Regulatory Alert: Hospital Outpatient PPS - Notice of Delay until 8/1/2000

[Guest guest]

[Federal Register: June 30, 2000

(Volume 65, Number 127)]

[Rules and

Regulations]

[Page 40535-40537]

From the Federal Register Online via GPO Access

[wais.access.gpo.gov]

[DOCID:fr30jn00-14]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

Office of Inspector General

42 CFR Parts 409, 410, 411, 412, 413, 419, 424, 489, 498, and 1003

[HCFA-1005-N5]

RIN 0938-AI56

Medicare Program; Prospective Payment System for Hospital

Outpatient Services; Delay of Effective Date

AGENCY: Health Care Financing Administration (HCFA), HHS, and Office of

Inspector General (OIG), HHS.

ACTION: Notice of delay of effective date for final rule with comment

period.

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SUMMARY: This document delays the effective date on a final rule with

comment period published in the Federal Register on April 7, 2000 (65

FR 18434). That rule implemented a prospective payment system for

hospital outpatient services furnished to Medicare beneficiaries, as

set forth in section 1833(t) of the Social Security Act. It also

established requirements for provider departments and provider-based

entities, and it implemented section 9343© of the Omnibus Budget

Reconciliation Act of 1986, which prohibits Medicare payment for

nonphysician services furnished to a hospital outpatient by a provider

or supplier other than a hospital, unless the services are furnished

under an arrangement with the hospital. In addition, the rule

established in regulations the extension of reductions in payment for

costs of hospital outpatient services required by section 4522 of the

Balanced Budget Act of 1997, as amended by section 201(k) of the

Balanced Budget Refinement Act of 1999. The effective date is delayed

from July 1, 2000 to August 1, 2000.

DATES: Effective date: August 1, 2000, except that the changes to

Sec. 412.24(d)(6), new Sec. 413.65, and the changes to Sec. 489.24(h),

Sec. 498.2, and Sec. 498.3 are effective October 10, 2000.

Applicability date: For Medicare services furnished by

hospitals

that are subject to the prospective payment system, including hospitals

excluded from the inpatient prospective payment system, and by

community mental health centers, the applicability date for

implementation of the hospital outpatient prospective payment system is

August 1, 2000.

FOR FURTHER INFORMATION CONTACT: Janet Wellham, .

SUPPLEMENTARY INFORMATION:

I. Background

On April 7, 2000, we issued a final rule with comment

period in the

Federal Register (65 FR 18434) that reflected the provisions of the

September 8, 1998 proposed rule (63 FR

[[Page 40536]]

47552), except as noted in the preamble of the April 2000 rule (65 FR

18527).

Based on the following concerns, we have decided to

delay the

effective date of the April 2000 final rule until August 1, 2000.

In order to implement the prospective payment system

(PPS), we have

had to make a major change to the current claims processing system.

This change, called the claims expansion and line item processing

(CELIP), expands the electronic version of the claim form used by

hospitals to submit claims to the automated bill processing systems to

correctly determine the Medicare payment and beneficiary copayment

amounts for outpatient services under PPS. Because a beneficiary can

receive many outpatient services during one hospital visit and the

payment system must properly group all the services furnished in one

visit to accurately calculate Medicare's payment and the beneficiary's

copayment, it was necessary to expand the electronic claim form to

greatly increase the number of line items a hospital can bill for any

one visit as well as provide for adjudication of each individual line

item on the claim. As noted in the final rule with comment period, the

CELIP is a necessary prerequisite for implementing outpatient PPS (65

FR 18488).

During most of 1998 and for all of 1999, HCFA, along

with other

government agencies and private sector companies throughout the world,

focused its technology resources on ensuring the Y2K compliance of its

computer systems. After meeting the challenges posed by Y2K, HCFA then

resumed other systems work, including testing implementation of the

CELIP. As we began testing the CELIP, some unanticipated problems

arose, resulting in a need for reprogramming and testing the systems

changes. Although we originally believed that the problems could be

corrected in time to implement the PPS on July 1 as provided in the

April final rule with comment period, we have concluded based on more

recent testing and adjustment that it is virtually impossible for the

new payment system to be effectively implemented on July 1 as we had

planned. We address below some of the problems HCFA, its contractors,

and hospitals encountered in transitioning to the new outpatient PPS

payment system that have necessitated a change in effective date for

implementation of that payment system.

Expanding the number of line items on the electronic

claim form

from the current 56 to the 450 needed to implement the PPS caused

serious problems for HCFA's computer systems. When we attempted to

program this change, we found that our computer systems could not

accommodate the expanded claim form. As a result, we had to split the

claim form into four different files, expending time and programming

resources for tasks we had not anticipated. We encountered similar

problems in installing the outpatient code editor (OCE). The OCE is

also a critical component of the system we use to pay outpatient

claims. The OCE edits claim data to identify errors and returns edit

flags when appropriate. It also assigns the Ambulatory Payment

Classification (APC) number. Each APC is comprised of services that are

similar clinically and which require similar hospital resources. The

APC is supplied by the OCE to the pricing program that calculates a

payment rate for each APC. We found that the OCE did not fit into the

configuration management tool that governs the size of the software

used by each computer system to make payment under the PPS. As a

result, the tables in the OCE were reconfigured as with the claim form,

and we had to split the OCE into segments to allow it to work with

HCFA's computer systems. Because of these and similar problems, the

testing of our computer systems with the CELIP installed had to be

repeated a number of times. (In the testing mode in which we were

operating, this did not cause any disruptions to payments made under

current payment methodologies.)

As noted above, the CELIP was a necessary prerequisite

for the

systems changes that will actually implement the new PPS payment

methodology. The OCE and CELIP have now been released to

intermediaries, although we continue to test and refine CELIP further.

Now that the CELIP has been released, we must make and fully test the

PPS methodology systems changes before implementation to ensure that we

make accurate payments. It is not feasible to complete this work

consistent with a July 1 effective date for the PPS.

A one-month delay in the effective date of the PPS

will also allow

hospitals to have sufficient time to adjust to the programming changes

necessary to implement the new payment system. Hospitals need

sufficient time after HCFA completes its programming changes to

complete modifications of their own systems, test those systems in

interaction with HCFA's new systems, and train their personnel on use

of the new systems. As previously discussed, these activities have been

delayed due to problems with various required systems changes and

modifications to the OCE, the magnitude of which was not known when we

published the April 2000 final rule with comment period.

We acknowledge that unavoidable delays in software

development by

HCFA have impeded the ability of the hospital industry to fully prepare

for implementation of outpatient PPS. We have been informed by

hospitals and major hospital associations that, given these programming

delays that HCFA has encountered, maintaining the current effective

date for the PPS would virtually ensure that hospitals would not be

able to implement the PPS accurately. A brief delay in the effective

date would allow the industry more time for training and preparation

for what we hope will be a fully operational PPS, which would in turn

help reduce the number of errors or other problems that might occur as

hospitals transition to the new PPS.

We are intensifying our efforts to provide clear and

accurate

training to fiscal intermediaries, hospitals, and community mental

health centers. On June 15, 2000, we held a national satellite

broadcast to assist hospitals in preparing for implementation. We are

also compiling a booklet of ``Frequently Asked Questions and Answers''

that will be available both on the internet and in printed form. Other

efforts include reconfiguring the PPS materials on the HCFA web site to

facilitate access to relevant program instructions, training documents,

and other materials. In July 2000, we plan to host a face-to-face town

hall meeting at the HCFA headquarters in Baltimore, land. The

purpose of this meeting will be to respond to any remaining concerns

about the implementation of the new system. To assure that our fiscal

intermediaries remain up-to-date, and that we can respond to any

contractor concerns, we are continuing our weekly conference calls with

them and will also provide them with a video to update their training.

We also plan to continue our weekly teleconferences with hospital and

beneficiary associations to keep them abreast of our implementation

schedule, and to answer any questions.

We considered, but rejected as unworkable, contingency

plans that

we hoped might have allowed us to meet the July 1 effective date. Under

these plans, we might have been able to meet the effective date even

though we would not have been able to implement the PPS on that date.

Under this scenario, we would have had to either request hospitals to

hold claims until our systems were ready or hold the claims ourselves.

We concluded that we could not request hospitals to hold their claims,

thus interrupting their stream of

[[Page 40537]]

payment for outpatient services for a potentially significant period of

time. In addition, many of our intermediaries do not have sufficient

electronic storage space to hold claims for nearly as long as it will

take for our systems to be fully tested.

Even if sufficient storage capacity were available,

holding claims

until HCFA was fully able to implement the PPS would lead to problems.

These would have included extensive operational delays at the

intermediaries to process and pay the claims once the software became

available. Considerable risk of improper or inaccurate payment exists

in later working off what would be a crippling backlog of held claims

in an expedited manner. Therefore, given our need to accurately program

and test the PPS, it would not be feasible, given our operational

limitations, to maintain the previous July 1 effective date. Because of

the uncertainty for providers, beneficiaries, and HCFA contractors that

would be caused by holding claims for any significant period of time,

we do not believe that such a course of action provides a viable

alternative to a brief delay in the effective date of the PPS.

We had hoped and planned to be able to implement the

PPS on July 1,

2000 as stated in the April final rule with comment period. We regret

that we must postpone the benefits of the new payment system for

beneficiaries, even for only one month. Nevertheless, because of the

significance of the considerations discussed above and the unacceptable

risk to the successful implementation of the PPS that would be incurred

if we chose to move forward as originally planned and implement the PPS

on July 1, we have recognized the need to postpone the effective date

announced in the April rule.

As stated earlier, the changes to Sec. 412.24(d)(6),

new

Sec. 413.65, and the changes to Sec. 489.24(h), Sec. 489.2 and

Sec. 489.3 will still be effective on October 10, 2000.

II. Impact Statement

In the April 7, 2000 final rule, we discussed the

changes the BBA

and BBRA will have on payments to hospitals and beneficiaries. Because

we are delaying the implementation of the final rule, the current

payment rates required under pre-BBA rules will remain in effect for an

additional 32 days which may have a significant impact on a substantial

number of small entities.

(Catalog of Federal Domestic Assistance 93.774, Medicare--

Supplementary Medical Insurance Program)

Dated: June 22, 2000.

-Ann Min DeParle,

Administrator, Health Care Financing Administration.

Dated: June 23, 2000.

F. Mangano,

Principal Deputy Inspector General, Department of Health and Human

Services.

Approved: June 23, 2000.

Donna E. Shalala,

Secretary.

[FR Doc. 00-16586 Filed 6-29-00; 8:45

am]

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