Disclaimer: Many facets of Medicare's new hospital outpatient prospective payment system (OPPS) are not clearly specified in the regulation. Other facets will evolve rapidly as the program is implemented. This summary focuses on issues of concern to cardiologists. Readers who would like more detailed or hospital-oriented analysis should contact groups such as the American Hospital Association or the American Association of Medical Colleges.

Introduction
Medicare implemented OPPS on August 1, 2000. Recent legislation and regulatory changes have improved upon the draft payment system that was published in September 1998. Under the payment system prior to August 1, many hospitals had difficulty figuring out how Medicare paid them for specific procedures. The new system significantly clarifies and changes facility payment rates. Payment is now eliminated for some procedures in the outpatient setting and the anomalies between the payment rates for hospitals and physician offices have become more apparent (see ACC website).

Improvements in the final rule are the result of changes recommended by the ACC (and other groups) and changes mandated by the Balanced Budget Refinement Act of 1999 (BBRA). The BBRA provided additional funding for hospital outpatient services and therefore most hospitals will see net increases in payments over the next several years. Rural hospitals with fewer than 100 beds and cancer hospitals have additional financial protections.

Background
Until August 1, 2000, Medicare paid for hospital outpatient services on the basis of reasonable costs (subject to significant limits). As of August 1, 2000, payments are now based on ambulatory patient classification groups (APCs). A national rate is established for each APC, which is adjusted by a wage index to account for variation in labor costs in different geographic areas. Services are assigned to an APC group on the basis of clinical coherence and similarity in resource requirements. Some groups consist of as many as 50 different procedure codes while others have only two or three services assigned. In addition to the APCs for services, additional "pass through" payments are made for cancer and orphan drugs, new drugs and medical devices, and radiopharmaceuticals.

The relative value for an APC is calculated based on the median cost of the services included in the group. This was largely based on 1996 hospital claims using the most recent cost report data available.

HCFA is "packaging" most supplies, drugs, anesthesia, and room charges into the payment for the procedure as indicated under the proposed rule. However, a substantial change from the proposal is that separate payment is now made for blood and blood products. In addition, 15 APC groups are assigned to services involving new technology introduced after 1996. These APCs are organized based on similarity in costs and not clinical coherence.

Where multiple procedures are provided during the course of an outpatient encounter, separate payment is made for each service. If a status indicator "T" is assigned to the additional codes, the additional services are paid at 50% of the full rate. If status indicator "S" is attached, the additional procedures are reimbursed at the full rate. These multiple billings may result in significant payment increases for echo, nuclear and catheter procedures commonly billed with multiple CPT Codes. Additional payments are also made for outlier cases whose estimated costs are in excess of 2.5 times the APC payments applicable to the services included on that claim.

Beneficiary coinsurance for hospital outpatient department services is currently based on 20 percent of hospital charges. Since hospital charges greatly exceed hospital costs, beneficiaries (or their insurers) are currently paying 40-50 percent of hospital OPD payments. Under the new system, beneficiary coinsurance will ultimately be based on 20 percent of the APC rate with the program paying 80 percent of the rate. However, this will happen very gradually and, in the interim, the coinsurance is based on the estimated current amounts paid as coinsurance for each APC. This coinsurance amount is frozen until it represents 20 percent of the rate. Hospitals, however, have been given the option of reducing coinsurance to 20 percent of the rate and advertising this fact to the public.

Overall, the financial impact on hospitals of the new system should be very favorable, at least initially. This is largely because of the financial protection for losing hospitals and rural hospitals. For CY 2000-2001, hospitals will gain an average of 4.6 percent in higher outpatient Medicare revenues as compared with the cost-based system. This converts to about a 0.5 percent positive impact on total Medicare payments to hospitals.

Restrictions on Where Procedures Can Be Performed
HCFA's September 1998 proposed rule would have restricted 1803 procedures to the inpatient setting. The ACC and other groups strongly opposed making such coverage determinations via a payment regulation and recommended that HCFA allow physicians, their patients and facilities to determine the appropriate setting for individual patients. We also identified specific procedures that should be allowed in the outpatient setting.

HCFA's final rule modified its list of procedures restricted to the inpatient setting and made many of the changes recommended by the ACC. HCFA decided to allow the following procedures in the outpatient settings; insertion/removal/replacement of pacemakers, pulse generators, electrodes and cardioverter-defibrillators; embolectomies and thrombectomies; transluminal balloon angioplasty and peripheral atherectomy.

HCFA did add invasive cardiovascular procedures, including angioplasty and atherectomy to the list of procedures allowed in outpatient settings but is restricting payment for these procedures to facilities where the patients can immediately be placed on cardiopulmonary bypass in the event of a complication. We are surprised that HCFA made this decision in a payment rule and that they did not consult the relevant specialty societies or even HCFA's own Medicare Coverage Advisory Committee. These restrictions apply only to hospital outpatient procedures and not on inpatient procedures.

Non-Coverage of Outpatient Observation Services
HCFA decided to bundle the cost of cardiac observation units and other observation services in with its payments for emergency room visits. Separate billings by observation units is not allowed. HCFA attributed this decision to a desire to avoid inappropriate billings for unnecessary care. The ACC and other concerned physician specialty groups have already met with HCFA and are seeking ways to help HCFA reimburse for appropriate observation care while avoiding payments for unnecessary observation care.

Add-On And Pass-Through Procedures
In order to account properly for the costs of radiopharmaceuticals and new items, Congress mandated separate pass-through payments in its BBRA 1999 changes. HCFA's initial list of radiopharmaceuticals and new procedures failed to include many items.

ACC, other specialty groups and manufacturers, informed HCFA of these omissions and several of our recommendations were added to the list per a May 12 HCFA ruling (see http://www.hcfa.gov/medicare/hopsmain.htm). We remain concerned that a 2.5% cap on payments through this exception may force HCFA to pay only a small percentage of the actual cost for add-on and pass-through items

Hospital Outpatient Visit Classifications
HCFA acknowledges that a facility's cost of providing emergency room and clinic services frequently are not directly related to the level of service provided by the physician. They are allowing facilities significant flexibility in deciding what level of service to bill.

Specific APCs
APCs 089 & 090: Pacemakers—HCFA's draft rule would have restricted to the impatient setting the Removal/Revision, Pacemaker/Vascular Devices. In its final rule HCFA agreed that payment for pacemaker insertion or replacement codes under the outpatient PPS is appropriate if the outpatient setting is determined to be reasonable and medically necessary for the individual beneficiary. HCFA assigned procedures for revising or removing implanted infusion pumps and venous access ports in proposed APC 360 to final APCs 0089 and 0090.

APC 0279: Level I Diagnostic Angiography—HCFA believes the median costs for the codes at the low end of this APC may be inaccurate, because, clinically, these codes are homogeneous. Therefore, HCFA has exempted this APC group from the "two times limit" until it can collect more accurate cost data under outpatient PPS. Essentially, this lowers reimbursement for diagnostic angiography codes. The Act now provides that the items and services within a group cannot be considered comparable with respect to the use of resources if the highest cost item or service within a group is more than two times greater than the lowest cost item or service within the same group.

APCs 0917 & J1245: Stressing Agents—Another area of considerable controversy is the need for separate payment to be provided for pharmacologic cardiac stress agents. In the proposed rule, HCFA would have bundled in the cost of the stressing agent into payment for the test. In the final rule, however, there is a separate APC (0917) for Dipridamole, 10 mg (J1245), and Adenosine, 6 MG, (J0150) paid at the rate of $17.46. We understand that when additional dosage levels are provided, multiple units will be billed. For example, if 50 MG of Adenosine were used, 10 units would be billed.

Provider Based Status
In order to bill Medicare as an outpatient hospital department, these facilities need to be closely aligned with the hospital. In the final rule HCFA clarified, but did not liberalize, its rules requiring that all groups billing as hospital outpatient departments be a real part of the hospital.

Lack of A Behavioral Offset
In the proposed rule, HCFA proposed to apply a behavioral offset to the conversion factor. The intent of the offset was to adjust for hospital coding changes that take place in response to reductions in beneficiary coinsurance. A number of commentaries suggested that HCFA remove the behavioral offset. In the final rule, the behavioral offset was not included. HCFA expects hospital coding changes to occur under the outpatient PPS, likely from hospitals billing more accurately. The behavioral offset may be considered, however, in the future as HCFA gathers data and gains experience with the new system. Hopefully HCFA has changed its viewpoint on this issue.

ACC Comments on Final Rule
Comments were due to HCFA on June 6, 2000. HCFA only considered comments on portions of the final rule which were new or different from its positions in the September 1998 draft rule.

The ACC submitted comments citing its major concerns with the final rule, specifically HCFA requiring surgical back-up for interventional cardiology procedures; and HCFA's denial of separate reimbursement for observation care in chest pain centers (see ACC website).

The College, in coalition with other interested groups, has already met with HCFA to seek appropriate reimbursement for observation units and we are in the process of formulating joint recommendations that will hopefully be adopted by HCFA in the short run. In addition, Congressional staff from rural states has already contacted us regarding HCFA's ban on interventional procedures in facilities without surgical back-up. We are in process of working with HCFA staff to resolve this matter.