CMS eases diagnostic testing rules for EDs

Payment simplified, documentation lessened

The final rule on hospital outpatient payment services for 2005 from the Centers for Medicare & Medicaid Services (CMS) has some good news for ED managers: Requirements for reporting diagnostics tests have become less burdensome.

"The Observation Subcommittee of the APC [Ambulatory Patient Classification] panel asserted that the diagnostic testing rules caused an unreasonable reporting burden on hospitals, as they required manual chart review, and that the requirement might actually have resulted in an overutilization and duplication of diagnostic testing," explains Susan M. Nedza, MD, MBA, FACEP, chief medical officer for CMS’ Region V in Chicago.

The new rule will allow emergency care professionals providing observation services to use clinical criteria to determine whether to perform diagnostic tests on individual patients, Nedza explains.

"This change does not negate the necessity to perform tests such as pulse oximetry and appropriate EKGs that are medically necessary to provide quality care," she cautions. The rule does, however, affect payment for observation services for patients with asthma, congestive heart failure, or chest pain. "In other words, the reporting burdened has been lessened. If providers had been having difficulty meeting the data collection burden in order to obtain payment, that should no longer be a problem," Nedza points out.

The new regulations have not only lessened the documentation necessary for payment for observation services for diagnostic testing, but also the times, she adds. "It brings the times related to payment more in line with common practice in observation centers," Nedza asserts.

More money — but not enough

Under the new rule, the nation’s EDs will see payment rate increases of between 3.3% and 4.3% for services provided, or slightly higher than the overall 3.3% increase announced for all services by CMS. Currently, the APC rate for low-level emergency visits is $74.70; under the proposed new rule, the rate will be $77.18, or a 3.3% increase. For midlevel emergency visits, the current rate of $130.77 will rise to $136.34, or a 4.3% increase. For high-level emergency visits, the rate will go from $226.30 to $234.42, or a 3.6% increase.

The changes will take effect Jan. 1, 2005. These increases, however, are far from adequate, according to Don May, vice president for policy of the American Hospital Association (AHA) in Washington, DC. "Our key problem is we know emergency services are not paid completely by Medicare, and EDs lose money on them," he asserts.

"The outpatient system is tremendously under-funded, and emergency services are right up at the top; we’d like to see much larger increases." In total, the outpatient system pays about 87 cents on the dollar of costs for each Medicare patient, May says. "And I think it’s probably worse in the ED."

Another area in which the AHA was "somewhat disappointed," and which directly affects EDs, he says, is that "CMS has again failed to provide evaluation and management [E/M] coding guidelines for hospitals." Accordingly, May adds, hospitals have had to develop internally what they consider to merit low-level and high-level E/M coding.

Five codes can be used, he notes. "The ultimate problem is a patient who comes in may be put into a midlevel code, another may be put in low-level, and there’s possibly a lack of consistency."

And while it’s unlikely, the Office of the Inspector General could determine not to reimburse the facility based on E/M coding. "It still leaves a lack of clarity for the field," May concludes.


For more information on the new outpatient payment rules, contact:

  • Don May, Vice President, Policy, American Hospital Association, Washington, DC. Phone: (202) 638-1100.
  • Susan M. Nedza, MD, MBA, FACEP, Chief Medical Officer, Region V, Centers for Medicare & Medicaid Services, Chicago. Phone: (312) 886-5341. E-mail:

For more information on the new outpatient payment rule, go to: Next, click "providers" on the left side of the page. Then under "Highlights," click on "CMS announces CMS-1427-FC; Medicare Program; Changes to the Hospital Outpatient Prospective Payment System and Calendar Year 2005 Payment Rates on display at the Federal Register on November 2, 2004."