GAO Examines Impact of Advanced Diagnostic Imaging Accreditation on Medicare Beneficiary Access

The Government Accountability Office (GAO) has issued its second statutorily-mandated report regarding implementation of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) accreditation requirement for Medicare suppliers that furnish the technical component of advanced diagnostic imaging (ADI) services. The first report assessed CMS's standards for ADI accreditation and the agency’s oversight of the accreditation requirement. In the second report, "Medicare Imaging Accreditation: Effect on Access to Advanced Diagnostic Imaging Is Unclear amid Other Policy Changes," the GAO concentrates on the Medicare beneficiary impact of the accreditation requirement, focusing on beneficiary use of magnetic resonance imaging, computed tomography, and nuclear medicine (including positron emission tomography services). The GAO found that the number of such ADI services provided to Medicare beneficiaries in the office setting declined at similar rates both before and after the accreditation requirement went into effect on January 1, 2012, which suggests that the overall decline was driven at least in part by factors other than accreditation. The GAO also observed that the effect of accreditation on access is unclear given the other recent policy changes implemented by CMS and private payers (e.g., payment reductions and prior authorization requirements) that also could have contributed to the decline in the number of these services. CMS officials, accrediting organization representatives, and accredited ADI suppliers that the GAO interviewed suggested that any effect of accreditation on access was likely limited.

California Weighs Further Curtailment of Physician Self-Referrals

This post was written by Paul Pitts.

California State Senator Ed Hernandez, O.D., Chair of the Senate Health Committee, has introduced legislation that would close an exception in state law that currently permits physicians to provide advanced imaging, anatomic pathology, radiation therapy, and physical therapy within their office or the office of their group practice.  Under current law, the so-called “in-office exception” permits physicians to refer patients to their own practice for these services, which are typically ancillary to the primary service of the referring physician. If this legislation is adopted, California’s self-referral law would be more restrictive than the federal physician self-referral law, commonly referred to as the Stark law. Physicians in California residing outside of rural areas would be prohibited from referring any patients, regardless of source of payment, for advanced imaging, anatomic pathology, radiation therapy, and physical therapy performed by the referring physician’s own practice. The proposed legislation, Senate Bill 1215, is scheduled for an April 21, 2014 hearing before the Senate Business, Professions and Economic Development Committee. Comments on the legislation may be sent to the committee at State Capitol, Room 2053 Sacramento, California 95814.

CMS Releases Physician-Specific Medicare Charge/Payment Data

CMS has released its highly-anticipated data files with Medicare payment data for individual Medicare physicians and certain other Part B suppliers as part of the Obama Administration’s initiative “to make our healthcare system more transparent, affordable, and accountable.” Specifically, the “Physician and Other Supplier Public Use File” contains information on utilization, payment (allowed amount and Medicare payment), and submitted charges organized by National Provider Identifier (NPI)/provider last name, Healthcare Common Procedure Coding System (HCPCS) code, and place of service for physician/supplier Part B non-institutional line items for the Medicare fee-for-service population for calendar year 2012. The files include data on services furnished by physicians, non-physician practitioners, laboratories, imaging, and ambulances, but not durable medical equipment (DME). To protect Medicare beneficiary privacy, any aggregated records derived from 10 or fewer beneficiaries are excluded from the dataset.

CMS cautions that the dataset has a number of limitations, including that the data may not be representative of a physician’s entire practice since it only includes information regarding Medicare fee-for-service beneficiaries. Moreover, CMS notes that the data are not intended to indicate the quality of care provided and are not risk-adjusted to reflect differences in the severity of disease of patient populations.  In an accompanying blog post, Jonathan Blum, Principal Deputy Administrator of CMS, notes that the agency hopes that “businesses and consumers alike can use these data to drive decision-making and reward quality, cost-effective care.”

President Signs Medicare Physician Fee Schedule/SGR Patch with Numerous Health Policy Provisions

This post was written by Debra McCurdy, Paul Pitts, Gail Daubert, Thomas Greeson, Susan Edwards, and Katie Hurley.

On April 1, 2014, President Obama signed into law H.R. 4302, the “Protecting Access to Medicare Act of 2014” (“the Act”). The Act includes a one-year Medicare physician fee schedule fix that averts a nearly 24 percent payment cut set for April 1, 2014, but which falls far short of earlier hopes for full repeal of the current sustainable growth rate (SGR) formula. The Act also includes numerous other Medicare payment and policy changes, including skilled nursing facility value-based purchasing provisions, reforms to the physician fee schedule relative valuation process, a new framework for clinical laboratory payments, a variety of changes impacting imaging services, changes in the exceptions for long term care hospitals, and extension of certain expiring provisions. In other areas, the bill includes a one-year delay in the transition to ICD-10, changes to the timetable for Medicaid disproportionate share hospital cuts, and “front-loading” of the 2024 Medicare sequestration reduction.

For more information, read our summary of major provisions of the Act.

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

On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):

Major Medicare Provider Payment Provisions

The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.

  • Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
  • Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
  • Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($720 million).
  • Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
  • Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
  • Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated conditions), saving $2.4 billion.
  • Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
  • Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
  • Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
  • Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 billion).
  • Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point, which would make it easier to trigger ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
  • The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.

Prescription Drug Provisions

  • Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner. This proposal is estimated to result in $6.8 billion in savings.
  • Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
  • Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
  • Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
  • Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 billion).
  • Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts, exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
  • Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
  • Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. In addition, the budget would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase penalties for reporting false information for the calculation of Medicaid rebates.
  • Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into “pay for delay” agreements ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).

Major Program Integrity/Efficiency Provisions

  • Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (HHS) program integrity efforts.
  • Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($60 million in savings).
  • Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
  • Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
  • Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary effective for calendar year 2016 ($6 billion).
  • Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
  • Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
  • Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).

Other Medicare & Medicaid Provisions

  • Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
  • Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter.
  • Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
  • Base Medicaid rates for DME on Medicare rates ($3.1 billion).
  • Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).

CMS Invites Suggestions for Advanced Diagnostic Imaging Quality/Safety Regulations

CMS is inviting public comments on potential future regulations intended to improve the safety and quality of services furnished by Advanced Diagnostic Imaging (ADI) suppliers. ADI services include computed tomography, magnetic resonance imaging, and nuclear medicine services. Specifically, CMS seeks suggestions on potential improvements pertaining to personnel qualifications, infection control practices, quality improvement programs, image and equipment quality, patient safety, evidence-based research, and related topics. Although accreditation has been required for suppliers of the technical component of ADI services since January 1, 2012, CMS heretofore has relied on four accrediting organizations it selected to establish their own standards for quality and safety pursuant to the broad criteria under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). It has been anticipated that CMS would initiate this move to establish national minimum standards for accreditation of ADI equipment. Comments may be submitted to ADISuggestions@cms.hhs.gov until March 31, 2014.

Bipartisan/Bicameral SGR Reform Bill Released; Offsets Not Yet Identified

The bipartisan leadership of the House Energy and Commerce Committee, House Ways & Means Committee, and Senate Finance Committee have released a consensus Medicare physician fee schedule reform bill expected to be considered by Congress before the latest temporary payment patch expires at the end of March. Highlights of H.R. 4015, the SGR Repeal and Medicare Provider Payment Modernization Act, include the following:

  • The bill would repeal the statutory “Sustainable Growth Rate” (SGR) provision, which has called for deep cuts in Medicare rates in recent years. Congress has routinely stepped in to override the full application of the formula – most recently replacing a 20.1% cut scheduled to go into effect January 1, 2014 with a 0.5% update for the first three months of 2014 – but H.R. 4015 would offer a permanent fix.
  • For five years (2014-2018) the bill would provide annual Medicare physician fee schedule updates of 0.5% during a transition period to a new quality-based system (thus for 2014, the temporary 0.5% update in place through March would be extended for the full year). 
  • Three current physician quality programs would be consolidated into a single value-based program called the “Merit-Based Incentive Payment System,” which starting in 2018 would tie payment to performance in four categories: quality; resource use; electronic health record meaningful use; and clinical practice improvement activities. Quality measures will be developed and updated in consultation with physicians and other stakeholders.
  • The bill would provide bonus payments to providers who receive a significant portion of their revenue from an alternative payment model (APM) or patient centered medical home (PCMH); the threshold would begin at 25% in 2018 and increase over time. 
  •  The measure includes a number of other provisions designed to improve payment accuracy for individual provider services, promote appropriate use criteria for certain advanced diagnostic imaging services, expand care coordination for individuals with chronic care, and expand the use of Medicare data for transparency and quality improvement.

A formal budget estimate for the package has not yet been released, although earlier versions of the plans have had 10-year costs of more than $121 billion over 10 years. The Committees have not yet identified what “offsets” would be used to pay for the package, but cuts impacting a broad range of health care provider types, health plans, and drug manufacturers have all been unofficially floated as options.  

Advisory Panel Recommends Access Standards for Medical Diagnostic Equipment

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

CMS Issues Final Medicare OPPS, ASC Policies for 2014

On December 10, 2013, CMS published a final rule that updates Medicare payment and other policies under the hospital outpatient prospective payment system (OPPS) and the ambulatory surgical center (ASC) prospective payment system (PPS) for calendar year (CY) 2014. Key provisions of the final rule include the following:

  • CMS is increasing OPPS rates by 1.7% for 2014, which reflects a 2.5% hospital market basket increase, minus a 0.5% multifactor productivity (MFP) adjustment and an additional 0.3% reduction (both mandated by the Affordable Care Act, or ACA). The OPPS update is subject to other adjustments, including a 2% reduction for hospitals that do not meet quality reporting requirements.
  • CMS is adopting a revised version of its proposal to establish larger payment bundles to maximize hospitals’ incentives to provide care in an efficient manner. Specifically, CMS will package the following five new categories of supporting items and services into the procedural ambulatory payment classification (APC) payment: (1) drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; (2) drugs and biologicals that function as supplies or devices when used in a surgical procedure; (3) certain clinical diagnostic laboratory tests; (4) procedures described by add-on codes (except for add-on codes for drug administration services and, for CY 2014 only, add-on codes assigned to device-dependent APCs); and (5) device removal procedures. Note that in some cases separate payment is permitted if these services are reported alone on a claim. CMS is not finalizing its proposed policy to include two other categories of items in its expanded packaging policy: ancillary services with a CY 2013 status indicator of “X,” and diagnostic tests on the bypass list.
  • CMS has adopted its proposal to create 29 all-inclusive, “comprehensive APCs” to replace 39 existing device-dependent APCs, but CMS is delaying implementation until 2015. Under this policy, CMS will package into the comprehensive APCs all “adjunctive services” provided during the delivery of the comprehensive service, which results in a single prospective payment for all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS. Under this policy, the comprehensive APC payment will include all outpatient services, including: diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; coded and uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment (DME), as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other outpatient components reported by HCPCS codes that are provided during the comprehensive service (except for certain services including mammography services, ambulance services, brachytherapy seeds, and pass-through drugs and devices). Because CMS has delayed implementation until 2015, CMS will accept comments on this policy to be considered in next year’s rulemaking.
  • CMS has adopted its plan to collapse the current five levels of outpatient clinic visit codes into a single code for each unique type of outpatient hospital visit. CMS is not finalizing its proposal to replace the current five levels of codes for each type of emergency department visits, however; CMS will reassess this policy issue and consider revisions in a future rulemaking.
  • For 2014, CMS is calculating OPPS relative payment weights using distinct cost-to-charge ratios for cardiac catheterization, CT scan, and MRI, and implantable medical devices. To address commenters’ concerns about the impact of this change on rates for MRI and CT procedures, CMS has adopted a temporary policy that accommodates variations in hospital cost allocation methods, which has the effect of mitigating the rate reductions for these procedures compared to the proposed rule. CMS will allow four years for hospitals to transition to the cost allocation methods identified in the final rule.
  • CMS will continue a policy adopted last year setting OPPS payment for separately payable drugs and biologicals without pass-through status at average sales price (ASP) plus 6% (which it calls the "statutory default" rate), without an adjustment for pharmacy overhead costs. The 2014 threshold for separate payment for outpatient drugs is a cost per day that exceeds $90, compared to $80 in 2013.
  •  With regard to ASC policy, the final rule increases ASC rates by 1.2% compared to 2013 levels. ASCs that do not meet quality reporting requirements are subject to a 2% payment reduction. As proposed, ancillary services that are packaged under the OPPS also will be packaged under the ASC payment system for CY 2014.
  • In addition, the final rule addresses, among many other things: refinements to the Hospital Outpatient Quality Reporting Program, the ASC Quality Reporting Program, and the Hospital Value-Based Purchasing Program; payment for partial hospitalization services; a requirement that individuals furnish “incident to” hospital or critical access hospital outpatient services in compliance with state law; and changes to Quality Improvement Organization eligibility and contracting rules.

Comments on limited provisions of the rule will be accepted until January 27, 2014.
 

CMS "Phase 2" Ordering/Referral Denial Edits to Go Live on Jan. 6, 2014

Despite continuing provider concerns, CMS has announced that it will direct Medicare administrative contractors (MACs) to activate controversial “phase 2” ordering/referral edits effective January 6, 2014. Once activated, MACs will deny claims for Medicare Part B services (including lab services and the technical component of imaging services), durable medical equipment, and Part A home health agency (HHA) services if the ordering/referring physician or other professional is not identified, is not in Medicare's enrollment records, or is not of a specialty type that may order/refer the service/item being billed. CMS had previously delayed an earlier May 1, 2013 target date for implementation due to objections by physicians and suppliers that they could experience claims denials and delays based on discrepancies between the names of the ordering physician on the 1500 claim form and in Medicare’s enrollment records. There has been no assurance from CMS, however, that these concerns have been fully resolved, and the only recourse for providers if claims are inappropriately denied claim will be to file an appeal. A CMS educational article accompanying the announcement suggests that imaging suppliers and providers bill global claims separately to prevent a denial for the professional component in the event that the new edits deny the technical component of imaging services. 

CMS Seeks Input on Advanced Diagnostic Imaging Program

CMS is requesting public suggestions on potential improvements to the Advanced Diagnostic Imaging (ADI) program, an accreditation program mandated by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) that applies to suppliers that furnish the technical component of advanced diagnostic imaging services such as diagnostic MRI, CT, and nuclear medicine (including PET), and certain other diagnostic imaging services (excluding X-ray, ultrasound, and fluoroscopy). According to a recent CMS newsletter, CMS is considering incorporating health and safety standards into the ADI program through Conditions for Coverage, potentially addressing personnel qualifications, infection control practices, quality improvement programs, image quality, patient safety, evidence-based research, among other topics. Suggestions may be sent to ADISuggestions@cms.hhs.gov

This request for input is in response to a recent GAO report recommending that CMS publish minimum national standards for the accreditation of ADI suppliers; develop an oversight framework for evaluating accrediting organization performance; develop more specific requirements for accrediting organization audits; and clarify guidance on immediate-jeopardy deficiencies. The report, “Medicare Imaging Accreditation: Establishing Minimum National Standards and an Oversight Framework Would Help Ensure Quality and Safety of Advanced Diagnostic Imaging Services,” is posted here.

Bill Introduced to Narrow Stark Exception for In-Office Services

This post was written by Paul Pitts and Rachel Golick.

A new bill introduced in the House on August 1, 2013 by Congresswoman Jackie Speier (D-CA) and Congressman Jim McDermott (D-WI) would dramatically narrow the in-office ancillary services (IOAS) exception to the Stark law for physician groups performing imaging, pathology radiation therapy and physical therapy services. The bill (“Promoting Integrity of Medicare Act of 2013”) would amend the IOAS exception by excluding “specified non-ancillary services” from its protection. Initially, the bill identifies the following services as “non-ancillary services” excluded from the IOAS exception: (a) pathology services; (b) radiation therapy services and supplies; (c) advanced imaging services (i.e., CT, MRI and PET); and (d) physical therapy services. If adopted, the bill would prohibit, for example, a physician ordering advanced imaging services for a Medicare beneficiary if the services are performed in the ordering physician’s offices. However, referrals of low-end imaging, such as x-ray or ultrasound, would still fall within the IOAS exception.

In addition, the bill would require enhanced CMS review of so-called “non-ancillary services” to identify those creating a high risk of Stark Law noncompliance, including using prepayment reviews, claims audits, focused medical review, or computer algorithms. The bill would also create higher penalties for referrals of “non-ancillary services” by imposing upon those referrals civil monetary penalties that are greater than the penalties currently authorized for other violations of the Stark law.

The bill was introduced after others in the federal government have criticized self-referral. A September 2012 study by the Government Accounting Office found that the number of advanced imaging services ordered by physicians increased when the services were performed in the referring physician’s office. The GAO recommended that CMS improve its ability to identify self-referral of advanced imaging services and address increases in these services. More recently, the Obama Administration’s proposed federal budget for fiscal year 2014 suggested excluding radiation therapy, therapy services, and advanced imaging from the IOAS exception, except in cases where a practice meets certain accountability standards. No action on the bill, the GAO recommendation or the Obama budget has been taken to date.

GAO Highlights Gaps in Medicare Imaging Accreditation Framework

The Government Accountability Office (GAO) has identified shortcomings in CMS’s implementation of accreditation requirements for suppliers of advanced diagnostic imaging (ADI) services under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). For instance, the GAO found significant differences among the accrediting organizations arising from the lack of minimum national standards, rendering it difficult for CMS to monitor and assess such factors as qualifications of technologists and medical directors and the quality of clinical images. The GAO also reports that CMS’s oversight of the accreditation requirement is limited, with the initial focus on ensuring that claims were paid only to accredited suppliers. According to the GAO, CMS has not developed an oversight framework that would enable it to monitor and measure performance. The three accrediting organizations for ADI facilities approved by CMS are the American College of Radiology, the Intersociety Accreditation Commission and The Joint Commission (TJC). One area of controversy in the report involves the GAO’s criticism of TJC’s accreditation program for having less focus on imaging quality and physician qualifications than the other two accrediting organizations, assertions the TJC strongly contested. The GAO recommends that CMS: publish minimum national standards for the accreditation of ADI suppliers; develop an oversight framework for evaluating accrediting organization performance; develop more specific requirements for accrediting organization audits; and clarify guidance on immediate-jeopardy deficiencies. HHS concurred with the recommendations.

Bioethics Panel Seeks Comments on Ethical/Legal Issues Involving "Incidental Findings" in Research and Testing

The Presidential Commission for the Study of Bioethical Issues is requesting public comment on the ethical, legal, and social issues raised by “incidental findings” (e.g., information obtained from testing that was not its intended or expected object) that arise from genetic and genomic testing, imaging, and testing of biological specimens conducted in the clinical, research, and direct-to-consumer contexts. The Commission is particularly interested in receiving public commentary regarding:

  • The likelihood of such incidental findings and any related case studies;
  • What, if anything, patients, participants, and/or consumers should be told about incidental findings resulting from large-scale genetic testing, imaging, and testing of biological specimens before tests are conducted;
  • Any duties or ethical obligations that clinicians, researchers, and direct-to-consumer companies might have to actively look for certain incidental findings;
  • Best practices, methods, and mechanisms for determining when and how incidental findings should be returned to patients, participants, and/or consumers;
  • The acceptability of holding back information--such as establishing “no return” policies, or advance stipulations that no incidental findings will be returned; and,
  • Any best practices or recommendations regarding incidental findings that apply no matter the type of test or context.

Comments will be accepted until July 5, 2013. Additional information about the Commission’s work in this area is available here.  

CMS Proposes Medicare IPPS and LTCH PPS Rates/Policies for FY 2014

On Mayl 10, 2013, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule updating Medicare inpatient prospective payment system (IPPS) and long-term acute care hospital prospective payment system (LTCH PPS) rates and policies for fiscal year (FY) 2014, which begins October 1, 2013. Comments on the proposed rule will be accepted until June 25, 2013. Highlights of the sweeping rule include the following: 

  • The proposed rule would increase IPPS operating rates by 0.8% after accounting for all adjustments (if a hospital does not successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program, this update is reduced by 2.0 percentage points). The 0.8% update reflects the hospital market basket of 2.5% reduced by a -0.4 percentage point multi-factor productivity adjustment and an additional -0.3 percentage point reduction in accordance with the Affordable Care Act (ACA). The rate is further decreased by 0.8% for a proposed documentation and coding recoupment adjustment required by the American Tax Relief Act of 2012 and by a 0.2% proposed adjustment to offset the cost of a proposal addressing its inpatient medical review criteria. Specifically, CMS proposes to clarify its medical review criteria to presume that Part A hospital inpatient status is appropriate if the beneficiary is admitted to the hospital pursuant to a physician order and receives care for at least two midnights. On the other hand, hospital inpatient admissions spanning less than two midnights will presumptively be inappropriate under Part A. Appropriate documentation could rebut the presumption.
  • The proposed rule includes a number of hospital quality initiatives. For instance, CMS is proposing to implement the ACA’s Hospital-Acquired Condition (HAC) Reduction Program. Under this provision, effective beginning in FY 2015, hospitals that rank among the lowest-performing 25% with regard to HACs will be paid 99% of the IPPS payment that otherwise would be made. The proposed rule addresses, among other things, the payment adjustment, measure selection, risk-adjustment and scoring methodology; performance scoring; public availability of hospital-specific performance information; and limitation of administrative and judicial review. CMS also proposes to update the Hospital Value-Based Purchasing (VBP) Program, which adjusts IPPS payments based on how well a hospital performs or improves performance on a set of quality measures. For FY 2014, CMS proposes increasing the applicable percent reduction to base operating DRG payment amounts to 1.25%, increasing the total estimated amount available for value-based incentive payments (approximately $1.1 billion), and adding new measures to the program. In addition, the proposed rule would expand the Hospital Readmissions Reduction Program, under which CMS currently assesses hospitals’ penalties using three readmissions measures (heart attack, heart failure, and pneumonia). The maximum payment reduction will increase from 1% to 2% in FY 2014, as mandated by the ACA. For FY 2014, CMS also proposes to add two new measures to calculate readmission penalties effective for FY 2015: readmissions for hip/knee arthroplasty and chronic obstructive pulmonary disease. CMS also proposes a revised methodology to take into account planned readmissions for the existing readmissions measures. The proposed rule also would revise IQR program measures.
  • CMS proposes to implement new cost centers for Implantable Devices, MRIs, CT scans, and cardiac catheterization for FY 2014, which would increase the total number of cost-to-charge ratios (CCRs) used to calculate the FY 2014 proposed relative weights from 15 to 19. The additional CCRs generally increase the relative weight values for surgical Medicare severity diagnosis related group (MS-DRGs) and decrease the relative weight values for medical MS-DRGs.
  • CMS proposes to implement an ACA provision revising how Medicare disproportionate share hospital (DSH) payments are paid. Under the proposed rule, hospitals will receive 25% of the payment they otherwise would receive, and the remaining 75% percent will be adjusted for decreases in the national rate of uninsured individuals and distributed to hospitals payments based on the hospital’s share of uncompensated care relative to all Medicare DSH hospitals.
  • The proposed rule also addresses, among many other things: MS-DRG classifications for certain procedures; applications for new technology add-on payments; direct graduate medical education and indirect medical education payments; and the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. In addition, CMS proposes to revise the conditions of participation (CoPs) for hospitals relating to the administration of vaccines by nursing staff, and the CoPs for critical access hospitals relating to the provision of acute care inpatient services.
  • With regard to the LTCH PPS, CMS proposes a 1.8% annual update for LTCHs, which would increase the standard federal rate to $40,622.06. The rule also includes a number of other LTCH PPS payment and policy provisions, including a proposal to allow the regulatory moratorium on the full application of the “25% Rule” to lapse, new quality measures, and solicitation of comments on patient criteria-based payment adjustments. Reed Smith has prepared a Client Alert with additional details on the LTCH PPS provisions.

CMS Delays Phase 2 Ordering and Referring Denial Edits

On April 25, 2013, CMS announced that, due to technical issues, it is delaying implementation of the Phase 2 ordering and referring denial edits until further notice. By way of background, CMS plans to implement edits that will deny claims for Medicare Part B services (including the technical/non-interpretation component of imaging services, lab services, and durable medical equipment) and Part A home health agency services if the ordering/referring physician or other professional is not identified, is not in Medicare's enrollment records, or is not of a specialty type that may order/refer the service/item being billed. While CMS intended to require Medicare contractors to activate these edits effective May 1, 2013, concerns had been raised by physicians and suppliers that they could experience claims denials and delays based on discrepancies between the names of the ordering physician on the 1500 claim form and in Medicare’s enrollment records. CMS expects to announce a new implementation date in the near future.

Obama Administration's Proposed FY 2014 Budget Includes $401 Billion in Health Program Savings

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.

Medicaid Provisions

  • 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.

Implementation of Medicare Ordering/Referring Provider Edits (March 20 Call)

Effective May 1, 2013, Medicare contractors will activate edits that will deny claims for Medicare Part B (including imaging and lab services), DME, and Part A home health agency (HHA) services if the ordering/referring physician or other professional is not identified, is not in Medicare's enrollment records, or is not of a specialty type that may order/refer the service/item being billed. Concerns have been raised by physicians and suppliers that they could experience claims denials and delays after May 1 based on discrepancies between the names of the ordering physician on the 1500 claim form and in Medicare’s enrollment records. CMS is holding a March 20, 2013 National Provider Call to discuss these new requirements.

CMS Proposes Reforms to Reduce Provider Regulatory Burdens

The Centers for Medicare & Medicaid Services (CMS) published a proposed rule on February 7, 2013 that it estimates would save health care providers $676 million annually by streamlining unnecessary, obsolete, or excessively burdensome regulations and making reforms to the Clinical Laboratory Improvement Amendments of 1988 (CLIA). The provisions of the wide-ranging proposal would affect numerous policy areas; among other things, the proposed rule would:

  • Revise the requirements ambulatory surgical centers (ASCs) must meet in order to provide radiological services that are integral to procedures offered by the ASC and provide that a qualified doctor of medicine or osteopathy must supervise the provision of radiologic services (eliminating the requirement that ASCs meet the hospital condition of participation (CoP) requirement to have a radiologist supervise the provision of radiologic services);
  • Permit qualified dietitians to order patient diets under the hospital CoPs;
  • Revise the nuclear medicine services CoP to remove the requirement for direct supervision of hospital in-house preparation of radiopharmaceuticals;
  • Eliminate a requirement that critical access hospitals (CAHs), rural health clinics (RHCs), and federally qualified health centers have a physician on site at least once in every two-week period, and eliminate the requirement that a CAH develop its patient care policies with the advice of at least one member who is not a member of the CAH staff;
  • Allow long-term care facilities to apply for an extension of the August 13, 2013 deadline for installing automatic sprinkler systems;
  • Eliminate a transplant center data submission requirement and an automatic re-approval survey process.
  • Make a number of clarifications pertaining to CMS regulations governing proficiency testing referrals under CLIA, including establish policies under which certain PT referrals by laboratories would not generally be subject to revocation of a CLIA certificate.
  • Address a variety of other issues, such as hospital reclassification of swing-bed services, hospital medical staff, hospital governing bodies, practitioners permitted to order hospital outpatient services, and potential changes to reduce barriers to the provision of telehealth, hospice, or home health services in an RHC.

CMS will accept comments on the proposed rule until April 8, 2013.

Access Board Committee to Meet on ACA Medical Diagnostic Equipment Standards (Jan. 22-23)

The Medical Diagnostic Equipment Accessibility Standards Advisory Committee is holding its next meeting on January 22 and 23, 2013 to discuss its February 9, 2012 proposed rule on medical diagnostic equipment accessibility standards. Among other things, the session will focus on standards for transfer surfaces.

Older Entries

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

November 16, 2012 — CMS Issues Final 2013 Medicare Physician Fee Schedule Rule, Including Other Part B Policy Updates

November 13, 2012 — GAO Report Examines Medicare Costs From Self-Referrals of Advanced Imaging Services

November 12, 2012 — Affordable Care Act and the Post-Election Implications for Radiology

November 12, 2012 — Meeting on ACA Medical Diagnostic Equipment Access Standards (Dec. 3-4)

July 19, 2012 — CMS Proposes Update to 2013 Medicare Physician Rates, Other Part B Policies

June 18, 2012 — June Congressional Health Policy Hearings

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

May 8, 2012 — CMS Finalizes Changes in Medicare/Medicaid Provider and Supplier Enrollment, Ordering, Documentation Requirements

April 2, 2012 — Advisory Committee on ACA Medical Diagnostic Equipment Access Standards

March 12, 2012 — CMS Seeks Accrediting Organizations for Imaging Accreditation Program

February 14, 2012 — President Obama Proposes FY 2013 Budget

February 13, 2012 — Access Standards Proposed for Medical Diagnostic Equipment under the ACA

January 4, 2012 — CMS Delays Application of Imaging MPPR Policy to Physicians in Same Group Practice

January 4, 2012 — OIG Report on Portable X-Ray Supplier Billing Patterns

November 14, 2011 — CMS Issues Final Medicare Physician Fee Schedule Rule for 2012

September 30, 2011 — MedPAC Offers Medicare SGR Proposal, With Offsetting Medicare Cuts

September 29, 2011 — CMS Seeks Comments on Potential Medicare Coverage Determination Topics

September 27, 2011 — OIG "Spotlight" on IDTFs

August 9, 2011 — CMS "Provider Compliance Group Outreach Calls" to Focus on Medicare Vulnerabilities (Aug. 23-25, 2011)

July 19, 2011 — CMS Issues Proposed CY 2012 Physician Fee Schedule Rule

June 23, 2011 — MedPAC Recommends Changes to Medicare Ancillary Services Policies

June 10, 2011 — CMS Call on Accreditation for Advanced Diagnostic Imaging (ADI) Technical Suppliers (June 23)

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

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

April 29, 2011 — MedPAC Issues Recommendations on the Use of Diagnostic Services

March 29, 2011 — CMS Hosts Forum on Advanced Diagnostic Imaging (ADI) Accreditation

March 10, 2011 — CMS Open Door Forum on Advanced Diagnostic Imaging Accreditation (March 22)

March 7, 2011 — GAO Reports on Duplications in HHS and Other Federal Programs

February 17, 2011 — Medicare Imaging Demonstration Conveners Selected

December 6, 2010 — CMS Meeting on Developing New Imaging Efficiency Measures (Jan. 31, 2011)

November 16, 2010 — CMS Issues Final CY 2011 Physician Fee Schedule Rule

August 13, 2010 — Guidance on Whether Radioactive Studies Require an Investigational New Drug (IND) Application

July 29, 2010 — CMS Solicits Proposals for Medicare Imaging Demonstration

July 29, 2010 — CMS Outreach on Advanced Diagnostic Imaging Services Accreditation

July 12, 2010 — CMS Issues Proposed CY 2011 Physician Fee Schedule Update

June 8, 2010 — CMS Transmittal on Physician Supervision Requirements

June 4, 2010 — CMS Calls on Medicare Provider/Supplier Vulnerabilities (June 7, 8, & 9)

May 13, 2010 — Medicare/Medicaid Provider and Supplier Enrollment, Ordering and Referring, and Documentation Requirements, and Changes in Provider Agreements

May 13, 2010 — Other PPACA Updates

May 10, 2010 — CMS Special Open Door Forum on Medicare Enrollment Issues (May 19, 2010)

May 10, 2010 — FDA Meeting on Medical Device Radiation Exposure (June 9-10, 2010)

March 31, 2010 — FDA Realignment of the Office of New Drugs within CDER

February 26, 2010 — Congressional Health Policy Hearings

February 26, 2010 — FDA Meeting/Comment Opportunity on Reducing Radiation Exposure

February 12, 2010 — FDA Initiative to Reduce Unnecessary Radiation Exposure from Medical Imaging

January 26, 2010 — CMS Announces Accreditation Organizations for Imaging Suppliers

November 11, 2009 — Final CY 2010 Medicare Physician Fee Schedule Rule Released

October 15, 2009 — CMS Transmittal on OIG Reports with Medical Review Implications

October 15, 2009 — Utilization of Physician Services

September 25, 2009 — Medicare Imaging Demonstration Project.

September 4, 2009 — Medicare Physician Payments for Services Provided Together

July 28, 2009 — Medicare Part B Billing for Ultrasound Services

July 7, 2009 — CMS Proposes CY 2010 Medicare Physician Fee Schedule Rule

June 16, 2009 — MedPAC Report on Medicare Payment Policy

June 13, 2009 — White House proposes $313 billion in additional Medicare/Medicaid cuts

May 18, 2009 — Senate Finance Releases Health Reform Financing Options -- Comments Due May 26, 2009

May 15, 2009 — CMS Forum on Appropriate Use of Imaging Services (May 27, 2009)

May 8, 2009 — HOPPS Imaging Efficiency Measures

May 7, 2009 — Finance Committee Releases Health Care Delivery System Reform Options; Comment Opportunity (Due May 15)

April 3, 2009 — Upcoming MedPAC Meeting (April 8-9, 2009)

March 6, 2009 — Obama Budget Proposal

February 27, 2009 — 2009 HCPCS Meeting Dates Announced

November 25, 2008 — Preliminary Outpatient Imaging Efficiency Measures

November 4, 2008 — Medicare Physician Fee Schedule Final CY 2009 Rule

November 3, 2008 — MedPAC Meeting

October 7, 2008 — Trends in Medicare Imaging Services

July 29, 2008 — Medicare Payment for Imaging Services