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

On August 27, 2010, the Centers for Medicare & Medicaid Services (CMS) published a final rule that clarifies and expands the requirements that suppliers of durable medical equipment and prosthetics, orthotics, and supplies (DMEPOS) must meet to establish and maintain Medicare billing privileges. Among other things, the rule prohibits suppliers from sharing a practice location with any other Medicare supplier or provider, unless the practice location is: (1) where certain physicians or nonphysician practitioners furnish items to their own patients as part of their professional service; (2) where a physical or occupational therapists furnishes items to their own patients as part of their professional service; or (3) where a hospital, home health agency, skilled nursing facility, or other Part A provider that is enrolled in Medicare co-locates with a DMEPOS supplier that meets all other supplier standards and that is owned by that Part A provider and is a separate unit. The rule also imposes new physical facility requirements on suppliers, including square footage, accessibility, signage, and storage requirements (these rules also apply to “closed door” businesses such as a pharmacy or supplier providing services only to beneficiaries residing in a nursing home). Among other things, the rule also:

• Clarifies the prohibition on the direct solicitation of Medicare beneficiaries.
• Defines adverse final action and allows CMS to reopen all Medicare claims paid on or after the date of a final adverse action in order to establish an overpayment determination.
• Prohibits suppliers from contracting with another individual to perform licensed services, with certain exceptions.
• Requires the use of a primary business telephone, and prohibits the use of cellular phones, beepers, pagers, or answering machines/answering services as the primary business telephone.
• Mandates that suppliers obtain oxygen from a state-licensed oxygen supplier (as applicable in the state).
• Requires suppliers to maintain ordering and referring documentation consistent with regulations.
• Establishes minimum hours of operation (with certain exceptions).
• Permits CMS to revoke a supplier's billing privileges if it is found not to meet certain supplier standards.

The effective date is September 27, 2010 (although there are separate deadlines for compliance with the physical facility standards for existing suppliers with leases that expire after that date).

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On August 26, 2010, the Internal Revenue Service, Employee Benefits Security Administration (EBSA), and the HHS Office of Consumer Information and Insurance Oversight published a notice announcing the availability of guidance detailing interim procedures for the federal external review process and model notices both for internal claims and appeals and for external review processes under the Patient Protection and Affordable Care (Affordable Care Act or ACA). Among other things, the guidance (EBSA Technical Release No. 2010-01) provides an interim enforcement safe harbor for non-grandfathered self-insured group health plans not subject to a state external review process, and therefore subject to the federal external review process. 

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On August 26, 2010, HHS announced the adjusted Federal Medical Assistance Percentage (FMAP) rate for the third quarter of fiscal year (FY) 2010, as required under the American Recovery and Reinvestment Act of 2009 (ARRA). The ARRA provides for temporary increases in the FMAP rates to provide fiscal relief to states and to protect and maintain state Medicaid and certain other assistance programs in a period of economic downturn. The notice is effective April 1, 2010 through June 30, 2010. The notice does not account for changes recently enacted by Congress (H.R. 1586, the Education, Jobs and Medicaid Assistance Act) that extends the availability of enhanced matching payments, but HHS expects to address this new law in the future. In the meantime, CMS has issued instructions to states on how they can qualify for the extended enhanced federal Medicaid matching rates under H.R. 1586. Importantly, states must affirmatively apply for such funding by September 24, 2010.

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On August 26, 2010, CMS published a notice correcting technical and typographical errors in the July 13, 2010 Medicare physician fee schedule proposed rule. 

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The Presidential Commission for the Study of Bioethical Issues is requesting public comments on the emerging science of synthetic biology, including its potential applications and risks, as well as appropriate ethical boundaries. President Obama requested this review following an announcement in May 2010 that a research institute had successfully engineered a synthetic cell. Comments will be accepted until October 1, 2010. 

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CMS has released information on ACA provisions that require a new minimum Medicaid rebate of 17.1% of the average manufacturer price (AMP), effective January 1, 2010, for drugs approved by the FDA exclusively for pediatric indications and for blood clotting factors. CMS also has released listings of the specific drugs impacted by these provisions. CMS also has issued Medicaid Drug Rebate Program Release No. 81, which, among other things, provides updated information on the new Medicaid rebate calculation for Single Source/Innovator Multiple Source line extension drugs in an oral solid dosage form. 

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CMS has issued a letter to state Medicaid directors on "Federal Funding for Medicaid HIT Activities." Specifically, the letter provides guidance regarding implementation of section 4201 of the ARRA, which allow the payment of incentives to eligible professionals (EPs) and eligible hospitals to promote the adoption and meaningful use of certified electronic health record (EHR) technology. The ARRA provides 100% federal financial participation (FFP) to states for incentive payments to eligible Medicaid providers to adopt, implement, upgrade, and meaningfully use certified EHR technology, and 90% FFP for state administrative expenses related to the program. The CMS guidance outlines CMS's expectations relating to the activities and potential uses of the 90/10 matching funds.

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This month CMS mailed its first Medicare comparative billing reports (CBRs) to as many as 5,000 physical therapists, comparing the providers' individual billing practices for specific procedures and services with those of their peer group. The initial CBRs are based on 2009 Medicare claims data from outpatient physical therapy services provided by independent physical therapists. Physical therapists were selected for the program based on identified vulnerabilities in their billing procedures involving the use of the KX modifier (which indicates that a service was medically necessary and justified by medical records, that the physical therapy financial limitation cap was met, and that a patient's condition requires further treatment). The CBR program ultimately is designed to reduce improper payments and educate providers on Medicare billing requirements. 

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On August 16, 2010, CMS announced changes to 2011 Medicare Part C and D plan ratings on the new Medicare “Plan Finder Tool,” including the use of a “consistently low performer” notation when health and/or drug plan summary ratings fall under 3 stars for at least 3 consecutive years. The notation includes the following message: “Caution: For three years in a row, the Medicare program has given this plan a low overall rating. If you are considering enrolling in this plan, look closely at the detailed ratings for this plan.” 

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As part of an Administration-wide effort to combat fraud and abuse in government programs, CMS is launching a “chiropractic services supplemental measure study” to focus on whether chiropractic services billed to Medicare were medically-necessary, covered acute chiropractic treatments. For each claim selected, CMS will review medical records up to 12 months prior to the date of service on the claim. The agency will deny claims for services determined to be maintenance therapy and recoup any overpayments. CMS urges all chiropractors who receive a letter for this chiropractic services supplemental measure study to respond to the request for medical records immediately upon receipt of the letter; failure to respond within 30 days will result in a full denial of the claim, as well as a possible fraud referral.

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On August 19, 2010, HHS released a report entitled “The Public Health Emergency Medical Countermeasure Enterprise Review: Transforming the Enterprise to Meet Long Range National Needs.” Prepared in response to the H1N1 pandemic flu experience, the HHS report reviews the federal government’s role in producing medical countermeasures -- medications, vaccines, equipment and supplies for a health emergency. Among other things, the report addresses the government’s need to: upgrade science and regulatory capacity at the FDA; quickly develop manufacturing processes that can be used for multiple medications or vaccines; help small, emerging biotech companies bring products to market; and identify promising research and facilitate its translation into vaccines, drugs, and treatments.

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This post was written by Jacqueline B. Penrod.

On August 10 – 12, 2010, the HHS ONC held telephone conferences to further explain and answer questions about the EHR Incentive Program for eligible professionals and hospitals. Information presented included a discussion of the distinction between the Medicare and Medicaid incentive programs and the core and menu set of objectives professional providers must meet in order to establish meaningful use. Participants also received information about a variety of topics from the audience. The calls were open to the public, and copies of the presentations are to be posted on the ONC website. The materials also are available by contacting Jacqueline Penrod.

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The OIG has issued a report entitled "Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Carriers During Calendar Year 2007. " The OIG found that physicians did not always correctly code nonfacility places of service on Medicare Part B claims. By way of background, to account for increased overhead expenses that physicians incur when performing services in nonfacility locations, such as physician's offices, Medicare pays physicians a higher rate for certain services performed in these locations and at a lower rate for services performed in facility settings, such as hospital outpatient departments or ambulatory surgical centers (ASCs). Physicians are must identify the place of service on their Medicare claim forms. However, for 90 of the 100 services in the OIG's sample, physicians used nonfacility place-of-service codes on their claims for services that were actually performed in hospital outpatient departments or ASCs. Based on sample results, the OIG estimated that Medicare contractors nationwide overpaid physicians $13.8 million for incorrectly coded services provided in 2007. The OIG recommends that CMS: instruct contractors to recoup identified overpayments; reopen nonsampled services to identify and recoup any additional overpayments; enhance educational efforts; and develop a data match that will identify physician services at high risk for place-of-service miscoding and recover any identified overpayments.

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A new OIG report, "Review of Less-Than-Effective Drugs in the Medicare Part D Program," examines Medicare Part D coverage of drugs the FDA approved before 1962 but subsequently found to be less than effective, and which should not be covered by Part D. The OIG found that CMS accepted $43.3 million in Medicare Part D sponsors' prescription drug event (PDE) data for calendar years 2006 and 2007 that was associated with less-than-effective drugs. While CMS claims edits identified and rejected the vast majority of PDE data associated with less-than-effective drugs, it missed some drugs because of incomplete data (the OIG notes that there is no definitive list of less-than-effective drugs). The OIG recommended that CMS determine whether it can impose financial adjustments on sponsors that were paid for furnishing less-than-effective drugs. The OIG also recommends that CMS collaborate with FDA to create and maintain a comprehensive list of less-than-effective drugs, regularly disseminate this list to all sponsors, and use this list to reject PDE data for less-than-effective drugs.

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The GAO has issued a report, “New Drug Approval: FDA's Consideration of Evidence from Certain Clinical Trials,” examining FDA’s use of non-inferiority trial evidence as part of the drug approval process. According to the report, evidence from non-inferiority trials was included in 43 of the 175 new drug applications (NDAs) for new molecular entities submitted between FY 2002 and 2009, many of which were for antimicrobial drugs. As of December 31, 2009, FDA approved 18 of the 43 NDAs on the basis of evidence from non-inferiority trials (certain additional NDAs were approved based on other evidence). The GAO also examined the characteristics of these trials, and describes FDA’s guidance on these trials. According to GAO, “the agency has become more conservative in allowing evidence from non-inferiority trials to demonstrate a drug’s effectiveness,” both by limiting the indications for which these trials may be used and by becoming more rigorous in its review of evidence from non-inferiority trials. 

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On September 20, 2010, CMS is hosting a listening session to receive comments regarding implementation of section 10332 of the ACA, which authorizes the Secretary to release to qualified entities standardized extracts of Medicare claims data under Parts A, B, and D to evaluate the performance of providers and suppliers on measures of quality, efficiency, effectiveness, and resource use, effective January 1, 2012. The purpose of the listening session is to solicit input from potential stakeholders on key components of the design of the program, including: (1) eligibility criteria and the application process for qualified entities; (2) definition and selection of quality and performance measures; (3) data extraction and distribution process; and (4) data privacy and security requirements, including oversight. The registration deadline for the session is September 16, 2010, and the deadline for written comments on the topic is September 27, 2010.

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This post was written by Paul Sheives. 

FDA will hold a public meeting on September 23, 2010 to seek input on the manufacturing, characterization, and biocompatibility evaluation of medical devices containing or utilizing nanomaterials and nanostructures, including diagnostics. Meeting participants may either make a short oral presentation or participate in a round-table discussion. Registration for the meeting closes on September 15, 2010. The deadline for submitting written comments to be considered at the meeting is September 15, 2010, and all other comments will be accepted until October 22, 2010. 

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This post was written by Paul Sheives.

FDA announced a two-day public hearing to be held on September 27 -28, 2010 to seek public input on a new framework for the development and distribution of patient medication information (PMI) to be provided to patients with prescription drug products. FDA is considering the use of a single, standardized document with consistent format and content. FDA seeks input on processes and procedures for standardizing PMI using a quality system approach for monitoring the development and distribution of PMI. Registration for the meeting closes September 13, 2010. FDA is accepting written comments on the issue until October 29, 2010. 

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CMS will host a follow-up national provider conference call on "ICD-10 Implementation in a 5010 Environment" on September 13, 2010.  The call is intended for medical coders, physician office staff, provider billing staff, health records staff, vendors, educators, system maintainers, and all Medicare fee-for-service providers. The call will cover:  ICD-10; ICD-10 implementation for services provided on and after October 1, 2013; differences between ICD-10 and ICD-9-CM codes; ICD-10-CM basic information for all users; tools for converting codes – General Equivalence Mappings (GEMs); proposal to freeze ICD-9-CM and ICD-10 code updates except for new technologies and diseases; HIPAA Version 5010; compliance dates and timelines; 5010 before and after ICD-10 implementation; readiness review for implementing HIPAA version 5010 and D.0; how to prepare; and Medicare fee-for-service activities update. The registration deadline is September 10 or when space is filled. 

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On August 24, 2010, CMS is hosting a listening session regarding the recent trend of Medicare beneficiaries receiving extended observation care as a hospital outpatient. Pre-registration is required.

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On August 24, 2010, CMS is hosting a Special Open Door Forum on the Medicare End Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for payment year 2012. The call, which is designed for ESRD facilities and provider, supplier, and laboratory groups, will focus on CMS’s August 12 proposed rule that would establish performance standards and a scoring methodology for the QIP.

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

• Legislative Developments. President Obama signed into law H R 1586, which provides an extra $16.1 billion in enhanced Medicaid matching funds to the states, offset in part by changes in Medicaid average manufacturer price (AMP) policy. 
   
• CMS Regulatory Developments. CMS has released final rules on FY 2011 Medicare inpatient hospital and LTCH PPS rates and policies, and on payment error rate measurement for Medicaid and CHIP. CMS is seeking comments on potential legislative changes to improve quality of care for children. OMB has given final regulatory clearance to CMS’s long-awaited Medicare supplier standards final rule. 
   
• Other HHS Regulatory Developments. HHS has issued rules and notices regarding Affordable Care Act (ACA) state insurance exchange provisions, the ACA's temporary high risk health insurance pool program, and ONC temporary certification program test tools and test procedures. HHS has withdrawn from OMB consideration its final health information breach notification rule. 
   
• ACA Implementation Developments. CMS has finalized the model Manufacturer Agreement and model Third Party Administrator Agreement for the ACA Medicare Coverage Gap Discount Program. Other recent guidance addresses health insurance for children, home and community-based services, and timely filing of Medicare claims. CMS also released a report on ACA Medicare cost savings provisions. 
   
• Other CMS Developments. CMS has released the annual report of the Medicare Board of Trustees, which includes a discussion of the impact of the ACA on Medicare finances. CMS has issued educational articles on the Medicare DMEPOS competitive bidding program.
   
• FDA Developments. Recent FDA developments include a memorandum of understanding between FDA and CMS regarding collaboration on coverage, payment, and clinical benefit of drugs, biologics, and medical devices; announcements on generic drug and medical device user fees; recommendations related to the 510(k) process; guidance on OTC drug labeling comprehension studies and radioactive studies; and CDRH’s Compliance Strategic Plan. FDA has withdrawn a direct final rule regarding pediatric uses of medical devices. 
   
• OIG & GAO Developments. The HHS OIG issued a report on capped rental DME. A GAO report examines actuarial soundness of Medicaid managed care rates.
   
• Health Industry Events. CMS is hosting calls/meetings on the PQRI and e-prescribing, outpatient therapy payment alternatives, HOPPS ambulatory payment classifications, and value-based purchasing program for services of physicians. The ICD-9-CM Coordination and Maintenance Committee has scheduled an ICD-10 crosswalk revisions meeting.

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On August 10, 2010, President Obama signed into law H R 1586, the Education Jobs and Medicaid Assistance Act. Among other things, the legislation provides an extra $16.1 billion in enhanced Medicaid matching funds to the states after temporary spending under the American Recovery and Reinvestment Act (ARRA) expires at the end of the year. Specifically, H.R. 1586 provides a 3.2% increase in the federal matching rate for all states (compared to the 6.2% rate currently in effect) for the period of January – March 2011, which is further reduced to 1.2% for April through June 2011. For the same six-month period, states with high unemployment also would continue to receive additional funding authorized by the ARRA. This increased Medicaid funding is offset in part by changes in Medicaid average manufacturer price (AMP) policy. Currently, the calculation of AMP excludes certain payments and rebates if received from or provided to entities other than retail community pharmacies. H.R. 1586 provides an exception to that exclusion for inhalation, infusion, instilled, implanted, or injectable drugs that are not generally dispensed through retail community pharmacies. This change is expected to save $2 billion over 10 years.

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On August 16, 2010, CMS is publishing its final rule updating Medicare hospital inpatient prospective payment systems (IPPS) and long term care hospital (LTCH) prospective payment system (PPS) rates for 2011. The rule, which responds to comments that CMS received on its May 4, 2010 proposed rule and a June 2, 2010 supplemental proposed rule, also makes numerous changes to Medicare policies affecting hospitals and other providers. The rule generally is effective October 1, 2010, with certain exceptions. Highlights of the lengthy rule are available after the jump.

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On August 10, 2010, CMS published a final rule designed to reduce the rate of errors in Medicaid and the Children’s Health Insurance Program (CHIP). The rule implements provisions from the Children’s Health Insurance Program Reauthorization Act of 2009 with regard to the Medicaid Eligibility Quality Control and Payment Error Rate Measurement programs, and it codifies several procedural aspects of the process for estimating Medicaid and CHIP improper payments. The rule is effective September 10, 2010. CMS has posted additional background materials regarding the rule here. 

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CMS is seeking public input as it develops recommendations for legislative changes to improve the quality of care provided to children under Medicaid and CHIP, including recommendations for quality reporting by the states, as mandated by the Children's Health Insurance Program Reauthorization Act of 2009. Comments are due August 30, 2010. 

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On August 3, 2010, the Office of Consumer Information and Insurance Oversight (OCIIO) published a notice soliciting comments regarding ACA state insurance exchange provisions to inform future rulemaking and grant solicitations. OCIIO requests comments on number of specific questions in the following areas: state exchange planning and establishment grants; implementation timeframes and considerations; exchange operations; qualified health plans; quality; an exchange for non-electing states; enrollment and eligibility; outreach; rating areas; consumer experience; employer participation; risk adjustment, reinsurance, and risk corridors; and economic analysis, Paperwork Reduction Act, and Regulatory Flexibility Act considerations. Comments will be accepted until October 4, 2010.

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The OCIIO has published an interim final rule with comment period implementing the ACA's temporary high risk health insurance pool program. This program, which is intended to provide affordable health insurance coverage to uninsured individuals with pre-existing conditions, will continue until January 1, 2014, when health insurance exchanges are operational. Key issues addressed in the rule include administration of the program, eligibility and enrollment, benefits, premiums, funding, and appeals and oversight rules. The rule is effective July 30, 2010, and comments will be accepted until September 28, 2010. 

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The Department of Health and Human Services (HHS) has announced that it is withdrawing from Office of Management and Budget (OMB) consideration its final rule intended to govern breach notifications involving unsecured protected health information. HHS states that it intends to publish a final rule “in the coming months.” An interim final rule on this topic has been in effect since September 23, 2009.

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