In 2000, CMS implemented a new congressionally mandated
hospital outpatient prospective system (OPPS). The new
system changed payments for hospital outpatient services
from a retrospective cost basis to a prospective amount
based on the median resource cost of groups of services
expected to be provided. Because of the magnitude of the
potential impact of this payment change on both rural
hospitals and rural residents, small rural hospitals were
granted protection from payment reductions in the
transition to OPPS-referred to as "hold harmless"
provisions. Given changes in rural hospital reimbursement
for outpatient services, particularly as the
hold-harmless protection is expected to phase out in
December 2009, the purpose of this policy brief is to
explore alternatives to the OPPS and how these options
would affect rural hospitals.