MEDICARE S OUTPATIENT PROSPECTIVE PAYMENT SYSTEM

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1 2003 Update MEDICARE S OUTPATIENT PROSPECTIVE PAYMENT SYSTEM Outpatient Hospital Services for Medicare Patients

2 OPPS Overview On August 1, 2000, the Centers for Medicare and Medicaid Services (CMS) implemented the outpatient prospective payment system (OPPS). As a result of OPPS implementation, CMS began paying for most Medicare hospital outpatient services based on a fixed unit of payment called the Ambulatory Payment Classification (APC). Since the beginning of OPPS, certain categories of medical devices considered to be innovative, new technology have been eligible for pass-through payments in addition to the procedural APC payment. What s new in OPPS? How do the 2003 APC rates compare with rates in 2002? On December 31, 2002, 95 device pass-through codes and 200 drug and biological pass-through codes, including pass-through codes for most Medtronic Cardiac Rhythm Management (CRM) devices, expired. The expired pass-through codes will not have a 90-day grace period. Any claims for services performed on or after January 1, 2003, that contain these codes will be returned to the hospital. Of the current Medtronic CRM devices, only the left ventricular lead for cardiac resynchronization therapy will continue to be billed separately as a pass-through item using pass-through code C1900. As a result, effective January 1, 2003, the costs of the devices previously billed as pass-through items will be reflected in the overall Ambulatory Payment Classification (APC). Passthrough payments as a concept are not dead. As eligible new technologies become available, they will be funded temporarily under this mechanism before being folded into an APC. The final OPPS rule for 2003, released on November 1, 2002, by the Centers for Medicare and Medicaid Services (CMS), calls for a 3.7% market basket increase in payments in fiscal year The conversion factor for 2003 will be $

3 How do the 2003 APC rates compare with rates in 2002? (continued) Overall, for most services, the APC rates were higher in 2002 because they were based on pricing data provided by the manufacturers. The proposed 2003 APC payments were based on actual hospital claims data from January 1, 2001 December 31, A glance at the column with 2003 proposed rates clearly demonstrates that the hospital data were flawed in as much as the proposed rates generally did not cover the device acquisition costs. It appears that some hospitals were either inadequately or inconsistently reflecting their costs for the device in their Medicare billing for outpatient procedures. Medtronic, cooperating with other device manufacturers, provided to CMS the industrywide device acquisition cost data during the public comment period. This resulted in significant improvement in the approved final rates. Cardiac Device Procedure APC Rates for 2003 Proposed Final APC APC Payment Procedure CPT Code 1 Payment Rate 2 Rate 3 ICD System Implant $12,102 $23,131 4 ICD Pulse Generator Replacement $9,440 $17,013 Single or Dual Chamber 33206, $5,665 $5,870 (SC) 5 Pacemaker System Implant 33207, $6,408 4 (DC) 6 Single or Dual Chamber $4,013 $4,587 (SC) 5 Pacemaker Pulse Generator Replacement $4,791 (DC) 6 Reveal Implant $2,702 $2,927 EP Studies/Recording and Pacing $302 $2,055 EP Studies/Comprehensive EP Evaluation $1,652 $2,176 EP Studies/EP Evaluation of ICD $499 $487 EP Studies/Catheter Ablation $2,273 $2,755 1 All Current Procedural Terminology (CPT) five-digit numeric codes, descriptions, numeric modifiers, instructions, guidelines, and other material are Copyright 2002 American Medical Association. All rights reserved. 2 Source: August 9, 2002 Federal Register 3 Source: November 1, 2002 Federal Register 4 For resynchronization a second APC payment of $1,125 is added plus the left-sided lead is passed-through for additional payment based on hospital charges. 5 Single chamber pacemaker 6 Dual chamber pacemaker 2

4 Your future is in your hands CMS intends to set each year s new rates based on hospital claims data collected for the previous year. For the 2003 final rates, CMS accepted manufacturers input, but there is no guarantee that they will be receptive to that in future years. To ensure that future payment rates are adequate, hospitals need to adequately reflect the costs of all parts of the procedure, including device costs, in their Medicare billing. Although a device may no longer be eligible for pass-through payment and may no longer have a reportable pass-through code, it is essential that the device charge continue to be billed on the claim, either as part of the charge for the procedure or as a separate charge under a device revenue code. This will ensure that the cost of the device is taken into account in determining future APC payments. Accurate coding and billing today are key to adequate payment in future years. To ensure accurate billing, hospitals may wish to consider these important points: Do not bill for pass-through codes that have expired. Claims containing expired pass-through codes will be returned to the hospital. Educate your physicians, administrative staff, and coding staff about the implications of OPPS and APCs for your facility. Capture all costs associated with the procedure completely and accurately making sure that the device charge is billed on the claim. Review the accuracy and completeness of your CPT and HCPCS coding including modifiers. Be sure that you are using the most recent CPT and HCPCS publications received from your intermediary and all of the new coding guidance. Review the administrative links between coding and billing to ensure consistency and completeness. Be consistent with CMS s Correct Coding Initiative (CCI). Medtronic working for you Medtronic, Inc., both individually and together as a part of a medical manufacturers consortium, has been working with CMS to address some of the inequities and anomalies in the payment system for outpatient services, especially as they relate to medical device technology. Substantial changes have been made in response to our input, yet many issues regarding the use of high tech medical devices within the outpatient setting still remain. We will continue to work through these issues. 3

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