Medicare Update

CMS Requests Quality Measure Suggestions for Physician Quality Reporting Initiative

The Centers for Medicare & Medicaid Services (CMS) recently announced that it is accepting quality measure suggestions for possible inclusion in the proposed set of quality measures to be published in the 2009 Medicare Physician Fee Schedule (MPFS) Proposed Rule for the Physician Quality Reporting Initiative (PQRI). CMS expects to publish the 2009 MPFS Proposed Rule no later than August 15, 2008.

According to CMS, individuals and organizations interested in suggesting measures for possible inclusion in the proposed set of measures should email suggestions to pqritemp@cms.hhs.gov by 5:00 p.m. (EST) on March 24, 2008.  Measure suggestions should contain the final measure title, measure description, date of expected development completion and date of expected AQA Adoption or NQF Endorsement.

For more information on the suggestion of quality measures, visit the "Notice of 2009 Measure Suggestions" download on the Measures/Codes page of the CMS website.

Medicare Recovery Audit Contractors Identify $371.5 Million in Improper Payments

On February 28, 2008, the Centers for Medicare & Medicaid Services (CMS) released the Medicare recovery audit contractor (RAC) status document and a related Press Release for fiscal year (FY) 2007.

In the status document, CMS reports on the results of the RAC demonstration project for FY 2007.  Since March 2005, the RAC demonstration project has operated in the states of California, New York and Florida to determine whether RACs would be a cost-effective means of identifying Medicare underpayments and overpayments, and recovering the overpayments.

According to the status document, RACs identified and corrected $371.5 million in Medicare improper payments during FY 2007 at a cost $77.7 million, and returned $247.4 million to the Medicare Trust Fund.  Of the improper payments identified during FY 2007, only 4 percent ($14.3 million) were underpayments repaid to providers. 

As reflected in the status document for FY 2007, most of the overpayment amounts collected by RACs (about 85 percent) were from inpatient hospitals.  The status document also suggests that most of the improper payments were attributable to claims that did not comply with Medicare's coding or medical necessity policies and rules.

The RAC status document for FY 2007 includes claims that were originally paid by a Medicare claims processing contractor between October 1, 2002 and September 30, 2006 for which a RAC corrected an overpayment or underpayment during FY 2007.

The RAC demonstration project is scheduled to end on March 27, 2008.  The Tax Relief and Health Care Act of 2006 directs the Department of Health and Human Services to make the RAC program permanent and nationwide by no later than January 1, 2010. To accomplish this objective, CMS intends to implement a nationwide RAC program in phases beginning in March 2008.

CMS to Host Physicians, Nurses & Allied Health Professionals Open Door Forum

The Centers for Medicare & Medicaid Services (CMS) recently announced that the next Physicians, Nurses & Allied Health Professionals Open Door Forum will take place at 2:00 p.m. (EDT) on March 11, 2008.

There are 2 ways to participate in the Open Door Forum.  To participate by telephone, one must dial 1-800-837-1935 and reference conference ID 33257655.  To participate in person, one must RSVP to CMS PHYSICIANODF-L@cms.hhs.gov by 2:00 p.m. (EDT) on March 7, 2008 and include your name, organization or representation, telephone number and "Physician ODF" in the subject line. The Open Door Forum will take place at the Hubert H. Humphrey Building, 200 Independence Ave. SW, Washington, DC.

Beginning 2 hours after the Open Door Forum, CMS will also make an audio recording of the Open Door Forum 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 Releases National Health Expenditure Projections

The Centers for Medicare & Medicaid Services (CMS) has prepared an analysis of projected national health care expenditures through 2017, which has been published in the journal Health Affairs.

According to CMS, the growth in U.S. health care spending is projected to be 6.7 percent in 2007 and reach $2.2 trillion.  As a percentage of gross domestic product (GDP), CMS projects that health care spending will increase to 16.3 percent in 2007 (from 16.0 percent in 2006).  However, CMS expects for health care spending to reach just over $4.3 trillion and comprise 19.5 percent of GDP by 2017. 

Further, CMS expects for Medicare spending growth to slow to 6.5 percent in 2007 (after 18.7 percent growth in 2006).  CMS reports that nearly all of the projected slowdown in growth (in 2007) is related to the spending that was devoted to the Medicare Part D benefit in 2006, which continues in 2007 but is no longer new to the program.  CMS also reports that reduced increases in Medicare Advantage plan payments for 2007 contribute to the projected slowdown.  However, CMS expects for Medicare spending growth to accelerate, reaching 8.0 percent by 2017, as the baby boom generation begins to enroll in the program.

To access a media briefing on the projections, visit the HealthCast page of the Kaisernetwork.org site.

CMS Publishes Final Rule on Prior Determinations of Coverage

On February 22, 2008, the Centers for Medicare & Medicaid Services (CMS) published a Final Rule establishing a process for Medicare contractors to provide physicians and beneficiaries with a determination of coverage (related to medical necessity) before physicians' services are furnished.   

In the Final Rule, CMS establishes limits on the physicians' services for which a prior determination of coverage may be requested. In fact, the Final Rule outlines the services that will be subject to a prior determination of coverage request by providing for a national list of:

• the most expensive physicians' services in the Medicare Physician Fee Schedule (MPFS) that are performed at least 50 times annually.
• plastic and dental surgeries that may be covered and have an amount of at least $1,000 on the MPFS (not including the adjustment for location by the geographic practice cost index).

The Final Rule also allows a Medicare contractor to send a copy of a local coverage determination (LCD) or national coverage determination (NCD) to a requester, with an explanation that the LCD or NCD serves as the prior determination, if the LCD or NCD has sufficiently specific reasonable and necessary criteria addressing the clinical indication for the procedure for which the prior determination is requested.  Medicare contractors will determine whether a LCD or NCD has "sufficiently specific reasonable and necessary criteria."

Among the limitations, the Final Rule also discusses CMS' plan for establishing procedures for obtaining a determination. Further, CMS reports that it intends to issue detailed instructions on the determination of coverage process to Medicare contractors through the CMS manuals.

The effective date of the Final Rule is March 24, 2008.  The Final Rule implements provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and is intended to provide physicians and beneficiaries with an opportunity to know the financial liability for a service before expenses are incurred.  On August 30, 2005, CMS published a Proposed Rule for public comment.  CMS responds to the public comments in the Final Rule.

OIG Issues Advisory Opinion on Disease Screening Kiosks in Physicians Offices

On February 22, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) posted OIG Advisory Opinion No. 08-05 (Advisory Opinion).

In the Advisory Opinion, a company that develops, manufacturers and markets pharmaceuticals (Company) for a number of diseases and conditions, including 4 disease states (Disease States), inquired about a proposal to place electronic kiosks, which offer patients free Disease State screening questionnaires, in physicians' offices (Proposed Arrangement). 

Specifically, the Company inquired whether the Proposed Arrangement would violate the Federal anti-kickback statute or the prohibition against beneficiary inducements and result in the imposition of related sanctions. Based on the facts presented, the OIG concluded that the Proposed Arrangement would not violate the Federal anti-kickback statute or the prohibition against beneficiary inducements.

Under the Proposed Arrangement, the Company would place freestanding kiosks, which offer interactive questionnaires about the Disease States, in the waiting rooms of physicians. Use of the kiosks would be voluntary. The kiosks would generate a printout containing the screening questions and the patient's responses. The printouts would not provide any conclusions regarding whether a patient has a particular condition or requires a particular therapy, but would advise patients to talk to their physician about the screening results.  According to the Company, the kiosks would help patients determine whether they should discuss symptoms of the Disease States with a physician.

Furthermore, the Company would offer to place the kiosks in the writing room of physicians whom the Company expects would treat a large number of patients with the Disease States, including Federal health care program beneficiaries.  However, the physicians would not be required to prescribe the Company's drugs in return for the kiosks. The physicians would also neither pay the Company, nor receive payment from the Company, for hosting the kiosks. The physicians could have the kiosks removed at any time.

Moreover, the questionnaires would not mention the Company's drug products or contain any advertisements or incentives for using the kiosks. However, the kiosks would carry a small image of the Company's logo with wording similar to "brought to you by [Company]" and a footer on the printouts that would display the Company's logo and a copyright notice.  The Company would obtain the aggregate data from the kiosks, but no individual identifying data.

The OIG examined the Proposed Arrangement under 2 possible kickback scenarios. However, after examining both scenarios, the OIG found that the Proposed Arrangement would not generate prohibited remuneration under the Federal anti-kickback statute. 

First, the OIG considered whether there would be a potential kickback from the Company to the patient users of the kiosks to induce them to self-refer to the Company's drugs.  Since the kiosks would only provide a printout reprising the questionnaire and each patient's answers and not offer incentives for using the kiosks, the OIG found that the Proposed Arrangement would not provide anything of value to the patients and not implicate the Federal anti-kickback statute.  However, the OIG noted that its conclusion would most likely be different if the kiosks were used to communicate offers of remuneration to patients (e.g., coupons, gifts or services).

Second, the OIG considered whether there would be a potential kickback from the Company to the participating physicians to induce them to prescribe the Company's drugs.  However, the OIG found that the kiosks would "amount to little more than high-tech interactive brochures" and have no independent value to the physicians. The OIG pointed out that the kiosks would remain the property of the Company, physicians would not receive any space rental, utilities fees or other compensation, and found that the kiosks would not influence prospective patients to select a particular physician.

For the same reasons that the Proposed Arrangement would not generate prohibited remuneration under the Federal anti-kickback statute, the OIG concluded that the Proposed Arrangement would not violate the prohibition against beneficiary inducements.

CMS Issues Advance Notice on CY 2009 Medicare Advantage Capitation Rates

In a February 22, 2008 Memorandum, the Centers for Medicare & Medicaid Services (CMS) issued an advance notice of proposed changes to the Medicare Advantage (MA) capitation rate methodology and risk adjustment methodology under the Medicare Part C program for calendar year (CY) 2009.

In Attachment I of the Memorandum, CMS indicates that the current estimate of the change in the national per capita MA growth percentage for aged and disabled enrollees combined is 4.8 percent for CY 2009. According to CMS, this estimate reflects an underlying trend change in per capita costs of 3.4 percent for CY 2009, and adjustments to the estimates for aged and disabled growth percentages for CYs 2004-2008.

In Attachments II-V of the Memorandum, CMS also addresses:

• changes in payment methodology for CY 2009 for original Medicare benefits
• changes in payment methodology for CY 2009 for Part D benefits
• preliminary CMS-HCC risk adjustment factors
• annual adjustments for 2009 for the Part D benefit parameters for the defined standard benefit

The final rates will be announced on April 7, 2008 in the Announcement of Calendar Year 2009 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies.  In order to be considered, comments must be received by 6:00 p.m. (EST) on March 7, 2008.  The Memorandum and a related Fact Sheet contain information regarding the submission of comments to CMS.

Senators Baucus and Grassley Comment on Specialty Hospital Article

On February 21, 2008, Senate Finance Committee Chairman Max Baucus and Ranking Member Charles Grassley released a statement regarding a recent story on specialty hospitals at Forbes.com. 

The Forbes.com story praises physician-owned specialty hospitals for their safety and quality of care, and states that "the hospital industry, through legally questionable bullying tactics and arduous lobbying, has all but stamped out expansion of the specialty hospital sector, the only real competitive threat it has ever faced."

However, in the statement, Senators Baucus and Grassley assert that the Forbes.com story fails to mention any of the shortcomings of specialty hospitals.  In fact, the Senators assert that the story "misses the central point of the debate because it fails to mention the wealth of available evidence recognizing that these physician-owned limited service facilities are far less likely to treat the sickest of the sick." 

The Senators also assert that specialty hospitals often cherry pick the more profitable, healthier patients while sending the uninsured, underinsured or high risk patients elsewhere.  Further, the Senators claim that the "potential for more profits often induces the physician investor to order more procedures than are needed, which puts patients at increased risk and unnecessarily drives up health care costs." 

CMS Reports to Congress on Bundled Prospective Payment System for ESRD Patients

On February 20, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release announcing the release of a Report to Congress, which details the design and implementation of a fully bundled end stage renal disease (ESRD) prospective payment system (PPS).

Currently, payment for outpatient maintenance dialysis services furnished to ESRD patients is made under a partially bundled prospective payment system known as the composite payment rate.  However, ESRD facilities bill Medicare separately for certain dialysis-related services, such as certain ESRD-related drugs and laboratories services, that are outside the composite payment rate.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 required that CMS issue the Report to Congress detailing the design and implementation of a bundled ESRD PPS for services furnished by ESRD facilities that includes to the maximum extend feasible, both composite rate and separately billed services.  Both the Government Accountability Office and Medicare Payment Advisory Commission have endorsed the inclusion of the separately billable services under a fully bundled ESRD PPS.

HHS Secretary Releases Medicare Funding Warning Response Act of 2008

The Secretary of the Department of Health and Human Services, Michael O. Leavitt, recently released the text of a letter to House Speaker Nancy Pelosi and a related legislative proposal, entitled the Medicare Funding Warning Response Act of 2008 (Act).

According to the letter, the Act is being proposed to address the Medicare funding warning issued by the Medicare Board of Trustees (Trustees) pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA).  Under the MMA, the Trustees are required to include a finding in their annual report whenever they project that general revenues will make up more than 45 percent of total Medicare funding within 7 years.  If the Trustees make this determination for 2 consecutive years, a Medicare funding warning is triggered requiring the President to propose policies to reduce general revenues as a share of Medicare costs.

According to Secretary Leavitt, the Act would take a 3-step approach.  As reflected in a summary of the Act, the first step would generally include the development and implementation of interoperable electronic health records and personal health records for beneficiaries, increasing the transparency of pricing and quality information for beneficiaries, and providing incentives for providers to deliver, and beneficiaries to choose, high-quality, low-cost health care.

As an apparent second step, the Act would implement malpractice liability reforms, including reforms limiting noneconomic damages, regulating attorney contingency fees, addressing evidence of collateral source benefits, and specifying guidelines for punitive damages. As a third step, the Act would increase the Medicare Part D premium for beneficiaries with incomes greater than $82,000 and married beneficiaries with incomes greater than $164,000. 

In the President's budget for fiscal year 2009, the President proposes to reduce Medicare spending by $178 billion over 5 years.  The President also proposes an automatic reduction in the rate of Medicare growth if the above MMA threshold is exceeded.  The reduction would begin as a .4% reduction to all payments to providers in the year the threshold is exceeded, and would grow by .4% every year the shortfall continues to occur. Reportedly, this automatic reduction is designed to encourage the President and Congress to reach an agreement on reforms to slow Medicare spending and bring it back in line with the threshold established by the MMA.

In the letter to House Speaker Nancy Pelosi, Secretary Leavitt characterizes the Act and the President's budget for fiscal year 2009 as taking "the first step of responding to the funding warning" and laying the "foundation for the comprehensive Medicare reforms that are necessary to strengthen and improve the program for future generations."  However, others have characterized the proposals as dead on arrival.