Medicare beneficiaries would see a decline in their out-of-pocket costs for services they receive in hospital outpatient departments (HOPDs) in calendar year (CY) 2011 under provisions in a proposed rule issued today by the Centers for Medicare & Medicaid Services (CMS).  The proposed rule implements changes required by the Affordable Care Act of 2010. 

The Affordable Care Act – which was enacted as the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 – waives beneficiary cost-sharing for most Medicare-covered preventive services, including the Initial Preventive Physical Examination (IPPE or “Welcome to Medicare Visit”).  This waiver applies not only to the 20 percent coinsurance for the physician’s service, but also to any cost-sharing relating to the separate payment to the facility when the service is furnished in an HOPD, as well as those preventive services, such as colonoscopies, that may be furnished in a ambulatory surgical centers (ASC). 

The changes are included in a proposed rule which proposes updates to the policies and payment rates for covered outpatient department services furnished on or after Jan. 1, 2011, by HOPDs in more than 4,000 hospitals that are paid under the Outpatient Prospective Payment System (OPPS).  The proposed rule would also update policies and payment rates for services in approximately 5,000 Medicare-participating ASCs, under a payment system that aligns ASC payments with payments for the corresponding services in HOPDs.  CY 2011 is the first year the revised ASC payment system rates will be fully implemented.  CMS projects total Medicare payments of approximately $40 billion to HOPDs and $4 billion to ASCs for CY 2011.

While the Affordable Care Act imposes a 0.25 percentage point reduction to the HOPD fee schedule increase factor (an update for inflation) for services furnished under the OPPS in CY 2011 that will affect all hospitals, it includes several provisions that will boost payments to certain groups of hospitals.  For example, the Affordable Care Act requires Medicare to adjust payments under the OPPS to a small number of cancer hospitals that meet the classification criteria set forth in the statute if the Secretary determines that costs incurred by those hospitals with respect to ambulatory payment groups are higher than the costs incurred by other hospitals under the OPPS as determined appropriate by the Secretary.  Medicare is proposing an adjustment to OPPS payments for those cancer hospitals with some reductions in payments to other hospitals to make to meet the budget neutrality requirement for these changes.

The proposed rule would make several significant changes to the OPPS in addition to those required by the Affordable Care Act.  These proposals include:

  • Modifying the supervision requirements for outpatient therapeutic services to require direct supervision of the initiation of a service followed by general supervision for a limited set of non-surgical extended duration services, including observation services.
  • Establishing separate APCs for partial hospitalization programs in community mental health centers (CMHCs) and for hospital-based programs, while continuing the policy of paying a separate APC per diem payment rate for partial hospitalization services depending on the number of services provided; that is, one APC for three services and a separate one for four or more services.
  • Paying for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status furnished in HOPDs at 106 percent of the manufacturers’ average sales prices. 
  • Expanding the set of measures that must be reported by HOPDs to qualify for the full payment update in the succeeding year.  The proposed rule includes proposals for additions to the set for reporting in CYs 2011, 2012, and 2013 to make it easier for hospitals and the agency to prepare for the changing reporting requirements.

CMS will accept public comments on the proposed rule through Aug. 31, 2010, and will respond to them in a final rule to be issued by Nov. 1, 2010. 

For more information on the CY 2011 proposals for the OPPS and ASC payment system, please see or

Additional information can be found on the CMS website at: OPPS:  

(Source: CMS Press Release)