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Immediate Impact of the Affordable Care Act on Outpatient PPS Hospital Payments

On July 15, 2010, the Centers for Medicare & Medicaid Services (CMS) issued Change Request 7029 (CR 7029), which outlines changes appearing in upcoming Federal Register notices as a result of the Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010, collectively known as the Affordable Care Act (ACA).  Many of these changes, which impact payments for Outpatient Prospective Payment System (OPPS) hospitals, are effective retroactively as if they were included in the calendar year (CY) 2010 OPPS Final Rule included in the Federal Register dated November 20, 2009.

Market Basket Update

The ACA reduces the 2010 market basket, an adjustment to payment rates reflecting inflation, by .25 percentage points for OPPS hospitals.  This changes the originally published market basket of 2.1 percent to 1.85 percent, applicable to all OPPS services furnished during CY2010.

Wage Index

Section 508 of the Medicare Modernization Act of 2003 allowed providers not meeting the general criteria for obtaining a reclassified wage index to appeal to the Medicare Geographic Classification Review Board to take advantage of the increased payments of the reclassified area.  In addition, for several years, certain providers have been granted special exceptions to the reclassification requirements.  Congress previously extended the original expiration dates for these provisions.  The ACA further extends reclassifications under Section 508 and the wage index for special exception providers through September 30, 2010.

Section 508 and special exception hospitals will receive additional payments if their wage index applicable from October 1, 2009, through March 31, 2010, is less than for the period April 1, 2010, through September 30, 2010, to compensate for the differences between the wage indices.

Beginning July 1, 2010, under the OPPS, hospitals located in a Core Based Statistical Area that includes Section 508 or special exception providers will be paid based on a revised wage index that excludes Section 508 and special exception wage data if doing so results in an increased wage index.

Impact on Payments

Changes to the market basket and post-reclassification wage index values directly impact the calculation of the CY2010 OPPS conversion factor.  As such, the originally published conversion factor of $67.406 was reduced to $67.241.  Payment rates, calculated based on the conversion factor, will be changed to reflect the revised conversion factor effective January 1, 2010.  In addition, any calculations based on payment rates, such as co-payment rates and certain offset calculations, also will be revised.  However, co-payment rates remain limited to a maximum of 40 percent of the OPPS payment rate and the $1,100 inpatient deductible.

Transitional Outpatient Payments

Upon implementation of the PPS for outpatient services on August 1, 2000, transitional outpatient payments (TOPs) were established to limit provider losses associated with changing payment systems.  Well after transitioning to the new system, Congress has allowed certain types of hospitals to continue to receive these payments.

Immediately preceding the ACA, sole community hospitals (SCHs) and Essential Access Community Hospitals (EACHs) qualified for TOPs only if they had 100 or fewer beds.  Under the ACA, SCHs and EACHs with more than 100 beds now have the opportunity to receive TOPs at 85 percent of the hold-harmless amount (the difference between pre-OPPS and OPPS payments) effective January 1, 2010, through December 31, 2010.

Small rural hospitals with 100 or fewer beds will continue to receive payments at 85 percent of the hold-harmless rate through December 31, 2010.

Changes Unrelated to ACA

Effective April 1, 2010, a correction will be made to payment amounts for three Healthcare Common Procedure Coding System (HCPCS) codes for drugs and biologicals:  C9258, C9262 and J1540.

While many of these changes are effective retroactively, CMS has not yet provided instructions on how to handle past claims paid under pre-ACA requirements.

Contact your BKD National Health Care Group advisor with questions or for more information on these matters.

This post was written by:

Andrew, a senior in BKD's Little Rock office, is a member of BKD National Health Care Group. His experience includes acting as an in-charge and assisting audit engagements on several regional health systems.

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