Fact Sheets

FINAL 2010 POLICY, PAYMENT CHANGES FOR HOSPITAL OUTPATIENT DEPARTMENTS AND AMBULATORY SURGICAL CENTERS

OVERVIEW

On Oct. 30, 2009, the Centers for Medicare & Medicaid Services (CMS) issued a final rule with comment period that updates payment policies and rates for both hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) for calendar year (CY) 2010.  The update to ASC rates constitutes the third year of a four-year transition to a revised payment system that aligns ASC payment rates with those paid to HOPDs for similar services.    The final rule with comment period also seeks to promote higher quality, efficient services for Medicare beneficiaries by adopting improvements to the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) and establishing procedures to make the data collected through the HOP QDRP publicly available.

CMS  projects that total payments for services furnished to people with Medicare in HOPDs during CY 2010 under the Outpatient Prospective Payment System (OPPS) will be $32.2 billion, while total projected CY 2010 payments under the ASC payment system will be approximately $3.4 billion.

OUTPATIENT PROSPECTIVE PAYMENT SYSTEM

Background:

Since August 2000, Medicare has paid hospitals for most services furnished in their outpatient departments under the OPPS.    Medicare currently pays more than 4,000 hospitals ‑‑ including general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term acute care hospitals, children’s hospitals, and cancer hospitals â€‘‑ for outpatient services under the OPPS.  Medicare also pays community mental health centers (CMHCs) under the OPPS for partial hospitalization services.  The OPPS payments cover facility resources including equipment, supplies, and hospital staff, but do not pay for the services of physicians and nonphysician practitioners who are paid separately under the Medicare Physician Fee Schedule (MPFS). 

All services under the OPPS are classified into groups called Ambulatory Payment Classifications (APCs).   Services in each APC are similar clinically and require the use of similar resources.  A payment rate is established for each APC.  The APC payment rates are adjusted for geographic cost differences, and payment rates and policies are updated annually through rulemaking.  The final rule is generally issued by November 1 each year and, unless otherwise specified, becomes effective January 1 of the subsequent year.

Beneficiaries share in the cost of services under the OPPS by paying either a 20 percent coinsurance rate or, for certain services, a copayment required under the Medicare law not to exceed 40 percent of the total payment for the APC.   The statutory copayment is gradually being replaced by the 20 percent coinsurance as the composition of APC groups is updated in response to policy changes or new cost data.  CMS estimates that the overall beneficiary share of the total payments for Medicare covered outpatient services will be about 22.6 percent in CY 2010.

Significant Changes For Calendar Year 2010

CMS projects that the aggregate Medicare payments to providers under the OPPS in CY 2010 will be $32.2 billion, a $1.9 billion increase over projected payments in CY 2009.

Implementing New Coverage Authorized by MIPPA:   The final rule with comment period implements several expansions of Medicare coverage that were required in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), including:

• Kidney disease education –CMS is establishing payment to rural providers under the Medicare Physician Fee Schedule (MPFS) for kidney disease education services furnished on or after Jan. 1, 2010 for Medicare beneficiaries diagnosed with Stage IV chronic kidney disease.

• Pulmonary and cardiac rehabilitation – CMS is establishing OPPS payment for new, comprehensive pulmonary and intensive cardiac rehabilitation services furnished to beneficiaries with chronic obstructive pulmonary disease, cardiovascular disease, and related conditions, effective Jan. 1, 2010.

Strengthening Ties between Payment and Quality:

• Payment reduction for failure to report quality measures – As required by law, CMS will reduce the CY 2010 annual inflation update factor by two percentage points for most services furnished by hospitals that failed to meet the CY 2009 reporting requirements of the HOP QDRP.  The reduction will not apply to payments for separately payable pass-through drugs, biologicals and devices, separately payable non-pass-through drugs and non-implantable biologicals, separately payable therapeutic radiopharmaceuticals, and services assigned to New Technology APCs.

• Quality measures to be reported – CMS will continue to require hospitals subject to HOP QDRP requirements to provide quality data for the current 7 chart-abstracted emergency department and surgical care measures and 4 claims-based imaging efficiency measures for CY 2011 payment determinations. 

• Validation of quality reporting – CMS will be implementing a HOP QDRP validation requirement to ensure that hospitals are accurately reporting measures using chart-abstracted data.  Under this requirement, CMS will select a sample of reported cases, request the corresponding medical records, re-abstract the HOP QDRP chart-abstracted measures, and compare the results with the measures reported by the hospital.  Hospitals will be required to return paper copies of requested medical records for this CY 2011 requirement within a 45 calendar day timeframe.  However, the validation results will not affect a hospital’s CY 2011 OPPS payment.  This initial validation requirement for CY 2011 will provide hospitals an opportunity to become familiar with the process   for future years.

• Public reporting of quality data – CMS is establishing procedures to make HOP QDRP quality measure data publicly available as early as June 2010. 

Supervision of Hospital Outpatient Services:

• Supervision requirements for outpatient services – In order to ensure that hospital outpatient services are appropriately supervised by qualified practitioners while not impeding beneficiary access to these services, and in response to concerns raised by the hospital community, CMS is revising or further defining several current policies for the supervision of outpatient services.  First, in CY 2010, CMS will allow certain nonphysician practitioners ‑ specifically physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and licensed clinical social workers ‑ to provide direct supervision for all hospital outpatient therapeutic services that they are authorized to personally perform according to their state scope of practice rules and hospital-granted privileges.  Under current policy, only physicians may provide the direct supervision of these services. 

For purposes of on-campus hospital outpatient therapeutic services, CMS is defining “direct supervision” to mean that the physician or nonphysician practitioner must be present anywhere on the hospital campus and immediately available to furnish assistance and direction throughout the performance of the procedure.  For services furnished in an off-campus provider-based department, “direct supervision” would continue to mean that the physician or nonphysician practitioner must be present in the off-campus provider-based department and immediately available to furnish assistance and direction throughout the performance of the procedure. 

CMS  also will require that all hospital outpatient diagnostic services furnished directly or under arrangement, whether provided in the hospital, in a provider-based department, or at a nonhospital location, follow the MPFS physician supervision requirements for individual tests. 

Payment for Drugs, Biologicals, and Radiopharmaceuticals:

• Drugs and pharmacy overhead – CMS will pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at the average sales price (ASP) plus 4 percent in CY 2010.  The payment rate of ASP plus 4 percent is based upon the cost of separately payable drugs and biologicals calculated from hospital claims and cost reports (ASP minus 3 percent), with an adjustment for pharmacy overhead cost that reflects the redistribution of $200 million of the pharmacy overhead cost currently attributed to packaged drugs and biologicals (both coded and uncoded) to separately payable drugs and biologicals without pass-through status.

• Pass-through implantable biologicals – Beginning in CY 2010, implantable biologicals that are surgically implanted (through a surgical incision or a natural orifice) and that are not receiving pass-through payment before Jan. 1, 2010 will be evaluated for pass-through status using the device category pass-through process rather than the drug and biological pass-through process.  Implantable biologicals that initially qualify for device pass-through status beginning on or after Jan. 1, 2010 will be paid at hospitals’ charges adjusted to cost for the two to three year pass-through payment period.

• Drug and biological pass-through payment eligibility period – Consistent with current policy, in CY 2010, CMS will continue to recognize the first date of OPPS pass-through payment of ASP plus 6 percent as the beginning of the two to three year pass-through payment eligibility period for a new drug or non-implantable biological. 

• Therapeutic radiopharmaceuticals – Beginning Jan. 1, 2010, CMS will provide payment for separately payable therapeutic radiopharmaceuticals with ASP data at ASP plus 4 percent.  If ASP data are not available, payment will be based upon mean unit cost from hospital claims data.  Subregulatory guidance on submitting ASP for OPPS radiopharmaceutical payment based on ASP is available on the CMS Web site at: www.cms.hhs.gov/HospitalOutpatientPPS/.

Payment for Brachytherapy Sources:

CMS is adopting the proposal to pay for brachytherapy sources based on median unit costs in CY 2010, as calculated from claims data according to the standard OPPS ratesetting methodology.  

Partial Hospitalization Services, including Services Provided by CMHCs:

CMS will continue paying two separate partial hospitalization program (PHP) per diem rates:   one for days with three services ($150) and one for days with four or more services ($211).  The CMHC multiple outlier threshold will continue to be set at 3.4 times the APC payment amount for the higher intensity partial hospitalization day for CY 2010.

AMBULATORY SURGICAL CENTERS

Background:

There are approximately 5,000 Medicare-participating ASCs.   Since Jan. 1, 2008, ASCs have been paid under a revised ASC payment system that both aligns payment in ASCs and hospital outpatient settings by basing ASC payment rates on the APC relative weights for similar services and extends payment to more surgical services in ASCs than under the prior payment system.  To minimize the impact of the revised payment system, the ASC payment rates calculated under the new ratesetting methodology are being phased in over four years.  CY 2010 is the third year of the transition.  In general, the revised ASC payment rate for a surgical procedure is a percentage of the payment rate for the same procedure under the OPPS; however, there are a few exceptions.  For device-intensive procedures (assigned to a subset of the OPPS device-dependent APCs where device costs account for more than 50 percent of the total cost of the service), ASCs receive the same payment for the device cost as under the OPPS.  For new ASC procedures that are predominantly performed in physicians’ offices, the ASC payment is capped at the amount the physician is paid under the MPFS for practice expenses for providing the same procedure in an office.

In the CY 2008 final rule that revised the ASC payment system, CMS  added approximately 800 procedures to the list of ASC procedures for which payment could be made.  Only those surgical procedures that would be expected to pose a significant safety risk to beneficiaries or that would be expected to require an overnight stay following the procedure are excluded from the ASC list.  These changes in payment policies for ASCs give patients broader access to surgical services in settings that are clinically appropriate. 

Significant Changes For Calendar Year 2010:

ASC Payment Rate Updates:   The revised ASC payment rates were established to reflect the same relativity of resource use among procedures as under the OPPS, taking into consideration the lower costs of surgical procedures performed in ASCs and maintaining budget neutrality in the payment system.  By law, CY 2010 is the first year that CMS may provide an inflation update under the revised ASC payment system.  The percentage increase in the Consumer Price Index for All Urban Consumers that updates the ASC conversion factor for CY 2010 is 1.2 percent. 

Changes to ASC Covered Surgical Procedures and Covered Ancillary Services:   CMS is adding 26 surgical procedures to the list of procedures for which Medicare would pay when performed in an ASC.  CMS also is newly designating 6 procedures as office-based procedures (subject to payment at the lesser of the national office practice expense payment to the physician or the national ASC rate), and temporarily designating an additional 16 procedures as office-based procedures based on coding changes for CY 2010.  The final rule with comment period also updates the list of device-intensive procedures and covered ancillary services and their rates, consistent with the OPPS update.

The CY 2010 OPPS/ASC final rule with comment period will appear in the Nov. 20 Federal Register.   Comments on designated provisions are due by 5:00 p.m. Eastern time on Dec. 29, 2009.  CMS will respond to comments in the CY 2011 OPPS/ASC final rule. 

For more information on the CY 2010 final rule with comment period for the OPPS and ASC payment system, please see the CMS  Web site at:  

OPPS:  http://www.cms.hhs.gov/HospitalOutpatientPPS/

ASC payment system:   http://www.cms.hhs.gov/ASCPayment/  

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