Drug Coding Advisor-HCFA to phase in APCs for surgery centers

Tremendous victory for outpatient procedures

In a tremendous victory for outpatient surgery programs, Congress on Nov. 19, 1999, ordered the Health Care Financing Administration (HCFA) to phase in ambulatory patient classifications (APCs) over three years for ambulatory surgery centers (ASCs).

Congress ordered that these new reimbursement rates, the foundation for an outpatient prospective payment system (PPS), be blended with current rates at a 1/3:2/3 ratio the first year, 2/3:1/3 ratio the second year, and full implementation the third year.

Preventing erratic changes

"The obvious advantage of this provision is that it requires HCFA to slowly phase in changes, so that ASCs don't experience abrupt and erratic reimbursement changes," says an advisory memorandum from Michael Romansky, JD, partner in the health law practice at McDermott, Will, and Emery in Washington, DC.

Congress' choice of words — If [HCFA] implements a revised prospective payment system . . . — indicates that Congress disapproves of the payment rule and prefers that HCFA not proceed, he said. "HCFA may choose to forgo implementation of the payment update rather than wrestle with a complicated and time-consuming phase-in mechanism."

And there's more good news, according to McDermott, Will, and Emery's publication, Health Law Update (1999; 16:1-2). Hospital-based same-day surgery programs will receive supplemental payments, in addition to APC payments, during the first three years of an outpatient PPS, if the PPS payments are less than the payments that would have been made prior to PPS (i.e., calendar year 1996).

These three years of supplemental payments for hospitals are being referred to as the "transitional corridor."

Cancer hospitals will be held harmless under the outpatient PPS indefinitely, which means the reimbursement for cancer hospitals under the PPS will not be less than they received prior to the Balanced Budget Act, which would be calendar year 1996. Rural hospitals with fewer than 100 beds will be held harmless through calendar year 2003.

Congress wants impact study

Congress has ordered the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment issues, to study the appropriateness of an outpatient PPS for Medicare-dependent hospitals, sole community hospitals, rural referral centers, rural health clinics, and other types of rural hospitals.

"This study reflects Congress' concern with the ability of these entities to remain viable under an outpatient PPS and signals possible future Congressional action in this area," according to Health Law Update.

Congress has ordered HCFA to make additional payments for new drugs, devices, and biologicals — those not paid for on an outpatient basis before 1997. Congress also has limited beneficiary copayment liability for outpatient procedures to the amount of the inpatient deductible that year ($776 in fiscal year 2000). Medicare will offer supplemental payments to hospitals to compensate for the difference between the copayment and this limit.

Many of the changes made to reimbursement for hospital outpatient services are budget-neutral, "which means one hospital's gain may be another's loss," the article stated.

Implementation delayed again

If HCFA does proceed with the phased-in period for surgery center reimbursement, implementation will be delayed beyond the previous estimate of July 2000, Romansky predicted. "Assuming HCFA maintains the link between the [ambulatory surgery center] and hospital outpatient payment systems, it may be 2001 before HCFA can possibly implement these regulations."

In other news, the Medicare bill also requires MedPAC to study the cost-effectiveness and efficacy of extending Medicare reimbursement to post-surgical recovery care centers.