CMS proposes sweeping changes to E/M visits, increased packaging, and new comprehensive APCs

HCPRO Website, July 9, 2013

By Michelle A. Leppert, CPC

CMS released a number of proposed changes to the OPPS payment system July 8. The 2014 OPPS Proposed Rule is shorter than normal at 718 pages, but the proposed changes are significant and probably the most sweeping changes since the inception of OPPS, says Jugna Shah, MPH, president and founder of Nimitt Consulting.

The proposed changes to the OPPS payment system are just as significant as the changes proposed in the 2014 IPPS Proposed Rule, says Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance at HCPro, Inc., in ¬Danvers, Mass. “Just when we thought CMS couldn’t shake things up more than the two-midnight proposal in IPPS, they are shaking up OPPS just as much.”

Evaluation and management

Evaluation and management (E/M) coding and reimbursement for hospital outpatients could change dramatically.

Currently, hospitals report five different levels of E/M CPT® codes for new patient clinic visits, established patient clinic visits, and Type A ED visits, and HCPCS G-codes for Type B ED visits. Under the proposal, CMS would replace all of these codes with three new HCPCS G-codes. The G-codes would be assigned to three different visit APCs:

  • One APC for all clinic visits
  • One APC for all Type A ED visits
  • One APC for all Type B ED visits

“This proposal, if finalized, could result in significant financial impact for hospitals depending on the distribution of low and high visits they have,” says Shah. “Moreover, this proposal may be coming from CMS’ desire to create payment parity between the hospital-based clinic setting and physician offices. The agency has historically indicated that the existing E/M visit reporting and payment were fine as is under the OPPS despite provider group and industry organizations asking CMS to provide national guidelines and make changes to the current E/M structure for years.”

This proposal, if finalized, would pay a single APC for clinic visits regardless of what type of clinic the patient visits and regardless of the facility resources expended. “The one good thing about CMS’ proposal is that the need to differentiate between new vs. established patients would be eliminated and so may the need for facility-specific guidelines,” says Shah.

This proposal seems to be a big step to try and standardize the use of a set of codes that can vary from facility to facility based on internally developed facility-specific guidelines, says Shannon E. McCall, RHIA, CCS, CCS-P, CPC, CPC-I, CEMC, CCDS, director of coding and HIM at HCPro, Inc., in Danvers, Mass.

Technical E/M services have always been an area of concern. It is difficult to measure and consistently report facility E/M codes to fairly account for resources used without encouraging overutilization, she says.

“This standardization would take out the guess work of did we over-report or under-report the technical E/M service level?” McCall adds “But, as with any change, if it affects the overall payment the facility receives it may not be received with thunderous applause especially if that means less revenue for some cases. Hopefully, the calculation of the one payment per type of HCPCS service code billed is one that is going to be somewhat budget neutral and not ones where the reimbursement overall suffers.”

Although the facility’s costs for a clinic visit are likely to be relatively consistent for all patients, facility costs in the ED can vary considerably, Hoy says. That is especially true of nursing costs. Nurses can spend variable amounts of time with patients in the ED. If a patient comes in with road rash, the nurse could spend a lot of time cleaning the wounds, but that cost would not be reflected in the single ED visit code.

“I think this makes more sense in the clinic than it does in the ED,” Hoy says. Shah is concerned that the proposal may be just as problematic for clinic visits because paying a single rate for all different clinic types ignores the different costs and services being rendered.

“There is a risk that certain providers may be systematically overpaid, while others may be underpaid depending on the types of clinics they have, the volume of patients, and the manner in which they deliver care,” Shah says. “If the rate is inappropriately low, providers may be forced to reduce certain services or “rush” through others, such as education and teaching, care coordination, etc. CMS’ payment policy shouldn’t systematically penalize providers or patients, and must be reviewed carefully in the coming months.”

CMS is also looking closely at provider-based clinics, which could be one reason for the E/M change, Hoy says. CMS will be collecting information about off-campus provider-based clinics.

CMS is looking for comments about the proposed E/M changes, so providers should review this proposal and submit their comments to CMS, Shah says.

Extended Assessment and Management Services

CMS proposed a related change to the Extended Assessment and Management Services (EAM) APCs as well. Currently, two EAM Composite APCS exist, APC 8002 and APC 8003. Under the proposal, CMS would pay for the entire visit through the proposed new EAM Composite APC 8009 when observation care is provided and criteria is met. Since CMS has proposed to replace existing E/M codes with new G-codes, the new EAM will not specify a certain level of E/M, but rather just the presence of one of the G-codes, critical care, or direct referral G-code.

The proposed payment rate for the new composite is $1,343 which is significantly higher than today’s APC rate for either APC 8002 or 8003. This may allow hospitals to be more appropriately paid for Extended Assessment and Management but this still needs to be carefully evaluated, Shah says.

Packaged services

CMS proposed major changes to which services are packaged and how, in an effort to make OPPS more “PPS-like” and less “fee-for-service like,” Shah says.

CMS proposes packaging the following seven new categories of supporting items and services:

  • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure
  • Drugs and biologicals that function as supplies or devices when used in a surgical procedure
  • Clinical diagnostic laboratory tests (except molecular pathology) when provided on the same date of service as another service
  • Procedures described by add-on codes
  • Ancillary services (currently assigned status indicator “X”); proposal to reassign all services to status indicator Q1
  • Diagnostic tests on the bypass list
  • Device removal procedures

New Addendum P on the CMS website lists all of the codes involved in CMS’ new packaging proposals (approximately 2149 codes).

For many of these services, CMS will continue to make a separate payment if they are reported alone on a claim.

“This is a very extensive proposed change,” Shah says and one that is likely to have long-term impacts that we may not even be aware of today.”

One of the most notable changes is the packaging of laboratory tests, Hoy says. “Those tests have never been part of packaging at all. They’ve been paid on the Clinical Lab Fee Schedule.”

On the face of it, some procedure APC rates are certainly higher as a result of CMS’ packaging proposal, but hospitals will need to perform a detailed financial impact to truly begin to understand the impact these policies will have on their bottom line, says Shah.

For example, all of the “add-on” type drug administration codes (e.g.,, each additional hour codes, additional injections, additional/sequential infusions etc.) are proposed to be packaged, which meansCMS will only pay for what it calls the main/primary procedure or the initial service codes in the case of drug administration.

These “primary” or initial service codes have a much higher proposed payment rate compared to today’s APC rates for those same codes, but the question is whether this single payment will cover what is paid by multiple APCs today, says Shah. Again, without computing a financial impact analysis it will be nearly impossible to assess impact. “In addition, future payment rates are likely to suffer since providers typically do not pay as close attention to reporting packaged services [those with a status indicator of N],” she adds.

CMS also proposes replacing existing device-dependent APCs with 29 new comprehensive APCs.

CMS is proposing to make a single payment when a primary procedure is on the claim and all other services would be packaged, Shah says. CMS has proposed a new status indicator “J1” to identify HCPCS codes that would be paid under this comprehensive APC.

A claim with the new proposed status indicator “J1” will trigger a comprehensive APC payment for the claim, meaning a single APC will be paid while all other items and services on the same date of service will no longer generate separate payment,” Shah says.

Additional proposed changes

CMS proposed other changes, including:



  • Keeping the payment level for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals at average sales price plus 6%
  • Increasing the drug packaging threshold to $90
  • Continuing to apply the 7.1% adjustment to OPPS payments to certain rural sole community hospitals, including essential access community hospitals
  • Beginning to enforce physician supervision requirements for critical access hospitals
  • Removing various edits like device-to-procedure edits and nuclear medicine and radiopharmaceutical edits
  • Eliminating modifiers -FB and -FC and instead requiring hospitals to report the amount of the credit in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device). Hospitals would report value code FD when the hospital receives credit for a replaced device that is 50% or greater than the cost of the device.

    CMS did not propose to remove any procedures from the inpatient-only list.

    Comment on the proposed rule

    CMS is asking for provider comments about the proposed rule. The proposed rule will appear in the July 19 Federal Register. You can download the display copy from the Federal Register. CMS will accept comments on the proposed rule until September 6, and will respond to all comments in a final rule to be issued by November 1. As always, Shah stresses the importance of hospital involvement and urges organizations to provide comments and feedback to CMS.

    “This time it is even more critical for providers to comment on the proposed rule,” Shah says. Comment thoughtfully and give examples, she says.




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