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.

The 2002 outpatient prospective payment system (PPS), which was published in the Federal Register on August 24, 2001, includes significant changes for cardiovascular-care providers; these include modified cardiac-specific APCs, a new observation APC, and reduced pass-through payments. If the provisions of the proposed rule are implemented on January 1, 2002, CMS (formerly HCFA) estimates hospital reimbursement will increase by $450 million compared to 2001, spurred by a 2.3 percent rise in average payments per case.

New observation APC subject to strict standards

For 2002, CMS proposes a separate observation APC (0339), which only will be applicable to chest pain, asthma, and CHF patients meeting stringent criteria. The proposed guidelines represent CMS officials’ attempt “to balance the issues of access, medical necessity, potential for abuse, and the need to ensure appropriate payment.”

In order to utilize APC 0339:

  •  Must bill an emergency visit in conjunction with each bill for observation services

  •  Must bill observation care hourly (minimum 8 hours, maximum 48 hours)

  •  Begin observation at clock time on nurse observation admission note

  •  End observation at clock time on physician discharge note

  •  Document physician supervision of observation services for the duration of the observation period in the medical record with timed, written, and signed patient admission, progress, and discharge notes

  •  Record evidence that the physician utilized risk stratification criteria (published medical standards or established hospital specific medical standards) to determine need for observation

  •  Administer appropriate diagnostic tests to continually validate the need for observation – include bill for these services on the observation claim

  • Chest Pain: at least two sets of serial enzymes and two sequential ECGs

  • CHF: a chest x-ray, an ECG, and pulse oximetry

 Some cardiac pass-through payments cut; pro rata reduction on hold

The Balanced Budget Refinement Act (BBRA) established transitional pass-through payments to cover incremental costs of specified medical devices, drugs, and biologicals; costs for these technologies were not reflected in the 1996 data upon which APC payment calculations were based.  The Benefits Improvement and Protection Act (BIPA) mandated that, up to 2004, pass-through payments account for less than 2.5 percent of total outpatient PPS payments in a given year.  Preliminary estimates indicate that 2001 pass-through payments will exceed the BIPA spending cap by more than $1 billion; therefore, CMS may have to employ an across-the-board payment cut.  Importantly, officials have delayed quantifying the potential cuts and are searching for alternative solutions.

To move closer to budgetary goals, CMS plans to reduce specific transitional pass-through payments—totaling $450 million—to offset costs packaged into APC groups. These cuts would be in addition to any pro rata reduction.

APC                                                                                                 Proposed pass-through cut

00032: Insertion of Central Venous/Arterial Catheter                             $73

00080: Diagnostic Cardiac Catheterization                                           $164

00081: Non-Coronary Angioplasty or Atherectomy                                $303

00082: Coronary Atherectomy                                                             $462

00083: Coronary Angioplasty                                                               $506

00089: Insert/Replace Permanent Pacemaker and Electrodes                $3,052

00090: Insert/Replace Pacemaker Generator only                                  $2,877

00104: Transcatheter Placement of Intracoronary Stents                        $422

00106: Insert/Replace/Repair of Pacemaker and/or Electrodes               $640

00107: Insert Cardioverter-Defibrillator                                                   $6,449

00108: Insert/Replace/Repair Cardioverter-Defibrillator Leads                 $5,768

Hospitals using certain devices on the pass-through payment list stand to lose significant reimbursement under the provisions of the proposed outpatient PPS.  For example, the current outpatient PPS provides $7,411.02 plus hospital-specific pass-through payments for APC 107: Insertion of Cardioverter-Defibrillator.  While reimbursement for APC 107 increases under the proposed rule to $7,894.24, a pass-through payment reduction of $6,449 is stipulated. Hospitals using ICDs on the pass-through list would, therefore, lose approximately $5,965.78 per case.

On a related note, the proposed rule allows pass-through reimbursement for reprocessed single-use devices (SUDs) that meet the FDA’s most recent reprocessing standards.  Since reprocessed devices significantly reduce hospital costs, CMS officials expect claims for reprocessed SUDs to reflect lowered device costs.

Overall impact

CMS officials estimate that reimbursement levels will increase by 2.3 percent for all hospitals, 1.9 percent for large urban hospitals, 3.1 percent for other urban hospitals, and 1.9 percent for rural hospitals.  Since analysis of the need for a pro rata reduction delayed publication of the proposed rule, CMS has shortened the comment period from 60 to 40 days.  Analysts predict the final rule will be published to the Federal Register in November 2001.

If this proposal is implemented, it will force hospitals to rethink strategies associated with shifting business to the outpatient arena.  Over the past year, there have been reasonable revenue opportunities associated with the provision of traditionally inpatient services on an outpatient basis.  This holds specifically true for technologies such as advanced mapping systems commonly utilized in radiofrequency ablation procedures.  APC pass-through payments have been utilized by many administrators as a primary justification for the acquisition of these types of systems.  Furthermore, reductions in pacemaker and ICD generator pass-through payments may force institutions to revert to admitting patients for implant procedures, in spite of what has been learned via clinical trials such as SCD-HeFT.

Once again, the American College of Cardiology and the North American Society for Pacing and Electrophysiology are encouraging their members and hospitals to contact their congressional leaders regarding the negative impact these changes will have upon hospitals related to their ability to continue to provide medically appropriate, cost effective cardiovascular care to patients with cardiovascular diseases.

Key contacts regarding this topic are as follows:

Thomas Scully
Centers for Medicare and Medicaid Services
7500 Security Boulevard
Attention: HCFA-1158-P
P.O. Box 8010
Baltimore, Maryland, 21244-1850

The Honorable Nancy L. Johnson Chairwoman House Subcommittee on Health 2113 Rayburn H.O.B.

Washington, D.C. 20515