CMS Publishes Proposed Rule for CY 2020 Hospital Outpatient Prospective Payment System, Includes Major Proposals on Price Transparency – On July 29, 2019, CMS published a proposed rule revising the factors for determining Medicare payment rates under the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgery Center (ASC) Payment System in calendar year 2020 (the Proposed Rule). The Proposed Rule covers a myriad of topics, the most significant of which includes added proposals for implementing price transparency, ongoing efforts to transition to site neutral payments, addressing disparities affecting rural health providers, and continuing to pay for drugs or biologics acquired through the 340B program at the average sales price minus 22.5 percent (despite recent litigation on this very issue). Additionally, CMS proposes to increase the OPPS payment rates by a fee schedule increase factor of 2.7 percent and to increase ASC payment rates by 2.7 percent.
Price Transparency of Hospital Standard Charges
CMS proposes new regulations (at 45 C.F.R. Part 180), which the agency describes as an effort to implement both a statutory requirement that hospitals make available a list of their current standard charges, as well as a recent Executive Order that instructed the agency to propose a price transparency regulation.
By way of background, section 2718(e) of the Public Health Service Act, enacted as part of the Patient Protection and Affordable Care Act, requires:
Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.
42 U.S.C. § 300gg-18(e) (emphasis added). The statute states that hospitals must make standard charges public “in accordance with guidelines developed by the Secretary.” Id. CMS did not issue any such guidelines until relatively recently in the FY 2019 Inpatient Prospective Payment System Final Rule. 83 Fed. Reg. 41144, 41686 (Aug. 17, 2018). Around that time, CMS published two FAQ documents that provided some guidance, available here and here, which described “standard charges” as the list price for a hospital’s services posted on the hospital’s chargemaster.
In the Proposed Rule, CMS proposes guidelines that takes price transparency even further by requiring hospitals to make public not only their gross charges for all items and services but also payer-specific negotiated charges. CMS begins by defining the many terms that comprise the statutory requirement in section 2718(e) of the Public Health Service Act:
- “Hospital” means an institution in any state that provides for the licensing of hospitals and which is licensed as a hospital pursuant to such law. This includes all Medicare-enrolled and non-Medicare-enrolled institutions that are licensed as hospitals (or approved as meeting licensing requirements).
- “Standard Charges” means both the hospital’s gross charge and payer-specific negotiated charge for an item or service.
- “Items and Services” means all items and services (including individual items and services and service packages) provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a charge.
Therefore, as proposed, CMS requires that hospitals make public their standard charges (both gross charges and payer-specific negotiated charges) for all items and services.
In fulfilling its price transparency obligations, hospitals must “make public” their standard charges, which CMS interprets as publishing online in a machine-readable format and, for “shoppable services,” in a consumer-friendly display derived from the machine-readable file. Note that a PDF file would not suffice, as the data must be machine-readable (e.g., .XML and .CSC formats). CMS further proposes standardized data elements of the machine-readable file to include, among other things, standardized identifying codes (like HCPCS or CPT codes), descriptions of each item or service, the corresponding gross charge, the corresponding payer-specific negotiated charge, and any code used for purposes of accounting or billing.
CMS also makes substantial proposals for hospitals to display a list of payer-specific negotiated charges for a set of “shoppable” services in a “consumer-friendly” format. This is a different format than the all-encompassing publication of standard charges for all items and services in a machine-readable file. Instead, hospitals must provide a consumer-friendly format for “shoppable” services, which is defined as a service that can be scheduled by a health care consumer in advance.
CMS provides a listing of 70 required “shoppable” services that hospitals must include, while allowing hospitals discretion to select another 230 “shoppable” services, for a total of 300 such services. CMS seeks comment on what constitutes a consumer-friendly format for hospitals to publish “shoppable” services but suggests that a consumer should be able to easily search for and find charges for the shoppable services based on the service description, identifying code, or by payer. CMS proposes that this information be displayed in a way that is understandable to a patient with plain-language descriptions of the services. Further, such information for consumers must be displayed prominently on the hospital’s website and, if requested by a patient, must be made available via a brochure, pamphlet, or some other paper format.
To enforce the above requirements, CMS proposes monitoring and enforcement provisions for non-compliant hospitals. If a hospital is non-compliant, CMS proposes first to require a hospital to submit a corrective action plan, and, second, if the hospital continues to be out of compliance, to impose a civil monetary penalty (CMP) for each day of non-compliance, not to exceed $300 per day. CMS plans to publicize these penalties on its website. Hospitals will have an opportunity to appeal the imposition of CMPs.
CMS seeks comments to its many proposals regarding price transparency, including, among others, on alternative definitions for types of standard charges. Although CMS proposes gross charges and payer-specific negotiated charges as “standard charges,” CMS seeks comments on whether other alternatives would be useful. Some examples that CMS mentions in the Proposed Rule include volume-driven negotiated charge; minimum, median, and maximum negotiated charge; all allowed charges; discounted cash price; and median cash price.
Site Neutrality Payment Reductions for Excepted Off-Campus Provider-Based Departments
The Proposed Rule announced CMS’s plan to further reduce payment on OPPS Medicare payment rates for so called “excepted” off-campus provider-based departments. CMS’ first effort to reduce these payments for the 2019 calendar year has proven to be controversial, and King & Spalding is representing a group of hospitals challenging that effort in litigation that is currently pending in federal court.
As background, under Section 603 of the Bipartisan Budget Act of 2015 (BBA), CMS reimburses hospitals for outpatient services provided at certain off-campus provider-based departments (PBDs) under the Medicare Physician Fee Schedule (PFS), commonly referred to as a “site neutral” payment policy. But, certain off-campus PBDs furnishing services to Medicare beneficiaries prior to November 2, 2015, were excepted by Congress from these payment reductions and continued to be paid the applicable (and higher) OPPS rate. In the 2019 OPPS rule, however, CMS finalized a policy to pay the lower site-neutral PFS payment rate for clinic visit services for all off-campus PBDs, even when provided in an excepted off-campus PBD. CMS planned to phase-in these payment reductions over a two-year period.
Under the Proposed Rule, CMS plans to continue with the final year of the phase-in by paying off-campus PBDs approximately 40 percent of the OPPS rate. For CY 2019, it was estimated that affected hospitals would receive $300 million less in Medicare funding and $610 million less in 2020 when the rate cut is fully implemented. 83 Fed. Reg. 58818, 59014, 59009 (Nov. 21, 2018).
Rural Health Wage Index
CMS is proposing to adopt the many changes to the Inpatient Prospective Payment System (IPPS) wage index as the wage index for the OPPS payment rate and copayment standardized amount. Specifically, in the FY 2020 IPPS proposed rule, CMS proposed to increase the wage index for hospitals below the 25th percentile by decreasing the wage index for hospitals above the 75th percentile. Additionally, CMS proposed to exclude the wage data of reclassified rural hospitals from the calculation of the rural floor. As finalized in the FY 2020 IPPS final rule, however, CMS modified its proposal slightly by no longer decreasing the wage index for hospitals above the 75th percentile. Instead, CMS opted to apply a budget-neutrality adjustment to the national standardized amount. CMS finalized the increase to the wage index for hospitals below the 25th percentile and the exclusion of wage data of reclassified rural hospitals from the calculation of the rural floor. In other words, one can expect that CMS will finalize such proposals in the CY 2020 OPPS final rule as specified in the FY 2020 IPPS final rule.
340B Purchased Drugs
CMS proposes to continue to pay for 340B-acquired drugs at the average sales price (ASP) minus 22.5 percent when furnished in nonexcepted off-campus PBDs paid under the PFS.
As background, in the 2018 OPPS final rule, CMS dramatically cut reimbursement for 340B drugs by paying under the OPPS system at ASP minus 22.5 percent, rather than ASP plus 6 percent. However, that payment cut applied only to excepted off-campus PBDs. Sections 1833(t)(1)(B)(v) and (t)(21) of the Act, as amended by BBA § 603, excluded nonexcepted off-campus PBDs from the OPPS and instead made payment “under the applicable payment system” under Medicare Part B. In other words, because nonexcepted off-campus outpatient PBDs were no longer payable under the OPPS, they were outside the scope of the OPPS payment cuts and could continue to be paid at ASP plus 6 percent. In the 2019 OPPS final rule, however, CMS finalized its proposal to apply the ASP minus 22.5 percent payment formula to nonexcepted off-campus PBDs.
CMS’ legal authority to cut 340B drug payments to nonexcepted off-campus PBDs was challenged in federal court and was found to be unlawful. The court concluded the Secretary exceeded his statutory authority by adjusting the Medicare payment rates for drugs acquired under the 340B Program to ASP minus 22.5 percent for that year. Nonetheless, CMS announces in the Proposed Rule that it will continue with its policy, stating it intends to appeal the court’s decision. CMS also explains it is taking steps to “craft an appropriate remedy” in the event it loses the issue on appeal. Therefore, CMS solicits comments on whether ASP plus 3 percent could be an appropriate payment amount for these drugs, both for CY 2020 and for purposes of determining the remedy for CYs 2018 and 2019.
Changes for Organ Procurement Organizations
Organ Procurement Organizations (OPOs) are responsible for procuring and preserving transplantable organs and transporting them to transplant centers and hospitals. The CMS Regional Office conducts recertification surveys of OPOs every four years based on a set of statutory and regulatory criteria. The regulations specify that OPOs are evaluated on outcome measures self-reported to the Organ Procurement and Transplantation Network, the Scientific Registry of Transplant Recipients, and the Department of Health & Human Services.
Recently, OPOs have been targeted for reforms in an Executive Order calling for changes to performance measures and data reporting requirements. Consistent with the reforms called for in the executive order, CMS proposes to revise the definition of “expected donation rate” that is included in one of the outcome measures to match the definition used by the Scientific Registry of Transplant Recipient (SRTR). The regulations require the OPO to meet two of the three following outcome measures:
- The OPOs donation rate of eligible donors as a percentage of eligible deaths is no more than 1.5 standard deviations below the mean national donation rate of eligible donors as a percentage of eligible deaths, averaged over the 4 years of the re-certification cycle.
- The observed donation rate is not significantly lower than the expected donation rate for 18 or more months of the 36 months of data used for re–recertification, as calculated by SRTR;
- The OPO data reports, averaged over the 4 years of the re-certification cycle, must meet the rules and requirements of the most current OPTN aggregate donor yield measure.
SRTR’s expected donation rate is calculated as the rate expected for an OPO based on the national experience for OPOs serving similar eligible donor populations and DSAs, adjusted for the distributions of age, sex, race, and cause of death among eligible deaths. However, due to an oversight, CMS did not make a corresponding change to the definition of “expected donation rate” in its conditions for coverage. Therefore, CMS proposes to adopt SRTR’s definition prospectively and, for the 2022 recertification cycle, reduce the time period for the second outcome measure and calculate the expected donation rate using 12 out of the 24 months of data (from January 1, 2020 through December 31, 2020).
Additionally, CMS is considering a comprehensive proposal that would update the OPO Conditions for Coverage (CfCs) and potentially update the transplant center Conditions of Participation (CoPs). Therefore, CMS is soliciting public comments regarding what revisions may be appropriate for the current OPO CfCs and the current transplant center CoPs. Specifically, CMS seeks public input on the following questions:
- Do the current OPO outcome measures that are set forth at 42 C.F.R. § 486.318 accurately and reliably reflect an OPO’s performance? If not, please explain.
- What are the impacts or consequences of the current outcome measures on: (1) an OPO’s performance; and (2) the availability of transplantable organs?
- What impact, if any, do the certification and decertification processes for OPOs have on organ procurement and transplantation?
- Are there any potential, empirically based outcome measures, other than those currently at § 486.318, that could be used either in addition to, or instead of, the current outcome measures for OPOs? If recommending another outcome measure, what is the empirical evidence for that recommended measure?
- In addition to the outcome measures, are there other indicators of quality that could be used for OPOs in the CfCs? If recommending another quality indicator, why should that indicator be used in the OPOs CfCs and what is the supporting evidence for this indicator?
- Are there any transplant center CoPs that conflict with or should be harmonized with the OPOs CfCs? If yes, identify the specific requirements and how they would harmonize or otherwise modify the requirements.
CMS also solicits public comments on whether two potential OPO outcome measures would be valid measures and would be consistent with statutory requirements.
- The first potential measure would be the actual deceased donors as a percentage of inpatient deaths among patients 75 years of age or younger with a cause of death consistent with organ donation. This measure would account for: (1) geographic differences in the manner of deaths across the United States (for example, trauma deaths); (2) geographic differences in the age distribution of deaths; and (3) geographic differences in in-hospital versus out-of-hospital deaths.
- The second potential measure is the actual organs transplanted as a percentage of inpatient deaths among patients 75 years of age or younger with a cause of death consistent with organ donation. This measure also would reward efforts to maximize total organ procurement and efforts to improve placements of all procured organs.
Other Notable Proposed Changes
- Changes to the Inpatient Only List: CMS proposes to remove Total Hip Arthroplasty from the Inpatient Only (IPO) list, making it eligible to be paid by Medicare in both the hospital inpatient and outpatient setting. Additionally, CMS proposes to establish a one-year exemption from medical review activities for procedures removed from the inpatient-only list beginning in CY 2020 and subsequent years.
- Additions to the ASC Covered Procedures List (CPL): CMS is proposing to add Total Knee Arthroplasty (TKA), Knee Mosaicplasty, and three additional coronary intervention procedures to the ASC CPL. CMS solicits comments on whether there should be any additional limitations on the provision of TKA or other procedures in the ASC setting. Additionally, CMS solicits comments on how the agency could redesign the role of the ASC CPL to improve physicians’ ability to determine the setting of care as appropriate for a given beneficiary situation.
- Hospital Outpatient Quality Reporting Program (OQR) and Ambulatory Surgical Center Quality Reporting Program (ASCQR): CMS requests comment on adding to the OQR four patient safety measures, adopted as part of the ASCQR, and removing one web-based measure, External Beam Radiotherapy for Bone Metastases (OP-33). CMS proposes to adopt one claims-based measure for the ASCQR, ASC-19: Facility-Level 7-Day Hospital Visits after General Surgery Procedures Performed at Ambulatory Surgical Centers (NQF #3357).
- “Pass-through” Status for Innovative Devices: CMS proposes an alternative pathway to qualifying for device “pass-through” payment status for transformative devices that meet the FDA Breakthrough Device designation. Specifically, in situations where a new medical device is part of the Breakthrough Devices Program and has received FDA marketing authorization, CMS proposes an alternative outpatient pass-through pathway to facilitate access to this technology for Medicare beneficiaries beginning with applications received for pass-through payment on or after January 1, 2020, under which the “substantial clinical improvement” criterion would not apply.
- Prior authorization for Certain Outpatient Services: CMS proposes to implement a prior authorization requirement for Blepharoplasty, Botulinum Toxin Injections, Panniculectomy, Rhinoplasty, and Vein Ablation. According to CMS, the goal of this policy is to ensure that these services, which are sometimes cosmetic, are only billed when medically necessary.
The Proposed Rule is available here. The CMS Fact Sheet discussing the Proposed Rule is available here, and the accompanying CMS Press Release is available here. Comments to the Proposed Rule must be submitted no later than September 27, 2019.
CMS Announces Proposed CY 2020 Physician Fee Schedule with a Focus on Updating Payment Policies and Rates as Well as Quality-Related Provisions – On July 29, 2019, CMS released the Calendar Year (CY) 2020 Physician Fee Schedule (PFS) proposed rule (the Proposed Rule). The Proposed Rule updates payment policies, payment rates, and quality provisions for services furnished under the PFS. A display copy of the Proposed Rule is available here and the CMS fact sheet available here. The Proposed Rule is scheduled to be published in the Federal Register on August 14, 2019. Comments are due by September 27, 2019.
Rate Setting & Conversion Factor
PFS payments are based on the relative resources typically required to furnish the service, also known as Relative Value Units (RVUs). These RVUs become payment rates through the application of a conversion factor. To account for budget-neutrality adjustments for changes in RVUs, the proposed CY 2020 PFS conversion factor is $36.09, a slight increase from the CY 2019 PFS conversion factor of $36.04.
Additionally, CMS proposes a series of technical improvements involving practice expense, including pricing updates to market-based supply and equipment pricing in the second year, and refinements to standard rates to reflect premium data involving malpractice expense and geographic practices cost indices (GPCIs).
Evaluation and Management Services Payments
For CY 2020, CMS proposes to align CMS Evaluation and Management (E/M) coding with changes set forth by the CPT Editorial Panel for office/outpatient E/M visits. The proposal will retain 5 levels of coding for established patients but reduce the number of levels to 4 for new patients and involves revisions to code definitions. The proposal also includes revisions to the times and medical decision-making process for all codes and requires the performance of a patient history and exam only as medically appropriate. These new changes will permit clinicians to choose the E/M visit level based on either medical decision making or time.
For CY 2021, CMS proposes to adopt American Medical Association RVS Update Committee (AMA RUC) recommended values for office/outpatient E/M visits codes and permit a new add-on CPT code for prolonged service time. CMS is also soliciting information and feedback from the public regarding the consolidation of the Medicare-specific add-on code for office/outpatient E/M visits for primary care and non-procedural specialty care, which was finalized in the CY 2019 PFS Final Rule, into a single code describing all work related to visits that are part of ongoing, comprehensive primary care and/or visits related to a patient’s ongoing care for a chronic condition.
Bundled Payments Under the PFS for Substance Use Disorders
In response to comments received to the CY 2019 PFS proposed rule, CMS is now proposing to create new coding and payment for bundled episodes of care for management and counseling for opioid use disorder (OUD). The new proposed codes include overall management, care coordination, individual and group psychotherapy, and substance use counseling. CMS is also seeking comment on bundles for other substance use disorder services and the use of medication-assisted treatment (MAT) in emergency department settings to determine whether CMS should propose separate payments for such services in the future.
Care Management Services
Among other proposals relating to Care Management Services, CMS proposes increasing payment for transitional care management, a care management service provided to beneficiaries after discharge from an inpatient stay or certain outpatient stays. CMS is also proposing a set of Medicare-developed Healthcare Common Procedure Coding (HCPC) G-codes for certain Chronic Care Management (CCM) services. CCM services provide care coordination to beneficiaries with multiple chronic conditions over a calendar month service period. CMS proposes replacing certain CCM codes with Medicare-specific codes to allow clinicians to bill incrementally to reflect additional time and resources required in certain cases and better distinguish complexity of illness as measured by time.
CMS also proposes creating new coding for principal care management services, which would pay clinicians for providing care management for patients who have a single serious, high-risk condition.
In the Proposed Rule, CMS proposes adding certain HCPCS codes to the list of telehealth services covered by Medicare. These codes include GYYY1, GYYY2, and GYYY3, which describe a bundled episode of care for treatment of opioid use disorders.
Beginning in January 1, 2020, the therapy services modifiers listed in the CY 2019 PFS final rule will be required by statute to be reported on all claims. Those modifiers identify therapy services that are furnished in whole or in part by physical therapy and occupational therapy assistants and set a de minimis 10 percent standard for when such modifiers will apply to specific services. CMS is now proposing a policy to implement these modifiers and the 10 percent de minimis standard.
Medicare Coverage for Opioid Use Disorder Treatment Services Furnished by Opioid Treatment Programs
Under Section 2005 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act, CMS is required to establish a new Medicare Part B benefit for OUD treatment services, including medications for MAT furnished by opioid treatment programs (OTPs). To fulfill this statutory requirement, CMS specifically proposes:
- Definitions of OTP and OUD treatment services;
- Enrollment policies for OTPs;
- Methodology and estimated bundled payment rates for OTPs that vary by the medication used to treat OUD and service intensity, and by full and partial weeks;
- Adjustments to bundled payment rates for geography and annual updates;
- Flexibility to deliver the counseling and therapy services described in the bundled payments via two-way interactive audio-video communication technology as clinically appropriate; and
- Zero beneficiary copayment for a limited period of time.
The SUPPORT act requires CMS to implement this benefit beginning January 1, 2020.
Open Payments and Medicare Shared Savings Programs
Open Payments Program
CMS proposes several changes to the Open Payments Program including (1) expanding the definition of “covered recipient;” (2) modifying payment categories; and (3) standardizing data on reported medical devices. These minor changes are aimed at reducing the associated burden of reporting under the program while clarifying and making the data more useful to the public.
Medicare Shared Savings
CMS seeks comments on how to potentially align the Medicare Shared Savings Program (MSSP) quality performance scoring methodology more closely with the Merit-based Incentive Payment System (MIPS) quality performance scoring methodology. Furthermore, CMS proposes refining the MSSP measure set by (1) removing one measure and adding another to the CMS Web Interface, and (2) reverting one measure to pay-for-reporting due to substantive change made by measure owners.
Physician Supervision Requirements for Physician Assistants
CMS proposes modifications to CMS’s regulation of physician supervision of physician assistants (PAs). Specifically, in the absence of state law governing physician supervision of PAs, the physician supervision required for PA services must be evidenced by documentation in the medical record of the PA’s approach to working with physicians in furnishing services.
Review and Verification of Medical Record Documentation
In the Proposed Rule, CMS proposes broad modifications to the current medical record documentation policy so that physicians, PAs, nurse practitioners, clinical nurse specialists, and certified nurse-midwives may review and verify (sign and date) notes made in the medical record by other physicians, residents, nurses, students, or other members of the medical team, as opposed to completely re-documenting these notes, as the current rule requires. These proposed modifications come as a response to feedback CMS received from clinicians in response to CMS’ “Patients Over Paperwork” initiative request for information. Stakeholders argued that undue burden is created when physicians and other practitioners must re-document notes entered into the medical record by other members of the medical team.
Ambulance Services and Ground Ambulance Data Collection System
CMS proposes to clarify that there is no CMS-prescribed form for physician certification statements (PCSs) for ambulance transports. CMS also proposes to grant ambulance suppliers and providers increased flexibility regarding who may sign a non-PCS by allowing licensed practical nurses, social workers, and case managers as staff members who may sign the non-PCS if the provider or supplier is unable to obtain the attending physician’s signature within 48 hours of the transport.
Also, in accordance with the Bipartisan Budget Act of 2018, CMS proposes a sampling methodology to identify ground ambulance organizations for reporting each year through 2024 and not less than every three years after 2024. CMS also proposes reducing payments that would otherwise be made to a ground ambulance organization that is identified for reporting but fails to sufficiently submit data. A ground ambulance organization will be able to request a hardship extension that would all the organization to avoid the payment reduction.
Stark Advisory Opinion Process
In 2018, CMS issued a request for information to gather public input on how to address unnecessary burden created by the federal physician self-referral law (the Stark Law). Many stakeholders urged CMS to update the regulations governing its advisory opinion process to reduce provider burden and uncertainty. CMS is now soliciting additional comments regarding potential changes to its advisory opinion process, which the agency expects to address in a separate rulemaking.
CMS Issues FY 2020 Inpatient PPS and Long-Term Care Hospital PPS Final Rule – On August 2, 2019, CMS issued its annual Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System Final Rule for FY 2020 (the Final Rule). Highlights include substantial changes to how rural hospitals are treated for wage index and rural floor purposes, a full transition to utilizing Worksheet S-10 data to calculate uncompensated care, changes in capturing graduate medical education occurring in Critical Access Hospitals, a significant increase in add-on new technology payments, and tweaks to various quality reporting programs. A summary of these and other changes is below.
Payment Rates Overview
Under the Final Rule, total Medicare spending on inpatient hospital services, including capital, will increase by about $3.8 billion in FY 2020. The total includes an increase in inpatient operating payments of $3.4 billion, a $0.2 billion increase in new technology payments (a 70 percent increase), a $0.1 billion increase in uncompensated care payments, a $0.1 billion increase in capital payments, and an approximate $7 million decrease in low-volume hospital payments. CMS will make a 3.1 percent update to the FY 2020 national standardized amount, setting the market basket update to 3.0 percent, further reduced by 0.4 percent for the statutory multifactor productivity adjustment and increased by 0.5 percent, purportedly as required under Section 631 of the American Taxpayer Relief Act of 2012. Hospitals failing to submit quality data see a further reduction of 0.75 percent; hospitals who are not Meaningful EHR users will be reduced by 2.25 percent.
Payments to LTCHs will increase by $43 million, as compared to FY 2019, an increase of approximately 1 percent. By statute, all LTCH discharges are paid according to a lower site neutral payment rate unless they meet criteria for exclusion and can be paid the LTCH PPS standard Federal payment amount. This policy was first enacted in FY 2016 and included a transition period of paying a blended rate to mitigate payment reduction. That transition ends for non-excluded LTCH discharges occurring in cost reporting periods beginning in FY 2020, which will now be paid exclusively on the site neutral payment rate.
Medicare Wage Index
Pursuant to the Final Rule, CMS will make upward adjustments over the next four years to the wage indices of hospitals with a wage index value below the 25th percentile nationally. CMS’s purpose in giving this adjustment is to allow hospitals with the lowest wage index values in the country an opportunity to increase their wages. The adjustment for each eligible hospital will be equal to half of the difference between the otherwise applicable final wage index value for the hospital and the 25th percentile wage index value for all hospitals that same year. For FY 2020, the 25th percentile wage index value will be 0.8457. To budget neutralize these adjustments, CMS had proposed to reduce the wage index values of hospitals above the national 75th percentile. Facing strong opposition by commenters, CMS instead opted to apply a budget-neutrality adjustment to the national standardized amount.
CMS also finalized its proposal to exclude the wage data of reclassified rural hospitals from the calculation of the statutory rural floor. The rural floor provision of the Medicare statute provides that the wage index of an urban hospital cannot be less than the wage index assigned to rural hospitals in the same state. In prior years, the rural floor for each state was equal to the wage index assigned to rural hospitals in the state, as calculated based on the combined wage and hour data of all hospitals located in rural parts of the state and all hospitals in the state that had elected to reclassify as rural. In FY 2020 and onward, CMS will calculate the rural floor and the rural wage index separately. In calculating the rural floor for each state, CMS will exclude the data of urban hospitals that have reclassified as rural. CMS stated that this policy is necessary to prevent hospitals from manipulating the rural floor to bring a windfall to other hospitals in their state.
Furthermore, CMS placed a cap on wage index decreases in FY 2020. The maximum amount that a hospital’s wage index can decrease in FY 2020 is five percent. This means that no hospital will be assigned a wage index in FY 2020 that is less than 95 percent of its wage index from FY 2019. This is a one-time transitional policy designed to limit the impact of the wage index policies in the FY 2020 rule and applies to all hospitals, regardless of whether their wage indices have decreased because of the changes in the rulemaking. To ensure that the cap is budget neutral, CMS will make an adjustment to the national standardized amount.
Uncompensated Care (UCC) Pool
CMS’s adjustments to the UCC pool are mostly as expected, although the agency provided additional insight into its use of cost reporting Worksheet S-10. UCC Factor 1 (75 percent of estimated disproportionate share hospital (DSH) payments that would otherwise have been made, absent the UCC pool) is set at $12.643 billion and Factor 2 (reflecting changes in the national uninsured rate related to the Affordable Care Act) reduces the amount in the pool to $8.35 billion (roughly $78 million more than FY 2019). This is the pool of money from which subsection (d) hospitals receive their proportionate share under the individualized Factor 3.
In FY 2018, CMS reached a “tipping point” and determined that SSI and Medicaid data were no longer a better proxy for uncompensated care and began to transition in the use of Worksheet S-10 in the Factor 3 calculation. That transition is now complete, as CMS calculates individual Factor 3 using solely Worksheet S-10 data for FY 2020.
Although CMS used three years of data in the recent past to “smooth over anomalies” and “mitigate undue fluctuations,” for FY 2020, CMS used just a single year’s cost report: FY 2015, rejecting a proposed alternative of FY 2017. The agency gave itself room to return to a 3-year data set “if appropriate” in the future, particularly as more fiscal years are audited. CMS selected providers’ longest cost reports from Federal FY 2015, annualized costs from Line 30 of Worksheet S-10 if that cost report was more or less than 12 months and combined annualized costs for hospitals that merged. The new methodology is reflected in amended 42 C.F.R. § 412.106(g)(1)(iii)(C)(6). Hospitals have until August 31, 2019 to review and submit comments on the accuracy of the DSH data file posted online and pulled from the June 30, 2019 HCRIS file. Comments must be submitted to Section 3133DSH@cms.hhs.gov. CMS will not accept revised Worksheet S-10 data.
Notably, FY 2015 Worksheet S-10 cost reporting pages were subject to Medicare Administrative Contractor (MAC) audit starting in fall 2018, though audited hospitals represented only about half of the uncompensated care payments for FY 2020. CMS noted that it was infeasible to audit all hospitals, and that those audited were selected with a “risk-based assessment process.” Consistent with statements in prior IPPS rulemakings, CMS will not release the Worksheet S-10 instructions issued to the MACs. Nonetheless, the agency proposed to attempt to address concerns about Worksheet S-10 cost reporting instructions through future clarifications, including a forthcoming Paper Reduction Act package for Form CMS 2552-10 that will be open to public comment.
Indirect and Direct Graduate Medical Education Costs
As proposed, CMS will allow hospitals to include in the FTE count residents training at Critical Access Hospitals (CAHs), if such training meets the non-provider setting requirements found at 42 C.F.R. §§ 412.105(f)(1)(ii)(E) and 413.78(g). CMS believed that this will “support the training of residents in rural and underserved areas.” This change is particularly beneficial for hospitals still within their 5-year cap-building period. The hospital claiming the FTEs must be able to demonstrate that it actually paid the residents’ salaries and fringe benefits. CAHs may continue to incur training costs in approved programs and receive payment based on 101 percent of reasonable cost—indirect costs, regardless if another hospital claims the FTEs, and direct costs if the CAH incurs salary and fringe benefits and no other hospital claims the FTEs.
Further, a teaching hospital in Washington, D.C., closed, and CMS will redistribute its Indirect Graduate Medical Education (IME) FTE resident cap (50.5) and Direct Graduate Medical Education (DGME) FTE Resident Cap (52.12). Interested hospitals must apply for the redistributed cap base within 90 days by submitting to the CMS Central Office a “Section 5506 Application Form,” which is available here.
New Technology Add-On Payments
Under 42 C.F.R. § 412.87, medical services or technology can receive an additional add-on payment if new, costly (such that the DRG payment is inadequate) and a substantial clinical improvement over existing services or technologies. CMS revised the substantial clinical improvement criteria in the Final Rule. Applicants for the add-on payment in FY 2021 must submit a formal application, which CMS states will be available here. CMS has approved 18 technologies for add-on payment in FY 2020.
Revising 42 C.F.R. § 412.88, if costs of the discharge involving a new medical service or technology exceed the full DRG payment (including IME and DSH but excluding outliers) Medicare will make an add-on payment of the lessor of 65 percent of the costs of the new service/technology or 65 percent of the amount by which the costs of the case exceed the standard DRG payment. Formerly, the percentage threshold was 50 percent, so this is a payment increase. Certain antimicrobials designated by the FDA as a Qualified Infectious Disease Product (QIDP) have a 75 percent threshold.
Furthermore, starting with applications for FY 2021, if the medical device is the subject of the FDA’s Breakthrough Devices Program or is designated by the FDA as a QIDP, and received FDA marketing authorization, CMS will consider the device new and not substantially similar to an existing technology. Such devices will be eligible to receive the add-on payment, provided they meets the cost criterion. They need not meet the “substantial clinical improvement” criterion at 42 C.F.R. § 412.87(b)(1).
Quality Reporting Programs
- Hospital Readmissions Reduction Program, which requires a payment reduction for excess readmissions, relative to other hospitals with similar proportions of dual-eligible beneficiaries—CMS updated definitions of several key regulatory terms, including “dual-eligible,” “aggregate payments for excess readmissions,” “applicable condition,” and “base-operating DRG payment amount.” See 42 C.F.R. § 412.152. The biggest change is that the “dual-eligible” definition now specifies that, effective FY 2021, data for patients who died should be pulled from the State Medicare Modernization Act files from the prior month. There is no change in required measures, though CMS finalized a measure removal policy based on eight factors, consistent with other quality programs. CMS also adopted a policy to make non-substantive updates to payment adjustment factor components in a sub-regulatory manner, outside of notice-and-comment rulemaking.
- Inpatient Quality Reporting Program, which decreases payment for hospitals who do not successfully report quality data—As proposed, CMS removed the Claims-Based Hospital-Wide All-Cause Unplanned Readmissions Measure starting with the July 1, 2023 through June 30, 2024 reporting period and affecting the FY 2026 payment determination. This measure is replaced with the Hybrid Hospital-Wide All-Cause Readmission Measure and Claims and Electronic Health Record Data Measure, also beginning with the FY 2026 payment determination. CMS also adopted new measure Safe Use of Opioids – Concurrent Prescribing electronic clinical quality measure but did not finalize its proposal to adopt the Hospital Harm – Opioid-Related Adverse Events electronic clinical quality measure.
- Hospital Value-Based Purchasing Program, which adjusts hospital payments based on quality measure performance— CMS aligns the VBP Program with the Hospital-Acquired Conditions Reductions Program, utilizing the same data to calculate the National Health Safety Network Healthcare-Associated Infection measures starting with CY 2020 data collection.
- Hospital-Acquired Conditions Reduction Program, which reduces payment by 1 percent for hospitals performing in the lowest quartile of applicable hospitals on incidence of hospital-acquired conditions—CMS adopted the same eight measure-removal factors discussed above and clarified the administrative process for validating the National Healthcare Safety Network Healthcare-Associated Infection data, which is submitted by hospitals to the Center for Disease Control and Prevention.
- Medicare and Medicaid EHR Incentive Programs, now known as the “Promoting Interoperability Programs,” which requires eligible professionals and hospitals to use 2015 edition certified electronic health record technology (CEHRT) or face a payment reduction—CMS finalized its policy that the EHR reporting period for CY 2021 is a minimum of any continuous 90-day period for new and returning participants attesting to their compliance. Reporting on the Query of Prescription Drug Monitoring Program measure remains optional and available for bonus points, given stakeholder implementation issues. The measure will be converted to a yes/no attestation starting with the CY 2019 reporting period. CMS removed the Verify Opioid Treatment Agreement measure and adopted Safe Use of Opioids—Concurrent Prescribing electronic clinical quality measure, in alignment with the IQR program.
- LTCH Quality Reporting Program, which reduces the standard payment rate by 2 percent for LTCHs failing to satisfy program requirements—CMS adopted two new quality measures related to the transfer of health information and several Standardized Patient Assessment Data Elements (SPADEs). CMS also modified the Discharge to Community measure to exclude nursing home residents. It will no longer publish a list of compliant LTCHs on the LTCH QRP website.
Provider Reimbursement Review Board and Medicaid-Eligible Day Counts
With the FY 2020 IPPS proposed rule, CMS solicited comments on how providers might update Medicaid eligibility data after filing of the cost report. The Provider Reimbursement Review Board sees a large volume of appeals related to the DSH Medicaid fraction, and CMS is interested in reducing this backlogged docket. Nonetheless, CMS enacted no changes regarding refreshing Medicaid eligibility in response to comments. CMS considered ordering MACs to reopen cost reports near the end of the three-year reopening window to refresh the Medicaid data used in the DSH calculation. The agency also explored undertaking rulemaking to allow hospitals a one-time option for resubmission of updated Medicaid eligibility information.
CMS Issues Final Rule on FY 2020 SNF Payments – On July 30, 2019, CMS released its final rule updating the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for FY 2020 (the Final Rule). Under the Final Rule, total Medicare payments to SNFs will increase by $851 million, or 2.4 percent over FY 2019. In CMS’s proposed rule, the agency anticipated 3 percent inflation in the mix of goods and services covered by Medicare’s SNF payments. However, new data became available before the Final Rule was adopted, reducing the agency’s inflation estimate to 2.8 percent. To arrive at its final rate increase, CMS further reduced its inflation estimate using the multifactor productivity adjustment” (MFP), a measure of economy-wide annual labor productivity growth. CMS’s MFP estimate for FY 2020 is 0.4 percent.
The Final Rule also updates requirements for the SNF Quality Reporting Program. Under the Final Rule, SNFs will be required to report two new transfer of health information quality measures and standardized patient assessment data elements for admissions and discharges occurring on or after October 1, 2020. CMS estimates the annual cost to SNFs of reporting these new quality measures is $29 million.
Finally, the Final Rule adopts estimates of the potential savings attributable to Medicare’s SNF Value Based Purchasing (VBP) program for FY 2020. The SNF VBP program requires SNFs to score in the 25th percentile on certain quality measures, including 30-day all cause readmission, to receive full Medicare payment. According to CMS, the VBP program will reduce overall SNF payments by $213.6 million in FY 2020.
Reporter, David Tassa, Los Angeles, +1 213 443 4335, firstname.lastname@example.org.
D.C. Circuit Issues Favorable Jurisdictional Decision in Medicare Clinical Laboratory Case – On July 30, 2019, the D.C. Circuit issued a favorable jurisdictional decision on behalf of King & Spalding client the American Clinical Laboratory Association (ACLA), reversing the district court. Accepting ACLA’s arguments, the Court found that, while the Protecting Access to Medicare Act of 2014 precludes judicial review of the setting of laboratory reimbursement rates, it does not preclude review of CMS’s implementation of the statute’s separate data-collection provision, as the government had argued.
This is a significant procedural win affecting clinical laboratories across the country and is precedent-setting for important principles of administrative law around statutory preclusion of review provisions. The case now returns to the district court for further proceedings on the question of whether CMS acted in an arbitrary and capricious manner in collecting private payor data from only a small number of laboratories before setting national Medicare reimbursement rates. The case is American Clinical Laboratory v. Azar, and theCourt’s decision is available here.
Reporter, Elizabeth Swayne, Washington, D.C., +1 202 383 8932, email@example.com
Eleventh Circuit Issues Decision Underscoring the Stark Law’s Favorable Treatment of Indirect Financial Relationships – In an opinion issued last Wednesday, the Eleventh Circuit affirmed the district court’s entry of final judgment in favor of a multi-state hospital system by dismissing the qui tam relator’s claims under the federal False Claims Act (FCA). The relator’s claims against the hospital system were predicated on allegations that it violated the federal anti-kickback statute (AKS) and the Stark Law by providing sweetheart deals to physicians who leased space in on-campus medical office buildings (MOBs) in exchange for referrals. Under arrangements with the hospital system, third-party developers constructed and managed the MOBs, leasing space to hospital system affiliates and independent physicians. The opinion is notable because it is one of the few opportunities courts have had to consider the Stark Law’s favorable treatment of indirect financial relationships.
In 2003, the multi-state hospital system began developing a medical center that included an on-campus MOB, which would include space for hospital-based diagnostic facilities and clinics, office space for employed physicians, and office space for independent physicians and medical practices. The hospital system engaged a third-party developer to build and manage the MOB. The arrangement between the hospital system and the developer consisted of three agreements:
- A development agreement under which the developer agreed to finance, develop, and construct the MOB. In exchange, the hospital system would enter into a ground lease with the developer for the MOB site; finance, develop and construct parking improvements for the campus; grant a parking easement in favor of MOB tenants and invitees; enter space leases with the developer to house system-owned or affiliated practices and facilities in the MOB; and execute a “burnoff lease” to help the developer secure construction financing.
- A ground lease under which the hospital system leased to the developer, for a term of 99 years, the MOB site. The ground lease contained restrictions prohibiting certain uses without the hospital system’s prior approval and a parking easement, which allowed the MOB’s tenants and invitees to park anywhere on the hospital campus.
- A “burnoff lease,” under which the hospital system initially leased certain space in MOB from the developer. The burnoff lease envisioned that the hospital system would release the space when the developer was able to secure new tenants.
The developer then entered space leases and “Cash Flow Participation Agreements” (CFPAs) with the MOB tenants. If a tenant agreed to a ten-year lease, the developer offered a CFPA under which the tenant would receive pro-rata share of the MOB’s operating cash flow, including proceeds from any sale of the building. In 2012, the developer sold the MOB to a third party and made payouts to the tenants that had entered into CFPAs.
Before the developer began entering into leases with physician tenants, the hospital system engaged an appraiser to determine the fair market value (FMV) ranges of the leases. The initial study assumed the tenants would receive free parking and did not take into account the CFPAs. The appraiser subsequently updated its study to reflect the use of CFPAs and confirmed the FMV range remained the same. At a later date, the appraiser concluded the FMV range for the rental rate had increased, but due to higher construction costs, rather than the CFPAs. Significantly, the relator acknowledged through interrogatories that “all of the [developer’s] leases at the…MOB were more or less at market FMV terms.”
In its briefing, the relator argued that when the hospital system planned the MOB, it “took into account the value” of the referrals of the physician tenants. Specifically, the relator argued that the hospital system intended to fund the MOB through providing subsidies to the developer to induce physicians—who would benefit the hospital system economically—to become tenants. The relator further alleged that the hospital system “poured money up front into the development, ensuing it would shower referring physicians at the other end,” and stressed that “even fixed compensation—which does not ‘vary’ with the volume of referrals—are implicated in Stark, when considerations otherwise reflect their value.”
In contrast to relator’s arguments, which the court characterized as “conclusory,” the hospital system introduced evidence showing that the amount of space that the physicians leased lacked any correlation with the volume of their referrals to the hospital system. In both the hearing before the district court on its motion for summary judgment and in its briefing before the Eleventh Circuit, the hospital system included a chart that showed tenants with larger spaces were, in fact, not the largest referral sources. The court ultimately affirmed the district court’s grant of summary judgment, agreeing the relator had failed to establish a genuine factual dispute about whether the leases formed an indirect compensation arrangement.
With respect to the AKS-predicated FCA claims, the relator alleged that as part of the MOB’s development, the hospital system paid the developer $4 million in improper subsidies, primarily through the initial ground lease and the parking easement, which the developer then passed on to physician tenants through the CFPA payouts, low initial lease rates, restricted use waivers, and free office improvements.
The Eleventh Circuit determined the relator failed to show that the hospital system conveyed any remuneration to the physician tenants. In rejecting the relator’s argument, the court noted that the rental rates were within the FMV range that had been established by the hospital system’s third-party appraiser, albeit at the lower end. The court also rejected the relator’s argument that the physician tenants received unlawful remuneration through the CFPAs. The court stressed the FMV appraisal accounted for the CFPAs and that those agreements were offered only to those tenants who entered into a ten-year lease, which was longer than the average length in the relevant market.
Based on the above, the Eleventh Circuit affirmed the district court’s entry of final judgment in favor of the hospital system with respect to all of relator’s claims.
The case is Bingham ex rel. United States v. HCA, Inc., Case No. 16-17059, and the Eleventh Circuit’s decision is available here.
The case now returns to the district court for further proceedings on the question of whether CMS violated the statute and/or acted in an arbitrary and capricious manner in collecting private payor data from only a small number of laboratories before setting national Medicare reimbursement rates.
Reporter, Kyle Gotchy, Sacramento, +1 916 321 4809, firstname.lastname@example.org.
ALSO IN THE NEWS
CMS Releases CY 2020 Medicare End-Stage Renal Disease PPS and Durable Medical Equipment Proposed Rule – On July 29, 2019, CMS released the CY 2020 End-Stage Renal Disease (ESRD) PPS and Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) proposed rule. Proposed changes include:
- A $5 increase to the ESRD PPS base rate over CY 2019, to $240.27, plus a transitional add-on payment adjustment for new and innovative renal dialysis equipment and supplies.
- A decrease in the outlier services fixed-dollar loss amount to $44.91 (pediatric) and $52.50 (adult) and a decrease in the Medicare allowable payment to $33.82 (pediatric) and $36.60 (adult).
- Updating the ESRD Quality Incentive Program.
- Gap-filling new DMEPOS pricing based on a comparison to existing items; where no comparable item exists, using “other, more accurate sources of commercial pricing data.” The latter might be adjusted one time if, within 5 years, commercial prices decrease by less than 15 percent.
- Developing list of DMEPOS that require face-to-face encounters, written orders prior to delivery, or prior authorization.
CMS is also soliciting comments on data collection to refine the ESRD PPS case-mix adjustment and comments on the ESRD PPS wage index values. The final rule is available here. CMS’s fact sheet is available here. Comments to the proposed rule must be filed no later than September 27, 2019.
CMS Releases FY 2020 Inpatient Psychiatric Facilities PPS Final Rule – On July 30, 2019, CMS released the FY 2020 inpatient psychiatric facilities (IPF) final rule. The final rule includes updates to Medicare payment policies and rates under the IPF Prospective Payment System (PPS) and IPF Quality Reporting (IPFQR) Program, including:
- A 1.5 percent increase (approximately $65 million) in IPF payments compared to 2019. CMS rebased and revised the IPF market basket to reflect a 2016 base year. The IPF market basket increase is 2.9 percent.
- Removal of the one-year lag of the IPF PPS wage index data to enhance the consistency of the wage indexes across settings.
- Adoption of one new claims-based measure under the IPFQR, Medication Continuation Following Inpatient Psychiatric Discharge, beginning with the 2021 payment determination and subsequent years.
CMS Releases FY 2020 Medicare Inpatient Rehabilitation Facility PPS Final Rule – On July 31, 2019, CMS released the FY 2020 inpatient rehabilitation facility (IRF) final rule. CMS’s final rule includes updates to Medicare payment policies and rates under the IRF Prospective Payment System, including:
- A 2.5 percent increase (approximately $210 million) in IRF payments compared to FY 2019. CMS rebased the IRF market basket using data from a base year of 2016 instead of 2012. CMS also increased the outlier threshold amount to $9,300 in FY 2020.
- Modification of case-mix group (CMG) relative weights and average length-of-stay values based on FY 2017 and 2018 data. CMS will use an unweighted motor score to assign patients to CMGs, instead of weighted as proposed.
- Revision of the IRF patient assessment instrument (IRF-PAI) used to assign patients to CMGs, including removal of the Functional Independent Measure and addition of standardized patient assessment data elements (SPADEs).
- Addition of two interoperability measures to IRF Quality Reporting Program related to medication lists for transferred/discharged patients and revision of the Discharge to Community-Post Acute Care measure.
- Clarification that who constitutes a “rehabilitation physician” (to meet regulatory requirements around supervision and documentation) is to be determined by the IRF itself.
CMS Releases FY 2020 Hospice Final Rule – On July 31, 2019, CMS released the FY 2020 hospice final rule. The final rule includes updates to Medicare payment rates, the wage index, and cap amount for FY 2020. The rule’s changes include:
- A 2.6 percent increase (approximately $520 million) in hospice payment rates.
- An increase in the aggregate cap amount for the 2020 cap year by 2.6 percent to $29,964.78.
- Rebasing the continuous home care, general inpatient care, and the inpatient respite care per diem payment rates in a budget-neutral manner, through a small reduction to the routine home care rates, to more accurately align payments with the costs of providing care in different settings.
- A modification to the election statement content requirements under which hospices must provide, upon request, an addendum—with a list and rationale for the items, drugs, and services that the hospice has determined to be unrelated to the terminal illness and related conditions—to the beneficiary (or representative), other treating providers, and Medicare contractors.
- Use of the concurrent inpatient prospective payment system (IPPS) wage index for the hospice wage index.
King & Spalding Webinar: Medicare Litigation Opportunities after Allina and Kisor – The Supreme Court recently issued two major decisions that give healthcare providers new tools to challenge Medicare payment policies. In the wake of Azar v. Allina Health Services, King & Spalding LLP will host a webinar on Wednesday, August 21, 2019, from 1:00 p.m. ET until 2:30 p.m. ET that will explore what sub-regulatory payment policies may now be open to challenge. We will also discuss how the limitations applied to “Auer deference” in Kisor v. Wilkie may herald the further erosion of agency deference as lower courts apply the Supreme Court’s reasoning in future cases.
Click here to register. You do not have to be a client to attend, and there is no charge.