GOVERNMENT and LAW

Proposed outpatient PPS rule is sowing confusion

A move by the Centers for Medicare and Medicaid Services (CMS) to clarify proposed rule changes for its Outpatient Prospective Payment System (OPPS) may have backfired. CMS officials insist that the proposal, published in the Federal Register, will have no impact on OPPS payments to hospitals in 2002. Hospitals themselves are divided.

"It's not a rosy picture for 2002," said Ernest Anderson, pharmacy director at the Lahey Clinic in suburban Boston. "There would seem to be a strong possibility that payment will go from AWP minus 5% to AWP minus 22% or 23%."

If that happens, he said, community cancer centers and hospital oncology departments would be devastated. Oncology is one of the largest APCs, or ambulatory payment classifications. APCs are to outpatient care and payment what DRGs (diagnosis-related groups) are to inpatient care and payment.

In addition to oncology APCs, hospitals get separate reimbursement for oncology drugs and biological products used to treat Medicare outpatients. Community cancer centers make a small profit at current reimbursement rates, which are based on AWP minus 5%.

"At AWP minus 22%, they will lose money and no longer stay in the practice, at least for Medicare patients," Anderson said. "They will send patients to hospitals, but we will be in the same predicament of losing money. We can't afford that, either, but we can't deny patients care."

Then again, the changes may not be that dramatic. In Los Angeles, Melsen Kwong, pharmacy manager at Cedars Sinai Medical Center, is keeping her fingers crossed. "Everybody will be getting less reimbursement, but we do not have a good handle on how much less we will get. And this is only a proposed rule. All the lobbyists have been working feverishly."

Gary Stein, director of federal regulatory affairs for ASHP, is optimistic but not hopeful. The reality, he said, is that any reimbursement cuts could force weaker hospitals to close.

"We have heard from members that they are very concerned with this proposed rule. It's going to hit hospital outpatient clinics very hard. The only good news is that the rule is still proposed. They might see the light if enough people comment on just how bad it is."

Part of the problem is a lack of agreement about what the rule means for pharmaceuticals. CMS officials said the total reimbursement for drugs and biological products for 2002 will not change as a result of the rules proposed in the Aug. 24 Federal Register. Fears that payment for oncology or other products will decline are unfounded, they say.

And the officials emphasize that the current proposal is just that—a proposed rule. The department expects to publish a final rule by Nov. 1. And the final rule could contain "a significant pro rata reduction" in payments to hospitals.

The problem is a statutory limit on what are called pass-through payments. Pass-through payments cover drugs that are not already included in APC codes, as well as drugs in four specific categories: orphan drugs; chemotherapeutic products; radiopharmaceuticals and biologic products; and new drugs or biologics.

When Medicare implemented OPPS in August 2000, 2.5% of the total projected OPPS payments for the next year were set aside to cover pass-through payments. If the projected pass-through payments are expected to exceed the 2.5% cap, CMS is required to make pro rata cuts in every payment to keep the total pass-through payment within the cap.

Hospitals managed to convince Congress to suspend the 2.5% cap for 2001. According to the hospital industry, that will let hospitals collect $1.4 billion in pass-through payments for 2001. If the cap had been in place, they would have received around $425 million.

CMS can't recover the additional $1 billion it paid out this year, said department officials. But it is required by statute to prevent a similar overpayment for 2002. Starting in 2004, the pass-through cap falls to a maximum of 2%.

"Just cutting reimbursement without looking at the cost of treatment is backwards," Stein said. "Costs are increasing, but that is hardly reason to cut reimbursement to the level that it harms patient care."

Fred Gebhart

Fred Gebhart. Proposed outpatient PPS rule is sowing confusion.

Drug Topics

2001;21:35.