Health Information Management

CMS' billion dollar projection error will cost hospitals in 2016

APCs Insider, August 7, 2015

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By Steven Andrews
Anyone who has looked at an OPPS proposed or final rule is aware the rules contain a massive amount of data, both in the form of projections and numbers from years past. Most of the time (but not always), CMS’ data is relatively accurate.
However, CMS’ predictions for costs due to changes for laboratory packaging in 2014 were way off, and hospitals will have to pay for it in 2016.
For the first time, CMS proposed lowering OPPS payment rates in the proposed rule by 0.1%. That’s based on a projected market basket increase of 2.7% minus a 0.6% adjustment for multi-factor productivity and a 0.2% adjustment required by law. Then, CMS is taking off an additional 2% due to an error in its projections from 2014, leading to an estimated 0.2% decrease in OPPS payments in 2016, assuming all other proposed changes are finalized.
OPPS costs rose approximately $1 billion more than expected in 2014 because CMS overestimated the impact of laboratory packaging changes, according to the 2016 OPPS proposed rule. Because of the overestimate, the agency moved too much money from the Clinical Laboratory Fee Schedule (CLFS) into the OPPS for packaging.
By doing this and allowing for the separate payment of labs when reported with an –L1 (separately payable laboratory test) modifier, the agency essentially paid double for many labs–first by packaging their costs into APC rates and second by making separate payment in CY 2014 through the CLFS. As a result, CMS proposes a reduction to the CY 2016 conversion factor so that it can account for its error.
The introduction of the –L1 modifier in July 2014 led to a lot of confusion for providers because CMS instructions initially weren’t clear about what an “unrelated” lab test might be. It’s hard to believe this led to such a massive overpayment in so short a time when many providers struggled to apply it or simply didn’t charge for relatively inexpensive tests.
And don’t forget that CMS extended the 2% sequestration cuts from March 2015 to March 2016. Providers will have to keep all these cuts in mind when considering other policies CMS has proposed for 2016. It’s still not too late to comment, you have until August 31.
For more on CMS’ proposed changes, visit Jugna Shah, MPH, and Valerie A. Rinkle, MPA, will analyze the 2016 OPPS proposed rule and give a comprehensive overview of the changes and what providers may want to comment on in HCPro’s annual OPPS proposed rule webcast from 1-2:30 p.m. (Eastern) Tuesday, August 18. Look for more in-depth coverage of the 2016 OPPS proposed rule in the September 2016 issue of Briefings on APCs, scheduled to publish August 13.


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