The CMS revised its treatment of high-cost cases known as outliers in its final regulations for Medicare's 2005 payments to hospital outpatient departments, physicians and inpatient psychiatric facilities. The rest of the regulations remain much the same as proposed. The criteria by which outpatient cases qualify as outliers were changed. Under the final regulations, the costs of an outlier case must be at least 1.75 times the ambulatory payment classification rate, instead of 2.6 times the rate, or as a flat dollar value, at least $1,175 above the ambulatory payment classification rate, up from the proposed threshold of $625. As proposed, hospital outpatient departments will receive a 3.3% rate increase for inflation in 2005. They will receive $78 for each "welcome to Medicare" physical performed, a benefit established under the Medicare Modernization Act of 2003. The changes are effective Jan. 1.
Also as proposed, physicians will receive a 1.5% Medicare rate update in 2005 and new reimbursement for providing Medicare beneficiaries with preventive care, another mandate of the Medicare law. The CMS' most controversial proposals, which change how physicians are reimbursed for providing cancer drugs, were softened over the past months in negotiations with the industry. The final regulations allow payments for drug preparation, physician supervision of drug preparation and infusion of a second drug. The 2005 regulations also mark the start of the CMS' long-planned, three-year conversion of inpatient psychiatric facilities to a per-diem prospective payment system from the current cost-based reimbursement. -- by Jeff Tieman and Tony Fong