Outpatient PPS changes delayed; No suspension of claims processing - Updata - prospective payment system - Brief Article

Healthcare Financial Management, Feb, 2002

On December 31, 2001, the Centers for Medicare and Medicaid Services (CMS) published a notice in the Federal Register formally delaying implementation of the 2002 update to the outpatient prospective payment system (PPS). The 2002 update has seen much controversy and confusion since it was issued in two separate final rules on November 2 and November 30, 2001. (In the short time since its release, the update has seen threats of lawsuits by industry groups, the revelation that CMS would be unprepared to handle the changes for months after the original implementation date, and reversals of position by CMS regarding both the authority to impose an implementation delay and the integrity of the data included in the final rules.)

The delay, which affects both November final rules, means that 2001 payment rates will continue through at least the first quarter of 2002. Hospitals and community mental health centers should continue to use 2001 HCPCS codes and definitions for outpatient PPS services rendered on or after January 1, 2002. CMS will issue a program memorandum (PM) when the 2002 HCPCS can be used for outpatient PPS purposes. The delay also applies to the 2002 outpatient-PPS-related changes to CPT codes.

The following outpatient PPS provisions, however, will not be delayed:

* The 2002 outpatient coinsurance limit of $812;

* The coinsurance rate caps of 55 percent;

* Changes in services covered by the outpatient PPS;

* Categories of hospitals subject to, and excluded from, the outpatient PPS;

* Criteria for new-technology ambulatory payment classifications (APCs);

* Provider-based issues; and

* Changes to the definition of single-use devices for transitional pass-through payments.

Further, since the delay affects only the outpatient PPS services, hospital billing for physician services outside of the outpatient PPS should include 2002 HCPCS codes for services rendered as of January 1, 2002, as originally planned. Other provider types (bill types 22X, 23X, 24X, 32X, 33X, 34X, 71X, 72X, 73X, 74X, 75X, 81X, 82X, and hospitals not paid under the outpatient PPS) also will receive payments under updated codes for services rendered on or after January 1, 2002.

On December 21, 2001, CMS issued PM A-01-145, providing fiscal intermediaries (FIs) with instructions for the continuation of outpatient PPS claims processing using 2001 rates. To read the PM, go to http://www.hcfa.gov/pubforms/transmit/A01145.pdf. Also, on December 28, 2001, CMS issued PM A-01-150, which summarized the delay's key billing issues for providers (http://www.hcfa.gov/pubforms/transmit/A01150.pdf).

Once the corrected rates, wage indexes, and payment algorithms are approved, a new 2002 outpatient PPS PRICER will be used. In the interim, a revised outpatient PPS PRICER, which takes into account the new coinsurance limits, is in use. To further complicate matters, it is possible that before a 2002 outpatient PPS update can be implemented, new outpatient PPS rules will need to be published to address the miscalculations cited by CMS.

Scully says that maintaining the 2001 rates through the first quarter of 2002 will boost hospital reimbursements by $240 million over the amount that would have been paid if the new rates took effect on time.

The decision to delay implementation of the 2002 update may have been spurred by a December 12, 2001, letter to HHS from a bipartisan group of congressional leaders. Despite the threat of lawsuits by provider groups claiming that the rules contained miscalculations and the rule-making process was flawed, CMS had insisted that it could not lawfully delay the implementation date without congressional authorization. In their letter, however, the lawmakers' state that, in their opinion, the HHS Secretary does have the authority to impose a delay and has established precedents for delaying systems if they are not ready.

On December 18, 2001, under pressure from Congress and the industry, CMS convened a small, informal meeting of industry groups, including HFMA, to announce the delay. In a press announcement the next day, CMS attributed the delay to "a number of technical miscalculations in the assignment of the cost of certain new-technology devices to related procedure codes." CMS Administrator Tom Scully stated, "I expect this to be a one-time glitch in the system. I believe a review of all our outpatient codes, and the entire program, is best served by this delay. We do not want to undercut patient or provider confidence in the Medicare program." To read the press release, go to http://www.cms.gov/media/press/press_release.asp? Counter=324.

In early December, before deciding to delay the 2002 outpatient PPS update, CMS had established a process for interim payments, outlined in PMs A-01-139 and A-01-140, advising FIs to hold claims until the agency's software was ready to accommodate the 2002 rates. However, with CMS's subsequent, and apparently newly discovered, finding that miscalculations within the outpatient PPS final rules necessitated the delay, PMs A-01-139 and A-01-140 were rendered moot. Thus, providers need not pursue special payments at this time.