Business Briefs: HOPD Charges Drive Medicare Payment Rates!

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Nothing influences the increases and decreases in payment rates for wound care hospital-based outpatient department (HOPD) services, procedures, and products set forth by the Centers for Medicare & Medicaid Services (CMS) more than the actual charges submitted on HOPD claims. Keep in mind the charges on the industry’s collective 2014 HOPD claims determined the 2016 Medicare payment rates currently being received by HOPDs. Similarly, the charges on 2015 HOPD claims determined the Medicare payment rates HOPDs will receive in 2017. There is nothing that can be done now to change 2017 payment rates. However, HOPDs can still impact 2018 Medicare payment rates if charge description masters (CDMs) are updated immediately (and moving forward) so that the remainder of one’s 2016 HOPD claims reflect the true costs of performing the vital work and the true cost of purchasing state-of-the-art technology for patients living with chronic wounds. 

Medicare released its 2017 proposed Outpatient Prospective Payment System (OPPS) rule in early July (see Table). In a few instances HOPDs’ 2015 claims caused the proposed OPPS rates to increase (eg, surgical debridement, application of total contact cast, application of Unna’s boot, application of multilayer high-compression bandage system to lower leg, application of traditional and disposable negative pressure wound therapy [tNPWT and dNPWT] pumps). In other instances HOPDs’ 2015 claims caused significant decreases in the proposed OPPS rates (eg, some “high cost” and “low cost” applications of cellular and/or tissue-based products for skin wounds [CTPs] and selective debridement). 

As this author reviewed the sizeable 2017 proposed decreases, it was obvious the HOPDs’ true costs are higher than the 2017 proposed OPPS rates. HOPDs cannot afford to continue this self-destruction of their Medicare payment rates. Now is the time to stop this downward spiral. After reading this article, all wound care providers should immediately review charge sheets, CDMs, and actual claims to take the appropriate steps to correct any problems now — the 2018 Medicare payment rates are at risk otherwise.  

Let’s review three action steps HOPDs must take immediately:

Action Step No. 1): Anytime the HOPD adds a new service/procedure/product, provides pay increases to the staff, and/or receives a price change from the manufacturer, the HOPD should adjust its charge submission system and its CDM. 

CDMs should be updated on an ongoing basis. 

Unfortunately, many HOPDs only make their updates on an annual basis (and some less frequently than that). Many HOPDs do not carefully work with their finance department to set their Medicare charges correctly and to consistently provide CMS with a clear picture of their actual costs. In addition, many HOPDs fail to remove codes and charges no longer applicable; these items can be mistakenly selected by HOPDs while submitting their charges. 

Example: Many HOPDs have begun using dNPWT pumps. When this relatively new technology was released, CMS assigned the temporary codes G0456 and G0457 to the procedure, which also includes the disposable equipment and supplies. CMS also assigned G0456 and G0457 to an Ambulatory Payment Classification (APC) group that was fairly representative of the HOPD costs. 

When many HOPDs added G0456 and G0457 to their CDMs, they mistakenly assigned those codes the same charge as the codes (97605 and 97606) for the work to apply tNPWT, which does not include the equipment and supplies. As is generally known, Medicare patients acquire tNPWT equipment and supplies from a durable medical equipment (DME) supplier. The DME supplier bills Medicare and receives 80% of the Medicare allowable rate from CMS; the DME supplier bills the patient for the other 20% of the Medicare allowable rate. When the patient receives wound care management at an HOPD, the patient supplies his/her tNPWT equipment to the HOPD. The qualified healthcare professional (QHP) assesses the wound, determines that tNPWT should be continued, and either applies the tNPWT or requests the HOPD staff to apply it. Therefore, the CDM charge for 97605/97606 should only account for the work affiliated with assessing and applying tNPWT, not for the equipment and supplies that are furnished by the DME supplier. As is also generally known, HOPDs are paid and are responsible for providing Medicare patients with dNPWT equipment and supplies used during an HOPD encounter. The HOPD bills Medicare and receives 80% of the Medicare allowable APC rate from CMS; then bills the patient for the other 20% of the Medicare allowable rate. When the patient receives wound care management in the HOPD, the QHP assesses the wound, determines that dNPWT is required, and either applies the dNPWT or requests the HOPD staff to apply it. Therefore, in 2013, each time an HOPD opened and applied a new dNPWT pump, the HOPD should have billed for G0456 or G0457. The CDM charge should have been established to account for the work affiliated with assessing and applying dNPWT as well as the cost of the dNPWT equipment and supplies.  

Unfortunately, in 2013, most HOPDs set their charges for G0456 and G0457 exactly the same as 97605 and 97606. Guess what happened to the APC group assignment and the CMS allowable payment rate in 2015? First, a good thing happened: The temporary codes G0456 and G0457 were replaced with permanent codes 97607 and 97608. Second, due to the inadequate charges submitted on 2013 HOPD claims, a bad thing happened: The 2015 Medicare national average allowable rate dropped from $274.81 to $146.14. 

Luckily, in 2014, some (but not most) HOPDs adjusted their charges for 97607 and 97608 to include the cost of the work as well as the cost of the dNPWT equipment and supplies, and the 2016 OPPS national average allowable rate increased somewhat — to $225.55. The 2017 proposed OPPS national average rate ($289.56) proves a few more HOPDs adjusted their charges to reflect their true costs. However, many HOPDs across the country are just now adding dNPWT to their CDMs. As this author speaks to HOPDs across the country, it’s clear that HOPDs are making two unfortunate mistakes that will drive a decrease in future dNPWT rates: 

1. Many HOPDs are adding the deleted temporary codes (G0456 and G0457) rather than the new permanent codes (97607 and 97608) to their CDMs; and
2. Many HOPDs are setting their charges for dNPWT the same as for tNPWT.  

Of course, this author strives to educate theses HOPDs. Likewise, it’s best to educate readers here that HOPDs should immediately:

• remove G0456 and G0457 from their CDMs and replace those codes with 97607 and 97608; and 
• refine their CDM 97607/97608 charges to reflect the costs for their work and for the dNPWT equipment and supplies. 

What action step should HOPDs take now to prevent unrealistic Medicare OPPS rates in 2018?

Review and update your CDM now. Verify that the CDM charges for all HOPD services and procedures (including dNPWT) and that separately reportable products are set to appropriately reflect true costs for the work and for the products. Consult with the finance department for guidance with setting charges to include overhead costs. 

REMEMBER: 2016 claims will determine 2018 OPPS rates. Once the CDM has been refined, educate your coding and billing department staff members about the changes made so they do not override and change the codes, units, or charges before they submit the HOPD’s claims. 

Action Step No. 2): HOPDs should verify the charges submitted in their department cause their CDMs to make the correct calculations..

HOPDs must understand the units that are built into their CDMs for each line item (service, procedure, and product) and should verify that the charge information submitted (codes, units) in their department is correctly aligned with their CDMs. Unfortunately, many HOPDs “trust” their charge-submission system and their CDM always work together perfectly. Nothing could be further from the truth! Perfection can only be achieved when the HOPD program director and the CDM director coordinate, communicate, and validate their two systems process every line item in the CDM correctly. 

Example: In 2014, CMS began packaging the OPPS payment for CTPs into the OPPS payment for the application procedure. As always, CMS used 2012 HOPD claims data to determine the cost of the products to incorporate into the 2014 “packaged” payment rate. When the 2014 national average allowable OPPS “packaged” payment rates were released, most of the “packaged” rates were less than the actual costs of most of the CTPs. 

Of course, HOPDs thought CMS made a mistake. Unfortunately, HOPDs across the country made big mistakes when submitting their 2012 claims. The charges on the HOPDs’ 2012 claims were typically less than the actual product costs, which provided inaccurate information to CMS when they decided to “package” the CTP application and product into one OPPS payment. Following are four of the big mistakes HOPDs made in 2012, and unfortunately are still making in 2016:

1) CMS assigns Healthcare Common Procedure Coding System (HCPCS) codes to qualified CTPs; the codes should be reported separately on each claim when a CTP application code is reported. From 2012-16, many hospital systems did not allow their HOPDs to report the charge for the CTPs, claiming CTPs were “supplies.” Therefore, CMS received no charge to use in the calculation for the “packaged” products. Even when CTPs are “packaged,” HOPDs should always report their appropriate charge on claims. 

2) Most CTPs are billed “per square centimeter [sq cm].” Most CDMs include the “cost per sq cm.” From 2012-16, a large number of HOPDs reported a unit of “1” in their charging system, which caused their CDMs to only bill for “1 sq cm.” Therefore, CMS receives very low charges for the CTPs; those low charges are built into the calculation for the “packaged” CTP payments. HOPDs should record the total number of sq cm that were purchased for the application. Their CDMs will then calculate the correct charge for the CTPs.  

3) HOPDs should bill for the entire piece of CTP purchased for the patient. If a portion of the CTP is wasted, the QHP should properly document (according to CMS and/or the Medicare Administrative Contractor’s guidance) the amount opened, applied, and wasted in the medical record. However, HOPDs should report the total number of sq cm opened on their claims. From 2012-16, many coding and billing departments only allow(ed) the HOPDs to report the number of sq cm applied. Once again CMS receives inaccurate low charges for the CTPs, those low charges are built into the calculation for the “packaged” CTP payments.

4) HOPDs report application codes (15271-15278/C5271-C5278) based on the size of the wound and the anatomic location of the wound. For example, if a CTP assigned to the “low cost” package is applied to a 20 sq cm venous ulcer on the leg, the HOPD reports “1” unit of C5271. If the venous ulcer is 30 sq cm, the HOPD reports “1” unit of C5271 and “1” unit of C5272. And if the venous ulcer is 110 sq cm, the HOPD reports “1” unit of C5373 and “1” unit of C5274. Most HOPDs understand how to correctly report and bill these application codes. 

However, most HOPDs are not reporting the correct number of sq cm of CTPs applied when the wound is > 25 sq cm. For example, if the HOPD purchased a 140 sq cm CTP for the 110 sq cm venous ulcer previously described, the units of the product “Q” code should be reported as “140” and the charge on the claim should be the charge for “140 sq cm.” 

From 2012-16, very few hospitals billed for more than 25 sq cm of product even though many more sq cm were purchased and applied. That practice has caused CMS to believe the cost of CTPs for large wounds is the same or slightly more than the cost of CTPs for small wounds. Therefore, CMS has not established OPPS payment rates high enough to allow CTPs to be provided to Medicare beneficiaries living with larger wounds. To make the matter worse, HOPD claims have reported the cost of CTPs for large wounds on the legs is higher than the cost of CTPs for the same size wounds on the feet. 

That is absolutely not true: The cost of 140 sq cm of a CTP applied to the leg is exactly the same cost as 140 sq cm of the CTP applied to a foot! Although these inaccurate CTP claim submissions have plagued HOPDs for the past three years (since “packaging” began), HOPDs have not taken the time to correct their charging systems and CDMs for CTPs. Unfortunately, this lackadaisical behavior will have a very large impact in 2017, if the proposed OPPS rates become final. Because HOPDs’ 2015 claim charges did not correctly report the cost of CTPs, the cost of CTPs for wounds > 25 sq cm, and the cost of the same size CTPs for different anatomic locations CMS has proposed some draconian rate reductions. 

Following are a few examples of the 2017 proposed reductions:

• CTPs Assigned to “High Cost” Package

In 2016, the national average OPPS allowable rate to apply “high cost” CTPs to 100 sq cm wounds on legs (15273) and feet (15277) was the same: $2,137.49. That rate is well below the actual cost of 100 sq cm of most “high cost” CTPs. 

Due to the inaccurate 2015 claim charges, the proposed 2017 rate for 15273 is scheduled to increase to $2,447.97, which is still not adequate to purchase 100 sq cm of most “high cost” CTPs. But here’s the shocking news: The proposed 2017 rate for 15277 is scheduled to decrease to $1,411.92 – the same payment for 25 sq cm wounds! 

• CTPs Assigned to “Low Cost” Package

In 2016, the national average OPPS allowable rate to apply (C5273) “low cost” CTPs to 100 sq cm wounds on the leg increased to $2,137.49, which was allowing HOPDs to afford to apply “low cost” CTPs to larger ulcers on the legs. But the inaccurate 2015 claims data caused the proposed 2017 rate for C5273 to decrease to $1,411.92, which is not adequate to purchase 100 sq cm of most “low cost” CTPs. To make matters worse, the 2016 rate of $1,411.92 for 100 sq cm of “low cost” CTPs applied to the foot (C5277) was already too low; remember the 2016 rate to apply the same size product to 100 sq cm on the leg was $2,137.49. This may seem hard to believe, but the proposed 2017 OPPS rate for C5277 is scheduled to decrease to $453.92 – the same payment for 25 sq cm wounds!

What action steps should HOPDs take now to prevent unrealistic Medicare OPPS rates in 2018?

Review and update your HOPD charge sheets and your CDM now. Verify the charges submitted in the HOPD cause the correct calculations in your CDM. Something is terribly wrong with HOPDs’ charge sheets and CDMs that are causing HOPDs’ claims to report charges for CTPs well below the cost to purchase them. HOPDs throughout the country must conduct serious self-inspections to uncover what part of their processes are broken and to fix the processes before many more 2016 claims go out the door with charges below their costs. 

Action Step No. 3): HOPDs should verify services and procedures performed, and products used, appear on their actual claims with the correct codes, units, and charges.

When this author consults with HOPDs, serious claim-submission errors are revealed. Almost exclusively, the HOPD representative says, “ … but I always submit the correct codes and the correct units on my charge sheets.” Then, when asked the next important questions, such as, “Have you audited your actual claims to be sure the claims reflect what you entered into your charge sheets?” the answer is usually “no.” HOPDs should beware that from the time codes and units are recorded on charge sheets, are entered into the HOPD charging system, travel through the CDM software, travel through several other coding and billing systems, and then pass by coders and/or billers (who may have the opportunity to change what is on the claim), many mistakes and system errors can occur. Therefore, HOPDs must audit their submitted claims to be sure the claims are actually submitted with the correct codes, units, and charges. In action steps Nos.1 and 2, we reviewed the importance of updating the HOPD charging system and CDM immediately. Once that work is complete, HOPDs should audit a sampling of their actual submitted claims for the services, procedures, and products for which the CDM was just refined. Be sure the claims reflect the appropriate codes, units, and charges for the work performed in the HOPD.

What action steps should HOPDs take now to prevent unrealistic Medicare OPPS rates in 2018?

Do not blindly trust your entire revenue cycle is working properly. Audit it immediately and make all the corrections now so remaining 2016 claims have the opportunity to positively impact the 2018 Medicare OPPS rates. The draconian rate decreases caused by inaccurate HOPDs’ claims are unsustainable!