On October 30, 2008, CMS released its final rule with comment period updating Medicare hospital outpatient prospective payment system (HOPPS) and ambulatory surgical center (ASC) reimbursement and related policies for CY 2009. CMS expects that the final rule will increase HOPPS spending by 3.9 percent overall as a result of the inflation update and other policy changes. With respect to HOPPS policy, the final rule, among many other things:

  • Provides a 3.6% market basket update tied to the reporting of quality measures. The Medicare law requires that the annual HOPPS payment inflation update be reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements.  The final rule adopts four new quality measures for imaging efficiency, increasing to 11 the number of quality measures that hospital outpatient departments must report in CY 2009 to receive the full update in CY 2010.  Note that quality measure non-reporting reduction does not apply to payments for pass-through drugs and devices, separately payable drugs and biologicals, separately payable therapeutic radiopharmaceuticals, and services assigned to new technology ambulatory payment classifications (APCs). CMS will continue to consider additional quality measures for the outpatient hospital setting for future updates. CMS also notes that it expects to propose in the future a policy that would deny payments to hospitals for care related to illness or injuries acquired by the patient during a hospital outpatient encounter, similar to a policy now in effect in the inpatient setting. 
  • Continues separate payments for outpatient drugs that have a cost per day that exceeds $60; drugs with costs below that threshold are packaged into the reimbursement for the associated procedure. For 2009, CMS is setting payment for separately payable drugs and biologicals at average sales price (ASP) plus 4%, rather than the current ASP plus 5%. CMS believes that hospitals’ average costs for drugs and biologicals, including both drug acquisition and pharmacy overhead costs, actually equal ASP+2 percent, so the agency considers the CY 2009 rate of ASP+4 percent to be a transition rate. CMS is restructuring the drug administration APCs from six levels to five levels in order to more appropriately reflect clinical and resource homogeneity. CMS did not adopt its proposal to modify the Medicare cost report to establish two cost centers for reporting drugs with high and low pharmacy overhead costs. For CY 2009, CMS is packaging payment for Intravenous Immune Globulin (IVIG) preadministration-related services, rather than making a separate payment for these services as CMS did on a temporary basis from CY 2006 to CY 2008.
  • Adopts payment changes to recognize efficiencies available when hospitals perform multiple imaging procedures of a particular type during a single session. Specifically, CMS is establishing the following five HOPPS imaging bundles, called composite APCs: (1) ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA) without contrast; (3) CT and CTA with contrast; (4) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA) without contrast; and (5) MRI and MRA with contrast. CMS will provide a single payment (including associated packaged services) when two or more imaging procedures in the same composite APC are provided in a single session beginning in 2009. This policy is consistent with CMS’s overall strategy of encouraging hospitals to use resources more efficiently by increasing the size of the payment bundles under the HOPPS.
  • Sets forth payment policies for other specific categories of services, including device-dependent APCs, nuclear medicine procedures, therapeutic radiopharmaceuticals, brachytherapy sources, and implantable devices and biologicals. CMS also has adopted changes in payment for partial hospitalization services, and it continues its phase-in of reduced beneficiary coinsurance obligations. 

CMS has adopted more limited changes for ambulatory surgical centers for 2009. The ASC prospective payment system (ASC PPS) is in the second year of a four-year transition that aligns ASC rates with HOPPS rates. For CY 2009, rates are be based on a blend of 50% of the CY 2007 ASC payment weight for the procedure and 50% of the CY 2009 fully implemented ASC weight (generally 65% of the corresponding HOPPS rate). CMS notes that the statute does not allow an inflation update to the ASC PPS for CY 2009. The rule also, among other things, refines the lists of covered ASC services, office-based procedures that are subject to special payment policies, and device-intensive procedures. The rule also finalizes updates to the ASC conditions for coverage (proposed August 31, 2007) to reflect current ASC practices and to establish new requirements to promote patient health and safety. 

While CMS has released the advance text of the rule, and the official version is scheduled to be published in the Federal Register on November 18, 2008. CMS will accept comments until December 29, 2008 on HOPPS payment classification for certain HCPCS codes and number of policy issues outlined in the rule.