OUTPATIENT PROVISIONS OF THE BALANCED BUDGET REFINEMENT ACT

OUTPATIENT PROVISIONS OF THE BALANCED BUDGET REFINEMENT ACT

The hospital outpatient provisions of the Balanced Budget Refinement Act (Sec. 201) change the fundamental structure of the Medicare outpatient prospective payment system (PPS). The changes will encourage continued adoption of new technologies in the outpatient setting by rapidly integrating and adequately paying for such products. Without these changes, Medicare would have seriously underpaid for many cutting-edge outpatient treatments and would have severely restricted access to new technologies.
History has shown repeatedly that when payment is too low, access is denied. One example of this is the experience with coronary stents, a tiny metallic mesh tube that has revolutionized treatment for coronary artery disease. In the first three years after FDA approval (1994-1997), this treatment was underpaid by Medicare and provided to less than 25% of eligible beneficiaries. Reimbursement then was raised to a more appropriate level and 70-80% of eligible patients now receive this breakthrough device.
Background
Advances in medical technology have enabled more and more procedures to be performed on an outpatient basis. These procedures are often less invasive, involve fewer complications and involve shorter hospital stays. Patients enjoy better quality of life and health care costs are reduced.
Creation of a hospital outpatient department prospective payment system was mandated by the Balanced Budget Act of 1997. Under such a system, payments amounts are established in advance for an "episode of care" such as urinary incontinence surgery.
HCFA published an outpatient PPS proposed rule in September 1998. The HCFA regulation proposed a system that was fundamentally flawed and would have prevented widespread adoption of many technologies in the outpatient setting. The BBA Refinement Act makes major improvements to outpatient PPS, creating an environment that encourages rather than discourages use and access to existing and new technologies and procedures.
Key changes
Outpatient PPS will ensure access to existing technology by accurately reflecting its costs.
HCFA's outpatient PPS proposal would have drastically underpaid for many technology-intensive procedures, severely restricting their availability. This is because the agency included a wide range of procedures in each APC and based the payment rate on the median cost. This severely biased payment towards high-volume, low-cost procedures at the expense of innovative technologies.
Device manufacturers provided HCFA with dozens of examples, such as the APC that covered plasma and/or cell exchange. In this case, the payment rate of $325.34 fell far short of the median costs of plasma and/or cell exchange ($837.34). ). The APC for electrophysiology (EP) procedures would have paid $247, even though the costs of the catheters alone totaled $1,955. Other technologies that would have been hit hard include brachytherapy and various types of minimally invasive endoscopes,
The BBA Refinement Act makes three key changes that ensure that any technology that makes a significant contribution to the cost of an outpatient procedure is adequately paid for by HCFA.

First, the law says that the cost of the most expensive procedure within an APC can be no more than two times the cost of the least expensive procedure. Under HCFA's proposal, the costs of many newer technologies dramatically exceeded this limit, and the agency now will have to either assign these products to different APCs or create entirely new APCs that better reflect their costs.

Once the new APC system is created, HCFA is authorized to base outpatient PPS payment calculations on mean average costs instead of median costs. This means that the costs of more expensive, lower volume technologies will be properly accounted for in calculating reimbursement rates.

Finally, the bill creates an outpatient "outlier" payment mechanism that allows hospitals to request additional payment for individual cases whose costs significantly exceed the standard APC amount. This ensures that more complex, technology-intensive cases are adequately reimbursed.

Outpatient PPS will ensure access to newer technologies by properly account for their costs.
The outpatient PPS program proposed by HCFA would have failed to recognize many significant, recent advances in medical technology. This is because the system was built on claims data from 1996. HCFA did not plan on updating rates until 2003, meaning payment would have been based on data that was seven years old.
Access to breakthrough technologies introduced after implementation of an outpatient PPS program also would have been threatened. HCFA said it planned to put these technologies in the lowest paying APC, which would have created strong disincentives to dissemination of the innovations.

To ensure patient access to recent medical advances, the BBA Refinement Act creates a separate "pass-through" payment for newer technologies that is in addition to reimbursement provided under the ambulatory payment classification group. This extra payment is based on the actual cost of the device.

The additional payment will last 2-3 years and applies to devices first paid in the outpatient setting after 1996 but prior to inception of an outpatient PPS system, as well as a drugs and biologics. The payment also is provided to new technologies approved after outpatient PPS is implemented.

This fosters access to new technologies by ensuring they are adequately reimbursed. It also creates a window of time during which adequate data on new technologies can be gathered to ensure APC payment rates are properly set.

Outpatient PPS ensures access to new technologies by rapidly, accurately integrating them into the program.

The BBA Refinement Act requires HCFA to update the outpatient PPS system "at least annually" to ensure that it reflects advances in medical technology. HCFA had proposed less-frequent updates.

The conference report on the BBA Refinement Act instructs HCFA to develop a process for adding devices, drugs and biologicals to the outpatient PPS system after payment rates "for a particular year [have] been set." The process must include assignment of an appropriate reimbursement code and add-on payment amount. New codes and payment amounts "should be made effective quarterly," the report says.

The bill also ensures that implantable devices such as pacemakers, drug pumps, stents, and orthopedic implants will be paid for under outpatient PPS, not under an inappropriate fee schedule (the durable medical equipment, prosthetics and orthotics schedule) that is not set up to pay for such high-technology products.