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This proposed rule would revise the Medicare hospital outpatient prospective paymentsystem Waerhouse to implement applicable statutory requirements and changes arising from our continuingexperience with this system. In this proposed rule, we describe the proposed changes to the amounts andfactors used to determine the payment rates for Medicare hospital outpatient services paid under theprospective payment system. These changes would be applicable to services furnished on or afterJanuary 1, In addition, this proposed rule would update the revised Medicare ambulatory surgical center ASC payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system.

In this proposed rule, we set forth the applicable relative payment weights and amounts for services furnished opeartions ASCs, specific HCPCS codes to which these proposed changes would apply, and other pertinent ratesetting information for the CY ASC payment system. These proposed changes would be applicable to services furnished on or after January 1, To be assured consideration, comments on all sections of this proposed rule must be received atone of the addresses provided in the ADDRESSES section no later than 5 p.

EST onAugust 31, In commenting, please refer to file code CMSP. Because of staff and resourcelimitations, we cannot accept comments by facsimile FAX transmission. You may submit electronic comments on this regulation to http: Follow the instructions for “Comment or Submission” and enter the filecode to find the document accepting comments.

The Official Unofficial MCI Answer Webpage

You may mail written comments one original and two copies to the followingaddress ONLY: BoxBaltimore, MD Please allow sufficient time for mailed comments to be received before the close of the commentperiod. By express or overnight mail. You may send written comments one original and two copies tothe following address ONLY: By hand or courier. If you prefer, you may deliver by hand or courier your written comments oneoriginal and two copies before the close of the comment period to one of the following addresses:.

Room G, Hubert H. Because access to the interior of the HHH Building is not readily available to persons withoutFederal Government identification, commenters are encouraged to leave their comments in the CMSdrop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed. If you intend to deliver your comments to the Baltimore address, please call the telephone number in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. Alberta Dwivedi,Hospital outpatient prospective payment issues. Michele Franklin,and Jana Lindquist,Partial hospitalization and community mental health center issues.

We welcomecomments from the public on warehojse issues set forth in this proposed rule to assist us in fully considering issues and developing policies. You can assist us by referencing file code CMSP for all issues on which you wish to comment.

The Official Unofficial MCI Answer Webpage

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare Medicaid Services, Security Boulevard, Baltimore, MDon Mondaythrough Friday of each week from 8: To schedule an appointment to view public comments, phone Internet users can access the database by using the World Wide Web; the Superintendent of Documents” home page address is http: Dial-in users should use communications software and modem to call ; type swais, then login as guest no password required.

In this document, we address two payment systems underthe Medicare program: When the Medicare statute was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs.

In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system PPS. Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the ambulatory payment classification APC group to which the service is assigned.

The OPPS includes payment for most hospital outpatient services, except those identified in section I. Section t 1 B ii of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary which includes partial hospitalization services furnished by community mental health centers CMHCs and hospital outpatient services that are furnished to inpatients who have exhausted their Part A benefits, or who are otherwise not in a covered Part A stay.


Section of Public Law added provisionsfor coverage for an initial preventive physical examination, subject to the applicable deductible and coinsurance, as an outpatient department service, payable under the OPPS. The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment.

This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

Full text of “training & education”

All services and items within an APC group are comparable clinically and with respect to resource use section t 2 B of the Act. In accordance with section t 2 of the Act, subject to certain exceptions, services and items within an APC group cannot be considered comparable with respect to the use of resources if the highest median or mean cost, if elected by the Secretary for an item or service in the APC group is more than 2 times greater than the lowest median cost for an item or service within the same APC group referred to as the “2 times rule”.

In implementing this provision, we generally use the median cost of the item or service assigned to an APC group. For new technology items and services, special payments under the OPPS may be made in one of two ways.

Section t 6 of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices.

For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated operaations procedures that are not yet reflected in our claims data. While most hospital outpatient services are payable under the OPPS, section t 1 B iv of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule.

Section of Warebouse Law amended section t 1 B iv of the Act to exclude payment for screening and diagnostic mammography services from the OPPS. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule MPFS ; laboratory services paid under the clinical diagnostic laboratory fee schedule CLFS ; services for beneficiaries with end-stage renal disease ESRD that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system IPPS.

These wqrehouse entities include: Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with mxi b 3 of the Act; critical access hospitals CAHs ; hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service hospitals.

On April 7,we published in the Federal Register a final rule with comment period 65 FR to implement a prospective payment system for hospital outpatient warehousr.

Section t 9 of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.

Since initially implementing the OPPS, we have published final rules in the 303y Register annually to implement statutory warehoouse and changes arising from our continuing experience with this system.

These rules can be viewed on the CMS Web site at: In that final rule with comment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY OPPS on the basis of claims data from January 1,through December 31,and to implement certain provisions of Public Law and Public Law Section t 9 A of the Act, as amended by section h of Public Lawand redesignated by section a 2 of Public Lawrequires that we consult with an outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS.

The Act further specifies that the panel will act in an advisory capacity. The APC Panel is not restricted to using data compiled by CMS, and it may use data collected or developed by organizations outside the Department in conducting its review. This expert panel, which may be composed of up to 15 representatives of providers currently employed full-time, not as consultants, in their respective areas of expertise subject to the OPPS, reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights.

The current charter specifies, among other requirements, that: Since the initial meeting, the APC Panel has held 15 meetings, with the last meeting taking place on February 18 and 19, Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for APC Panel membership and to announce new members.


The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process.

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The Data Subcommittee is responsible for studying the data issues confronting the APC Panel and for recommending options for resolving them. The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but whose payments are bundled or packaged into APC payments. All subcommittee recommendations are discussed and voted upon by the full APC Panel. Discussions of the other recommendations made by the APC Panel at the February meeting are included in the sections of this proposed rule that are specific to each recommendation.

In this proposed rule, we set forth proposed changes to the Medicare hospital OPPS for CY to implement statutory requirements and changes arising from our continuing experience with the system. In addition, we are setting forth proposed changes to the revised Medicare ASC payment system for CY, including proposed updated payment weights and covered surgical ancillary services based on the proposed OPPS update.

Finally, we are setting forth proposed quality measures for the Hospital Outpatient Quality Data Reporting Program HOP QDRP for reporting quality data for annual payment rate updates for CY and subsequent calendar years, the requirements for data collection and submission for the annual payment update, and a proposed reduction in the OPPS payment for hospitals that fail to meet the HOP QDRP requirements for the CY payment update, in accordance with the statutory requirement.

These changes would be effective for services furnished on or after January 1, The following is a summary of the major changes that we are proposing to make:. In this section, we set forth proposed changes in the amounts and factors for calculating the full annual update increase to the conversion factor. We discuss the proposed quality measures for reporting hospital outpatient HOP quality data for the annual payment update factor for CY and subsequent calendar years; set forth the requirements for data collection and submission for the annual payment update; and propose a reduction in the OPPS payment for hospitals that fail to meet the HOP Quality Data Reporting Program QDRP requirements for CY Section t 9 A of the Act requires that the Secretary review and revise the relative payment weights for APCs at least annually.

For CYwe are proposing to use the same basic methodology that we described in the April 7, OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1,and before January 1, CY That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department HOPD services.

We are proposing to use the most recent available data to construct the database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CYwe used approximately million final action claims for hospital outpatient department services furnished on or after January 1,and before January 1, For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at: Of the million final action claims for services provided in hospital outpatient settings used to calculate the CY OPPS payment rates for this proposed rule, approximately million claims were the type of bill potentially appropriate for use in setting rates for OPPS services but did not necessarily contain services payable under the OPPS.

Of the million claims, approximately 46 million claims were not for services paid under the OPPS or were excluded as not appropriate for use for example, erroneous cost-to-charge ratios CCRs or no HCPCS codes reported on the claim. From the remaining 54 million claims, we created approximately 91 million single records, of which approximately 61 million were “pseudo” single or “single session” claims created from 24 million multiple procedure claims using the process we discuss later in this section.

As described in section II. The bypass process described in section II. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable.

Consistent with the goal of using appropriate information in our data development process, we only use claims or portions of each claim that are appropriate for ratesetting purposes.

The proposed APC relative weights and payments for CY in Addenda A and B to this proposed rule were calculated using claims from CY that were processed before January 1,and continue to be based on the median hospital costs for services in the APC groups.

We selected claims for services paid under the OPPS and matched these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the median costs which we are proposing to convert to relative payment weights for purposes of calculating the CY payment rates.