Prepare for 2011 OPPS Final Rule

By Denise Williams, RN, CPC, CPC-H

For the 2011 Outpatient Prospective Payment System (OPPS) Final Rule, the Centers for Medicare & Medicaid Services (CMS) based payments on claims data submitted by hospital providers during 2009. Let’s highlight some of the rule to prepare you for the changes in the year ahead.

Evaluation and Management – CEMC

You can download the CMS display copy of the rule and all preamble tables and addenda at: Select CMS-1504-FC to access the Final Changes to the Hospital Outpatient Prospective Payment System and CY 2011 Payment Rates files and final rule documents.

2X Rule Violation Exceptions Increase

As in the past couple of years, CMS made changes to the ambulatory payment classification (APC) assignment this year based on the “2X rule violation.” Prospective payment involves an inherent grouping of services requiring comparable resource usage. A 2X rule violation happens when the highest cost item’s median cost is twice that of the lowest cost item within the same APC. The secretary of Health and Human Services (HHS) has the discretion to allow exceptions to this rule (such as for low-volume procedures and services), and has approved 22 APCs as exceptions to the 2X rule for 2011 (seven more than in 2010). These are listed in Table 22 in the Final Rule.

Composite APCs Remain the Same

CMS made no changes to existing composite APCs, nor did they create new composite APCs for 2011. The Multiple Imaging composites were implemented in 2009, and the first claims data for monitoring the impact were available for this year’s rate setting. The APC panel and rule commenters recommended additional composites that could be created in the future. CMS continues to “consider the development and implementation of larger payment bundles, such as composite APCs (a long-term policy objective for the OPPS), and continues to explore other areas” where this model could be utilized, according to the Final Rule.

Outlier Fixed-Dollar Thresholds Updated

CMS annually updates the formula for calculating outlier payments. Just like in 2010, an outlier payment is triggered in 2011 when costs for providing a service or procedure exceed both:

  • 1.75 times the APC payment amount
  • The APC payment plus $2,025 fixed-dollar threshold (decreased by $150 from 2010)

CMS made no changes to the outlier reconciliation policy for outpatient services provided based on cost reporting periods beginning in 2009.

Pass-through Payment Changes

There is one device that became eligible for pass-through payment in October 2010. Described by HCPCS Level II code C1749 Endoscope, retrograde imaging/illumination colonoscope device (implantable), this item will continue with pass-through status for 2011. There are additional applications for pass-through items under consideration. Drugs and biologicals with pass-through status that expired Dec. 31, 2010 are listed in Table 27 of the Final Rule. The cost of 13 of these drugs is above the packaging threshold, which is $70 for 2011, and separate payment will continue.

Payment for separately-payable drugs without pass-through status will increase for 2011 to average sale price (ASP) plus 5 percent. For the 42 drugs and biologicals having pass-through status for 2011, payment is ASP plus 6 percent. These drugs are listed in Table 28. There are HCPCS Level II code changes for several of these drugs.

New vs. Established Definitions Continue

CMS notes that 2009 claims data continues to reflect a cost difference between new and established patient visits. The agency continues to define “new” and “established” patients based on whether the patient was an inpatient or outpatient of the hospital within the past three years.

E/M Guidelines Are Passed By

No new national evaluation and management (E/M) guidelines are established for 2011. Claims data continues to reflect stable distribution of billed visits. CMS instructs hospitals to keep using their individual internal guidelines, being sure that the guidelines meet the 11 criteria specified in the 2008 Final Rule. Fiscal intermediaries (FIs) and Medicare administrative contractors (MACs) are encouraged to use the individual hospital’s internal E/M guidelines when an audit occurs.

New CPT® Instruction, New Edit

CMS instructs facilities to follow CPT® guidelines. Beginning in 2009, this included the introductory guidelines for services contained in critical care services (CPT® 99291 Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes and +99292 Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (list separately in addition to code for primary service). For 2011, the American Medical Association (AMA) has added language to the Critical Care instructions noting that, “Facilities may report the above services separately.” CMS has provided packaged payment for critical care services based on the CPT® definition for the past two years. CMS notes, “Beginning in CY 2011, hospitals that report in accordance with the CPT® guidelines will begin reporting all of the ancillary services and their associated charges separately when they are provided in conjunction with critical care.”

In response to this change, CMS will institute a new Outpatient Code Editor (OCE) edit that will package the services for the separately-reported procedures into the payment for critical care services. Instituting “automatic packaging” via the OCE will ease a huge operational burden on facilities who have had to use an internal, usually manual, process to remove the HCPCS Level II codes from the claim and roll the charges into one line item for critical care services.

Inpatient-only Procedures Shrink

The “Inpatient Only” list specifies procedures typically provided in an inpatient setting due to the invasive nature of the procedure; the need for at least 24 hours of post-procedure monitoring before the patient can be safely discharged; or the underlying physical condition of the beneficiary; and therefore, these procedures are not reimbursable under the OPPS.  For 2011, CMS removed three procedures from the inpatient-only list, which allows hospitals to be reimbursed when these procedures are performed on an outpatient basis.

21193     Reconstruction of mandibular rami; horizontal, vertical, C, or L osteotomy; without bone graft

21395     Open treatment of orbital floor blowout fracture; periorbital approach with bone graft (includes obtaining graft)

25909     Amputation, forearm, through radius and ulna; reamputation

These procedures, their corresponding CPT® codes, and APC assignments are found in Table 46.

Direct Supervision for Outpatient Therapeutic Services

In 2010, there was a lot of discussion regarding the requirements under the conditions of participation versus the definition requirements of direct physician supervision. CMS delayed enforcement of direct supervision for therapeutic services provided in critical access hospitals (CAHs) as of March 2010. In the Final Rule, CMS extended this non-enforcement period through 2011 and extended the exception to small rural hospitals with 100 beds or fewer located in a rural area or paid under OPPS with a rural wage index.

CMS listened to providers during the year and made some changes to the definition of direct supervision. The updated definition requires the practitioner to be “immediately available” and “interruptible,” but specific references to where the practitioner must be physically located are removed. The removal of reference to geographical location is applicable for both on-campus and off-campus provider-based departments and applies to cardiac rehab, pulmonary rehab, and intensive cardiac rehab.

The agency created a list of 16 services, called “non-surgical extended duration services,” for which direct supervision is required at the initiation of the service. Once the patient is stable, general supervision may be provided for the duration of the service. These services are identified in Table 48a. The included services must meet four criteria:

1. May last a significant time

2. Have a low risk of requiring direct supervision once initiated

3. Have a significant monitoring component typically provided by nursing/auxiliary staff

4. Are not surgical services that include recovery time

Initiation of these services requires direct supervision; once the treating practitioner deems the patient to be medically stable, general supervision is acceptable. CMS expects the transition from direct to general supervision to be documented in the medical record, but does not specify what this documentation must look like.

The agency acknowledges that “the statute does not explicitly mandate direct supervision,” but believes that direct supervision is the most appropriate level for services provided incident-to a physician service. CMS proposes to establish a committee and independent review process to assess the appropriate supervision level for hospital outpatient therapeutic procedures. For the 2012 rule-making cycle, CMS most likely will establish a timeframe for receiving requests, develop criteria for evaluation of each service, and create or designate a committee. CMS has requested public comment on this proposal.

Additional Notable Changes

The Patient Protection and Affordable Care Act (PPACA) waives the Part B deductible and coinsurance for certain preventive services payable under the OPPS. Based on classification by the U.S. Preventive Services Task Force (USPSTF), covered preventive services graded as A or B mean the beneficiary coinsurance is waived and, for many of the services, the Part B deductible also is waived. Table 48b contains specific information regarding these services.

Changes to the 2011 Medicare Physician Fee Schedule (MPFS) (CMS-1503-FC, found at: also impact OPPS facilities related to laboratory requisitions and rehabilitation services with payment based on the fee schedule. Beginning in 2011, requisitions for clinical laboratory services paid under the laboratory fee schedule must be signed/authenticated by the physician/non-physician practitioner (NPP). CMS discussed the history of lab requisitions vs. orders in the MPFS proposed rule.

CMS also is instituting a “multiple procedure payment reduction” for outpatient therapy services paid under the MPFS. The reduction is 25 percent of the second and subsequent “always therapy” services’ practice expense component. The first unit of the highest valued service is payable at 100 percent; all additional units of the same service or different service are paid at 75 percent. The payment reduction is based on services provided on a single date of service, even if the services are provided by different therapy disciplines. Table 21 in the 2011 MPFS Final Rule lists the services subject to this policy.


Denise Williams, RN, CPC, CPC-H, is the director of revenue integrity services for Health Revenue Assurance Associates, Inc. She has been involved with APCs since their initiation. She has worked as corporate chargemaster manager for two health care systems, heavily involved in compliance and coding/billing edits and issues.



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