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CMS Continues Scrutiny of PHP Payments to CMHCs and OPDs

August 16, 2010:

For calendar year 2011, the Centers for Medicare and Medicaid Services is proposing to set different payment rates for partial hospitalization programs (PHPs) in community mental health centers and hospital outpatient departments.

The PHP is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for individuals who have an acute mental illness. PHP services are paid under the outpatient prospective payment system (OPPS) for both community mental health centers (CMHCs) and hospital outpatient departments (HOPDs).

At the inception of OPPS, CMS established a per diem payment for PHP payment as a day of care is the unit that defines the structure and scheduling of partial hospitalization services. Historical median per diem cost is used to set OPPS payment rates. The median per diem cost for CMHCs has fluctuated significantly from year to year, from a high of $685 in CY 2003 to a low of $154 in CY 2006. HOPD median per diem cost has remained relatively constant at between $177 and $225. The significant CHMC fluctuations lead CMS to believe that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Consequently PHP payment rates were set based on only HOPD costs.

The fluctuations prompted CMS to perform extensive data analysis with resulting policy and payment changes. First, 10 revenue codes that are common among hospital-based PHP claims were remapped to the most appropriate cost centers. Secondly, per day methodology was used to calculate PHP per diem costs. In CY 2009, CMS introduced a two-tiered payment approach. There is a payment rate for a PHP day that is composed of three services with a higher payment rate for days with four or more services. Beginning in CY 2009, payment has been denied for any PHP day when fewer than three units of therapeutic services were provided. These changes continue through 2010 and 2011.

Since CMHC costs continued to fluctuate and HOPD costs continued to be stable, CY 2010 per diem payment rates were calculated using only hospital-based PHP data. CMS chose this approach so that the effect of other policy and payment changes made in CY 2009 could be viewed more easily. Changes made in CY 2009 are reflected for the first time in the claims data used for CY 2011 rates.

For CY 2011, CY 2009 claims data were used to compute median per diem costs for all days; for days with three services; and for days with four or more services. These costs were computed separately for CMHC PHPs and HOPD PHPs. The data indicate that CMHC median per diem costs are again substantially lower than the median per diem costs for the same units of service provided in hospital-based PHPs. CMHCs continue to have an apparent lower cost structure than hospitals.

For CY 2011, CMS proposes setting different payment rates for these two providers because their cost differences continue to be so disparate. The agency wanted to continue to protect hospital-based PHPs from inadequate payments since they offer the widest access to PHP services. CMS proposes four separate PHP APC per diem payment rates: CMHC PHP levels I and II, and HOPD PHP levels I and II. HOPD data alone were used to calculate HOPD payment rates, and CMHC data alone were used to calculate CMHC rates. This approach yields APC median costs of $118.19 for CMHC and $184.47 for HOPD level I PHP, and $123.35 for CMHC level II PHP with HOPD level II at $235.58.

CMHC fluctuations also led CMS to establish a separate outlier threshold for CMHCs beginning in CY 2004. The CY 2011 proposed outlier threshold for CMHC PHP services, paid under either APC 0172 or APC 0173, is 3.40 times the payment for APC 0173. The outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

For proposed CY 2011 OPPS, 1.0 percent of the aggregate total payments are designated for outlier payments. A proposed 0.04 percent of outlier payments (or 0.0004 percent of total OPPS payment) would be allocated to CMHCs for PHP outliers. There is no set dollar threshold for CMHC outliers as PHP services are the only services payable under OPPS and there is no need to redirect outlier payments.

Section 1301(a) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010) (Pub. L. 111-152, enacted on March 30, 2010) revised the definition of a CMHC. HCERA amended definition of a CMHC by adding a provision that the CMHC must provide at least 40 percent of its services to individuals who are not eligible for benefits under Medicare. This provision takes effect on the first day of the first calendar quarter that begins at least 12 months after the date of enactment, which is April 1, 2011. Section 1301(b) of HCERA 2010 amended the description of a PHP to specify that the program must be a distinct and organized intensive ambulatory treatment service offering less than 24-hour daily care “other than in an individual’s home or in an inpatient or residential setting.”

Regina Magnani, RHIT
Clinical/Technical Editor, Coding Solutions


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