Summary of Medicare’s CY2016 Hospital Outpatient Rule

The purpose of this memo is to summarize key findings in Medicare’s CY16 PROPOSED Hospital Outpatient Prospective Payment System (HOPPS) rule, as posted on Medicare’s website on July 1, 2015.

  • The anticipated date of publication in the Federal Register is 7/8/2015.
  • Public comments will be accepted until 5 p.m. (EST) on August 31, 2015.
  • This rule impacts approximate 3,800 facilities paid under the OPPS (including general acute care hospitals, children’s hospitals, cancer hospitals, and CMHCs).
  • This rule also impacts approximately 5,300 ASCs.
  • It proposes to decrease payments to facilities by approximately $43 million compared to CY 2015 payments.
  • Approximately 151 million claims were used to calculate proposed payments.

Summary of Major Provisions begins on page 38:

  • CY16 OPPS Proposed Update =1.9%.
  • Continues to implement the statutory 2% reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements.
  • Proposing to expand the set of conditionally packaged ancillary services.
  • 25 Comprehensive APCs (C-APCs) were established in CY 2015. Nine new C-APCs proposed for CY16, as listed in Table 6 (page 120).
  • Proposing to restructure the OPPS APC groupings for nine APC clinical families based on the following principles: (1) improved clinical homogeneity; (2) improved resource homogeneity; (3) reduced resource overlap in longstanding APCs; and (4) greater simplicity and improved understandability of the OPPS APC structure.

Two-Midnight Rule was adopted effective October 1, 2013. Under the 2-midnight rule, an inpatient admission is generally appropriate for Medicare Part A payment if the physician admits the patient based upon the expectation that the patient will need hospital care that crosses at least 2 midnights. If the patient is expected to need less than 2 midnights of care, the services furnished should generally be billed as outpatient. In this proposed rule, we are proposing to modify our existing “rare and unusual” exceptions policy.  Medicare continues to believe that use of the 2-midnight benchmark gives appropriate consideration to the medical judgment of the physician. “We have been clear that this instruction does not override the clinical judgment of the physician regarding the need to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital”. (p 589)

Brachytherapy (page 107): In this proposed rule, Medicare proposes to use the costs derived from CY14 claims data to set the proposed CY16 payment rates for brachytherapy sources. CMS proposes to pay for the stranded and nonstranded not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or nonstranded prospective payment rate for such sources respectively, on a per source basis (as opposed to, for example, a per mCi).  Medicare also requests recommendations for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-03-27, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new brachytherapy source codes and descriptors on a quarterly basis.

Comprehensive APCs (C-APCs) = Comprehensive payment policy that packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure. The comprehensive APC (C-APC) policy was implemented effective January 1, 2015 with #25 C-APCs. Proposing nine additional C-APCs in 2016.

  • Table 6 (page 120) lists proposed CY16 C-APCs
  • Of note, discontinuing composite APC cardiac electrophysiologic evaluation and ablation services (APC 8000), replacing it with C-APC 0086 (Level III Electrophysiologic Procedures) =$15,563.93
  • LDR Prostate Brachytherapy Composite APC 8001 (p132) derived from claims for the same date of service that contain both CPT codes 55875 and 77778. Proposing to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and implemented for CY 2008 through CY 2015. Medicare continues to believe that composite APC 8001 contributes to the goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate geometric mean cost upon which to base the proposed composite APC payment rate. CMS used 226 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geometric mean cost of approximately $3,807 for these procedures upon which the proposed CY 2016 payment rate for composite APC 8001 is based.

Packaged Items and Services (page 144): Medicare’s packaging policies support its strategic goal of using larger payment bundles in the OPPS to maximize hospitals’ incentives to provide care in the most efficient manner. Packaging encourages hospitals to use the most cost-efficient item that meets the patient’s needs, rather than to routinely use a more expensive item. Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care delivery. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000.

Inpatient Procedures Only (page 403) For CY 2016, Medicare is proposing to remove the following procedures from the “Inpatient Only” list, as shown in Table 54 (page 406):

  • CPT code 0312T (Vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction (EGJ), with implantation of pulse generator, includes programming).
  • CPT code 20936 (Autograft for spine surgery only (includes harvesting the graft); local (eg, ribs, spinous process, or laminar fragments) obtained from the same incision).
  • CPT code 20937 (Autograft for spine surgery only (includes harvesting the graft); morselized (through separate skin or fascial incision)).
  • CPT code 20938 (Autograft for spine surgery only (includes harvesting the graft); structural, bicortical or tricotical (through separate skin or fascial incision)).
  • CPT code 22552 (Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots; cervical below C2, each additional interspace).
  • CPT code 54411(Removal and replacement of all components of a multi-component inflatable penile prosthesis through an infected field at the same operative session, including the irrigation and debridement of infected tissue).
  • CPT code 54417 (Removal and replacement of non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis through an infected field at the same operative sessions, including irrigation and debridement of infected tissue).

ASC: Proposed updates to the Ambulatory Surgical Center (ASC) payment system begins on page 417.  Nothing every interesting from a policy perspective.

Overall, this proposed rule is benign. It continues Medicare’s intent to bundle ancillary services to encourage efficiencies. It continues Medicare’s desire for more transparency, such as its proposal to publish C-code applications on a quarterly basis. It continues to tinker with clinical homogeneity, evidenced by the major re-grouping of clinical specialties by levels of complexity. The devil is in the details to appreciate Medicare’s proposed renumbering of APCs. There are many surprises associated with higher reimbursements for many surgical procedures. Please look at the specific worksheets I’ve prepared for procedures of interests. I am immediately available for personal discussion.