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Health Headlines – March 17, 2014

17 Mar 2014

CMS Will Not Move Forward With Four Controversial Provisions in Recent Part D Proposed Rule – On March 10, 2014, CMS Administrator, Marilyn Tavenner, sent a letter to Rep. Sander Levin (D-Mich), the Ranking Member of the House Ways and Means Committee, stating that CMS has decided not to finalize four controversial proposals in the proposed rule published on January 10, 2014, on the Medicare Advantage (Part C) and Part D Prescription (PDP) Drug Programs. The four controversial proposals involved:  (i) determining that three drug classes (anti-depressants, immunosuppressants used for organ rejection and anti-psychotics) should lose their protected class status that requires Part D plans to cover all or substantially all drugs in these classes; (ii) clarifying that the non-interference provision does not apply to negotiations between PDP sponsors and pharmacies; (iii) reducing to two the number of Part D plans that a Part D sponsor may offer; and (iv) revising requirements for pharmacy participation in Part D plan preferred pharmacy networks.   

These four controversial proposals have created significant industry concern and political backlash.  After CMS published its proposed rule on January 10, 2014, Rep. Renee Ellmers (R-NC) introduced legislation in the House on March 6, 2014, aimed at preventing CMS from making the proposed controversial changes.  The next day, Republicans from the House Energy and Commerce Committee sent Administrator Tavenner a letter expressing concern that millions of seniors would lose their Part D plans and could be forced to pay more for prescription drugs, and stating that if CMS failed to rescind the proposed rule immediately, the signatories would move the legislation through the House to block the proposed rule. 

Although CMS rescinded the four controversial proposals, Administrator Tavenner’s letter makes clear that CMS nonetheless intends to finalize other proposals contained in the January 10, 2014 proposed rule, including provisions related to “consumer protections (e.g., ensuring access to care during natural disasters), anti-fraud provisions that have bipartisan support (e.g., strengthening standards for prescribers of prescription drugs), and transparency (e.g., broadening the release of privacy-protected Part D data)” after taking into consideration comments received.

Click here to view the March 10, 2014 letter from Administrator Tavenner, and here to view the March 7, 2014 letter from House Republicans.  For a copy of the January 10, 2014 proposed rule, click here, and to view a copy of H.R. 4160, click here

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

CMS Expands Hardship Exemption for Stage 2 Meaningful Use – CMS Administrator Marilyn Tavenner announced on March 11, 2014, an expansion of the hardship exemption available to eligible providers who were unable to attest to being meaningful users under the Stage 2 Meaningful Use Rule in 2013.  In addition to the original bases for a hardship exemption, the exemption also will be available for those eligible providers who were unable to successfully attest due to delays in their EHR’s certification and other “EHR vendor issues.”

Applications for eligible hospitals (available here) are due by April 1, 2014.  Applications for eligible professionals (available here) are due by July 1, 2014.  Applications may be submitted electronically via email at this e-mail address.

The exemption will apply for the 2015 payment year only, meaning that eligible providers that did not qualify as meaningful users in 2013 would be exempt from the FY 2015 Medicare payment adjustment.

The eligible professional application notes that hospital-based eligible professionals, including those physicians enrolled in the Provider Enrollment, Chain, and Ownership System (PECOS) with a specialty in diagnostic radiology, nuclear medicine, interventional radiology, anesthesiology, and pathology, do not need to complete the hardship exemption application and will automatically be exempt from any payment adjustment in 2015. 

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

CMS Extends Deadline for Low-Volume Hospitals and the Medicare-Dependent Hospital Program – On March 14, 2014, CMS released an interim final rule implementing a six-month extension of the low-volume payment adjustment and Medicare-Dependent Hospital (MDH) program under the inpatient prospective payment system (IPPS) rule for fiscal year 2014.  These changes were made in accordance with sections 1105 and 1106 of the Pathway for SGR Reform Act of 2013, a December 2013 law (Pub. L. No. 113-67) that made continuing appropriations for FY 2014.

Guidance for Low-Volume Hospitals

For the applicable low-volume percentage increase to be applied to payments for discharges on or after October 1, 2013 (the beginning of FY 2014) and on or before March 31, 2014, a hospital must:

  • have fewer than 1,600 Medicare discharges annually;

  • be located 15 road miles or more from the nearest subsection (d) hospital (i.e., IPPS); and

  • make its request for low-volume hospital status in writing to its Medicare Administrative Contractor (MAC) by March 31, 2014, and provide documentation that it meets the 15-mile mileage criterion; CMS will accept the use of a web-based mapping tool, such as MapQuest, as part of acceptable documentation related to the mileage requirement.

A hospital that qualified for the low-volume payment adjustment in FY 2013 may continue to receive a low-volume payment adjustment for FY 2014 discharges (occurring prior to April 1, 2014) without reapplying if it continues to meet the Medicare discharge and distance criteria.  However, the hospital must send written verification to its MAC by the March 31, 2014 deadline that it continues to be more than 15 miles from any other IPPS hospital. 

Starting on April 1, 2014, the 6-month extension of the temporary changes to the low-volume hospital payment adjustment policy will expire and the low-volume hospital definition and payment methodology will revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act.

Guidance Related to MDH Classification

With respect to the six-month extension of the MDH classification (October 1, 2013 to March 31, 2014), CMS generally will permit hospitals that qualified as an MDH in FY 2013 to continue with MDH classification in FY 2014 (effective October 1, 2013) without reapplying, so long as they have not been reclassified as a sole community hospital (SCH), or have not requested a cancellation of their rural classification.  If, however, a former MDH requested cancellation of its rural classification, or if it was classified as a SCH on or after October 1, 2013, it would need to reapply for MDH status consistent with 42 C.F.R. § 412.108(b), and the provider’s MDH status would be effective prospectively only (i.e., effective 30 days after the date of the MAC’s written notice to the hospital that it again meets the requirements for MDH status).  Hospitals in this situation stand to lose several months of MDH status, and the more favorable reimbursement associated with it, simply because they acted to limit the negative reimbursement impact from what appeared to be the end of the MDH program. 

If a hospital reclassified to SCH status or cancelled its rural status effective on a date after October 1, 2013, CMS instructs that “MDH status will be reinstated effective from October 1, 2013 but will end on the date on which the provider changed its status to an SCH or cancelled its rural status.”  Hospitals falling within this category may reapply for MDH status, which status will be effective 30 days from the date the hospital is notified of the determination, consistent with 42 C.F.R. § 412.108(b)(4).  CMS reiterates throughout the interim final rule that, given the partial year extension of the MDH program, there may not be sufficient time for hospitals that have reclassified as SCHs or cancelled classification of their rural status to reapply and be approved for MDH status.  

CMS projects a $227 million increase to small rural hospitals and providers, as well as other classes of hospitals and providers.  The interim final rule is available here and  was published in the March 18, 2014 Federal Register.  Comments are due by 5:00 p.m. on May 13, 2014. 

This article has been corrected from the version originally published on March 17, 2014.

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

Senate Finance Committee Stakeholder Discussion Regarding Audit Concerns – On March 13, 2014, with the strong support of Senate Finance Ranking Committee Member Orrin Hatch (R-UT), the Republican oversight staff of the Senate Finance Committee convened an informal stakeholder discussion attended by over a dozen providers and suppliers with day-to-day responsibility for compliance issues.  A group of bicameral and bipartisan staffers from congressional committees of jurisdiction and individual Member offices attended the session.  The moderated discussion focused on developing solutions to the current challenges presented by Medicare audit and appeals burdens, while ensuring and improving the integrity of Medicare payments.  The three main discussion areas focused upon the following questions:

  • What are the main sources of audit burden (i.e., RACs, MACs, ZPICs)?

  • What can be done to alleviate those burdens, while avoiding or recovering improper payments?

  • What changes could be made to alleviate appeals bottlenecks or reduce the number of appeals? 

King & Spalding is very pleased that two members of our RAC Coalition, an ad-hoc group of hospital clients created in April 2013 in an effort to communicate jointly to CMS and Congress the need for meaningful and common-sense reforms to the RAC program, participated in this discussion.  We look forward to continuing our work with Congress and the Administration to find fundamental, practical, cost-effective, and lasting RAC reform.  

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600,

Also in the News

CMS Guidance on Medicare Signature Requirements – CMS issued a fact sheet describing common Comprehensive Error Rate Testing (CERT) Program errors related to the practitioner signature requirement for medical services and supplies and answered related frequently asked questions including what to do about unsigned medical orders and illegible signatures.  Signature deficiencies can lead to claim delays or denials. 

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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