CMS Rejects OIG Call to Limit Medicare OPPS Rates for ASC-Approved Procedures to ASC Rates

In a recent report, the HHS Office of Inspector General (OIG) recommended that CMS limit Medicare hospital outpatient prospective payment system (OPPS) payments for procedures that can be safely performed in an ambulatory surgical center (ASC), given that ASC payments are typically lower than the corresponding OPPS payments. According to the OIG, Medicare would save as much as $15 billion for CYs 2012 through 2017 if CMS reduces OPPS rates to ASC payment levels for ASC-approved procedures performed on beneficiaries with low-risk or no-risk medical profiles (which the Agency for Healthcare Research and Quality estimates represents 68% of hospital patients 65 and older); beneficiaries would realize additional out-of-pocket savings. The OIG observes that its proposal would require legislative changes to current budget neutrality rules to prevent resulting savings from being redistributed in the form of higher payments for other procedures. Under the OIG proposal, outpatient departments would continue to receive the standard OPPS payment rate for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary’s individual clinical needs.

CMS disagreed with the OIG’s recommendations, which are not binding on the agency. CMS noted that because most ASC rates are based on OPPS rates, the OIG’s recommendations may raise “circularity” concerns with the respect to the rate calculation process. Moreover, CMS observes that the OIG suggests no specific clinical criteria to distinguish patients that can be adequately treated in an ASC relative to the hospital outpatient setting, which would be needed to act on these recommendations. The OIG stands by its recommendations, however, and urges CMS to take the necessary steps to implement them.

The OIG prepared its report, “Medicare and Beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgical Center Payment Rates," in response to a congressional request.

CMS to Host Calls on Electronic Clinical Template for Home Health Orders

CMS is hosting a series of Special Open Door Forum calls to solicit feedback on data elements for a new “Suggested Electronic Clinical Template for Home Health.” Specifically, CMS seeks input on a list of clinical elements within a Suggested Electronic Clinical Template that would assist physicians when documenting the home health face-to-face encounter for Medicare purposes. Calls are scheduled for April 22, May 8, June 19, and July 16, 2014.

Highlights from Reed Smith's Post-Acute Care Conference

In early April, Reed Smith hosted an enlightening, industry-leading conference on post-acute care in Washington, D.C. The conference, entitled “Reed Smith 2014 Washington Health Care Conference: Focus on Post-Acute Care," brought together a panel of experts to discuss episodic care, bundling models, and alternative payment and delivery systems. The conference also featured other speakers who presented from the perspective of investors and Capitol Hill, along with a keynote address from American Enterprise Institute resident scholar Dr. Norman Ornstein.

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CMS to Implement Fingerprint-Based Background Checks for High-Risk Providers and Suppliers in 2014

Fingerprint-based background checks intended to “detect bad actors” enrolled or attempting to enroll in federal health programs

This post was authored by Elizabeth Carder-Thompson and Debra McCurdy.

More than three years after publication of final regulations to implement Affordable Care Act (ACA) provisions that strengthen provider and supplier enrollment screening provisions under federal health care programs, the Centers for Medicare & Medicaid Services (CMS) has selected a Fingerprint-Based Background Check Contractor (FBBC) and intends to phase in fingerprint-based background checks beginning in 2014.

 

By way of background, CMS published a final rule on February 2, 2011 pursuant to Section 640 of the ACA, which required the Department of Health and Human Services to establish procedures for screening providers and suppliers participating in federal health care programs (specifically, Medicare, Medicaid, and the Children’s Health Insurance Program).  Among other things, the final rule applies various screening tools, including unannounced site visits, background checks, and fingerprinting, based on the level of risk associated with different provider and supplier types.  CMS established three levels of risk – limited, moderate, and high – and every provider and supplier category is assigned to one of these three levels.  Individuals who maintain a 5 percent or greater direct or indirect ownership interest in a provider or supplier in the high risk category -- including newly-enrolling home health agencies (HHAs) and newly-enrolling durable medical equipment, orthotics, prosthetics, and supplies (DMEPOS) suppliers -- are subject to a fingerprint-based criminal history report check of the Federal Bureau of Investigations (FBI) Integrated Automated Fingerprint Identification System. 

 

While the final rule was effective March 25, 2011, as mandated by the ACA, CMS delayed the effective date of the fingerprint-based criminal history record check provision until after additional subregulatory guidance was issued.   CMS awarded a $4.19 million FBBC contract to Accurate Biometrics, Inc. in March 2014, a significant step in the implementation process.  Following this award, CMS issued a provider update announcing that it intends to phase in the fingerprint-based background check implementation beginning in 2014Not all providers and suppliers in the "high" level of risk category will initially be a part of the fingerprint-based background check requirement, but eventually the fingerprint-based background check will be completed on all individuals with a 5 percent or greater ownership interest in a provider or supplier that falls under the high-risk category.

 

Providers and suppliers subject to the fingerprint requirements will receive a notification letter from their Medicare Administrative Contractor (MAC), and applicable individuals will have 30 days from the date of the notification letter to be fingerprinted at one of at least three locations identified by the FBBC (individuals will incur the cost of having their fingerprints taken). After fingerprinting is complete, the fingerprints will be forwarded to the FBI, which will compile the background history and share results with the FBBC within 24 hours of receipt. The FBBC will assess the data and provide a "fitness recommendation" to CMS indicating whether the criminal history record information contains enrollment violations or otherwise fails to meet requirements or guidelines established by CMS for enrollment of a Medicare provider or supplier; CMS will then make the final determination about the provider or supplier. CMS will notify providers and suppliers if the assessment of the fingerprint-based background check results in the denial of an enrollment application or revocation of existing Medicare billing privileges. The CMS guidance also provides information on standards for securing the data under the review process.

 

This announcement marks the latest steps in seemingly ever-escalating CMS efforts to clamp down on fraud and abuse in the Medicare and Medicaid programs. While the initial targets of the fingerprint-based background requirements are new DMEPOS suppliers and HHAs, the policy also will apply to those who are elevated to the high risk category in accordance with enrollment screening regulations, which could include providers/suppliers coming back into the Medicare fee-for-service program after a moratorium is lifted, or providers which have been subject to a payment suspension, exclusion, or revocation. It is likely that some "owners" of entities, such principals of investment firms with financial interests in providers and suppliers, will balk at the whole idea of being fingerprinted. Moreover, the pending fingerprint process will doubtless provide even more opportunities for administrative missteps, and erroneous and time-consuming supplier/provider number revocations.

Will Physician Payment Sunshine Act Data Usher in a New Era of False Claims Act Litigation?

This post was authored by Scot Hasselman, Elizabeth Carder-Thompson, Katie Pawlitz and Jillian Riley.

While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.

Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators’ attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.

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California Weighs Further Curtailment of Physician Self-Referrals

This post was written by Paul Pitts.

California State Senator Ed Hernandez, O.D., Chair of the Senate Health Committee, has introduced legislation that would close an exception in state law that currently permits physicians to provide advanced imaging, anatomic pathology, radiation therapy, and physical therapy within their office or the office of their group practice.  Under current law, the so-called “in-office exception” permits physicians to refer patients to their own practice for these services, which are typically ancillary to the primary service of the referring physician. If this legislation is adopted, California’s self-referral law would be more restrictive than the federal physician self-referral law, commonly referred to as the Stark law. Physicians in California residing outside of rural areas would be prohibited from referring any patients, regardless of source of payment, for advanced imaging, anatomic pathology, radiation therapy, and physical therapy performed by the referring physician’s own practice. The proposed legislation, Senate Bill 1215, is scheduled for an April 21, 2014 hearing before the Senate Business, Professions and Economic Development Committee. Comments on the legislation may be sent to the committee at State Capitol, Room 2053 Sacramento, California 95814.

New Postings on the Reed Smith Health Industry Washington Watch Blog

The Reed Smith Health Industry Washington Watch blog has been updated to report on recent health policy developments, including the following:

  • HHS Developments. CMS has released highly-anticipated Medicare payment data for individual Medicare physicians and certain other Part B suppliers. In addition, CMS has announced final 2015 Medicare Advantage and Part D drug plan rates and policies, published a notice announcing a new system to collect hospice care data, and extended deadlines for certain individuals to enroll for health coverage through Affordable Insurance Exchanges. CMS also is seeking comments on supervision levels for select hospital outpatient services. HHS has developed a HIPAA Security Risk Assessment tool.
  • Fraud & Abuse Developments. The OIG and GAO have issued separate reports examining the Medicare DMEPOS competitive bidding program. The OIG has identified its top 25 priorities to protect the integrity of HHS programs, and it has issued reports on Medicare billing for electrodiagnostic tests, Medicare payments for hospital clinic visits, and Medicare ESRD drug payment policies. According to new CMS data, RACs corrected $2.4 billion in Medicare claims in FY 2012.
  • Legislative Developments. President Obama has signed into law a Medicare physician fee schedule fix bill with numerous health policy provisions, along with a bill that provides funding for pediatric medical residency programs. Congressional hearings have examined health policy issues.
  • Health Industry Events. Upcoming CMS events will focus on HCPCS coding applications and clinical laboratory payments.

CMS Releases Physician-Specific Medicare Charge/Payment Data

CMS has released its highly-anticipated data files with Medicare payment data for individual Medicare physicians and certain other Part B suppliers as part of the Obama Administration’s initiative “to make our healthcare system more transparent, affordable, and accountable.” Specifically, the “Physician and Other Supplier Public Use File” contains information on utilization, payment (allowed amount and Medicare payment), and submitted charges organized by National Provider Identifier (NPI)/provider last name, Healthcare Common Procedure Coding System (HCPCS) code, and place of service for physician/supplier Part B non-institutional line items for the Medicare fee-for-service population for calendar year 2012. The files include data on services furnished by physicians, non-physician practitioners, laboratories, imaging, and ambulances, but not durable medical equipment (DME). To protect Medicare beneficiary privacy, any aggregated records derived from 10 or fewer beneficiaries are excluded from the dataset.

CMS cautions that the dataset has a number of limitations, including that the data may not be representative of a physician’s entire practice since it only includes information regarding Medicare fee-for-service beneficiaries. Moreover, CMS notes that the data are not intended to indicate the quality of care provided and are not risk-adjusted to reflect differences in the severity of disease of patient populations.  In an accompanying blog post, Jonathan Blum, Principal Deputy Administrator of CMS, notes that the agency hopes that “businesses and consumers alike can use these data to drive decision-making and reward quality, cost-effective care.”

CMS Announces Final 2015 Medicare Advantage/Part D Drug Plan Rates and Policies

The Centers for Medicare & Medicaid Services (CMS) has released its 2015 rate announcement and final call letter for Medicare Advantage (MA) and Part D prescription drug plans. Notably, the final rate announcement increases 2015 MA rates by 0.4% compared to 2014 levels and compared to an estimated 1.9% reduction anticipated in the advance notice released in February 2014. Factors contributing to the rate boost include a modified phase-in schedule for a new risk-adjustment model, a refined risk adjustment methodology to account for the impact of baby boomers, and CMS’s decision not to finalize a proposal to exclude diagnoses from enrollee risk assessments. CMS also is not adopting at this time earlier proposals to implement a new Part D risk adjustment model; make changes to star ratings; or require additional coverage in the gap for generic and brand drugs in Enhanced Alternative plans. On the other hand, CMS is adopting a number of policies intended to strengthen beneficiary protections when MA plans make significant changes to their provider networks. Beginning in 2015, CMS will require MA organizations to provide CMS with 90 days notice of any significant changes to their provider networks. CMS also will allow enrollees to switch plans when they are affected by significant mid-year provider network terminations initiated by their MA plan without cause. In addition, the call letter establishes “best practices” for MA organizations to follow when they make significant changes to provider networks.

OIG, GAO Reports Examine Round 1 Rebid of the Medicare DMEPOS Competitive Bidding Program

On April 8, 2014, the OIG and GAO each issued reports focusing on different aspects of the “Round 1 Rebid” of the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program. By way of background, under DMEPOS competitive bidding, only suppliers that are winning bidders, meet licensing and other standards, and enter into a contract with CMS may furnish selected categories of DMEPOS to Medicare beneficiaries in competitive bidding areas (CBAs), with very limited exceptions. Contract suppliers are paid based on the median of the winning suppliers’ bids in the CBA, rather than the DMEPOS fee schedule amount. The Round 1 Rebid was in effect for a 3-year period, from 2011 through 2013, involving nine DME product categories in nine CBAs. CMS subsequently “recompeted” contracts in the Round 1 areas (including additional products), with three-year contracts effective January 1, 2014. CMS also established a second round of bidding covering 100 CBAs, along with a national mail-order diabetic testing supplies competitive bidding program; those three-year contracts went into effect July 1, 2013.

The OIG report assesses CMS compliance with DMEPOS bidding rules in the Round 1 Rebid. The OIG concluded that CMS generally followed its competitive bidding program rules when it selected suppliers and computed single payment amounts for the Round 1 Rebid – although a number of CMS errors were identified. Specifically, the OIG conducted a review based on a random sample of 100 of the 3,011 established DMEPOS single payment amounts in the Round 1 Rebid Program and the selection process for 266 winning suppliers associated with the sampled payment amounts. The OIG determined that CMS followed all applicable requirements for 255 of the 266 winning suppliers, but nine winning suppliers did not meet financial documentation requirements, and CMS incorrectly used two suppliers in one single payment computation. While the OIG characterizes the overall effect on Medicare payments to suppliers as “immaterial,” the OIG estimates that CMS paid suppliers $34,000 less than they would have received without any errors (less than 0.1 percent of the $113 million paid under the Round 1 Rebid Program during the first 6 months of 2011). The OIG recommends that CMS: (1) follow its established program procedures and applicable federal requirements consistently in evaluating the financial documents of all suppliers, and (2) ensure that all bids of winning suppliers are included in the calculation of single payment amounts before offering contracts. CMS concurred with the recommendations, and pointed out that it has enhanced the financial review process to ensure that all reviewers are accountants or certified public accountants.  Looking ahead, the OIG will be conducting a similar analysis for Round 2 of competitive bidding; this analysis may include an analysis of CMS’s procedures for ensuring supplier compliance with applicable state licensure requirements (depending on the results of an ongoing limited scope review).

The GAO issued a broader review focusing on data from the second year of the Round 1 Rebid contracts, covering the Round 1 Rebid’s effects on Medicare beneficiaries, contract suppliers, and non-contract suppliers. Among other things, the GAO observed that:

  • The number of beneficiaries furnished DME items included in the competitive bidding program generally decreased more in CBAs than in demographically similar “comparator” areas. CMS suggests that such declines may be attributable to reduced inappropriate usage of DME and do not necessarily reflect beneficiary access issues. In fact, CMS stated in comments on the report that its “sophisticated real-time claims monitoring system has continuously found that beneficiary access to all necessary and appropriate competitive bid items has been preserved since the program began” – a conclusion generally disputed by industry.
  • A small number of contract suppliers generally had a large proportion of the market share in the nine competitive bidding areas.
  • The total number of DME suppliers and Medicare allowed charges decreased more in CBAs than in the comparator areas. For instance, the number of suppliers with Medicare allowed charge amounts of $2,500 or more per quarter decreased an average of 27% in the CBAs compared to 5% in the comparator areas.
  • The number of grandfathered suppliers had so diminished that CMS was no longer monitoring them after the second quarter of 2012.
  • The program did not appear to have adversely affected beneficiary access to covered items, although additional monitoring would be needed to monitor the impact of the national mail-order diabetic testing supplies program and Round 2.

CMS Seeking Comments on Supervision Levels for Select Hospital Outpatient Services

CMS has released its preliminary decisions on potential changes to outpatient supervision level requirements for a number of medical services in response to recommendations made last month by the Hospital Outpatient Payment (HOP) Panel. Notably, CMS proposes not to change the supervision level from direct to general for several codes describing injection and intravenous infusion of chemotherapy or other highly complex drugs or complex biological agents. While CMS is proposing to maintain the direct supervision standard for chemotherapy administration, the agency is raising the question of whether to distinguish the supervision level between initial and subsequent administrations of a given chemotherapeutic or biological agent. CMS will accept comments on the preliminary supervision level determinations until April 30, 2014, and final decisions will be effective on July 1, 2014.

HHS Releases HIPAA Security Risk Assessment Tool

HHS has developed a Security Risk Assessment (SRA) tool to help providers comply with a Health Insurance Portability and Accountability Act (HIPAA) requirement that covered entities conduct a risk assessment to ensure compliance with HIPAA’s administrative, physical, and technical safeguards and to determine where electronic protected health information could be at risk. The SRA tool is intended to help entities regulated under HIPAA better understand potential vulnerabilities and identify safeguards that they could institute.

HHS OIG Identifies "Top 25" Priorities

The OIG has released its “Compendium of Priority Recommendations,” which lists 25 priority issues for which the OIG has open recommendation and that, if implemented, would best protect the integrity of HHS programs. The 25 top priorities are as follows:

  • Medicare Policies and Payments: address wasteful Medicare policies and payment rates for clinical laboratories, hospitals, and hospices; improve controls to address improper Medicare billings by community mental health centers, home health agencies, and skilled nursing facilities; detect and recover improper Medicare payments for services to incarcerated, unlawfully present, or deceased individuals; maximize recovery of Medicare overpayments; improve monitoring and reconciliation of Medicare hospital outlier payments; ensure that Medicare Advantage Organizations are implementing programs to prevent and detect waste, fraud, and abuse; and improve controls to address questionable billing and prescribing practices for Part D prescription drugs.
  • Medicare Quality of Care and Safety Issues: address adverse events in hospital settings; improve care planning and discharge planning for beneficiaries in nursing home settings; address harm to patients, questionable resident hospitalizations, and inappropriate drug use in nursing homes; improve nursing home emergency preparedness and response; and ensure hospice compliance with Medicare conditions of participation.
  • Medicaid Program Policies and Payments: ensure that state claims and practices do not inappropriately inflate federal reimbursements; ensure that states prevent, detect, and recover improper payments and return the federal share of recoveries to the federal government; assist states to better align Medicaid drug reimbursements with pharmacy acquisition costs; ensure that Medicaid Information Systems are fully functional; and address Medicaid managed care fraud and abuse concerns.
  • Medicaid Quality of Care and Safety Issues: ensure that Medicaid home- and community-based care service providers comply with quality and safety requirements; and ensure that States improve utilization of preventive screening services for eligible children.
  • Oversight of Food Safety: improve oversight of dietary supplements; and improve oversight of food inspections and traceability.
  • HHS Grants and Contracts: improve oversight of grantee compliance, quality assurance, and conflicts of interest; and improve oversight of Medicare contractor performance and conflicts of interest.
  • HHS Financial Stewardship: reduce improper payments and fraud; and correct deficiencies found in financial statement audits.

Note that some of these recommendations would require additional authority or other legislative change.  

RACs Correct $2.4 Billion in Medicare Claims in FY 2012

CMS has released data on Recovery Audit Contractor (RAC) operations fiscal year 2012. Key findings included the following:

  • In FY 2012, Medicare fee-for-service (FFS) RACs collectively identified and corrected 1,272,297 claims for improper payments, which resulted in $2.4 billion in improper payments being corrected ($2.3 billion in overpayments/$109.4 million in underpayments). Subtracting fees, costs, and first level appeals, the Medicare FFS Recovery Audit Program returned over $1.9 billion to the Medicare trust funds.
  • The Part D RAC’s initial review focused on identifying improper payments for prescriptions written by excluded prescribers or filled by excluded pharmacies beginning with contract year 2007. Recoupment of approximately $2 million in overpayments began in the first quarter of FY 2013 for those plans identified in the Part D RAC's initial audit review. The Part D RAC is continuing its review of excluded providers and pharmacies for contract years 2008 and 2009. In addition, CMS posted a notice on April 4, 2013, seeking potential contractors to perform Part C RAC activities.
  • As of September 30, 2012, 36 states had implemented Medicaid RAC programs, and other states are in various stages of preparation. For FY 2012, the states have recovered a total federal and state share combined amount of $95.64 million. CMS expects recoveries to increase as more states have fully operational State Medicaid RAC programs.

As previously reported, CMS has “paused” its RAC audits in preparation for the procurement of new RAC contracts and to “allow CMS to continue to refine and improve the Medicare Recovery Audit Program.”

OIG Report: Questionable Billing for Medicare Electrodiagnostic Tests

The OIG has issued a report examining questionable Medicare billing for electrodiagnostic tests, which are used to evaluate patients who may have nerve damage and which the OIG has identified as an area vulnerable to fraud, waste, and abuse. According to the OIG, 4,901 physicians had questionable billing for Medicare electrodiagnostic tests in 2011, based on seven measures of questionable billing developed by the OIG (e.g., physicians with an unusually high percentage of electrodiagnostic test claims using modifier 59 or 25, physicians with an unusually high average number of miles between the physicians’ and beneficiaries’ locations, and physicians with an unusually high average number of electrodiagnostic test claims for the same beneficiary on the same day). These questionable claims totaled $139 million in 2011, with physicians in the New York, Los Angeles, and Houston areas having the highest total questionable billing. In response to these findings, the OIG recommend that CMS: increase its monitoring of billing for electrodiagnostic tests; provide additional guidance and education to physicians regarding electrodiagnostic tests, and take appropriate action regarding physicians identified as having inappropriate or questionable billing. 

OIG Faults CMS for Incorrect Medicare Payments for Hospital Clinic Visits

The OIG estimates that CMS made $7.5 million in incorrect Medicare payments to hospitals in 2010 and 2011 for outpatient clinic visits, in part because of errors in identifying patients as “new” versus “established.” According to the OIG, hospitals attributed the incorrect payments to clerical errors, staff not fully understanding Medicare billing requirements, reliance on codes selected by the physician, or billing systems that could not identify established patients. The OIG recommends that CMS work with the Medicare administrative contractors (MACs) to recover incorrect payments; provide additional guidance to hospitals on billing clinic visits for new or established patients; and instruct hospitals on the need for stronger compliance controls.

OIG Recommends Adjustments to Medicare ESRD Drug Payment Policies

The OIG recently offered recommendations to CMS on how to update Medicare payments to end stage renal disease (ESRD) facilities for drugs used by dialysis patients. Based on a review of ESRD drug prices in the first quarter of 2012, the OIG concluded that independent dialysis facilities can purchase ESRD drugs for less than the levels provided in the ESRD base rate (9% below, in the aggregate), but average acquisition costs for hospital based dialysis facilities exceeded the reimbursement amounts (5% above, in the aggregate). Thus the OIG cautioned that any reductions to the ESRD base rate could potentially harm hospital-based dialysis facilities. While dialysis facilities’ average acquisition costs for the majority of drugs under review have decreased over the last 3 years, the average costs for epoetin alfa (which represented more than three-quarters of drug costs in responding facilities) have increased by at least 17%. The OIG also determined that the concluded that the Producer Price Index (PPI) for Prescription Drugs was not an accurate predictor of cost changes for most drugs under review. In addition to rebasing the ESRD base rate to reflect current trends in drug acquisition costs (as is required by law), the OIG recommends that CMS (1) distinguish payments in the ESRD base rate between independent and hospital-based dialysis facilities, and (2) consider updating the ESRD payment bundle using a factor that takes into account drug acquisition costs.

CMS Announces System to Collect Hospice Care Data Beginning July 1, 2014

On April 8, 2014, CMS published a notice announcing that it is establishing a new “system of records” to collect data to support the Hospice Quality Reporting Program. The new “Hospice Item Set” (HIS) is a standardized mechanism for abstracting data from a patient’s medical record to confirm that the appropriate assessments were made and concerns were addressed for the following domains of care: (1) Pain; (2) Respiratory Status; (3) Medications; (4) Patient Preferences; and (5) Beliefs & Values. The notice is effective on May 8, 2014, and comments will be accepted until that date. Beginning July 1, 2014, hospices will be required to submit two HIS records for each patient admitted to their organization: an HIS-Admission record and an HIS-Discharge record. 

April Congressional Hearings

Recent Congressional hearings on health policy issues include the following:

  • House Energy and Commerce Committee hearings on the “Helping Families in Mental Health Crisis Act”; the FDA’s proposed changes to generic drug labeling; and legislation intended to improve predictability and transparency in Drug Enforcement Agency and FDA regulation (H.R. 4299, H.R. 4069, and H.R. 4250).
  • House Ways and Means Health Subcommittee hearing on final Treasury Department regulations implementing the employer mandate and employer information reporting requirement provisions of the ACA..

In addition, on April 9, 2014, the Senate Health, Education, Labor and Pensions Committee is holding a hearing on “Addressing Primary Care Access and Workforce Challenges: Voices from the Field.”

Children's Hospital GME Reauthorization Act Signed

On April 7, 2014, President Obama signed into law S. 1557, the Children’s Hospital Graduate Medical Education Support Reauthorization Act, which provides funding to children’s hospitals for their pediatric medical residency programs.

CMS Extends Deadline for Individuals to Enroll in Health Insurance through Exchanges

CMS has extended the Affordable Care Act (ACA) insurance enrollment period for individuals (1) who have had difficulty signing up for a health insurance plan through an Affordable Insurance Exchange by March 31, 2014, or (2) who have not signed up by March 31 due to a wide range of circumstances. First, in a March 26, 2014 document, CMS announces it has established a “special enrollment period” for individuals who cannot complete the enrollment process “despite their best efforts” for reasons such as “high consumer traffic across various consumer enrollment channels…leading up to the March 31 deadline.” Provided that consumers who were “in line” pay their first month’s premium by the deadline set by their chosen insurance company, CMS anticipates that enrollments made in an unspecified time period after March 31 will have a May 1 coverage effective date. Consumers who receive a special enrollment period for being “in line” and select new coverage within the timeframes outlined in the guidance will be able to claim a hardship exemption from the shared responsibility payment for the months prior to the effective date of their coverage.

CMS also has compiled all of the categories CMS has identified to date that warrant special enrollment periods after the end of the March 31 open enrollment period, including situations involving: certain exceptional circumstances; misinformation, misrepresentation, or inaction by entities providing formal enrollment assistance; enrollment error; system errors related to immigration status; display errors on Marketplace website; Medicaid/CHIP - Marketplace transfer problems; error messages; unresolved casework; victims of domestic abuse; or other system errors that hindered enrollment completion.

President Signs Medicare Physician Fee Schedule/SGR Patch with Numerous Health Policy Provisions

This post was written by Debra McCurdy, Paul Pitts, Gail Daubert, Thomas Greeson, Susan Edwards, and Katie Hurley.

On April 1, 2014, President Obama signed into law H.R. 4302, the “Protecting Access to Medicare Act of 2014” (“the Act”). The Act includes a one-year Medicare physician fee schedule fix that averts a nearly 24 percent payment cut set for April 1, 2014, but which falls far short of earlier hopes for full repeal of the current sustainable growth rate (SGR) formula. The Act also includes numerous other Medicare payment and policy changes, including skilled nursing facility value-based purchasing provisions, reforms to the physician fee schedule relative valuation process, a new framework for clinical laboratory payments, a variety of changes impacting imaging services, changes in the exceptions for long term care hospitals, and extension of certain expiring provisions. In other areas, the bill includes a one-year delay in the transition to ICD-10, changes to the timetable for Medicaid disproportionate share hospital cuts, and “front-loading” of the 2024 Medicare sequestration reduction.

For more information, read our summary of major provisions of the Act.

FDA Proposal Amends Medical Device Classification Rules

This post was written by Jennifer Pike.

On March 25, 2014, the Food and Drug Administration (FDA) published a proposal to amend its regulations governing the classification and reclassification of medical devices. In addition to conforming the regulations to recent changes made by the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), the proposed rule makes changes unrelated to FDASIA. Among other changes to 21 CFR Part 860, FDA proposes to:

  • Amend several definitions at 21 CFR § 860.3, including the definitions of Class I, Class II and Class III to reflect the key principle underlying device classification that a reasonable assurance of safety and effectiveness is necessary for all three classes, but that the level of regulation necessary to provide such assurance is specific to the level of risk.
  • Amend the definition of Class III to clarify which devices fall in this category.
  • Establish special controls for Class II devices by replacing the term “performance standards” in 21 CFR § 860.7.
  • Amend 21 CFR § 860.84 to remove from the classification process the requirement to answer the classification questionnaire and provide information using the supplemental data sheet.
  • Revise the procedure at 21 CFR § 860.130 to reflect the FDASIA requirement that devices reclassified under 513(e) of the Food, Drug and Cosmetic Act be reclassified using an administrative order procedure.
  • Revise the process under 21 CFR § 860.133 for the filing of a premarket approval for Class III preamendment devices to conform to FDASIA.

Comments to the proposed rule may be submitted in writing, or at www.regulations.gov, on or before June 23, 2014.

Reed Smith Hosting Washington Health Care Conference: Focus on Post-Acute Care on April 4, 2014 - One Week Left to Register

On April 4th, 2014, Reed Smith will host its inaugural Washington Health Care Conference at The Mayflower Renaissance Hotel in Washington, D.C. With a keynote from Dr. Norman Ornstein, this year’s conference will focus on post-acute care, bringing together leading industry professionals for a discussion on several important issues, including:

Governing in Polarized America: The Prospects for Policy in 2014 and Beyond (Keynote)

  • Dr. Norman Ornstein, Resident Scholar, American Enterprise Institute, and weekly columnist for National Journal and The Atlantic

Policy discussion on episodic care, bundling models, and alternative payment and delivery systems

  • Mike Cheek, Vice President for Medicaid and Long Term Care Policy, American Health Care Association
  • Judy Feder, Professor, Georgetown University McCourt School of Public Policy, and Urban Institute Fellow
  • Dr. Barbara Gage, Fellow, Managing Director, Engelberg Center for Health Care Reform, Brookings Institution
  • Dr. Vincent Mor, Ph.D., Florence Pirce Grant Professor of Community Health, Public Health Program, Brown University School of Medicine

Wall Street perspective: the current appetite for deals

  • Jay Barnes, Senior Vice President, Healthcare Investment Banking, Jefferies LLC

Hill briefing on Medicare legislation

  • Cate McCanless, Senior Policy Advisor, Brownstein Hyatt Farber Schreck

Limited seating is still available for this complimentary program. If you are interested in registering, please email Lindsay Korenich at lkorenich@reedsmith.com. For more information about this conference, click here.

New Postings on the Reed Smith Health Industry Washington Watch Blog

The Reed Smith Health Industry Washington Watch blog has been updated to report on recent health policy developments, including the following:

  • Regulatory Developments. The Administration has issued several regulations making changes to operational policies, payment provisions, and other standards applicable to health plans and Health Insurance Exchanges under the Affordable Care Act. CMS also has issued a final rule that increases Medicare payments for low-volume hospitals.
     
  • Other CMS Developments. Recent CMS announcements have addressed: ACA insurance coverage and exchange policies; the Medicare electronic health record “Meaningful Use” hardship exception; a new “Medicare Care Choices Model” to allow certain hospice patients to seek curative care; Medicare payment for hospice enrollees' drug expenses; an upcoming deadline for using the revised 1500 form for Medicare paper claims; Medicare Part B drug payment files; and Medicare inpatient admissions criteria.
     
  • Legislative Developments. The clock is winding down for Congress to pass Medicare physician fee schedule reform legislation before steep payment cuts are triggered, and Congressional hearings have examined health policy issues.
     
  • Fraud & Abuse Developments. The OIG has released its Annual Report on Medicaid Fraud Control Unit Activities, along with reports on Medicare Part B drug pricing and diabetic test strip cost and compliance concerns. Medicare contractors have issued a joint open letter to physicians warning about DMEPOS Supplier “Marketing Schemes."
     
  • Odds & Ends. MedPAC and MACPAC have issued reports to Congress making Medicare and Medicaid payment policy recommendations, respectively.
     
  • Health Industry Events. Upcoming CMS events will focus on HCPCS coding applications, clinical laboratory payments, and the Medicare Shared Savings Program.

MedPAC Issues 2014 Report to Congress on Medicare Payment Policy

The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on Medicare payment policy, including payment update recommendations for all the major Medicare fee-for-service payment (FFS) systems, limited recommendations related to the Medicare Advantage (MA) program, and a status report on the Medicare Part D program. The following are highlights of the recommendations for 2015 (many of which were recommended previously):

  • MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates, concurrent with two changes that would institute site-neutral payments among settings. First, Congress should direct the HHS Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for long-term care hospital (LTCH) services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients.
  • Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory updates that includes a higher update for primary care services than for specialty care services. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments from overpriced to underpriced services; and relative value unit reductions to achieve fee schedule savings.
  • Congress should eliminate the ambulatory surgical center (ASC) payment update for 2015, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
  • Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs. Moreover, Congress should direct the Secretary to reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization during Medicare-covered stays.
  • MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use. In addition, Congress should direct the Secretary to reduce payments to home health agencies with relatively high risk-adjusted rates of hospital readmission.
  • Congress should eliminate the update to hospice rates for FY 2015 and adopt a series of previous MedPAC payment reform recommendations.
  • Congress should eliminate the 2015 updates for outpatient dialysis services and direct the Secretary to establish a quality measure that assesses poor outcomes related to anemia in the End-Stage Renal Disease Quality Incentive Program, revise the low-volume adjustment, and audit dialysis facilities’ cost reports.
  • Congress should eliminate the FY 2015 payment updates for inpatient rehabilitation facilities and LTCHs.
  • With regard to Medicare Advantage (MA), MedPAC recommends that Congress: (1) direct the Secretary to determine payments for employer-group MA plans in a manner more consistent with the determination of payments for comparable non-employer group plans; and (2) include the Medicare hospice benefit in the MA benefits package beginning 2016.

Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.

As End of 3-Month SGR Patch Approaches, Hope Fading for Permanent Fix This Month

The clock is winding down for Congress to pass Medicare sustainable growth rate (SGR) formula reform legislation before the latest temporary spending patch expires at the end of the month and doctors again face steep cut in Medicare physician fee schedule (MPFS) payments.  While there had been high hopes for a permanent reform once key committee leaders reached agreement on a bipartisan, bicameral SGR reform bill, financing the roughly $180 billion package (including funding for various expiring Medicare provisions) has been the sticking point. When the House of Representatives approved its version of the bill on March 14 (H.R. 4015), it relied on savings attributed to repeal of the ACA individual insurance mandate to finance the bill – a proposal which drew a veto threat from the Administration and which will not be considered by the Senate. On the other hand, Senate Finance Committee Chairman Wyden has suggested offsetting the costs by capturing savings from “overseas contingency operations” funds (future war spending that is not expected to be expended) or not offsetting the costs – neither of which would pass the House.  Given this impasse, lawmakers are exploring another temporary fix, potentially through the end of 2014, with offsets for the smaller package likely to come from reductions in other Medicare spending. If Congress does not reach an agreement, MPFS payments will be subject to an approximate 24% cut on April 1, 2014 (although CMS announced in the final MPFS rule the conversion factor would be reduced by 20.1%, the Congressional Budget Office estimates that given other adjustments in the rule, the effective update to physician payments for 2014 will be a reduction of 23.7% if the rule goes into effect).

CMS Finalizes 2014 Policy on Medicare Payment for Hospice Enrollees' Drug Expenses

On March 10, 2014, CMS issued a final memorandum outlining the criteria it will use to determine payment responsibility for drugs for Medicare hospice beneficiaries, effective May 1, 2014. CMS cites the statutory requirement that the hospice cover all drugs or biologicals for the palliation and management of the terminal and related conditions; these drugs are excluded from coverage under Medicare Part D. For prescription drugs to be covered separately under Part D when the enrollee has elected hospice, the drug must be for treatment of a condition that is completely unrelated to the terminal condition or related conditions. Since CMS expects drugs will rarely be covered under Part D for hospice beneficiaries, CMS is requiring Part D sponsors to place beneficiary-level prior authorization requirements on all drugs for hospice beneficiaries to determine whether the drugs are coverable under Part D. This will require the hospice and/or the prescriber to make a case for why each drug is not related to the terminal illness or related conditions before sponsors will pay for the drug. The agency also recommends that hospice providers initiate the prior authorization process prior to submission of a Part D claim, as described in the memo.

CMS requires the Part D sponsor and hospice to negotiate the retrospective recovery of amounts paid if the sponsor has paid for drugs after the effective date of the hospice election, but prior to receipt of notification from CMS. If the drug is determined to be a hospice liability, the parties should negotiate repayment. In situations where the beneficiary is liable (e.g., drugs the patient was taking prior to the hospice election for the treatment -- as opposed to the palliation and management -- of the terminal illness, that are not covered by the hospice but that the beneficiary chooses to continue taking), the sponsor should send a recovery notice to the beneficiary. CMS notes that there are still outstanding issues, primarily for 2015 and beyond, that will be subject to future rulemaking.

CMS Public Meeting on Clinical Lab Codes (July 14)

CMS is holding a public meeting on July 14, 2014 to receive comments on the appropriate basis for establishing payment amounts for new or substantially revised HCPCS codes being considered for Medicare payment under the clinical laboratory fee schedule for 2015. The meeting also provides a forum for those who submitted reconsideration requests regarding final determinations made last year on new test codes.

Obama Administration Continues to Update ACA Insurance Exchange and Health Plan Regulations

The Administration has issued numerous regulations recently that make additional changes to operational policies, payment provisions, and other standards applicable to health plans and Health Insurance Exchanges (also called Marketplaces) under the Affordable Care Act (ACA). Highlights include the following:

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