HFMA Comment Letter to CMS: FY14 Hospital Outpatient Prospective Payment Systems for Acute Care Hospitals

September 3, 2013

Marilyn Tavenner
Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1599-P
P.O. Box 8011
Baltimore, MD 21244-1850

File Code: CMS–1601–P

Re: Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Hospital Value-Based Purchasing Program; Organ Procurement Organizations; Quality Improvement Organizations; Electronic Health Records (EHR) Incentive Program; Provider Reimbursement Determinations and Appeals

Dear Ms. Tavenner:

The Healthcare Financial Management Association (HFMA) would like to thank the Centers for Medicare & Medicaid Services (CMS) for the opportunity to comment on the 2014 Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Hospital Value-Based Purchasing Program; Organ Procurement Organizations; Quality Improvement Organizations; Electronic Health Records (EHR) Incentive Program; Provider Reimbursement Determinations and Appeals (hereafter referred to as the 2014 OPPS Proposed Rule) published in the July 19, 2013, Federal Register. 

HFMA is a professional organization of more than 40,000 individuals involved in various aspects of healthcare financial management. HFMA is committed to helping its members improve the management of and compliance with the numerous rules and regulations that govern the industry.  

Introduction

HFMA would like to commend CMS for its thorough analysis and discussion of the myriad Medicare hospital reimbursement decisions addressed in the 2014 OPPS Proposed Rule. Our members have significant concerns related to CMS’s proposals to: 

• Collapse five levels of outpatient visits for ED and outpatient clinic into one APC
• Calculate and use cost-to-charge ratios (CCRs) from expanded cost center
• Change packaged items and services 

Proposed OPPS Payment for Hospital Outpatient Visits

CMS is proposing to collapse five levels of outpatient code (each with its own CPT code and APC) for clinical visits, Type A ED visits, and Type B ED visits into one HCPCS code for each setting of care that CMS will create. Each of the three new APCs will have its own payment level based on the total mean cost of the existing five levels of CPT codes for the respective settings of care. 

In the proposed rule, CMS has articulated several reasons for proposing this policy:

1. CMS, despite working with stakeholders and contractors since 2000, is unable to develop national guidelines for outpatient visits.
2. The proposed policy supports CMS’s strategic goal of using larger payment bundles by removing incentives hospitals may have to provide medically unnecessary services to support a higher level of payment.
3. The proposed policy reduces the administrative burden on providers by eliminating the need for hospitals to develop and maintain their own internal billing guidelines.
4. The proposed policy creates a “large universe” of claims from which to set payment rates for the new APCs.

HFMA strongly recommends that CMS continue its current policy of paying for five separate levels of outpatient clinic and ED visit. While HFMA appreciates CMS’s reasons for pursuing this policy, we are concerned about the potential for inappropriate revenue redistribution. Under the averaging mechanism that CMS has outlined in the proposed rule, hospitals that see more complex ED and clinic visits will be financially harmed while providers that see less complex cases will benefit financially without any change in the underlying health of the patient populations served. Further, by taking this approach, CMS will lose the ability to understand differences in patient acuity (for both ED and clinic visits) by site and region. 

Should CMS adopt this policy, we are concerned about the administrative burden this would impose on providers. Our members believe that they would incur significant expense updating ED and clinic computer systems and charge interfaces. This would come at a time when they are already struggling to meet the implementation deadlines for ICD-10 while achieving meaningful use.

Moving forward, we strongly suggest CMS continue to work with stakeholders to develop national guidelines. We would encourage CMS to collaborate with major national commercial payers to develop cross-payer guidelines for ED and clinic visits. This would be a far more significant step towards reducing administrative burdens on providers than simply moving to a flat rate for ED and clinic visits as hospitals’ internally developed guidelines associated with billing these services have been established and in almost all cases static for over a decade. Further, HFMA questions how moving to a single APC for each service will improve rate setting. The method described in the proposed rule is simply an average of the costs across the five levels for each setting. In theory, this is the same universe of claims that CMS will be working with if it finalizes its proposed rule—minus an indication of the level of patient severity as assigned by the providers’ internal policy.  

Calculation and Use of CCRs for Rate Setting

CMS is proposing to use the specific cost centers from the Medicare cost report for implantable devices, MRI, CT, and cardiac catheterization to develop CCRs for rate setting in 2014. HFMA strongly recommends that CMS not use these cost centers as we are concerned about the accuracy of these ratios. We believe the significant year-over-year changes in APC cost illustrated in Table 3 of the proposed rule confirms these concerns. While CMS states in the proposed rule that it believes there is a sufficient amount of data in from the CMS form 2552-10, we strongly disagree with that assertion. Based on data provided in the proposed rule, CMS was only able to generate CCRs for MRI, CT, and cardiac catheterization for 55, 58, and 41 percent of PPS hospitals respectively. Given the wide prevalence of these services, we believe the number of hospitals reporting data for these lines is too low. 

Given the relatively short amount of time these line numbers have been in use, HFMA is concerned that both providers and the Medicare Administrative Contractors (MACs) may not have sufficient understanding of how to accurately assign costs to these centers. This is particularly true with MRI and CT, where providers will need to directly allocate certain costs (particularly capital depreciation and supplies like contrast solution) as opposed to the typical indirect allocation method for these areas. We strongly encourage CMS to delay the use of these cost centers for three years to allow for provider and MAC education.

Proposed Changes to Packaged Items and Services

HFMA appreciates CMS’s efforts in proposed 2014 OPPS to create more inclusive APCs by discussing the further packaging of:

1. Drugs, biological and radiopharmaceuticals that function as supplies or devices when used as part of a diagnostic test or procedure
2. Drugs, biological and radiopharmaceuticals that function as supplies or devices when used as part of a surgical procedure
3. Clinical diagnostic laboratory tests
4. Procedures described by add-on codes
5. Ancillary services (status indicator X)
6. Diagnostic tests on the bypass list
7. Device removal procedures

While if finalized, the packaging policy will occur in a budget neutral manner, HFMA is concerned about the redistributive impact of the various components of this policy. As discussed in the economic analysis, the impact of these policies varies significantly by the type of provider. We are particularly concerned about the negative impact to smaller urban and rural providers. Compared to larger providers, these organizations are less equipped to weather a significant shock to their revenue. This is particularly true of rural providers, for which Medicare outpatient services typically make up a greater portion of the revenue base. We strongly encourage CMS to delay implementation of this policy to allow for further study. We believe it is necessary to understand the individual impacts of each of the seven components of this policy on the various types of provider organizations. Additionally, if CMS eventually elects to move forward with this policy, we believe it will need to be phased in to allow negatively affected organizations to adapt to reduced revenues.

Further, HFMA believes CMS should not adopt the proposal to further bundle clinical diagnostic tests into existing APCs under any circumstance. Given that clinical diagnostic tests are currently exempt from Medicare cost sharing, we believe it is unfair for the program to further shift costs to Medicare beneficiaries.

HFMA looks forward to any opportunity to provide assistance or comments to support CMS’s efforts to refine and improve the 2014 OPPS Proposed Rule. As an organization, we take pride in our long history of providing balanced, objective financial technical expertise to Congress, CMS, and advisory groups. We are at your service to help CMS gain a balanced perspective on this complex issue. If you have additional questions, you may reach me or Richard Gundling, Vice President of HFMA’s Washington, DC, office, at (202) 296-2920. The Association and I look forward to working with you.

Sincerely,

Joseph J. Fifer, FHFMA, CPA
President and Chief Executive Officer
Healthcare Financial Management Association

About HFMA
HFMA is the nation’s leading membership organization for more than 40,000 healthcare financial management professionals. Our members are widely diverse, employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members’ positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant.

HFMA is a nonpartisan professional practice organization. As part of its education, information, and professional development services, HFMA develops and promotes ethical, high-quality healthcare finance practices. HFMA works with a broad cross-section of stakeholders to improve the healthcare industry by identifying and bridging gaps in knowledge, best practices, and standards.