CMS Schedules August 24-25, 2015 OPPS Advisory Panel Meeting

CMS has announced that it is holding a meeting of the Advisory Panel on Hospital Outpatient Payment on August 24-25, 2015. The purpose of the Panel is to advise HHS and CMS on the clinical integrity of the Ambulatory Payment Classification (APC) groups and their associated weights and hospital outpatient therapeutic services supervision issues. Presentation forms are due by July 24 and the meeting registration timeframe runs from June 29 through July 31, 2015.  During the scheduled meeting, webcasting is accessible online.   

GAO Report on Oversight of Medicaid Payments to Hospitals

The Government Accountability Office (GAO) has released a report entitled “Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited Data and Unclear Policy.”  The report examines how state Medicaid payments to government hospitals compare to those made to private hospitals in selected states (Illinois, New York, and California) and CMS oversight of such payments. Because states receive federal matching funds for their payments to health providers, the GAO observes that states “may have incentives to make excessive Medicaid payments to certain institutional providers such as hospitals operated by local governments.” The GAO notes that its assessment was hampered by inaccurate and incomplete data on payments. For example, the GAO notes that large supplemental payments states often make to hospitals are not reported by the hospital. While some of the available data was inconclusive, the GAO believes that a small number of government hospitals it identified as receiving high payments warrants oversight. With regard to CMS oversight, the GAO observes that CMS has insufficient information on payments, lacks a policy and process for assessing payments to individual providers, and lacks a policy and standard process for determining whether Medicaid payments to individual providers are economical and efficient. The GAO recommends that CMS take steps to ensure states report provider-specific payment data, establish criteria for assessing payments to individual providers, develop a process to identify and review payments to individual providers, and expedite review of the appropriateness of New York's hospital payments. HHS concurred with the recommendations.

Action Continues on 21st Century Cures Act; Hearings on Medicare Competition, ACA Implementation, Opioid Abuse

Later today, the full House Energy and Commerce Committee is scheduled to begin markup of the 21st Century Cures Act, following Health Subcommittee approval on May 14. Votes are expected tomorrow (markup was subsequently delayed until May 21).  Also today, the House Ways and Means Subcommittee on Health is holding a hearing on "Improving Competition in Medicare: Removing Moratoria and Expanding Access.”

Tomorrow the House Ways and Means Committee has scheduled a hearing on the use of administrative actions in Affordable Care Act implementation. On May 21, the Energy and Commerce Oversight Subcommittee will address state government efforts to combat opioid abuse.

CMS Call: Medicare Acute Care Quality and Reporting Programs (May 12)

On May 12, 2015, CMS is hosting a call that will provide an overview of all Medicare hospital inpatient quality reporting and value-based purchasing programs. Specifically, the call will cover: the Hospital Inpatient Quality Reporting (IQR) Program; the Hospital Value-Based Purchasing (HVBP) Program; the Hospital Acquired Condition Reduction Program (HACRP); the Hospital Readmission Reduction Program (HRRP); and the Electronic Health Records (EHR) Incentive Program. The target audience for this call is hospital administrators, executive-level leaders, quality professionals, and staff new to quality reporting programs. Registration closes at noon on the day of the call or when available space has been filled.

CMS Issues Proposed Rule to Update FY 2016 IPPS, LTCH PPS Rates, Policies

On April 30, 2015, the Centers for Medicare & Medicaid Services (CMS) is publishing its proposed 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) 2016.  CMS will accept comments on the proposed rule until June 16, 2015. The final rule will be published by August 1, 2015, and generally will apply to discharges occurring on or after October 1, 2015.

With regard to the IPPS, CMS projects that the rate and policy changes in the proposed rule would increase IPPS operating payments by approximately 0.3%, or about $120 million in FY 2016. The proposed rule would provide for a 1.1% operating payment rate update for hospitals that submit quality data and are meaningful users of Electronic Health Records (EHR). This update reflects a 2.7% market basket update, adjusted by a -0.6 percentage point multi-factor productivity (MFP) cut and an additional -0.2 percentage point cut (as mandated by the Affordable Care Act, or ACA), with an additional -0.8 percentage point documentation and coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Updates to IPPS hospitals are subject to several quality-related adjustments under the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition (HAC) Reduction Program, the Hospital Inpatient Quality Reporting (IQR) Program, and the EHR Incentive Program. Hospitals that do not successfully participate in the Hospital IQR Program will be subject to a one-fourth reduction of the market basket update, which CMS estimates would equal 0.675 percentage points. Hospitals that are not meaningful EHR users would be subject to a separate reduction equal to half of the market basket update in FY 2015 (currently estimated to be a 1.35 percentage point reduction).

The proposed rule also would make numerous changes to hospital quality programs, including updates to quality measures. CMS also would increase the reduction to base diagnosis related group (DRG) payments under the Hospital VBP Program from 1.5% to 1.75%. In addition, CMS addresses, among many other things: proposed changes to MS-DRG classifications and recalibration of relative weights, new technology add-on payment applications, rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis, distribution of Medicare disproportionate share hospital (DSH) allotments in accordance with the ACA, and a potential future expansion of the Bundled Payments for Care Initiative.

With regard to LTCHs, the proposed rule would provide for a standard federal rate of $41,884, reflecting an adjusted market basket increase of 1.9%. Nevertheless, CMS estimates that LTCH PPS payments would decrease by 4.6% (approximately $250 million) under the proposed rule. CMS attributes this cut largely to implementation of the Pathway for SGR Reform Act of 2013, which requires CMS to establish an alternative site-neutral payment rate, generally based on IPPS rates, for Medicare inpatient discharges from an LTCH that fail to meet certain statutory-defined, patient-level clinical criteria, beginning with LTCH discharges occurring in cost reporting periods beginning on or after October 1, 2015. Under the patient-level clinical criteria, LTCHs will be reimbursed under LTCH PPS only if, immediately preceding the patient’s LTCH admission, the patient was discharged from a general acute care hospital paid under IPPS and the patient’s stay included at least three days in an intensive care unit or coronary care unit or the patient is assigned to an MS LTC DRG for cases receiving at least 96 hours of ventilator services in the LTCH. Patient’s discharge from an LTCH with a principal diagnosis relating to psychiatric or rehabilitation services may not be reimbursed under LTCH PPS. For any Medicare patient who does not meet the patient-level clinical criteria, the LTCH will be paid a lower “site neutral” payment rate, which will be the lower of (1) the IPPS comparable per diem payment rate including any outlier payments, or (2) 100% of the estimated costs for services.

The proposed rule would establish the patient-level clinical criteria by adopting a new rule at 42 C.F.R. § 412.522 and address implementation issues, including the transitional blended payment rate methodology for FYs 2016 and 2017. CMS projects that payments for these site neutral payment rate cases will decrease by approximately 14.3% (or about $293 million). On the other hand, about 54% of LTCH cases are expected to meet the criteria for exclusion from the site neutral payment rate in FY 2016, and be paid based on the LTCH PPS standard federal payment rate. CMS projects that payment for those cases that qualify for the standard LTCH PPS payment rate will increase by 1.9%, reflecting a 2.7% market basket update reduced by a 0.6 percentage point multi-factor productivity adjustment and an additional adjustment of -0.2 percentage point under the ACA.

OIG Issues 2015 Compendium of Unimplemented Recommendations

The OIG has released its March 2015 “Compendium of Unimplemented Recommendations,” which highlights the OIG’s top 25 recommendations for cost savings and/or quality improvements in HHS programs, along with other significant unimplemented recommendations. High-priority recommendations address the following areas, among others:

  • Payment Policies and Practices: Expand the DRG window to include additional days prior to the inpatient admission and other hospital ownership arrangements; establish a hospital transfer payment policy for early discharges to hospice care; and reduce hospital outpatient department payment rates for ambulatory surgical center-approved procedures.
  • Billing and Payment: Develop oversight mechanisms for the home health face-to-face requirement; change the method for determining how much therapy is needed to ensure appropriate skilled nursing facility payments; detect and recoup improper Medicare payments made for services rendered to incarcerated beneficiaries; implement an automated system to recalculate outlier claims to facilitate reconciliations; and provide states with definitive guidance for calculating the federal upper payment limit (UPL), including using facility-specific UPLs that are based on actual cost report data.
  • Contractor Oversight: Utilize and report Zone Program Integrity Contractors’ (ZPICs') workload statistics in ZPIC evaluations.
  • Grants and Contracts: The National Institutes of Health (NIH) should promulgate regulations addressing institutional financial conflict of interest.
  • Program and Financial Management: Reduce significant variation in states’ personal care services laws and regulations; and standardize administrative law judge level case files and make them electronic.
  • Quality of Care and Safety: Broaden patient safety efforts to include all types of adverse events; require states to report on vision and hearing screening data; strengthen oversight of state access standards for Medicaid managed care; and expand regulatory authority and oversight of dietary supplements.
  • Emergency Preparedness: Establish effective hospital emergency preparedness and response policies.
  • Health Information Technology: Improve the Transformed Medicaid Statistical Information System; and address fraud vulnerabilities in EHRs.
  • Program Integrity: Increase reviews of clinicians associated with high cumulative payments; and restrict certain beneficiaries to a limited number of pharmacies or prescribers.
  • Affordable Care Act: Improve internal CMS controls related to determining applicants’ eligibility for enrollment in quality health plans and eligibility for insurance affordability programs.

While some of these recommendations could be achieved administratively, other policies would require legislative changes to implement. 

GAO Calls for Changes to Medicare Payments to PPS-Exempt Cancer Hospitals

A recent Government Accountability Office (GAO) report, “Medicare: Payment Methods for Certain Cancer Hospitals Should Be Revised to Promote Efficiency,” examines the Medicare reimbursement methodology for cancer hospitals exempt from the acute inpatient prospective payment systems (PPS). The GAO determined that Medicare payments were substantially higher at PPS-exempt cancer hospitals (PCHs) in 2012 than at PPS teaching hospitals in the same geographic area for beneficiaries with the same diagnoses or services. GAO estimated that PCHs were paid an average of about 42% more for inpatient services and 37% more for outpatient services than a local PPS teaching hospital would have received for a similar patient. According to the GAO, the PCH inpatient and outpatient reimbursement methodologies “provide little incentive for efficiency.” The GAO therefore recommends that Congress consider requiring Medicare to pay PCHs on the same basis as PPS teaching hospitals or otherwise authorize the HHS Secretary to modify how Medicare pays PCHs. 

MedPAC Meeting on Medicare Policy (April 2-3, 2015)

 On April 2-3, 2015, the Medicare Payment Advisory Commission (MedPAC) is meeting to discuss various Medicare policy issues, including: hospital short stay policy; polypharmacy/multiple drug use (focusing on Part D opioid use); Medicare Part D risk sharing; measuring low-value care; using episode bundles to improve care efficiency (including potential refinements to the Medicare spending per beneficiary measure); bundling oncology services; and synchronizing Medicare policy across payment models.

House Approves Medicare DMEPOS Competitive Bidding, Hospital Observation, Controlled Substances, & Trauma Care Bills

Yesterday the House of Representatives approved the following health policy bills:

  • H.R. 284, the Medicare DMEPOS Competitive Bidding Improvement Act of 2015 – which would require Medicare suppliers that bid under a DME, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to obtain a $50,000-$100,000 bid surety bond for each competitive bidding area (CBA).  If the bidder is offered a contract for any product category in the CBA, and the supplier’s bid for the product category was at or below the median composite bid rate that was used to calculate single payment amounts, the bid bond would be forfeited if the supplier does not accept the contract.   In all other cases, the bid bond would be returned to the bidder.  The bill is intended to prevent  suppliers from submitting not-binding, “low-ball” bids that artificially drive down prices and jeopardize beneficiary access to equipment.   The bill also would codify that competitive bidding contracts can only be awarded to suppliers that meet applicable state licensure requirements.
  • H.R. 876, the “NOTICE Act” – which would require hospitals and critical access hospitals to provide written and oral notification to Medicare beneficiaries classified as being under observation status for more than 24 hours, rather than admitted as inpatients.  Such notice would include an explanation of the implications of observation status for beneficiary cost-sharing obligations and subsequent skilled nursing facility eligibility.
  • H.R. 639, Improving Regulatory Transparency for New Medical Therapies Act – to amend the Controlled Substances Act to improve the efficiency, transparency, and consistency of the Drug Enforcement Agency’s (DEA) process for scheduling new drugs.  According to the bill sponsor, the lack of predictability in the timing of DEA scheduling decisions results in uncertainty in the drug development process and delays patient access to new therapies.
  • H.R. 647, Access to Life-Saving Trauma Care for All Americans Act –  to reauthorize certain Public Health Service Act trauma care center grants.  
  • H.R. 648, Trauma Systems and Regionalization of Emergency Care Reauthorization Act – to reauthorize grants supporting state and rural development of trauma systems and authorize new regionalized emergency care model pilot projects.

The bills are now awaiting Senate consideration.

MedPAC Report to Congress on Medicare Policy

The Medicare Payment Advisory Commission (MedPAC) has released its annual recommendations to Congress on Medicare policies, including Medicare fee-for-service (FFS) payment updates and a status report on the Medicare Advantage and Medicare Part D programs. The following are highlights of the recommendations for 2016 (many of which were recommended previously):

  • With regard to physician services, Congress should repeal the Sustainable Growth Rate (SGR) methodology for physician services and replace it with a 10-year path of statutory updates that includes a higher rate update for primary care services than for specialty care services (note that Congress may take up SGR reform legislation as early as this month, before the latest temporary patch expires and a 21.2% fee schedule cut goes into effect April 1, 2015). In addition, Congress should direct the Department of Health and Human Services (HHS) Secretary to increase shared savings opportunities for physicians and health professionals in two-sided risk accountable care organizations (ACOs). MedPAC also endorsed the collection of data to establish more accurate work and practice expense values, along with reductions to the relative values for overpriced fee-schedule services to reduce fee schedule spending by at least 1% annually for each of five consecutive years. Congress also should establish a prospective per beneficiary payment to replace the Primary Care Incentive Payment program (which provides a 10% bonus payment for certain primary care practitioner services) after it expires at the end of 2015.
  • MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates for 2016, concurrent with changes to the outpatient payment system and the long-term care hospital (LTCH) payment system. Specifically, MedPAC calls on Congress to direct the Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for LTCH services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients (this provision would be phased in from 2016 to 2018).
  • Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the SNF prospective payment system (PPS) to rely on patient characteristics and begin a process of rebasing a year after these revisions are implemented, with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs.
  • Congress should eliminate the fiscal year 2016 Medicare rate update for inpatient rehabilitation facilities (IRFs) and direct the Secretary to eliminate payment differences between IRFs and SNFs for selected conditions, with IRF payment reductions phased in over 3 years. IRFs also should receive relief from regulations specifying the intensity and mix of services for site-neutral conditions.
  • Congress should eliminate the ambulatory surgical center (ASC) payment update for 2016 and require ASCs to submit cost data.
  • Congress should direct teliminate the home health market basket update for 2016, rebase rates, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and expand medical review activities and exercise program integrity authorities. In addition, Congress should direct the Secretary to reduce payments to HHAs with relatively high risk-adjusted rates of hospital readmission and establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use.
  • Congress should eliminate the 2016 update for LTCHs, hospices, and outpatient dialysis services.

While MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.

Ways and Means Committee to Markup Medicare Fraud, Competitive Bidding, and other Medicare Policy Bills

On February 26, 2015, the House Ways and Means Committee is scheduled to vote on the following bills:

  • H.R. 1021, “Protecting the Integrity of Medicare Act of 2015” – a sweeping bill to promote Medicare program integrity and efficiency. Among many other things, the bill would: eliminate civil money penalties for inducements to physicians to limit services that are not medically necessary; create a Part D drug management program for beneficiaries at risk of prescription drug abuse; require MACs to establish improper payment outreach and education programs for providers; expand the Senior Medicare Patrol program; require the HHS Secretary to issue guidance on the application of the “Common Rule” protecting individuals involved in research; and require the Secretary to issue a report on how to establish a permanent physician-hospital gainsharing program.
  • H.R. 284, “Medicare DMEPOS Competitive Bidding Improvement Act of 2015” -- which would require Medicare suppliers that bid under a durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to submit binding bids or risk forfeiture of a surety bond.
  • H.R. 876, “NOTICE Act” – which would require hospitals to provide certain notifications to individuals classified as being under observation status rather than admitted as inpatients.
  • H.R. 887, “Electronic Health Fairness Act of 2015” -- which addresses the treatment of patient encounters in ambulatory surgical centers in determining meaningful electronic health record use.

** These bills were approved with amendments

Hospital Engagement Network Contract Solicitation

CMS is requesting proposals for Hospital Engagement Network (HEN) contracts from qualified entities to work on reducing preventable hospital acquired conditions and readmissions through the Partnership for Patients initiative. HENs will engage the hospital, provider, and broader care-giver communities to quickly implement tested, evidence-based, and measured best practices in order to reduce hospital-based harm and preventable readmissions. 

CMS Hospital Industry Call Today to Focus on RAC Improvements

Today CMS is hosting an Open Door Forum call to discuss several Medicare developments impacting hospitals, including changes CMS has made to the recovery audit program to strengthen oversight, reduce the provider burden, and enhance program transparency. The call begins at 2:00 eastern.

Obama Administration Releases FY 2016 Budget Proposal with Medicare/Medicaid Provisions

On February 2, 2015, the Obama Administration released its proposed federal budget for fiscal year (FY) 2016. The budget would impact all types of health care providers, health plans, and drug manufacturers if adopted as proposed – which is unlikely given Republican control of the House and Senate. Nevertheless, Congress can be expected to consider the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) during expected debate in the coming months on Medicare physician fee schedule (MPFS) reform legislation or during future budget negotiations.

The following is a summary of the major Medicare, Medicaid, and related policy proposals contained in the FY 2016 budget proposal.

Medicare Delivery & Payment Reforms

The proposed FY 2016 budget includes a package of Medicare legislative proposals estimated to save $423.1 billion over 10 years (note that the proposals are scored off an adjusted baseline that assumes a zero percent update to Medicare physician payments). Highlights include the following (all savings estimates are for the 10-year period of FYs 2016-2025):

  • Repeal the Sustainable Growth Rate (SGR) formula used to update MPFS payments, and replace it with reforms contained in recent bipartisan reform legislation (including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing). The Administration estimates that this would cost $44 billion over 10 years.
  • Reduce Medicare payment for services provided in off-campus hospital outpatient departments under the Outpatient Prospective Payment System to either the MPFS-based rate or the rate for surgical procedures covered under the Ambulatory Surgical Center (ASC) payment system. The provision would be phased in over four years beginning in 2017 ($29.5 billion in savings).
  • Implement bundled payment for post-acute care providers, including long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies (HHAs) beginning in 2020. Payments would be bundled for at least half of the total payment for post-acute care providers, with rates set to produce a permanent and total cumulative adjustment of -2.85% by 2022, with beneficiary coinsurance equal to current levels ($9.3 billion).
  • Allow the Centers for Medicare & Medicaid Services (CMS) to assign more Medicare fee-for-service (FFS) beneficiaries to Federally Qualified Health Centers and Rural Health Clinics that participate in an Accountable Care Organization (ACO) under the Medicare Shared Savings Program ($80 million), and expand the basis for beneficiary assignment for ACOs to include nurse practitioners, physician assistants, and clinical nurse specialists ($60 million).
  • Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ASCs, hospital outpatient departments, and community mental health centers beginning in 2017. At least 2% of payments must be tied to the quality and efficiency of care in the first two years, rising to at least 5% in 2019 (no budget impact).
  • Eliminate the 190-day lifetime limit on inpatient psychiatric facility services: ($5 billion in costs).
  • Reduce market basket updates for IRFs, LTCHs, and HHAs by 1.1 percentage points each year from 2016 through 2025 (the update could not fall below 0%), and reduce SNF updates by -2.5% in FY 2016, tapering down to a -0.97% update in FY 2023 ($102.1 billion).
  • Increase the minimum Medicare Advantage coding intensity adjustment ($36.2 billion).
  • Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2016 ($31.1 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 Affordable Care Act (ACA) provisions requiring reductions to Medicare provider reimbursement ($20.9 billion).
  • Reduce Medicare indirect medical education add-on payments ($16.3 billion).
  • 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 is “clinically integrated” and demonstrates cost containment, as defined by the Secretary ($6 billion).
  • Adjust the standard for classifying a facility as an IRF; at least 75% of patient cases admitted would be required to meet one or more of 13 designated conditions beginning in 2016 ($2.2 billion).
  • 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 ($770 million).
  • Expand the Part B benefits to cover short-term scheduled dialysis at a Medicare-certified End Stage Renal Disease (ESRD) facility for the treatment of acute kidney injury ($200 million).
  • 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 (no budget impact).

Medicare, Medicaid, & Other Prescription Drug Provisions

  • Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2017 ($116.1 billion).
  • Accelerate manufacturer Medicare Part D “coverage gap” discounts from 50% to 75% beginning in plan year 2017 ($9.4 billion).
  • Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP) starting in 2016. 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 ($7.4 billion).
  • Extend Medicare Secondary Payer reporting requirements to group health plans offering prescription drug coverage ($480 million).
  • Authorize the Secretary to negotiate Part D prices for biologics and high-cost prescription drugs eligible for placement on a plan’s specialty tier (no budget impact).
  • Authorize the Secretary to require high-risk Medicare beneficiaries to use certain prescribers and/or pharmacies to obtain controlled substance prescriptions under Part D; allow the Secretary to suspend coverage and payment for Part D drugs prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, or that that pose an imminent risk to patients; and allow the Secretary to require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage (no budget impact).
  • Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.9 billion).
  • 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 ($10.1 billion) and modifying the length of exclusivity on brand name biologics ($4.4 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 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; calculate Medicaid federal upper limits based only on generic drug prices; and exempt emergency drug supply programs from the Medicaid rebate calculations. ($6.3 billion.)
  • 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. The budget also 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. ($10 million.)
  • Fully fund a nationwide retail pharmacy survey incorporating prices paid by cash-paying, third-party insured, and Medicaid insured consumers. The funding also permits collection of actual invoice prices from retail community pharmacies to enable states to set reasonable payment rates to pharmacies. CMS would be authorized to collect wholesale acquisition costs for all Medicaid covered drugs. ($30 million in costs.)
  • Requires states to track high prescribers and utilizers of Medicaid prescription drugs ($710 million).

Major Program Integrity Provisions

  • Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other 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 ($70 million).
  • Authorize civil monetary penalties for providers who do not update enrollment records ($29 million).
  • Establish a registration process for clearinghouses and billing agents that act on behalf of Medicare providers and suppliers (no budget impact).
  • Expand CMS’s authority to require prior authorization for all Medicare FFS items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
  • Increase the minimum amount of the HHA surety bond to $50,000 (no budget impact).
  • Authorize Medicaid Fraud Control Units to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings (no budget impact).
  • The budget includes several provisions to reform the Medicare appeals process, including allowing Department of Health and Human Services (HHS) to retain a portion of Recovery Audit Contractor recoveries to fund related appeals; increasing the minimum amount in controversy required for Administrative Law Judge adjudication; allowing the Office of Medicare Hearings and Appeals (OMHA) to use attorney adjudicators for certain claims; establishing expedited OMHA procedures for claims with no material fact in dispute; remanding an appeal to the first level of review when new documentary evidence is submitted into the administrative record at the second level of appeal or above; and authorizing the Secretary to adjudicate appeals through the use of sampling and extrapolation techniques

Other Medicare & Medicare Reforms

  • Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D ($66.4 billion).
  • Increase Part B deductible for new enrollees ($3.7 billion), and increase premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements ($4 billion).
  • Establish a new home health copayment ($830 million).
  • Base Medicaid rates for DME on Medicare rates ($4.3 billion).
  • Rebase future Medicaid Disproportionate Share Hospital allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).

Precision Medicine Initiative

The President proposes a high-profile “Precision Medicine Initiative,” which would provide $215 million to focus on developing treatments, diagnostics, and prevention strategies tailored to the individual genetic characteristics of each patient. This effort includes $200 million for the National Institutes of Health to launch a national research cohort of a million or more Americans who volunteer to share their genetic information, expand current cancer genomics research, and initiate new studies on how a tumor’s DNA can inform prognosis and treatment choices. The budget provides $10 million for the FDA to modernize its regulatory framework to support the development and use of molecular diagnostics in precision medicine, and it provides the HHS Office of the National Coordinator for Health Information Technology (ONC) with $5 million to define standards to enable the exchange of genomic data. The Office for Civil Rights will also work with the participating agencies to ensure that privacy protections are in place.

Note that the budget proposal includes numerous other proposals impacting programs and operations throughout the HHS agencies.

OIG Reviews Oversight of Compounded Pharmaceuticals Used in Hospitals

The OIG has issued another report examining the safety of compounded sterile preparations (CSPs) used in hospitals, in response to a 2012 meningitis outbreak caused by contaminated injections. This report, "Medicare’s Oversight of Compounded Pharmaceuticals Used in Hospitals," assesses the extent to which Medicare's oversight of hospitals addresses 55 practices for CSP oversight in acute-care hospitals recommended by various expert guidelines. While CMS and the four CMS-approved hospital accreditors addressed most of the recommended CSP-related practices at least some of the time, the OIG identified certain gaps, particularly with regard to review of hospital contracts with stand-alone compounding pharmacies. The OIG also questioned the human capital available by oversight entities to thoroughly review hospitals' preparation and use of CSPs, and the adequacy of surveyor training related to compounding. The OIG recommends that CMS: (1) ensure that hospital surveyors receive training on standards from nationally recognized organizations related to safe compounding practices; and (2) amend its interpretive guidelines to address hospitals' contracts with standalone compounding pharmacies. CMS concurred with the recommendations.

GAO Examines Geographic Variation in Private Payer Spending on High-Cost Procedures

On January 28, 2015, the Government Accountability Office (GAO) released a report entitled “Private Health Insurance: Geographic Variation in Spending for Certain High-Cost Procedures Driven by Inpatient Prices.” In the report, the GAO examines: (1) how spending per episode of care for certain high-cost procedures varies across geographic areas for private payers, and (2) how the mix of service types, and the volume, intensity, and price of services contribute to variation in episode spending across geographic areas for private payers. Specifically, using a large private sector claims database, GAO examined 2009 and 2010 spending by metropolitan statistical areas (MSA) for episodes of care for three commonly performed inpatient procedures -- coronary stent placement, laparoscopic appendectomy, and total hip replacement. The GAO examined spending by service category: hospital inpatient, hospital outpatient, post-discharge, professional, and ancillary services. For inpatient and professional services, GAO examined the volume, intensity, and price of services.

According to the GAO, its investigation found that spending for an episode of care in the private sector varied across MSAs for the three procedures, even after GAO adjusted for geographic differences in the cost of doing business and differences in enrollee demographics and health status. MSAs in the highest-spending quintile had average adjusted episode spending that was 74% to 94% higher than MSAs in the lowest-spending quintile, depending on the procedure. The price of the initial hospital inpatient admission was the key driver of differences in episode spending in high- and low-spending MSAs. Professional services (office visits and other services provided by a physician or other health professional) were the second largest contributor to geographic differences, but accounted for only 7% or less of the difference in total episode spending between MSAs in the lowest- and highest-spending quintiles. The report does not include recommendations, and GAO notes that its findings may not be generalizable to all private insurers due to data limitations. 

OIG Examines CMS Payments to Hospitals for Clinic Visits

The HHS Office of Inspector General (OIG) estimates that CMS made $4.6 million in incorrect Medicare outpatient payments to hospitals for established patients’ clinic visits in 2012. According to the OIG, hospitals attributed the incorrect payments to staff making clerical and programing errors, not verifying whether the patient was registered as an inpatient or outpatient of the hospital within the past 3 years (and thus considered an established rather than new patient), not following hospital procedures, not fully understanding Medicare billing requirements for clinic visits, and relying on the code that the treating physician billed for that visit. The OIG also observes that CMS does not have edits in place to identify Medicare payments for patients who were already registered at a facility. The OIG recommends that CMS work with its Medicare administrative contractors to recover identified incorrect payments and resolve additional potential overpayments to the extent feasible. For more information, see the full report, “CMS Did Not Always Correctly Make Clinic Visit Payments to Hospitals During Calendar Year 2012.” 

OIG Questions Potentially Duplicative Hospital Quality Improvement Efforts

The OIG recently issued a report that examined the extent to which Quality Improvement Organizations (QIOs) duplicate other CMS hospital quality improvement efforts, particularly Hospital Engagement Networks (HENs) and the Community-Based Care Transitions Program (CCTP). Based on a questionnaire sent to a random sample of 410 Medicare hospitals, more than half of responding hospitals reported that that they participated with QIOs on quality improvement projects in 2013, but the majority also worked with other federally-funded and non-federally-funded entities on the same topics. The OIG observes that the overlap in the CMS quality improvement efforts raises concerns about duplication of efforts and complicates attributing quality improvements to any one effort. The OIG therefore recommends that CMS: (1) take steps to coordinate and reduce overlap between the QIO program and CMS’s other quality improvement efforts; and (2) determine the relative contribution of each of its quality improvement efforts. CMS concurred with the recommendations, which were set forth in the report, “Quality Improvement Organizations Provide Support to More Than Half of Hospitals but Overlap with Other Quality Improvement Programs.” 

IRS Issues Additional ACA Requirements for Tax-Exempt Hospitals

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.

Extension of Enforcement Moratorium on Rural Hospital Supervision Requirements

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.

Older Entries

September 4, 2014 — CMS Offers Settlement to Acute Care Hospitals, CAHs to Resolve Patient Status Denial Appeals

August 18, 2014 — CMS Finalizes Medicare IPPS/LTCH PPS Update for FY 2015

August 12, 2014 — Two Health Policy Laws Enacted, Additional Bills Advance

July 24, 2014 — Sunshine Act Open Payments System Review/Dispute Process Underway

June 25, 2014 — CMS Plans Medicare Quality "Star" Ratings for Hospitals, Dialysis Facilities, Home Health

June 25, 2014 — CMS Releases Updated Hospital Charge Data, New Chronic Conditions & Geographic Variations Files

June 24, 2014 — Medicare Payment Adjustments for Low-Volume Hospitals and Medicare-Dependent Hospitals

May 15, 2014 — CMS Adopts Final Rule to Reduce Provider Regulatory Burdens

May 14, 2014 — House Panel to Examine Medicare Hospital Issues (May 20)

April 28, 2014 — CMS Proposes Updated Life Safety Code for Health Care Facilities

April 28, 2014 — CMS Posts First Medicare Inpatient Psychiatric Facility Quality Data

April 8, 2014 — HHS OIG Identifies "Top 25" Priorities

April 8, 2014 — OIG Faults CMS for Incorrect Medicare Payments for Hospital Clinic Visits

April 8, 2014 — Children's Hospital GME Reauthorization Act Signed

March 20, 2014 — CMS Expands Medicare EHR "Meaningful Use" Hardship Exception to Cover Vendor Issues

March 20, 2014 — CMS Rule Increases FY 2014 Medicare Payments for Low-Volume Hospitals

March 20, 2014 — MACPAC Issues Annual Report to Congress on Medicaid, CHIP Policy

March 20, 2014 — Two-Midnight Inpatient Admissions Policy Guidance

March 5, 2014 — Obama Administration Proposes FY 2015 Budget with Medicare, Medicaid Savings Provisions

March 4, 2014 — OIG Recommends Expanding the Medicare "DRG Window"

March 4, 2014 — CMS Continues to Modify Implementation of 2-Midnight Inpatient Admissions Policy

February 17, 2014 — CMS Seeks New Participants for Bundled Payments for Care Improvement Initiative

February 13, 2014 — CMS Again Extends "Probe & Educate" Phase for 2-Midnight Inpatient Admissions Criteria Implementation; Clarifies Physician Certification Requirements

January 30, 2014 — Advisory Panel Recommends Access Standards for Medical Diagnostic Equipment

January 28, 2014 — CMS Special Open Door Forum on Hospital Inpatient Criteria/2-Midnight Benchmark (Feb. 4)

January 7, 2014 — CMS Proposes Emergency Preparedness Requirements for Medicare/Medicaid Providers

January 7, 2014 — CMS Revises Hospital Equipment Maintenance Requirements

January 7, 2014 — OIG Report Addresses Potential Hospital EHR Technology Vulnerabilities

January 6, 2014 — House Panel to Examine Medicare "Extenders" Policy

January 6, 2014 — CMS Call: 2-Midnight Benchmark for Inpatient Hospital Admissions (Jan. 14)

December 30, 2013 — President Signs 2-Year Funding Bill with Medicare SGR Patch, Sequestration Extension for Medicare Providers

November 25, 2013 — OIG Examines Medicare Acute Hospital Outlier Payments

November 11, 2013 — CMS Call on Inpatient Hospital Admissions 2-Midnight Policy (Nov. 12)

October 30, 2013 — IPPS New Technology Add On Applications for FY 2015 Due November 25

October 30, 2013 — GAO Reports Jump in Medicare EHR Payments

October 30, 2013 — OIG Highlights Volume of Spinal Surgeries Tied to Physician-Owned Distributors (PODs)

October 10, 2013 — CMS Final Rule Refines FY 2014 DSH Payment Calculations

October 10, 2013 — CMS Limits Compliance Reviews under New "2 Midnight" Inpatient Admissions Policy

October 9, 2013 — CMS Corrects FY 2014 Medicare Payment Rules

September 24, 2013 — CMS Call on Two Midnight Benchmark for Inpatient Hospital Admissions (Sept. 26)

September 17, 2013 — CMS Issues Guidance on Admission Order and Certification Requirements for Inpatient Admissions

September 16, 2013 — OIG Report Examines Critical Access Hospital Qualifications

September 3, 2013 — Recent Updates to the Hospital Readmissions Reduction Program

August 28, 2013 — CMS Finalizes FY 2014 Medicare IPPS, LTCH Rates

August 27, 2013 — CMS Issues Final FY 2014 Inpatient Psychiatric Facility PPS Rates

August 27, 2013 — Medicare Billing For Cancelled Elective Surgeries

August 27, 2013 — OIG Questions Hospital Use of Observational Stays

August 27, 2013 — Medicaid Disproportionate Share Hospital Allotments

June 11, 2013 — OIG Reports Review Medicare Hospice Inpatient Care, Hospital Discharges to Hospice Care

June 11, 2013 — CMS Invites Comments on Proposed PPS-Exempt Cancer Hospital Quality Measures

May 14, 2013 — CMS Proposes Medicare IPPS and LTCH PPS Rates/Policies for FY 2014

May 13, 2013 — CMS Proposes Updated FY 2014 Medicare Payments and Other Policies for IRFs

May 13, 2013 — CMS Releases Hospital Charge Data

May 13, 2013 — HHS Releases Enhanced National Standards for Culturally and Linguistically Appropriate Services (CLAS) in Health Care, Highlights Compliance Efforts

April 15, 2013 — IRS Proposes Hospital Community Health Needs Assessment Regulations

March 8, 2013 — National Provider Call: Hospital Value-Based Purchasing FY 2015 Overview (March 14)

January 4, 2013 — Fiscal Cliff Deal Includes Medicare Cuts and Other Health Policy Changes

November 29, 2012 — OIG Finds Overwhelming Hospital Compliance with Present on Admission (POA) Indicator Reporting

October 16, 2012 — GAO Spotlights Top Provider Types for Criminal/Civil Health Fraud

October 16, 2012 — OIG Issues FY 2013 Work Plan

October 10, 2012 — IRS Schedules Hearing on Proposed Rules for Charitable Hospitals (Dec. 5)

September 24, 2012 — CMS Call: Hospital Value-Based Purchasing for FY 2013 (Oct. 4).

August 4, 2012 — CMS Announces August 27, 2012 Start Date for Recovery Audit Prepayment Review Demonstration; Provider Call Scheduled for Aug. 9

July 19, 2012 — CMS Issues Proposed OPPS, ASC Policies for 2013

June 27, 2012 — IRS Proposes ACA Standards for Charitable Hospitals

June 27, 2012 — Health IT Pilot Targets Prescription Drug Abuse

June 27, 2012 — CMS Outlines Conditions for Provider Use of Repackaged Medications

June 22, 2012 — National Provider Call: Hospital Value-Based Purchasing (July 11)

June 18, 2012 — Medicare Payments for Outpatient Services Before/During Inpatient Stay

May 23, 2012 — Hospital Readmissions Reduction Program May Impact Post-Acute Providers

May 14, 2012 — CMS Issues Final Rules to Ease Regulatory Burdens on Hospitals, Other Providers

April 23, 2012 — Patient Safety Events: Common Formats for Reporting, Reporting Challenge Announced

April 23, 2012 — HHS Report On Wage Index Reform

April 23, 2012 — Extension of Hospital Wage Index Reclassifications and Special Exceptions

April 2, 2012 — CMS Initiative Targets Avoidable Nursing Facility Resident Hospitalization

February 14, 2012 — President Obama Proposes FY 2013 Budget

February 13, 2012 — GAO Examines Price Transparency for Implantable Medical Devices

February 10, 2012 — CMS Seeks Comments on Application of EMTALA Rules to Inpatients

February 10, 2012 — IPPS/LTCH FY 2012 Final Rule Corrections

February 10, 2012 — CMS Call on Hospital Value-Based Purchasing Program Performance Reports (Feb. 28)

February 8, 2012 — CMS Call on New Medicare Hospital Spending Per Beneficiary Measure (Feb. 9)

January 25, 2012 — Fall 2011 Regulatory Agenda (Belatedly) Released

January 25, 2012 — CMS Proposes Changes to Medicaid DSH Rules

January 25, 2012 — OIG Reviews Hospital Incident Reporting Systems

January 5, 2012 — CMS Delays Recovery Audit Prepayment Review, Power Mobility Device Prior Authorization Demonstrations

January 4, 2012 — CMS Guidance to Surveyors on ACA Physician-Owned Hospital Provisions

December 1, 2011 — Reed Smith Analysis and Overview of the Medicare Shared Savings Program for Accountable Care Organizations

November 30, 2011 — CMS Renames APC Advisory Panel, Seeks Nominees

November 30, 2011 — New CMS Demonstration Programs Target Medicare Improper Payments

November 29, 2011 — FY 2013 IPPS New Technology Payment Town Hall Meeting (Feb. 14, 2012)

November 22, 2011 — Hospital Value Based Purchasing National Provider Call

November 13, 2011 — OIG Examines Medicare's Response to Hospital Adverse Events

October 28, 2011 — Upcoming MedPAC Meeting (Nov. 3-4)

October 27, 2011 — CMS Call on ICD-10 Implementation Strategies and Planning (Nov. 17)

October 20, 2011 — CMS Releases Final Medicare Shared Savings Program/ACO Rule

September 27, 2011 — OIG Reviews Place-of-Service Coding for Physician Services

September 1, 2011 — HHS Issues Final Plan to Reduce Regulatory Burdens

August 31, 2011 — CMS Seeks Applicants for ACA Bundled Payment Initiative

August 16, 2011 — CMS Issues Final Medicare Inpatient Hospital PPS Rule for FY 2012

August 16, 2011 — OIG Follow-Up Report on Medicaid Hospital Outlier Payments