CMS Releases Final OPPS Rule for CY 2008

On November 1, the Centers for Medicare and Medicaid Services (CMS) released the Medicare Outpatient Prospective Payment System (OPPS) final rule for calendar year (CY) 2008.

The changes in this final rule represent the beginning of a shift in CMS’ overall approach to payment under the OPPS.  CMS is moving away from “service-specific” payments by expanding the packaging of individual services into Ambulatory Payment Classification (APC) groups and creating “encounter-based” APCs that will pay a single rate for a combination of specific services.

Major Provisions of the OPPS Final Rule Include:

Elimination of Certain APCs through Expanded Packaging of Ancillary Services: Currently, there are a number of services that are not paid separately, but are packaged into the APC rate for their related procedure or services.  For CY 2008, CMS is looking to create more incentives for the efficient delivery of services and, hence, is expanding the number of services that will be packaged into larger APC groups.  CMS is packaging payment for Healthcare Common Procedure Coding System (HCPCS) codes associated with the following ancillary services:

• Guidance Services
• Image Processing Services
• Intraoperative Services
• Imaging Supervision and Interpretation Services
• Diagnostic Radiopharmaceuticals
• Contrast Agents
• Certain Observation Services (excluding instances where observation care is a major component of the encounter, see below)

This policy will be implemented in a budget neutral manner by redistributing outpatient dollars to all other services.  While this does not result in immediate savings for the Medicare program, CMS believes elimination of separate payments for these procedures will reduce growth in the volume of services provided in the outpatient setting over the longer term.

Combining Certain APCs into New, Encounter-Based APCs:  CMS is creating a new type of APC called a “Composite APC”.  These new APCs would differ significantly from the current APCs in that Composite APCs are encounter-based and a single payment would be made when a certain combination of HCPCS codes are reported on the same date of service, rather than paying for individual services under service-specific APCs.

For CY 2008, CMS is establishing a total of five Composite APCs:

Proposed and Adopted as Final:

APC 8000 – Cardiac Electrophysiologic Evaluation and Ablation Composite
APC 8001 – LDR Prostate Brachytherapy Composite

New in the Final Rule and Adopted as Final - CMS is creating two additional Composite APCs that will pay hospitals for extended observation care provided to patients with a Level 5 clinic visit, a Level 4 or 5 emergency department visit, or direct admission to observation:

APC 8002 – Level I Extended Assessment & Management Composite
APC 8003 – Level II Extended Assessment & Management Composite

Current APC now identified as a Composite APC:

APC 0034 – Mental Health Services Composite

Quality Reporting:  As required by law, CMS has established a quality measure reporting program called the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) that will measure a hospital’s outpatient quality of care.  Providers will be required to submit data on seven (reduced from the proposed ten) outpatient measures; effective for hospital outpatient services furnished on or after April 1, 2008, in order to be eligible to receive the full OPPS payment update in CY 2009.  Non-compliant providers in CY 2008 will receive the OPPS update reduced by 2.0 percentage points in CY 2009.

The seven measures CMS is requiring for the initial implementation of the HOP QDRP have been endorsed by the National Quality Forum (NQF) and include:

1. Emergency Department (ED) Transfer Acute Myocardial Infarction (AMI)-1 - Aspirin at Arrival
2. ED-AMI-2 - Median Time to Fibrinolysis
3. ED-AMI-3 - Fibrinolytic Therapy Received Within 30 Minutes of Arrival
4. ED-AMI-4 - Median Time to Electrocardiogram (ECG)
5. ED-AMI-5 - Median Time to Transfer for Primary PCI
6. PQRI #20 Perioperative Care:  Timing of Antibiotic Prophylaxis
7. PQRI #21 Perioperative Care:  Selection of Prophylactic Antibiotic

In the final rule, CMS responded favorably to comments from The Mississippi Hospital Association and others by:

• reducing the number of required reporting measures from ten to seven; deciding not to implement three of the proposed measures (related to heart failure, diabetes, and community-acquired pneumonia) in recognition of the burden placed on providers;
• delaying the deadline for submission of the Notice of Participation until January 31, 2008.  The proposed rule had required submission by November 15, 2007;
• delaying both the collection and submission periods from the original proposal.  Under the final rule, data collection will begin for services provided during the period April through June 2008 and must be submitted by November 1, 2008; and
• not requiring validation of the HOP QDRP data for purposes of the CY 2009 payment update.

Pharmacy Overhead:  CMS had proposed that hospitals report their pharmacy overhead charges in separate billings in order to provide data for possible future payment changes.  In the final rule, citing industry concerns over the administrative burden of this reporting requirement, CMS is not requiring separate billing for pharmacy overhead.

Marketbasket Update:  The final rule provides a full marketbasket update of 3.3%.  Including adjustments for budget neutrality, the conversion factor will increase by approximately 3.6% from $61.468 in CY 2007 to $63.694 in CY 2008.

Outlier Payments:  The final rule will decrease the outlier fixed-dollar threshold from $1,825 in CY 2007 to $1,575 in CY 2008.  Therefore, under the final rule, outlier payments will be provided when the cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $1,575 fixed-dollar threshold.

Other Provisions:  The final OPPS rule also addresses changes to the final payment rules for
Ambulatory Surgery Centers and the Inpatient PPS.

The final rule is scheduled to be published in the November 27 Federal Register.  MHA will provide a detailed summary of the rule.

A display copy of the final rule and other information regarding OPPS is available online.

CMS has also posted a press release on the final rule.

For more information, contact Michael Bailey, MHA chief financial officer, at (800) 289-8884, (601) 368-3208 or mbailey@mhanet.org.

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