CY 2011 Outpatient PPS and Ambulatory Surgical Centers Proposed Rule

On July 2, CMS released the outpatient prospective payment system (OPPS) and the ambulatory surgical center (ASC) payment system proposed rule for calendar year (CY) 2011. The proposed rule also implements several provisions enacted by the ACA, including rural provisions such as a wage index floor for frontier states, physician supervision, a hold-harmless payment and adjustment for sole community hospitals (SCHs), and a "rural provider" exception in the physician self-referral prohibition. The final rule is expected to be issued by November. 1.

Outpatient PPS Update - The rule includes a mandated 0.25 percentage point reduction to the CY 2011 market basket update of 2.4 percent. The resulting market basket update for CY 2011 will be 2.15 percent. For 2011 payment update purposes, hospitals must continue to report on the 11 existing outpatient quality measures. The update in 2011 for hospitals that do not meet quality reporting requirements would be 0.15 percent. CMS proposes a 2011 OPPS conversion factor for hospitals meeting quality data reporting requirements of $68.267. Hospitals that do not report the quality data will receive a reduced conversion factor of $66.930.

Wage Index Floor for Frontier States - The ACA required CMS to establish a wage index floor of 1.0 for Medicare inpatient and outpatient PPS payments to hospitals in frontier states. Therefore, CMS proposes to adjust the FY 2011 wage index to 1.00, as adopted on a calendar year basis for the OPPS, for all hospitals paid under the OPPS located in a frontier state in instances where their assigned FY 2011 wage index is less than 1.00. CMS used Census Bureau data to propose the following states as eligible: Montana, Nevada, North Dakota, South Dakota and Wyoming.

Physician Supervision - In response to concerns raised by the AHA, rural, CAH and other hospital and rural health groups, CMS proposes to permit a modified level of physician supervision for a few specified hospital outpatient therapeutic services, beginning in 2011. CMS identifies a set of 16 "nonsurgical extended duration therapeutic services" - these are procedures with a significant monitoring component that can extend for a sizable period of time, are not surgical, and typically have a low risk of complication. The list of services to which this revised policy applies includes observation services, various intravenous and subcutaneous infusions and various therapeutic, prophylactic or diagnostic injections. CMS proposes that these services require direct supervision only for the initiation of the service followed by general supervision for the remainder of the service. CMS would adopt the same definition of "general supervision" currently used for certain diagnostic services.

Physician Self-Referral - CMS proposes to implement AHA-supported changes enacted in ACA to the "whole hospital" and "rural provider" exceptions in the physician self-referral law that will prohibit their use by new physician-owned hospitals and limit the ability of existing physician-owned hospitals to expand their capacity.

Transitional Corridor "Hold-Harmless" Payments - As required by the ACA, CMS proposes to end the transitional outpatient payments (TOPs), also known as the "hold-harmless" payments, for rural hospitals with 100 or fewer beds and for SCHs with 100 or fewer beds as of December 31. Thus, in the absence of an extension of this policy in law, no hold-harmless payments are expected to be made for these hospitals in 2011.

Rural Adjustment for SCHs - CMS proposes to continue increasing payments to SCHs, including essential access community hospitals, by 7.1 percent for all services paid under the OPPS, with the exception of drugs, biologicals, services paid under the pass-through policy, and items paid at charges reduced to costs. The adjustment is budget neutral to the OPPS and applied before calculating outliers and coinsurance.

Cardiac and Pulmonary Rehab Services - In the outpatient PPS proposed rule, CMS clarifies that a CAH outpatient department is considered a covered setting for cardiac, pulmonary and intensive cardiac rehabilitation programs, provided that the program meets all of the regulatory requirements including direct supervision of all services by a physician.


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