The AHA expressed disappointment over the Centers for Medicare & Medicaid Services’ (CMS) decision to reduce hospital outpatient payment rates by 0.4% next year in its final rule for the outpatient prospective payment and ambulatory surgical center payment systems (PPS). However, in the final rule issued on Oct. 30, the agency also said it would carry out AHA-supported changes proposed in July for its “two-midnight” policy.

The final rule’s 0.4% decrease in 2016 hospital outpatient payments largely results from a 2 percentage point cut to the outpatient PPS conversion factor that is intended to account for CMS’s overestimation of the amount of packaged laboratory payments for laboratory tests that were previously paid under the Clinical Laboratory Fee Schedule.

AHA Executive Vice President Tom Nickels criticized the agency for the negative update “It is unfortunate that hospitals and the patients they serve are now left to deal with the consequences of CMS’ faulty math,” he said. “We continue to be troubled by CMS’ actuaries’ lack of transparency, which is untenable.”

Two-midnight policy. CMS finalized its proposal to alter its “two-midnight” policy so that certain hospital stays that do not cross two midnights may be considered appropriate for payment under Medicare Part A if a physician determines and documents in the patient’s medical record that the patient required reasonable and necessary admission to the hospital. CMS made no changes for stays that last at least two midnights.

The agency also restated changes it announced to its medical review strategy in the outpatient PPS proposed rule. The agency now requires Quality Improvement Organizations (QIO) to conduct first-line medical reviews of the majority of patient status claims rather than the Medicare Administrative Contractors or Recovery Audit Contractors (RAC), which will focus only on those hospitals with consistently high denial rates.

“Hospitals appreciate the certainty that stays of at least two midnights are inpatient, with stays of less than two midnights also considered inpatient based on physician judgment,” Nickels said. “We look forward to working with the [QIOs], which are not paid on a contingency fee basis like the bounty hunter RACs, and to a more fair auditing process.”

As expected, CMS did not reverse the 0.2% payment cut associated with the two-midnight policy. For the outpatient quality reporting program, CMS removes one imaging utilization measure and adds one new measure that assesses radiation therapy dosing for certain cancer patients. 

AHA members on Nov. 2 received a Special Bulletin with further details.