HHS OIG Identifies "Top 25" Priorities

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.  

OIG Faults CMS for Incorrect Medicare Payments for Hospital Clinic Visits

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.

Children's Hospital GME Reauthorization Act Signed

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.

CMS Expands Medicare EHR "Meaningful Use" Hardship Exception to Cover Vendor Issues

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.

CMS Rule Increases FY 2014 Medicare Payments for Low-Volume Hospitals

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.

MACPAC Issues Annual Report to Congress on Medicaid, CHIP Policy

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.

Two-Midnight Inpatient Admissions Policy Guidance

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.

Obama Administration Proposes FY 2015 Budget with Medicare, Medicaid Savings Provisions

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).

OIG Recommends Expanding the Medicare "DRG Window"

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.

CMS Continues to Modify Implementation of 2-Midnight Inpatient Admissions Policy

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.

CMS Seeks New Participants for Bundled Payments for Care Improvement Initiative

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.

Advisory Panel Recommends Access Standards for Medical Diagnostic Equipment

The Access Board's Medical Diagnostic Equipment Accessibility Standards Advisory Committee has issued its final report on “Advancing Equal Access to Diagnostic Services: Recommendations on Standards for the Design of Medical Diagnostic Equipment for Adults with Disabilities.” The report includes detailed recommendations on standards for access to equipment such as examination tables and chairs, weight scales, and diagnostic equipment. Among other things, the report address transfer access, armrests, lift compatibility, and other features for accessibility. The standards, which are being developed as directed under the ACA, still must be approved by the full Access Board.

CMS Special Open Door Forum on Hospital Inpatient Criteria/2-Midnight Benchmark (Feb. 4)

 On February 4, 2014, CMS will host a follow-up Special Open Door Forum call on the two-midnight benchmark for inpatient hospital admissions included in the FY Medicare inpatient prospective payment system final rule. The call will provide an opportunity allow hospitals, practitioners, and other interested parties to ask questions on the physician order and physician certification, inpatient hospital admission and medical review criteria included in the new policy.

CMS Proposes Emergency Preparedness Requirements for Medicare/Medicaid Providers

On December 27, 2013, CMS published a proposed rule that would establish national emergency preparedness requirements for Medicare- and Medicaid-participating providers and suppliers to ensure that they can meet the needs of patients and residents during emergency situations, both natural and man-made. The proposed requirements cover four aspects of emergency preparedness:

  • Risk assessment and planning: Providers and suppliers must perform a risk assessment using an “all-hazards'' approach focusing capabilities needed to prepare for a full spectrum of emergencies. This approach is location-specific considering the types of hazards most likely to occur in a provider or supplier’s area.
  • Policies and procedures: Providers must develop and implement policies and procedures based on their emergency plan and risk assessment.
  • Communication plan: Providers must develop and maintain an emergency preparedness communication plan that complies with both federal and state law. Patient care must be well-coordinated within the facility, across health care providers, and with state and local public health departments and emergency systems to protect health and safety.
  • Training and testing: Providers must develop and maintain emergency preparedness training and testing programs, including initial and annual training and annual emergency drills.

The new requirements would apply to 17 provider types (with certain variations): hospitals; critical access hospitals; long-term care facilities; psychiatric residential treatment facilities; intermediate care facilities for individuals with intellectual disabilities; religious nonmedical health care institutions; transplant centers; hospice, ambulatory surgical centers, Program for the All-inclusive Care for the Elderly organizations; home health agencies; comprehensive outpatient rehabilitation facilities; community mental health centers; organ procurement organizations; clinics, rehabilitation, and therapy providers; rural health clinics/federally qualified health clinics; and end-stage renal disease providers.

CMS is seeking comments on numerous aspects of its proposal, including when these requirements should be implemented; comments will be accepted until February 25, 2014.

** February 21 update: CMS has extended the comment period until March 31, 2014.

CMS Revises Hospital Equipment Maintenance Requirements

CMS has issued updated survey guidance clarifying requirements for hospital maintenance of facilities, supplies, and equipment.  Most notably, under certain circumstances, CMS is allowing a hospital to adjust its maintenance, inspection, and testing frequency and activities for facility and medical equipment from what is recommended by the manufacturer, based on a risk-based assessment performed by qualified personnel. Hospitals that choose to employ such “alternate equipment maintenance” activities and/or schedules must implement a documented program to minimize risks to patients and others in the hospital associated with the use of facility or medical equipment.

OIG Report Addresses Potential Hospital EHR Technology Vulnerabilities

An OIG report released in December 2013 assessed the extent to which hospitals that received Medicare EHR incentive payments as of March 2012 had implemented fraud safeguards for EHR technology previously recommended by an HHS contractor, RTI International, and set forth in a 2007 HHS Office of the National Coordinator for Health Information Technology (ONC) report. The OIG found widespread hospital compliance with RTI-recommended audit functions, user authorization and access controls, and data transfer safeguards, but less than half of hospitals had begun implementing RTI recommendations to include patient involvement in anti-fraud efforts, and only about one quarter of hospitals had policies regarding the use of the copy-paste feature in EHR technology, which potentially could pose a fraud vulnerability. The OIG report includes several recommendations for ONC and CMS to strengthen efforts to address fraud vulnerabilities in EHRs, with which the agencies concurred.

House Panel to Examine Medicare "Extenders" Policy

On January 9, 2014, the House Energy and Commerce Health Subcommittee is holding a hearing on “The Extenders Policies: What Are They and How Should They Continue Under a Permanent SGR (Sustainable Growth Rate) Repeal Landscape?” The so-called extenders are measures that secure the continuation of various temporary Medicare payment and policy revisions impacting hospitals, physicians, therapy providers, and certain other provider types that are routinely extended by Congress (most recently as part of the Pathway for SGR Reform Act).

CMS Call: 2-Midnight Benchmark for Inpatient Hospital Admissions (Jan. 14)

CMS is hosting a provider call on January 14, 2014 to discuss the Medicare inpatient hospital admission and medical review criteria (also known as the 2-Midnight Rule) included in the FY 2014 Medicare inpatient prospective payment system/long-term care hospital final rule. During the call, CMS will present case scenarios on the application of the rule to sample medical records and address frequently-asked questions received from providers.

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

This post was written by Debbie McCurdy and Paul Pitts.

On December 26, 2013, President Obama signed into law H.J. Res. 59, the Bipartisan Budget Act of 2013, which includes the Pathway for SGR Reform Act of 2013 (“the Act”). In addition to establishing federal budget targets for fiscal years (FYs) 2014 and 2015, the Act includes a number of provisions impacting the Medicare and Medicaid programs. Most notably, the Act provides a short-term reprieve from a looming Medicare physician fee schedule cut while lawmakers work to finalize a longer-term solution. It also extends Medicare provider payment cuts under existing sequestration authority for two years and makes a variety of other policy changes. The Act’s major Medicare and Medicaid provisions are summarized below.

Short-Term Medicare Physician Fee Schedule Patch. The final Medicare physician fee schedule rule, which was published on December 10, 2013, called for a 20.1% reduction in the fee schedule update for 2014, largely as a result of the statutory sustainable growth rate (SGR) formula.  The Act blocks the 20.1% cut and replaces it with a 0.5% increase for services provided through March 31, 2014, resulting in a 2014 conversion factor after all adjustments of $35.8228 (note that Medicare sequestration cuts applicable to the MPFS and other Medicare payment systems continue, as described below.). This temporary payment boost is intended to provide Congress with additional time to finalize pending legislation that would permanently repeal the SGR policy and replace it with a period of stable payment followed by reimbursement linked to quality of care. Bipartisan SGR reform bills have been overwhelmingly approved by the Senate Finance Committee, the House Ways and Means Committee, and the House Energy and Commerce Committee, but differences in the measures must still be resolved and spending offsets need to be identified.

2-Year Extension of Medicare Sequestration Cuts. While the Act provides limited relief from sequestration cuts for certain defense and non-defense spending for FYs 2014 and 2015, the Act does not extend relief to sequestration reductions impacting mandatory programs such as Medicare; the 2% reduction to Medicare provider and plan payments therefore will continue in 2014 unless additional Congressional action is taken. In fact, the Act achieves new savings by extending sequestration for mandatory programs – including Medicare – for another two years, through 2023.  The Act also “realigns” the Medicare sequestration amounts for FY 2023 to capture more of the sequestration savings during the first half of FY 2023, which falls in the legislation’s 10-year budget window. Specifically, the 2% cap on Medicare provider payment cuts will be raised to 2.9% for the first 6 months of FY 2023, and then drop to 1.11% for the second half of FY 2023. This change “scores” as $2.1 billion in savings, although the provision is billed as not increasing the overall effect of the sequester on Medicare providers. Obviously, there is a hope that Congress will adopt an alternative deficit reduction framework well before the sequestration extension would be triggered.

Extension of Therapy Cap Exceptions. The Act maintains the status quo for outpatient therapy services by extending the exceptions process for outpatient therapy caps through March 31, 2014.  The Medicare program has annual limitations (or caps) on the amount of expenses a patient can accrue for outpatient therapy services in a given year. When an exception to the cap is requested for medically-necessary services furnished through March 31, 2014, therapy providers must continue to include the KX modifier on the claim form.  All claims exceeding the cap continue to be subject to manual medical review. In addition, the Act extends the application of the therapy cap and exceptions to therapy services furnished in a hospital outpatient department through March 31, 2014 (which was otherwise set to expire on December 31, 2013).

Extension of Other Expiring Provisions. The Act extends for three months certain Medicare policies set to expire December 31, 2013, including: the floor used in the Medicare physician work geographic adjustment; certain ambulance add-on payments;the Qualified Individual program that reimburses states for certain Part B premiums; and the Transitional Medical Assistance program.

The Act also extends for six months (through March 31, 2014) the Medicare low-volume hospital payment and the Medicare-dependent Hospital program. In addition, the Act extends for one year the authority for Medicare Advantage Special Needs Plans (through 2016) and certain Medicare reasonable cost contracts (through 2014).  Funding for the National Quality Forum (NQF) for certain health care performance measurement activities is extended until currently-available funds expire.

Medicare Long Term Care Hospital (LTCH) Payments. The Act includes a number of provisions impacting the provision of and payment for LTCH services provided to Medicare beneficiaries. Among other things, the Act establishes new criteria for LTCHs to be paid under the LTCH PPS rather than the acute inpatient prospective payment system (IPPS) rate. In particular, the Act establishes new “site neutral” Medicare payment criteria for LTCH services provided on or after October 1, 2015. Subject to certain exceptions, LTCHs will be reimbursed at the rate otherwise paid under the IPPS unless the patient had a preceding hospital stay including at least three days in an Intensive Care Unit (ICU) or received qualifying ventilator services. The Act provides for a two-year transition to the site neutral payment rate, during which time a blended rate will be paid. 

For cost reporting periods beginning in FY 2020, payment for all discharges from an LTCH may be subject to the new site neutral payment limitation unless the number of discharges for which payment is not made at the site neutral payment rate is greater than 50% of the total number of discharges for the LTCH. In other words, if the LTCH’s site neutral payment rate is 50% or greater, then all discharges (beginning in the next cost reporting period) will be reimbursed at the IPPS rate. The Act requires CMS to establish a process for an LTCH subject to the IPPS payment rate to re-qualify for payment under LTCH PPS.

Moreover, the Act delays full implementation of the so-called “25% rule” for three years, through FY 2017 (when this policy is implemented, if an LTCH admits more than the specified percentage of its patients from a single acute care hospital during a fiscal year, it will be paid at a rate comparable to the IPPS rate for patients above the specified percentage threshold). In addition, the Act extends the current moratorium on establishing or increasing LTCH beds (with certain exceptions) through September 30, 2017.

For cost reporting periods beginning on or after October 1, 2015, LTCH discharges paid at the site neutral payment rate or by a Medicare Advantage plan will be excluded from calculation of the LTCH’s average length of stay.

Medicaid DSH Payments.  The Act restructures planned reductions in Medicaid disproportionate share hospital (DSH) payments by delaying FY 2014 cuts until FY 2016 but increasing the overall level of reductions and extending cuts through FY 2023, for a total savings of $3.9 billion during the FY 2014-2023 budget window.

Strengthening Medicaid Third-Party Liability. The Act includes provisions intended to strengthen Medicaid third-party liability. Among other things, the Act reinforces Medicaid’s standing as the payer of last resort by letting states delay paying certain prenatal and preventive pediatric care claims, to the extent that doing so is cost-effective and will not adversely affect access to care. It also allows Medicaid to recover costs from beneficiary liability settlements. These provisions take effect on October 1, 2014.

Older Entries

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

August 9, 2011 — CMS Call on Medicare and Medicaid EHR Incentive Programs: Understanding Meaningful Use (Aug 18, 2011)

July 18, 2011 — IRS Seeks Comments on ACA Community Health Needs Assessment (CHNA) Requirements for Tax-Exempt Hospitals

July 18, 2011 — Inpatient Hospital PPS, Value-Based Purchasing Program Correction Notices

July 18, 2011 — CMS Announces Updated RAC Recovery Amounts

July 18, 2011 — CMS Demonstration Seeks to Reduce Preventable Hospitalizations of Nursing Facility Residents

July 15, 2011 — CMS Special Open Door Forum on FY 2013 Hospital Value-Based Purchasing Program (July 27)

June 24, 2011 — Upcoming Markup of GME, Autism Policy Legislation

June 14, 2011 — CMS Final Rule on ACA Medicaid Provider-Preventable Condition Policy

May 31, 2011 — Federal Agencies Outline Regulatory Review Plans

May 18, 2011 — CMS Seeks Comments on Advance Payments to ACOs, Announces "Pioneer" ACO Model and ACO Training Sessions

May 13, 2011 — CMS Publishes Final Hospital Telemedicine Credentialing Standards

April 29, 2011 — CMS Proposes Medicare Inpatient Hospital/LTCH Payment Policies for FY 2012

April 29, 2011 — CMS Finalizes ACA Hospital Value-Based Purchasing Program

April 29, 2011 — OIG Examines Medicare Radiology Services in Emergency Departments

April 26, 2011 — CMS Open Door Forum on "Partnership for Patients: The Community-Based Care Transitions Program" (May 5)

April 21, 2011 — CMS Issues Proposed Changes to LTCH Payment Rates and Other Payment Policies for Fiscal Year 2012

April 21, 2011 — Summary and Analysis of Medicare's Shared Savings Program for Accountable Care Organizations

April 13, 2011 — CMS Proposes FY 2011 Hospital Wage Indices/Reclassifications

April 13, 2011 — Official Version of CMS Accountable Care Organization (ACO) Rule Now Available

April 13, 2011 — HHS Launches $1 Billion Partnership for Patients to Improve Hospital Care

April 12, 2011 — Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations

April 11, 2011 — CMS Call on Hospital Wage Index Reform (April 12)

April 6, 2011 — CMS Call on Accountable Care Organization Rule (April 7)

April 1, 2011 — CMS Proposes Long-Awaited Accountable Care Organization (ACO) Regulations

March 29, 2011 — CMS Issues Rule on Medicare GME Affiliation Agreements

March 29, 2011 — Compendium of Unimplemented OIG Recommendations

March 29, 2011 — CBO Presents Budget Options, Including Potential Health Policy Savings

March 23, 2011 — CMS Call on Hospital Registration for EHR Incentives (April 6)

February 18, 2011 — CMS Proposes Requiring Providers to Notify Beneficiaries of Right to Access QIOs

January 27, 2011 — Hospital Value-Based Purchasing Rule Open Door Forum (Feb. 10)

January 13, 2011 — CMS Proposes Hospital Value Based Purchasing Program