestions such as the creation of standard cost centers for CT, MRI, and cardiac catheterization. Given the lag in data, any changes in APC rates as a result of changes in cost reporting is likely to be two or more years away.
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Blood and Blood Products
Background
As in past years, CMS is continuing to use simulated cost to charge ratios for converting hospital charges for blood and blood products to costs for those hospitals without blood specific cost centers. This simulated CCR is advantageous as compared to defaulting to the overall hospital CCR.
Proposal
For CY 2009 CMS is proposing to establish a new status indicator "R" (blood and blood products) to facilitate development of blood product median costs and implementation of hospital outpatient quality data.
Intravenous Infusion of Immunoglobulin (IVIG)
Background
For several years CMS has been paying an additional amount for the pre-administration costs of acquiring IVIG. This is in addition to the payment for the drug itself and for the administration. A temporary code, G0332 was established to report this service, which was intended to compensate for the time and effort to locate and obtain the product in a difficult market.
Proposal
For CY 2009, CMS proposes to consider this a packaged service and no longer pay separately for pre-administration services. In the rule CMS states that additional payment was intended to be a temporary measure during a period of market fluctuations for IVIG and the agency has concluded that market conditions have improved and, that this extra payment is no longer necessary.
Wage Index
CMS is maintaining the labor share of outpatient cost, which are subject to the wage index at 60 percent. In addition, CMS will continue to apply the IPPS wage indices under HOPPS.
Adjustment for Rural Hospitals
CMS will continue to apply a 7.1 percent adjustment for rural sole community hospitals for all services paid under HOPPS other than drugs and biologicals.
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Outlier Payments
Background
When a hospital incurs cost in rendering a service for a particular patient that substantially exceeds a certain threshold, an additional payment is made called an outlier payment. Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2008, the outlier threshold is met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $1,575 fixed-dollar threshold.
Proposal
For CY 2009, when the cost of furnishing a service exceeds 1.75 times the APC amount and also exceeds the APC rate plus $1,800 an outlier payment will be made. The outlier payment will be equal to 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 percent of the APC rate. Also, under certain circumstances there will be a retroactive reconciliation of the outlier payment using CCR data in the most current settled cost report.
Payment for Drugs and Biologicals
Proposals
- Packaged into APC rate – CMS proposes to maintain their current policy of not paying separately for drugs where the per-day cost is less than $60. These drugs will be packaged into the APC rate.
- Exception to package-into-APC-rate policy – Certain enumerated anti-emetic drugs used during a course of chemotherapy will be paid separately regardless of the per-day cost.
- Non-pass through separately payable drugs – CMS proposes that all separately payable drugs (non-pass through) will be paid at the rate of 104 percent of the average sales price using the data applicable to the payments to physicians.
- Pharmacy overhead – CMS also indicated that they again reviewed the possibility of paying separately for pharmacy overhead, particularly for very costly drugs for which charges do not fully reflect the overhead cost. For CY 2009 they have proposed to establish two new cost centers to distinguish between drugs with low overhead cost and those with high overhead cost. The agency anticipates that in two to three years they will be able to refine OPPS drug estimates by accounting for differential markup practices for drugs with low vs. high overhead costs.
Blood Clotting Factor
Proposal
For CY 2009, CMS proposes to pay for blood clotting factor at the rate of ASP plus 4 percent. This is a reduction from the current ASP plus 5 percent rate. They will announce the separately payable fee for furnishing clotting factor later this year when the data is available.
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Radiopharmaceuticals
Proposals
- Diagnostic radiopharmaceuticals — CMS proposes to retain the current policy of packaging diagnostic radiopharmaceuticals into the related nuclear medicine procedure.
- Radioimmunotherapy (RIT) — CMS reviewed suggestions they received to establish a composite APC for Bexxar and Zevalin used for radioimmunotherapy (RIT). There has been a great deal of concern about the inadequacy of the payment for RIT largely because of the mix of payment rules used for the therapy regimen — e.g., certain of the doses used are considered diagnostic and packaged despite the high costs involved. In any case, CMS rejected the use of a composite APC for 2009. Several reasons were cited. First, some of the patients who receive the "dosimetric doses" do not go on to receive the full course of therapy, which would complicate any payment rate. Second, CMS said they could not use external data which had been suggested. Finally, CMS indicates that since the therapy is given over a course of weeks it would be very difficult for hospitals to report and for payments to be made under an APC system.
- Therapeutic radiopharmaceuticals — Some manufacturers have argued that therapeutic radiopharmaceuticals should be paid as drugs under an ASP+ arrangement as opposed to basing rates on estimated costs. CMS rejected the argument that radiopharmaceuticals are drugs. However, they did accept the recommendation that manufacturers be given the option of reporting ASP rates for drugs. If all the manufacturers of a given radiopharmaceutical report ASP prices, CMS proposed that for 2009 it would substitute ASP plus 4 percent for the mean cost.
Drug Administration Services
Background
Several different coding structures have been used for drug administration services under HOPPS. In 2007, CMS mandated use of the CPT code structure which had been substantially modified in 2006.
Proposal
For CY 2009 CMS has examined actual data reported with the new codes and has proposed a reconfiguration of the coding structure to a five-tier system, currently there are six. CMS also found that there was a need to reconfigure the groupings of codes in an APC because the 2X rule was violated. The 2X rule states that codes should be in the same APC if they are clinically similar and homogenous in terms of resources consumed. If there is more than a twofold difference in median costs between the highest and lowest cost codes in the group, the grouping would not be considered homogenous.
Proposed APC configuration for the drug administration codes is available online.
Payment for Hospital Outpatient Visits
Proposals
- Structure of codes - CMS proposes to maintain the current structure of visit codes under HOPPS.
- Definition of "new" and "established" — CMS proposes to clarify the new and established patient definitions. Essentially, the meaning of "new" and "established" would pertain to whether or not the patient was registered as an inpatient or outpatient of the hospital within the past three years. They had considered and rejected a concept of making this determination based on the specific hospital clinic seen.
- Emergency department visits - CMS is proposing to modify the APC structure for emergency department visits.
- National visit guidelines - For CY 2009 CMS is not proceeding with any plan to implement national visit guidelines for visit and emergency department visits and indicates hospitals should continue to report visits for 2009 based on their own internal guidelines.
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Inpatient-Only Procedures
Proposal
Based on comments from the APC Advisory Panel and the public, CMS proposes to remove 11 procedures from the list of procedures that can only be performed on an inpatient basis.
Physician Supervision of HOPD Services
Discussion
In the proposed rule, CMS provides a discussion and restatement of the requirements for physician supervision of services of so-called "incident to" services.
- Diagnostic services — For diagnostic services furnished to hospital outpatients, hospitals and intermediaries are required to follow the supervision requirements for individual diagnostic tests used for the Medicare physician fee schedule. Depending on the test, this might require personal (i.e., in the room), direct supervision (on the premises), or supervision not applicable such as in the case of audiology services. For diagnostic tests not listed in the fee schedule, intermediaries are to define the appropriate supervision level in order to determine whether the claims are reasonable and necessary.
- Therapeutic services — For therapeutic procedures not personally provided by a physician, the physician must be "present on the premises…of the hospital and, therefore, immediately available to furnish assistance and direction…" This direct supervision applies to both on and off-campus locations. CMS has not further defined the term "immediately available."
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Quality Measures
Background
In the past, the increase in Medicare's payment for outpatient services has not been specifically tied to the quality of health care. The law now requires that the annual OPPS payment inflation update be reduced by 2.0 percentage points for hospitals that do not meet quality reporting requirements.
Proposals
- CY 2009 - To receive the full update for 2009, hospitals are required to have successfully reported on seven quality measures in CY 2008. Five of the measures relate to care provided for patients with acute myocardial infarctions that are treated and transferred to another facility. For non-transferred patients, three of the measures are currently included in the quality measures under the IPPS. Two of the measures relate to perioperative timing and selection of antibiotics for surgical patients.
- CY 2010 - For the CY 2010 update, CMS is proposing that in 2009 the existing seven measures will be retained and four additional measures relating to imaging are proposed to be added. These relate to MRI of the lumbar spine for low back pain, mammography follow-up rates, use of contrast for abdomen CT, and use of contrast for thorax CT. The specifications for these measures are not spelled out in the proposed rule. Supposedly, CMS can monitor performance under these measures through claims data rather than through separate reporting.
- CY 2011 - For CY 2011, CMS invites comments on 18 additional quality measures under consideration and on ways to improve data collection and reporting. The additional measures relate to cancer treatment and diagnosis, emergency department care, diabetes, screening for risk of falls, medication for depression, use of CT or MRI for stroke, use of carotid imaging, screening, therapy and management of fractures and osteoporosis, medication reconciliation, and respiratory care.
The rule also contains a lengthy description of the administrative processes associated with reporting and measures compliance with the measures.
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Hospital Acquired Conditions
Background
Under the Hospital Inpatient PPS, there is a provision to penalize hospitals for certain hospital acquired conditions (HAC) that should not occur if quality care is provided such as giving the wrong blood type. When these "never" events occur, the added cost associated with treating the resultant complication will not be paid. CMS provides an extensive discussion of the potential for and difficulties of applying the HAC concept to payments under HOPPS.
Request for Comments
The rule did not include any proposals related to HACs. At this time, CMS is only inviting comments on this issue.
Composite Imaging Procedures
Background
Effective January 1, 2006, CMS implemented a multiple procedure payment reduction (MPR) on certain diagnostic imaging procedures paid off of the Medicare physician fee schedule. When two or more procedures within one of 11 imaging code families are furnished on the same patient in a single session, the TC of the highest priced procedure is paid at 100 percent and the TC of the subsequent procedure is paid at 75 percent (a 25 percent reduction). The reduction does not apply to the PC. For CY 2009 CMS is considering a similar payment reduction policy for the APC payment.
Proposal
CMS conducted a code-specific analysis of codes currently in use under the Medicare Physician Fee Schedule (MPFS) multiple imaging procedure payment reduction policy. Based on that analysis the agency has concluded that they do not expect second and subsequent imaging services of the same modality involving noncontiguous body areas to require duplicate facility services. Instead, they believe that there are economies of scale when more than one procedure in a family of ultrasound, CT or MRI codes is performed on the same day.
For CY 2009 CMS is proposing to establish five multiple imaging composite APCs. The proposed APCs are:
- APC 8004 (Ultrasound Composite)
- APC 8005 (CT and CTA without Contrast Composite)
- APC 8006 ( CT and CTA with Contrast Composite)
- APC 8007 (MRI and MRA without Contrast Composite)
- APC 8008 (MRI and MRA with Contrast Composite)
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Ambulatory Surgical Center (ASC) Proposals
General Payment Update
Background
CY 2009 will be the second year of the transition to the new ASC payment system for Medicare. Under this system ASC payment rates are aligned to a percentage of the HOPPS rate for the same procedure. In 2008, in the aggregate, ASCs are reimbursed at a rate of 65 percent of the HOPPS rate.
Proposals
- Transition to new system – For CY 2009, in the second year of a four-year transition to the new payment system, 50 percent of the payment is tied to the HOPPS rates and 50 percent is derived from the 2007 ASC rates.
- Conversion factor - Due to the statute, there again will not be any inflationary increase in the conversion factor for 2009. Because of some technical changes in the wage index, there will be a very modest reduction in the conversion factor (0.9996) necessitated to preserve budget neutrality. The current CF of $41.401 will be reduced to $41.384.
- Scaling adjustment - As indicated in the final rule published on November 27, 2007, CMS is required to assure that changes to the ASC relative weights (based on the HOPPS weights) are budget neutral year to year. Based on the ratio of 2008 to 2009 payment weights, CMS calculated that an ASC scaling adjustment of 0.9753 is needed to preserve budget neutrality for 2009. In other words, the ASC payment weights will be reduced by 2.47 percent from what they otherwise would have been. While ostensibly budget neutral in the aggregate, the new weights will shift dollars between families of ASC procedures. CMS also indicates that if there were no transition for 2009, the weight scaler would be 0.9412. Unfortunately, CMS did not provide data to allow the impact of the scaling factor at a specialty and code level to be easily understood.
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Application of Quality Measures to ASCs
Request for Comments
CMS has indicated its intention of establishing a quality measurement system for ASCs comparable to the hospital outpatient system, with a provision for a 2 percent reduction in payment for ASCs who do not comply. The details will be described in a subsequent rulemaking. They decided to defer consideration of this system for 2008 and 2009 to give ASCs time to adjust to the new payment system. CMS does, however, invite public comment on quality measures for services provided by ASCs and reporting measures including electronic submission of data.
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List of Covered ASC Procedures and Changes in Designation
Background
As of January 1, 2008 CMS has added approximately 790 procedures to the ASC list of covered surgical services eligible for Medicare payment. While historically CMS has maintained an inclusive list, responding to public comments and Congressional requests, CMS is now maintaining a list in which all surgical services are included and only those procedures excluded for a specific reason (i.e., poses a significant risk to the patient) have been removed from the list of eligible services. This is a major shift in Medicare's philosophy about coverage and should make it easier to add procedures to the ASC covered list in the future.
Proposals
- Surgical and ancillary procedures - CMS is proposing adding several new codes to the list of ASC-covered surgical and ancillary procedures. These include some new injection codes and dermal substitute. In addition, CMS will be adding three category III codes to the ASC list along with six surgical codes which had originally been omitted including a sinus endoscopy code, a blood exchange code, and several laparoscopy codes. There will be the opportunity to comment on these additions. There are also six codes, which CMS is proposing to designate as office based including two apheresis procedures.
- Device-intensive procedures - CMS is adding a number of procedures to be designated as device intensive, which allows more favorable payment. Most of these codes are in the cardiology, urology, and neurology families. Also, CMS identifies the device-intensive procedures for which a reduction in payment applies when a device is provided free of charge or at a full or partial (at least 50 percent) credit.
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Impact of ASC System on Services of Interest to ASH
With the expansion of services covered in an ASC setting, now some services of interest to ASH can be performed in an ASC. The proposed 2009 rates for these services are available online.
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