Translate this page RSS Share this page Print this page


Health Headlines - November 5, 2012

05 Nov 2012

CMS Releases Final CY 2013 Medicare Outpatient Prospective Payment and Ambulatory Surgical Center System Rules – On November 1, 2012, CMS issued the final outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) system rules to implement rate and policy updates for hospital outpatient departments (HOPDs) and ASCs for calendar year (CY) 2013.  Under the OPPS final rule, Medicare payments to HOPDs will increase 1.8 percent, which includes a 2.6 percent market basket increase minus statutory reductions totaling 0.8 percent.  The statutorily mandated minus 2.0 percent payment penalty will be applied to hospitals that fail to comply with hospital outpatient quality reporting requirements.  ASC payment rates, on the other hand, will increase by 0.6 percent—which includes a 1.4 percent increase based on updates to the consumer price index for urban consumers (CPI-U) minus a 0.8 productivity bonus adjustment required by law.  Significant changes and updates under the OPPS final rules for HOPDs, ASCs, quality improvement organizations (QIOs), and inpatient rehabilitation facilities (IRFs) are set forth below. 

OPPS Proposed Rule Changes Affecting HOPDs

  • Shift from Median Costs to Geometric Mean Costs. As proposed, CMS will use the geometric mean costs of services within each Ambulatory Payment Classification (APC) to determine the services’ relative payment weights instead of median costs, as has been used since the inception of the OPPS.  According to CMS, geometric mean costs are a better reflection of the average costs of services than the median of costs, and they align the OPPS rate-setting metric with the inpatient prospective payment system. 
  • Hospital Outpatient Quality Reporting Program.  The OPPS final rule does not add any new quality reporting measures to the 22 previously adopted for CY 2014 payment determinations.  However, CMS confirmed the removal of one measure (OP-16: Troponin results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 minutes of arrival), confirmed the suspension of another measure (OP-19 Transition Record with Specified Elements Received by Discharged ED Patients), and deferred data collection for a third measure (OP-24 Cardiac Rehabilitation Patient Referral). 
  • Drugs and Pharmacy Overhead.  For CY 2013, CMS will pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at the statutory default of average sales price (ASP) plus 6.0 percent. 
  • Supervision of Hospital Outpatient Therapeutic Services.  CMS clarified the application of the supervision regulations to physical therapy, speech-language pathology, and occupational therapy services that are furnished in HOPDs and critical access hospitals (CAHs).  CMS also stated that it would extend the enforcement instruction one final year through CY 2013. This additional year, which CMS expects will be the final year of the extension, will provide additional opportunities for HOPDS to bring issues to the Hospital Outpatient Payment Panel.
  • Partial Hospitalization Services.  CMS finalized its proposal to update four separate partial hospitalization program (PHP) APC per diem rates based on geometric mean cost levels.

OPPS Final Rule Changes Affecting ASCs

  • New Intraocular Lenses Technology.  CMS finalized proposed changes to its new technology for intraocular lens (NTIOLs) regulations.  Under the final rule, FDA-approved labeling for NTIOLs must contain a claim of a specific clinical benefit on new lens characteristic relative to currently available IOLs.  The clinical benefit identified in the labeling must be supported by evidence demonstrating that the NTIOL results in a measurable, clinically meaningful, improved outcome. 
  • Proposed ASC Quality Reporting Measures.  CMS finalized its proposal regarding the process for reducing ASC payment rates for ASCs that fail to meet the ASC Quality Reporting program requirements for CY 2014 and subsequent payment determinations.  

OPPS Proposed Rule Changes Affecting Other Providers and Organizations
The OPPS final rule also makes certain changes to the IRF Quality Reporting Program, and the Quality Improvement Organization (QIO) regulations. 

  • With respect to the IRF Quality Reporting Program, CMS finalized proposals for (1) an application of the National Quality Forum (NQF)-endorsed catheter-associated urinary tract infection (CAUTI) measure for the FY 2014 annual payment update determination, and (2) the actual NQF-updated CAUTI measure for the FY 2015 and subsequent payment determinations.  A non-risk adjusted version of a NQF-endorsed pressure ulcer measure was also adopted. 
  • Changes were made to QIO regulations to improve QIO operations, transparency, and responsiveness to beneficiary complaints regarding quality of care.  These changes include providing beneficiaries with more information about QIO review processes, establishing a new alternative dispute resolution process to resolve beneficiary complaints, allowing QIOs to send and receive secure electronic health information, and giving beneficiaries the right to authorize the QIOs’ use and disclosure of confidential information.

The OPPS final rule is scheduled to be published in the November 16, 2012 edition of the Federal Register.  The OPPS final rule is available here and the Fact Sheet is available here

Reporter, Adam Robison, Houston, +1 713 276 7306,

CMS Issues Final CY 2013 Medicare Physician Fee Schedule (MPFS) Rule – On November 1, 2012, CMS issued the final Medicare physician fee schedule (MPFS) rule for calendar year (CY) 2013.  This rule, among other things, is expected to increase payment to family physicians by 7% and other primary care physicians between 3% – 5% so long as Congress overrides the statutorily required Sustainable Growth Rate (SGR) reduction (as it has done every year since 2003).

Other changes in the MPFS final rule include:

  • (in the absence of Congressional action) a 26.5% across-the-board reduction to Medicare payment rates for physicians and non-physician practitioners, as required under the Balanced Budget Act’s SGR methodology;
  • a new procedure to pay for the management of a patient’s care for the 30 days following a hospital or skilled nursing facility stay; 
  • the implementation of a physician value-based payment modifier, to be phased in over three years from 2015-2017, providing differential Medicare payments to physicians based on comparison of the quality and the cost of care, and enlarging the group size for whom the modifier applies from groups of physicians with 25 or more eligible professionals to groups of 100 or more;
  • a choice for these groups to select the method for calculating the modifier based on their participation in the Physician Quality Reporting System (PQRS); 
  • changes to the PQRS and the Electronic Prescribing (eRx) Incentive Program, the two MPFS-applicable quality reporting programs;
  • updates to the Medicare Electronic Health Records (EHR) Incentive Pilot Program;
  • allowing Medicare to pay for portable x-rays ordered by non-physician practitioners;
  • details on how Medicare will pay for molecular pathology services under the Clinical Laboratory Fee Schedule;
  • an expansion of access to non-physician practitioner services;
  • the ability for Medicare to pay Certified Registered Nurse Anesthetists (CRNAs) for a requirement of an in-person encounter for some durable medical equipment (DME) items for orders written on or after July 1, 2013 as a condition of payment; and
  • efforts to enhance the Physician Compare website, including, as part of the Million Hearts campaign, the names of practitioners who effectively report heart-disease prevention measures.

The rule will be published in the Federal Register on November 16, 2012 and will take effect January 1, 2013, with a comment period closing on December 31, 2012.  For the final MPFS rule, click here

Reporter, Katy Lucas, Atlanta, +1 404 572 2822,

OIG Advisory Opinion Finds Low Risk of Fraud in Per Diem Emergency Department Coverage Agreements – An October 30, 2012 advisory opinion posted by the HHS Office of Inspector General (OIG) found a “low risk of fraud and abuse” in a hospital’s arrangement with specialty physicians to provide on-call coverage of the hospital’s emergency department.  The hospital used an independent valuation consultant to calculate per diem rates for physicians in a variety of specialties.  Under the arrangement, the hospital would pay a per diem rate to those physicians who were available for telephone consultations with the hospital’s emergency department, and able to respond in-person to an emergency department call within 30 minutes.  Participating physicians who admitted emergency department patients also would be responsible for treating the admitted patients and providing follow-up care in their offices after discharge, regardless of the patient’s ability to pay.  Though the arrangement did not fit squarely within a safe harbor to the federal anti-kickback statute, 42 U.S.C. 1320a-7b, OIG stated it would not impose sanctions on the arrangement.

While OIG expressed concern that per diem coverage arrangements can be abused to provide compensation to physicians either in excess of fair market value or for services not actually rendered, OIG found that the specific circumstances of this arrangement did not raise those concerns.  First, the per diem rate was calculated by an independent valuation consultant and the hospital represented that the per diem rates represented fair market value.  The hospital paid different rates to each type of specialist, reflecting the estimated amount of work each type of specialist would provide while on call.  The rate did not vary among physicians within each specialty to favor those physicians who provide referrals to the hospital.  The rate is set in advance every year, and the hospital had established procedures for ensuring that on-call physicians actually provided the necessary coverage according to a coverage schedule.  Participation in the coverage arrangement was open to all specialists on its medical staff, regardless of referrals.

OIG cautioned, however, that hospitals are not required to provide on-call coverage compensation and that such arrangements should be “scrutinized closely to ensure that [they are] not a vehicle to disguise payments for referrals.”  The advisory opinion is available by clicking here.

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253,

GAO Report Highlights Higher Use of Advanced Imaging Studies by Providers Who Self-Refer – The Government Accountability Office (GAO) recently published the results of a study detailing the higher use of advanced imaging studies by providers who self-refer.  Self-referral by providers occurs when providers refer patients to entities with which they or an immediate family member have a financial relationship.  Self-referral may include situations when a physician refers a patient to his or her office for an imaging study when such physician has purchased or leased advanced imaging equipment. 

The GAO found that (i) from 2004 through 2010, the number of self-referred and non-self-referred advanced imaging services (specifically, magnetic resonance imaging (MRI) and computed tomography (CT) services) both increased, with the larger increase among self-referred services and (ii) providers’ referrals of MRI and CT services substantially increased the year after they began to self-refer.  For example, the GAO noted, among many statistics, that the number of self-referred MRI services increased from about 380,000 services in 2004 to about 700,000 services in 2010, an 80 percent increase, while the number of non-self-referred MRI services only grew about 12 percent during the same time period, from about 1.97 million services in 2004 to about 2.21 million services in 2010.   The GAO noted that the differences in advanced imaging referrals between self-referring and non-self-referring providers continued even after taking into consideration differences in practice size, specialty, geography, or patient characteristics. 

Medicare Part B expenditures, including payment for CTs and MRIs, are expected to continue to grow at what the GAO has called an “unsustainable rate,” and many see self-referral as a factor in this growth.  While the GAO made three recommendations to address the increases in self-referred imaging services, the Department of Health & Human Services only will consider one of those recommendations, specifically, the recommendation that CMS employ an approach to ensure the appropriateness of advanced imaging services referred by self-referring providers.  The GAO report may be read here.

Reporter, Christina A. Gonzalez, Houston, +1 713 276 7340,

CMS Clarifies Coverage of Extended SNF Services under Part A – On October 26, 2012, CMS issued notice of policy clarifications to be effective next year governing key components of coverage of post-hospital extended care services payable under Medicare Part A.  In Transmittal 161 (Change Request 8044), CMS has clarified its coverage rules relating to the three-day prior hospitalization requirement, the 30-day transfer rule, and the definition of daily skilled services. 

In general, Medicare Part A covers post-hospital extended care services furnished in skilled nursing facilities (SNFs) when: (i) a beneficiary was an inpatient of a hospital for not less than three consecutive days before discharge; (ii) the inpatient stay was medically necessary; (iii) the extended care services are initiated within 30 days after discharge from a qualifying hospital stay; (iv) the extended care services are for the treatment of a condition for which the beneficiary received treatment during the qualifying hospital stay; and (v) it is medically necessary to provide skilled services to the beneficiary on a daily basis, which, as a practical matter, can only be provided in a SNF.  When these coverage requirements are not satisfied, no payment is made under Medicare Part A for post-hospital extended care services to the SNF. 

With regard to these coverage rules, CMS provides the following clarifications affecting Chapter 8 of the Medicare Benefit Policy Manual (Coverage of Extended Care (SNF) Services Under Hospital Insurance):

  • The condition treated in the SNF need not be the principal diagnosis that precipitated the beneficiary’s admission to the hospital, but it could be any of the conditions present during the qualifying hospital stay.
  • If the beneficiary qualifies for limitation of liability for the hospital stay, this conclusively establishes that the hospital stay was not medically necessary. 
  • The date of hospital discharge is the day the beneficiary physically leaves the hospital.   The level of care furnished just prior to discharge (even if less intensive) is not a determining factor of SNF coverage as long as some portion of the stay included at least three consecutive days of medically necessary inpatient care. 
  • If a beneficiary’s care needs drop from acute to SNF-level, but no SNF bed is available, the regulations at 42 C.F.R. § 424.13(b) permit a physician to certify that the beneficiary’s continued inpatient stay in the hospital is, in fact, medically necessary under this particular set of circumstances.  These “alternative placement” days can be included in the 3-day count for coverage of SNF services under Medicare Part A.
  • So long as a skilled level of care is needed and initiated in a SNF within 30 days after discharge from a qualifying hospital stay, the timely transfer requirement is satisfied even if actual Medicare payment does not commence until later (e.g., when another payment source is primary to Medicare for the initial portion of a the SNF stay).
  • A new inpatient hospital qualifying stay is required for Medicare Part A SNF coverage when a beneficiary has had coverage under Medicare Part for a SNF stay, but thereafter is determined not to require skilled care for a period of more than 30 days, even if the beneficiary remains in the SNF.
  • The provision of skilled services on a daily basis can be met by furnishing a single type of skilled service on a daily basis, or by furnishing various types of skilled services on different days of the week that collectively add up to “daily” skilled services.  However, arbitrarily staggering the timing of therapy modalities through the week just to meet the daily basis requirement will be subject to question.  The requirement is only satisfied when the beneficiary actually needs skilled rehabilitation services to be furnished on each of the days the facility makes the services available.  “The basic issue here is not whether the services are needed, but when they are needed.  Unless there is a legitimate medical need for scheduling a therapy session each day, the ‘daily basis’ requirement for SNF coverage would not be met.” 

The clarifications will be effective and implemented in Chapter 8, Sections 20.1, 20.2.1, and 30.6 of the Medicare Benefit Policy Manual as of April 1, 2013. 

Notably, the above policy clarifications should be distinguished from the issues of Medicare coverage for skilled services in SNFs (and for home health and outpatient therapy benefits) addressed in the Department of Health & Human Services (HHS) recent proposed settlement in Jimmo v. Sebelius, Civ. Act. No. 5:11-CV-17-CR (D. Va. Oct. 16, 2012).  In Jimmo, the plaintiffs challenged the use of an alleged “improvement standard” for determining coverage of skilled services.  Although HHS denies use of an improvement standard, the standard according to the plaintiffs in Jimmo, refers to a rule of thumb under which Medicare coverage of skilled services is denied on the basis that a Medicare beneficiary is not improving without regard to an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the treatment, care or services in question.  Under the terms of the proposed settlement, HHS has agreed, among other things, to clarify maintenance coverage standards for SNF, home health and outpatient therapy benefits when a patient has no restorative or improvement potential but the patient nevertheless needs skilled services.  The proposed settlement must be approved by the Court and thereafter HHS will have one year from the Court’s approval of the settlement to make the promised policy clarifications.  Expressly excluded from the proposed settlement agreement are eligibility requirements for receiving Medicare coverage for, among other things, post-hospital extended care (SNF) services.

Reporter, Tracy Weir, Washington, D.C., +1 202 626 2923,

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.

>> Back to Top