On December 31, 2014, the IRS published final regulations providing guidance on the community health needs assessment and financial assistance policy requirements for charitable hospitals under the ACA. The regulations address the entities that must meet these requirements, related reporting obligations, and the consequences for failing to satisfy these ACA requirements. The regulations apply to taxable years beginning one year after December 29, 2014.
On December 4, 2014, President Obama signed into law H.R. 4067, which requires the Secretary of HHS to continue to instruct Medicare contractors not to enforce requirements for direct physician supervision of outpatient therapeutic services in critical access and small rural hospitals through 2014.
In an effort to reduce the backlog in Medicare appeals related to certain short-stay hospital claims, CMS is offering an "administrative agreement" providing partial payment to hospitals that drop their appeals. Specifically, CMS would provide a payment equal to 68% of the net payable amount to acute care hospitals or critical access hospitals (CAH) willing to resolve their pending appeals (or waive their right to request an appeal) for inpatient-status claim denials with dates of admissions prior to October 1, 2013, and where the patient was not a Part C enrollee. Such denials involve services that may have been reasonable and necessary, but the contractor contends that treatment on an inpatient basis was not. A hospital may not choose to settle some claims and continue to appeal others, and certain hospitals could be excluded from participating in the settlement based on pending False Claims Act investigations. Also note that PPS-excluded hospitals are not eligible to participate in this program. CMS is encouraging eligible hospitals with such claim denials "to make use of this administrative agreement to alleviate the burden of current appeals on both the hospital and Medicare system." Hospitals should send their request for agreement by October 31, 2014 or request an extension from CMS. CMS is hosting a national provider call on September 9, 2014 to discuss the settlement process.
On August 22, 2014, CMS is publishing a final rule to update the Medicare acute hospital inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2015, which begins October 1, 2014. The following are highlights of the sweeping regulations.
With regard to the IPPS, the final rule provides for a 1.4% operating payment rate update for hospitals that submit quality data and are meaningful Electronic Health Record (EHR) users. This update reflects a 2.9% market basket update, adjusted by a -0.5 percentage point multi-factor productivity (MFP) cut and an additional -0.2 percentage point cut (both mandated by the Affordable Care Act), with an additional -0.8 percentage point documentation and coding recoupment adjustment. Despite the positive operating rate update, total IPPS payments (capital and operating payments) are projected to decrease by about $756 million in FY 2015 as a result of reductions under the Hospital Readmissions Reduction Program, the Hospital Acquired Condition (HAC) Reduction Program, Medicare disproportionate share hospital (DSH) payment changes, and other policy changes. Moreover, CMS is revising the labor market areas used in the wage index, but adopting a 1-year transition policy for FY 2015 to mitigate potential negative payment impacts.
The rule makes numerous changes to hospital quality programs, including updating measures aligning certain reporting requirements in both the EHR Incentive Program and the Hospital Inpatient Quality Reporting Program. In addition, the rule modifies the Hospital Value-Based Purchasing Program to increase the applicable percent reduction (the portion of Medicare payments available to fund incentive payments under the program) to 1.5% of the base operating DRG payment amounts to all participating hospitals, which will generate approximately $1.4 billion for value-based incentive payments in FY 2015. In addition, the rule increases the maximum reduction in payments under the Hospital Readmissions Reduction program from 2% to 3%. The rule also implements the ACA HAC Reduction Program, which will reduce by 1% Medicare inpatient payments to hospitals with the highest rates of certain conditions that are reasonably preventable when those conditions are acquired after the beneficiary has been admitted to the hospital for a different condition.
Other IPPS policies in the rule address, among other things, the low-volume hospital payment adjustment and the Medicare Dependent Hospital program, graduate medical education funding, and critical access hospital payments. CMS also reminds hospitals of their statutory obligation to establish and make public a list of its standard charges for items and services.
With regard to the LTCH PPS, CMS estimates that estimated payments per discharge will rise by 0.8% in FY 2015, and total payments will increase by 1.1%, or approximately $62 million. This increase is attributable to several factors, including a 2.2% rate update, which is based on a market basket update of 2.9% adjusted by a -0.5 percentage point MPF adjustment and an additional adjustment of -0.2 percentage points. CMS is also applying a “one-time” prospective budget neutrality adjustment to standard federal rate of approximately -1.3% under the last year of a three-year phase-in. For 2015, the standard federal rate will be $40,240.51 (compared to the FY 2014 rate of $40,607.31), and the fixed-loss amount for high cost outlier cases will be $14,972 (compared to the FY 2014 amount of $13,314). Note that LTCHs are subject to a 2.0 percentage point reduction for failure to submit required quality data for FY 2015.
The final rule also eliminates the 5 percent readmissions policy for LTCH patients discharged on or after October 1, 2014. Under this policy readmissions from co-located providers in excess of 5 percent are paid a single LTCH payment instead of separate admission and readmission payments. CMS indicated that this policy is not needed in light of recent statutory changes establishing clinical criteria for standard LTCH-PPS payments that will be implemented for discharges beginning on or after October 1, 2015. CMS did not finalize an earlier proposal to change the fixed-day threshold under the LTCH PPS greater than 3-day interrupted stay policy.
Separately, CMS has published corrections to the August 19, 2013 FY 2014 IPPS/LTCH final rule to restore regulatory text related to the administration of pneumococcal vaccines that had been inadvertently removed.
On August 8, 2014, President Obama signed into law the following two bills approved by the Senate in July:
- H.R. 4631, the Autism CARES Act, to continue federal research, early identification and intervention, and education related to autism; and
- H.R. 3548, the Improving Trauma Care Act, to include in the Public Health Service Act definition of trauma injuries caused by thermal, electrical, chemical, or radioactive force.
In addition, prior to beginning the August recess, the House of Representatives approved the following bills:
- H.R. 4250, the Sunscreen Innovation Act, which is intended to establish a more efficient FDA review process for new sunscreen ingredients;
- H.R. 594, the Paul D. Wellstone Muscular Dystrophy Community Assistance, Research and Education Amendments of 2014; and
- H.R. 4709, the Ensuring Patient Access and Effective Drug Enforcement Act, which would amend the Controlled Substances Act to improve enforcement efforts related to prescription drug diversion and abuse while ensuring patient access to necessary medications.
The House Energy and Commerce Committee also voted in favor of the following legislation:
- H.R. 4701, the Lyme and Tick-borne Diseases Act of 2014, which would convene working groups to focus on vector-borne disease and develop strategic plans for prevention and treatment.
- H.R. 3522, the Employee Health Care Protection Act, which would allow health insurance issuers to continue to offer non-ACA compliant group coverage that was in effect during 2013.
- H.R. 4067, which would continue to delay for the remainder of 2014 the enforcement instruction regarding supervision requirements for outpatient therapeutic services offered in critical access and small rural hospitals.
- H.R. 5214, a bill to require the HHS Secretary to make recommendations for the development and use of clinical data registries for the improvement of patient care.
CMS has made a series of announcements related to the Sunshine Act Open Payments system, including information about the Open Payments review, dispute and correction process that runs from July 14 through August 27, 2014. This period allows physicians and teaching hospitals to review and initiate any disputes they may have regarding the data reported about them by applicable manufacturers and applicable group purchasing organizations. CMS has also extensively updated the Open Payments User Guide, which is intended to provide industry, physicians, and teaching hospitals with a comprehensive understanding of the Open Payments system and reporting requirements.
On June 18, 2014, CMS announced in a blog posting that it is planning to add a “Five Star” quality rating system to the Hospital Compare, Dialysis Facility Compare, and Home Health Compare websites on Medicare.gov. The agency will start making the new quality ratings available later this year and into early 2015. CMS already maintains star ratings on its Nursing Home Compare and Physician Compare sites.
Earlier this month, CMS released its first annual update to its Medicare inpatient and outpatient hospital charge databases. Specifically, the updated CMS databases include information on 2012 average hospital charges for the 100 most common Medicare inpatient services and 30 most common Medicare outpatient services. The database now includes two years of data, allowing researchers to begin to look at trends. CMS also has released a variety of information on chronic conditions among Medicare fee-for-service (FFS) beneficiaries, including data on prevalence, utilization, and Medicare spending. In addition, the CMS Geographic Variation Dashboards present Medicare FFS per-capita spending at the state and county levels in interactive formats, and a CMS Research Cohort Estimate Tool is intended to help researchers and other stakeholders estimate the number of Medicare beneficiaries with certain demographic profiles or health conditions.
On June 17, 2014, the Centers for Medicare & Medicaid Services (CMS) published a notice making changes to the Medicare payment adjustment for low-volume hospitals and to the Medicare-dependent hospital (MDH) program under the inpatient prospective payment system (IPPS). The adjustments, which were mandated by the Protecting Access to Medicare Act of 2014, apply to the second half of fiscal year (FY) 2014, or April 1, 2014 through September 30, 2014. The payment adjustments are expected to increase overall IPPS payments in FY 2014 by $227 million (an additional 0.24%) compared to the previous estimate of FY 2014 payments to all IPPS hospitals published in the IPPS final rule for FY 2014. Specifically, CMS estimates that approximately 600 hospitals qualifying as low-volume hospitals through September 30, 2014 will experience an increase in payments of approximately $161 million compared to CMS’s earlier estimate in the FY 2014 IPPS final rule, and 118 MDHs will experience an overall increase of approximately $66 million compared to CMS’s estimate in the final IPPS rule.
On May 12, 2014, the Centers for Medicare & Medicaid Services (CMS) published a final rule that reforms federal health policy regulations that CMS has identified as unnecessary, obsolete, or excessively burdensome on health care providers and suppliers. The rule also is intended to eliminate or reduce requirements that impede quality patient care or that divert resources away from providing high quality patient care. CMS estimates that the rule will result in annual recurring savings of about $660 million, plus a $22 million one-time savings to long-term care facilities from a sprinkler deadline extension. Highlights of the wide-ranging rule include the following:
- Two provisions of the rule address imaging services offered in ambulatory surgical centers (ASCs) and hospitals. First, CMS is reducing the requirements that ASCs must meet in order to provide radiological services to patients. Under the new rule radiology services performed as an integral part of surgical procedures in a ASCs are no longer required to be supervised by a radiologist. Instead, the ASC’s governing body must appoint an individual qualified in accordance with state law and the ASC’s policies who is responsible for assuring that all radiologic services are provided in accordance with the ASC Conditions of Coverage. Second, CMS is modifying hospital requirements for in-house preparation of radiopharmaceutical to remove the “direct” supervision requirement; that is, while the preparation remains under the general supervision of a pharmacist, doctor of medicine, or doctor of osteopathy, their physical presence will no longer be required during the delivery of off-hour nuclear medicine tests.
- CMS is permitting qualified dietitians and qualified nutrition professionals to order patient diets under the hospital conditions of participation.
- The rule eliminates a requirement that critical access hospitals (CAHs), rural health clinics, and federally qualified health centers (FQHC) have a physician on site at least once in every two-week period. It also eliminates the requirement that a CAH develop its patient care policies with the advice of at least one member who is not a member of the CAH staff.
- Under the rule, long-term care facilities may apply for an extension of the August 13, 2013 deadline for installing automatic sprinkler systems.
- The rule removes a redundant transplant center data submission requirement. In addition, the rule eliminates an automatic re-approval survey requirement for transplant programs, which CMS states will allow the agency to better focus survey activities.
- CMS makes a number of clarifications pertaining to CMS regulations governing proficiency testing (PT) referrals under the Clinical Laboratory Improvement Amendments (CLIA) of 1988, including establishing policies under which certain PT referrals by laboratories would not generally be subject to revocation of a CLIA certificate, clarifying the restriction on referrals of PT samples to other laboratories, and revising the standard for what constitutes an “intentional” referral of PT samples.
- Other issues addressed in the rule include, among others, hospital reclassification of swing-bed services, the composition of hospital medical staff and hospital governing bodies, and practitioners permitted to order hospital outpatient services.
On May 20, the House Ways and Means Health Subcommittee is holding a hearing on current Medicare hospital issues, including the CMS two-midnights policy, short inpatient stays, outpatient observation stays, Recovery Audit Contractor audits, and the appeals backlog.
On April 16, 2014, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would amend fire safety standards applicable to the following types of Medicare- and Medicaid-participating health care facilities: hospitals, critical access hospitals, long-term care facilities (skilled nursing facilities, nursing facilities, and distinct part skilled nursing facilities or nursing facilities), intermediate care facilities for individuals with intellectual disabilities, ambulatory surgery centers, hospices that provide inpatient services, religious nonmedical health care institutions, and programs of all-inclusive care for the elderly facilities. As part of the rulemaking, CMS intends to adopt the National Fire Protection Association’s (NFPA) 2012 editions of the Life Safety Code (LSC) and the Health Care Facilities Code (HCFC). CMS notes in a press release that this change “would reduce burden on health care providers, as the 2012 edition of the LSC also is aligned with the international building codes and would make compliance across codes much simpler for Medicare and Medicaid-participating facilities.” Among other things, the LSC requires that all existing high-rise buildings containing health care occupancies be protected throughout by an approved, supervised automatic sprinkler system. CMS estimates the total cost of implementation of the rule will be $119.6 million, although the costs associated with installing sprinklers in high rise health care facilities would be distributed over a 12-year phase-in period. Comments will be accepted until June 16, 2014.
On April 17, 2014, CMS announced that it making inpatient psychiatric facility quality data available as part of the Hospital Compare website. Specifically, CMS is now posting data for the period of October 1, 2012 through March 31, 2013 regarding the following measures: Hours of Physical Restraint Use; Hours of Seclusion Use; Post-Discharge Continuing Care Plan Created; and Post-Discharge Continuing Care Plan Transmitted to Next Level of Care Provider Upon Discharge. Next year, CMS also expects to post data regarding the measures “Patients Discharged on Multiple Antipsychotic Medications” and “Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification.”
The OIG has released its “Compendium of Priority Recommendations,” which lists 25 priority issues for which the OIG has open recommendation and that, if implemented, would best protect the integrity of HHS programs. The 25 top priorities are as follows:
- Medicare Policies and Payments: address wasteful Medicare policies and payment rates for clinical laboratories, hospitals, and hospices; improve controls to address improper Medicare billings by community mental health centers, home health agencies, and skilled nursing facilities; detect and recover improper Medicare payments for services to incarcerated, unlawfully present, or deceased individuals; maximize recovery of Medicare overpayments; improve monitoring and reconciliation of Medicare hospital outlier payments; ensure that Medicare Advantage Organizations are implementing programs to prevent and detect waste, fraud, and abuse; and improve controls to address questionable billing and prescribing practices for Part D prescription drugs.
- Medicare Quality of Care and Safety Issues: address adverse events in hospital settings; improve care planning and discharge planning for beneficiaries in nursing home settings; address harm to patients, questionable resident hospitalizations, and inappropriate drug use in nursing homes; improve nursing home emergency preparedness and response; and ensure hospice compliance with Medicare conditions of participation.
- Medicaid Program Policies and Payments: ensure that state claims and practices do not inappropriately inflate federal reimbursements; ensure that states prevent, detect, and recover improper payments and return the federal share of recoveries to the federal government; assist states to better align Medicaid drug reimbursements with pharmacy acquisition costs; ensure that Medicaid Information Systems are fully functional; and address Medicaid managed care fraud and abuse concerns.
- Medicaid Quality of Care and Safety Issues: ensure that Medicaid home- and community-based care service providers comply with quality and safety requirements; and ensure that States improve utilization of preventive screening services for eligible children.
- Oversight of Food Safety: improve oversight of dietary supplements; and improve oversight of food inspections and traceability.
- HHS Grants and Contracts: improve oversight of grantee compliance, quality assurance, and conflicts of interest; and improve oversight of Medicare contractor performance and conflicts of interest.
- HHS Financial Stewardship: reduce improper payments and fraud; and correct deficiencies found in financial statement audits.
Note that some of these recommendations would require additional authority or other legislative change.
The OIG estimates that CMS made $7.5 million in incorrect Medicare payments to hospitals in 2010 and 2011 for outpatient clinic visits, in part because of errors in identifying patients as “new” versus “established.” According to the OIG, hospitals attributed the incorrect payments to clerical errors, staff not fully understanding Medicare billing requirements, reliance on codes selected by the physician, or billing systems that could not identify established patients. The OIG recommends that CMS work with the Medicare administrative contractors (MACs) to recover incorrect payments; provide additional guidance to hospitals on billing clinic visits for new or established patients; and instruct hospitals on the need for stronger compliance controls.
On April 7, 2014, President Obama signed into law S. 1557, the Children’s Hospital Graduate Medical Education Support Reauthorization Act, which provides funding to children’s hospitals for their pediatric medical residency programs.
Medicare eligible professionals and eligible hospitals that are not “meaningful users” of certified electronic health record (EHR) technology will be subject to payment adjustments under the Medicare EHR Incentive Programs beginning on October 1, 2014 for hospitals and on January 1, 2015 for eligible professionals. Eligible professionals and hospitals may be exempt from payment adjustment, however, if demonstrating meaningful use would result in a significant hardship. CMS recently released the hardship exception applications, which outline the specific circumstances that CMS has determined pose a significant barrier to achieving meaningful use. Of particular interest, CMS has added an exception category for “2014 EHR Vendor Issues,” to cover circumstances under which the professional’s or hospital’s EHR vendor was unable to obtain 2014 certification, or the eligible professional or hospital was unable to implement meaningful use due to 2014 EHR certification delays. The hardship application is due by April 1, 2014 for eligible hospitals, and by July 1, 2014 for eligible professionals. Important to certain specialists, the application for eligible professionals states that physicians classified in the Medicare Provider Enrollment, Chain and Ownership System (PECOS) with a primary area of practice of Diagnostic Radiology (30), Nuclear Medicine (36), Interventional Radiology (94), Anesthesiology(05), or Pathology (22) are automatically exempt from the 2015 payment adjustment and are not required to complete the exception application.
On March 18, 2014, CMS published an interim final rule with comment period that implements changes to the payment adjustment for low-volume hospitals and to the Medicare-dependent hospital (MDH) program for fiscal year 2014 in accordance with the Pathway for SGR Reform Act of 2013. The rule, which applies to discharges on October 1, 2013 through March 31, 2014, is estimated to increase Medicare inpatient prospective payment systems (IPPS) payments to these hospitals by an additional 0.24%, or $227 million. Comments on the rule will be accepted until May 13, 2014.
On March 14, 2014, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommended that Congress take steps to promote continuity in Medicaid coverage, such as by providing states with an option for 12-month continuous eligibility for adults and extending the current transitional medical assistance program. Among other things, the report also discusses at length the policy implications of Medicaid non-disproportionate share hospital supplemental payments, and calls for additional data collection related to these payments to promote transparency, support program integrity efforts, and facilitate assessments of Medicaid payment adequacy. In addition, the report includes a statistical supplement containing detailed Medicaid data.
CMS continues to provide guidance to providers and the MACs on its “2 Midnight Rule” Medicare inpatient hospital admission and medical review criteria. Additional updates were posted on March 12, 2014 to clarify review guidelines, questions and answers, and the mechanism to request redeterminations.