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Medicare Compliance & Reimbursement

Outpatient PPS:

6.6-Percent Pay Boost On Its Way For Outpatient Pay

Published on Thu Aug 26, 2004

Administration fees soar from 2003, but plummet from 2004.

Hospitals are about to receive some much-needed funding enhancements.
 
Hospital outpatient services will see a 3.3-percent payment update for calendar year 2005, plus other increases enacted in last year's Medicare Prescription Drug, Improvement and Modernization Act (MMA). The various payment boosts will bring the total reimbursement increase to 6.6 percent, the Centers for Medicare and Medicaid Services announced in an August 9 proposed rule.
 
Under the outpatient prospective payment system, Medicare pays for services on a rate-per-service basis in which payment varies according to which ambulatory payment classification the service is part of. A labor-related portion of the OPPS payment is geographically adjusted using the local inpatient hospital wage index.
 
Features of the 2005 rule include the following:

 

  • An MMA-enacted continuation into 2005 of "hold harmless" payments for rural hospitals with fewer than 100 beds and sole community hospitals in rural areas. The provision ensures that the hospitals are reimbursed at least as much under the OPPS as they would have been under the old, cost-based reimbursement system.

     

  • Continuation of a policy that provides separate payments for most drugs that cost more than $50 per administration, rather than including payment for the drugs as part of their associated APCs.

     

  • An MMA-enacted provision that increases pay for mammograms. Diagnostic mammograms will be removed from OPPS reimbursement and paid under the Medicare Physician Fee Schedule, as screening mammograms already are. Final payment rates won't be available until later this year, but CMS estimates that reimbursement for regular diagnostic mammograms will increase by 40 percent and reimbursement for digital diagnostic mammograms will jump by around 60 percent.

     

  • A new payment for beneficiaries' "Welcome to Medicare" physical. Under the OPPS, CMS will pay a hospital $75 for the use of its facility for the comprehensive examination that Congress hopes will provide baseline health information for new enrollees. A separate physician payment for the physical is included in the Medicare Physician Fee Schedule proposed last month.

     

  • Payment hikes for some screening procedures Medicare has covered in the past. These include a 3.24-percent boost in payment for cancer-detecting pelvic and breast exams, a 4.25-percent increase for bone-density studies; and a 10.4-percent hike for glaucoma screening. Exams to detect colon cancer will see reimbursement increases to the tune of 4.25 percent for barium enemas, 7.42 percent for flexible sigmoidoscopies, and 9.9 percent for screening colonoscopies.

     

  • A change in the basis for making additional so-called outlier payments that are supposed to ensure beneficiary access to care by "having the Medicare program share" in the financial losses providers incur from "individual, extraordinarily expensive cases."
     
    Outlier payments are "not intended to pay hospitals additional amounts for specific services on a routine basis," the rule says. But according to the Medicare Payment Advisory Commission, that's exactly what's been happening on the outpatient side.
     
    MedPAC has found that "a significant portion of outpatient outlier payments are being made for high-volume, lower-cost services, rather than for unusually high-cost services, contrary to the intent of an outlier policy." The panel's finding has led CMS to propose a change to the standard it has previously used to qualify a service for outlier payments under the OPPS.
     
    Previously, a service has qualified for an outlier payment if a hospital's cost for that service exceeded the APC payment rate for the service by a specific multiple of that rate. Beginning in 2005, if the proposed rule stands, CMS would add a fixed dollar threshold that a service would have to meet in order to qualify, thus preventing high-volume, low-cost services from garnering outlier payments. To qualify, the cost of a service would have to exceed 1.5 times the APC payment rate and also exceed the sum of the APC rate plus a $625 fixed-dollar threshold.
     
    The proposed rule was published in the August 16 Federal Register, and public comments are due by October 8.

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