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.
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).
A recent HHS Office of Inspector General (OIG) report examines Medicare services provided during the Medicare Severity Diagnosis Related Group (DRG) payment window – that is, the period when certain outpatient services related to an inpatient admission are considered to be included in the DRG payment. Currently, outpatient services delivered within three days of an inpatient admission in a setting owned by the admitting hospital are included in the DRG payment. On the other hand, the OIG notes that services provided by hospitals that share a common owner (i.e., multiple hospitals owned by the same corporation) are not subject to the DRG window. The OIG estimated that Medicare payments for outpatient services provided at settings owned by admitting hospitals in the 11 days prior to the DRG window totaled $263 million in 2011. The Medicare program also paid an estimated $45 million in 2011 for outpatient services provided at hospitals affiliated with, but not owned by, admitting hospitals during the three days prior to inpatient admissions. The OIG recommends that CMS seek legislative authority to (1) expand the “DRG window” to include additional days prior to the inpatient admission (the OIG does not specify the number of days), and (2) expand the DRG window to include other hospital ownership arrangements, such as affiliated hospital groups. CMS did not concur with either recommendation, noting that they have not been proposed by the President and observing that they would require legislation.
On February 24, 2014, CMS posted additional guidance on its controversial “2 Midnight Rule” Medicare inpatient hospital admission and medical review criteria. Among other things, CMS is requesting Medicare Administrative Contractors (MACs) to re-review claims denials made during the “probe and educate” phase of implementation to make sure that MACs are applying CMS clarifications issued in September 2013 and January 2014.
On February 14, 2014, CMS published a notice announcing an open period for additional organizations to be considered for participation in Models 2, 3, and 4 of the Bundled Payments for Care Improvement initiative. The three models are described as follows:
- Model 2--Retrospective bundled payment models for hospitals, physicians, and post-acute providers for an episode of care consisting of an inpatient hospital stay followed by post-acute care.
- Model 3--Retrospective bundled payment models for post-acute care where the episode does not include the acute inpatient hospital stay.
- Model 4--Prospectively administered bundled payment models for the acute inpatient hospital stay and related readmissions.
Interested parties must submit the requisite forms by April 18, 2014.
CMS Again Extends "Probe & Educate" Phase for 2-Midnight Inpatient Admissions Criteria Implementation; Clarifies Physician Certification Requirements
CMS has announced that it is extending provider education activities related to its new Medicare inpatient hospital admission and medical review criteria (commonly known as the 2-Midnight Rule). Specifically, CMS is extending what it refers to as the “Probe & Educate” review process for an additional six months, through September 30, 2014. Under this extension, Recovery Audit Contractors (RACs) and other Medicare review contractors will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission on or after October 1, 2013 through October 1, 2014. Medicare Administrative Contractors (MACs) will continue to select claims for review with dates of admission between March 31, 2014 and September 30, 2014, however, and claims not in compliance will be denied. MACs also will continue to hold educational sessions with hospitals through September. CMS also has clarified related provisions regarding physician orders for and certification of hospital inpatient services.