The Health Care Financing Administration today (March 31, 2000) announced a new Medicare payment system for hospital outpatient services designed to encourage more efficient delivery of care and to ensure more appropriate payment for services by Medicare and its beneficiaries. Over time, the regulation will save beneficiaries millions of dollars in coinsurance payments for outpatient services. In addition to hospital outpatient services, the new prospective payment system will also apply to partial hospitalization services furnished by community mental health centers.
The final regulation, to be published on April 7 in the Federal Register, carries out the payment changes initially proposed by the Clinton Administration, which were enacted in the Balanced Budget Act of 1997 and adjusted in the Balanced Budget Refinement Act of 1999. The proposed regulation was open for comment by individuals and organizations between its publication in September 1998 and July 1999.
HCFA, which oversees the Medicare program, will implement the new payment system expected to go into effect on July 1, 2000. The provisions for provider-based facilities owned by hospitals, including physician office practices, will be effective six months from the publication date.
"This regulation helps Medicare reduce copayments for hospital outpatient services that are being used more frequently by elderly and disabled Americans," said HCFA Administrator Nancy-Ann DeParle. "The new system gives hospitals changed incentives to become more efficient and will result in more consistent payments across hospitals.
"The new prospective payment system increases total payments to hospitals, although individual hospitals may see an increase or a decrease in their payments," DeParle said. "During the transition period, we are protecting hospitals by paying a part of any reduced payments they might incur for outpatient services. For rural hospitals, we will fully cover any payment reductions. And hospitals will receive additional payments for new medical devices and drugs for up to three years."
HCFA will make certain that hospitals and their billing companies have the information and training they need to carry out system changes for the new outpatient prospective payment system. The agency also will monitor the progress of hospitals as they make the necessary changes and will continue to work closely with the hospital associations.
"I am committed to ensuring that the nation's hospitals and other providers are fully educated about this regulation," DeParle said. "We will launch an aggressive and comprehensive campaign to inform people about the rule."
The new payment system is based on groups of services called ambulatory payment classifications (APC), which divides all outpatient services included in the new payment schedule into 451 groups. The services within each group are clinically similar and require comparable resources.
A key provision of the 1997 budget law is a change in beneficiary coinsurance payments. The current coinsurance is based on 20 percent of charges billed by the hospitals and community mental health centers. In fact, for many outpatient services, beneficiaries pay 50 percent or more of the total payment to the hospital for outpatient treatment.
The Clinton Administration has long advocated reducing coinsurance that beneficiaries must pay for hospital outpatient services. In 1997, the administration's budget proposed to reduce coinsurance for beneficiaries to 20 percent of Medicare payment rates by 2007. Congress adopted a variation of the president's proposal in the 1997 budget law.
Coinsurance amounts will be frozen until the coinsurance payment for an APC becomes 20 percent of the total payment. Once coinsurance becomes 20 percent of the total payment, both the Medicare payment and the coinsurance amount will be updated annually so that coinsurance will continue to be 20 percent of the total payment. The actual copayment amounts for an APC will be limited to the Medicare hospital inpatient deductible, which for 2000 is $776. In addition, hospitals have the option of reducing the copayment.
The APC payment rate established for each group applies to all services within the group. Although national payment rates are established for each group, payments will be wage adjusted to reflect geographic differences. Under the final rule, HCFA has developed separate APCs to pay for blood, other blood products and anti-hemophilic factors.
In addition, HCFA modified the proposed regulation to allow a smoother transition to the new fee system for providers. The APC groups were refined based on comments. The changes included paying for corneal tissue, at least temporarily, at its acquisition cost, rather than as part of the payment for overall corneal transplant surgery, and requiring the use of HCPCS codes only for purposes of computing payments for medical visits to clinics and emergency departments.
The regulation excludes ambulance services because a new fee schedule is being developed. Physical, occupational and speech therapies, orthotic and prosthetic devices, durable medical equipment and clinical laboratory services are excluded because they are paid under existing fee schedules.
The final rule incorporates changes in hospital outpatient payments set by the 1999 budget law including:
Medicare will make additional payments for certain new medical devices and drugs for up to three years.
During a transition period until 2004, Medicare will pay hospitals a portion of any losses they would otherwise incur resulting from smaller payments than under prior law. For rural hospitals with 100 or fewer beds, these losses will be fully replaced.
Medicare will make an outlier payment for high-cost cases, with payments projected not to exceed 2.5 percent of total payments to hospital outpatient departments in 2000-2003.
Certain cancer hospitals will be protected permanently from any reduced Medicare payments.
Medicare will pay for implanted medical devices under the new payment system, rather than under a medical equipment fee schedule.
HCFA will annually review the APC groups, wages and other adjustments. As part of this review, HCFA will consult with an expert panel composed of provider representatives.
A 60-day comment period in the final regulation applies only to the regulatory changes resulting from the 1999 budget law.
The new regulation also addresses the criteria a facility must meet to be designated "provider-based." In recent years, provider-based facilities have expanded, including an increase in hospitals acquiring physician office practices to use as hospital outpatient departments. The regulation also includes requirements for hospitals to furnish an appropriate level of physician supervision in off-site clinics.
The final regulation, to be published on April 7 in the Federal Register, carries out the payment changes initially proposed by the Clinton Administration, which were enacted in the Balanced Budget Act of 1997 and adjusted in the Balanced Budget Refinement Act of 1999. The proposed regulation was open for comment by individuals and organizations between its publication in September 1998 and July 1999.
HCFA, which oversees the Medicare program, will implement the new payment system expected to go into effect on July 1, 2000. The provisions for provider-based facilities owned by hospitals, including physician office practices, will be effective six months from the publication date.
"This regulation helps Medicare reduce copayments for hospital outpatient services that are being used more frequently by elderly and disabled Americans," said HCFA Administrator Nancy-Ann DeParle. "The new system gives hospitals changed incentives to become more efficient and will result in more consistent payments across hospitals.
"The new prospective payment system increases total payments to hospitals, although individual hospitals may see an increase or a decrease in their payments," DeParle said. "During the transition period, we are protecting hospitals by paying a part of any reduced payments they might incur for outpatient services. For rural hospitals, we will fully cover any payment reductions. And hospitals will receive additional payments for new medical devices and drugs for up to three years."
HCFA will make certain that hospitals and their billing companies have the information and training they need to carry out system changes for the new outpatient prospective payment system. The agency also will monitor the progress of hospitals as they make the necessary changes and will continue to work closely with the hospital associations.
"I am committed to ensuring that the nation's hospitals and other providers are fully educated about this regulation," DeParle said. "We will launch an aggressive and comprehensive campaign to inform people about the rule."
The new payment system is based on groups of services called ambulatory payment classifications (APC), which divides all outpatient services included in the new payment schedule into 451 groups. The services within each group are clinically similar and require comparable resources.
A key provision of the 1997 budget law is a change in beneficiary coinsurance payments. The current coinsurance is based on 20 percent of charges billed by the hospitals and community mental health centers. In fact, for many outpatient services, beneficiaries pay 50 percent or more of the total payment to the hospital for outpatient treatment.
The Clinton Administration has long advocated reducing coinsurance that beneficiaries must pay for hospital outpatient services. In 1997, the administration's budget proposed to reduce coinsurance for beneficiaries to 20 percent of Medicare payment rates by 2007. Congress adopted a variation of the president's proposal in the 1997 budget law.
Coinsurance amounts will be frozen until the coinsurance payment for an APC becomes 20 percent of the total payment. Once coinsurance becomes 20 percent of the total payment, both the Medicare payment and the coinsurance amount will be updated annually so that coinsurance will continue to be 20 percent of the total payment. The actual copayment amounts for an APC will be limited to the Medicare hospital inpatient deductible, which for 2000 is $776. In addition, hospitals have the option of reducing the copayment.
The APC payment rate established for each group applies to all services within the group. Although national payment rates are established for each group, payments will be wage adjusted to reflect geographic differences. Under the final rule, HCFA has developed separate APCs to pay for blood, other blood products and anti-hemophilic factors.
In addition, HCFA modified the proposed regulation to allow a smoother transition to the new fee system for providers. The APC groups were refined based on comments. The changes included paying for corneal tissue, at least temporarily, at its acquisition cost, rather than as part of the payment for overall corneal transplant surgery, and requiring the use of HCPCS codes only for purposes of computing payments for medical visits to clinics and emergency departments.
The regulation excludes ambulance services because a new fee schedule is being developed. Physical, occupational and speech therapies, orthotic and prosthetic devices, durable medical equipment and clinical laboratory services are excluded because they are paid under existing fee schedules.
The final rule incorporates changes in hospital outpatient payments set by the 1999 budget law including:
Medicare will make additional payments for certain new medical devices and drugs for up to three years.
During a transition period until 2004, Medicare will pay hospitals a portion of any losses they would otherwise incur resulting from smaller payments than under prior law. For rural hospitals with 100 or fewer beds, these losses will be fully replaced.
Medicare will make an outlier payment for high-cost cases, with payments projected not to exceed 2.5 percent of total payments to hospital outpatient departments in 2000-2003.
Certain cancer hospitals will be protected permanently from any reduced Medicare payments.
Medicare will pay for implanted medical devices under the new payment system, rather than under a medical equipment fee schedule.
HCFA will annually review the APC groups, wages and other adjustments. As part of this review, HCFA will consult with an expert panel composed of provider representatives.
A 60-day comment period in the final regulation applies only to the regulatory changes resulting from the 1999 budget law.
The new regulation also addresses the criteria a facility must meet to be designated "provider-based." In recent years, provider-based facilities have expanded, including an increase in hospitals acquiring physician office practices to use as hospital outpatient departments. The regulation also includes requirements for hospitals to furnish an appropriate level of physician supervision in off-site clinics.
