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

Medicare is the “secondary” payer of health benefits for Medicare beneficiaries when another entity is the “primary” payer. Under new MSP enforcement rules, all entities that are considered primary payers and meet the definition of a responsible reporting entity (RRE) must register with CMS and comply with certain reporting requirements. Such RREs include (1) group health plans, and (2) non-group health plan (NGHP) arrangements, such as carriers of liability insurance (including self-insurance), no-fault insurance, and workers’ compensation. CMS recently announced it is extending its reporting requirement for NGHPs until January 1, 2011. CMS also has posted three new alerts on NGHP RRE Compliance, NGHP Alert Risk Management and NGHP RREs Who Must Report.

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Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

• Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
• Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
• Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
• Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
• Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
• Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
• Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
• CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

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Today CMS announced that it is delaying until January 3, 2011 its controversial policy under which it will institute edits to deny Medicare claims for Part B items and services if the physician or non-physician practitioner who ordered the item or service does not have a current enrollment record. CMS considers a current enrollment record to be one that is in the Medicare Provider Enrollment, Chain and Ownership System (PECOS) and also contains the physician/non-physician practitioner's National Provider Identifier (NPI). The delay in the policy from April 5, 2010 until January 3, 2011 is intended to "give physicians and non-physician practitioners who order items or services for Medicare beneficiaries or who refer Medicare beneficiaries to other Medicare providers or suppliers sufficient time to enroll in Medicare or take the action necessary to establish a current enrollment record in Medicare" before the claims edits go into effect.

 

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On February 11, 2010, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) released their draft “Hiring Incentives to Restore Employment (HIRE) Act.” In addition to providing tax incentives to spur hiring and extending uninsurance and COBRA health insurance premium subsidies, the legislation would extend a number of Medicare provisions, some of which expired at the end of 2009. As noted above, the legislation would extend until October 1, 2010 the current freeze on Medicare physician fee schedule payments, further blocking the 21.2% fee schedule cut now set for March 1, 2010. The bill also would, among other things: extend the outpatient therapy cap exceptions process; extend certain legislative relief for long-term care hospitals; extend payment provisions impacting mental health providers, ambulance services, certain physician and physician pathology services, rural health providers; extend certain Medicare Advantage policies; exempt certain pharmacies from Medicare supplier accreditation requirements; and clarify eligibility for physician health information technology incentive payments.  Note that after the Finance Committee released its draft bill, however, Majority Leader Harry Reid (D-NV) announced that the Senate will consider job promotion legislation in stages, and the first bill will not include the Finance Committee health provisions.  The Senate is expected to take up the jobs bill later this month. The House approved a separate jobs package in December 2009; differences between the two chambers’ approaches would need to be reconciled before a bill (or bills) could be sent to the President. 

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On February 17, 2010, CMS is hosting a Special Open Door Forum (ODF) to discuss Medicare provider enrollment issues.  Topics expected to be covered include:  Internet-based Provider Enrollment, Chain and Ownership System (PECOS) for physicians, non-physician practitioners, and provider and supplier organizations; provider and supplier reporting responsibilities; Medicare ordering and referring issues; and revalidation efforts.

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The Medicare Payment Advisory Commission (MedPAC) recently voted on recommendations it will make to Congress regarding Medicare payment updates for 2011. At the meeting, MedPAC voted to recommend increasing acute inpatient and outpatient prospective payment system reimbursement in 2011 by the projected rate of increase in the hospital market basket index (MBI). This rate increase would be coupled with implementation of a quality incentive payment program, along with an offset in 2011 through 2013 to recover payments attributable to hospital documentation and coding improvements. MedPAC also recommends that Congress increase payments for physician services in 2011 by 1.0%. For ambulatory surgical centers (ASCs), MedPAC recommends a 0.6% increase in rates, together with a requirement that ASCs to submit cost and quality data. MedPAC recommends updating the end stage renal disease (ESRD) composite rate by the ESRD MBI increase minus a productivity growth adjustment. MedPAC approved a series of recommendations regarding home health services, including elimination of the inflation update for 2011, rebasing of home health rates with provisions to protect quality of care, development of quality outcomes measures, and implementation of certain program integrity safeguards. With regard to other post-acute services, MedPAC recommends no payment update in 2011 for skilled nursing facilities, inpatient rehabilitation facilities, or long-term care hospitals. MedPAC also recommends updating hospice rates by the projected MBI for 2011, minus an adjustment for productivity gains. These recommendations will be included in MedPAC's March 2010 report to Congress. While the recommendations are not binding, MedPAC’s assessments often help shape federal policy. 

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CMS has published a notice correcting errors that appeared in the final CY 2010 rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and the ambulatory surgical center (ASC) payment system.  Among other technical changes, the rule corrects Medicare ambulatory surgical center (ASC) payment rates that had been based on incorrect Medicare physician fee schedule payment amounts. The December 31, 2009 correction notice includes an updated ASC fee schedule.

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CMS Implements Two-Month Medicare Physician Fee Schedule Fix. President Obama has signed into law an appropriations bill that includes a 2-month freeze in physician fee schedule payments, instead of the 21.2% cut that was set to go into effect January 1, 2010. CMS has provided instructions to Medicare contractors on the processing of 2010 physician fee aschedule claims that temporarily had been put on hold while the legislation was pending. Under the CMS policy, contractors are directed to begin processing claims at the new rates no later than January 19, 2010. CMS also has extended the 2010 Annual Participation Enrollment Program deadline from January 31, 2010, to March 17, 2010 in light of the temporary changes in physician rates. CMS notes, however, that the effective date for any participation status change during the enrollment extension remains January 1, 2010, and will be in force for the entire year.

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CMS has issued an educational article for providers regarding certain Medicare payment policies that expired as of December 31, 2009, including the therapy cap exceptions process and the ability of independent laboratories to bill for the technical component of physician pathology services furnished to hospital patients. CMS notes that these policies could be extended by Congress. Health care providers therefore may choose, to the extent possible, to hold their claims for Medicare services provided on or after January 1, 2010 until it becomes clearer as to whether new legislation will be enacted to extend these provisions. 

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The final 2010 Medicare home health prospective payment system (HH PPS) rule established an annual limitation on Medicare outlier payments that can be paid to each home health agency (HHA). Specifically, effective January 1, 2010, outlier payments may comprise no more than 10% of the HHA’s total HH PPS payments for the year. CMS has issued instructions to contractors and a provider educational article about how the new policy is being implemented, including the use of a quarterly reconciliation process. 

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On December 7, 2009, HHS published its semiannual regulatory agenda outlining the Obama Administration's planned regulatory initiatives in a number of health policy areas.  Note that discussions of certain major regulatory initiatives (health information technology, drug and device reporting requirements, and Medicare physician, inpatient hospital, and outpatient hospital rules, among others) are highlighted in an introduction to the regulatory plan. 
 

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The Centers for Medicare & Medicaid Services (CMS) has released its final rule updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2010. Most notably, the final rule calls for a 21.2% across-the-board cut in MPFS paymentsfor 2010 due to the statutory sustainable growth rate (SGR) formula (CMS had forecast a 21.5% cut in the proposed rule). For 2010, the SGR formula results in a conversion factor of $28.4061, compared to the 2009 conversion factor of $36.0666. [NOTE:  CMS subsequently published a notice correcting the conversion factor; the new conversion factor is $28.3895].   As noted above, Congressional leaders are seeking a legislative solution to block the pending cut, but the outcome of these reform efforts are not certain at this time. CMS did exercise its administrative authority to remove drugs from the definition of “physicians’ services” for purposes of the SGR formula, which CMS expects will reduce the number of future years in which physicians are projected to experience a negative update under the SGR formula, but which does not impact 2010 rates. The sweeping rule affects a wide range of other Medicare policies, as discussed after the jump.

• CMS is cutting technical component payments for certain non-hospital imaging procedures by changing the imaging equipment usage assumption for equipment priced over $1 million from the current 50% usage rate to a 90% usage rate, which will reduce per procedure practice expense (PE) relative value units (RVUs) -- and thus the per procedure technical component reimbursement -- for services using such imaging equipment).   In the final rule, CMS decided only to apply this change to MRIs and CTs. The payment cut will be transitioned with full implementation not for four years. Beginning 2010, 75% of the practice expense is paid based on the old usage rate with full implementation in 2013. CMS also has adopted provisions to begin implementing the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) provision mandating an accreditation process for entities furnishing the technical component of certain advanced diagnostic testing procedures by January 1, 2012. CMS also is publishing a separate notice inviting independent accreditation organizations to participate in the accreditation program. 
• The final rule revises the Electronic Prescribing Incentive Program and the Physician Quality Reporting Initiative (PQRI) to, among other things, simplify e-prescribing reporting requirements, provide additional reporting options (including an electronic health record-based reporting mechanism), allow group practices to be considered successful e-prescribers; and expand PQRI quality measures. 
• CMS is adopting its proposal to refine malpractice RVUs to redirect payment to physicians with the highest malpractice costs.
• CMS is ending payment for consultation codes and instead requiring use of evaluation and management (E/M) codes. Note that under the final rule, CMS is making an exception to this policy for telehealth consultations and maintaining payment for G-codes used to bill for these consultations. Savings from the discontinuation of consultation codes are being redistributed to increase payments for the existing E/M services and to the payment for the surgical global period.
• The final rule clarifies the "stand in the shoes" standard for considering compensation arrangements under Stark.
• CMS is establishing a process for submitting claims for damages caused by the MIPPA provision terminating contracts awarded in 2008 under the durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) competitive bidding program, and making changes in the “grandfathering” rules for noncontract suppliers. CMS is also finalizing policy changes regarding maintenance and servicing of oxygen equipment. 
• The rule provides that the annual per beneficiary outpatient therapy caps for CY 2010 will be $1860 each for (1) outpatient physical therapy and speech-language pathology services combined, and (2) outpatient occupational therapy services. CMS also notes that its authority to provide for exceptions to therapy caps will expire on December 31, 2009, unless the Congress acts to extend it.
• The final rule implements a variety of other Part B policies, including provisions that: establish Medicare coverage of cardiac and pulmonary rehabilitation services and chronic kidney disease education; update end-stage renal disease (ESRD) facility rates; require authorized compendia used to determining medically-accepted indications of drugs and biologicals used off-label in anti-cancer chemotherapeutic regimens to have a transparent process to evaluate therapies and identify potential conflicts of interests; revise certain requirements under the Part B drug competitive acquisition program. 

The official version of the rule is scheduled to be published in the Federal Register on November 25, 2009. CMS will accept comments on certain provisions of the final rule until December 29, 2009. Specifically, CMS is accepting comments on the following issues: interim RVUs for selected codes, the physician self-referral designated health services, services for consideration for the Five-Year Review of work RVUs, and whether additional guidance is needed regarding CMS’s policy regarding services provided under arrangement.  

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CMS has issued its final rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and ambulatory surgical center (ASC) payment system for 2010.  The official version of the rule is scheduled to be published in the Federal Register on November 20, 2009. With regard to the HOPPS update, CMS estimates that the rule will increase HOPPS rates by 1.9% compared to total spending in CY 2009.  This reflects a 2.1% market basket increase (reduced by 2.0 percentage points for hospitals that do not report quality data), adjusted for changes in the pass-through estimate, outlier payments, and wage index payments. Other major HOPPS and ASC provisions are outlined after the jump.

Other major provisions of the HOPPS final rule include the following: 

• CMS adopted its proposal to increase the threshold for separate payment for outpatient drugs to drugs with a cost per day that exceeds $65, up from $60 in 2009.  CMS will continue making payment for separately-payable drugs and biologicals at average sales price (ASP) plus 4%, representing a combined payment for both the acquisition and pharmacy overhead costs of separately payable drugs and biologicals. CMS uses a new methodology to arrive at this rate for CY 2010. In short, CMS is basing payments on estimated costs of separately-payable drugs and biologicals for 2010 (estimated to be ASP minus 3%), with an adjustment for pharmacy overhead cost. Through the pharmacy overhead adjustment, CMS is redistributing $200 million (rather than $150 million in the proposed rule) from the cost of packaged drugs and biologicals to separately payable drugs and biologicals.
• CMS is maintaining its policy of beginning the pass-through payment eligibility period for a new drug or nonimplantable biological on the date that the first HOPPS pass-through payment is made (rather than it the date of first U.S. sale of the product following FDA approval as the agency had proposed). CMS did adopt its proposal to establish a payment offset for pass-through contrast agents in accordance with its standard offset methodology, and the agency modified the payment methodology for pass-through implantable biologicals.
• CMS adopted its proposal to provide payment for separately-payable therapeutic radiopharmaceuticals and pass-through radiopharmaceuticals using ASP data, if data is submitted by manufacturers for a given calendar quarter (CMS has posted subregulatory guidance on submitting radiopharmaceutical ASP data).
• CMS adopted significant revisions and clarifications its rules regarding physician supervision of outpatient services. Among other things, CMS is requiring all hospital outpatient diagnostic services furnished directly or under arrangement -- in a hospital, provider-based department, or nonhospital location -- to follow the same physician supervision requirements for individual tests that apply under the Medicare physician fee schedule. Diagnostic tests can be supervised only by physicians. CMS will allow physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and licensed clinical social workers to directly supervise all hospital outpatient therapeutic services that they may personally perform under their state scope of practice rules and hospital-granted privileges. CMS also is clarifying that, for purposes of on-campus hospital outpatient services, “direct supervision” means that the physician (for diagnostic tests) or the physician or nonphysician practitioner (for therapeutic services) need not be in the department, but must be present anywhere on the hospital campus and immediately available to furnish assistance and direction throughout the performance of the procedure. For outpatient services furnished in an off-campus provider-based department, “direct supervision” would continue to require the physician (for diagnostic tests) or the physician or nonphysician practitioner (for therapeutic services) to be present in the off-campus provider-based department and immediately available to furnish assistance and direction throughout the performance of the procedure.

With regard to ASC services, the final rule provides a 1.2% inflation update to the conversion factor.  CMS also is adding 26 surgical procedures to the list of procedures covered when performed in an ASC. In addition, the rule: designates six procedures as office-based procedures (subject to payment at the lesser of the national office practice expense payment to the physician or the national standard ASC rate); temporarily designates an additional 16 procedures as office-based for 2010; and updates the list of device-intensive procedures and covered ancillary services. 

CMS is accepting comments on limited provisions of the rule until December 29, 2009. These provisions pertain to: payment classifications for certain HCPCS codes; treatment of plasma protein fraction for HOPPS payment purposes; alternative coding for hospital clinic visits for new and established patients; potentially extending the direct supervision requirements for hospital-based partial hospitalization program services to such services in community mental health centers; and potentially establishing direct physician supervision requirements for ASC services.

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Under CMS’s CY 2010 Medicare home health PPS (HH PPS) final rule, published November 10, 2009, Medicare home health spending is expected to be reduced by $140 million (1.03%) in 2010 compared to 2009 levels. The reimbursement reduction reflects a 2.0% home health MBI increase ($350 million), offset by the effects of an updated wage index (-$10 million), and a 2.75% decrease resulting from the third year of a 4-year phase-in of adjustments to rates to account for case-mix changes (-$480 million). Note that the home health MBI update is reduced by 2 percentage points (to 0.0%) for CY 2010 for those HHAs that do not submit required quality data. CMS also has adopted provisions designed to “mitigate possible billing vulnerabilities associated with excessive outlier payments.” Specifically, for 2010 CMS will cap per-agency outlier payments at 10%, and reduce the target for total aggregate outlier payments to 2.5% of total HH PPS payments (compared to the current 5% target), with a corresponding 2.5% increase in HH PPS rates. The rule also, among other things: requires the submission of Outcome and Assessment Information Set (OASIS) data as a condition for payment under the HH PPS; clarifies coverage of skilled services and routine medical supplies; updates conditions of participation; implements use of OASIS Version C beginning January 1, 2010; updates quality reporting measures; and implements a Consumer Assessment of Healthcare Providers and Systems (CAHPS) Home Health Care Survey beginning in 2012. The final rule also includes various payment safeguards for HHAs, but with a number of modifications from the proposed rule. Notably, CMS did not adopt a provision in its proposed rule that would have prohibited an HHA from sharing its practice location or base of operations with another Medicare-enrolled HHA or supplier, citing its determination that a broad-based prohibition on co-location policy could “negativity impact the health care delivery for some services.” CMS expressed its continuing concerns about these arrangements, however, particularly when an HHA that maintains a practice location in one state and furnishes services to beneficiaries in another state, or when HHAs have merged or consolidated operations into a single practice location, but continue to operate as distinct entities. CMS will consider its administrative remedies to address its concerns in this area.

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The Medicare Payment Advisory Commission (MedPAC) met on October 8 and 9, 2009 to discuss a variety of Medicare payment and policy issues, including the in-office ancillary exception to the physician self-referral law, provider consolidation, physician fee schedule prices, and medical education. 

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On September 16, 2009, CMS published a final rule that implements a provision of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 that prohibits recouping Medicare overpayments from a provider or supplier that seeks a reconsideration from a Qualified Independent Contractor (QIC) and changes how interest is to be paid to a provider or supplier whose overpayment is reversed at subsequent administrative or judicial levels of appeal. The final rule describes the overpayments to which the limitation applies, how the limitation works in concert with the appeals process, and the change in CMS’s obligation to pay interest to a provider or supplier whose appeal is successful at levels above the QIC. The rule is effective November 16, 2009.

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On September 25, 2009, CMS published a notice announcing the annual adjustment in the amount in controversy (AIC) threshold amounts for Administrative Law Judge (ALJ) hearings and judicial review under the Medicare appeals process. Specifically, the 2010 AIC threshold amounts are $130 for ALJ hearings and $1,260 for judicial review, effective for requests for ALJ hearings and judicial review filed on or after January 1, 2010. 

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On September 25, 2009, CMS published a notice correcting technical errors in the August 11, 2009 Medicare skilled nursing facility (SNF) PPS final rule (two typographical errors and a technical error in the wage index values).

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CMS is hosting its annual Medicare Provider Feedback Group Town Hall Meeting on October 29, 2009. CMS invites Medicare providers, suppliers, third-party billers, and other interested parties to participate. 

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The Medicare Payment Advisory Commission (MedPAC) has released its June 2009 Data Book on Healthcare Spending and the Medicare Program, which includes detailed data for various provider settings .

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CMS has issued a memo to state survey agencies reiterating current policy that all surveys must be unannounced for all providers and suppliers, except for standard Clinical Laboratory Improvement Amendments surveys of laboratories and other limited exceptions. 

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On April 30, 2009, CMS will hold a Special Open Door Forum to discuss the availability of Internet-based Provider Enrollment, Chain and Ownership System (PECOS) and the implementation of regulatory provisions. During this call, CMS staff will discuss:

• Internet-based PECOS for physicians, non-physician practitioners and provider and supplier organizations
• Provider and supplier reporting responsibilities
• Final adverse actions
• Change of practice locations
• Change of ownership
• Other reportable events
• Effective date of Medicare billing privileges and retrospective billing for physicians, certain non-physician practitioners, and physician and non-physician practitioner organizations
• Revalidation efforts

More information, including an audio recording of the event, will be posted on the CMS website.

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The GAO has issued a report entitled “Medicare and Medicaid Participating Facilities: CMS Needs to Reexamine Its Approach for Funding State Oversight of Health Care Facilities.” The GAO identified a number of weaknesses in the health facility survey system, including state funding inequities, limited data on the impact of funding on facility oversight, and limited oversight of state spending. The GAO recommends that CMS broadly reexamine its current approach to funding and conducting surveys, and makes a number of specific suggestions for addressing identified these weaknesses. CMS concurred with most of the GAO’s recommendations.

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CMS has scheduled two educational calls on the Recovery Audit Contractor (RAC) program, under which four designated contractors will review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid a contingency fee based on overpayments and underpayments they find. The first call on April 8, 2009 is intended for Part A providers, while the second call on April 14 will focus on Part B providers. 

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On March 27, CMS published a notice soliciting nominations for membership on the Medicare Evidence Development & Coverage Advisory Committee (MedCAC), which advises the HHS Secretary on whether medical items and services are “reasonable and necessary” and therefore eligible for Medicare coverage. MedCAC is looking for experts in a number of area, with the most critical needs in the following fields: experts in Bayesian statistics; clinical epidemiology; clinical trial methodology; knee, hip, and other joint replacement surgery; ophthalmology; psychopharmacology; registries; rheumatology; screening and diagnostic testing analysis; and stroke. MedCAC also needs experts in biostatistics in clinical settings, cardiovascular epidemiology, cost effectiveness analysis, dementia, endocrinology, geriatrics, gynecology, minority health, observational research design, stroke epidemiology, and women’s health. Nominations will be considered if postmarked by April 27, 2009. 

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The Government Accountability Office (GAO) has released a report entitled “Medicare: Improvements Needed to Address Improper Payments in Home Health.” The report examines the growth in Medicare home health spending and utilization linked to upcoding and other fraudulent practices, concentrating on a review of home health agencies (HHAs) in California, Florida, Louisiana, Nevada, Oklahoma, Texas, and Utah. The GAO recommends that CMS: consider verifying the criminal history of key officials named on an HHA enrollment application; provide additional information to physicians who's identification number was used to certify HHA plans of care; direct CMS contractors to conduct postpayment medical reviews on claims submitted by HHAs with high rates of improper billing identified through prepayment review; and issue rules to expand the types of improper billing practices that are grounds for revocation of billing privileges.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A House Education and Labor Subcommittee on Health hearing on "Strengthening Employer-Based Health Care";
• House Energy and Commerce Health Subcommittee hearings on “Making Healthcare Work for American Families,” focusing on “Designing a High Performing Healthcare System” and “Ensuring Affordable Coverage”;
• House Ways and Means Committee hearings on “Health Reform in the 21st Century: Expanding Coverage, Improving Quality and Controlling Costs” and the Medicare Payment Advisory Commission's (MedPAC) Report to the Congress on Medicare Payment Policy; and
• Senate Finance Committee hearings on "Workforce Issues in Health Care Reform: Assessing the Present and Preparing for the Future" and “What is Health Care Quality and Who Decides?”; and
• A House Small Business Committee hearing on "The President's FY 2010 Budget and Medicare: How Will Small Providers be Impacted?" 

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On March 18, 2009, the Finance Committee is holding a hearing on “What is Health Care Quality and Who Decides?”. Also on March 18, 2009, the House Small Business Committee is holding a hearing on "The President's FY 2010 Budget and Medicare: How Will Small Providers be Impacted?" On March 24, the Senate Health, Education, Labor, and Pensions Committee is holding hearings to examine addressing insurance market reform in national health reform.

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On February 26, 2009, the Obama Administration released its proposed federal budget for fiscal year (FY) 2010. Most significantly in terms of health policy, the proposal would establish a reserve fund of $633.8 billion over 10 years to finance health reform. While half of the reserve funds would come from tax increases on higher-income individuals, the rest would come from health system savings impacting a wide range of providers, health plans, and manufacturers. While additional details are expected to be released in the coming weeks, the following are highlights of the information released to date: 

• Medicare Advantage (MA) Payments. The budget would replace the current mechanism for establishing MA rates with a competitive system in which Medicare payments would be based upon an average of plans’ bids. The Administration estimates a savings of more than $175 billion over 10 years from this provision – approximately half of the health care savings in the budget proposal.
• Reducing Drug Prices. The Administration proposes establishing a regulatory pathway for approval of follow-on biologicals. Additionally, brand biologic manufacturers would be prohibited from reformulating existing products into new products to restart the exclusivity process. The Administration also would prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements between brand name and generic drug manufacturers intended to keep generic drugs off the market. The budget also would increase the Medicaid drug rebate for brand-name drugs from 15.1% to 22.1% of the average manufacturer price (AMP), apply the additional rebate to new drug formulations, and allow states to collect rebates on drugs provided through Medicaid managed care organizations. The budget also supports the Food and Drug Administration’s (FDA) efforts to allow Americans to buy drugs from other countries.
• Medicare and Medicaid Payment Accuracy/Program Integrity. The budget would expand CMS’s capacity to identify excessive payments and correct problems, such as through use of National Correct Coding Initiative edits for Medicaid claims. The budget also proposes to dedicate additional resources for oversight and program integrity activities related to the Medicare prescription drug program, MA, and Medicaid.
• Hospital/Post-Acute Care Bundling, Reduced Hospital Readmission Rates. The budget calls for bundling payments to hospitals and certain post-acute providers for services provided within 30 days after discharge from the hospital. In addition, hospitals with high rates of readmission would be paid less if patients are re-admitted to the hospital within the same 30-day period.
• Hospital Quality Improvement. The budget would link a portion of Medicare payments for acute inpatient hospital services to hospital performance on specific quality measures.
• Physician Payment System Reforms. The Administration supports “comprehensive, but fiscally responsible” reforms to the physician fee schedule formula.
• Cancer Research.  The budget includes over $6 billion in funding for the National Institutes of Health (NIH) to support cancer research.

Other Medicare/Medicaid health policy line-items identified in the budget charts include the following, among others: 

• Establishing survey and certification revisit and recertification user fees;
• Enabling physicians to form voluntary groups that coordinate care for Medicare beneficiaries and to receive performance-based payments for coordinated care;
• Addressing financial conflicts of interest in physician-owned specialty hospitals;
• Requiring the use of radiology benefit managers for Medicare imaging services;
• Aligning Medicare home health payments with costs; and
• Imposing higher Medicare drug benefit premiums on certain higher-income beneficiaries.

Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, a number of Congressional committees have scheduled hearings on the budget proposal, including a March 10 Senate Finance Committee hearing focusing on the budget’s health care provisions.

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On February 27, 2009, CMS published a notice announcing the continuation of a 2005 interim final rule regarding Medicare claims appeal procedures through March 1, 2010, since the agency was unable to meet the March 1, 2009 deadline for publication of the final rule. 

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On February 13, 2009, the House and Senate approved the conference report to accompany H.R. 1, the American Recovery and Reinvestment Act.  President Obama signed the bill into law on February 17, 2009.  The $790 billion economic stimulus package includes a number of health care policy provisions.  Among other things, the final agreement includes:

• $19 billion to accelerate the adoption of health information technology systems;
• Strengthened federal privacy and security provisions to protect personally-identifiable health information;
• Approximately $87 billion in additional federal matching funds over two years to help states maintain their Medicaid programs in the face of state budget shortfalls;
• $1.1 billion to support comparative effectiveness research;
• $1 billion for a new Prevention and Wellness Fund; and
• Provisions to help unemployed workers maintain health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) law.
• A provision blocking a fiscal year 2009 reduction in Medicare payments to teaching hospitals related to capital payments for indirect medical education;
• A provision blocking a fiscal year 2009 Medicare payment cut to hospice providers related to a wage index payment add-on;
• Technical corrections to the Medicare, Medicaid, and SCHIP Extension Act of 2007 related to Medicare payments for long-term care hospitals;
• A temporary increase in states’ annual disproportionate share hospital allotments;
• An extension of moratoria on Medicaid regulations for targeted case management, provider taxes, and school-based administration and transportation services through June 30, 2009, and a new moratorium on a Medicaid regulation related to hospital outpatient services through June 30, 2009;
• An extension of Transitional Medical Assistance and the Qualified Individual program; and
• Medicaid prompt payment requirements for nursing facilities and hospitals.

Information on the versions of the measure approved earlier by the House and Senate is available here.    

Update:  On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”).  Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

 

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CMS has announced that a bid protest regarding the award of Recovery Audit Contractors (RAC) was settled on February 4, 2009. CMS will now continue with implementation of the RAC program, under which four designated contractors will review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid a contingency fee based on overpayments and underpayments they find. 

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The OIG has reviewed the operations of the Office of Medicare Hearings and Appeals (OMHA) , which is responsible for the third level of the Medicare administrative appeals process. The OIG found that OMHA’s caseload has increased between the 2005/2006 and 2007/2008 timeframes, but OMHA has improved the timeliness of its decisions and the quality of the data in the appeals system. 

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The Government Accountability Office (GAO) has issued a report entitled “High-Risk Series: An Update,” which identifies areas where federal programs are at risk of fraud, waste, abuse, and mismanagement. This biennial report highlights areas of continuing concern, including Medicare and Medicaid program management.  While the GAO points to certain improvements in Medicare program operations, it recommends further actions, such as monitoring beneficiary grievances; eliminating inappropriate payment incentives; safeguarding the program from payment errors; and addressing deficiencies in oversight of care quality in nursing homes and hospitals. The GAO also identified continued weaknesses in oversight of state Medicaid claims and supplemental payments, review of the budget neutrality of Medicaid demonstrations prior to approval, and the overall level of improper Medicaid payments. The GAO also adds a new high risk area this year focusing on the FDA’s ability to ensure the safety and efficacy of drugs, biologics, and medical devices. The GAO recommendations in this area address, among other things, foreign drug inspections, review of promotional materials, and presentation of clinical trial results by drug sponsors.

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On January 20, 2009, Rahm Emanuel, Assistant to the President and Chief of Staff, sent a memo to all federal department and agency heads announcing that all regulations approved or pending at the end of the Bush Administration must be reviewed by the Obama Administration before being implemented. Specifically, except in cases of emergency situations, such as urgent health, safety, environmental, financial, or national security matters, no proposed or final regulation should be sent to the Office of the Federal Register for publication unless reviewed and approved by an department or agency head appointed or designated by President Obama, and pending Bush Administration regulations not yet published in the Federal Register must be withdrawn for review. Moreover, agencies are directed to consider extending for 60 days the effective date of Bush Administration rules that have been published but not yet taken effect, with a reopening of the public comment period. Although the Administration has not released a complete listing of regulations subject to this review, the Centers for Medicare & Medicaid Services (CMS) published a notice January 27, 2009 delaying for 60 days the effective date of a November 25, 2008 final rule designed to provide state Medicaid agencies with increased flexibility to impose premium and cost sharing requirements on certain Medicaid recipients. The new effective date is March 27, 2009, and the comment period has been reopened until February 26, 2009. Additional Department of Health and Human Services (HHS) rules also may be affected by the regulatory review.

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CMS has issued Medicare Claims Processing Manual instructions clarifying what constitutes new and material evidence as good cause for reopening a Medicare claim.

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On January 6, 2009, the House of Representatives approved a package of rules for the 111^th Congress that, among other things, suspends for two years a provision of the Medicare Modernization Act of 2003 that requires expedited consideration of Medicare funding legislation when general revenues cover less than 45 percent of overall Medicare costs. 

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On January 7, 2009, CMS announced the final five Medicare Administrative Contractors (MAC) that will process and pay Medicare Part A and Part B fee-for-service claims in 14 states. CMS now has met its goal of awarding all 15 MAC contracts.  When fully operational the Part A and Part B MACs will completely replace the fiscal intermediaries and carriers that have administered Medicare since its inception. 

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On December 5, 2008, the Internal Revenue Service (IRS) issued a proposed rule to implement a tax withholding requirement of the Tax Increase Prevention and Reconciliation Act of 2005 that requires federal, state, and local government entities to withhold income tax when making payments to persons providing property or services. The tax withheld will equal 3% of payments made after December 31, 2010. The statute provides an exception for payments made in connection with a public assistance/welfare programs for which eligibility is determined based on needs or income, but not based on age. Therefore, while Medicaid payments are exempt, Medicare payments would be subject to the withholding requirements. The withholding requirement also would not apply to payment amounts below a $10,000 threshold. Multiple payments made to a person generally would not be aggregated for determining if the threshold has been met, but an anti-abuse rule would be established to prevent payment manipulation to avoid required withholding. The IRS will accept comments on the proposed rule until March 5, 2009.  

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CMS has provided additional guidance on a provision of the November 19, 2008 final Medicare physician fee schedule rule for calendar year 2009. In the final rule, CMS adopted a requirement that an entity providing mobile diagnostic testing services enroll with Medicare as an Independent Diagnostic Testing Facility (IDTF), comply with the IDTF performance standards, and bill Medicare directly for its services (although CMS did not require a mobile testing entity to bill directly for its services they are furnished “under arrangement” to hospitals). In a frequently-asked question dated December 15, 2008, CMS clarifies that if the mobile provider of testing services provides only the equipment and the non-physician technicians, they are not required to enroll and bill as an IDTF. Note, however, that if the mobile provider also provides the physician supervision of the test as well as the equipment and the technician, the mobile entity would be required to enroll and bill as an IDTF effective January 1, 2009. 

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On December 18, 2008, the Congressional Budget Office (CBO) released a major report entitled “Budget Options, Volume 1: Health Care,” which sets forth 115 policy options for Congress to consider as it addresses health care system reform. The CBO points out that Medicare is expected to grow from 2.8 percent of gross domestic product (GDP) in 2008 to nearly 9 percent of GDP in 2050. This spending growth will be fueled primarily by growth in per capita medical costs, according to the CBO, with the aging of the population playing a secondary role. In light of these trends, the CBO offers specific options addressing such areas as: health insurance (market reforms, tax treatment, access to federal programs); health care quality and efficiency; geographic variation in Medicare spending; paying for Medicare services (including hospital, physician, imaging, and post-acute care, and Medicare Advantage plan services, among others); financing and paying for services in Medicaid (including drug payment revisions) and SCHIP; premiums and cost sharing in federal health programs; long-term care; health behavior and health promotion; and closing the gap between Medicare’s spending and receipts.  The CBO also issued a separate report focusing on insurance reform, “Key Issues in Analyzing Major Health Insurance Proposals.” The CBO warns that without changes in policy, a substantial and growing number of nonelderly people are likely to be without health insurance. This issue cannot be addressed without making major changes in the financing or provision of health insurance and health care, which will involve "difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care." The report describes the assumptions that CBO would use in estimating the effects of key elements of proposals to modify the health insurance system on federal costs, insurance coverage, and other outcomes. In particular, it considers the types of issues that would arise in estimating the effects of proposals to: provide tax credits or other types of subsidies to make insurance less expensive to the purchaser; require individuals to purchase health insurance; require firms to offer health insurance to their workers or pay into a fund that subsidizes insurance purchases; replace employment-based coverage with new purchasing arrangements or provide strong incentives for people to shift toward individually purchased coverage; and provide individuals with coverage under, or access to, existing insurance plans such as the Medicare program, either as an additional option or under a “Medicare-for-all” single-payer arrangement.

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As previously reported, CMS announced in September that the 2009 Medicare Part B drug competitive acquisition program (CAP) is being postponed indefinitely. The CAP is a voluntary program that offers physicians the option to acquire many injectable and infused Part B drugs from an approved CAP vendor, rather than buying and billing the drugs directly.  In preparation for the 2009 CAP postponement, CMS has provided information to physicians on claims submission deadlines for drugs administered in 2008, the procedures for dealing with CAP drugs not administered by December 31, 2008, and emergency restocking of CAP drugs for dates of service on or before December 31, 2008. 

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On December 2, 2008, CMS proposed three national coverage determinations (NCDs) to deny Medicare coverage of certain types of serious, preventable surgical errors. Specifically, under the proposed NCDs, Medicare would not cover: (1) wrong surgical or other invasive procedures performed on a patient; (2) surgical or other invasive procedures performed on the wrong body part; or (3) surgical or other invasive procedures performed on the wrong patient. The coverage policy is intended to complement CMS’s hospital-acquired conditions policy, under which Medicare will not make higher payments to hospitals for care associated with certain reasonably-preventable conditions unless the condition were reported as present on admission. CMS will accept comments on the proposed coverage policies until January 1, 2009.  

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On December 3, 2008, CMS issued FY 2009 hospital wage index changes to implement Section 124 of the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). The notice contains revised final wage indices and hospital reclassifications for 27 hospitals and are applicable for discharges beginning October 1, 2008. 

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CMS has released an “Issues Paper” as part of it’s plan to transition to a Medicare value-based purchasing program for physician and other professional services, as required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  

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On December 9, 2008, CMS is hosting a listening session as part of the development of a plan for the transition to a value-based purchasing program for physician and other professional services, as required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). CMS is seeking feedback on an issues paper discussing components of the plan under development, including measures, data infrastructure and reporting, incentive methodology; and public reporting. Physicians, physician associations, and other interested parties are invited to participate in person or via teleconference.  The registration deadline has been extended until Thursday, December 4th at 5 PM EST.

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On November 24, 2008, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period making technical changes to the methodology used to compute each state's preliminary and final allotments available to pay the Medicare Part B premiums for qualifying individuals (QIs). The rule also contains charts providing the states' final QI allotments for the federal fiscal year (FY) 2008 and preliminary QI allotments for FY 2009. While the rule is effective November 24, 2008, the final allotments for FY 2008 are effective October 1, 2007 and the preliminary allotments for FY 2009 are effective October 1, 2008. CMS will accept comments on the rule until January 23, 2009.  

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On November 17, 2008, CMS reported that the improper payment rate for the Medicare, Medicaid and SCHIP programs fell from 3.9% in FY 2007 to 3.6% percent in FY 2008. For the Medicare fee-for-service program, most improper payments were due to claims for services that were medically unnecessary or incorrectly coded, while the vast majority of Medicaid and SCHIP errors are due to inadequate documentation. CMS also reported the Medicare Advantage improper payment rate for the first time; that rate was 10.6% in 2006, primarily reflecting health plan errors in documenting members’ diagnoses. CMS also is developing methodologies to report the Medicare Part D error rate in the future.

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On November 24, 2008, the Department of Health and Human Services (HHS) published its semiannual regulatory agenda, outlining planned regulatory initiatives in a number of health policy areas. A separate document listing major Administration regulatory initiatives and priorities, including health policy priorities, also is available.

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On November 12, 2008, Senate Finance Committee Chairman Max Baucus released a white paper entitled "Call to Action: Health Reform 2009." The document details Senator Baucus’ goals for health care reform in the broad areas of coverage, quality, and cost. Highlights of the lengthy plan include the following.  

• Ensuring Health Coverage for All Americans. The Baucus plan seeks universal health insurance coverage by supplementing the current employer-based system with a nationwide insurance pool called the Health Insurance Exchange. Premium subsidies would be available to qualifying families and small businesses. While the Exchange is being created, individuals aged 55 to 64 could buy in to Medicare, and access would be expanded to Medicaid and the State Children’s Health Insurance Program (CHIP). Once affordable health insurance options are available, all individuals would be required to have insurance coverage. 
• Improving Value by Reforming the Health Care Delivery System. Among other things, the plan calls for strengthening the role of primary care and chronic care management; refocusing payment incentives toward quality and value; and encouraging providers in different settings to collaborate in a way that improves quality and saves money (e.g., gainsharing). As part of the payment reforms, Baucus calls for overhaul of the Medicare physician fee schedule formula, greater surveillance of high-growth services, expanded use of pay-for-performance methodologies, and global payments for services provided to a patient during hospitalization and post-discharge. The Baucus plan also seeks to improve the health care infrastructure by supporting comparative effectiveness research through a new Health Care Comparative Effectiveness Research Institute and by promoting the adoption of health information technology. 
• Financing a More Efficient Health Care System. The Baucus plan seeks to prevent Medicare fraud, waste, and abuse through: more stringent enrollment criteria; enactment of payment methodologies that discourage waste (such as the DMEPOS competitive bidding program); encouraging provider and supplier compliance; vigilant government oversight of government health programs; and strong punishment for program abuses. The plan also seeks to increase transparency in the health system by mandating disclosure of gifts and other transfers of value made by drug and device companies to physicians and other health care professionals; increasing scrutiny of physician self-referrals (including a focus on physician-owned hospitals); and requiring public reporting and disclosure of health care price and quality information. With regard to private plans in Medicare, the Baucus plan also would address overpayments to Medicare Advantage (MA) plans, promote performance measures for Part D prescription drug plans and the application of pay-for-performance principles to these plans, and extend Medicaid price discounts to the drugs used by the dual-eligible population in the Part D program. In addition, the plan addresses long-term care reforms, including policies to continue to shift care from institutional settings to home and community settings, malpractice reform, and reforms of the tax code designed to make incentives more efficient, distribute benefits more fairly, and promote smarter consumer spending of health care dollars.

Health care reform promises to be a high-profile issue for the new Congress and the incoming Obama Administration. The broad scope of the Baucus white paper suggests that Congress intends to focus beyond access to insurance or the immediate problem of fixing the Medicare physician fee schedule and examine fundamental policy questions concerning how to promote quality and value throughout the health system at a time of limited federal resources.

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CMS has released the 2009 update of the Healthcare Common Procedure Coding System (HCPCS) code set.

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The Secretary of the Department of Health and Human Services (HHS) has submitted to Congress the Department's annual report on Medicare national coverage determinations (NCDs). The report includes detailed information on the time periods necessary for HHS to complete and implement Medicare NCDs and other background information.

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On October 24, 2008, CMS issued a transmittal updating the Medicare Benefit Policy Manual to recognize the four authoritative compendia for use in the determination of a medically-accepted indication of drugs and biologicals used off-label in an anti-cancer chemotherapeutic regimen. The transmittal also modifies requirements for contractors to identify off-label uses that are supported by clinical research.

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On December 3, 2008, CMS is hosting a special open door forum teleconference to obtain feedback on the Competitive Acquisition Program (CAP), under which physicians may acquire certain Part B drugs from an approved CAP vendor, rather than buying and billing the drugs directly. On September 10, 2008, CMS announced that the 2009 Medicare Part B drug competitive acquisition program (CAP) is being postponed indefinitely. In the meantime, CMS is considering making changes to the CAP. The agency invites public comments on the program, including: the categories of drugs provided under the CAP; the distribution of areas that are served by the CAP; and procedural changes that may increase the program's flexibility and appeal to potential vendors and physicians. Feedback will be accepted at the teleconference or through email.

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CMS has released updated final quality standards for Medicare suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). The new version, dated October 2008, includes a number of changes from the August 14, 2006 version, including: requirements that the supplier furnish appropriate quality equipment and services; expanded documentation requirements; additional protections related to infection control; protections against adulterated and counterfeit equipment; and a variety of revisions to the product-specific quality standards. Also with regard to suppliers, CMS is seeking final regulatory clearance from the White House Office of Management and Budget for its final Medicare DMEPOS supplier standard and security bond requirements. The text of the rules is not available at this time, but they could be published in the Federal Register in the near future.

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On November 6, 2008, CMS will host a Special Open Door Forum to discuss a Medicare Improvements for Patients and Providers Act provision that provides coverage for Kidney Disease Patient Education Services for individuals with Stage IV chronic kidney disease (CKD).  Among other things, CMS is seeking comments on: specific competencies for referring clinicians and the qualified individual providing the education services; accepted clinical criteria for diagnosing someone with Stage IV CKD; information needed for informed patient decisionmaking; and appropriate modalities of education.

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On December 8, 2008, the Practicing Physicians Advisory Council is holding its quarterly meeting to discuss Medicare policy changes related to physicians’ services. Agenda items include: Physician Fee Schedule Final Rule; Outpatient Prospective Payment System/Ambulatory Surgical Center Fee Schedule Final Rule; Stark Reform; Value Based Purchasing—Efficiency Measures; CMS-FDA Collaboration; and Medically Unlikely Edits Update. 

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President Bush recently signed into law the following health policy bills:

• S. 3560, the “QI Program Supplemental Funding Act,” which authorizes an additional $45 million for the Medicare Qualifying Individuals (QI) program, which helps certain low-income individuals pay their Medicare Part B premiums. The legislation also includes provisions to modify the patent protections applicable to antibiotics and clarify the ability of generic drug companies to gain approval of and market generic antibiotics. In addition, the bill expands education activities under the Medicaid Integrity Program (MIP) and extends funding for the Medicare Improvement Fund to make improvements under the original Medicare program.  
• H.R. 6353, the “Ryan Haight Online Pharmacy Consumer Protection Act,” which prohibits the sale of controlled substances over the Internet without a valid prescription and subjects on-line pharmacies to a series of new restrictions.
• H.R. 1343, the "Health Care Safety Net Act of 2008," which reauthorizes the Department of Health and Human Services Health Centers, National Health Service Corps, Rural Health Care, State Loan Repayment, and Primary Dental Workforce programs. 
• H.R. 6469, the "Stephanie Tubbs Jones Organ Transplant Authorization Act of 2008," which authorizes an increase in funding for the Organ Procurement and Transplantation Network.
• S. 2932, which reauthorizes the poison center national toll-free number, provides grants for poison centers, and expands poison prevention education efforts.
• Several measures aimed at expanding disease research and information resources: H.R. 1157, which authorizes grants for the development and operation of research centers for the study of environmental factors that may be related to the etiology of breast cancer; H.R. 1532, which reauthorizes the Preventive Health Services Regarding Tuberculosis program; H.R. 5265, which promotes research into the causes and treatments of various forms of Muscular Dystrophy; S. 1810, to authorize the HHS Secretary to collect and disseminate information regarding Down syndrome or other prenatally or postnatally diagnosed diseases and to coordinate the provision of support services for those who receive a diagnosis of one of those diseases; and S. 1382, which authorizes funding for the establishment of a national registry for the collection and storage of data on amyotrophic lateral sclerosis (ALS).  

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On October 28, 2008, CMS is hosting a Special Open Door Forum for physicians on the Medicare Medical Home Demonstration (MMHD) project. The Medical Home program is a three-year demonstration to provide coordination of services for certain Medicare beneficiaries with chronic or prolonged illnesses through a personal physician. Outreach and recruitment of eligible practices is expected to begin in January 2009, and monthly medical home fee payments will begin in January 2010. On the call, CMS will present background information, define the core capabilities required to qualify as a Medical Home, and discuss the monthly Medical Home fee amounts. The call will take place from 2:00 PM to 4:00 PM EDT; to participate, dial 1-800-837-1935, and reference conference ID number 65752061. 

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On October 1, 2008, the HHS Office of Inspector General (OIG) released its FY 2009 Work Plan, which discusses planned OIG audit, inspection, and investigative initiatives affecting virtually every type of health care provider and supplier.

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CMS has announced that the 2009 “amount in controversy” threshold for administrative law judge hearings is $120, and the threshold for judicial review is $1,220.

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Numerous recent Congressional committee hearings have focused on health policy issues, including the following:

• On September 24, 2008, the Senate Aging Committee examined "ways to respect Americans' choices at the end of life.” The panel also held a hearing September 17 on direct-to-consumer medical device advertising.
• House Ways and Means Health Subcommittee held a hearing September 23, 2008 on problems in the private health insurance market, with a focus on the need for reforms in the non-group or individual market. The panel also met September 11 to examine on Medicare physician payment policy reform. 
• On September 23, 2008, the House Oversight and Government Reform Domestic Policy Subcommittee held a hearing on Medicaid pediatric dental care reform. The full Committee also held a hearing September 16 on HIV prevention.
• The House Energy and Commerce Subcommittee on Health held a hearing September 18, 2008 on health reform, as did the House Small Business Committee.
• The Senate Finance Committee held a hearing September 16, 2008, on health care delivery system reform, focusing on creating a patient-centered model of care and supporting primary care. On September 23, 2008, the Committee held a hearing on insurance market reform, highlighting health insurance exchanges that connect individuals, small businesses and those eligible for premium subsidies to available health insurance plans.
• The Senate Special Committee on Aging held a hearing September 11, 2008 on Medicare information issues.  

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CMS has announced Medicare Part A and Part B premium and deductible levels for 2009. Notably, there will be no increase in the standard Medicare Part B monthly premium for 2009, which is the first year since 2000 that there was no increase in the standard premium.

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CMS has announced it is convening a Special Needs Plan Chronic Condition Panel to determine the conditions that meet the definition of severe or disabling chronic conditions under MIPPA. CMS will accept comments until October 8, 2008 on the criteria the panel could use for selecting conditions. CMS held a special open door forum to discuss the Panel on September 10, 2008; an audio recording of the event will be available for 30 days beginning September 17. 

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CMS has posted the fiscal year 2010 Medicare inpatient prospective payment system (IPPS) new technology application on its website. The deadline for FY 2010 applications is November 17, 2008.

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CMS has announced the names of 32 registries that have been qualified by CMS to submit quality data on behalf of their participants for the 2008 Physician Quality Reporting Initiative (PQRI) registry submission option.

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On August 21, 2008, CMS published a notice correcting technical errors that appeared in its May 23, 2008 final rule with comment period revising and clarifying various regulations governing provider reimbursement determinations, appeals before the Provider Reimbursement Review Board, appeals before the intermediaries, and Administrator review of decisions made by the Board.

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On August 18, 2008, the Centers for Medicare & Medicaid Services (CMS) published its final Medicare hospital inpatient prospective payment system (IPPS) rule for fiscal year (FY) 2009, which begins October 1, 2008. CMS estimates that the rate updates and other policies in the rule will increase Medicare payments to acute care hospitals by almost $4.75 billion in FY 2009, although the impact on particular procedures varies.  The following are highlights of the sweeping regulation.

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

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On August 8, 2008, CMS published its Medicare inpatient rehabilitation facility (IRF) PPS rule for FY 2009. While the rule provides a freeze in the standard federal rate as required by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), CMS estimates that the rule will cut IRF payments by $40 million, or 0.7%, for FY 2009, primarily due to an increase in the outlier payment threshold amount to $10,250. As required by the MMSEA, the final rule retains the requirement that at least 60% of a facility’s patient population have one of 13 qualifying conditions, and CMS will continue to count comorbidities under certain conditions when determining an IRF’s compliance with the threshold. The rule also, among other things, updates the case mix group relative weights, average length of stay values, and wage index tables. The updated IRF PPS rates are applicable for discharges on or after October 1, 2008 and on or before September 30, 2009.

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On August 8, 2008, CMS published the Medicare skilled nursing facility (SNF) prospective payment system (PPS) final rule for FY 2009, which includes a 3.4% inflation update that CMS estimates will increase overall payments by $780 million. Most notably, CMS did not adopt a controversial provision included in its May 7, 2008 proposed rule to recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in January 2006. The recalibration would have cut overall SNF PPS payments by 3.3% ($770 million) in FY 2009.  The preamble to the final rule also addresses several SNF policy issues, including, among others, revisions to the Minimum Data Set (MDS), development of an integrated post-acute payment system, rehabilitative services in SNFs, and consolidated billing.

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On August 8, 2008, CMS published a final rule updating the Medicare hospice wage index for FY 2009. CMS is adopting a 3.6% inflation update for hospices in FY 2009, but this increase is partially offset by a 1.1% decrease in payments in FY 2009 resulting from a phase-out of the hospice wage index budget neutrality adjustment factor (BNAF). Specifically, CMS is phasing out the BNAF over three years, beginning with a 25% reduction in FY 2009, an additional 50% reduction (for a total of a 75% reduction) in FY 2010, and a complete elimination in FY 2011. CMS estimates that phasing-out this adjustment will reduce Medicare hospice spending by $2.18 billion over five years. In addition, the final rule clarifies two wage index issues pertaining to the definition of rural and urban areas and multi-campus hospital facilities. The rule is effective October 1, 2008.

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On August 11, 2008, CMS published a notice correcting proposed drug administration ambulatory payment classifications (APCs) included in its July 18, 2008 proposed 2009 Medicare hospital outpatient prospective payment system (HOPPS) rule.  In addition, on August 1, CMS published a notice making a series of technical changes to its July 7, 2008 proposed 2009 Medicare physician fee schedule rule.

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CMS is soliciting comments regarding whether the agency should undertake Medicare national coverage determinations (NCDs) regarding a wide range of medical technologies. CMS will accept comments until September 28, 2008, on whether a review should or should not proceed prior to the formal decision to open an NCD, based on: 1) a significant number of inquiries from the public, providers, or patients; 2) new evidence or a reexamination of previously available evidence; 3) inconsistent or conflicting local coverage policies; 4) program integrity concerns; 5) substantial clinical advances; 6) technologies for which rapid diffusion could have a significant programmatic impact; or 7) significant uncertainty about the health benefit, patient selection, or appropriate facility and staffing requirements for a new technology. The specific technologies under review are as follows: thrombopoiesis stimulating agents, erythropoiesis stimulating agents, levocarnitine, parenteral iron supplementation, bisphosphonates, gene expression profiling tests, treatment of wet AMD, proton beam therapy for prostate cancer, artificial cervical discs, minimally invasive methods for bariatric surgery, biological therapies for treatment of chronic wounds, bone morphogenetic protein, hip resurfacing, ablation for atrial fibrillation, off label use of drug eluting coronary stents, vertebroplasty and kyphoplasty, lumbar fusion for degenerative disc disease, peripheral arterial stenting and vascular intervention, and pharmacogenomic testing. 

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CMS has posted the Medicare Evidence Development & Coverage Advisory Committee (MedCAC) Medicare Evidentiary Priorities list, which lists research topics on clinical practice for which there are significant knowledge gaps. CMS encourages researchers to consider these research priorities when designing studies for items or services that have a direct impact on the health of the elderly. CMS is working with the Agency for Healthcare Research and Quality (AHRQ) to develop a process for future revisions to the priority list. CMS is accepting comments on both the Medicare Evidentiary Priorities List and a process for revising the list, although no comment deadline is provided.

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CMS published a final rule June 27, 2008 establishing appeals processes for all providers and suppliers whose enrollment, reenrollment, or revalidation application for Medicare billing privileges is denied and whose Medicare billing privileges are revoked. It also establishes timeframes for deciding enrollment appeals by an Administrative Law Judge or the Departmental Appeals Board, and processing timeframes for CMS’ Medicare fee-for-service contractors. In addition, the rule allows Medicare contractors to revoke Medicare billing privileges when a provider or supplier submits claims for services that could not have been furnished to a beneficiary. The rule also specifies that a Medicare contractor may establish a Medicare enrollment bar for any provider or supplier whose billing privileges have been revoked. Finally, the rule requires all providers and suppliers to receive Medicare payments by electronic funds transfer upon submitting an initial enrollment application to Medicare, changing enrollment information, or revalidating or re-enrolling in the Medicare program. The rule is effective August 26, 2008.

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A June 27, 2008 CMS final rule provides a special enrollment period (SEP) for Medicare Parts A and B for certain individuals who are volunteers outside of the United States and who have health insurance that covers them while outside the United States, effective August 26, 2008.

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CMS published a final rule June 27, 2008 that sets forth the conditions under which CMS will grant a provider or supplier an opportunity to use a repayment plan, also known as an extended repayment schedule, for Medicare overpayments. The rule is effective July 28, 2008.

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CMS issued a proposed rule June 27, 2008 that would establish a number of new standards for RHCs and FQHCs participating in the Medicare program. Among other things, the rule would: establish location requirements and quality assessment and performance improvement program requirements for RHCs; clarify policies regarding “commingling” of an RHC with another entity; revise the RHC and FQHC payment methodology to implement statutory requirements; revise payments for services furnished to skilled nursing facility (SNF) patients; allow RHCs to contract with RHC nonphysician providers under certain circumstances; modify regulations regarding waivers of staffing requirements; update infection control requirements; and update the requirements under the emergency services standard and patient health records condition for certification to reflect advancements in technology and treatment. Finally, CMS solicits comments on payment for high cost drugs and the appropriateness of a mental health specialty clinic as an exception to the location requirements. CMS will accept comments on the proposed rule until August 26, 2008.

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CMS has published a notice outlining the criteria and standards to be used for evaluating the performance of fiscal intermediaries (FIs) and carriers in the administration of the Medicare program during FY 2009. The criteria and standards, which address claims processing accuracy and timeliness, customer service, payment safeguards, fiscal responsibility, and administrative management requirements, are effective October 1, 2008, but CMS will accept comments until August 26, 2008.

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As previously reported, on June 6, 2008, Senate Finance Committee Chairman Max Baucus introduced the “Medicare Improvements for Patients and Providers Act of 2008” (S. 3101). The legislation would block a 10.6 percent cut in Medicare physician payments scheduled to go into effect July 1, 2008 and make numerous other Medicare policy changes. The Senate held a procedural vote on the measure on June 16, 2008, but Senate Democratic leaders failed to muster the 60 votes needed to proceed with consideration of the bill.  On June 20, 2008, the House Ways and Means Committee released its proposed amendments to S. 3101.   The House could consider this amended version the week of June 23 in an attempt to avert the upcoming physician payment cut. 

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On June 13, 2008, the Medicare Payment Advisory Commission (MedPAC) released its June 2008 report to the Congress on "Reforming the Delivery System." MedPAC discusses a variety of payment and delivery reforms to improve Medicare quality, coordinate care, and reduce cost growth. 

Major recommendations include the following:

• Primary Care -- MedPAC recommends a budget-neutral adjustment that increases fee schedule payments for primary care services furnished by clinicians focused on delivering primary care. It also proposes establishing a Medicare "medical home" coordinated care pilot program
• Resource Use Around a Hospitalization -- MedPAC recommends several changes in Medicare payment for care provided around a hospitalization (e.g., inpatient stay plus 30 days postdischarge) to encourage care coordination and efficiency. First, the Secretary should confidentially report to hospitals and physicians information about resource use around a hospitalization and readmission rates, followed by public reporting of the data in two years. Medicare also should reduce payments to hospitals with relatively high readmission rates for select conditions while allowing hospitals and physicians to share in the savings that result from providing care more efficiently. MedPAC also recommends that CMS conduct a voluntary pilot program to test bundled payment for all services around a hospitalization for select conditions.
• Skilled Nursing Facilities -- MedPAC recommends revising the SNF prospective payment system (PPS) to incorporate a nontherapy ancillary payment component, a therapy payment component, and an outlier policy based on exceptionally high ancillary costs per stay. MedPAC also recommends that CMS require SNFs to report on patient diagnoses, service use during the SNF stay, and nursing costs. MedPAC concurrently released a contractor report prepared by staff from the Urban Institute on "Model Alternative Designs for a Revised PPS".
• Cost-Effectiveness -- MedPAC examines issues associated with creating a comparative effectiveness entity, including issues related to the structure and governance of the entity. MedPAC endorses a dedicated, broad-based, public and private financing mechanism.
• Physician-Manufacturer/ASC Relationships -- MedPAC examines options for collecting data on physicians’ financial relationships with manufacturers, hospitals, and ambulatory surgical centers.
• Hospice -- MedPAC observes that Medicare hospice spending increases have been largely driven by more beneficiaries using the hospice benefit and increases in hospice length of stay, in part due to incentives in Medicare’s hospice payment system that financially reward longer lengths of stay. Overall, Medicare payments to hospices appear adequate, but MedPAC found that this assessment masks considerable variation. In 2005, nonprofit and provider-based hospices had small negative margins, while for-profit and freestanding hospices had large positive margins.

While MedPAC’s recommendations are not binding on Congress, lawmakers often consider MedPAC’s advice as they develop Medicare policy.

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On June 6, 2008, Senate Finance Committee Chairman Max Baucus introduced the “Medicare Improvements for Patients and Providers Act of 2008” (S. 3101).   Most notably, the legislation would block a scheduled cut in Medicare physician payments, extend certain expiring health care provisions, and make numerous other Medicare and Medicaid payment and coverage changes. 

The following are highlights of the bill:

• Physician Payments: In the absence of Congressional action, Medicare physician fee schedule payments will be subject to a more than 10 percent across-the-board cut effective July 1, 2008. The Baucus bill would delay the cut through December 31, 2009 and provide a 1.1% update for 2009. In addition, the bill would extend the physician quality reporting initiative (PQRI) through December 31, 2010, with an increase in the PQRI bonus to 2.0% for 2009 and 2010. The bill also would provide financial incentives for physicians to use e-prescribing, establish accreditation requirements for providers of the technical component of certain diagnostic imaging services, extend the current treatment of certain physician pathology services, and extend an increase in the geographic adjustment to payment for physician work in rural areas.
• Renal Dialysis Provisions:  The bill would increase the composite rate for end stage renal disease (ESRD) services by 1 percentage point for both 2009 and 2010, and require the Secretary to established a fully bundled payment system for ESRD services. In addition, dialysis providers would be subject to new quality standards.
• Other Part B Provisions:  Among other things, the bill would extend the outpatient therapy cap exceptions process; extend current payment rules covering brachytherapy and radiopharmaceuticals; extend the Medicare hold harmless provision under the hospital outpatient prospective payment system for certain small rural hospitals; repeal the clinical laboratory competitive bidding demonstration project (offset by a 0.5 percent reduction in lab payment updates for each of the next 5 years); improve payments for clinical lab tests performed by critical access hospitals; and modify payments for oxygen and power wheelchairs.
• Hospital Provisions: The legislation would extend the Medicare Rural Hospital Flexibility Program, rebase sole community hospital payments, and make other rural hospital improvements.
• Medicare Advantage Reforms: The proposal includes a series of changes to Medicare Advantage payment and other policies, including a phase-out of indirect medical education payments and a $1.8 billion cut in the Medicare Advantage Stabilization Fund.
• Medicare Part D Drug Plan Provisions: Among other things, the bill would set deadlines for drug plan payment to pharmacies; establish claims submission time-frames for long-term care pharmacies; require weekly updates on pricing standards used for pharmacy reimbursement; allow coverage of barbiturates and benzodiazepines; codify coverage of certain “protected classes” of drugs; clarify the use of compendia for the drug benefit; and clarify the use of Part B data for research and other purposes.
• Clinical Trials, Clinical Effectiveness: The bill would authorize alternative methods of payment for Medicare services provided to beneficiaries who participate in certain randomized control trials conducted by a Department of Health and Human Services (HHS) agency. It also would authorize Institute of Medicine studies on best practices in setting clinical decision-making protocols and on methodological standards for conducting systematic reviews of clinical effectiveness research.
• Medicaid Drug Payments:  The bill would delay the establishment of Medicaid payment limits using Average Manufacturer Price for multiple source drugs through September 30, 2009.
• Beneficiary Improvements: The bill would expand coverage of preventive services, reduce copayments for outpatient mental health services, expand access to certain low-income programs, and limit certain Medicare Advantage and Part D drug plan sales and marketing practices, among other things.

Additional details regarding the Baucus bill are available here. The full Senate is expected to consider the legislation later this month. If approved by the Senate, attention would then shift to reaching an agreement with the House, which passed a much different Medicare bill last summer (H.R. 3162). Prospects for enactment are uncertain, given the Administration’s strong opposition to reductions in Medicare Advantage funding. Note that Senator Chuck Grassley, Ranking Republican on the Finance Committee, also has outlined an alternative Medicare proposal that does not include managed care cuts, which could serve as the basis of a compromise agreement.

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