The Health Care Financing Administration ("HCFA") published its final regulation regarding the outpatient prospective payment system ("PPS") for Medicare beneficiaries on April 7. The PPS was mandated by the Balanced Budget Act of 1997 ("BBA") and modified by the Balanced Budget Refinement Act of 1999 ("BBRA"). The effective date for the rule is July 1, 2000. The PPS uses 451 ambulatory payment classification ("APC") groups. We assume you are generally familiar with the PPS and APCs.
The focus of this Update is six specific issues arising from the PPS final rule.
1. Services and procedures that require inpatient care are excluded from the services paid under the PPS. HCFA tells us, helpfully, that its designation of a service as "inpatient only" does not preclude the service from being furnished in a hospital outpatient setting. The designation does mean that Medicare will not pay for the service if it was furnished to a Medicare beneficiary in an outpatient setting! The beneficiary would be liable to pay for the procedure. Addendum E to the final rule is the list of CPT codes which will be paid only as inpatient procedures. HCFA will review this list annually.
HCFA excluded from the PPS those services furnished in a hospital outpatient setting that were already subject to an existing fee schedule or other prospectively determined rate.
2. HCFA defined "provider-based." The Medicare statute lists the types of facilities that are regarded as providers of services, but does not use or define the term "provider-based." In this final rule, HCFA defined provider-based as a provider that, "is either created by, or acquired by, a main (emphasis added) provider for the purpose of furnishing health care services of a different type from those of the main provider under name, ownership, and administrative and financial control of the main provider ..." According to the final rule, a joint venture by providers cannot achieve provider-based status.
The final rule defines a provider's campus as "the physical area immediately adjacent to the provider's main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis by the HCFA regional office, to be part of the provider's campus."
These definitions of provider-based and a provider's campus should be reviewed carefully because they may raise questions about many existing arrangements for providing outpatient care.
3. The BBRA added a transitional pass-through payment to hospitals for a period of two to three years for additional costs for new medical devices, drugs, and biologicals. These transitional pass-through payments apply when the item was not being paid for as a hospital outpatient service as of December 31, 1996, and where the cost of the item is "not insignificant" in relation to the PPS amount. The PPS final rule specifies that the total amount of pass-through payments for a given year cannot be projected to exceed an applicable percentage of total payments. Before 2004, that percentage is 2.5%. For 2004 and subsequent years, the percentage is 2%.
The comments accompanying the final rule describe examples of the drugs and biologicals that are candidates for pass-through payments, including certain orphan drugs, cancer therapy drugs, and radiopharmaceutical drugs.
HCFA excluded equipment, instruments, apparatuses, implements or items that are generally used for diagnostic or therapeutic purposes, that are not implanted or incorporated into a body part, and that are used on more than one patient (i.e., reusable) from consideration of being a new medical device which may be eligible for pass-through payments.
HCFA developed a three part test to determine whether the costs of transitional drugs, biologicals and devices are "not insignificant." Because the "not insignificant" threshold is stringent and will limit the number of transitional pass-through payments, all potential "add-on" payments should be examined with care.
4. The final rule creates special APC groups for new technology services. HCFA will assign new items and services that it determines cannot be placed in existing APC groups and which do not meet the pass-through requirements to the new technology APC groups. In contrast to other APC groups, the new technology APC groups do not take into account clinical aspects of the services they are to contain, but only their costs. Similar to those items qualifying for the transitional pass the term "provider-based." In this final rule, HCFA defined provider-based as a through payment, placement of a product in a new technology APC will be temporary until it can be moved to a clinically-related APC. A product placed in a new technology APC will be paid the APC amount regardless of its price.
5. Review Charge Masters Against Packaged Services By Revenue Center. Table 1 of the final PPS rule lists the revenue centers included in the outpatient PPS payment rate. The revenue centers are: ASC and other surgery; medical visit; other diagnostic (blended services); radiology subject to the fee schedule and other radiology; and, all other APC groups. If a UB-92 revenue code is not included on this packaged services table, it is not part of the bundled payment rate and separate payment can be received for the service(s). Accordingly, institutions should review their charge masters to identify revenue codes which are not on the bundled PPS list and for which separate payment still may be received. For example, revenue codes 278 (medical/surgical supplies - other implants) and 324 (radiology - diagnostic, chest x-ray) are not included on Table 1 and therefore are eligible for separate payment presumably through interim payments and the cost report.
6. The PPS rule explicitly provides that certain hospitals in Maryland which qualify under Section 1814(b)(3) of the Social Security Act for payment under the Maryland payment system are excluded from the outpatient PPS. Any other outpatient services furnished by an otherwise excluded Maryland hospital, however, are paid under the outpatient PPS.
This Update was prepared by John B. Reiss, Partner and Chairman of Saul Ewing's Health Law Practice Group and Bruce D. Armon, Associate in the Health Law Practice. If you have any questions or would like additional information, please contact Mr. Reiss at 215-972-7124 or by e-mail at jreiss@saul.com or Bruce D. Armon at 215-972-7985 or by e-mail at barmon@saul.com.
Note: Posted articles are for general information only and should not be considered legal advice.