Health Care Payment Reform

In an effort to transform Medicare from a passive payer to an active purchaser of high-quality, efficient care, the government has instituted three mandates: a readmission reduction program which penalizes hospitals for higher-than-expected readmission rates with a cut in the hospital’s base DRG payment (1% cut in 2013, 2% in 2014, and 3% in 2015); a hospital acquired condition (“HAC”) program beginning in 2015 which will impose a 1% penalty on all discharges at hospitals that are in the top 25%, with regard to HACs; and a value-based purchasing (“VBP”) program which will take away 1% of the MS-DRG rate for all hospitals starting Oct. 1, 2013 (and 2% by FYE 2017), however hospitals can get that money back by performing well on clinical process measures, patients’ experience-of-care measures, and outcome measures.   When all three programs are fully implemented, up to 6% of a hospitals bottom line will be affected by quality of care.

These new quality of care programs are also creating compliance challenges.  Sloppy documentation could subject hospitals to false claims under value based purchasing, which may be intensified by shortcuts in electronic health record (“EHR”) systems, such as copy/paste.  If hospital EHRs prepopulate the administration of drugs, they should document that the drug was in fact administered in the time frame that was in the EHR documentation.  Hospitals must also be aware of physician compensation risks.  If hospitals pay physicians for quality-related activities, they could run afoul of the fraud and abuse laws, as these activities should be performed as an integral part of their professional duties.  However, hospitals may incentivize physicians to adhere to quality improvement programs, as long as the incentive falls within a Stark exception.

Rather than simply responding to these government mandates, hospitals should look overall at how they can reform their health care delivery systems to benefit patients, and how they can deliver optimal care to patients using consistent, reliable methods.  The following identifies examples of how hospitals can begin to implement consistent quality of care:

• Ensure all caregivers are comfortable identifying their concerns regarding inappropriate patient care with their colleagues;
• Use meetings to educate physicians regarding meaningful clinical process issues and to share data with them to garner their support and promote behavior change;
• Rather than comparing hospital statistics to publicly available information, which may be too old to be meaningful, use current results at every level and tie to Joint Commission core measures; and
• To reduce readmissions, ensure clinicians follow-up with patients after discharge from the hospital, whether by phone or an in-person visit. 

If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.

On April 7, 2011, CMS issued a joint notice with the OIG (Notice) relative to the waiver of certain fraud and abuse laws as necessary to carry out the Medicare Shared Savings Program set forth in the PPACA reform legislation passed in March of 2010. The Notice describes and solicits public input regarding possible waivers of the application of the federal Anti-Kickback Statute, the Stark Law, and certain civil monetary penalties (CMP) law provisions to specified financial arrangements involving accountable care organizations (ACOs). The Notice states that CMS and the OIG are seeking to address application of these fraud and abuse laws to ACOs so that the laws do not unduly impede the development of beneficial ACOs, while ensuring that ACOs are not misused for fraudulent or abusive purposes that harm patients or Federal health care programs.

Stark Law

As proposed in the Notice, the application of the Stark Law would be waived for distributions of shared savings received by an ACO from CMS: (i) to or among eligible ACO participants; or (ii) for activities necessary for and directly related to the ACO’s participation in and operations under the Shared Savings Program. All other financial relationships involving physicians or entities participating in the Medicare Shared Savings Program that implicate the Stark Law would still need to satisfy a Stark Law exception.

Federal Anti-Kickback Statute

As proposed, the application of the federal Anti-Kickback Statute would be waive with respect to two scenarios: (i) distributions of shared savings received by an ACO from CMS under the Medicare Shared Savings Programs to or among eligible ACO participants; and (ii) any financial relationship between or among the ACO, ACO participants, and ACO providers/suppliers necessary for and directly related to the ACO’s participation in the Medicare Shared Savings Program that implicates the Physician Self-Referral Law and fully complies with a Stark Law exception. Failure to qualify for one of the proposed waivers under the federal Anti-Kickback Statute does not mean that an arrangement is automatically illegal; however, to the extent that the federal Anti-Kickback Statute is implicated by a financial arrangement that is not subject to a waiver, the financial arrangement would need to comply with the law.

Prohibition on Hospital Payments to Physicians to Induce Reduction or Limitation of Services

As proposed in the Notice, application of certain CMPs would be waived in the following scenarios: (i) distributions of shared savings received by an ACO from CMS in circumstances where the distributions are made from a hospital to a physician, provided that the payments are not made knowingly to induce the physician to reduce or limit medically necessary items or services, and the hospital and physician are ACO participants; and (ii) any financial relationship between or among the ACO, its participants, and its providers/suppliers necessary for and directly related to the ACO’s participation and operations under the Medicare Shared Savings Program that implicates the Stark Law and complies with a Stark Law exception.

In order to qualify for any of these proposed waivers, ACOs would be required to enter into an agreement with CMS to participate in the Medicare Shared Savings Program, and be compliant with associated transparency, reporting, and monitoring requirements. Public comments on the Notice are due to CMS no later than June 6, 2011.

For additional information, please contact Leeanne R. Coons.

In a notice published in the April 5, 2011 issue of the Federal Register, the Department of Health and Human Services ("HHS") announced that the Early Retiree Reinsurance Program ("ERRP") will soon stop accepting new applications for participation in the program.  According to the HHS notice, applications for ERRP certification from group health plan sponsors will no longer be accepted after 5:00 p.m. ET on May 5, 2011.

The ERRP was created as part of the Patient Protection and Affordable Care Act ("PPACA"), in order to encourage employers to continue providing or implement new group health plan coverage for retired employees between the ages of 55 and 64.  According to an agency report released on March 31, 2011, the program has been widely utilized by both private and public sector employers since its inception, and has funded nearly $1.8 billion in payments to certified employers since it began disbursing claim reimbursements in October of 2010.  However, in order to participate in this funding reimbursement opportunity, sponsors of group health plans providing early retiree coverage must apply to HHS and receive certification.  The program has limited funding, and in accordance with PPACA requirements, will be offered only as long as funding is available.  It is due to the anticipated exhaustion of PPACA funding that HHS is formally ending the certification process for new applicants. 

If you need more information about this topic, or would like assistance with the submission of an application before the close of the application period, please contact Katy Stowers at 317-238-6257, or at cstowers@kdlegal.com.

On March 31, 2011, CMS released the long-awaited rules proposed to implement the provisions in PPACA, the Health Care Reform legislation enacted on March 23, 2010, referred to as the Affordable Care Act, on Accountable Care Organizations ("ACOs") and the Medicare Shared Savings Program that is designed to contract with these organizations. Likewise, the same day, the antitrust agencies, the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice ("DOJ"), issued proposed enforcement guidelines relating to the size, scope and ability of an ACO to contract in the commercial market and how that affects Medicare Shared Savings Program contracts as well. Additionally, the Centers for Medicare and Medicaid ("CMS") and the HHS Office of Inspector General ("OIG") proposed various waivers for standard Stark, Antikickback and Civil Money Penalty rules relating to ACO activities. Finally, the Internal Revenue Service ("IRS") issued a notice requesting comments on its existing private inurement and private benefit rules relating to tax-exempt entities and their financial relationships with "insiders".

Last week CMS published new federal regulations for nursing homes that will significantly change the way the government imposes and collects civil monetary penalties (“CMPs”). The regulations implement changes first mandated by Section 6111 of the health care reform law and become effective on January 1, 2012.  Some of the key provisions of the regulations include:       

• Mandatory Upfront Payment of CMPs.  Currently facilities may appeal a CMP imposition of remedies notice and need not pay the CMP until after all administrative appeals have been exhausted. Under the new regulations, facilities must pay the CMPs before the appeal is finally resolved and within certain specific deadlines.
  
  CMS will hold all CMPs in an escrow account pending the facility's appeal. If the facility wins the appeal, CMS will return the CMP to the provider with interest once the decision is final. Additionally, CMS may extend the time period for payments of the CMP into escrow if it finds immediate payment would create a “substantial and undue financial hardship on the facility.” If the facility does not timely pay the disputed CMP into escrow after receiving a demand, CMS may setoff the CMP amount from sums later due the facility.

• CMPs Reduced 50% For Self-Reporting and Correction of Deficiencies.  The new regulations also encourage facilities to self-report deficiencies by giving a 50% CMP reduction incentive if certain conditions are met. This reduction does not apply to Intermediate Jeopardy tags or non-compliance showing a pattern of harm, widespread harm to residents, or non-compliance resulting in a resident’s death. Additionally, the 50% reduction is not available for any deficiency existing in a previous survey.
  
  To qualify for the 50% reduction, the facility must:
  
  • Self-report the non-compliance to the State or CMS before it is identified by surveyors or before the government receives a complaint.
  • Correct the deficiency within a certain number of days of identifying the non-compliance or when the CMP is imposed.
  • Waive its right to a hearing regarding the deficiency and penalty. 
    
• Opportunity for Independent IDR Process.  If CMPs are assessed and are eligible for payment to the escrow fund, the facility has the opportunity to request a new “independent” IDR process. This IDR is a new alternative to the current State IDR process. CMS calls this IDR “independent” because it would be run by a separate State agency that must be approved by CMS. 

Yesterday the Centers for Medicare and Medicaid Services published a Final Rule titled "Medicare, Medicaid, and Children’s Health Insurance Programs (CHIP); Additional Screening Requirements, Application Fees, Temporary Enrollment Moratoria, Payment Suspensions and Compliance Plans for Providers and Suppliers." The Final Rule impacts Medicare, Medicaid, and CHIP providers by establishing various changes to Medicaid, Medicare and CHIP, such as the following:

For more information on the Final Rule and to learn more about the impact of health care reform, please visit Health Reform Connect, or contact one of our health care reform lawyers, Leigh Ann O'Neill at 317-238-6346.

Last week Illinois Governor Pat Quinn signed into law major reforms to the State’s Medicaid program. Public Act 96-1501 authorizes the Illinois Department of Healthcare and Family Services (HFS) to expand HMO-style “coordinated care” to cover at least 50% of all recipients by the year 2015. The law also changes the Illinois Medicaid eligibility process by requiring certain income verifications and annual re-determinations.

On the provider side, the law empowers HFS to impose significant Medicaid fraud penalties. HFS may now impose civil monetary penalties up to $2,000 for each fraudulent claim submitted to the Illinois Medicaid program. Providers will be able to appeal the assessment of these civil monetary penalties through an administrative process before HFS and through the Circuit Court. Pharmacy providers, meanwhile, may now promote 90-day maintenance prescriptions to Medicaid beneficiaries. The law also reduces the interest rate the State must pay to pharmacies from 2% to 1% for late reimbursement payments.

For additional information about this new law, Illinois State health care, or other issues involving Medicare or Medicaid fraud, please contact Randall Fearnow or Mark Bina in the Firm’s Chicago office at 312-423-9300.

On November 17, 2010 the Centers for Medicare and Medicaid Services (“CMS”) published a final rule updating the Home Health Prospective Payment System (HH PPS) rates for 2011. The final rule also imposes new ownership, capitalization, and certification requirements for Home Health agencies.

CMS is reducing Home Health PPS rates by 4.89% for 2011. This reduction stems from the health care reform legislation, wage index and market basket updates, and case-mix coding changes. Under the final rule, the current home health outlier cap becomes permanent and PPS rates are reduced an extra 2.5%. CMS provides agencies an incentive to submit certain quality data; those agencies that do not report quality data receive an additional percentage point reduction. CMS notes that it continues to study the need for future reductions and thus the likelihood of continued cuts for 2012 is uncertain. In total, CMS believes the rule will decrease Medicare reimbursements to home health agencies by approximately $960 million for fiscal year 2011.

The rule also finalizes two controversial policies announced earlier this year regarding capitalization and ownership changes. First, the rule requires a newly enrolling home health agency to furnish proof it has “sufficient” initial reserve operating funds to survive a 90 day period. CMS may revoke billing privileges for enrolled home health agencies if they do not provide supporting documentation within 30 days of a request by CMS or a contractor that the agency had sufficient funds.

The second controversial policy in the final rule involves changes of ownership. Under the new rule rule, a home health agency that changes ownership within the first 36 months of initial enrollment may not transfer its provider agreement and Medicare billing privileges to a new owner. Instead, the new owner must file a new 855A and obtain a state survey or accreditation. Bowing to industry pressure, however, CMS did slightly modify the proposed rule and carved out some exceptions to benefit legitimate owners of home health agencies. The exceptions include:

• Change in majority ownership” is now defined as when an individual or organization acquires more than a 50% interest in a home health agency during 36 months following enrollment. A “change” also includes asset sales, stock transfer, mergers, or consolidations.
• Publicly traded companies acquiring a home health agency in which the buyer and seller had at least 5 years of cost reports in the previous 5 years are exempt from the 36 month policy.
• Restructuring of a current home health agency by its owners (e.g., partnership to LLC or S-Corp to LLC) are exempt where the individual owners remain the same and there is no change in majority ownership.
• Ownership changes involving the death of an owner with 49% or less interest in the home health agency are exempt from this rule.

Finally, the rule provides some guidance on the “face to face” encounter mandate. The health care reform act requires that a physician must document that they had a face-to-face encounter with a patient before certifying a patient’s eligibility for a home health benefit. This encounter and documentation must occur at least (a) 30 days preceding the start of home health care, or (b) 14 days after the start of care if no encounter occurs which is related to the primary reason the patient needs home health care. Similarly, a hospice physician or nurse practitioner must document they had a face-to-face encounter with a hospice patient 45 days prior to any 180 day recertification and prior to each subsequent recertification.

The rule and its new requirements go into effect on January 1, 2011.

For additional information on this rule, or if you have any questions about regulations affecting home health or hospice providers, please contact Mark Bina in Krieg DeVault’s Chicago office at 312-423-9305 or mbina@kdlegal.com.

All eyes are on House now to pass a bill, passed by the Senate yesterday, which would stave off the ever-looming 23% Medicare reimbursement reduction facing physicians.  If the House does not pass the measure, the health care reimbursement cuts will go into effect on December 1, 2010.  However, if the House does pass the measure, the reduction to reimbursement for Medicare participating physicians will be postponed until December 31, 2010.  Despite promises from many lawmakers, Congress has yet to pass a permanent fix to the Sustainable Growth Rate problem that has plagued the Medicare Physician payment system for years.  While an original version of the PPACA contained a provision that would have remedied the problem, amendments made later in the health care reform process eliminated the curative provision.

If you have questions about the Medicare physician reimbursement reductions, or about health care reform, please visit us at Health Reform Connect, or contact one of our health care reform lawyers, Leigh Ann O'Neill.

• The  policies or standards that should be considered to ensure that groups of solo and small practice providers have the opportunity to actively participate in ACOs and shared savings programs;
• How to address small practices' limited access to capital needed to fund efforts from which shared savings could be generated;
• How to attribute patients to providers (either prior to or after the end of the performance period) for purposes of measuring savings and quality performance;
• Ways to assess beneficiary and caregiver experience with providers;
• The aspects of patient-centeredness that are important to consider for assessment of ACOs and shared savings programs and how those aspects should be evaluated;
• The quality measures the Secretary should use to determine performance in the ACO and shared savings programs; and
• Any other additional payment models that CMS should consider in addition to the ACO model set forth in PPACA?