(Medicare Claims Processing Manual)

The reduction applies only to hospitals that are identified as Subsection (d) hospitals.  Subsection (d) hospitals have the same definition for hospitals paid under the OPPS as for hospitals paid under the IPPS.  Specifically, Subsection (d) hospitals  are defined under Section 1886(d)(1)(B) of the Act as hospitals that are located in the 50 states or the District of Columbia other than those categories of hospitals or hospital units that are specifically excluded from the IPPS, including psychiatric, rehabilitation, long- term care, childrens and cancer hospitals or hospital units.  In other words, the provision does not apply to hospitals and hospital units excluded from the IPPS or to hospitals located in Maryland, Puerto Rico or the U.S. territories .  Hospitals that are not required to submit quality data (i.e., those that are not Subsection (d) hospitals) will receive the full OPPS update.  Similarly, the reduced update will not apply to Subpart (d) hospitals that are not paid under the OPPS (e.g., Indian Health Service hospitals).   10.6.2.2 - Services to which the Payment Reduction Applies  (Rev. 1657, Issued: 12- 31-08, Effective: 01 -01-09, Implementation: 01- 05-09)  The reduction to the annual update factor for failure to meet the quality reporting requirements applies to most, but not all, services paid under the OPPS.  The reduction of payments does not apply to services paid under the OPPS if the payment amounts are not calculated using the conversion factor to which the annual update factor appli es (e.g., drugs and biologicals paid based on the average sales price (ASP) methodology, new technology services paid at a fixed amount, and services paid at charges adjusted to cost).  The reduction also does not apply to hospital outpatient services paid through other fee schedules or other mechanisms.  Examples of these exceptions are services paid under the physician fee schedule (e.g., physical therapy and diagnostic and screening mammography), services paid at reasonable cost (e.g., influenza and pneu mococcal vaccines), and services paid under other fee schedules (e.g., clinical laboratory services and durable medical equipment).  The specific services to which this policy applies can be identified by OPPS status indicator.  CMS will identify the status indicators of the HCPCS codes to which the reduction applies each year in the change request that announces changes to the OPPS for  the forthcoming calendar year.  Also, the status indicators for the services (identified by HCPCS codes) to which the reduction applies can be found in the OPPS final rule for the year of interest under Hospital Outpatient Regulations and Notices at www.cms.hhs.gov/HospitalOutpatientPPS/ .  The services excluded from the payment reduction may change each year if the method of calculating payment under the OPPS changes.   10.6.2.3 - Contractor Responsibilities  (Rev. 1657, Issued: 12- 31-08, Effective: 01 -01-09, Implementation: 01 -05-09)  CMS claims processing software will automatically reduce payment to Subsection (d) hospitals when those hospitals that fail to meet the quality reporting requirements bill for services to which the reduced update applies.  However, contractors must updat e the Outpatient Provider Specific File (OPSF) quality reporting field when CMS furnishes the list of hospitals to which the payment reduction applies.  The FISS auto- populates the Hospital Quality Indicator field of the OPSF field with a 1 for all hospitals.  Once CMS has issued the list of hospitals failing to meet the requirements, Medicare contractors must remove the 1 in the Hospital Quality Indicator field for each Subsection (d) hospital that fails to meet the quality reporting requirements.  Con tractors make no changes to the 1 indicator for hospitals that are not Subsection (d) hospitals providing OPPS services or for hospitals that are Subsection (d) hospitals providing OPPS services that are not listed as failing the requirements.   CMS sends Medicare contractors the file of hospitals to which the reduction applies for a given calendar year by a Joint Signature Memorandum/Technical Direction Letter as soon as the list is available.  This will be sent as soon as possible, expected to be on or about December 1 of each year preceding the calendar year to which the payment reduction applies.  Should a Subsection (d) hospital later be determined to have met the criteria after dissemination of this list, CMS will change the hospitals status .  CMS will notify Medicare contractors of the change in status and contractors must update the OPSF as needed and must mass adjust paid claims.   For new hospitals, Medicare contractors must provide information to the Quality Contractor to be specified by CMS as soon as possible so that the Quality Contractor can enter the provider information into the Program Resource System and follow through with ensuring provider participation with the requirements for quality data reporting, if applicable.  CMS will notify Medicare contractors of how to contact the Quality Contractor each year in the annual OPPS update change request.  This allows the Quality Contractor the opportunity to contact new facilities as early as possible in the calendar year to inform them of the hospital outpatient quality reporting requirements.  As soon as possible, Medicare contractors must provide the following information on newl y participating hospitals to the Quality Contractor to be specified by CMS:    State code;   Provider name;   Provider ID numbe;   Medicare accept dat;e   Contact name (if available); and   Telephone number.   10.6.2.4 - Application of the Payment Reduction Factor in Calculation of the Reduced Payment and Reduced Copayment  (Rev. 1657, Issued: 12- 31-08, Effective: 01 -01-09, Implementation: 01- 05-09)  For services to which the payment adjustment applies, CMS calculates a payment reduction factor that is used in the OPPS Pricer to adjust the payments for hospitals that fail to meet the reporting requirements.  CMS calculates this factor by dividing the OPPS conversion factor that incorporates the reduced update factor by the OPPS conversion factor that incorporates the full update factor for the applicable calendar year.   This ratio is applied to the full national unadjusted payment amount for a service s ubject to the payment reduction in order to calculate the reduced payment amount.  Similarly, this ratio is applied to the full national unadjusted copayment for an applicable service to calculate the reduced copayment that may be collected from the benefi ciary by the hospital.  The payment reduction factor will be included in the annual OPPS update change request and may also be found in the applicable OPPS final rule, which can be found at www.cms.hhs.gov/HospitalOutpatientPPS/  under Hospital Outpatient Regulations and Notices.   10.6.3 - Payment Adjustment for Certain Cancer Hospitals  (Rev. 2453, Issued: 04- 26-12, Effective: 01 -01-12, Implementation: 05- 29 -12)  Section 3138 of the Affordable Care Act requires CMS to conduct a study to determine if, under the OPPS, outpatient costs incurred by 11 specified cancer hospitals exceed the costs incurred by other hospitals furnishing services under the OPPS.  In addition, Section 3138 of the Affordable Care Act provides that if the specified cancer hospitals costs are determined to be greater than the costs of other hospitals furnishing services under the OPPS, CMS shall provide a payment adjustment to the 11 specified cancer hospitals that will appropriately reflect these higher outpatient costs.  We determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals.  Therefore, consistent with Section 3138 of the Affordable Care Act, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospitals final payment to cost ratio (PCR) for services provided in a given calendar year i s equal to the weig hted average PCR (which we refer to as the target PCR) for other hospitals paid under the OPPS.  The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year.   The cancer hospital payment adjustment will be made through interim monthly payments with the final payment adjustment amount calculated based on the providers settled cost report.  The calculation for the monthly cancer hospital payment adjustment amount  is described as follows:    Step 1 -  Compute the cancer hospital target payment amount for each month by first multiplying the total charges for covered services for all OPPS services on claims paid during the month and adjust the total charges to cost by multiplying them by the outpatient cost -to-charge ratio and then multiplying this amount by the target PCR for the calendar year.   Step 2 -  Add together the total Medicare program payments, unreduced coinsurance and deductible applied for all APCs, as well as all outlier payments (including reconciled outlier payments and the time value of money) and transitional pass -through payments  for drugs, biological and/or devices for those same claims paid during the month as those used in Step 1.   If the result is greater than the result of Step 1, go to Step 4.  No additional payment is due this month.   Step 3 -  Subtract the result of Step 2 from the result of Step 1 and pay .85 times this amount.    Step 4 -  When the result of step 2 is greater than the result of Step 1 for the final month of a providers cost report period, do nothing more.  When the result of Step 2 is greater than the result of Step 1 for any other month, store all Step 1 and Step 2 totals and include these totals with the totals for the next months additional payment calculation.   10.6.3.1 - Payment Adjustment for Certain Cancer Hospitals for CY 2012 and CY 2013 (Rev. 2611, Issued: 12- 14-12, Effective: 01 -01-13, Implementation, 01- 07-13)  The target PCR that should be used in the calculation of the interim monthly payments associated with the cancer hospital adjustment, as described above in section 10.6.3, and at final cost report settlement is 0.91 for hospital outpatient services furnish ed on or after January 1, 2012 through December 31, 2013.   10.6.3.2 - Payment Adjustment for Certain Cancer Hospitals for CY 2014 (Rev. 2845, Issued: 12- 27-13, Effective: 01 -01-14, Implementation: 01- 06-14)  The target PCR that should be used in the calculation of the interim monthly payments associated with the cancer hospital adjustment, as described above in section 10.6.3, and at final cost report settlement is 0.89 for hospital outpatient services furnish ed on or after January 1, 2014 through December 31, 2014.   10.6.3.3 - Payment Adjustment for Certain Cancer Hospitals Beginning CY 2015  (Rev. 3941; Issued: 12- 22-17; Effective: 01 - 01-18; Implementation: 01 -02-18)  The target PCR that should be used in the calculation of the interim monthly payments associated with the cancer hospital adjustment, as described above in section 10.6.3, and at final cost report settlement is 0.90 for hospital outpatient services furnish ed on or after January 1, 2015 through December 31, 2015.   10.6.3.4 - Payment Adjustment for Certain Cancer Hospitals Beginning CY 2016  (Rev. 3941; Issued: 12- 22-17; Effective: 01 - 01-18; Implementation: 01 -02-18)  The target PCR that should be used in the calculation of the interim monthly payments associated with the cancer hospital adjustment, as described above in section 10.6.3, and at final cost report settlement is 0.92 for hospital outpatient services furnish ed on or after January 1, 2016 through December 31, 2016.   10.6.3.5 - Payment Adjustment for Certain Cancer Hospitals Beginning CY 2017  (Rev. 3941; Issued: 12- 22-17; Effective: 01 - 01-18; Implementation: 01 -02-18)  The target PCR that should be used in the calculation of the interim monthly payments associated with the cancer hospital adjustment, as described above in section 10.6.3, and at final cost report settlement is 0.91 for hospital outpatient services furnish ed on or after January 1, 2017 through December 31, 2017.   10.6.3.6 - Payment Adjustment for Certain Cancer Hospitals Beginning CY 2018  (Rev. 3941; Issued: 12- 22-17; Effective: 01 - 01-18; Implementation: 01 -02-18)