Health Headlines – July 13, 2015

FEATURED ARTICLES

CMS Issues CY 2016 Medicare Physician Fee Schedule Proposed Rule – On July 8, 2015, CMS issued its annual proposed rule outlining payment policies, payment rates, and quality provisions for services furnished under the Medicare Physician Fee Schedule (PFS) for CY 2016.  In the proposed rule, CMS seeks comments on the implementation of the new Merit-based Incentive Payment System (MIPS) that will apply to payment for items and services beginning in CY 2019.  The proposed rule also contains several policy proposals, including new exceptions to the Stark physician self-referral law, a clarification of Part B payment policy for biosimilars, a methodology to adjust misvalued codes, and a new payment for advance care planning visits.  Comments on the proposed rule are due by September 8, 2015, with the final rule expected to be published in the Federal Register by November 1. 

Payment Provisions

CMS outlines several payment policy proposals in the proposed rule, the most sweeping of which is the implementation of the MIPS.  Earlier this year, on April 16, Congress enacted the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which, among other provisions, repealed the contentious Sustainable Growth Rate (SGR) update methodology for physicians’ services, established annual PFS payment rate increases for 2015 and subsequent years, and created the MIPS, under which the payment to physicians and other healthcare professionals will be adjusted based on their past performance, beginning in CY 2019.  (For a detailed summary of MACRA, please see our prior Health Headlines article here.)  In the proposed rule, CMS seeks comments on the general implementation of MIPS as well as two specific aspects:  (1) the low-volume threshold for professionals to qualify for MIPS eligibility (i.e., a minimum number of Medicare beneficiaries, services, or claims), and (2) the clinical practice improvement activities that should be used (along with other performance categories) in determining the composite performance score. 

CMS also proposes updates to the Physician Value-Based Payment Modifier, a program that will expire in CY 2018 and will be replaced by the MIPS.  These updates include the application of the Value Modifier to non-physician eligible professionals, and the setting of payment-at-risk under the CY 2018 Value Modifier to 4.0 percent for groups with ten or more eligible professionals.
The proposed rule contains several policies aimed at correcting misvalued codes.  In the Protecting Access to Medicare Act of 2014 (PAMA) and the Achieving a Better Life Experience Act of 2014 (ABLE), Congress set targets for adjustments to misvalued codes for CY 2016-2018.  In the proposed rule, CMS proposes a methodology to identify changes to misvalued codes, the implementation of which would achieve 0.25 percent in net reductions in estimated expenditures, and solicits comments on the changes needed to achieve the statutory goal of 1 percent.  CMS also proposes to make changes to misvalued codes for radiation therapy and codes for lower gastrointestinal endoscopy services.

The proposed rule contains several additional payment policy provisions: 

• With respect to drugs, CMS proposes to set the Part B payment amount for each biosimilar based on the average sales price (ASP) of all of the biosimilars referencing the same reference biologic. 
• With respect to “incident to” services, CMS proposes to clarify that the billing physician must also be the supervising physician.  Accordingly, the use of the Medicare billing number of the ordering practitioner would only be appropriate if the practitioner directly supervised the auxiliary personnel.
• Section 218 of PAMA directed CMS to establish a program to promote the use of appropriate use criteria (AUC) for advanced diagnostic imaging services.  In the proposed rule, CMS proposes several regulatory definitions and an implementation process focused onto define “provider-led entity,” “priority clinical areas of priority,” and “specified applicable appropriate use criteria,” and outlines its plan for implementing the program. 
• CMS proposes to establish payment for two advance care planning visits, separate from the payment for a “Welcome to Medicare” visit, and paid based on a dedicated CPT code.
• CMS is soliciting comments on the potential expansion of the Comprehensive Primary Care Initiative (CPCI) beyond currently participating practices, but does not propose an expansion.
• The proposed rule does not discuss the implementation of section 216 of PAMA, which reforms Medicare payment for clinical laboratory tests by setting the Medicare payment based on the rates paid for certain tests by commercial payers.  To comply with statutory deadlines, CMS may implement these payment reforms in a separate rulemaking.

Compliance Provisions

The proposed rule contains several significant revisions to the  Stark physician self-referral law, with the stated goal of reducing compliance burdens.  These proposals include:

1. Recruitment and retention.  Establishing an exception for payment by hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs) to physicians to assist with employing non-physician practitioners; and clarifying the geographic area for FQHCs and RHCs that rely on the exception. 
2. Physician-owned hospitals.  Clarifying that the Affordable Care Act’s physician-owned-hospitals website and advertising requirements can be satisfied through a broad range of actions, because they are not prescriptive of specific actions.  Also clarifying that the 2010 baseline physician-ownership percentage includes physicians who do not refer to the hospital.
3. Other exceptions.  Establishing a new exception to permit timeshare arrangements in underserved areas; and clarifying that separate billing of a patient by a hospital and a physician do not necessarily create a financial relationship.
4. Administrative requirements. 
   • Clarifying regulatory flexibility with certain administrative requirements, including:
   • The regulatory exceptions requiring writing can be satisfied through a collection of documents. 
   • The term of a lease or personal services arrangements need not be in writing if the arrangement lasts at least one year and is otherwise compliant.
   • Holdover arrangements may last indefinitely (or, alternatively, for longer than six months), provided that certain safeguards are met.
   • The requirement to obtain missing signatures can be complied with within a 90-day grace period, regardless of whether the failure to obtain a signature was inadvertent.

CMS is also seeking comments on additional changes to the Stark physician self-referral law that may be needed to facilitate alternative payment models and value-based purchasing. 

Quality Provisions

The proposed rule includes updates to policies regarding the quality of patient care.  CMS proposes to continue to implement the Physician Quality Reporting System (PQRS) in CY 2018, while adding and removing certain measures, and employing new policies to promote the public reporting of quality data.  In CY 2019, PQRS will be replaced by the MIPS.  

The proposed rule also includes quality proposals applicable to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program.  These proposals would add a statin therapy quality measure, preserve the ability to maintain and revert measures in certain circumstances, clarify compliance with PQRS for professionals within an ACO, and include services by Electing Teaching Amendment hospitals in the definition of primary care services. 

The proposed rule is scheduled for publication in the Federal Register on July 15, 2015 and is available in pre-publication form here.  The accompanying CMS Fact Sheet is available here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.

CMS Proposes to Revise Payment System for Joint Replacements – On July 9, 2015, CMS released a proposed rule to revise how it pays for joint replacement procedures like hip and knee replacements, also known as lower extremity joint replacements (LEJR).  This payment structure, called the Comprehensive Care for Joint Replacement (CCJR) Model, encourages providers to improve the quality and coordination of care from LEJR surgery through recovery.  According to CMS, the new proposed CCJR bundled payment and quality measurement model is designed to address what CMS says is a large variation in the quality and cost of care, and to streamline the care experience for LEJR patients.  Hospitals in 75 geographic regions (performing at least 400 eligible LEJR cases between July 2013 and June 2014) would be required to participate in the proposed five-year model.  Comments on the proposal are due September 8, 2015. 

Under the CCJR Model, the hospital performing the LEJR would be accountable for the “episode” of care, which would begin at the time of surgery and end 90 days later.  Every year during the five performance years of the CCJR Model, Medicare episode prices would be set for LEJR procedures at each participating hospital.  While the normal Medicare payment rules and procedures would apply for episode services throughout the year, under the CCJR Model, a hospital would earn a payment bonus or incur a payment reduction depending on the hospital’s quality and cost performance during an LEJR episode.  Participant hospitals that achieve LEJR episode spending below the target price during a model performance year and also meet quality thresholds would be eligible to earn a payment from Medicare for the difference between the target price and actual episode spending, up to a specified cap.  However, hospitals with LEJR episode spending that exceeds the target price would be responsible for the repayment of the difference to Medicare (to be phased-in during performance year two of the model).

Under the proposal, the three quality performance measures that hospitals must meet to receive reconciliation payments are:

1. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550);
2. Hospital-Level 30-day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551); and
3. Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) (NQF #0166) Survey. 

Further, quality performance requirements for reconciliation payment eligibility would increase over the lifetime of the model, and the model would incentivize hospitals to avoid events such as complications and readmissions.

The proposal is set for publication in the July 14, 2015 Federal Register.  For the full CMS Fact Sheet, click here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822, klucas@kslaw.com. 

CMS Proposes Initiative to Tie Home Health Payments to Quality Performance – On July 10, 2015, CMS published in the Federal Register the CY 2016 Home Health Prospective Payment System proposed rule effective for episodes ending on or after January 1, 2016.  CMS estimates that the net impact of the proposed rule would result in a decrease in Medicare payments to home health agencies of 1.8 percent (a $350 million decrease).  Comments on the proposal are due September 4, 2015. 

The proposed rule sets forth a Home Health Value-Based Purchasing model designed to test whether incentives for better care can improve outcomes in the delivery of home health services.  The model will begin January 1, 2016 and will apply to all agencies delivering services within nine states to be selected randomly by CMS.  Under the model, CMS would apply a reduction or increase to current Medicare-certified home health agency payments, depending on a home health agency’s quality performance.  The payment adjustments would be applied on an annual basis starting at five percent and increasing to eight percent in later years.  CMS states that participants in the model will be representative of home health agencies nationally, and there will be no selection bias.

In addition to initiating the value-based care delivery model, the proposed rule updates Medicare payments and requirements for home health agencies.  Consistent with the Affordable Care Act, the proposed rule reflects the third year of the four-year phase in of the rebasing adjustments, and for CY 2016, would reduce the national, standardized 60-day episode payment rate by $80.95, increase the national per-visit rates by 3.5 percent of the national per-visit payment amounts in CY 2010 with the increases ranging from $1.79 for home health aide services to $6.34 for medical social services, and reduce the non-routine medical supply conversion factor by 2.82 percent.  Among other things, the proposed rule sets forth the following updates and proposals:

• Reduces the national, standardized 60-day episode payment rate in CY 2016 and CY 2017 by 1.72 percent in each year to account for estimated case-mix growth unrelated to increases in patient acuity (nominal case-mix growth) between CY 2012 and CY 2014;
• Updates the payment rates under the Home Health PPS by the home health payment update percentage of 2.3 percent;
• Updates the CY 2016 home health wage index solely using the new geographic area designations; and
• Changes the home health quality reporting program to include a new quality measure, the establishment of a minimum threshold for submission of Outcome and Assessment Information Set (OASIS) assessments for purposes of quality reporting compliance.

The proposed rule is available here.  CMS’s press release regarding the proposed rule is available here.  More information is available on CMS’s home health agency website, available here. 

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.

OIG Recommends Improvements to Skilled Nursing Facility Billing Policies Regarding Changes in Therapy – The Department of Health and Human Services Office of Inspector General (OIG) recently issued a report that calls for CMS to accelerate its efforts to implement a new method for paying for changes in skilled nursing facility (SNF) therapy to prevent SNFs from billing for higher-paying services when a patient is set to receive lower-intensity therapy services. 

In its report, OIG analyzed billing by SNFs for changes in therapy under recently implemented Medicare policies that were designed to address concerns that SNF billing did not adequately reflect changes in therapy that occurred during a beneficiary’s stay.  In FYs 2011 and 2012, CMS introduced three types of assessments to capture when SNF beneficiaries (1) started therapy, (2) ended therapy, and (3) decreased or increased therapy.  Under these policies, the choice of assessments determines when the SNF begins billing for the therapy and for changes in therapy.  Because these assessments were intended to capture changes in a beneficiary’s therapy more timely than scheduled assessments, the ultimate goal was that SNF billing and Medicare payments would be better aligned. 

OIG specifically analyzed SNFs’ billing for (1) changes in therapy under the new policies, (2) the uses of assessments for decreases and increases in therapy, and (3) how often SNFs used the new therapy assessments incorrectly.  OIG found that:

1. Under the recently implemented billing policies, SNFs slightly increased their billing for changes in therapy (by only 4 percent).
2. SNFs used scheduled assessments and combined change-of-therapy assessments very differently when decreasing therapy than when increasing.  The new billing policies permit SNFs in certain circumstances to choose between conducting a scheduled assessment or a combined change-of-therapy assessment when a level of therapy changes.  The choice determines when the SNF begins billing for the new therapy resource utilization group (RUG).  Using a combined change-of-therapy assessment results in more timely billing.  On the contrary, the choice of a scheduled assessment when a SNF decreases therapy, rather than a combined change-of-therapy assessment, allows the SNF to delay billing for the lower paying therapy RUG.  This ultimately results in increased costs to Medicare.  According to OIG, SNFs were more likely to use scheduled assessments when they decreased therapy (versus when they increased therapy).  According to OIG, SNFs’ use of scheduled assessments to change therapy levels in FYs 2012 and 2013 cost Medicare $143 million more than if SNFs had used combined change-of-therapy assessments.
3. SNFs frequently used the start-of-therapy assessments incorrectly.

OIG noted that the SNF billing policies are “complex and create challenges for effective oversight.”  As a result of its report, OIG recommended that CMS:

1. Reduce the financial incentive for SNFs to use assessments differently when decreasing therapy than when increasing it by potentially eliminating SNFs’ ability to choose a scheduled assessment over a combined change-of-therapy assessment when changing therapy levels; and
2. Strengthen the contractor oversight of SNF billing for changes in therapy.

CMS agreed with these recommendations.  OIG’s report, entitled “Skilled Nursing Facility Billing for Changes in Therapy: Improvements Are Needed,” can be found here.

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

GAO Report Concludes Prescribing Incentives Exist at 340B Hospitals – According to a report released July 6, 2015 by the Government Accountability Office (GAO), hospitals that qualify to participate in the 340B Drug Pricing Program by virtue of their serving a disproportionate share of low-income patients (340B DSH hospitals) had higher rates of per‑beneficiary Medicare Part B drug spending than non‑340B hospitals in 2008 and 2012.

340B DSH hospitals are but one category of covered entity eligible to participate in the 340B Program, which enables covered entities to purchase, at a discounted rate, covered outpatient drugs to be furnished to patients of the entity.  340B DSH hospitals are general acute care hospitals with a Medicare disproportionate share adjustment percentage greater than 11.75 percent that also meet certain other eligibility criteria.

In performing its analysis, GAO compared 340B DSH hospitals to non‑340B DSH hospitals (i.e., those that received DSH payments but did not participate in the 340B Program) and to all other non‑340B hospitals.  Based on 2012 cost report data, GAO compared characteristics such as hospital size, teaching status, ownership type, location, DSH adjustment percentage, provision of charity care and uncompensated care, and various financial characteristics.  GAO also analyzed 2008 and 2012 claims data to examine characteristics of Medicare Part B drug spending.
GAO’s conclusions were as follows:

• Financial Characteristics—According to GAO’s analysis, 340B DSH hospitals were generally larger and had lower total facility margins, but higher (i.e., less negative) total Medicare and inpatient Medicare margins than non‑340B hospitals.  GAO speculated that these higher Medicare margins may be due to the fact that 340B hospitals were more likely to receive Medicare payment adjustments, and in higher amounts, as compared with non‑340B hospitals.  However, GAO noted that 340B hospitals generally had lower outpatient Medicare margins than non‑340B hospitals.
• Charity Care and Uncompensated Care—GAO concluded that many 340B DSH hospitals provided more charity care and uncompensated care than did non‑340B hospitals, but 12 percent of 340B DSH hospitals in GAO’s analysis were among the hospitals that provided the lowest amounts of charity care, and 14 percent were among the hospitals that provided the lowest amounts of uncompensated care across all hospitals in the analysis.
• Per-Beneficiary Part B Drug Spending—GAO concluded that in both 2008 and 2012, per beneficiary spending on Medicare Part B drugs was substantially higher at 340B DSH hospitals than at non-340B hospitals, indicating that, “on average, Medicare beneficiaries were prescribed more drugs, more expensive drugs, or both, at 340B DSH hospitals.”  GAO speculated that the observed drug spending differences “did not appear to be explained by the hospital or patient population characteristics,” and that the higher spending at 340B DSH hospitals may reflect a response to the “financial incentive” at 340B hospitals to “prescribe more drugs or prescribe more expensive drugs to Medicare beneficiaries,” since Medicare reimbursement for Part B drugs does not vary depending on hospitals’ acquisition costs.  The report specifically examines the relative increase in the numbers of oncology patients served at 340B DSH hospitals from 2008 to 2012.

Much of the meat of this report lies in the third bullet point above.  GAO speculated that the drug spending differences at 340B DSH hospitals “were likely not explained by the health status of the outpatients served,” because the “health status of outpatient beneficiaries was generally similar at 340B and non-340B hospitals.”  GAO compares, without analysis, the average risk scores at 340B DSH hospitals to those at non 340B DSH hospitals and other non 340B hospitals, and asserts that the differences between the risk scores is likely insufficient to explain the observed differences in drug spending.  Rather, GAO concludes that 340B DSH hospitals may be responding to the “financial incentive to maximize Medicare revenues through the prescribing of more or more expensive drugs.”  GAO recommends that Congress consider eliminating this incentive in order to “help ensure the financial sustainability of the Medicare program, protect beneficiaries from unwarranted financial burden, and address potential concerns about the appropriateness of the health care provided to Part B beneficiaries.”

HHS expressed concerns that certain of GAO’s conclusions are “not supported by the study methodology.”  Specifically, HHS noted that GAO did not examine differences in patient outcomes or quality, noting the possibility that higher spending on physician-administered drugs could lead to better clinical outcomes.  Without comparing outcomes, HHS argues, GAO’s characterization of Part B drug spending at 340B DSH hospitals as excessive or “potentially inappropriate” is inappropriate.  HHS also questioned GAO’s interpretation of the differences between the average risk scores at the various groups of hospitals in GAO’s analysis, noting that the stated differences “could represent a meaningful difference in health status of beneficiaries,” and that further analysis is warranted.

A copy of the GAO report, which includes HHS’s response, is available by clicking here.  An industry response to the GAO report from 340B Health, formerly Safety Net Hospitals for Pharmaceutical Access (SNHPA), is available here.

Reporter, Susan Banks, Washington, D.C., +1 202 626 2953, sbanks@kslaw.com.

 Also in the News

CMS and AMA Announce Efforts to Help Providers Get Ready for ICD-10 – On July 6, 2015, CMS and AMA announced efforts to continue to assist providers to get ready for the upcoming October 1 switch from ICD-9 to ICD-10 coding for medical diagnoses and inpatient hospital procedures.  According to the Joint Press Release, over the next three months CMS and AMA will be educating providers through webinars, on-site training, educational articles, and national provider calls to help physicians and other health care providers prepare for the transition.

Roundtable on CMS’s 2016 OPPS Proposed Rule: Changes to the Two Midnight Rule and Patient Status Reviews – On Tuesday, July 14, 2015, King & Spalding will host a Roundtable to discuss the Calendar Year 2016 Outpatient Prospective Payment System (OPPS) Proposed Rule issued by CMS on July 1, 2015, which includes proposed changes to the controversial Two Midnight Rule, as well as changes regarding the review of patient status claims requiring Quality Improvement Organization (QIO) contractors to conduct reviews of short inpatient stays.  In this 90-minute session, K&S attorneys will discuss the details of the OPPS Proposed Rule and the implications of QIO patient status audits, as well as practical considerations for providers.  You do not have to be a client to attend, and there is no charge.  For more information and to register, 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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