Corporate Compliance

Note from the instructor: CMS issues proposed OPPS and ASC rule for calendar year (CY) 2016, Part I

Medicare Insider, July 14, 2015

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This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.

On July 1, 2015, CMS released proposed CY 2016 changes to payment policies, rates, and quality initiatives for the majority of Medicare outpatient facility services. Such services include those provided in hospital outpatient departments (HOPD), generally payable under the OPPS, and those provided in ASCs, generally payable under the ASC Payment System. The proposed rule also includes recommended changes to the 2-Midnight Rule, which has been the primary criteria for determining coverage under Part A for inpatient hospital discharges since October 1, 2013. In this week’s note, we will focus on key proposed changes to the OPPS. In next week’s note, we will discuss proposed updates to the 2-Midnight Rule.

Brief background on the OPPS

The OPPS is the principal payment methodology for covered Part B services, including both outpatient services provided in HOPDs and certain inpatient services that are not covered under Part A. The OPPS is a prospective payment system. That is, for those services that are separately payable under the OPPS, there is a predetermined average payment amount that is payable for each covered service based upon the payment group (referred to as the “ambulatory payment classification” or “APC”) to which it is assigned.

Under the OPPS, however, not all covered separately billable services are separately payable. In many instances, the payment for those services is packaged into the payment for other separately payable related services. For example, payment for the use of the operating room, anesthesia, surgical supplies, and implantable devices will generally be packaged into the payment for the related surgical service. In recent years, CMS has been moving away from separate individual OPPS payments to more and more packaging. In addition, starting in CY 2008, CMS began to reimburse providers for certain combinations of specific related services with a single composite APC payment. Beginning January 1, 2015, CMS implemented even more comprehensive single payments for certain primary procedures and virtually all “adjunctive” services (services integral or ancillary to, supportive of, or dependent on, that primary procedure), based on “comprehensive” APCs or “C-APCs.”

Proposed OPPS changes for CY 2016

There were no real surprises included in the proposed OPPS updates for the coming calendar year. Signaling that it intends to continue moving in the direction outlined above, CMS has proposed the following key OPPS policy and payment changes for CY 2016:

  • Payment update. CMS proposes to update OPPS rates by -0.1% based on the projected hospital market basket increase of 2.7% minus both a 0.6% adjustment for multifactor productivity and a 0.2% adjustment required by the Affordable Care Act. CMS is also proposing an additional 2% reduction to address inflation in the APC payment rates for separately payable OPPS services. These rates were originally calibrated to cover the costs of packaging the majority of clinical diagnostic laboratory services (CDLS) with dates of service on and after January 1, 2014. In reality, however, a significantly higher proportion of laboratory tests than expected continue to be paid separately under the clinical diagnostic laboratory fee schedule (CDLFS) rather than being packaged into applicable OPPS payment rates.
  • OPPS spending for CDLS. CMS is proposing to reduce the CY 2016 conversion factor to account for roughly $1 billion in inflation in OPPS payments resulting from a significant overestimate of the costs of packaging CDLS, beginning in CY 2014. In anticipation of the packaging of most CDLS performed on and after January 1, 2014, CMS shifted $2.4 billion previously paid under the CDLFS into APC payments for the services into which the laboratory services were expected to be packaged. As noted above, however, a much higher than expected portion of CDLS continues to be paid separately under the CDLFS, requiring CMS to address the inflated OPPS payment rates.

CMS is also proposing to implement a new conditional packaging status indicator for laboratory tests that will make it easier for hospitals to receive separate payment for tests that are provided without other related OPPS services.

  • Chronic Care Management (CCM) Services. In response to hospital requests for clarification, CMS is proposing further guidance on coverage, billing, and payment rules for outpatient hospital CCM services. CCM services are non-face-to-face care management services for Medicare beneficiaries who have two or more significant chronic conditions. To be covered, hospital CCM services must be performed under the direction of a physician or authorized non-physician practitioner.
  • CAPCs for CY 2016. As noted above, a C-APC is an APC that provides for an encounter-level payment for a designated primary procedure and most adjunctive and secondary services provided in conjunction with the primary procedure. During CY 2015, there are 25 C-APCs, which primarily involve device-dependent procedures. For CY 2016, CMS is proposing nine new C-APCs, including several surgical APCs and a new C-APC for comprehensive observation services.

Currently, CMS provides a single composite payment for non-surgical encounters with a high-level visit and eight or more hours of medically necessary observation care. In addition, CMS pays separately for most covered ancillary services performed during the period of observation. Under the proposed rule, CMS would create a C-APC to provide comprehensive payment for all services received when receiving comprehensive observation services. These comprehensive services would include a nonsurgical encounter with a high-level outpatient hospital visit and eight or more hours of observation, as well as any ancillary services provided during the period of observation. The beneficiary would be responsible for only a single coinsurance payment, capped at the current calendar year inpatient deductible amount.

  • Expanded packaging. In CY 2015, CMS conditionally packaged many ancillary services. For CY 2016, CMS is proposing to conditionally package a limited number of additional ancillary services, including certain minor procedures and pathology services. CMS is also proposing to package payment for a few drugs that function as supplies during a surgical procedure. These changes were initially proposed in the CY 2014 OPPS/ASC rule, but were not finalized at that time.
  • OPPS device pass-through process. Medicare prefers to package payment for implantable devices into the payment for the procedures that utilize them. CMS currently provides separate pass-through payments, however, for newly FDA-approved implantable devices for a period of at least two, but not more than three, years. This gives CMS the opportunity to track utilization of those devices in order to determine which procedures to package them into. CMS is proposing to make some changes to the current process in response to stakeholders’ requests for more transparency and to align the outpatient process more closely to a similar process used for evaluating new technology add-on payment requests under the inpatient prospective payment system (IPPS).

Although CMS will continue to accept and review device pass-through applications on a quarterly basis, CMS is proposing to include discussions and accept public comments on preliminary decisions (both approvals and denials) in the next OPPS proposed rule. This would allow CMS to take those comments into consideration before arriving at a final determination for each application, which would then be published in the final rule. CMS is also proposing to add a newness criterion similar to the newness requirement that technologies must meet to qualify for IPPS add-on payments.

Opportunity for public comment

In next week’s note we will continue our discussion on the proposed OPPS/ASC rule, focusing on the recommended changes to the 2-Midnight Rule. In the meantime, hospitals and other interested entities and individuals are encouraged to carefully review CMS’ suggested changes to determine the potential impact on themselves, their organizations, and other stakeholders. In addition, they are encouraged to submit relevant comments and concerns, along with supporting documentation, to CMS by August 31, 2015.

For additional information on the proposed changes or to provide comments to CMS, please refer to the following websites:

View CMS-1633-P.

View the fact sheet.

View the fact sheet on the 2-midnight rule.

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