On December 10, 2013, the Centers for Medicare and Medicaid Services (CMS) published final rules: revising the hospital outpatient prospective payment and the ambulatory surgical center payment systems (OPPS Rule); and the physician fee schedule rule (PFS Rule) for calendar year 2014.

OPPS Rule

CMS made numerous changes to the hospital outpatient payment system, including:

• A net increase of 1.7 percent in payment rates for hospitals participating in the hospital outpatient quality reporting requirement program (those hospitals that do not participate will see a slight decrease in rates).  Ambulatory surgical centers will see a net increase of 1.2 percent.

• · CMS adopted its proposal to “package” the costs of certain items and services into payment for other services when the packaged items are “integral, ancillary, supportive, dependent, or adjunctive” to the main services.  The packaged items and services are: (1) drugs, biologicals, and radiopharmaceuticals used in a diagnostic test or procedure; (2) drugs and biologicals when used as supplies in surgical procedures; (3) certain clinical diagnostic laboratory tests; (4) certain procedures described by add-on codes; and (5) device removal procedures.

• For hospital outpatient clinic visits, CMS adopted its proposal to replace the current five level visit codes with a new, single-level code for all outpatient hospital clinic visits.  CMS did not adopt its proposal to replace five levels of codes with one level for emergency room visits.

• In a policy change, effective January 1, CMS will enforce its direct supervision standard for outpatient therapeutic services provided in critical access and small rural hospitals.  This issue has been simmering since 2009, when CMS announced that direct supervision (requiring the immediate availability of the physician or non-physician practitioner, or NPP) rather than general supervision (procedures are furnished under the physician’s or NPP’s overall direction or control, but presence is not required) was required for outpatient therapeutic services.  This announcement generated much controversy.  CMS responded to the controversy by limiting its decision through a number of steps, including a moratorium on enforcement of the direct supervision standard for critical access and small rural hospitals.  In addition, CMS established an independent review process that has resulted in designating general supervision, as opposed to direct supervision, for dozens of outpatient therapeutic procedures.  The issue remains controversial; there have been proposals to change the requirement by means of a change in the applicable statute.

PFS Rule

For many years, Congress has required CMS to use a “sustainable growth rate” (“SGR”) methodology in setting the Medicare physician fee schedule.  The SGR methodology typically dictates a substantial proposed reduction in the fee schedule followed by Congressional action to avoid it.  This proposed rule follows the normal pattern.

• CMS estimates that the SGR methodology will result in a 20.1 percent reduction in the physician fee schedule.

• Medicare has imposed caps on therapy services rendered to Medicare beneficiaries Previously, critical access hospitals were not directly subject to the caps; the new rule applies the caps fully to critical access hospitals effective January 1, 2014.

• CMS modified the “incident to” physician service billing rule to require that the person providing services incident to the physician’s service may do so only as permitted by state law or regulation.

• CMS expanded the use of telehealth services expanding eligible geographic areas for such services to include certain rural areas in Metropolitan Statistical Areas.