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Washington Highlights

CMS Proposes Payment Changes for Hospital Outpatient PPS and ASCs

July 10, 2009—The Centers for Medicare and Medicaid Services (CMS) July 1 posted on its website a proposed rule  that contains changes to the outpatient prospective payment system (OPPS) as well as proposed payment rates for Ambulatory Surgical Centers (ASC). If finalized, CMS will implement the changes to both the OPPS and the ASC payment system Jan. 1, 2010. Comments on the proposed rule are due Aug. 31. The AAMC will be submitting comments.

CMS proposes to raise the base OPPS payment rate by the full market basket increase of 2.1 percent.

The proposed rule changes the requirements for "direct supervision" of hospital outpatient therapeutic services furnished in a hospital and in on-campus provider-based departments (PBDs) of a hospital. The new definition requires that the physician be present on the same campus, in the hospital, or the on-campus PBD, and immediately available to furnish assistance and direction through the performance of the procedure. In the 2009 final OPPS rule, CMS clarified that "direct supervision" was required that the physician had to be "on the premises of the location" where the service was provided. Prior to the 2009 final rule, many hospitals had understood that CMS required general supervision of outpatient therapeutic services furnished "incident to" a physician's service in the hospital and the on-campus PBDs. Despite the confusion about the level of supervision, CMS states that "we have not instructed contractors to delay initiation of enforcement actions or to discontinue pursing pending enforcement actions regarding the physician supervision of hospital outpatient services."

The proposed rule also would allow physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse-midwives to directly supervise all hospital outpatient therapeutic services that they may perform under state law and scope of practice or hospital-granted privileges.

CMS proposes a new methodology for calculating the payment rate for separately payable drugs and biological. Under the new methodology hospitals will receive the same payment rate as before, the average sales price (ASP) plus 4.0 percent. If CMS had not made this proposal, under the current methodology, separately payable drugs would be reimbursed at ASP minus 2 percent. Recognizing that current methodology underestimates the acquisition and overhead costs of separately payable drugs and biologicals while overestimating the costs of packaged drugs and biologicals, the new methodology will redistribute some of the overhead cost of packaged drugs and biologicals to separately payable drugs and biologicals.

The proposed rule does not add any additional measures to the hospital outpatient quality reporting program. Thus, the reporting requirements for the CY 2011 would remain the same. The proposed rule also does not expand the Hospital Acquired Condition (HAC) program to the hospital outpatient setting. While CMS is still committed to addressing HACs in the hospital outpatient setting, the agency realizes there are significant operational as well as structural challenges to implementing such a program at this time.

CMS also proposes to increase the fixed-dollar outlier threshold from $1,800 in CY 2009 to $2,225 in CY 2010.


Ivy Baer, J.D., M.P.H.
Senior Director and Regulatory Counsel
Telephone: 202-828-0499

Jennifer Faerberg, MHSA
Director, Clinical Transformation Unit
Telephone: 202-862-6221

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806