Payment Rule Summary
Proposed Rule
Medicare Outpatient Prospective Payment System
Calendar Year 2012
Table of Contents
Overview 1
Updates to the Conversion Factor 1
Wage Index and Labor-Related Share 2
Additions to the Outpatient Rate and Payments 3
Outlier Payments 3
Continuation of the Rural SCH Adjustment 3
Expiration of Hold-Harmless TOPs Payments to Small Rural and SCHs 4
Establishment of a Cancer Hospital Payment Adjustment 4
Updates to the Hospital OQR Program 5
CY 2013 Payment Determinations 5
CY 2014 Payment Determinations 6
CY 2015 Payment Determinations 6
Possible New Measures and topics for Future Years 7
Updates to the OQR Program Participation Policies 7
Updates to the APC Groups and Weights, Composite APCs, and the Packaging Threshold 7
Revisions to the APC Groups 7
Recalibration of the APC Weights 8
Updates to the Composite APCs 8
Packaging Threshold for Drugs, Biologicals, and Radiopharmaceuticals 9
Other Outpatient Payment and Policy Issues 9
Physician Supervision Requirements for Outpatient Services 9
Payment for PHP Services 10
Updates to the Inpatient List 11
Visit Codes for Clinic Visits, ED Visits, and Critical Care Services 12
Payment Reduction for No Cost/Full Credit and Partial Credit Devices 13
Beneficiary Copayments 13
Updates to the Hospital VBP Program for FFY 2014 13
Retainment of the FFY 2013 VBP Measures and Establishment of a New Process Measure 14
Minimum Number of Cases and Measures for the Outcomes Domain 14
Baseline and Performance Periods 15
National Performance Standards 15
Scoring Methodology for the HAC Measures 17
Domain Weighting 18
Review and Correction Process 18
Proposed Change to the Quality Reporting Requirements of the EHR Incentive Program and Establishment of a New Electronic Quality Reporting Pilot 18
Submission of Comments 19
Overview
On July 18, 2011, the Centers for Medicare and Medicaid Services (CMS) released the calendar year (CY) 2012 proposed payment rule for the Medicare Outpatient Prospective Payment System (OPPS). The proposed rule updates outpatient payment rates and policies and implements provisions of the Affordable Care Act (ACA) of 2010.
In addition to updating outpatient payments for CY 2012, the rule includes new policy proposals related to the second year (federal fiscal year (FFY) 2014) implementation of the ACA’s Medicare inpatient value-based purchasing (VBP) Program. Complete program polices for the first year program (FFY 2013 program), and several program policies for the FFY 2014 program have already been adopted by CMS.
CMS is also using the OPPS rule to propose changes to the quality reporting requirements of the Electronic Health Record (EHR) Incentive Program authorized by the American Recovery and Reinvestment Act (ARRA) of 2009 and implemented by CMS last year.
A copy of the proposed rule Federal Register and other resources related to the OPPS are available on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS/.
An online version of the proposed rule Federal Register is available at
http://www.federalregister.gov/articles/2011/07/18/2011-16949/medicare-and-medicaid-programs-hospital-outpatient-prospective-payment-ambulatory-surgical-center.
Comments on the proposed rule are due to CMS by Tuesday, August 30. Instructions for submitting comments are available on the last page of this summary. Proposed program changes, if adopted, would be effective for discharges on or after January 1, 2011 unless otherwise noted.
Complete details of the proposed rule are provided below. Text in italics is from the July 18 Federal Register.
Updates to the Conversion Factor
Federal Register pages 42,209-42,211
CMS’ Proposal: The proposed CY 2012 conversion factor would be updated as follows:
· Plus 2.8%: CMS is proposing to update the conversion factor by a marketbasket of 2.8%.
· Minus 1.2 percentage points: Offsetting the marketbasket is an ACA-mandated productivity reduction of 1.2 percentage points.
· Minus 0.1 percentage points: Offsetting the marketbasket is an ACA-mandated pre-determined reduction of 0.1 percentage points.
· Minus 0.73%: CMS is proposing to reduce the outpatient conversion factor by 0.73% to ensure the budget neutrality of the payment system based on the proposed implementation of a payment adjustment that would increase outpatient payments to exempt cancer hospitals (see “Establishment of a Cancer Hospital Payment Adjustment” section below).
The following table shows the proposed conversion factor for CY 2012 compared to the rate currently in effect.
FinalCY 2011 / Proposed
CY 2012 / Percent Change
OPPS Conversion Factor / $68.876 / $69.420 / +0.8%
Wage Index and Labor-Related Share
Federal Register pages 42,211-42,213
Background: The labor-related portion of the conversion factor is adjusted for differences in area wage levels using a wage index. Currently, CMS applies to the OPPS, the wage index used under the Inpatient Prospective Payment System (IPPS) with all reclassifications, adjustments, and application of the rural floor. CMS is not required to use the IPPS wage index with all adjustments under the OPPS, but does so as the agency believes use the IPPS wage index has been reasonable.
CMS’ Proposal: “. . . our longstanding policy for OPPS has been to adopt the final wage index used in IPPS. Therefore, for calculating proposed OPPS payments in CY 2012, we use the proposed FY 2012 IPPS wage indices.”
As established by the ACA, a wage index floor of 1.0 would continue to be applied to hospitals located in a Frontier State (Montana, Nevada, North Dakota, South Dakota, and Wyoming). In addition, Section 508 wage index reclassifications are set to expire on September 30, 2011. CMS does not have the authority to extend these reclassifications without legislative action. Lastly, CMS would continue to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county.
CMS would continue to apply the wage index to a labor-related share of 60%. A complete list of the proposed wage indexes for FFY 2012 is available on the CMS Web site at https://www.cms.gov/AcuteInpatientPPS/IPPS2012/.
Citing concerns about inflated wage indexes in certain states as a result of hospitals converting status under the IPPS (i.e. converting from Critical Access Hospital (CAH) to PPS or urban status to rural status), CMS is considering modifications to the wage index used under the OPPS. CMS is considering and seeking public comment on the following options for modification of the OPPS wage index:
“(1) Adopt the IPPS wage index for the OPPS in its entirety including the rural floor, geographic reclassifications and all other wage index adjustments;
(2) adopt the IPPS wage index for the OPPS in its entirety except when a small number of hospitals set the rural floor for the benefit of all other hospitals in the State;
(3) adopt the IPPS wage index for the OPPS in its entirety except apply rural floor budget neutrality within each State instead of nationally; or
(4) adopt another decision rule for when the rural floor should not be applied in the OPPS when we have concerns about disproportionate impact.”
CMS is also requesting public comments on an option under consideration for both the IPPS and OPPS where CMS would determine the applicable rural wage index floor using only data from hospitals that are geographically located in rural areas. Such a policy would ensure that a state’s rural floor wage index is based on hospitals located in rural areas.
CMS did not propose moving forward with any of the options under consideration.
Additions to the Outpatient Rate and Payments
Outlier Payments
Federal Register pages 42,221-42,223
Background: Outlier payments are provided under OPPS for individual services or procedures with extraordinarily high costs compared to the payment rates for their Ambulatory Payment Classification (APC) group. The outlier threshold is met when the cost of a service or procedure exceeds both 1.75 times the APC payment amount and the APC payment rate plus a fixed-dollar threshold. This dual test is intended to eliminate outlier payments for low-cost services and provide higher outlier payments for more expensive procedures. Currently, the projected target for aggregate outlier payments is set at 1.0% of aggregate total OPPS payments, with a portion of that equal to 0.02% which is set aside to allocate partial hospitalization program (PHP) outlier payments to community mental health centers (CMHCs).
CMS pays outlier payments under OPPS at 50% of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 threshold and the fixed-dollar threshold are met. For CY 2011, the outlier fixed-dollar threshold is $2,025. For CMHCs, if the cost for partial hospitalization services exceeds 3.40 times the payment for APC 0173, the outlier payment is paid at 50% of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.
CMS’ Proposal: “We are proposing for CY 2012 to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, specifically 0.14 percent, would be allocated to CMHCs for PHP outlier payments.”
“To ensure that the estimated CY 2012 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the hospital outlier threshold be set so that outlier payments would be triggered 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 $2,100 fixed-dollar threshold.”
The proposed threshold increase would reduce the number of cases eligible for outlier payments.
Continuation of the Rural SCH Adjustment
Federal Register page 42,216
Background: Since 2006, CMS has applied a 7.1% payment increase for rural sole community hospitals (SCHs) for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs. In 2007, CMS clarified that essential access community hospitals (EACHs) were eligible to receive this adjustment. This payment increase is a result of a provision of the Medicare Modernization Act (MMA) of 2003 that gave the Secretary authority to make an adjustment to OPPS payments for rural hospitals, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas.
CMS’ Proposal: “For the CY 2012 OPPS, we are proposing to continue our policy of a budget neutral 7.1 percent payment adjustment for rural SCHs, including EACHs . . .”
“We intend to reassess the 7.1 percent adjustment in the near future by examining differences between urban and rural hospitals’ costs using updated claims, cost reports, and provider information.”
Expiration of Hold-Harmless TOPs Payments to Small Rural and SCHs
Federal Register pages 42,215-42,216
Background: When OPPS was implemented, hold-harmless transitional outpatient payments (TOPs) were established to provide relief to hospitals that would receive less in payments under the OPPS methodology than they would have received under the prior payment system. TOPs payments for most hospitals expired at the end of CY 2003. However, legislation has extended TOPs payments for small rural hospitals and SCHs/EACHs. Most recently, the Medicare and Medicaid Extenders Act of 2010 extended TOPs for rural hospitals with 100 or fewer beds and SCHs/EACHs through December 31, 2011. CMS does not have the authority to extend these payments beyond CY 2011 without legislation. Cancer hospitals and children’s hospitals are permanently held harmless from the impact of OPPS.
CMS’ Proposal: Effective for services provided on or after January 1, 2012, rural hospitals with 100 or fewer beds and SCHs/EACHs will no longer be eligible for TOPs.
Establishment of a Cancer Hospital Payment Adjustment
Federal Register pages 42,216-42,221
Background: Since the inception of OPPS, Medicare has paid cancer hospitals under OPPS for covered outpatient hospital services. There are 11 cancer hospitals nationwide. As described above, cancer hospitals are permanently held harmless from the impact of OPPS.
A provision of the ACA requires CMS to study costs incurred by cancer hospitals for outpatient services to determine if they exceed the costs of other OPPS hospitals. If appropriate, the law requires CMS to provide a payment adjustment to cancer hospitals for outpatient services furnished on or after January 1, 2011. In the CY 2011 OPPS proposed rule, CMS put forward, but ultimately did not adopt a proposal that would have provided hospital-specific payment adjustments to each of the 11 cancer hospitals. CMS noted that further study of this issue was necessary.
CMS’ Proposal: As proposed last year, but ultimately not adopted, CMS is again proposing to increase payments to 11 hospitals identified as exempt cancer hospitals. CMS is proposing a hospital-specific adjustment under the OPPS for each cancer hospital if their outpatient costs are determined to be greater than the costs of other hospitals paid under the OPPS.
“. . . for services furnished on and after January 1, 2012, we are proposing that, for a cancer hospital with an individual [payment-to-cost ratio] PCR (as determined by the Secretary) below the weighted average PCR for other hospitals . . . we would make a hospital-specific payment adjustment by adjusting the wage-adjusted OPPS payment for covered OPD services (except for devices receiving pass-through status . . .by the percent difference between the hospital’s individual PCR and the weighted average PCR of other hospitals . . . in the CY 2012 dataset.”
“For a cancer hospital with an individual PCR (as determined by the Secretary) above the weighted average PCR for other hospitals . . . we are proposing a zero percent adjustment for covered hospital outpatient services furnished on and after January 1, 2012.”
This payment adjustment would be applied in a budget neutral manner; requiring CMS to reduce the outpatient conversion factor by 0.73% (see “Updates to the Conversion Factor” section above). CMS is proposing to update the cancer hospital payment adjustments and budget neutrality factor each year. Cancer hospitals remain eligible to receive hold-harmless TOPS.
Table 13, on page 42,221 of the Federal Register lists the proposed cancer hospital payment adjustments by hospital.
Updates to the Hospital OQR Program
Federal Register pages 42,313-42,334
Background: The Medicare Improvements and Extension Act (MIEA-TRHCA) of 2006 authorized the Health and Human Services (HHS) Secretary to develop a quality data pay-for-reporting program for hospitals paid under the OPPS. Hospitals that fail to successfully participate in what is now known as the Hospital Outpatient Quality Reporting (OQR) Program receive reduced payments through a reduction of 2.0 percentage points to the hospital marketbasket update. CMS makes these payment determinations each year.