Medicare beneficiaries in 2003 will be overcharged approximately $111 million for some hospital outpatient services, and Medicare will overpay about $303 million for other outpatient services because of the flawed application of a CMS payment methodology, according to a letter sent Monday by the General Accounting Office to CMS Administrator Thomas Scully.
The Balanced Budget Act of 1997 created a mechanism that would gradually lower Medicare beneficiary cost-sharing under the outpatient prospective payment system (OPPS) from about 50% to 20% for each hospital outpatient service.
When CMS published its final rule regarding outpatient prospective payment for 2003, it said it was using a methodology from 2002 designed to ensure that all outpatient co-payments would eventually be 20%, and that none would increase from year to year.
But certain modifications to the methodology were inconsistent with CMS rules, the GAO letter says, and the office found several ambulatory payment classification (APC) groups of services for which co-payments did go up in 2003. Co-payments increased for 28 APCs, and the co-payment decreases for 47 other APCs were greater than they would have been if the unadulterated 2002 methodology had been used.
The main difference between the 2002 and 2003 methodologies was that in 2003 CMS deemed any APC that had one or more services added to it to be a new APC instead of a recalibrated APC.
In its August 2003 proposed rule establishing the 2004 OPPS payment rates, CMS said it would revise the methodology of 2002 to calculate co-payments beginning in 2004, but it did not propose to recalculate the 2003 co-payments, which were used as the basis for determining those 2004 amounts.
The GAO recommends that CMS first apply the 2002 co-payment methodology to the 2003 APC services for which beneficiaries were overcharged. CMS says it will take the recommendations into consideration when issuing its final rule.