HFMA Express News - November 5, 2004

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IN THIS WEEK’S ISSUE:

Final Outpatient Rule Tightens Outlier Criteria
2005 Physician Fee Schedule Increases Payments, Preventive Care
Psych PPS Phase-In To Start January 1
CMS: Presenting Symptoms Should Determine Medicare ED Payments
Sentencing Commission Sends Guideline Amendments to Congress
Health Plan Rate Increases Decline, CDH Plan Offerings Rise
Third-Quarter Healthcare Employment Costs Rise
Security Rule Compliance Date Clarified
Quick Link
In the HFMA Resource Center

1. FINAL OUTPATIENT RULE TIGHTENS OUTLIER CRITERIA

Criteria for outlier payments are more stringent in the just-released final Medicare hospital outpatient prospective payment (PPS) rule than CMS had proposed August 9. Otherwise, the final rule adopts most provisions of the proposed rule. To qualify for outlier payment, the cost of furnishing a service would have to be more than 1.75 times the payment of the ambulatory payment classification (APC) (up from 1.5 in the proposed rule) and $1,175 over the APC payment rate (up from $625).

The final rule includes the proposed rule’s emphasis on preventive services required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This focus adds new covered services and some special rates.

Among the adopted provisions are:

A "Welcome to Medicare” physical for new beneficiaries
Payment increases of 40 to 60 percent for diagnostic mammograms
Reduction in the maximum copayment for any service from 50 percent to 45 percent of the total payment
Continuation of the hold harmless payments for small rural hospitals with fewer than 100 beds, as well as for sole community hospitals in rural areas
Elimination of the requirement for specified diagnostic tests in order to qualify certain observation services for payment

CMS estimates that changes to the outpatient PPS, including the 3.3 percent full market basket update, should amount to $24.6 billion in payments to hospitals in 2005, compared to projected payments of $23.1 billion in 2004, a 6.5 percent increase.

The rule will be published in the November 15 Federal Register, but is available now, with accompanying tables and appendices, on the CMS web site.

2. 2005 PHYSICIAN FEE SCHEDULE INCREASES PAYMENTS, PREVENTIVE CARE

CMS has implemented the MMA's second consecutive 1.5 percent physician payment increase and new preventive care benefits in the final physician fee schedule update for 2005. This 1.5 percent increase comes in place of a 3.3 percent decrease that would have been required under previous law. End-stage renal disease facilities will receive an 8.7 percent increase in their composite payment rate, in addition to a 1.6 percent update for 2005.

Preventive care benefits lead the list of coverage changes, including:

A “Welcome to Medicare” physical
New Medicare coverage of cardiovascular screening blood tests
Diabetes screening tests for at-risk beneficiaries
Increased payments for administering influenza vaccine

The rule provides incentive payments of an additional 5 percent for physicians practicing in physician scarcity areas and an additional 10 percent for those in health professions shortage areas. Additionally, payments for drugs are generally reduced while payments for administering the drugs are improved.

The final rule is to be published in the Federal Register November 15 and will take effect January 1, 2005.

3. PSYCH PPS PHASE-IN TO START JANUARY 1

CMS has released the final rule establishing a PPS for inpatient psychiatric facilities (IPFs) and units built around per diem payments, a shift from the current per-case, cost-based system. The IPF PPS will be launched with reporting periods beginning on or after January 1, 2005. However, CMS advises, their claims processing system will not be in place until April, requiring the current system to be used until then. The PPS phase-in process will culminate with full payment under the new system in the fourth year.

Elements of the rule include:

Adjustment to the base rate for facilities with full-service emergency departments staffed to provide a comprehensive array of emergency services
A per-case-based outlier policy, with a threshold of $5,700 (up from $4,200 in the proposed rule)
Additional payments for rural and teaching facilities
An interrupted stay policy for readmissions within three days

Public comments inspired some changes from the proposed rule, most notably:

Adjustments to the PPS per diem for higher costs on the front end of the stay and then declining, originally proposed to end on the eighth day will be carried through day 22.
An increase in recognized diagnoses from the 15 psychiatric DRGs in the proposed rule to all psychiatric diagnoses regardless of their DRG assignment

The IPF PPS will affect about 2,000 entities, including freestanding psychiatric hospitals and certified psychiatric units in general acute care hospitals. The rule will be published in the November 15, 2005, Federal Register.

4. CMS: PRESENTING SYMPTOMS SHOULD DETERMINE MEDICARE ED PAYMENTS

Under the Emergency Medical Treatment and Labor Act (EMTALA), intermediaries must base payment decisions on the information that is available to the treating physician when determining whether a service is reasonable and necessary, according to new clarification issued by CMS on October 22. When determining medical necessity, intermediaries must consider the patient’s presenting symptoms and principal diagnosis, not the frequency with which an item or service is provided to the patient, according to CMS.

Additionally, only one diagnosis code should be recorded on a claim as the reason for the visit. However, providers may report additional signs and symptoms codes not inherent in the principal diagnosis, CMS said. Intermediaries are required to reopen claims previously denied for emergency department services provided on or after January 1, 2004, if requested by providers.

5. SENTENCING COMMISSION SENDS GUIDELINE AMENDMENTS TO CONGRESS

The United States Sentencing Commission recently amended the original organizational guidelines submitted to Congress on April 30, 2004. The amended guidelines toughen the requirements for “effective” corporate compliance and ethics programs. The Commission notes that organizations must identify areas of risk where criminal violations may occur, train high-level officials as well as other employees in relevant legal standards and obligations, and provide their compliance officers sufficient authority and resources to carry out their responsibilities. The amendments went into effect November 1, 2004; however, Congress may disapprove them during a six-month review period.

6. HEALTH PLAN RATE INCREASES DECLINE, CDH PLAN OFFERINGS RISE

Milliman’s annual survey of HMOs and preferred provider organizations (PPOs) indicates a slowing of renewal rate increases. The anticipated 2005 renewal rate increase of 11 percent for HMOs is down from the 15 percent reported in the 2003 survey. The anticipated rate increase for PPOs is roughly 13 percent.
This year's survey, released October 25, was expanded to include questions on consumer-driven health (CDH) and Medicare Advantage programs. At least 89 percent of respondents expect to offer a CDH plan to employers within the next year, a sharp increase over the 29 percent from last year’s survey. Health insurance executives expect 7.8 percent of the total 2005 commercial group premium revenue to be attributable to their CDH products versus 3.2 percent in 2004, according to Milliman.

7. THIRD-QUARTER HEALTHCARE EMPLOYMENT COSTS RISE

Third-quarter 2004 compensation costs for health services rose 1.3 percent, up from 0.8 percent in the second quarter, according to Bureau of Labor Statistics Employment Cost Index data released October 29. The rate of increase outpaces compensation costs for all civilian workers, which increased 0.9 percent from June to September 2004, the same as from March to June 2004 (all numbers not seasonally adjusted).

Healthcare service compensation costs increased 4.4 percent for the year ended September 2004, compared with a 4.1 percent rise for the year ended September 2003. Compensation costs in hospitals increased at 4.3 percent for the third quarter for the year ending September 2004.

8. SECURITY RULE COMPLIANCE DATE CLARIFIED

CMS issued a clarification that the HIPAA security rule effective date for all covered entities except for small health plans is April 20, 2005. The security standards effective date for small health plans is April 20, 2006. The final rule, published in the Federal Register in February, 2003, listed the effective date as April 21.

9. QUICK LINK

HCPCS CODES USED FOR HOME HEALTH CONSOLIDATED BILLING UPDATED 64. CMS has published annual updates to the healthcare common procedure coding system (HCPCS) codes subject to consolidated billing under the home health (HH) PPS. The update is effective January 1, 2005.

10. IN THE HFMA RESOURCE CENTER

SELF-ASSESSMENT TOOL: CUSTOMER SERVICE AND COLLECTIONS. Use this worksheet of key processes and performance indicators to ensure you have important customer service, collections, and third-party collection considerations covered for effective revenue cycle management. This completes the set of revenue cycle self-assessment tools available in the Resource Center.

UPDATED: HIGHLIGHTS OF THE HIPAA FINAL SECURITY RULE. Brush up on the key provisions of the security rule, which goes into effect in April 2005.

For customer service, send an e-mail to HFMA’s Member Service Center or call (800) 252-HFMA, and press 2.

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