On July 6, 2012, CMS issued proposed rules to implement both rate and policy updates for:  (i) hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs); and (ii) physicians, non-physician practitioners, and other suppliers (Proposed Rules) for calendar year (CY) 2013. Under the OPPS Proposed Rule, CMS would increase OPPS payment rates by 2.1 percent.  This increase is based on the projected hospital market basket of 3.0 percent minus statutory reductions totaling 0.9 percent to, among other things, incorporate an adjustment for economy-wide productivity.  The statutorily mandated minus 2.0 percent payment penalty will be applied to hospitals that fail to comply with hospital outpatient quality reporting requirements.  For ASCs, the OPPS Proposed Rule would increase ASC payment rates by 1.3 percent, which is equivalent to updates to the consumer price index for urban consumers (CPI-U) of 2.2 percent minus a statutorily-mandated productivity adjustment of 0.9 percent.  The MPFS Proposed Rule would, among other things, update payment rates to physicians and non-physician practitioners, and make certain changes under the Physician Quality Reporting System, the Electronic Prescribing Incentive Program, the PQRS-EHR Incentive Pilot, and the Physician Compare tool on CMS’s Medicare.gov website.  Proposals to implement the Affordable Care Act (ACA)’s value-based payment modifier (Value Modifier) are also included in the Proposed Rule.  Significant changes and updates under the Proposed Rules for HOPDs, ASCs, and physicians, non-physician practitioners, and other suppliers are set forth below. 

OPPS Proposed Rule Changes Affecting HOPDs

• Shift from Median Costs to Geometric Mean Costs.  CMS proposes to use the geometric mean costs of services within each Ambulatory Payment Classification (APC) to determine the services’ relative payment weights instead of median costs, as has been used since the inception of the OPPS.  According to CMS, geometric mean costs are a better reflection of the average costs of services than the median of costs.  CMS posits that such change will not have a significant payment impact on most providers, but the agency acknowledges that some providers will experience either a small gain or loss depending on their service-mix.
• Drugs and Pharmacy Overhead.  CMS would pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at the statutory default of average sales price (ASP) plus 6.0 percent. 
• Partial Hospitalization Services.  Four separate partial hospitalization program (PHP) APC per diem rates would be updated to support continued access to the PHP benefit.  Two of the PHP APC per diem rate updates are for community mental health center PHPs and two are for hospital-based PHPs. 
• Inpatient/Outpatient Status.  CMS would make changes to the Part A to Part B Rebilling Demonstration which allows hospitals whose inpatient stays are denied as not reasonable and necessary to bill Medicare for all Part B services and be paid 90 percent of what would otherwise be allowable.  CMS also solicits comments on changes to provide more clarity regarding inpatient and outpatient status.
• Hospital Outpatient Quality Reporting Program.  The OPPS Proposed Rule does not propose the addition of any new quality reporting measures to those previously adopted for CY 2014 and CY 2015 payment determinations.  If finalized, hospitals would be required to report on 23 measures for the CY 2013 payment determination and 24 measures for the CY 2015 payment determination.  CMS proposes to defer data collection for OP-24 Cardiac Rehabilitation Patient Referral from an Outpatient Setting for one year and confirmed the suspension of OP-19 Transition Record with Specified Elements Received by Discharged ED Patients.  As stated in the CY 2012 OPPS final rule, public reporting for claims-based imaging efficiency measure OP-15 will be deferred until at least 2013.  Program procedures for measure retirement, measure suspension, measure retention, and administrative forms are also proposed. 

OPPS Proposed Rule Changes Affecting ASCs

• New Intraocular Lenses Technology.  CMS proposes to make a number of changes to its new technology for intraocular lens (NTIOLs) regulations.  Under the proposed changes, IOL’s FDA-approved labeling would be required to contain a claim of a specific clinical benefit on a new lens characteristic relative to currently available IOLs.  The clinical benefit identified in the labeling must be supported by evidence demonstrating that the IOL results in a measurable, clinically meaningful, improved outcome. 
• Proposed ASC Quality Reporting Measures.  CMS proposes to impose additional requirements on ASCs under its ASC Quality Reporting (ASCQR) Program, including procedural requirements for data reporting, requirements for updating policies, data completeness requirements, and a methodology for applying the 2.0 percent reduction when reporting requirements are not satisfied.

OPPS Proposed Rule Changes Affecting Other Providers and Organizations

In addition to the changes referenced above, the OPPS Proposed Rule also includes proposed changes to the Inpatient Rehabilitation Facility Quality Reporting Program and the Quality Improvement Organization regulations. 

MPFS Proposed Rule Changes Affecting Physicians, Non-Physician Practitioners, and Other Suppliers

• Primary Care and Care Coordination.  In acknowledgment of primary care and care coordination services as critical components to achieving better care, CMS proposes to create a new procedure code to recognize the additional resources required for a community physician to coordinate a patient’s care 30 days after discharge from an inpatient or skilled nursing home stay or from certain outpatient services.  The procedure code would not require a face-to-face encounter with a community physician.  CMS is also soliciting comments on other ways of recognizing and paying for advanced primary care medical home services.   
• Potentially Misvalued Codes.  CMS is proposing the review of two new categories of potentially misvalued codes:  (i) “Harvard valued” CPT codes with Medicare annual allowed charges of $10 million or more; and (ii) services with stand alone practice expense procedure times.  With respect to the latter category, CMS proposes to reduce the procedure time assumptions in developing RVUs for intensity modulated radiation treatment (IMRT) delivery and stereotactic body radiation therapy (SBRT) delivery.  According to CMS, Medicare sometimes pays freestanding IMRT facilities more than hospitals for treatment and delivery.  The proposed new values are reportedly derived from procedure time information that better reflects current practice as reported in publicly available patient education materials.  
• Interest Rate Assumptions.  CMS proposes to reduce interest rate assumptions used to establish practice expense payments from 11 percent to a range between 5.5 percent and 8 percent to reflect current economic conditions.  The lower range of interest rates is premised on Small Business Administration maximum interest rates for different categories of loan size and maturity. 
• Multiple Procedure Payment Reduction.  CMS would apply a multiple procedure payment reduction policy to the technical component of certain cardiovascular and ophthalmology diagnostic services.  This would be accomplished by making full payment for the highest paid cardiovascular or ophthalmology diagnostic service and reduce the technical component payment for subsequent cardiovascular or ophthalmological diagnostic services furnished by the same physician or group practice to the same patient on the same day by 25 percent.   
• DME Face-to-Face.  To combat fraud and abuse, CMS proposes to implement a face-to-face requirement as a condition of payment for certain high dollar DME items.   
• Elimination of Prepayment Medical Review Limitation.  To implement the ACA, CMS would remove a limitation imposed on Medicare contractors to continue complex prepayment medical review if a provider or supplier has failed to reduce its individual error rate.   
• Molecular Pathology Services.  CMS is soliciting comments on whether certain new molecular pathology CPT codes should be paid under the MPFS or the Clinical Laboratory Fee Schedule.  If paid under the MPFS, the codes would be priced by Medicare contractors given the tendency for the price of these codes to vary across locality and to give CMS more time to collect data on them.   
• Telehealth Services.  A series of preventative services would be added to the list of Medicare covered telehealth services, including:  annual alcohol misuse screening, brief behavioral counseling for alcohol misuse, annual face-to-face intensive behavioral therapy for cardiovascular disease, annual depression screening, behavioral counseling for obesity, and  semi-annual high intensity behavioral counseling to prevent sexually transmitted infections.  Alcohol and/or substance abuse assessment and intervention services would also be added to the list.  
• Therapy Data Collection.  A claims-based data collection process for therapy services would be implemented to gather data regarding patient function and condition.  New codes and modifiers would be required to be added to therapy service claims to report information regarding the patients’ functional limitations at the inception of therapy, during therapy, and at end of therapy.  The data reported through these codes would, according to CMS, be used to design a new payment system for therapy services.
• Removal of Midlevel Provider Barriers.  CMS proposes to allow non-physician practitioners and limited-license physicians to order portable x-ray services within the scope of their Medicare benefit and state scope of practice laws.  With respect to the certified registered nurse anesthetist (CRNA) benefit, there is a proposal to clarify that “anesthesia and related care” means services related to anesthesia that are within the scope of practice for CRNAs in the state in which the services are rendered.   

The OPPS Proposed Rule and the MPFS Proposed Rule are scheduled to be published in the July 30, 2012 edition of the Federal Register.  CMS will accept comments to either of the Proposed Rules until September 4, 2012.  Final OPPS and MPFS rules for CY13 will be published by November 1, 2012.  The OPPS Proposed Rule is available here and the Fact Sheet is available here.  The MPFS Proposed Rule is available here and the Fact Sheet is available here. 

Reporter, Adam Robison, Houston, +1 713 276 7306, arobison@kslaw.com.