Knowledge Base Article

CMS is known for their novel-length explanations of their calculations and reasoning for rate setting.  This year is no different as they take over 20 pages of the Medicare Physician Fee Schedule (MPFS) Proposed Rule for 2018 to explain why they chose an adjustment of 25% versus last year’s 50% adjustment for the PFS payment rates for nonexcepted off-campus hospital provider based department payment rates.  Then they say based on comments, they may consider a middle ground such as 40% - maybe they should just spin a wheel.

In compliance with Section 603 of the Bipartisan Budget Act of 2015, CMS began paying nonexcepted hospital provider based departments under a different payment system than the Outpatient Prospective Payment System (OPPS) beginning January 1, 2017.  Nonexcepted PBDs are new off-campus hospital provider-based departments that began furnishing and billing for services on or after November 2, 2015.  The payment system CMS selected for payment of nonexcepted services was the Physician Fee Schedule (PFS).  For 2017, Medicare set PFS rates at 50% of the OPPS payment rates. This 50% adjustment is known as the PFS Relativity Adjuster. In the 2018 MPFS Proposed Rule, CMS proposes revising the PFS Relativity Adjuster for nonexpected hospital PBDs for CY 2018. 

Background

First, let’s look at a little background on the payment system.  CMS originally proposed to pay only the physicians at a non-facility rate for these services and provide no payment to the hospital. There were many concerns with this approach so CMS selected the PFS as the payment system for nonexcepted PBDs.  They set new PFS rates at 50% of OPPS rate, which allowed hospitals to continue to bill on an institutional UB claim form. CMS required nonexcepted services to be appended with a PN modifier so the appropriate payment rate could be applied.  This also allowed the claims to process through the Outpatient Code Editor (OCE) so OPPS packaging rules (such as comprehensive APCs, packaged and conditionally packaged services) could be applied to the claims. Services assigned to an OPPS status indicator of “A” continued to be paid under the “other” appropriate fee schedules. That included therapy services paid under the MPFS, laboratory services when separate payment criteria is met under the Clinical Lab Fee Schedule, separately payable drugs at ASP + 6%, preventive services, etc. For more information on the 2017 payment system see last year’s article.

In 2017 CMS attempted to strike an appropriate balance that avoided potentially underestimating the relative resources involved in furnishing services in nonexcepted off-campus PBDs.  CMS arrived at a 50% reduction of OPPS rates by comparing the OPPS rate to the technical component portion of PFS rate and to the ASC rate for 22 high volume services. Although there was considerable variation in the differences, per CMS “the overall total payment made for services is more relevant to the goal of site neutrality than the quantity of individual payments made.” It is important to note that the data analysis did not include the most frequently billed service furnished in nonexcepted off-campus hospital PBDs, outpatient visits.

2018 Proposed Payment

Precise data to identify and value nonexcepted services billed by hospitals is still not available for 2018 rate setting, so again CMS must estimate payment rates to reflect overall relativity between PFS and OPPS payments. 

The bad news is that in the 2018 proposal, CMS shifts their focus from making sure rates do not underestimate the relativity to ensuring rates do not overestimate the appropriate overall payments for these services.  Since the majority of services currently billed in off-campus PBDS are visit services, for 2018 CMS performed a comparison of only the clinic visit code, G0463 to the weighted average of outpatient visits (CPT codes 99201-99205 and CPT codes 99211-99215) billed by physicians and other professionals in an outpatient hospital place of service.  Based on this comparison, CMS arrived at a proposed PFS Relativity Adjuster of 25%.  This means nonexcepted services provided in a nonexcepted off-campus hospital PBD will be paid at 25% of the OPPS rate for that service. This is a significant payment decrease for 2018 from the 2017 payment rate.

CMS is requesting comment on whether they “should adopt a different PFS Relativity Adjuster, such as 40 percent, that represents a relative middle ground between the CY 2017 PFS Relativity Adjuster, selected to ensure adequate payment to hospitals and our proposed CY 2018 PFS Relativity Adjuster, selected to ensure that hospitals are not paid more than others would be paid through the PFS nonfacility rate.”

Other payment policies for nonexcepted off-campus PBDs that are not proposed to change from last year include:

• OPPS packaging rules will continue to apply
• Services with an OPPS status indicator of “A” will continue to be paid under the appropriate fee schedule

• Partial hospitalization program (PHP) will be paid at the Community Mental Health Centers (CMHCs) per diem rate for APC 5853, for providing three or more partial hospitalization services per day
• 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
• Hospitals will bill clinic visits at nonexcepted off-campus PBDs with HCPCS code G0463 (which will be paid at 25% of the OPPS rate)
• Outlier payments, the rural sole community hospital (SCH) adjustment, the cancer hospital adjustments, transitional outpatient payments, the hospital outpatient quality reporting payment adjustment, and the inpatient hospital deductible cap to the cost-sharing liability for a single hospital outpatient service are not being adopted into the new payment system
• The supervision rules that apply for hospitals will continue to apply for off-campus PBDs that furnish nonexcepted items and services
• Beneficiary cost-sharing under MPFS of 20% will apply
• Geographic adjustments used under the OPPS continue to apply

Moving Forward

CY 2017 claims data for services reported using the “PN” modifier will be available for use in PFS rate setting for CY 2019.  CMS plans to use these data to determine the appropriate PFS Relativity Adjuster and additional adjustments if appropriate.  They want to equalize payment rates as much as possible but still allow straight-forward billing.  CMS’s ultimate goal is to attain “site neutral payments to promote a level playing field under Medicare between physician office settings and nonexcepted off-campus PBD settings, without regard to the kinds of services furnished by particular off-campus PBDs.”