RSSAll Entries in the "OPPS" Category

Note from the instructor: CMS issues proposed Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule for calendar year (CY) 2016, Part II

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.

On July 1, 2015, CMS released proposed CY 2016 changes to payment policies, rates, and quality initiatives for the majority of Medicare outpatient facility services, including services provided in hospital outpatient departments (HOPD), generally payable under the OPPS, and those provided in ASCs, generally payable under the ASC Payment System. In last week’s note, we focused on key proposed changes to the OPPS. The proposed rule also recommended changes to the so-called “2-Midnight Rule,” the primary criteria for determining coverage under Part A for inpatient hospital discharges on and after October 1, 2013. In this week’s note, we will discuss the proposed changes to the 2-Midnight Rule.

Background on Part A reimbursement and coverage policy, in general

In contrast to reimbursement under Part B, which continues to permit multiple separate payments for individual HOPD covered services payable under the OPPS (and other fee schedules), payment for most inpatient hospital services covered under Part A is made in the form of a single payment under the inpatient prospective payment system (IPPS).

Payment for a particular Part A covered inpatient stay is based upon the payment group (referred to as the “Medicare Severity Diagnosis-Related Group” or “MS-DRG”) to which the stay is assigned. MS-DRG assignment is based primarily upon the patient’s diagnoses (principal and secondary), procedures performed, and certain demographic factors (e.g., age, sex). Like the OPPS, the IPPS is a prospective payment system, which provides for a predetermined MS-DRG-based average payment amount for each inpatient stay.

Prior to CMS’ implementation of the 2-Midnight Rule, hospitals and other stakeholders made repeated requests for additional clarification of inpatient coverage criteria under Part A. This became an even greater concern following the introduction of the permanent Recovery Audit (RA) Program in January 2009. Prior to the implementation of the RA Program, certain contractors (referred to as “Quality Improvement Organizations” or “QIOs”) had primary review responsibility to determine whether inpatient stays were medically necessary, and, therefore, met Medicare’s Part A coverage criteria. In doing so, the QIOs integrated peer review into the process, applying relatively specific criteria (e.g., Interqual, Milliman) to each case. They also took a collaborative approach, providing significant guidance in the form of related education and training to healthcare providers.

As part of the RA Program, contractors referred to as “Recovery Auditors” replaced the QIOs as the primary contractors responsible for post-payment reviews. As part of their authority, Recovery Auditors were given broad discretion to determine whether prior paid inpatient hospital stays met applicable Part A coverage criteria. Moreover, they were also given the latitude to apply different coverage criteria from those originally used to adjudicate the claim for that stay. In addition, the Recovery Auditors were reimbursed on a contingency basis; the higher the amount of overpayments identified, the higher their reimbursement, incentivizing them to focus on higher cost services (e.g., inpatient stays) and to apply stringent coverage criteria when performing related post-payment reviews.

This resulted in a much higher percentage of post-payment inpatient hospital denials under Part A, which led to significant increases in the number of related appeals, overwhelming the Medicare appeals process. Hospitals were able to recover some of their costs by rebilling under Part B, but it was often too late for them to do so. In any event, these denials also led to significant adverse consequences to beneficiaries, including the following:

  • Additional cost sharing responsibility in the form of Part B deductible and coinsurance amounts when services were rebilled under Part B; and/or
  • Denial of Medicare coverage under Part A for subsequent inpatient skilled nursing facility (SNF) admissions based on failure to meet the three-day qualifying inpatient hospital stay requirement.

To address all of the above-noted concerns and repeated stakeholder requests for clarification of Part A inpatient coverage criteria, CMS created and implemented the 2-Midnight Rule.

Coverage under the 2-Midnight Rule, as initially implemented

As part of the fiscal year (FY) 2014 IPPS Final Rule, CMS established the following Part A coverage criteria for inpatient hospital discharges on and after October 1, 2013:

  1. An inpatient order signed or authenticated by the ordering physician or other authorized practitioner; and
  2. An expectation that the patient will require hospital care for at least two midnights; and
  3. A physician certification for cases that either

a.Qualify as long stays (20 days or longer); or
b.Reach the cost outlier point.

The most significant requirement is the 2-Midnight Rule, which actually encompasses two different standards, depending upon when the rule is applied. At the time that the physician makes the decision to admit the patient, he or she should apply the 2-Midnight Benchmark. Under the benchmark, the physician must determine whether he or she reasonably expects the patient to require medically necessary hospital care for at least two midnights.

In determining whether the patient is expected to receive hospital care for two midnights, the practitioner may consider not only care anticipated after inpatient admission, but also hospital care received prior to admission, either at a transferring hospital before transfer or in the HOPD (e.g., the emergency department, observation). In determining whether the patient reasonably requires medically necessary care for two midnights, the physician must exercise his or her independent medical judgment, based on relevant complex medical factors (e.g., patient history and comorbidities, severity of signs and symptoms), all of which should be carefully documented in the medical record to support the reasonableness of the admission decision. At the time of the rule’s implementation, CMS also acknowledged certain exceptions to the requirement of a two-midnight stay (e.g., inpatient-only procedure, initiation of mechanical ventilation).

Under the 2-Midnight Rule, once the patient has remained for at least two midnights after the inpatient order, Medicare will apply a different standard, referred to as the 2-Midnight Presumption. That is, absent evidence of gaming or a record of prior inappropriate status determinations, contractors should assume that the inpatient stay was medically necessary and, therefore, covered.

For hospital discharges from October 1, 2013, through September 30, 2015, Recovery Auditors are prohibited permanently from conducting post-payment status reviews. During this period, MACs have been directed to conduct initial (and, if issues are identified, subsequent) prepayment “probe and educate” audits for each hospital with stays of fewer than two midnights. If results are negative and the stay is denied, hospitals may rebill under the AB rebilling rules. In addition, any such denials give rise to appeal rights under the regular Medicare appeals process.

Proposed changes to the 2-Midnight Rule

Not surprisingly, despite CMS’ efforts to ease the transition to the new inpatient coverage rules, hospitals and other stakeholders continue to have concerns, most of which focus on requests for more specific guidance on the factors physicians need to document in order to support the reasonableness of their length-of-stay expectations.

In an attempt to address some of these concerns, CMS is recommending several changes to the 2-Midnight Rule, which would become effective for discharges on and after January 1, 2016. Most of the recommendations focus on process, rather than substance, with renewed emphasis on the importance of physicians in making the initial status decisions, and the role and approach of contractors in reviewing those decisions.

To emphasize the importance of the physician’s role in the status decision, CMS is proposing the following clarifications:

  • For stays expected to last fewer than two midnights (in circumstances not listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis, based on the judgment of the admitting physician, as supported by documentation in the medical record, and subject to medical review.
    • CMS believes it would be rare for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital expected to keep him or her in the hospital for less than 24 hours; CMS will monitor the number of these types of admissions and plans to prioritize these cases for medical review.
  • For hospital stays that are expected to last two midnights or longer, CMS’ policy is unchanged; if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Medicare Part A payment, as long as the record supports that expectation. This includes stays in which the physician’s expectation is supported, but the length of the actual stay was less than two midnights due to unforeseen circumstances such as unexpected death, transfer, clinical improvement, or departure against medical advice.
CMS is also recommending the following changes in its approach to educating providers and enforcing the 2-Midnight Rule:
  • The QIOs will conduct first line medical reviews of providers who submit claims for inpatient admissions, rather than MACs or Recovery Auditors. QIO patient status reviews will focus on educating physicians and hospitals about the Part A payment policy for inpatient admissions.
  • The Recovery Auditors will conduct patient status reviews only for those hospitals that have consistently high denial rates, based on QIO patient status review outcomes.

CMS’ proposed changes in enforcement policy are encouraging and likely to be viewed positively by the healthcare community, based on providers’ prior experience with the QIOs. In the past, both hospitals and physicians appreciated the QIOs’ integration of peer review into the review process, as well as their collaborative approach. The relationships between providers and the QIOs were generally collegial, rather than adversarial. In particular, the QIOs past focus has been to provide significant guidance in the form of related education and training on accepted standards of medical practice and identification of factors supporting the appropriateness of inpatient admission, from a medical perspective. This is exactly the kind of guidance providers have been requesting for years.

Opportunity for public comment For additional information on the proposed changes or to provide comments to CMS, please refer to the following websites: View CMS-1633-P. View the fact sheet. View the fact sheet on the 2-Midnight Rule. Leave a comment.

Note from the Instructor: CMS Releases OPPS Final Rule

This note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  

CMS released the OPPS final rule. There are three significant changes I wanted to discuss in my note this week. First, CMS finalized the packaging of most ancillary services. They also finalized the Comprehensive APC (C-APC) policy. Lastly, certification for most inpatient cases was eliminated.

For CY2015, CMS eliminated the ancillary services status indicator X and conditionally packaged most of these services, reassigning them to status indictor Q1. Status indicator Q1 triggers packaged payment if any other code with a status indictor S (significant procedure), T (surgical procedure) or V (visit) is reported on the claim. The service is only paid separately if no other service with an S, T, or V status indicator is reported. This separate payment will be made based on the codes reported on the claim and no additional action will be required by the provider, unlike the laboratory packaging for CY2014 which requires application of the modifier L1 for labs to be paid separately.

Under this new increased packaging policy, CMS conditionally packaged services with a geometric mean cost of $100 or less, except preventative services, psychiatry–related services, and drug administration services. The number of services assigned status indicator Q1 increased from 11 to 538. Newly conditionally packaged services include minor procedures such as foreign body removals, application of splints and strapping; diagnostic procedures such as x-rays and ECGs; and pathology and blood product– related services along with many others.

Continuing the increased level of packaging under OPPS, CMS finalized 25 C-APCs that make a single comprehensive payment for expensive primary procedures and all the related and “adjunctive” services reported on the claim with them. There are 248 primary procedures, identified by status indicator J1. CMS ranked each of the primary procedure codes in a table in Addendum J. The assignment of the final C-APC is controlled by the highest ranking primary procedure code reported on the claim.

CMS finalized a “complexity adjustment” allowing the C-APC to be increased one level if specific secondary or add-on codes are reported on the claim with the primary procedure. CMS finalized 63 complexity adjustment pairs affecting only 29 of the 248 primary procedure codes. The complexity adjustment pairs are published in a table in Addendum J.

CMS also published a list of services that will be excluded from the C-APC payment in Table 6 of the final rule. In general, services required to be paid separately by statute continue to be paid separately, including: preventative services; pass-through drugs, biologicals and devices; brachytherapy seeds and sources; and cost based services such as vaccines. Also excluded are services paid on other fee schedules, including ambulance services, mammography services, and therapy provided under a plan of care and reported on a separate monthly claim.

Lastly, CMS finalized their revised proposal to exclude self-administered drugs from packaging to the C-APC unless they function as supplies integral to the procedure. In CY2014, CMS had originally proposed to package the self-administered drugs into the C-APC. The finalized rule means patients will still be responsible for most self-administered drugs in hospital outpatient departments.

Also included in this otherwise outpatient rule was a change to the requirements for certifications for hospital inpatients. CMS eliminated the need for certification for most inpatients, with the requirement now only applying to patient stays of 20 days or greater and cost outlier cases. This change provides relief from a very onerous requirement for providers. However, the requirement for a certification prior to billing an outlier case will require hospitals to be diligent in monitoring for cases that hit outlier. These cases can be difficult to identify because it requires you know the final DRG as well as all the charges on the case, some of which may be added later.

Additionally, I had hoped that CMS would allow inpatient status orders to be signed in the same manner as other orders. They had previously taken the position that the order had to be signed before discharge because it was the first element of the certification which had to be signed before discharge. Now that certification is not required in most cases, I was hoping they would loosen this requirement to match the requirements for other kinds of orders. In the preamble commentary to the rule, however, they reiterated the requirement that the inpatient order must be signed before discharge, even if the case does not require a certification.

Providers interested in these new rules should review the comment and response sections of the CY2015 OPPS Final Rule preamble because they contain good clarifications and information. Additionally, the Addenda contains detailed information on the status indicators for codes and the rankings and complexity adjustments for the C-APCs, and can be found on the final rule home page.

Note from the instructor: CY 2015 OPPS Proposed Rule contains Significant Policies

This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  

On July 3, CMS posted the display copy of the CY 2015 OPPS Proposed Rule with proposed payment and policy changes for hospital outpatient and ambulatory surgery center services. Notably, the rule contains refinements to the Comprehensive Ambulatory Payment Classification (APC) policy (adopted in the CY 2014 OPPS Final Rule for implementation in CY 2015) and significant increased packaging of ancillary services. The rule also included a very significant proposal on inpatient certification, eliminating the onerous requirement for most hospital inpatient stays.

CMS made several adjustments to the policy for payment of Comprehensive APCs. Most significantly they proposed a “complexity adjustment”. The complexity adjustment applies when a primary procedure assigned to a Comprehensive APC is reported with other specified procedures also assigned to Comprehensive APCs or with a specified packaged add-on code.  When one of these combinations are reported, the payable APC is increased to the next highest APC in the clinical group (i.e., from level II to level III). New Addendum J has details of the code combinations subject to this complexity adjustment and the APC that will be paid when one of the combinations is reported. Also included in Addendum J is the ranking of procedure codes for determining the primary procedure that will control the APC assigned when multiple procedures assigned to Comprehensive APCs are reported.

Another significant refinement to the policy relates to the services excluded from the Comprehensive APC payment. The rule contains new Table 6, listing 10 categories of services not subject to packaging to the Comprehensive APCs. There are two significant changes from the policy articulated in the CY 2014 OPPS Final Rule. Self-administered drugs that are not treated as supplies to the procedure will be excluded from packaging and are still billable to the patient. The prior rule implied these drugs would be packaged to the Comprehensive APC. However, CMS proposes excluding them based on their statutory exclusion from coverage under Part B.

They have also proposed to exclude therapy services that are reported on separate facility claims “for recurring services” from packaging to Comprehensive APCs. CMS refers to them as “recurring” services in the proposed rule, but they are presumably referring to services the Claims Manual defines as “repetitive services”, which are required to be billed on a separate monthly claim. They also proposed to exclude ambulance service; brachytherapy; mammography; preventative services; pass-through drugs, biologicals and devices; and services paid on a reasonable cost basis.

The proposed rule also makes another significant packaging proposal related to ancillary services with costs of $100 or less. CMS is proposing to conditionally package services with a mean cost of $100 or less, eliminating status indicator “X” and reassigning these codes to status indicator “Q1” (STV Packaged). Table 11 has the list of APCs that will be packaged under the new rule, including level I and II x-rays, level I ultrasounds, ECGs, and many other ancillary procedures and diagnostic tests. The proposal would exclude preventative services, certain psychiatry and counseling services, and drug administration services from the new policy. Services that formerly had a status indicator “X” but are not subject to packaging (i.e., they have a cost greater than $100) will be reassigned to status indicator “S”.

One of the most significant proposals in the rule did not relate to outpatient services at all, but rather to the inpatient certification requirement. In the CY 2014 IPPS Final Rule, CMS adopted revised certification requirements for all inpatient admissions. Because all elements of the new certification had to be signed by the physician prior to discharge, this requirement has created a great deal of difficulty for hospitals and arguably required the most extensive change to computerized documentation systems of all the changes in 2014.

The proposal would modify the regulation on certification to only require the certification for outlier cases and long-stays, defined as stays 20 days or longer. The requirements for the new certification are similar to the requirements under the current rule: reason for continued hospitalization or special and unusual circumstances for outliers, estimated time the patient will remain in the hospital, and plans for post-hospital care. CMS is careful to note that the order requirements also adopted in the CY 2014 IPPS Final Rule are not proposed to change and an order complying with the new order requirements is still necessary to demonstrate the patient is considered an inpatient during this stay.

The rule contains other proposals including payment updates, a proposal for a new modifier to identify off-campus provider based department services, an increase to the outlier threshold, and quality proposals. As always, providers are encouraged to read the rule for policies significant to their operations and submit comments on proposals that will unduly or negative affect them. The comment deadline was not set in the display copy of the rule, but the rule is set to be published in the Federal Register on July 14 and the comment period is normally 60 days from the publication date.

Note from the instructor: CMS’ Advisory Panel on Hospital Outpatient Payment seeks input on chemotherapy supervision rules

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.  

Hospital outpatient therapeutic services paid under OPPS or paid to critical access hospitals (CAH) on a cost basis must be furnished “incident to” a physician’s service to be covered. There are four elements to meet incident to; however, furnishing the service under the appropriate level of supervision by a physician or non-physician practitioner has become the most complex.

In most circumstances, CMS has designated direct supervision to be the default level of supervision for hospital outpatient therapeutic services. CMS has also designated general supervision as appropriate for specific services that have been identified through a sub-regulatory process. The Advisory Panel on Hospital Outpatient Payment–called the Panel—which has included representation from CAHs since 2010, considers recommendations from providers and its own members.

The Panel meets in March and August, and CMS prioritizes requests for consideration by the Panel based on service volume, total expenditures, and frequency of requests. Hospitals may request that the Panel review a particular service and recommend to CMS that it be approved to be provided under general supervision. Following the Panel meeting, CMS posts their preliminary decisions on the Panel’s recommendations for a 30-day comment period. After the comment period, they will issue their decisions effective July 1 following the March meeting or January 1 following the August meeting.

On March 10, 2014, the Panel met and reviewed the supervision levels of eight HCPCS codes related to the administration of chemotherapy, complex drugs, or biologic agents. At that meeting, the Panel recommended that these codes be changed from direct to general supervision. However, CMS “believed that the appropriate supervision level for these services is inherently a clinical issue” and they decided not to change the supervision requirement. Although CMS solicited public comments regarding the clinical standards for supervision for both initial and subsequent administrations of these drugs, it appeared to CMS that the commenters misunderstood their intent of suggesting a different supervision level for the initial administration and when that same drug is being given in a subsequent encounter. Instead, CMS decided to refer these services back to the Panel for further deliberations at the August 2014 Panel meeting.

CMS explained that current clinical guidelines suggest that a general level of supervision is unsafe. They are asking for more input whether the supervision level should be direct for the initial administration followed by general for subsequent administrations of the same drug. CMS also stated that they “welcome other suggested approaches that balance professional and hospital viewpoints” and asked the Panel to weigh supervision levels as recommended by clinical guidelines from professional associations with the realities of hospital operations and patient care in rural areas.

On CMS’ hospital OPPS website, hospitals can also find the current list of hospital outpatient therapeutic services that are either designated as non-surgical extended duration therapeutic services (NSEDTS or “extended duration services”) or those that may be furnished under general supervision in accordance with applicable Medicare regulations and policies. When hospitals review the list, they may find a surprise that will go into effect on July 1, 2014. CMS’ preliminary decision on one of the recommendations from the March 10 Panel meeting stated that they would not move transfusion of blood or blood products (HCPCS 36430) from direct to general supervision.

“While we would not accept the Panel’s recommendation that CMS change the supervision level to general for CPT code 36430, we would designate this code as a Non-Surgical Extended Duration Therapeutic Services (or “extended duration services”), which would require an initial period of direct supervision with potential transition of the patient to general supervision. We believe blood transfusion warrants direct supervision initially to manage potential adverse events and reactions.”

In looking at the updated list, hospitals will find that HCPCS 36340 will change from direct supervision to general supervision which is contradictory to their March statement. For hospitals that struggle with meeting direct supervision for certain outpatient services, like blood transfusions, that are often provided by nursing staff and sometimes “after usual department hours,” this may be the solution they have been looking for.

2015 OPPS Proposed Rule CMS reintroduces Comprehensive APCs, proposes expanded packaging

by Steven Andrews

The 2015 OPPS proposed rule, released July 3 by CMS, is relatively short at less than 700 pages, but contains refinements to the previously introduced Comprehensive APC policy, significant packaging of ancillary services, and a change for inpatient certification requirements.

“In terms of the volume of changes, it’s less than we normally see, but in terms of impact, it’s on par with last year’s big changes,” says Kimberly Anderwood Hoy Baker, JD, director of Medicare and Compliance for HCPro, a division of BLR, in Danvers, Massachusetts.

Jugna Shah, MPH, president of Nimitt Consulting, agrees and encourages hospitals to begin assessing financial impact now in light of CMS’ packaging proposals.

Comprehensive APCs

CMS has proposed implementing a concept it finalized in the 2014 OPPS final rule by introducing Comprehensive APCs for device-dependent APCs. With Comprehensive APCs, a single payment will be made rather than separate, individual APC payments, Shah says.

The 2015 OPPS proposed rule includes some lower-cost device-dependent APCs and two new APCs for other procedures and technologies that are either largely device dependent or represent single session services with multiple components. After additional consolidation and restructuring, CMS is now proposing 28 Comprehensive APCs for 2015.

The most significant change to the policy is a proposed “complexity adjustment.” The adjustment is applied when a primary procedure assigned to a Comprehensive APC is reported with other specified procedures also assigned to Comprehensive APCs or with a specified packaged add-on code. When the facility reports one of these combinations, CMS will increase the payable APC to the next higher APC in the clinical group, similar to DRGs on the inpatient side.

“This is the first time in OPPS history where we have something like severity adjustment,” says Baker.

Device-dependent edits

Instead of eliminating all device-dependent edits, beginning in CY 2015, CMS proposes to require that facilities report a device code for procedures currently assigned to a device-dependent APC.

Under CMS’ proposal, the device claims edit would be met by reporting any medical device C code currently listed among the device edits for the CY 2014 device-dependent APCs, rather than reporting a particular device C code(s).

“It’s nice that CMS heard commenters’ concerns about the elimination of all device-to-procedure edits altogether and has instead proposed to retain some level of editing,” says Shah. “This is critical to ensure that the agency receives completely coded claims for future rate-setting.”

Packaging increases

The rule includes four proposals to continue expanding packaging, a common theme for the OPPS in recent years.

“CMS continues full steam ahead with packaging, and has added an interesting twist to how it’s looking at packaging additional services, using a dollar threshold,” Shah says.

CMS proposes to package add-on codes assigned to device-dependent APCs (paid separately in CY 2014) starting in CY 2015, since these device-dependent add-on codes will be paid under the Comprehensive APC policy. These codes are listed in Table 9 of the proposed rule.

CMS also proposes to conditionally package ancillary services that have a geometric mean cost of less than or equal to $100 (with some exceptions, including preventive service, counseling/psychiatry, and drug administration services).

Additionally, CMS proposes to eliminate status indicator X (ancillary services). This means that all CPT® codes currently assigned to status indicator X will either be reassigned to status indicator Q1 (conditionally packaged) or S (significant procedure, not discounted).

If finalized, ancillary services with status indicator Q1 will not generate separate payment when provided on the same date of service as another separately payable procedure with a status indicator of S, T (significant procedure, multiple reduction applies), or V (clinic or ED visit), but will generate separate payment if provided on their own.

Providers will need to carefully examine the proposed changes and assess the financial impact of the proposed packaging changes, which will require an examination of claims rather than individual CPT codes or line items, Shah says.

Finally, CMS proposes to package and change the status indicator from A (services furnished to a hospital outpatient paid under a fee schedule or payment system other than OPPS) to N (items and services packaged into APC rates) for all DMEPOS prosthetic supplies.

CMS says this is consistent with the change it finalized for CY 2014 for all non-prosthetic DMEPOS supplies (with the status indicator changed from A to N). If this proposed change is finalized for CY 2015, then all medical and surgical supplies would be packaged in the OPPS.

Physician certification of inpatient services

CMS is proposing several changes to requirements related to inpatient physician certification, according to Baker.

Although CMS will continue to require a physician order for inpatient services, it will no longer require certification that the stay was medically necessary in most cases. CMS believes that in most cases the admission order, medical record, and progress notes contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification, with two exceptions.

For stays of 20 days or longer and outlier cases, CMS believes physician certification is needed and therefore proposes to require formal physician certification beyond the admission order to substantiate the medical necessity for these cases.

E/M visits

CMS proposed no changes to E/M visit configuration or payment policy methodology in 2015, a year after CMS proposed replacing all E/M visit levels with three HCPCS Level II G-codes. CMS proposes to continue using the single visit G code and existing coding convention for Type A and Type B ED visits, though the agency says it plans on looking at different payment methodologies for the most costly ED trauma-type cases.

Additional proposals

CMS proposed the packaging threshold to remain at $90, the same as CY 2014, and for the average sales price plus 6% remains in effect for all separately payable drugs, biologicals, and radiopharmaceuticals. CMS proposed no changes to packaging of diagnostic radiopharmaceuticals and contrast agents, or the payment methodology of therapeutic radiopharmaceuticals or brachytherapy for 2015.

To better understand the frequency and type of services furnished in provider-based departments in off-campus locations, CMS proposes a new data collection requirement that, if finalized, would impact both physician and hospital reporting, according to Shah.

Specifically, CMS is proposing to collect this information beginning January 1, 2015, by requiring the use of a new HCPCS modifier that would be reported with every code for physician and outpatient hospital services furnished in an off-campus provider-based department of a hospital.

The modifier would be reported on both the CMS-1500 claim form for physician services and the UB-04 form (CMS Form 1450) for hospital outpatient services. CMS is asking for additional public comment on whether the use of a modifier is the best mechanism for collecting this service-level data.

“If providers do not like or support this option, they need to comment now, because this is the second time CMS has asked for comments and alternatives,” Shah says. “If they are not provided, it seems very likely that CMS will finalize this.”

CMS will accept comments on the proposed rule until September 2, 2014, and will respond to comments in a final rule to be issued on or around November 1, 2014. The proposed rule will appear in the July 14 issue of the Federal Register.

Note from the instructor: CMS Releases Guidance on Modifier L1 and Clarifies Lab Payment for TOB 12X

A few weeks ago, CMS released the recurring OPPS update Transmittal 2971, as well as the recurring Integrated Outpatient Code Editor (I/OCE) specifications Transmittal 2957 for dates of service beginning July 1. In these transmittals, CMS officially announces the new modifier L1 for use by PPS hospitals when submitting claims for separate payment of outpatient lab tests that are paid under the Clinical Laboratory Fee Schedule (CLFS). In previous issues of the Medicare Insider, I wrote about the concerns surrounding billing for unrelated lab on Type of Bill (TOB) 14X and the lack of additional reimbursement for sole community hospitals (SCH).

As of January 1 date of service, hospitals have been reporting separately payable labs on TOB 14X which created confusion and controversy for facilities and the National Uniform Billing Committee (NUBC). Historically and by definition, TOB 14X was for non-patient (specimen only) lab services where the patient did not receive outpatient services on the same date of service. These types of labs were easy for hospitals to identify and systematically direct the claim to process under TOB 141X. In order to comply with the new billing guidance, hospitals have had to create back-end processes and, in some cases, separate review by staff to identify if the outpatient lab should be billed on TOB 14X to receive separate reimbursement under the “exceptions” guidance provided by CMS.

Transmittal 2971 announces that beginning July 1 date of service, separately payable labs should be billed on TOB 13X and with modifier L1. This guidance directs all hospitals to revert back to billing non-patient lab tests on TOB 14X which is consistent with the NUBC’s definition of this bill type—just when hospitals finally have their registration and billing staff re-trained one way.

According to Transmittal 2971, modifier L1 will be used with lab services only in either of these two circumstances:

  1. When the hospital collects the specimen and only provides lab services on that date of service; or,
  2. When the hospital provides outpatient lab services and they are clinically unrelated to other hospital outpatient services furnished on the same day.

In order to apply the second circumstance correctly, hospitals need to understand that “unrelated means the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services, for a different diagnosis.” If the definition is met, the lab test would be eligible to be reported with modifier L1 to trigger separate payment. If the definition is not met, modifier L1 would not be reported and the lab payment would be packaged into another separately payable service. PPS hospitals do not have to resubmit claims for lab tests that had previously been billed using TOB 14X prior to July 1 date of service.

But what about those SCHs that have not been receiving their add-on payment since January 1 for separately payable lab billed on TOB 14X? SCHs have to go back to MLN Matters Article SE1412 that was published March 5 for additional guidance as Transmittal 2971 does not provide this information.

MLN Matters Article SE1412 explains that TOB 14X does not trigger the differential payment rates (CLFS amount/0.6 X 0.62) for SCHs with qualified laboratories. Unfortunately, MACs will not reprocess claims for SCHs because the MACs have no way of knowing which labs should have been paid the add-on payment vs. which labs should have been paid as true non-patient labs. These providers may need to cancel or adjust claims that were submitted without the modifier L1 prior to July 1 and then submit a new TOB 13X with the appended modifier after July 1 in order to receive the corrected reimbursement.

Also in Transmittal 2971, CMS expounds and clarifies its current payment policy regarding the limited set of Part B inpatient services that a hospital may bill for when a beneficiary is either not eligible for or not entitled to Part A coverage or when a beneficiary has exhausted their Part A benefits. Included in that short list of services is lab service paid under the CLFS.

CMS clarifies that in these scenarios, lab testing is excluded from OPPS packaging rules if the primary service with which the lab would have been bundled into is not a payable Part B inpatient service. CMS has adjusted its claims processing logic to make separate payment for laboratory services paid under the CLFS that would otherwise be packaged under OPPS beginning in 2014.

For those hospitals that billed under TOB 12X and were denied payment for lab services, they have to read the fine print in the transmittal to identify the next step:

“Medicare contractors shall adjust 12X claims for beneficiaries who are either not entitled to Part A at all, or are entitled to Part A but have exhausted their Part A benefits where the laboratory services were packaged for 2014 dates of service that are brought to their attention.”

In other words, if hospitals want to collect their separate reimbursement for lab services that were denied on TOB 12X, they must take the initiative to rebill for those services. Hospitals should contact their MACs for additional guidance on how to appropriately resubmit claims to prevent further delays in payment.

In addition to guidance for new modifier L1, both of these transmittals have other details that facilities should review regarding brachytherapy services, new HCPCS codes for drugs and biologicals, and payment updates for specific HCPCS codes that facilities should consider rebilling for the appropriate reimbursement.

Note from the instructor: Devices and Anesthesiologist/CRNA Payments – Clarification of Two CMS Transmittals

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.

In the Medicare Claims Processing Transmittal 2903, April 2014 Update of the Hospital Outpatient Prospective Payment System (OPPS), CMS discusses the current policy regarding billing for certain devices that are received by facilities at no cost, full credit, or partial credit. As of January 1, 2014, the modifiers “FB” or “FC” that were previously used to identify these devices are no longer accepted by Medicare Administrative Contractors (MAC), and providers should now be reporting value code “FD” with the amount of the credit. This is not anything new, but I wanted to point out a percentage that was used in the transmittal that may be confusing to facilities.

In the transmittal, CMS states:

Also effective January 1, 2014, for claims with APCs that require implantable devices and have significant device offsets (greater than 40%), the amount of the device credit will be specified in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) and will be deducted from the APC payment from the applicable procedure. The OPPS payment deduction for the applicable APCs referenced above will be limited to the total amount of the device offset when the FD value code appears on a claim. The offset amounts for the above referenced APCs are available on the CMS Web site.

The “greater than 40%” referenced above is actually a threshold used to identify ambulatory payment classifications (APC) that will be affected by the policy. CMS uses this percentage to identify an APC where at least 40% of the payment rate is determined by the cost of the device itself. In theory, if the APC does not meet that device cost threshold, a facility would not have to report a credit regardless of the amount. A list of the affected APCs can be found in Table 30 of the 2014 OPPS Final Rule.

The actual reporting policy for facilities is still based on at least a 50% credit of the cost of the device. Specifically, page 75006 of the Federal Register states that hospitals are required to report the amount of the credit with value code ‘‘FD’’ (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device listed in Table 31 that is 50% or greater than the cost of the device. Although MLN Matters article MM8653 somewhat clarifies the confusion that Transmittal 2903 created, hospitals will continue to use the 50% credit as their reporting threshold for complying with this CMS policy.

To further clarify the remainder of the device credit policy, the OPPS payment deduction for the APCs referenced above is limited to the total amount of the device “offset” when the FD value code appears on a claim. The offset amounts are available under the Annual Policy Files link on the on the CMS OPPS website and can help facilities identify the maximum amount by which the APC payment may be reduced.

In an unrelated transmittal, One Time Notification 1379, CMS published a clarification for certified registered nurse anesthetist (CRNA) and anesthesiologist payments made to a Method II Critical Access Hospital (CAH). For those readers that may not be familiar with this cost based reimbursement system, the following is a brief explanation.

  • Anesthesiologists and CRNAs may reassign their billing rights to a CAH.
  • The CAH may bill under Method II (optional method) by billing the facility outpatient service and the related professional fee on the same outpatient claim by reporting specific revenue codes.
  • In most instances, this allows the CAH to receive reimbursement at 115% of what the Medicare Physician Fee Schedule (MPFS) would have paid the physician or CRNA if they had billed independently on the 1500 claim form.
  • Under certain qualifying circumstances, a CAH can receive cost based reimbursement for its CRNA services rather be paid under the MPFS. This type of payment is called a pass-through payment.

On June 7, 2013 in previously released Transmittal 2719, CMS announced that effective January 1, 2013, qualifying CAHs and rural hospitals were eligible to receive pass-through payments for services that CRNAs are legally authorized to perform in the state in which the services are furnished (see amended 42 CFR 410.69(b)). The pass-through payments included those procedures outside of the anesthesia HCPCS codes (00100-01999) that were billed using revenue code 964 on the CAH’s outpatient claim (TOB 085X).

Although this information was first released in June 2013, CMS is now clarifying in One Time Notification Transmittal 1379 that the effective date for payment of CRNA service outside of the anesthesia code range is January 1, 2013, and includes payment made under pass-through and Method II reimbursement methodologies. Unfortunately, CAHs have to read the entire transmittal to understand that if they want the proper Method II reimbursement for procedures performed by CRNAs outside of the anesthesia code range, the CAH is responsible to resubmit claims to their MAC. CMS also instructs MACs to bypass timely filing so that facilities can rebill claims back to the January 1, 2013 date of service based on this more recent clarification. This transmittal goes on to announce that effective January 1, 2014, a Method II CAH can also receive reimbursement for anesthesiologist services identified by revenue code 963 on the CAH’s outpatient claim.

Unfortunately, in the current Medicare claims editing and processing systems, the only HCPCS codes 00100–01999 performed by an anesthesiologist (revenue code 963) or CRNA (revenue code 964) that can be reimbursed under Method II. The claims processing system will not be updated until October 6, 2014, as identified by the implementation date on this transmittal. Again, the CAH is responsible to resubmit claims to their MAC once this policy is implemented.

To prevent lost reimbursement, CAHs may want to consider reviewing claims data from January 1, 2013, to the current period that were billed with revenue code 964 and a HCPCS code outside of the anesthesiology code range. These claims may need to be resubmitted to receive proper Method II reimbursement and CAHs should consult their MACs for further guidance.

CAHs may also want to review claims data from January 1, 2014, to the current period that were billed with revenue code 963 and a HCPCS code outside of the anesthesiology code range. If the service was not paid appropriately under Method II reimbursement methodology, hold the claim and resubmit after October 6, 2014. For outpatient claims that have not been billed yet and for which the facility will report revenue code 963 with a HCPCS code outside of the anesthesiology code range, hold the claim and submit after October 6, 2014, keeping in mind that timely filing requirements must be met.

Note from the instructor: CMS reassigns packaged skin substitute products approved for payment in CY 2014 based upon updated payment information


This note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro.

One of the more complex aspects of coding, billing, and payment for covered drugs and biologicals relates to skin substitute products. Under the CY 2014 OPPS/ASC final rule (CY 2014 final rule), CMS is packaging most skin substitute products into the application procedures that utilize them. Per CMS policy, there is no separate payment for packaged items and services; the payment for packaged items and services is included in the payment for the separately payable procedures of which they are an integral part.

Special billing rules for packaged skin substitute products

For packaging purposes, CMS created two groups of application procedures: application procedures that use high-cost skin substitute products (billed using CPT codes 15271–15278) and application procedures that use low-cost skin substitute products (billed using HCPCS codes C5271–C5278).

In making its decision as to whether a skin substitute product will be assigned to the high cost or low cost group, CMS did a comparison of the July 2013 payment rate for the skin substitute product to $32, which is the weighted average payment per unit for all skin substitute products. In doing so, CMS used skin substitute utilization data from CY 2012 claims and the July 2013 payment rate for each product. For CY 2014, skin substitute products with a July 2013 payment rate that was more than $32 per square centimeter are packaged into the payment for the high-cost application procedures, and those with a July 2013 payment rate that was equal to or less than $32 per square centimeter are packaged into the low cost application procedures. 

A listing of the respective high- and low-cost skin substitute products, as well as the high- and low-cost skin application procedures into which they will be packaged, is set out in the CY 2014 Final Rule, Tables 13 and 14 respectively. A few skin substitute products (e.g., skin substitute products that are applied as either liquids or powders per milliliter or per milligram and are currently employed in procedures outside of the CPT code range of 15271–15278) are not designated as either high or low cost. They should be billed with the applicable surgical procedures that use them rather than the skin application procedures noted above (that is, they should not be reported with CPT codes15271–15278 or HCPCS codes C5271–C5278). Payment for these skin substitutes will be packaged into payment for the related surgical procedures.

Reassignment of new CY 2014 skin substitute products

Under the CY 2014 final rule, CMS also finalized a policy that for any new packaged skin substitute products approved for payment during CY 2014, CMS will use the $32 per square centimeter threshold to determine mapping to the high- or low-cost skin substitute group, as soon as sufficient pricing information becomes available. Any new packaged skin substitute products without pricing information were assigned originally to the low-cost category. There were nine new packaged skin substitute products that were covered as of January 1, 2014, and that were assigned to the low-cost payment group because pricing information was not available for these products at the time of the January 2014 update.

As reported in CMS’ April quarterly OPPS update (Transmittal R2903CP), there is now pricing information available for three of these nine products. Table 7 below shows the three new products and their updated low/high cost status based on the comparison of the price per square centimeter for each product to the $32 square centimeter threshold for CY 2014.

Table 7—Updated Payment Rates for Certain HCPCS Codes Effective April 1, 2014


Long Descriptor

Status Indicator

Low/High Cost Status


Repriza, Per Square Centimeter




Architect Extracellular Matrix, Per Square Centimeter




Neox 1k, Per Square Centimeter



Billing and payment for pass-through skin substitute products

Although most skin substitute products are packaged, for CY 2014 five skin substitute products have been granted pass-through status and are separately payable. Skin substitutes with pass-through status have a status indicator of “G,” as set out in Table 13. Pass-through skin substitutes should be reported with CPT codes 15271–15278. Payment for pass-through skin substitutes is subject to an offset based on the amount of packaged skin substitute that is already included in the payment for the related skin application procedure. During CY 2014, for those skin application procedures assigned to APC 0328, the offset amount is 56.77%, and for those skin application procedures assigned to APC 0329, the offset amount is 15.93%.

Practical implications

There are several practical implications for hospitals under these complex billing rules. First, for dates of service on and after January 1, the Integrated Outpatient Code Editor will return to provider (Edit 87) any claim with an appropriate skin application procedure that does not also include an appropriate skin substitute product. This applies to both packaged and pass-through skin substitute products. In order to receive payment for the skin application procedure (as well as any pass-through skin substitute product, if applicable), the hospital will need to add the appropriate skin substitute product to the claim.

Second, effective April 1, based upon the reassignment of two skin substitute products—Q4147 and Q4148—from the low to the high-cost group, hospitals will need to revise their billing policies to ensure  that these skin substitute products are billed with the applicable skin application procedures. Hospitals will also need to keep an eye out for potential reassignment of the remaining six new skin application procedures so that appropriate changes in billing policy can be implemented.

Note from the instructor: Lab billing details in the January 2014 OPPS update

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.

Last week, CMS released MLN Matters article MM8572 with billing instructions for laboratory services paid under either OPPS or the Clinical Laboratory Fee Schedule (CLFS). Prior to this guidance, I had received several questions from clients and past students regarding rural sole community hospital (SCH) add-on payments for lab services. Several weeks ago, I had requested clarification from CMS and the response that I received last week with the release of this article only generated more questions and I am waiting for further clarification.

According to the OPPS Final Rule (78 Fed. Reg. 74832), the 7.1% upward adjustment will continue to be paid for all services paid under OPPS, excluding separately payable items such as drugs, biologicals, and devices. Historically, rural SCHs also received an add-on payment for lab paid under the CLFS amount (fee schedule amount/0.6 X 0.62). As of January 1, 2014, the lab status indicator has been changed from “A” to “N” to indicate the lab is packaged into other separately payable services on the same claim, excluding molecular pathology. Upon further review of the rule, Table 55 (78 Fed. Reg. 75180-183) demonstrates how APC payments for SCHs were recalibrated to accommodate labs that are now packaged when billed on TOB 13X.

According to the CMS guidance, in calendar year 2014 the use of Type of Bill (TOB) 14X has been expanded to allow separate billing and payment at CLFS rates for hospital outpatient laboratory tests. Laboratory tests may be (or must be for a non-patient specimen) billed on TOB 14X in the following circumstances:

  • For non-patient laboratory specimen tests when the beneficiary does not receive other hospital services on the same day and is not physically present at the hospital; or,
  • When the hospital only provides outpatient laboratory tests to the patient and the patient does not also receive other hospital outpatient services during that same encounter; or,
  • When the hospital provides a laboratory test during the same encounter as other hospital outpatient services that is clinically unrelated to the other hospital outpatient services and the laboratory test is ordered by a different practitioner than the one who ordered the other hospital outpatient services.

Unfortunately, when following this guidance using TOB 14X, the add-on payment is not triggered for SCHs. I have recently received confirmation from a hospital that they, in fact, did not receive the add-on payment for their outpatient lab services appropriately billed on TOB 141. The financial impact for rural SCHs is yet to be determined and will highly depend on the volume of “outpatient lab only” that had traditionally been billed on TOB 131 but are now required to be billed on TOB 141. One of the problems that SCHs may encounter is how to identify a non-patient lab from an outpatient lab when they are billed on the same bill type. SCHs should put a system into place now to track this issue if their volume warrants monitoring potential changes in revenue.

Note: Although the release date on the related Medicare Claims Processing Manual Transmittal 2845 is December 27, 2013, I did not see a notice that this was published until MM8572 was available on January 14, 2014. All PPS hospitals should review the transmittal for other outpatient billing instructions related to the major changes impacting them with dates of service January 1, 2014.

Note from the instructor: On the road to a more prospective OPPS, part II

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.

Last week we discussed CMS’ movement from a largely fee-for-service outpatient hospital reimbursement methodology to a more prospectively determined outpatient prospective payment system (OPPS) payment methodology. Looking at the proposed calendar year (CY) 2014 OPPS/Ambulatory Surgery Center (ASC) rule, we spent most of our time focusing on CMS’ proposal to create comprehensive ambulatory payment classifications (APCs) for the 29 most costly device-dependent primary services. Under this proposal, CMS would make a single prospective payment based on the cost of all individually reported codes that represent the provision of one of these primary services and all adjunctive services provided to support the delivery of that primary service. This would result in a significant reduction in the number of individual separate payments for OPPS covered items and services.

We also noted CMS’ recommendation to significantly expand the number and type of OPPS covered items and services subject to “packaging.” When a covered item or service that is payable under the OPPS is packaged, the payment for that item or service is included in the payment for the related primary service of which it is an integral, supporting part. In the remainder of this week’s note, we will focus on the specific details of CMS’ proposed expansion of packaging for CY 2014. This expansion would also significantly reduce the number of individual separate payments for OPPS covered items and services.


Historical perspective on packaging

Since August 2000, the OPPS has been the primary payment methodology for most hospital outpatient services covered under Medicare Part B and certain inpatient hospital services that are not covered under Part A but are covered under Part B. Under the OPPS, as originally implemented, most covered services were separately payable based upon the HCPCS code that identified those services and the APC to which that HCPCS code was assigned.

From the beginning, certain dependent services that Medicare considered to be covered and payable under the OPPS were not separately payable. These items and services were referred to as  “packaged.” As noted above, the payment for a packaged item or service is included in, or “packaged into,” the payment for the related primary service of which it is an integral part.

Initially, packaged items and services tended to be relatively low cost and were usually furnished in support of some other more significant independent service. Items and services that have been traditionally packaged include anesthesia, use of the operating/treatment/procedure room, drugs, devices, and observation. Effective January 1, 2008, CMS vastly expanded the number of packaged items and services to include many that are fairly expensive and that might be used independently, at least in some circumstances. The expanded list of packaged items and services includes diagnostic radiopharmaceuticals, contrast agents, guidance services, image processing services, intraoperative services, and imaging supervision and interpretation services.


Proposed CY 2014 packaging expansion

In the proposed CY 2014 OPPS/ASC rule, CMS has recommended packaging the following additional items and services:

  • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure
  • Drugs and biologicals that function as supplies or devices when used in a surgical procedure
  • Clinical diagnostic laboratory tests
  • Procedures described by add-on codes
  • Ancillary services (currently identified with status indicator ‘‘X’’)
  • Diagnostic tests on the bypass list
  • Device removal procedures

Let us look at each of these categories in more detail.


Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure

In its rationale for expanding packaging to include these items and services, CMS noted that it currently unconditionally packages the following six categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies):

  • Those with per day costs at or below the packaging threshold (for CY 2014, the proposed packaging threshold is $90 per day based on historical claims data from CY 2012)
  • Diagnostic radiopharmaceuticals
  • Contrast agents
  • Anesthesia drugs
  • Drugs used as supplies according to § 419.2(b)(4)
  • Implantable biologicals

CMS noted that the same rationale that justifies packaging diagnostic radiopharmaceuticals and contrast agents that function as supplies when used in specific diagnostic tests or procedures should logically be expanded to package all drugs, biologicals, and radiopharmaceuticals that function as supplies in such circumstances. Thus, CMS proposes to unconditionally package all drugs, biologicals, and radiopharmaceuticals that function as a supply when used in a diagnostic test or procedure, except when the drug, biological, or radiopharmaceutical has pass-through status. For purposes of this proposed expansion, a diagnostic test or procedure is defined as any kind of test or procedure performed (i) to aid in the diagnosis, detection, monitoring, or evaluation of a disease or condition; or (ii) to determine which treatment option is optimal.

CMS mentioned two specific drugs that would be included in this expanded packaging category in addition to currently packaged diagnostic radiopharmaceuticals and contrast agents: stress agents and hexaminolevulinate hydrochloride (Cysview®). Stress agents are composed of a class of drugs that are used in certain diagnostic tests (primarily myocardial perfusion imaging) to evaluate certain aspects of cardiac function. Stress agents include those drugs currently identified by HCPCS codes J0152, J1245, J1250, and J2785. Cysview® (HCPCS code C9275) is an optical imaging agent indicated for use in the cystoscopic detection of non-muscle invasive papillary cancer of the bladder among patients suspected or known to have lesion(s) on the basis of a prior cystoscopy.

The drugs, biologicals, and radiopharmaceuticals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”


Drugs and biologicals that function as supplies or devices when used in a surgical procedure

Since the implementation of the OPPS, CMS has packaged virtually all medical devices (except for those subject to temporary pass-through status), medical and surgical supplies, and surgical dressings. For purposes of these packaging rules, supplies constitute a large category of items that are typically either for single patient use or have a shorter life span than equipment. Supplies include not only minor, inexpensive, or commodity-type items, but also a wide range of products used in the hospital outpatient setting, including certain implantable devices and biologicals. CMS has long considered these implantable devices and biologicals to be integral to the surgical implantation procedures using them, and, except for devices and biologicals subject to temporary pass-through status, CMS has packaged payment for them into the payment for the related surgical procedure of which they are an integral part.

As with the prior expansion category, CMS has moved from the specific to the general, proposing to unconditionally package all drugs and biologicals that function as supplies or devices when used in a surgical procedure.

In its discussion, CMS identified one specific class of drugs or biologicals that would fall within this category: skin substitutes. The term ‘‘skin substitutes’’ refers to a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers. These products do not actually function like human skin and are not a substitute for a skin graft. Instead, these products are various types of wound dressings that stimulate the host to regenerate lost tissue and replace the wound with functional skin. Skin substitutes are subject to regulation by the FDA as medical devices, human tissue, or cellular products and are applied to wounds during surgical procedures described by CPT codes 15271 through 15278. Some of these products have dual uses and can be used either as skin substitutes or implantable biologicals, depending on whether they are applied externally or internally.

The drugs and biologicals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”


Clinical diagnostic laboratory tests

Up to this point, clinical diagnostic laboratory tests have been paid under the clinical laboratory fee schedule (CLFS), rather than the OPPS. However, the secretary of HHS has broad discretion to determine which covered items and services are to be paid under the OPPS. In the interest of moving toward a more prospective OPPS, and after a careful review of how, why, and when laboratory tests are performed in the outpatient hospital setting, CMS has determined that the vast majority of such tests are integral, ancillary, supportive, dependent, or adjunctive to the primary services provided and should be packaged.

Therefore, except for molecular pathology tests, CMS is proposing to package laboratory tests when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. This would be the case when they are provided on the same date of service as the primary service and are ordered by the same practitioner who ordered the primary service.

CMS would consider a laboratory test to be unrelated to a primary service and, thus, not part of this packaging policy, when the laboratory test is the only service provided on that date of service or when the laboratory test is provided on the same date of service but is ordered for a different purpose by a different practitioner from the one who ordered the primary service. The laboratory tests not included in this packaging proposal would continue to be paid separately at CLFS rates when billed on a 14X bill type. As noted above, CMS also proposed that molecular pathology tests described by CPT codes 81200 through 81383, 81400 through 81408, and 81479 should be exceptions from this packaging policy.

The HCPCS codes for the laboratory tests subject to this packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”


Procedures described by add-on codes

Add-on codes describe procedures that are always performed in addition to a primary procedure. The example that CMS discussed is the procedure described by CPT code 11001 (debridement of extensive eczematous or infected skin; each additional 10% of the body surface, or part thereof), which is used for additional debridement beyond that described by the primary procedure code. Currently, add-on codes typically receive separate payment based on APC assignment and are assigned status indicator ‘‘T.’’

Because add-on codes represent an extension or continuation of a primary procedure, CMS argues that they are typically supportive, dependent, or adjunctive to that primary procedure and, consequently, their payment should be packaged into the payment for the primary procedure. Therefore, CMS is proposing to unconditionally package all procedures described by add-on codes in the OPPS.

The specific HCPCS codes for the add-on codes subject to this packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”


Ancillary services (status indicator ‘‘X’’)

Under the OPPS, CMS currently pays separately for certain ancillary services that are assigned to status indicator ‘‘X,’’ defined as ‘‘ancillary services.’’ In most instances, these services, which include a number of minor diagnostic tests (e.g., x-rays, pathology laboratory tests) are actually performed ancillary to a primary service. However, in certain circumstances they may be performed independently.

Consistent with their desire to develop a more prospective OPPS and the packaging principles discussed above, CMS believes that these ancillary services, which are assigned status indicator ‘‘X,’’ should be packaged when they are performed with another primary service, but should continue to be separately paid when performed independently. Therefore, CMS is proposing to conditionally package all ancillary services (except for preventive services) that were previously assigned a status indicator of ‘‘X’’ and to assign to these services status indicator ‘‘Q1’’ instead (packaged when provided with a service assigned a status indicator of ‘‘S,’’ ‘‘T,’’ or ‘‘V’’). Status indicator ‘‘X’’ would be discontinued. For preventive services previously assigned to status indicator ‘‘X,’’ CMS is proposing to change their status indicator to ‘‘S’’ and to continue to pay for them separately.

The specific HCPCS codes for those ancillary services previously assigned a status indicator of “X” and subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “Q1.”


Diagnostic tests on the bypass list

For a number of years, CMS has created a bypass list of separately paid services. The list is used to convert claims with multiple separately payable procedures, which are generally not used for rate-setting purposes, into claims with a single separately paid procedure that can be used for rate setting. Services on the bypass list have limited associated packaged costs so they can be bypassed when assigning packaged costs on a claim to a separately paid procedure on that same claim.

CMS noted that in the past and under the current proposal, they have packaged or recommended packaging a number of adjunctive diagnostic tests into the primary procedures of which they are an integral part. CMS argues that the diagnostic tests on the bypass list share many characteristics with these other conditionally or unconditionally packaged or proposed packaged categories of items and services. Examples include a barium swallow test (CPT code 74220) and a visual field examination (CPT code 92081). In many instances, these tests are integral, ancillary, supportive, dependent, or adjunctive to a primary service. However, in certain circumstances they may be performed independently.

Therefore, CMS is proposing to conditionally package these procedures (except for preventive services) when performed adjunctively and to continue to pay for them separately when performed independently. CMS is proposing the assignment of status indicator “Q1” for these codes. Some of the diagnostic tests on the bypass list are currently assigned to status indicator ‘‘X’’ and would be conditionally packaged under the proposed policy to conditionally package ancillary services currently assigned status indicator ‘‘X.’’ Thus, the only diagnostic codes on the bypass list affected by this proposal are currently assigned to status indicator ‘‘S.’’ Preventive services will continue to be paid separately.

The specific HCPCS codes for services on the bypass list that are subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “Q1.”


Device removal procedures

Implantable devices frequently require removal or replacement due to a variety of factors such as wear, failure, recall, infection, etc. Since the beginning of the OPPS, most implantable devices (except for those subject to pass-through status) have been packaged as supplies, implantable prosthetics, or implantable DME into their associated procedures. Device removal is sometimes reported with a code that describes both removal and repair/replacement, or with a code that only describes removal. Although device removal procedures are frequently performed with procedures to repair or replace devices, device removal may occur without repair or replacement if the clinical indication for the device that was removed no longer exists.

When a separately coded device removal procedure is performed with a separately coded device repair or replacement procedure, CMS argues that the device removal procedure actually represents an integral part of an overall primary procedure that is removal plus repair or replacement of the device. Consistent with their desire to develop a more prospective OPPS and the packaging principles discussed above, CMS is proposing to conditionally package device removal codes when they are billed with other surgical procedures involving repair or replacement and to assign to these services a status indicator  of ‘‘Q2’’ (packaged when provided with a service assigned a status indicator of ‘‘T’’).

The specific HCPCS codes for removal services that are subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “Q2.”


Clarification regarding packaging of medical and surgical supplies

CMS provided one additional clarification regarding the packaging of medical and surgical supplies under the OPPS. Although such items are generally unconditionally packaged, prosthetic supplies are sometimes paid separately. Prosthetic devices are paid according to the DMEPOS fee schedule if paid separately. In a recent review, CMS discovered many supplies that should be paid under the OPPS as packaged items and services, but that are currently assigned to status indicator ‘‘A’’ and are being paid separately, according to the DMEPOS fee schedule.

For CY 2014, CMS is proposing to revise the status indicator for all supplies described by Level II HCPCS A-codes (except for prosthetic supplies) from status indicator ‘‘A’’ to ‘‘N,’’ so that these supplies are  unconditionally packaged under the OPPS, as required by applicable regulations. The specific HCPCS codes for the supplies that are subject to this change are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “N.”


Correctly reporting packaged items and services and their related charges

Even though there is no separate payment for covered packaged items and services, hospitals are strongly encouraged to report them on the same claim as the more significant services of which they are an integral part, whether required by CMS to do so or not. They should be reported as separate line items, along with their related charges. This is to ensure that these charges are appropriately allocated so the payments for the separately payable services of which they are an integral part are calibrated to cover the cost of the related packaged items and services. With the increase in the number of packaged items and services, including very high cost drugs, biologicals, and devices, it has become even more important for hospitals to accurately and completely identify and report their respective costs.