On October 16, 2013, the House and Senate approved H.R. 2775, the Continuing Appropriations Act of 2014. Under the resolution, the federal government was reopened, after being closed since October 1, 2013. The resolution also funds government operations through January 15, 2014 and suspends the debt limit through February 7, 2014. In the only health care policy provision, HHS is directed to verify the income of individuals applying for premium tax credits under the ACA. As part of the agreement, the House and Senate also agreed to go to conference on a budget resolution to establish the Congressional budget for FY 2014, which started October 1, 2013, and to set budget levels for FY 2015. Conferees are directed to present a budget agreement to Congress by December 13, 2013. As part of the conference deliberations, lawmakers are expected to address Medicare funding to some extent, particularly as lawmakers seek to avert an upcoming steep reduction in Medicare physician fee schedule payments and to extend certain Medicare provisions that expire at the end of the year. Any increases in Medicare program spending are typically offset by other health program cuts, so a wide range of Medicare policies could still be in play this year.
On August 6, 2013, CMS released a request for public comment on how the agency can promote greater transparency regarding physician-specific Medicare payment information. CMS is seeking input on the following specific issues:
- Whether physicians have a privacy interest in information concerning payments they receive from Medicare and, if so, how to properly weigh the balance between that privacy interest and the public interest in disclosure of Medicare payment information, including physician-identifiable reimbursement data;
- What specific policies CMS should consider with respect to disclosure of individual physician payment data that will further the goals of improving the quality and value of care, enhancing access and availability of CMS data, increasing transparency in government, and reducing fraud, waste, and abuse within CMS programs; and
- The form in which CMS should release information about individual physician payment, should CMS choose to release it (e.g., line item claim details, aggregated data at the individual physician level).
The request stems from a May 31, 2013 Florida federal district court decision that lifted a previous injunction prohibiting CMS from disclosing annual Medicare reimbursement payments to individual physicians. CMS notes that it is not considering public disclosure of any information that could directly or indirectly reveal patient-identifiable information. CMS will accept comments on this issue until September 5, 2013. A related CMS blog post is available here.
On July 19, 2013, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule updating Medicare physician fee schedule (PFS) rates and polices for calendar year (CY) 2014. CMS projects that PFS payments will be reduced by approximately 24.4% in 2014, largely due to the statutory Sustainable Growth Rate (SGR) update formula (although Congress is expected to eventually take action to block the automatic cuts, as it has in the past). The rule also includes a number of significant policy proposals, including the following highlights:
- Under the proposed rule, CMS projects an estimated 2014 conversion factor of $25.7109, adjusted to $26.8199 to include a budget neutrality adjustment, compared to the 2013 conversion factor of $34.0230. As noted, Congress could override the SGR formula on either a temporary or permanent basis, but the timing and scope of any such action is uncertain. Reimbursement changes for individual procedures would vary based on numerous other policy proposals and updates.
- Under its potentially misvalued code initiative, CMS is proposing to reduce PFS rates for more than 200 codes if Medicare physician office payment exceeds the payment in the outpatient hospital department or ambulatory surgical center (ASC) setting. CMS proposes limiting PFS payment in such cases to the total payment that Medicare would make to the practitioner and the facility when the service is furnished in a hospital outpatient department or ASC. Certain services would be exempt from this provision, including services without separate hospital outpatient prospective payment system (OPPS) payment rates and codes already subject to cuts pursuant to the Deficit Reduction Act imaging cap, among others). CMS estimates that this policy would have the biggest negative impact on allowed charges for independent laboratory PFS payments, radiation therapy center services, and pathology services. CMS also proposes to examine other specific codes as part of the agency’s ongoing review of misvalued codes.
- CMS proposes to make payments for non-face-to-face complex chronic care management services for Medicare beneficiaries who have multiple (two or more) significant chronic conditions. This provision would be implemented in 2015 to provide sufficient time to develop and obtain public input on the standards necessary to demonstrate the capability to provide these services.
- CMS proposes to modify the definition of eligible telehealth originating sites to include health professional shortage areas (HPSAs) located in rural census tracts of urban areas as determined by the Office of Rural Health Policy, which CMS expects to result in the inclusion of additional HPSAs as areas for telehealth originating sites. CMS also proposes adding transitional care management services to the list of eligible Medicare telehealth services.
- CMS proposes to continue implementation of the physician value-based payment modifier (Value Modifier), which was mandated by the Affordable Care Act (ACA) to reward physicians for providing higher quality and more efficient care. The Value Modifier is being phased in from CY 2015 to CY 2017, with CY 2013 serving as the initial performance period for the CY 2015 Value Modifier. In the proposed 2014 rule, CMS calls for the value modifier to apply to groups of 10 or more eligible physicians in 2016 (compared to groups of 100 or more in 2015), and increases the amount of payment at risk from 1% to 2% in 2016. CMS also proposes to refine the methodologies used to calculate the value-based payment modifier to better identify both high and low performers for upward and downward payment adjustments.
- CMS proposes to amend the “incident to” regulations to require that services and supplies be furnished in accordance with applicable state law, and that the individual performing “incident to” services meet any applicable requirements to provide the services, including state licensure requirements. CMS is proposing this policy to ensure that auxiliary personnel providing services to Medicare beneficiaries incident to the services of other practitioners do so in accordance with applicable state requirements, and to ensure that Medicare payments can be recovered when such services are not furnished in compliance with the state law.
- CMS proposes a process to systematically reexamine payment amounts under the Clinical Laboratory Fee Schedule (CLFS) to determine if changes in technology for the delivery of that service (e.g., changes to the tools, machines, supplies, labor, instruments, skills, techniques, and devices by which laboratory tests are produced and used) warrant an adjustment to the payment amount. Beginning with the CY 2015 PFS proposed rule, CMS would identify the test code, discuss how it has been impacted by technological changes, and propose an associated payment adjustment. CMS would solicit comments, and any payment adjustment would be adopted in the final rule, beginning with the CY 2015 final rule. CMS would first examine the codes that have been on the CLFS the longest and then work forward, over multiple years, until all of the codes on the CLFS have been reviewed.
- CMS proposes a centralized review process under which a single entity would be responsible for making Investigational Device Exemption (IDE) coverage decisions. The rule also would establish minimum standards for IDE studies and trials for which Medicare coverage of devices or routine items and services is provided (including pivotal study and superiority study design criteria).
- CMS proposes to apply the outpatient therapy cap limitations and related policies to outpatient therapy services furnished in a critical access hospital beginning on January 1, 2014, in conformance with the American Taxpayers Relief Act (ATRA).
- The sweeping rule also addresses, among many other things: updates to the geographic practice cost indices (GPCIs) and revisions to the weights assigned to each GPCI to increase the weight of work and reduce the weight of practice expense; revisions to the calculation of the Medicare Economic Index (MEI); revisions to the Physician Quality Reporting System (PQRS) and the Electronic Health Record (EHR) Incentive program; revisions to regulations regarding liability for overpayments to conform to ATRA provisions with regard to the timing of the triggering event for the ‘‘without fault’’ and ‘‘against equity and good conscience’’ presumptions; and updates to the ambulance fee schedule regulations to conform with statutory requirements.
The comment deadline is September 6, 2013.
On July 23, 2013, the House Energy and Commerce Health Subcommittee approved legislation to repeal the Medicare physician fee schedule SGR formula and replace it with a period of stable payment followed by reimbursement linked to quality of care. In the first phase, the legislation would set the fee schedule update for each of years 2014 through 2018 at 0.5%. During this time, the current law payment incentives, such as the PQRS and the EHR Incentive Program will continue. After that 5-year period, providers will receive an annual update of 0.5%, but an additional update adjustment would be based on quality performance under a new Update Incentive Program (UIP). Eligible professionals could choose at any time to opt-out of the fee-for-service program and participate in alternative payment models. The bill also requires the Secretary to implement a system for the periodic reporting by physicians of data on the accuracy of relative values for physician services, such as data relating to service volume and time; the Secretary could provide incentive payments to providers for reporting this data. The bill also directs Medicare to identify improperly valued services to reduce net physician fee schedule expenditures by 1% per year for 2016 through 2018 (not budget neutral). The full Committee is expected to vote on the legislation later this week.
The House Energy and Commerce Committee is inviting comments on advance draft legislation to repeal the Medicare physician fee schedule sustainable growth rate (SGR) formula and replace it with a system linking payment to quality of care. Comments will be accepted until July 9, 2013. In a related development, on July 10, the Senate Finance Committee is holding a hearing on "Repealing the SGR (Medicare Sustainable Growth Rate) and the Path Forward: A View from CMS.”
Recent Congressional hearings focusing on health policy include the following:
- The House Energy and Commerce Committee held hearings on health insurance premiums under the ACA and drug compounding. The House Energy and Commerce Health Subcommittee also held a hearing on "Reforming SGR (Sustainable Growth Rate): Prioritizing Quality in a Modernized Physician Payment System," which reviewed draft SGR reform legislative language. A June 12 hearing will focus on the state perspective on the need for Medicaid reform, and a June 14 hearing will examine the federal government's response to the prescription drug abuse crisis.
- A House Ways and Means Committee Health Subcommittee hearing addressed the “President's and Other Bipartisan Proposals to Reform Medicare," and the panel has scheduled a June 14 hearing to concentrate on proposals to reform Medicare post-acute care payments.
- The Homeland Security Committee held a second hearing on “Oversight and Business Practices of Durable Medical Equipment Companies.”
- The Senate Special Committee on Aging held a hearing entitled “10 Years Later: A Look at the Medicare Prescription Drug Program."
Following a similar initiative on the House side, leaders of the Senate Finance Committee are inviting provider input on Medicare physician payment system reform. Specifically, Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) are requesting information on: (1) what specific reforms should be made to the physician fee schedule to ensure that physician services are valued appropriately; (2) what specific policies should be implemented that could co-exist with the current physician payment system and would identify and reduce unnecessary utilization to improve health and reduce Medicare spending growth; and (3) within the current fee-for-service system, how can Medicare most effectively incentivize physician practices to undertake the structural, behavioral, and other changes needed to participate in alternative payment models? Additional information, including a full copy of letter from Senators Baucus and Hatch to the health care provider community, is available here. Responses are due by May 31, 2013. The panel also has scheduled a May 14 hearing on "Advancing Reform: Medicare Physicians Payments."
On May 8, 2013, the House Energy and Commerce Subcommittee on Health approved by voice vote H.R. 1407, legislation to reauthorize and combine the Animal Drug User Fee Act and the Animal Generic Drug User Fee Act. TheEnergy and Commerce Committee also recently held hearings on: the Administration’s HHS budget proposal; the Center for Consumer Information and Insurance Oversight and implementation of the ACA; the lack of transparency and consumer driven market forces in U.S. health care system; and the impact of HIPAA on patient care and public safety. The House Ways and Means Health Subcommittee held a hearing on Medicare physician payment reform, and the Senate Finance Committee has scheduled a May 14 hearing on this topic. Other Senate panels also recently held hearings on health policy issues, including: a HELP Committee hearing on "Successful Primary Care Programs: Creating the Workforce We Need"’ a Homeland Security Committee hearing on “Oversight and Business Practices of Durable Medical Equipment Companies”; and a Special Committee on Aging hearing on "The National Plan to Address Alzheimer's Disease: Are We On Track to 2025?"
The chairmen of the House Energy and Commerce Committee and Ways and Means Committee have provided additional details regarding their proposal to repeal the current Medicare physician fee schedule sustainable growth rate (SGR) methodology and replace it with an alternative physician payment system. The update builds on comments received from the public on the panels’ February 7, 2013 outline. Among other things, the expanded proposal discusses processes to determine quality and efficiency measures that focus on evidence while being flexible and specialty-specific; recognizes the role that specialty-specific registries play in quality improvement; and addresses timely performance feedback for providers. Comments will be accepted until April 15 at firstname.lastname@example.org.
Today, the Obama Administration released its proposed federal budget for fiscal year 2014. As widely reported, the budget incorporates an offer the President made to Congress in December 2012 to achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, including $401 billion in health savings (the Administration observes that this level of cuts would “provide more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration”).
Virtually all provider types – and drug manufacturers – would be impacted by the budget provisions, if adopted as proposed. The budget proposal is certainly subject to change during the legislative process, particularly as the House and Senate leadership pursue alternative budget frameworks, and indeed, gridlock could prevent significant action on entitlement reform this year. Nevertheless, the proposals bear careful monitoring because they could eventually be included in any long-elusive “grand bargain” to reform the Medicare program and reduce the federal debt.
Highlights of the Administration’s Medicare and Medicaid proposals include the following:
Medicare Provider Payments
- Reform the Medicare physician fee schedule/sustainable growth rate (SGR) formula to provide stable payments followed by payment linked to participation in an “accountable payment model.”
- Reduce Medicare coverage of bad debts from 65% generally to 25% over three years starting in 2014.
- Reduce Medicare indirect medical education add-on payments by $11 billion over 10 years.
- Reduce payment for post-acute care services in several ways.
- Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points, beginning in 2014 through 2023 (the update could not fall below 0%). This provision would save $79 billion over 10 years.
- Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated severity conditions), saving about $2.5 billion over 10 years.
- Equalize IRF and SNF payments for three conditions involving hips and knees, pulmonary conditions, as well as other conditions selected by the Secretary, saving $2.0 billion over 10 years.
- Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2017, saving $2.2 billion over 10 years.
- Implement bundled payments for post-acute care providers (LTCHs, IRFs, SNFs, and HHAs) beginning in 2018. Payments would be bundled for at least half of the total payments for post-acute care providers. Rates based on patient characteristics and other factors would be set to produce a permanent and total cumulative adjustment of -2.85% by 2020. Beneficiary coinsurance would equal levels under current law. This provision would save $8.2 billion over 10 years.
- Align Medicare payments to rural providers with the cost of care, saving $2 billion over 10 years.
- Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results.
Prescription Drug Provisions
- Reduce payment for physician-administered Medicare Part B drugs from 106% of average sales price to 103% of average sales price. Manufacturers would be required to provide a specified rebate in certain instances as determined by the Secretary “to preserve access to care.”
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to beneficiaries who receive Part D low-income subsidies, saving $123 billion over 10 years.
- Close the Medicare Part D donut hole by 2015, rather than 2020, by increasing manufacturer discounts to from 50% to 75% beginning in plan year 2015.
- Lower Medicaid drug costs by clarifying the definition of brand drugs, excluding authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs, making a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, and calculating Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.8 billion over 10 years.
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments, saving approximately $7 billion over 10 years.
- Improve program integrity for Medicaid drug coverage by directing states to track high prescribers and utilizers of Medicaid prescription drugs; requiring manufacturers to make full restitution to states for any covered drug improperly reported by the manufacturer on the Medicaid drug coverage list; allowing more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; requiring drugs to be electronically listed with the FDA to receive Medicaid coverage; and expanding penalties for reporting false information for the calculation of Medicaid rebates.
- Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into “pay for delay” agreements and modifying the length of exclusivity on brand name biologics.
Program Integrity/Efficiency Provisions
- Provide $640 million in combined mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid, and CHIP.
- Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records and permit exclusion of individuals affiliated with entities sanctioned for fraudulent or other prohibited actions from federal health care programs.
- Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in additional health care settings.
- Exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary.
- Require prior authorization of advance imaging services.
- Require prepayment review or prior authorization for power mobility devices.
- Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
Other Medicare Provisions
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
- Increase the minimum Medicare Advantage (MA) coding intensity adjustment (which decreases MA plan payments to reflect differences in coding practices between Medicare fee-for-service and MA) and align employer group waiver plan payments with MA bids, saving $19 billion over 10 years.
- Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point.
- Expand the availability of Medicare data released to physicians and other providers for performance improvement, fraud prevention, value-added analysis, and other purposes.
- Base Medicaid rates for durable medical equipment on Medicare rates to save $4.5 billion over 10 years.
- Align Medicaid Disproportionate Share Hospital (DSH) payments with expected levels of uncompensated care to save $3.6 billion over 10 years.
- Affirm Medicaid’s position as a payer of last resort when another entity is legally liable to pay claims.
A 131-page Department of Health and Human Services (HHS) “Budget in Brief” summary discusses these provisions in greater detail, and also addresses other HHS agency budget proposals and discusses HHS’s implementation of private health insurance protections and programs under the ACA.
Due to continuing budget gridlock in Washington, sequestration has been triggered – meaning automatic cuts to a wide range of federal programs, including Medicare payments to providers and health plans. While the Centers for Medicare & Medicaid Services has not yet announced detailed plans for implementing the sequester requirements for its programs, this Alert answers some basic questions about sequestration and how it will impact the Medicare program. Among other things, the Alert addresses what Medicare spending is impacted by sequestration, when the Medicare cuts start, and how long sequestration will last.
The Chairmen of the House Ways and Means Committee and House Energy and Commerce Committee are inviting comments on the outline of a proposal to permanently repeal the sustainable growth rate (SGR) formula for updating Medicare physician fee schedule payments and institute other payment reforms. The lawmakers are considering a three-phase proposal. In the first phase, the SGR formula (which Congress has repeatedly overridden to avoid sharp reimbursement cuts) would be repealed, which would eliminate an estimated 25% across-the-board rate cut in 2014 and any future SGR cuts. In its place, the plan would provide an unspecified “period of predictable, statutorily-defined payment rates.” In phase two, the plan would link payment to performance on physician-endorsed measures of quality of care, while in phase three, physicians could earn additional payments based on efficiency of care. The Committees also are considering addressing several other related issues, including gainsharing, medical liability reform, Independent Payment Advisory Board repeal, and private contracting/balance billing. Comments will be accepted on the plan until February 25, 2013 at SGRComments@mail.house.gov.
House Energy and Commerce subcommittees have held hearings on “Influenza: Perspective on Current Season and Update on Preparedness” and on “SGR: Data, Measures and Models; Building a Future Medicare Physician Payment System.” On the Senate side, the Senate Health, Education, Labor, and Pensions Committee voted to approve H.R. 307, the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 (which was approved by the House last month), and S. 252, “The Prematurity Research Expansion and Education for Mothers who deliver Infants Early (PREEMIE) Act.” In addition, the Finance Committee held a hearing on ACA health insurance exchanges.
On February 14, 2013, the House Energy and Commerce Health Subcommittee is holding a hearing entitled “SGR: Data, Measures and Models; Building a Future Medicare Physician Payment System.”
The GAO has examined how private-sector efforts to adjust physician payments to reflect quality and efficiency could be applied successfully to the Medicare program. As previously reported, CMS developing a physician value-based payment modifier (Value Modifier), which was mandated by the ACA as a way to reward physicians for providing higher quality and more efficient care. The Medicare Value Modifier is being phased in from 2015 to 2017, with 2013 serving as the initial performance period for the 2015 Value Modifier. Under the final 2013 Medicare physician fee schedule rule, the Value Modifier initially will apply to all groups of physician with 100 or more eligible professionals. These groups will be able to choose two payment calculation options: (1) Value Modifier based strictly on participation in the Physician Quality Reporting System, or (2) Value Modifier based on quality tiering, with payments based on quality and costs. Based on a review of successful private-sector practices, the GAO recommends that CMS: consider rewarding physicians for performance improvement in addition to meeting absolute benchmarks; make more timely Medicare payment adjustments to enhance the significance of the incentive to physicians; and develop a strategy to reliably measure the performance of solo or small group practices. HHS concurred with the recommendations.
On January 2, 2013, President Obama signed into law (via autopen) the “fiscal cliff” deal, H.R. 8, the American Taxpayer Relief Act of 2012 (ATRA). In addition to making well-publicized changes to the tax code, the new law includes numerous Medicare payment provisions. Most notably, the law includes a one-year Medicare physician fee schedule (MPFS) fix that is paid for by approximately $30 billion in other health care (mainly Medicare) spending reductions over 10 years. ATRA also delays until March 2013 the automatic, across-the-board “sequestration” cuts in federal spending imposed by the Budget Control Act of 2011, which was expected to reduce Medicare provider payments by more than $11 billion in fiscal year (FY) 2013 and $123 billion over the period of FY 2013 to 2021 (CBO subsequently estimated that the 2013 cut to Medicare payments now will be approximately $9.9 billion due to changes in the sequestration targets under the ATRA). The delay in sequestration, coupled with the government again reaching its debt ceiling, sets up another near-term battle on federal spending, during which Medicare, Medicaid, and other health care programs could be targeted for even more significant cuts.
The health provisions of ATRA are summarized in our Client Alert.
The Centers for Medicare & Medicaid Services (CMS) has sent several final Medicare calendar year 2013 payment rules to the White House Office of Management and Budget (OMB) for final regulatory clearance. Rules under review will establish final 2013 payment and other policies under the Medicare physician fee schedule, hospital outpatient prospective payment system,, home health prospective payment system (PPS), and end-stage renal disease PPS. Copies of the rules are not available at this point, but they are expected to go on display at the Federal Register in the coming days.
MedPAC is meeting on November 1 -2, 2012 to discuss a variety of Medicare policy issues, including: Medicare payment for ambulance services, reducing the hospitalization rate for Medicare beneficiaries receiving home health care, Medicare payment for outpatient therapy services, geographic adjustment of payments for the work of physicians and other health professional, the role of provider prices in determining private-plan Medicare costs relative to fee-for-service Medicare, Medicare Advantage special needs plans, and Medicare payment differences for ambulatory care services across settings.
On August 1, 2012, CMS is holding a national provider call on its proposals for the Physician Value-Based Payment Modifier under the Medicare physician fee schedule (MPFS). The Value Modifier was mandated by the ACA as a way to reward physicians for providing higher quality and more efficient care. In the final 2012 MPFS rule, CMS adopted performance measures to be used for future MPFS Value Modifier payment adjustments. The proposed 2013 MPFS rule sets forth the Value Modifier payment methodology and phase-in plans.
CMS has sent several major calendar year 2013 proposed Medicare payment rules to the White House Office of Management and Budget (OMB) for final regulatory clearance. Rules under consideration include the proposed Medicare outpatient hospital, ambulatory surgical center (ASC), end-stage renal disease, and home health prospective payment system rules for calendar year (CY) 2013, along with notices updating payment policies for inpatient rehabilitation facilities and hospices for fiscal year 2013. We also expect the CY 2013 proposed Medicare physician fee schedule rule to reach the OMB shortly. While the text of the regulations are not available at this point, we expect that they will be put on display at the Federal Register in the near future. We will be providing summaries of the rules in future updates.