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

Medicare Provider Payments

• Reform the Medicare physician fee schedule/sustainable growth rate (SGR) formula to provide stable payments followed by payment linked to participation in an “accountable payment model.”
• Reduce Medicare coverage of bad debts from 65% generally to 25% over three years starting in 2014.
• Reduce Medicare indirect medical education add-on payments by $11 billion over 10 years.
• Reduce payment for post-acute care services in several ways.
  
  • Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points, beginning in 2014 through 2023 (the update could not fall below 0%). This provision would save $79 billion over 10 years.
  • Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated severity conditions), saving about $2.5 billion over 10 years.
  • Equalize IRF and SNF payments for three conditions involving hips and knees, pulmonary conditions, as well as other conditions selected by the Secretary, saving $2.0 billion over 10 years.
  • Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2017, saving $2.2 billion over 10 years.
  • Implement bundled payments for post-acute care providers (LTCHs, IRFs, SNFs, and HHAs) beginning in 2018. Payments would be bundled for at least half of the total payments for post-acute care providers. Rates based on patient characteristics and other factors would be set to produce a permanent and total cumulative adjustment of -2.85% by 2020. Beneficiary coinsurance would equal levels under current law. This provision would save $8.2 billion over 10 years.
• Align Medicare payments to rural providers with the cost of care, saving $2 billion over 10 years.
• Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results.

Prescription Drug Provisions

• Reduce payment for physician-administered Medicare Part B drugs from 106% of average sales price to 103% of average sales price. Manufacturers would be required to provide a specified rebate in certain instances as determined by the Secretary “to preserve access to care.”
• Provide Medicaid-level drug rebates for brand name and generic drugs provided to beneficiaries who receive Part D low-income subsidies, saving $123 billion over 10 years.
• Close the Medicare Part D donut hole by 2015, rather than 2020, by increasing manufacturer discounts to from 50% to 75% beginning in plan year 2015.
• Lower Medicaid drug costs by clarifying the definition of brand drugs, excluding authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs, making a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, and calculating Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.8 billion over 10 years. 
• Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments, saving approximately $7 billion over 10 years. 
• Improve program integrity for Medicaid drug coverage by directing states to track high prescribers and utilizers of Medicaid prescription drugs; requiring manufacturers to make full restitution to states for any covered drug improperly reported by the manufacturer on the Medicaid drug coverage list; allowing more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; requiring drugs to be electronically listed with the FDA to receive Medicaid coverage; and expanding penalties for reporting false information for the calculation of Medicaid rebates. 
• Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into “pay for delay” agreements and modifying the length of exclusivity on brand name biologics.

Program Integrity/Efficiency Provisions

• Provide $640 million in combined mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid, and CHIP. 
• Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records and permit exclusion of individuals affiliated with entities sanctioned for fraudulent or other prohibited actions from federal health care programs. 
• Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in additional health care settings.
• Exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary.
• Require prior authorization of advance imaging services.
• Require prepayment review or prior authorization for power mobility devices.
• Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.

Other Medicare Provisions

• Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
• Increase the minimum Medicare Advantage (MA) coding intensity adjustment (which decreases MA plan payments to reflect differences in coding practices between Medicare fee-for-service and MA) and align employer group waiver plan payments with MA bids, saving $19 billion over 10 years. 
• Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point.
• Expand the availability of Medicare data released to physicians and other providers for performance improvement, fraud prevention, value-added analysis, and other purposes.

Medicaid Provisions

• Base Medicaid rates for durable medical equipment on Medicare rates to save $4.5 billion over 10 years.
• Align Medicaid Disproportionate Share Hospital (DSH) payments with expected levels of uncompensated care to save $3.6 billion over 10 years. 
• Affirm Medicaid’s position as a payer of last resort when another entity is legally liable to pay claims.

A 131-page Department of Health and Human Services (HHS) “Budget in Brief” summary discusses these provisions in greater detail, and also addresses other HHS agency budget proposals and discusses HHS’s implementation of private health insurance protections and programs under the ACA.

By way of background, under 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. Winning bidders who sign contracts 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” went into effect January 1, 2011 in nine CBAs, involving nine product categories. Payment amounts under the Round 1 rebid average 32% below the Medicare DMEPOS fee schedule amounts. CMS has recently conducted a “recompete” for six product categories in the Round 1 Rebid areas (including additional products) to take effect in 2014.

Round 2 will take place in 100 CBAs covering 91 metropolitan statistical areas, with three-year contracts effective July 1, 2013. CMS announced yesterday that the weighted average savings by product category are as follows:

• Oxygen, Oxygen Equip. & Supplies - 41%
• Standard (power & manual) Wheelchairs, Scooters, & Accessories - 36%
• Enteral Nutrients, Equip. & Supplies - 41%
• CPAP/RAD & Related Supplies & Accessories - 47%
• Hospital Beds & Accessories - 44%
• Walkers & Accessories - 46%
• Support Surfaces (Group 2 Mattresses & Overlays) - 63%
• NPWT Pumps & Related Supplies & Accessories - 41%

CMS also conducted a national mail-order competition for diabetic testing supplies concurrent with the Round 2 competition. CMS announced that Medicare payment for diabetic testing supplies (100 lancets and test strips) under competitive bidding will be reduced from $77.90 to a national rate of $22.47. While the competition for diabetic testing supplies was intended to apply only to mail-order suppliers, it is important to note that the American Taxpayer Relief Act of 2012 (ATRA), which was signed into law on January 2, 2013, sets Medicare payment amounts for retail diabetic supplies at the national mail order competitive bidding single-payment amounts, effective July 1, 2013.  In other words, as a result of the ATRA, the competitive bidding process is being used to reduce pricing for DMEPOS other than items that actually were subject to competitive bidding. This policy was adopted despite CMS’s previous acknowledgment that "there are pricing differences between mail order and non-mail order diabetic testing supplies because of the delivery methods for these supplies."  Even though under competitive bidding program rules, only successful bidders that sign a contract with CMS will be eligible to furnish mail order diabetes supplies to Medicare beneficiaries as of July 1, 2013, Medicare beneficiaries will not be limited to using contract suppliers to obtain retail/storefront diabetes supplies. In sum, a Medicare beneficiary must use a contract supplier to obtain mail order diabetic testing supplies, but can pick up diabetic testing supplies from any local retailer; the payment to the supplier and the beneficiary copayment will be the same in either setting. (The ATRA also temporarily reduces fee schedule amounts for retail diabetic testing supplies to mail order amounts from April 1, 2013 until the national mail-order program single payment amounts start on July 1, 2013.)

CMS next will be mailing contracts to “winning” bidders. According to a CMS fact sheet, 14,654 contract offers will be made to 867 Round 2 bidders, who have 3,109 locations to serve Medicare beneficiaries in the CBAs. CMS also will offer 15 contracts for the national mail-order program; the national mail-order program winners have 48 locations in all. CMS notes that about 62% of Round 2 winning suppliers are small suppliers (gross revenues of $3.5 million or less), and 33% of national mail-order contract offers will go to small suppliers. When the contracting process is complete, unsuccessful bidders will be notified of the reasons they were not offered a contract. CMS expects to announce the names of the contract suppliers in the spring of 2013. CMS and the Competitive Bidding Implementation Contractor (CBIC) also will be stepping up educational activities leading up to implementation of Round 2 and national mail-order bidding.

For more information, including the single price amounts for each code subject to bidding, see the CBIC website, and Reed Smith’s previous reporting on the competitive bidding program is available here. 

• The rule will increase 2013 OPPS rates by 1.8% compared to 2012 levels (although the impact on particular procedures will vary). This update reflects a hospital market basket increase of 2.6%, which is reduced under two Affordable Care Act (ACA) provisions – a 0.1 percentage point reduction and a 0.7% “multi-factor productivity” (MFP) adjustment/reduction. The OPPS update is subject to other adjustments, including a 2 percentage point reduction for hospitals that do not meet quality reporting requirements.
• Effective for 2013, CMS will determine OPPS relative weights using the geometric mean costs of services within an Ambulatory Payment Classification, rather than median costs. CMS expects this change will have a limited payment impact on most providers, but believes it better encompasses variations in costs and aligns with the inpatient PPS methodology.
• CMS will set OPPS payment for separately payable drugs and biologicals without pass-through status at average sales price (ASP) plus 6% (which it refers to as the “statutory default” rate), compared to the current ASP plus 4%. Notably, CMS will not make an adjustment for pharmacy overhead costs in 2013 to reflect the redistribution of package costs, as it had for 2010 through 2012. The final 2013 threshold for separate payment for outpatient drugs is a cost per day that exceeds $80, compared to $75 in 2012. CMS also adopted a special payment adjustment policy to account for the costs of radioisotopes derived from non-highly enriched uranium sources.
• With regard to ASC policy, CMS will increase ASC payment rates by 0.6%, which is derived from a 1.4% inflation update reduced by an MFP adjustment of -0.8%.
• The final rule makes refinements to several Medicare quality programs, including the Hospital Outpatient Quality Reporting Program, the ASC Quality Reporting Program, and the Inpatient Rehabilitation Facility Quality Reporting Program.
• CMS is clarifying the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in OPPS hospitals and critical access hospitals (CAHs). CMS also is extending nonenforcement of the requirement for direct supervision of outpatient therapeutic services furnished in CAHS and small rural hospitals with 100 or fewer beds for one final year through CY 2013 (CMS anticipates that this will be the final year of the extension).
• CMS adopted changes to the regulations regarding payment for new technology intraocular lens (NTIOLs) to require more stringent labeling and clinical outcomes evidence to support NTIOL applications.
• The final rule also addresses, among other things, payment for partial hospitalization services; revisions to the electronic reporting pilot for the Electronic Health Record Incentive Program; changes to regulations governing Quality Improvement Organizations (including the secure transmittal of electronic medical information, beneficiary complaint resolution, and notification processes); and a discussion of public comments related to potential changes to the Part A to Part B Rebilling Demonstration and hospital observation services policy.

CMS will accept comments on certain provisions, including payment classifications assigned to certain HCPCS codes and other specified provisions, until December 31, 2012.

• Under the final rule, the 2013 MPFS conversion factor will be $25.0008, compared to $34.0376 in 2012. As noted, Congress could override the 26.5% SGR cut on either a temporary or permanent basis. Other provisions of the rule impact reimbursement for different types of services. For instance, the final rule seeks to benefit primary care physicians by authorizing separate payment to a patient’s community physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled nursing facility (SNF) stay. On the other hand, certain specialists, like diagnostic radiologists, would be negatively impacted by CMS’s continued expansion of the multiple procedure payment reduction (MPPR) policy. Under the final rule, on January 1, 2013 CMS will implement its policy, discussed in the CY 2012 final rule, applying the MPPR when one or more physicians in the same group practice furnish the interpretation of advance imaging services to the same patient, in the same session, on the same day. CMS also will apply the MPPR to the technical component of certain cardiovascular and ophthalmology diagnostic services for 2013. Under this policy, CMS will make full payment for the highest paid cardiovascular or ophthalmology diagnostic service and reduce the technical component payment for subsequent cardiovascular or ophthalmologic diagnostic services furnished by the same physician or group practice to the same patient on the same day by 25% for cardiovascular diagnostic services or 20% for ophthalmologic diagnostic services.
• CMS announced it is continuing to pay certain molecular pathology tests under the clinical laboratory fee schedule (CLFS), instead of assigning new genetic and genomic test codes to the physician fee schedule (as contemplated under the proposed rule). CMS also is establishing a new code (G0452, Molecular diagnostics; interpretation and report) to reimburse physicians under the MPFS for interpreting these tests.
• CMS is continuing implementation of the physician value-based payment modifier (Value Modifier), which was mandated by the ACA as a way to reward physicians for providing higher quality and more efficient care. In the final 2012 rule, CMS adopted performance measures to be used for future MPFS payment adjustments based on the Value Modifier. The final 2013 rule sets forth the payment methodology and phase-in plans. The Value Modifier is being phased in over from CY 2015 to CY 2017, with CY 2013 serving as the initial performance period for the CY 2015 Value Modifier. Under the final 2013 rule, the Value Modifier initially will apply to all groups of physician with 100 or more eligible professionals (up from 25 in the proposed rule). These groups will be able to choose two payment calculation options: (1) Value Modifier based strictly on participation in the Physician Quality Reporting System (PQRS), with groups that do not participate in the PQRS having a Value Modifier set at a -1.0% and groups that have reported at least one measure or elected the PQRS administrative claims option receiving a modifier of 0.0% (no payment adjustment, or (2) Value Modifier based on quality tiering, whereby groups with higher quality and lower costs will be paid more (maximum 2% increase), and groups with lower quality and higher costs will be paid less (maximum 1% negative adjustment).
• The rule also addresses, among many other things: modification of CMS’s Part B drug average manufacturer price (AMP) substitution policy to address drug shortage situations; payment reviews and adjustments for potentially misvalued codes; revisions to the PQRS and the Electronic Prescribing (eRx) Incentive Program; allowing Medicare to pay for portable x-ray services ordered by non-physician practitioners acting within their services within their state scope of practice and the scope of their Medicare benefit (in addition to physicians who currently may do so); termination of non-random prepayment review under the Medicare Prescription Drug, Improvement, and Modernization Act, and new claims-based data reporting requirements for therapy services under the Middle Class Tax Relief and Jobs Creation Act. Also, as discussed in the separate summary below, CMS has adopted a requirement for a face-to-face evaluation as a condition of Medicare payment for certain types of durable medical equipment (DME).

The rule was published in the Federal Register on November 16, 2012. CMS will accept comments on a limited number of provisions (interim final work, practice expense (PE), and malpractice RVUs for new, revised, potentially misvalued, and certain other CY 2013 HCPCS codes) until December 31, 2012.