October 31 saw the display of several rules of significance, including the 1827-page final rule encompassing changes to the Hospital Outpatient Prospective Payment System (PPS), Ambulatory Surgical Center Payment System, Hospital Conditions of Participation, and Ambulatory Surgical Center Conditions of Coverage (OPPS/ASC Final Rule). The OPPS/ASC Final Rule will be formally published in the Federal Register on November 18, 2008, and will establish payment rates for 2009.

Outpatient PPS

The OPPS/ASC Final Rule provides for a market basket increase of 3.6 percent for outpatient PPS services, with hospitals projected to receive $30.1 billion for outpatient services in 2009. Of significance, the OPPS/ASC Final Rule links Medicare payment for outpatient services to the reporting of quality measures by hospitals for the first time. As a qualification for receiving the 2009 payment update, hospitals must have reported to CMS concerning quality with respect to seven measures for 2008. Hospitals that fail to meet these outpatient reporting requirements will take a 2 percent reduction in their payment update. For 2010, hospitals will be required to provide a report relating to four additional imaging efficiency measures, bringing the total quality reporting measure count to eleven. As we previously reported, none of these measures has yet been adopted by the Hospital Quality Alliance, and only two of the four have been endorsed by the National Quality Forum. CMS continues to seek input with respect to 18 additional quality measures including those relating to cancer care, emergency department throughput, screening for risk of fall, and management of certain conditions, such as depression, stroke and rehabilitation, osteoporosis, asthma and community-acquired pneumonia. It is clear from the OPPS/ASC Final Rule that CMS is moving in a similar direction to inpatient payment in which payment would not be made for preventable hospital-acquired conditions during a patient stay.

CMS finalizes its proposal to encourage imaging efficiencies within the outpatient PPS system by creating five imaging composite APCs. These APCs shall be used when two or more imaging procedures using the same imaging modality are provided in a single session.

With respect to emergency department services, CMS has established a differential in payment between what it clarifies as a Type A Emergency Department (meaning one that offers services 24/7) and a Type B Emergency Department (one not open 24 hours a day). The payment rate for the new "Type B" APCs was created to more accurately reflect the cost differential between the two emergency departments.

The outpatient OPPS/ASC Final Rule also adopts the proposed changes to partial hospitalization program services, maintained the hold harmless payments for rural hospitals with 100 or fewer beds at a rate of 65 percent through December 31, 2009, and finalizes its proposal to pay for certain separately-payable drugs and biologicals at a rate of ASP plus 4 percent.


The OPPS/ASC Final Rule continues to implement the transition payments to the new outpatient PPS-based system for ASCs. CMS will pay for services based upon a blended rate of 50 percent of the 2007 ASC payment amount and 50 percent of the 2009 fully implemented payment amount. ASCs will not see a payment update for calendar year 2009.

The OPPS/ASC Final Rule adds 27 surgical procedures to the list of covered ASC procedures performed in an ASC, adds eight procedures to the list of office-based procedures that are subject to reduced payment, and updates the list of device-intensive procedures and covered ancillary services and their rates.

With respect to transplant centers, the OPPS/ASC Final Rule clarifies what appears to have been an error in prior issuances relating to the ability of a transplant center that has been terminated from the Medicare program to remain open pending appeal. The OPPS/ASC Final Rule clarifies that a transplant center may not remain open pending any appeals following an action to terminate it from the Medicare program, citing longstanding Medicare program policy. Prior issuances from CMS indicate that transplant programs terminated could remain open through the exhaustion of all appeals.

Finally, newly-established ASC Conditions for Coverage were issued in this OPPS/ASC Final Rule, beginning with a new definition of ASC -- "any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization and in which the expected duration of services would not exceed 24 hours following an admission." The new Conditions for Coverage strengthen patient rights, impose greater oversight, including requiring the implementation of a disaster preparedness plan, and performance improvement and quality assessment. In addition, the Conditions for Coverage improve patient admission and discharge planning, as well as strengthen applicable infection control requirements.

The OPPS/ASC Final Rule is available online. For more information regarding the OPPS/ASC proposed rule, see the July 10, 2008 issue of the Baker Hostetler Health Law Update.