Physician's Coding Strategist-Outpatient payments rise under final PPS rule
A drop in payments had been expected
Rather than dropping by 5.7% as previously predicted, Medicare payments for hospital outpatient services will increase 4.6% under the new outpatient prospective payment system (PPS) when the new system becomes official July 1, estimates the Health Care Financing Administration (HCFA). Medicare outpatient payments are estimated to total some $11 billion this year.
"This is a significant swing," says Robert Berenson, director of HCFA's Center for Health Plans and Providers. The new hospital transitional corridor payments Congress decided to include in the Balanced Budget Refinement Act of 1999 (BBRA) are credited with creating most of the swing.
Some hospitals omitted
The budget bill also permanently exempts certain cancer hospitals from any reduced Medicare payments resulting from the PPS and provides for outlier payments for high-cost cases. (For information about what's in the final rule, see story, p. 88.)
The BBRA also mandates that Medicare pay hospitals part of any losses they incur as a result of lowered payments under PPS during a transition period lasting until 2004. For rural hospitals with up to 100 beds, the losses will be fully replaced by Medicare.
As a result of these legislative changes:
• Payments to rural hospitals will increase 4.4% annually, rather than decreasing 1.8%.
• Payments to large urban hospitals will increase 4.3% rather than decreasing 0.3%.
• Major teaching hospitals will see a 0.2% payment gain rather than a 3.7% decline.
To implement the new PPS, the final rule divides all outpatient services included in the new payment schedule into 451 groups, or ambulatory payment classifications (APC). The APC payment rate for each group applies to all services within the group and is wage-adjusted to account for geographic differences.
Blood products separate
HCFA also developed separate APCs to pay for blood and blood products. However, the new regulation does not apply to services paid for under existing fee schedules, such as durable medical equipment and orthotic and prosthetic devices. Ambulance services also will be included under another fee schedule HCFA is now developing.
Currently, Medicare beneficiaries pay half or more of their total hospital bills for outpatient services, according to HCFA. One of the primary objectives of the new regulation is to reduce beneficiary copayments for hospital outpatient services to 20% of Medicare payment rates.
To accomplish that, under the final rule, co-insurance will be frozen until the coinsurance payment for an APC becomes 20% of the total payment.
It could take as long as 20 years for the coinsurance payment for some APCs to come down to 20%, estimates HCFA. But when that does happen, the Medicare payment and co-insurance amount will be updated annually to keep the co-pay at 20% of the total payment. In addition, the copayment amounts for an APC will be capped at the Medicare hospital inpatient deductible. In 2000, that deductible is set at $776.
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