Health Headlines – November 2, 2015

FEATURED ARTICLES

Budget Deal to Limit Provider-Based Status, Extend Sequestration – On October 28 and 30, 2015, the U.S. House of Representatives and U.S. Senate approved the Bipartisan Budget Act of 2015 (the Act)—a measure designed to raise the limit on Federal borrowing that would also have significant implications for healthcare providers.  In particular, the Act directs CMS, effective January 1, 2017, to cease paying Hospital Outpatient PPS rates for off-campus provider-based departments that begin billing as such on or after the date the Act is signed into law.  These new off-campus departments will instead be paid according to the Medicare Physician Fee Schedule or Ambulatory Surgical Center Payment System.  All provider-based off-campus departments that had billed Medicare for outpatient hospital services prior to the date of enactment will be exempt from the payment change.  President Obama signed the Act into law today, November 2, 2015.  King & Spalding’s Client Alert summarizing in detail the Act’s changes to provider-based status is available here. 

While the Act will end the growth of off-campus provider-based departments, the Act’s payment changes do not apply to on-campus provider-based departments, dedicated emergency departments (even if off-campus), remote locations of a hospital (i.e., inpatient campuses of multi-campus hospitals), satellite facilities for excluded units, and provider-based entities such as rural health clinics.  These organizations that comply with the provider-based regulation at 42 C.F.R. § 413.65 will continue to receive payments based on the OPPS (or other applicable payment system) even if established or acquired after the Act is signed into law.

In addition, the Act expands the definition of an on-campus provider-based department to include departments located within 250 yards of either (i) the hospital’s main buildings or (ii) any remote location of a hospital.  Previously, CMS directed multi-campus hospitals to designate one main campus from which all provider-based departments are measured, even those located on the campus of a remote hospital location.
The Act also exempts services furnished in dedicated emergency departments from the payment change.  In an original version of the Act, Congress identified emergency department services by specific HCPCS codes.  In the version passed by the House and Senate, however, Congress has exempted all services furnished in a dedicated emergency department (as defined in 42 C.F.R. § 489.24(b)) from the payment change.

In addition to the changes to provider-based status, the Act will extend the two-percent Medicare sequestration cuts through FY 2025.  Congress previously extended the two-percent cut through FY 2023 and instituted a four-percent cut for the first six months of FY 2024.  The Act replaces this timetable with a flat two-percent reduction through FY 2025. 
Many of these payment changes are intended to prevent an expected 52-percent spike in 2016 Medicare Part B beneficiary premiums.  Savings from the changes in hospital outpatient reimbursement and sequestration will enable CMS to increase Part B premiums by only 15 percent, and across a broader set of beneficiaries. 

The text of the as-passed Act is available here.

Reporter, Christopher Kenny, Washington, DC, +1 202 626 9253, ckenny@kslaw.com.

CMS Issues Final Rule for CY 2016 OPPS and Changes to the Two-Midnight Rule – On October 30, 2015, CMS issued its final rule with comment period (Final Rule) for the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for calendar year 2016, as well as updates to the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.  The Final Rule also finalized certain policies relating to the hospital inpatient prospective payment system (IPPS), including changes to the two-midnight rule.

CMS estimates that based on the Final Rule, total payments for CY 2016 to the estimated 4,000 facilities paid under the OPPS will decrease by a projected $133 million (0.4 percent) compared to CY 2015.  This impact is greater than the proposed rule’s estimated $43 million (0.2 percent) decrease in total OPPS payments.  Additionally, although the proposed rule estimated a payment increase to ASCs of 1.1 percent, under the Final Rule, CMS estimates that total payments to ASCs for CY 2016 will be approximately $4.221 billion, an increase of only 0.3 percent, or approximately $128 million, as compared to estimated CY 2015 Medicare payments. 

In the Final Rule, CMS has finalized a number of changes for CY 2016, including the following changes to OPPS and the ASC payment system:

• An Outpatient Department (OPD) fee schedule increase factor of 1.7 percent (which is based on the final estimated hospital IPPS market basket percentage increase of 2.4 percent, less the final 0.5 percentage point multifactor productivity (MFP) adjustment, and less an additional 0.2 percentage point adjustment mandated by the Affordable Care Act);  
  
  
• Reducing the CY 2016 conversion factor by 2.0 percent to account for an approximately $1 billion inflation in CY 2014 OPPS payments that resulted from excess packaged payment for laboratory tests that were projected to be packaged into OPPS payment rates, but continued to be paid separately in CY 2014;
  
  
• Requiring that laboratory tests be conditionally packaged  on a claim with an OPD service that is assigned a certain status indicator, irrespective of the date(s) of service, unless an exception applies or the laboratory test is “unrelated” to the other OPD service(s) on the claim; 
  
  
• Setting a statutory default of average sales price plus 6 percent for payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status;
  
  
• Expanding the set of conditionally packaged ancillary services to include three new ambulatory payment classifications;
  
  
• Establishing for the Hospital OQR Program for the CY 2017 payment determination and subsequent years, the following requirements, among other changes: (1) removing the OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache measure, effective January 1, 2016; (2) revising from November 1 to August 31 the deadline for withdrawing from the Hospital OQR Program; (3) shifting to a new payment determination timeframe that will use only three quarters of data for the CY 2017 payment determination; (4) changing the timeframe in which data may be submitted for measures submitted via the CMS QualityNet website to January 1 through May 15; and (5) changing the deadline for submitting a reconsideration request to the first business day on or after March 17 of the payment year at issue;
  
  
• Establishing for the Hospital OQR Program for the CY 2018 payment determination and subsequent years the following  requirements, among others:  (1) adding a new measure: OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) with a modification to the proposed manner of data submission; and (2) shifting the quarters on which CMS bases payment determinations to again include four quarters of data;
  
  
• Increasing payment rates under the ASC payment system by 0.3 percent for ASCs that meet the quality reporting requirements under the ASCQR Program;
  
  
• Establishing a revised process of assigning ASC payment indicators for new and revised Category I and III CPT codes that would be effective January 1; and
  
  
• Setting the final ASC conversion factor of $44.177 for ASCs that meet the quality reporting requirements, based on the product of the CY 2015 conversion factor of $44.058 multiplied by the wage index budget neutrality adjustment of 0.9997 and the MFP-adjusted CPI–U payment update of 0.3 percent.

Under the Final Rule, CMS has also modified its prior “exceptions” policy under the two-midnight benchmark, which previously was limited to cases involving services designated by CMS as inpatient-only and those other exceptions published on the CMS website or in other sub-regulatory guidance.  CMS will now allow exceptions to the two-midnight benchmark to be determined on a case-by-case basis by the beneficiary’s responsible physician, subject to medical review.  CMS is careful to note that it expects that stays less than 24 hours would rarely fall into an exception. 

The Final Rule also finalized certain proposed changes from the FY 2015 IPPS Proposed Rule to the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.  Specifically, CMS has finalized revisions to the cost reporting rules requiring providers to include an appropriate claim for a specific item on their cost reports—either by affirmatively claiming reimbursement or expressly self-disallowing the cost by filing a cost report item under protest—in order to be eligible to potentially receive Medicare reimbursement and/or to be eligible to appeal their reimbursement (or lack thereof) to the Provider Reimbursement Review Board.  CMS has eliminated the duplicative requirement to do the same in order to meet the “dissatisfaction” requirement for Board jurisdiction.  CMS has also specified procedures for Board review of whether a provider’s cost report meets this substantive reimbursement requirement of an appropriate cost report claim for a specific item.

Any comments on the payment classifications assigned to HCPCS codes identified in Addenda B, AA, and BB with the “NI” comment indicator and on other areas indicated in the Final Rule must be received no later than 5 p.m. EST on December 29, 2015.

The CMS Fact Sheet on the Final Rule is available here.  An additional Fact Sheet on the Two-Midnight Rule is available here.  The Final Rule is scheduled to be published in the Federal Register on November 13, 2015.  Our Health Headlines article summarizing the proposed rule is available here.

Reporter, Christina A. Gonzalez, Houston, +1 713 276 7340, cagonzalez@kslaw.com

CMS Issues Final Rule for Waivers in Connection With the Shared Savings Program – On October 29, 2015, CMS issued its Final Rule setting forth waivers of the application of the physician self-referral law (the Stark law), the Federal anti-kickback statute (AKS), and the civil monetary penalties (CMP) law provision relating to beneficiary inducements, to specified accountable care organizations (ACOs) arrangements under section 1899 of the Social Security Act (the Shared Savings Program).  The Final Rule became effective October 29, 2015, upon publication in the Federal Register.

The Final Rule sets forth detailed eligibility requirements for the following five waivers:

1. An “ACO Pre-Participation Waiver” of the Stark law and the AKS that applies to ACO-related start-up arrangements in anticipation of participating in the Shared Savings Program, subject to certain limitations, including limits on the duration of the waiver and the types of parties covered;
   
   
2. An “ACO Participation Waiver” of the Stark law and the AKS that applies to ACO-related arrangements during the term of the ACO’s participation agreement under the Shared Savings Program and for a specified time thereafter;
   
   
3. A “Shared Savings Distribution Waiver” of the Stark law and AKS that applies to distributions and uses of shared savings payments earned under the Shared Savings Program;
   
   
4. A “Compliance With the Physician Self-Referral Law Waiver” of the AKS for ACO arrangements that implicate the Stark law but satisfy the requirements of an existing exception; and
   
   
5. A “Patient Incentive Waiver” of the Beneficiary Inducements CMP and the AKS for medically-related incentives offered by ACOs, ACO participants, or ACO providers/supplies under the Shared Savings Program to beneficiaries to encourage preventative care and compliance with treatment regimes.

The foregoing waivers were finalized as promulgated in the interim final rule, with the exception of the following changes made in the Final Rule:

• The waivers no longer waive the CMP for “Gainsharing”;
  
  
• For the ACO Pre-Participation and ACO Participation waivers to apply, the ACO governing body’s documentation of its authorization “must” (changed from “should”) provide the basis for the documentation that an arrangement is reasonably related to the purpose of the Shared Savings Program; and
  
  
• CMS clarified that for purposes of the Final Rule, the term “home health supplier” means “a provider, supplier or other entity that is primarily engaged in furnishing home health services.”

Reporter, John Whittaker, Sacramento, +1 916 321 4808, jwhittaker@kslaw.com.

CMS Issues Proposed Rule Regarding Discharge Planning Requirements – On October 29, 2015, CMS released a Proposed Rule that would revise discharge planning requirements for hospitals.  CMS released the proposed revisions in an effort to modernize the discharge planning requirements by bringing them into closer alignment with current practices, improve patient care, and reduce avoidable complications, adverse events, and readmissions.  Comments on the Proposed Rule are due by January 4, 2016.

The Proposed Rule would implement the discharge planning requirements outlined in the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act).  Those changes are aimed to improve transparency and beneficiary experience during the discharge planning process.  Specifically, the IMPACT Act requires providers to employ data regarding quality and resource use measures to assist patients during the discharge planning process, while taking into account the beneficiary’s goals and preferences. 

The Proposed Rule would require providers—including hospitals, inpatient rehabilitation facilities and long-term care hospitals, critical access hospitals, and home health agencies—to develop a discharge plan for Medicare and Medicaid beneficiaries within 24 hours of the patient’s admission or registration, and to complete the discharge plan before the patient is discharged or transferred to another facility.  The requirements would apply to all inpatients and certain categories of outpatients, including beneficiaries receiving observation services, patients who are undergoing surgery or other same-day procedures where anesthesia or moderate sedation is used, and certain emergency department patients that require discharge planning.

A pre-publication version of the Proposed Rule is available here, and the CMS Press Release is available here.  The Proposed Rule is scheduled to be published in the November 3, 2015 edition of the Federal Register.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com.

CMS Issues CY 2016 Medicare Physician Fee Schedule Final Rule – On October 30, 2015, CMS released the CY 2016 Medicare Physician Fee Schedule (PFS) Final Rule updating payment policies, payment rates, and quality provisions for services furnished under the PFS on or after January 1, 2016.  CMS also finalized new policies and changes to quality reporting initiatives that are associated with PFS payments, including the Physician Quality Reporting System (PQRS) and the Physician Value-Based Payment Modifier (Value Modifier).  The Final Rule also contains two new exceptions to and clarifications of the Stark physician self-referral law, establishes a new payment for advance care planning visits, clarifies a Part B payment policy for biosimilars, finalizes a proposal to amend the “incident to” billing regulations, and adopts a methodology to adjust misvalued codes, among other provisions.

Payment Provisions

In the PFS Final Rule, CMS updated the Value Modifier, a program that will expire in CY 2018 and will be replaced by the Merit-Based Incentive Payment System (MIPS).  These updates include (1) applying the Value Modifier to non-physician eligible professionals and (2) setting payment-at-risk under the CY 2018 Value Modifier to 4.0 percent for groups with ten or more eligible professionals.

The Final 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 CYs 2016-2018.  In the Final Rule, CMS implements a methodology to identify changes to misvalued codes, the implementation of which would achieve 0.23 percent in net reductions in estimated expenditures. 

Additional payment policy provisions that are set forth in the Final Rule include the following: 

• With respect to drugs, CMS set the Part B payment amount for each biosimilar based on the average sales price of all of the biosimilar biological products included within the same billing and payment code;
  
  
• With respect to “incident to” services, CMS proposed to amend its regulations to state that the physician or other practitioner who bills for incident to services must also be the physician or other practitioner who directly supervises the auxiliary personnel who provide the incident to services.  Accordingly, the use of the Medicare billing number of the ordering practitioner would only be appropriate if the practitioner directly supervised the auxiliary personnel;   
  
  
• In PAMA, Congress required that providers that order advanced diagnostic imaging services consult with appropriate use criteria via a clinical decision support mechanism.  CMS was directed to establish such appropriate use criteria from among those developed or endorsed by national medical professional specialty societies and other provider-led entities.  The Final Rule establishes which organizations are eligible to develop or endorse appropriate use criteria, the evidence-based requirements for appropriate use criteria development, and the process CMS will follow for qualifying provider-led entities;
  
  
• CMS established separate payment and a payment rate for two advance care planning visits, which are separate from the payment for a “Welcome to Medicare” visit; and
  
  
• CMS reduced payments for lower gastrointestinal endoscopy services. 

CMS did not finalize its proposal to implement a new code set for payment of radiation therapy treatment under the PFS.  CMS will continue the use of the current G-codes and values for CY 2016 while it seeks additional public comments and recommendations regarding the proposed new codes.

Compliance Provisions

The Final Rule contains several significant revisions to the Stark physician self-referral law, with the stated goals of reducing compliance burdens, facilitating compliance, and accommodating delivery and payment system reform.  These revisions, consistent with revisions in the proposed rule reported on here in July 13, 2015, include:

1. Two new exceptions
   
   
   • Establishing two new exceptions—(1) an exception for payment by hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs) to physicians for the purpose of compensating non-physician practitioners under certain conditions; and (2) an exception to permit timeshare arrangements for the use of office space, equipment, personnel, items, supplies, and other services;
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; 
     
     
   • Conforming the regulations to the statute so that the baseline and future calculations of hospital’s physician ownership percentage includes all physicians rather than only those physicians who refer to the hospital.  The physician ownership calculation changes take effect on January 1, 2017;
3. Other clarifications—Other clarifications and guidance provided in the Final Rule include, among others, the following:
   
   
   • Clarifying that separate billing of a patient by a hospital and a physician do not necessarily create a financial relationship;
     
     
   • Clarifying that the regulatory exceptions requiring a writing can be satisfied through a collection of documents;
     
     
   • Clarifying that the term of a lease or personal services arrangement need not be in writing if the arrangement lasts at least one year and is otherwise compliant;
     
     
   • Allowing expired leases and personal services arrangements to continue indefinitely on the same terms if otherwise compliant;
     
     
   • Allowing a 90-day grace period to obtain missing signatures without regard to whether the failure to obtain the signature was inadvertent;
     
     
   • Clarifying the geographic service area for FQHCs and RHCs using the physician recruitment exception; and
     
     
   • Clarifying that compensation paid to a physician organization cannot take into account the referrals of any physician in the physician organization, not just a physician who stands in the shoes of the physician organization, and that employees and independent contractors need not sign arrangements between the physician organization and a DHS entity.

Quality Provisions

The Final Rule establishes the same criteria for satisfactory reporting that were established for the 2017 PQRS payment adjustment, which are generally to require the reporting of nine measures covering three National Quality Strategy Domains.  If an individual eligible professional or group practice does not satisfactorily report or satisfactorily participate in PQRS for 2016, the Final Rule imposes a two percent negative payment adjustment to covered professional services.  Starting in 2019, adjustments to payment for quality reporting and other factors will be made under MIPS, as required by the Medicare Access and CHIP Reauthorization Act of 2015.  The Final Rule also adds and removes certain PQRS measures.

The Final Rule also includes quality proposals applicable to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program.  The Final Rule (1) adds a statin therapy quality measure, (2) preserves the ability to maintain and revert measures in certain circumstances, (3) clarifies compliance with PQRS for professionals within an ACO, and (4) amends the definition of primary care services to include claims submitted by Electing Teaching Amendment hospitals and to exclude certain claims for services furnished in skilled nursing facilities.

The Final Rule is scheduled for publication in the Federal Register on November 26, 2015, and is available in pre-publication form here.  The accompanying CMS Fact Sheet is available here.

Reporter, Kristin Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com.

ALSO IN THE NEWS

CMS Publishes Medicaid Access Final Rule – CMS published a Final Rule in the Federal Register today, November 2, 2015, that implements a process for states to determine whether Medicaid payments satisfy what is known as the Medicaid “access requirement.”  Specifically, Social Security Act Section 1902(a)(30(A) requires that states have methods and procedures to ensure that payments are “sufficient to enlist enough providers so that care and services are available under the plan at least to the same extent that such care and services are available to the general population in the geographic area.”  Notably, the Final Rule does not require states to raise payment rates.  Rather, it requires states to consider access when setting and adjusting payment methodologies and to address, through any number of steps, any problems with access that are identified. 

CMS Releases CY 2016 Home Health Final Rule – On October 29, 2015, CMS released the calendar year 2016 Final Rule governing the Home Health Prospective Payment System; Home Health Value-Based Purchasing Model; and Home Health Quality Reporting Requirements.  Under the Final Rule, total payments to home health agencies are expected to decrease by 1.4 percent, up from the proposed rule’s estimated rate decrease of 1.8 percent.  This rule is set for publication in the Federal Register on November 5, 2015, and is available by clicking here.  The CMS Fact Sheet is available here.

CMS Releases CY 2016 ESRD Final Rule – On October 29, 2015, CMS released the calendar year 2016 End-Stage Renal Disease (ESRD) Prospective Payment System and Quality Incentive Program Final Rule.  Under the Final Rule, total payments to ESRD facilities are expected to increase by 0.2 percent, down from the proposed rule’s estimated rate increase of 0.3 percent.  This rule is set for publication in the Federal Register on November 6, 2015, and is available by clicking here.  The CMS Fact Sheet is available here.

CMS Announces $1.5 Billion Available for Value-Based Purchasing Program Incentive Payments in FY 2016 – CMS recently released the actual Value-Based Purchasing Program (VBPP) hospital adjustment factors for FY 2016.  In the data released, CMS estimates that approximately $1.5 billion will be available to hospitals in the form of VBPP payments in FY 2016.  The VBPP adjusts payments, both positively and negatively, to hospitals according to each hospital’s adjustment factor, which is based upon the quality of care provided by each hospital.  The VBPP is funded through DRG payment reductions, which is 1.75 percent for FY 2016, that are redistributed.  The CMS Fact Sheet is available here.

CMS Proposes Sweeping Changes to Medicare Reimbursement for Clinical Diagnostic Laboratory Tests – On October 1, 2015, CMS published a Proposed Rule outlining extensive revisions to Medicare reimbursement for clinical diagnostic laboratory tests (CDLTs) that are paid based on the Medicare Clinical Laboratory Fee Schedule (CLFS).  The Proposed Rule implements a portion of the Protecting Access to Medicare Act of 2014 (PAMA), which requires that CMS set CLFS payment rates based on the weighted median of private payor rates for CDLTs as reported by clinical laboratories to CMS.  In order to set CLFS payment rates effective on January 1, 2017 using this new methodology, CMS proposes that clinical laboratories collect private payor payment data for the period from July 1, 2015 through December 31, 2015, and report this data to CMS by March 31, 2016.  Thus, clinical laboratories must immediately take steps to interpret the provisions of the Proposed Rule, assess their CDLT revenues, and prepare to implement applicable data collection and reporting processes, without the benefit of final regulations to establish the parameters of these requirements.  King & Spalding’s Reimbursement and Government Pricing Teams have published a client alert analyzing the Proposed Rule available by clicking here.