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.
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.
On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):
Major Medicare Provider Payment Provisions
The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.
- Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
- Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
- Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($720 million).
- Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
- Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
- Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated conditions), saving $2.4 billion.
- Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
- Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
- Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
- Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 billion).
- Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point, which would make it easier to trigger ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
- The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.
Prescription Drug Provisions
- Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner. This proposal is estimated to result in $6.8 billion in savings.
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
- Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
- Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 billion).
- Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts, exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
- Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
- Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. In addition, the budget would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase penalties for reporting false information for the calculation of Medicaid rebates.
- Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into “pay for delay” agreements ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).
Major Program Integrity/Efficiency Provisions
- Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (HHS) program integrity efforts.
- Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($60 million in savings).
- Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
- Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
- Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary effective for calendar year 2016 ($6 billion).
- Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
- Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
- Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).
Other Medicare & Medicaid Provisions
- Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
- Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter.
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
- Base Medicaid rates for DME on Medicare rates ($3.1 billion).
- Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).
The OIG released a report on March 3, 2014, “Adverse Events in Skilled Nursing Facilities: National Incidence among Medicare Beneficiaries,” that examines the national incidence rate, preventability, and cost of adverse events in skilled nursing facilities (SNFs). This report is an outgrowth of a series of studies about hospital adverse events. For purposes of this report, the OIG defined an adverse event as harm to a patient or resident as a result of medical care in a health care setting that resulted in a prolonged SNF stay or hospitalization (including emergency room visit), permanent harm, life-sustaining intervention, or death. Based on a small sample of individuals discharged from hospitals to SNFs with SNF stays that ended in August 2011 (a total of 653 Medicare beneficiaries), the OIG estimates that 22% of Medicare beneficiaries experienced adverse events during their SNF stays and 11% of Medicare beneficiaries experienced temporary harm events during their SNF stays. The OIG’s physician reviewers determined, based on review of the patients’ medical record, that 59% of these adverse events and temporary harm events were clearly or likely preventable. More than half of the residents who experienced harm were rehospitalized, with an estimated Medicare cost of $208 million in August 2011. This equates to $2.8 billion spent on hospital treatment for harm caused in SNFs in FY 2011 (or roughly 2% of inpatient hospital spending).
The OIG observes that the preventable nature of many of the events it identified indicates an opportunity for SNFs to significantly reduce the incidence of resident harm events. To that end, the OIG recommends that the Agency for Healthcare Research and Quality (AHRQ) and CMS raise awareness of nursing home safety and reduce resident harm through methods the agencies previously used to promote hospital safety. For instance, OIG recommends that the agencies collaborate to create and promote a list of potentially reportable nursing home events to help nursing home staff better recognize and reduce harm (but AHRQ and CMS should specify that they do not require external nursing home reporting of these events). Likewise, the OIG recommends that AHRQ and CMS encourage nursing homes to report adverse events to Patient Safety Organizations. CMS also should include potential events and information about resident harm in future guidance to nursing homes on the development of Quality Assurance and Performance Improvement (QAPI) programs pursuant to the ACA. Finally, the OIG recommends that CMS instruct state agency nursing home surveyors to review facility practices intended to identify and reduce adverse events. AHRQ and CMS concurred with the OIG’s recommendations.
On March 6-7, 2014, the Medicare Payment Advisory Commission (MedPAC) is meeting to discuss a number of Medicare payment and policy issues, including: site-neutral payments for select conditions treated in inpatient rehabilitation facilities and skilled nursing facilities; developing payment policies to promote the use of services based on clinical evidence; measuring quality in Medicare delivery systems; payment for primary care; aligning Medicare benchmarks across payment models; and Medicare Advantage risk adjustment.
On December 27, 2013, CMS published a proposed rule that would establish national emergency preparedness requirements for Medicare- and Medicaid-participating providers and suppliers to ensure that they can meet the needs of patients and residents during emergency situations, both natural and man-made. The proposed requirements cover four aspects of emergency preparedness:
- Risk assessment and planning: Providers and suppliers must perform a risk assessment using an “all-hazards'' approach focusing capabilities needed to prepare for a full spectrum of emergencies. This approach is location-specific considering the types of hazards most likely to occur in a provider or supplier’s area.
- Policies and procedures: Providers must develop and implement policies and procedures based on their emergency plan and risk assessment.
- Communication plan: Providers must develop and maintain an emergency preparedness communication plan that complies with both federal and state law. Patient care must be well-coordinated within the facility, across health care providers, and with state and local public health departments and emergency systems to protect health and safety.
- Training and testing: Providers must develop and maintain emergency preparedness training and testing programs, including initial and annual training and annual emergency drills.
The new requirements would apply to 17 provider types (with certain variations): hospitals; critical access hospitals; long-term care facilities; psychiatric residential treatment facilities; intermediate care facilities for individuals with intellectual disabilities; religious nonmedical health care institutions; transplant centers; hospice, ambulatory surgical centers, Program for the All-inclusive Care for the Elderly organizations; home health agencies; comprehensive outpatient rehabilitation facilities; community mental health centers; organ procurement organizations; clinics, rehabilitation, and therapy providers; rural health clinics/federally qualified health clinics; and end-stage renal disease providers.
CMS is seeking comments on numerous aspects of its proposal, including when these requirements should be implemented; comments will be accepted until February 25, 2014.
** February 21 update: CMS has extended the comment period until March 31, 2014.
On October 3, 2013, CMS published notices correcting technical and typographical errors in two final Medicare FY 2014 payment rules. The first notice corrects the August 19, 2013 final FY 2014 IPPS/LTCH PPS rule. The second notice corrects technical errors in the August 6, 2013 final skilled nursing facility PPS rule for FY 2014.
On August 6, 2013, CMS published a final rule to update Medicare skilled nursing facility (SNF) PPS rates for FY 2014 and make other updates to SNF reimbursement policy. CMS estimates that the final rule will increase aggregate Medicare payments to SNFs in FY 2014 by $470 million, or 1.3%, compared to FY 2013 rates. Specifically, SNF PPS rates will be updated to reflect a 2.3% market basket increase, but that update is reduced by a 0.5 percentage point multifactor productivity adjustment required by the ACA, and further reduced by a 0.5 percentage point forecast error correction (resulting from a technical change in the methodology for determining whether to make a forecast error correction when the difference between the actual and projected market basket percentage change rounds to 0.5%). CMS also adopted its proposals to rebase the SNF market basket to reflect FY 2010 data, rather than data from FY 2004, and to change the components of the SNF market basket index. With regard to therapy services, CMS is adding an item to the Minimum Data Set (MDS) to record the number of distinct calendar days of therapy provided to a beneficiary by all rehabilitation disciplines over the 7-day look-back period, and to specify the number of calendar days of therapy required to qualify for the Medium Rehab (RM) and Low Rehab (RL) Category Resource Utilization Group (RUG). The rule is effective October 1, 2013.
A recent OIG report examined “Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries.” The report was conducted in response to concerns about hospitals’ use of observation stays, which may be resulting in Medicare beneficiaries paying more as outpatients than if they were admitted as inpatients, and which may prevent beneficiaries from qualifying under Medicare for SNF services following discharge from the hospital. In addition, CMS is concerned about improper payments for short inpatient stays when the beneficiaries should have been treated as outpatients. Based on a review of claims from 2012, the OIG found that Medicare beneficiaries had 1.5 million observation stays, commonly spending one night or more in the hospital. Beneficiaries had an additional 1.4 million long outpatient stays; some of these may have been observation stays. Beneficiaries also had 1.1 million short inpatient stays, which the OIG notes typically cost Medicare and beneficiaries more than observation stays. In addition, beneficiaries had more than 600,000 hospital stays that lasted 3 nights or more but did not qualify them for SNF services, while Medicare inappropriately paid $255 million for SNF services for which beneficiaries did not qualify (CMS will refer these SNFs to CMS so the agency can look into recoupment). The OIG points out that that the CMS proposed IPPS rule for FY 2014 (which subsequently was finalized, as discussed above) would substantially affect how hospitals bill for these stays. While the number of short inpatient stays would be significantly reduced under the proposed rule, the number of observation and long outpatient stays may not be reduced if outpatient nights are not counted towards the proposed two night presumption. The OIG suggests that CMS consider how to ensure that beneficiaries with similar post-hospital care needs have the same access to and cost sharing for SNF services. In a related matter, a nationwide class action lawsuit filed November 3, 2011 on behalf of 14 named seniors by the Center for Medicare Advocacy and the National Senior Citizens Law Center challenging CMS’s observation day policy and practice is still pending in federal district court. Bagnall v. Sebelius, No. 11-1703 (D. Conn. filed Nov. 3, 2011). The lawsuit alleges that the use of observation status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment to the Constitution.