CMS Updates Medicare Part B Drug Pricing Files

CMS has posted its October 2014 update to the Medicare average sales price (ASP) drug pricing files, which contain the payment amounts that CMS will use to pay for Part B covered drugs for the fourth quarter of 2014. CMS notes that prices for the top Part B drugs decreased by 0.4% on average this quarter. 

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. Recent CMS regulations have addressed the EHR meaningful use timeline and the ACA Marketplace eligibility redetermination/renewal process. HHS has issued regulations on ACA contraception coverage requirements. FDA is seeking comments on informed consent in clinical trials. OMB has cleared an OIG proposed rule that would expand the OIG’s fraud and abuse authorities.
  • Other CMS Developments. CMS has made additional changes to the Sunshine Act “Open Payments” timeline, and it has implemented fingerprint-based background checks for "high-risk" providers and suppliers. CMS also has offered to settle certain short-stay hospital claims, and it has announced the 2015 Medicare ambulance update factor. 
  • OIG & GAO Reports. Recent OIG reports have focused on nursing facility abuse/neglect reporting practices and Medicaid drug rebate disputes between manufacturers and states. GAO reports have addressed Medicare contractor postpayment reviews and the accuracy of Medicare Advantage encounter data.
  • Legislative Developments. Upcoming House hearings will address ACA implementation and ways to accelerate medical innovation.
  • Health Industry Events. CMS is hosting ICD-10-CM/PCS Coordination and Maintenance Committee meetings and a call on how to avoid 2016 negative payment adjustments under Medicare quality reporting programs. FDA is hosting a workshop on 3-D printing of medical devices.
  • @ReedSmithHealth is on Twitter. For the latest news on health policy issues involving Medicare, Medicaid, HIPAA, OIG, FDA, and more, follow us at @ReedSmithHealth.

OMB Clears OIG Proposed Rule on Anti-Kickback Safe Harbors, CMPs for Beneficiary Inducements & Gainsharing

The Office of Management and Budget (OMB) has cleared an HHS Office of Inspector General (OIG) proposed rule that would expand the OIG’s Medicare and state health care program fraud and abuse authorities. Specifically, on September 4, 2014, the OMB gave final regulatory clearance to an OIG proposed rule that would add new anti-kickback safe harbors to reflect statutory changes, codify the ACA’s definition of "remuneration," and add a gainsharing civil monetary penalty (CMP) regulation. The proposed rule should be published in the Federal Register in the near future.

CMS Final Rule Revises EHR Meaningful Use Timeline

The Centers for Medicare & Medicaid Services (CMS) and the Office of the National Coordinator for Health Information Technology (ONC) have issued a final rule that gives providers additional options in how they use certified electronic health record (EHR) technology (CEHRT) to meet meaningful use requirements for the 2014 EHR Incentive Program reporting period. Under the final rule, eligible providers can use the 2011 Edition CEHRT or a combination of 2011 and 2014 Edition CEHRT for an EHR reporting period in 2014. All eligible professionals, eligible hospitals, and critical access hospitals will be required to use the 2014 Edition CEHRT in 2015. Among other things, the final rule also extends meaningful use Stage 2 through 2016 for certain providers (Stage 2 meaningful use criteria focus on exchange of clinically relevant information between providers and promote patients’ secure online access to their health information). The rule also provides that Stage 3 will begin in 2017 for providers who first became meaningful EHR users in 2011 or 2012 (under Stage 3, meaningful use will include demonstrating improvement in quality of health care). 

Medicare Ambulance Update Factor for CY 2015

CMS has announced that the 2015 Medicare ambulance update factor for determining the payment limit for Medicare ambulance services will be 1.4%. This update reflects the a 2.1% increase in the consumer price index for all urban consumers (CPI-U), which is partially offset by a 0.7% productivity adjustment in accordance with the ACA.

GAO Assesses Accuracy of Medicare Advantage Encounter Data

A new GAO report reviews CMS’s collection of Medicare Advantage (MA) encounter data, which includes detailed information on services and items furnished to enrollees. CMS plans to use MA encounter data in addition to current diagnosis data to risk adjust capitated payments to MA organizations in 2015. The GAO determined that CMS has not yet developed requirements for completeness and accuracy of the encounter data, nor has it performed statistical analyses that could detect complex data validity issues. The GAO recommends that CMS establish specific plans for using MA encounter data and thoroughly assess data completeness and accuracy before using the data to risk adjust payments or for other purposes.

GAO Calls for Improvements to Medicare Contractor Postpayment Review Process

The Government Accountability Office (GAO) has issued a report entitled “Medicare Program Integrity: Increased Oversight and Guidance Could Improve Effectiveness and Efficiency of Postpayment Claims Reviews."  In the report, the GAO assesses CMS policies and procedures to prevent certain Medicare contractors (Medicare Administrative Contractors, Zone Program Integrity Contractors, Recovery Auditors, and the Comprehensive Error Rate Testing contractor) from conducting duplicative postpayment claims reviews. According to the GAO, while CMS has taken steps to avoid duplicative reviews, the agency “neither has reliable data nor provides sufficient oversight and guidance to measure and fully prevent duplication.” Since ineffective requirements and lack of oversight in this area create “an unnecessary administrative and financial burden for Medicare-participating providers and the Medicare program,” the GAO recommends that CMS provide additional oversight and guidance regarding contractor claims review data collection, duplicative reviews, and contractor correspondence with providers.

CMS Call: How to Avoid 2016 Negative Payment Adjustments under Medicare Quality Reporting Programs

On September 17, 2014, CMS is hosting a call on negative payment adjustments that could apply under several Medicare quality reporting programs in 2016.  Specifically, the call will offer instructions on how eligible professionals and group practices can avoid the 2016 Physician Quality Reporting System negative payment adjustment, satisfy the clinical quality measure component of the EHR Incentive Program, and avoid the automatic CY 2016 Value-Based Modifier downward payment adjustment.

Upcoming House Hearings to Address ACA Implementation, Accelerating Medical Innovation

On September 9, 2014, the House Energy and Commerce Subcommittee on Health is holding a hearing entitled “21st Century Cures: Examining the Regulation of Laboratory Developed Tests.” The hearing will focus on the FDA’s recent guidance on the regulation of lab developed tests and its “impact on innovation and the practice of precision medicine.” The panel will also host a “roundtable” discussion September 10 at which HHS Secretary Burwell, NIH Director Collins, FDA Commissioner Hamburg, and other experts will address opportunities to accelerate the discovery, development, and delivery of new cures and treatments. In addition, two hearings are scheduled on ACA implementation. On September 10, the House Ways and Means Subcommittee on Health will review ACA Marketplace administration, including verification of tax credit eligibility. On September 18, the House Oversight and Government Reform Committee will address Healthcare.gov transparency, accountability, and information security.

OIG Reviews Nursing Facility Abuse/Neglect Reporting Practices

The OIG has issued a report reviewing the extent to which Medicare- and Medicaid-certified nursing facilities comply with federal requirements related to reporting allegations of resident abuse or neglect. For the purposes of this report, the OIG uses the term “nursing facility” (NF) to refer to both Medicare skilled nursing facilities and Medicaid nursing facilities. Based on a sample of 250 NFs, the OIG estimates that:

  • 85% of NFs reported at least one allegation of abuse or neglect to OIG in 2012. The OIG notes that for the purposes of this study, it did not determine whether the reported allegations were substantiated.
  • 76% of NFs maintained policies that address federal regulations for reporting both allegations of abuse or neglect and investigation results.
  • 61% of NFs had documentation supporting the facilities’ compliance with regulations under Section 1150B of the Social Security Act requiring NFs to (1) annually notify covered individuals (i.e., owners, operators, employees, managers, agents, or contractors of nursing facilities) of their obligation to report to the appropriate entities any reasonable suspicion of a crime, and (2) clearly post a notice specifying employees’ rights to file a complaint under Section 1150B.
  • 53% of allegations of abuse or neglect and the subsequent investigation results were reported, as required.

The OIG recommends that CMS ensure that nursing facilities: (1) maintain policies related to reporting allegations of abuse or neglect; (2) notify covered individuals of their obligation to report reasonable suspicions of crimes; and (3) report allegations of abuse or neglect and investigation results in a timely manner and to the appropriate individuals. 

CMS Offers Settlement to Acute Care Hospitals, CAHs to Resolve Patient Status Denial Appeals

In an effort to reduce the backlog in Medicare appeals related to certain short-stay hospital claims, CMS is offering an "administrative agreement" providing partial payment to hospitals that drop their appeals. Specifically, CMS would provide a payment equal to 68% of the net payable amount to acute care hospitals or critical access hospitals (CAH) willing to resolve their pending appeals (or waive their right to request an appeal) for inpatient-status claim denials with dates of admissions prior to October 1, 2013, and where the patient was not a Part C enrollee. Such denials involve services that may have been reasonable and necessary, but the contractor contends that treatment on an inpatient basis was not. A hospital may not choose to settle some claims and continue to appeal others, and certain hospitals could be excluded from participating in the settlement based on pending False Claims Act investigations. Also note that PPS-excluded hospitals are not eligible to participate in this program. CMS is encouraging eligible hospitals with such claim denials "to make use of this administrative agreement to alleviate the burden of current appeals on both the hospital and Medicare system." Hospitals should send their request for agreement by October 31, 2014 or request an extension from CMS. CMS is hosting a national provider call on September 9, 2014 to discuss the settlement process.

CMS Finalizes ACA Marketplace Eligibility Redetermination/Renewal Process for 2015

On September 5, 2014, CMS is publishing a final rule that specifies additional options for annual eligibility redeterminations and renewal and re-enrollment notice requirements for qualified health plans (QHP) offered through the ACA insurance Exchange/Marketplace, beginning with annual redeterminations for coverage for plan year 2015. The rule provides an auto-enrollment process intended to provide current Marketplace consumers with a simple way to keep their 2014 QHP, although CMS encourages consumers to reevaluate their plan options and financial assistance eligibility for 2015. The rule also gives state-based Marketplaces flexible options to implement annual redetermination procedures.

HHS Revises ACA Contraception Coverage Requirements

The Obama Administration has issued two regulations addressing coverage of contraceptive services under QHPs in response to recent court rulings (in particular the Supreme Court ruling in Burwell v. Hobby Lobby Stores, Inc.) addressing certain religious objections to such coverage. First, an interim final rule provides an additional pathway for nonprofit organizations eligible for a religious accommodation to provide notice of their religious objection to covering contraceptive services. These eligible organizations are permitted to notify the Department of Health and Human Services (HHS) in writing of their religious objection to providing contraception coverage. HHS and the Department of Labor will in turn notify insurers and third party administrators so the organization’s enrollees will receive separate coverage for contraceptive services, with no additional cost to the enrollee or the employer. The interim final rule is effective August 27, 2014; comments will be accepted until October 27, 2014.

The Administration also published a related proposed rule that would extend to certain “closely-held” for-profit entities (such as Hobby Lobby) the same accommodation that is available to non-profit religious organizations with religious objections to coverage of contraceptive services. Under the proposed rule, these companies would not be required to contract, arrange, pay or refer for contraceptive coverage to which they object on religious grounds. Payments for contraceptive services provided to participants and beneficiaries in the eligible organization's plan would be provided separately by an issuer or arranged separately by a third party administrator, consistent with existing regulations for certain religious employers. Comments on the proposed rule are due by October 21, 2014.

House Panel to Examine FDA Lab-Developed Test Policy

On September 9, 2014, the House Energy and Commerce Subcommittee on Health is holding a hearing entitled “21st Century Cures: Examining the Regulation of Laboratory Developed Tests.” The hearing will focus on the FDA’s recent guidance on the regulation of lab developed tests and its “impact on innovation and the practice of precision medicine.”

Medicaid Drug Rebate Disputes between Manufacturers & States are Limited, OIG Finds

A recent OIG report, “Medicaid Drug Rebate Dispute Resolution Could Be Improved,” focuses on the extent to which drug manufacturers and states disagree on the amount of money that manufacturers owe states in Medicaid rebates, and how such disputes are resolved. Most states providing data (29 of 31) estimated that only a small percentage of rebate dollars were disputed, such as when poor quality claims data leads to disputes regarding unit of measure conversions, physician-administered drugs, and ineligible drugs (e.g., drugs purchased under the 340B Drug Pricing Program and terminated drugs). States reported difficulties in providing data to resolve such disputes, and some state and manufacturer representatives expressed interest in greater CMS involvement in preventing and resolving disputes. To that end, the OIG recommends that CMS: work with states to improve the quality of claims data submitted by providers and pharmacies; help states obtain better data on ineligible drugs; facilitate states’ submission of standardized claims data, and establish a stronger role in dispute resolution.

More Changes to Sunshine Act "Open Payments" Timeline

On August 28, 2014, CMS announced the latest changes to the deadlines associated with the Sunshine Act “Open Payments" System review and dispute process resulting from additional system down-time. Specifically, because the system will be periodically unavailable on August 30 and September 5, CMS is making the following changes to the data review and correction periods:

  • Review and dispute (45 days): 7/14/2014 – 8/3/2014, 8/14/2014 – 9/10/2014 
  • Correction period (15 days): 9/11/2014 – 9/25/2014

CMS is still standing by its September 30, 2014 target date for public release of the data, although it remains to be seen whether continuing questions about the data integrity and the shrinking window to resolve all technical issues will permit CMS to meet this deadline.

* Note that CMS announced on September 9 that it was extending the review and dispute period for one more day, through September 11, 2014.

FDA Seeks Comments to Updated Guidance on Informed Consent in Clinical Trials

This post was written by Jennifer Pike and Vicki Morris.

Earlier this summer, the Food and Drug Administration (FDA) issued a draft 42-page "Informed Consent Information Sheet" that provides guidance for institutional review boards (IRBs), clinical investigators, and clinical trial sponsors on complying with the Agency’s informed consent regulations. Once finalized, the draft guidance will supersede FDA’s previous Information Sheet on this topic, "A Guide to Informed Consent," which was last updated over 15 years ago, in 1998.  The guidance, which is a compilation of FDA’s regulations and past guidances on informed consent, also reflects the Agency’s coordinated efforts with the Department of Health and Human Services (HHS) to facilitate consistency across informed consent requirements and policies among federal government agencies.

Broadly, the new guidance indicates FDA policy shifting towards enhanced informed consent processes. More narrowly, the draft guidance explains the various and often caveated elements of informed consent (including providing patients with a description of the trial, its risks, benefits, alternative treatments, confidentiality and compensation in the event of injury), depicts the detailed responsibilities of IRBs, clinical investigators and sponsors of clinical trials (including compliance with the process, elements and documentation of informed consent), and provides examples of recommended language to assist industry parties in complying with FDA’s informed consent regulations. FDA accomplishes this task by clarifying some aspects of existing guidance and creating additional guidance in new areas.

The following provides an overview of some of the draft guidance’s notable new and revised provisions.

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CMS Fingerprint-Based Background Checks are Underway - Impacting "High-Risk" Providers and Suppliers

CMS's long-awaited fingerprint-based background check screening process is underway for certain “high-risk” providers and suppliers participating in federal health care programs (specifically, Medicare, Medicaid, and the Children’s Health Insurance Program). Under CMS regulations, 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.

This week CMS announced that the fingerprint-based background check process was launched on August 6, 2014. CMS confirmed that not all providers and suppliers in the “high” screening category will be included in the first phase of the background checks. Fingerprint-based background checks eventually will be required, however, “for all individuals with a 5 percent or greater ownership interest in a provider or supplier that falls into the high risk category and is currently enrolled in Medicare or has submitted an initial enrollment application.”

Medicare Administrative Contractors will send letters to the applicable providers or suppliers listing all 5 percent or greater owners who are required to be fingerprinted, and applicable individuals will have 30 days from the date of the notification letter to be fingerprinted at one of at least three specified locations. Fingerprints will be forwarded to the FBI, which will compile the background history and share results with the Fingerprint-based Background Check (FBBC) contractor (Accurate Biometrics). The FBBC will provide CMS with a "fitness recommendation" for the individual indicating whether the criminal history record information contains enrollment violations or otherwise fails to meet CMS enrollment requirements; CMS will then make the final determination about the provider or supplier.

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. CMS has issued several final rules to update Medicare prospective payment systems (PPS) for FY 2015, including the Medicare inpatient PPS, the long-term care hospital PPS, the skilled nursing facility PPS, the inpatient rehabilitation facility PPS, the inpatient psychiatric facility PPS, and the hospice payment system. CMS is extending its current enrollment moratoria for new ground ambulance suppliers and home health agencies in designated areas. HHS has officially set October 1, 2015 as the date for ICD-10 implementation, and the IRS has issued ACA branded prescription drug fee regulations.
  • Other CMS Developments. CMS has revised Sunshine Act “Open Payments” system review and dispute deadlines amid concerns about data accuracy. Other CMS announcements involve innovative models for beneficiary engagement and behavioral insights, a Medicare Intravenous Immune Globulin (IVIG) demonstration, and the status of Recovery Audit Contractor reviews.
  • OIG & GAO Reports. Recent OIG reports have focused on utilization of HIV drugs under Medicare Part D and ACA Marketplace operations, and the OIG has posted guidance on its contractor self-disclosure program. GAO reports address federal program drug prices and Healtcare.gov contractor performance.
  • Legislative Developments. New health policy laws have been enacted and other bills are advancing through Congress, and the Ways and Means Committee is seeking comments on Medicare program integrity legislation.
  • Health Industry Events. CMS is hosting ICD-10-CM/PCS Coordination and Maintenance Committee meetings in September. FDA events will address 3-D printing of medical devices, implementation of Generic Drug User Fee Amendments, and biomarker development. 
  • @ReedSmithHealth is on Twitter. For the latest news on health policy issues involving Medicare, Medicaid, HIPAA, OIG, FDA, and more, follow us at @ReedSmithHealth.

CMS Revises Sunshine Act "Open Payments" System Review/Dispute Deadlines Amid Concerns about Data Accuracy

CMS has reopened the Open Payments system after it was taken offline temporarily to “resolve a data integrity issue.” According to a CMS press release, applicable manufacturers and group purchasing organizations (GPOs) had submitted intermingled data (e.g., wrong state license number or national provider identifier) for doctors with the same last and first names, which erroneously linked payments in the Open Payments system. CMS has enhanced its algorithms and validation checks in an attempt to resolve the issues and removed incorrect payment transactions. CMS states that it will remove the questionable data from the current review and dispute process and will not publish this data this year; according to multiple press reports, this has resulted in the removal of one-third of the records from the system.

CMS has also extended the Open Payments review and dispute deadline and the following 15-day corrections period deadline for each day the Open Payments system was offline. The review and dispute period now ends September 8, 2014, the correction period will run through September 9-23, 2014, and the public website launch date remains September 30, 2014.

CMS contends that its correction efforts underscores that it “is committed to ensuring the integrity of data made available to the public.” Nevertheless, the scope of the reported errors and the exclusion of millions of records raise broader questions about the accuracy and completeness of the database and heighten concerns about the potential for public and press misinterpretation of the incomplete data set.

ICD-10-CM/PCS Coordination and Maintenance Committee Meetings (Sept. 23-24)

CMS is hosting ICD-10-CM/PCS Coordination and Maintenance Committee meetings in September to provide a public forum to discuss proposed code changes to the ICD-10-CM and ICD-10-PCS. The meeting scheduled for September 23 will address procedure code issues, while the September 24 meeting is devoted to diagnosis code issues.

CMS Finalizes Medicare Hospice Payment Policies for FY 2015

On August 22, 2014, CMS will publish a final rule to update the Medicare hospice wage index for FY 2015 and make other payment and policy changes. CMS estimates that hospice payments will increase by 1.4% ($230 million) in FY 2015 compared to FY 2014 under the final rule. Specifically, CMS will update the hospice per diem rates by 2.1% (reflecting a 2.9% market basket increase that is reduced by 0.8 percentage points under ACA-mandated adjustments), but this update is partially offset by a 0.7 percentage point cut resulting from the use of updated wage data and CMS’s continued phase-out of its wage index budget neutrality adjustment factor. Hospices that fail to report quality data will have their market basket update reduced by 2 percentage points.

CMS is finalizing a number of policy proposals. For instance, the final rule requires hospices to file a beneficiary Notice of Election (NOE) within five calendar days after the effective date of hospice election (compared to three days in the proposed rule). If an NOE is not filed timely, the days from the effective date of election to the date of filing the NOE would be the financial responsibility of the hospice (unless there are exceptional circumstances). Likewise, CMS is requiring hospices to file a notice of termination/revocation within five (rather than the proposed three) calendar days of a beneficiary’s discharge or revocation, unless the hospice has already filed a final claim. The rule also, among other things: requires the hospice to identify the attending physician on the election form; revises the applicability of quality reporting penalties to new hospices; requires hospices to complete their hospice cap determinations within five months after the cap year but no sooner than 3 months after the cap period and remit any overpayments; and describes the development of the CAHPS® Hospice Survey.

OIG, GAO Reports Focus on Healthcare.gov Operations

The OIG has issued two reports on implementation of the ACA health insurance “Marketplaces.” The first report, “Marketplaces Faced Early Challenges Resolving Inconsistencies with Applicant Data,” looked at the extent to which the federal and state health insurance marketplaces ensured the accuracy of information submitted by insurance applicants, including information related to eligibility for premium tax credits and cost sharing reductions. According to the OIG, marketplaces were unable to resolve most data inconsistencies, particularly involving citizenship and income information (although the OIG cautions that inconsistencies do not necessarily indicate that incorrect information was provided or that financial assistance is inappropriate). The report recommends additional planning and oversight to resolve inconsistencies.

A related OIG report questions the effectiveness of internal controls implemented by the federal, California, and Connecticut marketplaces in ensuring that individuals were enrolled in qualified health plans (QHPs) according to federal requirements. In particular, the OIG identified deficiencies in internal controls that could limit the marketplaces’ ability to prevent the use of inaccurate or fraudulent information when determining applicant’s eligibility for enrollment in a QHP.  The OIG recommended steps to verify applicant data, determine enrollment and cost sharing assistance eligibility, and maintain and update enrollment data. 

Finally, the GAO released a report that concentrates on contractor performance related to the Healthcare.gov portal. The GAO points cost increases and delayed system functionality for the federally facilitated marketplace that resulted from CMS’s lack of effective planning, changing requirements and oversight gaps. GAO recommends that CMS take immediate steps to address contract costs, acquisition strategies, and use of oversight tools. In its response to the report, CMS discussed improvements it was making in the management of the Marketplace (including a stronger CMS management structure, an improved structure of Marketplace contracts, and a strengthened acquisition workforce). CMS expressed confidence that “its contractors will deliver the needed capabilities for the 2015 open enrollment period in a timely and cost-efficient manner.”

CMS Seeks Innovative Models on Beneficiary Engagement and Behavioral Insights

CMS is seeking input on potential initiatives to test innovative models that increase the engagement of Medicare, Medicaid, and/or Children’s Health Insurance Program (CHIP) beneficiaries in their health and health care. CMS is especially interested in models that use evidence-based social and behavioral insights to improve beneficiary involvement in behaviors and activities meant to improve their health status and outcomes. CMS will accept comments until September 15, 2014.

FDA Public Hearing on the Implementation of Generic Drug User Fee Amendments (Sept. 17)

This post was written by Jennifer Pike and Vicki Morris

On September 17, 2014 the Food and Drug Administration (“FDA”) is holding a public hearing at the College Park Marriot Hotel and Conference Center, in Hyattsville, MD, to discuss the Agency’s implementation of the Generic Drug User Fee Amendments of 2012 (GDUFA) and its obligations under GDUFA as set forth in the GDUFA Commitment Letter accompanying the legislation. The central purpose of GDUFA is to help speed the delivery of safe and effective generic drugs to the public and to reduce costs to industry. GDUFA requires manufacturers to pay a user fee to supplement FDA’s costs of reviewing generic drug applications and inspecting facilities. Per the GDUFA Commitment Letter, the user fees enable the Agency to reduce a backlog of pending applications, cut the average time required to review generic drug applications for safety, and increase risk-based inspections.

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CMS Issues FY 2015 Medicare SNF PPS Final Rule

This post was written by Susan Edwards.

The Centers for Medicare & Medicaid Services (CMS) published the final FY 2015 Medicare skilled nursing facility (SNF) prospective payment system (PPS) rule on August 5, 2014 (Final Rule). The Final Rule largely adopts the proposals set forth in the FY 2015 proposed SNF PPS rule (Proposed Rule). CMS estimates that the Final Rule will result in a $750 million increase in aggregate payments to SNFs during FY 2015 as compared to FY 2014. The Final Rule will implement a market basket update of 2%, resulting from a market basket increase of 2.5 percentage points, reduced by the Multifactor Productivity Adjustment of 0.5 percentage points, as required by the Affordable Care Act (ACA). Below we discuss highlights of the Final Rule, including: (1) the adopted wage index update; (2) revised change of therapy (COT) Other Medicare Required Assessment (OMRA) policy; (3) revisions to the Civil Money Penalties (CMP) regulations; and (4) CMS’s responses to comments regarding the agency’s observations on therapy trends.

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CMS Finalizes Medicare IPPS/LTCH PPS Update for FY 2015

On August 22, 2014, CMS is publishing a final rule to update the Medicare acute hospital inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2015, which begins October 1, 2014.  The following are highlights of the sweeping regulations.

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CMS Publishes Final FY 2015 Update to Medicare IRF PPS

On August 6, 2014, CMS published its final rule to update Medicare payment policies under the inpatient rehabilitation facility (IRF) PPS for FY 2015. Under the final rule, CMS expects aggregate Medicare payments to IRFs will increase by $180 million, or 2.4%, compared to 2014 levels. The standard payment conversion factor for discharges for FY 2015 is $15,198, up from $14,846 in FY 2014. The update to the conversion factor reflects a 2.9% market basket update, reduced by a -0.5% MFP adjustment and an additional -0.2 percentage point adjustment mandated by the ACA. CMS also is decreasing the outlier threshold amount for FY 2015 to $8,848 from $9,272 in FY 2014, which increases IRF PPS payments by about 0.2%. In addition, CMS adopted a freeze in the facility-level adjustment factors (e.g., adjustments for Low-Income Percentage, teaching status, and location in a rural area, if applicable) for FY 2015 and all subsequent years at FY 2014 levels while the effects of FY 2014 changes are evaluated.

In other policy areas, the final rule revises the list of impairment group codes that presumptively meet the “60 percent rule” compliance criteria; however, in response to public comments, CMS is delaying the effective date for these changes and revisions finalized in the FY 2014 IRF PPS final rule until compliance review periods beginning on or after October 1, 2015. In addition, the rule adds a therapy data item to the IRF patient assessment instrument. Beginning October 1, 2015, IRFs must record the total number of therapy minutes received and the type of therapy provided (i.e. individual, group, concurrent or co-treatment) during the first two weeks of an IRF stay. CMS also is revising the IRF Quality Reporting Program to update measures, add a reconsideration policy, and adopt a data accuracy validation policy. The final rule also discusses the transition from ICD-9-CM to ICD-10-CM for use on Medicare claims (although this transition has been put on hold temporarily as a result of the Protecting Access to Medicare Act of 2014).

IRS issues ACA Branded Prescription Drug Fee Regulations

The Internal Revenue Service has published final regulations that provide guidance on the annual fee imposed by the Affordable Care Act on covered entities engaged in the business of manufacturing or importing branded prescription drugs. The regulations describe the rules related to the fee, including how it is computed and how it is paid. The document also withdraws the Branded Prescription Drug Fee temporary regulations published August 18, 2011, and contains new temporary regulations regarding the definition of “controlled group” that apply beginning on January 1, 2015. The text of the temporary regulations also serves as the text of proposed regulations. Comments on the proposed regulations and requests for a public hearing must be received by October 27, 2014. Finally, the IRS also has issued Notice 2014-42, which provides additional guidance on the fee for 2015 and subsequent years.

CMS Issues Final Medicare Inpatient Psychiatric Facility PPS Rule for FY 2015

CMS has published a final rule that updates prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs) for FY 2015. Under the final rule, the federal per diem base rate will be increased by 2.1%, reflecting a market basket increase of 2.9%, offset by a 0.3 percentage point reduction and a productivity adjustment reduction of 0.5 percentage points (both reductions were mandated by the ACA). CMS also anticipates that the final update to the outlier fixed-dollar loss threshold amount will provide an additional 0.4% boost in overall payments to IPFs. In light of all payment policies, CMS estimates that total payments to IPFs under the final rule will increase by $120 million (2.5%) compared to FY 2014 payments. The final rule also, among other things, establishes a new methodology for updating the cost of living adjustment (consistent with the inpatient hospital methodology), expands quality measures under the IPF Quality Reporting Program, adopts coding changes related to comorbidity categories and unspecified codes, and discusses CMS’s future plans to propose an IPF-specific market basket. The final rule was published August 6, 2014.