Is OPPS rule as good as it looks for EDs?

Experts divided about benefits

At first glance, the proposed outpatient prospective payment system (OPPS) rule for Medicare payment for hospital and outpatient services in calendar year 2007 is great news for ED managers. The Centers for Medicare & Medicaid Services (CMS) has expanded the number of levels for emergency visit ambulatory payment classification (APC) assignments from three to five, a change that emergency medicine advocates have been requesting for several years. What's more, the highest-level payment for an ED visit in calendar year 2007 will be $332.14, compared with $237.17 in 2006.

The three levels for ED visits in 2006 — low level, midlevel, and high level — have respective APC median payments of $76.43, $133.98, and $237.17. This year, the proposed APC for level 1, 2, 3, 4, and 5, respectively, are $51.41, $84.79, $133.98, $214.88, and $332.14. These payments would be effective Jan. 1, 2007.

But the news may not be as positive as it first appears, warns Frederick C. Blum, MD, FACEP, FAAP, president of the Dallas-based American College of Emergency Physicians. "We've been working very hard to try and get our visit levels coded and valued properly and [the proposed new rule] reflects that, but what we've already seen is that it is going to be counterbalanced by the budget neutrality adjustment," he says. "In other words, if CMS does this, it would add significant dollars to the system, so this adjustment will take back a significant amount from that."

The actual impact on reimbursement will depend on the method used, Blum says. "They could either do it through a conversion factor or through an adjustment of work RVUs [relative value units]," he notes.

A conversion factor, which would simply reduce reimbursements by a fixed percentage across the board, would be less onerous for ED managers, Blum explains. "Because emergency medicine has the highest percentage of work to total RVUs — 73% — using that method would have a disproportionate effect on us, so we've been suggesting that using a conversion factor would be the most appropriate," he says. Blum notes that the conversion factor is a methodology CMS has used before to make these sorts of adjustments.

EDs still win?

Despite the potential offset, EDs still will be among the winners when the smoke has cleared, insists Michael J. Williams, MPH, HAS, president of The Abaris Group, a Walnut Creek, CA-based health care consulting firm specializing in emergency services.

"While each hospital has a different mix, anywhere from 5% to 15% of your Medicare patients would be Level 5 patients," he says. "This is a big deal."

How big? In an ED with 40,000 visits per year, if 10% of the patients were Level 5 patients that would mean approximately a $100 differential for 4,000 patients, or a revenue increase of $400,000 per year.

Even with the budget neutrality adjustment, Williams says, "I think EDs will still win." While the vast majority of the 420 ED-related APC codes are for procedures, and not visits, hospitals typically underbill for procedures, he says, "so if you get more bang for your buck out of your visit codes, you will come out better."

In addition, note observers, ED managers may want to increase their efforts to get the lowest-paying codes out of their EDs by offering fast tracks, marketing appropriate use of the ED, and so forth. "I think that's totally appropriate," says Williams. "There's already been a major trend across the country where EDs put docs at triage."

Williams says on the average, 30% of the patients who present at triage are sent out of the ED "and don't even get to the back of the department," and that that percentage is likely to increase. "If you have the capacity to move sicker patients through faster, you could add your capacity to see a larger percentage of the sicker patients," Williams says.

Another double-whammy

But Blum counters that ED managers may, in fact, be in store for another double-whammy. "The other side of the formula, the sustainable growth rate, is fixed," notes Blum, explaining that there are another five or six years of cuts scheduled, the end result of which would be a drop of 26% in Medicare reimbursement for all physicians.

While this change in physician reimbursement does not directly address hospital ED reimbursement, there could be an impact on EDs, Blum says. "It actually has a multiplying bad effect on emergency medicine because as you cut Medicare reimbursement, primary care providers are less likely to enroll Medicare patients in their practice, so they are likely to come more often to the ED," he predicts. (Editor's note: These updates can be found on-line in the "Hospital Outpatient Regulation and Notices" section at: For information on how to comment on the proposed rule, see resource, below.)


For more information on the proposed outpatient payment rule for 2007, contact:

  • Frederick C. Blum, MD, FACEP, FAAP, President, American College of Emergency Physicians, Dallas, TX. E-mail:
  • Michael J. Williams, MPH, HAS, President, The Abaris Group, 700 Ygnacio Valley Road, Suite 270, Walnut Creek, CA 94596. Phone: (925) 933-0911. Fax: (925) 946-0911. E-mail:

To comment on the proposed rule, comments must be received by Oct. 10, 2006. Please refer to file code CMS-1506-P. You may submit electronic comments at Attachments should be in Microsoft Word (preferable), WordPerfect, or Excel. Or you may mail written comments (one original and two copies) to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1506-P, P.O. Box 8011, Baltimore, MD 21244-1850.