Proposed OPPS rule offers modest changes

Acute care hospitals will receive a 3.2% inflation update in Medicare payment rates in 2006 for outpatient services under a proposed Outpatient Prospective Payment System (OPPS) rule announced by the Centers for Medicare & Medicaid Services (CMS), a slight change from the 3.3% update in the final rule for 2005. Experts say that when you read between the lines of the latest proposal, the results are quite similar: Not much has changed.

However, says Roslyne Schulman, senior associate director for policy at the American Hospital Association (AHA) in Washington, DC, "While the proposed rule provides a 3.2% marketbasket update in payment rates for hospital outpatient services, average outpatient payments to hospitals only will increase about 1.9% due to offsetting reductions from expiring MMA [Medicare Prescription Drug, Improvement, and Modernization Act of 2003] provisions, primarily the expiration of a provision that provided a payment floor for sole source drugs." She adds that the actual impact on a particular hospital (and thus, ED) will vary depending on their service mix and volume of services.

The new proposal concerning payment for observation services offers "a distinction without a difference," according to Barbara Marone, federal affairs director in Washington, DC, for the American College of Emergency Physicians.

CMS still pays a separate observation ambulatory payment classification (APC) for only three conditions: asthma, chest pain, and congestive heart failure. "Our members feel there is clinical evidence to support expanding it to other types of diagnoses and conditions, such as TIA [transient ischemic attack], dehydration, and syncope," Marone says. If a condition has a separate observation APC, there are more payments to a hospital for a series of resources that go into monitoring a patient very actively, she explains.

Marty Karpiel, MPA, FACHE, FHFMA, president of Karpiel Consulting Group in Long Beach, CA, also is disappointed the conditions have not expanded. CMS, however, will reduce the administrative burden caused by reporting requirements associated with payment for observation services, APC 0339, he says.

"Transmittal 514 released March 30, 2005, instructed hospitals to rely on clinical judgment in combination with internal and external review processes to ensure that appropriate diagnostic testing is provided for patients receiving medically necessary observation services," Karpiel adds.

"As of Jan. 1, 2006, hospitals will no longer have to code certain ancillary tests, i.e., pulse oximetry, to qualify for payment," he explains.

Look at E&M coding

In light of the relatively modest payment increases this year, Karpiel advises ED managers to take a closer look at their current coding and reimbursement processes and strategies — specifically, those involving evaluation and management (E&M) coding.

He notes that CMS has been working with the AHA and the American Health Information Management Association (AHIMA) on developing "Standardized Hospital Evaluation and Management Coding Guide-lines for Emergency Departments and Clinic Services" since 2003, but that the draft still is being reviewed. The guidelines call for three new E&M codes to match the three ED APC codes.

"As of the July 25th Federal Register [where the proposed new rule was published], there are no immediate plans to implement the AHA/AHIMA guidelines," Karpiel notes.

However, he adds, based on his experience at approximately 60 hospitals, ED charge systems continue to undervalue E&M services.

E&M codes should form a bell shape

Most hospitals use E&M code 99282 to code 40% to 60% of their emergency department visits, Karpiel explains. "A more representative distribution would be a bell-shaped curve." (See graph.) Hospitals should compare their own E&M level distribution against the benchmark shown in the graph, he says. There are three reasons why your distribution may look different, he offers:

  • Your ED patient acuity may be higher or lower than the national average.
  • Your nursing documentation may not be adequate to support the appropriate level of service — leading to undercoding.
  • Your E&M decision matrix or coding tool may be inadequate or difficult to use.

Another area of concern, he says, is that many E&M level decision matrix or scoring tools use ED procedures (IVs, injectables, laceration repairs, or ancillary tests) as part of their level determination.

"CMS raised concerns in 2003 that many of the decision matrix or E&M scoring tools allowed counting of separately paid services in determining a service level," Karpiel explains.

CMS stated that the level should be determined by resource consumption that is not otherwise separately payable, he says. "For example, X-rays are separately payable, and therefore, they should not be one of the variables considered in determining E&M level," Karpiel says.

However, if an RN accompanies an acute patient on a monitor to have a computed tomography (CT) or magnetic resonance imaging (MRI), that is a resource not separately billable and can be used in determining the E&M Level, he says.

"Hospitals should evaluate their E&M level decision matrix or scoring tools to ensure they are complying with the CMS interpretation of appropriate resources," Karpiel says.


For more information about the proposed rule, contact:

  • Rebecca Kane, Centers for Medicare & Medicaid Services, Baltimore. Phone: (410) 786-0378.
  • Marty Karpiel, MPA, FACHE, FHFMA, President, Karpiel Consulting Group, 6475 Pacific Coast Highway, Suite 402, Long Beach, CA 90803. Phone: (562) 597-1108. Fax: (562) 597-7448. E-mail:
  • Barbara Marone, Federal Affairs Director, American College of Emergency Physicians, 2121 K St. N.W., Suite 325, Washington, DC 20037-1801. Phone: (202) 728-0610.

To view proposed regulation, go to and click on "CMS-1501-P."

Comments will be accepted until Sept. 16, 2005, and a final rule is scheduled to be published by Nov. 1, 2005. In commenting, please refer to file code CMS-1501-P. You may submit comments to Attachments should be in Microsoft Word (preferred), WordPerfect, or Excel. You may submit written comments (one original and two copies) by mail to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1501-P, P.O. Box 8016, Baltimore, MD 21244-8018.