Analysis of Final Rule for 2005 Revisions to the Medicare Hospital Outpatient Prospective Payment System

The final rule for calendar year 2005 revisions to the Medicare Hospital Outpatient Prospective Payment (OPPS) System was published in the Federal Register on November 15, 2004. This rule becomes effective for services on or after January 1, 2005.

This analysis will cover highlights of the revisions to the OPPS that are of particular interest to HIM professionals. The listed page numbers refer to the beginning of the relevant section of the final rule published in the Federal Register.

Changes to the Ambulatory Payment Classifications (APC)

APC Reclassifications

APC 0018 Biopsy/Puncture of Lesion (page 65691)

Codes 0046T (Catheter lavage, mammary duct(s)) and 0047T (Each additional duct) have been moved from APC 0018 to APC 0021 (Level III Excision/Biopsy).

APCs 0041 Level I Arthroscopy and 0042 Level II Arthroscopy (page 65691)

Code 29868 (Arthroscopy, knee, surgical, osteochondral autograft(s) meniscal transplantation (including arthrotomy for meniscal insertion, medial or lateral), formerly code 0014T is reassigned to APC 0042.

APCs 0279 Level II Angiography and Venography Except Extremity, 0280 Level III Angiography and Venography Except Extremity and 0668 Level I Angiography and Venography Except Extremity, have been restructured for 2005. Table 3, pages 65695-6, defines the radiological codes included in each APC.

APCs 0130 Level I Laparoscopy and 0131 Level II Laparoscopy (page 65698)

CPT code 44970 (Laparoscopy, appendectomy) was moved from APC 0130 to APC 0131, because it’s inclusion in APC 0130 violated the 2 times rule.

APCs 0148 Level I Anal/Rectal Procedure, 0155 Level II Anal/Rectal Procedure, 0149 Level III Anal/Rectal Procedure, and 0150 Level IV Anal/Rectal Procedure (pages 65698-99)

APC 0148 contained several codes that violated the 2 times rule. CPT codes 46020 (Placement of seton) and 46706 (Repair of anal fistula with glue) were moved from APC 0148 to APC 0150. CPT codes 45005 (Drainage of rectal abscess) and 45020 (Drainage of rectal abscess) were moved from APC 0148 to APC 0155. Table 6 on page 65699 reflects these changes.

APCs 0204 Level I Nerve Injections, 0206 Level II Nerve Injections, 0207 Level III Nerve Injections, and 0203 Level IV Nerve Injections (pages 65699-701)

Codes in APC 0203 and APT 0207 were also found to violate the 2 times rule. Consequently, CPT codes 64630 (Injection treatment of nerve), and 64640 (Injection treatment of nerve), were moved from APC 0207 to APC 0206. Tables 7-9B (pages 656700-01) reflect these changes.

APCs 0232 Level I Anterior Segment Eye Procedures and 0233 Level II Anterior Segment Eye Procedures (page 65701)

CPT codes 65286 (Repair of eye wound), 66030 (Injection treatment of eye), and 66625 (Removal of iris) were moved from APC 0233 to APC 0232, again because of violations of the 2 times rule. Table 10 on page 65701 shows the realignment of APC 0232.

APCs 0343 Level II Pathology and 0344 Level III Pathology (page 65702)

CPT code 88346 (Immunofluorescent study) is moved from APC 0343 to APC 0344.

APCs 0355 Level III Immunizations (for CY 2005: Level I Immunizations) and 0356 Level IV Immunizations (for CY 2005: Level II Immunizations) (page 65702)

CPT code 90740 (Hepatitis B vaccine, dialysis or immunosuppressed patient, intramuscular) is moved from APC 0356 to APC 0355 and CPT code 90636 (Typhoid vaccine, AKD, subcutaneous) is moved from APC 0355 to APC 0356, as shown in Table 11 (page 65702). In addition, CPT codes 90693 and 90375 (Rabies immune globulin, intramuscular or subcutaneous) will be packaged codes.

APCs 0367 Level I Pulmonary Tests, 0368 Level II Pulmonary Tests, and 0369 Level III Pulmonary Tests (page 65703)

CPT code 94015 (Patient recorded spirometry) is moved from APC 0369 to APC 0367 and CPT codes 93740 (Temperature gradient studies), 94014 (Patient recorded spirometry), 94375 (Respiratory flow volume loop), 94450 (Hypoxia response curve), 94690 (Exhaled air analysis), and 94750 (Pulmonary compliance study) to APC 0368. Table 12A on page 65703 shows these changes.

Codes 19296, 19297, 19298 (Placement of catheters into the breast for brachytherapy (pages 65703-04)

CPT codes 19296 and 19298 have been assigned to New Technology APC 1524 (New Technology-Level XIV ($3,000-$3,500)) with a payment amount of $3,250 and CPT code 19297 in APC 1523 (New Technology-Level XXIII ($2,500-$3,000)) with a payment amount of $2,750 for CY 2005 OPPS.

APCs 0387 (Level II Hysteroscopy) and 0202 (pages 65704-05)

CPT code 58356 Endometrial cryoablation (formerly CPT code 0009T) has been reassigned to APC 0202 for 2005. In addition, new CPT code 58565 Hysteroscopic fallopian tube cannulation and micro insert placement) will be placed in APC 0202 as well.

Intracranial Studies, Electrodiagnostic Testing, Autonomic Testing, and EEG (pages 65705-06)

APCs 0266 Level II Diagnostic Ultrasound Except Vascular, 0267 Level III Diagnostic Ultrasound Except Vascular, 0218 Level II Nerve Muscle Tests, 0216 Level III Nerve and Muscle Tests and 0209 Extended EEG Studies and Sleep Studies, Level II

CPT code 95923 (Autonomic nerve function test) is moved from APC 0215 to APC 0218. CPT codes 95953 (EEG monitoring/computer) and 95956 (EEG monitoring/cable, radio), as well as code 95950 (Ambulatory EEG monitoring), are moved to APC 0209 (Extended EEG Studies and Sleep Studies, Level II). Table 12B on page 65706 summarizes these changes.

Therapeutic Radiation Treatment (Page 65706)

CPT code 77370 (Radiation physics consult) is moved from APC 0305 (Level II Therapeutic Radiation Treatment Preparation, with a proposed median of $229.92) to APC 0304 (Level I Therapeutic Radiation Treatment Preparation, with a proposed median of $99.92).

Physician Blood Bank Services (Page 65706)

CPT codes 86077, 86078 and 86079 (Physician blood bank services) have been placed into APC 0343 with status indicator “X”. Although these codes primarily report physician services, reimbursed under the Physician Fee Schedule, they may also be used by hospitals. The codes have a condition code of “NI” New Interim.

Audiometry (Page 05706-07)

APCs 0365 (Level II Audiometry) and 0366 (Level III Audiometry)

A new APC, APC 0366(Level III Audiometry) has been established and populated with codes describing aural rehabilitation following cochlear implant (CPT codes 92601 – 92604).

Noncoronary Intravascular Ultrasound (IVUS) (Page 65707)

CPT 37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; initial vessel) is moved to APC 0416 (Level I Intravascular and Intracardiac Ultrasound and Flow Reserve).

Electronic Analysis of Neurostimulator Pulse Generators (Page 65707)

Code 95970 is moved to APC 0218 (Level II Nerve and Muscle Tests).

Stereotactic Radiosurgery (Page 65710)

Extensive discussion of the coding and APC assignment of stereotactic radiosurgery codes can be found on pages 65710 – 65714. No changes were made in the coding or APC assignment of these codes for FT 2005.

Movement of Procedures From New Technology APCs to Clinically Appropriate APCs (Page 65714 and following)

Radiotherapy Dose Plan (pages 65714-15)

CPT code 77301 (Radiotherapy dose plan, IMRT) is moved from new technology APC 1510 (New Technology, Level X) with a payment rate of $850 to clinical APC 0310 (Radiation treatment preparation, Level III) with a payment rate of $811.91. New CPT 0073T (Compensator-based beam modulation treatment delivery of inverse planned treatment using three or more high resolution (milled or cast) compensator convergent beam modulated fields, per treatment session) will be assigned to APC 0412 (IMR Treatment Delivery) with an “S” status indicator.

Photodynamic Therapy of the Skin (pages 65715-16)

CPT code 96567 (Photodynamic therapy of the skin) is moved from New Technology APC 1540 (New Technology, Level III), with a payment rate of $150 to clinical APC 0013 (Level II Debridement and Destruction), with a proposed payment rate of $66.15 for CY 2005.

In addition, CPT codes 96570, (Photodynamic therapy, first 30 minutes) and 96571 (Photodynamic therapy, additional 15 minutes) are moved from New Technology APC 1541 to clinical APC 0015 for CY 2005, with a status indicator of “T”.

Positron Emission Tomography – PET/FDG Nonmyocardial (Page 65716)

For CY 2005, PET scans will be assigned to New Technology APG 01513 with a blended payment of $1150, a blended transition payment based upon a 50-50 blend of median cost and the CY 2004 new technology reimbursement. HHS will not recognize the new CPT codes for PET with concurrent CT imaging (78814-78816), but will issue coverage guidelines in the future. In the meantime, the existing G codes for these procedures will remain in effect.

PET Myocardial (pages 65717-18)

All PET myocardial scans currently assigned to APC 1516 will be moved to APC 1513 for 2005. In addition, CPT code 78459 (myocardial imaging, PET, metabolic evaluation) will be assigned a status indicator of “B” Not payable under OPPR, and HCPCS code G0230 (PET imaging; metabolic assessment for myocardial viability following inconclusive SPECT study) will be moved to APC 1513 for 2005.

Bard Endoscopic Suturing System (Page 65718)

HCPCS code C9703 (Bard Endoscopic Suturing System) will be discontinued for 2005 and providers are instructed to report CPT code 0008T (Upper gastrointestinal endoscopy with suture), which will be payable under the OPPS for CY 2005. HCPCS code C9703, which will be replaced with CPT code 0008T, is moved from New Technology APC 1555, payment rate $1650, to clinical APC 0422 (Level II Upper GI Procedures), payment rate $1274 for CY 2005. Code 0008T is assigned status indicator “NI” and, as such, is open for public comment during the 60-day comment period associated with the final rule with comment period.

Stretta System (pages 65718-19)

HCPCS code C9701 (Stretta system) will be discontinued and providers are instructed to report service with this technology under CPT code 43257 (Upper gastrointestinal endoscopy with delivery of thermal energy), a new CPT code that will be payable under OPPS for CY 2005. HCPCS code C9701, which will be replaced with CPT code 43257, will be moved from New Technology APC 1557, payment rate $1850, to clinical APC 0422 (Level II Upper GI Procedures), payment rate $1274 for CY 2005.

Gastrointestinal Tract (GI) Capsule Endoscopy (Page 65719)

CPT code 91110 (GI Capsule Endoscopy) is moved from New Technology APC 1508 with a payment rate of $650 to clinical APC 0142 (Small Intestine Endoscopy) with a proposed payment rate of $503.20 for CY 2005. There was discussion regarding the validity of the cost data due to inconsistent reporting of the device (capsule). CMS reminds providers that they should include the charges for device costs associated with the capsule within the charges reported for CPT code 91110.

Proton Beam Therapy (pages 65719-21)

CY 2005 payment for CPT codes 77523 (intermediate proton beam treatment) and 77525 (complex proton beam treatment) will be a 50-50 blend of the median cost of $690.45 derived from 2003 claims and the CY 2004 new technology APC payment rate of $950. Intermediate and complex proton beam therapies (CPT codes 77523 and 77525) will be assigned to New Technology APC 1510 for a blended payment rate of $850 for CY 2005

All reassignments of new technology procedures into clinical APCs are summarized on Table 14, page 65720.

New Technology APC Assignments for CY 2005

Kyphoplasty (Page 65721)

C9718 Kyphoplasty, one vertebral body, unilateral or bilateral injection, and C9719 Kyphoplasty, one vertebral body, unilateral or bilateral injection; each additional vertebral body (list separately in addition to code for primary procedure) are new HCPCS codes, which are assigned to clinical APC 0051, rather than a new technology APC. These procedures were previously reported with CPT code 22899.

Laser Treatment of Benign Prostatic Hyperplasia (Page 65722)

HCPCS code C9713 (Non-contact laser vaporization of prostate, including coagulation control of intraoperative and postoperative bleeding) was assigned to New Technology APC 1525 for CY 2005, which represents a continuation of the new technology APC placement established on April 1, 2004.

Computerized Tomographic Angiography (CTA) (pages 65722-23)

The payment rates for APC 0662 (CTA) will remain unchanged for CY 2005, despite the fact that they are slightly lower than CT scan alone ($320.60 for CTA vs. $323.21 for CT) and significantly lower than the reimbursement for CT scan with reconstruction ($323.21 + $98). HHS believes that inappropriate coding still exists for CTA procedures.

Acoustic Heart Sound Services (Page 65723)

CPT Category III code 0069T (Acoustic heart sound recording and computer analysis only) is new for CY 2005. Because this procedure is always performed with an ECG, packaged status is assigned for CT 2005. Because 0069T was a mid-year code addition, public comment is still available for it.

Council on Technology and Innovation (CTI) (Page 65724)

The Council on Technology and Innovation (CTI) represents a newly-formed alliance of CMS senior leadership to better coordinate coverage, coding and payment policy for new medical technologies to aid in achieving more efficient coverage and payment of these medical technologies. The CTI will also help identify and develop study methods for gathering reliable evidence about the risks and benefits of new and existing medical technologies that can be carried out more easily on a regular basis, such as simple protocols, registries, and other study methods.

Changes to the Inpatient List (Page 65724)

CPT codes for percutaneous abscess drainage 44901 (Drain append. abscess, percutaneous), 49021 (Drain abdominal abscess), 49041 (Drain percutaneous abdominal abscess), 49061 (Drain, percutaneous, retroperitoneal abscess)) are removed from the inpatient list and assigned to appropriate APCs. Each of the four codes is assigned to APC 0037.

In its February 2004 meeting, the APC Panel made a recommendation to either eliminate the inpatient list from the OPPS or to evaluate the current list of procedures for any other appropriate changes. CMS declined to eliminate the inpatient list at this time, but did remove the above codes from the list.

Unlisted Procedure Codes (Pages 65724-26)

A number of codes were found to not be in the lowest clinically appropriate APC category and were reassigned for CY 2005. Table 15 on page 65726 summarizes these changes.

Initial Preventive Physical Examination (pages 65726-29)

Section 611 of Pub. L. 108-173 (The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)), provides for coverage under Medicare Part B of an initial preventive physical examination for new beneficiaries, effective for services furnished on or after January 1, 2005. This allows for the payment of one initial preventive physical examination within the first six months after the beneficiary’s part B coverage begins, although not before 01/01/05.

This initial physical examination is defined as including:

  • Physical examination including height, weight, blood pressure and EKG, but excluding clinical laboratory data
  • Education, counseling and referral for screening or other preventive covered benefits, including
    • Pneumococcal, influenza and hepatitis B vaccine and administration,
    • Screening mammography,
    • Screening Pap smear and pelvic examination,
    • Prostate cancer screening tests,
    • Colorectal cancer screening tests,
    • Diabetes outpatient self-management training,
    • Bone mass measurements,
    • Glaucoma screening tests,
    • Medical nutrition therapy services,
    • Cardiovascular screening blood tests, and
    • Diabetes screening blood tests.

HHS interpreted physical examination to include the following:

  • Review of the beneficiary’s medical and social history,
  • Review of the beneficiary’s potential risk factors for depression,
  • Review of the beneficiary’s functional ability and level of safety,
  • Examination including height, weight, blood pressure and visual acuity and other factors based upon initial history,
  • EKG and interpretation,
  • Education, counseling and referral for screening or other preventive covered benefits as deemed appropriate, including the above.

HCPCS code G0344 (Initial preventive physical examination) is assigned to APC 0601 (Mid Level Clinic Visits). In addition, code G0366 EKG complete, G0367, EKG tracing only, or G0368 EKG, interpretation and report only would be reported. The hospital would report only code G0367, which is assigned to APC 0099 (Electrocardiograms). Total reimbursement for these services would be approximately $78.

Mammography Services (pages 65729-30)

Both screening and diagnostic mammograms are excluded from payment under OPPS and are moved to the Medicare Physician Fee Schedule.

Use of C Codes for Devices (pages 65761 and following)

Because hospitals were not consistently reporting the costs of implanted medical devices in the appropriate revenue codes, CMS has mandated that, effective for services provided on or after January 1, 2005, they will require hospitals to include device category codes on claims when such devices are used in conjunction with procedures billed and paid for under the OPPS. The following summarizes CMS’ actions with regard to requirement for C codes:

1. Hospitals are required to report device category codes on claims when such devices are used in conjunction with procedure(s) billed and paid for under the OPPS in order to improve the claims data used annually to update the OPPS payment rates.

2. Beginning April 1, 2005, the OCE will include edits to ensure that certain procedure codes are accompanied by an associated device category code.

3. CMS will post the OCE edits that are to be implemented beginning April 1, 2005 on the CMS Web site to give hospitals and the provider community ample opportunity to review them and provide feedback prior to implementation.

4. Edits will apply at the CPT/HCPCS code level rather than the APC level.

5. Edits will not apply when a procedure code is reported with a modifier -73 or -74 to designate an incomplete procedure.

6. CMS will add edits as needed in future quarterly updates of the OCE to ensure that hospitals are reporting device category codes appropriately with associated procedure codes. CMS will post future device category and procedure code edits on the CMS Web site to give hospitals and the provider community ample opportunity for input prior to implementation.

Pass-Through Pharmaceuticals (pages 65775 and following)

There was extensive discussion regarding reimbursement for pass-through pharmaceuticals, which is summarized on Tables 27 and 28 and will not be discussed in detail here.

Drug Administration (pages 65811-65815)

HCPCS codes Q0081, Q0083 and Q0084 for drug administration will be deactivated for the OPPS effective January 1, 2005 and hospitals will report CPT codes. Table 33 on page 65814 depicts the reimbursement methodology that will be in effect. Reimbursement will be based upon that of the Q codes in CY 2004, as these codes assign a per-visit reimbursement, while there may be multiple CPT codes for drug administration within a single visit. When a patient is seen for more than one infusion visit in a single day (e.g. for antibiotic administration) the facility should assign modifier 59 to the second and subsequent codes to indicate that this is a distinct and reportable service. With CPT codes 90780 and 90781, CMS will allow up to four units of APG 0120 per day to reflect this type of treatment, provided the modifier is used appropriately.

CMS reiterated that the new G codes that are used in the 2005 Physicians’ Fee Schedule are not to be used by hospitals at this time.

Blood and Blood Products (pages 65815 and following)

CMS believes that blood usage is being under-reported and intends to provide further billing guidelines to clarify the original Program Transmittal A-01-50 issued on April 12, 2001 (CR Request 1585) regarding correct billing for blood-related services.

Observation Services (pages 65828 and following)

CMS reiterated that observation time begins at the clock time appearing on the nurse's observation admission note, which coincides with the initiation of observation care or with the time of the patient's arrival in the observation unit (66 FR 59879, November 30, 2001; Transmittal A-02-026 issued on March 28, 2002; and Transmittal A-02-129 issued on January 3, 2003.)

CMS has eliminated the specific diagnostic testing requirements for observation services for CY 2005 as follows:

  • For congestive heart failure, a chest x-ray (71010, 71020, 71030), and electrocardiogram (93005) and pulse oximetry (94760, 94761, 94762);
  • For asthma, a breathing capacity test (94010) or pulse oximetry (94760, 94761, 94762);
  • For chest pain, two sets of cardiac enzyme tests; either two CPK 82550, 82552, 82553) or two troponins (84484, 84512) and two sequential electrocardiograms (93005).

CMS declined to expand the list of covered diagnoses to include syncope and collapse, transient cerebral ischemia, and hypovolemia, believing that there is not a well-defined set of hospital services for these diagnoses that are distinct from the services provided during a clinic or emergency room visit.


AHIMA responded to the August 16, 2004 Proposed Rule with a number of comments. CMS responded to these comments in the Final Rule as follows.

Initial Preventive Physical Examination

AHIMA expressed concern about CMS' proposal to create a new “G” code for the initial preventive physical examination because there is no current CPT code that contains the specific elements required for Medicare coverage. As noted above, CMS opted for the creation of new “G” codes, and indeed expanded the number of G codes to include EKG tracings.

AHIMA also expressed concern with the amount of responsibility that will fall on the beneficiary for identifying the evaluation as an initial preventive physical examination. CMS provided additional information on this in the 2005 version of the “Medicare and You Handbook” and issues a 2-page bilingual fact sheet for beneficiaries.

Drug Administration

AHIMA supported CMS' proposal to use the CPT codes for drug administration rather than the “Q” codes, and, as noted, CMS has adopted the CPT codes and deleted HCPCS codes effective 01/01/05.

Status Indicators and Comment Indicators

AHIMA supported CMS' proposal to delete condition indicators “DNG” and “DG” in light of the elimination of the 90-day grace period for reporting discontinued HCPCS codes.

Observation Services

AHIMA supported CMS' proposal to remove the current requirements for specific diagnostic testing in order to receive payment for observation services. AHIMA also supported provision of observation services for post-surgical patients. CMS declined to add this coverage at this time as the packaged status of these services has resulted in significant under-reporting, such that the impact of such a change cannot be assessed. CMS does believe that most patients do not require observation services beyond the standard recovery period.

E/M Services Guidelines

CMS reiterated that they intend to make available for public comment the proposed coding guidelines that they are considering through the CMS OPPS Web site as soon as they have completed them. As stated in the August 16, 2004 OPPS proposed rule, CMS will notify the public through their list-serve when the proposed guidelines become available. CMS indicates that they are continuing to review the public comments received relative to the proposed guidelines.

Source: AHIMA Policy and Government Relations (December 2004)