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The Centers for Medicare & Medicaid Services (CMS) released the Final Rule for SNF PPS and consolidated billing for fiscal year (FY) 2012 on Friday, July 29. An important provision included in this rule will reduce Medicare SNF PPS payments in FY 2012 by $3.87 billion, or 11.1% lower than payments for FY 2011. CMS states that the reason for this rate reduction is to correct for an unintended spike in payment levels and better align Medicare payments with costs.

CMS found that the parity adjustment made in FY 2011, which was intended to ensure that the new RUG-IV system would not change overall spending levels from the prior year, instead resulted in a significant increase in Medicare expenditures during FY 2011. This increase in spending was primarily due to shifts in the utilization of therapy modes under the new classification system differing significantly from the projections on which the original parity adjustment was based.  According to CMS, “additional data analyzed by CMS since publication of the proposed rule confirmed the extent of the overpayments that have occurred since implementation of the RUG-IV system.”  The FY 2012 recalibration of the CMIs will result in a reduction to skilled nursing facility payments of $4.47 billion or 12.6 percent.  However, this reduction would be partially offset by the FY 2012 update to Medicare payments to skilled nursing facilities.  The update — an increase of 1.7 percent or $600 million for FY 2012 — reflects a 2.7 percent increase in the prices of a “market basket” of goods and services reduced by a 1.0 percent multi-factor productivity (MFP) adjustment mandated by the Affordable Care Act.   The combined MFP-adjusted market basket increase and the FY 2012 recalibration will yield a net reduction of $3.87 billion, or 11.1 percent.

Along with recalibrating and updating the SNF PPS payment rates for FY 2012, this final rule makes a number of additional revisions aimed at enhancing SNF PPS accuracy and integrity.  The final rule also:

• Affordable Care Act initiatives:
  • CMS is in the process of developing the SNF value based purchasing plan and will submit a report to Congress by October 1, 2011.
  • The Secretary of the Department of Health and Human Services (HHS) will evaluate the possibility of expanding the hospital-acquired condition policy from acute care hospitals to a variety of other settings, including SNFs, and will submit a report to Congress by January 1, 2012.
  • Nursing home transparency and improvement. Due to the many comments CMS received regarding disclosure of certain parties on Medicare and Medicaid facility applications and revalidations, CMS has deferred any changes in this area for now and will release a final rule sometime in fiscal year 2012. 
• Therapy student supervision: The Final Rule will discontinue the policy requiring lineof-sight supervision of therapy students in SNFs. Instead, effective October 1, 2011, each SNF will determine for itself the appropriate manner of supervision of therapy students consistent with state and local laws and practice standards.
• Group therapy clarifications: Effective October 1, 2011, group therapy will be defined as therapy provided simultaneously to four patients who are performing the same or similar activities, and group therapy time will be divided by four in determining the reimbursable therapy minutes for each group therapy participant and, therefore, the appropriate RUG-IV group.
• Five- or seven-day a week therapy clarification: Elimination of the distinction between facilities regularly furnishing therapy services on a 5- or 7-day basis for purposes of setting the date for the End of Therapy (EOT) Other Medicare Required Assessment (OMRA).
• Introduction of the End of Therapy – Resumption (EOT-R) OMRA: Effective for services provided on or after October 1, 2011, when an EOT OMRA has been completed and therapy subsequently resumes, SNFs may complete an EOT-R OMRA rather than a Start of Therapy (SOT) OMRA, in cases where the resumption of therapy date is no more than five consecutive days after the last day of therapy provided and the therapy services have resumed at the same RUG-IV level that had been in effect prior to the EOT OMRA.
• Introduction of the Change of Therapy (COT) OMRA: Effective for services provided on or after October 1, 2011, SNFs would be required to complete a COT OMRA for patients classified into a RUG-IV therapy group whenever the intensity of therapy (that is, the total reimbursable therapy minutes provided) changes to such a degree that it would no longer reflect the RUG-IV classification and payment assigned for a given SNF resident based on that resident’s most recent assessment used for Medicare payment. The ARD of the COT OMRA would be set for day seven of a COT observation period, which is a successive seven-day window beginning on the day following the ARD set for the most recent scheduled or unscheduled PPS assessment and ending every seven calendar days thereafter.

Questions remain frequent among long term care providers in Indiana regarding facility-level impacts of the decision by the Indiana Office of Medicaid Policy and Planning (“OMPP”) to eliminate reimbursement for bed-hold days.  The elimination of reimbursement for bed-holds was effective February 1, 2011 (For a copy of this bulletin, click here), and the Indiana Medicaid State Plan will be amended in the coming months to finalize elimination of reimbursement.  OMPP has also posted, and periodically updated, a news summary on www.IndianaMedicaid.com that discusses the impact of the reimbursement changes on Indiana’s long term care facilities and their residents (Click here for the news summary).

More recently, requirements for long term care facilities to maintain updated bed-hold policies were discussed during a panel presentation at the 2011 Indiana Health Care Association's ("IHCA") Convention & Expo in May.  In addition to the above OMPP-issued materials, the IHCA offers the following points for long term care facilities when developing bed-hold policies. 

·         Facilities must have a bed-hold policy that states whether or not the facility allows a resident to pay to hold a bed during a leave of absence

o    Though facilities are not required to allow a resident to pay to hold a bed, facilities must still have a policy that states whether or not payment for holding a bed is permitted by the facility

·         The duration of the bed-hold period must be clearly stated in the facility policy

·         Bed-hold policies should state that Indiana Medicaid does not reimburse for bed-holds

·         Payment by residents for bed-holds must follow applicable Medicare and Medicaid guidelines regarding billing for non-covered services

·         Charges for bed-holds should be set at fair market value and must be equally applied to all residents regardless of payor source

o    Facilities may be at risk for Anti-Kickback violations related to improper inducements to government program beneficiaries if charges for bed-holds are not fair market value and equal application of those charges are not maintained.  However, an exception to the Anti-Kickback statute may apply in certain circumstances for bed-hold charges that are unable to be collected.  This exception depends on certain elements regarding facility advertisements, other relevant services and financial need of the resident. 

·         If a resident on leave is expected to return to the facility, regardless of whether they have paid to hold a bed, the facility is not required to discharge the resident

·         If a resident is discharged from a facility, however, the facility must permit the resident to return to the first available semi-private bed when (i) the resident continues to qualify for Medicaid, (ii) the resident requires nursing-level care and (iii) the facility is able to provide appropriate care for the resident.

o    A resident may be discharged from the facility for many reasons including, but not limited to, the resident’s failure to pay for a bed-hold or when the bed-hold period expires.  Facilities must follow applicable regulations and procedures when discharging a resident.

If you have questions about this article or about bed hold policies, please contact Zach Cattell at zcattell@ihca.org or 317-616-9001 or Leigh Ann O'Neill at 317-238-6346.  .

Since the time the Stark Act Self-Referral Disclosure Protocol (“SRDP”) procedure was published by the Centers for Medicare & Medicaid Services (“CMS”) in September, 2010, providers have wondered whether the SRDP is the best method for resolving Stark violations.  With Saints Medical Center resolving their known Stark Act violations with CMS for a fraction of the total liability in the first settlement under the new SRDP protocol on February 10, 2011, the provider community has been buzzing about the potential benefits of resolving known Stark Act violations through the SRDP.  In order to assist providers in determining whether they should use the SRDP to resolve Stark violations, here are two examples of when the SRDP is not appropriate for settling Stark violations:

1.  When Stark Act violations also violate the Anti-Kickback Statute - Participation in the SRDP is limited only to violations of the Stark Act.  For conduct that violates the Stark Act and also raises possible liability under the Federal Anti-Kickback Statute or the Civil Monetary Penalty laws, providers should use the Office of the Inspector General’s (“OIG”) Self-Disclosure Protocol, and not the SRDP.  For example, if a provider has an unsigned medical director agreement with a physician that pays the physician based on the physician’s volume or value of referrals to the provider, the provider will want to use the OIG’s Self-Disclosure Protocol since the underlying conduct likely violates both the Stark Act and the Federal Anti-Kickback Statute.

2.  When only possible Stark Act violations exist - The SRDP cannot be used to obtain an advisory opinion as to whether an actual or potential violation of the Stark Act occurred.  The SRDP is only intended to resolve matters that, in the disclosing party’s assessment, are actual violations of the Stark Act.  As a result, providers should not use the SRDP unless they have discovered actual violations of the Stark Act.  For example, a provider who believes that their payments to a physician for the lease of medical equipment may have exceeded fair market value should not use the SRDP until the provider has conducted an adequate investigation and determined that the payments for the medical equipment truly exceeded fair market value.

            While the SRDP provides a promising process to settle Stark Act violations for a fraction of the total possible liability, the SRDP is not appropriate for all situations.  Providers may want to consult their attorneys about whether the SRDP is appropriate for their particular Stark Act violations.

            To see a summary of the SRDP published by CMS, see: https://www.cms.gov/PhysicianSelfReferral/Downloads/6409_SRDP_Protocol.pdf.

If you would like additional information, please contact Jason D. Schultz at jschultz@kdlegal.com or (574) 485-2003 or Robert A. Wade at bwade@kdlegal.com or (574) 485-2002.

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".

In recent cases, we have seen the Health and Human Services Office of Inspector General ("OIG") flexing its exclusion authority muscle, prohibiting even company CEOs from participating in Federal health care programs due to their failure to cease unlawful operations occurring within their companies.  When we think of the OIG's exclusion authority, we typically think of nurses, physicians, and other clinicians being excluded from Medicare and Medicaid participation due to serious acts such as patient neglect or abuse, or prescription drug violations.  However, in recent news we have seen upper management figures of large companies excluded from Federal health program participation for health care fraud perpetrated within their companies.  One case involved a company's false marketing of the drug Oxycontin, which resulted in the 12-year exclusion of three company executives. 

While it has been made clear that the OIG has the authority to exclude management and other administrators from Federal health care participation, such instances have been far more rare than the exclusion of clinicians.  If your health are organization does not yet have on its books an excluded provider policy, it is strongly recommended that one be implemented which would require the OIG's List of Excluded Individuals and Entities to be checked for all new hires and for all employees every 6 months.  If your organization is found to have billed Medicare or Medicaid for services provided by an excluded provider, your organization can face severe penalties, in addition to being required to return any Federal funds improperly paid that are attributable to excluded providers. 

If you have questions about the OIG's exclusion authority, or about how your organization can protect itself from penalties and subsequent exclusions, please contact Susan Ziel at 317-238-6244 or Leigh Ann O'Neill at 317-238-6346.

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.