The Centers for Medicare & Medicaid Services (CMS) today issued a final rule with comment period updating the hospital Outpatient Prospective Payment System (OPPS), effective for services furnished during calendar year (CY) 2008, which encourages higher quality and accessible health care through new payment policies and the reporting of quality measures.  The final rule with comment period also updates the payment rates for the revised ambulatory surgical center (ASC) payment system, beginning in CY 2008.

“The changes included in this rule again signify our continuing commitment to making sure that Medicare beneficiaries receive high quality care delivered in an efficient manner,” said CMS Acting Administrator Kerry Weems.  “Hospitals will now have additional incentives to deliver the right service to the right patient in the right setting at the right time.”

            After taking into account the market basket update and other factors that affect the level of payments, CMS estimates hospitals will receive an overall average increase of 3.8 percent in Medicare payments for outpatient services in CY 2008.  

            Medicare expenditures for Part B services have grown rapidly over the past several years, due in part to significant increases in spending for hospital outpatient services. The CMS Office of the Actuary projects that payments (including beneficiary coinsurance) under the OPPS will increase by about 10 percent to approximately $36 billion in CY 2008 from $32.7 billion in CY 2007. 

            “The policies of the revised ASC payment system that are reflected in the 2008 payment rates further expand beneficiary choices by providing patients the flexibility to select, in consultation with their physicians, the most appropriate care setting for their particular surgical needs,” continued Weems.  “The revised system takes a major step toward eliminating financial incentives for choosing one care setting over another, thereby placing patients’ needs first, increasing efficiencies, and leading to savings for both beneficiaries and the Medicare program.”

While payments to hospitals have increased under the OPPS, these payment increases have not historically been tied to quality improvement. This final rule with comment period better focuses the OPPS on value-based purchasing by expanding CMS’ efforts to link payment updates to reporting quality measures specific to hospital outpatient services. 

In addition, the reforms in this final rule with comment period will promote efficiencies within the OPPS payment structure by providing larger payment bundles for certain OPPS services.  These larger payment bundles will provide hospitals with greater flexibility in managing their resources.

Ultimately, the provisions of this final rule with comment period are expected to improve quality, encourage hospital efficiency, and make health care more affordable and accessible for Medicare beneficiaries.

This final rule with comment period affects outpatient services furnished by general acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, and long-term acute care hospitals.

CY 2008 OPPS Final Rule with Comment Period Provisions

• Linking payment updates to quality measure reporting:  The Medicare Improvements and Extensions Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432 (MIEA-THRCA) requires the Secretary of Health and Human Services to develop measures to make it possible to assess the quality of care (including medication errors) furnished by hospitals in outpatient settings. In CY 2008, CMS is requiring that hospitals report seven consensus quality measures, including five emergency department acute myocardial infarction transfer measures and two surgical care improvement measures. Hospitals that are paid under the Inpatient Prospective Payment System are required to report the applicable hospital outpatient quality measures in order to receive the full OPPS market basket update in CY 2009; otherwise, their CY 2009 update will be reduced by 2.0 percentage points.

• Expanded packaging for CY 2008:  In order to further efficiencies within the OPPS, CMS is extending the current packaging approach to include guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, contrast agents, and observation services.  These groups of supportive ancillary services are integral to the performance of primary diagnostic and treatment procedures, so that packaging payment for these additional services results in larger payment bundles that will provide hospitals with the flexibility to manage their resources efficiently.

• Introduction of composite ambulatory payment classification (APC) groups:   In this final rule with comment period, CMS is also adopting the use of composite APCs to encourage efficiencies by providing one bundled payment for several major services. Composite APCs encourage even greater hospital efficiencies than expanding packaging by making a single payment for the totality of hospital outpatient care provided during an encounter. CMS will provide payment for extended outpatient visits with observation care through two composite APCs and will also utilize composite APCs to pay for low dose rate prostate brachytherapy and cardiac electrophysiologic evaluation and ablation services.

• Ensuring Medicare and its beneficiaries benefit from device credits:  Medicare payment and beneficiary liability for certain device-dependent APC groups will be reduced when a hospital receives a substantial partial credit from the manufacturer toward the cost of a replacement device implanted in a procedure.  This parallels Medicare’s inpatient hospital policy and extends the current OPPS payment reduction policy when a hospital replaces an implantable device without cost.

The final rule with comment period can be found at http://www.cms.hhs.gov/HospitalOutpatientPPS/.  It will be published in the Federal Register on November 27, 2007.