Action Alert – CMS issues proposed rule on outpatient PPS for CY 2002

Action Alerts — Cardiovascular

CMS issues proposed rule on outpatient PPS for CY 2002

As a continued service to our members, the AAMA specialty group American College of Cardiovascular Administrators (ACCA) is attuned to recommended changes in federal laws, guidelines and reimbursement as they relate to cardiovascular medicine.  In that light, we would like to make you aware of some important recommended changes to the Medicare outpatient hospital reimbursement payment system.

On February 28, 2002, CMS released long-awaited corrections to the 2002 hospital outpatient prospective payment system (OPPS), which took effect on April 1, 2002.  Implementation of the final rule concerning payment rates, originally published Nov. 30, 2001, was delayed to correct technical errors “that would have inappropriately affected payments to hospitals.”  The subsequent recalculations adjusted the 2002 pro rata reduction of pass-through payments, but had only a negligible effect on most APC payment rates.

Superstitious? Thirteen APCs caused delay

In the original final rule released on Nov. 30, 2001, CMS intended to complete its “fold-in” of 75 percent of pass-through device costs into their associated procedural APCs. However, the agency had performed calculations incorrectly for 13 APC groups, and the errors would have impacted all other APC payment rates. Several cardiovascular-related APCs had to be adjusted as part of the corrected final rule, resulting in significant payment changes for some procedures.


Top-line ramifications

The correct assignment of device costs in the new rule prompted four amendments to the November ruling:      

  • The payment rates for the 13 APCs changed due to the fold-in of device costs – seven increased and six decreased.       

  • The relative weights of all other APCs increased slightly, resulting in minor payment increases in the range of 0 to 1 percent for the majority of APC groups.

  • The outlier payment threshold was revised upward to 3.5 times the applicable APC payment.

  • The estimate of total pass-through payments in CY 2002 was reduced, resulting in a decline  in the pro rata reduction from 68.9 to 63.6 percent.

Because APC payment rates changed negligibly compared to the original final rule, and the pass-through pro rata reduction declined only slightly, the effect of this rule is fairly similar to that of the November ruling. CMS notes that hospitals have received the “advantage” of much higher pass-through payments during the first quarter of 2002 than they would have garnered if implementation had not been delayed. The American Hospital Association remains “concerned that the changes will reduce Medicare outpatient payments to hospitals by more than $1 billion, at a time when the program already pays 17 percent less than the cost of providing care” (AHA News Now, 3/1/02).

Key cardiovascular advocacy groups such as the ACC have not yet responded to the corrected final rule, as they are entrenched in a significant battle with CMS over physician reimbursement.  However, it is clear that the level of frustration felt with the original proposal for outpatient reimbursement will persist.  Given the realities associated with this plan, it is paramount that cardiovascular program administrators have clear plans for dealing with potential losses in revenue from outpatient operations.  This is specifically true for procedural areas where device pass-through payments were expected.  As such, new strategies may need to be developed for handling patients that had been shifted to the outpatient arena.

The full impact of the revised plan will not be known for some time.  However, when combined with the impending release of new, more expensive interventional technologies (i.e., drug-eluting stents) and new strategies for treating patients post acute infarct (i.e., MADIT II), the life of a cardiovascular program administrator continues to grow more interesting and complex.  Networking with colleagues in the American College of Cardiovascular Administrators will prove to be invaluable over the course of the next few months and for years to come.