Health Information Management

MedPAC report could serve as preview of OPPS proposed rule

APCs Insider, June 19, 2015

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By Steven Andrews
CMS deferred making any updates to the 2-midnight rule in its 2016 IPPS proposed rule, but the agency did say it would consider provider feedback and recommendations from the Medicare Payment Advisory Commission (MedPAC) for refining the policy, potentially in this year's OPPS rule.
In an April meeting, MedPAC voted on recommendations that CMS eliminate the 2-midnight rule and overhaul the Recovery Auditor program. MedPAC formalized those recommendations in its June report to Congress.
MedPAC's four-part recommendation would have:
  • CMS entirely withdraw the 2-midnight rule
  • Auditors focus reviews on hospitals with a high use of short stays
  • Improved accountability of auditors for the claims they deny
  • The timing of auditor reviews and the hospital rebilling program synchronized
MedPAC also recommends the government evaluate a penalty for hospitals with excess rates of short inpatient stays to partially or completely replace auditor reviews of short inpatient stays.
In addition, MedPAC made three recommendations to reduce financial risks for Medicare beneficiaries as a result of being placed in observation. Those recommendations are:
  • Revising the skilled nursing facility (SNF) eligibility requirement of three inpatient hospital days to allow for up to two outpatient observation days to count toward meeting the criterion
  • Requiring hospitals to notify beneficiaries placed in outpatient observation that their status may affect their financial liability for SNF care
  • Packaging payment for self-administered drugs provided during outpatient observation within the hospital outpatient payment system on a budget-neutral basis
The 2-midnight policy isn't the only regulation that MedPAC's report recommended changing that could appear in the 2016 OPPS proposed rule. The commission also looked at Part B drug payments and made recommendations to change the average sales price (ASP) plus 6% policy.
While the commission found the policy does give providers incentive to seek the lowest available price for drugs, its standard percentage increase could lead to higher-priced drugs being used. For example, depending on the acquisition price of the drugs, the 6% increase could provide more revenue for providers when selecting higher-priced drugs.
The commission recommends moving to a flat-fee add-on price for drugs. MedPAC concludes this might increase the likelihood of providers choosing less expensive drugs when multiple alternatives exist, reducing costs for beneficiaries and Medicare.
The report notes current Part B drug payment policies do not give providers incentive to consider a drug's clinical effectiveness compared to alternatives. MedPAC makes several suggestions about how CMS and Congress could implement policies to take this into consideration in an effort to reduce costs, but it's unlikely they would be instituted into this year's OPPS rule, due in just a few weeks.
With CMS acknowledging the 2-midnight rule would be addressed in the future, it's far more likely to be included in the 2016 OPPS proposed rule. MedPAC's drug payment recommendations might not be coming this year, but providers should consider how they might affect revenue and be prepared to offer comments to CMS on their potential impact.

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