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February 14, 2005

OPPS and the “Oops” Factor
By Susan M. Hull, MPH, RHIA, CCS, CCS-P
For The Record
Vol. 17 No. 4 Page 18

Confused by the 2005 revisions to the OPPS final rule? A coding expert helps set things straight in this comprehensive review.

If HIM professionals didn’t have their hands full enough already, the release of the massive Outpatient Prospective Payment System (OPPS) final rule for 2005 (Federal Register, November 15, 2004) will make sure they’re kept busy. The final rule carries with it a number of significant changes in the way Medicare will reimburse for outpatient services.

Among the changes are the following:

• elimination of the grace period for new code implementation;

• increase in the conversion factor and overall outpatient reimbursement;

• changes to the Inpatient Only list;

• elimination of Q codes for chemotherapy administration;

• elimination of requirements for specific diagnostic tests for observation services;

• changes in outlier reimbursement methodology;

• requirement for reporting of C codes with device-dependent ambulatory payment classifications (APCs);

• inclusion of a number of new procedures;

• guidelines for the “Welcome to Medicare” physical examination; and

• changes in reimbursement for blood and blood products.
Hoped-for changes that did not materialize include the following:

• guidelines for evaluation and management coding for clinics and emergency departments (EDs); and

• elimination of the Inpatient Only list.

First, regarding hoped-for changes that did not happen. Providers continue to wait for guidance on billing of evaluation and management services in hospital-based clinics and emergency departments. The Centers for Medicare & Medicaid Services (CMS) advised hospitals to continue using whatever method they have been using to assign levels of service. The CMS states that it will make the proposed guidelines still up for consideration available for public comment through the CMS Web site and will allow at least a six- to 12-month lead time to implementation.

In its February 2004 meeting, the APC advisory panel made a recommendation to either eliminate the Inpatient Only list from the OPPS or evaluate the current list of procedures for any other appropriate changes. The CMS declined to eliminate the inpatient list at this time but did remove 22 codes. The revised Inpatient Only list can be found as Addendum B to the final rule.

Among the significant changes that will occur are the following:

Elimination of the grace period for new code implementation
Effective for services provided on or after January 1, there is no longer a 90-day grace period for removal of deleted codes and implementation of new codes. This requirement applies to both Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) Level II codes and to both the annual updates and midyear coding changes.

Use of discontinued codes will cause the claim to be returned to the provider (RTP) for correction and resubmission. This requirement also applies to ICD-9-CM codes, which become effective every year on October 1. This change is necessary to comply with HIPAA code set mandates and applied to both providers and payors.

Increase in the conversion factor and overall outpatient reimbursement
The conversion factor will increase to $56.983 (up from $54.561 in 2004). This represents an increase of 4.4%, of which 3.3% is due to market basket adjustments, 1.2% from funds not required for pass-through, and a wage index adjustment for neutrality of 0.9986. Actual total OPPS payments will increase approximately 4%, which is roughly $1.5 billion more than in 2004.

Changes to the Inpatient Only list
The so-called Inpatient Only list contains a list of CPT codes for procedures that the CMS deems to require the facilities to make available only as a hospital inpatient.

Although the APC advisory panel had recommended that the Inpatient Only list be eliminated, CMS declined to do so at this time. However, 22 procedure codes were removed from the Inpatient Only list, while none were added. Of the 22 codes removed from the list, two are anesthesia codes with SI “N,” and 20 are surgery codes with SI “T.” The complete, current Inpatient Only list can be found as Addendum E of the final rule.

Elimination of Q codes for chemotherapy administration
Effective January 1, HCPCS codes Q0081, Q0083, and Q0084 for drug administration have been deactivated for the OPPS and hospitals will report CPT codes. Table 29 of the Proposed Rule (Federal Register, Vol. 29, No. 157, Monday, August 16, 2004, page 50,521) contains the crosswalk that will be used to assign reimbursement. Each of the CPT codes correlates to an HCPCS Q code and is assigned to one of three APCs (116 for chemotherapy by other than infusion, 117 chemotherapy by infusion, and 120 infusion therapy).

Because the Q codes were per visit and the CPT codes are per injection, reimbursement will continue to be per visit. Payment will be for up to two units of chemotherapy and four units of nonchemotherapy infusion per date of service. The affected APCs are 116, 117, and 120. One unit of each APC will be reimbursed, irrespective of the number of codes reported.

Interestingly, physician offices began reporting HCPCS G codes for drug administration effective January 1. These G codes are only for physician reporting and should not be used by hospitals.

Elimination of requirements for specific diagnostic tests for observation services
For 2005, the CMS has eliminated the specific diagnostic testing requirements for observation services for chest pain, congestive heart failure (CHF), and asthma. Hospitals must still provide an appropriate ICD-9-CM admission or principal diagnosis code on the bill to receive payment, report HCPCS code G0244 for a minimum of eight hours, and report an ED visit, clinic visit, or critical care on the same day as the observation services or G0263 direct admission for CHF, asthma, or chest pain. Note that the qualifying diagnosis must now be reported in the admitting or principal diagnosis field. Secondary diagnoses will no longer be considered as qualifying diagnoses for observation services. This portion of the requirement will not be implemented until April 1 to allow hospitals time to modify reporting requirements.

The definition of code G0244 now includes only the minimum number of hours that must be reported (eight) and no longer specifies a maximum number of hours (which used to be 48).

The CMS also attempted to clarify the issue of observation time in the final rule, stating that observation time begins at the clock time appearing on the nurse’s observation admission note, which coincides with the initiation of observation care or with the time of the patient’s arrival in the observation unit. Observation time ends when the patient is discharged from the hospital or admitted as an inpatient.

The CMS declined at this time to expand the list of covered diagnoses to include syncope and collapse, transient cerebral ischemia, and hypovolemia on the grounds that there is no well-defined set of hospital services for these diagnoses that are distinct from the services provided during a clinic or ED visit.

Changes to outlier reimbursement
Fifty percent of OPPS outlier payments in 2004 were for 21 common services, such as plain x-rays and pathology services, that had relatively low reimbursements. Outlier payments are intended to compensate for high-cost cases, not high-volume cases. Therefore, in 2005, the cost must exceed 1.75 times the APC rate and exceed the APC rate plus a $1,175 fixed-dollar threshold. The CMS will pay 50% of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate.

Requirement for reporting of C codes with device-dependent APCs
Hospitals have not been consistent in reporting costs of medical devices since the elimination of the requirement for C code reporting. Therefore, effective for services provided on or after January 1, the CMS requires hospitals to include device category codes on claims when such devices are used in conjunction with procedures billed and paid for under the OPPS.

Beginning April 1, the outpatient code editor (OCE) will include edits to ensure that certain procedure codes are accompanied by an associated device category code. This requirement will apply to 24 “device-dependent” APCs. The CMS will post the OCE edits that are to be implemented beginning April 1 on its Web site to give hospitals and the provider community ample opportunity to review and provide feedback prior to implementation.

Thus, facilities effectively have until April 1 to complete the reintroduction of the C codes into their chargemasters. Because data reported now will affect future reimbursement, now is the time for hospitals to correct inequities in device payment that have come about because of poor reporting.

Guidelines for the “Welcome to Medicare” physical examination
Section 611 of Pub. L. 108-173 (The Medicare Prescription Drug Improvement and Modernization Act of 2003) provided for coverage under Medicare Part B of an initial preventive physical examination for new beneficiaries, effective for services furnished on or after January 1. This allows for the payment of one initial preventive physical examination within the first six months after the beneficiary’s part B coverage begins, although not before January 1. Although most initial physical examinations will probably be provided in physicians’ offices, hospital-based clinics can also provide the service, and specific guidelines have been issued for reporting of this service.

This initial physical examination is defined as including the following:

• physical examination, including height, weight, blood pressure, and electrocardiogram (EKG), but excluding clinical laboratory data; and

• education, counseling, and referral for screening or other preventive covered benefits, including the following:

- pneumococcal, influenza, and hepatitis B vaccine and administration;

- screening mammography;

- screening Pap smear and pelvic examination;

- prostate cancer screening tests;

- colorectal cancer screening tests;

- diabetes outpatient self-management training;

- bone mass measurements;

- glaucoma screening tests;

- medical nutrition therapy services;

- cardiovascular screening blood tests; and

- diabetes screening blood tests.

The HHS interpreted physical examination to include the following:

• review of the beneficiary’s medical and social history;

• review of the beneficiary’s potential risk factors for depression;

• review of the beneficiary’s functional ability and level of safety;

• examination including height, weight, blood pressure, visual acuity, and other factors based on initial history;

• EKG and interpretation; and

• education, counseling, and referral for screening or other preventive covered benefits as deemed appropriate, including the above.

HCPCS code G0344 (Initial preventive physical examination) is assigned to APC 0601 (Mid Level Clinic Visits). In addition, code G0366, EKG complete; G0367, EKG tracing only; or G0368 EKG, interpretation and report only would be reported. The hospital would report only code G0367, which is assigned to APC 0099 (Electrocardiograms). Total reimbursement for these services would be approximately $78.

Changes in reimbursement for blood and blood products
Reimbursement for blood and blood products has been problematical since the inception of OPPS—indeed, even before that. In an attempt to remedy the situation, in 2005 each blood product is now in a separate APC, except for approximately 13 low-volume blood products. All blood products are to be reported with P codes and all C codes for blood products have been deleted. It is expected that there will be increased reimbursement for all products except the low-volume ones, whose cost-based reimbursement is based on cost-to-charge ratios from 2002.

In summary, the OPPS final rule for 2005 contains a number of significant changes that will affect all hospitals. Each hospital should be sure to review any portions of the rule that impact its services and hurry to make the appropriate changes to the chargemaster or other billing systems. Remember: There is no longer a grace period. With few exceptions, these rules are in effect now.

— Susan M. Hull, MPH, RHIA, CCS, CCS-P, is a coding products and services manager at the AHIMA.

To view the entire final rule, visit www.cms.hhs.gov/regulations/hopps/2004f.

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