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

• 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.

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.

• Under the final rule, the 2013 MPFS conversion factor will be $25.0008, compared to $34.0376 in 2012. As noted, Congress could override the 26.5% SGR cut on either a temporary or permanent basis. Other provisions of the rule impact reimbursement for different types of services. For instance, the final rule seeks to benefit primary care physicians by authorizing separate payment to a patient’s community physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled nursing facility (SNF) stay. On the other hand, certain specialists, like diagnostic radiologists, would be negatively impacted by CMS’s continued expansion of the multiple procedure payment reduction (MPPR) policy. Under the final rule, on January 1, 2013 CMS will implement its policy, discussed in the CY 2012 final rule, applying the MPPR when one or more physicians in the same group practice furnish the interpretation of advance imaging services to the same patient, in the same session, on the same day. CMS also will apply the MPPR to the technical component of certain cardiovascular and ophthalmology diagnostic services for 2013. Under this policy, CMS will make full payment for the highest paid cardiovascular or ophthalmology diagnostic service and reduce the technical component payment for subsequent cardiovascular or ophthalmologic diagnostic services furnished by the same physician or group practice to the same patient on the same day by 25% for cardiovascular diagnostic services or 20% for ophthalmologic diagnostic services.
• CMS announced it is continuing to pay certain molecular pathology tests under the clinical laboratory fee schedule (CLFS), instead of assigning new genetic and genomic test codes to the physician fee schedule (as contemplated under the proposed rule). CMS also is establishing a new code (G0452, Molecular diagnostics; interpretation and report) to reimburse physicians under the MPFS for interpreting these tests.
• CMS is continuing implementation of the 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. In the final 2012 rule, CMS adopted performance measures to be used for future MPFS payment adjustments based on the Value Modifier. The final 2013 rule sets forth the payment methodology and phase-in plans. The Value Modifier is being phased in over from CY 2015 to CY 2017, with CY 2013 serving as the initial performance period for the CY 2015 Value Modifier. Under the final 2013 rule, the Value Modifier initially will apply to all groups of physician with 100 or more eligible professionals (up from 25 in the proposed rule). These groups will be able to choose two payment calculation options: (1) Value Modifier based strictly on participation in the Physician Quality Reporting System (PQRS), with groups that do not participate in the PQRS having a Value Modifier set at a -1.0% and groups that have reported at least one measure or elected the PQRS administrative claims option receiving a modifier of 0.0% (no payment adjustment, or (2) Value Modifier based on quality tiering, whereby groups with higher quality and lower costs will be paid more (maximum 2% increase), and groups with lower quality and higher costs will be paid less (maximum 1% negative adjustment).
• The rule also addresses, among many other things: modification of CMS’s Part B drug average manufacturer price (AMP) substitution policy to address drug shortage situations; payment reviews and adjustments for potentially misvalued codes; revisions to the PQRS and the Electronic Prescribing (eRx) Incentive Program; allowing Medicare to pay for portable x-ray services ordered by non-physician practitioners acting within their services within their state scope of practice and the scope of their Medicare benefit (in addition to physicians who currently may do so); termination of non-random prepayment review under the Medicare Prescription Drug, Improvement, and Modernization Act, and new claims-based data reporting requirements for therapy services under the Middle Class Tax Relief and Jobs Creation Act. Also, as discussed in the separate summary below, CMS has adopted a requirement for a face-to-face evaluation as a condition of Medicare payment for certain types of durable medical equipment (DME).

The rule was published in the Federal Register on November 16, 2012. CMS will accept comments on a limited number of provisions (interim final work, practice expense (PE), and malpractice RVUs for new, revised, potentially misvalued, and certain other CY 2013 HCPCS codes) until December 31, 2012.

• Under the proposed rule, the 2013 MPFS conversion factor would be $24.7124, compared to $34.0376 in 2012. 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.
• Numerous other provisions of the rule impact payment for particular services under the MPFS. For instance, CMS would boost payment to primary care physicians by authorizing separate payment to a patient’s community physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled nursing facility stay. On the other hand, certain specialists would be negatively impacted by CMS’s proposal to expand its multiple procedure payment reduction (MPPR) policy. Under the proposed rule, CMS will implement its policy, discussed in the CY 2012 final rule, applying the MPPR when one or more physicians in the same group practice furnish advance imaging services to the same patient, in the same session, on the same day (note that this is not a proposal; it will be effective January 1, 2013). CMS states that it generally intends to apply its MPPR policy to services furnished by physicians in the same group practice, unless special circumstances warrant a more limited application. CMS also proposes to apply the MPPR to the technical component of certain cardiovascular and ophthalmology diagnostic services for 2013. Under this proposed policy, CMS would make full payment for the highest paid cardiovascular or ophthalmology diagnostic service and reduce the technical component payment for subsequent cardiovascular or ophthalmologic diagnostic services furnished by the same physician or group practice to the same patient on the same day by 25%.
• CMS requests comments on the appropriate basis for payment for advanced diagnostic molecular pathology services. CMS is considering whether all new advanced diagnostic molecular pathology codes should be priced under the same fee schedule (either the MPFS or the clinical laboratory fee schedule). If CMS decides that such codes should be paid under the MPFS for CY 2013, the agency proposes to allow local Medicare contractors to price these codes because CMS does not believe it has sufficient information to establish accurate national pricing and because the price of tests can vary locally.
  • CMS proposes to continue implementation of the 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. In the final 2012 rule, CMS adopted performance measures to be used for future MPFS payment adjustments based on the Value Modifier. The proposed 2013 rule sets forth the payment methodology and phase-in plans. The Value Modifier is being phased in over from CY 2015 to CY 2017, with CY 2013 serving as the initial performance period for the CY 2015 Value Modifier. Under the proposed 2013 rule, the Value Modifier initially will apply to all groups of physician with 25 or more eligible professionals. These groups will be able to chose two payment calculation options: (1) Value Modifier based strictly on participation in the Physician Quality Reporting System (PQRS), with groups that do not participate in the PQRS having a Value Modifier set at a -1.0 percent, or (2) Value Modifier based on quality tiering, whereby groups with higher quality and lower costs would be paid more, and groups with lower quality and higher costs would be paid less.
• The sweeping rule also addresses, among many other things: modification of CMS’s Part B drug average manufacturer price (AMP) substitution policy to address drug shortage situations; payment reviews and adjustments for potentially misvalued codes; revisions to the PQRS and the Electronic Prescribing (eRx) Incentive Program; allowing Medicare to pay for portable x-ray services ordered by non-physician practitioners acting within their services within their state scope of practice and the scope of their Medicare benefit (in addition to physicians who currently may do so); termination of non-random prepayment review under the Medicare Prescription Drug, Improvement, and Modernization Act, and new claims-based data reporting requirements for therapy services under the Middle Class Tax Relief and Jobs Creation Act. Also, as discussed in the separate summary below, CMS is proposing to require a face-to-face evaluation as a condition of Medicare payment for certain types of durable medical equipment (DME).

• The first rule reforms requirements that hospitals and critical access hospitals (CAHs) must meet in order to participate in the Medicare and Medicaid programs. Among other things, the rule: allows one governing body to oversee multiple hospitals in a single health system; revises requirements for reporting of restraint-related deaths; provides flexibility to consider other practitioners (e.g., advanced practice registered nurses, physician assistants, and pharmacists) as eligible candidates for the medical staff; allows patients or their caregivers to administer certain medications; allows hospitals to have a single, interdisciplinary care plan including nursing and other disciplines or a stand-alone nursing care plan; revises the rules for standing orders and verbal orders; and removes the requirement for a single Director of Outpatient Services. The rule also allows CAHs to provide certain diagnostic and therapeutic services, including laboratory and radiology services and emergency procedures, under arrangement (rather than directly by CAH staff).
• A second final rule make a series of reforms to regulations identified as unnecessary, obsolete, or excessively burdensome for providers and suppliers. For instance, the rule: clarifies which end stage renal disease facilities must comply with the full federal Life Safety Code requirements; streamlines requirements for emergency equipment at ambulatory surgical centers (ASCs); eliminates the Medicare re-enrollment bar in instances when revocation of billing privileges is based solely upon the failure of a provider or supplier to respond timely to a revalidation request or other CMS information request; removes obsolete language related to initial determinations, appeals, and reopenings of Part A and Part B claims and entitlement determinations; removes duplicative language on ASC infection practices; updates obsolete e-prescribing technical requirements to meet current standards; and removes outdated Medicaid personnel qualifications language for physical therapists and occupational therapists.

Both rules will be published May 16, 2012, and are effective on July 16, 2012.

Among other things, the proposed budget would:

• Provide $610 million in discretionary funding for Health Care Fraud and Abuse Control, plus $581 million in program integrity funding to: reduce the Medicare fee-for-service improper payment rate; invest in prevention-focused, data-driven initiatives like predictive modeling; cost-avoidance activities; and Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiatives.
• Increase program integrity funding and legislative authorities, including: creation of a Medicare claims ordering system to validate physician orders for certain high-risk services, increased scrutiny of providers using higher-risk banking arrangements to receive Medicare payments, prior authorization for advanced imaging service; tracking of high prescribers and users of Medicaid prescription drugs; strengthened enforcement of manufacturer compliance with Medicaid drug rebate requirements; and exclusion of individuals affiliated with entities sanctioned for fraudulent or other prohibited actions from federal health care programs.
• Reform post-acute care payment by reducing Medicare reimbursement for inpatient rehabilitation facilities (IRFs), long-term care hospitals, skilled nursing facilities (SNFs), and home health agencies by 1.1 percentage points beginning in 2014 through 2021 (updates would not fall below 0%), adjusting the standard for classifying a facility as an IRF; equalizing payments for certain conditions commonly treated in IRFs and SNFs; and adjusting SNF payments to reduce hospital readmissions.
• Require manufacturers to pay the same rebates for Medicare Part D low-income subsidy beneficiaries as they do for Medicaid, beginning in 2013 (manufacturers would be required to pay the difference between rebates paid to Part D plans and the Medicaid rebate levels).
• Reduce Medicare bad debt payments to 25% for all eligible providers over three years.
• Reduce Medicare add on payments to teaching hospitals for indirect costs of medical education by 10% and cut payments to critical access hospitals.
• Reduce reimbursement for certain advanced imaging equipment to account for higher levels of utilization of certain types of equipment.
• Provide an adjustment totaling $429 billion over 10 years to reflect the Administration’s best estimate of the cost of future congressional action to reform the Medicare physician fee schedule statutory Sustainable Growth Rate formula (details of the plan are not specified).
• Increase Medicare cost-sharing for higher-income beneficiaries, imposes Medicare home health copayments, and applies a premium surcharge for new beneficiaries with Medigap plans offering first-dollar coverage.
• Lower the Independent Payment Advisory Board’s target Medicare spending rate from the gross domestic product (GDP) per capita growth plus 1% to GDP per capita growth plus 0.5%.
• Reduce Medicaid spending by reducing the Medicaid provider tax threshold, instituting a single blended matching rate for Medicaid and CHIP; capping Medicaid durable medical equipment rates at Medicare levels, and rebasing Disproportionate Share Hospital allotments.
• Prohibit “pay for delay” agreements to increase the availability of generic drugs and biologics, and award brand biologic manufacturers seven years of exclusivity rather than 12 years.

Note that many provisions of the proposed budget would require Congressional approval to implement; leaders of both parties have indicated that Congress is unlikely to take up the President’s legislative proposals in its current form.