CMS releases OPPS rule for 2016, finalizes two-midnight changes: 10 things to know

Written by Ayla Ellison for Becker’s Hospital CFO

CMS released its final 2016 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System rule on Friday, which finalizes CMS’ proposal to alter its controversial two-midnight rule and implements previously announced modifications to CMS’ medical review strategy.

Here are 10 things to know about the 2016 rule, which applies to the more than 4,000 facilities that are paid under the OPPS.

Final two-midnight rule
1. Under the two-midnight rule, CMS generally considers hospital stays of less than two midnights to be outpatient cases, while hospital admissions for stays spanning two midnights or longer are deemed appropriate. Under the OPPS rule for 2016, certain stays that are less than two midnights would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician.

2. For hospital stays that are expected to span less than two midnights to be payable under Medicare Part A, documentation in a patient’s medical record must support that an inpatient admission is necessary. For an admission to be payable under Part A the documentation in the medical record must support either the admitting physician’s reasonable expectation a patient will require hospital care spanning at least two midnights or the physician’s determination that the patient requires formal admission to the hospital on an inpatient basis.

3. Regarding the two-midnight changes, Thomas Nickels, American Hospital Association executive vice president of government relations and public policy, said, “Hospitals appreciate the certainty that stays of at least two midnights are inpatient, with stays of less than two midnights also considered inpatient based on physician judgment.”

4. CMS made no changes for stays lasting at least two midnights in the final OPPS rule.

Medical review strategy
5. In the 2016 final rule, CMS restated the changes it previously announced to its medical review strategy.

6. Under the new strategy, Quality Improvement Organizations — groups of health quality experts, clinicians and consumers who work under direction of CMS — will conduct initial patient status reviews to determine the appropriateness of Medicare Part A payment for short-stay inpatient hospital claims. These first-line medical reviews were previously conducted by Recovery Audit Contractors or Medicare Administrative Contractors.

7. “We look forward to working with the Quality Improvement Organizations, which are not paid on a contingency fee basis like the bounty hunter RACs, and to a more fair auditing process,” said Mr. Nickels from the AHA.

Decrease in OPPS payments
8. Under the final rule for 2016, there is a net decrease in OPPS payments of 0.4 percent. CMS said it estimates total OPPS payments for 2016 will decrease by approximately $13.3 million compared to the year prior, excluding estimated changes in enrollment, utilization and case mix.

9. The decrease for 2016 is attributable to a 2 percentage point reduction to the OPPS conversion factor. The reduction is intended to account for CMS’ overestimation of the amount of packaged laboratory payments under the OPPS for laboratory tests and other budget neutrality adjustments, according to the rule.

10. The AHA showed its disappoint with the negative payment update. “It is unfortunate that hospitals and the patients they serve are now left to deal with the consequences of CMS’ faulty math,” said Mr. Nickels.