2016 Hospital OPPS Proposed Rule

on Tuesday, 21 July 2015. All News Items | Outpatient Services | Billing

A Proposal for You

The waning light from the setting sun filtered through the vines and flowers in the garden as the young man bowed to one knee in front of his love with a proposal. Although he was the one to initiate the proposal, his partner has the ultimate say in whether she will accept or not. Things are a little different when CMS offers a proposal to hospitals as they did on July 1st with the Outpatient Prospective Payment System (OPPS) Proposed Rule. They will be accepting comments but only the most convincing arguments by numerous commenters are likely to affect change. In the end, CMS will have the ultimate word. What a way to start (or continue) a relationship!

This year’s proposed rule does not contain the large number of significant changes seen in the last two years, but there are some things worth noting. Some of the highlights of the 2016 Hospital OPPS Proposed Rule are discussed below.

Comprehensive APCs

Last year, CMS implemented a comprehensive payment policy that packages payment for adjunctive and secondary items, services and procedures into the most costly primary procedure at the claim level. This means the hospital receives one payment for the entire claim based on the primary procedure which is assigned to a status indicator of “J1”.

For 2016, CMS is proposing nine additional Comprehensive APCs (C-APCs) to be paid under the existing C-APC payment policy. These include:

  • Level 5 ENT Procedures (Level 6 ENT procedures are already a C-APC)
  • Level 2 Intraocular Procedures (Level 3 and 4 already C-APCs)
  • Level 6 Gynecologic Procedures (Level 5 already C-APC)
  • Level 1 and Level 2 Laparoscopy
  • Level 3 Musculoskeletal Procedures (Level 4 already C-APC)
  • Level 5 Urology and Related Services (Level 6 and 7 already C-APCs)
  • Ancillary Outpatient Services When Patient Expires
  • Comprehensive Observation Services

Do you see a trend here with the addition of adjacent levels of APCs? This relates to another proposal in the rule – a major reorganization of APCs from numerous smaller APC groupings into fewer levels based on resource costs and clinical consistency. It is the opinion of this writer that this APC reorganization will allow for easier transition to more comprehensive APCs in future years more consistent with a prospective payment system. In discussing the realignment of APC groupings, CMS even notes that “the current level of granularity for some of the … APCs results in groupings that are unnecessarily narrow for the purposes of a prospective payment system.”

Probably the most significant proposal for Comprehensive APCs is the Comprehensive Observation Services. This comprehensive APC is different from the others in that it is a comprehensive payment when a claim contains a specific combination of services performed in combination with each other, as opposed to the presence of a single primary service. A new status indicator “J2” will designate these specific combinations and will result in all other OPPS payable services (excluding preventive services) being packaged into the comprehensive service with one payment for the entire claim. Due to packaging rules from previous years, a number of services are already packaged such as labs, minor imaging services, respiratory tests and treatments, and other minor diagnostic services. The new comprehensive payment for observation will result in even more packaging including services such as injections and infusions, and major imaging services such as CTs and MRIs. The good news is that the new proposed payment rate for observation is around $2,100 up from approximately $1,200 for 2015. The criteria for payment of comprehensive observation will be the same as it was for the payment of the observation composite in prior years – greater than 8 hours of observation, observation services reported in conjunction with a high level ED service or direct referral for observation, no status T procedure performed the day of or the day after initiation of observation, and no status “J1” procedure on the claim.


As I have already mentioned, the previous two years saw major increases in the packaging of services. In 2014, almost all clinical laboratory services were packaged when reported with other outpatient services and 2015 saw the packaging of numerous minor diagnostic and therapeutic services. This year CMS is proposing to package three more APCs:

  • Level 4 Minor Procedures will be S, T, V packaged with a status indicator of “Q1”
  • Level 3 and Level 4 Pathology will be T packaged with a status indicator of “Q2”

Lab Packaging

The bad news is that CMS states they overestimated the effect of lab packaging two years ago resulting in $1 billion in spending for exceptions to the lab packaging policy they did not anticipate. To offset their estimation error they “are proposing a reduction of 2.0 percentage points to the proposed CY 2016 conversion factor to redress inappropriate inflation in the OPPS payment rates and remove the $1 billion in excess packaged payment.”

Some better (or at least not so bad) news can be found in the other proposed revisions for laboratory packaging:

  • Expand the exclusion from packaging to all molecular pathology tests, including any new codes
  • Make separate payment for preventive laboratory tests
  • Expand lab packaging to lab services provided during the same outpatient stay – that is, package per claim rather than per date of service
  • Pay labs separately if they are the only type of service reported on a claim without requiring the L1 modifier.

This last revision should make life easier for hospitals – you will receive separate payment for laboratory services if they are the only service provided and reported on an outpatient claim (type of bill 13x) and you no longer have to report the L1 modifier in order to receive the payment. To accomplish this, Medicare is changing the status indicator of packaged lab services to “Q4” which packages with “J1,” “J2,” “S,” “T,” “V,” “Q1,” “Q2,” or “Q3” services. “Unrelated” lab services provided on the day of another outpatient service but ordered by a different physician for a different diagnosis are still reported with the L1 modifier in order to receive separate payment. Reference lab services for non-patients, where a specimen is sent to a lab for testing, are reported on a 14x type of bill and paid separately.

Other issues addressed in the OPPS proposed rule include:

  • Numerous additional requirements for hospitals to bill and receive payment for Chronic Care Management (CCM) services, CPT code 99490.
  • Removal of seven procedures from the inpatient only list (vagus nerve blocking therapy, spine surgery procedures and penile implants). Carotid artery stenting remains on the inpatient only list.
  • Payment reduction for CT scans (5% in 2016; 15% in 2017) if CT scanner does not meet the NEMA Standard XR-29-2013. Use of new modifier to report if scanner does not meet the standards.
  • Development of new HCPCS codes, GXXX2, to report lung cancer screening with low-dose CT.

We encourage hospitals to submit comments to CMS by the August 31, 2015 deadline. This will be your only chance to express your thoughts on the terms of the proposal for your continuing relationship with Medicare.

Article by Debbie Rubio

Debbie Rubio, BS, MT (ASCP), is the Manager of Regulatory Affairs and Compliance at Medical Management Plus, Inc. Debbie has over twenty-seven years of experience in healthcare including nine years as the Clinical Compliance Coordinator at a large multi-facility health system. In her current position, Debbie monitors, interprets and communicates current and upcoming regulatory and compliance issues as they relate to specific entities concerning Medicare and other payers. You may contact Debbie at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information. MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.

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