2013 OPPS: Up 1.8 Percent

By Denise Williams, RN, CPC-H

CMS estimates an “overall” rate increase, but changes cost methodology.

In the 2013 Outpatient Prospective Payment System (OPPS) final rule, the Centers for Medicare & Medicaid Services (CMS) bases payments on claims data submitted by hospital providers during 2011. CMS is changing the calculation based on median cost to geometric mean cost, citing this methodology will result in payment rates more accurately reflecting the cost of providing services. CMS believes this means improved data under the OPPS, and improved payment policy. CMS notes there will be some fluctuation in the relative weights used for calculating payment, but as the costs are realigned, the fluctuations should stabilize over time.

Understand the Master Plan

CMS estimates payments under the OPPS will increase overall by 1.8 percent compared to 2012 (see Chart A for a six-year conversion factor history); however, there continue to be other factors involved that will affect payments. Payments to community mental health centers (CMHC) will decrease by 3.9 percent due to the relative weight being based on geometric mean cost rather than median cost.

The payment adjustment for dedicated cancer centers will continue for calendar year 2013. Because these centers provide cutting edge therapies and procedures, their cost is higher on average than other facilities. CMS recognizes this, and the adjustment is to offset their higher-than-usual cost. Since the OPPS contains a budget neutral requirement, CMS must shift monies from other facilities to the cancer centers to make the adjustment.

Chart A

chart a

CMS reviewed comments regarding intraoperative radiation therapy (IORT) services represented by CPT® codes 77424 Intraoperative radiation treatment delivery, X-ray, single treatment session and 77425 Intraoperative radiation treatment delivery, electrons, single treatment session. These services are not the typical intraoperative services considered integral to or dependent on the surgical procedure because these are actual radiation therapy services provided while a patient is in the operative suite. These services will no longer be packaged for 2013 and are assigned to Ambulatory Payment Classification (APC) 0412.

It appears CMS has abandoned the establishment of national guidelines for reporting visits under the OPPS. The final rule notes, “it would be disruptive and administratively burdensome” to require hospitals that have successfully implemented internal guidelines to implement new national guidelines. CMS acknowledges new guidelines would have to be implemented by thousands of hospitals and inevitably create new problems that would need to be addressed.

You can download the CMS display copy of the rule and all addenda. Select CMS-1589-FC to download the final rule: “Hospital Outpatient Prospective Payment – Final Rule with Comment Period and CY 2013 Payment Rates.”

Composite APCs Remain the Same

No new composite APCs were created for 2013; however, new CPT® codes have been established to combine electrophysiological (EP) evaluations with ablations and have been assigned to the composite APC. Previously, composite payment was triggered when an EP evaluation and ablation were reported on the same date of service, so the cost for both studies was included in the payment calculation. Assigning new CPT® codes for the combination services to the composite APC should maintain consistent payment rates.

Outlier Fixed-dollar Thresholds Updated

CMS annually updates the formula for calculating outlier payments. Consistent with prior years, for 2013 an outlier payment will be triggered when costs for providing a service or procedure exceed both:

  • 1.75 times the APC payment amount; and
  • APC payment plus the $2,025 fixed-dollar threshold (increased $125 from 2012).

Two-times Rule Violations: Resolutions and Exemptions

During the Hospital Outpatient Payment (HOP) Panel’s (formerly called the APC Panel) February 2012 meeting, information was presented regarding the resource expenditures involved in a direct referral for observation services. CMS analyzed claims data and agreed with the information presented: The resources involved with HCPCS Level II G0379 (*Direct referral for observation services) are very similar to the resources expended for CPT® 99205 (**Level 5 outpatient visit). Based on this data, CMS has reassigned G0379 to APC 0608; this change also resolves the longstanding “two times rule” violation. This change will also provide more appropriate payment when the criteria for composite APC 8002 are not met.

Seventeen APCs have been deemed exemptions from the two-times rule for 2013, based on meeting CMS’ criteria for exceptions (resource homogeneity; clinical homogeneity; hospital outpatient setting utilization; volume of services; opportunity for upcoding and code fragments). A complete discussion of these criteria can be found in the April 7, 2000 OPPS final rule (65 FR 18457 and 18458).

Radioisotope Add-on Payment

The U.S. government and the International Atomic Energy Agency (IAEA) are promoting the conversion of all medical radioisotope production to non-highly enriched uranium (non-HEU) fueled nuclear reactors. This transition is expected to be completed in five years. Alternative methods for producing Tc-99m, such as in cyclotrons, are expected to apply costs in the OPPS that are not accounted for in current or previous claims data. Suppliers of these radioisotopes are expected to pass on the full impact of these costs to hospitals. CMS believes this will create significant payment discrepancies for hospitals due to factors that are over and above the norm.

CMS has created a new HCPCS Level II code, Q9969 Tc-99m from non-highly enriched uranium source, full cost recovery add-on per study dose, to provide an add-on payment to cover additional cost as these sources become available, rather than waiting until the cost is reflected in the claims data. The add-on payment will change as the use becomes more widespread and is included in the rate setting claims data. As these isotopes become more widely used, the cost will fold into the procedure, just as costs for established radiopharmaceutical sources do currently.

Pass-through Payment Changes

Three devices are eligible for pass-through payment in 2013: HCPCS Level II codes C1830 Powered bone marrow biopsy needle; C1840 Lens, intraocular (telescopic); and C1886 Catheter, extravascular tissue ablation, any modality (insertable). Edits will continue for device/procedure reporting and radiopharmaceutical/nuclear medicine procedures.

Reporting of modifiers FB Item provided without cost to provider, supplier or practitioner, or full credit received for replaced device (examples, but not limited to, covered under warranty, replaced due to defect, free samples) and FC Partial credit received for replaced device continues to be mandated by CMS for 2013. These modifiers indicate a device was received at no cost or at a discounted cost from the manufacturer and triggers a reduced APC payment. The APCs for which these modifiers apply are listed in Tables 29 and 30 of the OPPS final rule.

Pass-through status for 23 drugs and biologicals expired Dec. 31, 2012. These are listed in Table 31 of the final rule. The cost of two of these drugs is above the packaging threshold, which is $80 for 2013, and separate payment will continue. There are 26 drugs and biologicals designated for pass-through status for 2013. These drugs are listed in Table 32. There are HCPCS Level II code changes for several of these drugs; for example, C9289 is replaced by J9019 Injection, asparaginase (erwinaze), 1000 iu beginning Jan. 1, 2013.

Payment for all separately-payable drugs (with or without pass-trhough status) for 2013 will be made at average sales price (ASP) plus 6 percent. The packaging threshold applies to all classes of drugs, including anticancer therapies.

Number of Inpatient-only Procedures Reduced by One

Despite commenters’ requests that 39 procedures be removed from the list for 2013, only one procedure—CPT® 22856 Total disc arthroplasty (artificial disc), anterior approach, including discectomy with end plate preparation (includes osteophytectomy for nerve root or spinal cord decompression and microdissection), single interspace, cervical—was removed from the inpatient-only list. CMS noted the procedures not removed from the list were reviewed, and safe performance can be accomplished only in the inpatient setting. Table 45 provides the specifics regarding the single procedure removed, its corresponding CPT® code, and APC assignment.

Supervision for Outpatient Therapeutic Services

CMS extended through 2013 the enforcement of direct supervision for therapeutic services provided in critical access hospitals (CAHs) and small rural hospitals with 100 beds or fewer. In the final rule, CMS notes this will be the final year for the extension.

The HOP Panel received requests for change in supervision levels at both meetings held during 2012. The latest requests were reviewed during the August 2012 meeting and recommendations were made to CMS. Comments were accepted and are in the review process. The final decision will be issued prior to January 2013. The final decisions for change in supervision levels can be found on the CMS website.

Hospital Quality Reporting Program

No new quality measures were established for 2013, and one was removed. CMS policy of reducing payment to hospitals that fail to meet quality reporting requirements will continue at 2 percent for 2013. This reduction extends to the beneficiary and secondary payer payments, as well. CMS will again use a separate conversion factor to apply these reduced payments.

Short Stay Billing Under Part B – Demonstration Project

A new demonstration project has been initiated and is expected to last over the next three years. Titled the “Medicare Part A to Part B Rebilling (AB Rebilling) Demonstration,” this project is in response to hospital comments that staffing restrictions prevent all short stay admissions from being reviewed while the patient is still in-house. Based on the requirements for reporting Condition Code 44, if the patient has been discharged, the hospital has no means to change the status from inpatient to outpatient. Under the demonstration project, when the recovery audit contractor (RAC), Medicare audit contractor (MAC), or Comprehensive Error Rate Testing (CERT) contractor denies the short stay claim on the basis that an inpatient admission was not reasonable and necessary, participating hospitals can rebill the claims under Part B and receive 90 percent of allowable Part B payment for these Part A short stays. Medicare beneficiaries are protected from any adverse impacts based on Part B rebilling.

Other Nuggets

CMS published updates for therapy services in the 2013 Medicare Physician Fee Schedule final rule. Over the past couple of years, CMS has noted they are required to implement a claims-based methodology for therapy services to reform the payment system in the future. To move in that direction, the new guidance initiates the capture of data that has never been reported via a claim. New HCPCS Level II G codes and modifiers have been created to reflect the complexity of service and severity of illness related to beneficiary condition, services furnished, and final outcome. It is imperative that therapy departments review the requirements. Documentation and correct reporting of services are crucial.

Editor’s Note:

*  The definition provided in this article for G0379 is not the HCPCS Level II definition, “Direct admission of patient for hospital observation care.” The definition “Direct referral for observation services” was used purposefully because CMS has repeatedly noted that observation is an OP service and “admission” infers IP admission. CMS has publically stated that “referral” is more appropriate.

** The definition provided in this article for CPT® 99205 is the short definition that hospitals use and will recognize. The full definition is for physicians, not hospitals.


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

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