New ACO Developments Announced – In two new Accountable Care Organization (ACO) developments, 15 of the 89 ACOs recently announced by CMS have been approved as “advance-payment” ACOs, which means they will receive some of their anticipated savings upfront to defray start-up costs, and Cigna has announced new ACO initiatives in six states.
The 15 latest ACOs to receive advance payments operate in 10 states, according to the CMS website. A list of the 15 ACOs can be found here. As advance payment ACOs, these ACOs will qualify to receive advance payments of their anticipated savings in three forms: an upfront fixed payment, an upfront variable payment based on the number of enrollees, and a monthly payment based on the size of the ACO. To be eligible for advance payment, ACOs must either: 1) operate with less than $50 million in annual revenue and not include a hospital, or 2) operate with a critical access or low-volume rural hospital and have less than $80 million in annual revenue.
CMS said it would accept advance payment model applications for 2013 ACOs from August 1st through September 19th. More information about the advance payment ACO benefits and requirements can be found here.
In other ACO news, Cigna announced new ACO initiatives in the following six states: California, Colorado, Texas, Ohio, Maine, and Vermont. Cigna’s news release on these new ACOs is available here.
Cigna’s ACO in California is with the Palo Alto Medical Foundation, an affiliate of Sutter Health. This is Cigna’s first ACO arrangement in California and will cover about 21,000 patients. Cigna's ACO in Colorado is with New West Physicians in Denver, its ACO in Texas is with St. Luke's Health System Clinically Integrated Providers and Renaissance Physician Organization, its ACO in Ohio is with Mount Carmel Health Partners in Columbus, its ACO in Maine is with Martin’s Point Health Care and Mercy Health System, and its ACO in Vermont is with Fletcher Allen Health Care and Central Vermont Medical Center. For each of these ACOs, Cigna has said that registered nurses will be “critical to the program’s benefits” since they will “serve as clinical care coordinators to help patients navigate their health care system.” In addition, Cigna has said that all of “these programs focus on expanding patient access to health care, improving care coordination, and achieving the ‘triple aim’ of improved health outcomes (quality), affordability and patient satisfaction.”
According to Cigna’s press release, “Cigna is now engaged in 32 collaborative accountable care initiatives in 16 states, encompassing more than 300,000 Cigna customers and more than 4,500 primary care physicians.”
Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128, dhettich@kslaw.com.
CMS Solicits Comments Regarding Patient Inpatient/Outpatient Status for Purposes of Medicare Payment – On July 6, 2012, CMS released the Hospital Outpatient Prospective Payment Proposed Rule (CMS-1589-P). In the preamble discussion of the proposed rule, CMS acknowledges the multifaceted issues associated with a beneficiary’s patient status and Medicare hospital payment. In particular, CMS discusses concerns regarding how it can make changes to help reduce the error rate with respect to the medical necessity of inpatient hospital stays, reduce the amount of time that patients spend in observation, and reduce the impact on hospitals of subsequent inpatient denials. CMS is soliciting public comments on the following topics, among others:
- “Whether it may be appropriate and useful to establish a point in time after which the encounter becomes an inpatient stay if the beneficiary is still receiving medically necessary care to treat or evaluate his or her condition;”
- Whether the agency should “establish more specific criteria for patient status in terms of how many hours the beneficiary is in the hospital, or to provide a limit on how long a beneficiary receives observation services as an outpatient;”
- Whether the agency should provide additional clarity in the definition of an inpatient; and
- Whether the agency should establish “more specific clinical criteria for admission and payment, such as adopting specific clinical measures or requiring prior authorization for payment of an admission.”
CMS also notes that it is currently accepting hospital applications to participate in the 3-year Medicare Part A to Part B Rebilling (AB Rebilling) Demonstration which began on January 1, 2012. This demonstration allows the hospital participants to rebill outside of the usual timely filing requirements for services relating to all inpatient short-stay claims that are denied for lack of medical necessity. Under the demonstration, participating hospitals will waive any appeal rights associated with the denied inpatient claims eligible for rebilling. Additional information regarding this demonstration is available by clicking here.
The unpublished proposed rule is available here. The proposed rule is scheduled to be published in the July 30, 2012 Federal Register.
Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.
CMS Issues Revised FAQ Affecting EHR Incentives for Critical Access Hospitals – In response to an effort led by the American Hospital Association, along with King & Spalding and the accounting firm BKD, CMS posted a revised answer to a frequently asked question (FAQ) governing payment of Medicare EHR incentives for critical access hospitals (CAHs). The revised FAQ now permits CAHs to receive incentives under the HITECH Act for the reasonable costs of certified EHR technology obtained through a capital lease or “virtual-purchase agreement.” Previously, CMS only permitted incentives for CAHs that purchased EHRs outright. That policy would have prevented many CAHs from receiving incentives, even if they qualified as meaningful users.
Because CAHs are otherwise reimbursed on a reasonable cost basis and not pursuant to a prospective payment system (PPS), the HITECH Act provides for a different incentive payment methodology for CAHs than for PPS hospitals. The statute states that CAHs that qualify as meaningful users of certified EHR technology will be reimbursed for the acquisition costs of such EHR systems.
CMS’s prior FAQ prohibited incentive payments to CAHs that had entered into lease agreements for their EHR systems, rather than having purchased the EHRs outright. The revised FAQ now will treat capital leases the same as purchase agreements, enabling CAHs that qualify as meaningful users to claim capital lease payments as reasonable costs eligible for incentives.
A capital lease differs from an operating lease in which the CAH simply pays a rental fee for use of an asset that is at all times owned and depreciated by the lessor. A capital lease, by contrast, is treated as if the CAH purchased the EHR (a “virtual purchase”), and CMS will treat rental payments as allowable costs of ownership so long as total payments do not exceed the costs the CAH would have incurred to purchase the EHR outright. According to the FAQ, an agreement will qualify as a capital lease if it contains one of the following terms:
- The lease transfers title of the EHR to the CAH during the lease term;
- The lease contains a bargain purchase option;
- The lease term is 75 percent or more of the useful life of the facilities or equipment (This provision is not applicable if the lease begins in the last 25 percent of the useful life of the facilities or equipment.); or
- The present value of the minimum lease payments (that is, payments to be made during the lease term, including bargain purchase option, guaranteed residual value, or penalties for failure to renew) equal 90 percent or more of the fair market value of the leased property. This provision is not applicable if the lease begins in the last 25 percent of the useful life of the facilities or equipment. The present value is computed using the lessee's incremental borrowing rate, unless the interest rate implicit in the lease is known and is less than the lessee's incremental borrowing rate, in which case, the interest rate implicit in the lease is used.
This revision is consistent with prior CMS policy that treats capital leases or virtual-purchase agreements as purchases. See 42 C.F.R. § 413.130(b)(8); see also Medicare Provider Reimbursement Manual (CMS Pub. 15-1), § 110.B.1.b.
The new FAQ is available by clicking here.
Reporters, Dennis Barry, Washington D.C., + 1 202 626 2959, dbarry@kslaw.com and Christopher Kenny, Washington D.C., + 1 202 626 9253, ckenny@kslaw.com.
OIG Report Finds Hospitals Failing to Identify Adverse Events Subject to State Reporting Requirements – In a report released July 19, 2012, by the Department of Health and Human Services Office of Inspector General (OIG), OIG found that hospitals are under-reporting adverse events to State authorities. OIG found that approximately 60 percent of adverse events nationwide occurred in States with reporting systems, 12 percent of events met State requirements for reporting, and hospitals reported only 1 percent of events. Notably, most of the reportable events that hospitals failed to report had not been identified by internal hospital incident reporting systems, suggesting that the under-reporting problem stems from a failure to identify reportable events rather than from a failure to report known events.
State reporting requirements were surveyed in a 2008 OIG report, Adverse Events in Hospitals: State Reporting Systems (OEI-06-07-00471), available by clicking here, which found that 25 States plus the District of Columbia maintained adverse event reporting systems, but that the State systems varied as to whether reporting was voluntary or mandatory and as to what types of events and information must be reported. According to the 2008 report, 3 states use the National Quality Forum List of Serious Reportable Events and 23 states have their own lists, which vary greatly.
Earlier this year, OIG published a related report (OEI-06-09-00091) in which it evaluated the efficacy of hospital incident reporting systems, concluding that by and large, these systems fail to capture most patient harm events affecting Medicare beneficiaries. This earlier report is discussed in a Health Headlines article published in the January 9, 2012 edition, available by clicking here.
The most recent OIG report, Few Adverse Events in Hospitals Were Reported to State Adverse Event Reporting Systems (OEI-06-09-00092), is available by clicking here. Additional OIG resources pertaining to adverse event reporting are available on the OIG’s website.
Reporter, Susan Banks, Washington, D.C., +1 202 626 2953, sbanks@kslaw.com.
CMS Updates Hospital and Nursing Home Compare Websites – In furtherance of its efforts to improve quality through transparency, CMS announced updates to its Hospital Compare and Nursing Home Compare websites on July 19, 2012. The agency has added two new quality measures to the “use of medical imaging” tab on the Hospital Compare website. The two measures indicate the percentage of outpatients in hospitals who received both brain and sinus CT scans at the same time, thereby exposing patients to high levels of radiation, and outpatients who received cardiac stress tests before undergoing outpatient surgeries that are considered low-risk. CMS has also updated data on the website with respect to previously available quality measures. On the Nursing Home Compare website, CMS has updated quality measures, posted nursing home ownership information, and posted a copy of each nursing home’s most recent health inspection report.
The Hospital Compare website provides data to the public on over 4,000 Medicare-certified hospitals, and the Nursing Home Compare website makes data available on all Medicare and Medicaid-certified nursing homes that provide skilled care in the country. The Hospital Compare website may be accessed by clicking here, and the Nursing Home Compare website may be accessed by clicking here.
Reporter, Kate Stern, Atlanta, +1 404 572 4661, kstern@kslaw.com.
Proposed Regulations Under 501(r) Affecting Tax-Exempt Hospitals Webinar Roundtable – On Tuesday, July 31, 2012, King & Spalding LLP will be hosting a Roundtable Webinar focused on the proposed regulations recently published by the Treasury Department and the IRS concerning certain additional requirements imposed on charitable hospitals by Section 501(r) of the Internal Revenue Code.
The Roundtable will include the following topics related to requirements of Internal Revenue Code Section 501(r) and the new proposed regulations:
- Financial assistance policy (FAP) requirements, including what is required to satisfy the obligation to “widely publicize” the FAP
- Emergency medical care policy requirements
- Limitations on charges, including permitted methods of calculating “amounts generally billed”
- Billing and collection restrictions, including those imposed on “extraordinary collection actions”
- Requirement to make “reasonable efforts” to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy
- Update on the status of IRS guidance concerning the requirement for charitable hospitals to conduct a community health needs assessment
This Roundtable will only be presented as a Webinar. You do not have to be a client to attend, and there is no charge. You can register to participate by clicking here.
This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.
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