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CMS Releases CY 2016 Proposed Rule on OPPS and ASC Payment Systems, Including Changes to the Two Midnight Rule – On July 1, 2015, CMS released a Proposed Rule that would revise the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) Payment System payment rates for calendar year (CY) 2016, and would revise the so-called “Two Midnight” Rule governing payment for hospital inpatient admissions under Medicare Part A. The Proposed Rule would also modify the requirements for the quality reporting programs for outpatient hospitals and ASCs and clarify the role of hospitals in providing Chronic Care Management services. The Proposed Rule is scheduled to be published in the July 8, 2015 Federal Register, and comments are due by August 31, 2015.
With respect to OPPS payment, CMS begins with a projected hospital market basket increase of 2.7 percent, but ends up with a net decrease in OPPS rates of -0.1 percent after applying offsetting reductions. Those reductions include a -0.6 percentage point adjustment for multi-factor productivity and a -0.2 percentage point adjustment required by the ACA. The majority of the adjustment, however, or -2.0 percent, is meant “to redress inflation in the OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests that continue to be paid separately outside of the OPPS.” In particular, CMS explains that “about $1 billion in laboratory tests payments that were projected to be packaged into OPPS payment rates continued to be paid separately in CY 2014” and the 2.0 percent reduction is meant to recapture that amount. CMS estimates that total payments to hospitals under the OPPS would decrease by 0.2 percent ($43 million) in CY 2016 if all of the changes in the Proposed Rule are adopted.
Notably, CMS reiterated in the Proposed Rule that it would not reverse the 0.2 percent reduction in inpatient payments the agency implemented beginning in FFY 2014 that it claimed were necessary to maintain the budget neutrality of the Two Midnight Rule. This payment adjustment remains the subject of Federal court litigation.
CMS proposes to increase ASC payment by 1.1 percent, which is based on a projected CPI-U update of 1.7 percent less a multifactor productivity (MFP) adjustment of -0.6 percent. CMS estimates that total ASC payments under the Proposed Rule would increase by approximately $169 million.
With respect to the Two Midnight Rule, CMS proposes to revise its policy to permit payment under Part A on a “case-by-case” basis for stays expected to last fewer than two midnights based on the judgment of the admitting physician, as supported by documentation in the medical record. Among other factors, CMS cites the following as relevant to determining when an inpatient admission expected to last fewer than two midnights is appropriate for Part A payment: (1) the severity of the signs and symptoms exhibited by the patient; (2) the medical predictability of something adverse happening to the patient; and (3) the need for diagnostic studies that appropriately are outpatient services (i.e., their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more). CMS is not proposing to change its policy for stays expected to last two midnights or longer. In other words, if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Part A payment.
In addition, CMS states that no later than October 1, 2015, patient status review of claims for short-stay admissions will be conducted by Quality Improvement Organizations (QIOs) and not Medicare Administrative Contractors. Only those hospitals with high error rates during the QIO review will be referred to Recovery Audit Contractors for further audits and potential payment recoupment.
With respect to quality reporting, CMS is proposing to add to the Hospital Outpatient Quality Reporting (OQR) Program measures OP-33: External Beam Radiotherapy for Bone Metastases (for the CY2018 payment determination and subsequent payment years) and OP-34: Emergency Department Transfer Communication Measure (for the CY2019 payment determination and subsequent years), and to remove measure OP-15: Use of Brain Computed Tomography in the Emergency Department for Atraumatic Headache (effective January 1, 2016). CMS is not proposing to add any new measures to the Ambulatory Surgical Center Quality Reporting (ASCQR) Program, but is requesting comment on two measures for future consideration: Normothermia Outcome and Unplanned Anterior Vitrectomy.
CMS is also proposing several policy changes to align the OQR Program with the ASCQR Program, including: (1) changing the deadline for withdrawing from the program from November 1 to August 31; (2) shifting the quarters on which payment determinations are based and making conforming changes to the validation process requiring a one-time change in the payment determination timeframe to cover three quarters instead of four quarters; (3) changing the data submission timeframe for measures submitted via the CMS web-based tool to January 1 through May 15; and (4) changing the deadline for submitting a reconsideration request to the first business day on or after March 17 of the affected payment year.
Finally, CMS cites “confusion” regarding the implementation of the Chronic Care Management (CCM) fee and uses the proposed rule to “respond[] to hospital requests for clarification of their role in furnishing CCM services and defin[e] the scope of service elements for the hospital outpatient setting that are analogous to the scope of service elements finalized as requirements to bill for CCM services.”
CMS expects to issue a final rule on or around November 1. Please click here for a copy of a CMS fact sheet on the proposed rule’s payment changes, and here for a fact sheet on the Two Midnight Rule.
For more information about CMS’s proposed changes to the Two Midnight Rule, please refer to our King & Spalding Client Alert, available here.
Reporters, Daniel J. Hettich, Washington, D.C., +1 202 626 9128, dhettich@kslaw.com, and Kerrie S. Howze, Atlanta, +1 404 572 3594, khowze@kslaw.com.
Circuit Court Affirms $237.5 Million Judgment Against Tuomey – On July 2, 2015, the Fourth Circuit affirmed a $237,454,195 judgment against Tuomey Health Care System (Tuomey) for violations of the Federal False Claims Act (FCA), which liability arose from violations of the Stark law.
Last week’s decision comes after a lengthy trial and re-trial, and a prior appeal to the Fourth Circuit. A full analysis of the prior qui tam litigation and the at-issue compensation arrangements is available in our October 7, 2013 Health Headlines article, available here. Key is whether the hospital’s payment of base compensation and bonuses to part-time physicians were in excess of fair market value and varied with the volume and value of the physicians’ referrals.
The three-judge panel first affirmed the district court’s decision to grant the government’s motion for a new trial, albeit on different grounds than the district court contended. The Fourth Circuit found that the exclusion of testimony by Tuomey’s prior counsel was prejudicial to the government, in that it spoke directly to whether Tuomey “knowingly” submitted false claims. According to the court, Tuomey waived attorney-client privilege by attempting to assert the advice-of-counsel defense. Under such defense, the hospital would not violate the FCA, had it acted in good faith reliance on the advice of its counsel. The Fourth Circuit found the advice-of-counsel exception ultimately inapplicable, holding instead that Tuomey “shopped for legal opinions approving of the employment contracts, while ignoring negative assessments.” Thus, Tuomey was not entitled to judgment as a matter of law on this ground and, therefore, the jury’s determination that Tuomey violated the FCA and Stark law stands.
The Fourth Circuit next rejected Tuomey’s arguments that a reasonable jury could not have concluded that (1) the physicians’ part-time employment contracts violated the Stark law and (2) Tuomey knowingly submitted false claims. With respect to the first issue, the circuit court concluded that a “reasonable jury could have found that Tuomey’s contracts in fact compensated the physicians in a manner that varied with the volume or value of referrals.” The court found that there were two components of the physicians’ compensation that they believed varied: the upward or downward adjustment of the physicians’ base salary each year depending on the prior year’s collections and the physicians’ productivity bonus, which was established at 80 percent of their collections. The court reiterated the finding in its prior opinion that collections for the physicians’ personally performed services reflect referrals because there is a corresponding facility fee, which constitute referrals. Thus, according to the court, “the more procedures the physicians performed at the hospital, the more facility fees Tuomey collected, and the more compensation the physicians received in the form of increased salaries and productivity bonuses.” The court also concluded that the evidence at trial, including evidence of shopping for legal opinions, provided “ample support for the jury’s verdict as to Tuomey’s intent.”
The Fourth Circuit also rejected Tuomey’s challenges to the district court’s jury instructions in all respects. Finally, the circuit court found that the district court properly calculated the civil penalty and concluded that the $237,454,195 judgment was not in violation of the Due Process Clause of the Fifth Amendment or the Excessive Fines Clause of the Eighth Amendment. Said the court, “while the penalty is certainly severe, it is meant to reflect the sheer breadth of the fraud Tuomey perpetrated upon the federal government.”
In concurring opinion, a third judge wrote separately “to emphasize the troubling picture this case paints: An impenetrably complex set of laws and regulations that will result in a likely death sentence for a community hospital in an already medically underserved area.” Although agreeing with the majority’s legal assessment, the judge noted that, “it seems as if, even for well-intentioned health care providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure – especially when coupled with the False Claims Act.”
The full opinion is available here.
Reporters, Adam Robison, Houston, + 1 713 276 7306, arobison@kslaw.com and Elizabeth N. Swayne, Washington, D.C., + 1 202 383 8932, eswayne@kslaw.com.
PRRB Releases New Reinstatement Rules – Effective July 1, 2015, the Provider Reimbursement Review Board (PRRB or Board) has promulgated new rules regarding the reinstatement and withdrawal of appeals before the Board. The most significant change is a new rule allowing providers to seek reinstatement of issues withdrawn pursuant to an agreement with the Medicare Administrative Contractor (MAC) to reopen the cost report to address an issue, but where the MAC fails to do so. Under the new rules, a provider may file a motion for reinstatement of the appeal, providing written evidence of the MAC’s agreement to reopen on the condition that the provider withdraw the appeal.
This rule is welcome news to providers. MACs frequently deny providers’ requests to reopen cost reports on the basis that the issue for which reopening is requested is also the subject of an appeal before the Board, but state they will consider reopening if the appeal is withdrawn. MACs have adopted this policy despite the fact that CMS has been clear in Federal Register preamble statements that MACs are not precluded from considering a reopening on an issue merely because the issue is also the subject of an appeal. The MACs’ policy presents providers with a dilemma: dismiss the appeal and forgo appeal rights, or continue with an appeal that may take many years to resolve. The dilemma is made worse by the fact that providers do not have a right to challenge a MAC’s decision to deny a request to reopen a cost report and, therefore, they have no remedy if the MAC reneges on any agreement to reopen.
The Board’s new rule is intended to give providers some relief in such cases. There is one wrinkle with the new Board rule, however—providers must present a “copy of the correspondence from the Intermediary where the Intermediary agreed to reopen the final determination for that issue(s).” PRRB Rule 46.2(B). Whether MACs will put their agreement to reopen in writing remains to be seen. Finally, the motion for reinstatement must also be filed within three years of the date the PRRB received the withdrawal from the provider. PRRB Rule 46.1; see also 42 C.F.R. § 405.1885.
The Board also included other significant changes with its July 1, 2015 update. While the time limit to seek reinstatement of any dismissed or withdrawn appeal remains the same (three years from the PRRB’s dismissal or the provider’s withdrawal of the issue), new rules require that a motion for reinstatement be filed. The prior rule only required that the request be in writing. Under the new rules, any request for reinstatement must comply with the PRRB rule governing motions (PRRB Rule 44), which requires providers to specifically set forth the legal and factual basis for the reinstatement and to include supporting documentation. The new PRRB rules also bar reinstatement of appeals if the provider was at fault. For cases that were remanded pursuant to a CMS ruling, the PRRB now requires the provider to address whether the CMS ruling permits reinstatement of each case or issue. See PRRB Rule 46.1.
The PRRB has also set forth explicit withdrawal filing requirements. All withdrawals must now describe the issue being withdrawn, indicate if the withdrawal is the result of an administrative resolution or agreement to reopen, and confirm if there are any remaining open issues and the status of those issues. Similar to a motion for reinstatement, when a provider withdraws an issue or case pursuant to an administrative resolution or agreement to reopen, providers must include a copy of the administrative resolution or correspondence where the MAC agreed to reopen the issue under appeal. Providers should note that a decision acknowledging the withdrawal will not be issued by the PRRB if the withdrawal does not result in closure of the appeal. See PRRB Rule 48.
Reporters, Mark Polston, Washington, D.C., + 1 202 626 5540, mpolston@kslaw.com, and Catherine Greene, Summer Associate, Washington, D.C., +1 202 626 9556, cgreene@kslaw.com.
CMS Open Payment Program Data Indicates $6.49 Billion Paid by Manufacturers, GPOs to Physicians and Hospitals in 2014 – CMS recently released data collected through the Open Payments Program in accordance with the Affordable Care Act from applicable manufacturers and group purchasing organizations (GPOs) about payments and other transfers that they made to physicians and teaching hospitals in 2014. In summary, CMS reported that 1,444 companies made $6.49 billion in payments to physicians and teaching hospitals.
The financial data collected by CMS is categorized into three areas: (1) general payments ($2.56 billion), such as payments for travel and lodging or food and beverage; (2) research payments ($3.23 billion); and (3) ownership or investment interest ($703 million). The public may search much of the data published by CMS on the CMS website. For example, information such as the name, address, and specialty of physicians who were reported as the recipient of a payment or as the principal investigator named on a research project may be found through the search tool. More information on the Open Payments Program, including which GPOs or manufacturers are required to submit data, may be found here.
Reporter, Christina A. Gonzalez, Houston, +1 713 276 7340, cagonzalez@kslaw.com.
Also in the News
CMS Reopens Attestation Period For First-Time Hospitals Until August – CMS recently announced that eligible hospitals participating in the Medicare Electronic Health Record Incentive Program for the first time in 2015 may attest to meeting program requirements between now and August 14, 2015, rather than waiting until January 1, 2016. Eligible hospitals may attest to a 90-day reporting period for FY 2015. Further information is available here on CMS’s website.
King & Spalding Publishes Client Alert on Enforcement Delay on Certain Drug Supply Chain Security Act Product Tracing Requirements for Dispensers – On June 30, 2015, the FDA issued guidance for the pharmaceutical industry regarding the implementation of the Drug Supply Chain Security Act’s (DSCSA) product tracing requirements, announcing that it does not intend to take action against dispensers. Please click here to access the recent King & Spalding Client Alert discussing the guidance.
King & Spalding to Host Roundtable on the Supreme Court’s Decision in King v. Burwell –On Wednesday, July 8, 2015, King & Spalding will host an Atlanta-based Roundtable addressing the Supreme Court’s June 25th decision in King v. Burwell upholding the availability of Affordable Care Act subsidies for private insurance in exchanges established by the federal government. The Roundtable discussion will address the decision, the political fallout, and its impact on healthcare providers, life sciences companies, and consumers. For more information and to register, please click here.
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