December 21, 2001

2002 Outpatient PPS Final Rule Delayed

The Centers for Medicare & Medicaid Services (CMS) Dec. 19 announced its decision to delay implementation of the 2002 Medicare outpatient prospective payment system (OPPS) final rule. In a meeting with the AAMC and other national hospital associations, CMS Administrator Thomas Scully announced that since publishing the final regulation on Nov. 30, a number of errors related to the ambulatory payment classification (APC) rates were discovered, necessitating the delay decision. Most observers believe the delay will be until April 1, 2002.

CMS had previously announced that, in the absence of a delay, it would be unable to process outpatient claims at the 2002 rates until at least April 1. The Agency had announced that it would "hold" hospitals' 2002 claims until its payment systems were ready, and give hospitals payments in the interim that would equate to only about half of what hospitals otherwise would receive if CMS could pay claims effective Jan. 1 [See Washington Highlights, Dec. 7].

Both CMS and the Department of Health and Human Services had been under intense pressure to delay the rule. The AAMC, along with the American Hospital Association and Federation of American Hospitals, had threatened to sue the Agency if the rule were not delayed [see Washington Highlights, Nov. 30]. In addition, the chairs and ranking minority members of the Senate Finance Committee and House Ways and Means and Energy and Commerce Committees (and their Health subcommittees) Dec. 12 sent a letter to HHS Secretary Tommy Thompson and CMS Administrator Scully urging a delay.

During the delay period, hospitals will be paid at 2001 rates. The effect of this is that there will be no "pro rata" reductions to the pass-through payments for applicable drugs and devices - estimated at saving hospitals about $340 million for the three month period. At the same time, however, there will be no 2002 payment update until April 1 - estimated to result in a loss of approximately $100 million for hospitals. The net impact of the delay has been estimated to result in a net savings to hospitals of about $240 million. AAMC President Jordan Cohen stated that "there was no easy solution, but on balance we believe that [the delay] is a good outcome."

Information: Karen Fisher, AAMC Division of Health Care Affairs, 202-862-6140.