CMS, OIG play tag-team to target hospital outpatient payments

The Centers for Medicare and Medicaid Services (CMS) and the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services approached hospital outpatient payments from different directions, but ended up in the same place--focused on reducing provider payments.

On July 2, CMS posted for public inspection at the Federal Register a proposed rule for the calendar 2011 outpatient prospective payment system (OPPS) that pays hospital outpatient departments (HOPDs) and the ambulatory surgical center (ASC) payment system, tacking on other key issues such as graduate medical education costs. (The hefty title of the proposed rule is: "Medicare Program; Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2011 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2011 Payment Rates; Proposed Changes to Payments to Hospitals for Certain Inpatient Hospital Services and for Graduate Medical Education Costs; and Proposed Changes to Physician Self-Referral Rules and Related Changes to Provider Agreement Regulations.")

The proposed rule includes several changes mandated by the Patient Protection and Affordable Care Act (PPACA). First, the PPACA waives beneficiary cost-sharing for most Medicare-covered preventive services, including the Initial Preventive Physical Examination. The waiver will apply to the 20 percent coinsurance for the physician's service, as well as any cost-sharing relating to the separate facility payment when the service is provided in an HOPD or an ASC. 

In addition, the PPACA will reduce the HOPD fee schedule increase factor by 0.25 percentage points. However, certain groups of hospitals will actually see payment increases, CMS noted. For example, some cancer hospitals that incur higher costs with respect to ambulatory payment groups than other hospitals under the OPPS will get higher payments. (Medicare is proposing an adjustment to OPPS payments for those cancer hospitals with some reductions to other hospitals for budget neutrality.)

CMS also wants to do the following:

  • Modify the supervision requirements for outpatient therapeutic services to require direct supervision of the initiation of a service followed by general supervision for a limited set of non-surgical extended duration services, including observation services.
  • Pay for the costs of separately payable drugs and biologicals without pass-through status furnished in HOPDs at 106 percent of the manufacturers' average sales prices.
  • Expand the set of measures that must be reported by HOPDs to qualify for the full payment update in the succeeding year.The proposed rule includes proposals for additions to the reporting set in calendar 2011, 2012 and 2013.

CMS will accept public comments through Aug. 31 and publish a final rule by Nov. 1. 

Meanwhile, the OIG has used its auditing superpowers to target inappropriate HOPD payments. In "Payments for Outpatient Infusion Therapy, Lithotripsy, and Blood Administration Services Provided at Providence Hospital, Washington, DC" (A-03-10-10004), the OIG reviewed payments totaling $140,143 that Providence received for 1,519 outpatient infusion therapy, lithotripsy, and blood administration services billed on 1,448 claims from Jan. 1, 2003, through Dec. 31, 2007.

Of the 1,519 claims, "payments received by the hospital from its Medicare contractor for 1,448 claims were not appropriate," said the OIG. "Each of these claims had errors relating to outpatient infusion therapy, lithotripsy, or blood administration services. As a result, the hospital received overpayments totaling $127,391." Yes, that means the hospital should have gotten a grand total of $12,752 for 40 outpatient services.

To learn more:
- read the CMS press release
- take a look at this CMS fact sheet
- read CMS' proposed rule for 2011 here
- read this Outpatient Surgery article
- read the OIG report

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