CMS has released guidance for long term care (LTC) facilities, including nursing facilities and skilled nursing facilities, on beneficiary disenrollments. According to the guidance, “CMS continues to see an unacceptable practice of LTC facilities disenrolling beneficiaries from Medicare advantage prescription drug plans (MAPDs) and enrolling them into stand-alone drug plans (PDPs) without the beneficiary’s or the representative’s knowledge and/or complete understanding. This action automatically returns the beneficiary to Original Medicare coverage for those services covered by Parts A and B. This practice is noncompliant with regulatory requirements.” Likewise, CMS has observed similar, unacceptable practices among LTC facilities serving Medicare-Medicaid (dually eligible) enrollees eligible to join a Medicare-Medicaid plan as part of a nine-state demonstration under the Financial Alignment Initiative. CMS encourages LTC facilities to review its guidance to ensure compliance with federal regulations and guidance concerning changes to facility residents’ Medicare plan coverage.
On April 20, 2015, CMS published its proposed rule updating Medicare skilled nursing facility (SNF) PPS rates and policies for FY 2016. CMS projects that the proposed rule would increase overall payments to SNFs by $500 million, or 1.4%, compared to FY 2015 levels. This update would be attributed to a 2.6% market basket increase that would be reduced by a 0.6 percentage point forecast error adjustment and a 0.6 percentage point multifactor productivity adjustment.
The proposed rule also would implement a provision of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) that reduces, by two percentage points, the annual update to SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP), beginning with FY 2018. CMS is proposing to adopt three measures SNFs would be required to report beginning with the FY 2018 SNF QRP that address three quality domains identified in the IMPACT Act: (1) skin integrity and changes in skin integrity; (2) incidence of major falls; and (3) functional status, cognitive function, and changes in function and cognitive function. The proposed measures are intended to address the IMPACT Act requirement of standardized post-acute care data reporting across home health agencies, inpatient rehabilitation facilities, long term care hospitals, and SNFs. CMS intends to propose additional quality measures and resource use measures in future rulemaking.
Additionally, CMS proposes establishing a 30-day all-cause, all-condition hospital readmission quality measure that will be used in a new SNF Value-Based Purchasing (VBP) Program beginning with FY 2019, as required by the Protecting Access to Medicare Act of 2014 (PAMA). CMS notes that PAMA also requires CMS to specify an all-condition, risk-adjusted potentially preventable hospital readmission rate, which CMS intends to address in future rulemaking. CMS also seeks comments on numerous issues associated with the SNF VBP Program, which will be addressed in the FY 2017 SNF PPS proposed and final rules. In addition, the proposed rule would establish new regulatory reporting requirements for SNFs and nursing facilities to electronically submit staffing information based on payroll data, as mandated by the Affordable Care Act (ACA).
Comments on the proposed rule will be accepted until June 15, 2015.
CMS recently sent several major proposed rules to the White House Office of Management and Budget for regulatory clearance – the last step before publication in the Federal Register. OMB is reviewing proposed rules to update the skilled nursing facility, inpatient rehabilitation facility, and inpatient psychiatric facility prospective payment systems (PPS) for fiscal year (FY) 2016, and the FY 2016 acute inpatient PPS proposed rule also should be joining them in the near future. Other CMS regulations pending at OMB include proposed rules updating the Medicare and Medicaid Electronic Health Record (EHR) Incentive Program meaningful use requirements for 2015 through 2017 and Medicaid managed care regulations.
The Medicare Payment Advisory Commission (MedPAC) has released its annual recommendations to Congress on Medicare policies, including Medicare fee-for-service (FFS) payment updates and a status report on the Medicare Advantage and Medicare Part D programs. The following are highlights of the recommendations for 2016 (many of which were recommended previously):
- With regard to physician services, Congress should repeal the Sustainable Growth Rate (SGR) methodology for physician services and replace it with a 10-year path of statutory updates that includes a higher rate update for primary care services than for specialty care services (note that Congress may take up SGR reform legislation as early as this month, before the latest temporary patch expires and a 21.2% fee schedule cut goes into effect April 1, 2015). In addition, Congress should direct the Department of Health and Human Services (HHS) Secretary to increase shared savings opportunities for physicians and health professionals in two-sided risk accountable care organizations (ACOs). MedPAC also endorsed the collection of data to establish more accurate work and practice expense values, along with reductions to the relative values for overpriced fee-schedule services to reduce fee schedule spending by at least 1% annually for each of five consecutive years. Congress also should establish a prospective per beneficiary payment to replace the Primary Care Incentive Payment program (which provides a 10% bonus payment for certain primary care practitioner services) after it expires at the end of 2015.
- MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates for 2016, concurrent with changes to the outpatient payment system and the long-term care hospital (LTCH) payment system. Specifically, MedPAC calls on Congress to direct the Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for LTCH services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients (this provision would be phased in from 2016 to 2018).
- Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the SNF prospective payment system (PPS) to rely on patient characteristics and begin a process of rebasing a year after these revisions are implemented, with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs.
- Congress should eliminate the fiscal year 2016 Medicare rate update for inpatient rehabilitation facilities (IRFs) and direct the Secretary to eliminate payment differences between IRFs and SNFs for selected conditions, with IRF payment reductions phased in over 3 years. IRFs also should receive relief from regulations specifying the intensity and mix of services for site-neutral conditions.
- Congress should eliminate the ambulatory surgical center (ASC) payment update for 2016 and require ASCs to submit cost data.
- Congress should direct teliminate the home health market basket update for 2016, rebase rates, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and expand medical review activities and exercise program integrity authorities. In addition, Congress should direct the Secretary to reduce payments to HHAs with relatively high risk-adjusted rates of hospital readmission and establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use.
- Congress should eliminate the 2016 update for LTCHs, hospices, and outpatient dialysis services.
While MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.
A recent OIG report examines increasing use of CAH “swing-bed” services, which the OIG describes as being equivalent to services performed at a SNF, but which are reimbursed at 101% of a CAH’s reasonable cost rather than at the Medicare SNF PPS rate. The OIG estimates that Medicare could have saved $4.1 billion over six years if payments for swing-bed services at CAHs were made using SNF PPS rates, and OIG recommends that CMS seek legislation to tie CAH swing-bed reimbursement rates to SNF PPS rates. CMS disagreed with these recommendations, stating that the OIG’s methodology overestimated potential savings. Nevertheless, CMS concurs that changes should be made to CAH designation and payment policies to “balance beneficiary access to care while promoting payment efficiency.” CMS pointed to provisions of the President's fiscal year 2015 budget proposal that would reduce CAH payments from 101% to 100% of reasonable costs and modify eligibility rules. For more information, see the full report, “Medicare Could Have Saved Billions at Critical Access Hospitals If Swing-Bed Services Were Reimbursed Using the Skilled Nursing Facility Prospective Payment System Rates.”
On February 2, 2015, the Obama Administration released its proposed federal budget for fiscal year (FY) 2016. The budget would impact all types of health care providers, health plans, and drug manufacturers if adopted as proposed – which is unlikely given Republican control of the House and Senate. Nevertheless, Congress can be expected to consider the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) during expected debate in the coming months on Medicare physician fee schedule (MPFS) reform legislation or during future budget negotiations.
The following is a summary of the major Medicare, Medicaid, and related policy proposals contained in the FY 2016 budget proposal.
Medicare Delivery & Payment Reforms
The proposed FY 2016 budget includes a package of Medicare legislative proposals estimated to save $423.1 billion over 10 years (note that the proposals are scored off an adjusted baseline that assumes a zero percent update to Medicare physician payments). Highlights include the following (all savings estimates are for the 10-year period of FYs 2016-2025):
- Repeal the Sustainable Growth Rate (SGR) formula used to update MPFS payments, and replace it with reforms contained in recent bipartisan reform legislation (including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing). The Administration estimates that this would cost $44 billion over 10 years.
- Reduce Medicare payment for services provided in off-campus hospital outpatient departments under the Outpatient Prospective Payment System to either the MPFS-based rate or the rate for surgical procedures covered under the Ambulatory Surgical Center (ASC) payment system. The provision would be phased in over four years beginning in 2017 ($29.5 billion in savings).
- Implement bundled payment for post-acute care providers, including long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies (HHAs) beginning in 2020. Payments would be bundled for at least half of the total payment for post-acute care providers, with rates set to produce a permanent and total cumulative adjustment of -2.85% by 2022, with beneficiary coinsurance equal to current levels ($9.3 billion).
- Allow the Centers for Medicare & Medicaid Services (CMS) to assign more Medicare fee-for-service (FFS) beneficiaries to Federally Qualified Health Centers and Rural Health Clinics that participate in an Accountable Care Organization (ACO) under the Medicare Shared Savings Program ($80 million), and expand the basis for beneficiary assignment for ACOs to include nurse practitioners, physician assistants, and clinical nurse specialists ($60 million).
- Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ASCs, hospital outpatient departments, and community mental health centers beginning in 2017. At least 2% of payments must be tied to the quality and efficiency of care in the first two years, rising to at least 5% in 2019 (no budget impact).
- Eliminate the 190-day lifetime limit on inpatient psychiatric facility services: ($5 billion in costs).
- Reduce market basket updates for IRFs, LTCHs, and HHAs by 1.1 percentage points each year from 2016 through 2025 (the update could not fall below 0%), and reduce SNF updates by -2.5% in FY 2016, tapering down to a -0.97% update in FY 2023 ($102.1 billion).
- Increase the minimum Medicare Advantage coding intensity adjustment ($36.2 billion).
- Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2016 ($31.1 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 Affordable Care Act (ACA) provisions requiring reductions to Medicare provider reimbursement ($20.9 billion).
- Reduce Medicare indirect medical education add-on payments ($16.3 billion).
- 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 is “clinically integrated” and demonstrates cost containment, as defined by the Secretary ($6 billion).
- Adjust the standard for classifying a facility as an IRF; at least 75% of patient cases admitted would be required to meet one or more of 13 designated conditions beginning in 2016 ($2.2 billion).
- 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 ($770 million).
- Expand the Part B benefits to cover short-term scheduled dialysis at a Medicare-certified End Stage Renal Disease (ESRD) facility for the treatment of acute kidney injury ($200 million).
- 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 (no budget impact).
Medicare, Medicaid, & Other Prescription Drug Provisions
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2017 ($116.1 billion).
- Accelerate manufacturer Medicare Part D “coverage gap” discounts from 50% to 75% beginning in plan year 2017 ($9.4 billion).
- Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP) starting in 2016. 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 ($7.4 billion).
- Extend Medicare Secondary Payer reporting requirements to group health plans offering prescription drug coverage ($480 million).
- Authorize the Secretary to negotiate Part D prices for biologics and high-cost prescription drugs eligible for placement on a plan’s specialty tier (no budget impact).
- Authorize the Secretary to require high-risk Medicare beneficiaries to use certain prescribers and/or pharmacies to obtain controlled substance prescriptions under Part D; allow the Secretary to suspend coverage and payment for Part D drugs prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, or that that pose an imminent risk to patients; and allow the Secretary to require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage (no budget impact).
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.9 billion).
- 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 ($10.1 billion) and modifying the length of exclusivity on brand name biologics ($4.4 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 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; calculate Medicaid federal upper limits based only on generic drug prices; and exempt emergency drug supply programs from the Medicaid rebate calculations. ($6.3 billion.)
- 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. The budget also 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. ($10 million.)
- Fully fund a nationwide retail pharmacy survey incorporating prices paid by cash-paying, third-party insured, and Medicaid insured consumers. The funding also permits collection of actual invoice prices from retail community pharmacies to enable states to set reasonable payment rates to pharmacies. CMS would be authorized to collect wholesale acquisition costs for all Medicaid covered drugs. ($30 million in costs.)
- Requires states to track high prescribers and utilizers of Medicaid prescription drugs ($710 million).
Major Program Integrity Provisions
- Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other 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 ($70 million).
- Authorize civil monetary penalties for providers who do not update enrollment records ($29 million).
- Establish a registration process for clearinghouses and billing agents that act on behalf of Medicare providers and suppliers (no budget impact).
- Expand CMS’s authority to require prior authorization for all Medicare FFS items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
- Increase the minimum amount of the HHA surety bond to $50,000 (no budget impact).
- Authorize Medicaid Fraud Control Units to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings (no budget impact).
- The budget includes several provisions to reform the Medicare appeals process, including allowing Department of Health and Human Services (HHS) to retain a portion of Recovery Audit Contractor recoveries to fund related appeals; increasing the minimum amount in controversy required for Administrative Law Judge adjudication; allowing the Office of Medicare Hearings and Appeals (OMHA) to use attorney adjudicators for certain claims; establishing expedited OMHA procedures for claims with no material fact in dispute; remanding an appeal to the first level of review when new documentary evidence is submitted into the administrative record at the second level of appeal or above; and authorizing the Secretary to adjudicate appeals through the use of sampling and extrapolation techniques
Other Medicare & Medicare Reforms
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D ($66.4 billion).
- Increase Part B deductible for new enrollees ($3.7 billion), and increase premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements ($4 billion).
- Establish a new home health copayment ($830 million).
- Base Medicaid rates for DME on Medicare rates ($4.3 billion).
- Rebase future Medicaid Disproportionate Share Hospital allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).
Precision Medicine Initiative
The President proposes a high-profile “Precision Medicine Initiative,” which would provide $215 million to focus on developing treatments, diagnostics, and prevention strategies tailored to the individual genetic characteristics of each patient. This effort includes $200 million for the National Institutes of Health to launch a national research cohort of a million or more Americans who volunteer to share their genetic information, expand current cancer genomics research, and initiate new studies on how a tumor’s DNA can inform prognosis and treatment choices. The budget provides $10 million for the FDA to modernize its regulatory framework to support the development and use of molecular diagnostics in precision medicine, and it provides the HHS Office of the National Coordinator for Health Information Technology (ONC) with $5 million to define standards to enable the exchange of genomic data. The Office for Civil Rights will also work with the participating agencies to ensure that privacy protections are in place.
Note that the budget proposal includes numerous other proposals impacting programs and operations throughout the HHS agencies.
In mid-2014, state survey agencies and CMS piloted a short-term focused survey in five states to assess nursing home Minimum Data Set, Version 3.0 (MDS 3.0) coding practices and its relationship to resident care. According to a CMS memo to state survey agencies, these surveys enhanced surveyors’ ability to identify errors and deficiencies, such as inaccuracies related to staging and documentation of pressure ulcers, the classification of antipsychotic drugs, and coding regarding the use of restraints. CMS therefore announced that it plans to expand these surveys nationwide in 2015. The scope of some or all of the focused surveys also will be expanded to include an assessment of the staffing levels of nursing facilities. Specifically, the assessment is intended to verify the staffing data self-reported by the nursing home and identify changes in staffing levels throughout the year.
On December 9, 2014, CMS is hosting a call to provide an update on the CMS National Partnership to Improve Dementia Care in Nursing Homes. The partnership focuses on continuing to reduce the use of unnecessary antipsychotic medications and other potentially-harmful medications in nursing homes and eventually other care settings.
On October 6, 2014, President Obama signed into law H.R. 4994, the Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”). The IMPACT Act’s provisions will affect a broad range of post-acute care (PAC) providers: home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and long-term acute care hospitals (LTCHs). Various facets of daily operations of these PAC providers will change as a result of the Act and ensuing regulations: what information PAC providers must collect and report, the information the public will receive about PAC providers, and the method of determining future Medicare payments to PAC providers, among others. The IMPACT Act also increases survey frequency for Medicare-certified hospice programs. A Reed Smith client alert summarizing the Impact Act is available here.
Separately, President Obama also signed into law a number of other health policy bills approved by Congress, including the following:
- H.R. 594, Paul D. Wellstone Muscular Dystrophy Community Assistance, Research and Education Amendments of 2014, which revises and expands research, surveillance, and education activities relating to muscular dystrophy at the National Institutes of Health and the Centers for Disease Control and Prevention, and expands the federal agencies comprising the Muscular Dystrophy Coordinating Committee;
- S. 2154, Emergency Medical Services for Children Reauthorization Act of 2014, which reauthorizes appropriations through fiscal year 2019 for a program to provide high‑quality emergency medical care to children; and
- H.R. 4631, Autism Collaboration, Accountability, Research, Education, and Support (CARES) Act of 2014, which reauthorizes Combating Autism Act funding for autism research, screening, intervention, and education activities, as well as an HHS coordinating committee.
The OIG has issued a report reviewing the extent to which Medicare- and Medicaid-certified nursing facilities comply with federal requirements related to reporting allegations of resident abuse or neglect. For the purposes of this report, the OIG uses the term “nursing facility” (NF) to refer to both Medicare skilled nursing facilities and Medicaid nursing facilities. Based on a sample of 250 NFs, the OIG estimates that:
- 85% of NFs reported at least one allegation of abuse or neglect to OIG in 2012. The OIG notes that for the purposes of this study, it did not determine whether the reported allegations were substantiated.
- 76% of NFs maintained policies that address federal regulations for reporting both allegations of abuse or neglect and investigation results.
- 61% of NFs had documentation supporting the facilities’ compliance with regulations under Section 1150B of the Social Security Act requiring NFs to (1) annually notify covered individuals (i.e., owners, operators, employees, managers, agents, or contractors of nursing facilities) of their obligation to report to the appropriate entities any reasonable suspicion of a crime, and (2) clearly post a notice specifying employees’ rights to file a complaint under Section 1150B.
- 53% of allegations of abuse or neglect and the subsequent investigation results were reported, as required.
The OIG recommends that CMS ensure that nursing facilities: (1) maintain policies related to reporting allegations of abuse or neglect; (2) notify covered individuals of their obligation to report reasonable suspicions of crimes; and (3) report allegations of abuse or neglect and investigation results in a timely manner and to the appropriate individuals.
This post was written by Susan Edwards.
The Centers for Medicare & Medicaid Services (CMS) published the final FY 2015 Medicare skilled nursing facility (SNF) prospective payment system (PPS) rule on August 5, 2014 (Final Rule). The Final Rule largely adopts the proposals set forth in the FY 2015 proposed SNF PPS rule (Proposed Rule). CMS estimates that the Final Rule will result in a $750 million increase in aggregate payments to SNFs during FY 2015 as compared to FY 2014. The Final Rule will implement a market basket update of 2%, resulting from a market basket increase of 2.5 percentage points, reduced by the Multifactor Productivity Adjustment of 0.5 percentage points, as required by the Affordable Care Act (ACA). Below we discuss highlights of the Final Rule, including: (1) the adopted wage index update; (2) revised change of therapy (COT) Other Medicare Required Assessment (OMRA) policy; (3) revisions to the Civil Money Penalties (CMP) regulations; and (4) CMS’s responses to comments regarding the agency’s observations on therapy trends.
Wage Index Update
CMS is required by statute to adjust federal rates using a wage index that reflects geographic differences in wage levels. In the Final Rule, CMS modifies the SNF PPS wage index to conform with a February 28, 2013 Office of Management and Budget (OMB) bulletin (OMB Bulletin No. 13-01) that made changes to the delineation of Metropolitan Statistical Areas, Micropolitan Statistical Areas, Combined Statistical Areas, and the guidance on uses of these delineations.
Despite comments requesting that CMS implement a two-year or three-year transition to the new OMB delineations, CMS will implement OMB Bulletin No. 13-01 through a one-year transition that will use a blended SNF PPS wage index for FY 2015. Under this policy, 50% of the wage index will use prior OMB delineations (the Core-Based Statistical Area geographic designations adopted in FY 2006) and 50% of the wage index will use the 2013 OMB delineations. CMS declined to accept recommendations from commenters that the agency implement the three-year transition proposed in the FY 2015 Inpatient Prospective Payment System rule, explaining that the one-year transition would “strike the best balance” and would “provide relief to the largest percentage of adversely impacted SNFs with the least impact on the rest of the facilities.”
COT OMRA Policy Update
CMS also adopted revisions to the COT OMRA policy, which is used to classify a resident into a new resource utilization group (RUG) due to changes in therapy use. In the Final Rule, CMS explains that effective October 1, 2014, a COT OMRA is permitted for patients classified into non-therapy RUGs, but only in certain limited circumstances. Specifically, the final rule now expressly permits providers to complete a COT OMRA for a resident who is not currently classified into a therapy RUG (or index maximized into a nursing RUG) if the resident had:
- Qualified for a therapy RUG on a prior assessment during the resident’s current Medicare Part A stay; and
- No discontinuation of therapy services between Day 1 of the COT observation period for the COT OMRA that classified the resident into his/her current nursing RUG and the assessment reference date of the COT OMRA that would reclassify the patient into a therapy RUG.
The Final Rule also explains that in the Proposed Rule, CMS provided an incorrect example of how this revised COT OMRA policy would apply. Specifically, the example included in the Proposed Rule was incorrect because the resident in the example is no longer in a RUG-IV therapy group, and therefore, an End of Therapy (EOT) OMRA would not be completed on the patient. As explained by commenters, this scenario would violate the rules associated with the EOT OMRA, which require that the resident be in a RUG-IV therapy group for this assessment to be completed.
CMS also explains that if providers previously misinterpreted the COT OMRA policy, they should “immediately address any assessments that were completed inappropriately.” Notably, however, until the Proposed Rule, CMS never stated in written guidance that COT OMRAs were prohibited in the circumstances set forth in the “new” policy above.
The Final Rule modifies 42 C.F.R. § 488.433 to clarify certain statutory provisions established by Section 6111 of the ACA regarding how states may use CMPs and how states must obtain approval for CMP use from CMS. While the current regulations specify that CMS must approve states’ use of CMP funds and that CMPs “must be used entirely for activities that protect or improve the quality of care for residents,” CMS contended in the Proposed Rule that states have used CMP funds without CMS approval, have used CMP funds even though CMS disapproved the state’s intended use, and/or have not used CMP funds at all. In the Final Rule, CMS adopts modifications to strengthen the regulations, provide more guidance to states regarding the approval process and the permissible uses of CMPs, and increase state accountability with respect to CMP funds. The Final Rule, at 42 C.F.R. § 488.433(e), specifically requires that a state obtain formal CMS approval of all plans for the effective use of CMPs. In addition, the Final Rule mandates that states make certain CMP-related information publicly available on a state website. Such information includes the dollar amount awarded for approved projects, the grantee or the contract recipients, the results of projects, and other “key information.” CMS states in preamble that it will post a report on approved CMP projects on an annual basis. CMS also will publish further operational details for states related to this regulation in the State Operations Manual.
Agency’s Observations on Therapy Utilization Trends
In the Proposed Rule, CMS observed that the percentage of SNF residents classified into an Ultra-High Rehabilitation groups has increased “rather steadily” (according the agency, from 44.8 percent in FY 2011 to over 50 percent in FY 2013). CMS also noted that many patients are receiving the minimum minutes of therapy to qualify for a given therapy RUG. In the Proposed Rule, CMS stated that it will continue to follow and analyze these trends and requests comments regarding such “observations.”
In the Final Rule, CMS responded to comments regarding the Proposed Rule’s discussion of therapy utilization trends. CMS observed that “given the comments highlighting the lack of medical evidence related to the appropriate amount of therapy in a given situation, it is all the more concerning that practice patterns would appear to be as homogenized as the data would suggest.” CMS also notes that it finds certain commenters’ explanations for the therapy trends “troubling and entirely inconsistent with the intended use of the SNF benefit.” In a separate discussion in the Final Rule, CMS states that it is currently working with contractors to “identify potential alternatives to the existing methodology used to pay for therapy services received under the SNF PPS,” but such research, and the potential, subsequent implementation of a new payment model, has no set timeframe.
The OIG has issued a report entitled “Vulnerabilities in Medicare’s Interrupted-Stay Policy for Long-Term Care Hospitals.” By way of background, the Medicare long-term care hospital (LTCH) interrupted-stay policy generally treats time spent at an LTCH before and after an interruption as a single stay, rather than considering the second portion of the LTCH stay to be a readmission with a separate payment. However, LTCHs receive payment for a second stay if a beneficiary returns home, receives services from multiple facilities before returning to the LTCH, or is discharged to an inpatient prospective payment system (IPPS) hospital, inpatient rehabilitation facility (IRF), or skilled nursing facility (SNF) and then readmitted to the LTCH after the applicable “fixed-day threshold” – a specified number of days that varies by the type of intervening facility. The OIG identified several vulnerabilities in the LTCH interrupted-stay policy, including inappropriate payments, financial incentives to delay readmissions, and potential overpayments to co-located LTCHs. The OIG estimates that in 2010 and 2011, Medicare inappropriately paid $4.3 million to LTCHs and “intervening facilities” (facilities that treated the patients during the interruptions in the LTCH stay) for interrupted stays, and potentially millions of dollars more for inappropriate readmissions. The OIG points out that the readmissions may be appropriate, but the OIG raises concerns regarding “whether financial incentives, rather than beneficiaries’ medical conditions, may have influenced some LTCHs’ readmission decisions.” The OIG recommends a series of steps to address identified vulnerabilities, including CMS analyses, enforcement, and recoupment of identified overpayments. Previously, in the May 15, 2014 proposed Medicare IPPS/LTCH PPS update for FY 2015, CMS proposed to expand the interrupted stay policy by adopting the same 30-day standard as the fixed-day threshold for a discharge to and readmission from an IPPS hospital, IRF or SNF.
On May 12, 2014, the Centers for Medicare & Medicaid Services (CMS) published a final rule that reforms federal health policy regulations that CMS has identified as unnecessary, obsolete, or excessively burdensome on health care providers and suppliers. The rule also is intended to eliminate or reduce requirements that impede quality patient care or that divert resources away from providing high quality patient care. CMS estimates that the rule will result in annual recurring savings of about $660 million, plus a $22 million one-time savings to long-term care facilities from a sprinkler deadline extension. Highlights of the wide-ranging rule include the following:
- Two provisions of the rule address imaging services offered in ambulatory surgical centers (ASCs) and hospitals. First, CMS is reducing the requirements that ASCs must meet in order to provide radiological services to patients. Under the new rule radiology services performed as an integral part of surgical procedures in a ASCs are no longer required to be supervised by a radiologist. Instead, the ASC’s governing body must appoint an individual qualified in accordance with state law and the ASC’s policies who is responsible for assuring that all radiologic services are provided in accordance with the ASC Conditions of Coverage. Second, CMS is modifying hospital requirements for in-house preparation of radiopharmaceutical to remove the “direct” supervision requirement; that is, while the preparation remains under the general supervision of a pharmacist, doctor of medicine, or doctor of osteopathy, their physical presence will no longer be required during the delivery of off-hour nuclear medicine tests.
- CMS is permitting qualified dietitians and qualified nutrition professionals to order patient diets under the hospital conditions of participation.
- The rule eliminates a requirement that critical access hospitals (CAHs), rural health clinics, and federally qualified health centers (FQHC) have a physician on site at least once in every two-week period. It also eliminates 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.
- Under the rule, long-term care facilities may apply for an extension of the August 13, 2013 deadline for installing automatic sprinkler systems.
- The rule removes a redundant transplant center data submission requirement. In addition, the rule eliminates an automatic re-approval survey requirement for transplant programs, which CMS states will allow the agency to better focus survey activities.
- CMS makes a number of clarifications pertaining to CMS regulations governing proficiency testing (PT) referrals under the Clinical Laboratory Improvement Amendments (CLIA) of 1988, including establishing policies under which certain PT referrals by laboratories would not generally be subject to revocation of a CLIA certificate, clarifying the restriction on referrals of PT samples to other laboratories, and revising the standard for what constitutes an “intentional” referral of PT samples.
- Other issues addressed in the rule include, among others, hospital reclassification of swing-bed services, the composition of hospital medical staff and hospital governing bodies, and practitioners permitted to order hospital outpatient services.
This post was written by Susan Edwards.
The Centers for Medicare & Medicaid Services (CMS) published the fiscal year (FY) 2015 proposed skilled nursing facility (SNF) prospective payment system (PPS) rule on May 6, 2014 (Proposed Rule). CMS estimates that the Proposed Rule’s implementation would result in a $750 million increase in aggregate payments to SNFs during FY 2015 as compared to FY 2014. The Proposed Rule anticipates a market basket update of 2%, resulting from a market basket increase of 2.4 percentage points, reduced by the Multifactor Productivity Adjustment of 0.4 percentage points, as required by the Affordable Care Act (ACA). We discuss highlights of the Proposed Rule below, including: (1) the proposed wage index update; (2) a proposed policy change to the change of therapy (COT) Other Medicare Required Assessment (OMRA); (3) proposed revisions to the Civil Money Penalties (CMP) regulations; (4) CMS’s request for public comment on services excluded from consolidated billing; (5) CMS’s observations on therapy trends; and (6) CMS’s discussion regarding electronic health record (EHR) use in SNFs. CMS will accept public comments regarding the Proposed Rule until June 30, 2014.
Proposed Wage Index Update
CMS is required by statute to adjust federal rates using a wage index that reflects geographic differences in wage levels. CMS proposes modifying the SNF PPS wage index to conform with a February 28, 2013 Office of Management and Budget (OMB) bulletin (OMB Bulletin No. 13-01) that made changes to the delineation of Metropolitan Statistical Areas, Micropolitian Statistical Areas, Combined Statistical Areas, and the guidance on uses of these delineations.
CMS proposes to implement OMB Bulletin No. 13-01 through a one-year transition that would use a blended SNF PPS wage index for FY 2015. Under this policy, 50% of the wage index would use prior OMB delineations (the Core-Based Statistical Area geographic designations adopted in FY 2006) and 50% of the wage index would use the 2013 OMB delineations. CMS also proposes using OMB delineations to identify whether a SNF is urban or rural for rate purposes. CMS estimates that 15% of providers would have a higher wage index under the proposed new labor market area delineations, while 22% would have a lower wage index.
COT OMRA Policy Update
CMS also proposes revisions to the COT OMRA policy, which is used to classify a resident into a new resource utilization group (RUG) due to changes in therapy use, to address industry-wide confusion regarding CMS’s current policy. While CMS has addressed this policy during industry calls, until the proposed rule, CMS had not formalized what the agency says is its current standard that “the resident must be classified into a RUG-IV therapy category or into a nursing RUG because of index maximization (while receiving a level of therapy sufficient for classification into a RUG-IV therapy category) in order for the COT OMRA requirements to apply.” In the Proposed Rule, CMS proposes that a COT OMRA would be permitted for patients classified into non-therapy RUGs, but only in certain circumstances. Specifically, if a SNF patient were previously classified into a therapy-RUG and had no discontinuation of therapy services between Day 1 of the COT observation period for the COT OMRA that classified the resident into his/her current non-therapy RUG and the assessment reference date of the COT OMRA that reclassified the patient into a therapy RUG, a SNF could complete a COT OMRA even though the patient was in a non-therapy RUG.
The Proposed Rule would modify 42 C.F.R. § 488.433 to clarify certain statutory provisions established by Section 6111 of the ACA regarding how states may use CMPs and how states must obtain approval for CMP use from CMS. While the current regulations specify that CMS must approve states’ use of CMP funds and that CMPs “must be used entirely for activities that protect or improve the quality of care for residents,” CMS contends that states have used CMP funds without CMS approval, have used CMP funds even though CMS disapproved the state’s intended use, and/or have not used CMP funds at all. As a consequence, CMS proposes modifications to § 488.433 to strengthen the regulations, provide more guidance to states regarding the approval process and the permissible uses of CMPs, and increase state accountability with respect to CMP funds.
CMS Request for Additional Services to Be Excluded from Consolidated Billing
The Proposed Rule also discusses the statutory consolidated billing provisions applicable to SNFs, which require that, with the exception of certain delineated services, SNFs submit consolidated bills to Medicare Administrative Contractors for all of the services SNF patients receive during a Medicare Part A-covered stay. SNF consolidated billing excludes a number of services, such as those furnished by physicians and other practitioners, and certain “high-cost, low probability” services within certain specific categories. In the Proposed Rule, CMS invites comments on whether the agency should exclude any additional services from consolidated billing within the four service categories excluded under the statute: (1) chemotherapy items; (2) chemotherapy administrative services; (3) radioisotope services; and (4) customized prosthetic devices. The current list of excluded services, listed by HCPCS codes, is available here.
Agency’s Observations on Therapy Utilization Trends
In the Proposed Rule, CMS observes that the percentage of SNF residents classified into an Ultra-High Rehabilitation groups has increased “rather steadily” (according the agency, from 44.8% in FY 2011 to over 50% in FY 2013). CMS also notes that many patients are receiving the minimum minutes of therapy to qualify for a given therapy RUG. CMS states that it will continue to follow and analyze these trends and requests comments regarding such “observations.”
Accelerating Health Information Exchange in SNFs
In the Proposed Rule, CMS emphasizes the government’s favorable view of health information exchange through the SNFs’ use of EHR, while acknowledging that SNFs are not eligible for EHR incentive payments. The comment period affords industry an opportunity to suggest to CMS how the government could accelerate the adoption of EHR among SNFs.
CMS has sent several major fiscal year (FY) 2015 Medicare payment rules to the White House Office of Management and Budget (OMB) for final regulatory clearance. Proposed rules under OMB consideration would update rates and policies for FY 2015 for the following Medicare payment systems: the acute hospital inpatient prospective payment system (PPS), the long-term care hospital PPS, the skilled nursing facility PPS, the inpatient rehabilitation facility PPS, the inpatient psychiatric facilities PPS, and the PPS for federally qualified health centers. While the regulations are not available at this point, we expect that they will be put on display at the Federal Register in the coming days. We will be providing summaries of the proposed rules in future updates.
On April 16, 2014, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would amend fire safety standards applicable to the following types of Medicare- and Medicaid-participating health care facilities: hospitals, critical access hospitals, long-term care facilities (skilled nursing facilities, nursing facilities, and distinct part skilled nursing facilities or nursing facilities), intermediate care facilities for individuals with intellectual disabilities, ambulatory surgery centers, hospices that provide inpatient services, religious nonmedical health care institutions, and programs of all-inclusive care for the elderly facilities. As part of the rulemaking, CMS intends to adopt the National Fire Protection Association’s (NFPA) 2012 editions of the Life Safety Code (LSC) and the Health Care Facilities Code (HCFC). CMS notes in a press release that this change “would reduce burden on health care providers, as the 2012 edition of the LSC also is aligned with the international building codes and would make compliance across codes much simpler for Medicare and Medicaid-participating facilities.” Among other things, the LSC requires that all existing high-rise buildings containing health care occupancies be protected throughout by an approved, supervised automatic sprinkler system. CMS estimates the total cost of implementation of the rule will be $119.6 million, although the costs associated with installing sprinklers in high rise health care facilities would be distributed over a 12-year phase-in period. Comments will be accepted until June 16, 2014.
In early April, Reed Smith hosted an enlightening, industry-leading conference on post-acute care in Washington, D.C. The conference, entitled “Reed Smith 2014 Washington Health Care Conference: Focus on Post-Acute Care," brought together a panel of experts to discuss episodic care, bundling models, and alternative payment and delivery systems. The conference also featured other speakers who presented from the perspective of investors and Capitol Hill, along with a keynote address from American Enterprise Institute resident scholar Dr. Norman Ornstein.
Policy Discussion on Payment Models
The conference started with a panel discussing bundling initiatives and other alternative payment models. The panel featured Barbara Gage, Ph.D., Fellow and Managing Director of Engelberg Center for Health Care Reform at the Brookings Institution; Judy Feder, Ph.D., Professor at Georgetown University; Vincent Mor, Ph.D., Professor at Brown University School of Medicine; and James Michel, Director for Medicare Research & Reimbursement at the American Health Care Association (“AHCA”). The panel brought with them decades of experience in health care policy and research, and a deep knowledge of post-acute care providers’ current reimbursement systems, in addition to models expected to reform payment for post-acute services in the future.
Dr. Gage spoke first, and introduced bundling by discussing the triple aim adopted by the Centers for Medicare & Medicaid Services (“CMS”): achieve better care for patients, better communities’ health, and lower costs by improving the health care system. She explained how new payment models—including bundled payment initiatives and accountable care organizations—strive to accomplish the above-mentioned triple aim. Gage discussed whether the post-acute setting in which a patient receives treatment distinguishes the patient’s outcome and the level of resources that different post-acute settings (e.g., home health, skilled nursing facilities (“SNF”), inpatient rehabilitation facilities (“IRF”), or long-term acute care hospitals (“LTCH”)) furnish to patients. Gage described in great detail the arguments in favor of bundled payments, emphasizing that one of the benefits of a bundled payment model is that it forces communication across all care settings.
Dr. Feder, on the other hand, urged caution as reimbursement moves to new models. She stressed that bundled payment models, for example, create powerful incentives to potentially reduce or limit the care furnished to patients, and therefore could result in reduced quality of care. Feder explained that bundling is not new, and that, e.g., payers have bundled in the inpatient hospital setting for 30 years. Feder pointed out that when Medicare implemented diagnosis-related groups in the inpatient hospital prospective payment system, hospital length of stay “dropp[ed] like a stone.” Feder underscored that the biggest challenges arise from patients whose health is deteriorating, and explained that the number of home health visits, for instance, are the lowest when patient acuity is the highest. In order to ensure adequate, appropriate, and high-quality care for patients, Feder suggested that policymakers thoughtfully develop and implement any new payment system over time, and incorporate quality mechanisms that serve to protect patients. Feder suggested that good patient data and strong accountability measures are essential to any bundled payment program.
After Feder spoke, Dr. Mor took the podium and analogized capitation versus fee-for-service as being “between the devil and the deep blue sea.” He further explained that fee-for-service reimbursement models have encouraged runaway costs and increased utilization, and that there is a lack of provider accountability and responsibility. In contrast, he explained that in capitation reimbursement models, there is an inherent incentive to deny care. Mor discussed how policymakers can ensure patients receive quality care from providers, and raised a number of thought-provoking questions, such as whether a SNF or other post-acute provider should be responsible for rehospitalization after the discharge of a patient, and whether low rehospitalization reflects overall high-quality care. Mor urged the development of a common assessment tool that includes hospital assessment data in order to more accurately measure post-acute quality and case-mix. He also recommended that CMS use the “Welcome to Medicare” assessment and other periodic beneficiary assessments to obtain risk profiles for patients. Mor ended his presentation by suggesting that while capitation models—such as bundling—are preferable to fee-for-service because one entity is responsible for patients’ care, capitation models face challenges as well, including how to properly measure case-mix and outcomes.
James Michel from AHCA noted the operational challenges associated with bundled payments. For example, it is difficult for post-acute providers to assume the responsibility for patients after the post-acute provider discharges a given beneficiary. Michel also stated that the Center for Medicare & Medicaid Innovation Bundled Payments for Care Improvement initiative’s models incentivize low-cost providers to participate, but providers who recognize they have higher costs than the community average will not participate because of the risk that they will miss the spending target, resulting in a payment to the government. Michel noted that AHCA has developed its own bundled payment proposal, in part to preserve a process in which patients and their families can decide where the patient should be treated after an acute stay. The AHCA bundled payment proposal includes four proposed episodes (e.g., major respiratory condition and septicemia) that would account for approximately 60 percent of all SNF care and more than 50 percent of all post-acute care.
Wall Street Perspective
Jay Barnes, a Senior Vice President for Healthcare Investment Banking at Jefferies, LLC, spoke from the Wall Street perspective, addressing the current appetite for deals in the post-acute space. He described a tepid outlook for post-acute investment stemming from the uncertainty of the future payment models and the changing regulatory landscape, particularly with regard to LTCHs. He informed attendees that the private equity market has been non-existent in the post-acute space because it is challenging to create projection models when future reimbursement for post-acute care remains murky. He explained that the post-acute transactions occurring are largely driven by real estate. For example, Barnes described the recently announced Emeritus Senior Living and Brookdale Senior Living merger as driven by real estate.
Cate McCanless, Senior Policy Analyst at Brownstein Hyatt Farber Schreck, provided an insightful overview of Medicare activity on Capitol Hill. She explained that Congress has focused on post-acute care because of the perceived “comfortable” margins achieved by post-acute providers (according to the Medicare Payment Advisory Commission). McCanless also described the outlook for the discussion draft of the Improving Medicare Post-Acute Care Transformation (“IMPACT”) Act of 2014, released by the House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Ranking Member Sandy Levin (D-Mich.), along with Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Orrin Hatch (R-Utah), March 18, 2014. The IMPACT Act draft includes one measure discussed by Mor during the bundling panel: the reporting of common data across post-acute providers, and the required reporting by acute-care hospitals of patient assessment data gathered in advance of discharge. McCanless also explained that while there has been some Congressional momentum in eliminating Medicare's sustainable growth-rate (“SGR”) formula in order to move to an alternative payment model, such momentum may lose steam this year now that a temporary patch has been enacted, because eliminating the SGR would be expensive, and it is an election year. McCanless pointed out certain post-acute policy proposals that would result in cost savings, such as reducing the SNF payment update by 1.1 percent, which would save an estimated $12 billion, and equalizing certain payments for SNFs and IRFs, which would save an estimated $1 billion; these provisions could be targets for offsets for future Medicare reforms.
Impact of Political Polarization on Health Policy
Dr. Norman Ornstein, noted observer of Congress and politics, and keynote speaker at Reed Smith’s inaugural Health Care Conference, closed the session with a thoughtful discussion regarding the current state of American politics. He described not just the polarization, but also the tribalism, of American politics today, depicting a broken American political system where opposing parties have adopted a mantra of, “if you support it, I am against it.” Despite Ornstein’s bleak description of the current state of politics, he offered some suggestions for reform, including incentivizing citizens to vote. He argued that if more of the American public is engaged, politicians must meet in the middle on at least some policy debates.
In all, the inaugural Reed Smith Health Care Conference led to provocative discussions and a deeper understanding of the political climate and policy recommendations likely to impact—or even transform—post-acute care in the not-so-distant future. We look forward to next year’s conference.
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.
Reed Smith Hosting Washington Health Care Conference: Focus on Post-Acute Care on April 4, 2014 - One Week Left to Register
On April 4th, 2014, Reed Smith will host its inaugural Washington Health Care Conference at The Mayflower Renaissance Hotel in Washington, D.C. With a keynote from Dr. Norman Ornstein, this year’s conference will focus on post-acute care, bringing together leading industry professionals for a discussion on several important issues, including:
Governing in Polarized America: The Prospects for Policy in 2014 and Beyond (Keynote)
- Dr. Norman Ornstein, Resident Scholar, American Enterprise Institute, and weekly columnist for National Journal and The Atlantic
Policy discussion on episodic care, bundling models, and alternative payment and delivery systems
- Mike Cheek, Vice President for Medicaid and Long Term Care Policy, American Health Care Association
- Judy Feder, Professor, Georgetown University McCourt School of Public Policy, and Urban Institute Fellow
- Dr. Barbara Gage, Fellow, Managing Director, Engelberg Center for Health Care Reform, Brookings Institution
- Dr. Vincent Mor, Ph.D., Florence Pirce Grant Professor of Community Health, Public Health Program, Brown University School of Medicine
Wall Street perspective: the current appetite for deals
- Jay Barnes, Senior Vice President, Healthcare Investment Banking, Jefferies LLC
Hill briefing on Medicare legislation
- Cate McCanless, Senior Policy Advisor, Brownstein Hyatt Farber Schreck
Limited seating is still available for this complimentary program. If you are interested in registering, please email Lindsay Korenich at email@example.com. For more information about this conference, click here.
The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on Medicare payment policy, including payment update recommendations for all the major Medicare fee-for-service payment (FFS) systems, limited recommendations related to the Medicare Advantage (MA) program, and a status report on the Medicare Part D program. The following are highlights of the recommendations for 2015 (many of which were recommended previously):
- MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates, concurrent with two changes that would institute site-neutral payments among settings. First, Congress should direct the HHS Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for long-term care hospital (LTCH) services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients.
- Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory updates that includes a higher update for primary care services than for specialty care services. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments from overpriced to underpriced services; and relative value unit reductions to achieve fee schedule savings.
- Congress should eliminate the ambulatory surgical center (ASC) payment update for 2015, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
- Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs. Moreover, Congress should direct the Secretary to reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization during Medicare-covered stays.
- MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use. In addition, Congress should direct the Secretary to reduce payments to home health agencies with relatively high risk-adjusted rates of hospital readmission.
- Congress should eliminate the update to hospice rates for FY 2015 and adopt a series of previous MedPAC payment reform recommendations.
- Congress should eliminate the 2015 updates for outpatient dialysis services and direct the Secretary to establish a quality measure that assesses poor outcomes related to anemia in the End-Stage Renal Disease Quality Incentive Program, revise the low-volume adjustment, and audit dialysis facilities’ cost reports.
- Congress should eliminate the FY 2015 payment updates for inpatient rehabilitation facilities and LTCHs.
- With regard to Medicare Advantage (MA), MedPAC recommends that Congress: (1) direct the Secretary to determine payments for employer-group MA plans in a manner more consistent with the determination of payments for comparable non-employer group plans; and (2) include the Medicare hospice benefit in the MA benefits package beginning 2016.
Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.