CMS Releases 2009 Outpatient PPS, ASC and Physician Fee Schedule Final Rules

On October 30, the Centers for Medicare & Medicaid Services (CMS) released two final regulations - the calendar year (CY) 2009 outpatient prospective payment system (PPS) and ambulatory surgical center (ASC) payment system final rule and the CY 2009 physician fee schedule final rule. Highlights of the rules follow.

HIGHLIGHTS OF THE OUTPATIENT PPS FINAL RULE

Update. The rule includes a 3.6 percent market-basket update for outpatient PPS services, with hospitals projected to receive $30.1 billion for outpatient services in 2009.

Quality Reporting.

2009: This rule links, for the first time, Medicare payment for outpatient services to the reporting of certain quality measures. That is, in order to receive the full outpatient payment update for 2009, hospitals must have reported data in 2008 on seven quality measures of emergency department and perioperative surgical care. Hospitals that fail to meet the outpatient reporting requirements will receive a 2 percentage point reduction in their payment update.

2010: CMS finalizes four additional quality measures of medical imaging efficiency in order for hospitals to receive the full payment update in CY 2010, bringing the total number of measures to 11. None of the measures has been adopted by the Hospital Quality Alliance (HQA) and only two of the four have been endorsed by the National Quality Forum (NQF). The measures will be calculated by CMS using billing data, and hospitals will not have to abstract any new data from patients' medical charts. CMS decided not to require hospitals to report their aggregate population counts for 2010 payment purposes; however, hospitals may continue to voluntarily submit these data. In addition, hospitals with five or fewer patients for a measure will not be required to submit data for any measures under that measure topic area, such as surgical care, for that calendar quarter.

Validation: CMS adopted a voluntary test process for validating hospitals' outpatient quality data for CY 2010 payment purposes. The process differs from that used to validate inpatient reporting data and will involve the review of 50 medical charts from 800 randomly selected hospitals. The review will assess the accuracy of the hospitals' measure rate, as opposed to the accuracy of individual data elements. Participation in the test validation program will be voluntary for those hospitals randomly selected to participate, and the results will not affect the CY 2010 payment update for any hospital. CMS plans to propose a validation program for the CY 2011 payment update in next year's proposed rule.

FY 2010 Inpatient Reporting Program: The rule also finalizes two NQF-endorsed quality measures - heart attack 30-day readmission rate and pneumonia 30-day readmission rate - that hospitals must report on to qualify for a full market-basket update for the fiscal year (FY) 2010 inpatient PPS. No data collection is required by hospitals for these measures; CMS will use administrative data to calculate the measures for hospitals. Hospitals that fail to report these quality measures face a penalty of 2 percentage points from their inpatient payment update for FY 2010.

Imaging. CMS finalizes its proposal to encourage imaging efficiencies within the outpatient PPS by creating five imaging composite ambulatory payment classifications (APCs). These composite APCs will be used when two or more imaging procedures that use the same imaging modality are provided in a single session.

Emergency Department Services. CMS implements four new APCs for services provided in "Type B" emergency departments that offer emergency-level services but are not open 24 hours per day, seven days per week. Data collected over the last two years shows that most emergency visits to Type B emergency departments are more expensive than clinic visits, the current payment level assigned to these Type B emergency services. However, they are less costly than emergency visits in "Type A" emergency departments that are open 24/7. The payment rate for the new Type B APCs reflects these cost differences. However, as the costs for the most intensive emergency visits are approximately the same between Type A and B emergency departments, CMS will use a single APC for these visits.

Partial Hospitalization Program (PHP) Services. As recommended by AHA, CMS will calculate the rates of payment for PHP services using only hospital-based PHP data. CMS also finalizes its proposal to create two separate APC payment rates for PHP services: Level I for days with three services, paid at $157 (up from $140 in the proposed rule), and Level II for days with four or more services, paid at $200 (up from $174 in the proposed rule). The rate for Level II services is only slightly lower than the $203 per diem rate paid for PHP services in 2008. In addition, CMS will no longer pay for PHP services with fewer than three units of service per day and the agency is strengthening patient eligibility criteria for PHP services.

Hold-harmless Payments. As required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS will continue to provide hold-harmless outpatient payments to rural hospitals with 100 or fewer beds at a rate of 85 percent through December 31, 2009. In addition, MIPPA requires CMS to expand the same hold-harmless payments to sole community hospitals with 100 or fewer beds in 2009.

Drugs. CMS finalizes its proposal to pay for certain separately payable drugs and biologicals at the rate of average sales price (ASP) plus 4 percent - a reduction from the ASP plus 5 percent paid in 2008. This rate is intended to include drugs' acquisition and pharmacy overhead costs. CMS also withdrew its proposal to modify the Medicare cost report to establish two new cost centers, one for reporting drugs with high pharmacy overhead costs and one for drugs with low pharmacy overhead costs. This proposal was strongly opposed by the AHA.

Outliers. CMS raises the fixed-dollar threshold for outliers to $1,800 from $1,575. CMS also will give Medicare administrative contractors and fiscal intermediaries the authority to reconcile outlier payments when a hospital cost report is settled if the hospital meets specified thresholds for charging structure fluctuation and total outpatient PPS outlier payments. Consistent with AHA's recommendation, the start date for the outlier reconciliation process will be hospitals' first cost reporting period of CY 2009.

HIGHLIGHTS OF ASC FINAL RULE

CMS continues the transition to the new outpatient PPS-based payment system for ASCs. In CY 2009, the second year of a four-year transition, CMS will pay for ASC services at a rate that is based on a blend of 50 percent of the 2007 ASC payment amount and 50 percent of the 2009 fully implemented ASC amount. The ASC conversion factor, which converts the ASC payment weights into dollar amounts, after being adjusted for wage index budget neutrality, is $41.393, which is 63 percent of the hospital outpatient PPS conversion factor. The law sets the ASC payment update for CY 2009 at 0 percent.

The final rule also adds 27 surgical procedures to the list of allowed ASC procedures; adds eight procedures to the list of office-based procedures that are subject to reduced payment; and updates the list of device-intensive procedures and covered ancillary services and their rates, consistent with the outpatient PPS.

In the final rule, CMS also establishes new Medicare ASC Conditions for Coverage (CfCs) to help ensure ASCs are safely equipped and qualified to perform a much broader range of services under the revised ASC payment system implemented in 2008. The rule expands the definition of an ASC to include facilities in which the expected duration of services would not exceed 24 hours following an admission. The new CfCs also strengthen patients' rights provisions, impose stronger oversight for ASCs' quality assessment and performance improvement program; strengthen infection control requirements; improve patient admission, assessment and discharge standards; and require ASCs to adopt a disaster preparedness plan.

HIGHLIGHTS OF THE PHYSICIAN FEE SCHEDULE FINAL RULE

Physician payment update. As required by MIPPA, payment rates for physician fee schedule services will be increased by 1.1 percent in CY 2009, rather than being reduced by 5.4 percent, as proposed.

Electronic prescribing incentive program. The rule implements a new initiative, required by MIPPA, that will provide an incentive payment of up to 2 percent of total Medicare allowed charges for physicians and other eligible professionals who adopt and use qualified electronic prescribing (e-prescribing) systems to transmit prescriptions to pharmacies in 2009.

Quality measure reporting. Physicians successfully reporting quality measures under the Physician Quality Reporting Initiative (PQRI) will be able to earn an incentive payment, in addition to the e-prescribing incentive payment, of 2 percent of their total Medicare allowed charges. The final rule adds 52 new quality measures, bringing the total number of measures from which eligible professionals can select from for the 2009 PQRI to 153.

Physician Self-Referral. CMS did not finalize a new exception for incentive payments and shared-savings programs. Instead, it will reopen the comment period for 90 days and requests comments on 55 specific questions. As in the proposed rule, CMS acknowledges that it started with a narrowly drafted exception. It reiterates its interest in expanding the proposed exception in a "meaningful way" if the agency can develop sufficient safeguards against the "risk of program or patient abuse." In the American Hospital Association's comments on the proposed exception, they cautioned that it was "so complex, costly and limiting that it will not realistically advance the goals for health care delivery." They urged CMS to create an exception that would permit the use of incentives to encourage adherence to sound practices that achieve patient safety, quality improvement and efficiency goals; use the quality improvement processes hospitals already have in place; and allow rewards tailored to individual physician performance, not simply participation. AHA will submit a comment letter and would welcome feedback from members.

Mobile diagnostic testing facilities. CMS will require that entities furnishing mobile diagnostic services enroll in the Medicare program as an independent diagnostic testing facility (IDTF), regardless of where the services are furnished, and comply with IDTF performance standards. CMS also will require these mobile facilities to bill directly for the services that they furnish, unless, as recommended by AHA, the services that they provide are part of a hospital service and furnished under arrangement with that hospital.

Enrollment and billing rules. The rule revises the effective billing date for physicians and non-physician practitioners enrolling in the Medicare program; prohibits physicians from submitting claims after certain reportable events occur, such as a felony conviction or state license revocation; revises reporting responsibilities and timelines when there are changes of ownership or in location of the physician practice or when certain other reportable changes occur.

Beneficiary signature requirements for non-emergency ambulance services: The rule changes existing requirements for circumstances in which there is no individual available and authorized to sign a non-emergency ambulance transport claim on behalf of a beneficiary who is physically or mentally incapable of signing. The rule permits the ambulance provider or supplier to submit the claim without the beneficiary's signature, as long as specified documentation requirements are met.

NEXT STEPS

The 1,827-page outpatient PPS and ASC rule, available online here, will be published in the November 18 Federal Register. CMS will accept comments on specified issues until December 29. The final rule will take effect January 1.   

The 1,459-page physician fee schedule rule, which can be downloaded here, will be published in the November 19 Federal Register. CMS will accept comments on specified issues until December 29. The final rule will take effect January 1.

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The Centers for Medicare & Medicaid Services has released a specifications document for the Medicare E-Prescribing measure, which will be used to determine whether an eligible professional is a successful e-prescriber for the 2009 reporting period. See the Medicare Update weblog’s post at http://tinyurl.com/5sjqj6.

[Michael Apolskis]

The Centers for Medicare & Medicaid Services has released a specifications document for the Medicare E-Prescribing measure, which will be used to determine whether an eligible professional is a successful e-prescriber for the 2009 reporting period. See the Medicare Update weblog’s post at http://tinyurl.com/5sjqj6

[Michael Apolskis]

The Centers for Medicare & Medicaid Services has released a specifications document for the Medicare E-Prescribing measure, which will be used to determine whether an eligible professional is a successful e-prescriber for the 2009 reporting period. See the Medicare Update weblog’s post at http://tinyurl.com/5sjqj6

[Michael Apolskis]

The Centers for Medicare & Medicaid Services has released a specifications document for the Medicare E-Prescribing measure, which will be used to determine whether an eligible professional is a successful e-prescriber for the 2009 reporting period. See the Medicare Update weblog’s post at http://tinyurl.com/5sjqj6

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The rule permits the ambulance provider or supplier to submit the claim without the beneficiary's signature.

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The final rule also adds 27 surgical procedures to the list of allowed ASC procedures.