Unbiased Analysis of Today's Healthcare Issues

Medicare Reimbursement Information VI

Written By: Jason Shafrin - Sep• 09•09

The Medicare Reimbursement series continues with today’s focus on outpatient care. The sources of this information is MedPAC’s Payment Basics.

Outpatient Hospital Services

  • Outpatient hospital procedures range from injections to complex surgical procedures that require anesthesia. Outpatient hospital care accounted for $19 billion of total Medicare spending in 2007.
  • Currently, outpatient hospital reimbursement is based on the outpatient prospective payment system (OPPS); similar to the PPS for inpatient hospital care. Originally, outpatient hospital reimbursement was based on hospital cost. Under this system, copayments for outpatient care were about 50% of cost. Under the OPPS, copayments are declining each year as a share of total OPPS payments until they reach 20 percent. OPPS pays providers based on HCPCS coding, specifically the ambulatory payment classifications (APCs).
  • Congress has legislated permanent hold-harmless status to cancer and children’s hospitals. In addition, beginning in 2006 rural sole community hospitals (SCHs) receive an additional 7.1 percent above standard payment rates on all OPPS services except drugs and biologicals.
  • CMS assigns some new services to “new technology” APCs based only on similarity of resource use. CMS chose to establish new technology APCs because some services were too new to be represented in the data the agency used to develop the initial payment rates for the OPPS. Services remain in these APCs for two to three years, while CMS collects the data necessary to develop payment rates for them.
  • CMS makes most OPPS payments on a per service basis, but CMS pays for partial hospitalizations on a per diem basis.
  • Hospitals can receive three payments in addition to the standard OPPS payments: i) pass-through payments for new technologies, ii) outlier payments for unusually costly services, and iii) hold-harmless payments for cancer and children’s hospitals and rural hospitals with 100 or fewer beds.

Outpatient Dialysis Services

  • In 1972, the Social Security Act extended all Medicare Part A and Part B benefits to individuals with ESRD (of any age) who are entitled to receive Social Security benefits. ESRD beneficiaries account for 1% of Medicare enrollment.
  • Spending for the 450,000 enrolled ESRD beneficiaries in 2006 was $20 billion. Of this, $8.4 billion was spent on dialysis.
  • The base payment rate for each dialysis treatment is $132.49 for freestanding facilities and $136.68 for hospital-based facilities. By 2009, however, this rate will be the same for both types of facilities. The base rate is adjusted for patient age, BMI, body surface area as well as a geographic cost adjustment factor.
  • Medicare pays dialysis facilities a predetermined payment for each dialysis treatment they furnish. Medicare covers two methods of dialysis—hemodialysis and peritoneal dialysis. The composite rate currently excludes several injectable drugs—such as erythropoietin, vitamin D, and iron—for which physicians are separately reimbursed.
  • The Medicare Improvements for Patients and Providers Act of 2008 adjust payments in a number of ways. In the near future, injections will also be included in the composite rate. A P4P program is being instituted which evaluates physicians based on anemia management, dialysis adequacy, patient satisfaction, iron management, bone mineral metabolism, and vascular access.

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  1. […] to receive Social Security benefits. ESRD beneficiaries now account for 1% of Medicare enrollment. This post review the types of services ESRD Medicare beneficiaries receive and how Medicare pays providers […]

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