Note from the instructor: CMS significantly expands packaging under the Calendar Year 2014 Outpatient Prospective Payment System Final Rule

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This week’s note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro.

In last week’s note from the instructor, HCPro Regulatory Specialist Kimberly Anderwood Hoy Baker, JD, highlighted important calendar year (CY) 2014 changes to CMS’ Hospital Outpatient Prospective Payment System (OPPS). In particular, she noted CMS’ decision to expand the number and type of OPPS covered items and services subject to “packaging.” When a covered item or service that is payable under the OPPS is packaged, the payment for that item or service is included in the payment for the related primary service of which it is an integral, supporting part. In this week’s note, we will focus on the specific details of CMS’ expansion of packaging for CY 2014. This expansion will significantly reduce the number of individual separate payments for OPPS covered items and services.

Historical perspective on packaging

Under the OPPS, as originally implemented, most Part B covered services were separately payable, based upon the HCPCS code that identified those services and the APC to which that HCPCS code was assigned. From the beginning, however, certain dependent services that Medicare considered to be covered and payable under the OPPS were not separately payable. These items and services were referred to as “packaged.” As noted above, the payment for a packaged item or service is included in, or “packaged into,” the payment for the related primary service of which it is an integral part.

Over time, CMS has continued to expand the number of items and services subject to packaging. In the proposed CY 2014 OPPS rule, CMS recommended packaging the following additional items and services:

  • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure
  • Drugs and biologicals that function as supplies or devices when used in a surgical procedure
  • Clinical diagnostic laboratory tests
  • Procedures described by add-on codes
  • Ancillary services (currently identified with status indicator ‘‘X’’)
  • Diagnostic tests on the bypass list
  • Device removal procedures

With the exception of ancillary services and diagnostic tests on the bypass list, CMS finalized its plan to expand packaging to the other proposed categories in CY 2014. Let us consider each of these categories in more detail below.

Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure

Applying the same rationale that it has used to justify packaging diagnostic radiopharmaceuticals and contrast agents that function as supplies when used in specific diagnostic tests or procedures, CMS finalized its proposal to unconditionally package all drugs, biologicals, and radiopharmaceuticals that function as supplies in such situations. The only exception is when those drugs, biologicals, or radiopharmaceuticals have pass-through status, qualifying them for separate payment. For purposes of this expansion, a diagnostic test or procedure is defined as any kind of test or procedure performed to:

  • Aid in the diagnosis, detection, monitoring, or evaluation of a disease or condition; or
  • Determine which treatment option is optimal.

CMS mentioned two drugs that are included in this expanded packaging category in addition to currently packaged diagnostic radiopharmaceuticals and contrast agents: stress agents and hexaminolevulinate hydrochloride (Cysview®). Stress agents are a class of drugs that are used in certain diagnostic tests (primarily myocardial perfusion imaging) to evaluate certain aspects of cardiac function. Stress agents include those drugs identified in CY 2014 by HCPCS codes J1245, J1250, J0151, and J2785. Cysview® (HCPCS code C9275) is an optical imaging agent indicated for use in the cystoscopic detection of non-muscle invasive papillary cancer of the bladder among patients suspected or known to have lesion(s) on the basis of a prior cystoscopy.

The drugs, biologicals, and radiopharmaceuticals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the CY 2014 OPPS final rule, with a status indicator of “N.”

Drugs and biologicals that function as supplies when used in a surgical procedure

Since the implementation of the OPPS, CMS has packaged virtually all medical devices (except for those subject to temporary pass-through status), other medical and surgical supplies, and surgical dressings. For purposes of these packaging rules, supplies constitute a large category of items that are typically either for single patient use or have a shorter life span than equipment. Supplies include not only minor, inexpensive, or commodity-type items, but also a wide range of products used in the hospital outpatient setting, including certain implantable devices and biologicals. Except for devices and biologicals subject to temporary pass-through status, CMS has packaged payment for these implantables into the payment for the related surgical procedure of which they are an integral part.

As with the prior expansion category, CMS moved from the specific to the general, finalizing its proposal to unconditionally package all drugs and biologicals that function as supplies when used in a surgical procedure, except for those that are subject to temporary pass-through status, and, thus, are separately payable.

CMS made some changes to its original proposal with respect to skin substitutes, however. The term ‘‘skin substitutes’’ refers to a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers. Skin substitutes are subject to regulation by the FDA as medical devices, human tissue, or cellular products and are applied to wounds during surgical procedures described prior to January 1, 2014, by CPT codes 15271 through 15278. Some of these products have dual uses and can be used either as skin substitutes or implantable biologicals, depending upon whether they are applied externally or internally.

Under the CY 2014 OPPS final rule, CMS will package all skin substitutes (except for those subject to pass-through status), as intended. However, most skin substitutes subject to packaging will be assigned to either the high-cost or the low-cost category. Skin substitutes assigned to the high-cost category will be reported with CPT codes 15271 through 15278 and the applicable skin substitute HCPCS Q-code, while skin substitutes assigned to the low-cost category will be reported with HCPCS codes C5271 through C5278 and the applicable skin substitute HCPCS Q-code. See the final rule for special rules relating to the few skin substitute products that are applied as either liquids or powders per milliliter or per milligram and are currently employed in procedures outside of the CPT code range 15271 through 15278.

The drugs and biologicals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the CY 2014 OPPS final rule, with a status indicator of “N.”

Clinical diagnostic laboratory tests

Prior to January 1, 2014, clinical diagnostic laboratory tests generally were paid under the clinical laboratory fee schedule (CLFS), rather than the OPPS. However, exercising her broad discretion to determine which covered items and services are to be paid under the OPPS, the secretary of HHS determined that the vast majority of clinical diagnostic lab tests are “integral, ancillary, supportive, dependent, or adjunctive” to the primary services provided and should be packaged.

Therefore, under the CY 2014 OPPS final rule, except for molecular pathology tests, CMS finalized its proposal to package laboratory tests that are integral, etc., into the primary service of which they are an integral part. This will be assumed to be the case when the lab tests are provided on the same date of service as the primary service and are ordered by the same practitioner who ordered the primary service. Such tests should be submitted on a 13X bill type.

CMS will consider a laboratory test to be unrelated to a primary service and, thus, not part of this packaging policy, when the laboratory test is the only service provided on that date of service or when the laboratory test is provided on the same date of service but is ordered for a different purpose by a different practitioner from the one who ordered the primary service. The laboratory tests determined to be unrelated to a primary service will continue to be paid separately at CLFS rates when billed on a 14X bill type. As noted above, molecular pathology tests described by CPT codes 81200 through 81383, 81400 through 81408, and 81479 are excepted from this packaging policy and will continue to be billed on a 13X bill type and paid under the CLFS.

The HCPCS codes for the laboratory tests subject to this packaging category are included in both Addendum B and Addendum P to the CY 2014 OPPS final rule, with a status indicator of “N.”

Procedures described by add-on codes

Add-on codes describe procedures that are always performed in addition to a primary procedure. The example that CMS discussed in the final rule is the procedure described by CPT code 11001 (debridement of extensive eczematous or infected skin; each additional 10% of the body surface, or part thereof), which is used for additional debridement beyond that described by the primary procedure code. Prior to January 1, 2014, add-on codes typically received separate payment based on APC assignment and were assigned status indicator ‘‘T.’’

Because add-on codes represent an extension or continuation of a primary procedure, CMS has determined that they are typically supportive, dependent, or adjunctive to that primary procedure and, consequently, their payment should be packaged into the payment for the primary procedure. Therefore, CMS finalized its proposal to unconditionally package all procedures described by add-on codes in the OPPS, with the exception of the following:

  • Drug administration add-on codes; and
  • Procedures described by add-on codes that are currently assigned to device-dependent APCs.

That is, for services provided on and after January 1, 2014, subsequent drug administration codes will continue to be paid separately in addition to the initial service. With respect to add-on codes currently assigned to device-dependent APCs, almost all such codes will be included in a comprehensive APC for CY 2015, but CMS will continue to pay for them separately during CY 2014.

The specific HCPCS codes for the add-on codes subject to this packaging category are included in both Addendum B and Addendum P to the CY 2014 OPPS final rule, with a status indicator of “N.”

Device removal procedures

Implantable devices frequently require removal or replacement due to a variety of factors such as wear, failure, recall, infection, etc. Since the beginning of the OPPS, most implantable devices (except for those subject to pass-through status) have been packaged as supplies, implantable prosthetics, or implantable DME into their associated procedures. Device removal is sometimes reported with a code that describes both removal and repair/replacement, or with a code that only describes removal. Although device removal procedures are frequently performed with procedures to repair or replace devices, device removal may occur without repair or replacement if the clinical indication for the device that was removed no longer exists.

When a separately coded device removal procedure is performed with a separately coded device repair or replacement procedure, CMS has determined that the device removal procedure actually represents an integral part of an overall primary procedure that is removal plus repair or replacement of the device. Accordingly, CMS finalized its proposal to conditionally package device removal codes when they are billed with other surgical procedures involving repair or replacement and to assign to these services a status indicator of ‘‘Q2’’ (packaged when provided with a service assigned a status indicator of ‘‘T’’).

The specific HCPCS codes for removal services that are subject to this expanded packaging category are included in both Addendum B and Addendum P to the CY 2014 OPPS final rule, with status indicator “Q2.”

Correctly reporting packaged items and services and their related charges

Even though there is no separate payment for covered packaged items and services, hospitals are strongly encouraged to report them on the same claim as the more significant services of which they are an integral part, whether required by CMS to do so or not. They should be reported as separate line items, along with their related charges. This is to ensure that these charges are appropriately allocated so that the payments for the separately payable services of which they are an intetral part are calibrated to cover the cost of the related packaged items and services. With the increase in the number of packaged items and services, including very high cost drugs, biologicals, and devices, it has become even more important for hospitals to accurately and completely identify and report their respective costs.

Hospitals should review the CY 2014 OPPS final rule carefully to assure that they understand and are fully prepared to implement these and other changes by January 1, 2014.