MPFS Updates Affecting Hospitals

on Thursday, 16 November 2017. All News Items | Outpatient Services | Billing

From One Rule to Another

I am sure our readers are tired of hearing about the 2018 Outpatient Prospective Payment System (OPPS) Final Rule. As tiresome as it may be, as Medicare providers you have to keep up with Medicare’s policy changes from year to year and all the months in between. You will be glad to know this article is not about the OPPS final rule – yeah! It is about the Medicare Physician Fee Schedule (MPFS) Final Rule – sorry. Specifically, since our focus at Medical Management Plus is acute care hospitals, it is about the issues in the MPFS rule that affect hospital providers.

Payment Rate for Nonexcepted Off-Campus Provider Based Departments

Section 603 of the Bipartisan Budget Act of 2015 required that “new” off-campus hospital provider-based departments no longer be paid the higher payment rates of the Outpatient Prospective Payment System (OPPS), but instead be paid under a different payment system whose rates are more equitable with physician office rates. Last year, CMS finalized a rule that these provider-based departments be paid under the Medicare physician fee schedule (MPFS) at new rates established for this purpose.  For 2017, that rate was 50% of the OPPS payment rate.  For 2018, the payment rate for nonexcepted off-campus PBDs is 40% of the OPPS payment rate, a reduction of 10% from last year. This goes in the good news column because CMS had originally proposed a payment rate of 25% of the OPPS payment rate.

As a reminder, the new payment system applies to new off-campus hospital provider-based departments that began furnishing and billing for services on or after November 2, 2015.  For 2018, hospitals will continue to bill on an institutional claim form (UB) and will append a “PN” modifier to services provided in a non-excepted off-campus PBD. Other things to know about the new payment system are:

  • The packaging requirements of OPPS will apply to these services (such as comprehensive APCs, packaged and conditionally packaged services).
  • Services assigned to an OPPS status indicator of “A” will continue to be paid under the “other” fee schedule by which they are currently paid, such as:
    • Therapy services (PT, OT, and Speech) paid under the MPFS but includes a multiple procedure payment reduction (MPPR)
    • Laboratory services when separate payment criteria are met under the Clinical Lab Fee Schedule (CLFS fees are reduced for 2018 to be closer to private payor lab payment rates)
    • Separately payable drugs at ASP + 6% (drugs with status indicators of “G” and “K”); the payment reduction for drugs purchased through the 340B program will not be applied to nonexcepted PBDs.
    • Preventive services
  • Partial hospitalization program (PHP) will be paid at the same rate as Community Mental Health Centers (CMHCs)
  • Hospitals will report radiation treatment delivery procedures with the HCPCS “G” codes appended with the PN modifier, which will be paid at the MPFS technical component rate

Most other requirements from last year will be continued for this year – you can read more about this at our Wednesday@One article on the topic from last year. CMS indicates they are still planning to propose a more precise payment rate once they have 2017 data available, hopefully for CY 2019.

Therapy Caps

For several years now (since implementation of the requirement from the Balanced Budget Act of 1997), there has been an annual limitation on the amount Medicare will pay for therapy services for a beneficiary.  This is known as the therapy caps. There is one therapy cap for outpatient occupational therapy (OT) services and another separate therapy cap for physical therapy (PT) and speech-language pathology (SLP) services combined. The therapy caps are permanent, meaning that the statute does not specify an end date, but the amounts of the caps are updated annually.  For 2018, the therapy cap is $2,010 – this is a $2,010 limit for OT services and a separate $2,010 limit for PT and Speech services.

What is not permanent is the therapy caps automatic exception process, the manual medical review of therapy services exceeding a threshold amount, or the application of therapy caps to outpatient services furnished by hospitals.  The statutory authority for all of these regulations will expire on December 31, 2017. 

  • The exception process allows providers to be granted an automatic exception for services beyond the therapy cap when they append a KX modifier to the therapy procedure codes. By using the KX modifier, the therapist is attesting the services above the therapy caps are reasonable and necessary and that there is documentation of medical necessity for the services in the patient’s medical record. Claims for outpatient therapy services over the caps without the KX modifier are denied.
  • Since 2012, Medicare has conducted manual medical review of therapy services when they exceed the threshold of $3,700. Like the therapy caps, there is one threshold of $3,700 for OT services and another $3,700 for PT and speech combined. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) changed the rules for the manual medical review so that not all therapy services exceeding the threshold have to be reviewed. Instead, Medicare now only reviews certain claims based on factors such as therapy providers with a high claims denial rate for therapy services or with aberrant billing practices compared to their peers.
  • The Middle Class Tax Relief and Jobs Creation Act of 2012 (MCTRJCA) implemented, and MACRA extended, the application of therapy caps to outpatient services furnished by hospitals.

In prior years, as these regulations neared expiration, Congress stepped in and extended them.  Sometimes they cut it close, as in 2013 when the bill extending these was not signed into law until January 2, 2013.  If Congress does not pass a law extending these provisions, effective January 1, 2018, the therapy caps will be applicable to all outpatient therapy settings, except for services furnished and billed by outpatient hospitals. Without a therapy caps exceptions process, 1) Medicare patients become financially liable for 100% of expenses for therapy services that exceed the therapy caps, 2) the therapy caps will be applicable without any further medical review, and 3) using the KX modifier on claims for these services will have no effect.

Appropriate Use Criteria for Advanced Diagnostic Imaging Services

When first introduced in the 2016 MPFS Final Rule, CMS stated “the goal of this statutory AUC program is to promote the evidence-based use of advanced diagnostic imaging to improve quality of care and reduce inappropriate imaging services.” Evidence-based Appropriate Use Criteria for imaging can assist clinicians in selecting the imaging study that is most likely to improve health outcomes for patients based on their individual clinical presentation. As you can imagine, this is a huge process that has created a whole new set of acronyms –

  • First Medicare had to decide who is qualified to create the criteria (provider-led entities - PLEs),
  • The criteria have to be developed (appropriate use criteria – AUC),
  • There must be an electronic tool that communicates the criteria to the user (clinical decision support mechanisms – CDSMs),
  • The ordering professional is required to consult with a qualified CDSM when ordering an applicable imaging service,
  • The furnishing professional must include information about the ordering professional’s consultation with a qualified CDSM on the Medicare claim, and
  • Finally, identification of outlier ordering professionals in order to facilitate a prior authorization requirement for outlier professionals.

It is quite complicated and I will not go into more details at this time. The things that hospitals need to know now are:

  • The reporting requirements are being delayed until January 1, 2020.
  • Consulting and reporting are not required for emergency services when provided to individuals with emergency medical conditions, for an inpatient for which payment is made under Medicare Part A, and by certain ordering professionals who are granted a significant hardship exception to the Medicare EHR Incentive Program payment adjustment.
  • Payment may only be made if the claim for the advanced diagnostic imaging service includes the specific required information. This information is required across claim types (including both the furnishing professional and facility claims) and across all three applicable payment systems (PFS, hospital outpatient prospective payment system and ambulatory surgical center payment system). In other words, this information must be included on the hospital outpatient claim for the technical component of the imaging service.
  • Medicare is still exploring methods for reporting the required information in a way that is least burdensome for providers.

These issues from the MPFS give hospital providers something to think about now (reduced payment rates for nonexcepted off-campus PBDs), something to watch for in the near future (extension of the expiring therapy caps provisions), and something to anticipate in a couple of years (reporting information on use of AUC for advanced imaging).  At least CMS is spreading out the joy.

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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