Qualifying Payment Amount Calculation Methodology | CMS, Summaries of Law

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Qualifying Payment Amount Calculation

Methodology

45 CFR 149.

December 2021

Disclaimers and Notifications

• The information provided in this presentation is intended only to be

a general informal summary of technical legal standards. It is not

intended to take the place of the statutes, regulations, or formal

policy guidance upon which it is based. This presentation

summarizes current policy and operations as of the date it was

presented. We encourage readers to refer to the applicable

statutes, regulations, and other interpretive materials for complete

and current information.

• The contents of this document do not have the force and effect of

law and are not meant to bind the public in any way, unless

specifically incorporated into a contract. This document is intended

only to provide clarity to the public regarding existing requirements

under the law.

• This communication was printed, published, or produced and

disseminated at U.S. taxpayer expense.

QPA Defined

The QPA for a given item or service is generally the

median contracted rate on January 31, 2019 for the

same or similar item or service, increased for inflation

Median Contracted Rate

The median contracted rate for an item or service is determined by:

• Identifying the contracted rates of all plans of the plan sponsor (or

of the administering entity, if applicable) or all coverage offered by

the issuer in the same insurance market for the same or similar

item or service that is provided by a provider in the same or

similar specialty or facility of the same or similar facility type and

provided in the geographic region in which the item or service is

furnished.

• Arranging the contracted rates from least to greatest, and selecting

the middle number (or the average of the middle two numbers, if

there are an even number of contracted rates).

Contracted Rate – Rules & Exclusions

• The amount negotiated under each contract is

treated as a separate amount.

o Excludes rates paid under single case agreements, letters

of agreement, or similar arrangements between a provider,

facility, or provider of air ambulance services and a plan or

issuer, used to supplement the network of the plan for a

specific enrollee, participant, or beneficiary in unique

circumstances.

• The rate negotiated under a contract constitutes a

single contracted rate regardless of the number of

claims paid at that contracted rate.

Contracted Rate – Other Rules

• If a plan or issuer has:

o separate contracts with individual providers → rate under

each contract constitutes a single contracted rate (even if the

same rate is paid to other providers under separate contracts).

o a single contract with a provider group or facility, with the

same negotiated rate applying to all providers in the

group/facility → rate negotiated with that provider group or

facility is treated as a single contracted rate.

o a single contract with multiple providers, with separate

negotiated rates with each particular provider → each unique

contracted rate constitutes a single contracted rate for purposes

of determining the median contracted rate.

“Same or Similar Item or Service”

• Defined as a health care item or service billed under

the same service code, or a comparable code under a

different procedural code system.

• Service code : the code that describes an item or

service, including a Current Procedural Terminology

(CPT), Healthcare Common Procedure Coding

System (HCPCS), or Diagnosis-Related Group (DRG)

code.

“Same or Similar Item or Service” –

Modifiers

• Modifiers: codes that are applied to the service code to provide

a more specific description of the furnished item or service and

that may adjust the payment rate or affect the processing or

payment of the code billed.

• Median contracted rates must be calculated separately for CPT

code modifiers that distinguish the professional services

component (“26”) from the technical component (“TC”).

• If application of a modifier causes contracted rates to vary, the

plan or issuer must calculate a separate median contracted rate

for each such service code-modifier combination.

• Modifiers that don’t cause contracted rates to vary must not be

taken into account when calculating the median contracted

rate.

“Facility of the Same or Similar

Facility Type”

• Defined to mean, with respect to emergency services, either an

emergency department (ED) of a hospital or an independent

freestanding emergency department (IFED).

• If a plan’s or issuer’s contracted rates for emergency services

vary based on the type of facility (that is, whether a facility is a

hospital ED or an IFED, the median contracted rate is

calculated separately for each facility type.

• Note: Plans and issuers may not separately calculate a

median contracted rate based on other characteristics of

facilities that might cause contracted rates to vary, such as

whether a hospital is an academic medical center or teaching

hospital.

Geographic Region

Non-air ambulance items and services Air ambulance services

Primary definition

One region for each MSA in the state

One region consisting of all other portions of the state

One region consisting of all MSAs in the state

One region consisting of all other portions of the state

First alternative

One region consisting of all MSAs in the state

One region consisting of all other portions of the state

One region consisting of all MSAs in the Census division

One region consisting of all other portions of Census division

Second alternative

One region consisting of all MSAs in the Census division

One region consisting of all other portions of the Census division

• If a plan or issuer does not have sufficient information to calculate a median contracted rate for the geographic regions under the primary definition, geographic regions are defined according to the first alternative definition.
• If the plan or issuer still does not have sufficient information after applying these broader regions, geographic regions are defined using the second alternative definition (N/A for air ambulance services).

Non-Fee-for-Service Contractual

Arrangements

• QPA methodology establishes an approach for calculating a median contracted rate where

payment for an item or service is not fully on a fee-for-service basis (e.g., under bundled and fully- or partially-capitated arrangements).

• General approach: The plan or issuer must calculate a median contracted rate for each item or

service using the underlying fee schedule rates (if available) for the relevant items and services. o Underlying fee schedule rate : the rate for a covered item or service that a group health plan or health insurance issuer uses to determine an individual’s cost-sharing liability for the item or service, when that rate is different from the contracted rate.

• Alternative approach: If there is no underlying fee schedule rate, the plan or issuer must

calculate the median contracted rate using a derived amount , which is the price that a plan or issuer assigns an item or service for the purpose of internal accounting, reconciliation with providers, or for the purpose of submitting data in accordance with 45 CFR 153.710(c).

• When calculating median contracted rates, plans and issuers must exclude risk sharing,

bonus, or penalty, and other incentive-based and retrospective payments or payment adjustments.

Indexing: Overview

• In cases where the median contracted rate is determined using 1/31/

contracted rates:

o To calculate QPA for items/services furnished during 2022: increase the

median contracted rate as of 1/31/2019 by the percentage increase in the

consumer price index for all urban consumers (U.S. city average) (CPI–U) over

2019, the percentage increase over 2020, and the percentage increase over

o To calculate QPA for items/services furnished during 2023 or a

subsequent year: the QPA for 2022 is then adjusted annually by the annual

increase in the CPI–U.

• Plans and issuers will calculate the increases using the factors determined by the

Treasury Department and the IRS, and published in guidance by the IRS. The

percentage increase for any year is calculated by using the CPI–U published by

the Bureau of Labor Statistics (DOL).

• For this purpose, the CPI–U for each calendar year is the average of the CPI–U as

of the close of the 12-month period ending on 8/31 of the calendar year, rounded

to 10 decimal places.

Indexing: Anesthesia Services

• For anesthesia services furnished during 2022, the QPA is calculated by taking the

median contracted rate for the anesthesia conversion factor (determined in

accordance with the methodology for calculating median contracted rates for service

code-modifier combinations) for the same or similar item or service as of 1/31/2019,

and increasing that amount to account for changes in the CPI–U.

• This amount is referred to as the indexed median contracted rate , and it is

multiplied by the sum of the following three factors in order to calculate the QPA :

(1) the base unit for the anesthesia service code

(2) the time unit , and

(3) the physical status modifier unit.

• For anesthesia services furnished during 2023 or a subsequent year, the QPA is

calculated by taking the indexed median contracted rate for the anesthesia

conversion factor, and adjusting that amount by the percentage increase in the CPI–

U over the previous year. The indexed median contracted rate is then multiplied by

the sum of the base unit, time unit, and physical status modifier units for the

participant, beneficiary, or enrollee.

Indexing: Air Ambulance Services

• Payers often reimburse air ambulance services in part by using air mileage service codes (A0435 and A0436) and reimbursement levels that reflect the number of miles an individual is transported by the air ambulance, which are referred to as loaded miles. Payment amounts are calculated as: (negotiated rate for the service code, referred to as the air mileage rate ) X (number of loaded miles).
• The QPA for air ambulance services billed using the air mileage service codes (A0435 and A0436) that are furnished during 2022 is calculated as follows: o Step 1: Increase the median contracted rate to account for changes in the CPI–U. This amount is referred to as the indexed median air mileage rate. o Step 2: Multiply (indexed median air mileage rate) by (number of loaded miles).
• The QPA for air ambulance services billed using service codes A0435 and A0436 that are furnished during 2023 or a subsequent year is calculated as follows: o Step 1: Increase the indexed median air mileage rate determined for such services furnished in the preceding year. o Step 2: Multiply (indexed median air mileage rate) by (number of loaded miles).