On November 24, 2010, the Centers for Medicare & Medicaid Services (CMS) is publishing its final 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.  Highlights of the lengthy rule are available after the jump.

• CMS estimates that the rule will increase HOPPS payments by 2.5% in 2011 compared to 2010 (the increase is 2.8% when cancer and children’s hospitals and community mental health centers are excluded). Note that the impact of the rule on payment for individual procedures varies. The HOPPS update for 2011 is 2.35%, reflecting a 2.6% market basket increase minus a 0.25 percentage point adjustment mandated by the Affordable Care Act (ACA). The HOPPS update is reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements. In the final rule, CMS has expanded the set of quality measures that must be reported by hospital outpatient departments to qualify for the full payment update.
• CMS is increasing 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 will equal the average sales price (ASP) plus 5% (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 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 rule modifies the supervision requirements for outpatient therapeutic services in a number of ways. Among other things, the rule: requires direct supervision of the initiation of a service, followed by general supervision for certain non-surgical, extended-duration services, including observation services; extends through 2011 the notice of non-enforcement regarding the direct supervision requirements for outpatient therapeutic services furnished in critical access hospitals (CAHs) and applies the notice to certain small rural hospitals; and modifies the definition of direct supervision of diagnostic tests for all hospital Medicare outpatients, except for under arrangement services, to require “immediate availability” of the supervising physician without reference to the boundaries of a physical location. Presence in the office and immediate availability will be required for supervision of tests performed under arrangement.
• The rule implements a number of ACA provisions related to limitations on certain physician referrals to hospitals in which they have an ownership or investment interest (and certain related changes to provider agreement regulations); payments to hospitals for direct graduate medical education and indirect medical education costs; and waiver of beneficiary cost-sharing for preventive services.
• With regard to ASC services, 2011 is the first year of the fully-implemented payment rates under the revised ASC payment system following a 4-year transition. CMS estimates that the ASC update factor for CY 2011 is 1.5%; however, this update will be almost entirely offset by a “multi-factor productivity” (MFP) adjustment mandated by the ACA, which is 1.3% in 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 applying a 0.2% update to the ASC payment system for CY 2011. CMS also is adding six surgical procedures to the list of covered ASC procedures, designating two procedures as office-based procedures, and updating the list of covered ancillary services. The rule also implements an ACA provision waiving beneficiary copayments for certain preventive services under the ASC payment system.

Comments on select provisions of the rule (HOPPS payments for certain new codes and provisions addressing certified nurse anesthetist services furnished in rural hospitals and CAHs) will be accepted until January 3, 2011.