News & Insights


November 3, 2014

Health Headlines – November 3, 2014


CMS Releases CY 2015 Outpatient PPS/Ambulatory Surgical Center Final Rule – On October 31, 2014, CMS issued its CY 2015 outpatient and ambulatory surgical center (ASC) PPS final rule. CMS finalized a net payment rate increase of 2.2 percent under the OPPS. This figure includes a 2.9 percent market basket update, less a productivity adjustment of 0.5 percent and a 0.2 percent adjustment required by the Affordable Care Act. The final payment increase is 0.1 percent higher than originally proposed. CMS will continue to pay for Part B drugs at the average sales price plus six percent for non-pass-through drugs and biologicals.

OPPS Outlier Payments

CMS will make OPPS outlier payments when the cost of an outpatient hospital service exceeds both the multiple threshold of 1.75 times the APC payment rate for the service and the CY 2015 fixed dollar threshold of the APC payment amount plus $2,775. CMS reduced the fixed-dollar threshold from the proposed amount of $3,100 and estimates that outlier payments will total one percent of all OPPS payments in CY 2015.

Comprehensive APCs

CMS adopted 25 of 28 comprehensive APCs (C-APCs) included in the proposed rule. CMS will group items and services into C-APCs in order to make one packaged payment for those items and services commonly furnished during high-cost primary services such as device implantations. However, CMS opted not to establish C-APCs for Level II Tube or Catheter Changes/Repositioning (APC 0427), Level II Vascular Access Procedures (APC 0622), and Insertion of Intraperitoneal and Pleural Catheters (APC 0652). CMS agreed with commenters that actual costs associated with these three procedures significantly exceed their proposed C-APC amounts. The agency will instead pay for these services at their current APC amount.

Packaging of Ancillary Services

CMS finalized its proposal to package payment for ancillary services assigned to APCs with a geometric mean cost of $100 or less. When furnished with other primary services, these ancillary services will not be separately payable. When these ancillary services are furnished by themselves, and not ancillary to other primary services, CMS will continue to make separate payment.  Exceptions to the ancillary services packaging policy include preventive services, psychiatry-related services, and drug administration services. 

Abandonment of Physician Certification Requirement

CMS finalized its proposal to no longer require physician certification of the medical necessity of inpatient services for all inpatient admissions under the Two-Midnight Rule. CMS will only require a physician certification for outlier cases and long-stay cases of 20 days or more. CMS will continue to require, however, a signed physician admission order when a patient has been formally admitted as an inpatient of the hospital.

Tracking of Outpatient Provider-Based Services

On January 1, 2015, CMS will begin collecting information on the types and frequency of services furnished in off-campus provider-based departments. To track this data, CMS will require providers to include the HCPCS modifier “PO” with every code for outpatient hospital services furnished in an off-campus provider-based department. Physician services will not require a modifier, but will instead be billed using a new place of service (POS) code. Currently, physicians bill for services furnished in a provider-based department using POS 22. CMS will delete POS 22 and instead release two new POS codes “as soon as practicable”—one for on-campus and satellite hospital locations, and another for off-campus provider-based outpatient departments. Data collection from hospitals will be voluntary in 2015 and required beginning on January 1, 2016.

ASC Payment Rate Update

CMS adopted an overall payment rate adjustment of 1.4 percent for ambulatory surgical centers (ASCs), up from the proposed increase of 1.2 percent. The increase is based on a revised Consumer Price Index-Urban Consumers update of 1.9 percent for 2015, net of a 0.5 percent productivity adjustment required by the Affordable Care Act.

Overpayment Recovery and Appeals Processes for Medicare Parts C and D

CMS adopted its proposal to establish a formal process that will allow CMS to recoup overpayments that result from the submission of erroneous payment data by a Medicare Advantage (MA) organization or Part D sponsor when the organization or sponsor fails to correct those data voluntarily before payment reconciliation. In addition to the recoupment process, CMS adopted its proposed three-level appeals process for MA organizations and Part D sponsors to seek review of CMS’s determination that the payment data submitted by the organization or sponsor was erroneous.

The final rule is available here, and will be published in the Federal Register on November 10, 2014.

Reporter, Christopher Kenny, Washington, DC, + 1 202 626 9253,

CMS Releases CY 2015 Physician Fee Schedule Final Rule – On October 31, 2014, CMS released the CY 2015 Physician Fee Schedule (PFS) final rule. CMS calculated the conversion factor using the Sustainable Growth Rate (SGR). Due to the Protecting Access to Medicare Act of 2014, there will be a 0.0 percent update (that is, no cuts) through March 2015. However, barring Congressional action, there will be a 21.2 percent cut effective April 1, 2015 mandated by the SGR formula. CMS implores Congress for a permanent SGR fix stating, “While Congress has provided temporary relief from these reductions every year since 2003, a long-term solution is critical. We will continue to work with Congress to fix this untenable situation . . . .”

In addition to updating the RVUs, the rule also updated a number of other items related to physician payment and quality reporting.  

Medicare Telehealth Services 

For CY 2015, CMS updated the list of telehealth services eligible for coverage under Medicare. Telehealth encounters for annual wellness visits, psychoanalysis, psychotherapy, and prolonged evaluation and management services will now be covered under Medicare.

Valuing New, Revised, and Potentially Misvalued CPT Codes

Beginning in CY 2016, with full implementation in CY 2017, CMS will annually identify CPT codes that are potentially misvalued. In the subsequent year, new, revised, and misvalued codes will be reviewed and revalued, if appropriate, via notice and comment rulemaking. CMS will also consider recommendations by the Relative Value Update Committee (RUC) and other relevant stakeholders in making its final determination. In the CY 2015 final rule, CMS identified several potentially misvalued services to be reviewed, including hip and knee replacements, radiation therapy, and epidural pain injections

Chronic Care Management

The final rule established CY 2015 payment for chronic care management (CCM)—$40.39 per patient/per 30 days, reduced from the $41.92 proposed amount. This payment accounts for non-face-to-face coordination services such as revision of a patient’s care plan, communication with other treating practitioners, and medication management.

To be eligible for payment, CCM services must be furnished using EHR certification criteria required by the prior year’s PFS payment year. For CY 2015, practitioners may use technology certified to either the 2011 or 2014 criteria. Furthermore, the electronic care plan must be accessible at all times to practitioners within the practice, and available to be shared electronically with care team members outside the practice.

Outpatient Therapy Caps

The therapy cap—a limitation on the expenses incurred for outpatient therapy services under Part B—are updated yearly based on the Medicare Economic Index (MEI). For CY 2015, the therapy cap amount is $1,940.

Definition of Colorectal Cancer Screening

The CY 2015 rule revises the definition of screening colonoscopy, such that anesthesia provided by a separate anesthesia practitioner does not trigger coinsurance and deductible payment obligations on the part of beneficiaries.

Ambulance Extender

The final rule increases the ambulance fee schedule amount for ground ambulance transportation originating in rural areas by 3 percent. So-called “super rural” areas (the lowest 25th percentile of all rural populations by population density) will receive a 22.6 percent bonus. All other covered ground ambulance transportation fees will be increased by 2 percent.

Services “Incident To” Rural Health Clinics and Federally Qualified Health Center

To provide greater flexibility to staff Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs), the final rule removes the requirement that incident to services furnished during an RHC or FQHC visit be furnished by an employee of the provider.

Manufacturer Payments to Physicians and Hospitals

Manufacturers of covered drugs, devices, biological, and medical supplies must annually submit information about payments or other transfers of value made to physicians and teaching hospitals under the “Open Payments” program. The CY 2015 final rule requires new disclosures: reporting of the marketed name and therapeutic area of the item, unless the payment or transfer of value was not related to a specific item, as well as reporting of stocks, stock options, and other ownership interests as payment. The final rule removes the Continuing Education Exclusion—that is, payments for speakers at certain educational events are no longer exempt from the Open Payments reporting requirements.

Physician Quality Reporting System (PQRS)

Starting in 2015, the PQRS will dictate payment adjustments based on whether practitioners and group practices satisfactorily report data on quality measures. Measures reported in 2015 will affect payments in 2017, and each reporting period will run for 12 months. The final rule outlines individual and group practice measures, and the various available reporting mechanisms.

Physician Compare Website

Public reporting on physician performance on the Physician Compare website continues under the final rule. The website will now include data from the 2015 PQRS measures for individuals and group practices, as well as Shared Savings Program ACO measures. The website will also include a notation for physicians successfully participating in the Medicare EHR Incentive Program.

EHR Incentives

While CMS still requires that eligible professionals who report quality measures for the Medicare EHR Incentive Program use the most recent version of the electronically specified clinical quality measures (eCQMs), they are not required to ensure that their Certified EHR Technology (CEHRT) are recertified to the most recent version of the electronic specifications for the CQMs.

Medicare Shared Savings Program

Under the Shared Savings Program, eligible groups of providers and suppliers can form Accountable Care Organizations (ACOs), subject to quality performance standards. The CY 2015 final rule includes a number of additions, deletions, and other revisions to required quality measures. New quality measures include depression remissions, diabetes measures for eye exams, and documentation of current medication in the medical record.

The full text of the rule is available by clicking here. This rule will be published in the Federal Register on November 13, 2014.

Reporter, Elizabeth N. Swayne, Washington D.C., + 1 202 383 8932,

OIG Releases Its Workplan for 2015 – HHS’s Office of Inspector General (OIG) released on Friday its Work Plan for fiscal year (FY) 2015. The 94-page work plan summarizes the new and ongoing reviews and activities that OIG plans to pursue across the full spectrum of HHS programs and operations including all aspects of Medicare and Medicaid. This article summarizes the OIG’s planned activities relating to hospital services and will list some of notable new initiatives the OIG has announced in other areas.

The OIG announced two new initiatives affecting hospital services for 2015. First, the OIG will review “hospital controls over the reporting of wage data used to calculate wage indexes for Medicare payments.” The OIG explained that this review was a reaction to the fact that “[p]rior OIG wage index work identified hundreds of millions of dollars in incorrectly reported wage data.” Second, the OIG announced a new initiative focusing on “[h]ospitals’ electronic health record system contingency plans,” whereby the OIG “will determine the extent to which hospitals comply with contingency planning requirements of the Health Insurance Portability and Accountability Act (HIPAA).”

In addition to these two new initiatives pertaining to hospital services, the OIG announced the following ongoing projects:

  • Determining the impact of the “new inpatient admission criteria,” known as the 2-midnight rule, “on hospital billing, Medicare payments, and beneficiary copayments.” This review is particularly significant in light of the ongoing litigation in D.C. district court expressly challenging the Secretary’s assumptions regarding the financial impact of her new policy on hospitals.
  • Reviewing “Medicare outlier payments to hospitals to determine whether CMS performed necessary reconciliations in a timely manner to enable Medicare contractors to perform final settlement of the hospitals’ associated cost reports.”
  • Reviewing Medicare claims to identify the costs resulting from additional use of medical services associated with defective medical devices.
  • Reviewing data from Medicare cost reports and hospitals to identify salary amounts included in operating costs reimbursed by Medicare and determining the effect of limiting the amount of employee compensation that could be submitted on future cost reports.
  • Reviewing “Medicare outpatient payments made to hospitals for evaluation and management (E/M) services for clinic visits billed at the new-patient rate to determine whether they were appropriate and will recommend recovery of overpayments.”
  • Reviewing provider-based entities for compliance with Medicare’s provider-based requirements and scrutinizing differences in payments made to provider-based facilities and freestanding facilities.
  • Comparing reimbursement for swing-bed services at critical access hospitals (CAHs) to the same level of care obtained at traditional SNFs to determine whether Medicare could achieve cost savings through a more cost effective payment methodology.
  • Reviewing the national incidence of adverse and temporary harm events for Medicare beneficiaries receiving care in long-term-care hospitals (LTCHs), which is a new initiative.
  • Reviewing the national incidence of adverse and temporary harm events for Medicare beneficiaries receiving post-acute care in inpatient rehabilitation facilities (IRF).

Beyond these OIG reviews affecting hospitals, several notable new initiatives affecting other healthcare providers or suppliers include the following:

  • Reviewing Medicare payments to independent clinical laboratories to determine laboratories’ compliance with selected billing requirements with the goal of identifying clinical laboratories that routinely submit improper claims and recommend recovery of overpayments.
  • Conducting a risk assessment of internal controls over administration of the Pioneer Accountable Care Organization (ACO) Model.
  • Determining what steps CMS has taken to improve its oversight of Part D sponsors’ Pharmacy and Therapeutics (P&T) committee conflict-of-interest procedures.
  • Reviewing the rate and reasons for Medicaid beneficiary transfers from group homes and nursing facilities to hospital emergency rooms since occurrences of emergency transfers could indicate poor quality.

These are only selected highlights of the OIG’s 2015 work plan and interested parties should review the entire plan, which is available here.

Reporter, Daniel J. Hettich, Washington D.C., +1 202 626 9128,

CMS Announces CY 2015 Home Health Prospective Payment System Rates – On October 30, 2014, CMS issued a final rule for Medicare Home Health Prospective Payment System (HH PPS) rates for CY 2015. The final rule estimates that Medicare payments to home health agencies (HHAs) in CY 2015 will be reduced by 0.30 percent, or $60 million. This decrease reflects the effects of the 2.1 percent home health payment update percentage ($390 million increase) and the second year of the four-year phase-in of the rebasing adjustments to the HH PPS payments rates required by the Affordable Care Act ($450 million decrease). The CY 2015 rebasing adjustments will reduce the national, standardized 60-day episode payment rate by $80.95, decrease the non-routine medical supplies (NRS) conversion factor by 2.82 percent, and increase the national per-visit payment rates. The national, standardized 60-day episode payment rate for CY 2015 will be $2,961.38.

In addition to updating the HH PPS rates, the final rule includes several significant changes that affect HH PPS.

Face-to-face Encounter Requirements

The final rule eliminates the narrative requirement in 42 C.F.R. § 424.22(a)(1)(v), except when the physician is ordering skilled nursing visits for management and evaluation of the patient's care plan. Notwithstanding the elimination of the narrative requirement, the certifying physician is still required to demonstrate that a face-to-face patient encounter occurred. For medical review purposes, only the documentation in the certifying physician's medical records and/or the acute/post-acute care facility's medical records (if the patient was directly admitted to home health) may be used as the basis for certification of patient eligibility.

Physician claims for certification/re-certification of patient eligibility will not be covered if the corresponding HHA claim was denied. This proposal will be implemented through future sub-regulatory guidance.

CMS also clarified that the face-to-face encounter requirements are applicable for certifications (not re-certifications), rather than initial episodes; a certification (versus a re-certification) generally occurs any time that a new state of care assessment is completed to initiate care.

Therapy Reassessment Timeframes

CMS eliminated the requirement for therapy reassessments to be performed on or close to the 13th and 19th therapy visits and at least once every 30 days. For episodes ending on or after January 1, 2015, a qualified therapist, not assistant must provide the needed therapy service and functionally reassess the patient at least every 30 calendar days.

Home Health Quality Reporting Program

The final rule establishes a minimum submission threshold for the number of Outcome and Assessment Information Set (OASIS) assessments that HHAs must submit to meet their quality data reporting requirement. For episodes beginning on or after July 1, 2015 and before June 30, 2016, HHAs must submit admission and discharge OASIS assessments for a at least 70 percent of all patients with episodes of care occurring during that period or be subject to a two percent annual payment reduction. CMS plans to increase the compliance threshold over the next two years to reach a maximum threshold not exceeding 90 percent.

Speech-language Pathologist Personnel Qualifications

Under the final rule, a qualified speech-language pathologist is an individual who meets one of the following requirements: (1) has a masters' or doctoral degree in speech-language pathology and is licensed as a speech-language pathologist by the state where they furnish services; or (2) meets the specific requirements set forth in the Social Security Act.

Home Health Value-Based Purchasing (VBP) Model

CMS is still considering whether to test a HHA VBP model in CY 2016. As envisioned, the model would include a five to eight percent adjustment in payment made after each planned performance period in the projected five to eight states selected to participate in the model. If CMS moves forward with the implementation, it intends to invite additional comments on a more detailed model proposal to be included in future rulemaking.

The final rule is scheduled to be published in the Federal Register on November 6, 2014. The final rule is available here.

Reporter, Linda Lin, Atlanta, +1 404 572 3566,

CMS Issues 2015 ESRD and DMEPOS Final Rule – On October 31, 2014, CMS issued a final CY 2015 End-Stage Renal Disease (ESRD) PPS and Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) final rule. CMS finalized its proposal to increase overall ESRD payments by 0.3 percent, including a 0.5 percent payment increase for hospital-based ESRD facilities. The agency also adopted a two-year transition period in which it will increase the labor-related share of the ESRD PPS payment rate, softening the blow to rural ESRD facilities in low-wage areas that will experience a decrease in their ESRD payment rates. A detailed description of CMS’s calculation of the labor-related share is available in a discussion of the CY 2015 ESRD proposed rule, available here.

In addition, CMS will raise the ESRD outlier fixed-dollar loss amount for pediatric patients from $54.01 to $54.35 (down from the proposed increase of $56.30), and increase the Medicare Allowable Payment (MAP) amount from $40.49 to $43.57. For adult patients, CMS proposes to lower the fixed-dollar loss amount from $98.67 to $86.19 (up from the proposed $85.24), and increase the MAP amount from $50.25 to $51.29.

The final rule adopted a number of revisions to the PY 2017 and PY 2018 ESRD Quality Incentive Program. For PY 2017, CMS finalized the addition of eight clinical measures and three reporting measures. With respect to the clinical measures, one is new (the proposed Standardized Readmission Ratio measure), while CMS opted not to revise the National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Outpatients measure. CMS did remove as topped out the “Hemoglobin Greater than 12” measure. As for the reporting measures, CMS states that facilities will no longer be able to attest that they only had a single qualifying case to avoid being scored on the measure.

For PY 2018, CMS adopted eleven clinical measures and five reporting measures. CMS will group the clinical measures for PY 2018 into three subdomains: (i) Safety, (ii) Patient and Family Engagement/Care Coordination, and (iii) Clinical Care. Each subdomain will comprise 20 percent, 30 percent, and 50 percent, respectively, of the total Clinical Measure Domain score. Among the proposed revisions to the reporting measures in PY 2018 are three new measures: (i) Pain Assessment and Follow-Up, (ii) Clinical Depression Screening and Follow-Up, and (iii) NHSN Healthcare Personnel Influenza Vaccination.

The final rule also includes a number of proposed changes to the DMEPOS payment methodology for CY 2015. Notably, CMS will implement a new methodology for using data gathered from the DMEPOS Competitive Bidding Program (CBP) to adjust the fee schedule prices for DME in regions of the country with no CBPs. For certain areas under the CBP, CMS will phase in a system of monthly bundled payments (in replace of capped rental policies) to cover equipment costs, supplies, accessories, maintenance, and repair of certain equipment and devices furnished under the CBP.

CMS also adopted an exception to the change of ownership rules that would permit a competitive bidding contract supplier to sell a distinct company that furnishes a specific product category or competitive bidding area.

The CY 2015 final rule is available here.

Reporter, Christopher Kenny, Washington, DC, + 1 202 626 9253,

Internal Revenue Service Releases Interim Guidance Regarding Accountable Care Organizations' Use Of Tax-Exempt Bond-Financed Facilities – On October 24, 2014, the Internal Revenue Service (IRS) released Notice 2014-67, which provides guidance for determining whether a state or local governmental entity or an organization described by Section 501(c)(3) of the Internal Revenue Code that benefits from tax-exempt bond financing will be considered to have private business use of its bond-financed facilities as a result of its participation in the Medicare Shared Savings Program (MSSP) through an Accountable Care Organization (ACO).

Use of tax-exempt bond-financed property by an ACO that participates in an MSSP will not result in impermissible private business use of the property as long as:

  • The terms of MSSP participation by the exempt organization are set in advance in a written agreement negotiated at arm's length;
  • CMS accepted the ACO into the MSSP;
  • The tax-exempt organization's share of economic benefits derived from the ACO are proportional to its benefits or contributions. If the organization receives an ownership interest in the ACO, that interest must be proportional and equal in value to its capital contributions to the ACO, and all ACO returns of capital, allocations, and distributions must be made in proportion to its ownership interests;
  • The tax-exempt organization's share of the ACO's losses, including its share of MSSP losses, do not exceed the share of ACO economic benefits to which the organization is entitled;
  • All contracts and transactions entered into by the tax-exempt organization with the ACO and the ACO's participants, and by the ACO with the ACO's participants and any other parties, are at fair market value; and
  • Bond-financed property is not contributed or transferred to the ACO unless the ACO is an entity that is a governmental person, or in the case of qualified 501(c)(3) bonds, either is a governmental person or a Section 501(c)(3) organization.

In addition, the guidance expands the permitted productivity rewards and types of permissible arrangements described by Revenue Procedure 97-13 that do not result in private business use.

Notice 2014-67 is available at: The IRS has requested comments on the guidance by January 22, 2015.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592,


CMS Releases New Cost Reporting Instructions – CMS announced a revision to the effective date of cost reporting requirements for certain providers. Under Transmittal 8, the new requirements affect cost reporting periods ending on or after September 30, 2014, rather than June 30, 2014 as originally published under Transmittal 7. Both transmittals identify providers that must continue to complete Form CMS-339—home health agencies, community mental health centers, rural health clinics, federally qualified health centers, hospices, and organ procurement organizations. Transmittal 8 is available 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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