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HOPPS favors wholesale packaging payments

Radiology Administrator's Compliance and Reimbursement Insider, March 1, 2008

The biggest change to the 2008 Medicare hospital outpatient prospective payment system (HOPPS) has major implications for radiology reimbursement—wholesale packaging.

This means your hospital will no longer receive many of the separate ambulatory payment classification (APC) payments previously received in imaging supervision and interpretation services and diagnostic radiopharmaceuticals.

CMS expands packaging

Despite comments from providers, industry leaders, and trade associations, expanded packaging is now the rule in the following hospital outpatient categories:

• Guidance services
• Image processing
• Intraoperative services
• Imaging supervision and interpretation
• Diagnostic radiopharmaceuticals
• Contrast media
• Observation services

With the expanded packaging logic, hospitals no longer see separate payment for several services for which they received payment in the past.

“This final rule appears to contain the most radical changes to HOPPS payment policy since its inception in August 2000,” says Jugna Shah, MPH, president of Nimitt Consulting in Washington, DC.

Some changes are understandable regardless of whether they will be positive or negative for hospitals, Shah says. However, others raise questions about the outside pressures CMS faced that caused it to move forward with so many significant changes all at once, she adds.

CMS created a composite APC in the 2008 HOPPS that, in certain circumstances, provides a single payment to cover services across an entire patient encounter.

Through packaging, CMS hopes to:

Improve the quality of services

Improve outcomes for Medicare beneficiaries through the quality data reporting program

Initiate specific payment approaches to encourage efficient delivery of services and control future growth of the volume of services

In the preamble to the 2008 HOPPS final rule, CMS says expanding various APC payment bundles will encourage increased efficiency of outpatient care. In addition, increases in packaging provide hospitals the flexibility to manage resources more efficiently, CMS says.

Further, the effect of increased packaging is budget neutral because the payment for the primary procedure is being increased to reflect the cost of the packaged services.

Prepare for packaging confusion

Packaging is certainly an understandable and acceptable concept in any prospective payment system, Shah says. However, CMS’ grand-scale introduction on the outpatient side, in such a short time, is too much, she says. It left industry and providers wondering about the accuracy of the calculations, particularly in cases in which the logic doesn’t seem quite appropriate.

For example, in 2007, a provider billed two line items and received two separate APC payments totaling $1,500. This year, the same two billed line items receive only $800 because one service is now packaged and included in the other service.

“It’s pretty clear that providers are going to be unhappy and raise questions with respect to CMS’ calculations related to its expanded packaging logic,” Shah says. “The rapid movement and expansion of the packaging policy apparently reflects CMS’ goals of controlling outpatient expenditures and volume,” she adds.

The agency moved toward packaging to reduce costs rather than examining value-based purchasing or trying to streamline payment policies between hospitals and ambulatory surgery centers (ASC), she says.

One advantage is that the new packaging policies do not require changes to billing for radiology services, says Jackie Miller, RHIA, CPC, a senior consultant at Coding Strategies, Inc., in Powder Springs, GA. Hospitals will continue to submit charges on their Medicare claims for all of the services that are now defined as packaged, she says. They just won’t receive separate payment from Medicare for those services.

Four major concerns

Radiology professionals should stay apprised and heed the following tips:

Don’t stop billing for packaged services. Hospital staff members may wrongly believe that they can’t bill for packaged services and may stop entering charges for these services, says Miller. “That would cause the department’s revenue to drop significantly,” she says. 

Additionally, reimbursement could lower if charges for packaged services are not entered on non-Medicare accounts (where those services will still be separately paid). “This sounds like a far-fetched scenario, but I do periodically run into people who have this mistaken belief, including the occasional compliance officer—who should know better,” says Miller.

Watch for drops in reimbursement. Administrators could be blindsided by drops in reimbursement for outpatient radiology services, says Miller. “This will be particularly important for outpatient interventional radiology services,” she says.

Even though accounts receivable remain unchanged, if reimbursement for specific services drops, the hospital administration may be less willing to support expansion of specific services or new equipment.

In other words, Miller explains, there will be no decrease in the hospital’s billings. For example, if the radiology department produced $2 million in charges in 2007, it will still produce $2 million in charges in 2008. However, the Medicare payment received for those charges will go down due to the packaging changes, says Miller. 

Knowing that payment is decreasing, hospital administrators might decide not to approve purchases of expensive new imaging equipment, Miller says.

Many of the 2007 vs. 2008 reimbursement examples are quite significant. For example, payment for a four-vessel cerebral arteriogram dropped from $5,119 to $2,847 due to the packaging of imaging supervision and interpretation services. Although administrators can’t do much about these drops in reimbursement, they must be aware of them, says Miller.

Pay attention to diagnostic radiopharmaceuticals packaging. On p. 249 of the final rule, CMS finalized the decision to package all diagnostic radiopharmaceuticals, despite the comments it received against this proposal. The APC Advisory Panel recommended continuing separate payment for diagnostic radiopharmaceuticals greater than $200. However, CMS declined to heed this advice and adopted the package payment concept for all diagnostic radiopharmaceuticals. This change is likely to significantly affect hospitals that provide specific nuclear medicine procedures.

The one positive change for providers in this area is that CMS will implement edits in the Medicare outpatient code editor for nuclear medicine services furnished on and after January 1. CMS will look for claims submitted without a HCPCS code or the charge for a diagnostic radiopharmaceutical. Shah notes that this will allow providers to fix their claims and ensure that CMS has complete data for future rate-setting.

Review reimbursement. If you haven’t paid close attention to your Medicare/Medicaid reimbursement, be sure to do so, says Maurine Spillman-Dennis, MPH, senior director of economics and health policy at the American College of Radiology (ACR). Give your reimbursement a much higher level of scrutiny, she says. Because the packaging concept is brand-new, there could be errors in reimbursement. (Use the chart from ACR on p. 4 of the PDF of this issue to examine the packaging changes.)

Don’t panic if you don’t understand all the details, but be aware that changes have occurred; it will help you in your interactions with chief financial officers, says Miller. 

Tip: The final rule includes changes in payment policy for ASCs, including some that affect payment for imaging services in ASCs. We’ll keep you updated in future issues.

Insider sources

Maurine Spillman-Dennis, MPH, senior director, economics and health policy, American College of Radiology, 1891 Preston White Drive, Reston, VA 20191, 800/227-5463, Ext. 4559; msdennis@acr.org.

Jackie Miller, RHIA, CPC, senior consultant Coding Strategies, Inc., 5041 Dallas Highway, Suite 606, Powder Springs, GA 30127; jackie.miller@codingstrategies.com.

Jugna Shah, MPH, president, Nimitt Consulting, Inc., 1740 18th Street NW, #103, Washington, DC 20009, 215/888-6037; jugna@nimitt.com.

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