Hospital outpatient PPS reg to bring 3.8% reduction in outpatient revenue
Hospital outpatient PPS reg to bring 3.8% reduction in outpatient revenue
Rural and cancer hospitals to be among the hardest hit
It wasn't the news that outpatient financial directors were hoping for. When the Health Care Financing Administration published its proposed prospective payment system (PPS) for hospital outpatient services, the agency revealed that it will lose $570 million in beneficiary co-insurance, and it's passing on that loss to hospitals.
The system was supposed to be budget-neutral, emphasizes Linda Magno, interim vice president for policy at the American Hospital Association in Washington.
"As a result, the system, rather than being budget-neutral, which we believe Congress intended system to be, takes 3.8% of outpatient revenue out of [the reimbursement total]," Magno says. "It essentially takes it out of our pockets, because it reduces the total payments to hospitals."
Implementation of the proposed regulation, which was published in the Sept. 8 Federal Register, is delayed until at least April 2000 so HCFA can address concerns over Year 2000 compliancy. A 90-day notice will precede implementation. HCFA will accept comments on the proposal until Nov. 9, 1998. (For information on how to access the Federal Register notice and how submit comments, see box, p. 75.)
The proposed regulation provides for a new method of calculating beneficiary copayment so that beneficiaries pay 20% of total payments rather than 20% of charges. HCFA has stated that it believes behavior will change and volume will increase under the new payment system to offset losses in revenue, Magno says.
"But hospitals don't generate volume," she says. "It's the division that orders services."
Also, it's not clear what behavior change HCFA expects, Magno says.
"With the coinsurance issue, it's seems like a tortured logic to get there," she says. "It's a small dollar amount in the greater scheme of things, but it's the principle."
Cancer hospitals to receive 29.2% loss
For some hospitals, the dollar amount may not be small.
HCFA predicts that low-volume hospitals will lose a large percentage of their payments under the new payment system: 17% for rural and 15.6% for urban hospitals with less than 5,000 units of service. Cancer hospitals will experience a 29.2% loss, HCFA says. And because those numbers are averages, some hospitals will lose more, Magno points out.
"Our concern about the redistribution is that we don't know why it's occurring," Magno says. "We don't know if it is a flaw in the way cases are classified, a flaw in the way APCs are classified or coded, or a flaw in not adjusting for legitimate differences in hospital costs, or certain types of hospitals. So we need to get below surface and find out why there are redistributions."
Magno says the primary concern is access - "what changes of this magnitude in payment system can do to individual facilities and what that means for outpatients in our communities."
For example, a rural hospital may be the only provider in a community. "If it's no longer viable because it's heavily dependent on outpatient revenue, and it's taking a big hit in the move to prospective payment, it may eliminate the one source to Medicare care in that community," Magno says.
Other hospitals may be forced to change the mix of services they offer, she points out.
The staff at the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment issues, also expresses concern about the redistribution of payments.
"We want to ensure that the level of payment is enough for hospitals to continue to provide services to beneficiaries," says James Mathews, PhD, policy analyst at MedPAC in Washington, DC. HCFA is aware of the concerns, "but they haven't chosen to do anything up front," he says. "Obviously, it's a cause for concern."
MedPAC and HCFA disagree on the approach to setting relative weights under the new system. MedPAC prefers more of a fee schedule approach to an outpatient PPS, while HCFA chooses the grouping approach.
"As far as the costs and benefits of grouping are concerned, I don't think they've been sufficiently articulated in terms of outpatient payment enough to warrant running risk of introducing inequities of payment that might disproportionately affect certain classes of hospitals," Mathews says. "That's not to say the grouping approach won't work. Obviously it's been tremendously successful on the inpatient side, from Medicare's points of view. But the outpatient world is a little different, in terms of the nature of services provided."
More bad news: Volume expenditure cap
The negative impact doesn't end there: HCFA also is placing a cap on volume expenditure.
HCFA is required to develop a method for controlling unnecessary increases in the volume of covered outpatient services and can adjust the conversion factor to do so. HCFA says in the proposed regulation, "The volume of services is a significant concern, particularly during the first few years of the outpatient PPS, because of the possible incentives under PPS to increase utilization."
"Our concern is that the business of projecting future volume in the outpatient business is messy, not precise," Magno says. "We're not sure HCFA can accurately distinguish appropriate increases in volume from inappropriate increase in volumes and [distinguish] generating additional services from providing unnecessary services."
The outpatient area, in particular, is unpredictable in terms of what future levels of outpatient services should be, she says. "On any given day, a new therapy, or new drug allows patients currently treated in inpatient settings to be treated in outpatient setting. You may create tremendous growth in outpatient area. It's appropriate and desirable. You shouldn't penalize hospitals for changing delivery to respond to those new therapies and new drugs, because you can't predict them in advance."
Projections are projections, she emphasizes. "They're only as good as what you know at any given time," Magno says. "If we do the right thing by our patients, we get penalized in future because the outpatient volume is higher than HCFA predicted it would be."
Any good news?
HCFA has tightened the criteria to determine which off-site clinics are part of a hospital. (See criteria, inserted.) At this point, the AHA is analyzing the criteria and hasn't determined whether the changes are good, bad, or neutral.
"Many of our hospitals offer satellite outpatient departments around the city," Magno points out. "We want to make sure they can continue to operate and be paid for the care they're providing in the community."
So is there any good news? At this point, Magno isn't sure. Others see a couple of silver linings to the cloud:
· HCFA withdrew its proposal requiring hospitals to bill for all diagnostic tests ordered for outpatients, including those furnished outside the hospital.
· HCFA revised its proposal requiring hospitals to bundle diagnostic tests with surgery or medical visits. The rule only requires hospitals to bundle related costs, such as those that result from the use of an operating room, recovery room, drugs, and blood.
"MedPAC has stated that, at least at the outset, the unit of payment should be narrowly defined," Mathews says. "If there are any add-ons, any diagnostic services provided in connection with the surgical procedure or medical visit, we'd like to have those paid separately under PPS, but with a distinct line-item payment. HCFA seems to have concurred."
Tests must be clinically relevant
Keep in mind that services such as EKGs, which will be paid separately from surgical APCs, still must meet medical necessity criteria, warns says Lois Yoder, ART, CCS, president of The enVision Group, a resource management and consulting firm for hospital-based services in Naples, FL. Yoder has worked with APGs since states began implementing them for Medicaid.
"And that means if there isn't a clinically relevant diagnosis to justify the EKG, it still may not get paid," Yoder warns. (For more documentation issues and other areas that need preparation, see story, p. 77.)
(Editor's note: For information on the impact of the proposal on coding, a discussion of surgical APCs, more on requirements for a provider-based designation, and lists of services included in the outpatient PPS, services excluded, and items included in the APC packages, see Outpatient Coding Strategist, inserted in this issue.)
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.