May 25, 2010

Proposed Changes to the Outpatient Prospective Payment System

Proposed Rule
Summary

Score: 27 / 60

Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0938-AP17
Agency Name
Department of Health and Human Services
Rule Publication Date
07/18/2008

RULE SUMMARY

This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2009. In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The link to the proposed rule containing the RIA is five clicks from the home page. Click on "regulations" (intuitive). The rest is unintuitive: click on "other regulations," expand the "detail" list, click on "CMS regulations," and then click on "quarterly provider updates—regulations" and select the update list from the period covering the date of the regulation. They can also be found on regulations.gov using the RIN.
4/5
2. How verifiable are the data used in the analysis?
The sources for most data are provided but not necessarily linked. The RIA directs readers to a Web site that shows hospital-specific results and supporting data. Other Web addresses are also provided for other data.
4/5
3. How verifiable are the models and assumptions used in the analysis?
HHS apparently uses a simulation model to estimate how changes in parameters will alter payments to various types of hospitals. The reader is referred to prior rulemakings for documentation of some calculation methodologies. Other calculations are explained in detail. Assumptions/inputs appear to be well-documented. The analysis presents evidence that the models and assumptions are justified, but does not back its argument up with any citations of other literature or analyses that used similar models or assumptions.
3/5
4. Was the analysis comprehensible to an informed layperson?
The RIA is heavy on description and light on analysis since no clear breakdown between the proposed rule and the RIA exists. As CMS states, "the accompanying discussion, in combination with the rest of this final rule with comment period, constitutes a regulatory impact analysis" (68800–01). The language and structure used throughout the RIA/ rule are difficult to follow. While the results are clear, how the agency arrived at said results is somewhat murky. The document has many, many acronyms that are listed at the beginning. Overall, it is very difficult for a non-specialist to follow.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
1/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Early on the proposed rule and, by extension, the RIA assert that Medicare's prospective payment system for hospital outpatient services ensures that Medicare and its beneficiaries pay appropriately for services and encourages more efficient delivery of care (41419). Direct discussion of bottom-line results for citizens is sparse.
2/5
Does the analysis identify how these outcomes are to be measured?
Expenditures are measured. The payment reduction of hospitals who fail to report quality measures and subsequent reduction in beneficiary co-payment amount for services in said hospital is one specific illustration outlined of how patients' quality of life might be improved by this final rule. But the health outcome measures are not used to project or measure benefits of the regulation.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The analysis does not explain how the projected level of expenditures accomplishes any of the above goals. Some judgment calls are explained in terms of efficiency or incentives.
1/5
Does the analysis present credible empirical support for the theory?
Since outcomes are not measured and no theory is presented, there is no empirical support either.
0/5
Does the analysis adequately assess uncertainty about the outcomes?
The analysis does not address this topic.
0/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
The RIA argues that continued clarification (via annually published rules) is necessary for OPPS/ ASC payment systems to take into account changes in medical practices, changes in technologies, new cost data and other relevant information and factors (68508). There is a concern with efficiency, and occasional mentions of how a regulation might affect incentives for cost containment or gaming. But these are not presented as rationales for the entire regulation. Since the analysis is located within the proposed rule it seems less likely that it would explore whether or not the Medicare price system itself allocates services as well as a competitive market would.
1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
No. The RIA is written from a perspective that already assumes that systemic problems necessitate Medicare pricing systems (it does elaborate on the scope in charts by geographically breaking down the effects of the 4,252 hospitals). The RIA would be improved if it elaborated a testable theory that explained why.
1/5
Does the analysis present credible empirical support for the theory?
No.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The analysis does not address this topic.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
Yes, the analysis enumerates several alternatives for both OPPS and ASC changes. For OPPS options alternatives are considered for payment of multiple imaging procedures formed during single session (68794), HOP QDRP Requirements for the 2009 payment update and OPPS cost estimates for relative payment weights (68795). For ASC alternatives, options considered include alternatives for office based procedures and covered surgical procedures (68801–02).
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
Options are generally no action plus one or two modest alternatives that would generate different levels of costs or different incentives for efficiency.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
The main focus of alternatives analysis is efficiency (in the sense of lower costs), not outcomes. Costs of alternatives are not directly measured, but some data are used to assess which option is more likely to promote cost containment.
2/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
To illustrate the impact of the final CY 2009 changes, this analysis "begins with a baseline simulation model that uses the final CY 2008 weights, the FY 2008 final post-reclassification IPPS wage indices, and the final CY 2008 conversion factor" (68797). The baseline is transparent, but maybe not realistic: "...we do not make adjustments for future changes in variables such as service volume, service-mix, or number of encounters."
2/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The simulation quantifies the effect of each proposed change on federal expenditures, but only for the chosen alternative.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
It identifies all federal expenditures only. CMS estimates the total increase in expenditures under the OPPS for CY 2009 compared to CY 2008 to be approximately $1.6 billion (68792). It also estimates that the effects of the changes to the ASC payment system provisions for CY 2009 (such as adding 14 procedures that were previously excluded to the CY 2009 ASC list of covered surgical procedures and designating 8 additional procedures as office-based) will have no net effect on Medicare expenditures in CY 2009 compared to the level of expenditures in CY 2008 (69792). Lastly, CMS determined that the final rule that contains clarification regarding the secretary's ability to terminate Medicare providers and suppliers during an appeal of a determination that affects participation in the Medicare program will have no net effect on Medicare expenditures (68792).
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Only in the sense that the rulemaking determines what price the federal government will pay for services. The analysis notes that this "final rule with comment period will not… affect private sector costs.” As reflected in table 51, however, CMS estimates that OPPS payments to certain hospitals will increase by 4.4% under this final rule with comment period (68793). A wider range of price effects could have been considered.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
For the principal cost analysis, "We use the best data available but do not attempt to predict behavioral responses to our proposed policy changes." Some discussions of regulatory alternatives recognize effects of incentives on behavior. However, in the discussion of changes that accrue to CMHCs, the analysis does mention that they expect CMHCs to "change their behavior in response to..." their policy to deny payment for days with less than three services (68799). The latter statement is evidence that further assessment may be possible
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
In terms of the distributional impacts presented in the OPPS payment discussion, the limitation is that hospital-specific data cannot be modeled, but the RIA does provided links to this information. Also, the CMS highlights several limitations of ASC projections in the analysis. Key limitations include their inability to predict changes in ASC service-mix between FY 2007 and FY 2009 with precision and the absence of data on services that are newly payable under revised ASC payment system in present claims data (68802). The RIA notes that ultimately the affect of an individual ASC will depend on its mix of patients, the proportion of ASC’s patients that are Medicare beneficiaries, the degree to which payments for procedures offered by ASC are changed under the revised payment system, and the extent to which ASC provides a different set of procedures in coming year (68805).
2/5
Does the analysis identify the alternative that maximizes net benefits?
Since only federal expenditures are measured, net benefits are not calculated.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Since benefits are not measured, cost-effectiveness is not calculated.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Tables show how the changes would alter payouts to hospitals, broken down by geographic location, urban/rural, size, ownership, teaching status, etc. The RIA also discusses how these changes would affect beneficiaries' copayments. Other tables show how changes would affect payments for different types of ambulatory care centers.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis does not address this topic.
0/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The simulation model was used to adjust weights to attain budget neutrality when required by law. The RIA section describes alternatives considered for several issues, including billing categories for imaging, reimbursement rates for hospitals that do not meet quality reporting requirements, and categorization of certain surgical procedures as physician office-based. In these cases, decisions reflect concern about incentives for efficiency and cost-effectiveness and are based on analysis of data. Even though "the accompanying discussion, in combination with the rest of this final rule... constitutes a regulatory impact analysis," the analysis seems to confirm, not inform, the ultimate decision (68800-01). Still, the extensive analyses outlined in tables 51–55 provides evidence that the RIA affected at least some decisions (68799– 66805).
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Net benefits are not calculated. A large number of decisions seem to be driven by legislative mandates or by judgments whose linkage to outcomes or costs is not explained in much depth.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The proposed rule establishes seven quality of care measures that providers must report on. The purpose appears to be to evaluate quality of care by providers, not to evaluate effects of the regulatory changes. But these could be used to measure the effects of the regulation.
2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
See above.
1/5
 
Total 27 / 60