Outpatient Prospective Payment System Final Rule 2016

Thoughtware Article Published: Feb 01, 2016
Doctor checking child's heart

The Centers for Medicare & Medicaid Services (CMS) has released the Outpatient Prospective Payment System (OPPS) Final Rule for 2016, which took effect January 1. This article highlights several of the major provisions related to outpatient services. The complete text may be found online. Consistent with previous years, the OPPS rules exclude critical access hospitals and Indian Health Service hospitals as well as hospitals located outside the 50 states, District of Columbia and Puerto Rico.


The Medicare rates will decrease by 0.3 percent, compared to a 2.2 percent increase for 2015. The overall 0.3 percent decrease includes a 2.4 percent market basket increase, reduced by a 0.5 percent multifactor productivity adjustment and a 0.2 percent reduction required by the Affordable Care Act. The final component to the 0.3 percent overall decrease is a 2 percent reduction—an attempt to rectify the inflation in OPPS rates resulting from excess packaged payments under the OPPS for laboratory tests that are excepted from the final 2014 laboratory packaging policy. CMS estimates total payments for calendar year (CY) 2016 will decrease by approximately $133 million when compared to CY 2015 payments.

Hospitals will continue to see a 2 percent reduction in payments if they don’t meet the hospital outpatient quality reporting requirements. The 7.1 percent adjustment to OPPS payments for rural sole community hospitals will continue for 2016. The estimated impact of the 2016 hospital OPPS changes to various hospital types is found in Table 70 of the final rule. These estimated changes include a 0.4 percent decrease for urban hospitals, 0.6 percent decrease for rural hospitals, 0.1 percent increase for major teaching hospitals and 0.7 percent decrease for nonteaching hospitals.

As 60 percent of the outpatient payment remains adjusted by the wage index, it’s essential to monitor the impact all outpatient rate changes can have on a hospital’s wage index. The OPPS final rule indicates finalization of the use of the inpatient post-reclassified wage index for urban and rural areas, which issued revisions to the core-based statistical areas (CBSA) based on 2010 census data. The 2015 final rule included a one-year blended wage index for all hospitals that experienced any decrease due to these CBSA changes. This one-year transitional blended payment expires for 2016.

Advance Care Planning

The 2015 Current Procedural Terminology (CPT) added a new subsection, Advance Care Planning (ACP), to the Evaluation and Management (E/M) section; two new codes also were added that describe the services involved in ACP.

ACP involves consideration of the types of decisions required at the time of eventual life-ending situations and considering a patient’s preferences regarding those decisions. These discussions also would include preparation of an advanced directive.

CMS finalized its proposal to establish separate payment for ACP services, based initially on the recommendations of the American Medical Association (AMA). These codes are:

  • 99497, Advance care planning, including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; first 30 minutes, face-to-face with the patient, family member(s) and/or other surrogate
  • 99498, Advance care planning, including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; each additional 30 minutes

CMS hasn’t yet issued a National Coverage Determination; this indicates there initially will be no limitations on how often the codes can be reported to allow for continued discussion times with patients. However, CMS will monitor utilization of trends.

According to Addendum B of the final rule, the national payment for CPT 99497 will be $54.41; the 99498 add-on code will be packaged.

Hospital coders and billers should refer to AMA’s CPT Assistant (December 2014, Volume 24, Issue 12, page 11) for examples of Ambulatory Payment Classification (APC) code reporting and required documentation.

Two-Midnight Rule

For 2016, CMS maintains the benchmark for hospital stays expected to be two midnights or longer, but the agency created more flexibility for admissions not meeting the benchmark. For stays in which the physician expects the patient to need fewer than two midnights of hospital care, an inpatient admission may be payable under Medicare Part A on a case-by-case basis based on the admitting physician’s judgment and documentation to support medical necessity.

CMS reiterates that inpatient admission for minor surgical procedures not requiring an overnight stay would be unlikely and will be prioritized for review.

On October 1, 2015, CMS moved the enforcement of the two-midnight rule (initial medical reviews of providers who submit claims for short stays) from Medicare Administrative Contractors (MAC) and Recovery Auditors to Beneficiary and Family Centered Care (BFCC) Quality Improvement Organizations (QIO) beginning in 2016.

Hospital utilization review and clinical documentation improvement teams should continue working with physician staff to improve documentation efforts.

Payment Policy Updates

Below are some of the significant updates in payment policies included in the final rule.

Comprehensive Observation Services (C-APC 8011): Effective January 1, 2016, CMS no longer will reimburse for APC 8009 for extended E/M services. Instead, qualifying extended E/M services will be paid through APC 8011. The unadjusted national rate for APC 8009 for 2015 was $1,234, and providers were paid for a number of ancillary services outside that APC when the status indicator wasn’t conditionally packaged. For example, if fewer than eight hours of observation were billed, a higher-level visit code wasn’t billed or surgical procedures with status indicator T were performed the day before or the day of the initiation of the observation, CMS would not group the claim into a comprehensive APC; instead, these claims would be considered nonqualifying and APCs not packaged would be paid individually. The unadjusted national rate for APC 8011 is $2,174. CMS now will bundle all nonsurgical procedures performed, regardless of date of service, and surgical procedures will be excluded from the bundling.

The concept of “adjunctive services” has been expanded in 2016. In the past, CPT codes with status indicator J1 were subject to packaging if certain other codes were billed. However in 2016, CMS created status indicator J2 to identify CPT codes considered payable under OPPS that could trigger comprehensive composite payment if certain other codes are billed in combination. With cases qualifying for payment of the APC 8011, all covered Part B services on the claim could be considered adjunct to a J2 procedure and packaged into a single payment, except those items excluded by statute. Those excluded services include covered screening procedures, preventive services, pass-through drugs and devices, physical therapy, speech-language pathology and occupational therapy services, certain vaccines, corneal tissue acquisition and certain services payable when an inpatient Part B only claim is billed.

A major difference in payment for comprehensive services for 2016 is that all levels of emergency department (ED) and clinic visits, if billed in combination with observation time, can trigger the comprehensive composite rate. In “the old days,” only higher-level Type A and B ED visit, office visit and critical care CPT codes triggered packaged payment under a composite APC.

Under the 2016 final rule, if an observation claim contains a status indicator T procedure (which is the case for most surgical procedures), the claim will not be reimbursed under APC 8011. Instead, the procedure will be paid and, unlike 2015, many more CPT codes on that claim will be considered packaged into the surgical procedure and not paid separately. CMS has increased payment for status indicator T procedures to compensate.

For the first time, therapeutic injections and infusions will not be paid separately when billed on a claim subject to payment through a composite rate or a claim containing a J2 service. (Those codes were paid outside the extended E/M composite rates in 2015.) However, when drug administration is the primary reason for the encounter, most injection and infusion CPT codes—including those for chemotherapy administration—remain status indicator “S” procedures that will be paid separately. The reimbursement amount remains the same as in 2015.

A table of exclusions from the comprehensive APC payment policy for 2016 can be found in Table 7, page 70327 of the Federal Register.

In 2014, CMS began packaging payment for laboratory procedures other than molecular pathology tests. The CPT codes for molecular pathology were new for that year, and CMS wanted to monitor their use. CMS intended that the vast majority of laboratory CPT codes would be paid individually only if lab was the sole service billed, was ordered by a different practitioner or was for a different diagnosis than the other service billed on the claim. For 2016, molecular pathology CPT codes are added to the packaging policy; status indicator Q4 was created specifically to address conditionally packaged laboratory tests.

Key changes and billing instructions for various updated payment policies can be found in the final rule. Additional information is available in MLN Matters Article MM9486 as well as CMS Transmittal R3425C, including policies for new device pass-through categories, device-intensive APCs and new modifiers for inpatient-only services furnished to patients who expired before the inpatient admission.

There also are new G-codes for billing lung cancer screening using low-dose computed tomography. Quite a few C-codes—OPPS payable services without permanent Healthcare Common Procedure Coding System codes assigned—have more specific J-codes in 2016. CMS aligned the payment for biosimilar pharmaceuticals with the payment rate in the physician office setting.

Also of interest, a new edit was implemented for OPPS claims in the Integrated Outpatient Code Editor related to billing for high- and low-cost skin substitutes and their related surgical procedure codes.

These are just some of the changes affecting outpatient services. You should thoroughly review the final rule to understand all the potential effects on your organization. If you have questions on this or other topics, contact your BKD advisor.

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