Advisor Live ® July 16, 2012

1. Advisor Live ®July 16, 2012 Summary of the proposed CY2013 Medicare Outpatient Prospective Payment System (OPPS) rule Note: printable slides are posted at www.premierinc.com/advisorlive

2. Speaker • Danielle Lloyd, M.P.H. Vice President, policy development and analysisPremier healthcare alliance

3. OPPS CY 2013 Rule Making Process • Medicare CY 2013 Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) proposed rule released July 6, 2012. • Official publication in July 30, Federal Register. • Comments to CMS due September 4, 2012. • CMS will release final rule by November 1, 2012. • Provisions generally effective January 1, 2013.

4. How to Comment • CMS proposed rule for the Outpatient PPS and ASCs • Comments due 60 days from the date of publication (September 4, 2012) • Go to http://www.regulations.gov • Select “Submit a comment” • Select “Proposed rule” in “Select Document Type” • Type “CMS-1589-P” into the “Keyword or ID” box • Find “Hospital Outpatient Prospective and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Quality Improvement Organization Regulations” (should be first selection) • Click on “Submit a Comment” under “Actions”

5. CY 2013 Outpatient PPS Proposed Rule • Initial CY 2013 market basket update of 3.0% • Productivity reduction of 0.8 percentage points • Additional 0.1 percentage point reduction per ACA • Overall average increase of 2.1% • 2.2% for large urban and rural • 1.9% for other urban • Net update of 0.1% for those not reporting quality • Conversion Factor going from $70.016 to $71.537 • Total payment for outpatient departments will be approximately $48.1 billion

6. CY 2013 Outpatient PPS – Changes in Rate Setting Methodology • Geometric mean costs of services in APC to determine the relative payment weights instead of median costs • CMS states this change will not significantly impact most providers • Slight payment increase to low volume urban hospitals (mostly psych hospitals), payment decrease to CMHCs because of lower partial hospitalization APC payment • Nonpass-through separately payable drugs and biologics continues to use separate process • Utilizing new cost center data “Implantable Devices Charged to Patients” from cost reports for Cost-to-Charge Ratio calculation • Captures higher costs for cardio implant APCs • Higher costs generally results in higher payment weight

7. CY 2013 Outpatient PPS—Wage Index • Wage Index • Section 508 benefit extension expired June 30, 2012 for OPPS • Continues frontier state 1.0 floor • Proposes to use FY 2013 IPPS wage indices for CY 13 OPPS • Proposes to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration wage adjustment if in “Section 505” out-migration county

8. CY 2013 Outpatient PPS—Rural hospitals • Rural hold-Harmless • A rural hospital with 100 or fewer beds that is not an SCH and an SCH (including an EACH) with no more than 100 beds are no longer eligible for TOPs for services performed on or after January 1, 2013. • Rural Adjustment • Will continue a budget neutral 7.1% payment increase for certain rural SCH (including EACHs) services • CMS will reexamine this adjustment by comparing rural and urban costs in the near future

9. CY 2013 Outpatient PPS— Cancer hospitals • Continue to provide additional payments to cancer hospitals so that the hospital’s payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data. • Proposes target PCR of 0.91 would be used to determine the CY 2013 cancer hospital payment adjustment to be paid at cost report settlement.

10. CY 2013 Outpatient PPS—Outliers • To qualify for outlier payments in CY 2012 a service or procedure cost must exceed 1.75 times the APC payment amount and exceed the payment amount by $2,025 (know as the fixed loss threshold). • CMS estimates that it will spend 1.03% of payments on outliers in CY 2012, which exceeds the target by 0.3% • For CY 2013, CMS proposes to increase the fixed loss threshold to $2,400.

11. CY 2013 Outpatient PPS—Drugs & Biologicals • ASP adjustment • CMS proposes to pay for separately payable drugs and biologicals at ASP + 6 percent based on the statutory default • Rationale is that it yields greater predictability in payment for separately payable drugs under the Outpatient PPS • Prior method to account for acquisition and pharmacy overhead costs had data limitations and provider/stakeholder criticism • Represents an increase from the current payment rate of ASP + 4 percent • Packaging threshold for drugs and biologicals is $80 per day cost

12. CY 2013 Outpatient PPS – Outpatient Status • CMS seeking comments on policy changes or clarifications to improve admission decisions such as • Improving current instructions for determining inpatient (IP) versus outpatient (OP) status • Definition of status based on time of treatment duration • Status based on specific clinical criteria or clinical measures • Evidence of more patients kept in long duration observation stays to avoid financial risk of wrongful admission • Increase in 48 hr observation stays from 3% in 2006 to 7.5% in 2010 • Lack of resources available to review and change status from IP to OP in accordance with condition code 44 requirements is one explanation • AB Rebilling Demonstration still accepting applications http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/Part_A_to_Part_B_Rebilling_Demonstration.html

13. CY 2013 Outpatient PPS – Supervision • CMS clarifies that the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in OPPS hospitals and critical access hospitals (CAHs) are the same • Do not apply if the services are paid under the MPFS • Exception for “sometimes therapy” services which are paid under the OPPS when not furnished as therapy services • Proposes to extend the non-enforcement instruction for CAHs and certain small rural hospitals for one final year through 2013 • Rational is to give hospitals one more year to gain familiarity with submitting evaluation requests to Advisory Panel on Hospital Outpatient Payment

14. CY 2013 Outpatient PPS – Intraocular Lenses • Proposes significant revisions to the regulations governing payments for new technology intraocular lens (NTIOLs). • Revises § 416.195(a)(2) to require that the IOL’s FDA-approved labeling contain a claim of a specific clinical benefit based on a new lens characteristic in comparison to currently available IOLs. • Revises § 416.195(a)(4) to require that any specific clinical benefit referred to in § 416.195(a)(2) must be supported by evidence that demonstrates that the IOL results in a measurable, clinically meaningful, improved outcome.

15. CY 2013 Outpatient PPS – Enriched Uranium • To eliminate domestic reliance on reactors outside of the United States that produce highly enriched uranium (HEU), and to promote the conversion of all medical isotope production to non- HEU sources. • Adjustment covers the marginal cost of radioisotopes produced from non-HEU sources over the costs of radioisotopes produced by HEU sources • Proposes $10 payment adjustment for diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope produced by non-HEU methods.

16. CY 2013 Outpatient PPS – EHR Incentives • Extends the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs through 2013, exactly as finalized for 2012. • Other changes to the Medicare and Medicaid EHR Incentive programs were proposed in a rule published in the Federal Register on March 7, 2012.

17. Hospital Outpatient Quality Reporting (OQR) Proposals • FY 2014 and 2015 Payment • No new measures for Hospital OQR program *OP-15 not reported until 2013 **OP-19 Suspended, OP-24 delayed until January 2014 collection ***Add OP-24 to data collection

18. Hospital OQR Data Collection/Submission Proposals • FY 2014 Dates

19. Hospital OQR Data Collection/Submission Proposals • FY 2015 Dates

20. CY 2013 Ambulatory Surgical Center • Projected CPI-U update of 2.2%. • Minus a multifactor productivity adjustment required by the ACA of 0.8%. • Minus additional ACA-mandated reduction of 0.1% • Average payment increase of 1.3%. • Total ASC payments, including beneficiary cost-sharing, for FY 2013 of $4.103 billion, an increase of $211 million compared to CY 2012.

21. CY 2013 ASC Quality Reporting (ASCQR) • Proposes no additions or deletions for previously finalized 2014, 2015, or 2016 measures. • Seeks public comment on approach for future measure selection and development for future inclusion. • For the CY 2015 payment determination and beyond, CMS proposes requirements regarding the dates for submission, payment, and completeness for claims-based measures. • Proposes to mirror the OQR method for the 2% reduction in payments for ASCs that fail to meet program requirements beginning in CY 2014 by calculating two conversion factors. • Clarifies policy on updating measure

22. Inpatient Rehabilitation Facility Quality Reporting Program • Updates on a previously adopted measure for the IRF QRP that will affect annual prospective payment amounts in FY 2014. • Adopts a policy that would provide that any measure that has been adopted for use in the IRF QRP will remain in effect until the measure is actively removed, suspended, or replaced. • Adopts policies, similar to IQR proposal, using the subregulatory guidance rather than notice-and-comment rulemaking if NQF makes minor updates to a measure.

23. Quality Improvement Organization (QIO) Regulations • Revises the QIO program regulations to: • give QIOs the authority to send and receive secure transmissions of electronic versions of medical information; • provide more detailed and improved procedures for QIOs when completing beneficiary complaint and quality reviews, including procedures related to a new alternative dispute resolution process called “immediate advocacy”; • increase the information beneficiaries receive in response to QIO review activities; • convey to beneficiaries the right to authorize the release of confidential information by QIOs; and • make other technical changes that are designed to improve the regulations.

24. Question and answer • Danielle Lloyd, M.P.H. Vice President, policy development and analysisPremier healthcare alliance • Christine Van DusenSenior Consultant, clinical standards and qualityPremier healthcare alliance