WASHINGTON – The Centers for Medicare & Medicaid Services has released proposed rules updating payment policies for hospital outpatient departments and ambulatory surgery centers in calendar year 2010.

Medicare currently pays more than 4,000 hospitals for outpatient services under the Outpatient Prospective Payment System, which also sets payment policies and payment rates for partial hospitalization services furnished by community mental health centers. CMS is projecting a market basket update for CY 2010 of 2.1 percent for outpatient departments, and estimates total payments of $31.5 billion under the OPPS in CY 2010.

There are approximately 5,000 Medicare-participating ASCs. Since January 1, 2008, ASCs have been paid under a revised payment system that aligns ASC payment rates with the rates paid for similar services when furnished in hospital outpatient departments. The system also expands the number and types of surgical services that are covered by Medicare when performed in ASCs.

CY 2010 is the third year of a four-year phase-in of the ASC payment rates calculated under the standard rate-setting methodology and the first year for which CMS is authorized to apply an update to the conversion factor.

CMS is projecting the percentage increase in the Consumer Price Index for All Urban Consumers that would update the ASC conversion factor to be 0.6 percent. Total CY 2010 payments to ASCs are estimated to be $3.4 billion.

The proposed rule affects Medicare payments to hospitals and ASCs for the resources - such as equipment, supplies, and hospital or ASC staff - they use to furnish ambulatory healthcare services to beneficiaries. CMS pays separately for the services of physicians and nonphysician practitioners under the Medicare Physician Fee Schedule.

Under the Hospital Outpatient Department Quality Reporting Program (HOP QDRP), hospitals that did not participate in the program or did not successfully report the quality measures will receive an update in CY 2010 equal to the annual payment update factor minus 2.0 percentage points, or 0.1 percent.

Hospitals that are exempt from the Inpatient Prospective Payment System - such as long-term care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, cancer hospitals, and children's hospitals - as well as hospitals in Puerto Rico are not subject to the HOP QDRP payment reduction.

CMS is proposing to continue to require HOP QDRP participating hospitals to report the existing seven emergency department and perioperative care measures, as well as the four existing claims-based imaging efficiency measures for the CY 2011 payment determination.

Although it is not proposing to adopt any new measures for the CY 2011 update, CMS is seeking public comment on potential additional quality measures for consideration for future OPPS updates.

The potential measures relate to a number of areas including cancer care, emergency department throughput, diabetes, stroke and rehabilitation, osteoporosis, medication reconciliation, respiratory, immunization, health information technology, cataract surgery, overuse/appropriate use, imaging efficiency, and surgical care.

CMS is also proposing to phase in a new HOP QDRP validation requirement to ensure that hospitals are accurately reporting measures for chart-abstracted data, but the validation results will not have any impact on outpatient department payments in CY 2011. CMS is also proposing to establish procedures to make quality data collected under the HOP QDRP for quarters beginning with the third quarter of CY 2008 publicly available.

CMS will accept comments on the proposed rule until August 31, 2009, and will respond to comments in a final rule to be issued by November 1, 2009.