Healthcare Reform Update - CMS Issues Proposed CY 2011 Hospital Outpatient Rule

The CY 2011 Hospital OPPS rule also addresses the revised Ambulatory Surgical Center (ASC) payment system and implements key provisions of the Patient Protection and Affordable Care Act of 2010 (ACA).

Key Provisions for Drugs and Biologicals

• Increase in the packaging threshold for separately payable drugs and biologicals to $70. Items with a per-day cost less than or equal to $70 are proposed to be packaged, while those with a per-day cost greater than $70 are proposed to be separately payable.
  
• Proposal to pay most separately payable drugs and biologicals without pass-through status at average sales price (ASP) plus 6%. 
  
  In 2010, these drugs are paid based on ASP + 4%. CMS emphasizes that this proposed payment formula is a coincidental outcome of its methodology to determine average acquisition costs, rather than a deliberate change to equalize payment for drugs in the hospital outpatient and physician office settings.
  
• Continuation of the ASP + 6% payment methodology for pass-through drugs and biologicals.
  
• CMS estimates that CY 2011 spending for pass-through drugs, biologicals, and devices would represent 0.20% of total projected CY 2011 OPPS spending. Such estimates trigger adjustments in the conversion factor for CY 2011 to account for the difference between the CY 2010 (0.14%) and CY 2011 (0.20%) estimate of pass-through spending as discussed below.

Conversion Factor Considerations

• The proposed full conversion factor for CY 2011 is $68.267. This conversion factor is less than the expected 2.15% increase to the CY 2010 conversion factor (which equals $67.241) due to a number of adjustments, including the required proposed wage index budget neutrality adjustment of approximately 1.0011, the proposed cancer hospital budget neutrality adjustment of 0.9934, and the proposed adjustment of 0.06% of projected OPPS spending for the difference in the pass-through spending discussed above.
  
• The proposed reduced conversion factor for CY 2011 for hospitals that fail to meet the Hospital Outpatient Department Quality Data Reporting Program (HOPD QDRP) requirements is $66.930.

Affordable Care Act (ACA) Provisions

• Waiver of beneficiary cost-sharing for most Medicare-covered preventive services, including the Initial Preventive Physical Examination (IPPE or "Welcome to Medicare Visit"). This waiver applies not only to the 20% coinsurance for the physician's service but also to any cost-sharing for preventive services such as colonoscopies in the hospital outpatient and ASC settings.
  
• Several provisions that will boost payments to certain groups of hospitals. For example, adjustments to OPPS payments for a small number of cancer hospitals that meet the classification criteria set forth in the statute, if the Secretary determines that costs incurred by those hospitals with respect to ambulatory payment groups are higher than the costs incurred by other hospitals under the OPPS. Medicare is proposing an adjustment to OPPS payments for those cancer hospitals with some reductions in payments to other hospitals to meet the budget neutrality requirement for these changes.
  
• Implementing several ACA requirements for Graduate Medical Education (GME), in addition to making several significant changes to the OPPS required by the health reform legislation.

Other Provisions of Interest

• CY 2011 is the first year the revised ASC payment system rates will be fully implemented. CMS projects total Medicare payments of approximately $40 billion to HOPDs and $4 billion to ASCs for CY 2011.
  
• The proposed rule expands the set of measures that must be reported by HOPDs to qualify for the full payment update in the succeeding year. For 2011, CMS states that no new HOPD QDRP measures were added. Changes for CYs 2012, 2013, and 2014, however, are discussed in the proposed rule. 
  CMS will accept public comments on the proposed rule through Aug. 31, 2010, and will respond to them in a final rule expected to be issued by Nov. 1, 2010.

Xcenda's Reimbursement Strategy & Health Policy team is conducting a comprehensive analysis of the OPPS proposed rule. For additional information or a customized analysis of the rule, please contact Ana Stojanovska.