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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

HCPCS Code

Long Descriptor

Status Indicator

Low/High Cost Status

Q4143

Repriza, Per Square Centimeter

N

Low

Q4147

Architect Extracellular Matrix, Per Square Centimeter

N

High

Q4148

Neox 1k, Per Square Centimeter

N

High

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: Billing Outpatient Laboratory Services – TOB 131 vs. TOB 141

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

Since the implementation of the calendar year (CY) 2014 Outpatient Prospective Payment System (OPPS) final rule, there has been much confusion and discussion regarding the requirement to bill certain outpatient lab services on Type of Bill (TOB) 141 rather than TOB 131. Under the new OPPS packaging rules, reimbursement for most outpatient lab services is bundled into other separately payable services on the outpatient claim, excluding molecular pathology.

As of January 1, 2014, date of service, CMS expanded the use of TOB 14X to allow separate billing and payment at Clinical Laboratory Fee Schedule (CLFS) rates for hospital outpatient laboratory tests. However, this change is not only counterintuitive for facilities, it also creates major operational issues.

Historically and by definition, TOB 14X is for non-patient (specimen only) lab services where the patient does not receive outpatient services on the same date of service. Prior to January 1, 2014, the non-patient lab services were easy for hospitals to identify and systematically direct the claim to process under TOB 141. Under 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 141 to receive separate reimbursement under the “exceptions” guidance provided by CMS.

According to the Medicare Claims Processing Manual Transmittal 2845, lab tests may be (or must be for a non-patient specimen) billed on a 14X claim in the following circumstances:
  1. Non-patient laboratory specimen tests; non-patient continues to be defined as a beneficiary that is neither an inpatient nor an outpatient of a hospital, but that has a specimen that is submitted for analysis to a hospital and the beneficiary is not physically present at the hospital;
  2. Beginning in 2014, when the hospital only provides laboratory tests to the patient (directly or under arrangement) and the patient does not also receive other hospital outpatient services during that same encounter; and
  3. Beginning in 2014, when the hospital provides a laboratory test (directly or under arrangement) 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 practitioner who ordered the other hospital outpatient services provided in the hospital outpatient setting. In this case the lab test would be billed on a 14X claim and the other hospital outpatient services would be billed on a 13X claim.

In addition to the operational and compliance concerns that have been created under this new guidance, another issue surfaced. A former student, Melinda McCaslin of Solders + Sailors Hospital in Wellsboro, Pa., raised the question regarding the rural sole community add-on payment that certain hospitals receive when lab is billed on TOB 131. If the hospital must bill their “lab only” or “unrelated lab” on TOB 141, the add-on payment may not be triggered which could be a significant reduction in revenue depending on outpatient lab volumes. Although CMS stated in the OPPS final rule that the application of the rural adjustment for rural sole community hospitals would remain the same and that some APCs had been recalibrated to accommodate this change, it would appear that billing certain outpatient lab under TOB 141 would prevent the add-on payment from being generated as this bill type is only paid under the CLFS. McCaslin later confirmed that their hospital was not receiving their additional payment in these types of situations.

I inquired with CMS in regards to what appeared to be a lack of payment for the rural sole community adjustment for lab. After several emails back and forth, it was alluded that there may be a change in this OPPS policy in the near future. The CMS representative indicated that the use of a modifier on TOB 131 may replace the requirement to report outpatient lab on TOB 141. Shortly after the response I received from CMS, a letter was posted to the National Uniform Billing Committee (NUBC) website that indicated this change may be forthcoming.

I found several of the NUBC’s statements in the January 21 letter to CMS worthy of noting:
  • “…writing on behalf of the members of the National Uniform Billing Committee (NUBC) to express our concern about a recent Centers for Medicare & Medicaid (CMS) action that alters the official definition and purpose of an NUBC data element (as indicated in the Official UB-04 Data Specifications Manual (UB-04 Data Set)).“
  • “Unless the situation is corrected, the NUBC plans on filing a HIPAA complaint with CMS OESS for failure to adhere to the HIPAA standards.”
  • “Even if CMS had done so, the rule making process is not applicable to an external code list that is not within the purview of CMS to arbitrarily change. The NUBC has a change request process that CMS, in this instance, did not follow.”

CMS provided a written response to the NUBC February 18 and indicated that it has requested a modifier to be created for “lab only” and “unrelated lab” situations and that hospitals would be directed to return to billing under TOB 131 once the modifier was approved. This modifier would be retroactive to January 1, 2014, dates of service; however, CMS indicated in its letter to the NUBC that billing instructions to hospitals would probably not be published until the July quarterly OPPS update transmittal.

Hospitals should continue to bill using TOB 141 until CMS provides further instruction. At this time, it is unknown if hospitals will need to rebill certain TOB 141 claims using the new modifier or if the MACs will reprocess these claims for them. Based on the issues discussed above, it is my best guess that providers will be responsible to rebill claims because MACs will not be able to identify which labs are truly non-patient services appropriately billed on TOB 141 and those that are truly outpatient labs that had previously been billed on TOB 131. Stay tuned!

CMS issues recurring update notification highlighting important CY2013 OPPS changes

Editor’s note: Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., is the author of this week’s note from the instructor.

CMS issues recurring update notification highlighting important CY2013 OPPS changes

On Friday, CMS released its annual recurring update notification reflecting the claims processing-related changes implemented in the CY 2013 OPPS final rule. Hospitals and CAHs are encouraged to review the transmittal more thoroughly to assure that they are prepared to implement these changes for services provided on and after January 1, 2013.

Hospitals and CAHs are also encouraged to be on the lookout for a similar transmittal (which has not yet been released) designed to reflect benefit-related changes included in the CY 2013 OPPS final rule. CMS also noted that the January 2013 integrated outpatient code editor (I/OCE) and OPPS pricer will reflect the healthcare common procedure coding system (HCPCS), ambulatory payment classification (APC), HCPCS modifier, and revenue code additions, changes, and deletions identified in this transmittal.

Highlights

CMS identified the following key changes for CY 2013:

  • Changes to device, radiolabeled product and procedure edits for January 2013. The most current list of device edits can be found at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/ .Failure to pass these edits will result in the claim being returned to the provider.
  • Intracoronary stent placement procedure codes. The deletion of two CPT codes (92980 and 92981) that describe the placement of non-drug-eluting intracoronary stents and two existing HCPCS G-codes that describe the placement of drug-eluting intracoronary stents, along with the creation of nine new HCPCS C-codes in order to maintain the existing OPPS policy of differentiating payment for intracoronary stent placement procedures involving non-drug‑eluting and drug-eluting stents for CY 2013.
  • Outpatient payment for composite APC 8000. Modification of the intracardiac catheter ablation codes that may qualify a cardiac electrophysiologic evaluation and ablation service for composite payment under composite APC 8000 for services provided on and after 1/1/13. CMS’ action follows the AMA CPT editorial panel’s deletion of CPT codes 93651 and 93652 (intracardiac catheter ablation codes), effective 1/1/2013 and creation of new CPT codes 93653, 93654, and 93656, effective 1/1/2013.
  • New ‘sometimes therapy’ services that may be paid as non-therapy services for hospital outpatients, Effective January 1, 2013 the addition of two HCPCS codes (G0456 and G0457) to the list of PT/SLP/OT “sometimes therapy” services that may be paid under certain circumstances to a facility under the OPPS. The limited set of sometimes therapy services are paid under the OPPS when they are not furnished as therapy, that is, when they are not furnished under a certified therapy plan of care.
  • Coding changes for partial hospitalization psychiatric (PHP) services. Following the AMA’s CPT editorial panel deletion of 28 psychiatric CPT codes, including those related to PHP services, and replacing them with 12 new CPT codes (effective for services provided on and after 1/1/13), CMS’ implementation of corresponding changes to the PHP code set that is used for billing and documenting PHP services.
  • Certain changes to drugs, biologicals, and radiopharmaceuticals:
    • Effective for services provided on and after 1/1/13, the creation of several new HCPCS codes to identify those drugs, etc. for which no specific code had previously been created. The new codes are set out in Table 1 of Attachment A to the transmittal;
    • Effective for services provided on and after 1/1/13, changes to the HCPCS/CPT or long descriptor, or both, of certain drugs, etc. These changes are set out in Table 2 of Attachment A to the transmittal. Hospitals are once again admonished to pay close attention to accurate billing for units of service consistent with the dosages contained in the long descriptors of the active CY 2013 HCPCS and CPT codes;
    • For CY 2013, payment for nonpass-through drugs, biologicals and therapeutic radiopharmaceuticals is made at a single rate of ASP + 6%, which provides payment for both the acquisition and pharmacy overhead costs associated with the drug, biological or therapeutic radiopharmaceutical. In CY 2013, a single payment of ASP + 6% will also be made (providing payment for both associated acquisition and pharmacy overhead costs for these pass-through drugs, biologicals and radiopharmaceuticals);
    • Any changes in the payment rates effective for services provided on and after 1/1/13, based on sales price submissions from the third quarter of CY 2012, will be incorporated into the January 2013 release of the OPPS Pricer.
    • CY 2013 OPPS payment adjustment for certain cancer hospitals. CMS’ updating of thetarget payment to cost ratio (PCR)” for CY 2013, for purposes of the cancer hospital payment adjustment, to 0.91 for outpatient services furnished on or after January 1, 2013 through December 31, 2013. Under the Affordable Care Act (ACA), beginning in CY 2012, CMS is to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital’s final payment to cost ratio (PCR) for services provided in a given calendar year is equal to the weighted average PCR (which CMS refers to as the “target PCR”) for other hospitals paid under the OPPS.
    • Changes to OPPS pricer logic:
      • Rural sole community hospitals (SCHs) and essential access community hospitals (EACHs) will continue to receive a 7.1% payment increase for most services (excluding drugs, biologicals, items and services paid at charges reduced to cost, and items paid under the pass-through payment policy) in CY 2013;
      • New OPPS payment rates and copayment amounts will be effective January 1, 2013. All copayment amounts will be limited to a maximum of 40% of the APC payment rate. Copayment amounts for each individual service cannot exceed the CY 2013 inpatient deductible;
      • For hospital outlier payments under OPPS, there will be no change in the multiple threshold of 1.75, which will continue to apply for 2013;
      • In addition, for hospital outlier payments under the OPPS, there will be no change in the fixed-dollar threshold of $2,025, which will continue to apply for CY 2013. The estimated cost of a service must be greater than the APC payment amount plus $2,025 in order to qualify for outlier payments;
      • For outliers for community mental health centers (bill type 76x), there will be no change in the multiple threshold of 3.4, which will continue to apply for 2013;
      • Effective January 1, 2013, 3 devices are eligible for pass-through payment (pass-through payment generally equals charges reduced to cost, sometimes subject to an offset amount) in the OPPS Pricer logic. Category C1830 (Powered bone marrow biopsy needle), has an offset amount of $0, because CMS is not able to identify portions of the APC payment amounts for the related procedure that were associated with the cost of a predecessor device. Category C1840 (Lens, intraocular (implantable)) and C1886 (Catheter, extravascular tissue ablation, any modality (insertable)) have offset amounts included in the Pricer for CY 2013, because CMS was able to identify portions of the APC payment amounts for the related procedures that were associated with the cost of certain predecessor devices. Pass-through offset amounts are adjusted annually;
      • Effective January 1, 2013, there will be one diagnostic radiopharmaceutical receiving pass-through payment in the OPPS Pricer logic. For APCs containing nuclear medicine procedures, Pricer will reduce the amount of the pass-through diagnostic radiopharmaceutical payment by the wage-adjusted offset for the APC with the highest offset amount when the radiopharmaceutical with pass-through appears on a claim with a nuclear procedure. The offset will cease to apply when the diagnostic radiopharmaceutical expires from pass-through status. The offset amounts for diagnostic radiopharmaceuticals are the “policy-packaged” portions of the CY 2013 APC payments for nuclear medicine procedures and may be found on the CMS website;
      • Effective January 1, 2013, the OPPS Pricer will continue to apply a reduced update ratio of 0.980 to the payment and copayment for hospitals that fail to meet their hospital outpatient quality data reporting requirements or that fails to meet CMS validation edits. The reduced payment amount will be used to calculate outlier payments, if any;
      • Pricer will continue to update the payment rates for drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals with pass-through status when those payment rates are based on ASP, on a quarterly basis.

Again, hospitals and CAHs are encouraged to review this transmittal closely to assure that they are prepared to comply with these changes effective for applicable services provided on and after 1/1/13.


CMS publishes the 2013 OPPS and MPFS final rules

Right on cue, CMS released the 2013 OPPS Final Rule on November 1 and then followed up with the MPFS Final Rule. In a breaking news story, HCPro summarized the changes – the good, the bad and the ugly – that will impact hospitals across the country. I wanted to take this time to review several changes that will impact two high volume departments in the hospital outpatient setting – therapy services and laboratory.

Many laboratory departments have been struggling with the complexity and the number of CPT codes for molecular pathology – now at 115 codes in two different tiers – and how to implement the new codes, even though CMS had allowed hospitals to bill the “stacked codes” instead for 2012. That will all change with dates of service on January 1, 2013 when the stacked codes will be invalid and the CPT codes for the actual molecular pathology services will need to be reported and will be paid under the clinical Laboratory Fee Schedule (CLFS).

In 2012 when these codes first came into play, CMS stated they were not valid of payment and hospitals should still report combinations of “regular” CPT codes for payment that described various steps to perform a specific test – referred to as stacking because different groups of codes are billed depending on the components of the actual test. CMS also clarified in a Hospital Open Door Forum call that hospitals should also report the new molecular pathology codes with the stacked codes so that CMS could use that information for setting rates for implementation in 2013.

Hospitals need to begin now to get ready to implement the new codes as this has the potential to be a major project. This includes updating chargemasters, order entry and charge tickets so there will not be a delay in billing and reimbursement. Physicians, laboratory staff and coders may want to review the AMA CPT Assistant May 2012 and June 2012 for guidance on how to select the appropriate code. Keep in mind that hospitals will be responsible for creating their own pricing based on their current methodology and the CLFS as there is not a one-to-one crosswalk from the current CPT codes over to the molecular pathology codes.

Another major change for hospitals will be reporting functional limitation indicators and outcomes for outpatient rehabilitation therapy. This information will be found in the MPFS Final Rule and not under OPPS because therapy services are paid under the MPFS.

The MCTRJCA, the same Act that implemented the therapy caps and manual medical review for hospital outpatient services from October through December 2012, also required a claims-based data collection process to help reform the Medicare payment system. Of concern to Congress and CMS is that between 1998–2008, Medicare expenditures for outpatient therapy services increased at a rate of 10.1% per year while the number of Medicare beneficiaries receiving therapy services only increased by 2.9% per year. Beginning on page 221 of the display copy of the MPFS Final Rule, a thorough explanation is provided regarding what data CMS will be looking for under the five-year CMS project titled “Development of Outpatient Therapy Payment Alternatives” (DOTPA).

In summary, because current ICD-9 diagnosis codes cannot provide the data needed, specific G-codes will be used to identify what type of functional limitation is being reported and whether the report is on the current status, projected goal status or discharge status. Modifiers will also be used to indicate the severity/complexity of the functional limitation being tracked. The difference between the reported functional status at the start of therapy and projected goal status will represent any progress the therapist anticipates the beneficiary would make during the course of treatment. This reporting will apply to all therapy claims, including those for services above the therapy caps and those that include the -KX modifier.

Again, this will be a major undertaking to update the charge master, order entry systems and charge tickets with new G-codes for services that occur on January 1, 2013. Although this is not a change in the current reimbursement structure and hospitals will be given a six-month testing period to implement no later than July 1, 2013, therapists and billers, as well as other involved in coding and billing of therapy services should become familiar with the new data reporting requirement prior to January 1.

CMS Releases October OPPS Update

CMS released the October OPPS update this week with a smattering of unrelated, but important updates.  There were also two corrections to the claim manual in this update.

One of the manual corrections appears to be aimed at removing a barrier to payment for bariatric surgery in hospital outpatient departments.  Although CPT code 43770 (laparoscopic placement of adjustable gastric band), was removed from the inpatient only list effective January 1 of this year, there remained a notation in the claims processing manual that the procedure was only payable on a type of bill 11X, an inpatient type of bill.   CMS corrected this to indicate that the procedure is also payable on 13X, outpatient hospital, and 85X, critical access hospital outpatient, types of bills.

There is some confusion about when this change is effective.  The text of the transmittal, as well as the “Business Requirements” instructions to the MACs, indicate this change related to the type of bill is retroactively effective back to January 1, 2012 when the procedure was removed from the inpatient only list.  However, the transmittal has an effective date of October 1, 2012 and the actual manual section header also repeats this October 1, 2012 effective date.

On a related note, the IOCE indicates that code 43775 (laparoscopic sleeve gastrectomy) was added to the inpatient only list following its approval for coverage, retroactively effective April 1, 2012.

Also included in the update were codes for two new drugs approved for pass through payment, effective October 1, 2012.  The drugs are pertuzumab injection, 10mg (C9292) and glucarpidase injection, 10 units (C9293)

There was also one new HCPCS code added for October: G9157 (Short descriptor:  “Transesophageal Doppler mon”). This new code has a status indicator of “M” indicating it is not reportable by a hospital to a MAC.  Generally, codes with a status indicator “M” are codes that are not reportable because they represent professional services or there is an alternative code available for reporting the service.

Finally, CMS made updates to manual sections on Transitional Outpatient Payments (TOP) to certain rural and Sole Community Hospitals (SCH) to account for recent legislative activity extending these payments.  The additional payments were only extended to February 29, 2012 for SCHs and Essential Access Community Hospitals (EACH) with more than 100 beds.  However, for rural hospitals, as well as SCHs and EACHs with 100 or fewer beds the additional TOPs payments were extended through the end of this calendar year.

Lastly, on an unrelated note, I want to remind everyone that the comment period for comments to the CY2013 OPPS proposed rule, including CMS’ solicitation of comments on patient status issues, is open until September 4 at 5 p.m.  I encourage you all to comment.

Corrections to OPPS payment rates and OPPS and IPPS wage indices

Hospitals need to be aware of changes to OPPS payment rates and IPPS and OPPS wage indices that may impact their payments for OPPS and/or IPPS services during portions of CY 2011, CY 2012 and FY 2012.

In its July quarterly update to the OPPS, CMS reminded hospitals that it had published initial corrections to OPPS payment rates for CY 2012 in the Federal Register on January 4, and additional corrections to CY 2012 OPPS payment rates on April 24, 2012. These corrections, which are retroactive to dates of service on and after January 1, 2012, were fully incorporated into the July 1updates to Addenda A and B of the CY 2012 OPPS Final Rule. The updated addenda can be downloaded from the CMS website. Hospitals should check to see whether payments made for dates of service during the first half of CY 2012 were made in error, based upon these subsequent corrections. If so, CMS has informed hospitals that they must take the initiative and request adjustment of the previously improperly processed claims.

Under the Middle Class Tax Relief and Job Creation Act of 2012 (the MCTRJCA), Congress extended applicable reclassifications and revised wage indices for certain “Section 508” reclassified hospitals, as well as for certain non-section 508 and special exception hospitals.  For IPPS payments, the resulting revised wage indices are applicable to discharges on or after October 1, 2011 and on or before March 31, 2012. There is an exception, however, if the published FY 2012 wage index is higher for that hospital than the otherwise applicable revised wage index. In other words, hospitals are not to be harmed by application of these revised wage indices.

For OPPS payments, the revised wage indices for section 508 hospitals are applicable to services furnished on or after October 1, 2011 and on or before March 31, 2012, unless the published CY wage index for the last quarter of CY 2011 (October 1-December 31, 2011) and/or the first quarter of CY 2012 (January 1-March 31, 2012) for a specific hospital is higher for that hospital than the otherwise applicable revised wage index. Section 508 hospitals are not to be harmed by application of the revised wage indices. In other words, Section 508 hospitals will receive either the revised or published CY wage index, whichever is higher, for that period. In any event, section 508 hospitals will revert to the published CY 2012 wage indices for services furnished on and after April 1, 2012 through December 31, 2012.

For non-section 508 and special exception hospitals, the revised OPPS wage indices are applicable to services furnished on or after January 1, 2012 and on or before June 30, 2012, reverting to the published CY 2012 wage indices for services furnished on and after July 1, 2012 through December 31, 2012.

Hospitals should determine whether they are subject to these wage index revisions, and, if so, what the applicable wage indices are for the revision periods that apply to them in order to assure that their payments have been accurately calculated.

CMS posts questions and answers on three-day window

Slipping by somewhat unnoticed, CMS posted a set of Q&As on their Three-Day Window website a few weeks ago.  The questions focus on the more recent guidance for freestanding entities, such as physician offices and ASCs that are wholly-owned or wholly-operated by a hospital.  The questions also contain some information more broadly applicable to other service settings.

One interesting answer related to what is considered a diagnostic service.  In the hospital setting, this has always been defined by diagnostic revenue code and in some instance HCPCS code.  CMS had published a list of these revenue codes and HCPCS codes in Medicare Claims Processing Manual, Chapter 3 § 40.3.

This list has a couple of problems though.  First, the list has not been updated since the major change to the payment window in 2010.   This has resulted in the list containing outdated HCPCS codes that have been replaced by the CPT.  Second, defining diagnostic services by revenue code is not helpful in the physician environment because their claims are submitted on a CMS 1500 and do not use revenue codes.

The new Q&As state that the term diagnostic is defined more broadly as it is defined in the Benefit Policy Manual:  An examination or procedure to which the patient is subjected, or which is performed on materials derived from a hospital outpatient, to obtain information to aid in the assessment of a medical condition or the identification of a disease.  This means providers need to evaluate services beyond the traditional diagnostic laboratory and x-ray services, to determine if they would be considered diagnostic and therefore subject to bundling under the rule.  This would include surgical procedures that could be considered diagnostic in nature, similar to the list of HCPCS codes CMS currently lists in § 40.3.

There is also a helpful Q&A related to critical access hospitals (CAHs) and the payment window.  They make clear that it is true that if the admitting hospital is a CAH, the payment window does not apply.  However, they also clarify that if the admitting hospital wholly owns or operates a CAH, the outpatient services at the CAH are subject to bundling under the payment window.  This is helpful because many CAH providers are under the mistaken impression the payment window never applies to their services.

As to services provided at a freestanding entity, interestingly CMS states it is the hospital’s responsibility to determine which non-diagnostic services are related to an admission at the hospital and therefore subject to bundling.  Operationally, however, this responsibility is likely to fall on the physician’s office or ASC because, as they note in another answer, the decision will require knowledge of the specific clinical circumstances of the patient.

One thing the Q&As do well is make clear the exact portions of the freestanding practice’s claim that are subject to bundling.  They clarified that the technical portion of diagnostic services and the non-facility practice expense relative value units for related non-diagnostic services are paid through the IPPS under the payment window and must be bundled to the hospital claim.   As a result, it is easy to see that the practice would still be paid for the professional portion of diagnostic services and for non-diagnostic services, the facility rate which does not include practice office expense

In order to operationalize this, CMS adopted the -PD modifier (Diagnostic or related non-diagnostic item or service provided in a wholly owned or operated entity to a patient who is admitted as an inpatient within three days or one day).  CMS clarified that modifier -PD should be used by both wholly-owned and operated freestanding physician practices and ASCs as appropriate, but should not be used for services performed in the hospital (i.e. at provider-based clinics and outpatient departments).  Hospitals and freestanding entities were to have coordinated billing practices in place to ensure the proper application of the -PD modifier by July 1, 2012.

Codes with the -PD modifier pay at the professional rate for those codes with a -26/-TC split, however the Q&As specify that the -26 professional-services-only modifier should also be appended to these codes.  Codes that do not have a -26/-TC split reported with the -PD modifier will pay at the facility rate to ensure the non-facility practice office expense is not paid to the freestanding entity.

CMS also makes note of the fact that because the practice office expenses (the direct costs of clinic staff, equipment and supplies) of non-diagnostic related services are paid through the IPPS payment, the costs should be billed on the claim for the inpatient stay and be included in the hospital’s cost report.  They do not indicate exactly how the hospital should operationalize this, but they do indicate that the freestanding entity may, but is not required to, adjust its charge for these related non-diagnostic services on its claim.

All in all the Q&As are worth a read, although there are no new significant changes contained in them.

Lastly, I’d like to take the opportunity to encourage you to comment on CMS’ request for comments related to patient status.  I am currently working on an article on the proposals and request for comments for HCPro’s Revenue Cycle Institute which should come out later this week.  The details are in the section titled “XI.  Outpatient Status: Solicitation of Public Comments” beginning on page 95-97 of the OPPS Proposed Rule.   It is a short read and I believe almost every provider has strong opinions on this issue which they now have the opportunity to express to CMS by submitting comments by September 4 either by mail or through this website:

http://www.regulations.gov/#!submitComment;D=CMS-2012-0084-0001

Impact of proposed geometric mean cost data for APC relative weight calculations

Last week we announced that the CY 2013 OPPS Proposed Rule had been published by CMS in a display copy and highlighted some of the key proposals. This week I wanted to go into more detail on the proposed change, from calculating APC relative weights using median cost data to using geometric mean cost data.

CMS has given several reasons why this shift has been proposed, including bringing OPPS more in line with the Inpatient Prospective Payment System (IPPS), which uses mean costs to determine the relative payment weights associated with each of the payment classification groups. CMS stated that the proposal to base the APC relative payment weights on the geometric mean costs rather than the median costs of services within an APC “would not significantly impact most providers”. Payments to low volume urban hospitals and to hospitals for which disproportionate share hospital (DSH) data are not available would increase by an estimated 2.1% and 4.0%, respectively. In contrast, payments to CMHCs would decrease by an estimated 6.9% due primarily to lower payments for APC 0173.

Using the CMS 2013 OPPS NPRM Geometric Mean-Median Based Payment Compare File, here is a comparison of what CMS would pay in 2012 vs. 2013 for the same service.

Patient presents to the Emergency Department for lower leg pain after a fall. The physician ordered an infusion, an IV push, and x-ray of the lower leg. The E/M level was assigned to a level four and the physician performed a closed treatment of a tibial shaft fracture. Keep in mind that specific drugs that may be separately payable are not included in the example below, as well as any packaged items or supplies.

2012

July Add B Payment

2013

Median

Costs Payment

2013

Geometric Mean Costs Payment

99284

219.00

227.07

229.08

96365

126.76

141.99

146.11

96374

34.85

36.92

39.10

73590

44.84

45.13

46.10

27750

105.19

110.05

132.99

 

This simple scenario demonstrates that payments in 2013 may increase overall – more so using the Geometric Mean data – which is good news for providers. Unfortunately, this will not be true across the board. The following is an example of a more complex fracture, most likely requiring the use of the operating room for the closed treatment of a tibia fracture with manipulation and with or without skeletal traction.

2012

July Add B Payment

2013

Median

Costs Payment

2013

Geometric Mean Costs Payment

27752

1341.55

1305.70

895.29

CMS has used the median cost data for payment calculations since we began APCs in 2000. This change could potentially have a far reaching and as yet unknown impact into future reimbursements. At a minimum, hospitals should review the impact of this proposed payment methodology change for their high volume and/or high cost outpatient services and provide comments to CMS.

Correction: In last week’s note I stated that CMS is proposing to maintain the current payment rate that covers the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at average sales price (ASP) plus 6.0%.  Upon further review, I realized this is actually an increase of 2% over the current ASP plus 4%. I apologize for that misstatement.