CMS Finalizes Medicare Physician Fee Schedule Update for 2018

Delays AUC Requirement until 2020, Cuts Off-Campus Hospital Department Payments

The Centers for Medicare & Medicaid Services (CMS) has published its final Medicare physician fee schedule (PFS) rule for CY 2018. In addition to updating rates for 2018, the rule includes important policy changes, including an additional delay in implementation of appropriate use criteria (AUC) for advanced diagnostic imaging services and another reimbursement cut for off-campus hospital outpatient departments (although not as deep as proposed).  Highlights of the final rule include the following:

  • The 2018 MPFS conversion factor (CF) is $35.99096, up slightly from the 2017 CF of $35.8887.  CMS applied a 0.5% update factor specified under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which is partially offset by a -0.1% relative value unit (RVU) budget neutrality adjustment and a -0.09% “target recapture amount” (since the 0.41% savings from final revisions to “misvalued code” RVUs do not meet a statutory 0.5% target).
  • The final rule further reduced payments to certain newly-acquired, provider-based, off-campus hospital outpatient departments (which CMS calls “off-campus provider-based departments” or “off-campus PBDs”).  By way of background, the final 2017 Medicare hospital outpatient prospective payment system (OPPS) rule implemented Section 603 of the Bipartisan Budget Act of 2015, which establishes a site-neutral payment policy for off-campus PBDs.  Effective for services provided on or after January 1, 2017, off-campus PBDs are usually paid under the PFS, rather than the generally higher-paying OPPS (with certain exceptions).  The 2017 rule set PFS rates for the technical component of such non-excepted off-campus PBD services at the OPPS rate scaled downward by 50% (called the PFS Relativity Adjuster).  For CY 2018, CMS proposed to reduce the Relativity Adjuster to 25% of the OPPS rate. As a result of comments, CMS mitigated somewhat the additional reduction for these services. Specifically, CMS adopted a Relativity Adjuster of 40%, meaning that nonexcepted items and services furnished by nonexcepted off-campus PBDs will be paid a PFS rate that is 40% of the CY 2018 OPPS rate. CMS estimates that this change will cut Medicare Part B spending by $12 million for CY 2018.
  • CMS delayed by another year implementation of a Protecting Access to Medicare Act of 2014 (PAMA) requirement that physicians who order advance diagnostic imaging (ADI) services (diagnostic magnetic resonance imaging, computed tomography, and positron emission tomography/nuclear medicine) billed under the PFS, the OPPS, or the ambulatory surgery center payment system consult with AUC via a clinical decision support mechanism (CDSM).  While PAMA mandated that CMS fully implement the AUC program by January 1, 2017, CMS did not meet this deadline. In the final 2018 rule, CMS announced it will begin the Medicare AUC program on January 1, 2020 as an “educational and operations testing year” – one year later than proposed. Specifically, ordering professionals will be required to consult specified applicable AUC using a qualified CDSM when ordering applicable ADI services, and furnishing professionals will be required to report consultation information on the Medicare claim, effective January 1, 2020. However, CMS will pay claims for ADI services in 2020 regardless of whether the claims report the AUC consultation.  CMS intends to provide a voluntary participation period from July 2018 through December 2019 during which “early adopters” can begin reporting limited consultation information on Medicare claims. While CMS had discussed requiring the use of a variety of G-codes and modifiers for reporting, CMS is expected to propose in the 2019 rule less burdensome options, such as the use of a unique consultation identifier on claims. CMS also is expected to propose methodologies for identifying physicians who are outliers in their ordering practices and who may have their ADI orders subject to possible prior authorization review.
  • CMS modified its policy regarding Medicare Part B payment for biosimilar biological products. CMS currently bases payment for a biosimilar biological product on the average sales price (ASP) of all National Drug Codes (NDCs) assigned to the biosimilar biological products included within the same billing and payment code. Under the final rule, effective January 1, 2018, newly approved biosimilar biological products with a common reference product will no longer be grouped into the same billing code. Reimbursement for a biosimilar product will equal the ASP for the biosimilar product plus 6% of the ASP for the reference product. Also with regard to Part B drugs, the final rule implemented ASP-based payment for infusion drugs furnished through an item of durable medical equipment, in conformance with the 21st Century Cures Act.
  • The rule established a new “FY” payment modifier to implement a Consolidated Appropriations Act of 2016 provision that encourages the transition from traditional X-ray imaging to digital radiography by reducing the PFS payment for the technical component of X-rays taken using computed radiography technology beginning in 2018.  The statutory reduction equals 7% during 2018 through 2022, rising to 10% beginning in 2023.
  • The rule made various revisions to physician quality and value programs (the Medicare Electronic Health Record Incentive Program, the Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier). The rule includes policies to better align these programs with reporting requirements under the new Quality Payment Program (QPP) (see related final rule updating the QPP for 2018). CMS also revised 2018 payment adjustments under the Value Modifier program to continue the transition to the Merit-based Incentive Payment System. Notably, CMS reduced certain automatic downward payment adjustments for not meeting minimum quality reporting requirements (based on practice size) and adopted its proposal to hold harmless all physician groups and solo practitioners meeting minimum PQRS reporting requirements from downward payment adjustments for performance under quality-tiering.
  • The rule includes numerous other policy provisions, including:  modifications to Medicare Shared Savings Program beneficiary assignment rules; revisions to the physician self-referral list of CPT/HCPCS codes; payment and supplier enrollment policies to implement the Medicare Diabetes Prevention Program expanded model nationally on April 1, 2018; revisions to telehealth policies; and coding and payment changes to support care management and behavioral health services.

CMS Finalizes Medicare OPPS, ASC Rates and Policies for CY 2018

CMS has published a final rule updating Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rates and policies for calendar year (CY) 2018. In addition to rate updates, notable policy changes in the rule include a deep ($1.6 billion) OPPS reimbursement cut for drugs obtained through the 340B drug discount program, expanded OPPS drug administration packaging, and removal of total knee replacement procedures from the “inpatient only” list.

With regard to OPPS payments, the final rule provides a 1.35% update for 2018, reflecting a 2.7% market basket increase that is partly offset by both a 0.75 percentage point reduction and a 0.6% multi-factor productivity (MFP) reduction. The update for hospitals that fail to meet quality reporting requirements is reduced by 2.0% points.  Payment changes for individual procedures and ambulatory payment classifications (APCs) vary.  Under the new 340B discount drug policy CMS will reduce OPPS payment for separately payable, nonpass-through drugs and biologicals (other than vaccines) purchased through the 340B drug discount program from ASP plus 6% to ASP minus 22.5% (rural sole community hospitals, children’s hospitals, and certain cancer hospitals are excluded from this policy). CMS is redistributing the $1.6 billion in savings from this change by increasing by 3.2% conversion factor for non-drug items and services for 2018.  CMS may revisit how the 340B drug savings should be applied in the future.  Note that various hospitals and hospital associations have filed a lawsuit seeking to block this policy.

Other major provisions of the final rule include the following:   Continue Reading

DOJ Settles Second 60-Day Overpayment Case, Highlights Broader Reach of the FCA’s Reverse False Claims Provision

A recent False Claims Act (“FCA”) settlement involving an allegedly overpaid Florida medical practice reaffirms the interplay between the 60-Day Overpayment Statute and the FCA, but also highlights the importance for all providers and suppliers to report and return overpayments, regardless of the source of federal funds.

According to the Department of Justice (“DOJ”), First Coast Cardiovascular Institute (“FCCI”) allowed credit balances from various federal health care programs to accrue despite multiple internal warnings that the balances should be paid back. DOJ alleged that FCCI’s failure to return those credit balances within 60 days violated the FCA. DOJ’s comments are notable, however, because the credit balances not only involved Medicare and Medicaid, but also TRICARE and the Department of Veterans Affairs, both of which are outside the scope of the 60-Day Overpayment Statute. DOJ and FCCI resolved the alleged $175,000 in unreturned overpayments for a $448,821.58 price. Continue Reading

CMS Boosting Medicare ESRD Facility Payments by 0.5% for 2018

The Centers for Medicare & Medicaid Services (CMS) has issued its final Medicare end-stage renal disease (ESRD) prospective payment system (PPS) rates and policies for calendar year 2018. CMS projects that the final rule will increase total Medicare payments to all ESRD facilities by 0.5% in 2018 (lower than the 0.8% increase forecast in the proposed rule); payments to hospital-based ESRD facilities are expected to rise by 0.7% in 2018, while payments will increase by 0.5% for freestanding facilities.

The final update to the ESRD base rate is 0.3%, resulting from a 1.9% market basket increase that is partially offset by a 1% reduction under the Protecting Access to Medicare Act (PAMA) and a 0.6% multifactor productivity reduction. After the application of the wage index budget-neutrality adjustment, the final base rate is $232.37, compared to the 2017 base rate of $231.55.

The final rule also:

  • Updates outlier fixed dollar loss amounts and Medicare Allowable Payments;
  • Allows the use of any pricing methodology under section 1847A of the Social Security Act when average sales price (ASP) data is not available to determine the cost of drugs and biologicals for outlier payment purposes;
  • Sets the acute kidney injury (AKI) dialysis rate to equal the proposed ESRD PPS base rate ($232.37); and
  • Updates ESRD Quality Incentive Program (QIP) measures for payment year (PY) 2021, revises the ESRD QIP Extraordinary Circumstances Exception policy, and simplifies the Performance Score Certificate (beginning in PY 2019).

Final Medicare Provider Payment Rules in the Pipeline

The White House Office of Management and Budget (OMB) is reviewing several CMS rules that would finalize CY 2018 Medicare payment policies for various types of providers and suppliers. Specifically, OMB is reviewing final rules to update the hospital outpatient and ambulatory surgical center PPS; the Medicare physician fee schedule and physician Quality Payment Program; the home health PPS; and the end stage renal disease PPS.  These rules should be released late October or early November.

OIG Wants CMS to Track Medicare Costs from Device Failures

A recent Office of Inspector General (OIG) report suggests that the lack of medical device-specific information on Medicare claim forms complicates CMS efforts to identify and track Medicare costs related to the replacement of recalled or prematurely failed medical devices. The OIG also believes the lack of device information on claims data “impedes the ability of FDA and CMS to identify poorly performing devices as early as possible” and interferes with the provision of timely follow-up care. The OIG recommends that CMS: Continue Reading

CMS to Help SNFs Prepare for Value-Based Purchasing Program Rules (Nov. 16)

A November 16, 2017 CMS call will focus on how the Medicare SNF Value-Based Purchasing Program will affect Medicare’s payments to SNFs beginning October 1, 2018. Among other things, the call will cover how CMS will translate SNF performance scores into value-based incentive payments and policies included in the FY 2018 SNF PPS final rule.

Learn What is New Regarding the Medicare Hospital “Primarily Engaged” Requirement (Nov. 2)

CMS is hosting an educational call November 2, 2017 on new State Operations Manual guidance that discusses the Medicare definition of a hospital, including the requirement for hospitals to be primarily engaged in providing care to inpatients. Registration is required to participate.

New Laws Extend IVIG Demonstration and Expiring Public Health Programs, Promote Early Hearing Detection and Intervention

President Trump has signed into law a bill (P.L. 115-63) that extends the Medicare Intravenous Immune Globulin (IVIG) Demonstration through December 31, 2020. The law also extends through the first quarter of FY2018 (1) the Teaching Health Center Graduate Medical Education Program, and (2) the Special Diabetes Program for Indians.

The President also signed S 652, the Early Hearing Detection and Intervention Act of 2017. The new law reauthorizes and modifies HHS programs for early detection, diagnosis, and treatment regarding deaf and hard-of-hearing newborns, infants, and young children.

Congress Clears Bill to Improve Metabolic Syndrome Support Programs

The House of Representatives and Senate have both approved S 920, the National Clinical Care Commission Act, clearing the measure for the President. The bill would establish a national clinical care commission to improve coordination of federal programs that support care for people with metabolic syndromes and related autoimmune disorders.

Committees Approve Bills to Boost Medicare Penalties, Revise Part B Policies, Extend CHIP Funding

The House Energy and Commerce Committee has approved by voice vote the following bipartisan bills addressing the Medicare Part B program:

  • HR 3245, which would significantly increase various Medicare civil and criminal penalties under sections 1128A and 1128B of the Social Security Act. Sponsors of the bill note these penalties have not been updated in 20 years. Maximum penalties would at least double under the bill. For instance, CMPs that are now $10,000 would be increased to $20,000, while criminal fines that are now a maximum of $25,000 would increase to $100,000. Maximum sentences also would be doubled, from five years to 10 years.
  • HR 1148, the Furthering Access to Stroke Telemedicine Act, to provide for Medicare reimbursement of neurological consults via telemedicine for beneficiaries presenting at hospitals or mobile stroke units.
  • HR 2465, the Steve Gleason Enduring Voices Act, to make permanent current coverage of speech generating devices under the “routinely purchased” durable medical equipment payment category.
  • HR 2557, the Prostate Cancer Misdiagnosis Elimination Act, to provide coverage of DNA Specimen Provenance Assay testing for prostate cancer.
  • HR 3120, to amend the Health Information Technology for Economic and Clinical Health (HITECH) Act to remove the mandate that meaningful use standards become more stringent over time.
  • HR 3263, to extend for two years the Medicare Independence at Home Medical Practice Demonstration Program.
  • HR 3271, to revise Medicare competitive bidding rules pertaining to diabetes test strips, including stronger enforcement of requirement that bidders cover at least 50 percent of the types of diabetes test strips on the market.

Continue Reading

Ways & Means Committee Advances IPAB Repeal Bill

The House Ways and Means Committee has approved by a 24-13 vote HR 849, Protecting Seniors’ Access to Medicare Act, to repeal the Independent Payment Advisory Board (IPAB). The IPAB was established by the ACA to submit Medicare spending plans to Congress if projected spending growth exceeds specified targets. Under the ACA, future IPAB’s proposals would go into effect automatically unless Congress enacts alternative legislation achieving required savings levels. IPAB members have not been appointed, and the spending threshold has not yet been crossed. President Trump called for repeal of IPAB in his FY 2018 budget proposal, but opponents cite the bill’s estimated $17.5 billion/10 year cost. The legislation has not yet been considered by the full House.

Senate Advances Emergency Medicine Access Legislation

On October 24, 2017, the Senate approved HR 304, the Protecting Patient Access to Emergency Medicines Act, which would clarify that emergency medical services professionals may administer controlled substances pursuant to standing or verbal orders in certain circumstances. While the House passed the legislation in January 2017, the House needs to consider the measure again due to amendments adopted in the Senate.

Congressional Health Policy Hearings

Recent Congressional hearings focusing on health policy issues include the following:

  • House Energy and Commerce Committee hearings on how covered entities use the 340B drug pricing program, ways to address the opioid crisis, FDA’s Expanded Access Program, and HHS’s public health preparedness for and response to the 2017 hurricane season.
  • Senate Health, Education, Labor, and Pensions (HELP) Committee hearings on the cost of prescription drugs (focusing on how the drug delivery system affects what patients pay), how healthy choices can improve health outcomes and reduce costs, and the federal response to the opioid crisis.

Coming up, on October 31, 2017, the HELP Committee is holding a hearing on “Implementation of the 21st Century Cures Act: Achieving the Promise of Health Information Technology.”

Trump Administration Plan to Cut Off CSR Payments Withstands First Court Review

A Department of Health and Human Services (HHS) decision to discontinue ACA cost-sharing reduction (CSR) payments to insurers offering policies through ACA exchanges has cleared its first legal hurdle, with a U.S. district court declining to block the Administration’s action on an emergency basis.

On October 12, 2017, the Trump Administration declared it was “immediately” ending CSR payments, which are paid directly to insurance companies to offset the reduced cost sharing plans must offer to some enrollees based on income. The Trump Administration asserts that the payments are not legal because it claims Congress did not appropriate funds for CSR payments (unlike ACA premium tax credits, for which funds are specifically appropriated). The Congressional Budget Office (CBO) previously forecast that discontinuing CSR payments would trigger increased premiums for “silver plans” (which enrollees generally must purchase to qualify for CSR subsidies), which in turn would increase both average per-capita subsidies and the number of individuals receiving subsidies. In fact, the CBO estimated that cutting off CSR payments would result in a net $194 billion increase in the federal deficit from 2017 through 2026.

The Trump decision was immediately challenged in federal district court by 18 Democratic state attorneys general, who sought an emergency ruling requiring continuation of the CSR payments while the suit was pending. In a decision filed on October 25, 2017, Judge Vince Chhabria of the U.S. District Court for the Northern District of California declined to provide emergency injunctive relief. Although the court determined that ACA “required the federal government to pay the insurance companies in advance for [the cost-sharing] reductions,” and that the ACA “authorized the costs-sharing reductions program and the CSR payments to the insurers,” the court noted that the ACA “did not explicitly make a permanent appropriation for the CSR payments to the insurance companies.” The Court observed that “[o]n the merits, it’s a close and complicated question,” but the Judge determined that “it appears initially that the Trump Administration has the stronger legal argument.” Continue Reading

Trump Executive Order Calls for “Healthcare Choice and Competition”

As legislative efforts to replace or reform the Affordable Care Act (ACA) sputter, President Trump has issued an executive order seeking to expand affordable health insurance choices, “to the extent consistent with law.” While the executive order itself does not modify current ACA statutory or regulatory requirements, it signals the Administration’s intent to:

  • Facilitate the purchase of insurance across state lines.
  • Promote access “in the near term” to association health plans and short-term, limited-duration insurance (both of which are exempt from certain ACA benefit mandates), and tax-advantaged health reimbursement arrangements.
  • Limit “excessive consolidation throughout the healthcare system.”
  • Improve consumer access to data regarding healthcare prices and outcomes “while minimizing reporting burdens on affected plans, providers, or payers.”

Interim Final Rules Expand Contraceptive Coverage Exemption Based on Religious/Moral Beliefs

The Trump Administration has issued interim final rules to make it easier for employers and health insurance plans to qualify for an exemption from ACA rules mandating coverage of contraceptive services without cost sharing on the basis of religious or moral objections. The extent to which group health plans must cover contraceptive services in cases in which there is a religious objection has been the subject of numerous previous regulations and litigation, with final rules adopted in 2015 that established a process for eligible organizations to provide notice of religious objection to contraceptive services coverage. The new HHS interim final rules would expand current exemptions to protect additional entities and individuals that object to coverage of contraceptive services based on (1) “sincerely held religious beliefs” or (2) “sincerely held moral convictions” that are not religious beliefs. The interim final rules are effective on October 6, 2017. Comments on the rules will be accepted until December 5, 2017.

Update: Now it’s Wright out, Hargan in at HHS

President Trump has named Eric Hargan to serve as Acting HHS Secretary, replacing Don Wright (who was just named to the post on September 29, 2017).  The HHS Secretary vacancy was created when Tom Price, MD resigned the post September 29.  Hargan, an attorney who served at HHS during the George W. Bush Administration, was confirmed as Deputy HHS Secretary by the Senate last week.  Wright remains Acting Assistant Secretary for Health, Deputy Assistant Secretary for Health, and Director of the Office of Disease Prevention and Health Promotion.

HRSA Delays Final 340B Penalty Rule until July 1, 2018; Additional Rulemaking in the Works

The Health Resources and Services Administration (HRSA) has adopted its proposal to delay the effective date of its final rule revising the calculation of the 340B “ceiling price” that may be charged to covered entities and related civil money penalties.  As previously reported, while implementation of the January 5, 2017 rule was already delayed until October 1, 2017, HRSA has now pushed back the effective date to July 1, 2018.  HRSA states that this delay “provides regulated entities sufficient time to implement the requirements of the rule, as well as allowing a more deliberate process of considering alternative and supplemental regulatory provisions, and to allow for sufficient time for additional rulemaking.”  In fact, this new rulemaking is already in the works; HRSA sent a new 340B drug pricing/CMP proposed rule to the White House Office of Management and Budget for regulatory review on October 6, 2017. 

Price Out, Wright In at HHS (for Now)

In the wake of the resignation of former Secretary Tom Price, MD over concerns about his travel expenses, President Trump has named Don Wright, MD, MPH, as Acting Secretary of the Department of Health and Human Services (HHS). Wright previously served as Acting Assistant Secretary for Health.  The Administration has not yet indicated who will be nominated as a permanent replacement to lead the Department.

Separately, on October 4, the Senate confirmed attorney Eric Hargan as Deputy HHS Secretary, and he was sworn in by a 57-38 vote on October 5. Hargan previously served in various high-level HHS positions in the George W. Bush Administration.