[Federal Register Volume 73, Number 217 (Friday, November 7, 2008)]
[Rules and Regulations]
[Pages 66187-66198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26554]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 440
[CMS-2213-F]
RIN 0938-AO17
Medicaid Program; Clarification of Outpatient Hospital Facility
(Including Outpatient Hospital Clinic) Services Definition
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: Outpatient hospital services are a mandatory part of the
standard Medicaid benefit package. This final rule aligns the Medicaid
definition of outpatient hospital services more
[[Page 66188]]
closely to the Medicare definition in order to: Improve the
functionality of the applicable upper payment limits (which are based
on a comparison to Medicare payments for the same services), provide
more transparency in determining available hospital coverage in any
State, and generally clarify the scope of services for which Federal
financial participation (FFP) is available under the outpatient
hospital services benefit category.
DATES: Effective Date: These regulations are effective December 8,
2008.
FOR FURTHER INFORMATION CONTACT: Jeremy Silanskis, (410) 786-1592.
SUPPLEMENTARY INFORMATION:
I. Background
A. Definition of Outpatient Hospital Services
Section 1905(a)(2)(A) of the Social Security Act (the Act) lists
outpatient hospital services as a benefit that can be covered under a
State Medicaid program, and it is a mandatory benefit for most eligible
Medicaid populations under sections 1902(a)(10)(A) and
1902(a)(10)(C)(iv) of the Act. Though the statute does not provide a
definition for these services, federal regulations at 42 CFR 440.20
were established to define: An outpatient hospital service, the
circumstances under which outpatient services are delivered, and
qualifications for Medicaid outpatient hospital service providers.
As discussed in the proposed rule, the proposed changes would
address ambiguity in the definition of outpatient hospital services
which allowed for a high possibility of overlap between outpatient
hospital facility services and other covered Medicaid benefits. CMS
viewed the overlap in service definitions as problematic for several
reasons. The broad definition of outpatient hospital services did not
clearly limit the scope of the outpatient hospital service benefit to
those services over which the outpatient hospital has oversight and
control. The overlap could result in payment at the high levels
customary for outpatient hospital facility services instead of at the
lower levels associated with the other covered benefits. Also, the
definition's ambiguity potentially allowed States to include services
paid for under other Medicaid benefit categories in the State plan in
the calculation for Medicaid and uncompensated care cost supplemental
payments for outpatient hospital services. In addition, the definition
was inconsistent with the applicable upper payment limit (UPL), which
is based on the premise of some level of comparability between the
Medicare and Medicaid definitions of outpatient hospital and clinic
services.
B. Calculation of Outpatient Hospital and Clinic Upper Payment Limits
Regulations at 42 CFR 447.321 define the UPLs for Medicaid
outpatient hospital and clinic services. The UPLs for outpatient
hospital and clinic facilities are based on the amount that would be
paid under Medicare payment principles. We proposed to clarify this
standard by incorporating into the regulatory text guidance concerning
the methods for demonstrating compliance with the UPLs.
In consideration of the Congressional moratorium on the proposed
rule on Cost Limits for Governmentally-Operated Providers (the
``Government Provider Payment Rule''), published on January 18, 2007
(72 FR 2236), we are reserving action on the proposed provisions at
Sec. 447.321. We may consider publication of the UPL guidance at a
future date. If the UPL guidance is published in the future, we will
respond to the public comments concerning those regulatory
clarifications at that time. Since this final rule only concerns
changes to the outpatient hospital service definition, we have modified
the title of the final regulation to read: Clarification of Outpatient
Hospital Facility Services Definition.
C. Proposed Regulation
CMS published a proposed rule in the Federal Register on September
28, 2007 (72 FR 55158), entitled ``Clarification of Outpatient Clinic
and Hospital Facility Services Definition and Upper Payment Limit.'' We
provided for a 30 day public comment period and received a total of 333
timely comments from States, local government, providers, and health
care associations. Brief summaries for each proposed provision, a
summary of the public comments we received, and our responses to
comments, are set forth below.
II. Provisions of the Proposed Rule and Response to Comments
General Comments
Comment: A substantial number of commenters urged CMS to withdraw
the proposed rule. They stated the regulatory changes are in violation
with the Congressional Moratorium passed as part of the Troop
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability
Appropriations Act of 2007. Nearly all of the comments concerning a
violation of the moratorium focused on: The exclusion of graduate
medical education costs and payment in the outpatient upper payment
limit calculation, and the inclusion of certain terminology and
citations in the proposed rule that were a part of the proposed rule on
Cost Limits for Governmentally-Operated Providers (the ``Government
Provider Payment Rule''), published on January 18, 2007 (72 FR 2236)
and the proposed rule for Medicaid Graduate Medical Education (the
``GME Rule'') published on May 23, 2007 (72 FR 28930).
Response: The proposed rule addressed completely different policy
concerns from those published in the proposed Government Provider
Payments Rule and the GME Rule. Those rules concern the amount of the
permissible payment for government providers or for institutions
offering graduate medical education, rather than the scope of the
outpatient hospital benefit.
In our proposed rule, we integrated the proposed provisions in with
the provisions of the Government Provider Payment Rule because that
rule had been published in final form. Integrating this proposed rule
with the provisions of the Government Provider Payment Rule misstated
the existing regulatory framework. We regret any concern this may have
caused.
Therefore, we are reserving action on the proposed clarifications
to the outpatient hospital and clinic upper payment limits at 42 CFR
447.321. We may address these provisions at a future date, at which
time we will respond to the public comments we received concerning the
payment limit clarifications.
Comment: A number of commenters asserted that the rule did more
than clarify ambiguous regulatory language and formalize existing CMS
policy. Many commenters stated that the proposed regulation was
unwarranted and poor public policy. One commenter opined that ``CMS has
(not) adequately demonstrated the need for the proposed changes to the
regulations regarding the definition of outpatient hospital services.''
Another commenter stated: ``The proposed regulatory changes seem
arbitrary, not developed with care and not fulfilling CMS's own
purposes.'' Still, an additional commenter stated that the rule ``is
neither transparent nor clarifying.'' Many commenters stated that the
rule was not a minor clarification of CMS policy.
Response: As discussed in the proposed rule, the purpose of the
regulation is to establish consistency between the definition of
Medicaid outpatient hospital services and the applicable upper payment
limit for
[[Page 66189]]
those services, to provide more transparency in determining available
hospital coverage in any State, and to generally clarify the scope of
services for which Federal financial participation (FFP) is available
under the outpatient hospital services benefit category.
For example, in our review of State plan amendments, we found that
one State was including numerous services defined under other Medicaid
benefit categories and non-Medicaid covered services within the
Medicaid outpatient hospital benefit category. Some or all of these
services were provided in settings that did not involve the high
overhead costs of a hospital facility. The State's apparent purpose in
defining the services as part of the outpatient hospital services
benefit was to include the services in the calculation of the
outpatient hospital upper payment limit, in order to justify targeted
supplemental payments to hospitals that would otherwise violate
applicable upper payment limits.
We are concerned that such arrangements increase the outpatient
hospital upper payment limit without any justification based on any
increased cost or service levels, and thus is not consistent with
efficient and effective management of a Medicaid program.
This regulation will clarify that such arrangements, in which
higher payments are not justified by increased costs or service levels,
are not permitted. Therefore, we respectfully disagree that the
regulation does not provide additional clarification or that the
proposed changes are arbitrary.
Comment: One commenter requested that CMS ``clarify what UPL, if
any, applies to each service that is provided in hospital outpatient
facilities, but which would not be within the scope of the definition
of outpatient hospital services under 42 CFR 440.20.''
Response: The regulations at 42 CFR recognize facility services
provided to outpatients in outpatient hospital and clinic setting. As
of the publication of this final regulation, there are no upper payment
limits for non-institutional practitioner services defined in
regulation. As with any rate methodology, payments for other non-
institutional services must comply with section 1902(a)(30)(A) of the
Act, which requires that State plans have methods and procedures to
assure that payments are consistent with economy, efficiency and
quality of care. To establish such compliance, CMS may ask a State to
explain a reasonable basis for its rates. Within the scope of
1902(a)(30)(A), CMS allows States to determine payment rate
methodologies for non-institutional practitioner services consistent
with regulations at 42 CFR 430.10 and 447.204.
Comment: One commenter requested that CMS clarify how a State
should account in its UPL calculation for mandatory outpatient hospital
services that are not covered by Medicare as outpatient hospital
services, or are specified in Medicaid regulations as a separate State
Plan category of service. The commenter was under the impression that
such services could be required outpatient hospital services pursuant
to current 42 CFR 440.20(a)(4) (which would be moved to 42 CFR
440.20(a)(5) under this rule).
Response: The provisions at 42 CFR 440.20(a)(5) are generally
intended to provide States with the discretion to limit the outpatient
hospital service definition to exclude services that are not typically
provided in hospitals within the State. We do not interpret this
section of the regulation to expand the available scope of services
beyond those recognized under the Medicare outpatient prospective
payment system or paid by Medicare as an outpatient hospital services
under an alternative payment methodology. Instead, the provision allows
States to define the benefit category to exclude services that are not
typically provided in hospitals within the State.
Comment: One comment supported implementing the proposal into a
final regulation and offered that ``using consistent definitions across
these programs helps to simplify a very complex array of regulations
and pricing policies.''
Response: We thank the commenter for supporting the provisions of
the proposed regulation.
Outpatient Hospital Service Definition
We proposed to define Medicaid outpatient hospital services at 42
CFR 440.20 to include those services recognized under the Medicare
outpatient prospective payment system (defined under 42 CFR 419.2(b))
and those services paid by Medicare as an outpatient hospital service
under an alternate payment methodology. Further, we have proposed to
limit the definition to exclude services that are covered and
reimbursed under the scope of another Medicaid service category under
the Medicaid State plan and required that services be furnished by an
outpatient hospital facility or a department of an outpatient hospital
as described at 42 CFR 413.65.
Comment: Several commenters stated that the proposed rule
eliminates hospital overhead from many hospital and ambulatory
services. Further, a number of commenters noted that the rule
discourages safety net providers from providing community-based primary
and preventive ambulatory care services that improve community health
and reduce future health care costs.
Response: This rule would not have such effects. There is nothing
in this rule that precludes States from paying for community-based
primary and preventive ambulatory care services at rates that fully
account for costs to provide such services. This rule would, however,
provide for greater transparency in paying for such costs because the
payments would be made directly on a fee-for-service basis rather than
indirectly through complex facility or supplemental payment programs.
As a result, it will be easier to compare the cost-effectiveness of
different providers.
In other words, while this regulation would require that States
distinctly reimburse hospitals for the facility expenses and separately
reimburse for the practitioners who provide the Medicaid services
within the facility, it would not eliminate any Medicaid benefit
category, place reimbursement restrictions on those categories, or
alter the qualifications that must be met to provide a Medicaid covered
service. Any non-institutional Medicaid service covered under a State's
plan may continue to be provided in a safety-net hospital, a clinic, or
other non-institutional setting by a service practitioner who meets the
provider qualifications for the service set forth in the State plan.
Further, under section 1902(a)(32) of the Act, the hospital may
collect payment on behalf of the practitioner if the practitioner is
required to turn over the Medicaid fee on condition of employment or a
contractual arrangement.
Comment: Many commenters questioned whether the Medicare definition
included in the proposed regulation considers the role of the Medicaid
program in providing services to other populations. Commenters noted
that the Medicare and Medicaid programs are different in both scope and
the populations that they serve. In addition, the commenters pointed
out that Medicare is a Federal program with national standards, whereas
Medicaid is a State/Federal partnership with programmatic variations
among the States. One commenter cited examples of services provided to
children that are not covered under the Medicare programs, such as:
Dental and vision services, annual check-ups, and immunizations. By
restricting the scope of Medicaid services to those covered under
Medicare, the commenter stated
[[Page 66190]]
that CMS would be lowering the reimbursement for these important
services that hospitals provide to children insured by Medicaid, which
fall below the cost of care. The commenter suggested that CMS delay
implementation of the regulation and review the potential impact of the
regulation on Medicaid eligible children and the providers that serve
them.
Response: We believe that the difference in populations served by
Medicare and Medicaid has no impact on the nature and scope of
outpatient hospital facility services recognized by Medicare under OPPS
or an alternate fee schedule. We note that Medicare covers individuals
under the age of 65 with disabilities and that the Medicare program
recognizes procedures for a wide array of services that are not unique
to individuals over age 65. We have examined the Medicare payment
systems and are unable to identify hospital facility costs that are not
recognized by the Medicare program that would be unique to children or
other populations that are not covered under the Medicare program.
To the extent that there are such services, however, we interpret
the phrase ``would be included'' at 42 CFR 440.20(a)(4) of this rule to
include services that are not actually paid by Medicare under OPPS or
an alternate payment methodology, but that would be paid under those
methodologies if furnished to a Medicare beneficiary.
This is consistent with the goal of this regulation, which is to
limit the scope of Medicaid State plan outpatient facility services to
the type and scope of services that are generally recognized as actual
hospital services. We believe that the outpatient services described in
the proposed regulation represent the full and appropriate scope of
services provided in outpatient hospital settings. The services
mentioned in the comments are covered under other, distinct Medicaid
service definitions. These services may continue to be provided and
reimbursed by Medicaid within hospital settings under the coverage
policies and reimbursement methodologies defined by States specific to
those services.
Comment: Several of the commenters stated that under the Medicare
program, physical therapy is recognized as a separate benefit and the
service providers are qualified to provide services without physician
supervision. Under the Medicaid program, these commenters urged, many
States exclusively offer physical therapy services within outpatient
hospitals under the outpatient hospital benefit category.
Response: The proposed regulation allows for services that are not
covered under another Medical Assistance benefit category under the
State plan to be included as part of the outpatient hospital facility
benefit if the services are recognized under the Medicare OPPS or paid
as outpatient hospital services under an alternate fee schedule.
Therefore, if a State chooses to only cover and pay for these services
as part of the outpatient hospital benefit and the services are
recognized under the Medicare OPPS or paid as outpatient hospital
services under an alternate fee schedule, the services may be part of
the outpatient hospital Medicaid definition. However, if the services
are covered as a non-institutional practitioner service under a
separate benefit category, the State must pay for those services under
the reimbursement methodology specific to that benefit category and may
not define the services in the State plan as outpatient hospital
facility services. Regardless, physical therapy services may continue
to be paid under the Medicaid program in outpatient hospital settings.
Comment: One commenter stated that free-standing outpatient
rehabilitation facilities should be treated as outpatient hospitals and
not be recognized as clinics. This commenter explained that, regardless
of the setting, outpatient services should be paid the same
reimbursement rate.
Response: This regulation does not alter the requirements for
participation in the Medicaid program as an outpatient hospital
facility. For purposes of the Medicaid program, the regulation
continues to require that a facility be licensed or formally approved
as a hospital by an officially designated authority for State standard-
setting and meet the requirements for participation in Medicare as a
hospital. Moreover, this regulation does not preclude a State from
establishing identical payment rates for outpatient rehabilitation
services whether furnished in an outpatient hospital setting or in a
non-hospital clinic setting. Indeed, this regulation would encourage
this practice because rehabilitation services that are covered under a
non-hospital benefit category would be considered to be in that benefit
category rather than an outpatient hospital service.
Comment: One commenter stated that 8000 or more students will be
negatively impacted by the proposed rule changes. The commenter
suggested that the reimbursement dollars for outpatient hospital
services should be used to fund services in schools.
Response: We respectfully disagree. Under Title XIX of the Social
Security Act, specific services are listed as coverable under the
Medicaid program. The outpatient hospital benefit category recognizes
the unique nature of services furnished by an outpatient hospital
facility. Services furnished in schools or other non-hospital settings,
or by non-hospital practitioners, can still be covered under other
benefit categories.
Therefore, this regulation does not prohibit States from covering
services provided in schools under Medicaid benefit categories. Rather,
the regulation would define services that may be covered under the
outpatient hospital services benefit under a Medicaid State plan to
focus on those services unique to an outpatient hospital.
Further, federal Medicaid funds are not specifically allocated to
outpatient hospital services, and thus a shift in coverage from one
benefit category to another would not necessarily affect available
funding for any particular service. In other words, this rule would not
divert federal funding from schools. Federal funding is available to
match State or local non-federal expenditures for covered Medicaid
services in accordance with a State's federal medical assistance
percentage and the reimbursement methodology described in the State's
approved Medicaid plan.
Comment: A commenter requested clarification of the impact on the
provision of rehabilitation services in outpatient settings. The
commenter noted that this impact could affect services in State
psychiatric hospitals for patients over 64 and undermine progress on
the President's New Freedom Initiative.
Response: The regulation clarifies the scope of outpatient hospital
facility services that are eligible for federal financial
participation. To the extent that rehabilitative services are
recognized under the Medicare outpatient prospective payment system or
an alternate fee schedule for outpatient hospital services and are not
defined in a State's Medicaid plan under another Medicaid benefit, the
services may remain under the outpatient hospital benefit category. We
note that the psychiatric hospitals in question are typically inpatient
facilities, usually with little or no outpatient volume. These
institutions provide care to Medicaid inpatients under a separate
Medicaid benefit category for inpatient hospital services that would
not be affected by this rule.
Comment: One commenter suggested that the regulation could result
in non-coverage of certain pathology services. This commenter
recommended that a special provision be included in the regulation to
allow pathology services
[[Page 66191]]
provided by outpatient hospitals to be reimbursed under the outpatient
hospital benefit category using the appropriate State plan fee
schedule.
Response: The intention of the regulation is to appropriately
recognize the unique nature of outpatient hospital services. Pathology
services are typically delivered by physicians and in some instances
are an integral part of a hospital service. To the extent that the
pathology services in question are recognized under the Medicare
outpatient prospective payment system or an alternate Medicare fee
schedule for outpatient hospital services and are not defined in a
State's Medicaid plan under another Medicaid benefit, the services may
be included by the State under the outpatient hospital benefit
category. To the extent that the services would be covered by the State
plan under the physician services benefit, they should not be included
in the Medicaid outpatient hospital services benefit.
Comment: A commenter requested that CMS include a provision in the
final rule that would allow reimbursement of clinical diagnostic lab
services as an outpatient hospital services as long as there is not
duplicative payment for the services. The commenter noted that CMS
should make clear that outpatient hospitals and free-standing clinics
may continue to receive payment for these services.
Response: We did not accept this comment because we believe it is
more consistent with statutory requirements for clinical diagnostic
laboratory services to be claimed under the Medicaid benefit category
for laboratory services. Laboratory services are a mandatory benefit
category, and thus the services would remain covered even though not
included as outpatient hospital services. Only when reported separately
can CMS and States ensure consistency with the unique requirements
applicable to laboratory services. Laboratories are subject to a
different regulatory review than outpatient hospitals, under the
Clinical Laboratory Improvement Amendments of 1988 (CLIA), Public Law
100-578, implemented in part by regulations at 42 CFR part 493.
Moreover, section 1903(i) of the Act limits Medicaid reimbursement for
clinical diagnostic laboratory services to the amount of the Medicare
fee schedule for the services on a per test basis. Implementation of
these provisions will be improved by ensuring that laboratory services
are claimed under the benefit category specifically for such services.
Comment: One commenter stated that excluding rehabilitative,
school-based and practitioner services from the definition of
outpatient hospital services cuts funding and the availability of
services.
Response: As previously explained, federal Medicaid funds are not
specifically allocated to outpatient hospital services. The Centers for
Medicare and Medicaid Services matches expenditures for covered
Medicaid services in accordance with a State's federal medical
assistance percentage and the reimbursement methodology described in
the State's Medicaid plan. The purpose of the regulation is to define
the scope of outpatient hospital services unique to the outpatient
hospital setting and for which a hospital may receive a facility
payment, and not to limit the availability of services under other
benefit categories. The above services are provided by Medicaid
qualified professionals and are reimbursed on a fee-for-service basis
regardless of the setting in which the services are performed.
Comment: One commenter stated that CMS's decision to eliminate
reimbursement for Medicaid services covered in the State Plan is not
consistent with the Medicaid statute.
Response: The regulation does not eliminate any Medicaid benefit
category recognized under the Social Security Act or the settings in
which those services may be rendered. By clarifying the scope of
outpatient hospital facility services available for Federal financial
participation, CMS intends to recognize the nature of services that are
uniquely furnished by outpatient hospitals, including the high overhead
facility costs associated with such services. At the same time, we do
not believe it is effective and efficient to include other services
that do not have those unique characteristics in the outpatient
hospital services benefit category. These other services are more
appropriately included in other benefit categories, and paid at rates
warranted by the nature of the service regardless of the setting. Thus,
we believe that this rule is consistent with the Medicaid statute and
CMS's charge to preserve the fiscal integrity of the program.
Comment: One commenter stated that the definition of Medicare
criteria for ``provider-based status'' is a complicated standard. The
commenter suggested that some hospitals that have the authority to
claim a facility fee under the preceding Medicaid rules would only
receive payments for professional services under the proposed rule.
Response: The intention of the regulation is to recognize the high
facility overhead expenses that are associated with the delivery of
services unique to an outpatient hospital or a department of an
outpatient hospital that, according to 42 CFR 413.65, ``is either
created by, or acquired by, a main provider for the purpose of
furnishing health care services of the same type as those furnished by
the main provider under the name, ownership, and financial and
administrative control of the main provider.'' The commenter is correct
in that only a provider-based entity that is providing outpatient
hospital services as defined under the regulation may receive Medicaid
payment under the outpatient hospital benefit category.
This final regulation would not permit Medicaid payment under the
outpatient hospital service benefit for services furnished in settings
that are not within the scope of the certified hospital, even if the
setting is owned by the hospital and provider-based. In other words,
the services must be furnished by the main hospital or the department
of the hospital (a provider-based entity furnishing the same type of
care as the hospital). However, States may cover and pay for such a
service under other appropriate State plan benefit categories.
Comment: One commenter stated that excluding physician, physical,
occupational and speech therapy, clinical diagnostic laboratory
services, ambulance services, durable medical equipment and outpatient
audiology services from the definition of outpatient hospital services
does not represent the reality of the scope of care provided in
hospital settings. The commenter notes that CMS did not demonstrate
that access to these services is available in the community and outside
of a hospital outpatient department.
Response: We are not discouraging hospitals from providing primary
and preventive care services in hospital settings. The proposed rule
makes a distinction between outpatient services that are billed by a
recognized hospital facility in which services are furnished and those
billed by physicians and other professionals. Under Medicaid, States
generally pay a fee schedule rate for physician and other professional
services and a separate rate to hospitals providing outpatient
services. Physicians and other professionals cited in the example, who
provide services in a hospital facility, will be reimbursed at the
professional rate.
Comment: One commenter noted that overlap in Medicaid service
categories is a long-standing Medicaid policy and cited a CMS response
to comments on
[[Page 66192]]
a nurse-midwife regulation: ``While we view each category of service as
separate and distinct, the categories are not mutually exclusive. Some
services * * * can be classified in more than one category. It is also
possible that a service provided may meet the requirements under one
category and not another even though, as a general rule, the service
could be classified under either category. The specific circumstances
under which a service is provided and how the provider bills for the
service determines how the service is categorized and which regulatory
requirements apply.''
Response: Through this regulation, we are seeking to clearly
distinguish between services unique to an outpatient hospital facility
and services of practitioners to permit targeting of coverage and
payment. The regulation would assist in avoiding duplicative or
excessive payments that could result from the overlap of the outpatient
hospital service definition and a professional service definition.
Comment: A commenter stated that by ``limiting the locations where
services may be provided and requiring separation of professional and
other charges, the proposed regulation will result in the reduction of
the quality of care provided to consumers,'' particularly any aspects
of care for behavioral health clients who require services in settings
outside the walls of the clinic and require professional and non-
professional efforts which address aspects of behavioral health
problems that are not directly treatment of the client. Further, the
commenter noted that providing the services outside of the clinic
historically allowed for a high quality of care.
Response: As previously stated, the intention of the regulation is
not to limit or prescribe the location where a Medicaid service may be
rendered. Any qualified Medicaid provider may render a Medicaid covered
service in a non-institutional setting, including a hospital. The
regulation does not impact the definition of a clinic service (42 CFR
440.90). A behavioral health client who is Medicaid eligible may
receive a service, from a qualified Medicaid provider, defined under
the State plan within a clinic or in the community. We do not
understand the comment that professional and non-professional efforts
may be required to provide Medicaid services to an individual because
only a Medicaid qualified provider may render and receive payment for a
non-institutional professional service.
Comment: A commenter noted that the proposed rule change does not
define the terms ``traditional,'' ``non-traditional,'' ``facility
services,'' or ``non-facility services.''
Response: In issuing this regulation, we have looked to the plain
language of the statutory Medicaid benefit categories to distinguish
between services uniquely furnished by an outpatient hospital facility
and those furnished by individual practitioners or other providers. We
note that both outpatient hospitals and clinics are eligible for
facility payments, but they are included in the statute as separate
benefit categories. When we used the terms ``traditional'' and ``non-
traditional'' in the preamble, we meant to distinguish between those
services generally recognized as outpatient hospital services.
As discussed in the proposed rule, we did not consider services to
be appropriately included in the outpatient hospital services category
solely for purposes of including those services in the outpatient
hospital upper payment limit.
Comment: One commenter referenced CMS's comments in the 1983
revised definition of outpatient hospital services ``States would still
be required to cover the other mandatory services (such as physician
services) and some optional services when they are provided in the
outpatient hospital setting * * *'' The commenter argued that CMS is
not concerned with an overlap in service definitions. Instead, the
commenter contended, CMS's concern is with reimbursing hospitals higher
rates for Medicaid services, such as physician services. The commenter
maintained that the regulation represents new policy and not a simple
clarification of the outpatient hospital service definition.
Further, the commenter stated that CMS's contention that the
overlap in service definitions may not have been the intent of the
Congress and that the Medicaid statute was enacted over forty years
ago, yet CMS never took issue with varied payment rates in service
setting or required consistent service definitions between Medicare and
Medicaid.
Response: As previously discussed we are not restricting the
settings in which Medicaid covered services may be provided to covered
individuals by qualified Medicaid providers. The purpose of the
regulation is to define the scope of outpatient hospital services
unique to the outpatient hospital setting and for which a hospital may
receive a facility payment, and not to limit the availability of
outpatient services under other benefit categories. The rule does not
prohibit the provision of any covered Medicaid physician service in an
outpatient setting.
The commenter is correct that CMS has not previously restricted
State flexibility to include services under the outpatient hospital
benefit, even when the sole purpose was to affect the outpatient
hospital upper payment limit. This rule represents a new initiative to
preserve the fiscal integrity of the Medicaid program.
We do not intend through this regulation to deny coverage of any
Medicaid covered service to an individual eligible for Medicaid or deny
payment to a qualified Medicaid provider. The provisions of this
regulation help to ensure that coverage and payment under State plans
will be consistent with economy, efficiency and quality of care.
Comment: A commenter cited services that are excluded from Medicare
coverage that may be covered by a state under its Medicaid program:
Dental services, vision care, foot care and immunizations. The
commenter noted that these services are not paid by Medicare under the
Outpatient Prospective Payment System (OPPS) or under an alternative
payment methodology, and therefore would have to be excluded from
hospital outpatient services for Medicaid purposes.
Response: As previously discussed, the services included in the
comment are covered under a distinct Medicaid benefit category and
would have specific provider qualifications, coverage provisions and
payment policies. The services may continue to be provided to a
Medicaid beneficiary in any non-institutional setting, including
outpatient hospitals, by a qualified Medicaid provider. In addition,
CMS allows States discretion in setting payment rates that meet the
requirements of section 1902(a)(30)(A) of the Act and regulations at 42
CFR 430.10 and 447.204.
Comment: One commenter stated that Medicare does not recognize
dental services under OPPS or an alternative payment methodology,
whereas the service is a covered benefit under the Medicaid program. To
be consistent with the Medicare program, the commenter suggested that
CMS remove the statement that outpatient hospital services may be
furnished ``by or under the direction of a dentist'' from the
regulatory language.
Response: Medicare does recognize a number of dental procedures
provided in hospital settings. In addition, the regulation does not
prohibit the provision of a covered Medicaid dental procedure in an
outpatient hospital. However, the regulation will require
[[Page 66193]]
that the payments for dental services be reimbursed under the Medicaid
dental benefit category, which is distinct from the outpatient hospital
benefit category. Again, States have discretion in setting payment
rates for dental services within the authority of section
1902(a)(30)(A) of the Act and regulations at 42 CFR 430.10 and 447.204.
Comment: A commenter explained that the regulation may be at odds
with State flexibility in establishing payment methodologies and rates,
noting that one of CMS' rationales is to prevent States from paying
higher rates in hospitals for the same services paid at lesser rates in
other facilities. The commenter noted that CMS did not provide a basis
that the services provided in the hospital setting are the same as
services provided in other settings or a basis for paying the same
amount regardless of the setting. The commenter stated that it is
appropriate to pay hospitals higher amounts for services provided in
hospital settings because of the higher costs associated with the
hospital. Further, the commenter suggested that CMS is attempting to
re-define the coverage rules for outpatient hospital services in order
to place limitations on the payment for those services.
Response: We distinguish in this regulation between coverage of
services that are uniquely furnished by an outpatient hospital and
coverage of services furnished by practitioners or other providers. We
do not understand the comment that services rendered by professionals,
or qualified Medicaid practitioners, would be different in outpatient
hospital settings than those provided by the same professional in a
private practice or other community setting. But, if so, a State has
flexibility to vary the payment rate for practitioner or other provider
services furnished in an outpatient hospital setting.
As previously discussed, one impetus for this regulation was that
the ambiguous coverage definition in the Medicaid regulations for
outpatient hospital services allowed States to artificially increase
the outpatient hospital upper payment limit and direct supplemental
payments to a select group of hospitals. Therefore, to prevent this
artificial inflation of the upper payment limit we must clarify the
covered facility services that may be defined as part of the outpatient
hospital benefit category and, thus, may be included in the applicable
UPL calculation.
Comment: Several commenters noted that some hospitals treat the
hospital facility payment as an all-inclusive rate and pay physicians
furnishing services to hospital outpatients. These commenters stated
that the Medicare program recognizes this unique reimbursement
methodology and waives requirements under OPPS for certain facilities.
Response: We considered whether it would be warranted to permit an
exception for those facilities with a waiver of Medicare OPPS
requirements. Since the purpose of this regulation is to align the
definition of Medicaid outpatient hospital facility services with
Medicare's definition, we interpret the phrases ``would be included, in
the setting delivered'' and ``paid by Medicare as an outpatient
hospital services under an alternate payment methodology'' at 42 CFR
440.20(a)(4) of this rule to recognize those hospitals that receive the
exception to the OPPS requirements under the Medicaid definition.
Therefore, States may define the outpatient benefit to include an
exception for these hospitals, limited to the all-inclusive services
that are recognized by Medicare. However, the State must furnish to CMS
documentation that a hospital provider has received the Medicare
exception and include a reasonable estimate of Medicare payment for the
providers in the upper payment limit demonstration by using alternate
data sources recognized by Medicare specifically for those providers.
Comment: Several commenters were concerned that moving reimbursable
services out of outpatient hospital settings would reduce access to
services. One commenter noted that Medicaid practitioner fees are
inadequate and do not promote access of primary care outside of
hospital-based physician practices. The commenter noted that most
primary care physician practices within her state have converted to
provider-based entities in order to receive higher payment rates.
Response: States have considerable flexibility under federal law to
establish payment rates for Medicaid services that are sufficient to
ensure access to services while meeting the requirements of section
1902(a)(30)(A) of the Act and regulations at 42 CFR 430.10 and 447.204.
CMS does not have the authority to require States to increase payment
rates for Medicaid services. The outpatient hospital benefit provides
for coverage of those services unique to outpatient hospitals and
payments can take into account the overhead costs in hospital settings.
To the extent that providers are ``converting'' to provider-based
entities with the sole intention of receiving increased reimbursement,
we do not view this as an appropriate means of receiving higher
reimbursement under the Medicaid program.
Comment: Several commenters stated that CMS' concerns with
duplicative payments were baseless because State claims processing
systems screen for duplicative payments.
Response: The potential for duplicative payments is merely one
reason for implementing this regulation. In addition, we are attempting
to align the Medicaid definition of outpatient hospital services with
the applicable UPL, provide transparency to the services covered under
the benefit, and clarify the appropriate services under the benefit
that may be claimed for federal financial participation.
Comment: One commenter stated that CMS did not present an adequate
justification for the regulation and that State Plan Amendment reviews
allow CMS to address the requirements authorized under the proposed
rule.
Response: As discussed in the proposed regulation, the ambiguous
definition of outpatient hospital services does not clearly prevent
including in the benefit non-hospital facility services that would not
be included in the benefit under the Medicare program. Therefore, we
disagree that the provisions of the regulation may be carried out
through State plan review.
Comment: One commenter stated that the intent of the Congress was
to separate the Medicaid and Medicare program and not ``equate''
Medicaid services to Medicare.
Response: One purpose of this amendment is to align the Medicaid
definition more closely to the Medicare definition in order to improve
the functionality of the applicable upper payment limits under 42 CFR
447.321 (which are based on a comparison to Medicare payments for the
same services), provide more transparency in determining available
coverage in any State, and generally clarify the scope of services.
While we understand the difference between the populations served under
the Medicare and Medicaid programs, we believe that the services
recognized under the Medicare OPPS and the alternate fee schedules for
outpatient hospital services encompass outpatient hospital facility
services that are typically provided to the general public.
Comment: Several commenters stated that the regulation is
inconsistent and confusing because allowable services under the
Medicaid State plan overlap with some of the services paid for under
the Medicare OPPS. For instance, one commenter noted that OPPS pays for
prosthetic devices, prosthetics, supplies, and orthotic devices,
durable medical
[[Page 66194]]
equipment, and clinical diagnostic laboratory services and prosthetic
devices and durable medical equipment are ``separate'' Medicaid State
plan service categories.
In addition, the commenter remarked that OPPS coverage definition
for prosthetics and DME are more restrictive than what is allowable
under the Medicaid State plan. Several commenters requested that CMS
specify whether as service covered under the Medicaid regulations as a
separate State plan category of services is considered an outpatient
hospital service when furnished in an outpatient hospital facility and
included in OPPS. One commenter requested that CMS justify treating a
service recognized under Medicare as a hospital service differently
under the Medicaid program.
Response: As we indicated in the proposed rule, services provided
under a distinct Medicaid benefit category will operate under the
coverage and reimbursement provisions for those services under the
Medicaid State plan. If a service is described under a separate benefit
category in the State plan that service may still be provided in an
outpatient hospital setting. Coverage and payment for that service will
be governed by the relevant provisions in the State plan for the
service, and any applicable federal restrictions. For example, clinical
diagnostic laboratory services are subject to a statutory limit
regardless of setting, described at section 1903(i) of the Act, up to
the amount that Medicare pays on a per test basis. Further, outpatient
DME under Medicaid is paid under the home health benefit, as medical
equipment. There is a separate benefit category that includes
prosthetic devices.
Comment: One commenter stated that 42 CFR 419.2(b) does not contain
an all-inclusive list of costs allowable within OPPS.
Response: In this rule, we allow coverage of all of the outpatient
hospital services recognized under the Medicare OPPS or an alternate
fee schedule paid for outpatient services provided in hospitals that
are not included in another benefit category under the State plan. The
referenced regulations are the authority under the Medicare program for
OPPS and the alternate fee schedule for outpatient services. Services
or costs that are allowable under that authority, whether specifically
listed or not, would be allowable if not otherwise covered.
Comment: One commenter questioned the impact of the regulation on
EPSDT services or services that are difficult for Medicaid recipients
to access (such as dental services). Specifically, the commenter
requested that CMS clarify if any upper payment limits apply to these
services and suggested that the payment rates in hospitals should not
be limited to community rates because the community rates do not
recognize outpatient overhead expenses. The commenter explained that
limiting the outpatient hospital scope of services ``to reduce payments
to hospitals'' undermines the Congressional intent and creates access
issues.
Response: CMS is not discouraging hospitals from providing certain
services in the hospital setting; this regulation addresses only the
benefit category under which such services should be claimed. EPSDT and
dental services are distinct Medicaid benefit categories and the
coverage and payment provisions for those services are described
separately from outpatient hospital services in the Medicaid State
plan.
As previously discussed, States have discretion in defining the
payment methodology for non-institutional services within the authority
of section 1902(a)(30)(A) of the Act and regulations at 42 CFR 430.10
and 447.204. As of the publication of this regulation, there are no
upper payment limits for services provided to Medicaid outpatients
other than in clinics and outpatient hospital settings. Again, the
purpose of the regulation is not to reduce payments, but to clarify
those services that are uniquely provided in outpatient hospital
settings.
Comment: A commenter requested that CMS explain the rationale
behind eliminating a State's ability to pay hospitals' bundled rates.
The commenter argued that since OPPS is a bundled methodology designed
to promote efficiency and discourage over-utilization, States should
have the ability to continue to bundle hospital services in an effort
to promote efficiencies beyond those provided for under OPPS.
Response: The regulation does not define how States may structure
base Medicaid payments for outpatient hospital services, but removes
from that bundle services that are not unique to the outpatient
hospital. States continue to have the ability to ``bundle'' all covered
outpatient hospital services and make payments within the applicable
upper payment limit for those services. To the extent that the
commenter is referring to ``bundling'' facility and professional
services, we do not view such bundles as efficient or economical and
note that the majority of private payers make distinct payments for
facility and professional costs.
Comment: One commenter requested clarification as to the impact on
clinic services based on the inclusion of clinics under title of the
proposed regulation.
Response: In response to this comment, we determined that it was
confusing to add the word ``clinic'' without the entire phrase
``outpatient hospital clinic.'' The intent was to clarify that
outpatient hospital services include outpatient services provided
either in a hospital facility itself or in a clinic that meets the
standards for provider-based status as a department of the hospital. We
have thus revised the title of the final regulation to clarify that the
service clarifications in the final rule apply only to outpatient
hospital services.
Comment: One commenter noted that the proposed definition of
outpatient hospital services will remove services from State DSH
calculations and further cut hospital Medicaid reimbursement.
Response: One of the purposes of the regulation is to clarify the
services that are available for federal financial participation under
the outpatient hospital benefit category. We believe the services
included in the proposed rule described those services that are unique
to outpatient hospital settings. To the extent that States are
currently defining additional services as outpatient hospital services
in order to include their costs in calculating the hospital-specific
limit under the disproportionate share hospital (DSH) program, those
services would no longer be allowable in the DSH calculation under the
final rule. On the other hand, payment for those services would not be
subject to outpatient hospital upper payment limits.
Comment: One commenter urged CMS to specify that outpatient
hospital services must be provided in provider-based settings.
Response: As Sec. 440.20(4)(ii) explains, outpatient hospital
clinic and hospital facility services ``are furnished by an outpatient
hospital facility, including an entity that meets the standards for
provider-based status as a department of an outpatient hospital as set
forth in Sec. 413.65 of this chapter.'' As mentioned previously, the
outpatient hospital services benefit includes only services of
hospitals and departments of hospitals, not services provided in other
settings, even if hospital-owned and provider-based. All other Medicaid
covered services provided in a hospital-owned setting must be covered
and paid for under a distinct Medicaid State plan benefit category and
reimbursement methodology.
Comment: One commenter requested additional clarification on the
scope of services paid under alternate Medicare
[[Page 66195]]
payment methodologies as outpatient hospital services that would be
included under this proposed definition.
Response: The final rule allows for coverage of any service that
may be claimed as an outpatient hospital institutional service under
the Medicare program with the exception of those services that are
covered under another Medicaid benefit category in the State plan.
Please refer to Medicare rules and guidance for further information on
the scope of the Medicare outpatient hospital benefit.
Comment: One commenter requested that CMS ``confirm that costs for
services not explicitly excluded from the OPPS are therefore includable
(assuming that these services meet the other proposed criteria).''
Response: Only those services that are included in OPPS or an
alternate Medicare fee schedule may be included as part of the Medicaid
outpatient hospital benefit category.
Comment: One commenter stated that Title 42, Sec. 410.20(b) of the
CFR also excludes certain categories of hospitals from the Medicare
OPPS. The commenter requested that CMS clarify that services included
under this provision may be defined as Medicaid outpatient hospital
services.
Response: The commenter was apparently referring to 42 CFR 419.20,
since 42 CFR 410.20 refers to coverage of physician services. This rule
does not require that States apply the OPPS payment system, but only
that the definition of outpatient hospital services be consistent with
the scope of services included under OPPS. In other words, whether a
hospital is excluded from OPPS or not, the scope of outpatient hospital
services would be uniform for both Medicare and Medicaid.
Comment: Many commenters stated that the rule would eliminate rural
health clinics (RHCs) as eligible providers for DSH payments, even
though their RHCs are largely an extension of a hospital, wherein the
hospital: ``employs the RHC's personnel, pays its bills, performs
quality assurance, credentials the physicians and physician assistants
employed by the RHC, and provides medical supplies to the RHC.'' These
commenters stated that eliminating RHCs from State DSH calculations
would ``impede care'' in rural areas and create ``financial incentives
to use scarce and expensive emergency department services'' rather than
less costly RHC facilities. Many of these commenters referred to a
Fifth Circuit Court of Appeals decision which allowed for the inclusion
of services rendered in RHCs to be part of the outpatient hospital DSH
calculation. Several commenters opined that CMS does not have the
authority to overturn the decision.
Response: The Fifth Circuit Court of Appeals decision was based in
large part on an interpretation that, under then-current regulations,
services rendered in hospital-based RHCs meet the definition of
outpatient hospital services (and may be included in a hospital's DSH
calculation even though paid as RHC services). The decision relied on
the ambiguity in those regulations permitting an overlap between
services that meet the definition of outpatient hospital services and
also meet the definition of a service under another benefit category.
Under this final rule, there would be no such overlap, and the services
at issue in the Fifth Circuit case would have to be treated
consistently for all purposes. This means: that unless the services
provided in the RHCs meet the new definition of Medicaid outpatient
hospital services, because the RHCs are provider-based outpatient
departments of a hospital in accordance with 42 CFR 413.65, and the
Medicaid agency recognizes the RHCs consistently as Medicaid outpatient
hospital service providers, the services provided in rural health
clinics could no longer be recognized as outpatient hospital services.
This makes sense because the payment systems for hospitals and for
RHCs are completely different. Hospital payments are not required to
reflect actual costs, but must include an adjustment to take into
account the situation of hospitals that serve a disproportionate share
of low income patients. In contrast, RHCs are paid through a
prospective payment system based on actual costs that should reflect
essentially the full cost of Medicaid services. There is no need for
adjustments to reflect higher costs for RHCs, because the payment level
is on a full cost basis.
Comment: Many commenters opposed the proposed rule because the
upper payment limit references to the Medicare cost report (CMS 2552)
do not recognize graduate medical education (GME) costs. Several of
these commenters remarked that restricting GME payments violates the 1-
year congressional moratorium, passed as part of the U.S. Troop
Readiness, Veterans Care, Katrina Recovery, and Iraq Appropriations Act
of 2007, stating that the regulation presents ``restrictions on
Medicaid graduate medical education (GME) payments.'' One commenter
noted that GME costs ``are included on hospital cost reports and
Medicare pays them,'' while another commenter stated that GME costs are
located on the Medicare cost report at Worksheet B, Part 1, Column 25.
Several commenters stated that the exclusion of GME from the cost
report references used to calculate outpatient upper payment limits
will have a tremendous financial impact on teaching hospitals.
Response: This regulation does not prohibit States from covering or
paying for GME and thus does not address the issues set forth in the
proposed rule that was subject to a congressional moratorium. In
addition, the provisions of the proposed regulation at 42 CFR
447.321(b)(1)(i)(B) have not been included in this final regulation.
However, regardless of whether a Medicaid program determines to
make a GME payments or adjustments for outpatient hospital services,
the Medicare program does not make GME payments for outpatient hospital
services. As we explained in the proposed rule, the aggregate UPL based
on Medicare is reasonable only when there is a consistent definition of
outpatient hospital services between Medicare and Medicaid.
Comment: One commenter requested additional information regarding
the overlap between the proposed changes to 42 CFR 440.20(d) and
diagnostic services under the proposed rehabilitative services
regulation under 42 CFR 440.130(d) particularly, how States should
reconcile the provisions.
Response: We have reviewed the changes proposed to 42 CFR
440.130(d) and do not see a conflict with the regulatory changes
implemented in this final regulation. Rehabilitative services fall
under a distinct Medicaid benefit category and are defined and paid
under the Medicaid State plan provisions for rehabilitative services.
III. Provisions of the Final Regulations
As a result of our review of the comments we received during the
public comment period, we are making revisions to the proposed
regulation published on September 28, 2007. The title of the proposed
regulation is revised to make it clear that the definition of
outpatient hospital services also applies to services provided in
outpatient hospital clinics. The title will now read: ``Outpatient
hospital facility (including outpatient hospital clinic) services.'' In
addition, we have modified the phrase ``a department of an outpatient
hospital'' at Sec. 440.20(a)(4)(ii) to read ``a department of a
provider'' as this exact terminology is used in the referenced Medicaid
provider-based definition at 42 CFR 413.65. We are also reserving
action on the proposed changes to 42 CFR 447.321, the
[[Page 66196]]
outpatient hospital and clinic upper payment limits. We may address
these provisions at a future date. All other provisions are adopted as
proposed.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
V. Regulatory Impact Statement
A. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993, as
further amended, the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
04), and Executive Order 13132 on Federalism (August 4, 1999), and the
Congressional Review Act (5 U.S.C. 804(2)).
Executive Order 12866 (as amended by Executive Order 13258 directs
agencies to assess all costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). A regulatory impact analysis (RIA) must be prepared for
rules with economically significant effects ($100 million or more in
any 1 year). This is not a significant or economically significant rule
because the size of the anticipated reduction in Federal financial
participation is not estimated to have an economically significant
effect of more than $100 million in each of the Federal fiscal years
2008 through 2012.
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, we estimate that
small entities include small businesses, non-profit organizations, and
small governmental jurisdictions. Most hospitals and most other
providers and suppliers are small entities, either by being non-profit
organizations or by meeting the SBA definition of a small business of
having revenues of less than $7.0 million to $34.5 million in any 1
year. The Secretary has determined that this final rule would not have
a direct impact on providers of outpatient hospital services that
furnish services pursuant to section 1905(a)(2)(A) of the Act. This
rule will directly affect States and we do not know nor can we predict
the manner in which States will adjust or respond to the provisions of
this rule.
CMS is unable to determine the percentage of providers of
outpatient hospital services that are considered small businesses
according to the Small Business Administration's size standards with
total revenues of $7.0 million to $34.5 million or less in any 1 year.
Individuals and States are not included in the definition of a small
entity. In addition, section 1102(b) of the Act requires us to prepare
a regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we defined a small rural
hospital as a hospital that is located outside of a Core Based
Statistical Area for Medicaid payment regulations and has fewer than
100 beds. We are not preparing an analysis for section 1102(b) of the
Act because we have determined and the Secretary has determined that
this final rule will not have a direct significant economic impact on
small rural hospitals. The rule would directly affect States and we do
not know nor can we predict the manner in which States would adjust or
respond to the provisions of this rule.
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2008, that
threshold level is approximately $130 million. Since this rule will not
mandate spending in any 1 year of $130 million or more, the
requirements of the UMRA are not applicable.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs of State
and local governments, preempts State law, or otherwise has Federalism
implications. Since this rule would not impose any costs on State or
local governments, preempt State law, or otherwise have Federalism
implications, the requirements of E.O. 13132 are not applicable.
B. Anticipated Effects
On March 3, 2008, the Committee on Oversight and Government Reform
published a report titled: ``The Administration's Medicaid Regulations:
Summaries of State Responses.\1\'' The report provided a state-by-state
analysis of the anticipated monetary effects of several proposed
Medicaid regulations, including CMS 2213-P. In addition, the report
quoted specific concerns from Medicaid Directors in relation to the
proposed rules.
Of the States that participated in the analysis, twenty-two
reported no potential loss in FFP, four reported a specific monetary
loss, and eighteen reported there may be a potential loss of FFP but
were unable to estimate a monetary amount as a result of CMS 2213-P.
One year after implementation of CMS 2213-P, California estimated a
potential $266 million loss; while Illinois projected a loss of $700
million after one year. In addition, Missouri estimated losses of
approximately $6 million and Louisiana calculated a $3 million impact
after one year.
Based upon our review of the Medicaid Directors' concerns and the
public comments received in response to the proposed rule, we believe
that the potential for monetary loss is overstated in the analysis due
to misunderstandings of the goal and scope of the proposed rule. Though
many of these misunderstandings are clarified in our responses to the
public's comments, we will attempt to address the primary concerns
detailed in the Committee's report.
The purpose of this final regulation is to improve the
functionality of the applicable upper payment limits under 42 CFR
447.321 (which are based on a comparison to Medicare payments for the
same services), provide more transparency in determining available
hospital coverage in any State, and generally clarify the scope of
services for which Federal financial participation (FFP) is available
under the outpatient hospital services benefit category.
As discussed in detail in the response to public comment, the rule
will not eliminate any covered Medicaid services under Title XIX,
restrict the provision of a Medicaid service by a qualified Medicaid
provider to a Medicaid outpatient, or dictate the methodologies through
which States may reimburse providers for services in accordance with
applicable federal statute and regulations. In our review of State plan
amendments for outpatient hospital services, CMS noted only one State
that would be in violation of the
[[Page 66197]]
proposed rule at the time of publication. Since the publication of the
proposed rule, the State has taken measures to remove from the State
plan those services that would no longer be covered as part of the
outpatient hospital benefit.
In response to this concern, we emphasize that States continue to
have the authority to pay for any Medicaid service that is rendered in
a non-institutional setting by a qualified Medicaid provider and
establish economic and efficient payment rates for those services that
attract sufficient willing and qualified providers. Removing these
services from the outpatient hospital benefit category does not equate
to non-coverage or non-payment of the services in outpatient hospitals
or other non-institutional settings. Therefore, we do not believe there
will be a monetary impact as States will continue to have the ability
to receive Federal matching funds for covered Medicaid services paid
under the appropriate benefit category. However, to the extent a State
would not choose to adjust payment methods appropriately, there could
be a financial impact on the State. But, this is at the discretion of
the State and CMS can not quantify this possibility.
Instead, the regulation calls for States to define Medicaid
services under the appropriate coverage and payment provisions of the
State plan. Currently, services provided in non-institutional settings,
with the exception of outpatient hospitals and clinics, do not have
specific upper payment limits defined in regulation. States are free to
set economic and efficient State plan payment rates in consideration of
the Medicaid costs of providing services within the various settings
where outpatients receive care. In some instances, this could result in
increased Medicaid payments for some of these services. Therefore, we
do not anticipate that the regulation defining what is covered as an
outpatient hospital facility service will result in significant
reductions in FFP for Medicaid service providers or place significant
administrative burdens upon States.
We specifically requested comments on the regulatory impact
analysis and the comments and responses are summarized below. Several
providers and States noted a loss of specified or unspecified dollar
amounts that would result from the change in the coverage definition.
However, the public comments did not provide for any concrete evidence
that would support such a significant reduction in FFP. Therefore, we
are unable to determine if those reported monetary losses are based
upon misunderstandings of the regulation's scope and intent or whether
States' action in response to the regulation, within allowable Medicaid
authority, will offset the potential losses.
The second major concern voiced through the public's comments and
the Committee's report addressed the potential FFP and administrative
impact of the upper payment limit requirements. Particularly, the
Illinois Medicaid Director responded to the Committee's report by
stating that CMS 2213-P ``will constrain the ability of states like
Illinois to use the room in the UPL to supplement their relatively low
federal DSH allotments.'' Several public commenters and Medicaid
Directors also indicated that the UPL requirements would place new
administrative burdens upon State Medicaid agencies. We are puzzled by
the comments because the proposed rule did not deviate from the current
regulatory definition of the Medicaid outpatient hospital upper payment
limit, a reasonable estimate of Medicare payment for equivalent
services, or CMS's historic expectations of a reasonable upper payment
limit for the services. However, these types of concerns should be
alleviated because the clarifying provisions to the UPL regulation have
been removed from this final rule.
Finally, based on the public comments, many felt that we failed to
fully discuss the potential impact of the regulation on State
disproportionate share hospital calculations for outpatient hospital
services. We believe that Louisiana's Medicaid Director raised this
issue in the Committee report by stating: ``Implementation of the
proposed rule may cause a loss of essential medical services in
underserved rural areas.'' As noted in the response to public comments,
a rural health clinic or other Medicaid provider that does not meet the
definition of a department of a hospital or outpatient hospital and/or
is paid under a State plan reimbursement methodology other than that
defined for outpatient hospital services may not be considered in a
State's Medicaid DSH calculation for outpatient hospital services.
Louisiana is currently including rural health clinics in the
Medicaid DSH calculation. Because the scope of services provided within
these clinics and what, if any, relationship exists between the clinics
and a main hospital provider are not transparent in the State plan, CMS
is unable to determine if the clinics are departments of an outpatient
hospital and could continue to be included in the State's DSH
calculation. Therefore, we do not dispute the amount reported to the
Committee by Louisiana. Likewise, for any other State that is including
the uncompensated costs of services that would no longer be considered
outpatient hospital services there would be a potential reduction in
uncompensated costs that could be recognized through Medicaid DSH
payments. However, we believe that most States could find other
allowable uncompensated inpatient and outpatient hospital costs that
could be recognized for Medicaid DSH purposes and that, at least in
part, offset potential losses that result from this regulation.
Public Comments
Within the proposed regulation's regulatory impact analysis, we
noted that data was unavailable to calculate the exact impact of the
regulation because of the lack of transparency with State outpatient
hospital coverage provisions and the resulting payments for services.
However, we stated that we did not believe that the regulation would
have a significant impact because we believed that a majority of States
were in compliance with the provisions of the proposed rule. We
specifically requested public comments concerning the regulatory impact
analysis and have revised the analysis as part of this final rule.
Comment: Several commenters opposed the rule because of CMS's
inability to conduct a regulatory impact analysis. One commenter argued
that ``before a regulation of this magnitude is implemented, the impact
should be specified and addressed.'' Some commenters also stated that,
absent an impact analysis, the rule was bad public policy and should be
withdrawn. Several commenters argued that the impact analysis was in
violation of Executive Order 12886 and the Congressional Review Act.
Response: CMS specifically requested that the public provide
comments on the regulatory impact analysis and data to help develop the
analysis. We have revised the statement accordingly.
Comment: A number of commenters stated that since CMS has
identified only one State that would violate the proposed rule, the
administrative burden and restrictions in defining the Medicaid
outpatient hospital benefit placed upon States is unjustified.
Response: We believe that the vast majority of States are in
compliance with the regulation. Therefore, we do not agree that the
regulation would cause a significant administrative burden. As detailed
in the proposed regulation, we are implementing the
[[Page 66198]]
regulation to ensure consistency between the Medicaid outpatient
hospital service definition and the applicable UPL requirements,
provide more transparency in determining available hospital coverage in
any State, and generally clarify the scope of services for which
Federal financial participation (FFP) is available under the outpatient
hospital services benefit category. As stated previously, we are not
including any changes to the UPL provisions in this final rule, which
should alleviate concern over administrative burden at this time. If we
address these provisions in the future, we will respond to comments on
the associated administrative burden at that time.
Comment: One commenter noted that the RIA should include the
potential impact on units of government and disproportionate share
hospital payments.
Response: Again, we believe that the majority of States are in
compliance with the clarification of the definition of Medicaid
outpatient hospital services. The revised RIA includes a discussion of
DSH payments.
List of Subjects in 42 CFR Part 440
Grant programs--health, Medicaid.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 440--SERVICES GENERAL PROVISIONS
0
1. The authority citation for part 440 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
0
2. Section 440.20 is amended by revising the section heading and
paragraph (a) to read as follows:
Sec. 440.20 Outpatient hospital facility (including outpatient
hospital clinic) services and rural health clinic services.
(a) Outpatient hospital services means preventive, diagnostic,
therapeutic, rehabilitative, or palliative services that--
(1) Are furnished to outpatients;
(2) Are furnished by or under the direction of a physician or
dentist;
(3) Are furnished in a facility that--
(i) Is licensed or formally approved as a hospital by an officially
designated authority for State standard-setting; and
(ii) Meets the requirements for participation in Medicare as a
hospital;
(4) Are limited to the scope of facility services that--
(i) Would be included, in the setting delivered, in the Medicare
outpatient prospective payment system (OPPS) as defined under Sec.
419.2(b) of this chapter or are paid by Medicare as an outpatient
hospital service under an alternate payment methodology;
(ii) Are furnished by an outpatient hospital facility, including an
entity that meets the standards for provider-based status as a
department of a provider set forth in Sec. 413.65 of this chapter;
(iii) Are not covered under the scope of another Medical Assistance
service category under the State Plan; and
(5) May be limited by a Medicaid agency in the following manner: A
Medicaid agency may exclude from the definition of ``outpatient
hospital services'' those types of items and services that are not
generally furnished by most hospitals in the State.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: July 18, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: August 20, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-26554 Filed 11-6-08; 8:45 am]
BILLING CODE 4120-01-P