Health Information Management

FY 2010 OPPS proposed rule: CMS focuses on physician supervision, drug reimbursement

JustCoding News: Outpatient, September 8, 2009

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The text portion of the 2010 OPPS proposed rule that CMS released July 1 is shorter than previous years’ rules, and the substantive policy changes seem fewer as well. CMS did not propose to add any new composite ambulatory payment classifications (APC), nor did it add any national evaluation and management (E/M) guidelines. There are also no new hospital outpatient quality indicators or any other major coding or billing changes.

One reason for the lack of changes may be the pending healthcare reform Congress and the Obama administration are considering.

“CMS is of course aware of the many provisions being considered under health reform and may be taking a wait-and-see approach,” says Jugna Shah, MPH, president of Nimitt Consulting in Washington, DC. “Why make things even more complicated for hospitals when a whole slew of other changes may be imminent?”

However, in its rule, CMS did provide a considerable discussion of physician supervision and reimbursement rates for separately payable drugs. 

“These are some of the most controversial topics that have been under fire under OPPS for a while,” says Shah.

Proposed physician supervision changes

CMS proposes to permit nonphysician practitioners (NPP)—nurse practitioners, physician assistants, clinical psychologists, certified nurse midwives, and clinical nurse specialists—to directly supervise all hospital outpatient therapeutic services that they may perform themselves in accordance with their state law, scope of practice, and hospital-granted privileges.

This change is significant because hospital clinics are often comprised of mid-level practitioners who treat patients. However, in the past, even though these practitioners are allowed to order and perform many of these services under prior practice rules and hospital bylaws, they could not supervise, says Valerie A. Rinkle, MPA, revenue cycle director at Asante Health System in Medford, OR.

“This policy change is very positive and makes a lot of sense in today’s healthcare environment,” Rinkle says.

Another proposed change for 2010 is that physicians working in their private clinics co-located with a provider-based department would no longer be able to provide supervision in the hospital setting, Rinkle says. 

According to CMS:

The supervising physician may not be located in any other entity, such as a physician’s office, IDTF, co-located hospital, or hospital-operated provider or supplier such as a skilled nursing facility (SNF), end stage renal disease (ESRD) facility, or home health agency (HHA), or any other non-hospital space that may be co-located on the hospital’s campus.

So even when a physician of the same specialty is working across the hall in his or her freestanding clinic, that physician cannot provide direct supervision for the hospital department services.

Requirement to be immediately available

If the proposed rule is finalized, the number of practitioners who are able to provide supervision will increase, which could, in turn, help facilities with another problem—knowing whether someone is immediately available.

CMS states that the general definition of ‘immediate’ means ‘without interval of time.’ Therefore, the supervisory physician or NPP could not be immediately available while performing another procedure or service that he or she could not interrupt.

CMS includes a specific discussion about the availability and responsibilities of the physician or NPP providing direct supervision. According to the proposed rule:

The physician or nonphysician practitioner must be prepared to step in and perform the service, not just to respond to an emergency. This includes the ability to take over performance of a procedure and, as appropriate to both the supervisory physician or nonphysician practitioner and the patient, to change a procedure or the course of treatment being provided to a particular patient.

CMS seems to be saying that physicians performing other services in a nearby location, even if across the hall, may not in fact be readily available if they cannot drop what they are doing and take over the procedure or service being provided to the patient, Shah says.

Although CMS indicates the physician or NPP would not have to practice in the same specialty as the service he or she is supervising, that person would need hospital-granted privileges to perform the procedure.

“This could limit the physicians and NPPs that could act as supervising individuals for certain services, even though they are immediately available in terms of their ability to respond to the department,” says Kimberly Anderwood Hoy, Esq, CPC, director of Medicare and compliance at HCPro, Inc., in Marblehead, MA.

In this culture of retrospective chart review with RACs and Medicaid Integrity Contractors, facilities have the added concern of whether and how to document these requirements in the medical record for validation on a case-by-case basis. With so much uncertainty, hospitals are concerned that requirements not previously addressed in clinical documentation will become future requirements.

New methodology for drug reimbursement

Pharmacy stakeholders hoping to see an increase in payment rates for separately payable drugs in the 2010 OPPS proposed rule didn’t exactly get their wish.

Providers and various other stakeholders have shared with CMS their concerns about how differential drug markup practices result in ‘charge compression’ and have a negative effect on the calculation methodology CMS uses to set payment rates for separately payable drugs.

CMS acknowledges this issue in the 2010 OPPS proposed rule and is considering a different methodology for calculating drug APC payment rates.

This is a great first step, says Shah. Stakeholders can take some satisfaction in knowing that CMS acknowledges that charge compression overestimates the overhead costs associated with packaged drugs that are allocated to nondrug APC payment rates. The agency also acknowledges that it underestimates the costs associated with separately payable drugs, Shah says. “CMS’ recognition of this and concrete steps to address it is definitely a victory for providers,” she says.

Increased number of separately payable drugs

CMS proposes to change its calculation methodology for packaged drugs. The change involves shifting approximately $150 million of the costs associated with HCPCS-coded packaged drugs with average sales prices (ASP) to separately payable drugs. This will better account for the higher pharmacy overhead costs of high-cost separately payable drugs vs. low-cost packaged drugs.

Historically, all packaged drug costs have been included in APC payment rates for nondrug APCs, such as procedure and ancillary APCs.

However, Shah says, CMS’ proposal does not go far enough because it does not address two other categories of packaged drug charges:

  • Packaged drugs with no HCPCS codes, typically reported by hospitals with a revenue code, units, and the dollar charge
  • Packaged drugs with HCPCS codes that do not have an ASP

The charges associated with these two types of packaged drug are likely two to three times higher than the one category of packaged drug charges that CMS proposes to treat differently for the rate-setting process in 2010. CMS assumes that moving some packaged drug charges to separately payable drugs will realign some of the pharmacy overhead costs that should naturally be associated with separately payable drugs. But because CMS uses a single cost-to-charge ratio for packaged and separately payable drugs, this doesn’t happen, Shah says.

In other words, acquisition costs and pharmacy handling/overhead costs associated with packaged drugs tends to remain overestimated, whereas those same costs for high-cost, separately payable drugs remain underestimated even after CMS’ proposed $150 million reallocation—leading to continued inappropriately low APC payment rates assigned to separately payable drugs.

Despite this and other proposed changes, the ASP plus percentage formula for payment of separately payable drugs would not change under the 2010 proposals. For calendar year 2010 OPPS, CMS proposes to continue to reimburse hospitals for separately payable drugs at ASP plus 4%.

“We should commend CMS for taking this first step to address charge compression, but we also need to help the agency understand that the disappointing reality for providers is that ASP plus 4% still does not even begin to cover the acquisition cost, let alone the pharmacy handling costs associated with drugs,” Shah says.

Packaging threshold increase

CMS also proposes to increase the packaging threshold from $60 to $65 and proposes to eliminate separate APC payment rates for the 5-HT3 antiemetic drugs, with the exception of palonosetron hydrochloride.

Currently, drugs are separately payable when they have a median cost that is greater than $60. But by increasing that threshold to $65, some drugs that are currently separately paid will be packaged for 2010.

Inclusion of 340B hospital data

Another factor playing into CMS’ calculations is the inclusion of claims data from hospitals that are part of the 340B program, which limits the cost of drugs to federal purchasers and to certain grantees of federal agencies, federally qualified health center look-alikes, and qualified disproportionate share hospitals. However, pharmaceutical manufacturers do not include those discounts when they determine ASP.

During the February APC Advisory Panel meeting, commentators asked Medicare to exclude 340B hospitals, Shah says. If those hospitals purchase drugs at a lower price, and their markup occurs from a lower price, their charges will theoretically be lower, she adds.

Presenters at the February APC Advisory Panel showed that by removing 340B claims data, the ASP plus number increased from ASP plus 4% to ASP plus 7%.

Reimbursement changes for individual hospitals

Many hospitals may believe that because the proposed reimbursement rate for separately payable drugs remains at ASP plus 4%, they will receive the same reimbursement in 2010 as they do today. That’s definitely not true, Shah cautions.

Hospitals should compare what they receive today to what CMS has proposed for 2010 for their top 10 drugs (by total charges) to get an early picture of the expected financial effect if CMS’ proposal for separately payable drug reimbursement is finalized as is, Shah says.

Editor’s note: This story was adapted from various articles that were originally published in the September issue of Briefings on APCs.

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