March 09, 2001

CHEST PAIN OBSERVATION AND THE OUTPATIENT PPS

HCFA to Propose Separate APC for 2002

Within the April 2000 outpatient PPS final rule, HCFA questioned the appropriateness of outpatient chest pain observation, assuming that chest pain patients initially presenting to the emergency department (ED) are observed in the CCU or ICU and thus warrant inpatient admission. Subsequently, representatives from the American College of Cardiology, the American College of Emergency Physicians and the Society of Chest Pain Centers and Providers met with HCFA to educate the agency about the clinical evidence supporting outpatient observation of chest pain patients in the ED. These groups also lobbied for separately identifiable payment for chest pain observation, citing provider confusion over reimbursement and resultant closures of chest pain centers (CPCs), In response to these arguments, HCFA has reconsidered its stance and plans to propose a new chest pain observation APC group for 2002,

HCFA's CHANGE OF HEART
"In the case of chest pain, we are prepared to consider revising our policy ... to provide separate identification of payment for a well-defined set of observation services if the Concerns about potential abuse can be addressed." Source: Letter to SCPCP from Tom Gustafson, HCFA (November 2000)

This Issue Alert first explains the existing reimbursement methodology for outpatient chest pain observation services, then depicts the regulatory process for future adoption of a chest pain observation APC and points out the ambiguity surrounding its definition and financial impact.

BACKGROUND

Reimbursement Not Apparent, But Extant

Because evaluation of a chest pain patient within the ED is billed as an emergency room visit under the outpatient PPS, some providers erroneously believe that they receive no payment for observation. Observation services have, in fact, been reimbursed since the inception of the outpatient PPS; when constructing the APC system, HCFA used 1996 data to identify over $300 million in general observation-related costs reflected in various revenue codes. These observation costs were factored into APC payment rates for services that may lead to a period of observation, such as emergency room visits and outpatient surgery. In sum, observation is covered under the Outpatient PPS, though it is "packaged" into other APC rates and not in a discrete, identifiable form.

Rationale

Costs were packaged in this manner to curtail potential abuse of observation status and to incent hospitals to administer services more efficiently, In the past, HCFA noted instances of inappropriate maintenance of patients in observation status-sometimes for days-without formal admission. This abuse led to the development of outpatient observation coverage criteria in 1996, which placed a 48-hour maximum on observation services eligible for outpatient reimbursement. The packaging of observation costs within associated procedures or visits in the Outpatient PPS adds a measure of security against abuse and also compels hospitals to manage the costs of furnishing these services within a single APC payment.

EXPECTED ACTION

The APC for chest pain observation services will be described in the May 2001 outpatient PPS proposed rule, If approved following the usual comment period, the APC would apply to services rendered on or after January 1, 2002, as depicted in the timeline below. Of note, however, proposed provisions are not automatically guaranteed adoption-in whole or in part- within the final rule.

ANTICIPATED TIMELINE FOR HCFA ACTION

May 2001 - Publication of proposed rule on outpatient PPS

July, 2001 - End of 60-day comment period on proposed rule

November 2001 Publication of final rule on outpatient PPS

January, 2002 - Provisions of final rule become effective

The fine Print

To minimize the potential for abuse, HCFA plans to identify specific circumstances under which chest pain observation services must be provided to qualify for the new APC payment. These "carefully specified" criteria may incorporate recommendations-particularly appropriate amounts of observation time-from the September 2000 ACC/AHA guidelines for unstable angina and non-ST-segment elevation MI. The exact nature of these prerequisites, however, will not be known until the publication of the proposed rule and may be revised based on comments submitted by hospitals and other interested parties.

FINANCIAL IMPACT

Due to the strong clinical case supporting ED observation of chest pain patients, HCFA administrators expect the provider community to welcome the development of a chest pain observation APC. The new APC group, however, may not translate into additional payment for providers.

Hazy Reimbursement Picture

Because any changes to the outpatient PPS must be budget neutral, the payment amount for the new APC will be "carved out" of existing APCs with which observation is associated. Therefore, payments for emergency room visits and other services may be reduced, perhaps significantly.

Several unspecified data points, listed in the box at right, hinder efforts to predict the amount of the new APC payment or the magnitude of the reduction in associated APCs. Moreover, it is not clear whether the new APC will sufficiently reimburse providers for providing chest pain observation services, particularly within a CPC setting.

The structural implications of the prerequisites for chest pain APC payment are also uncertain. Depending on the specificity of these criteria, hospitals without CPCs may need to improve chest pain protocols-or perhaps invest resources into a designated ED chest pain unit-to ensure payment eligibility.

CRUCIAL UNKNOWNS

Which APC groups contain observation costs

How observation costs have been distributed among these APCs

The percentage of each APC payment that the observation component represents