On July 1, the Centers for Medicare & Medicaid Services (CMS) issued the proposed calendar year (CY) 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rule (collectively, OPPS rule).
In the proposed OPPS rule, CMS (1) provides changes to its inpatient short hospital stay policy known as the 2-midnight rule, and (2) updates payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs).
(1) Two proposed changes to the 2-midnight rule
i.) Add an exception. The proposed rule would permit a hospital to obtain inpatient reimbursement for short stays based on a case-by-case physician or qualified provider determination under the current “rare and unusual” circumstances exception. This rule would apply to stays that are expected to last fewer than two midnights. For Medicare payment review purposes, the following factors would be considered when determining whether a stay is appropriate for Medicare Part A payments:
- the severity of the signs and symptoms exhibited by the patient;
- the medical predictability of something adverse happening to the patient; and
- the need for diagnostic studies that are appropriate as outpatients services.
ii.) Authorize QIOs to review. Quality Improvement Organizations (QIOs) rather than Medicare Administrative Contractors (MACs) or Recovery Auditor Contractors (RACs) will conduct the first line medical reviews of short stay inpatient admissions as of October 1, 2015.
- Under the Medicare Act, a hospital must maintain an agreement with a QIO as a condition of participation in the Medicare program. Under the proposed rule, QIOs will refer claim denials to the MACs for payment adjustments. Hospitals with continued high claim denial rates will be referred to RACs for further payment audits.
- CMS has previously made changes to RACs that will likely go into effect upon procurement of the new recovery auditors, including:
- The recovery auditor “look-back period” for patient status reviews will be 6 months from the date of service in cases where a hospital submits the claim within 3 months of the date that it provides the service;
- RACs must complete complex reviews within 30 days and failure to do so will result in the loss of the recovery auditor’s contingency fee, even if an error is found;
- RACs will be required to wait 30 days before sending a claim to the MAC for adjustment.
In the proposed rule, CMS instructs that stays under 24 hours would rarely qualify for an exception to the 2-midnight benchmark, and inpatient stays that do not cross 2 midnights will be the focus of the QIOs reviews.
CMS acknowledged that MedPAC recommended repealing the 2-midnight rule in its entirety in its June 2015 report. However, because neither MedPAC nor the industry have recommended a particular short-stay payment policy, and public comment has not produced any consensus on a recommended payment policy, CMS continues to request feedback. *For background information on the 2-midnight rule, please see below.
(2) Highlights of the proposed OPPS payment policy and rate updates
- OPPS update: For CY 2016, CMS proposes a -0.1 percent update to OPPS Medicare payment rates for HOPDs, ASCs, and CMHCs, or $43 million less in total payments than in CY 2015, as a result of all of the policy changes offered in the proposed rule, including estimated spending for pass-through payments.
Notably, the negative update includes a 2.0 reduction to the conversion factor to correct the overpayment of $1 billion in laboratory tests payments that were projected to be packaged into OPPS payment rates in CY 2014 but continued to be paid separately.
- Chronic care management (CCM): CMS is proposing additional requirements for hospitals to bill and receive OPPS payments for CCM services described by CPT code 99490.
- Comprehensive APCs For CY 2016, CMS is proposing nine new C-APCs under which CMS will make single payments for a hospital’s provision of primary care services and adjunctive services and supplies supporting the delivery of the primary care service, including some surgical APCs and a new C-APC for comprehensive observation services.
- Biosimilars: For CY 2016, CMS is proposing to pay for biosimilar biological products based on the payment allowance of the product under §1874A of the Social Security Act, and to extend pass-through payment eligibility to biosimilar biological products, setting the payment at the difference between the amount paid under §1874A of the Act and the otherwise applicable HOPD fee schedule amount.
- ASC update: The CY 2016 CMS proposes a 1.1 percent update to the ASC payment system, or an increase of $186 million in total Medicare payments compared to CY 2015.
The proposed rule will appear in the July 8, 2015 Federal Register and can be downloaded from the Federal Register at: http://www.federalregister.gov/inspection.aspx. Public comments are due by August 31, 2015.
*Background on the 2-midnight rule
Generally, under the 2-midnight rule, hospitals should bill Medicare Part A for reasonable and necessary patient admissions that, according to a qualified provider’s clinical judgment, will exceed two midnights. Otherwise, health care services provided at a hospital should be billed under Medicare Part B as outpatient services. The only current exceptions to this short term stay admission policy are for cases involving services designated under the OPPS as inpatient only, or in the event of certain unforeseen circumstances such as death, or specific “rare and unusual” circumstances that CMS has previously identified in guidance. To date, the only published rare and unusual circumstance is the “Mechanical ventilation initiated during present visit.”
The 2-midnight rule also provides two medical review policies: the 2-midnight “presumption” and the 2-midnight “benchmark.” Under the 2-midnight “presumption,” inpatient stays that are greater than 2 midnights are presumed to be appropriate for payment under Medicare Part A, absent evidence of fraud. The 2-midnight “benchmark,” on the other hand, aims to provide guidance for the medical reviewers regarding the starting point of the patient’s stay that can be counted toward the 2-midnight metric, including when the patient starts receiving services as a registered outpatient. CMS stated, “we consider the physician’s expectation including the total time spent receiving hospital care – not only the expected duration of care after inpatient admission.” Medical reviews under the 2-midnight rule turn on the reviewer’s synthesis of the medical record information that documents the physician’s (or qualified provider’s) clinical judgment to keep the patient at the hospital and his or her expectation for the duration of the stay. The medical reviewer considers factors such as the beneficiary’s medical history and comorbidities, the severity of signs and symptoms, current medical needs and the risk of an adverse event during hospitalization.
In cases under which medical review supports a conclusion that inpatient admission is not reasonable or medically necessary, and therefore not payable under Medicare Part A, the hospital will not receive payments under the Inpatient Prospective Payment System (IPPS). The hospital still may be able to submit Medicare Part B inpatient claims for the Part B services that would have been payable to the hospital had the beneficiary originally been treated as an outpatient.
MACs had been authorized by CMS to review the short patient stays under the 2-midnight rule, and are now on the third round of “probe and educate” reviews for inpatient claims with dates of admission on or after October 1, 2013. The moratorium on the recovery auditor post-payment medical reviews of inpatient hospital patient status for claims continues to be in effect for claims with dates of admission between October 1, 2013 and September 30, 2015.