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Statement of Need: Medicare pays over 4,200 hospitals for outpatient department services under the Outpatient Prospective Payment System. The OPPS is based on groups of clinically similar services called Ambulatory Payment Classifications (APCs). CMS annually revises the APC payment amounts based on claims data, proposes new payment polices, and updates the payments for inflation using the market basket. The proposed and final rule solicit comments on the proposed OPPS payment rates and new policies. This final does not impact payments to Critical Access Hospitals as they are not paid under the OPPS.

Summary of the Legal Basis: Section 1833(t) of the Social Security Act establishes Medicare payment for hospital outpatient services. The proposed and final rules revise the Medicare hospital outpatient prospective payment system (OPPS) to implement applicable statutory requirements and changes arising from our continuing experience with this system and to implement certain related provisions of the Medicare Prescription Drug Improvement, and Modernization Act (MMA) of 2003, Pub. L. 108-173. In addition, the proposed and final rule describes changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2006.

Alternatives: None. This is a statutory requirement.

Anticipated Costs and Benefits: The estimated outpatient hospital expenditures in 2006 will approximate more than $27 billion.