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Health Headlines - February 4, 2013

04 Feb 2013

Long Term Care Hospital Moratorium Expires – As of December 29, 2012, the moratorium preventing the designation of new long term care hospitals (LTCHs) or LTCH satellites or the addition of new LTCH beds has expired.  The moratorium, which originally established a three-year suspension on such LTCH activities, with limited exception, was established by the Medicare, Medicaid and SCHIP Extension Act on December 29, 2007. The three year time frame was later extended by the Patient Protection and Affordable Care Act until December 28, 2012.  With the expiration of the moratorium as of December 29, 2012, CMS Regional Offices and state surveyors may now process requests from hospitals to change their classification to that of an LTCH, and may also process requests from current LTCHs seeking to increase their number of certified beds, or to establish new LTCH satellites.  CMS has sent a memorandum notifying all state surveyors of the expiration of the moratorium.  The memorandum is available here

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

CMS and IRS Publish Proposed Rules on Exemption to Individual Mandate Financial Penalty – CMS and the Internal Revenue Service (IRS) issued two proposed rules on January 30, 2013 setting forth the exemptions an individual may satisfy to avoid financial penalties associated with the Patient Protection and Affordable Care Act’s (PPACA) “individual mandate.”  PPACA requires individuals to possess health insurance that meets certain minimum coverage benchmarks, or else pay a financial penalty for forgoing coverage. The proposed regulations establish the criteria that would spare an individual from having to pay the penalty if he/she did not acquire minimum coverage.  As a result of these hardship exemptions, the Congressional Budget Office estimates that only two percent of Americans will actually pay the penalty.

Individuals will not be forced to pay the penalty if the health insurance exchange in that individual’s state determines that coverage available on the exchange would be unaffordable for the individual.  Moreover, individuals who would be eligible for Medicaid but for their State’s decision to refuse Federal funding to expand Medicaid eligibility also would be exempt from the penalty.  Individuals who are not otherwise required to file Federal income tax returns also would be exempt.  (Beginning in 2015, individuals who are required to file Federal income tax returns will indicate their hardship exemption on their 2014 returns.)

The CMS proposed rule is available here, and the IRS rule is available here.  Comments on the CMS proposal are due March 18, 2013, and comments to IRS are due March 2.

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

CMS Announces Participants in Bundled Payments for Care Improvement Initiative – On January 31, 2013, CMS announced the organizations that will be participating in its Bundled Payments for Care Improvement (BPCI) initiative. Established under CMS’s innovation authority provided for in the Patient Protection and Affordable Care Act, the BPCI initiative seeks to change the traditional Medicare fee-for-service reimbursement methodology to a bundled payment reimbursement methodology for a single episode of care. This bundled payment reimbursement methodology is expected to increase provider accountability, improve coordination of care, and lower costs.

The BPCI initiative proposes four models of bundled payments. Model 1, scheduled for implementation in April of this year, defines an episode of care as an inpatient stay in an acute care hospital. Hospitals will be reimbursed at a rate discounted from the traditional Inpatient Prospective Payment System (IPPS) for the episode of care, while physicians will be reimbursed separately under the traditional Medicare Physician Fee Schedule. Model 2 provides for an episode of care that includes an inpatient stay in an acute care hospital, as well as care provided for up to 30, 60, or 90 days after discharge. Under Model 3, the episode of care will begin after a patient’s discharge from an acute care hospital and will cover post-acute care services provided by participating skilled nursing facilities, home health agencies, long term care hospitals, or inpatient rehabilitation facilities. Under Models 2 and 3, participating organizations will be reimbursed by reconciling interim payments against a target price per episode of care that is based on historic data. Interim payments will be at regular rates with frequent retrospective reconciliation up or down to the negotiated target rates. Model 4 requires CMS to make a single, bundled payment to hospitals for all services, including physician services, provided during an inpatient stay and related readmissions for up to 30 days after discharge. Physicians and other practitioners will be paid by the hospital, rather than by submitting claims for reimbursement to Medicare. Implementation of Models 2, 3, and 4 will begin in July of 2013.

The BPCI initiative covers 48 specific episodes of care, such as stroke, diabetes, and chest pain. For a detailed list of all 48 episodes of care and the 450 participating organizations, please click here.

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

King & Spalding LLP to Host Roundtable on February 15, 2013 – King & Spalding LLP will host a Roundtable entitled Are You Covered? Insurance for Healthcare Regulatory Investigations on February 15, 2013, at 1:00 - 2:30 P.M. Eastern Time in the Atlanta office.  Prompted by the increased pace and complexity of government investigations, qui tam suits, and evolving delivery models, the Roundtable will focus on planning for and pursuing insurance coverage for defense costs and liability arising from such investigations, litigation, or regulatory enforcement actions.  The Roundtable will also be offered as a webinar.  For more information and to register for the event, click 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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