Health Headlines – August 11, 2014

FEATURED ARTICLES

CMS Releases FY 2015 Hospital Inpatient Prospective Payment System (IPPS) Final Rule  

On August 4, 2014, CMS released the annual Hospital Inpatient Prospective Payment System Final Rule for FY 2015 (the “Final Rule”) affecting discharges occurring on or after October 1, 2014. For inpatient acute care hospitals, CMS estimates a net operating payment rate increase of 1.4% over FY 2015 payments and projects a decrease of $756 million in total IPPS payments for FY 2015.

The 1.4% increase in operating payments reflects a market basket adjustment of 2.9%, minus a 0.5% multi-factor productivity reduction, minus a 0.2% reduction in accordance with the Affordable Care Act, and a 0.8% recoupment adjustment for MS-DRG documentation and coding changes. The operating and capital payment rates also carry forward a 0.2% reduction put in place by CMS in FY 2014 in response to implementation of the two midnight rule. Hospitals that either do not submit quality data or are not Electronic Health Record (EHR) meaningful users are subject to an additional one-quarter reduction (0.725% reduction) of this initial market-basket rate; hospitals that do not meet either of these requirements will be subject to a one-half reduction (1.45% reduction) of this initial market basket rate.

The Final Rule adopts disproportionate share hospital (DSH) payment adjustments, changes to various payment provisions aimed at improving the quality of care, such as the Hospital Value-Based Purchasing (VBP) Program and the Hospital Acquired Condition (HAC) Reduction Program, and changes to the board jurisdiction and cost reporting requirements, among numerous others provision. Additional information about some of the notable provisions in the Final Rule is set forth below.

Hospital VBP Program

The VBP Program adjusts payments to hospitals under the IPPS based on the quality of care they provide to patients as defined by reference to certain consensus-based measures. In FY 2014, the available funding pool for value-based incentive payments was equal to 1.25% of the base-DRG payments to all participating hospitals. This percentage will increase for FY 2015, 2016 and 2017 to 1.5%, 1.75% and 2%, respectively. For FY 2015, CMS continues to estimate that this 1.5% will translate into $1.4 billion available for value-based incentive payments.

In carrying out its statutory obligation to establish a Hospital VBP Program under which hospitals meeting performance standards receive value-based incentive payments, CMS adopted quality and performance standards for FY 2017, FY 2019, and FY 2020. For FY 2017, CMS added two new safety measures and one new clinical care - process measure, re-adopted the current version of the central-line associated bloodstream measure, and removed six “topped-out” clinical process measures. Over 80 percent of the measures in the Hospital VBP Program will assess health outcomes, patient experience, and cost. For FY 2019/2020 VBP Programs, CMS will adopt one new hospital-level risk-standardized complication rate following elective hip and knee arthroplasty measure with a 30-month performance period for FY 2019 and a 36-month performance period for FY 2020.

HAC Reduction Program

CMS is implementing the HAC Reduction Program, which was established as part of the Affordable Care Act. Under this Program, hospitals in the highest quartile for certain HACs (i.e., the poorest performing hospitals) will receive a one percent inpatient payment reduction beginning in FY 2015. The HACs are a group of reasonably-preventable conditions selected by CMS that patients developed during the course of a hospital admission. CMS estimates that this payment reduction will decrease overall payments by $369 million.

In the Final Rule, CMS finalized the FY 2015 scoring methodology for calculating a hospital’s total HAC score, as set forth in the FY 2014 IPPS Final Rule. The scoring methodology considers certain patient risk factors, such as a patient’s comorbidities, to prevent hospitals serving a large proportion of sicker patients from being unfairly penalized. Although the scoring methodology for FY 2015 will not change, CMS did make changes to certain scoring methodologies and weighting that will be implemented in FY 2016.

Hospital Inpatient Quality Reporting (IQR) Program

With respect to the IQR Program, which requires hospitals to report data on select measures to receive the full annual percentage increase, CMS is adding 11 new measures to the Hospital IQR measure set for FY 2017 and removing 19, although it proposed to remove 20. Ten of the 19 removed measures were “topped-out” measures that are being retained as voluntary electronic clinical quality measures. In total, CMS is finalizing 63 measures in the Hospital IQR Program measure set for FY 2017 payment determination and subsequent years. Of the 63 measures, 47 are required measures, which is 10 fewer than in FY 2016.

The Final Rule also aligns certain reporting requirements in both the EHR Incentive Program and the IQR Program and finalizes new policies relating to the administration of the IQR Program. The Final Rule does not, however, finalize its proposal to require quarterly submission of clinical quality measure data. Hospitals can voluntarily submit one calendar year quarter’s data for quarter 1, quarter 2, or quarter 3 of 2015 by November 30, 2015 to partially fulfill requirements for both programs.

Long-Term Care Hospitals (LTCHs)

CMS estimates that the Final Rule will increase LTCH PPS payments by 1.1% or approximately $62 million for FY 2015, which CMS attributed to multiple factors, including a 2.2% rate update (based on a market basket update of 2.9% adjusted by a multi-factor productivity reduction of 0.5% and an additional reduction of 0.2% points), and a 1.3% reduction for the budget neutrality adjustment imposed as year-three of a three-year phase-in. CMS also estimates that the projected impact of other policy changes will increase LTCH PPS payments by $116 million. Such policy changes, which are set forth in the Final Rule, include (1) the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds in existing facilities; (2) the delay in full application of the 25-percent patient threshold that provides for Medicare to make payments at a rate comparable to IPPS hospitals for patients above the 25-percent threshold, which would be reached when a LTCH admits more than 25 percent of patients from a single acute care hospital; (3) the elimination of the “5 percent payment threshold” policy, under which Medicare treats as one discharge for the cost reporting period (and makes one LTCH PPS payment on the basis of each patient’s initial principal diagnosis) all discharges to a co-located “on-site facility” (such as a co-located acute care hospital) and the readmissions to the LTCH, if a LTCH (or a LTCH satellite facility) directly readmits more than five percent of its total Medicare inpatients discharged from an “on-site facility”; (4) and the payment adjustment for “subclause (II)” LTCHs (i.e., those classified under Section 1886(d)(1)(B)(iv)(II) of the Social Security Act).

Uncompensated Care and DSH Payment

Pursuant to the Affordable Care Act, starting in FY 2014, hospitals receive 25 percent of the amount they previously would have received under the former statutory formula for DSH. The remaining portion, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH, will be aggregated nationally and adjusted for decreases in the rate of uninsured individuals and a statutory factor of 0.2% and distributed to hospitals based on their relative share of the total amount of uncompensated care.

In the Final Rule, CMS will distribute $7.65 billion in uncompensated care payments, a decrease from the $8.56 billion estimate in the proposed rule. CMS states that the decrease relates to changes to the Office of the Actuary’s estimate of payments that would otherwise be made for Medicare DSH in FY 2015 (resulting from lower projected inpatient spending) and also the change in the percentage of individuals that are uninsured as estimated by the Congressional Budget Office.

In addition, CMS finalizes a process to identify hospitals that have merged such that data from all hospitals involved in the merger can be considered for purposes of establishing the remaining provider’s uncompensated care payment. CMS is also providing hospitals with 30 days from display of the Final Rule to submit corrections to the existing list of mergers (this is an extension of the original 60 days from the date of public display of the proposed rule to notify CMS of any errors).

Board Jurisdiction and Cost Reporting Requirements

In the FY 2015 IPPS Proposed Rule, CMS proposed to remove from the current regulation the requirement that a provider have either an audit adjustment or a protest item for a specific item for the Provider Reimbursement Review Board (Board) to have jurisdiction over that item. Instead, CMS proposed to require that a provider include all such claims on its cost report as a condition for payment.

CMS is not finalizing its proposals to revise the cost reporting regulations and the provider appeals regulations as set forth in the FY 2015 IPPS Proposed Rule (79 FR 27978) due to the “concerns raised by commenters about the breadth of the proposed provisions, and the questions raised in public comments about the interpretations [CMS] provided in the preamble to the proposed rule . . . .” CMS further comments that it is not addressing public comments received with respect to these provisions of the Proposed Rule. Such comments will be later addressed, in a subsequent rulemaking document, as appropriate, according to CMS.

Hospital Readmissions Reduction Program

For FY 2015, the maximum possible readmissions payment adjustment factors under the Hospital Readmissions Reduction Program can be no more than a three percent reduction. CMS finalized the proposed expansion of the applicable conditions for FY 2017 to include the patients readmitted following Coronary Artery Bypass Graft (CABG) surgery measure. For FY 2016, CMS did not propose an expansion of the applicable conditions.

Graduate Medical Education Payments (IME/GME)

After recently increasing the full-time equivalent (FTE) cap-building period for new residency programs from three years to five years, CMS finalized a modified version of its proposal to “simplify and streamline” the timing of the FTE regulations by making the FTE resident caps, rolling average, and indirect medical education (IME) intern-and-resident-to-bed (IRB) ratio cap effective simultaneously, beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started.

CMS also adopts a policy stating that, effective October 1, 2014, a rural hospital that has been redesignated as urban, due to the implementation of new Office of Management and Budget (OMB) delineations, can receive a permanent cap adjustment for a new program, if the rural hospital received a letter of accreditation for the new program, and/or started training residents in the new program, prior to being redesignated as urban. CMS also finalized changes to the participation of redesignated hospitals in rural training tracks.

Miscellaneous

The Final Rule also:

• Finalized CMS’s proposal to remove the requirement for CAHs that physicians certify prior to discharge that an admitted inpatient is expected to be discharged or transferred within 96 hours and adopted a requirement that such certification be completed no later than 1 day before the date that the claim for the inpatient CAH service is submitted.
  
  
• Reminded hospitals of their obligation to publicly list their standard charges for items and services, as required by the Affordable Care Act.
  
  
• Finalized CMS’s proposal for a two-year transition period to enable CAHs to retain their CAH status any time a CAH becomes located in an urban area as a result of an OMB delineation.
  
  
• Described comments received on how an alternative payment methodology under the Medicare program for short inpatient hospital stays might be designated.
  
  
• Extended the low-volume hospital payment adjustment and the Medicare Dependent Hospital program for an additional year (through March 31, 2015) pursuant to Sections 105 and 106 of the Protecting Access to Medicare Act of 2014, respectively.
  
  
• Updated labor market areas used for the wage index based on the most recent core-based statistical area delineations issued by the OMB based on 2010 Census data.

As noted above, this article highlights some of the key provisions of the Final Rule. The full text of the Final Rule is available here and will be published in the Federal Register on August 22. The CMS Fact Sheets for the Final Rule are available here and here.

Reporters, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com and Kristin M. Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com.

Limited Restart of RAC Program

On August 4, 2014, CMS announced that, due to the continued delay in awarding new Recovery Audit Contractor (RAC) contracts, CMS will modify its current RAC contracts to allow for a limited number of reviews of Medicare fee-for-service claims. According to the CMS announcement, RAC reviews will restart this month with the current RACs conducting a “limited number” of automated reviews as well as a small number of complex reviews of certain types of claims, such as spinal fusions, outpatient therapy services, durable medical equipment, prosthetics, orthotics and supplies, and cosmetic procedures. However, in accordance with the Probe & Educate period, CMS confirmed that the RACs will not conduct any inpatient hospital patient status reviews during the limited restart period.

The current RAC contracts lapsed in June 2014. During the rebidding process, CMS encountered delays as a result of several contests filed by entities seeking contract awards, including a lawsuit filed by one of the incumbents, CGI Federal, Inc., challenging a provision that would delay the time at which the RAC would receive contingency payments on a claim until after the claim is upheld on the second level of review. Despite these delays, in its August 4 announcement, CMS stated that it remains hopeful that the new round of RAC contracts will be awarded this year.

To view CMS’s announcement, click here. To view the CGI Federal complaint, click here.

Reporter(s), Isabella Edmundson, Atlanta, +1 404 572 3527, iedmundson@kslaw.com.

CMS Temporarily Suspends Open Payments System

On August 7, 2014, CMS announced via email that it has temporarily suspended the Open Payments system “to investigate a reported issue.” Although CMS did not offer further explanation, our understanding is that the system has been shut down since Monday, August 4, amid complaints from some physicians that they have been able to view within their Open Payments data dashboards data that was reported about other physicians with the same name. As a result of the suspension, covered recipients are not currently able to register and review data, and the 45-day review and dispute period is effectively on hold.

CMS noted in an email announcement that “[f]or each day the Open Payments system is offline for this incident, CMS will adjust the Open Payments review and dispute deadline and the following 15-day corrections period deadline accordingly.” CMS indicated that it would follow up with stakeholders “when the Open Payments system is scheduled to go back online.”

CMS’s announcement did not address whether the current suspension would impact its plans to publish the data by September 30, 2014. The suspension and related issues, however, may increase the likelihood that CMS will seriously consider calls from the American Medical Association (“AMA”) and others to push back the first publication deadline.

On Tuesday, August 5, more than 100 physician professional societies, including the AMA, signed on to a letter to CMS to express “serious concerns regarding how the Open Payments System has been implemented.” The letter, sent to CMS Administrator Marilyn Tavenner, urged CMS to postpone the first publication of the Sunshine data until March 31, 2015, to allow physicians sufficient time to register, review, and dispute data reported about them before CMS makes it public.

The letter notes that CMS’s short timeframe for uploading data, processing registrations, generating aggregated, individualized reports, managing disputes, and incorporating the necessary data updates, “will likely lead to the release of inaccurate, misleading, and false information.” The letter also notes that the complex registration process in combination with the condensed timeframe make the task of reviewing and disputing records by August 27 “effectively impossible” for physicians.

Notably, the letter also describes the groups’ concerns that manufacturers have the power to unilaterally dismiss disputes initiated by covered recipients, even if the covered recipients do not agree with the dismissal. The letter references a June 24 meeting between CMS and society staff, where CMS officials apparently stated their intent to issue clarifying guidance that manufacturers are not authorized to unilaterally dismiss disputes. The groups request that CMS issue clarifying guidance on that point.

The groups also voiced concern over CMS’s proposed change to the Sunshine Final Rule that would remove the exclusion for payments for serving as faculty at a continuing medical education program, and CMS’s current belief that textbooks, journal article supplements, and reprints are reportable.

The letter came a little more than a week after 26 physician professional societies and industry associations, including PhRMA and BIO, sent another letter to Administrator Tavenner. That letter requested that CMS provide physician stakeholders with a preview of the contextual information that will accompany the public release of the Open Payments data. The groups noted that without the contextual information mandated by Congress, there exists an opportunity for “confusion and misinterpretation.” The groups also urged CMS to increase educational outreach efforts to physicians and to simplify the physician registration process. The groups request that the education include “more information on what will be reported, when it will be reported, what the reporting will look like, and how [physicians] can see what will be reported about them.” The groups also requested that CMS share the number of physicians who have registered in Open Payments so that the groups can evaluate what additional efforts are needed to increase physician awareness and potentially help with physician registration.

Copies of the letters can be accessed here and here.

Reporter(s), Brian A. Bohnenkamp, Washington, D.C., +1 202 626 5413, bbohnenkamp@kslaw.com.

OIG Report Takes Issue With Oversight of Security Controls for Electronic Health Records  

HHS Office of Inspector General (OIG) recently released a report concluding that the entity responsible for overseeing the testing and certification process for electronic health records (EHRs) did not fully ensure that electronic patient information was secure and protected.

The Office of the National Coordinator for Health Information Technology (ONC) is the principal entity charged with coordination of efforts to implement and use health information technology and the electronic exchange of health information. ONC-approved organizations test and certify EHRs in accordance with federal security standards. Providers that attest to the “meaningful use” of EHRs receive incentive payments from CMS, but the EHRs must be tested and certified by one of the ONC-approved organizations. The goal of certification is to assure providers that the EHR has the appropriate security and protection for the providers to participate in the EHR Incentive Programs. However, the OIG study identified vulnerabilities with the EHR certification program that could undermine providers’ confidence that their patient health information is secure and protected.

OIG audited ONC’s procedures for oversight of the testing and certification bodies. OIG found that ONC’s oversight did not fully ensure that EHRs were secure and protected. OIG recommended that ONC require the testing and certification bodies to:

1. Develop procedures to periodically evaluate whether certified EHRs continued to meet federal standards after initial certification; and
   
   
2. Develop a training program to ensure personnel are competent to test and certify EHRs and to secure proprietary or sensitive EHR information.

OIG also recommended that ONC work with the National Institute of Standards and Technology (NIST) to strengthen EHR test procedure requirements, such as by addressing common security issues like password complexity and user privilege changes.

The OIG report is available here.

Reporter(s), Jennifer S. Lewin, Atlanta, + 1 404 572 3569, jlewin@kslaw.com

CMS Paying Some Providers’ Medicare EHR Incentive Payment Using Incorrect Transition Factor  

We have learned that CMS has paid Medicare EHR Incentive Program Payments to some eligible hospitals using an incorrect transition factor, understating total payment. CMS personnel have informed us that they are aware of this problem and that the agency intends to implement a system edit that will pay the remaining balance using the correct transition factor no later than the end of October 2014. The statutory formula by which CMS pays out Medicare EHR Incentive Payments includes a transition factor that reduces the total payment with each year an eligible provider participates in the Program. Eligible providers that have successfully attested to Meaningful Use should verify that their payments have been made using the correct transition factor. Those providers paid using an incorrect transition factor should monitor their pay-to account and verify that CMS has paid the remaining balance by the end of October.

Reporter(s), Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com.

 ALSO IN THE NEWS

CMS Issues Final FY 2015 Hospice Wage Index and Payment Rate Update – On August 4, 2014, CMS released the Final Hospice Wage Index and Payment Rate Update for FY 2015. Among other items, the final rule notably increases per diem hospice rates by 2.1%, which reflects a 2.9% market basket and a required reduction of 0.8% by the Affordable Care Act, but reduces the rate increase by an additional 0.1% for a wage index change and an additional 0.6% for the sixth year of the Budget Neutrality Adjustment. Thus, CMS expects an overall increase to hospices of 1.4%. The final rule is effective October 1, 2014, and is expected to be published in the Federal Register on August 22, 2014. A display copy is available here and CMS’s fact sheet describing the final rule is available here.

Upcoming King & Spalding LLP Roundtable – On August 20, 2014, King & Spalding LLP will host a roundtable titled, “Affordable Care Act on Life Support? The DC Circuit’s Halbig v. Burwell Decision and Its Impact on Healthcare Providers.” The event will take place at the Atlanta office of King & Spalding LLP from 1:00 p.m. – 2:30 p.m. and will be offered as a webinar as well. To register for the roundtable, click here.

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice.

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