Outpatient PPS payments to rise; pass-through payments may fall - Updata - Centers for Medicare and Medicaid Services prospective payment system payment regulations - Brief Article - Statistical Data Included

Healthcare Financial Management, Oct, 2001

Overall, payment will increase 2.3 percent for outpatient prospective payment system (PPS) services, effective January 1, 2002, the Centers for Medicare and Medicaid Services (CMS--formerly HCFA) estimated in a proposed rule published in the August 24, 2001, Federal Register. As required by statute, the update is set at the market basket, which is projected to be 3.3 percent, minus 1.0 percentage points, In specific breakdowns, on average, urban hospitals will see an increase of 2.4 percent, while rural hospitals can expect an increase of 1.9 percent.

The rule explains possible approaches that CMS could use to estimate payments of pass-through devices, drugs, and biological products in outpatient settings. No actual estimate is included in the rule, however. By law, passthrough payments must be made temporarily and capped at 2.5 percent of the estimated overall outpatient PPS amount. Currently, if the pass-through payment estimate exceeds the cap, an across-the-board cut on all pass-through payments is triggered. CMS has stated that the estimate is likely to greatly exceed the cap.

Under the rule, beginning January 1, 2002, outlier payments would be calculated on a service-by-service basis, rather than on the basis of the sum of billed outpatient PPS services. For packaged services, total charges would be divided among all services based on the ratio of the APC payment rate for an individual service to the total APC payment rate for all services on the bill. The rule also would change the outlier threshold to require costs to exceed three times the APC payment amount (using the hospital's overall outpatient cost-to-charge ratio to convert charges to costs). CMS then would pay 50 percent of costs above this threshold amount. The rule also seeks to cap outlier payments at 2.0 percent, rather, than 2.5 percent.

In addition, the rule clarifies the two-year "grandfathering" law, which allows existing provider-based entities to retain their provider-based status through October 1, 2002, regardless of whether they meet the appropriate outpatient PPS criteria. The rule notes that CMS intends to reexamine the appropriateness of applying the Emergency Medical Treatment and Active Labor Act (EMTALA) to off-campus locations; CMS says it soon will publish a proposed rule to fully address this and other EMTALA-related concerns. Also of note, the rule proposes creating a new APC (0339) with several billing requirements to secure payment for observation services for chest pain, congestive heart failure, and/or asthma.