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

• CMS estimates that the rule would increase HOPPS rates by 2.2% in 2011 compared to 2010 (the increase is 2.1% when cancer and children’s hospitals and community mental health centers are excluded). This update reflects a provision of the Affordable Care Act (ACA) that imposes a 0.25 percentage point reduction to the HOPPS update for CY 2011. Note that the impact of the policy and payment provisions of the proposed rule on payment for individual procedures varies.
• The HOPPS update is reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements. CMS is proposing to expand the set of measures that must be reported by hospital outpatient departments (HOPDs) to qualify for the full payment update. To allow hospitals more time to prepare, CMS is proposing measures for reporting in CYs 2011 through 2013. Among other things, CMS is proposing to add six quality measures to the current 11 measures to be reported by HOPDs in CY 2011 for purposes of CY 2012 payment, including one structural health information technology measure, four claims-based imaging efficiency measures, and one chart-abstracted measure for emergency departments.
• CMS proposes to increase the threshold for separate payment of hospital outpatient drugs and biologicals to those with a cost-per-day that exceeds $70, up from $65 currently. Payment for separately-payable drugs and biologicals without pass-through status would equal the average sales price (ASP) plus 6% (compared to the current rate of ASP plus 4%). This amount reflects the cost of separately-payable drugs and biologicals, calculated from hospital claims and cost reports, with an adjustment for pharmacy overhead cost that reflects the redistribution of $200 million of pharmacy overhead costs currently attributed to packaged drugs and biologicals to separately-payable drugs and biologicals.
• The proposed rule would modify the supervision requirements for outpatient therapeutic services to require direct supervision of the initiation of a service followed by general supervision for certain non-surgical, extended-duration services, including observation services.
• CMS would implement a number of ACA provisions related to limitations on certain physician referrals to hospitals in which they have an ownership or investment interest (and related changes to provider agreement regulations); payments to hospitals for direct graduate medical education and indirect medical education costs; waiver of beneficiary cost-sharing for preventive services; and payment adjustments for certain cancer hospitals.
• With regard to ASC services, CMS estimates that the ASC update factor for CY 2011 would be 1.6%; however, this update would be entirely offset by a “multi-factor productivity” (MFP) adjustment mandated by the ACA, which CMS estimates will be 1.6% for 2011. The MFP adjustment is designed to encourage more efficient care by reducing Medicare reimbursement by the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity, as reported by the Bureau of Labor Statistics. Consequently, CMS is proposing a 0% update to the ASC payment system for CY 2011. CMS also is proposing to add five surgical procedures to the list of covered ASC procedures, designate six procedures as office-based procedures, and update the list of covered ancillary services. The proposed rule also would implement an ACA provision waiving beneficiary copayments for certain preventive services under the ASC payment system.

In a related development, CMS has released a notice modifying the final 2010 HOPPS and ASC rules to reflect provisions of the ACA applicable to 2010 rates, including a 0.25% reduction to the HOPPS update for 2010. CMS estimates that the revised update to the HOPPS conversion factor and other adjustments as provided by the statute will decrease total HOPPS payments by 0.1% in CY 2010 compared to payment rates under the November 20, 2009 final rule, while CMS expects no change in aggregate ASC expenditures under the notice. CMS also issued a final rule making technical changes to the final 2010 HOPPS/ASC rule; the official version of both documents will be published in the August 3, 2010 Federal Register. 

Hospitals

• The Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.
• The Congress should reduce the indirect medical education adjustment (IME) in 2010 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained by reducing the IME adjustment should be used to fund a quality incentive payment program.

Physicians and Ambulatory Surgical Centers

• The Congress should update payments for physician services in 2010 by 1.1 percent.
• The Congress should establish a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary-care-focused practitioners. Primary-care-focused practitioners are those whose specialty designation is defined as primary care and/or those whose pattern of claims meets a minimum threshold of furnishing primary care services. The Secretary would use rulemaking to establish criteria for determining a primary-care-focused practitioner.
• The Congress should direct the Secretary to increase the equipment use standard for expensive imaging machines from 25 to 45 hours per week. This change should redistribute RVUs from expensive imaging to other physician services.
• The Congress should increase payments for ambulatory surgical centers (ASC) services in calendar year 2010 by 0.6 percent. In addition, the Congress should require ASCs to submit to the Secretary cost data and quality data that will allow for an effective evaluation of the adequacy of ASC payment rates.

Dialysis Services

• The Congress should maintain current law and update the composite rate in calendar year 2010 by 1 percent.

Skilled Nursing Facility Services

• The Congress should eliminate the update to payment rates for skilled nursing facility services for fiscal year 2010.
• The Congress should require the Secretary to revise the skilled nursing facility (SNF) prospective payment system by: adding a separate nontherapy ancillary (NTA) component, replacing the therapy component with one that establishes payments based on predicted patient care needs, and adopting an outlier policy.
• The Secretary should direct SNFs to report more accurate diagnostic and service-use information by requiring that: claims include detailed diagnosis information and dates of service, services furnished since admission to the SNF be recorded separately in the patient assessment, and SNFs report their nursing costs in the Medicare cost report.
• The Congress should establish a quality incentive payment policy for SNFs in Medicare and to improve quality measurement for SNFs, the Secretary should: add the risk-adjusted rates of potentially avoidable rehospitalizations and community discharge to its publicly reported post-acute care quality measures; revise the pain, pressure ulcer, and delirium measures currently reported on CMS’s Nursing Home Compare website; and require SNFs to conduct patient assessments at admission and discharge.

Home Health Services

• The Congress should eliminate the market basket increase for 2010 and advance the planned reductions for coding adjustments in 2011 to 2010, so that payments in 2010 are reduced by 5.5 percent from 2009 levels.
• The Congress should direct the Secretary to re-base rates for home health care services in 2011 to reflect the average cost of providing care.
• The Congress should direct the Secretary to assess payment measures that protect the quality of care and ensure incentives for the efficient delivery of home health care. The study should include alternative payment strategies such as blended payments and risk corridors and outcome-based quality incentives.

Inpatient Rehabilitation Facilities

• The update to the payment rates for inpatient rehabilitation services should be eliminated for fiscal year 2010.

Long-Term Care Hospitals

• The Secretary should update payment rates for long-term care hospitals for fiscal year 2010 by the projected rate of increase in the rehabilitation, psychiatric and long-term care hospital (RPL) market basket index less the Commission’s adjustment for productivity growth.

Recommendations on Medicare Advantage Payments

• The Congress should: Eliminate the stabilization fund for regional PPOs. Remove the effect of payments for indirect medical education from the MA plan benchmarks. Set the benchmarks that CMS uses to evaluate MA plan bids at 100 percent of FFS costs. Pay-for-performance should apply in MA to reward plans that provide higher quality care. Clarify that regional plans should submit bids that are standardized for the region’s MA-eligible population.
• The Secretary should calculate clinical measures for the FFS program that would permit CMS to compare the FFS program with MA plans.

Recommendations on Public Reporting of Physician Financial Relationships

• The Congress should require all manufacturers and distributors of drugs, biologicals, medical devices, and medical supplies (and their subsidiaries) to report to the Secretary their financial relationships with: physicians, physician groups, and other prescribers; pharmacies and pharmacists; health plans, pharmacy benefit managers, and their employees; hospitals and medical schools; organizations that sponsor continuing medical education; patient organizations; and professional organizations.
• The Congress should direct the Secretary to post the information submitted by manufacturers on a public website in a format that is searchable by: manufacturer; recipient’s name, location, and specialty (if applicable); type of payment; name of the related drug or device (if applicable); and year.
• The Congress should require manufacturers and distributors of drugs to report to the Secretary the following information about drug samples: each recipient’s name and business address; the name, dosage, and number of units of each sample; and the date of distribution. The Secretary should make this information available through data use agreements.
• The Congress should require all hospitals and other entities that bill Medicare for services to annually report the ownership share of each physician who directly or indirectly owns an interest in the entity (excluding publicly traded corporations). The Secretary should post this information on a searchable public website.
• The Congress should require the Secretary to submit a report, based on the Disclosure of Financial Relationships Report, of the types and prevalence of financial arrangements between hospitals and physicians.

Recommendations on Reforming the Hospice Benefit

• The Congress should direct the Secretary to change the Medicare payment system for hospice to: have relatively higher payments per day at the beginning of the episode and relatively lower payments per day as the length of the episode increases; include a relatively higher payment for the costs associated with patient death at the end of the episode; and implement the payment system changes in 2013, with a brief transitional period. These payment system changes should be implemented in a budget neutral manner in the first year.
• The Congress should direct the Secretary to: require that a hospice physician or advanced practice nurse visit the patient to determine continued eligibility prior to the 180th-day recertification and each subsequent recertification and attest that such visits took place, require that certifications and recertifications include a brief narrative describing the clinical basis for the patient’s prognosis, and require that all stays in excess of 180 days be medically reviewed for hospices for which stays exceeding 180 days make up 40 percent or more of their total cases.
• The Secretary should direct the Office of Inspector General to investigate: the prevalence of financial relationships between hospices and long-term care facilities such as nursing facilities and assisted living facilities that may represent a conflict of interest and influence admissions to hospice, differences in patterns of nursing home referrals to hospice, the appropriateness of enrollment practices for hospices with unusual utilization patterns (e.g., high frequency of very long stays, very short stays, or enrollment of patients discharged from other hospices), and the appropriateness of hospice marketing materials and other admissions practices and potential correlations between length of stay and deficiencies in marketing or admissions practices.
• The Secretary should collect additional data on hospice care and improve the quality of all data collected to facilitate the management of the hospice benefit. Additional data could be collected from claims as a condition of payment and from hospice cost reports.

• Rate Update – The final rule includes a 3.6% market basket increase, although hospitals that do not report the quality measures will receive an update of market basket minus 2 percentage points, for a 1.6% update. This update will be partially offset by a 0.9% reduction designed to compensate for changes in documentation and coding practices that do not reflect real changes in case mix.  In FY 2009, CMS will complete the transition to cost-based relative weights, with relative weights based 100% on costs.
• Value-Based Purchasing Program – CMS is expanding the Hospital-Acquired Conditions policy, under which Medicare will not make higher payments to hospitals for care associated with certain reasonably-preventable conditions unless the condition were reported as present on admission.  CMS has added three new conditions for FY 2009: certain manifestations of poor glycemic control; surgical site infections following certain orthopedic surgeries and bariatric surgery for obesity; and deep vein thrombosis or pulmonary embolism following total knee replacement and hip replacement procedures. In addition, CMS is adding 13 new quality measures for which hospitals will have to report data in FY 2009 in order to receive the full Medicare IPPS market basket update in FY 2010 (down from 43 new measures in the proposed rule) and retiring one previous measure (pneumonia/oxygenation assessment).  Both initiatives are designed to further CMS's Value-Driven Health Care agenda.
• Charge Compression/Cost Centers – CMS is establishing separate cost centers for (1) medical supplies and (2) implantable devices. CMS is adopting this change to help address “charge compression," or the practice of hospitals applying a higher percentage charge markup over costs to lower-cost items and services and a lower-percentage charge markup over costs to higher cost items and services.
• New Technology Payments – Under the final rule, CMS will only consider for new technology add-on payments for a particular fiscal year, an application for which the new medical service or technology has received Food and Drug Administration (FDA) approval or clearance by July 1 prior to the particular fiscal year.
• Hospital Ownership/Physician Self-Referrals – The final rule includes significant revisions to hospital ownership and the physician self-referral provisions (also referred to as the "Stark Law").  Among other things, the final rule prohibits the use of “per-click” leases for office space or equipment when the lease is entered into between a referring physician or physician organization and an entity that furnishes designated health services (DHS). The rule also prohibits the use of a percentage-based compensation formula for determining the rental charges for the lease of office space or equipment (but does not apply to management agreements, billing services arrangements, and gainsharing arrangements). The final rule also revises the definition of an “entity” to include both the entity that bills Medicare for DHS as well as the entity that fully performs the DHS. These provisions are effective October 1, 2009.  Moreover, the rule modifies the “stand in the shoes” provisions in the Stark Act definition of indirect compensation arrangement. Specifically, a physician owner of (or investor in) a physician organization stands in the shoes of the physician organization for the Stark purposes if the physician has the ability or right to receive financial benefits of the ownership or investment.  However, a merely titular owner is not required to (but may select to) stand in the shoes of his or her physician organization.  CMS also is finalizing its proposed revisions to the definitions of “physician” and “physician organization,” and clarifying the period of time for which a physician would be prohibited from referring Medicare patients to an entity for DHS and for which the DHS entity would be prohibited from billing for such DHS where a financial relationship failed to satisfy a Stark Act exception.  The final rule also requires a physician-owned hospital to furnish to patients, on request, a list of physicians or immediate family members who own or invest in the hospital. Moreover, a physician-owned hospital must require all physician owners or investors who are also active members of the hospital's medical staff to disclose in writing their ownership or investment interests in the hospital to all patients they refer to the hospital.  CMS can terminate the Medicare provider agreement of a physician-owned hospital if it fails to comply with these disclosure provisions or with the requirement that a hospital disclose in writing to all patients whether there is a physician on-site at the hospital 24 hours per day, 7 days per week. Reed Smith is preparing a client memo analyzing these provisions; it will be available on our web site, reedsmith.com.
• Emergency Medical Treatment and Labor Act (EMTALA) – Under the final rule, if an individual with an unstable emergency medical condition presents to a participating hospital and is admitted, the admitting hospital has satisfied its EMTALA obligation.  If the patient is subsequently transferred to a hospital with capabilities for specialized care, that hospital does not have an EMTALA obligation to accept the individual. CMS invites ongoing public comment on whether this policy results in unintended consequences, such refusals by hospitals with specialized capabilities to accept the transfer inpatients whose emergency medical condition remains unstabilized.
• Other Policies – Among many other things, the rule: makes limited revisions to the classifications of cases to Medicare severity diagnosis-related groups (MS-DRGs) and Medicare severity long-term care diagnosis-related groups (MS-LTC-DRGs); updates the rate-of-increase limits for certain hospitals and hospital units excluded from the IPPS that are paid based on reasonable cost; implements wage index and geographic reclassification changes; reduces by 50% capital Indirect Graduate Medical Education payments; and implements provisions in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) rebasing sole community hospital payment rates and extending certain geographic reclassifications and special exceptions. The rule also requires Medicare Advantage plans to provide encounter-level data to CMS to be used for risk adjustment, disproportionate share hospital calculations, and Medicare coverage tracking purposes. CMS did not adopt its proposal to expandthe postacute care transfer policy to transfers to home for the furnishing of home health services within 7 days (rather than 3 days) of hospital discharge.