Physician Fee Schedule and Hospital Outpatient Prospective Payment System Proposed Rules
August 08, 2006 - On August 8, the Centers for Medicare and Medicaid Services (CMS) issued proposed changes to the Physician Fee Schedule and Hospital Outpatient Prospective Payment System for 2007. These changes are in addition to the changes previously announced in a proposed rule published June 29 announcing changes in the practice expense methodology changes and revisions resulting from the 5-year review of physician work values. Changes of interest to hematologists and hematologist/oncologists follow.
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PHYSICIAN FEE SCHEDULE PROPOSED CHANGES
Negative Medicare Payment Update
As expected, CMS proposed in the rule to reduce the Medicare reimbursement amount to physicians beginning January 1, 2007. The rule proposes to reduce the payments by 5.1 percent. The reduction is largely attributable to the fact that physician spending substantially exceeded the target rate established by the Sustainable Growth Rate system (SGR). The SGR formula is universally considered to be flawed by organized medicine, many members of Congress, and key officials at CMS. The American Society of Hematology (ASH) and other medical societies have been actively working for many years to repeal or substantially revise the SGR formula to avoid this annual threat to physician payment. Congressional members are again considering legislation to prevent the implementation of this unacceptable and unjustified reduction in payment for this coming year. You can urge your Representatives and Senators to support prevention of the payment reduction through the ASH Advocacy Center.
Adjustment of Previously Announced Rates
We previously described the changes in the relative values for 2007 proposed June 29 as compared with the current rates. The most significant changes for ASH members were the proposed increases in work relative values for many of the evaluation and management codes. In addition, a number of significant changes were proposed to the practice expense methodology which are being phased in over a four year period. In the most recent rule, CMS has proposed very slight changes in the previously announced rates. View a comparison chart showing the current and proposed changes in 2007 and 2010 for services of interest to hematologists. Overall, hematology-oncology is expected to see an increase in total relative values of about 2 percent in 2007. The proposed rule projects that if the 5.1 percent reduction in the conversion factor due to the SGR is implemented, this would result in a net reduction in payment of about 3 percent. However, as discussed above, Congressional action could prevent implementation of the projected reduction.
The changes in the rates announced in the June proposed rule were primarily due to:
- Multiple Imaging Procedure - For 2006, CMS implemented a policy change limiting payment for multiple imaging procedures performed on the same day. That led to a slight, 0.3 percent, increase in the practice expenses for all other services. The law allowed CMS to count this as budget savings as opposed to dollars to be redistributed to all physicians. Consequently, CMS has reversed the practice expenses adjustment made for 2006 and will reduce all practice expense values by 0.3 percent for 2007.
- CMS accepted changes in the direct practice expense inputs recommended by the Practice Expense Review Committee. This includes some changes to the inputs for flow cytometry and extracorporeal photopheresis services.
Some of the other changes in the rule include the following:
- Proposed Average Sales Price (ASP) Changes
- CMS intends to issue a final rule on the calculation of the ASP and issues relating to the submission of ASP data. While discounts, rebates, and other price concessions are factored into the determination of ASP, CMS indicates that they intend to clarify that service and administrative fees paid to group purchasing organizations and pharmacy benefit managers are not considered price concessions. It is expected that manufacturers will be commenting on this provision.
- Widely Available Market Price (WAMP) and Average Manufacturers Price (AMP)
- CMS is authorized to deviate from the standard drug payment methodology when the ASP exceeds the WAMP or AMP by a threshold to be determined by the Secretary. For 2007, CMS proposes to use a >5 percent threshold. However, at this time, the Office of Inspector General (OIG) has not yet completed its studies comparing WAMP and AMP to ASP and no proposals to use lower payment rates have been proposed.
- Reduction in Payment for Technical Components of Imaging Services
- The Deficit Reduction Act provides a limitation on payment for the technical component of imaging services when the physician fee schedule rate exceeds the payment established under the Hospital Outpatient Prospective Payment System (HOPPS). CMS projects that payments to radiologists will be reduced by about 6 percent as a result of this change. Independent diagnostic testing facilities providing radiology and other imaging services would lose an estimated 17 percent in payment as a result of this provision.
- Geographic Cost Index
- Medicare payments are adjusted based on geographic practice cost indices. Several years ago, the law was changed to provide for a floor on one element of the index in part to provide greater payments to rural areas that had lower practice costs. The authority for this floor expires the end of 2006, which will adversely affect those geographic areas that benefited from this provision. As might be expected, the largest reductions in payment will occur in the most rural states, including Montana, North Dakota, South Dakota, and Wyoming where reductions of up to 3 percent can be expected as a result of the expiration of this statutory authority.
- Medical Nutrition Therapy Services
- CMS proposes to improve payment for covered medical nutrition services provided by medical nutritionists.
- Changes in Medicare Coverage for Screening Procedures
- Medicare will cover ultrasound screening for abdominal aortic aneurism (AAA) for patients with a family history of AAA or who manifest certain risk factors; and
- Colorectal cancer screening will no longer be subject to the Part B deductible.
- Therapy Cap
- There is an overall limitation on Medicare spending for physical, occupational, and speech therapy spending in an outpatient setting. Beginning in 2007, no exceptions will be granted regardless of medical necessity.
- Consultation on Medicare Payment for New Clinical Diagnostic Laboratory Tests
- CMS established procedures in 2005 providing for increased public consultation under Medicare for establishing the fees paid for new lab tests. The process had not been sufficiently transparent and the industry had little opportunity to provide input. CMS proposes to codify this process in a more formal manner. CMS also clarifies the method of pricing new tests including the use of crosswalking a new code to an existing comparable service and gapfilling a price when no existing code is available.
- Promoting the Effective Use of Health Information Technology (HIT)
- CMS discusses the potential for HIT to facilitate the improvement in the quality and efficiency of health-care services. They note that “the Administration supports the adoption of HIT as a normal cost of doing business.” CMS indicates its intent to make quality and price information more readily available to the public.
HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM PROPOSED CHANGES
CMS also released the proposed 2007 changes to the hospital outpatient prospective payment system (HOPPS). Overall, hospital outpatient departments (OPD) will receive a 3.4 percent in the update for inflation. The rates assigned to individual procedures are based on the estimated median costs for each Ambulatory Payment Classification (APC), derived from hospital charges converted to costs. View a comparison of the current and proposed APC rates for services relevant to hematology.
The most significant payment changes are proposed increases of 20 percent for apheresis codes 36515 and 36516 and for photopheresis (code 36522). Bone marrow harvesting, biopsy, and transplant codes are either kept about the same or are modestly reduced. There was, however, substantial reductions in the proposed payment rates for the technical component of flow cytometry services. Payments for some of the high volume blood products will be enhanced.
Other significant issues in the rule or issues of particular interest to ASH include the following:
Payment for Drugs
CMS is proposing two significant changes. First, the threshold used to determine if a drug is “packaged” into the payment for a procedure is proposed to be increased from $50 to $55. However, anti-emetics costing less than that amount will continue to be separately paid. Second, CMS proposes to reduce the payment for most separately paid drugs in the OPD setting to 105 percent of the Average Sales Price (ASP). Currently, hospitals are paid the same as physicians or at 106 percent of ASP. This change is being made because it is estimated that this more closely approximates actual hospital costs including pharmacy costs.
Hold Harmless Provision for Small Rural Hospitals
For 2007, hospitals with less than 100 beds located in rural hospitals are assured that if the HOPPS payments in the aggregate are less than they would have received under the cost reimbursement system, they will receive 90 percent of the difference.
Data used in the APC Calculation
CMS continues to increase the number of claims used in calculating the APC rates. This had presented a problem determining costs when multiple procedures were reported on a single claim including multiple charges for supplies, low cost drugs, etc., that could not be easily allocated. For 2007, CMS will be using all but 4 million of the 54 million OPD claims in calculating the APC weights.
Positron Emission Tomography (PET) Procedures
For several years, CMS has established a payment rate for PET and PET CT in a new technology APC category. The rate was significantly above the costs of performing the procedure. This was in part done because the claims data did not seem robust enough to reliably allow the calculation of APC weights for PET. For 2007, however, CMS has concluded it has adequate claims data for both PET and PET CT and has proposed substantial reductions in payment based on the estimated cost of performing these services.
Medication Therapy Management
CMS has chosen not to accept the recommendation of the APC panel to establish a nominal payment for the Category III CPT codes assigned to medication therapy management provided by a pharmacist. CMS believes that these costs are adequately captured in the costs of other services.
Drug Administration and Coding
At the start of HOPPS through 2004, only three codes were used to report all chemotherapy services and drug infusion services for non-chemotherapy drugs. CMS has made a number of changes over the years. For 2007, CMS is still not planning to transition to the full set of CPT codes for drug administration although they indicate this is still an option in the future. For 2007, CMS proposes to continue the 2006 drug administration coding structure used for HOPPS. However, certain payment changes are proposed. For IVIG, in 2006, CMS used a temporary code (G0332) to capture the added preadministration services related to IVIG. Based on CMS’ analysis of the IVIG market and the proposed payment level for infusions, CMS does not think separate payment for preadministration related services is required for 2007.
Hospital Visit Codes
In lieu of using the CPT codes for new and established patients in a clinic setting, CMS has developed five new proposed “G” codes to report clinic visits. This is being done since they do not think that the current CPT codes, which are designed to measure physician activities, adequately describe hospital resource utilization.
CMS is also proposing to establish new “G” codes for use in the emergency department to replace the CPT codes. There would be five codes for use in fully dedicated emergency departments (called Type A emergency departments) and five codes for use in emergency departments that are really not a dedicated 24 hour, seven day a week emergency department but which happen to meet the minimum EMTALA (Emergency Medical Treatment and Active Labor Act) requirements. These are called Type B emergency departments.
Finally, CMS is proposing to create two new critical care codes for use by hospitals to replace the CPT codes in the OPD setting.
Blood and Blood Products
The calculation of APC rates for blood and blood products have presented substantial problems over the years. CMS implemented various hold harmless provisions and other adjustments to protect against substantial reductions in payment. CMS believes that improved reporting of charges and units for blood products has substantially improved and the use of blood specific cost to charge ratios allows the 2007 APC rates for blood to be reliable without imposing any unique payment policies. They estimate that payment for blood in 2007 will increase by over 90 percent as compared with 2005.
Hospital Reporting of Quality Measures
As is the case for inpatient services, CMS will be reducing payments to hospitals by 2.0 percent if they fail to report certain quality measures. There are 21 quality measures for heart attack, heart failure, pneumonia and surgical care. For example, there is a standard for use of aspirin on admission with a MI (myocordial infraction), use of antibiotics to prevent surgical infection, etc. Initially, CMS will use the same indicators.
Ambulatory Surgical Center
The proposed rule also included a total revision to the payment system for services performed in ambulatory surgical centers. Under the proposal, ASC payments would be tied to a percentage of the hospital APC rates. By law, the new system needs to be budget neutral with current ASC outlays. CMS has estimated that this would require an overall payment rate at about 62 percent of the HOPPS rate. The new system would be phased in over a two year period. In 2008, the ASC payment would be based on a 50-50 blend of the new and current ASC rates with full implementation in 2009.
ASH is continuing to analyze the proposed rules and will submit comments to CMS. Please e-mail your comments to Pamela Ferraro, ASH Practice Advocacy Manager, at pferraro@hematology.org.
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