Health Headlines – July 11, 2016

CMS Proposes Substantial Limitations on Off-Campus Provider-Based Departments – On July 6, 2016, CMS issued its Calendar Year (CY) 2017 Outpatient Prospective Payment System (OPPS) Proposed Rule.  Among other items (discussed in the article below), CMS also proposed its interpretation of Section 603 of the Bipartisan Budget Act of 2015 regarding limitations on new off-campus provider-based departments.  With limited exceptions, Section 603 limited OPPS payments beginning January 1, 2017 to only those off-campus provider-based departments billing as hospital departments on or before November 1, 2015.  A detailed King & Spalding Client Alert summarizing these provisions of the Proposed Rule is available here.

The Proposed Rule, if adopted, could significantly limit how hospitals operate off-campus provider-based departments (PBDs). For those off-campus PBDs that were being paid for services under the OPPS on or before November 1, 2015 (so-called “excepted” PBDs), CMS proposes to continue making OPPS payments only if the PBD remains in the same physical address and furnishes the same service lines that it offered prior to November 2, 2015. A PBD that relocates to a new (presumably off-campus) address would lose its excepted status, and any new service lines offered at an excepted PBD – even at the same location – would be paid Medicare Physician Fee Schedule (MPFS) rates.

For PBDs that were not billing as hospital departments as of November 1, 2015 (so-called “non-excepted” PBDs), CMS proposes to not pay hospitals at all for their services during CY 2017. CMS claims that it does not have the systems capabilities to pay hospitals under the MPFS and instead proposes that physicians who furnish services in a non-excepted PBD bill for all services furnished therein on a CMS-1500 claim form using the nonfacility Place of Service code. CMS states that it will aim to have a mechanism in place by CY 2018 to pay hospitals directly. In the meantime, this proposal presumably leaves the hospital and the physician to decide how payment should be divided between the two.

The Proposed Rule is available here.  Comments on the Proposed Rule are due to CMS no later than September 6, 2016. The Final Rule will be issued no later than November 1, 2016.

Reporters, Christopher Kenny, Washington, DC, +1 202 626 9253, ckenny@kslaw.com, and Mark Polston, Washington, DC, +1 202 626 5540, mpolston@kslaw.com.

CMS Releases Calendar Year 2017 OPPS Proposed Rule – On July 6, 2016, CMS released the Calendar Year (CY) 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.  In addition to significant proposals regarding provider-based status that are addressed in a detailed King & Spalding Client Alert, the Proposed Rule contains a number of updates to payment, quality, and performance policies.  Key aspects of these proposals are highlighted below.

Proposed Payment Policies

Overall, CMS estimates the Proposed Rule will result in a 1.6 percent payment increase for hospitals paid under OPPS in CY 2017.  Proposed total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2017 are anticipated to be approximately $63 billion, an increase of approximately $5.1 billion compared to estimated CY 2016 OPPS payments.

CMS’s proposed payment policies include the following:

• Comprehensive Ambulatory Payment Classifications (C-APCs) - For CY 2017, CMS is proposing 25 new C-APCs.  C-APCs are APCs that provide for an encounter-level payment for a designated primary procedure(s) and generally all adjunctive and secondary services provided in conjunction with the primary procedure.  Currently, there are 37 C-APCs, which mostly address procedures for the implantation of costly medical devices.  Many of the new proposed C-APCs involve major surgery APCs within the various C-APC clinical families, but CMS is also proposing three new clinical families to accommodate the new C-APCs.  These include (1) nerve procedures, (2) excision, biopsy, incision and drainage procedures, and (3) airway endoscopy procedures.

• Packaged Service Policies - The Proposed Rule contains proposed refinements to CMS’s packaged services policies.  Currently, many ancillary services are conditionally packaged.  However, for CY 2017, CMS is proposing the following three packaging refinements:
  
  
  • CMS proposes to align the packaging logic for all of the conditional packaging status indicators so that packaging would occur at the claim level (instead of based on the date of service);
    
    
  • CMS proposes to expand the molecular pathology laboratory test exception to include certain Advanced Diagnostic Laboratory Tests (ADLTs); and
    
    
  • In conjunction with its proposal to discontinue separate payment for “unrelated” laboratory tests, CMS proposes to discontinue the use of the “L1” modifier, which currently allows for separate payment of laboratory tests for use when (1) laboratory tests are the only services on the claim, or (2) when the laboratory test or tests are “unrelated” to the other services on the claim, meaning that the laboratory test was ordered by a different physician for a different diagnosis than the other services on the claim. 

• Device-Intensive Procedures - CMS also proposes the following two adjustments to its device-intensive procedure policies:
  
  
  • CMS is proposing to adjust the methodology for assigning device-intensive status.  Device-intensive APCs are APCs with a device offset more than 40 percent.  CMS proposes changing the device-intensive calculation methodology so that the device offset amount is calculated at the HCPCS code level rather than at the APC level so that device-intensive status is assigned to all device-intensive procedures that exceed the 40 percent threshold.
    
    
  • CMS is proposing that the payment rate for any device-intensive procedure that is assigned to an APC with fewer than 100 total claims for all procedures in the APC be based on the median cost instead of the geometric mean cost.

• Inpatient Only List - CMS proposes to remove six procedures (four spine procedures and two laryngoplasty procedures) from the Medicare Inpatient Only List.

• Partial Hospitalization Program (PHP) - CMS also proposes updates to PHP payments.  PHPs are intensive outpatient programs for mental health services paid on a per diem basis under the OPPS.  CMS proposes replacing the existing two-tiered APC structure for PHPs with a single APC by provider type for providing three or more services per day.  Additionally, CMS proposes to implement a Community Mental Health Center (CMHC) outlier payment cap to be applied at the provider level.  Under the proposal, an individual CMHC should receive no more than 8 percent of its CMHC total per diem payments in outlier payments in any given year. 

Quality and Performance Program Changes

CMS has proposed a number of updates to quality and performance provisions to reflect its focus on patient-centered outcomes and remove hardships placed on hospitals and providers as a result of previous rules.   Those changes include the following:

• Hospital Value Based Purchasing (VBP) Program - As a component of CMS’s efforts to address the nation’s opioid epidemic, CMS has proposed removing the pain management dimension of the Hospital Consumer Assessment of Health Providers and Systems (HCAHPS) survey beginning with the FY 2018 program year.  Stakeholders have expressed concern that these measures may pressure hospital staff to prescribe opioids to avoid negative scores. Therefore, CMS is removing this dimension as applied to the VBP program while continuing to assess these practices. 

• Changes in Hospital Outpatient Quality Reporting (OQR) Program - CMS proposes to modify its established set of measures for the OQR program by adding  seven new measures effective for CY 2020 and subsequent years.  There are two proposed claims-based measures, OP-35: Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy, which will capture incidents of preventable emergency room visits or inpatient admission following outpatient chemotherapy; and OP-36: Hospital Visits after Hospital Outpatient Surgery (NQF #2687), which is intended to capture unplanned and preventable hospital admissions following outpatient surgery.   CMS also proposes to add five measures, OP-37(a) – (e), based on the Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey, to solicit patient feedback regarding (1) outpatient facilities and staff; (2) communication about the procedure; (3) preparation for discharge and recovery; (4) overall rating of facility; and (5) the patient’s recommendation of the facility.  CMS notes that there is currently no standardized data available on the patient experience following outpatient surgeries or procedures, and is adding these measures to support the agency’s efforts to better capture patient-centered assessments as one component of the agency’s  2016 CMS Quality Strategy.  CMS also seeks comments regarding a future clinical quality measure that would address concerns with overlapping or concurrent prescribing of opioid drugs.

• Organ Transplant Centers Performance and Reporting Measures – CMS proposes to modify its transplant outcome measures for graft and organ survival one-year following receipt to better reflect the nationwide improvement in post-transplant outcomes.   Citing consistent research and innovation across transplant centers and the organ donation community as driving factors, the agency reports that post-transplant survival rates for transplant centers under the Medicare program are among the highest in the nation.  However, because the Conditions of Participation outcomes requirement is based on an individual transplant program’s outcomes in relation to the risk-adjusted national average, as national outcomes have improved, it has become much more difficult for an individual transplant program to meet the CMS outcomes standard.  CMS has expressed concern that transplant centers may not choose some available, viable organs out of concern that those organs could potentially lead to adverse effects – and thus a lower performance threshold than permissible for compliance with the program.  Therefore, CMS proposes to change its performance threshold for compliance from 1.5 to 1.85, which would bring the measure in parity for previous years.
  
  CMS is also proposing several procedural updates for facilities seeking approval or re-approval to participate in the Organ Transplant Program.  These include extending the due date from 10 days to 14 calendar days for programs to notify CMS of their intent to request mitigating factors approval, and clarifying that the time period for submission of the mitigating factors information is calculated in calendar days (that is, 120 calendar days), as well as a number of other technical corrections.

• Electronic Health Record (EHR) Incentive Program – CMS is proposing a number of updates to the Medicare EHR Incentive Program, including proposing a 90-day EHR reporting period for 2016, consistent with the reporting period provided in 2015.  CMS is also proposing to eliminate the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures for eligible hospitals and Critical Access Hospitals (CAHs), as well as to reduce the thresholds for a subset of the remaining objectives and measures in Modified Stage 2 for 2017 and Stage 3 for 2017 and 2018. CMS has not proposed these changes for hospitals and CAHs under the Medicaid EHR Incentive Program, citing the difficulty states may face in implementing these changes.
  
  CMS has also proposed that eligible providers, hospitals, and CAHs that have not successfully demonstrated Meaningful Use in a prior year (i.e., new participants) would be required to attest to Modified Stage 2 by October 1, 2017.  Returning participants will not be affected by this proposal.  Finally, CMS is proposing a hardship exception for the 2018 payment adjustment for eligible providers that have not demonstrated Meaningful Use but intend to do so in the 2017 EHR reporting period, as well as transition to the Merit-Based Incentive Payment System (MIPS) and report on measures specified for the advancing care information performance category under the MIPS as proposed in 2017.

Comments on the Proposed Rule are due by September 6, 2016.  The Proposed Rule is available here.  CMS’s fact sheet is available here. 

Reporters, C’Reda Weeden, Washington, D.C., + 1 202 626 5572, CWeeden@KSLAW.com,and Isabella E. Wood, Atlanta, + 1 404 572 3527, iwood@kslaw.com.

CMS Issues Medicare Physician Fee Schedule Proposed Rule – On July 7, 2016, CMS issued a proposed rule that updates payment policies, payment rates, and quality provisions for services furnished under the Medicare Physician Fee Schedule (PFS) on or after January 1, 2017 (Proposed Rule).  The Proposed Rule also contains proposed changes to the appropriate use criteria program (AUC) as well as the Medicare Shared Savings program, Medicare Advantage, and Accountable Care Organizations.   In addition, CMS included a proposal with respect to the Stark Law.  The Proposed Rule is scheduled for publication in the Federal Register on July 15, 2016 and is available in pre-publication form here.  The accompanying CMS Fact Sheet is available here. CMS will accept comments on the Proposed Rule until September 6, 2016.  The Proposed Rule contains payment rate updates, including relative value unit (RVU) adjustments, that are available here. In addition to payment rate updates, the Proposed Rule contains other proposed changes related to reimbursement, including:

• Changes intended to better identify and improve payment accuracy for primary care, care management, and cognitive services, including revaluation of certain CPT codes, separate payments for certain existing CPT codes, and using new codes;
  
  
• Changes removing moderate sedation as an inherent part of furnishing certain procedures;
  
  
• Adjustments to the Geographic Price Cost Index, including the use of Metropolitan Statistical Areas (MSAs) in California required for 2017.  According to CMS, the change in California may increase payment to many physicians in urban parts of California without any reductions in specified counties that the law “holds harmless” from payment reductions.  However, the changes may still decrease Medicare PFS payments in certain MSAs;
  
  
• A new place of service code specifically designed to report services furnished via telehealth;  
  
  
• New global service coding for pre- and post-operative care;
  
  
• New CPT coding for mammography services;
  
  
• Changes to RVU phase-in requirements for services that are not new or revised codes (if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the adjustments are phased in over a two-year period) so that for purposes of the 20 percent threshold, every service is evaluated anew each year, and any applicable phase-in is limited to a decrease of 19 percent; and
  
  
• Updates to the value-based payment modifier informal review policies to establish how the quality and cost composites under the value-based payment modifier (VM) would be affected for the CY 2017 and CY 2018 payment adjustment periods in the event that unanticipated program issues arise.

The Proposed Rule also contains changes to the appropriate use criteria program (AUC) for advanced diagnostic imaging services, which was established in CY 2016.  The Proposed Rule includes proposals for priority clinical areas, clinical decision support mechanism (CDSM) requirements, the CDSM application process, and exceptions for ordering professionals for whom consultation with AUC would pose a significant hardship.  CDSMs involve a technology platform through which a clinician consults AUC to determine the appropriateness of an advanced diagnostic imaging service for a particular patient.  These changes would not begin earlier than January 1, 2018.

CMS also included in the Proposed Rule changes applicable to specific programs and payors, including Medicare Shared Savings, Medicare Advantage, and Accountable Care Organizations.

• Proposed changes to the Medicare Shared Savings Program include:
  
  
  • Quality reporting changes, including changes to measures, revisions that would permit eligible professionals in Accountable Care Organizations (ACOs) to report quality apart from the ACO, and updates to align with the Physician Quality Reporting System and the proposed Quality Payment Program;
    
    
  • Modifications to align beneficiaries to an ACO when a beneficiary has designated an ACO professional as responsible for their overall care; and
    
    
  • New beneficiary protection policies related to use of the skilled nursing facility 3-day waiver.
• Proposed changes related to the Medicare Advantage (MA) Program include:
  
  
  • Requiring MA providers or suppliers that furnish health care items or services to Medicare enrollees who receive Medicare benefits through a MA organization to be enrolled in Medicare and be in an approved status, effective two years from the publication date of the final rule; and
    
    
  • CMS’s release of two new sets of data related to plan participation in  MA and the Part D prescription drug program:  MA Bid Pricing and Medical Loss Ratio.

CMS is also proposing expansion of the Diabetes Prevention Program (DPP) into Medicare beginning January 1, 2018.  The proposed benefit includes a 12-month program using the CDC-approved DPP curriculum, consisting of 16 core sessions over 16–26 weeks and the option for monthly core maintenance sessions over six months thereafter if the beneficiary achieves and maintains a minimum weight loss in accordance with the CDC Diabetes Prevention Recognition Program Standards and Operating Procedures. Under the Proposed Rule, any organization recognized by the CDC (that is, those with preliminary or full recognition) to provide DPP services would be eligible to apply for enrollment in Medicare as a supplier beginning on or after January 1, 2017, and would be subject to CMS enrollment requirements.  A Fact Sheet on the proposed expansion is available here.

Finally, in response to the remand of Council for Urological Interests v. Burwell to CMS for the Secretary to consider whether a ban on per-click equipment leases is consistent with the House Conference Report, CMS is  re-proposing the current regulation that per-unit of service (“per click”) rental charges for office space or equipment may be permitted, but only where the referral for the service provided in the space or using the equipment does not come from the lessor.

Reporters, Lara Compton, Los Angeles, +1 213 443 4369, lcompton@kslaw.com, and RJ Cooper, Sacramento, + 1 916 321 4809, rcooper@kslaw.com.

FTC Dismisses Challenge to Hospital Merger, Takes Shots at Cooperative Agreement Arrangements – The FTC dismissed its antitrust complaint against a proposed West Virginia hospital merger in a 3-0 vote in light of a recent West Virginia law immunizing hospitals from antitrust scrutiny.  “Our decision to dismiss this complaint without prejudice does not necessarily mean that we will do the same in other cases in which a cooperative agreement is sought or approved,” the FTC said in a statement issued on Wednesday, July 6, 2016.

Cabell Huntington Hospital announced its intention to acquire St. Mary’s Medical Center in November 2014, and, on July 30, 2015, the presidents of each hospital and West Virginia’s Attorney General entered into an Assurance of Voluntary Compliance agreement, wherein the hospitals agreed to certain conditions and obtained the Attorney General’s approval of the proposed merger. 

The FTC filed an administrative complaint challenging the proposed acquisition shortly thereafter, in November 2015.  According to the complaint, the hospitals are three miles apart and the only direct competitors in the Huntington, West Virginia, community.  The FTC alleged that the proposed merger would likely reduce competition in the area, lead to increased healthcare costs, and result in “a dominate firm with a near monopoly” over certain hospital services. 

On March 18, 2016, West Virginia passed S.B. 597, which exempts healthcare providers from federal antitrust liability as long as the providers act under the jurisdiction of the West Virginia Health Care Authority and comply with the Authority’s regulations and administrative decisions, which include cooperative agreements approved and directed by the Authority.  Prior to the bill’s passage, Delegate Mike Pushkin reached out to the FTC for staff comment on S.B. 597.  The FTC responded unfavorably, observing that the legislation would likely foster anticompetitive conduct “inconsistent with federal antitrust law and policy.”

Despite dropping its challenge to the merger last Wednesday, the FTC continued to express serious concerns about the newly passed law and cooperative agreements, more generally.  According to the FTC, “This case presents another example of healthcare providers attempting to use state legislation to shield potentially anticompetitive combinations from antitrust enforcement.  The Commission believes that state cooperative agreement laws such as S.B. 597 are likely to harm communities through higher healthcare prices and lower healthcare quality.”

Reporter, Brittany Strandell, Atlanta, +1 404 572 2796, bstrandell@kslaw.com. 

ALSO IN THE NEWS

House Committee Approves Bill Providing Relief for Rural Hospitals – On July 7, 2016, the Ways and Means Committee for the House of Representatives voted unanimously to approve the Continuing Access to Hospitals Act, as amended (H.R. 5613).  The legislation seeks to delay through the end of 2016 Medicare’s direct physician supervision requirement for routine outpatient therapeutic services provided in critical access and small rural hospitals.  Hospitals claim that implementation of the requirement would reduce margins at rural hospitals that already face financial difficulties and impact their ability to serve patients.  H.R. 5613 is available here.  S. 3129, companion legislation to H.R. 5613, is pending before the Senate Finance Committee and is available here.  The American Hospital Association expressed its support for S. 3129 in a letter available here.

Watch Sessions of the King & Spalding Health Law and Policy Forum Online! – King & Spalding is pleased to share sessions from its 25th Annual Health Law and Policy Forum by video. Currently, we are offering the keynote address by the distinguished associate editor of The Washington Post, Bob Woodward, as well as sessions on hospital consolidation, hot topics and trends in healthcare antitrust enforcement and opportunities and obstacles in healthcare delivery innovations. Find out more and register here.