On July 11, 2014, CMS published a proposed rule to update the Medicare end-stage renal disease (ESRD) PPS for CY 2015, which CMS anticipates would increase total payments to all ESRD facilities by 0.3% compared to CY 2014. While CMS projects that the ESRD market basket update, as adjusted for MFP, would have been 1.6%, the “Protecting Access to Medicare Act of 2014” (PAMA) sets the CY 2015 ESRD payment update at 0.0 percent. After applying a proposed wage index budget-neutrality adjustment factor, CMS estimates that the CY 2015 ESRD PPS base rate would be $239.33 under the proposed rule. The proposed rule also would, among other things: rebase the ESRD bundled market basket using 2012 data; update outlier Medicare Allowable Payment (MAP) and fixed dollar loss amounts (which will increase payments to ESRD facilities for beneficiaries requiring higher resource utilization); revise the market basket measures; update the labor -related share value with a two-year transition; clarify the eligibility criteria for the low volume payment adjustment ; and implement a PAMA provision providing that payment for ESRD-related oral-only drugs will not be made under the ESRD PPS prior to January 1, 2024. CMS also proposes updates to the ESRD Quality Incentive Program (QIP) for payment years 2017 and 2018. Finally, the proposed rule would make significant changes to Medicare reimbursement policy for DME, prosthetics, orthotics, and supplies (DMEPOS). CMS will accept comments on the proposed rule until September 2, 2014.
CMS Announces Plans for Medicare DMEPOS Competitive Bidding Round 2 Recompete and National Mail-Order Recompete
On July 15, 2014, the Centers for Medicare & Medicaid Services (CMS) announced its plans to recompete the supplier contracts awarded in Round 2 of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program and the National Mail-Order diabetic testing supplies competition, as it is required by statute to do at least every three years. The current contract period expires June 30, 2016; the new contracts will begin on July 1, 2016. For the recompete, CMS is making changes to both the composition of the product categories (including adding new products) and the number of competitive bidding areas (CBAs).
The product categories to be included in the Round 2 Recompete are as follows:
- Enteral Nutrients, Equipment and Supplies
- General Home Equipment and Related Supplies and Accessories
- includes hospital beds and related accessories, group 1 and 2 support surfaces, commode chairs, patient lifts, and seat lifts
- Nebulizers and Related Supplies
- Negative Pressure Wound Therapy (NPWT) Pumps and Related Supplies and Accessories
- Respiratory Equipment and Related Supplies and Accessories
- includes oxygen, oxygen equipment, and supplies; continuous positive airway pressure (CPAP) devices and respiratory assist devices (RADs) and related supplies and accessories
- Standard Mobility Equipment and Related Accessories
- includes walkers, standard power and manual wheelchairs, scooters, and related accessories
- Transcutaneous Electrical Nerve Stimulation (TENS) Devices and Supplies
This configuration reflects the following changes: the current Oxygen and CPAP Devices/Respiratory Assist Devices product categories were combined into a single product category; the current Walkers and Wheelchairs/Scooters categories were combined into a single product category; a new General Home Equipment category was created, including the previous Hospital Beds and Support Surfaces categories in addition to new products; and a new TENS devices product category was added. Suppliers can bid on one or more product categories, but they must bid on all specified HCPCS codes within the category. A list of the specific items in each product category is available on the Competitive Bidding Implementation Contractor (CBIC) website.
CMS is conducting the Round 2 Recompete in the same geographic areas that were included in Round 2. Because of changes to the metropolitan statistical areas and boundary changes to ensure that no CBA is included in more than one state, however, there will be 117 CBAs in the Round 2 Recompete (compared to 100 in the current competition). A list of the ZIP codes included in each CBA is also available on the CBIC website.
CMS will also be conducting the National Mail-Order Recompete for diabetic testing supplies concurrently with the Round 2 Recompete. The competition will include all parts of the United States, including the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.
CMS has announced the following general timeline for the Round 2 Recompete/National Mail Order Recompete:
July 15, 2014
- CMS begins “pre-bidding supplier awareness program”
- CMS announces bidding schedule
- CMS begins bidder education program
- Bidder registration period to obtain user ID and passwords begins
- Bidding begins
Suppliers considering bidding should prepare now, including ensuring that their enrollment files at the National Supplier Clearinghouse are current, and that they are accredited and hold all necessary state licenses for any products for which they will bid. For more information about the DMEPOS bidding program, see our previous postings at http://www.healthindustrywashingtonwatch.com/tags/dmepos-competitive-bidding/.
CMS Proposes Major Changes to Medicare DMEPOS Payment/Coverage Policy Inside/Outside of Competitive Bidding Areas
On July 2, 2014, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would make a series of significant changes to Medicare coverage and payment policies for durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS). Notably, the proposed rule would establish a methodology for adjusting Medicare DMEPOS fee schedule payment amounts across the country using information from the Medicare DMEPOS Competitive Bidding Program (CBP) – which CMS estimates would cut Medicare DMEPOS reimbursement by more than $7 billion in FYs 2016 through 2020. The proposed rule also would: test the use of bundled monthly payment amounts for DME and enteral nutrition under the CBP; modify CBP change of ownership (CHOW) and termination of contract rules; clarify qualifications for providing custom fitting services for orthotics; and revise Medicare hearing aid coverage policy. These provisions, which were part of a broader proposed rule that would also update the Medicare end-stage renal disease prospective payment system for 2015, are summarized in our Client Alert.
OIG Reports Assess Impact of Mail-Order Competitive Bidding on Diabetes Test Strips Market Concentration
The OIG has issued two reports on Medicare market share of mail-order diabetes test strips – one examining the market share before the start of Medicare mail-order competitive bidding in July 1, 2013 and a second report examining the three-month period after competitive bidding went into effect. By way of background, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) prohibited CMS from awarding competitive bidding program contracts for mail order diabetes test strips to suppliers that do not demonstrate that their bid covers at least 50%, by volume, of all types of mail order diabetes test strips. MIPPA also requires the OIG to complete a study to determine market shares of diabetes test strips in the competitive bidding program.
In a report entitled “Medicare Market Shares of Mail Order Diabetes Test Strips Immediately Prior to the National Mail Order Program,” the OIG provides a baseline for the 3-month period of April to June 2013. Based on a sample of 1,210 claims, the OIG concluded that 152 suppliers submitted at least 62 types of mail order diabetes test strips during this period, with two types of diabetes test strips accounting for approximately 34% of the Medicare mail order market share, four types accounting for 51%, and 10 types accounting for 75%.
In a second report, “Medicare Market Share of Mail Order Diabetes Test Strips from July–September 2013,” the OIG examined a sample of 1,210 Medicare claims in the first three-months of mail-order competitive bidding. According to the OIG, 22 suppliers submitted at least 43 types of mail order diabetes test strips in this period, but two types of diabetes test strips accounted for approximately 45% of the Medicare mail order market share, three types of diabetes test strips accounted for 59% of the market share, and 10 types accounted for 90%. The OIG did not make recommendations in the report, but noted that CMS may choose to consider these data when determining whether subsequent rounds of suppliers’ mail order diabetes test strip bids comply with the MIPPA 50% requirement.
CMS is hosting a Special Open Door Forum on June 17, 2014 to provide an overview regarding new Medicare prior authorization initiatives impacting durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers and ambulance suppliers. Specifically, the call will cover the Medicare Expanded Prior Authorization Demonstration for Power Mobility Devices (PMDs) Demonstration, the Hyperbaric Oxygen and Repetitive Scheduled Non-Emergent Ambulance Transport prior authorization models, and a recent proposed rule to require prior authorization for certain DMEPOS.
Is anybody home? Medicare contractors on the prowl for DMEPOS supplier violations of posted business hours and other physical facility standards.
Medicare suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) should be on the alert for enhanced Medicare supplier standard compliance monitoring by CMS, the National Supplier Clearinghouse (NSC), and their agents. Recently, these entities have taken draconian actions to revoke the enrollment of a number of suppliers who failed to be present during indicated hours of operation. Recent Administrative Law Judge (ALJ) decisions have upheld such revocations for technical violation of the Medicare supplier standard, even in the face of extenuating circumstances, reinforcing the need for suppliers to review their practices and policies to ensure full compliance.
Medicare supplier standard number 7 requires suppliers to appropriately maintain their physical facilities, including being accessible and staffed during posted hours of operation, maintaining a permanent visible sign in plain view, and posting hours of operation. In addition, supplier standard 7 requires the supplier’s business location to be accessible to the public, Medicare beneficiaries, CMS, NSC, and their agents (although there is an exception for “closed door” businesses, such as a pharmacy or supplier providing services only to beneficiaries residing in a nursing home, under certain circumstances).
Since compliance with all Medicare supplier standards is a condition of Medicare participation, suppliers must be present during published business hours or face revocation of their supplier number. This includes having staff present during lunch, unless the posted hours of operation specifically exclude certain lunch hours, and during holidays unless otherwise posted. We have observed a trend in deficiencies relating to supplier standard 7 being found during CMS and/or NSC supplier site visits resulting in supplier number revocations. For instance, suppliers have been found in violation when staff are out to lunch during a site visit or when an inspector uses the wrong set of elevators in a multi-use office building and is therefore unable to find the supplier’s office.
Recent ALJ decisions have upheld revocation of various DMEPOS suppliers’ billing privileges in similar situations. In one case, the supplier appealed the decision, noting that the days the surveyor attempted to visit the site were Christian and Jewish holidays. The ALJ, however, ruled that the timing of religious holidays was irrelevant because the supplier’s signage failed to notify the public that the business was closed for religious holidays (Lubell v CMS, Docket No. C-14-380, Decision No. CR3192, April 7, 2014). In another case, the supplier appealed the decision, arguing that its door was locked for the protection of its single staff member and that the staff member may not have noticed the inspector knocking due to being on lunch break. The ALJ upheld this revocation as well, noting that the office’s posted hours of operation did not indicate that the office would be closed for lunch. In that decision, the ALJ further ruled that the business was not accessible because the supplier’s locked-door approach represented an inappropriate restriction on access and indicated that a supplier may not close, even temporarily, during its posted hours of operation (Southeastern Orthotics and Prosthetics, Inc. v CMS, Docket No. C-14-315, Decision No. CR3208, April 23, 2014). In both of these cases, the ALJs held that retroactive revocations are not permitted under supplier standard 7, despite attempts by regulators to revoke the suppliers’ enrollments retroactive to the day of their second unsuccessful attempts to visit the sites.
As a reminder, suppliers must comply with all 30 supplier standards set out in 42 CFR § 424.57, an abbreviated version of which can be found on the NSC website. Given that Medicare authorities have been emphasizing supplier standard 7, we strongly encourage suppliers to ensure that their hours are posted, their offices are open to the public, and their staff are prepared for unannounced site visits at all times during posted business hours. Suppliers also should ensure that their address on file with the NSC is up to date and specific as to suite, room, and floor. In addition, we recommend that suppliers regularly review and update their Medicare 855S enrollment application whenever any changes to its content occur. Changes to a Medicare DMEPOS supplier’s enrollment information are due 30 days after they take place.
CMS has just released a proposed rule that would require Medicare prior authorization (PA) for certain Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) items that the agency characterizes as “frequently subject to unnecessary utilization.“ As part of the rulemaking, CMS has developed a “Master List” of initial items that it considers to meet this standard based on being (1) identified in a GAO or HHS OIG national report published in 2007 or later as having a high rate of fraud or unnecessary utilization; or (2) listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program's Annual Medicare FFS Improper Payment Rate Report DME Service Specific Overpayment Rate Appendix. CMS also proposes limiting the items on the Master List to those with an average purchase fee of at least $1,000 or an average rental fee schedule of at least $100 to allow CMS to focus on items with the largest potential savings for the Medicare Trust Fund. CMS proposes that the Master List will be “self-updating” annually, and that items generally will remain on the list for 10 years. Note, however, that presence on the Master List would not automatically require prior authorization. CMS would limit the PA requirement to a subset of items (called the “Required Prior Authorization List") “to balance minimizing provider and supplier burden with our need to protect the Trust Funds." CMS would publish the Required Prior Authorization List in the Federal Register with 60-day notice before implementation. CMS also proposes that the PA program could be implemented nationally or locally. The proposed rule does not announce the first items on the Required Prior Authorization List. Instead, CMS is seeking public comment on the number of items that should be selected initially and in the future, and the frequency with which CMS should select items.
The proposed PA process would not create new clinical documentation requirements for the selected DMEPOS items. Instead, the same information necessary now to support Medicare payment for the item would be submitted to the contractor, but before the item could be furnished to the beneficiary and before the claim could be submitted for payment. Upon receipt of a PA request, CMS or its contractors would determine whether the item complies with applicable coverage, coding, and payment rules, and then communicate a decision that provisionally affirms or non-affirms the request. CMS or its contractors would “make reasonable efforts” to provide a decision within 10 days of receipt of all applicable information, unless this timeline could “seriously jeopardize the life or health of the beneficiary,” in which case the target review period would be 2 business days.
The proposed rule also discusses, among other things: the process for updating the Master List; liability for an item on the Required Prior Authorization List if authorization is submitted and denied, the opportunity for unlimited PA resubmissions, and applicability to competitive bidding areas. The rule also would add a contractor's decision regarding prior authorization of coverage of DMEPOS items to the list of actions that are not initial determinations and therefore not appealable. The official version will be published on May 28, 2014. CMS will accept comments on the proposed rule until July 28, 2014.
In a related development, CMS has announced that it is expanding its current demonstration for prior authorization for power mobility devices to 12 additional states. CMS also will launch two payment model demonstrations to test prior authorization for hyperbaric oxygen therapy and repetitive scheduled non-emergent ambulance transport; information from these models will inform future CMS policy decisions on the use of prior authorization.
Fingerprint-based background checks intended to “detect bad actors” enrolled or attempting to enroll in federal health programs
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 2014. Not 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.
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.
On March 18, 2014, the OIG issued a report entitled “State Medicaid Agencies Can Significantly Reduce Medicaid Costs for Diabetic Test Strips.” The OIG highlighted examples of states that have saved millions of dollars through the use of rebates on blood glucose test strips. The OIG also estimated potential savings for state Medicaid agencies if they adopt competitive bidding for these supplies, or if they obtained pricing comparable to pricing under Medicare’s national mail-order competition for diabetic supplies. The OIG recommends that CMS work with state Medicaid agencies to determine whether the use of manufacturer rebates and lower provider reimbursement rates could achieve net savings for the purchase of blood glucose test strips. The OIG also has created a “spotlight” page to highlight fraud and waste associated with diabetes test strips, noting previous OIG action in this area, including special fraud alerts, enforcement actions, and inspection reports.
The four Durable Medical Equipment (DME) Medicare Administrative Contractor (DME MAC) medical directors have issued a joint open letter to physicians warning about “various marketing schemes” perpetrated by DME suppliers. Such methods cited by the DME MACs in a March 5, 2014 “Dear Physician” letter include unsolicited orders for medical equipment or supplies; advertisements that Medicare will provide the doctor with payment for patient referrals; or pre-completed medical necessity forms with instructions to just “Sign and Date Here.” The DME MACs note that doctors “are under no obligation to support or justify these supplier solicitations,” or to sign orders for items not initiated by the doctor or that were provided by the supplier without prior consultation. The letter suggests that physicians review the patient’s medical record before signing orders, and view with skepticism unsolicited orders for patients no longer in their care or who have not been seen in a long period of time. Physicians should document in the patient’s medical record the medical justification for any DME ordered. The letter also asks doctors to report suspected abuse to the OIG, which we note has long-standing concerns about DMEPOS supplier marketing practices. Particularly in light of tightened CMS requirements related to physician documentation of DMEPOS orders, the DME MACs’ open letter provides another reminder for suppliers to review their policies and practices in this area.
On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):
Major Medicare Provider Payment Provisions
The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.
- Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
- Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
- Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($720 million).
- 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 each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
- Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
- 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 conditions), saving $2.4 billion.
- Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
- Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
- Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
- Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 billion).
- 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, which would make it easier to trigger ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
- The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.
Prescription Drug Provisions
- Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner. This proposal is estimated to result in $6.8 billion in savings.
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
- Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
- Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 billion).
- Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts, exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
- Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
- Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. In addition, the budget would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase 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 (FTC) to stop companies from entering into “pay for delay” agreements ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).
Major Program Integrity/Efficiency Provisions
- Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (HHS) program integrity efforts.
- Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($60 million in savings).
- Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
- Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
- Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services 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 effective for calendar year 2016 ($6 billion).
- Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
- Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
- Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).
Other Medicare & Medicaid Provisions
- Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
- Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter.
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
- Base Medicaid rates for DME on Medicare rates ($3.1 billion).
- Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).
On February 26, 2014, CMS published an advance notice of proposed rulemaking (ANPRM) seeking public comments on two potential changes to Medicare reimbursement for durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) that could impact payment to DMEPOS suppliers nationwide regardless of whether they participate in competitive bidding. At this point, CMS is providing more questions than answers on the future of Medicare DMEPOS reimbursement policy, as discussed below.
First, CMS is requesting comments on how to implement a statutory requirement that it use pricing information from the DMEPOS competitive bidding program to adjust Medicare payments for DMEPOS items and services furnished outside of competitive bidding areas (CBAs). By way of background, the Affordable Care Act (ACA) requires CMS to use information from the DMEPOS competitive bidding program to adjust DME fee schedule amounts in areas where competitive bidding programs are not implemented by January 1, 2016; CMS also is authorized (but not mandated) to make such adjustments for off-the-shelf orthotics and enteral nutrients, supplies, and equipment in areas where competitive bidding programs have not been established. CMS must promulgate its methodology for making such adjustments through notice and comment rulemaking, and it must consider costs outside of CBAs compared to rates in CBAs.
Prior to issuing a proposed methodology for adjusting payments in non-CBAs, CMS is soliciting public comments on a number of aspects of this policy, including the following:
- Do the costs of furnishing DMEPOS items and services vary based on the geographic area in which they are furnished, and if so, how should the methodology account for these geographic variations?
- Do the costs of furnishing DMEPOS items and services vary based on population size, distance covered, or other logistical or demographic factors?
- How should CMS adjust payments for items that have not been included in all competitive bidding programs (such as transcutaneous electrical nerve stimulation (TENS) devices that have only been included in nine Round 1 areas so far)?
- Should competitive bidding programs be established in all areas of the country for a few high-volume items to gather general cost information (e.g., rural vs. urban area costs)?
- What factors should be used to determining a competitive service area in rural areas?
In addition to seeking comments related to adjustments of DMEPOS payments outside of CBAs, CMS is considering potential modifications to its competitive bidding payment policy to allow the use of bundled payments for certain types of DME and enteral nutrition. Under this concept, which would require future rulemaking, suppliers would submit one bid that reflects the average per beneficiary monthly cost of furnishing the DME, supplies, and accessories along with the maintenance and servicing costs. CMS would make monthly payments to the supplier for as long as the equipment were medical necessary; that is, rental payments would no longer reach a cap, but at the same time, CMS would no longer make separate payment for supplies, accessories, enteral nutrients, or maintenance and servicing. The supplier would retain title to the equipment. Whether CMS proceeds with proposing this change depends on issues such as administrative burden and feasibility, as well as other potential issues raised in public comments. CMS states that it is particularly interested in feedback on issues such as:
- Are lump sum purchases and capped rental payment rules for DME and enteral nutrition equipment still needed if monthly payment amounts can be established under competitive bidding?
- Are there reasons that beneficiaries need to own expensive DME or enteral nutrition equipment rather than use such equipment as needed on a continuous monthly basis?
- What would be the advantages and disadvantages to beneficiaries and suppliers associated with such a bundled approach?
- Would bundled monthly payment adversely impact beneficiary access to personalized items such as speech generating devices and specialized wheelchairs?
- If CMS maintains payment on a capped rental, rent-to-own basis or lump sum purchase basis, should CMS require that the supplier that transfers the equipment title to the beneficiary be responsible for all maintenance and servicing of the beneficiary-owned equipment for the remainder of the equipment's reasonable useful lifetime with no additional payment? The associated costs ostensibly would be factored into bids and payment amounts.
- Would payment on a bundled, continuous rental basis adversely impact the beneficiary's ability to direct their own care, follow a provider’s plan of care, or provide for appropriate care transitions?
Comments are due to CMS by March 28, 2014. Interested parties will have another opportunity to comment on these provisions when the proposed regulations are issued.
The Access Board's Medical Diagnostic Equipment Accessibility Standards Advisory Committee has issued its final report on “Advancing Equal Access to Diagnostic Services: Recommendations on Standards for the Design of Medical Diagnostic Equipment for Adults with Disabilities.” The report includes detailed recommendations on standards for access to equipment such as examination tables and chairs, weight scales, and diagnostic equipment. Among other things, the report address transfer access, armrests, lift compatibility, and other features for accessibility. The standards, which are being developed as directed under the ACA, still must be approved by the full Access Board.
Today CMS posted the 2014 Medicare fee schedule for durable medical equipment, prosthetics, orthotics, supplies (DMEPOS) reimbursed under Medicare Part B.
On December 2, 2013, CMS published its final rule updating Medicare end-stage renal disease (ESRD) PPS rates and policies for 2014. Instead of cutting rates by more than 9%, as CMS proposed this summer, the final rule holds 2014 rates flat compared to 2013. This improved reimbursement picture is a result of CMS adopting a multi-year phase-in of a drug utilization adjustment to the base rate mandated by the ATRA, which is intended to reflect changes in ESRD-related drugs and biologicals use since 2007. Instead of making the full drug utilization adjustment in 2014, which would be -$29.93, CMS is applying a $8.16 reduction in 2014, and the remainder of the adjustment will be phased in over the next two to three years (to be determined in the 2016 rulemaking). The 2014 drug utilization adjustment offsets other payment updates in the rule, including the 2.5% base rate update (derived from a 3.2% market basket update reduced by a 0.4% productivity adjustment). The rule also finalizes a 50% increase to the home dialysis training add-on payment adjustment for peritoneal dialysis and home hemodialysis training treatments. Moreover, CMS is updating ESRD Quality Incentive Program measures and scoring methodologies for 2016. Note that 2014 is the last year of the transition to the ESRD PPS; all ESRD facilities will be paid 100% of the ESRD PPS rate for services furnished on or after January 1, 2014. In addition to ESRD policy changes, the final rule addresses Medicare coverage of and payment for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), which are discussed in a separate post.
As part of the CY 2014 Medicare end stage renal disease (ESRD) prospective payment system (PPS) final rule, published on December 2, 2013, CMS has adopted updates to three Medicare durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) policies.
- 3-Year Minimum Lifetime Requirement (MLR). CMS previously issued regulations providing that, effective for items classified as DME after January 1, 2012, the item must have an expected life of at least 3 years to be considered “durable.” The final ESRD PPS rule clarifies the treatment of a “grandfathered item” classified as DME on or before January 1, 2012 if that product is subsequently modified (e.g., upgraded, refined, or reengineered). Specifically, effective April 1, 2014, if a grandfathered product is modified, and the modified product has an expected life that is shorter than that of the original product, the modified item will lose its grandfathered status and it will be subject to the 3-year MLR requirement. The impact of the loss of grandfathered status on coverage would depend on the new expected lifetime of the modified product. For instance, if a grandfathered product covered as DME prior to 2012 with a lifetime of four years is modified, resulting in a product with a lifetime of 2.5 years, this product would lose its grandfathered status and no longer meet the definition of DME because the 3-year MLR would not be met. On the other hand, if this modification reduced the lifetime of the product to 3.5 years, the product would lose its grandfathering status but would satisfy the 3-year rule and continue to meet the definition of DME.
- Reclassification of Routinely-Purchased DME. The final clarifies the definition of routinely purchased equipment at §414.220(a)(2) to address inconsistencies in how CMS has classified certain expensive items as routinely purchased, rather than capped rental. CMS adopted its proposal to reclassify as capped rental items about 80 DME and DME accessory HCPCS codes added after 1989 that are currently classified as routinely purchased (although CMS agreed with commenters that E0760, Osteogenesis Ultrasound Stimulator, should remain classified as routinely purchased equipment). The complete list of codes subject to this provision is set forth in Table 11. The effective dates for the reclassifications are: (1) April 1, 2014, for items not included in DMEPOS competitive bidding (which is 3 months later than CMS initially proposed); (2) July 1, 2016, for (a) items furnished in all areas of the country if the item is included in a Round 2 competitive bidding program (CBP) and not in a Round 1 Recompete CBP, and (b) for items included in a Round 1 Recompete CBP but furnished in an area other than one of the nine Round 1 Recompete areas; and (3) January 1, 2017, for items included in a Round 1 Recompete CBP and furnished in one of the nine Round 1 Recompete areas.
- Fee Schedules for Splints, Casts, and Certain IOLs. CMS has adopted its proposal to implement on a budget-neutral basis Medicare fee schedules for splints and casts, and intraocular lenses (IOLs) inserted in a physician’s office. This provision is effective for services furnished on or after April 1, 2014. In future years, the fee schedule amounts will be updated by the percentage increase in the CPI-U for the 12-month period ending with June of the preceding year, reduced by the multifactor productivity adjustment.
CMS also has adopted certain technical amendments to DMEPOS payment regulations.
CMS has announced the names of 282 suppliers that have been awarded 3-year contracts under the Medicare DME, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program “Round 1 Recompete.” As discussed in our previous reports, this phase of bidding applies to nine geographic areas where competitive bidding contracts have been in effect since 2011, but it includes a broader array of products than currently covered. The contract period for the Round 1 Recompete is January 1, 2014 through December 31, 2016.
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. CMS reported earlier this year that Medicare reimbursement will be cut by an average of 37% compared to fee schedule amounts under the Round 1 Recompete contracts, which include the following six product categories: (1) Respiratory Equipment and Related Supplies and Accessories (includes oxygen, oxygen equipment, and supplies; continuous positive airway pressure devices and respiratory assist devices, and related supplies and accessories; and standard nebulizers); (2) Standard Mobility Equipment and Related Accessories (includes walkers, standard power and manual wheelchairs, scooters, and related accessories); (3) General Home Equipment and Related Supplies and Accessories (includes hospital beds and related accessories, group 1 and 2 support surfaces, transcutaneous electrical nerve stimulation devices (TENS), commode chairs, patient lifts, and seat lifts); (4) Enteral Nutrients, Equipment and Supplies; (5) Negative Pressure Wound Therapy Pumps and Related Supplies and Accessories; and (6) External Infusion Pumps and Supplies.
CMS reports that Round 1 Recompete contract suppliers have 620 locations to serve Medicare beneficiaries in the CBAs, and about 58% of these suppliers are “small suppliers” with gross revenues of $3.5 million or less. CMS will now accelerate educational efforts aimed at suppliers, referral agents, and beneficiaries in preparation for the new contracts.
Despite continuing provider concerns, CMS has announced that it will direct Medicare administrative contractors (MACs) to activate controversial “phase 2” ordering/referral edits effective January 6, 2014. Once activated, MACs will deny claims for Medicare Part B services (including lab services and the technical component of imaging services), durable medical equipment, and Part A home health agency (HHA) services if the ordering/referring physician or other professional is not identified, is not in Medicare's enrollment records, or is not of a specialty type that may order/refer the service/item being billed. CMS had previously delayed an earlier May 1, 2013 target date for implementation due to objections by physicians and suppliers that they could experience claims denials and delays based on discrepancies between the names of the ordering physician on the 1500 claim form and in Medicare’s enrollment records. There has been no assurance from CMS, however, that these concerns have been fully resolved, and the only recourse for providers if claims are inappropriately denied claim will be to file an appeal. A CMS educational article accompanying the announcement suggests that imaging suppliers and providers bill global claims separately to prevent a denial for the professional component in the event that the new edits deny the technical component of imaging services.
In addition to delaying the CY 2014 Medicare payment update final rules, CMS has announced that the partial government shutdown is expected to impact completion of the CY 2014 HCPCS coding update. CMS intends to publish the 2014 HCPCS Annual Update file by November 27, 2013 (based on the timing of the final rules), with new HCPCS codes effective January 1, 2014 unless otherwise specified. Final decisions on HCPCS coding applications will be mailed to individual applicants to coincide with the publication of the HCPCS annual update.