Medicare Update

CMS to Host Program Advisory and Oversight Committee Meeting on DMEPOS Competitive Bidding

On October 11, 2007, the Centers for Medicare & Medicaid Services (CMS) will host a meeting with Program Advisory and Oversight Committee (PAOC) members to discuss some of the operational issues associated with the Medicare durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) competitive bidding program.  The meeting will take place from 8:00 a.m. to 5:00 p.m. (EST) at the Hilton Pikesville Hotel in Baltimore, Maryland.

During the meeting, CMS will focus on its progress in implementing the DMEPOS competitive bidding program, address key educational and operational issues, and accept public comments.  CMS hopes that the feedback it receives from PAOC members and the public will assist CMS in the next round of DMEPOS competitive bidding. To participate in the meeting, registration is required.  Registration must be received no later than 5:00 p.m. (EST) on October 5, 2007.

OIG Releases Resource Guide on Corporate Responsibility and Quality of Care

The Department of Health and Human Services' Office of Inspector General (OIG), in conjunction with the American Health Lawyers Association, recently released a resource guide entitled "Corporate Responsibility and Health Care Quality: A Resource for Health Care Boards of Directors."

The resource guide is intended to assist directors of health care organizations in exercising their oversight responsibilities with respect to corporate compliance and quality of care.  The OIG will be hosting a series of roundtable discussions with industry leaders on the topic.  The first roundtable discussion is co-sponsored by the Health Care Compliance Association, is scheduled for December 6, 2007, and will focus on a director's role in overseeing the quality of care in long-term care institutions.

CMS Revises the Disclosure of Financial Relationships Report

On September 14, 2007, the Centers for Medicare & Medicaid Services (CMS) published a Notice of information collection in the Federal Register for the Disclosure of Financial Relationships Report (DFRR).

The DFRR is a new disclosure form that will be used by CMS to obtain information (i.e., physician investment, ownership and compensation arrangement information) to analyze a hospital’s compliance with the Stark statute and regulations. CMS reports that the DFRR will be initially sent to 500 hospitals. Data from the DFRR will be used by CMS to propose a regular financial disclosure process that will apply to all Medicare participating hospitals.

On May 18, 2007, CMS published a notice of information collection for the DFRR, which included a 60 day public comment period. Based upon the comments received, CMS recently made a number of changes to the DFRR. The most significant change is the addition of worksheets to capture information on indirect ownership arrangements.

Hospitals that receive the DFRR will have 60 days (from the date on the cover letter or email transmission) to return a hard copy (and one additional copy) of the completed DFRR. Hospitals not responding to the DFRR within the prescribed time period may be subject to a civil monetary penalty of up to $10,000 for each day beyond the deadline.

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 those hospitals, 290 failed to respond or submitted incomplete answers.  Therefore, the 290 hospitals are expected to be among the 500 hospitals that initially receive the DFRR.    

The Notice provides for a 30 day public comment period, and describes how to submit comments on the revised DFRR. The revised DFRR, a related cover letter, a summary of changes to the DFRR, and a supporting statement can be found by visiting the PRA Listing page of the CMS website.

CMS Launches National Provider Identifier Registry

The Centers for Medicare & Medicaid Services (CMS) recently launched the National Provider Identifier (NPI) Registry, which disseminates Freedom of Information Act 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 would be available from the NPPES.  In the Notice, CMS describes the policy by which CMS will make certain NPPES data, including NPIs, available through the NPI Registry and downloadable files. 

CMS to Host Conference Call on 2007 Physician Quality Reporting Initiative

The Centers for Medicare & Medicaid Services (CMS) will host a seventh national provider conference call on the 2007 Physician Quality Reporting Initiative (PQRI).  The conference call will take place from 1:30 p.m. to 3:30 p.m. (EDT) on September 26, 2007.

PQRI establishes a financial incentive for eligible professionals to participate in a voluntary quality reporting program.  Eligible professionals who successfully report a designated set of quality measures on claims for dates of services from July 1, 2007 to December 31, 2007 may earn a bonus payment, subject to a cap, of 1.5% of total allowed charges for covered Medicare physician fee schedule services.  Eligible professionals started submitting claims with PQRI quality data codes on July 1, 2007.  During the conference call, eligible professionals will be given an opportunity to ask questions of CMS subject matter experts.

To participate in the conference call, one must register.  Registration will close at 1:30 p.m. (EDT) on September 25, 2007 or when available space has been filled.  CMS will also make an audio replay available from 5:30 p.m. (EDT) on September 26, 2007 to 11:59 p.m. (EDT) on October 3, 2007.  To access the audio replay, one must dial (800) 642-1687 and use passcode 15652356.

CMS Proposes Changes to Conditions for Coverage for Ambulatory Surgical Centers

On August 31, 2007, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule in the Federal Register, which would revise some of the existing conditions of coverage (CFC) and establish some new CFCs for ambulatory surgical centers (ASC). 

In particular, the Proposed Rule would revise the existing CFCs for Governing Body and Management, Evaluation of Quality, and Laboratory and Radiologic Services.  The Proposed Rule would also establish new CFCs for Patients' Rights, Infection Control, and Patient Admission, Assessment and Discharge.  For instance, the Proposed Rule would:

• require a more comprehensive quality assessment and performance improvement (QAPI) condition that enables ASCs to take tailored proactive steps to ensure quality care;
• require that an ASC’s governing body be responsible for the oversight and accountability for the QAPI program; 
• add a new disaster preparedness plan standard, which addresses emergency preparedness within the facility and interaction with local and state officials; 
• add requirements for radiologic services to ensure they parallel the requirements for laboratory services; 
• add a new patients' rights condition, which would require an ASC to provide a patient with verbal and written notice of his or her rights, and address the disclosure of physician financial interests in the ASC, advance directives, grievance process, and the confidentiality of clinical records; 
• expand the infection control requirement; and 
• add a patient assessment requirement to ensure that accurate and thorough assessments are conducted to assure appropriate and safe surgery, and that patients would be able to tolerate a scheduled surgical procedure.

According to CMS, the Proposed Rule would update the existing CFCs to reflect contemporary standards of practice, address recommendations of the Department of Health and Human Services' Office of Inspector General, and promote and protect patient access to quality services. CMS will be accepting public comments on the Proposed Rule until October 30, 2007 and expects to publish a final rule later this year.

CMS Selects Third Medicare Administrative Contractor

On September 7, 2007, the Centers for Medicare & Medicaid Services (CMS) announced in a Press Release that Wisconsin Physicians Service Health Insurance Corporation (WPS) has been awarded a 5 year contract for the administration of Medicare Part A and Part B claims for the states of Iowa, Kansas, Missouri and Nebraska.  According to CMS, WPS will assume full responsibility for claims in the 4 states no later than September 9, 2008.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 requires that CMS replace its current fiscal intermediaries and carriers with new competitively procured contract entities called Medicare Administrative Contractors (MACs).  In July 2006, CMS awarded the first MAC contract to Noridian Administrative Services, LLC for the states of Arizona, Montana, North Dakota, South Dakota, Utah and Wyoming.  In August 2007, CMS awarded the second contract to TrailBlazer Health Enterprises, LLC for the states of Colorado, New Mexico, Oklahoma and Texas.  CMS has 6 years (between 2005 and 2011) to complete the transition from fiscal intermediaries and carriers to MACs.

Weems to Serve as Acting CMS Administrator

On September 5, 2007, the Secretary of the Department of Health and Human Services, Michael Leavitt, issued a Statement indicating that Kerry N. Weems will begin serving as the Acting Administrator for the Centers for Medicare & Medicaid Services (CMS).  This Statement follows a Personnel Announcement, that was issued by the White House on September 4, 2007, indicating that Mr. Weems would be designated as the Acting CMS Administrator while his CMS Administrator nomination is pending in the U.S. Senate. 

Final Rule Makes Significant Changes to Home Health Payments for CY 2008

On August 29, 2007, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule (with comment period) in the Federal Register, updating and making major refinements to the Medicare home health prospective payment system (HH-PPS) for calendar year (CY) 2008. 

Under the HH-PPS, Medicare pays home health agencies (HHA) based on a national standardized 60-day episode rate, which is adjusted for case-mix and wage index. To adjust for case-mix, the HH-PPS currently uses 80 category case-mix classifications to assign payments to a home health resource group (HHRG). In the Final Rule, CMS makes a number of refinements to the HH-PPS methodology, including the following: 

Case-Mix Model. In the Proposed Rule for CY 2008, CMS proposed refining the case-mix model to reflect different resource costs for early episodes versus later episodes and to expand the case-mix variables. For CY 2008, CMS also proposed a 4-equation case-mix model that recognizes and differentiates payment for episodes based on whether a patient is in an early episode (1st or 2nd episode in a sequence of adjacent episodes) or later episode (the 3rd episode or subsequent episodes in a sequence of adjacent episodes) as well as recognizing whether a patient was a high therapy (14 or more therapy visits) or low therapy (13 or fewer therapy visits) case. In addition, CMS proposed replacing the current 10 visit therapy threshold with therapy thresholds at 6, 14, and 20 visits with graduated payment levels between the thresholds. 

In the Final Rule, CMS adopts the case-mix weights and scoring resulting from the 4-equation model with therapy thresholds at 6, 14, and 20 therapy visits and with an early or later episode distinction. CMS also makes changes to certain case-mix variables in the Final Rule.  For example, CMS creates M0110 to identify early and later episodes, and excludes M0175 from the case-mix model.  Further, CMS includes scores for infected surgical wounds, abscesses, chronic ulcers, gangrene, dysphagia, tracheostomy, and cystostomy.  CMS also adds gastrointestinal, pulmonary, cardiac, hypertension, cancer, blood disorders, and affective and other psychoses diagnosis groups, and assigns points for some secondary diagnosis and some combinations of conditions in the same episode.

HHRGs. To adjust for case-mix, HH-PPS currently uses 80 category case-mix classifications to assign patients to a HHRG. In the Final Rule, CMS increases the HHRGs from 80 to 153 in an effort to better capture the actual cost of care. 

Market Basket Increase. As part of the Proposed Rule, CMS proposed a home health market basket increase of 2.9 percent for CY 2008. In the Final Rule, CMS adopts a home health market basket increase of 3.0 percent for CY 2008. 

Wage Index. In the Proposed Rule, CMS proposed to continue using the pre-floor and pre-classification hospital wage index data to adjust the labor portion of the HH-PPS rates. In the Final Rule, CMS adopts this proposal. 

Case-Mix Growth. Under the Social Security Act, CMS may adjust the standard payment amount to eliminate the effect of coding and classification changes that do not reflect changes in case-mix. In the Proposed Rule, CMS identified a nominal change in case-mix of 8.7 percent (i.e., change that is not due to changes in the underlying health of patients). Therefore, CMS proposed a 2.75 percent reduction in the national 60-day episode rate for 3 years starting in CY 2008. However, after publishing the Proposed Rule, CMS updated its analysis and found a nominal change in case-mix of 11.75 percent. Therefore, in the Final Rule, CMS adopts the 2.75 percent reduction in the national 60-day episode rate for 3 years starting in CY 2008, and extends the adjustment period to a 4th year via a 2.71 percent reduction for CY 2011.  In the Final Rule, CMS requests public comment on the 2.71 percent reduction for CY 2011 and sets an October 29, 2007 deadline for public comment. 

Quality Data Reporting. The Deficit Reduction Act of 2005 provides for a 2 percent reduction in an HHA’s market basket increase if certain quality measure data is not submitted to CMS. For CY 2007, CMS identified 10 required quality measures captured by OASIS data. In the Proposed Rule, CMS proposed adding the following 2 additional quality measures for CY 2008: (1) emergent care for wound infections, deteriorating wound status; and (2) improvement in status of surgical wound. In the Final Rule, CMS adopts the 2 additional quality measures and requires that the 12 quality measures be reported for a full home health market basket increase in CY 2008. 

National Episode Rate. For episodes being and ending in CY 2008, the Final Rule sets the national 60-day episode rate at $2,270.32 for CY 2008. This amount reflects the 3.0 percent home health market basket increase, and the 2.75 percent reduction for nominal change in case-mix, for CY 2008.   

PEP Adjustment. In the Proposed Rule, CMS did not propose changes to the partial episode payment (PEP) adjustment. Instead, CMS solicited public comments on improving the PEP adjustment. In the Final Rule, the PEP adjustment remains unchanged. However, CMS indicates that it intends to study the public comments, continue public discussion on the issue, and may refine the PEP adjustment in a future rulemaking. 

SCIC Adjustment. In the Proposed Rule, CMS proposed eliminating the significant change in condition (SCIC) adjustment. In the Final Rule, CMS adopts this proposal. 

LUPA. The low utilization payment adjustment (LUPA) reduces the national standard rate when minimal services are provided during a 60-day episode. LUPAs are episodes with 4 or fewer days. In the Proposed Rule, CMS recognized that initial and only episode LUPAs may not offset the full cost of initial visits. Therefore, in the Final Rule, CMS adopts an increase of $87.93 for LUPA episodes that occur as the only episode or the initial episode during a sequence of adjacent episodes, which will be adjusted annually by the home health market basket. 

NRS. Payment for non-routine medical supplies (NRS), which was $49.62 at the onset of the HH-PPS, has been updated yearly as part of the national standardized 60-day episode payment rate. In the Proposed Rule, CMS proposed revising the NRS methodology, and accounting for NRS costs based on 5 severity groups and a national conversion factor. In the Final Rule, CMS adopts a 6 severity group methodology and a national conversion factor of $52.35 for CY 2008. 

Outlier Adjustment. The outlier threshold is defined as the 60-day episode payment plus a fixed dollar loss (FDL) amount. The proportion of additional costs paid as outlier payments is referred to as the loss sharing ratio. The FDL ratio and loss sharing ratio are selected so that estimated total outlier adjustments do not exceed 5 percent of total HH-PPS payments. In CY 2007, the FDL ratio is 0.67. In the Proposed Rule, CMS proposed maintaining the FDL ratio at 0.67. However, after further analysis, CMS adopts a FDL ratio of 0.89 in the Final Rule. Therefore, CMS expects that fewer episodes will receive outlier adjustments.

CMS believes that the HH-PPS updates and refinements in the Final Rule will improve the quality and efficiency of care through more accurate payments.  CMS also estimates that the updates and refinements to the HH-PPS will result in an additional $20 million in Medicare payments to HHAs in CY 2008.

CMS Releases Final Hospice Wage Index Rule for FY2008

On August 31, 2007, the Centers for Medicare & Medicaid Services (CMS) released a display copy of the Final Rule setting forth the Medicare hospice wage index for fiscal year 2008.  In the Final Rule, CMS also revises the methodology for updating the wage index for rural areas without hospital wage data, and clarifies certain existing Medicare hospice regulations and policies.