Ref: [CMS-1206-P] Medicare Program; Changes to the Hospital Outpatient Prospective Payment System and Calendar Year 2003 Payment Rates; and Changes to Payment Suspension for Unfiled Cost Reports (67 Federal Register 52092), August 9, 2002.
Liberty Place, Suite 700
325 Seventh Street, NW
Washington, DC 20004-2802
(202) 638-1100 Phone
Monday, September 30th 2002
Thomas A. Scully
The Centers for Medicare & Medicaid Services
200 Independence Avenue, S.W.
Room 445-G, Hubert H. Humphrey Building
Washington, DC 20201
Dear Mr. Scully:
On behalf of our nearly 5,000 member hospitals, health care systems, networks and other providers of ambulatory care, the American Hospital Association (AHA) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services’ (CMS) proposed rule which establishes new policies and payment rates for hospital outpatient services for calendar year (CY) 2003. We are pleased by CMS’ openness in soliciting comments on the numerous changes it proposes to this remarkably complex and difficult payment system.
The outpatient prospective payment system (OPPS), implemented in August 2000, has presented a significant challenge to hospitals. The ambulatory payment classification (APC) payment rates changed dramatically from 2001 to 2002, and now again from 2002 to 2003. It has been very difficult for hospitals to verify the accuracy of these swings in payment, as well as appropriately respond with prudent planning and budgeting. In undergoing such considerable revisions, it is clear that the payment system is still in its infancy. The AHA urges CMS’ support in requesting that Congress act to enhance and expand the transitional corridor and hold harmless provisions put in place to protect hospitals in the transition to the new payment system until outpatient payment rates become stable.
The severe problems associated with the outpatient payment system are magnified owing to the extreme underfunding of the entire outpatient system. We have ongoing concerns that payment rates were set at 17 percent less than the costs hospitals incur in caring for Medicare outpatients. We acknowledge that CMS is in the difficult, if not impossible, position of tweaking a fundamentally flawed payment system, with budget neutrality and complicated coding requirements exacerbating the issue. But hospitals must have adequate funds to address critical issues – such as severe worker shortages, expensive new drugs and technologies, disaster preparedness, aging facilities, expensive regulatory mandates, and skyrocketing health care liability premiums. The AHA will continue to urge Congress to increase Medicare reimbursement to ensure access to outpatient services for Medicare beneficiaries.
The AHA applauds CMS for using more – and better – data in setting the 2003 rates, as we believe this will yield more accurate payments for hospital services. Health care providers continue to be concerned that the 2002 APC payment rates were based on inaccurate data. CMS has conceded that the 2002 rates were incredibly difficult to determine because of the “75 percent fold-in” of transitional pass-through payments into the base APC rates. In the preamble of the proposed rule, CMS states:
“The outpatient pass-through provisions of the BBRA [Balanced Budget Refinement Act] and BIPA [Benefits Improvement and Protection Act] have been exceptionally difficult to implement, arguably the most complex and difficult in the history of the Medicare program. In CY 2002, the pass-through payments, and the APC rates were calculated on the best information available. This was often manufacturer list prices, which may not reflect actual prices paid by hospitals ….We believe that the payment rates for the device related procedures for 2002 may in some cases have been higher than they would have been had actual hospital acquisition cost data been available for us to use …We assumed that a device would be provided with a related procedure and packaged 75 percent of these manufacturer estimated costs for the devices into the APCs for the procedures. The costs that we packaged in for some devices may have been higher than actual hospital acquisition cost.” (August 9, 2002 Federal Register p. 52093-52094)
The 2002 rates appear to be an aberration, with payments that were too high for those APCs using new technologies, and too low for those APCs that did not use technology. The AHA fully supports the methodology used to calculate the new 2003 payment rates, which trend more closely with 2001 rates. We strongly caution against the use of external data sources in supplementing these rates, unless this data is publicly available and proves, with third party verification, that CMS’ data is erroneous.
We also recognize CMS’ difficulty in addressing the outpatient pass-through provision, and are pleased with your proposal to incorporate the costs of the vast majority of these pass-through drugs, devices and biologicals into the base APCs starting on January 1, 2003. This move will help reduce the overall complexity of the outpatient payment system, mitigate the need for a pro-rata reduction, and cause less disruption on the payment system than if the categories were to expire on either a quarterly basis or on August 1, 2003.
Finally, we are disappointed by CMS’ proposal to implement a temporary and partial solution to the coding of evaluation and management (E/M) services. CMS has proposed adding yet another layer of complexity in the creation of temporary G-codes, and has not addressed the fact that individual providers will need to continue using disparate hospital-specific guidelines to determine resource consumption at all but the lowest levels of clinic and emergency department visits. We urge CMS to allow hospitals to continue with its current system until a standardized, national system can be developed.
Attached are our detailed comments regarding CMS’s proposed changes to the outpatient payment system, including those related to the calculation of CY 2003 rates and weights, transitional pass-through payments, outliers, E/M services, observation services, inpatient-only procedures, APC groupings, and payment suspensions for unfiled cost reports.
The AHA appreciates the opportunity to submit these comments on the proposed outpatient rule. If you have any questions about these remarks, please feel free to contact me or Ashley Thompson, senior associate director for policy, at (202) 626-2340.
Executive Vice President
American Hospital Association
Comments on CY 2003 Medicare Hospital Outpatient PPS
September 30, 2002
The American Hospital Association (AHA) appreciates the opportunity to share our comments and concerns in response to the proposed rule published in the Federal Register on August 9, 2002, which changes the hospital outpatient prospective payment system (OPPS) and calendar year (CY) 2003 payment rates.
Calculation of CY 2003 Rates and Weights
The AHA applauds the Centers for Medicare & Medicaid Services’ (CMS) for using more – and better – hospital data in setting the 2003 rates, as we believe this will yield more accurate payments for hospital services.
Many of the proposed 2003 payment rates are significantly different than the 2002 rates for the same items and services, due largely to the use of new data sources in setting the payment rates. First, the 2003 rates are based on actual hospital claims data from 2001, the first full year of data for hospital outpatient services under OPPS. Second, the agency proposes to include those multiple procedure claims that map to separately payable ambulatory payment classifications (APCs), increasing the number of claims used to set the rates from less than 40 million in 2002 to over 80 million in 2003. Third, the majority of new technology drugs and devices are no longer eligible for transitional pass-through payments. Finally, numerous diagnoses and procedures have been moved among APCs to better reflect clinical coherency and resource use.
The AHA fully supports the methodology used to calculate the new 2003 payment rates, which trend more closely with 2001 rates. We are pleased that for the first time CMS has used hospital claims data submitted under the OPPS (i.e., CY 2001 claims) to set the new payment rates. This data is more precise than the claims data used to set the 2002 rates, which included pre-prospective payment system (PPS) outpatient claims and either manufacturer list prices or average wholesale prices (AWP) for items on the pass-through list, and thus the new data more accurately reflect the costs to hospitals in providing such services.
We also commend CMS on doubling the proportion of claims used to set the 2003 APC weights. The use of multi-procedure claims will make cost estimates more robust, and we encourage CMS to continue to identify ways to incorporate additional types of multiple procedure claims in the future.
The use of manufacturer list price and AWP in 2002, the best information available to CMS at the time, resulted in some payment rates that were artificially inflated. Due to budget neutrality requirements, this meant decreased payments in 2002 for other critical outpatient services, such as clinic visits, emergency room visits and preventive services. In fact, in 2002, rural hospitals were estimated to experience an overall decrease in per case payments of 0.7 percent in 2002, even after a 2.3 percent increase in the update factor.
We are pleased that CMS has released the 2001 hospital outpatient claims database, and will use it to set payment rates in 2003. While we acknowledge that there may be problems in the data, particularly for coding of devices in 2001, we believe that CMS’ proposal to use charges from other revenue centers on the claim (such as supplies) will help mitigate this problem (discussed further below). The AHA strongly cautions CMS from using external data, such as that provided by individual manufacturers or pharmaceutical companies, over hospital data in changing payment rates, unless this external data is publicly available, and proves, with third party verification, that CMS’ data is erroneous.
In the proposed rule, approximately 95 percent of outpatient cases will experience an increase in payment. Much of this is due to the overall outpatient update, set in statute as full market basket for 2003, which will result in an overall 3.5 percent increase in outpatient payment to hospitals.
Transitional Pass-Through Payments
In general, the AHA is pleased with CMS’ handling of the difficult and incredibly complex transitional pass-through payment provision. On January 1, 2003, the majority of new technology drugs and devices will lose their eligibility for special pass-through payments. The integration of a large number of pass-through drugs and devices into the base APCs will help make the payment system less complicated. In addition, this will remove the incentive for a physician to use certain inputs in a patient’s care because of additional pass-through reimbursement.
The AHA supports CMS’ proposal to package the costs of medical devices no longer eligible for pass-through payments into the costs of those procedures which use the device. Medicare payment for APCs utilizing the devices would be based on a relative weight calculated in the same manner that relative weights for all APCs are calculated. The incorporation of technologies into the base APC payment system minimizes the confusion and complication of identifying those special devices requiring “C-codes,” and eliminates the special payment incentive to use these devices until they are transitioned back into the PPS. The appropriate coding of pass-through items has been incredibly difficult and complicated, especially given the switch in April 2001 from a device-specific code to a code based on the category of devices. The AHA thus also supports CMS’ proposal to include the charges from devices that were billed in other revenue centers to the packaging of device costs into APCs. This should improve the likelihood that all medical device charges are rolled into the appropriate APC, even if these charges did not include a C-code by the hospital.
The AHA continues to encourage CMS to release the crosswalk it used to assign pass-through device costs to specific APCs so that we can help confirm the appropriateness of the assignments. Without such data, we have concerns that certain APCs may receive significantly inadequate payment rates. We will continue to urge Congress to allocate an additional set of funds, to be used at CMS’ discretion, to fix those APCs that are determined to be severely underfunded.
Five categories of devices will continue to receive pass-through payments, calculated on hospital charges reduced to cost and based on a hospital-specific cost-to-charge ratio. Although subject to a separate interim final rule, the AHA would like to reiterate its support that the criteria used for the creation of new device categories remain narrow, so that only those categories of devices that are truly breakthrough technologies with substantial cost impact qualify for pass-through payment. This is the only way to ensure appropriate payment for the most significant innovations without diverting too many dollars from more traditional outpatient care.
Although CMS typically allows a 90-day grace period for codes scheduled for deletion, it proposes not to do so for expiring pass-through codes. The AHA agrees that this is the only appropriate course of action, because if a grace period were permitted, then additional costs would need to be projected into the pass-through payment pool and any pro-rata reduction.
The AHA encourages CMS to expeditiously incorporate into the APCs both low cost and high cost drugs that will lose their eligibility for transitional pass-through payments, while retaining separate APC payment for orphan drugs, blood and blood products, and certain vaccines. Integrating these payments will be less burdensome for hospitals, and will eliminate the incentives created by special additional reimbursement. We urge CMS, however, to provide a crosswalk of which drugs are being associated with which APCs and in what amounts, to help ensure that costs are being appropriately transferred to, and allocated among, the APCs.
Currently, drugs, biologicals, radiopharmaceutical and blood – herein referred to collectively as drugs – are paid in one of three ways: a packaged payment as part of an APC, a separate APC payment (including new technology APCs), or a transitional pass-through payment. CMS has proposed to package the cost of those drugs that cost less than $150 into their associated APCs, while continuing to make separate payment for those drugs that cost more than $150, as well as for orphan drugs, blood and blood products, and certain vaccines. Those drugs receiving separate payments would be given a new APC, with its payment based on a relative weight calculated in the same manner that relative weights for all APCs are calculated.
While we appreciate the difficulties CMS is facing in incorporating pass-through drug costs into the APCs, we are concerned about the $150 threshold established for separate APC payment. This dollar amount is arbitrary. It was chosen by looking at median costs for a single administration of each drug and identifying a “natural break” in the data. The result is that almost 40 percent of the “high cost” drugs will be paid separately, and that this separate payment would potentially last only for one year. This creates undue burden on hospitals, which would need to change their systems and educate staff to accommodate a temporary fix, only to again potentially change their systems and educate staff 12 months later. And, if the $150 threshold continues into 2004, we are concerned that a number of drugs may swing from packaged payment to separate payment, and vice versa, given such small dollar amounts necessary to generate a change. This will become a coding morass for hospitals. Additionally, this policy creates incentives for pharmaceutical companies to increase their prices so their drugs will receive separate payment, and, potentially, for physicians to choose one drug over a clinically appropriate substitute. The AHA recommends limiting separate APC payment only to those drugs that are extremely costly and where packaging their costs would significantly discourage their use. We do support CMS’ proposal to carve out orphan drugs, blood and certain vaccines for separate APC payment.
While the AHA supports incorporation of pass-through drugs into the APC rates, we are concerned that many of these same drugs will continue to receive 95 percent of the AWP in other settings. This likely will result in significantly enhanced payment rates in physician offices, and we are concerned that this may result in patient care being directed out of the hospital outpatient setting and into physician office for non-clinical reasons.
At the time the proposed rule was published, CMS indicated that it did not have enough information to determine whether a pro-rata reduction to pass-through payments would be necessary in 2003. Total pass-through spending for 2003 is currently estimated at $450 million, which is within the 2.5 percent cap of $457 million. Of this, approximately $446 million is for pass-through drugs and biologicals and $4 million is for pass-through devices. However, CMS does not yet have utilization estimates for a number of items on the pass-through list. CMS has indicated that once these figures become available, then a pro-rata reduction likely would be necessary in 2003 to maintain pass-through spending at 2.5 percent of total OPPS payments. The AHA will continue to urge CMS and, if necessary, Congress to halt any reductions to payments above the 2.5 percent targeted spending amount.
Multiple Procedure Discounting
The AHA is concerned that CMS’ “multiple procedure discounting” policy may result in payment levels that are significantly less than the cost of providing the service (acknowledging that on average all services receive 83 percent of cost). Currently, if more than one procedure is performed during the same outpatient visit, hospitals receive full payment for the highest weighted APC with a status indicator of “T” (indicating that the multiple procedure payment discount under OPPS applies), and half the payment rate for all other APCs with a status indicator of “T.” While discounting may be appropriate for multiple surgical procedures that share services such as anesthesia, operating room, and recovery room, it is not appropriate when the cost of a device or drug represents the majority of costs in the APC. We encourage CMS to examine those APCs with a status indicator of “T,” and consider either not applying the discounting policy to the drug or device portion of the APC, or excluding the APC from the discounting policy altogether by reassigning the APC with a status indicator code of “S” (indicating that it is a significant service paid under the OPPS and to which the which the multiple procedure payment discount under OPPS does not apply).
Coding of E/M Services
The AHA recommends keeping the current Evaluation and Management (E/M) coding system until national coding guidelines with standard definitions are established. We encourage CMS to work expeditiously with the AHA and the American Medical Association (AMA) to develop unique Current Procedural Terminology (CPT) codes that can be used to report facility E/M services to any and all payors.
Since the implementation of OPPS in August 2000, hospitals have been reporting clinic and emergency department (ED) visits using the same CPT code numbers as physicians. Yet these codes have entirely different meanings for hospitals. Thus, CMS has allowed each facility to develop internal guidelines that map facility services to the CPT codes used by physicians. The only requirements were that the facility services be documented and be medically necessary, and that the mapping reasonably reflect the intensity of the hospital’s resources. Hospitals struggled to create their own systems and looked forward to CMS developing a standard methodology for reporting E/M services in the near future.
The AHA is disappointed that despite the many comments submitted to CMS by hospitals and other providers, as well as the recommendations of the APC Advisory Panel, national coding guidelines for reporting ED and clinic visits still have not been proposed. Since implementation of OPPS, hospitals have developed different types of systems based on resource intensity point scoring, severity acuity point scoring, staff intervention and staff time, or a combination of these criteria. CMS has expressed dissatisfaction with all of the existing models without proposing a national substitute.
Using the existing CPT codes without adhering to the published CPT descriptors leaves hospitals at risk for noncompliance with Health Insurance Portability and Accountability Act (HIPAA) electronic transaction standards. CPT is one of the designated HIPAA code set standards and these HIPAA requirements go into effect October 16, 2003. We support CMS’ decision to create unique codes to represent facility E/M services distinct from the CPT code numbers used to report physician services. However, CMS’s proposal to create new HCPCS Level II G codes falls short of a viable solution. “G codes” are used for Medicare reporting, but other payors do not recognize or allow these codes, making G codes in fact a type of Medicare “local code.”
Defining coding for a basic level ED and clinic visit is a good start, but it will create serious problems for facilities because additional E/M levels have not been defined, nor has a recommended methodology for developing the additional levels been proposed. Continuing to maintain a disparate system across the country affects the quality of the data available to CMS for decision-making.
The AHA recommends that CMS convene a panel of experts, which include the AHA and the AMA, to develop national standard E/M coding definitions that are meaningful, simple to understand and simple to implement. National standard E/M definitions should be submitted to the AMA CPT Editorial Panel for a special expedited process that would allow for HIPAA compliance. We strongly urge CMS to develop and propose national guidelines for facility E/M coding along with their corresponding CPT codes by no later than June 2003. Given the timeframe, and the looming HIPAA deadline, we urge CMS to publish a separate notice of proposed rule making by June 2003 to specifically address these issues. This is the only way to ensure that hospitals have the time necessary to train coders, change billing systems and implement the new codes by October 16, 2003. And while this would mean implementing a new system in the middle of the calendar year, there would not be a need to recalibrate the APC rates as the new codes would map to already existing APCs.
In the interim, the AHA recommends that CMS allow hospitals to refine their existing E/M mapping systems to better comply with CMS’ request that separately reportable and payable services are removed so that they are not considered in the determination of the E/M level. No other changes should be implemented until a comprehensive national standard hospital E/M coding system is developed.
Last year, CMS made extensive changes to the calculation of outlier payments. Not only did CMS decrease the overall pool of outlier funds to 1.5 percent (from 2.5 percent in 2001), raise the threshold to qualify for outlier payments to 3.5 times the APC payment rate (from 2.5 times), and decrease the payment percentage to 50 percent of costs in excess of the threshold (from 75 percent), but also, as required by statute, CMS determined outliers on a service-by-service basis, rather than for all aggregate services on a bill. Packaged services were 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 a bill. We continue to have concerns about this methodology, which results in increased complexity of the outlier calculation without any corresponding increase in the accuracy of the cost calculation. Prorating the charges for packaged services among all APCs does not result in a precise division of costs between the different APCs. The AHA will continue to urge Congress to allow the Secretary permanent authority to determine outlier eligibility and payment based on the total of all outpatient services on a bill.
For CY 2003, CMS is proposing to increase the pool of outlier funds to 2.0 percent of total OPPS payments (from 1.5 percent) and lower the eligibility threshold to 2.75 times the APC payment rate (from 3.5 times). While the AHA is supportive of these changes, as an outlier pool of funds is necessary in a prospective payment system to shield hospitals from extremely high-cost outpatient cases, we remain concerned that the proposed rule once again makes significant changes to outlier provisions without providing sufficient data or information to support such changes. What was the actual dollar and percent payout for outliers in 2001? What is the current projected amount for 2002?
The AHA is pleased that CMS has proposed providing separate payment for patients who are directly admitted from a physician’s office into observation care with chest pain, congestive heart failure (CHF) and asthma, but is concerned that the process set forth is overly burdensome.
The rule proposes adding two new G codes which will allow CMS to collect data on those patients who are directly admitted to observation services with a diagnosis of chest pain, CHF or asthma, as compared to those who are directly admitted to observation for other conditions. Patients with the any of the three above diagnoses would receive code G0LLL, which would be paid separately for observation services under APC 339 (Observation Care). The AHA is pleased that these direct admits would no longer be required to receive critical care or E/M services in a hospital clinic or ED in order to bill separately for observation care.
Those patients directly admitted to observation with a condition other than chest pain, CHF or asthma would use code G0MMM, which would track to APC 706, resulting in a New Technology – Level I payment. For these cases, CMS would collect data on the costs associated with these direct admissions to observation care so that these can be packaged and recognized in the future. We are concerned about the effect of these G codes on current reimbursement, whether other payors would accept these codes, and whether they will be HIPAA compliant (discussed further below). We request that CMS use data already present rather than create a new code for the purposes of collecting and tracking this data.
The AHA recommends that the inpatient-only list be eliminated, as recommended by the APC Advisory Panel. Hospitals are unable to receive any payment for services on this list that are performed in the outpatient setting. Yet, physicians, not hospitals, determine what procedures should be performed and whether a patient’s condition warrants an inpatient admission. We believe it is appropriate to leave this clinical decision-making process in the hands of physicians. If CMS continues to maintain an inpatient-only list, we strongly urge CMS to remove those services that are performed, and reimbursed by Medicare, in ambulatory surgery centers. A list of these procedures is attached in Appendix A.
In response to numerous provider questions and concerns, the proposed rule attempts to clarify CMS’ policy regarding payment of inpatient-only procedures that are performed in an emergency, and in which the patient dies or is transferred before being admitted as an inpatient. Because these procedures are inpatient-only, with a status indicator of C, Medicare coding systems reject payment for these claims under OPPS. In the rule, CMS instructs hospitals to submit the claim, wait for denial by the fiscal intermediary, and then resubmit it for inpatient payment. We find this process to be overly burdensome, creating extra work for both hospitals and the fiscal intermediaries. We urge CMS to develop a better solution.
Proposed Changes to the APC Groups
The APC Advisory Panel is a group of provider experts charged with advising CMS and reviewing the clinical integrity of the APC groups and weights. We are concerned that several changes have been made to APC groups in spite of the APC Advisory Panel’s recommendations to the contrary. It is also evident that the APC Advisory Panel continues to request that additional data be made available before any changes are pursued. We are concerned that CMS continues to ignore the panel’s recommendations. This is especially disconcerting when CMS does not provide a reason explaining why they are choosing not to accept the panel’s advice.
New HCPCS G Codes
As we have said previously in testimony before the National Committee on Vital Health Statistics, the AHA is very concerned about the lack of institutional provider input into the HCPCS Level II update process. The HCPCS Level II Editorial Panel is comprised of representatives from the Blue Cross/Blue Shield Association, the Health Insurance Association of America and CMS. HCPCS Level II G codes are not even subject to the editorial panel process since they were created in solidarity by CMS. There seems to be only minimal coordination between HCPCS Level II G codes and the other HIPAA standard code sets. While G codes are meant to be temporary codes created for the sake of expediency, they often can remain valid for many years without a process to incorporate them into permanent CPT codes. This eventually results in an overlap of descriptions between CPT codes and HCPCS codes. The AHA recommends that a process be developed in coordination with the AMA’s CPT Editorial Panel to either create new CPT codes to report services currently reportable with G codes, or modify existing CPT codes to allow separate identification of code components important for Medicare reimbursement.
Non-Medicare payers do not generally accept HCPCS Level II G codes. This adds another level of coding complexity for hospitals because coders have to be familiar with CPT codes, as well as HCPCS G codes. It is not always obvious to the coder when a CPT code, which appears to be perfectly suited to describe a service, may in fact not be appropriate for Medicare reporting.
The AHA also is concerned about the proliferation of G codes with long, complex descriptors that seem intent on encompassing all variables required for claim processing into a single code. Such complexity creates administrative burden for hospital coders and billers. We strongly urge CMS to consider whether other existing code sets or data items in a claim form are able to provide the required information to make a payment determination before the agency creates a new G code. For example, code G0LLL (initial nursing assessment of patient directly admitted to observation with diagnosis of congestive heart failure, chest pain or asthma) and code G0MMM (initial nursing assessment of patient directly admitted to observation with diagnosis other than congestive heart failure, chest pain, or asthma) could be replaced by the revenue code indicating observation, an ICD-9-CM diagnosis code reflecting the specific diagnosis, and a source of admission code from the UB92.
The structure and format of HCPCS G codes do not follow established code development standards. For example, CPT has been criticized for its vague and imprecise codes. Some of the more common culprits have been phrases such as “any method” and “with or without” as part of code titles. As a recommendation of the CPT-5 process, the CPT Editorial Panel has moved to reduce the number of codes using these terms, as well as consciously avoids such terms when creating new codes. Two of the new G codes proposed (G0NNN and G0OOO) contain both “with or without” as well as “any method” in the code titles.
Payment Suspensions for Unfiled Cost Reports
The AHA supports CMS’ proposal to allow the Secretary more flexibility in payment suspensions, such that the Secretary could choose to suspend certain payments, rather than necessitating suspension of all payments, if providers fail to file an acceptable cost report in a timely manner. This increased flexibility would allow hospitals to receive partial payment from Medicare, which would lessen the financial impact of payment suspensions on providers.