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AARC Meets with CMS over Reduced Payment for Pulmonary Rehabilitation

August 30, 2011

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Representatives from AARC, the American Association for Cardiovascular and Pulmonary Rehabilitation, the American College of Chest Physicians, the American Thoracic Society and the National Association for Medical Direction of Respiratory Care meet with staff from the Centers for Medicare and Medicaid Services (CMS) on August 24 to discuss concerns over CMS’ proposal to reduce payment for pulmonary rehabilitation (PR) services in the hospital outpatient setting from $63 to $38, effective January 1, 2012.


When CMS first set the payment rates for the new PR benefit, they used “proxy” data from long-standing codes G0237-39 in addition to including costs for other ancillary services that were determined to be part of the new comprehensive benefit.  In CY 2010 the rate was $50; in CY 2011 the rate was $63.  Now that CMS has actual data from the G0424 code they created specifically for the new benefit, they have revised their payment methodology which results in a proposed payment rate of $38 for CY 2012.

The Problem with CMS’ Analysis

In its discussions, the societies and organizations made it clear that there were numerous flaws in the data that CMS analyzed to come up with such a substantial reduction for PR from previous rates.  Some of these include the following:

  • CMS assumed that when hospitals reported charges for G0424 they would include the costs associated with related assessments and tests that comprise the comprehensive PR benefit.  This does not appear to be the case.    

  • Having two sets of codes which pay different amounts for the same services based on a patient’s diagnosis has apparently led to confusion among hospitals in reporting charges for G0424 versus G0237-39, which is understandable. We believe CMS should allow for the learning curve.

  • Medicare Administrative Contractors (MACs) have given conflicting instructions which also leads to confusion. For example, some MACs did not accept claims for G0424 until mid-way through 2010, even though the benefit was effective January 1, 2010.  Other MACs continued to advise hospitals to use G0237-39 for COPD patients, which is contrary to CMS rules.

  • It is illogical to conclude that the proposed bundled payment of $38 for G0424 for one hour of service should be 70% lower than the payment rate for G-0237-38 for the same period of time for very similar services.

The Fix

The pulmonary organizations believe there are two approaches CMS can take to correct the problem and produce a payment rate that is appropriate for the services being provided.  One is short term; the other has a longer-term effect.

  1. We strongly recommend that CMS continue to use G0237-39 data for determining the payment rates for PR for 2012 rather than rely on flawed data reported under G0424.

    • CMS has already used the data from G0237-39 as a proxy in determining the last two year’s rates.  Further, since these codes have been around for a number of years, there is a strong historical base upon which to make decisions since the clinical similarities of services furnished between G0424 and G0237-39 are very clear.

    • Given the fact that patient acuity in PR programs dramatically limits staffing ratios, the $38 payment rate based on G0424 charge data is simply not sustainable and can lead to limited patient access to these valuable programs which is counter to legislative intent.

      • Clinical studies show that PR programs save money and can reduce hospital readmissions and hospital lengths of stay.

  2. We also recommend CMS instruct hospitals to report PR services as a non-standard cost center for hospital cost reports filed after January 1, 2012.  Currently CMS uses a standard cost center approach for almost all outpatient therapeutic services.

    • Some time ago, a contractor hired by CMS recommended that certain outpatient therapeutic services, cardiac rehabilitation among them, be shifted to non-standard cost center reporting as a way to capture more accurately the charge data and costs associated with such services. 

    • Since CMS has recognized the similarities between PR and cardiac rehabilitation programs, and the legislative language establishing the programs is virtually identical, we believe using the non-standard cost center approach is also justified for pulmonary rehabilitation.  

      • Over time, this approach could resolve some of the confusion now associated with G0424 as a bundled code.

Some questions remain on how hospitals can accurately report the cost of the ancillary services associated with the comprehensive PR benefit as part of the bundled G-424 code.  We are seeking clarification from CMS and will keep you informed as additional information is available.  Also, don’t forget that there will be a presentation on “How to Bill for Pulmonary Rehabilitation” at our Tampa International Congress on November 8, 2011.  So plan to attend and get the latest information “hot off the press.”