Background

10.1 - Background (Rev. 12423; Issued: 12-20-23; Effective: 01-01-24; Implementation: 01-02-24) Section 1833(t) of the Social Security Act (the Act) as amended by §4533 of the Balanced Budget Act (BBA) of 1997, authorizes CMS to implement a Medicare PPS for: • Hospital outpatient services, including partial hospitalization and intensive outpatient services; • Certain Part B services furnished to hospital inpatients who have no Part A coverage; • Partial hospitalization and intensive outpatient services furnished by CMHCs; • Hepatitis B vaccines and their administration, splints, cast, and antigens provided by HHAs that provide medical and other health services; • Hepatitis B vaccines and their administration provided by CORFs; and • Splints, casts, and antigens provided to hospice patients for treatment of nonterminal illness. The Balanced Budget Refinement Act of 1999 (BBRA) contains a number of major provisions that affect the development of the OPPS. These are: • Establish payments under OPPS in a budget neutral manner based on estimates of amounts payable in 1999 from the Part B Trust Fund and as beneficiary coinsurance under the system in effect prior to OPPS (Although the base rates were calculated using the 1999 amounts, these amounts are increased by the hospital inpatient market basket, minus one percent, to arrive at the amounts payable in the year 2000. See §10.3 for Benefits and Improvement Protection Act (BIPA) changes in market basket updates.); • Extend the 5.8 percent reduction in operating costs and 10 percent reduction in capital costs (which had been due to sunset on December 31, 1999) through the first date the OPPS is implemented; • Require annual updating of the OPPS payment weights, rates, payment adjustments and groups; • Require annual consultation with an expert provider advisory panel in review and updating of payment groups; • Establish budget neutral outlier adjustments based on the charges, adjusted to costs, for all OPPS services included on the submitted outpatient bill for services furnished before January 1, 2002, and thereafter based on the individual services billed; • Provide transitional pass-through payment for the additional costs of new and current medical devices, drugs, and biologicals for at least two years but not more than three years; • Provide payment under OPPS for implantable devices including durable medical equipment (DME), prosthetics and those used in diagnostic testing; • Establish transitional payments to limit provider’s losses under OPPS; the additional payments are for 3 1/2 years for CMHCs and most hospitals, and permanent for the 10 cancer hospitals; and • Limit beneficiary coinsurance for an individual service paid under OPPS to the inpatient hospital deductible. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), which was signed into law on December 21, 2000, made a number of revisions to the Outpatient Prospective Payment System (OPPS). These are: • Accelerated reductions of beneficiary copayments; • Increase in market basket update for 2001; • Transitional corridor provision for transitional outpatient payments (TOPs) for providers that did not file 1996 cost reports; and • Special transitional corridor treatment for children’s hospitals. The Secretary has the authority under §1883(t) of the Act to determine which services are included (with the exception of ambulance services for which a separate fee schedule is applicable starting April 1, 2002). Medicare will continue to pay for clinical diagnostic laboratory services, orthotics, prosthetics (except as noted above), and for take-home surgical dressings on their respective fee schedules. Medicare will also continue to pay for chronic dialysis using the composite rate (certain CRNA services, PPV, and influenza vaccines and their administration, orphan drugs, and ESRD drugs and supplies are not included in the composite rate), for screening mammographies based on the current payment limitation, which changes to payment under the Medicare Physician Fee Schedule (MPFS), effective January 1, 2002, and for outpatient rehabilitation services (physical therapy including speech language pathology and occupational therapy) under the MPFS. Acute dialysis, e.g., for poisoning, will be paid under OPPS. The 10 cancer centers exempt from inpatient PPS are included in this system, but are eligible for hold harmless payment under the Transitional Corridor provision. The Outpatient Prospective Payment System (OPPS) applies to all hospital outpatient departments except for hospitals that provide Part B only services to their inpatients; Critical Access Hospitals (CAHs); Indian Health Service hospitals; hospitals located in American Samoa, Guam, and Saipan; hospitals located in the Virgin Islands; and effective January 1, 2017 non-excepted off-campus provider-based departments of a hospital. The OPPS also applies to partial hospitalization and intensive outpatient services furnished by Community Mental Health Centers (CMHCs). Certain hospitals in Maryland that are paid under Maryland waiver provisions are also excluded from payment under OPPS but not from reporting Healthcare Common Procedure Coding System (HCPCS) and line item dates of service.