AAMC Comment Letter on CY
2002 Outpatient Proposed Payment System Proposed Rule
October 3, 2001
Thomas A. Scully, Administrator
Centers for Medicare & Medicaid Services
Room 443-G
Hubert H. Humphrey Building
200 Independence Ave, SW
Washington, DC 20201
Attention: File Code CMS-1159-P
Dear Administrator Scully:
The Association of American Medical Colleges (AAMC) welcomes
this opportunity to comment on the Centers for Medicare &
Medicaid Services (CMS or the Agency) proposed rule entitled
"Medicare Program; Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2002 Payment
Rates," 66 Fed. Reg. 44672 (August 24, 2001). The
AAMC represents approximately 400 major teaching hospitals
and health systems; all 125 accredited U.S. medical schools;
98 professional and academic societies; and the nation's medical
students and residents.
This letter addresses the following issues: the financial
impact of the Medicare Outpatient Prospective Payment System
(OPPS) on teaching hospitals, pass-through payments for new
drugs and devices, the outlier payment calculation, cost-to-charge
ratio calculations, establishment of an ambulatory payment
classification (APC) for observation care, the APC payment
rate for positron emission tomography (PET), and provider-based
requirements.
Financial Impact of the OPPS on Teaching Hospitals
We continue to be concerned about the financial impact of
the OPPS on teaching hospitals. In the first OPPS final rule
(April 7, 2000), CMS estimated that major teaching hospitals
would lose 3.7 percent of Medicare outpatient payments under
the system, compared to an estimated increase of 0.2 percent
for all hospitals. In the August 24th proposed rule, CMS estimates
that major teaching hospitals will see only a slight increase
in payments, an estimate that is a full percentage point less
than the average for all hospitals-1.3 percent compared to
2.3 percent.
It is difficult for our members to analyze fully the impact
of the OPPS for a number of reasons, including the fact that
many of them have not been receiving Provider Statistical
and Reimbursement (PS&R) reports. However, to the extent
they are able to analyze their OPPS claims and payments, a
number have indicated that their financial position under
OPPS is precarious. It appears that to the extent there is
financial stability for some of our members it is dependent
on the receipt of outlier, pass-through and, most importantly,
transitional corridor payments. The latter two payments, however,
are not stable funding sources. The transitional corridor
payments end after 2004. In addition, when the pass-through
payments for current new drugs and devices end next year,
the amount of the APC payments that will be made to teaching
hospitals that continue to use these expensive, cutting-edge
technologies will likely be less than the current combined
APC plus pass-through payment because of the averaging process
using in determining the APC rates.
In the Association's comment letter on the original OPPS
proposed rule, we presented a number of reasons why teaching
hospitals would fare more poorly than other hospitals under
the OPPS (see AAMC Letter to Nancy-Ann Min DeParle, dated
July 30, 1999). For example, an analysis of 1996 outpatient
claims data revealed that the costs incurred by major teaching
hospitals for a disproportionate number of individual outpatient
services were consistently higher than the average cost. In
such cases, the APC rate would result in a systematic underpayment
for these services. Our July 30, 1999 letter also pointed
out that regression analyses conducted by both CMS and the
Lewin Group showed a significant effect related to cost differentials
and teaching intensity, indicating that teaching hospitals
would perform more poorly than other hospitals under the OPPS.
In the April 7th Final Rule, CMS stated that it would "conduct
analyses and studies of cost and payment differential among
different classes of hospitals, including teaching facilities,
when sufficient data under the PPS have been submitted. We
will carefully consider whether permanent adjustments should
be made in the system once the BBRA 1999 transition provisions
expire." (65 Fed. Reg. at 18500). In addition, the Balanced
Budget Act of 1997 requires the Secretary to establish adjustments
"as determined to be necessary to ensure equitable payments
. . . for certain classes of hospitals." (Section 4523
of the BBA)
We urge CMS to begin conducting these analyses as soon as
reliable OPPS data become available. We believe one of the
analyses should involve examining the reliance of teaching
hospitals on pass-through and transitional corridor payments.
If the results suggest that teaching hospitals depend on these
payments to achieve payment equity with other hospital types,
we believe a teaching hospital adjustment must be developed
prior to the expiration of these payments to ensure that it
can be implemented as soon as it is needed.
Pass-Through Payments for New Drugs and Devices
Teaching hospitals are harbingers for cutting-edge drugs
and devices. Appropriate payments for these services are critically
important to ensure access to appropriate and advancing health
care services for all patients, including Medicare beneficiaries.
The OPPS recognizes this need by making additional payments
to hospitals when they use new cutting edge services the costs
of which are not reflected in the APC rates. These "pass
through" payments are made for only 2-3 years-until cost
data are obtained and incorporated into the APC rate calculations.
In the preamble to the August 24 proposed rule, CMS states
"[t]he information that we have collected thus far suggests
that a significant pro rata reduction could be required for
2002 in order to meet the statutory limit on the amount of
the pass-through payments." (66 Fed. Reg. at 44704).
However, the proposed rule does not contain a pro rata reduction
amount. The preamble states that CMS staff are reviewing the
data and methodology for any "flaws or weaknesses"
as well as examining possible alternative options that would
minimize the amount of the pro rata reduction that would otherwise
be needed to reach the 2.5 percent level. We understand that
CMS believes it has the authority to make such a reduction
for 2002, so long as it is announced prior to January 1, 2002.
We are very concerned by the lack of information concerning
the data and methodology that underlie CMS' statement in the
proposed rule preamble. It is critical that any decision about
payment reductions be based on sound data. Yet, no information
has been provided to permit any evaluation of the current
level of pass through payments or possible pro rata reduction
amounts. In fact, it is unclear whether such data are yet
available. As we understand the proposed rule preamble, CMS
indicates that it is basing its statements on data from July
1, 1999 to July 1, 2000-before the OPPS even began.
We strongly urge that any decision about the need for a pro
rata reduction be delayed until OPPS claims data are collected,
analyzed, and CMS' methodology is made available to interested
parties. Continuing problems with the OPPS, including the
failure to provide hospitals with provider statistical and
reimbursement (PS&R) reports, suggest that the program
has not yet reached a position of stability. Consequently,
we believe it is important to proceed prudently on the pass-through
issue. Unexpected payment reductions would impose additional
financial burdens on many hospitals, particularly during a
period when they already are experiencing financial distress.
This would be especially detrimental if an announcement was
made and implemented either simultaneously or within a very
short time frame.
We also understand that other options are being considered
if significant pro rata reductions are necessary. One such
option would be to combine the 2.5 percent outlier pool with
the pass-through pool, which would eliminate outlier payments.
We oppose such an option. The purpose of outlier payments
is to help offset some, not all, of the losses incurred by
hospitals for services that result in extraordinarily high
costs. This is an important provision for many hospitals.
We do not believe a decision to eliminate this component of
the OPPS should even be contemplated until the system has
been in place for several years, and its experience can be
evaluated. We also understand that, similar to pass-through
payments, little, if any, data are available on the extent
to which outlier payments are being made currently. Again,
an important decision such as this should not be made in the
absence of sound data and program maturity.
Outlier Calculation
Under the proposed rule, effective January 1, 2002, outlier
eligibility would be determined at the individual service
level. Currently this determination is made on a claims basis.
In addition, CMS proposes to set the outlier threshold such
that service costs must be 3 times the corresponding APC payment
to qualify for an outlier payment, and the outlier payment
percentage is 50 percent of the costs exceeding the threshold.
Currently, these levels are 2.5 times the corresponding payment
and a payment percentage of 75 percent. While providing no
data on outlier payments, the Agency stated it believes the
increases are necessary to ensure the statutory 2.0 percent
outlier target limit is not exceeded.
We do not believe that the outlier threshold should be modified
without first publishing data on these payments. In the Medicare
inpatient rule, data on outlier payments are presented which
support any modifications that are implemented. This course
of action should also apply in the OPPS.
We also urge CMS to continue to determine outlier payments
on a claim-rather than individual service-basis. We believe
the complexity involved with establishing the methodology
and the administrative burden associated with complying with
the change cannot be understated. As CMS notes, allocating
packaged charges among multiple APCs on the same bill is difficult
to implement administratively and does not guarantee accuracy.
For example, on a claim with both a surgery and diagnostic
service, an anesthesia charge should be allocated entirely
to the surgery service. However, under CMS' proposal, this
charge would be prorated among the two services based on the
relative APC weights of the two services. In addition, providers
currently are permitted to submit bills that have one charge
amount that reflects the sum of several surgeries (the charge
field for the other surgeries contains a zero amount). It
is unclear how such claims would be handled under CMS' proposal.
And, if providers were to be required to change this charging
technique, it could require significant resources.
Cost-to-Charge Ratio Calculations
The cost-to-charge ratio (CCR) calculation is an important
determinant for a number of OPPS payments. For example, it
is used in the computation of pass-through and outlier payments,
as well as transitional corridor payments. Consequently, it
is important that this calculation be as accurate as possible.
Currently, CMS is using an overall hospital CCR (that
is reflecting both inpatient and outpatient costs and charges)
for calculations in which this ratio is needed. A CCR that
is based solely on outpatient costs and charges would be more
accurate for purposes of determining Medicare outpatient
payments.
In the Medicare inpatient PPS, for example, the outlier calculation
is based on inpatient costs and charges only. This philosophy
should also apply in the OPPS outlier calculation-that is,
OPPS outlier payments should be based on an outpatient-only
CCR. We urge CMS to investigate this issue and correct the
CCR methodology as soon as possible because it has financial
implications for a number of hospitals.
Establishment of an APC for Observation Care
The proposed rule would establish a new APC (APC 0339) to
provide payment for observation services associated with three
medical conditions: chest pain, asthma, and congestive heart
failure. To be able to bill for observation care, the care
must occur for a minimum of eight hours, the hospital must
furnish certain diagnostic services, and an emergency department
or clinic visit must be billed in conjunction with each bill
for observation services.
We appreciate CMS' recognition of the need for a distinct
APC for observation care. However, we are concerned about
the requirements associated with billing APC 0339. From an
overall perspective, we question why all observation care
that meets a minimum time threshold cannot receive payment.
To the extent that CMS has concerns about the medical necessary
of such care, a peer review organization review function could
be implemented to provide assurance that the services are
appropriate.
We also agree with concerns put forth in the American Hospital
Association's comment letter on specific proposed billing
requirements and conditions. In particular, we urge CMS to
eliminate the requirement for physician documentation of risk
stratification criteria. This is not a requirement for physician
payment and it would be difficult for hospitals to ensure
compliance.
APC Payment Rate for Positron Emission Tomography (PET)
Significant payment changes are proposed for Positron Emission
Tomography (PET). Particularly disturbing is the significant
decrease in payment for G0125 (PET image pulmonary nodule)
and G0126 (Lung image (PET) staging). The payment rate for
these procedures is proposed to decrease 63 percent, from
$2,301.26 to $841.94. Given the cost of PET scanners and the
radionuclide substances used in conjunction with these scanners,
this rate seems to be in error. If the proposed rate was not
an oversight, it is unclear what data CMS relied on to support
its decision given the newness of the codes for PET processions.
It is difficult to make definitive comments on this issue,
however, because there is no discussion of the PET payment
changes in the proposed rule, despite extensive explanations
about payment changes for a number of other outpatient services.
We urge CMS to reexamine the payment rates for these PET procedures
and publish information about the data and methodology underlying
a final determination.
Provider-Based Issues
We appreciate CMS' clarifications of various provider-based
provisions that were included in the April 7, 2000 final rule
and the Benefits Improvement and Protection Act of 2000. We
also appreciate the willingness of CMS to meet with the national
hospital associations to discussion the application of EMTALA
to provider-based entities. We believe continuing dialogue
between the Agency and the hospital community is important
to ensure that the issues that are still ambiguous can be
clarified in a way that is meaningful to providers and complies
with statutory intent.
If you have questions concerning these comments, please feel
free to call Robert Dickler, Senior Vice President of the
Association, or Karen Fisher, Associate Vice President, both
of whom may be reached at (202) 828-0490.
Sincerely,
Jordan J. Cohen, M.D.
cc: Robert Dickler
Karen Fisher
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