CMS continues packaging, tweaks 2-midnight rule in 2016 OPPS proposed rule

HCPRO Website, July 2, 2015

By Steven Andrews

CMS is sharply accelerating its push toward moving outpatient payments from a fee-for-service model to a true prospective payment system with a number of its proposals in the 2016 OPPS proposed rule, including new comprehensive APCs (C-APC) and extensive APC consolidation and reconfiguration.
“The rule is deceptively short at less than 700 pages, but it packs a punch with a number of new proposals that providers need to review carefully in order to determine both financial and operational impact,” says Jugna Shah, MPH, president and founder of Nimitt Consulting, based in Washington, D.C., and Spicer, Minnesota.
The proposed rule includes an update to the 2-midnight rule and introduces:
  • Two new status indicators (Q4 and J2)
  • A new comment indicator (NP)
  • A new data collection modifier to understand services related to C-APCs that are billed separately
  • Expanded packaging
  • Multiple changes pertaining to device-related procedure APCs and the inpatient-only list
“What’s clear is that CMS is moving full steam ahead in this proposed rule with creating larger and larger bundles of services in an attempt to be a more prudent purchaser of healthcare services,” Shah says.
APC restructuring and consolidation
Last year, CMS finalized changes to restructure and consolidate ophthalmology and gynecology APCs. For 2016, CMS proposes far more changes to restructure existing APCs in the following nine APC clinical families:
  • Diagnostic tests and related services
  • Endoscopy procedures
  • Gastrointestinal procedures
  • Imaging services (specifically diagnostic radiology and nuclear medicine)
  • Incision and drainage and excision/biopsy procedures
  • Orthopedic procedures
  • Skin-related procedure (combining debridement and destruction with skin procedure APCs)
  • Urology and related procedures
  • Vascular procedures
“This may be the single largest restructuring of APC groups since the inception of OPPS,” says Shah. “And it’s likely just the beginning.” 
Providers will need to thoroughly review these changes and look at their volumes of services in these areas to assess the potential financial impact if CMS finalizes the proposed changes, Shah says.
C-APC updates
CMS does not propose making changes to existing C-APC logic including how the complexity adjustment works, but the 2016 OPPS proposed rule does include nine new C-APCs to add to the 25 introduced last year.
While the original C-APCs focused mostly on services related to implantation of costly medical devices, CMS’ new C-APCs go beyond and extend to other services including a proposal for a new C-APC related to observation, C-APC 8011 (comprehensive observation services).  Providers will need to analyze the payment differential between this new C-APC and what they receive for payment today on claims that include services in addition to the extended management and assessment Composite APC. 
Expansion of ancillary packaging
CMS proposes to expand conditional packaging by packaging Level 4 minor procedures and Level 3 and 4 pathology service HCPCS codes when they are billed with a surgical service. CMS believes these to be typically ancillary or adjunctive to another primary service, most commonly surgery. CMS proposes assigning status indicator Q2 to these codes to allow for separate payment when provided on a different date of service from the surgical service.
Laboratory packaging updates
Due to a CMS overestimation of the impact of laboratory packaging changes, OPPS costs rose approximately $1 billion more than expected in 2014, according to the proposed rule. As a result, CMS’ overall proposed payment update for the 2016 conversion factor will be a negative update factor.
Providers need to review this to understand CMS’ rationale for reducing the overall conversion factor update by 2% to account for its overestimation of Clinical Laboratory Fee Schedule (CLFS) dollars pulled into OPPS because if finalized this means providers will in fact see a decrease in the CY 2016 final conversion factor, says Shah.
CMS also proposes a new status indicator to be assigned to lab tests so that when they are the only service rendered on a claim, they will be separately paid under the CLFS without providers having to do anything from a reporting perspective. 
“It’s a relief to see CMS propose new status indicator Q4, as this was suggested by many in the provider community in years past as a way to help reduce their administrative burden,” Shah says. “Many providers previously told CMS that it should create a new status indicator so that the claims processing system could take care of separate payment for labs when they were the only service provided without providers having to be forced to append modifier- L1.”
Providers should be thrilled to see CMS make this proposal and comment to CMS about it, she adds.
The new status indicator means providers would only use modifier -L1 to identify “unrelated” laboratory tests that are ordered for a different purpose and by a different practitioner than the other OPPS services on the claim. “On the claim” is a new proposal as today this modifier is used by date of service but for CY 2016, CMS proposes that editing will occur across an entire claim and not just by date of service. 
“CMS is taking the approach that labs reported without modifier -L1 should be packaged regardless of date of service, when multiple dates of service appear on a single claim and providers may want to weigh in on this,” Shah says.
CMS continues to propose that separate payment should be allowed for molecular pathology services under the CLFS and extends this proposal to future new molecular pathology tests. CMS also proposes to allow separate payment under the CLFS for all preventive laboratory tests. 
2-midnight rule review shifts to QIOs
CMS introduced no changes to the 2-midnight rule in the 2016 IPPS proposed rule but acknowledged plans to address it in the OPPS rule. The agency followed through by proposing changes for stays expected to last less than two midnights.
CMS proposes that for stays a physician expects to last less than two midnights, an inpatient admission would be acceptable on a case-by-case basis, depending on the judgment of the physician and the documentation justifying the stay. CMS expects short stays for minor surgical procedures or hospital care to be rare and will monitor these types of admissions to prioritize them for medical review. 
Responsibility for educating physicians and enforcing the 2-midnight rule will shift to Quality Improvement Organizations (QIO) from Recovery Auditors, according to the proposed rule. This appears to be a positive change, as the QIOs are likely better equipped than Recovery Auditors to conduct these reviews, but providers will know more once CMS releases information about the medical review strategy, says Shah.
Commenting on the rule
Providers should certainly take a deep dive into the rule after the holiday weekend in order to prepare comments for submission to CMS, according to Shah.
“CMS has taken a sharp right turn toward creating larger and larger bundles of services, introducing more nuances to OPPS, and proposing to embark on a data collection effort to better understand services that might be related to C-APCs but billed on a separate claim,” she says.
“This is all in the spirit of making the OPPS more of a true prospective payment system, so now is the time to perform analysis of the impact of these changes and to weigh in to CMS on these significant proposals.”
CMS will accept comments on the proposed rule until August 31, 2015, and will respond to comments in a final rule to be issued on or around November 1, 2015. The proposed rule will appear in the July 8 issue of the Federal Register.
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.