Hospital pharmacists relieved by reprieve in OPPS rule


New payment rates for OPPS rule is delayed



Hospital pharmacists relieved by reprieve in OPPS rule

Hospital pharmacy directors nationwide are breathing a collective sigh of relief. New rates for Medicare's outpatient prospective payment system (OPPS) that would have trimmed 69% from medication and medical device reimbursements have been delayed, possibly until April 1. The new rates were supposed to go into effect on Jan. 1, 2002.

The Centers for Medicare & Medicaid Services (CMS) delayed implementation of the final rule on OPPS because of "nontrivial errors" in new payment codes and calculations. The delay replaces an earlier move to freeze all Medicare outpatient claims for the first quarter of 2002 that could have devastated hospital cash flows.

Until new payment codes and rates are published in the Federal Register, hospitals will continue to be reimbursed at 2001 rates. A CMS spokeswoman said the agency is working feverishly to correct earlier errors but did not have estimates for revised reimbursement rates or a target implementation date.

Said Melsen Kwong, manager of pharmacy services at Cedars-Sinai Medical Center in Los Angeles, "The delay gives us an extra three months at higher payment rates. Nobody knows what the final impact of OPPS will be, but we all know that it is never in the patient's best interest to deal with decreased reimbursement."

The delay is the result of controversy over CMS' final rule on OPPS reimbursements that was published in the Federal Register on Nov. 30, 2001. The suspended rates would have reduced payments for drugs by 68.9%.

Among the biggest losers would be hospitals and ambulatory care clinics with significant use of oncology medications, orphan drugs, radiopharmaceuticals and biologic products, and drugs or biologics that have been approved in the past two to three years. All four categories are subject to pass-through payments based on AWP minus a set percentage that changes for single-source, multisource, or generic products.

The average blended acquisition cost for 2002 would have been AWP minus 64%, according to House Ways & Means Committee chairman Bill Thomas (R, Calif.), who was one of 10 Congressional Representatives and Senators who urged CMS to rethink its calculations for 2002. The Congressional group called on CMS to use a blended rate of AWP minus 75%.

Said Ernest Anderson, pharmacy director at the Lahey Clinic in Burlington, Mass., "We are cautiously waiting to see what CMS actually does. They are still looking to ratchet down overall expenditures."

The precise impact of CMS' eventual reimbursement changes will probably depend on each provider's patient population and medication use. CMS said the delayed 2002 rules would have cut reimbursement to some hospitals and boosted total payments to others compared with 2001.

Gary Stein, director of federal regulatory affairs for ASHP, said smaller hospitals would probably suffer less than large urban institutions with large Medicare populations.

But the problem is less CMS' formula than a statutory limit on the amount of pass-through payments. When Congress designed OPPS, it limited pass-through payments to 2.5% of total OPPS payments. If pass-through payments exceed the annual cap, CMS must make pro rata cuts in every payment for the succeeding year to keep total pass-through payments within the cap.

Until the current delay, CMS was planning to slice 2002 pass-through payments by 68.9% to make up for 2001 payments that exceeded the 2.5% cap. Boosting the base rate for drug reimbursement effectively reduces the pass-through payments, which helps hospitals avoid large pro rata reductions. But boosting base rates also increases overall Medicare costs, which flies in the face of Congressional intent.

"The whole OPPS rule seems to be a quagmire that CMS had not anticipated," sighed Stein.

Fred Gebhart


Fred Gebhart. Hospital pharmacists relieved by reprieve in OPPS rule. Drug Topics 2002;3:34.

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