Medicare Update

CMS Releases Stark Phase III Final Rule

On August 27, 2007, the Centers for Medicare & Medicaid Services (CMS) released a display copy of the third phase of the final rulemaking amending regulations regarding the Stark physician self-referral prohibition (Phase III Final Rule). 

In the Phase III Final Rule, CMS responds to public comments on the Phase II interim final rule published on March 26, 2004. According to CMS, the Phase III Final Rule also addresses many of the industry’s primary concerns, is consistent with the Stark statute’s goals and directives, and protects Medicare program beneficiaries.   

In general, the Stark physician self-referral prohibition: (1) prohibits a physician from making referrals for certain “designated health services” payable by the Medicare program to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies; and (2) prohibits the entity from filing claims with the Medicare program (or billing another individual, entity or third party payer) for those referred services.

The Phase III Final Rule is scheduled to be published in the Federal Register on September 5, 2007, and take effect 90 days after appearing in the Federal Register.

Medicare to Eliminate Additional Payments for Certain Hospital Acquired Conditions

On August 22, 2007, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule in the Federal Register updating the Medicare inpatient prospective payment system (IPPS) for fiscal year 2008.

As widely reported, one aspect of the Final Rule implements a provision of the Deficit Reduction Act of 2005 (DRA), which precludes the Medicare program from making additional payments for certain hospital acquired conditions beginning with discharges occurring on or after October 1, 2008. 

In the Final Rule, CMS reports that hospital acquired conditions could lead to higher Medicare payments in at least 2 ways.  First, CMS explains that the treatment of complications could possibly increase the cost of hospital stays enough to generate outlier payments.  Second, under the Medicare Severity Diagnosis Related Groups (MS-DRGs), CMS points out that there are 258 sets of DRGs that are split into 2 or 3 subgroups based on the presence or absence of a complication or comorbidity (CC) or major CC.  If a condition acquired during a beneficiary's hospital stay falls within the major CC or CC list, a higher payment may result for a hospital under the MS-DRGs.

To carry out the above DRA provision, the DRA also requires that CMS select, by October 1, 2007, at least 2 conditions that are: (1) high cost or high volume (or both); (2) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis; and (3) could reasonably have been prevented through the application of evidence based guidelines.  Working with the Centers for Disease Control and Prevention, CMS has selected 8 conditions in the Final Rule that will be subject to the DRA provision beginning October 1, 2008.  The conditions include:

• Serious Preventable Event - Object Left in Surgery
• Serious Preventable Event - Air Embolism
• Serious Preventable Event - Blood Incompatibility
• Catheter - Associated Urinary Tract Infection
• Pressure Ulcers (Decubitus Ulcers)
• Vascular Catheter - Associated Infection
• Surgical Site Infection - Mediastinitis After Coronary Artery Bypass Graft Surgery
• Hospital Acquired Injuries - Fractures, Dislocations, Intracranial Injury, Crushing Injury, Burn and Other Unspecified Effects of External Causes

According to the Final Rule, CMS also proposes the following conditions for consideration in the 2009 IPPS proposed rule, and for selection in the 2009 IPPS final Rule:

• Ventilator Associated Pneumonia
• Staphylococcus Aureus Septicemia
• Deep Vein Thrombosis/Pulmonary Embolism

In the Final Rule, CMS also indicates that certain conditions require further analysis for future implementation, including:

• Methicillin Resistant Staphylococcus Aureus
• Clostridium Difficile - Associated Disease

CMS has developed a process for hospitals to submit a present on admission (POA) indicator with each secondary condition.  The DRA requires that CMS begin collecting this information as of October 1, 2007.  The POA indicator will serve to identify which conditions were developed during a hospital stay.  CMS has already issued some instructions requiring acute care hospitals to submit the POA indicator for diagnosis codes effective October 1, 2007.

HHS Announces Demonstration Project for South Florida Infusion Providers

On August 20, 2007, the Department of Health and Human Services (HHS) announced a 2 year demonstration project by the Centers for Medicare & Medicaid Services (CMS), which will focus on South Florida and seek to develop and demonstrate improved methods for investigating and prosecuting fraud occurring among infusion providers.

Under the demonstration project, CMS will send letters to targeted South Florida infusion providers requesting that they resubmit Medicare provider enrollment applications within 30 days.  If an infusion provider fails to reapply within the 30 day period, CMS will revoke the provider's Medicare billing privileges (and take appropriate recoupment measures).  According to HHS, infusion providers that successfully complete the reapplication process will be subject to enhanced review, including site visits driven by established risk factors.

As part of the demonstration project, CMS will also revoke the Medicare billing privileges of an infusion provider if the provider fails to: report a change of ownership or address; report owners, partners, directors or managing employees who have committed a felony within the past 10 years; or comply with all of the Medicare provider enrollment requirements.

Further, to support the fraud prevention features of the demonstration project, CMS intends to establish a new toll-free infusion fraud hotline and issue Medicare Summary Notices (MSNs) to South Florida beneficiaries on a monthly rather than quarterly basis.  CMS believes that monthly MSNs will result in more frequent and timely scrutiny of infusion provider billings.

HHS reports that this demonstration project follows a number of Medicare infusion therapy scams, including the recruitment of HIV/AIDS patients by paying them to come to clinics and receive non-rendered or medically unnecessary infusion services.  To date, the U.S. Attorney's Office for the Southern District of Florida has filed criminal charges in 20 infusion therapy health care fraud cases involving 42 defendants during 2006 and 2007.

CMS Announces Next Home Health, Hospice & DME Open Door Forum

The Centers for Medicare & Medicaid Services (CMS) recently announced that it will hold the next Home Health, Hospice & DME Open Door Forum on August 29, 2007 at 2:00 p.m. (EDT).  To participate in the Open Door Forum by telephone, one must dial 1-800-837-1935 and reference conference ID 3650599.  Beginning 2 hours after the Open Door Forum, an audio recording of the Open Door Forum will be available.  To access the audio recording, one must dial 1-800-642-1687 and reference the conference ID.  The audio recording will be available for 3 business days.

CMS Issues FAQs on Skilled Nursing Facilities and DMEPOS Competitive Bidding

The Centers for Medicare & Medicaid Services (CMS) recently posted 2 Frequently Asked Questions (FAQs) regarding skilled nursing facilities (SNF) and the Medicare durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) competitive bidding program.   

In the FAQs, CMS clarifies that it is not acceptable for a supplier, which is affiliated with a chain of SNFs, to bid to provide services only to chain facilities located within a competitive bidding area (CBA).  According to CMS, only the SNFs may elect to participate in the DMEPOS competitive bidding program as "specialty suppliers," which only furnish competitively bid items to their own residents. Therefore, a supplier affiliated with a chain of SNFs must agree to service an entire CBA, not just beneficiaries of the affiliated SNFs.  The FAQs also clarify that SNFs that want to participate in the DMEPOS competitive bidding program (including SNFs that want to participate as specialty suppliers and only furnish competitively bid items to their own residents) must meet the same quality standards and accreditation requirements that apply to all other bidders. For additional information on the DMEPOS competitive bidding program, visit the DMEPOS Competitive Bidding Implementation Contractor website.

CMS Retains 75 Percent Rule in Final Inpatient Rehabilitation Facility Rule

On August 7, 2007, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule in the Federal Register, updating the payment rates and modifying the policies of the inpatient rehabilitation facility (IRF) prospective payment system (PPS) for fiscal year (FY) 2008. However, the Final Rule does not revise the current Medicare policy on the 75 percent compliance threshold (75 percent rule).

In order to be excluded from the inpatient hospital PPS and paid under IRF PPS, a hospital or hospital unit must meet the requirements for classification as an IRF. One criterion that CMS has used for classifying a hospital or hospital unit as an IRF is that a minimum percentage of a facility’s total inpatient population require intensive rehabilitative services for the treatment of at least 1 of 13 medical conditions. This minimum percentage is known as the “compliance threshold.”   

Prior to May 7, 2004, the compliance threshold was 75 percent. However, in a May 7, 2004 final rule, CMS lowered the compliance threshold, and established a transition period in which IRFs would have to satisfy the 75 percent rule starting on or after July 1, 2007. CMS also specified that, during the transition period, a patient’s comorbidity could be used to determine whether the compliance threshold was met.

The Deficit Reduction Act of 2005 (DRA) extended the compliance threshold transition period. Under the DRA, the transition period was extended to include cost reporting periods starting on or after July 1, 2004 and before July 1, 2008. Therefore, Medicare regulations were revised requiring that an IRF meet the 75 percent rule as of its first cost reporting period that starts on or after July 1, 2008. For cost reporting periods beginning before July 1, 2008, CMS also continued the use of a patient’s comorbidity when making compliance threshold determinations. However, for cost reporting periods beginning on or after July 1, 2008, current Medicare policy will not consider a patient’s comorbidities when determining whether a provider meets the 75 percent rule.

In the proposed IRF PPS rule for FY 2008, CMS solicited comments regarding current Medicare policy and other options (including the use of some or all of the existing comorbidities for an additional fixed period and the inclusion of some or all of the existing comorbidities on a permanent basis). However, in the Final Rule, CMS indicates that it will maintain the current Medicare policy. Therefore, for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2008, the compliance threshold will remain at 65 percent and comorbidities can be used when calculating the compliance threshold. However, for cost reporting periods beginning on or after July 1, 2008, comorbidities may not be used to determine whether the 75 percent rule has been met.

CMS to Send Disclosure of Financial Relationships Report to Hospitals

On May 18, 2007, the Centers for Medicare & Medicaid Services (CMS) published a Notice of proposed information collection in the Federal Register regarding a new mandatory disclosure form called the Disclosure of Financial Relationships Report (DFRR).  CMS accepted comments on the DFRR until July 17, 2007. In September 2007, CMS is expected to send the final version of the DFRR to approximately 500 hospitals. 

The DFRR is expected to seek information regarding: (i) hospital ownership and physician investments, such as direct ownership information for each physician owner or investor, and loans; (ii) leases or under arrangements; and (iii) compensation arrangements with physicians regarding space and equipment rentals, personal service arrangements and recruitment. A hospital's chief financial officer, chief executive officer or other appropriate official will be required to sign a certification statement verifying the accuracy of the information reported in the DFRR. 

The DFRR is expected to be sent to the hospitals electronically and consist of an Excel spreadsheet and instructions.  Hospitals that receive the DFRR will be required to submit a hardcopy of the completed DFRR to CMS within 45 days.  Hospitals not responding to the DFRR within the prescribed time period will be subject to a civil penalty of up to $10,000 for each day beyond the 45 day deadline. Due to the nature of the DFRR, completing the DFRR could be an administrative burden and may present compliance risks for some hospitals.   

The Deficit Reduction Act of 2005 (DRA) directed CMS to collect certain information on physician investment and compensation relationships with specialty hospitals. Consequently, CMS sent a voluntary DRA survey to 130 specialty hospitals and 322 competitor hospitals in 2006.  Of these hospitals, 290 failed to respond or submitted incomplete answers.  Therefore, those 290 hospitals are expected to be among the 500 hospitals that initially receive the DFRR.   

Based on the responses from the 500 hospitals, CMS is expected to determine whether to collect the same data annually from all Medicare participating hospitals to assess compliance with the Stark statute and regulations.

CMS Announces Operation Date for NPI Registry

On August 6, 2007, the Centers for Medicare & Medicaid Services (CMS) announced that it will make Freedom of Information Act disclosable health care provider data available from the National Plan and Provider Enumeration System (NPPES) beginning September 4, 2007.  Specifically, the National Provider Identifier (NPI) Registry will become operational on September 4, 2007, and the downloadable file will be ready approximately one week later.  To ensure that edits are reflected in the NPI Registry when it first becomes operational, CMS has indicated that health care providers need to submit their edits no later than August 20, 2007.  CMS also reports that health care providers who submit edits on paper need to ensure that they are mailed in time for receipt by the NPI Enumerator by that date.

CMS Delays Deployment of National Provider Identifier Registry

The Centers for Medicare & Medicaid Services (CMS) recently announced that it is delaying the deployment of the National Provider Identifier (NPI) Registry and the dissemination of Freedom of Information Act (FOIA) disclosable health care provider data from the National Plan and Provider Enumeration System (NPPES).

On May 30, 2007, CMS published a Notice in the Federal Register setting forth the data that will be available from the NPPES.  In the Notice, CMS also described the policy by which CMS will make certain NPPES health care provider data, including NPIs, available through a query only database (NPI Registry) and downloadable files.

According to CMS, the NPI Registry was to be operational on August 1, 2007.  The NPI Registry is expected to enable users to query the NPPES by, for example, the NPI or name of a provider.  The NPI Registry is then expected to display the FOIA disclosable data for those records.  CMS had also reported that the first downloadable files would be available by August 7, 2007.  The first downloadable files are expected to contain the FOIA disclosable data for health care providers who have been assigned NPIs.  In each following month, CMS will make a replacement file available.  CMS has reported that the replacement files will contain the FOIA disclosable NPPES health care provider data as of a certain date which will reflect updates and changes that were applied to the NPPES records of enumerated health care providers.

CMS has not published a new deployment date for the NPI Registry or the dissemination of FOIA disclosable health care provider data from the NPPES.  However, CMS has indicated that additional information will be made available in the Data Dissemination section of the NPI page of the CMS website. 

CMS Publishes Final Skilled Nursing Facility Prospective Payment Rule for 2008

On August 3, 2007, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule updating the skilled nursing facility (SNF) prospective payment system for fiscal year (FY) 2008.  Among other things, the Final Rule also revises and rebases the SNF market basket, which currently reflects FY 1997 data, to reflect FY 2004 data.  CMS projects that Medicare payments for SNF care will increase by approximately $690 million in FY 2008.