CMS Releases 2014 OPPS/ASC Proposed Rule

by King & Spalding

On July 8, 2013, CMS released the annual Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems Proposed Rule for calendar year 2014 (the “Proposed Rule”).  Significant proposed changes include the establishment of comprehensive APCs for high-cost device-dependent services, increased packaging of drugs and ancillary services, and the elimination of 5 coding levels for outpatient clinic and ED visits.  Comments are due by September 6, 2013.

Payment Rates Under the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System

CMS proposes to increase OPPS payment rates for CY 2014 by an increase factor of 1.8 percent, which represents the proposed 2.5 percent market basket percentage increase for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity adjustment of 0.4 percentage points, and minus a 0.3 percentage point adjustment required by the Affordable Care Act.  CMS estimates that proposed total payments under the OPPS for CY 2014 will be approximately $50.4 billion (including beneficiary cost-sharing), an increase of approximately $4.4 billion compared to CY 2013 payments, taking into account estimated changes in enrollment, utilization, and case-mix.  CMS estimates that under its proposal, most classes of hospitals would receive an increase that is in line with the proposed 1.8 percent overall increase after all budget neutrality adjustments are applied. 

CMS proposes to increase ASC payment rates by 0.9 percent, based on a projected CPI-U update of 1.4 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.5 percent, resulting in total payments to ASCs for CY 2014 of approximately $3.98 billion, an increase of approximately $133 million compared to estimated CY 2013 payments.

Proposed Establishment of “Comprehensive APCs”

CMS proposes to establish 29 new comprehensive APCs to replace the 29 existing device-dependent APCs for the most costly device-dependent services, where the cost of the device is large compared to the other costs involved in furnishing the service.  The comprehensive APCs will bundle payment for all individually reported codes that represent the provision of the primary service and all adjunctive services that are integral to or support the delivery of the primary service.  CMS proposes to make a single payment for the comprehensive service based on all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS (but including certain nontherapy services that are reported with therapy codes and are furnished during the perioperative period).  Room, board, and nursing costs necessary to deliver the outpatient service would also be packaged, regardless of the patient’s length of stay.  CMS also proposes to consider all medications, regardless of the route of administration, that are ordered by a physician and supplied and delivered by the hospital for administration during the primary service to be adjunctive supplies for which payment would be bundled into the comprehensive APC.  (This would not include drugs separately paid through a transitional pass through payment.)


Comprehensive APC Title


Level I Implantation of Neurostimulator Generator


Level I Implantation/Revision/Replacement of Neurostimulator Electrodes


Level II Implantation/Revision/Replacement of Neurostimulator Electrodes


Coronary or Non-Coronary Atherectomy


Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization


Level II Electrophysiologic Procedures


Insertion/Replacement of Permanent Pacemaker and Electrodes


Level I Insertion/Replacement of Permanent Pacemaker


Transcatheter Placement of Intracoronary Stents


Insertion/Replacement of Pacemaker Leads and/or Electrodes


Level I Implantation of Cardioverter-Defibrillators (ICDs)


Level II Implantation of Cardioverter-Defibrillators (ICDs)


Level VII Female Reproductive Procedures


Implantation of Drug Infusion Device


Level II Endovascular Revascularization of the Lower Extremity


Level VII ENT Procedures


Level VI Anterior Segment Eye Procedures


Level II Implantation of Neurostimulator Generator


Implantation of Neurostimulator Pulse Generator and Electrode


Level III Endovascular Revascularization of the Lower Extremity


Level I Prosthetic Urological Procedures


Level II Prosthetic Urological Procedures


Level II Arthroplasty or Implantation with Prosthesis


Level IV Breast Surgery


Level II Insertion/Replacement of Permanent Pacemaker


Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing


Transcatheter Placement of Intracoronary Drug-Eluting Stents


Prostate Cryoablation


Insertion of Patient Activated Event Recorders

Proposed Changes to Packaged Items and Services

For CY 2014, CMS proposes to define seven new categories of ancillary or supportive “dependent” items and services for which payment will be packaged into payment for the primary diagnostic or therapeutic service.  The proposed new categories of packaged services are:

  1. Drugs, biologicals, and radiopharmaceuticals that function as supplies in a diagnostic test or procedure (except when pass-through status applies);
  2. Drugs and biologicals that function as supplies or devices in a surgical procedure (e.g., skin substitutes);
  3. Clinical diagnostic laboratory tests provided on the same date of service as the primary service and ordered by the same practitioner who ordered the primary service (excluding molecular pathology lab tests);
  4. Procedures described by add-on codes;
  5. Ancillary services currently assigned status indicator “X” (excluding preventive services currently assigned status indicator “X”);
  6. Diagnostic tests on the bypass list; and
  7. Device removal procedures that are billed with other surgical procedures involving device repair or replacement.

In addition to the proposed increased packaging of imaging services that are included as ancillary services with status indicator “X” or as diagnostic tests on the bypass list (categories 5 and 6, above), CMS is soliciting comments on a potential CY 2015 proposal to package all imaging services associated with surgical procedures.

Proposed Single Payment Level for Hospital Outpatient Clinic and ED Visits

For CY 2014, CMS proposes to do away with the existing 5 levels of visit codes for hospital outpatient clinic, Type A ED, and Type B ED, and replace them with three new alphanumeric Level II HCPCS codes representing a single level of payment for each type of visit.  Under the proposal, new code GXXXC would replace HCPCS codes 99201 – 99205 and 99211 – 99215 for all clinic visits for all patients, whether new or established.  Similarly, new code GXXXA would replace 99281 – 99285 for all Type A ED visits, and new code GXXXB would replace G0380 – G0384 for all Type B ED visits.  CMS proposes to calculate payment rates for each new code on the basis of the total mean costs of Level 1 through Level 5 visit codes obtained from CY 2012 OPPS claims data for each visit type.  Existing critical care services codes 99291 and 99292 would  not be affected by this proposed consolidation of visit level billing codes.  CMS believes this change would reduce hospitals’ administrative burden by eliminating the need for hospitals to develop and apply their own internal visit level guidelines and by eliminating the need to distinguish between new and established patients.  CMS also believes this proposal would eliminate any incentive for hospitals to “upcode” or to furnish unnecessary services in order to move a patient into a higher visit level category with greater reimbursement. 

Outlier Payments

For CY 2014, CMS proposes that hospital outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds both the multiple threshold of 1.75 times the APC payment amount and the $2,775 fixed-dollar threshold over the APC payment rate. Outlier payments would be equal to 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount, when both the multiple threshold and the fixed-dollar threshold are met.  CMS estimates that outlier payments for CY 2014 would equal 1.0 percent of total OPPS payments.  CMS currently estimates that aggregate outlier payments for CY 2013 will be approximately 1.2 percent of the total CY 2013 OPPS payments. 

Proposed Changes to the Hospital Outpatient Quality Reporting (OQR) and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs

Hospitals and ASCs that fail to meet Hospital OQR Program and ASCQR Program reporting requirements will receive a 2.0 percentage point reduction to their OPPS and ASC payment system reimbursements for the applicable payment year. 

CMS is proposing to remove 2 measures from the Hospital OQR Program for the CY 2016 payment determination and subsequent years due to a variety of issues: (1) OP-19: Transition Record with Specified Elements Received by Discharged ED Patients; and (2) OP-24: Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting.  (These two measures are included among the 25 measures that have been previously adopted and retained for the CY 2014 and CY 2015 payment determinations.) 

CMS also proposes to adopt 5 new measures for the CY 2016 payment determination and subsequent years, for which data collection would begin in CY 2014:

  • OP-27: Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431);
  • OP-28: Complications within 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564);
  • OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients (NQF #0658);
  • OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659); and
  • OP-31: Cataracts: Improvement in Patient’s Visional Function within 90 Days Following Cataract Surgery (NQF #1536).

The first proposed measure is a healthcare-associated infection measure for which data would be submitted through the Centers for Disease Control and Prevention via the National Healthcare Safety Network.  The other 4 measures are chart-abstracted measures for which data would be submitted through a CMS Web-based tool via the QualityNet Web site.  CMS also proposes to adopt these last 4 measures under the ASCQR program for the CY 2016 payment determination and subsequent years.  (The second measure, “Complications within 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures,” is currently NQF-endorsed for the “Ambulatory Care: Clinic” setting, but not for the ASC setting.)

CMS is inviting comments on its plan to consider future measures for the Hospital OQR Program within the following measure domains: clinical quality of care; care coordination; patient safety; patient and caregiver experience of care; population/community health; and efficiency.  Under the ASCQR Program, CMS proposes to develop future quality measures in the following areas: clinical quality of care, patient safety, care coordination, patient experience of care, surgical outcomes, surgical complications, complications of anesthesia, and patient reported outcomes of care.

Value-Based Purchasing (VBP) Program

CMS proposes to create an additional appeal process that would be available to hospitals that have completed the existing appeal process under 42 C.F.R. § 412.167(b) to challenge CMS’s determination of their VBP scores, but are dissatisfied with the result.  Such hospitals would be permitted to request an additional, independent review by CMS.  CMS proposes to provide its independent review decision within 90 days of receiving a hospital’s proper request.  Section 412.167(b) enumerates the specific appealable elements of the VBP program, which are generally limited to technical errors, such as the failure to weight or sum the domains properly.  Many areas of appeal are expressly foreclosed by statute.  Although CMS categorizes its current proposal as an “additional appeal process . . . beyond the existing review and correction process,” CMS does not propose to expand the scope of a provider’s appeal rights under 412.167(b).  Exhaustion of the appeal process under 412.167(b) would be a prerequisite to receiving an independent review under CMS’s proposal.

Also, CMS notes in this Proposed Rule that in the FY 2014 Hospital Inpatient Prospective Payment System Proposed Rule (78 Fed. Reg. 27486, 27610-11 (May 10, 2013)), it inadvertently did not propose FY 2016 performance and baseline periods for the proposed new VBP measures, CLABSI, CAUTI, and SSI.  CMS now proposes to adopt CY 2014 as the performance period for the CLABSI, CAUTI, and SSI measures for the FY 2016 Hospital VBP Program, with CY 2012 as the baseline period.

Physician Supervision in CAHs and Small Rural Hospitals

Under a notice of nonenforcement in effect through the end of CY 2013, CAHs and small rural hospitals having 100 or fewer beds are, in effect, currently exempt from the requirement that all hospital outpatient therapeutic services must be furnished under direct supervision by a physician.  Under the Proposed Rule, this period of nonenforcement would be permitted to expire at the end of CY 2013, such that all outpatient therapeutic services furnished in hospitals and CAHs would require a minimum of direct supervision unless the service is on the list of services that may be furnished under general supervision or is designated as a nonsurgical extended duration therapeutic service.

Clarification Regarding General Supervision for Observation Services

In response to stakeholder questions, CMS clarifies in this proposed rule that once the supervising physician or appropriate nonphysician practitioner has determined that a beneficiary may be transitioned to general supervision, there is no Medicare requirement for multiple evaluations of the beneficiary during the provision of observation services.  General supervision may be furnished throughout delivery of the observation services.

Provision of Outpatient Therapeutic “Incident to” Services by Qualified Personnel

CMS proposes to make it an express condition of Medicare Part B payment that hospital or CAH outpatient “incident to” services must be personally provided by an individual who is qualified to furnish such services under the scope of practice laws of the State in which the services are provided.  CMS notes in the Proposed Rule that current payment regulations do not contain restrictions on the types of auxiliary personnel that can perform incident to services, other than rules relating to supervision by a physician or qualified nonphysician practitioner.  CMS proposes to add a new paragraph under § 410.27 to provide that hospital or CAH “incident to” services must be furnished “in accordance with applicable State law.”

Collection of Data on Services Furnished in Off-Campus Provider-Based Departments (PBDs)

In response to a “growing trend toward hospital acquisition of physician offices and subsequent treatment of those locations as off-campus provider-based outpatient departments,” CMS proposes to begin collecting data that would allow the agency to analyze the frequency, type, and payment for services furnished in off-campus PBDs.  CMS notes that in its March 2012 Report to Congress, MedPAC questioned the appropriateness of increased Medicare payment and beneficiary cost-sharing for provider-based physician practices, and has recommended that Medicare pay selected hospital outpatient services at the Medicare Physician Fee Schedule (MPFS) rates.  CMS is considering creating a HCPCS modifier that could be reported with every code for services furnished in off-campus PBDs and/or requiring hospitals to itemize costs and charges for their PBDs as outpatient service cost centers on their Medicare cost reports.  CMS invites comments on the best way of collecting this data.  Hospitals that have more than one campus with inpatient beds may want to comment on this rule to obtain clarification from CMS regarding the definition of what is “off-campus” for purposes of the proposed new modifier.

“Predicate Facts” Not Subject to Reopening After the 3-Year Reopening Period

CMS regulations provide that, absent evidence of fraud, a final determination may only be reopened within 3 years of the date of the determination.  42 C.F.R. § 405.1885(b).  In a recent decision by the United States Court of Appeals for the D.C. Circuit, Kaiser Foundation Hospitals v. Sebelius, 708 F.3d 226, the court concluded that this 3-year reopening limitation did not bar the reopening—solely for the purpose of correcting payments going forward—of a determination made longer than 3 years ago, which has a continuing effect on payment.  At issue in Kaiser was whether the hospitals could request a redetermination of their FTE counts in the 1996 base year for purposes of adjusting their resident caps as applied to later cost reporting periods.  The court held that they could.

CMS describes situations like the one at issue in Kaiser as involving “predicate facts”—situations where the “factual underpinnings” of a specific reimbursement determination were originally determined in a different fiscal period than the one under review.  In the Proposed Rule, CMS expressly disagrees with the court’s decision in Kaiser, which CMS believes is contrary to the reopening regulations.  Under the Proposed Rule, CMS would revise the regulations to clarify that “predicate facts” are only subject to review and potential redetermination through timely reopening of the  NPR for the cost reporting period in which the predicate fact first arose or was first determined by the fiscal intermediary.  CMS notes that the proposed clarification would apply to all Medicare reimbursement determinations, and not only to GME payment.  Also, CMS asserts that as a clarification of “longstanding agency policy,” the proposed revision would be effective for all appeals, reopenings, or requests for reopening that are pending on or after the effective date of the final rule, even if the intermediary determination at issue preceded the effective date of the final rule.

The Proposed Rule is available from the Office of the Federal Register website by clicking here.  The Proposed Rule is scheduled to be published in the July 19, 2013 Federal Register.

Reporter, Susan Banks, Washington, D.C., +1 202 626 2953,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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