Medicare Payment and Reimbursement

The Time Is Now to Act on the 2019 Medicare Final OPPS Rule

February 4, 2019 8:59 am

The 2019 final rule is now in effect, so a targeted, rapid assessment and implementation is necessary to mitigate any major risk areas.

Medicare issued the final rule changes for the 2019 Outpatient Prospective Payment System (OPPS) on Nov. 21, 2018. This rule includes numerous changes that will impact the 3,800 hospitals that are paid under the Medicare OPPS system. Although some of the rule changes are being challenged in the U.S. court system by key stakeholders, health systems need to move forward in implementing the required operational changes and measuring the financial impact that the rule changes will have to ensure they are adequately prepared. With the Jan. 1, 2019, implementation of the final rule changes, a systemic, rapid approach that includes the following is key to addressing the issues quickly and effectively:

  • Determine the issues in the final rule that represent the most significant financial and/or operational risk/reward for your institution.
  • Engage key stakeholders and develop implementation strategies to address your institution’s key areas of risk and opportunity.
  • Monitor and adjust strategies early in 2019, as appropriate, to optimize success in mitigating compliance risk and financial impact.

4 Key Issues in the 2019 OPPS Final Rule

Although the 2019 Final Rule includes numerous issues that impact health systems, revenue cycle leaders should, at minimum, review the following four key issues. Two of the issues are more focused on the financial impact, while the other two focus on operational workflow changes.

Keep in mind that the 2019 Final Rule is now in effect, so a targeted, rapid assessment and implementation is necessary to mitigate any major risk areas.

Issue 1: Clinic Visit Payment Reduction for Excepted Off-Campus Provider Departments

Medicare is concerned with the continuing growth of outpatient services that are being provided in a “hospital setting.” This expenditure growth continues to trend upward, with a 9.1 percent increase expected in 2019 (see exhibit directly below).

In addition, there continues to be an upward trend in the volume and intensity of outpatient services to Medicare beneficiaries (see exhibit below).

Both of these trends have resulted in Medicare’s decision in 2019 to implement measures to control the growth of outpatient services in the hospital setting. Medicare believes the increase in payment for services being provided in a hospital setting is a major reason for the migration of services to the hospital setting.

One particular area of focus by Medicare is the increased payment for outpatient “clinic” visits being provided in a hospital setting with HCPCS Code G0463 versus the same services in a physician office. In 2018, physician practice office visits were paid a single fee by Medicare that is lower than the fee paid to hospitals for a comparable “clinic visit.”

In hospitals, there is payment for the physician service and a second payment for the facility component, resulting in a higher total payment. For example, with an established patient Level 3 visit in a physician’s office, the payment was $74 in 2017. If the same patient was seen in a hospital-based clinic ,there would be two payments totaling $159: $57 for the physician service and $102 for the facility component.

To kick off its initiative to control outpatient expenditure growth, Medicare has decided in 2019 to target the clinic visit (G0463) payment made to excepted off-campus provider-based departments. Excepted off-campus provider departments are defined by Medicare as off-campus provider-based departments that were in place prior to Nov. 2, 2015, and all services in these departments must have a “PO” modifier appended. Non-excepted off-campus provider departments are defined by Medicare as off-campus provider-based departments that were in place after Nov. 1, 2015, and all services in these departments must have a “PN” modifier appended. Non-excepted off-campus provider departments are not impacted by this rule change.

For 2019, Medicare is reducing the payment for clinic visits in excepted off-campus campus provider departments to 70 percent of the OPPS clinic visit payment for G0463. The 2019 national payment rate for G0463 is $116. For excepted off-campus provider departments, that reduction in payment to 70 percent of the OPPS payment rate results in a payment of $81 for these excepted departments. In the 2019 proposed rule, Medicare had proposed to pay these excepted clinic visits at the same rate as non-excepted off-campus provider departments, which are 40 percent of the OPPS rate, resulting in a $46 payment.

After the receipt of many comments opposing this proposal, Medicare decided to use a two-phase approach to the payment reduction. In 2019, the excepted off-campus provider payment for G0463 is $81 in 2019 and will be reduced to 40 percent of the OPPS payment rate in 2020,  resulting in a $46 estimated payment.

Medicare projects that this initiative will save the Medicare program approximately $380 million in 2019, including $80 million in beneficiary savings. The impact of this 30 percent payment reduction on each hospital will be different based on the number of excepted off-campus provider clinic visits provided. It is prudent for each hospital to understand the impact of this payment reduction as quickly as possible on their institution.

To determine the impact on your institution, you should determine the number of clinic visits provided with HCPCS G0463 and the “PO” modifier to Medicare beneficiaries in excepted off-campus provider-based departments. This patient volume should be multiplied by the payment difference of $35 ($116 OPPS payment minus $81 reduced payment for excepted off-campus clinics). For example, if a hospital has 10,000 clinics visited billed to Medicare with HCPCS G0463 and modifier “PO,” the 2019 estimated impact will be a payment reduction of $350,000.

Although risk-mitigation strategies related to this payment reduction are limited, it is very important for hospitals with these excepted off-campus provider departments to understand the financial impact for 2019. Adjustments in current-year budget and strategic initiatives, particularly in areas such as physician practice acquisitions, may be necessary based on these payment reductions. Also, the additional 2020 reduction in payment planned by Medicare to 40 percent of the OPPS clinic payment rate should be estimated and planned for now to avoid any “surprises” in 2020.

Issue 2: 340B Drug Payment Reductions for Non-Excepted Off-Campus Provider Departments

In 2018, off-campus provider departments that are non-excepted (Modifier PN) were exempt from the average sales price (ASP) minus 22.5 percent reduction in payment for 340B drugs assigned Status Indicator K (Status Indicator K = separately payable drug). Medicare, in the proposed and final 2019 OPPS rule, indicated concern that the higher payment for these drugs in non-excepted, off-campus provider departments provides hospitals a financial incentive to have these drugs administered in this setting.

To eliminate the financial incentive to have these drugs administered in non-excepted off-campus provider departments, Medicare in 2019 has implemented the ASP minus 22.5 percent payment reduction for Status Indicator K drugs in both the excepted and non-excepted off-campus provider departments. This will now require appending the JG modifier to 340B drugs for non-excepted provider departments.

Although minimal operational changes (e.g., appending the JG modifier) are required as a result of this regulatory change, health systems should still determine the financial impact of this change in 340B reimbursement on their institution. To assess the financial impact, the health system should identify which non-excepted off-campus provider departments are administering 340B drugs with Status Indicator K. This identification process should include input from finance, revenue cycle, and pharmacy in determining the potential financial impact. After the identification of the applicable drugs is completed, the ASP minus 22.5 percent payment reduction should be quantified. It is also important to note that current payment for these Status Indicator K drugs is ASP plus 6 percent.

Issue 3: Modifier for Off-Campus Provider- Based EDs

The June 2017 Medicare Payment Advisory Commission (MedPAC) report to Congress states that there is significant growth in the number of facilities outside hospitals providing emergency department (ED)services. In addition, Medicare reiterated its concern with the growth of emergency services paid under OPPS. Medicare’s main concern since 2010 has been that patients are possibly being shifted to higher-acuity and high-cost ED services due to the higher OPPS payment rates in off-campus provider-based EDs. These off-campus EDs are currently exempt from regulations related to excepted and non-excepted off-campus provider-based departments.

To assess the impact of this shift of services to off-campus provider-based EDs, Medicare is requiring that services provided in these off-campus EDs have an “ER” modifier appended to the CPT Codes on the UB-04 claim. Note that critical access hospitals are exempt from this reporting requirement.

In the past, Medicare has used this type of data collection methodology as the precursor to payment cuts in areas such as off-campus provider-based departments. So, it is important to recognize that payment reductions similar to the payment reductions for other off-campus provider departments may be next on the agenda for Medicare.

Hospitals should determine whether they have off-campus EDs and develop a mechanism to ensure that the “ER” modifier is appended for the services provided in these settings. Assignment of the modifiers through hard coding of the services or “downstream” addition of the modifiers through your claims scrubber, charge transformation rules, or charge router should be investigated, and the most user-friendly method of implementation should be initiated.

Issue 4: Device Intensive Chargemaster Integrity

Medicare has a category of procedures called device intensive procedures. For these procedures, hospitals are required to report a device HCPCS on claims in addition to the surgical procedure CPT Code. In 2018, a device intensive procedure was defined as procedures that meet these three criteria:

  • Procedures with a device-offset percentage greater than 40 percent
  • Procedures must involve implantable devices that would be reported if device insertion procedures were performed
  • Required devices must be surgically inserted or implanted devices that remain in the patient’s body after conclusion of the procedure (at least temporarily)

For 2019, Medicare has revised the criteria to:

  • Procedures with a device-offset percentage greater than 30 percent
  • Procedures must involve an implanted device with an assigned CPT or HCPCS code
  • Required devices (including single-use devices) must be surgically inserted or implanted

The 2019 device intensive procedure criteria changes mean many more procedures in 2019 now qualify as device intensive because of the lowering of the cost threshold to 30 percent. The list of device intensive procedures is detailed in Addendum P of the Final OPPS Rule and includes an additional 140 procedure CPT codes.

In addition, the 2019 device definition change now states that devices no longer must remain in the patient’s body at the completion of the procedure. This definition of a device is not consistent with the definitions used for implants by Medicare and other third-party payers.

The implant definitions used by Medicare and other third-party payers include the requirement that the implant remain in the patient’s body after the surgery. This means that hospitals should be careful not to automatically assign Revenue Code 278 to all devices that meet the device intensive criteria without ensuring Revenue Code 278 is appropriate. Revenue Code 278 is only to be used for those devices that meet the applicable implant definition. For devices that do not meet the implant definition but still require a HCPCS code for the device, Revenue Code 272 rather than 278 would be appropriate.

This means that hospitals will need to review their chargemaster to ensure devices that are used with device intensive procedures have HCPCS codes (“C” codes) on the devices and the correct revenue code assigned (either 272 or 278) as appropriate. Dependent on current hospital policy for assigning HCPCS codes for devices, there may be devices without a HCPCS assigned on the chargemaster.

Hospitals should also review a sample of Medicare outpatient claims for each of the device dependent CPT codes added in 2019 to determine whether there is a device with an HCPCS code (C code) on the claim. If there is no HCPCS code for a device on a claim with a device-intensive surgical procedure CPT code, Medicare has an edit that will stop the claim from being paid. As a preventive measure, hospitals should make sure there are edits built in the claims scrubber to ensure there is a device with a HCPCS code (C code) on the claim prior to submission to Medicare.

For device-dependent procedures that do not have a device HCPCS code on the claim, HCPCS Code C1889, “Implantable/insertable device for device-intensive procedure, not otherwise classified,” should be used in billing the claim to ensure the Medicare outpatient claim is paid.

Although only two of the above issues require implementation of operational changes, it’s important to take the time to understand the financial impact on your organization of the payment reductions in off-campus provider-based departments for both clinic visits and 340B drugs. If these issues impact your organization, they can have a significant effect on your bottom line in 2019 and also drive your organization’s future strategic growth and profitability initiatives.


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