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

• Congress should increase payment rates for inpatient and outpatient hospital prospective payment systems by 1%, and require the difference between the statutory update and the recommended 1% update be used to offset payment increases due to documentation and coding changes and to recover past overpayments.
• Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory fee-schedule updates. This proposal, first offered in October 2011, would combine a freeze in payment levels for primary care and, for all other services, annual payment reductions followed by a freeze. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments to underpriced services, and changes to the structure of accountable care organization shared savings payments.
• Congress should eliminate the ambulatory surgical center (ASC) payment update for 2014, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
• Congress should eliminate the skilled nursing facility market basket update, and direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing payment as soon as practicable. 
• MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use, and expand program integrity efforts.
• Congress should eliminate the update to hospice rates for FY 2014 and adopt a series of previous MedPAC recommendations addressing payment and program integrity reforms.
• Congress should eliminate the 2014 updates for outpatient dialysis services, inpatient rehabilitation facilities, and long-term care hospitals.
• With regard to Medicare Advantage, Congress should allow the authority for most MA chronic care special needs plans (SNPs) to expire (with certain exceptions) and allow MA plans to enhance benefit designs for individuals with specific chronic or disabling conditions. MedPAC also recommends that Congress permanently reauthorize dual-eligible special needs plans (D–SNPs) that assume clinical and financial responsibility for Medicare and Medicaid benefits (with certain changes) and allow the authority for all other D–SNPs to expire.

• 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.

• The rule would increase 2013 OPPS rates by 2.1% compared to 2012 levels (although the impact on particular procedures would vary). This update reflects a hospital market basket increase of 3.0%, which is reduced under two Affordable Care Act (ACA) provisions – a 0.1 percentage point reduction and an estimated 0.8% “multi-factor productivity” (MFP) adjustment/reduction. The OPPS update is subject to other adjustments, including a 2 percentage point reductions for hospitals that do not meet quality reporting requirements. For 2013, CMS proposes to determine OPPS relative weights using the geometric mean costs of services within an Ambulatory Payment Classification, rather than median costs, which CMS expects would have a limited payment impact on most providers.
• CMS proposes setting 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 is not proposing to make an adjustment for pharmacy overhead costs in 2013 to reflect the redistribution of package costs, as it had for 2010 through 2012. The proposed 2013 threshold for separate payment for outpatient drugs would be a cost per day that exceeds $80, compared to $75 in 2012. CMS also proposes a special payment adjustment policy for radioisotopes derived from non-highly enriched uranium sources.
• With regard to ASC policy, CMS is proposing to increase ASC payment rates by 1.3%, which is derived from a 2.2% inflation update reduced by an MFP adjustment of -0.9%. ASC payment rates for CY 2013 will represent 57% of rates for the same services under the OPPS. CMS is soliciting comments on development of an ASC-specific inflation index in place of the current Consumer Price Index for All Urban Consumers. CMS also proposes changes to the regulations regarding payment for new technology intraocular lens (NTIOLs) in the ASC setting to require more stringent labeling and clinical outcomes evidence to support NTIOL applications.
• CMS proposes changes to the IRF Quality Reporting Program, including updates to the quality measures that will impact annual prospective payment amounts in FY 2014 and procedural changes to the process for updating quality measures.
• In addition, the proposed rule addresses: refinements to the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program; payment for partial hospitalization services; potential changes to the Part A to Part B Rebilling Demonstration; revisions to the electronic reporting pilot for the Electronic Health Record Incentive Program; clarification of the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services furnished in OPPS hospitals and critical access hospitals; and changes to regulations governing Quality Improvement Organizations, including the secure transmittal of electronic medical information, beneficiary complaint resolution and notification processes.

• Congress should increase acute care hospital inpatient and hospital outpatient payment rates by 1% in 2013; gradually recover past inpatient overpayments due to documentation and coding changes; and gradually reduce outpatient hospital payment rates for evaluation and management office visits to the rate of physician office visits for the same service.
• Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory fee-schedule updates. The proposal, first announced in October 2011, would freeze rates for primary care services for 10 years, while other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze. MedPAC also endorsed budget-neutral changes to improve data on which MPFS relative value unit (RVU) weights are based and to redistribute payments to underpriced services, and made recommendations regarding the structure of accountable care organization shared savings payments.
• Congress should eliminate the 2013 update for skilled nursing facilities (SNFs), and direct the Secretary to revise the SNF payment system to redistribute payments away from intensive therapy care that is unrelated to patient care needs and toward medically complex care. The Secretary also should begin rebasing payments in 2014, with an initial reduction of 4% and additional reductions thereafter to align with providers’ costs. The Secretary also should reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization.
• Congress should eliminate the 2013 market basket update for inpatient rehabilitation facilities and long-term care hospitals, and update the outpatient dialysis payment rate by 1%.
• Congress should update payment rates for ambulatory surgical centers (ASCs) by 0.5% for 2013, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
• Congress should direct the Secretary to: begin a two-year rebasing of home health rates in 2013; revise the case-mix system to rely on patient characteristics rather than therapy visits; establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use; and expand certain program integrity efforts.
• Congress should increase hospice rates by 0.5% for FY 2013 and adopt a series of previous MedPAC recommendations addressing payment and program integrity reforms.
• Congress should modify Part D low-income subsidy copayments for beneficiaries with incomes at or below 135% of poverty to encourage the use of generic drugs when available in selected therapeutic classes (with safeguards to prevent substitutions that are not clinically appropriate).

While MedPAC recommendations are not binding, they are often considered by lawmakers in developing Medicare legislation.

Medicare Extensions

• Temporarily blocks a 27.4% cut in the Medicare physician fee schedule set to go into effect March 1, 2012 as a result of the statutory Sustainable Growth Rate (SGR) formula, and instead extends current Medicare payment rates through December 31, 2012. The conference report also requires the Secretary of the Department of Health and Human Services (HHS) to report on bundled or episode-based payments to cover physicians' services for one or more prevalent chronic conditions or major procedures, and it requires a Government Accountability Office (GAO) report examining private sector initiatives that tie physician payment rates to quality, efficiency, and care delivery improvement, such as adherence to evidence-based guidelines.
• Extends Medicare Modernization Act (MMA) section 508 hospital geographic reclassifications through March 31, 2012.
• Extends outpatient hold harmless payments through December 31, 2012 (except for sole community hospitals with more than 100 beds), and requires an HHS study on which types of hospitals should continue to receive hold harmless payments.
• Extends the 1.0 floor used in the physician work geographic adjustment through December 31, 2012.
• Extends the Medicare outpatient therapy cap exceptions process through December 31, 2012.  The provision also temporarily extends the therapy cap to services received in hospital outpatient departments through December 31, 2012. Effective with services provided on or after October 1, 2012, the Secretary must ensure that therapy claims for which an exemption is requested include appropriate modifiers indicating that such services are medically necessary. The National Provider Identifier (NPI) of the physician who reviews therapy plans also must be included on Medicare claims. In addition, the Secretary is directed to implement a manual medical review process for beneficiaries whose annual spending for therapy services furnished in calendar year 2012 reaches $3,700 for physical therapy and speech-language pathology, or $3,700 in occupational therapy (the GAO subsequently must issue a report regarding this manual review process). The law also directs the Medicare Payment Advisory Commission (MedPAC) to issue recommendations on how to improve the Medicare outpatient therapy benefit to reflect individual acuity, condition, and therapy needs of the patient. Finally, the Secretary is required to implement, beginning on January 1, 2013, a claims-based strategy to collect data on patient function during the course of therapy services in order to better understand patient condition and outcomes in order to assist in reforming the Medicare outpatient therapy payment system.
• Extends authorization for independent laboratories to receive direct payments for the technical component for certain pathology services through June 30, 2012.
• Extends the add-on payment for ground and air ambulance services, including in super rural areas, through December 31, 2012 and requires related MedPAC and GAO reports.

Health Offsets

• Bad debt reimbursement for all Medicare providers is reduced gradually to 65%. Specifically, providers now paid at 100% will have a three-year transition of 88% in 2013, 76% in 2014, and 65% in 2015, while providers now paid at 70% will be reduced to 65% in 2013. (This provision saves $6.9 billion over 11 years).
• ReducesMedicare clinical laboratory fee schedule rates by 2 percent in 2013, and the reduced fee schedules will serve as the base for 2014 and subsequent years (saving $2.7 billion over 11 years).
• Extends Medicaid disproportionate share hospital (DSH) payment reductions under the Affordable Care Act (ACA) for an additional year (saving $4.1 billion over 11 years).
• Makes technical corrections to the ACA “disaster recovery federal medical assistance percentage (FMAP) provision ($2.5 billion in savings over 11 years).
• Reduces funding for the ACA Prevention and Public Health Trust Fund by $5 billion over 10 years.

Other Health Provisions

• Extends through December 31, 2012 the Qualifying Individual (QI) program (which allows Medicaid to pay the Medicare Part B premiums for certain low-income Medicare beneficiaries) and the Transitional Medical Assistance (TMA) program (which allows low-income families to keep Medicaid coverage as they transition into employment).