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August 2015

Centers for Medicare and Medicaid Services (CMS) Publishes Medicare 2016 Physician Fee Schedule:

The Medicare 2016 proposed physician fee schedule was published on Wednesday, July 8, 2015. Comments from the public are being accepted through September 8, 2015. Some points of interest include:

  • The conversion factor for 2016 will increase by 0.5% to $36.1096 as called for in the Medicare Access and CHIP Reauthorization Act (“MACRA”) legislation passed earlier this year. The conversion factor is the dollar amount that is multiplied by a service’s relative value units to get the dollar reimbursement amount.
  • There are several new quality measures proposed under the Physician Quality Reporting System (“PQRS”).

If adopted, this will bring the total number of measures to 300 for 2016. New quality measures for surgery include:

  • Perioperative anti-platelet therapy;
  • Perioperative temperature management; and
  • Prevention of post-operative nausea and vomiting

CMS is expanding the scope of information reported on the Physician Compare website to include measures submitted to qualified clinical data registries and the physician’s ranking under the value based modifier program, among other things. Medicare Bundling of Hospital Outpatient Payments to Increase: In the proposed 2016 hospital outpatient rule released on July 2, CMS continues its efforts to package outpatient services into increasingly larger bundles. Nine new comprehensive ambulatory payment classifications (“C-APCs”) are proposed for 2016, including some surgical APCs and a new C-APC for comprehensive observation services. This is consistent with CMS’ goal of making the outpatient reimbursement system similar to the inpatient DRG system. In that same rule, CMS proposed that ambulatory surgery centers receive an update of 1.1 percent for 2016. Changes Proposed for Two-Midnight Policy: CMS has proposed significant changes to the controversial Medicare “two-midnight” rule as part of its 2016 hospital outpatient prospective payment rule for 2016. Specifically, CMS proposes to allow an inpatient admission of less than two midnights on a case-by-case basis based on the judgment of the admitting physician. It also plans to turn over enforcement of the policy to Quality Improvement Organizations with the Recovery Audit Contractors (“RACs”) focusing only on hospitals with high denial rates. CMS proposes initiative to bundle Medicare payments for hip and knee replacements: CMS is planning to require more than 800 hospitals in 75 geographic areas to participate in an initiative of bundled payments for hip and knee replacements in an effort to incentivize quality and improve outcomes. The program would begin January 1, 2016 and run for five years. Payment would be based on an episode of care that begins with the admission to the hospital and runs through 90 days after discharge. The hospitals would bear financial risk for the procedure, the inpatient stay and all care related to the patient’s recovery. Depending on the hospital’s quality and cost performance during the episode, the hospital may receive an additional payment or be required to repay Medicare for a portion of the episode costs. Critical-access hospitals would be excluded from the initiative. In a press release announcing the initiative, CMS noted that despite the fact that hip and knee replacement are very common, the quality and cost of care varies greatly. Specifically, the average Medicare payment for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 across geographic areas. CMS stated that “[i]ncentives to coordinate the whole episode of care—from surgery to recovery—are not strong enough, and a patient’s health may suffer as a result.” House of Representatives Passes 21st Century Cures Bill: On July 10, 2015, the 21st Century Cures Act passed the House of Representatives by a vote of 344 to 77. The bill would give the National Institutes of Health an increase of $8.75 billion over five years, while the Food and Drug Administration would receive an additional $550 million over that period. While focused primarily on the NIH and the FDA, the legislation also includes “interoperability” language of direct interest to physicians. The language creates a framework of standards to encourage interoperability of HIT systems. It also includes decertification and pricing transparency provisions intended to give physicians assurances that EHR systems will properly exchange data, without hidden fees. In the case of a decertification of a vendor, a physician would receive a one-year automatic hardship exemption from Meaningful Use penalties. The Senate Health, Education, Labor, and Pensions (“HELP”) Committee has been engaged for the last several months in creating a Senate version of the 21st Century Cures legislation. Hurdles remaining include jurisdictional issues with Senate Finance, timing for introduction of a Senate bill, how the bill would be paid for, and whether the Senate bill will include all or just some of the provisions in the House bill. The Senate is expected to release a discussion document in the fall. MedPAC releases annual report to Congress: The Medicare Payment Advisory Commission (“MedPAC”) released its “Report to the Congress: Medicare and the Health Care Delivery System” on June 15, 2015 The report makes recommendations for hospital short-stay policy issues, payment policies for Part B drugs, value-based incentives for Part B drugs, polypharmacy and opioid use among Part D enrollees, risk-sharing in Part D, synchronizing policy across Medicare’s payment models, and the developing of new measures for quality of care within Medicare. Of particular interest are the recommendations for hospital short- stay policy issues, which were based partly in response to criticism over the Medicare Recovery Audit Contractor (“RAC”) Program audits and appeals process and the financial impact on beneficiaries associated with the growing use of outpatient observation day status. These recommendations include:

  • Withdrawal of the Two Midnight Rule;
  • Refocusing of RAC review on those hospitals with excess rates of short stays; and
  • Modification of the RAC contingency fees.

As noted above, CMS has already proposed changes to the Two Midnight policy as part of its 2016 outpatient hospital proposed rule. Cost Of New Medicaid Enrollees Higher Than Estimated: On July 10, 2015, CMS released its 2014 Actuarial Report on the Financial Outlook for Medicaid. The report found that health insurance costs for new Medicaid enrollees are higher than initially estimated. Earlier estimates assumed that the cost of new Medicaid enrollees would be 1% less than those already enrolled. However, adults who were newly eligible for Medicaid benefits cost the federal government $5,517 on average in 2014, while individuals already enrolled in Medicaid cost $4,650. In general, total Medicaid spending grew 9.4% between 2013 and 2014. These statistics may encourage future debate over whether Medicaid expansion is too costly.

CMS, AMA Announce Steps to Ease ICD-10 Transition/ Lawmakers Propose Transition Period for ICD-10

With the transition from ICD-9 to ICD-10 quickly approaching on October 1, 2015, CMS and the American Medical Association (“AMA”) announced several new policies to help ease the transition to ICD-10 coding. For one year, CMS will not deny Medicare Part B claims based solely on the specificity of the ICD-10 diagnosis code, provided the physician submits a valid code from the right family of codes. CMS will also provide a variety of training and educational resources, such as an ICD-10 Ombudsman to answer physician questions about ICD-10. In the meantime, Congress continues to consider a possible delay. Representatives Marsha Blackburn (R-Tenn.) and Tom Price (R-GA) introduced the Coding Flexibility in Healthcare Act of 2015 (HR 3018) on July 10, 2015, that would allow both ICD-9 and ICD-10 coding during a six-month transition period from October 1, 2015 to April 1, 2016. The bill would also require a report to Congress on the ICD-10 transition 90 days after the ICD-10 implementation date. LeapFrog Group Reports Results of 1500-Hospital Survey – Hospital-Acquired Conditions Remain a Problem: On July 9, 2015, the Leapfrog Group released its 2014 Hospital Survey of quality and safety measures. Of the 1,500 hospitals that responded, one in six had higher than expected rates for central-line infections. In addition, 48 percent of reporting hospitals had a higher than expected rate of catheter-associated urinary tract infections. Compliance with safety practices endorsed by the National Quality Forum is high among hospitals, but rural hospitals lag behind. About 20 percent more urban hospitals met Leapfrog’s standards for safety than rural hospitals. The survey found that while hospitals still face problems with hospital-acquired conditions, they are improving in other quality areas, such as hand washing compliance and intensive care unit staffing practices.