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

On December 13, 2011, the House of Representatives approved H.R. 3630, the Middle Class Tax Relief and Job Creation Act of 2011, a wide-ranging bill making payroll tax, unemployment insurance, energy, and other policy changes. Among many other things, the bill would avert a scheduled 27.4% cut in Medicare physician fee schedule (MPFS) payments in 2012 under the statutory Sustainable Growth Rate (SGR) formula and instead provide for a 1% payment update in 2012 and 2013. The costs of the MPFS fix would be offset through a variety of health care policy changes, including reducing funding for the ACA prevention and public health fund and ACA insurance subsidies, cutting Medicare reimbursement for hospital outpatient evaluation and management office visit services; reducing bad debt reimbursement, and rebasing Medicaid disproportionate share hospital allotments. The legislation also would extend: the Medicare outpatient therapy cap exceptions process; certain ambulance add-on payments; the floor used in the physician work geographic adjustment; the Qualified Individual program that reimburses states for certain Part B premiums; and the Transitional Medical Assistance program. In addition, the bill would relax certain restrictions on the expansion of physician-owned hospitals. The measure also would increase Medicare Part B and D premiums for higher-income beneficiaries beginning in 2017.  Note that the Senate is not expected to approve the House bill, and President Obama has announced that he would veto the bill if it does reach his desk. While Congress ultimately is expected to pass an SGR fix, the scope and timing of any such bill is uncertain at this time.

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On November 3, 2011, CMS is hosting a National Provider Call on "Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Minimum Data Set (MDS) 3.0 and Resource Utilization Group-Version 4 (RUG-IV) Policies and Clarifications.” CMS will provide a brief overview of the policies, along with clarifications on FY 2012 SNF PPS policies related to the MDS 3.0. The call will cover: Allocation of group therapy; Changes to the MDS Assessment Schedule; End of Therapy Other Medicare Required Assessment (OMRA) Clarifications; End Of Therapy with Resumption; and Change of Therapy (COT) OMRA. A question and answer session will follow the CMS presentations.  Registration is required to participate in the call. 

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On August 23, 2011, CMS will host a National Provider Call on "Skilled Nursing Facility (SNF) Prospective Payment System (PPS) FY 2012 Policy Changes Relating to the Minimum Data Set (MDS) 3.0." The session is scheduled to cover: allocation of group therapy; student supervision; changes to the MDS assessment schedule; End of Therapy Other Medicare Required Assessment (OMRA) clarifications; End Of Therapy with Resumption; Change of Therapy OMRA; and transition timeline for new policies. Registration will close at 1:30 pm on August 22 or when available space has been filled.

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On July 29, 2011, the Centers for Medicare & Medicaid Services (CMS) released its final update to Medicare skilled nursing facility (SNF) prospective payment system (PPS) rates and policies for fiscal year (FY) 2012. Under the final rule, SNF rates would be reduced by 11.1% -- or $3.87 billion – compared to FY 2011 levels. The rate reduction results from adoption of a controversial plan to “recalibrate” SNF PPS rates to correct what CMS characterizes as an “unexpected spike” in payments in FY 2011, when CMS implemented the Resource Utilization Groups, version four (RUG-IV) patient classification system. Although CMS intended implementation of RUG-IV to be budget-neutral, CMS maintains that claims under the updated system show a significant increase in Medicare expenditures, primarily due to changes in therapy use under the new classification system. CMS declined to phase in the reductions over several years, as had been recommended by commenters, since it “would continue to reimburse facilities at levels that significantly exceed intended SNF payments.” Instead, CMS is applying a 12.6% recalibration reduction, which is partially offset by a 1.7% standard rate update (which represents a 2.7% market basket update reduced by a 1.0% percentage point “multifactor productivity adjustment” mandated by the Affordable Care Act, or ACA). CMS observes that despite the recalibration, payments in FY 2012 will be 3.4% higher than in 2010, before the adoption of RUG-IV. In addition to these payment policies, the final rule establishes a standard for group therapy, defined as therapy provided simultaneously to four patients, regardless of payer source, who are performing the same or similar activities and are supervised by a therapist or assistant who is not supervising any other individuals. The rule also adopts policies related to the reporting and allocation of group therapy minutes, and requires new reporting when changes occur in the intensity of therapy. CMS also has adopted other modifications to the schedule for completing the MDS 3.0 patient assessment instrument. In addition, CMS has revised its policy regarding supervision of therapy students to provide that a therapy student working in an SNF will no longer be required to be in the supervising therapist’s “line of sight.” Note that CMS is deferring the adoption of the proposed rule to implement an ACA provision requiring Medicare SNFs and Medicaid nursing facilities to disclose certain information regarding the ownership and organizational structure of their facilities; these requirements will be finalized in a separate rule early in CY 2012.  The official version of the rule will be published on August 8, 2011.

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The OIG has issued a report entitled “Medicaid Services Provided in an Adult Day Health Setting.” Based on a random sample of 300 adult day health service days from the last 6 months of 2007, the OIG found that: meals and/or snacks were the only documented services for Medicaid beneficiaries on 34% of service days; about 43% of therapy services were provided by staff who lacked required supervision; and in some cases documentation lacked appropriate physician orders or was inconsistent with plans of care. The OIG recommends that CMS: specify what services are required for Medicaid reimbursement of adult day health services; direct states to enforce therapy supervision requirements; and address the centers that did not respond to repeated OIG data requests. CMS concurred with the recommendations. 

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CMS published a proposed rule on July 12, 2011 that would decrease Medicare home health agency (HHA) PPS payments for CY 2012 by 3.35%, or $640 million, compared to 2011 levels. This reimbursement cut would reflect a 2.5% market basket update that is reduced by 1 percentage point as mandated by the ACA, a 0.1% wage index increase, and a 5.06% reduction to account for increases in aggregate case-mix that are unrelated to changes in the patient’s health status. In addition, if an HHA does not submit required quality data, the home health market basket percentage increase would be reduced by an additional 2 percentage points. The rule also would make a number of case-mix changes, including removing two hypertension codes from the case-mix system, lowering payments for high-therapy episodes, and recalibrating case-mix weights. The rule also addresses a number of home health policy issues. For instance, the rule would allow physicians who attend to a home health patient in an acute or post-acute setting to inform the certifying physician of their encounters with the patient in order to satisfy the requirement that a certifying physician or an allowed non-physician practitioner (NPP) has see a patient prior to certifying a patient as eligible for the home health benefit. CMS also proposes to clarify its ‘‘confined to the home’’ definition and certain occupational therapy policies. Comments on the proposed rule will be accepted until September 6, 2011. 

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The OIG released a report entitled "Changes in Skilled Nursing Facilities Billing in Fiscal Year 2011."  The report discusses changes in skilled nursing facility (SNF) therapy reimbursement adopted in 2011 that unintentionally led to higher payments to SNFs. The OIG recommends that CMS make reimbursement changes in the FY 2012 rulemaking process to address the increased payments to SNFs. The OIG also recommends that CMS modify SNF group therapy billing policies and further adjust payments to reflect beneficiaries’ care and resource needs. Note that CMS’s May 6, 2011 proposed SNF PPS rule for FY 2012, apparently in alignment with the OIG recommendations, does set forth the option of applying a prospective adjustment to case mix weights to address the increase in Medicare expenditures associated with implementation of the Resource Utilization Groups, version four (RUG-IV) patient classification system, which would cut rates by $4.47 billion. CMS has not yet finalized this rule, but by law CMS is required to issue the SNF PPS update before August 1. In a separate report, the OIG examined the extent to which Medicare paid for Part B services for nursing home stays not paid for by Part A (non-Part A stays). Non-Part A stays are not subject to the same “consolidated billing” requirements as Part A stays, so individual providers may bill for services rendered to these individuals, which the OIG contends presents program integrity vulnerabilities. The OIG estimates that Medicare paid $4.9 billion in 2008 for Part B services during non-Part A stays; the OIG did not examine the medical appropriateness of these Part B services. Payments varied widely across service categories and by state. Three service categories – therapy services, evaluation and management, and major and minor medical procedures – accounted for 58% of the total payments, while the State of Louisiana had the highest average daily payments. The OIG concludes that its findings “will guide further review and identification of providers of Part B services warranting scrutiny by OIG and CMS.”

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The HHS Office of Inspector General (OIG) has issued a report entitled "Review of Physician Therapy Services Provided During Home Health Episodes in Calendar Year 2008." The OIG notes CMS includes in the home health prospective payment system (HH PPS) base rate physician-provided therapy services that are not subject to the consolidated billing requirement and are billable by physicians. As a result, when a physician bills Medicare Part B for therapy provided to a beneficiary during a home health episode, Medicare pays twice for the same service (once to the physician under Part B and again to the home health agency under the HH PPS).   The OIG recommends that CMS eliminate any duplicate payments when rebasing home health payments by adjusting the HH PPS rate to exclude physician-provided therapy services or by making physician therapy services subject to the consolidated billing requirement. CMS agreed and provided information on action that it planned to take to address the recommendation.

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On April 28, 2011, CMS released its proposed update to Medicare skilled nursing facility (SNF) PPS rates and policies for FY 2012. CMS sets forth two very different options under consideration for revising rates for 2012. The first option, applying the standard rate update methodology, would increase rates by 1.5% ($530 million) as a result of a 2.7% market basket update reduced by a 1.2 percentage point “Multifactor Productivity Adjustment” mandated by the ACA. The second option seeks to address what CMS characterizes as an “unexpected spike” in SNF PPS payments in FY 2011, when CMS implemented the Resource Utilization Groups, version four (RUG-IV) patient classification system. Although CMS intended implementation of RUG-IV to be budget-neutral, initial claims under the updated system show a significant increase in Medicare expenditures, in part because the proportion of patients grouped in the highest-paying RUG therapy categories greatly exceeded CMS expectations. Although CMS will continue to analyze claims data, the agency is considering making a prospective adjustment to case mix weights to “restore overall payments to their intended levels,” which would cut rates by $4.47 billion. While this amount would be partly offset by the 1.5% update, this option would still result in a net payment decrease of $3.94 billion (-11.3%) for FY 2012. In addition to these payment policies, the proposed rule would implement an ACA provision requiring Medicare SNFs and Medicaid nursing facilities to disclose certain information in a standardized format to HHS and other entities regarding the ownership and organizational structure of their facilities. CMS also proposes to establish a standard that defines group therapy under the SNF PPS as therapy provided simultaneously to four patients who are performing similar therapy activities, and to require the allocation of group therapy minutes in assigning RUG-IV payment groups. In addition, the rule would require a new Medicare-required assessment to be completed by SNFs when changes occur in the intensity of therapy, and CMS proposes modifications to the schedule for completing the MDS 3.0. In addition, CMS proposes revising its current policy regarding supervision of therapy students to provide that a therapy student working in an SNF would no longer be required to be in the supervising therapist’s “line of sight.”  The official version of the rule will be published on May 6, 2011. Comments on the proposal will be accepted until June 27.

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CMS is hosting three listening sessions on provider compliance issues March 22-24, 2011, focusing on a number of OIG reports. The schedule is as follows:

Tuesday, March 22

• Inappropriate Medicare Payments for Transforaminal Epidural Injections Services
• Medicare Part B Services During a Non-Part A Nursing Home Stays: Mental Health
• Medicare Part B services during Non-Part A Nursing Home Stays: Enteral Nutrition Therapy
• Review of Point Of Service (POS) Coding for Physician Services Processed by Part B Carriers

Wednesday, March 23

• Medicare Part B Payments for Ambulance Services Rendered to Beneficiaries During Inpatient Stays
• Review of Inpatient Rehabilitation Facilities (IRF) Compliance with Medicare Transfer Regulation
• Part A ER Department Adjust Nationwide Review of Medicare Part A Emergency Dept Adjustments for Inpatient Psychiatric Facilities
• Nationwide Review of IRF Transmission of Patients’ Assessment Instruments

Thursday, March 24

• Review of Claims for Capped Rental Durable Medical Equipment
• Questionable Billing for Physicians Services for Hospice Beneficiaries
• Questionable Billing for Medicare Outpatient Therapy Services
• Chiropractor Outreach and Education

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A new OIG report, “Questionable Billing for Medicare Outpatient Therapy Services,” reviews 20 counties with the highest Medicare outpatient therapy payments per beneficiary and overall high outpatient utilization levels in 2009. The report also separately analyzes Miami-Dade County, Florida, because it had the highest average Medicare payments per beneficiary among the high-utilization counties (three times the national average) and the highest total Medicare payments for outpatient therapy in 2009. Each of these counties exhibited questionable billing characteristics, which the OIG identified as: (1) services for which providers indicated that an annual cap would be exceeded, (2) beneficiaries whose providers indicated that an annual cap would be exceeded on the beneficiaries’ first date of service, (3) payments for beneficiaries who received outpatient therapy from multiple providers, (4) payments for therapy services provided throughout the year, (5) payments for services that exceeded an annual cap, and (6) providers who were paid for more than 8 hours of outpatient therapy provided in a single day. The OIG recommended that CMS target for further review outpatient therapy claims in high-utilization areas and those with questionable billing characteristics. The OIG also called on CMS to revise the current therapy cap exception process. CMS concurred with the OIG’s recommendations.

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The OIG has released a report entitled "Questionable Billing by Skilled Nursing Facilities." According to the OIG, skilled nursing facilities (SNFs) increasingly billed Medicare for higher paying source utilization groups (RUG) from 2006 to 2008, while beneficiary characteristics remained largely unchanged. For instance, payments for ultra high therapy increased by almost 90% during this period. For-profit SNFs were more likely than nonprofit or government SNFs to bill for higher paying RUGs, the OIG found. The OIG recommends that CMS: adjust SNF rates if necessary; modify the method for determining therapy needs; enhance monitoring of SNFs that bill for higher paying RUGs; and follow up on SNFs identified as having questionable billing.

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As previously reported, last week Congress approved legislation (H.R. 4994) that averts a 25% Medicare physician fee schedule cut scheduled to take effect January 1, 2011 under the statutory “sustainable growth rate” formula (Congress had already approved legislation to provide a one-month fix through December 2010). In addition, H.R. 4994 continues a variety of expiring Medicare provisions and makes other health policy changes, funded primarily through a change in limits on recoveries of excessive tax credits provided to subsidize insurance premiums under the ACA. The legislation still is awaiting the President’s signature, although the White House has previously expressed its support for the bill.

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Today the House of Representatives overwhelmingly approved a bill (H.R. 4994) that averts a 25% Medicare physician fee schedule cut scheduled to take effect January 1, 2011 under the statutory “sustainable growth rate” formula (Congress had already approved legislation to provide a one-month fix through December 2010). The vote, which followed a unanimous Senate vote yesterday, sends the measure to the President, who has expressed his support for the legislation. In addition to extending current Medicare physician payment rates through the end of 2011, H.R. 4994 continues a variety of expiring Medicare provisions and makes other health policy changes, funded primarily through a change in limits on recoveries of excessive tax credits provided to subsidize insurance premiums under the Affordable Care Act (ACA). Other highlights of the legislation include:

• Extensions of: hospital geographic reclassifications authorized under section 508 of the Medicare Modernization Act, the Medicare physician fee schedule work geographic adjustment floor, the outpatient therapy services exception process, the authority for independent laboratories to receive direct payments for the technical component of certain pathology services, ambulance service and physician fee schedule mental health add-on payments, the outpatient hold harmless provision, Medicare reasonable costs payments for certain clinical diagnostic laboratory tests furnished by certain rural hospitals, the qualifying individual program, the Transitional Medical Assistance program, and the Special Diabetes Programs.
• Implementation on October 1, 2010 of version four of the Resource Utilization Groups (RUG IV) case mix system for purposes of the Medicare skilled nursing facility prospective payment system.
• Clarification that residency positions that are being shared between teaching hospitals under an “affiliation agreement” may not be redistributed to other hospitals.
• Inclusion of orphan drugs in the definition of “covered outpatient drugs” with respect to children’s hospitals under the 340B drug discount program. 
• Various technical corrections to Medicaid and CHIP relating to exclusion from participation, children’s income eligibility levels, payment error rate measurement, coverage of children of state employees, and payment for electronic health records. 
• A $275 million reduction in the Medicare Improvement Fund over 10 years.
• $19 billion in savings by revising the limits on recoveries of tax credits under the ACA. Currently, if an individual’s income actually is higher than the amount that was used to calculate advanced premium tax credits, there is a limit on how much of the excessive credits certain low-income individuals and families must return to the government. The legislation replaces these limits with a scaled repayment structure.

As noted, this is the second time in a month that Congress has considered Medicare physician reimbursement. On November 30, 2010, President Obama signed into law H.R. 5712, “The Physician Payment and Therapy Relief Act of 2010.” The law provided a one-month continuation of physician fee schedule rates, paid for by adopting – with modification – the Centers for Medicare & Medicaid Services’ (CMS) new multiple procedure payment reduction (MPPR) policy for outpatient therapy procedures included in the 2011 MPFS final rule. As approved by Congress, the provision applies a 20% (rather than 25% in the CMS rule) MPPR to the practice expense component of Medicare payment for the second and subsequent therapy services when multiple outpatient therapy services are furnished to a single patient by a single provider on the same day. 

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On November 30, 2010, President Obama signed into law H.R. 5712, “The Physician Payment and Therapy Relief Act of 2010.”   The law continues current temporary Medicare physician fee schedule rates through the end of 2010, avoiding a steep cut previously scheduled for December 1, 2010, financed by adopting – with modification – CMS’s new multiple procedure payment reduction policy for outpatient therapy procedures for 2011.   For more information on the legislation, see our earlier article.

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On November 29, 2010, the House of Representatives approved H.R. 5712, a one-month Medicare physician fee schedule (MPFS) “fix,” financed by an outpatient therapy reimbursement change. Specifically, H.R. 5712 would continue current temporary MPFS rates through the end of the year, averting a 23% cut scheduled to go into effect December 1, 2010 under the statutory “sustainable growth rate” (SGR) formula. The legislation would be financed by adopting – with modification – the Centers for Medicare & Medicaid Services’ (CMS) new multiple procedure payment reduction (MPPR) policy for outpatient therapy procedures included in the final 2011 Medicare physician fee schedule rule. As approved by Congress, the provision would apply a 20% (rather than 25% in the CMS rule) MPPR to the practice expense component of Medicare payment for the second and subsequent therapy services when multiple outpatient therapy services are furnished to a single patient by a single provider on the same day. H.R. 5712 is now cleared for the President, who is expected to sign the measure into law. Note that when this latest stop-gap measure expires, physicians still will be facing a roughly 25% cut in MPFS payments under the SGR formula unless Congress acts yet again to avert the cuts.  

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On November 29, 2010, CMS is publishing its final Medicare physician fee schedule (MPFS) rule for 2011.  The rule addresses a wide variety of Medicare Part B policies, including many changes mandated by the ACA, as detailed after the jump.

Among many other things, the final rule:

• Establishes a 2011 conversion factor of $25.5217, compared to the conversion factor of $36.8728 applicable June 1-November 30, 2010. This steep drop is due primarily to the statutory sustainable growth rate (SGR) formula, which reduces rates by a total of 24.9% from November 2010 to January 2011 (reflecting the December 1, 2010 expiration of a temporary increase established by Congress plus an additional 2.9% cut that goes into effect January 1, 2011). CMS also has adopted a rescaling /budget neutrality adjustment of -8.2%, which is designed to offset rescaled relative value units and a rebased Medicare Economic Index (MEI) for 2011. Congress is expected to once again step in to at least mitigate the SGR cuts, but the timing and scope of any such action is still speculative at this time.
• Updates several durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program policies, including provisions that: expand Round 2 by adding 21 of the largest metropolitan statistical areas (MSAs); subdivide three of the largest MSAs; implement a national mail order competitive bidding program for diabetic testing supplies and make other refinements related to the furnishing of diabetes supplies; modify the definition of mail-order suppliers; create an appeals process for suppliers considered to be in breach of contract; and modify policies related to off-the-shelf orthotics, oxygen and oxygen equipment, and reimbursement to grandfathered suppliers. In addition, the rule addresses payment policy for power wheelchairs outside of the competitive bidding program.
• Implements ACA provisions that assign a 75% utilization rate assumption to certain expensive diagnostic imaging equipment used in diagnostic CT and MRI services, and that increase the multiple procedure payment reduction (MPPR) applied to the technical component of certain single session imaging services to contiguous body parts from 25% to 50% for more than one imaging procedure preformed in the same session. CMS also adopted its proposal (not mandated by the ACA) to apply the MPPR policy across imaging families and not limited to contiguous body areas. In addition, the rule implements an ACA requirement that physicians who refer patients to certain imaging services under the in-office ancillary services exception to the physician self-referral prohibition inform patients of their option to receive these services from other area suppliers and to provide a list of at least five alternative suppliers within a 25-mile radius of the physician’s office.
• Establishes a multiple procedure payment reduction policy applicable to certain Part B outpatient therapy services, under which CMS will apply a 25% payment reduction to the practice expense component of the second and subsequent therapy services for certain multiple therapy services furnished to a single patient in a single day (note that under the proposed rule, CMS would have imposed a 50% reduction).
• Updates certain payment policies for Part B drugs, including establishing a new “carry over” process to address certain delays in manufacturer reporting of pricing data for multiple-source drugs, and establishing an “intentional overfill” policy under which the Medicare payment limit will based on the amount of product in a vial or container as reflected on the FDA-approved label.
• Finalizes a proposal to use the annual MPFS rulemaking to consider changes in practice expense (PE) price inputs for supplies and equipment, but CMS deferred adopting its proposal to base PE inputs for supplies $150 or more on the U.S. General Services Administration medical supply schedule while it continues to review this policy.
• Implements ACA provisions that: establish the methodology for applying the ACA’s “multi-factor productivity” adjustment to the updates for the ASC, ambulance, clinical laboratory and DMEPOS fee schedules; update the Physician Quality Reporting Initiative and Electronic Prescribing Incentive Program; eliminate beneficiary coinsurance for most preventive services and expand coverage of certain preventive services; require the Secretary to identify and make appropriate adjustments to the relative values of misvalued services; and revise the timely filing requirements for Medicare claims.

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On August 27, 2010, the Centers for Medicare & Medicaid Services (CMS) published a final rule that clarifies and expands the requirements that suppliers of durable medical equipment and prosthetics, orthotics, and supplies (DMEPOS) must meet to establish and maintain Medicare billing privileges. Among other things, the rule prohibits suppliers from sharing a practice location with any other Medicare supplier or provider, unless the practice location is: (1) where certain physicians or nonphysician practitioners furnish items to their own patients as part of their professional service; (2) where a physical or occupational therapists furnishes items to their own patients as part of their professional service; or (3) where a hospital, home health agency, skilled nursing facility, or other Part A provider that is enrolled in Medicare co-locates with a DMEPOS supplier that meets all other supplier standards and that is owned by that Part A provider and is a separate unit. The rule also imposes new physical facility requirements on suppliers, including square footage, accessibility, signage, and storage requirements (these rules also apply to “closed door” businesses such as a pharmacy or supplier providing services only to beneficiaries residing in a nursing home). Among other things, the rule also:

• Clarifies the prohibition on the direct solicitation of Medicare beneficiaries.
• Defines adverse final action and allows CMS to reopen all Medicare claims paid on or after the date of a final adverse action in order to establish an overpayment determination.
• Prohibits suppliers from contracting with another individual to perform licensed services, with certain exceptions.
• Requires the use of a primary business telephone, and prohibits the use of cellular phones, beepers, pagers, or answering machines/answering services as the primary business telephone.
• Mandates that suppliers obtain oxygen from a state-licensed oxygen supplier (as applicable in the state).
• Requires suppliers to maintain ordering and referring documentation consistent with regulations.
• Establishes minimum hours of operation (with certain exceptions).
• Permits CMS to revoke a supplier's billing privileges if it is found not to meet certain supplier standards.

The effective date is September 27, 2010 (although there are separate deadlines for compliance with the physical facility standards for existing suppliers with leases that expire after that date).

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This month CMS mailed its first Medicare comparative billing reports (CBRs) to as many as 5,000 physical therapists, comparing the providers' individual billing practices for specific procedures and services with those of their peer group. The initial CBRs are based on 2009 Medicare claims data from outpatient physical therapy services provided by independent physical therapists. Physical therapists were selected for the program based on identified vulnerabilities in their billing procedures involving the use of the KX modifier (which indicates that a service was medically necessary and justified by medical records, that the physical therapy financial limitation cap was met, and that a patient's condition requires further treatment). The CBR program ultimately is designed to reduce improper payments and educate providers on Medicare billing requirements. 

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On August 19, 2010, CMS is hosting a Special Open Door Forum conference call on the "Developing Outpatient Therapy Payment Alternatives" (DOTPA) research project.  DOTPA is designed to collect and analyze therapy-related information tied to beneficiary need and the effectiveness of therapy in order to develop alternative payment methods to the current financial cap on outpatient therapy services.  DOTPA intends to enroll providers as data collection sites through the remainder of this year.  The Special Open Door Forum is intended for all institutional and noninstitutional providers of outpatient physical therapy, occupational therapy, and speech language pathology reimbursed under Medicare Part B, along with physicians who refer beneficiaries for outpatient therapy.  The call will provide background on the DOTPA program along with information on the provider enrollment and setup process, training resources, and data collection operations.

 

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On July 13, 2010, CMS is publishing its proposed rule to update the Medicare physician fee schedule (MPFS) for 2011. The proposed rule addresses a wide variety of Medicare Part B policies, including many policy revisions mandated by the ACA. CMS will accept comments on the proposed rule until August 24, 2010. A summary of the rule is available after the jump:

Among many other things, the proposed rule would:

• Provide a negative 6.1% update for 2011 under the statutory sustainable growth rate (SGR) formula. Coupled with the expiration of a temporary 2.2% boost in MPFS payments on November 30, 2010 (see summary of related legislation below) and the more than 21% cut that goes into effect December 1, 2010, along with a proposed 0.921 “rescaling factor”/ budget neutrality adjustment, the conversion factor will be reduced by approximately 29% in 2011 unless Congress takes further action.
• Update several durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program policies, including provisions that: expand Round 2 by adding 21 of the largest metropolitan statistical areas (MSAs); implement a national mail order competitive bidding program for diabetic testing supplies and make other refinements related to the furnishing of diabetes supplies, create an appeals process for suppliers considered to be in breach of contract; and modify policies related to off-the-shelf orthotics, oxygen and oxygen equipment, and reimbursement to grandfathered suppliers. In addition, the rule addresses payment policy for power wheelchairs and oxygen and oxygen equipment outside of competitive bidding.
• Implement ACA provisions that reduce Medicare payments for certain diagnostic imaging equipment, including assigning a 75% utilization rate assumption to certain expensive diagnostic imaging equipment used in diagnostic CT and MRI services and increases the multiple procedure payment reduction applied to the technical component of certain single session imaging services to contiguous body parts from 25% to 50% for more than one imaging procedure preformed in the same session (CMS also is proposing to apply the MPPR policy across imaging families and not limited to contiguous body areas).  CMS estimates that this provision, along with the equipment utilization change, will save Medicare $160 million in 2011.  In addition, CMS discusses how it will implement the ACA requirement that physicians who refer patients to certain imaging services under the in-office ancillary services exception to the physician self-referral prohibition inform patients of their option to receive these services from other area suppliers and to provide a list of alternative suppliers.
• Establish a multiple procedure payment reduction (MPPR) policy applicable to certain outpatient therapy services reimbursed under Medicare Part B, under which CMS would apply a 50% payment reduction to the practice expense (PE) component of the second and subsequent therapy services for certain multiple therapy services furnished to a single patient in a single day..
• Update certain payment policies for Part B drugs, including implementing the ACA provision providing for Medicare payment of biosimilar biological products using the ASP methodology.
• Implement an ACA requirement that the Secretary periodically review and identify potentially misvalued codes and make appropriate adjustments to the relative values of misvalued services.  As part of this effort, CMS has asked the RUC to review services that fall into five categories: high volume/cost items on the RUC's "Multi-Specialty Points of Comparison list of procedures, codes with low work values that are reported with multiple units; codes with high volume and low work RVUs; 23 hour stay services, and procedures that were inpatient and have subsequently migrated to the outpatient setting.
• Base future PE updates for certain high cost supplies (priced at $150 or more) on the U.S. General Services Administration medical supply schedule.
• Establish the methodology for applying the ACA’s “multi-factor productivity” adjustment to the updates for the ASC, ambulance, clinical laboratory and DMEPOS fee schedules.
• Update a variety of policies applicable to payment for renal dialysis services furnished by end stage renal disease facilities.
• Implement ACA provisions that authorize Physician Quality Reporting Initiative incentive payments through calendar year 2014, with a penalty thereafter for eligible professionals who do not provide satisfactory reports, and make revisions to the Electronic Prescribing Incentive Program and the Physician Feedback Program.
• Implement ACA provisions that eliminate beneficiary coinsurance for most preventive services and expand coverage of certain preventive services.

 

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HHS Secretary Kathleen Sebelius has issued a letter to governors and independent insurance commissioners to gauge interest in the temporary high risk pool program established by the PPACA to provide coverage to people who are uninsured because of pre-existing conditions. CMS also has issued initial guidance to states on the new state option under the PPACA to provide Medicaid coverage for the lowest income adults without regard to disability, parental status, or most other categorical limitations. Likewise, CMS has issued a number of informal announcements about implementation of various PPACA provisions, including announcements addressing:

• The Extension of Ambulance Add-Ons for Ambulance Services
• Timely Filing Requirements for Medicare Fee-for-Service Claims
• Medicare Home Health Rural Add-On
• Extension of Moratorium that Allows Independent Laboratories to Bill for the Technical Component of Physician Pathology Services Furnished to Hospital Patients
• Extension of Therapy Cap Exceptions Process
• Continuation of Payments to Indian Health Service Providers, Suppliers, Physicians, and other Practitioners for Certain Part B Services
• Extension of the Outpatient Hold-Harmless Provision
• Extension of Reasonable Cost Payment for Clinical Lab Tests Performed by Hospitals with Fewer than 50 Beds in Qualified Rural Areas

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Today the House approved H.R. 4851, the Continuing Extension Act of 2010, by a voice vote. The legislation, which still awaits Senate action, would:  extend current Medicare physician fee schedule rates through April 30, 2010 (preventing a 21.2% payment reduction), extend the outpatient therapy cap exceptions process through April 30, 2010; clarify that doctors in outpatient facilities are eligible for health information technology incentive payments; extend COBRA premium assistance subsidies through April 30, 2010; and make other policy changes.  Congress still is grappling with funding a package of longer-term policy extenders.

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Last night the Senate approved a variety of Medicare and Medicaid policy extenders as part of its version of H.R. 4213, the “Tax Extenders Act."  This legislation builds on the recently-enacted “Temporary Extension Act of 2010” (H R. 4691), which extended 2009 Medicare physician fee schedule rates through the end of March 2010 (in lieu of a 21.2% across-the-board cut previously set to take effect March 1, 2010) and continued the Medicare outpatient therapy cap exceptions process through March 2010.  With regard to Medicare and Medicaid policy, the Senate-approved version of H.R. 4691 would, among other things:

• Extend the current freeze on Medicare physician fee schedule rates through September 30, 2010 (in the absence of Congressional action, the statutory sustainable growth rate formula would require a 21.2% rate cut on April 1, 2010).
• Extend through December 31, 2010: the Medicare outpatient therapy cap exceptions process, add-on payments for Medicare mental health services, increased Medicare rates for ambulance services, the 1.0 floor on the work geographic practice cost index, the authority for independent laboratories to receive direct payments for the technical component for certain pathology services, and the hospital outpatient hold harmless provision for small rural hospitals.
• Exempt certain pharmacies from accreditation standards for suppliers of durable medical equipment, prosthetics, orthotics, and other supplies (DMEPOS).
• Clarify that non-hospital-based physicians and other health professionals who bill Medicare and Medicaid through a hospital may qualify for incentives for use of electronic health records.
• Extend certain legislative relief for Medicare long-term care hospital services.
• Continue the authority of special needs plans, cost plans, and senior housing programs to offer Medicare Advantage plans.
• Extend through June 30, 2011 the increased federal medical assistance percentage (FMAP) funding made available to states under the American Recovery and Reinvestment Act of 2009 (ARRA).

Note that the House approved a different version of the measure in December. It is not clear at this point what the timetable or process will be for reconciling the differences between the two measures.

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Last night the Senate joined the House in approving H.R. 4691, the Temporary Extension Act of 2010, which President Obama promptly signed into law.  The legislation includes a one-month extension of the Medicare physician fee schedule freeze in lieu of the 21.2% cut that briefly went into effect March 1, 2010 (that is, the law continues to hold payments at 2009 levels through the end of March). The measure also extends the outpatient therapy cap extension process, which had expired at the end of 2009, through March 31, 2010.  In addition, the law extends COBRA insurance premium assistance through March 31, 2010. Note that lawmakers are negotiating a longer-term extension of expiring Medicare provisions, along with an extension of enhanced federal Medicaid matching payments and other health policy revisions, as part of a broader jobs bill, the "American Workers, State and Business Relief Act."

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On February 25, 2010, the House of Representatives approved H. R. 4691, the “Temporary Extension Act of 2010,” by a voice vote. Among other things, the bill would extend current Medicare physician fee schedule rates through the end of March 2010; in the absence of such an extension, Medicare payments will be subject to a 21.2 % across-the-board cut on March 1, 2010 under the statutory sustainable growth rate (SGR) formula. The bill also would extend the Medicare outpatient therapy cap exceptions process – which expired at the end of 2009 – through March 2010.  The bill now moves to the Senate, where its fate is uncertain because at least one Senator is objecting to the legislation's cost not being offset. A vote on the measure therefore may not come until mid-week next week if parliamentary steps (cloture vote) must be taken to move the legislation.  Even if the SGR fix does not occur before March 1, CMS can hold claims for physician services for 14 days before processing them with the 21.2 % fee cut.

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On February 11, 2010, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) released their draft “Hiring Incentives to Restore Employment (HIRE) Act.” In addition to providing tax incentives to spur hiring and extending uninsurance and COBRA health insurance premium subsidies, the legislation would extend a number of Medicare provisions, some of which expired at the end of 2009. As noted above, the legislation would extend until October 1, 2010 the current freeze on Medicare physician fee schedule payments, further blocking the 21.2% fee schedule cut now set for March 1, 2010. The bill also would, among other things: extend the outpatient therapy cap exceptions process; extend certain legislative relief for long-term care hospitals; extend payment provisions impacting mental health providers, ambulance services, certain physician and physician pathology services, rural health providers; extend certain Medicare Advantage policies; exempt certain pharmacies from Medicare supplier accreditation requirements; and clarify eligibility for physician health information technology incentive payments.  Note that after the Finance Committee released its draft bill, however, Majority Leader Harry Reid (D-NV) announced that the Senate will consider job promotion legislation in stages, and the first bill will not include the Finance Committee health provisions.  The Senate is expected to take up the jobs bill later this month. The House approved a separate jobs package in December 2009; differences between the two chambers’ approaches would need to be reconciled before a bill (or bills) could be sent to the President. 

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CMS has issued an educational article for providers regarding certain Medicare payment policies that expired as of December 31, 2009, including the therapy cap exceptions process and the ability of independent laboratories to bill for the technical component of physician pathology services furnished to hospital patients. CMS notes that these policies could be extended by Congress. Health care providers therefore may choose, to the extent possible, to hold their claims for Medicare services provided on or after January 1, 2010 until it becomes clearer as to whether new legislation will be enacted to extend these provisions. 

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The Centers for Medicare & Medicaid Services (CMS) has released its final rule updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2010. Most notably, the final rule calls for a 21.2% across-the-board cut in MPFS paymentsfor 2010 due to the statutory sustainable growth rate (SGR) formula (CMS had forecast a 21.5% cut in the proposed rule). For 2010, the SGR formula results in a conversion factor of $28.4061, compared to the 2009 conversion factor of $36.0666. [NOTE:  CMS subsequently published a notice correcting the conversion factor; the new conversion factor is $28.3895].   As noted above, Congressional leaders are seeking a legislative solution to block the pending cut, but the outcome of these reform efforts are not certain at this time. CMS did exercise its administrative authority to remove drugs from the definition of “physicians’ services” for purposes of the SGR formula, which CMS expects will reduce the number of future years in which physicians are projected to experience a negative update under the SGR formula, but which does not impact 2010 rates. The sweeping rule affects a wide range of other Medicare policies, as discussed after the jump.

• CMS is cutting technical component payments for certain non-hospital imaging procedures by changing the imaging equipment usage assumption for equipment priced over $1 million from the current 50% usage rate to a 90% usage rate, which will reduce per procedure practice expense (PE) relative value units (RVUs) -- and thus the per procedure technical component reimbursement -- for services using such imaging equipment).   In the final rule, CMS decided only to apply this change to MRIs and CTs. The payment cut will be transitioned with full implementation not for four years. Beginning 2010, 75% of the practice expense is paid based on the old usage rate with full implementation in 2013. CMS also has adopted provisions to begin implementing the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) provision mandating an accreditation process for entities furnishing the technical component of certain advanced diagnostic testing procedures by January 1, 2012. CMS also is publishing a separate notice inviting independent accreditation organizations to participate in the accreditation program. 
• The final rule revises the Electronic Prescribing Incentive Program and the Physician Quality Reporting Initiative (PQRI) to, among other things, simplify e-prescribing reporting requirements, provide additional reporting options (including an electronic health record-based reporting mechanism), allow group practices to be considered successful e-prescribers; and expand PQRI quality measures. 
• CMS is adopting its proposal to refine malpractice RVUs to redirect payment to physicians with the highest malpractice costs.
• CMS is ending payment for consultation codes and instead requiring use of evaluation and management (E/M) codes. Note that under the final rule, CMS is making an exception to this policy for telehealth consultations and maintaining payment for G-codes used to bill for these consultations. Savings from the discontinuation of consultation codes are being redistributed to increase payments for the existing E/M services and to the payment for the surgical global period.
• The final rule clarifies the "stand in the shoes" standard for considering compensation arrangements under Stark.
• CMS is establishing a process for submitting claims for damages caused by the MIPPA provision terminating contracts awarded in 2008 under the durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) competitive bidding program, and making changes in the “grandfathering” rules for noncontract suppliers. CMS is also finalizing policy changes regarding maintenance and servicing of oxygen equipment. 
• The rule provides that the annual per beneficiary outpatient therapy caps for CY 2010 will be $1860 each for (1) outpatient physical therapy and speech-language pathology services combined, and (2) outpatient occupational therapy services. CMS also notes that its authority to provide for exceptions to therapy caps will expire on December 31, 2009, unless the Congress acts to extend it.
• The final rule implements a variety of other Part B policies, including provisions that: establish Medicare coverage of cardiac and pulmonary rehabilitation services and chronic kidney disease education; update end-stage renal disease (ESRD) facility rates; require authorized compendia used to determining medically-accepted indications of drugs and biologicals used off-label in anti-cancer chemotherapeutic regimens to have a transparent process to evaluate therapies and identify potential conflicts of interests; revise certain requirements under the Part B drug competitive acquisition program. 

The official version of the rule is scheduled to be published in the Federal Register on November 25, 2009. CMS will accept comments on certain provisions of the final rule until December 29, 2009. Specifically, CMS is accepting comments on the following issues: interim RVUs for selected codes, the physician self-referral designated health services, services for consideration for the Five-Year Review of work RVUs, and whether additional guidance is needed regarding CMS’s policy regarding services provided under arrangement.  

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On July 15, 2008, the House and Senate overrode the President's veto of H.R. 6331, the “Medicare Improvements for Patients and Providers Act of 2008” (MIPPA).  The law rescinds a 10.6% cut in physician payments and delays a controversial medical equipment competitive bidding program, both of which temporarily went into effect July 1, 2008, and makes numerous other Medicare and Medicaid policy changes.  Highlights of the law include the following:

• Physician Payments: MIPPA cancels a 10.6% Medicare physician fee schedule cut that was triggered on July 1, 2008 and provides a 1.1% increase for 2009 (rather than the forecasted 5.4% cut).  The law also expands the Physician Quality Reporting Initiative, promotes electronic prescribing, and requires non-hospital advanced imaging providers to be accredited by 2012.

 

• DMEPOS Competitive Bidding.  MIPPA delays and reforms the Centers for Medicare & Medicaid Services’ (CMS) competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  H.R. 6331 terminates contracts awarded under round one, rebids those areas in 2009, and delays round two bidding until 2011.  The delay is financed by cutting fee schedule payments for round one items by 9.5% nationwide beginning January 1, 2009.  MIPPA also includes a series of procedural improvements to the bidding process. A detailed Reed Smith analysis of the MIPPA DMEPOS bidding provisions is available on our website.
• Therapy Caps Exception Process.  MIPPA extends through December 31, 2009 the outpatient therapy service cap exceptions process.
• Clinical Laboratory Services.  The act repeals the clinical lab competitive bidding demonstration project and reduces the clinical lab fee schedule update by 0.5% in each of the next 5 years.
• Medicare Advantage (MA) Provisions.  MIPPA makes a series of MA payment and policy changes, including a $1.8 billion cut in the regional MA stabilization fund in 2012 and a phase-out of the adjustment for indirect medical education. 
• Medicare Part D Drug Plans.  MIPPA sets timeframes for plan payments to pharmacies and long-term care pharmacy submission of claims; mandates coverage of certain classes of drugs; clarifies the use of Part D drug data; limits certain sales and marketing activities; and makes other Part D reforms. 
• End-Stage Renal Disease (ESRD) Provisions.  The law updates the ESRD composite rate by 1.0% for 2009 and 2010, and mandates a fully-bundled ESRD payment system and quality incentive program by January 1, 2011.
• Medicaid Drug Reimbursement.  MIPPA delays the adoption of Medicaid payment based on average manufacturer price (AMP) for multiple source drugs and prevents publication of AMP data until October 1, 2009.

Reed Smith is preparing a client memo analyzing the new law, which will be available on our web site.  

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On August 6, 2008, CMS is hosting a Special Open Door Forum to discuss Medicare payment for physical therapy, occupational therapy, and speech language pathology services, focusing on the development of alternatives to the current financial cap on such services. 

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On July 15, 2008, the House and Senate overrode the President's veto of H.R. 6331, the  "Medicare Improvements for Patients and Providers Act of 2008” (MIPPA).  The law rescinds a 10.6% cut in physician payments and delays a controversial medical equipment competitive bidding program, both of which went into effect July 1, 2008, and makes numerous other Medicare and Medicaid policy changes. The vote was 70-26 in the Senate and 383-41 in the House, following the President's veto earlier in the day. 

The following are highlights of the legislation:

• Physician Fee Schedule: MIPPA maintains physician payment rates for 2008 (rather than implement the 10.6% cut that was triggered on July 1, 2008), and provides a 1.1% increase for 2009 (rather than the forecasted 5.4% cut). The law also extends for two years the Physician Quality Reporting Initiative (PQRI), increases incentive payments for reporting by 2%, and makes other reforms to the program. The act promotes electronic prescribing (e-prescribing) by providing incentive payments for practitioners who use a qualified e-prescribing systems in 2009 through 2013, and reducing payments by 2% for providers practitioners who fail to e-prescribe beginning in 2011 (with limited exceptions). MIPPA also requires non-hospital advanced imaging providers to be accredited by 2012 and establishes a voluntary demonstration program to test the use of appropriateness criteria for advanced diagnostic imaging services.
• DMEPOS Competitive Bidding.  MIPPA delays and reforms the Centers for Medicare & Medicaid Services' (CMS) competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). The first round of the program went into effect in 10 geographic areas on July 1, 2008. H.R. 6331 terminates contracts awarded under round one and rebids those areas in 2009, with bidding for round two delayed until 2011. The delay is financed by cutting fee schedule payments for all items covered by round one bidding program by 9.5% nationwide beginning January 1, 2009, followed by a 2% increase in 2014 (with certain exceptions). MIPPA also includes a series of procedural improvements to the bidding process, and addresses quality by, among other things, requiring subcontractor accreditation, excluding complex rehabilitation wheelchairs and negative pressure wound therapy from bidding, and exempting of certain rural and low-population areas from bidding. Separately, MIPPA repeals current oxygen equipment transfer of ownership requirements.
• Therapy Caps Exception Process.  MIPPA extends through December 31, 2009 the exceptions process relative to the annual per-beneficiary limitations on outpatient therapy services.
• Clinical Laboratory Services. The act repeals the competitive bidding demonstration project for clinical laboratory services and instead reduces the fee schedule update for clinical lab services by 0.5% in each of the next 5 years.
• Medicare Advantage (MA) Provisions. MIPPA makes a series of payment and policy changes affecting Medicare Advantage plans, including a $1.8 billion cut in the MA stabilization fund for regional preferred provider organizations in 2012 and a phase-out of the adjustment for indirect medical education. 
• Medicare Part D Drug Plans. MIPPA establishes timeframes for plan payments to pharmacies and long-term care pharmacy submission of claims; codifies current coverage of certain “protected classes” of drugs; clarifies the use of Part D drug data for research and other purposes; limits certain sales and marketing activities; and makes other Part D reforms. 
• End-Stage Renal Disease Provisions. The law provides a 1.0% update to the composite rate for renal dialysis services for 2009 and 2010, requires the Secretary to establish a fully bundled ESRD payment system by January 1, 2011, and establishes a quality incentive payment program for ESRD providers, effective January 1, 2011.
• Medicaid Drug Reimbursement. MIPPA delays the adoption of Medicaid payment based on average manufacturer price (AMP) for multiple source drugs and prevent publication of AMP data until October 1, 2009.

Additional details regarding the legislation are available on the House Ways and Means Committee web site.

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Congress’ failure to enact legislation prior to July 1, 2008 to avert the 10.6 percent Medicare physician fee schedule cut that went into effect July 1, 2008 has triggered certain CMS administrative actions.   CMS has instructed its contractors to hold claims for physician fee schedule services provided in July for the first 10 business days of July. After 10 business days, contractors will begin releasing claims into processing, which will reflect the negative 10.6 percent update. If a new law is enacted which retroactively restores funding, CMS could automatically reprocess most previously-processed claims. CMS notes that providers may hold claims until it becomes clearer whether new legislation will be enacted or until cash flow becomes problematic to reduce the need to reconcile payments and simplify beneficiary billing. CMS also has reminded providers that the exception process related to outpatient therapy caps also expired June 30, 2008 since Congress did not extend the effective date of the program. Likewise, CMS has instructed contractors that due to the expiration of statutory authority, independent laboratories may no longer bill the carrier for the technical component of physician pathology services furnished to patients of a covered hospital for services on or after July 1, 2008.  Note that while Congress subsequently passed legislation by a veto-proof margin to increase physician payments and extend these expiring provisions, the timing of enactment is still unclear (see related legislative story).

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CMS has issued detailed guidance on outpatient therapy services, including personnel qualifications and the timing of recertification of plans of care, effective January 1, 2008.

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