CMS FY 2010 IPPS Proposed Rule Would Result in $979 Million Decrease to Hospitals – On May 1, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule for the inpatient prospective payment system (IPPS) in FY 2010 that, according to CMS, would result in a $979 million decrease in operating and capital payments to hospitals. The proposed rule contains a 2.1% increase in the IPPS market-basket. This change is smaller than updates in previous years, as a result of the slowing economy and rate of inflation.
Over 3,500 acute care hospitals, approximately 58% of all Medicare-participating hospitals, would be affected by the updated payment rate, which would go into effect for services provided on or after October 1. Long-term care hospitals (LTCHs), on the other hand, would experience a 2.4% increase in their payments. LTCHs use a different mix of resources to provide care, which requires a separate market-basket calculation to update payments to LTCHs. The market-basket updates are coupled with payment cuts of 1.9% for acute care hospitals and 1.8% for LTCHs, in order to control for hospitals changing their coding and documentation practices to increase payments from Medicare. Based on payment simulations run by CMS, the low market-basket update, along with the documentation and coding adjustments and other aspects of payment reform introduced in the proposed rule, would result in a $979 million decrease in operating and capital payments to IPPS hospitals in FY 2010. This would represent a 0.5% decrease in operating payments and a 4.8% decrease in capital payments. The decrease in capital payments is primarily attributable to the phase-out of capital payments for indirect medical education costs.
CMS also introduced four new quality measures to the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program and retired one measure. The first two new RHQDAPU measures are extensions to the existing Surgical Care Improvement Project measures: removal of a urinary catheter on postoperative day 1 or 2, and perioperative temperature management for surgery patients. The last two are participation in systematic clinical database registries for nursing sensitive care and stroke care. CMS retired the quality measure for administration of beta-blockers to acute myocardial infarction patients upon arrival, due to evolving evidence and changes to clinical practice guidelines published by the American College of Cardiology and American Heart Association. Hospitals must report on their compliance with the RHQDAPU quality measures in order to receive the full market-basket increase. Failure to do so would result in receiving a payment update that is 2% age points lower than the full update. CMS did not propose any changes to the hospital-acquired conditions (HAC) list for FY 2010.
The proposed rule is scheduled to be published in the May 22 Federal Register and comments from the public are due by June 30. CMS anticipates the finalization of the rule by August 1. More detailed information can be found through fact sheets describing the proposed rule by clicking here. The IPPS proposed rule is available by clicking here. Reporter, Adam Laughton, Houston, (713) 276-7400, alaughton@kslaw.com.
House Passes Conference Report for the FY 2010 Congressional Budget Resolution – On Wednesday, April 29, the House of Representatives passed the Conference Report for S. Con. Res. 13, the Fiscal Year 2010 Congressional Budget Resolution, by a vote of 233-193. The Senate passed S. Con. Res. 13 the same day by a vote of 53–43. Although the annual Congressional Budget Resolution is not enacted into law, it does set the rules and spending/revenue parameters for all legislation considered on the floor of the House of Representatives and the Senate.
There are several provisions contained in S. Con. Res. 13 of potential importance to health policy observers. First, the budget resolution contains “reconciliation instructions” in the House of Representatives and Senate to the relevant healthcare authorizing committees (Ways and Means; Energy and Commerce; Finance; and Health, Education, Labor and Pensions) to report legislation by October 15th, 2009 to “reduce the deficit by $1,000,000,000” over five years. Because reconciliation bills require only a simple majority for passage in the Senate, this controversial provision appears to have been included at the behest of Democratic Leadership as a backup plan to ensure healthcare reform is enacted this year. This approach is widely understood as an imperfect approach to healthcare reform given the ability of opposing Senators to strike “extraneous provisions” (e.g. those provisions without a budget impact) from reconciliation legislation.
Additionally, the budget resolution contains provisions relevant to Medicare physician payment reform. While the House-passed budget resolution assumed a permanent freeze for physician payments under Medicare (i.e., no cuts, consistent with the President’s Budget), the Senate-passed resolution did not contemplate additional funds (i.e., simply a “deficit-neutral” reserve fund). The Conference Report appears to split the difference by assuming $38 billion over 5 years for a 2-year physician payment freeze (Section 421(a)), but maintaining deficit-neutral reserve funds for healthcare reform and continuing to subject any Medicare physician payment reform to the Senate PAYGO point-of-order. Moreover, Section 421(a) does not apply in the House of Representatives unless that chamber has passed statutory PAYGO requirements. Reporter, Jason McKitrick, Washington D.C., (202) 626-2646, jmckitrick@kslaw.com.
CMS Proposes Revisions to Calculation of DSH Medicare Inpatient Days – As part of the proposed rule for the fiscal year (FY 2010) inpatient prospective payment system (IPPS) reported above, the Centers for Medicare and Medicaid Services (CMS) has proposed three changes to the calculation of the Medicare disproportionate share hospital (DSH) payment, effective for cost reporting periods beginning on or after October 1, 2009.
First, CMS proposes to allow hospitals to count labor and delivery patient days in the Medicaid fraction, even if the patient has not previously occupied a routine bed. The proposed change would not allow hospitals to include patient days for labor and delivery patients who are not admitted to the hospital as inpatients (e.g. false labor).
Second, CMS proposes to allow hospitals to change the methodology by which they accumulate days in the numerator of the Medicaid fraction. The proposed rule says that under existing policy, hospitals are required to accumulate patient days based on the date of discharge, though some confusion may have arisen because some state Medicaid agencies may report Medicaid eligibility data to hospitals on a different basis (such as date of admission or date of discharge). Under the proposed rule, CMS would allow hospitals to accumulate days in the numerator of the Medicaid fraction based on either the date of admission, the date of discharge, or the date of service. In order to change its methodology of counting patient days, the hospital would have to submit a written notification of the change to the fiscal intermediary or Medicare Administrative Contractor 30 days prior to the beginning of the cost reporting period for which the change would apply. The methodology would then apply to the entire cost reporting period and all subsequent cost reporting periods until the hospital submits a subsequent notification changing its methodology.
Finally, CMS proposes to exclude outpatient observation days from the Medicaid fraction, even if the patient is ultimately admitted to the hospital as an inpatient. CMS argues that these days should not be counted because they are not inpatient days.
Each of these changes, if ultimately adopted in the final rule to be published on August 1, would be effective for all cost-reporting periods beginning on or after October 1, 2009. All comments to the proposed rule are due on June 30, 2009. Reporters, Christopher L. Keough, Washington, D.C., (202) 626-5451, ckeough@kslaw.com and Adam Laughton, Houston, (713) 276-7400, alaughton@kslaw.com.
CMS Proposes $390 Million Rate Reduction in FY 2010 SNF PPS Proposed Rule – On May 1, 2009, the Centers for Medicare and Medicaid Services (CMS) issued the FY 2010 proposed skilled nursing facility (SNF) prospective payment system (SNF PPS) rule. The proposed rule (CMS-1410-P) would, if finalized, reduce FY 2009 SNF payments by $390 million, or 1.2%.
The overall reduction in SNF PPS payments is the product of CMS’s proposal to: (1) recalibrate the case-mix indexes (CMIs) resulting in a $1.050 billion (3.3%) decrease in SNF PPS payments; but (2) increase the SNF PPS market-basket by 2.1% or $660 million. The downward CMI recalibration represents CMS’s attempt to counter the unintended effects of CMS’s FY 2006 CMI adjustments. The FY 2006 CMI refinements, which created new higher paying resource utilization groups (RUGS) to better account for the resources used to treat medically complex patients, were intended to be budget neutral. According to CMS, however, patients were placed into the new higher paying RUGS at much higher levels than anticipated, resulting in greater SNF PPS payments.
In addition to the CMI recalibration and market-basket update, the proposed rule:
- Discusses the results of CMS’s ongoing staff time measurement data compiled as part the Staff Time and Resource Intensity Verification Project;
- Proposes a new RUG case-mix classification model used to update the Minimum Data Set (MDS); and
- Requests public comment regarding proposals to require quarterly reporting of nursing home staffing data and apply the quality monitoring mechanism in place for other SNF PPS facilities to rural swing-bed hospitals.
To be considered, comments to the proposed rule must be received by CMS by no later than June 30, 2009 at 5:00 p.m. The proposed rule is available by clicking here. Reporter, Adam Robison, Houston, (713) 276-7306, arobison@kslaw.com.
Institute of Medicine Issues Report Recommending Changes to Conflict of Interest Policies – On April 28, 2009, the Institute of Medicine (IOM) released a report recommending changes to conflict of interest policies that should assist providers and institutions in preventing, rather than merely mitigating harm caused by, financial conflicts of interest without adversely affecting collaborations with industry to conduct research. The report – “Conflicts of Interest in Medical Research, Education, and Practice” (the Report) – stems from a study initiated in 2007 by an IOM-appointed committee, with the goal of developing recommendations on how to identify, limit, and manage conflicts of interest after examining the entire spectrum of financial conflicts of interest – from research and education to general practice – at both the individual and institutional level.
The Report sets forth 16 recommendations pertaining to general policy, medical research, medical education, medical practice, clinical practice guidelines, and institutional conflicts of interest policies, such as:
- When assessing conflict of interest policies, institutions should consider four criteria: (1) proportionality (effective and directed at most common conflicts); (2) transparency (comprehensible and accessible to individuals likely to be affected); (3) accountability (designates responsibility for policy monitoring, enforcement, and revisions); and (4) fairness (equal application to groups within an institution).
- Medical research conflicts policies should address both institutional and individual conflicts. Governing boards of medical institutions should establish standing committees to oversee conflicts of interest at the institutional level, and the National Institutes of Health should require its research grantees to adopt such a policy.
- Clinical researchers with a significant conflict of interest (such as, for example, ownership of the patent on an invention being tested) should not participate in research with human participants unless a researcher’s participation is vital and there are safeguards in place to manage the conflict and protect the participants and integrity of the research.
- Organizations representing academic medical centers, physicians, researchers, and research sponsors should work together to develop standard content, format, and procedures for disclosing financial relationships.
- Organizations such as medical journals, professional societies, and government agencies should develop incentives to encourage medical institutions to adopt and implement policies consistent with the Report’s recommendations.
The Report also recommends that Congress require pharmaceutical, medical device, and biotechnology companies to publicly report payments to physicians, researchers, health care institutions and other entities. Notably, steps have already been taken on this recommendation. In January 2009, Senators Kohl and Grassley reintroduced legislation that would increase transparency with respect to remuneration transferred by drug and device companies to physicians. The proposed legislation – the Physician Payments Sunshine Act of 2009 (S. 301) – is similar to legislation proposed by the Senators in 2007 (S. 2029) and would require a manufacturer of a drug, device, biological, or medical supply covered under Medicare, Medicaid, or State Children’s Health Insurance Program to report to the Department of Health and Human Services any “payment or other transfer of value” to a physician or physician practice totaling more than $100 annually. The proposed legislation has been referred to the Senate Finance Committee.
For information on the Report, click here. For more information on the Physician Payments Sunshine Act of 2009, click here. Reporter, Kerrie S. Howze, Atlanta, (404) 572-3594, khowze@kslaw.com.
Senate Passes Bill That Would Significantly Revise the False Claims Act – On April 28, 2009, the Senate approved the Fraud Enforcement and Recovery Act of 2009 (S. 386) by a vote of 92-4. Among other changes to the False Claims Act (FCA), S. 386 seeks to create liability for fraudulent claims submitted to government contractors and grantees – such as contractors administering the Medicaid program – and for certain attempts to avoid repayment of overpayments, including improper retention of Medicare and Medicaid funds through the prospective payment system. Also on April 28, the House Judiciary Committee passed similar language by a vote of 20–6 on the False Claims Act Correction Act (H.R. 1788). The House bill has not yet been brought to the floor for a vote, and it is not clear how the two bills will be reconciled.
As outlined in the Senate Judiciary Committee’s Report accompanying S. 386, one goal of the bill is to overturn the Supreme Court’s reading in Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008), that 31 U.S.C. § 3729(a)(1) precludes liability for presentation of claims to government contractors. The bill would eliminate the requirement of presentment of a claim to “an officer or employee of the Government, or to a member of the Armed Forces.” This change seeks to prohibit defendants from relying on Allison Engine to argue that liability for Medicaid claims should be restricted since presentment to Medicaid contractors does not constitute presentment to a federal official. See S. Rep. 111-10 at 11. The bill also amends §§ 3729(a)(2) and (3) to reject Allison Engine’s reading of an intent requirement in § 3729(a)(2) and to clarify that conspiracy liability under § 3729(a)(3) may be premised on the violation of any of the FCA’s substantive provisions in § 3729(a).
Another major change of interest to the healthcare industry is the revision of the § 3729(a)(7)’s prohibition of “reverse false claims.” Currently, the statute imposes liability on anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7). S. 386 would expand § 3729(a)(7) to also cover anyone who “knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” “Obligation” would be defined to include “an established duty, whether or not fixed arising from…the retention of any overpayment.” The Judiciary Committee explained that “[t]his new definition will be useful to prevent Government contractors and others who receive money from the Government incrementally based upon cost estimates from retaining any Government money that is overpaid during the estimate process.” S. Rep. 111-10 at 15. The Committee Report notes that this provision is not intended to capture simple retention of an overpayment permitted by a reconciliation process so long as it is not the product of any willful act to increase payments to which the entity is not entitled. Id.
The text of S. 386 is accessible by clicking here; H.R. 1788 is accessible by clicking here; and Senate Report 111-10 may be viewed here. Reporter, Mike Paulhus, Atlanta, (404) 572-2860, mpaulhus@kslaw.com.
CMS Issues Proposed Rule to Delay Enforcement of Medicaid Health Care-Related Taxes Rule – On February 22, 2008, the Centers for Medicare and Medicaid Services (CMS) published a final rule entitled, “Medicaid Program; Health Care-Related Taxes” (73 Fed. Reg. 9685 (Feb. 22, 2008)).
The final rule, among other things, clarified the standard for determining the existence of a hold harmless arrangement (for which federal financial participation is not available under the Medicaid program) under the following tests: the positive correlation test, the Medicaid payment test, and the Guarantee Test. The final rule, however, has been delayed until July 1, 2009 in accordance with a moratorium imposed by Section 5003(a) of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5. The proposed rule, if finalized, would delay finalization of the above-referenced hold-harmless clarifications until June 30, 2010. According to CMS, the delay is necessary to determine whether additional clarification or guidance is needed. Other portions of the final rule would not be subject to the delay. To ensure consideration, comments to the proposed rule must be received by CMS on or before June 1, 2009 at 5:00 p.m. The proposed rule can be accessed by clicking here. Reporter, Adam Robison, Houston, (713) 276-7306, arobison@kslaw.com.
Senate Finance Committee Releases Document Outlining Proposals to Improve Patient Care & Reduce Health Costs – On April 29, 2009, the Senate Finance Committee released a document entitled “Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs,” which outlines specific proposals on ways to revise payment systems and policies in the Medicare program to promote higher-quality and more cost-effective care.
The document is organized into five categories: (1) Payment Reform – Improving Quality and Promoting Primary Care; (2) Payment Reform – Fostering Care Coordination and Provider Collaboration; (3) Health Care Infrastructure Investments – Tools to Support Delivery System Reform; (4) Medicare Advantage - Promoting Quality, Efficiency and Chronic Care Management; and (5) Public Program Integrity – Combating Fraud, Waste and Abuse. A copy of the proposals is available by clicking here. Reporter, Lora L. Greene, Atlanta, (404) 572-2427, lgreene@kslaw.com.
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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