Medicare
Discrepancy in Hospital Outpatient Prospective Payment System Methodology Leads to Inaccurate Beneficiary Copayments and Medicate Payments Gao ID: GAO-04-103R October 6, 2003Under the Medicare hospital outpatient prospective payment system (OPPS), beneficiaries can be responsible for paying 50 percent or more of the total payment for outpatient services they receive in hospitals. The Balanced Budget Act of 1997 (BBA) introduced a mechanism to gradually decrease beneficiary cost sharing to 20 percent of the payment rate for each hospital outpatient service. The Centers for Medicare & Medicaid Services (CMS) published a final rule that implemented, effective with the 2002 payment rates, a methodology for calculating copayment amounts that was designed to ensure that even as certain changes affect the payment rates for hospital outpatient services over time, beneficiary coinsurance for services would eventually be 20 percent of the total payment rate for each service. Under this 2002 methodology, the copayment amount for each outpatient payment group of services, called an ambulatory payment classification (APC) group, could not increase from year to year, and the beneficiary coinsurance percentage would remain the same or decrease, eventually reaching 20 percent for each APC. When CMS published the final rule updating the OPPS payment rates for 2003, the agency stated that it used the methodology implemented in 2002 for determining 2003 copayments. However, in the course of other ongoing work, GAO found several APCs for which copayment amounts increased from 2002 to 2003, contrary to the methodology implemented in 2002. For a federal agency to adopt a new position or payment methodology that is inconsistent with existing rules and regulations, it must follow Administrative Procedure Act rulemaking requirements, which generally include publishing its intentions and allowing for public comment. Because of our concerns about this methodological discrepancy, we discussed the issue with CMS staff in May 2003. Thereafter, in its August 2003 proposed rule setting forth the 2004 OPPS payment rates, CMS stated that it would revise and clarify the copayment methodology implemented in 2002, and that this revised methodology would be used to calculate copayment amounts beginning in 2004. In this report, we present our complete analysis of the 2003 copayment methodology and the implications its use holds for copayment amounts in 2003 and future years. We also present the estimated financial impact this methodology has had on both beneficiary cost sharing and Medicare payments in 2003.
GAO found that use of a copayment methodology in 2003 that differed from the copayment methodology in 2002 has resulted in inaccurate 2003 copayment amounts for 75 APCs. For 28 APCs, this methodology has resulted in beneficiaries being responsible for higher copayments than they would have been under the 2002 methodology. For 47 APCs, beneficiaries are responsible for lower copayments, and, therefore, Medicare is making higher payments than it would have under the 2002 methodology. Moreover, under this methodology, copayment amounts for some APCs may never decline to 20 percent of the APC payment rate. Although CMS is proposing to revise the copayment methodology for 2004, the agency did not recalculate the 2003 copayment amounts using the 2002 methodology before using them as the basis for calculating the 2004 copayment amounts. Thus, certain proposed 2004 copayment amounts are higher and others are lower than they would have been if CMS had used the 2002 methodology in 2003. In addition, the time it will take for the copayment amounts for some of these APCs to reach 20 percent of the APC payment rate will increase. We estimate that in 2003 the methodology used by CMS will result in about $414 million in inaccurate copayments, with a net of $192 million in Medicare program overpayments. Specifically, we estimate beneficiaries will be overcharged by approximately $111 million for certain services, and Medicare will overpay by approximately $303 million for other services.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-103R, Medicare: Discrepancy in Hospital Outpatient Prospective Payment System Methodology Leads to Inaccurate Beneficiary Copayments and Medicate Payments
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Payment System Methodology Leads to Inaccurate Beneficiary Copayments
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October 6, 2003:
The Honorable Thomas A. Scully:
Administrator:
Centers for Medicare & Medicaid Services:
Subject: Medicare: Discrepancy in Hospital Outpatient Prospective
Payment System Methodology Leads to Inaccurate Beneficiary Copayments
and Medicare Payments:
Dear Mr. Scully:
Under the Medicare hospital outpatient prospective payment system
(OPPS), beneficiaries can be responsible for paying 50 percent or more
of the total payment for outpatient services they receive in hospitals.
The Balanced Budget Act of 1997 (BBA)[Footnote 1] introduced a
mechanism to gradually decrease beneficiary cost sharing to 20 percent
of the payment rate for each hospital outpatient service.[Footnote 2]
The Centers for Medicare & Medicaid Services (CMS) published a final
rule that implemented, effective with the 2002 payment rates, a
methodology for calculating copayment amounts that was designed to
ensure that even as certain changes affect the payment rates for
hospital outpatient services over time, beneficiary
coinsurance[Footnote 3] for services would eventually be 20 percent of
the total payment rate for each service.[Footnote 4] Under this 2002
methodology, the copayment amount for each outpatient payment group of
services, called an ambulatory payment classification (APC) group,
could not increase from year to year, and the beneficiary coinsurance
percentage would remain the same or decrease, eventually reaching 20
percent for each APC.[Footnote 5]
When CMS published the final rule updating the OPPS payment rates for
2003, the agency stated that it used the methodology implemented in
2002 for determining 2003 copayments.[Footnote 6] However, in the
course of other ongoing work, we found several APCs for which copayment
amounts increased from 2002 to 2003, contrary to the methodology
implemented in 2002.[Footnote 7] For a federal agency to adopt a new
position or payment methodology that is inconsistent with existing
rules and regulations, it must follow Administrative Procedure Act
rulemaking requirements, which generally include publishing its
intentions and allowing for public comment.[Footnote 8] Because of our
concerns about this methodological discrepancy, we discussed the issue
with CMS staff in May 2003. Thereafter, in its August 2003 proposed
rule setting forth the 2004 OPPS payment rates, CMS stated that it
would revise and clarify the copayment methodology implemented in 2002,
and that this revised methodology would be used to calculate copayment
amounts beginning in 2004.[Footnote 9]
In this report, we present our complete analysis of the 2003 copayment
methodology and the implications its use holds for copayment amounts in
2003 and future years. We also present the estimated financial impact
this methodology has had on both beneficiary cost sharing and Medicare
payments in 2003.
To estimate the impact of the 2003 copayment methodology on beneficiary
cost-sharing obligations, we used 2001 Medicare outpatient claims
data[Footnote 10] together with the 569 APC groups in 2003 and the 2003
payment rates. We calculated the 2003 copayment amount for each of the
APCs according to the 2002 methodology and calculated the difference
between that amount and the amount published in the 2003 OPPS final
rule. We compiled a list of the differences, multiplied the difference
by the respective service volume for each APC from the 2001 claims, and
then summed them across all affected APCs to estimate the total amount
of inaccurate copayments. See Enclosure I for more details on our
methodology. We performed our work in accordance with generally
accepted government auditing standards from May through October 2003.
In summary, we found that use of a copayment methodology in 2003 that
differed from the copayment methodology in 2002 has resulted in
inaccurate 2003 copayment amounts for 75 APCs.[Footnote 11] For 28
APCs, this methodology has resulted in beneficiaries being responsible
for higher copayments than they would have been under the 2002
methodology. For 47 APCs, beneficiaries are responsible for lower
copayments, and, therefore, Medicare is making higher payments than it
would have under the 2002 methodology. Moreover, under this
methodology, copayment amounts for some APCs may never decline to 20
percent of the APC payment rate. Although CMS is proposing to revise
the copayment methodology for 2004, the agency did not recalculate the
2003 copayment amounts using the 2002 methodology before using them as
the basis for calculating the 2004 copayment amounts. Thus, certain
proposed 2004 copayment amounts are higher and others are lower than
they would have been if CMS had used the 2002 methodology in 2003. In
addition, the time it will take for the copayment amounts for some of
these APCs to reach 20 percent of the APC payment rate will increase.
We estimate that in 2003 the methodology used by CMS will result in
about $414 million in inaccurate copayments, with a net of $192 million
in Medicare program overpayments. Specifically, we estimate
beneficiaries will be overcharged by approximately $111 million for
certain services, and Medicare will overpay by approximately $303
million for other services.
We recommend that, for the purpose of calculating the 2004 OPPS
beneficiary copayment amounts, the Administrator of CMS first apply the
2002 copayment methodology to the 2003 APCs for which beneficiaries
were inaccurately charged. The 2004 copayment amounts should then be
based on these revised 2003 copayment amounts. In written comments on a
draft of this report, CMS stated that it would take the information we
provided into consideration as part of issuing its 2004 final rule.
Background:
The initial OPPS payment rates that went into effect August 1, 2000
were based on hospitals' median costs in 1996. The initial copayment
amounts were based on hospitals' median charges for the same year, but
were to be no lower than 20 percent of the payment rate for each APC.
Because hospitals' median charges usually exceeded hospitals' median
costs, the copayments for most APCs were set at levels well above 20
percent of the payment rate.
BBA provides the methodology by which copayment amounts were to be
initially determined and specifies that a copayment amount for an APC
would be held constant as the payment rate increases for that APC with
the annual inflation adjustment until the copayment amount declines to
20 percent of the payment rate. However, BBA does not specify how
copayments are to be determined when CMS reviews and revises the APCs,
as it is required to do at least annually in accordance with section
1833(t)(9)(A) of the Social Security Act.[Footnote 12] CMS takes into
account changes in medical practice and technology and the addition of
new services, cost data, and other relevant information and makes
revisions in the services assigned to a particular APC, known as
reclassification, and in the relative payment weight for an APC, known
as recalibration. Thus, although the payment rates are annually
adjusted upward for inflation, an APC's payment rate could either
increase or decrease from one year to the next because of
reclassification and recalibration or recalibration alone.
In the final rule that established the 2002 OPPS rates, CMS set forth a
methodology for calculating copayments that was designed to take
reclassification and recalibration changes into account and ensure that
the copayment amount for a particular APC would not increase from one
year to the next due to these changes, until it represented 20 percent
of the total payment rate. CMS stated that if an APC's payment rate
increased, the copayment dollar amount would remain the same, causing
the coinsurance percentage to decrease. If an APC's payment rate
decreased, the coinsurance percentage for the APC would remain the
same, causing the copayment amount to decrease. If two or more APCs
were combined to make a new APC, the lowest of the contributing APCs'
coinsurance percentages would apply to the new APC.[Footnote 13]
According to the 2002 copayment methodology, the transfer of a service
from one APC to another is not considered the creation of a new APC.
The proposed 2004 copayment methodology confirms this
position.[Footnote 14]
Change in 2003 Copayment Methodology Affects Beneficiary Copayment
Amounts in 2003 and Future Years:
In the final rule that established the 2003 payment rates, CMS stated
that it calculated the copayment amounts using the 2002
methodology.[Footnote 15] However, when the 2003 copayment amounts were
calculated in that final rule, CMS made unexplained modifications that
were inconsistent with its rules. As a result, the 2003 copayment
amounts for 28 APCs increased compared to the 2002 amounts, and the
copayment amounts for 47 other APCs decreased more than they would have
using the 2002 methodology. In addition, under the 2003 methodology,
copayment amounts for some APCs may not have eventually declined to 20
percent of the APC payment rate. Finally, certain proposed 2004
copayment amounts are higher and others are lower than they would have
been if CMS had consistently applied the 2002 methodology in 2003.
The fundamental difference between the 2002 and 2003 methodologies was
that, according to CMS documentation, for 2003, CMS deemed any APC that
had one or more services added to it to be a "new" APC. In 2002, an APC
was not considered to be new if it had services added to it.[Footnote
16] Under the 2002 methodology, CMS calculated the copayment amount of
an APC containing reclassified services, referred to as a "revised"
APC, from its own copayment amount or coinsurance percentage from the
previous year depending on whether the payment rate increased or
decreased. Under the 2003 methodology, CMS calculated the copayment
amount of an APC containing reclassified services by adopting the
lowest coinsurance percentage from the previous year of any APC that
contributed a service to that APC. This change, when coupled with
payment changes, led the copayment amounts for some APCs to
inaccurately increase or decrease between 2002 and 2003. In order to
illustrate how the methodology used in 2003 affected copayment amounts,
we present two simplified hypothetical examples below.
Example 1: Demonstration of How the 2003 CMS Copayment Methodology Led
to Inaccurately High 2003 Beneficiary Copayment Amounts:
In 2002, hypothetical APC 1 had a payment rate of $50.00, a coinsurance
percentage of 50 percent, a copayment amount of $25.00, and included
services A, B, and C (see fig. 1). Hypothetical APC 2 had a payment
rate of $65.00, a coinsurance percentage of 45 percent, a copayment
amount of $29.25, and included services D, E, and F.
Figure 1: Hypothetical APCs in 2002:
[See PDF for image]
[End of figure]
For 2003, service D was reclassified to APC 1, and the payment rate of
APC 1 increased to $60.00 through recalibration and application of the
annual inflation adjustment (see fig. 2). Applying the 2002
methodology, the 2003 copayment amount should have remained $25.00
because this APC was not considered new, and the 2003 coinsurance
percentage should have decreased to 42 percent.
Figure 2: Update to the Copayment Amount for a Hypothetical APC with a
Payment Rate Increase for 2003 If the 2002 Methodology Had Been Used:
[See PDF for image]
[End of figure]
However, because service D was reclassified to APC 1, CMS would have
considered it a new APC under the 2003 methodology. Therefore, the 2003
coinsurance percentage for APC 1 would have been 45 percent, the lowest
2002 coinsurance percentage of all APCs contributing services to it, in
this case, APC 1 and APC 2 (see fig. 3). However, the payment rate for
APC 1 increased enough so that 45 percent of $60.00 ($27.00) is higher
than the $25.00 the copayment should have been.
Figure 3: Update to the Copayment Amount for a Hypothetical APC with a
Payment Rate Increase for 2003 Using the 2003 Methodology:
[See PDF for image]
[End of figure]
Example 2: Demonstration of How the 2003 CMS Copayment Methodology Led
to Inaccurately Low 2003 Beneficiary Copayment Amounts:
This example uses the same hypothetical APC 1 and APC 2 as presented in
figure 1. For 2003, service D was again reclassified to APC 1; however,
in this example, the payment rate of APC 1 decreased to $45.00 in 2003
(see fig. 4). Applying the 2002 methodology, the 2003 coinsurance
percentage of APC 1 should have remained 50 percent, because this APC
was not considered new, and the 2003 copayment amount should have
decreased to $22.50.
Figure 4: Update to the Copayment Amount for a Hypothetical APC with a
Payment Rate Decrease for 2003 If the 2002 Methodology Had Been Used:
[See PDF for image]
[End of figure]
However, under the 2003 methodology, CMS would have considered APC 1 a
new APC. Because the 2002 coinsurance percentage of APC 2 (45 percent)
was lower than the 2002 coinsurance percentage of APC 1 (50 percent),
CMS would have used 45 percent to calculate the copayment amount for
APC 1 (see fig. 5). In this example, because the payment rate for APC 1
decreased, the lower coinsurance percentage in conjunction with a lower
payment rate would have resulted in a copayment amount of $20.25,
instead of the $22.50 calculated using the 2002 methodology.
Figure 5: Update to the Copayment Amount for a Hypothetical APC with a
Payment Rate Decrease for 2003 Using the 2003 Methodology:
[See PDF for image]
[End of figure]
In the proposed rule updating the OPPS payment rates for 2004, CMS
stated that, effective with the 2004 payment rates, it would revise and
clarify the copayment methodology. Our review of the proposed
methodology indicates that it would be consistent with the statute
because it would not allow copayment amounts to increase from year to
year, and they would eventually decline to 20 percent of the APC
payment rate. However, CMS did not recalculate the 2003 copayment
amounts using the 2002 methodology before using them as the basis for
calculating the 2004 copayment amounts. Thus, certain 2004 copayment
amounts are higher, and others are lower, than they would have been if
CMS had consistently applied the 2002 methodology, and the time it will
take for the copayment amounts for some of these APCs to reach 20
percent of the APC payment rate will increase.
2003 Copayment Methodology Results in Inaccurate Beneficiary Copayments
and Medicare Payments:
We estimate that in 2003, the copayment methodology used by CMS will
result in about $414 million in inaccurate copayments, with a net of
$192 million in Medicare program overpayments. More specifically, we
estimate that beneficiaries will be overcharged by approximately $111
million for certain services. Beneficiaries will be undercharged for
other services, and therefore we estimate that Medicare will overpay by
approximately $303 million for these other services. The exact amounts
will depend on the actual number of services provided in the affected
APCs in 2003.
For some APCs, the beneficiary is being overcharged. APC 0291, Level II
Diagnostic Nuclear Medicine Excluding Myocardial Scans, is an example
of an APC for which the beneficiary is responsible for paying a higher
copayment as a result of the 2003 copayment methodology. We determined
that the 2003 copayment for this APC is more than $14 higher than it
would have been had the 2002 methodology been used. Multiplying that
amount by the total number of 2001 claims for this APC results in an
estimated $1.7 million in beneficiary overcharges for 2003. For the
APCs for which beneficiaries were overcharged, we estimate that the sum
of those overcharges is approximately $111 million.
For the majority of the miscalculated APCs, however, Medicare is
overpaying. For example, for APC 0110, Transfusion, we determined that
the 2003 copayment amount for this APC was $46 lower than it would have
been had the 2002 methodology been used and, therefore, the Medicare
payment portion was that much higher. Multiplying that amount by the
total number of 2001 claims for this APC results in an estimated $15.2
million in Medicare overpayments for 2003. Summing the Medicare
overpayments of all APCs for which beneficiaries were undercharged
results in an estimated total of approximately $303 million.
Conclusions:
The methodology that CMS used to calculate beneficiary copayment
amounts in 2003 is inconsistent with (1) the methodology published by
CMS in its final rule setting forth the 2002 OPPS payment rates and (2)
the statutory objective of steadily decreasing all copayment amounts
until they are 20 percent of the total payment rate for each service.
Though CMS has proposed clarifications to its methodology for 2004,
there are reasons for concern. First, some beneficiaries continue to be
inaccurately charged and Medicare continues to overpay for certain
outpatient hospital services delivered in 2003. In addition, although
CMS has proposed a methodology for 2004 and later years that would not
increase copayment amounts for an APC from one year to the next and
that would eventually decrease copayment amounts to 20 percent of the
payment rate, CMS would be using the miscalculated 2003 copayment
amounts as the basis for these and future copayment amounts. Finally,
the time it will take for the copayment amounts for certain APCs to
reach 20 percent of the APC payment rate will increase.
Recommendations for Executive Action:
For the purpose of calculating the 2004 OPPS beneficiary copayment
amounts, we recommend that the Administrator of CMS first apply the
2002 copayment methodology to the 2003 APCs for which beneficiaries
were inaccurately charged. The 2004 copayment amounts should then be
based on these revised 2003 copayment amounts.
Agency Comments:
In written comments on a draft of this report, CMS stated that in 2003
it treated reconfigured APCs as if they were new APCs. CMS also stated
that in the 2004 OPPS proposed rule, it proposed to change the method
of copayment calculation to treat reconfigured APCs in the same manner
as recalibrated APCs, consistent with the methodology that we stated
should have been used in 2003. However, CMS noted that it did not
propose to recalculate the 2003 copayments, which must be used in part
as the basis for the calculation of the 2004 OPPS copayments. In its
comments, CMS stated that it would carefully consider the information
we provided to it as part of issuing its final rule.
CMS's comments about its methodology are generally consistent with the
information in our draft report. We believe that CMS should apply the
2002 copayment methodology to the 2003 copayment amounts before
calculating the 2004 copayment amounts to ensure that they are
accurate. CMS's comments appear in Enclosure III.
We are sending copies of this report to interested congressional
committees. We will also make copies available to others upon request.
In addition, the report will be available at no charge on the GAO Web
site at http://www.gao.gov.
If you or your staff have questions, please contact me at (202) 512-
7119. Another contact and key contributors to this report appear in
Enclosure IV.
Sincerely yours,
A. Bruce Steinwald:
Director, Heath Care--Economic and Payment Issues:
Signed by A. Bruce Steinwald:
Enclosures--4:
:
Scope and Methodology:
We obtained the 2001 Medicare outpatient prospective payment system
(OPPS) claims data, the latest data available, directly from the
Centers for Medicare & Medicaid Services (CMS).[Footnote 17] We used
these claims data together with the 569 ambulatory payment
classification (APC) groups in 2003 and the published 2003 OPPS
copayment amounts to estimate the impact of the 2003 copayment
methodology on copayment amounts. We calculated the 2003 copayment
amount for each of the APCs using the 2002 methodology and calculated
the difference between that amount and the published 2003 copayment
amount. The copayment amounts we analyzed were those published in the
final rules setting both the 2002 and 2003 payment rates. We did not
take wage index adjustments into account, and thus our estimates are
based on national APC payment rates.
We determined that 75 APCs had inaccurate copayment amounts in 2003;
however, 6 of these 75 APCs are not included in our financial impact
estimate because, while they existed in 2002, they did not exist in
2001 and were not in the 2001 Medicare claims data. We multiplied the
difference between the two 2003 copayment amounts by the frequency of
each APC in the 2001 Medicare hospital outpatient claims data and
summed the beneficiary overcharges for the affected APCs. We then
summed the beneficiary undercharges (Medicare overpayments) for the
other affected APCs. We applied the CMS rule that payment rates and
copayment amounts for certain APCs are discounted by a factor of 50
percent when these services are performed more than once or with
certain other procedures during a single operative session by using the
discounted rates as appropriate in our analysis when these APCs
appeared in the claims data.
List of APCs for Which Beneficiaries Are Overcharged or Medicare
Overpays for 2003 Services:
Table 1: List of APCs for Which Beneficiaries Are Overcharged for 2003
Services:
APC: 0010; Table: Level I Destruction of Lesion.
APC: 0012; Table: Level I Debridement & Destruction.
APC: 0022; Table: Level IV Excision/Biopsy.
APC: 0025; Table: Level II Skin Repair.
APC: 0035; Table: Placement of Arterial or Central Venous Catheter.
APC: 0148; Table: Level I Anal/Rectal Procedure.
APC: 0155; Table: Level II Anal/Rectal Procedure.
APC: 0156; Table: Level II Urinary and Anal Procedures.
APC: 0164; Table: Level I Urinary and Anal Procedures.
APC: 0192; Table: Level IV Female Reproductive Procedures.
APC: 0214; Table: Electroencephalogram.
APC: 0216; Table: Level III Nerve and Muscle Tests.
APC: 0230; Table: Level I Eye Tests & Treatments.
APC: 0231; Table: Level III Eye Tests & Treatments.
APC: 0232; Table: Level I Anterior Segment Eye Procedures.
APC: 0234; Table: Level III Anterior Segment Eye Procedures.
APC: 0247; Table: Laser Eye Procedures Except Retinal.
APC: 0248; Table: Laser Retinal Procedures.
APC: 0254; Table: Level IV ENT Procedures.
APC: 0260; Table: Level I Plain Film Except Teeth.
APC: 0265; Table: Level I Diagnostic Ultrasound Except Vascular.
APC: 0266; Table: Level II Diagnostic Ultrasound Except Vascular.
APC: 0286; Table: Myocardial Scans.
APC: 0290; Table: Level I Diagnostic Nuclear Medicine Excluding
Myocardial Scans.
APC: 0291; Table: Level II Diagnostic Nuclear Medicine Excluding
Myocardial Scans.
APC: 0343; Table: Level II Pathology.
APC: 0344; Table: Level III Pathology.
APC: 0360; Table: Level I Alimentary Tests.
Source: CMS.
Note: GAO analysis of 2003 OPPS copayment rates and 2002 OPPS final
rule.
[End of table]
Table 2: List of APCs for Which Medicare Overpays for 2003 Services:
APC: 0002; Table: Fine Needle Biopsy/Aspiration.
APC: 0003; Table: Bone Marrow Biopsy/Aspiration.
APC: 0006; Table: Level I Incision & Drainage.
APC: 0015; Table: Level III Debridement & Destruction.
APC: 0021; Table: Level III Excision/Biopsy.
APC: 0041; Table: Level I Arthroscopy.
APC: 0045; Table: Bone/Joint Manipulation Under Anesthesia.
APC: 0049; Table: Level I Musculoskeletal Procedures Except Hand and
Foot.
APC: 0050; Table: Level II Musculoskeletal Procedures Except Hand and
Foot.
APC: 0051; Table: Level III Musculoskeletal Procedures Except Hand and
Foot.
APC: 0052; Table: Level IV Musculoskeletal Procedures Except Hand and
Foot.
APC: 0054; Table: Level II Hand Musculoskeletal Procedures.
APC: 0058; Table: Level I Strapping and Cast Application.
APC: 0070; Table: Thoracentesis/Lavage Procedures.
APC: 0072; Table: Level II Endoscopy Upper Airway.
APC: 0081; Table: Non-coronary Angioplasty or Atherectomy.
APC: 0083; Table: Coronary Angioplasty and Percutaneous Valvuloplasty.
APC: 0084; Table: Level I Electrophysiologic Evaluation.
APC: 0090; Table: Insertion/Replacement of Pacemaker Pulse Generator.
APC: 0099; Table: Electrocardiograms.
APC: 0110; Table: Transfusion.
APC: 0113; Table: Excision Lymphatic System.
APC: 0114; Table: Thyroid/Lymphadenectomy Procedures.
APC: 0115; Table: Cannula/Access Device Procedures.
APC: 0141; Table: Upper GI Procedures.
APC: 0147; Table: Level II Sigmoidoscopy.
APC: 0153; Table: Peritoneal and Abdominal Procedures.
APC: 0162; Table: Level III Cystourethroscopy and other Genitourinary
Procedures.
APC: 0163; Table: Level IV Cystourethroscopy and other Genitourinary
Procedures.
APC: 0182; Table: Insertion of Penile Prosthesis.
APC: 0183; Table: Testes/Epididymis Procedures.
APC: 0218; Table: Level II Nerve and Muscle Tests.
APC: 0220; Table: Level I Nerve Procedures.
APC: 0251; Table: Level I ENT Procedures.
APC: 0253; Table: Level III ENT Procedures.
APC: 0256; Table: Level V ENT Procedures.
APC: 0261; Table: Level II Plain Film Except Teeth Including Bone
Density
Measurement.
APC: 0263; Table: Level I Miscellaneous Radiology Procedures.
APC: 0264; Table: Level II Miscellaneous Radiology Procedures.
APC: 0288; Table: Bone Density: Axial Skeleton.
APC: 0292; Table: Level III Diagnostic Nuclear Medicine Excluding
Myocardial Scans.
APC: 0300; Table: Level I Radiation Therapy.
APC: 0340; Table: Minor Ancillary Procedures.
APC: 0345; Table: Level I Transfusion Laboratory Procedures.
APC: 0346; Table: Level II Transfusion Laboratory Procedures.
APC: 0368; Table: Level II Pulmonary Tests.
APC: 0689; Table: Electronic Analysis of Cardioverter-defibrillators.
Source: CMS.
Note: GAO analysis of 2003 OPPS copayment rates and 2002 OPPS final
rule.
[End of table]
Comments from the Centers for Medicare & Medicaid Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Service:
Administrator
Washington, DC 20201:
DATE:
OCT - 3 2003:
TO: A. Bruce Steinwald:
Director, Health Care-Economic and Payment Issues:
FROM: Thomas A. Scully
Administrator:
Signed by Thomas A. Scully:
SUBJECT: GAO Draft Correspondence, MEDICARE: Discrepancy in Hospital
Outpatient Prospective Payment SysTEM stem Methodology Leads to
Inaccurate Beneficiary Copayments and Medicare Payments, (GAO-04-
103R):
We appreciate the opportunity to review and comment on the above-
referenced draft correspondence and its findings.
Your letter raises the issue of how the Centers for Medicare & Medicaid
Services (CMS) should calculate the beneficiary copayment under the
hospital outpatient prospective payment system (OPPS) for groups of
services called ambulatory payment classification (APCs) that contain
new Healthcare Common Procedure Coding System (HCPCS) not previously
assigned to that APC. While you approve of the methodology we are
proposing to use in the 2004 OPPS, you believe that we should revisit
the copayments in the 2003 OPPS, before using them as the basis for the
2004 copayment calculation.
In enacting the OPPS, Congress sought, among other things, to change
how beneficiary copayments had been calculated under the prior cost-
based methodology. Because copayments were tied to 20 percent of the
hospital's charges, and because hospital charges rose faster than
Medicare payments, beneficiaries were paying as much as 50 percent or
more of the total payments to the hospital for outpatient services.
Under the OPPS, Congress established a statutory formula to cap
beneficiary copayments and gradually lower beneficiary coinsurance to
20 percent of the payment for the APC.
On August 12, 2003, CMS issued a proposed rule that proposed payment
rates and beneficiary copayment amounts for hospital outpatient
services under the OPPS for 2004. These changes would be applicable to
services furnished on or after January 1, 2004. The proposed rule went
on display on August 9, 2003 and the public comment period ends on
Monday October 6, 2003. (See August 12, 2003 Federal Register 42 CFR
Parts 410 and 419).
The specific issue raised by the General Accounting Office (GAO) deals
with how to determine the copayment for an APC that contains HCPCS
codes not previously assigned to that APC.
In a November 30, 2001 final rule, we adopted a methodology that
applied five rules for calculating APC copayment amounts when payments
for APC groups change because the APCs' relative weights are
recalibrated or when individual services are reclassified from one APC
group to another. In calculating the unadjusted copayment amounts for
2004, we encountered circumstances that the methodology in the November
30, 2001, final rule either did not address or whose applicability was
ambiguous. For example, two rules refer to payment rate changes
resulting from the recalibration of relative payment weights but do not
clearly apply to payment rate changes resulting from the
reclassification of HCPCS codes from one APC group to another APC
group. Therefore, we proposed to revise and clarify the methodology we
would follow to calculate unadjusted copayment amounts.
For the 2003 OPPS, we treated reconfigured APCs as if they were new
APCS, while GAO contends that we should have treated them as if they
were recalibrated APCs. In the 2004 OPPS proposed rule, we proposed to
change the method of copayment calculation to treat reconfigured APCs
in the same manner as recalibrated APCs, consistent with the
methodology GAO indicates should have been used in 2003. However in the
proposed rule, we did not propose to recalculate the 2003 copayments,
which must be used in part as the base for the calculation of the 2004
OPPS copayments. The GAO is suggesting that we both revise our
methodology as we proposed and also set the 2004 OPPS copayments as if
we had determined the 2003 copayments under the 2004 proposal.
Under the Administrative Procedure Act, we are required to carefully
consider the information GAO and all interested parties provided to CMS
during the open comment period and will take them into consideration as
part of issuing a final rule. At this time, it would be inappropriate
to prejudge the issue while the comment period is still open and in the
absence of careful review of all public comments that may be submitted
in response to the NPRM.
[End of section]
GAO Contact and Staff Acknowledgments:
GAO Contact:
Nancy A. Edwards, (202) 512-3340:
Acknowledgments:
Beth Cameron Feldpush, Joanna L. Hiatt, Maria Martino, and Jonathan
Sclarsic made major contributions to this report.
(290326):
FOOTNOTES
[1] Pub. L. No 105-33, § 4523(a), 111 Stat. 251, 445.
[2] Beneficiary cost sharing will decline to 20 percent at a different
time for each outpatient service depending on the service's initial
cost-sharing percentage. In 2000, the Medicare Payment Advisory
Commission estimated that achieving a 20 percent cost-sharing rate for
services will take an average of 30 to 40 years.
[3] We use the term "coinsurance" to refer to the percentage of the
Medicare payment amount that beneficiaries are responsible for paying
for a service under the OPPS. We use the term "copayment" to refer to
the dollar amount that beneficiaries are responsible for paying for a
service under the OPPS.
[4] 66 Fed. Reg. 59,856, 59,888 (2001).
[5] Under the OPPS, outpatient services with clinical and resource use
similarities are grouped into APCs for payment purposes. Each service
within an APC is paid at the same rate. The total payment rate for an
APC is composed of two parts: an amount that the beneficiary is
responsible for paying and an amount that Medicare is responsible for
paying. As the beneficiary coinsurance proportion declines to 20
percent, the proportion that Medicare is responsible for will increase.
Once the coinsurance percentage is 20 percent of the payment rate, the
copayment amount will increase to maintain the 20 percent coinsurance
rate if the payment rate increases.
[6] 67 Fed. Reg. 66,718, 66,788 (2002).
[7] In this report we will refer to the methodology CMS implemented for
2002 as the 2002 copayment methodology. We will refer to the
methodology used for 2003, but not implemented through the rulemaking
process, as the 2003 copayment methodology.
[8] See, e.g., Shalala v. Guernsey Memorial Hosp., 514 U.S. 87, 100
(1995).
[9] 68 Fed. Reg. 47,966, 48,006-07 (2003).
[10] The 2001 Medicare outpatient claims contain all outpatient claims
for services furnished on or after April 1, 2001 and on or before March
31, 2002.
[11] Enclosure II contains a list of these APCs.
[12] 42 U.S.C. § 1395l(t)(9) (2000).
[13] 66 Fed. Reg. 59,856, 59,888 (2001).
[14] 68 Fed. Reg. 47,966, 48,006 (2003).
[15] 67 Fed. Reg. 66,718, 66,788 (2002).
[16] According to the 2002 methodology, a new APC would be one that is
either composed of new outpatient services or is created from some or
all of the services from two or more existing APCs. (66 Fed. Reg.
59,856, 59,888 (2001).)
[17] The 2001 outpatient claims data file contains all final action
outpatient claims for services furnished on or after April 1, 2001 and
on or before March 31, 2002. As it is the file that CMS used to set the
2003 OPPS payment rates, we consider it reliable for the purpose of our
estimate, which is to count the frequency with which outpatient
services were performed.
