Knowledge Base Article

Composite is defined as something made up of several parts or elements and comprehensive is including all or nearly all elements of something. These definitions are spot on regarding the reclassification of payment for observation services from a composite payment to a comprehensive payment as announced in the 2016 Outpatient Prospective Payment System (OPPS) Final Rule. This is one of the most significant changes found in this year’s final rule. In this article we discuss the reality of the changes with observation payments and other updates from the Final Rule.

Observation Comprehensive Payment

Under the current composite payment method for observation services, the observation payment is combined with the payment for high level ED visits, clinic visits, or direct referral when the observation services meet certain criteria. Other separately billable services are paid according to OPPS guidelines. This means payment for some services is packaged - most clinical laboratory services (since 2014), routine x-rays and some other minor diagnostic services (since 2015), and some minor procedures such as breathing treatments (since 2015). More extensive services, such as injections and infusions, CTs and MRIs, and separately payable drugs are paid separately from the composite payment.

Things change under the Comprehensive Observation APC. In keeping with the Medicare criteria for comprehensive APCs, payment for all adjunctive services is bundled into the comprehensive payment. This means no separate payment for injections, infusions, CTs, or MRIs, – just the one comprehensive observation payment amount of approximately $2174 (Medicare unadjusted payment rate) for the entire episode of care. There were also some changes to the criteria for eligible observation services. The comprehensive observation APC is paid when there is:

• At least eight hours of observation services (no change)
• Observations services in conjunction with any ED visit level (change from only high level ED visits), clinic visit level, or direct referral to observation
• No surgical procedure on the claim with a status indicator of “J1” or “T” (change from “T” status procedure on the day of or day before obs)

When these criteria are not met, observation services are packaged and there is no separate or additional payment for observation.

Since the Comprehensive Observation is for a combination of services which differs from the criteria for other comprehensive services which are based on a primary service, CMS created a new status indicator for Observation of “J2.” Nine other “J1” Primary Service Comprehensive APCs were also added in the final rule for device-intensive procedures.

Lung Cancer Screening by Low-Dose CT

Medicare issued a National Coverage Determination (NCD) for lung cancer screening by low-dose CT on February 5, 2015. Providers have been anxiously awaiting Medicare guidance on how to bill for this service, specifically what CPT or HCPCS code to report. In the OPPS Final Rule, CMS created new HCPCS code G0297 to report this service on and after January 1, 2016. At that time, they will accept claims for dates of service on and after February 5, 2015, so if you have already been providing this service and holding your claims you can submit them after the first of the year and receive payment. The Medicare unadjusted payment rate for G0297 is $112.49. Timely filing rules do apply so be sure to submit claims before a year has passed since the date of service.

Clinical Laboratory Services

There is good news related to lab services and then there is some really bad news. Let’s get the bad news out of the way first. CMS finalized a reduction of 2.0 percentage points to the CY 2016 conversion factor. This reduction was due to an error CMS made in calculating the impact of lab packaging in 2014. In combination with other financial adjustments for the year, the bottom line is a -0.3% reduction in OPPS payments overall for 2016.

Clinical lab services continue to be packaged in 2016 with the exceptions of molecular pathology codes and preventive services. In fact they will now be packaged per claim instead of per date of service, but I doubt this will be a significant impact. The good news is that CMS created new status indicator “Q4” for lab services so that lab payments will automatically receive separate payment if they are the only type of service reported on the claim. This means laboratories will no longer have to report the L1 modifier when only lab services are performed. The L1 modifier can still be used when lab services are unrelated to other outpatient services on the claim (ordered by a different physician for a different diagnosis), but not having to use it for lab-only outpatient claims should result in a lot less time and effort expended by hospital staff.

Increased Packaging

Since so many minor services have already been packaged in previous years, there was only a minimal increase in packaging of services for 2016. This year CMS is packaging 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”

Other Issues

Other issues addressed in the OPPS final 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. Providers are to report new modifier “CT” if the CT scanner does not meet the standards in order to receive the appropriately reduced payment.

The reality of OPPS payment policies is increased packaging in the form of more comprehensive APCs, including an observation C-APC and increased packaging of services. CY 2016 also includes an overall reduction in payment due to adjustments for this and that, including a big adjustment for miscalculation of lab packaging payments. Sometimes the reality is just too real.