On July 2, 2010, CMS released its proposed rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and the ambulatory surgical center (ASC) payment system rates and policies for calendar year (CY) 2011. The official version of the rule is scheduled to be published in the Federal Register on August 3, 2010. Comments on the proposed rule will be accepted until August 31, 2010. CMS expects to issue a final rule by November 1, 2010, which will be effective for services furnished on or after January 1, 2011. Highlights of the rule are available after the jump.

  • CMS estimates that the rule would increase HOPPS rates by 2.2% in 2011 compared to 2010 (the increase is 2.1% when cancer and children’s hospitals and community mental health centers are excluded). This update reflects a provision of the Affordable Care Act (ACA) that imposes a 0.25 percentage point reduction to the HOPPS update for CY 2011. Note that the impact of the policy and payment provisions of the proposed rule on payment for individual procedures varies.
  • The HOPPS update is reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements. CMS is proposing to expand the set of measures that must be reported by hospital outpatient departments (HOPDs) to qualify for the full payment update. To allow hospitals more time to prepare, CMS is proposing measures for reporting in CYs 2011 through 2013. Among other things, CMS is proposing to add six quality measures to the current 11 measures to be reported by HOPDs in CY 2011 for purposes of CY 2012 payment, including one structural health information technology measure, four claims-based imaging efficiency measures, and one chart-abstracted measure for emergency departments.
  • CMS proposes to increase the threshold for separate payment of hospital outpatient drugs and biologicals to those with a cost-per-day that exceeds $70, up from $65 currently. Payment for separately-payable drugs and biologicals without pass-through status would equal the average sales price (ASP) plus 6% (compared to the current rate of ASP plus 4%). This amount reflects the cost of separately-payable drugs and biologicals, calculated from hospital claims and cost reports, with an adjustment for pharmacy overhead cost that reflects the redistribution of $200 million of pharmacy overhead costs currently attributed to packaged drugs and biologicals to separately-payable drugs and biologicals.
  • The proposed rule would modify the supervision requirements for outpatient therapeutic services to require direct supervision of the initiation of a service followed by general supervision for certain non-surgical, extended-duration services, including observation services.
  • CMS would implement a number of ACA provisions related to limitations on certain physician referrals to hospitals in which they have an ownership or investment interest (and related changes to provider agreement regulations); payments to hospitals for direct graduate medical education and indirect medical education costs; waiver of beneficiary cost-sharing for preventive services; and payment adjustments for certain cancer hospitals.
  • With regard to ASC services, CMS estimates that the ASC update factor for CY 2011 would be 1.6%; however, this update would be entirely offset by a “multi-factor productivity” (MFP) adjustment mandated by the ACA, which CMS estimates will be 1.6% for 2011. The MFP adjustment is designed to encourage more efficient care by reducing Medicare reimbursement by the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity, as reported by the Bureau of Labor Statistics. Consequently, CMS is proposing a 0% update to the ASC payment system for CY 2011. CMS also is proposing to add five surgical procedures to the list of covered ASC procedures, designate six procedures as office-based procedures, and update the list of covered ancillary services. The proposed rule also would implement an ACA provision waiving beneficiary copayments for certain preventive services under the ASC payment system.

In a related development, CMS has released a notice modifying the final 2010 HOPPS and ASC rules to reflect provisions of the ACA applicable to 2010 rates, including a 0.25% reduction to the HOPPS update for 2010. CMS estimates that the revised update to the HOPPS conversion factor and other adjustments as provided by the statute will decrease total HOPPS payments by 0.1% in CY 2010 compared to payment rates under the November 20, 2009 final rule, while CMS expects no change in aggregate ASC expenditures under the notice. CMS also issued a final rule making technical changes to the final 2010 HOPPS/ASC rule; the official version of both documents will be published in the August 3, 2010 Federal Register.