Health Information Management

CMS finalizes numerous provider-friendly OPPS changes for CY 2012

JustCoding News: Outpatient, January 11, 2012

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Fortunately for providers, CMS has decided not to cap outpatient payment rates for cardiac resynchronization therapy defibrillator (CRT-D) procedures at the standardized inpatient rate. The agency announced its decision as part of the calendar year (CY) 2012 Outpatient Prospective Payment System (OPPS) final rule released November 1, 2011.

In addition, CMS finalized several changes regarding payments for 11 cancer centers, drug payment calculations, and physician supervision.

"This is one of the first rules in the last several years that I recall where I can say that CMS seemed to really respond to commenters' suggestions and concerns and changed its position on proposed policies to final rule polices," says Jugna Shah, MPH, president of Nimitt Consulting in Washington, DC. "It's nice to see CMS' final rule for 2012 reflecting a lot of thoughtful analyses and changes to its ¬initial proposals, resulting in a number of nice wins for providers."

CRT-D payment
In the CY 2012 OPPS proposed rule, CMS announced plans to create a new composite APC for CRT-D procedures and cap payment for those services at the lesser of the newly established APC median cost or the inpatient standardized payment for MS-DRG 227. As a result, providers would have received decreased reimbursement when performing outpatient CRT-D procedures. Such a payment cap would also have marked CMS crossing payment systems in order to limit payment in one setting based on the lower rates paid in another.

"Historically we haven't seen CMS do this in setting its payment policies, even in cases where providers have asked CMS to create payment parity across sites of service, such as for drug reimbursement in the physician office and hospital setting," Shah says.

Numerous industry commenters pointed out their concern with CMS' proposal, which seemed unfair, and asked the agency to back away from it.

As a result of comments received and CMS' own additional analyses, the agency decided not to finalize its proposal for CY 2012. However, CMS stated it has the authority to use payments from other payment systems to cap or set OPPS payments in the future. This could be potentially very detrimental to OPPS providers, says Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc., in Danvers, MA.

Theoretically, CMS could calculate the OPPS payment using a variety of payment systems and then simply choose the one that yields the lowest payment, Hoy says. While CMS has not proposed that kind of significant change, Hoy offered a cautionary analogy involving boiling water.

When it's just hot water (just one or two services here and there) no one notices much," she says. "As the water heats up slowly (CMS adds more and more services), we don't seem to notice. But once the water is boiling (CMS is full-blown picking lowest payment system as a cap), it's too late to jump out of the water."

Drug payment changes
In its final rule, CMS made two provider-friendly changes to drug payments. First, although the agency proposed increasing the drug packaging threshold to $80, it ultimately reduced that amount to $75.

Second, and perhaps more importantly, CMS recognized a flaw in its separately payable drug reimbursement calculation methodology, Shah says. CMS' proposed average sales price (ASP) plus percentage ¬typically drops by one percentage point from proposed rules to final rules because by the time the final rule is released the agency has more complete claims and cost data, Shah says.

For 2012, CMS proposed ASP + 4%, which was expected to drop to ASP + 3% in the final rule due to additional claims data to work from, Shah says. However, CMS stated that it wanted to analyze the root cause of the typical 1% reduction when going from a proposed to a final rule, and it did so by conducting additional analyses during the comment period.

"I think CMS deserves kudos here for taking on the analytical question of why the ASP plus percentage has dropped each of the past three years from the proposal to the final rule and for conducting an analysis to really understand what's going on," Shah says.

CMS analysts realized that, rather than redistributing a fixed dollar amount, they should redistribute a proportion of packaged drug costs to the pool of separately payable drugs before computing the ASP plus percentage. That way, when additional claims and cost data are used to generate payment rates for the final rule, CMS' use of a redistribution model that moves the same proportion of costs from packaged drugs to separately payable drugs from the proposed to the final rule would not result in a decrease in the ASP plus percentage.

"It's great that CMS looked into this and uncovered a mathematical issue that resulted in the ASP plus percentage fluctuating between the proposed and final rules, but unfortunately payment rates for separately payable drugs in CY 2012 will still be lower than the ASP + 5% level hospitals receive today; but at least rates won't fall to ASP + 3%, which is what was expected," Shah says.

Physician supervision changes
CMS finalized two significant changes to the physician supervision requirements, neither of which is surprising, Shah says.

First, CMS agreed to delay enforcement of physician supervision rules for critical access hospitals (CAH) as well as small and rural hospitals with 100 or fewer beds.

Second, CMS will use the Federal Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to review supervision levels for outpatient services. These reviews could begin as soon as the winter 2012 APC Panel meeting, Shah says. "I think we're going to see some new efforts on this front, and everyone is going to want to pay attention to this."

CMS' decision to apply the supervision requirements in 76 Federal Register 74580 § 410.27 to all OPPS therapeutic services and all CAH services is particularly interesting, Hoy says. These services to which the requirements will apply include physical, occupational, and speech therapy as discussed in the rule.

"The weird result seems to be that physical, occupational, and speech therapy would require supervision in a CAH but not in an OPPS hospital because those services are paid on the Medicare Physician Fee Schedule to OPPS hospitals," she says.

CMS will delay enforcement of the supervision requirement for CAHs until next year. When CMS begins enforcing the supervision requirements, CAHs could ask the APC Panel to make a recommendation to CMS that the agency change the level for these services to general supervision rather than direct supervision, Hoy adds.

Payment for cancer centers
One of CMS' most significant proposed OPPS changes turned into a win for multiple stakeholders in the final rule despite what the agency had originally proposed. For CY 2012, CMS finalized a revised version of its initial proposal to provide a payment adjustment to 11 cancer centers. After studying how the centers' costs and payments compared to the costs and payments for all other providers, which CMS was required to do by law, the agency found a fix separate from the current hold-harmless payment mechanism.

CMS' original proposal for CY 2012 would have resulted in a large financial impact on beneficiaries and on the payment that non-cancer hospitals would receive due to CMS' budget-neutral implementation. In addition to these outcomes, CMS' proposal for CY 2012 would not have solved the primary problem—incorrect reimbursement—for cancer hospitals, Shah says.

CMS received numerous comments from industry stakeholders, many of which addressed the inappropriate financial impact that beneficiaries and other hospitals would bear as a result of the payment adjustment. Therefore, the agency revised its proposal, Shah says. "CMS should be commended for figuring out a different and better way to implement the payment adjustment for the cancer centers that does not come on the backs of beneficiaries or other hospitals in the manner it would have under CMS' original proposal," she adds.

New APCs for CT of abdominal and pelvis
CMS finalized its proposal to create two new APCs for CT of abdominal and pelvis. The AMA introduced new CPT® codes for combined CT of the abdomen and pelvis in CY 2011. CMS assigned those new CPT codes to existing APCs with payment rates that many felt were far too low to cover the costs of providing the combined service.

When setting the payment rates for the new codes in CY 2011, CMS did not use historical data from the predecessor codes. If it had, hospitals would have received better reimbursement in 2011 for the combined service. This has been a point of contention throughout 2011, Shah says.

For CY 2012, however, CMS proposed and finalized the use of historical predecessor code information for these services. The result is that hospitals will see significant improvements in APC payment rates for the combined services in 2012.

Shah sees this as a victory for hospitals, especially ¬because this is another example of CMS' ability to respond to comments and make changes. "It also sets a good precedent for how CMS will approach the APC rate-setting process in the future when we are likely to see even more combination codes."

Inpatient-only list
CMS removed 10 codes from the inpatient-only list. "This feels like the largest number of codes to be removed from the list at any one time since the inception of OPPS," Shah says.

For CY 2012, CMS removed the following CPT and HCPCS codes from the inpatient-only list:

  • 0184T, Excision of rectal tumor, transanal endoscopic microsurgical approach (i.e., TEMS), including muscularis propria (i.e., full thickness)
  • 20930, Allograft, morselized, or placement of osteopromotive material, for spine surgery only (List separately in addition to code for primary procedure)
  • 21346, Open treatment of nasomaxillary complex fracture (LeFort II type); with wiring and/or local fixation
  • 22551, Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots;cervical below C2
  • 22554, Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below C2
  • 35045, Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and graft insertion, with or without patch graft; for aneurysm, pseudo-aneurysm, and associated occlusive disease, radial or ulnar artery
  • 43281, Laparoscopy, surgical, repair of paraesophageal hernia, includes fundoplasty, when performed; without implantation of mesh
  • 43770, Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable gastric restrictive device (e.g., gastric band and subcutaneous port components)
  • 54650, Orchiopexy, abdominal approach, for intraabdominal testis (e.g., Fowler-Stephens)

Outlier payment threshold reduced
CMS also lowered the outlier payment threshold to $1,900. Theoretically, this lower threshold will make it easier for facilities to qualify for outlier payments; however, practically speaking, it's still very hard to reach, Shah says.

Editor’s note: This article was originally published in the Janaury issue of Briefings on APCs. E-mail your questions to Senior Managing Editor Michelle A. Leppert, CPC-A, at

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