Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

On October 3, 2008, CMS published a notice updating the final Medicare hospital inpatient prospective payment system (IPPS) wage indices, hospital reclassifications, payment rates, and other tables for fiscal year (FY) 2009, which began October 1, 2008. The data reflects the extension of the expiration date for certain geographic reclassifications and special exception wage indices as required by the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). In a related development, CMS published a separate notice correct a series of technical and typographical errors that appeared in August 19, 2008 IPPS final rule, including corrections of regulatory language related to physician self-referral provisions.

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On October 1, 2008, CMS published a document correcting technical errors that appeared in the August 8, 2008 Medicare skilled nursing facility (SNF) prospective payment system final rule for FY 2009. 

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On October 2, 2008, CMS published a notice soliciting nominations for individuals to serve on the Program Advisory and Oversight Committee (PAOC), which advises the Secretary of Health and Human Services on Medicare competitive bidding program for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).   CMS has a particular interest in individuals with expertise in DMEPOS and competitive bidding, as well as experience in furnishing services and items in the rural and the urban marketplace.   CMS will select 10-12 PAOC members representing beneficiaries, physicians, suppliers, professional standards organizations, financial standards specialists, and association representatives, among others.  These individuals will replace the previous members of the PAOC (although CMS could reappoint previous members).  Nominations are due November 3, 2008.    

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On October 3, 2008, CMS published a final rule to provides guidance to states that seek to administer self-directed personal assistance services through their state plans, as authorized by the Deficit Reduction Act of 2005. The state plan option allows beneficiaries, through an approved self-directed services plan and budget, to purchase personal assistance services, rather than have those services directed by an agency.   Beneficiaries could hire qualified family members to perform certain personal assistance (but not medical) services.   Allotments also could be used to purchase items that promote independence, such as a wheelchair ramp. The rule provides guidance to ensure beneficiary health and welfare and financial accountability of the state plan option. To request state plan change, the state must have an existing personal care services benefit or be operating a home or community-based services waiver program.   Beneficiary enrollment would be voluntary, and the state also must provide traditional agency-delivered services if the beneficiary wishes to discontinue self-directed care. The rule is effective November 3, 2008. 

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On October 7, 2008, CMS pubished a final rule revising the definition of "multiple source drug" under the Medicaid program. The rule also responds to public comments received on the March 14, 2008 interim final rule with comment period. The final rule adopts the March 2008 interim final rule with the following change: in §447.205, paragraph (3)(i) of the definition of multiple source drug, the term "covered outpatient drug" is revised to read "drug product" and "listed product" respectively to reflect the statutory language. As noted in the interim final rule with comment period, to the extent that this rule may affect Medicaid reimbursement rates for retail pharmacies, it is subject to the injunction issued by the United States District Court for the District of Columbia in National Association of Chain Drug Stores et al. v. Health and Human Services. The rule is effective is effective November 6, 2008. 

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On September 29, 2008, the Food and Drug Administration (FDA) published a direct final rule  requiring holders of a new drug application (NDA) to submit certain information regarding authorized generic drugs in an annual report .  The rulemaking is part of the agency’s implementation of the Food and Drug Administration Amendments Act of 2007 (FDAAA), which requires that FDA publish a list of all authorized generic drugs included in an annual report since 1999, and that the agency update the list quarterly.  The agency is publishing the requirement as a direct final rulemaking because it does not expect significant adverse comment on the rule. As part of the administrative requirements for a direct final rule, the agency is concurrently issuing a proposed rule and soliciting comments and, if any significant adverse comment is received, the FDA will withdraw the direct final rule and address the comments in a subsequent rulemaking.  If there is no significant adverse comment, the direct final rule will automatically become effective February 11, 2009.  Comments will be accepted until December 15, 2008, although comments on related information collection provisions are due October 29, 2008.

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On October 6, 2008, CMS announced expanded efforts to combat Medicare DMEPOS and home health fraud and abuse, including targeted reviews of home health agencies (HHAs) in Florida and greater scrutiny of DMEPOS suppliers in Florida, California, Texas, Illinois, Michigan, North Carolina, and New York. In particular, CMS will be reviewing DMEPOS items with high expenditures and high growth rates, such as oxygen supplies and equipment, power mobility devices/power wheelchairs, and diabetic test strips. Targeted steps will include:

• Closer reviews of new DMEPOS suppliers’ applications, including background checks to ensure that owners and managers have not been suspended by Medicare;
• Unannounced site visits of suppliers and HHAs;
• Extensive pre- and post-payment review of claims submitted by suppliers, HHAs, and ordering or referring physicians;
• Validation of claims submitted by physicians with high-volumes of orders for certain items or services, and verification of the relationship between such physicians and the beneficiaries for whom they ordered these services; and
• Interviews with high-risk beneficiaries to ensure they are appropriately receiving ordered items and services.

In addition, CMS has announced that it has awarded contracts to four permanent Recovery Audit Contractors (RACs) to review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid on a contingency fee basis on both the overpayments and underpayments they find. The nationwide RAC program follows a three-year demonstration program in six states that collected over $900 million in overpayments and returned nearly $38 million in underpayments. Finally, CMS is consolidating the Medicare’s program safeguard contractors (PSCs) and the Medicare Drug Integrity Contractors (MEDICs) with new Zone Program Integrity Contractors (ZPICs), which eventually will be responsible for ensuring the integrity of all Medicare-related claims. 

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CMS has issued an educational article clarifying issues related to Medicare payment of certain routine costs associated with clinical trials. The article focuses on the prohibition on payment for items or services which neither the beneficiary nor any other person or organization has a legal obligation to pay (i.e., items and services furnished gratuitously without regard to the beneficiary’s ability to pay and without expectation of payment from any source, such as free x-rays or immunizations provided by health organizations). CMS discusses the application of this policy in three scenarios: when a research sponsor says it will pay for routine costs if there is no reimbursement from any insurance company; when a research sponsor pays for the routine costs provided to an indigent non-Medicare patient; and when a research sponsor pays Medicare copayments for beneficiaries in a clinical trial. 

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CMS has announced that because of the impact of recent hurricanes, it will grant a data submission waiver to IPPS hospitals in selected counties of Louisiana and Texas that are unable to meet the submission of quality data requirements for the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) for FY 2010. Hospitals that have questions about this process should contact their local Quality Improvement Organization.

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CMS has released most of its “Medically Unlikely Edits” (MUE), which are used by Medicare contractors when processing claims to ensure that providers and suppliers do not report excessive services.   An MUE for a HCPCS/CPT code is the maximum units of service under most circumstances that a provider would report for a code for a single beneficiary on a single date of service; claims with more than the MUE edit amount will be denied (unless a modifier is used to used to report medically necessary units of service in excess of an MUE value).   The MUE currently contains edits for about 9,700 HCPCS/CPT codes, although CMS is not publishing all active MUEs since it could diminish the effectiveness of MUE edits that are designed to detect and deter questionable payments rather than billing errors. CMS will update the list quarterly. 

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On September 30, 2008, the OIG published supplemental compliance program guidance (CPG) for nursing facilities, targeting quality of care, billing issues, and kickback concerns that have arisen since the OIG’s original CPG for nursing facilities issued in 2000. The guidance is designed to help nursing facilities develop effective compliance programs by identifying operational areas that present potential liability risks under several key federal fraud and abuse statutes and regulations. With regard to quality of care, the supplemental CPG addresses staffing, resident care plans, medication management, appropriate use of psychotropic medications, and resident safety. The new CPG also highlights submission of accurate claims, including proper reporting of resident case-mix data, billing for therapy services and restorative and personal care services, and screening for excluded individuals and entities. In addition, the CPG identifies types of business arrangements that could implicate the anti-kickback statute, including those involving free goods and services or discounts; certain contracts with physicians, suppliers, and hospices; and reserve bed payments with hospitals. Other potential risk areas identified in the supplemental CPG include working with beneficiaries to select Medicare Part D plans, physician self-referrals, anti-supplementation rules, and compliance with HIPAA Privacy and Security Rules.  

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The OIG has issued a report entitled "Trends in Nursing Home Deficiencies and Complaints." The study describes the nature and extent of nursing home deficiencies and complaints in 2007 and identifies trends from 2005 to 2007. According to the OIG, in each of the past 3 years, more than 91 percent of nursing homes surveyed were cited for deficiencies, particularly quality of care, resident assessment, and quality of life deficiencies. Additionally, 17 percent of nursing homes surveyed in 2007 were cited for actual harm or immediate jeopardy deficiencies, and 3.6 percent were cited for substandard quality-of-care deficiencies. The number of substantiated complaints decreased slightly (about 3 percent) since 2005.

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A new Government Accountability Office (GAO) report reviews the impact of a Deficit Reduction Act of 2005 (DRA) provision capping Medicare fees for certain imaging services covered by the physician fee schedule at the rate for these services under Medicare’s hospital outpatient prospective payment system (OPPS). The GAO found that the OPPS cap reduced the fee for the performance of about one in four physician imaging tests overall in 2007, and fees for advanced tests were more likely than other imaging tests to be paid at the OPPS rate. Moreover, the GAO found that from 2000 through 2006 both expenditures for and utilization of Medicare physician imaging services increased, but in 2007 expenditures declined while per-beneficiary utilization continued to rise.  

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The GAO has issued a report entitled “Health-Care-Associated (HAI) Infections in Hospitals:  An Overview of State Reporting Programs and Individual Hospital Initiatives to Reduce Certain Infections." The report looks at (1) the design and implementation of state HAI public reporting systems, (2) hospital initiatives to reduce MRSA infections, and (3) the experience of certain early-adopting hospitals in overcoming challenges to implement such initiatives. 

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On October 3, 2008, President Bush signed into law the “Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008” as part of the broad Emergency Economic Stabilization Act of 2008 (H.R. 1424). The measure prohibits health plans that offer mental health coverage from imposing more restrictive financial requirements or treatment limitations for mental health and addiction benefits than are applied to comparable covered medical and surgical benefits.  

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On September 30, 2008, President Bush signed into law H.R. 2638, which funds the Department of Health and Human Services and other federal agencies at FY 2008 levels through March 6, 2009 (or until enactment of the applicable regular appropriations bill, which ever comes first). 

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The Senate recently joined the House in approving H.R. 6353, the “Ryan Haight Online Pharmacy Consumer Protection Act,” which would prohibit the sale of controlled substances over the Internet without a valid prescription and subject on-line pharmacies to a series of new restrictions. Likewise, the Senate approved H.R. 6469, which would increase funding for the Organ Procurement and Transplantation Network. Both bills now await the President’s signature. In addition, President Bush has signed into law S. 1760, which reauthorizes the Healthy Start Initiative to provides grants to reduce infant mortality and improve maternal health.

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On October 1, 2008, the HHS Office of Inspector General (OIG) released its FY 2009 Work Plan, which discusses planned OIG audit, inspection, and investigative initiatives affecting virtually every type of health care provider and supplier.

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On October 1, 2008, CMS published a notice correcting technical errors that appeared in the August 8, 2008 SNF PPS FY 2009 final rule.

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There has been a flurry of recent legislative activity as the 110^th Congress prepares to adjourn in the coming days. Congress has taken action on a wide range of health policy bills, addressing such issues as FDA drug and device approvals, internet pharmacy regulation, health care workforce issues, insurance coverage, and medical treatment, and patent protection for antibiotics.   Specifically, the following legislation has been approved by the House and Senate and now await the President’s signature:

• H.R. 6353, the “Ryan Haight Online Pharmacy Consumer Protection Act,” which would prohibit the sale of controlled substances over the Internet without a valid prescription and subject on-line pharmacies to a series of new restrictions.
• S. 3560, the “QI Program Supplemental Funding Act,” which would authorize an additional $45 million for the Medicare Qualifying Individuals (QI) program, which helps certain low-income individuals pay their Medicare Part B premiums. The legislation also includes provisions to modify the patent protections applicable to antibiotics and clarify the ability of generic drug companies to gain approval of and market generic antibiotics. In addition, the bill would expand the education activities under the Medicaid Integrity Program (MIP) and extend funding for the Medicare Improvement Fund to make improvements under the original Medicare program. 
• Several measures aimed at expanding disease research and information resources, including: H.R. 1157, which would authorize grants for the development and operation of research centers for the study of environmental factors that may be related to the etiology of breast cancer; H.R. 1532, which would reauthorize the Preventive Health Services Regarding Tuberculosis program; H.R. 5265, which would promote research into the causes and treatments of various forms of Muscular Dystrophy; S. 1810, to authorize the HHS Secretary to collect and disseminate information regarding Down syndrome or other prenatally or postnatally diagnosed diseases and to coordinate the provision of support services for those who receive a diagnosis of one of those diseases; and S. 1382, which would authorize funding for the establishment of a national registry for the collection and storage of data on amyotrophic lateral sclerosis (ALS).

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of regulatory and legislative developments, including the following:

• A wide range of health care legislation approved by one or both houses of Congress in the waning days of the session, including legislation addressing mental health parity requirements, FDA drug and device approvals, internet pharmacy regulation, and medical research, among many others.
• Final CMS rules on MIPPA Medicare Part D drug plan/Medicare Advantage marketing requirements.
• A series of CMS rules on contracting requirements under the Medicaid Integrity Audit program, the criteria for terminating a provider or supplier from non-random prepayment complex medical review, and the 2009 “amount in controversy” threshold for Medicare appeals.
• CMS announcements regarding Medicare Part A and Part B premium and deductible levels for 2009, Medicare PDP and MA plan options for 2009, preliminary Medicare payment determinations for certain new clinical laboratory codes, and October 2008 Medicare Part B prescription drug average sales price pricing files.
• FDA notices regarding animal drug user fee rates and guidance on genetically-engineered animals.
• HIPAA privacy rule guidance regarding when a health care provider may share a patient’s health information with the patient’s family, friends, or others involved in the patient’s care.
• Upcoming health industry events, including a MedPAC meeting, a CMS E-Prescribing conference, a DMEPOS supplier accreditation conference, and CMS conference calls on the adoption of the ICD-10 coding system.

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On September 18, 2008, the Centers for Medicare & Medicaid Services (CMS) published two final rules modifying Medicare Advantage (MA) and Part D Prescription Drug Plan (PDP) marketing and other requirements. 

• The first rule implements certain MA and PDP marketing provisions and a requirement related to the disclosure and dissemination of Part D information included in a May 16, 2008 proposed rule and subsequently enacted into statute by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Specifically, the rule: prohibits plans from providing meals to prospective enrollees at promotional events; prohibits unsolicited contact with potential enrollees (e.g., door-to-door solicitation); prohibits plans from cross-selling non-health care related products during Medicare marketing activities; restricts marketing activities in provider offices (except in certain common areas); prohibits plans from conducting marking activities at educational events; requires that only state-licensed representatives conduct marketing activities; requires plans to disclose certain beneficiary information at the time of enrollment and 15 days before the annual coordinated election period; and defines certain terms related to marketing activities. The rule is effective September 18, 2008 and applies to the 2009 benefit year marketing campaign, beginning October 1, 2008.  
  

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On September 26, 2008, CMS published a final rule establishing contracting requirements under the Medicaid integrity audit program, including procedures for identifying and resolving organizational conflicts of interest, competitive procedures to be used, and procedures under which a contract may be renewed. The rule is effective October 27, 2008.  

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CMS published a final rule September 26, 2008 setting forth the criteria for terminating a provider or supplier from non-random prepayment complex medical review, as mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The rule is effective January 1, 2009.

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CMS has announced that the 2009 “amount in controversy” threshold for administrative law judge hearings is $120, and the threshold for judicial review is $1,220.

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The Food and Drug Administration (FDA) has published a notice announcing animal drug and generic animal drug user fee rates and payment procedures for fiscal year 2009.

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The House and Senate both passed mental health parity legislation on September 23, 2008, but the fate of the initiative still is in doubt for procedural reasons.   Both versions of the measure would prohibit health plans that offer mental health coverage from imposing more restrictive financial requirements or treatment limitations for mental health and addiction benefits than are applied to comparable covered medical and surgical benefits. While the House passed H.R. 6983, the “Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008” as a freestanding bill, the Senate approved its version of the measure as part of a larger energy and tax package, H.R. 6049. The same bill must be approved by the House and Senate before Congress adjourns for the year -- which could come as early as this week -- in order for it to be sent to the President for his signature.

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Numerous recent Congressional committee hearings have focused on health policy issues, including the following:

• On September 24, 2008, the Senate Aging Committee examined "ways to respect Americans' choices at the end of life.” The panel also held a hearing September 17 on direct-to-consumer medical device advertising.
• House Ways and Means Health Subcommittee held a hearing September 23, 2008 on problems in the private health insurance market, with a focus on the need for reforms in the non-group or individual market. The panel also met September 11 to examine on Medicare physician payment policy reform. 
• On September 23, 2008, the House Oversight and Government Reform Domestic Policy Subcommittee held a hearing on Medicaid pediatric dental care reform. The full Committee also held a hearing September 16 on HIV prevention.
• The House Energy and Commerce Subcommittee on Health held a hearing September 18, 2008 on health reform, as did the House Small Business Committee.
• The Senate Finance Committee held a hearing September 16, 2008, on health care delivery system reform, focusing on creating a patient-centered model of care and supporting primary care. On September 23, 2008, the Committee held a hearing on insurance market reform, highlighting health insurance exchanges that connect individuals, small businesses and those eligible for premium subsidies to available health insurance plans.
• The Senate Special Committee on Aging held a hearing September 11, 2008 on Medicare information issues.  

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CMS has announced Medicare Part A and Part B premium and deductible levels for 2009. Notably, there will be no increase in the standard Medicare Part B monthly premium for 2009, which is the first year since 2000 that there was no increase in the standard premium.

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