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Health Headlines – November 7, 2016

07 Nov 2016

CMS Releases OPPS and ASC Payment Final Rules, Finalizes Changes to Off-Campus Provider-Based Status  –  On November 1, 2016, CMS released the final payment rates and policy changes in the Hospital Outpatient Prospective Payment System (OPPS) final rule (OPPS Final Rule) and Ambulatory Surgical Center Payment System Final Rule (ASC Final Rule) for CY 2017.  Included in these rules was as an Interim Final Rule with comment period (IFC) to establish Medicare Physician Fee Schedule (MPFS) rates for “non-excepted” items and services furnished by off-campus provider-based departments (PBDs) and to finalize changes to quality and performance programs.  The OPPS Final Rule, ASC Final Rule and IFC are expected to be published in the Federal Register on November 14, 2016, and CMS will accept comments through December 31, 2016.  

Off-Campus Provider-Based Changes

The OPPS Final Rule implements Section 603 of the Bipartisan Budget Act of 2015, which states that CMS may not pay for certain items and services provided in off-campus hospital outpatient departments under the OPPS beginning January 1, 2017.  For CY 2017, CMS will instead pay hospitals 50 percent of the corresponding OPPS payment rate for non-excepted services through a subset of rates established in the MPFS.  In addition, CMS will permit excepted PBDs to alter their service mix and retain excepted status after January 1, but will not permit a PBD that relocates or changes ownership to retain its excepted status.  King & Spalding issued a Client Alert on November 2, 2016, available here, describing these changes in detail. 

Other OPPS Final Rule Provisions

CMS is increasing payment rates under the OPPS by an outpatient department fee schedule increase factor of 1.65 percent.  This change reflects a market basket increase of 2.7 percent minus a 0.75 percent adjustment required by the Affordable Care Act and a 0.3 percent multi-factor productivity adjustment.  CMS is continuing the 2.0 percentage point reduction for hospitals that fail to meet the hospital outpatient quality reporting requirements, continuing the 7.1 percent adjustment to certain rural sole community hospitals, including essential access community hospitals, and continuing to provide additional payments to cancer hospitals.

CMS is adding 25 new comprehensive ambulatory payment classifications (C-APCs) for CY 2017, which are primarily major surgery APCs.  The new C-APCs will add to the existing 37 C-APCs in 2016 and result in a total of 62 C-APCs in CY 2017.  CMS is also adding a C-APC and dedicated cost center for bone marrow transplants.

CMS also finalized the following:

  • Three policy refinements with respect to packaging all integral, ancillary, supportive, dependent or adjunctive services into primary services;
  • Two policies regarding device-intensive procedures, which are APCs with a device offset greater than 40 percent;
  • The removal of seven procedures from the IPO list, which include 5 spinal procedures and 2 laryngoplasty procedures;
  • Updates to the Medicare payment rates for partial hospital program (PHP) services furnished in hospital outpatient departments and Community Mental Health Centers (CMHC) by replacing the two-tiered APC structure for PHPs with a single APC by provider type for providing three or more services per day;
  • A CMHC outlier payment cap of 8 percent of its CMHC total per diem payments; and
  • Changes to payment for non-excepted hospital-based PHP services to align with Section 603 of the Bipartisan Budget Act of 2015.

ASC Final Rule Payment Update

ASC payments are updated for CY 2017 by an adjusted Consumer Price Index for all urban consumers (CPI-U) update factor of 1.9 percent.

Quality and Performance Program Changes

With respect to the Hospital Value-Based Purchasing (VBP) Program, CMS removes the pain management dimension from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey beginning with the FY 2018 program year.  CMS will continue to develop and test alternative questions related to pain management.  In the meantime, however, HCAHPS survey data on all dimensions of care, including pain management, will be publicly reported under the Hospital Inpatient Quality Reporting (IQR) Program.

With respect to the Hospital Outpatient Quality Reporting (OQR) Program, CMS is adding seven measures, two claims-based and five Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) survey-based measures, starting in the CY 2020 payment determination.  CMS is also finalizing its proposals to publicly display data on the Hospital Compare website as soon as possible after data is submitted to CMS and granting hospitals approximately 30 days to preview their data. 

CMS also makes changes to the organ transplant program.  The agency revises an outcome requirement in the Medicare Conditions of Participation for organ transplant programs and finalizes changes to the conditions for coverage for organ procurement organizations.

With respect to the electronic health record (EHR) incentive program:

  • CMS finalizes a 90-day EHR reporting period in both 2016 and 2017 for all returning eligible professionals, eligible hospitals and critical access hospitals that previously demonstrated meaningful use in the Medicare and Medicaid EHR Incentive Programs.  Thus, the EHR reporting period is any continuous 90-day period between January 1 and December 31 in both CY 2016 and CY 2017;
  • CMS eliminates the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures for eligible hospitals and critical access hospitals attesting under the Medicare EHR Incentive Program for Modified Stage 2 and Stage 3 and dual-eligible hospitals that participate in both the Medicare and Medicaid EHR Incentive Programs;
  • CMS finalizes the provision that eligible professionals, eligible hospitals and critical access hospitals that have not successfully demonstrated meaningful use in a prior year will be required to attest to Modified Stage 2 objectives and measures;
  • CMS finalizes proposals permitting certain eligible professionals to apply for a significant hardship exception from the 2018 payment adjustment pursuant to an application process; and
  • CMS modifies measure calculations for actions outside of the EHR reporting period.

Finally, CMS adds 7 measures to the ASC Quality Reporting (ASCQR) Program beginning with the CY 2020 payment determination.  CMS is also finalizing its proposals to publicly display data on the Hospital Compare website as soon as possible after data is submitted to CMS, and grant ASCs approximately 30 days to preview their data. 

Display copies of the OPPS Final Rule, ASC Final Rule and IFC are available here.

Reporter, Kate Stern, Atlanta, +1 404 572 4661,

CMS Finalizes CY 2017 Physician Fee Schedule

On Wednesday, November 2, 2016, CMS issued a final rule (Final Rule) to update payment policies and payment rates for services furnished under the Medicare Physician Fee Schedule (PFS) on or after January 1, 2017.  In the Final Rule, CMS walked back proposed requirements for coding of post-operative care that would have required coding in 10-minute increments.  The Final Rule also expanded the list of telehealth services for which Medicare will pay and made other coding revisions. CMS set a CY 2017 conversion factor of $35.89, a slight increase to the CY 2016 conversion factor of $35.80. 

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) requires that, for CY 2017, the specified update to the PFS conversion factor increase by 0.5 percent before applying other adjustments.  CMS estimated that the CY 2017 net reduction in expenditures resulting from adjustments to relative values of misvalued codes is 0.32 percent.  According to CMS, because this does not meet the 0.5 percent target, PFS payments are to be reduced by 0.18 percent, which the American Academy of Family Physicians stated “violates the spirit of [MACRA]” in failing to give physicians MACRA’s 0.5 percent increase.  The Academy’s statement on the Final Rule is available here.

Surgical Care Coding and Reporting

In the proposed rule, CMS considered the use of G-codes for reporting services furnished during the pre- and post-operative periods of 10- and 90-day global services.  Instead, CMS finalized a policy that CPT code 99024 be used to report such visits.  Nor did CMS, as proposed, finalize a requirement for physicians to use time units in 10-minute increments to distinguish levels of visits.  Commenters had responded that “reporting of services by time did not reflect the way surgeons practiced and would divert practitioners from patient care.”

CMS is statutorily required to gather data on post-surgical visits, to be used to better value such services.  To that end, CMS finalized a policy that requires certain physicians to report on post-operative services furnished by more than 100 practitioners and are furnished more than 10,000 times or have allowed charges of more than $10 million annually.  CMS estimates this will allow it to collect data on 260 codes that describe approximately 87 percent of all furnished 10- and 90-day global services.  The list of codes will be based on CY 2014 claims data and posted to CMS’s website at a later date.  Reporting will be required for physicians in Florida, Kentucky, Louisiana, Nevada, New Jersey, North Dakota, Ohio, Oregon and Rhode Island (with an exemption for practices with fewer than 10 practitioners).  Reporting will become mandatory starting July 1, 2017, but CMS encourages physicians to begin on January 1, 2017.  CMS also finalized its proposal to collect post-surgical data from Accountable Care Organizations (ACOs).

Telehealth Expansion

CMS also finalized several policies related to services furnished via telehealth, most notably a place of service (POS) code specifically for such services.  Physicians reporting with the new telehealth POS code will be paid the facility PE RVUs.  CMS added telehealth codes for ESRD-related services (CPT codes 90967, 90968, 90969 and 90970), advance care planning services (CPT 99497 and 99498) and critical care consultation services (G0508 and G0509).  Lastly, for CY 2017, CMS set the payment amount for HCPC code Q3014 (telehealth originating site facility fee) at 80 percent of the lesser of the actual charge or $25.40.

Miscellaneous Billing Revisions

In addition, CMS made several revisions to the PFS billing code set, including:

  • Unbundling non-face-to-face prolonged Evaluation & Management (E/M) Services (CPT codes 99358 and 99359) and fixing an error in the proposed rule, now allowing that the prolonged time be provided on a different day than the companion E/M code;
  • Creating four new G-codes for behavioral health integration services focused on the psychiatric Collaborative Care Model (CoCM);
  • Changing Chronic Care Management (CCM) services to move “toward advanced primary care, while eliminating redundancy, simplifying provisions of services, and improving access ... .”  CMS added CPT descriptors for CPT codes 99487 and 99489 for complex CCM services;
  • Creating a G-code for separate payment to physicians for assessing and creating a care plan for beneficiaries with cognitive impairments such as Alzheimer’s disease or dementia.  CMS intends for the G-code to be replaced in CY 2018 with a CPT code, recently approved by the CPT Editorial Panel;
  • Finalizing values for new CPT codes related to moderate sedation for certain endoscopic procedures; and
  • Updating the coding framework around mammography services to reflect updated technology moving from film to digital imaging.

Remand from Council for Urological Interests

CMS responded to the D.C. Circuit’s 2015 remand of Council for Urological Interests v. Burwell for the Secretary to consider whether a ban on per-click equipment leases is consistent with the House Conference Report.  CMS made use of the Secretary’s “broad authority” and finalized the current regulations that per-unit of service (per click) rental charges for office space or equipment may be permitted, but only where the referral for the service provided in the space or using the equipment does not come from the lessor.

Medicare Shared Savings Program

CMS finalized several policies around its Medicare Shared Savings Program including:

  • Changing the measure set used in establishing the quality performance standard in the areas of patient/caregiver experience of care, care coordinating/patient safety, preventive health and at-risk populations (retiring certain measures and adding ACO-12 Medicaid Reconciliation Post-Discharge and ACO-44 Use of Imaging Studies for Low Back Pain, the latter of which will simply be a “pay for reporting”);
  • Changing the methodology used to validate quality data submitted by the ACO by increasing and changing audit procedures (including enforcement of penalties if ACO audit matches fall below 90 percent);
  • Revising the terms “quality performance standard” and “minimum attainment level” in the regulation text, used to determine whether an ACO has met the quality performance standard for a performance year;
  • Revising the use of flat percentages to establish quality benchmark (that is, CMS will no longer use flat percentages to set the quality performance benchmark for quality performance measures calculated as ratios);
  • Allowing eligible providers that bill under the TIN of an ACO to report for purposes of the Physician Quality Reporting System apart from the ACO; and
  • Aligning ACO quality reporting with policies proposed in the Quality Payment Program proposed rule, sunsetting PQRS and EHR Incentive Program alignment.

Medicare Part C

Lastly, CMS made a number of updates to Medicare Part C, most notably finalizing a policy that requires that providers and supplies must be enrolled in Medicare in order to render services to Medicare Advantage beneficiaries.

CMS’s fact sheet on the Final Rule is available here.  The display copy of the Final Rule is available here and is scheduled to be published in the Federal Register on November 15.

Reporter, Elizabeth Swayne, Washington, D.C., +1 202 383 8932,

CMS Announces Settlement Process for Inpatient Status Claims – On November 3, 2016, CMS announced details for a new Hospital Appeals Settlement program to permit eligible providers to settle certain inpatient status claims currently under appeal. According to CMS, the purpose of the 2016 Hospital Appeals Settlement program is to reduce the backlog of pending Medicare appeals, as well as reduce the associated litigation risk for providers and the Medicare program.

As previously reported here, CMS offered a similar settlement program in 2014 (2014 Settlement) whereby eligible providers could settle pending inpatient status claim appeals for 68 percent of the net allowable amount. The 2016 Hospital Appeals Settlement allows eligible providers to settle pending inpatient appeals for 66 percent of the net allowable amount, a two-percent payment reduction from the 2014 Settlement.

To participate in the 2016 Hospital Appeals Settlement program, eligible hospitals with inpatient status claims that are currently in the appeals process at the Administrative Law Judge level or the Departmental Appeals Board level may submit an Expression of Interest to CMS beginning on December 1, 2016. The deadline to submit an Expression of Interest is January 31, 2017

Eligible hospitals are limited to Acute Care and Critical Access Hospitals. Like the 2014 Settlement, Inpatient Rehabilitation Facilities (IRFs) are not eligible to participate.  In addition, certain otherwise eligible hospitals may be excluded from participation due to pending False Claims Act litigation or investigations.

Eligible claims are those that were (1) denied by a Medicare contractor because, while the services may have been reasonable and necessary, treatment on an inpatient basis was not reasonable or necessary; (2) are under appeal at Level 3 or Level 4 or within their administrative timeframe to request an appeal review, with dates of admissions prior to October 1, 2013; and (3) did not include items or services provided to a Part C enrollee.  A participating hospital cannot  select the eligible claims it wants to settle;  instead, the provider must include alleligible claims in the settlement.

The 2016 Hospital Appeals Settlement program is not unexpected, as the Government continues to receive pressure to resolve the appeals backlog.  Indeed, as previously reported here, the U.S. District Court for the District of Columbia recently denied the Government’s request to stay litigation proceedings in connection with the appeals backlog.

CMS’s announcement regarding the 2016 Hospital Appeals Settlement and additional information can be found here.  In addition, CMS is hosting a MLN Connects National Provider Call on the 2016 Hospital Appeals Settlement on November 16, 2016.  To register, click here.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592,

Optometrists Who Leased Space at Texas Wal-Mart Stores Cannot Recover Damages for Technical Violation of State Licensing Law Under Corporate Practice Theory — The United States Court of Appeals for the Fifth Circuit, in a per curium decision issued October 27, 2016 in Forte v. Wal-Mart Stores, Inc., vacated approximately $1.4 million in statutory civil penalties awarded by the district court to a group of optometrists who leased retail office space from Wal-Mart Stores, Inc. 

The optometrists sued Wal-Mart for violations of the Texas Optometry Act (the Act), which prohibits non-licensed parties from exercising control over licensees, in an attempt to limit the so-called “corporate practice of medicine.”  The optometrists alleged that Wal-Mart, in violation of the Act, attempted to control their practice of optometry by exercising influence over their hours.  The optometrists sought civil penalties under the Act but conceded that they did not suffer actual damages.  After trial, a jury returned a verdict in the optometrists’ favor, and the district court entered judgment in the amount of almost $1.4 million, consisting entirely of statutory civil penalties.  Wal-Mart appealed.

The Fifth Circuit held in a 2015 decision that Wal-Mart could be held liable under the Act for exercising influence over the optometrists’ hours, causing other retailers that offer health care services to take note of the decision.  However, the 2015 decision was vacated.  In this most recent decision, the Fifth Circuit concluded that although Wal-Mart was liable under the Act, the district court erred in entering the almost $1.4 million judgment against Wal-Mart because under Texas law, civil penalties under the Act were not available to private plaintiffs who had not sustained any actual damages.  The District Court reached this conclusion after the Texas Supreme Court resolved through certified questions that civil penalties under the Act are exemplary damages and may not, per Chapter 41 of the Texas Civil Practice and Remedies Code, be awarded to private plaintiffs who had not sustained actual damages. 

The full text of Forte is available here

Reporter, Kristin Roshelli, Houston, +1 713 751 3263,

FTC Wins Hospital Merger Challenge in the Seventh Circuit

On October 31, 2016, the U.S. Court of Appeals for the Seventh Circuit overturned a district court decision that denied a motion by the Federal Trade Commission (FTC) and Illinois Attorney General (IL AG) to block the proposed merger between Advocate Health Care (Advocate) and NorthShore University Health System (NorthShore). 

In June 2016, the U.S. District Court for the Northern District of Illinois held that the FTC and IL AG had, among other things, failed to prove a relevant geographic market and did not meet the burden required for a preliminary injunction.  The Seventh Circuit reversed that decision and largely endorsed the FTC’s methodology for examining hospital mergers.

The Seventh Circuit decision is a significant victory for the FTC, and it is the second time this year that the FTC achieved an appellate victory in blocking a hospital merger.  In September, the Third Circuit overturned a lower court decision in FTC v. Penn State Hershey,holding the FTC had met its burden in challenging the merger of two hospitals in Pennsylvania.  The FTC’s winning streak means that the agency will continue to heavily scrutinize provider combinations and challenge those it considers to be anticompetitive.

Materials related to the litigation are available here.

Reporter, John Carroll, D.C., + 1 202 626 2993,

First Circuit Upholds Exclusion of Dual-Eligible Patients That Are Not Entitled to SSI Benefits from Both the DSH Medicaid Fraction and the Numerator of the DSH SSI Fraction -- The U.S. Court of Appeals for the First Circuit recently ruled in favor of HHS, overturning a $17 million district court decision, in a dispute dating back as far as the 1993 fiscal year over whether hospitals may include, for purposes of their Medicare disproportionate share hospital (DSH) calculation, patient days for patients entitled to both Medicare Part A and Medicaid but not Supplemental Security Income (SSI).  The plaintiffs, a group of eight Maine hospitals, sued HHS arguing that these days should be included in one of the fractions because such patients were clearly indigent, while the Secretary asserted that they could not be included in the numerator of the Medicare/SSI fraction because they were not entitled to SSI benefits and they could not be included in the Medicaid fraction because the Medicaid fraction categorically excludes all individuals entitled to benefits under Part A.  The Court of Appeals held that the Secretary’s interpretation was supported by the plain meaning of the statute under a Chevron step one analysis.  Aside from the substantive holding, this case may be equally noteworthy for the technical and administrative issues analyzed on appeal regarding adequate notices of cost report reopenings and the effect of settlement agreements. 

In particular, the Court of Appeals rejected the hospitals’ argument “that the reopening notices were invalid because they failed to comply with mandatory reopening provisions contained in the regulations,” as well as their argument “that they should be held harmless” because they were merely following the previous advice of the Medicare Administrative Contractor (MAC). 

Departing from the district court decision on the technical issues, the Court of Appeals concluded that the regulation does not require that a reopening notice include advice about the opportunity to present evidence and arguments, and the regulation trumps any requirements found in the Provider Reimbursement Manual.  As for the effect of settlement agreements, the panel commented that the MAC lacks the authority to make payments, settlement agreements, or administrative resolutions that are not authorized by Medicare, and the fact that the Secretary was not a party to the settlement agreements reinforces this conclusion.    

The case is Maine Medical Center et al. v. Burwell, No. 15-2483 (1st Cir. Oct. 27, 2016).  Please click here for a copy of the opinion.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448,

Also In the News

CMS Names Latest Round of RAC Contracts – On October 31, 2016, CMS announced it awarded contracts for its Medicare Fee-for-Service Recovery Audit Contractors (RAC) to Performant Recovery, Inc. (Region 1), Cotiviti, LLC (Regions 2 and 3), HMS Federal Solutions (Region 4), and Performant Recovery, Inc. (Region 5). The Region 1-4 RACs are tasked with postpayment reviews to identify and correct Medicare over- and underpayments made under Parts A and B.  Their reviews involve all provider types except Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Home Health/Hospice.  Performant Recovery, Inc. (Region 5) will conduct postpayment reviews of  DMEPOS and Home Health/Hospice claims nationally.  For maps showing the regions and related RACs, click here and go to downloads.

CMS Issues Final Rule on 2017 Payments for Home Health Agencies – On Thursday, CMS published the 2017 PPS Final Rule for Home Health Agencies, reducing Medicare payments by an estimated $130 million, or 0.7 percent. Noting that the changes reflect the broader Administration goal to reduce spending by focusing on quality care, CMS emphasized that changes in the rules focus on prevention, achieving better health outcomes, and improvements in disease management. In a statement, the National Association for Home Care & Hospice noted that, while the changes in the Final Rule were generally unsurprising, it “remains concerned for the erosion of home health care access caused by rate reductions.”   The CMS Final Rule is available here. The NAHC statement is available here.

CMS Increases Value-Based Incentive Payments for FY 2017 – CMS estimates that approximately $1.8 billion will be available for the Hospital Value-Based Purchasing (VBP) Program for FY 2017 under the Inpatient Prospective Payment System. To create the $1.8 billion fund, CMS reduced base DRG payments by two-percent, which will then be redistributed to hospitals that perform well under the VBP Program. The Hospital VBP Program is one of the many ACA Programs focused on moving away from fee-for-service payments and instead structuring payments based on quality of care. Hospitals’ payments under the program are based on Clinical Care (30 percent), Patient and Caregiver Centered Experience of Care/Care Coordination (25 percent), Safety (20 percent ), and Efficiency and Cost Reduction (25 percent).  CMS also set new program requirements for FY 2018. The CMS Press Release is available here.

King & Spalding to Host a November 17 Webinar on How the 2016 Elections will Impact the Health Care Industry – The 2016 Elections will bring a change in administration and a change in the composition of, and perhaps the balance of power in, Congress. Our Government Advocacy & Public Policy Group will examine the impact of the elections on healthcare policy in a webinar, titled “Implications of the 2016 Elections for the Healthcare Industry.” We will provide an assessment of where healthcare regulatory and legislative policy currently stands, as well as an outline of the issues the 45th President and the 115th Congress will need to address. For more information and to register for this free webinar, click here.

The Atlanta Life Sciences & Healthcare Group to Host a Professionals Networking Event -The Atlanta Life Sciences & Healthcare Group (formerly Atlanta Young Professionals in Healthcare) is an educational, networking and social resource for professionals working in or serving the life sciences and healthcare industry. The group is hosting a fall networking event on November 17 in Atlanta. Please contact King & Spalding associates Isabella Wood ( or Lauren Gennett ( for more information.  To RSVP, click here.