Magazine article Drug Topics

Final OPPS Rule Shows Some Gains, Some Losses

Magazine article Drug Topics

Final OPPS Rule Shows Some Gains, Some Losses

Article excerpt

BUSINESS/MANAGEMENT

The Centers for Medicare & Medicaid Services (CMS) has published its final rule for Outpatient Prospective Payment System rates for 2003. The news looks good: OPPS payments will rise by nearly 6% next year.

Much of the increase, however, is earmarked for emergency departments, diagnostic procedures such as colonoscopies and mammograms, and rural hospitals. Most pharmacybased operations will see less money A few outpatient clinics will see no financial impact.

"We way overpaid on many drugs last year," said CMS administrator Tom Scully in announcing the final rule. "We are putting a greater emphasis on basic services and less toward high tech." Pushing basic services means that pharmacy is taking a bigger hit than medical services or medical devices.

"We project a decrease in gross margins from 34% to 4% for Medicare oncology patients," said Steve Rough, assistant director of pharmacy services at the University of Wisconsin Hospital. "Especially concerning is the number of passthrough payments that go away entirely. That's going to cost us $1.2 million. Starting Jan. 1, we will be losing our shirts on Medicare patients."

Many hospital outpatient operations will see similar revenue drops, warned Gary Stein, director of federal regulatory affairs for ASHE The precise impact in dollars depends on each institution's patient mix and Medicare population, but Stein said the final rule is no improvement over CMS' proposed OPPS rule published in August. "We see the same fiscal impact to every other outpatient clinic," he said. "Hospitals can afford to lose only so much money before they have to stem the tide of red ink."

Stein sees two significant issues with OPPS. The first is the transitional pass-through payments for certain higher-cost drugs and biologics. Pass-through payments are supposed to ease hospitals' financial woes by boosting payments for drugs approved within the past two to three years. New drugs typically carry higher-than-average price tags.

The problem: Almost all passthrough products, including oncology drugs, will be rolled into Ambulatory Payment Classifications (APCs) as of Jan. 1, 2003. Many APCs will increase with a highercost drug component, but the increase is more than offset by the loss of pass-through payments. Overall revenues will drop for many outpatient clinics.

There are also difficulties with the way CMS calculates APC payments. The agency generally relies on billing data from hospitals in setting OPPS rates. …

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