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September 15, 2015
Billing and reimbursement

2016 OPPS proposed rule

CMS proposes massive APC reconfiguration, updates 2-midnight rule

The 2016 OPPS proposed rule released July 2 is deceptively short, but packs a punch. CMS is proposing the most massive APC reconfiguration and consolidation of APC groups since the beginning of OPPS, says Jugna Shah, MPH, president and founder of Nimitt Consulting, based in Washington, D.C., and Spicer, Minnesota.

To get a real sense of the financial impact, providers will need to take several steps, says Shah. First, review the narrative text to get a feel for the major categories of changes CMS is proposing, including some of the operational ones.

Second, this year's rule includes many changes that aren't obvious from the narrative text. Providers will need to review the proposed rule's Addendum B to see if status indicators are changing for their top 25-50 billed services, according to Shah.

Third, to get a handle on financial impact, providers will once again need to move beyond line item payment rate comparisons and begin analyzing entire claims to see whether they will face financial impact and to what extent, says Shah.

For example, in addition to the collapsing APCs for services described by dozens of CPT® codes, CMS also proposes changing the status indicators on many of those codes to conditionally package them. If providers don't properly scrutinize the rule's Addendum B where these status indicator changes become obvious, they will not get a true reflection of all the changes CMS is proposing, Shah says.


APC reconfiguration

For 2015, CMS finalized changes to reconfigure and consolidate ophthalmology and gynecology APCs. The agency is proposing to expand that to include nine new clinical families for 2016:

  • Diagnostic tests and related services
  • Endoscopy procedures
  • Gastrointestinal procedures
  • Imaging services (specifically diagnostic radiology and nuclear medicine)
  • Incision and drainage and excision/biopsy procedures
  • Orthopedic procedures
  • Skin-related procedure (combining debridement and destruction with skin procedure APCs)
  • Urology and related procedures
  • Vascular procedures


Providers should anticipate continued changes as CMS continues to move through clinical families.

"These changes are another example of CMS' stated desire to create a true prospective payment system in the outpatient setting," she says. To do this, CMS must move away from payment for a lot of separate, individual services, similar to a fee-for-service system, and toward larger groupings of services.

Certain APCs are being renumbered to create consecutive numbering for similar services. Most of the renumbering is due to CMS' overall elimination of many APCs because it believes such changes are appropriate without compromising clinical or resource homogeneity. For example, urology procedures would be numbered APC 5371 (Level 1 Urology and Related Services), APC 5372 (Level 2 Urology and Related Services), etc., up through Level 7.  

But the changes for some clinical families go far beyond the cosmetic. The current APCs for diagnostic tests and related services are divided by organ system or physiologic test type. CMS determined these groups are unnecessarily narrow for a prospective payment system and proposes reducing 19 non-imaging diagnostic APCs into four general levels.

CMS proposes similar changes for APCs that contain imaging services such as x-ray and nuclear medicine. The proposal would reduce the number of APCs for these services by more than half by structuring them based on similar resource costs and not anatomic groupings.

The procedures assigned to each APC are available in Addendum B of the proposed rule. To show a full list of the proposed APC numbering changes, CMS has included a crosswalk of the 2015 APCs and proposed 2016 APCs in a new addendum titled Addendum Q.


New C-APCs

CMS proposes adding new comprehensive APCs (C-APC) in 2016, but did not change the logic or methodology for paying for these procedures. The new C-APCs are:

  • 5165, Level 5 ENT Procedures
  • 5492, Level 2 Intraocular Procedures
  • 5416, Level 6 Gynecologic Procedures
  • 5361, Level 1 Laparoscopy
  • 5362, Level 2 Laparoscopy
  • 5123, Level 3 Musculoskeletal Procedures
  • 5375, Level 5 Urology and Related Services
  • 5881, Ancillary Outpatient Services When Patient Expires
  • 8011, Comprehensive Observation Services


CMS proposes status indicator J2 to identify services that are part of the observation C-APC. When those services are performed and reported on a single claim, CMS would consider them, along with most other OPPS services and items (with some exceptions), to be adjunctive or related and therefore would not make separate payment. In developing the single C-APC observation payment rate from more than 1 million claims, CMS used almost all billed line items, according to the proposed rule.

If CMS finalizes its proposal for CY 2016, then a single C-APC payment will be made for observation services when claims meet the following criteria: 

  • The claim does not contain a HCPCS code with status indicator T reported on the same day or one day prior to the date of service associated with HCPCS code G0378 (observation services per hour)
  • The claim contains eight or more units reported for hours of observation described by G0378
  • The claim contains one of the following codes:
    • HCPCS code G0379 (direct referral of patient for hospital observation care) on the same date of service as G0378
    • CPT code 99284 (level 4 ED visit)
    • CPT code 99285 (level 5 ED visit) or HCPCS code G0384 (Type B ED visit Level 5)
    • CPT code 99291 (critical care, E/M of the critically ill or critically injured patient; first 30‑74 minutes)
    • HCPCS code G0463 (hospital outpatient clinic visit for assessment and management of a patient) provided on the same date of service or one day before the date of service for  G0378
  • The claim does not contain a HCPCS code with status indicator J1 (outpatient services paid through a C-APC)


This criteria is identical to the criteria used to generate the separately payable Composite Extended Assessment and Management (EAM) APC today, says Shah. The only difference is that today, in addition to the payment for the Composite EAM of approximately $1,250, additional APC payments may also be made for services such as drug administration and x-rays. Under CMS' proposed observation C-APC, only a single payment of approximately $2,200 would be made.

By establishing the new C-APC, CMS proposes deleting Composite APC 8009 (EAM).

As the C-APC program continues to expand, CMS also proposes to require providers to report a new HCPCS modifier to identify all adjunctive, related, and associated services delivered prior to the comprehensive service and billed on a separate claim in order to capture all related costs. This proposal, if finalized, will have a huge operational impact on providers and needs to be carefully reviewed and commented on, says Shah (see OPPS Advisor on p. 10 for more information).


2-midnight rule update

Providers anticipated an update to the 2-midnight rule in the 2016 IPPS final rule released April 17, but CMS noted that it was still collecting information and would provide more information in the OPPS proposed rule. CMS followed through with an update to the 2-midnight rule in the OPPS.

CMS proposes that for stays a physician expects to last less than two midnights, it will accept an inpatient admission on a case-by-case basis, depending on the judgment of the physician and the documentation justifying the stay. CMS expects short stays for minor surgical procedures or hospital care to be rare and will monitor these types of admissions to prioritize them for medical review.

Quality Improvement Organizations (QIO) would take over responsibility for educating physicians and enforcing the 2-midnight rule from Recovery Auditors, according to the proposed rule. This appears to be a positive change, as the QIOs are likely better equipped than Recovery Auditors to conduct these reviews, but providers will know more once CMS releases information about the medical review strategy, says Shah.

Even though the "new medical review short-stay inpatient review process" is mentioned in the OPPS proposed rule, it appears the decision to make this change within the statutory boundaries of the current QIO function has already been made, says Debbie Mackaman, RHIA, CPCO, CCDS, a regulatory specialist for HCPro, a division of BLR, in Danvers, Massachusetts.

"CMS states it will be effective no later than October 1, 2015," she adds. "The OPPS final rule will not even be published by then and it seems odd that CMS did not include this in the IPPS proposed rule in April instead."

Last year, CMS redesigned the QIO program to separately address beneficiary complaints and quality-of-care issues through the BFCC-QIO, who will now be performing the 2-midnight medical reviews. The QIN-QIO will continue to perform quality improvement activities.

In hindsight, CMS may have been one step in front of providers, says Mackaman.

"The proposed rule states that this move was to mitigate the perception of a potential conflict of interest between medical review and quality improvement functions of QIOs, which now makes more sense," Mackaman says. "I feel this is further proof that the basic framework of the 2-midnight rule is here to stay, regardless of comments and potential solutions offered by MedPAC and the AHA, which CMS doesn't appear to put much stock in."

As the QIOs begin medical necessity reviews of short inpatient stays (i.e., stays less than 24 hours), this may be a positive change for providers, Mackaman says. The audits will be conducted at a peer review level, which may be more collaborative in nature rather than punitive as providers have seen with Recovery Auditors, she adds.

Whether the cases are reviewed by the QIOs or the Recovery Auditors, the reviews will be performed as post-payment audits based on claims data. It is unclear from the OPPS proposed rule how case selection will work and this may be an area where providers may want clarification, Mackaman says.


Additional 2016 OPPS changes proposed by CMS

The proposed rule includes many other changes providers should be aware of and ready to comment on to CMS, says Jugna Shah, MPH, president and founder of Nimitt Consulting, based in Washington, D.C., and Spicer, Minnesota.

CMS proposes a payment reduction for discontinued procedures involving implantable devices assigned to a device-dependent APC, defined as APCs with a device offset greater than 40%, which are discontinued before anesthesia has been administered or is not required.

CMS would reduce the payment by 100% of the device offset prior to applying additional adjustments made when a procedure is discontinued and reported with modifier -52 (reduced services) or -73 (discontinued outpatient procedure prior to anesthesia administration). Currently, modifiers -52 and -73 result in a payment rate of 50% of the full OPPS payment for the procedure.

CMS expects these devices, in the majority of cases, would remain sterile and be used in future procedures. This policy would not include modifier -74 (discontinued procedure after anesthesia is administered), but CMS is seeking comments on how often devices become ineligible for use when a procedure is stopped after anesthesia is administered.

CMS proposes moving seven procedures from the inpatient-only list to the OPPS:

0312T, vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction, with implantation of pulse generator, includes programming

20936, autograft for spine surgery only (includes harvesting the graft); local (e.g., ribs, spinous process, or laminar fragments) obtained from the same incision

20937, autograft for spine surgery only (includes harvesting the graft); morselized (through separate skin or fascial incision

20938, autograft for spine surgery only (includes harvesting the graft); structural, bicortical or tricortical (through separate skin or fascial incision)

22552, arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots; cervical below C2, each additional interspace

54411, removal and replacement of all components of a multi-component inflatable penile prosthesis through an infected field at the same operative session, including the irrigation and debridement of infected tissue)

54417, removal and replacement of non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis through an infected field at the same operative sessions, including irrigation and debridement of infected tissue


CMS proposes assigning status indicator N (no additional payment, payment included in line items with APCs for incidental service) to codes 20936, 20937, 20938, and 22552. Codes 0312T, 54411, and 54417 would be assigned status indicator J1.