Medicare Update: UPDATE: House Democrats Introduce America's Affordable Health Choices Act

Yesterday, a number of news organizations (including a Wall Street Journal article) reported that House Democrats would introduce health care reform legislation on July 14, 2009. The legislation was introduced later that day and it is entitled America's Health Choices Act of 2009 (H.R. 3200).

In addition to addressing private health insurance reforms (and a public health insurance option), H.R. 3200 would make a number of changes to the Medicare program. In fact, as introduced, the changes to Medicare's Part A and B fee-for-service (FFS) program appear to be significant. Some of the highlights (as reflected in the House Ways and Means section-by-section analysis) are briefly outlined below.

Acute Care Hospitals

Productivity Improvements. H.R. 3200 would incorporate a productivity adjustment into the market basket update for inpatient hospitals beginning 2010 and set a floor for the update so that the productivity adjustment and any adjustments for quality reporting or meaningful use of electronic health records would not cause the update to go below zero. Beginning in 2010, H.R. 3200 would also incorporate a productivity adjustment into the market basket update for outpatient hospital services and set a floor for the update so that the productivity adjustment and any adjustments for quality reporting would not cause the update to go below zero.
Preventable Hospital Readmissions. Beginning in fiscal year (FY) 2012, H.R. 3200 would adjust payments based on the dollar value of each hospital's percentage of potentially preventable Medicare readmissions for 3 conditions with risk adjusted readmission measures endorsed by the National Quality Forum. H.R. 3200 would also direct the Secretary of the Department of Health and Human Services (Secretary) to expand the policy to additional conditions in future years and authorizes the Secretary to modify the adjustment based on a hospital's performance in readmissions compared national hospital rankings.
Disproportionate Share Hospital Payments. H.R. 3200 would direct the Secretary to submit a report to Congress by January 1, 2016 on Medicare disproportionate share hospital (DSH) payments. If the uninsured rate drops by a certain number of percentage points between 2012 and 2014, H.R. 3200 would also direct the Secretary to adjust Medicare DSH payments (starting in FY 2017) to the empirically justified level plus an adjustment reflecting uncompensated care costs.
Distribution of Unused Residency Positions. H.R. 3200 would direct the Secretary to redistribute residency positions that have been unfilled for the prior 3 cost reports and direct those slots for training of primary care physicians. Under H.R. 3200, special preference would be given to programs that saw a reduction in their slots, have formal arrangements to train residents in ambulatory settings or shortage areas, operate 3-year primary care residency programs, currently operate residency programs over their cap, or are located in states with a low physician resident to general population ratio.
Preservation of Resident Cap Positions from Closed Hospitals. H.R. 3200 would direct the Secretary to redistribute medical residency slots from a hospital that closes on or after the date that is 2 years before enactment to other hospitals in the same State, taking into account recommendations by the State's senior health official. Such recommendations would have to be submitted no later than 180 days after the date of the hospital closure involved or, in the case of a hospital that closed within 2 years of the enactment date, no later than 180 days after enactment.

Physicians' Services

Sustainable Growth Rate Formula. H.R. 3200 would reform the formula that annually updates the payment rates for Medicare physician services. The revised formula would provide for primary care services to grow at a higher rate than other services and not reduce physician pay rates for increases in spending on drugs or lab services. Physicians would also be encouraged to form Accountable Care Organizations (ACO) by providing ACOs with their own targets and update factors. H.R. 3200 would also update payment rates by the Medicare Economic Index in 2010 as reforms are implemented.
Accountable Care Organizations. H.R. 3200 would create an alternative payment model within Medicare FFS to reward physician-led organizations that take responsibility for costs and quality of care. Under H.R. 3200, ACOs that reduce the costs of their patients relative to a spending benchmark would be rewarded with a share of the programmatic savings (which would apparently be conditioned on meeting quality targets). ACOs could include groups of physicians organized around a common delivery system (including a hospital), an independent practice association, a group practice, or other common practice organizations. ACOs could also include nurse practitioners, physician assistants and other providers as designed by the ACO.
Payment Incentive for Selected Primary Care Services. H.R. 3200 would increase the Medicare payment rate by 5% for primary care services of physicians specializing in primary care. Physicians specializing in primary care would be defined by specialty (e.g., family practitioners, internists, and others) and by share of a practice in primary care (at least 50% of allowed charges for primary care services). Under H.R. 3200, eligible practitioners practicing in health profession shortage areas would receive an additional 5%.
Physician Quality Reporting Initiative. H.R. 3200 would extend (through 2012) payments under the Provider Quality Reporting Initiative (PQRI) program and create a review process for physicians who choose to have their PQRI submissions reviewed. H.R. 3200 would also direct the Secretary to integrate the PQRI program and the "meaningful use" measures used by the health information technology incentive program.

Ambulatory Surgical Centers

Productivity Adjustment. Beginning in 2010, H.R. 3200 would incorporate a productivity adjustment into the market basket update for ambulatory surgical centers (ASC).
Submission of Cost and Other Data. H.R. 3200 would direct the Secretary to develop a cost report for ASCs within 2 years of enactment and require reporting of cost data for cost reporting periods beginning on or after the date when the cost report is developed. H.R. 3200 would also direct the Secretary to require ASCs to submit quality data beginning in 2012.
Public Reporting of Healthcare-Associated Infections. H.R. 3200 would require ASCs (and hospitals) to report public health information on healthcare-associated infections to the Centers for Disease Control and Prevention.

Home Health Agencies

Payment Update. H.R. 3200 would provide a freeze in the market basket update for 2010.
Payment Adjustments. H.R. 3200 would accelerate the regulatory adjustment for case mix currently scheduled for 2011 so that it occurs in 2010 and direct the Secretary to rebase the home health prospective payment system in 2011, taking into account changes in the average number and types of visits per episode, change in the intensity of visits, and growth in the cost per episode.
Productivity Improvements. H.R. 3200 would incorporate a productivity adjustment into the market basket update beginning in 2010 and set a floor for the market basket so that the combination of the productivity adjustment and any adjustments for quality reporting cannot cause the update to go below zero.

Physical Therapy Services

Extension of Therapy Cap Exceptions Process. H.R. 3200 would extend the process allowing exceptions to limitations on medically necessary therapy through 2011.

Inpatient Rehabilitation Facilities

Payment Update. H.R. 3200 would provide a market basket freeze for the second, third and fourth quarters of FY 2010.
Productivity Adjustment. Beginning in 2010, H.R. 3200 would incorporate a productivity adjustment into the market basket update for inpatient rehabilitation hospitals.

Skilled Nursing Facilities

Payment Update. H.R. 3200 would provide for a market basket freeze for the second, third and fourth quarters of FY 2010.
Productivity Adjustment. H.R. 3200 would incorporate a productivity adjustment into the market basket update for skilled nursing facilities (SNF) beginning in 2010.
SNF Payments. H.R. 3200 would codify the recalibration factor included in the Proposed Rule for the Medicare SNF prospective payment system for FY 2010. H.R. 3200 would also provide a budget neutral adjustment within that system to improve payment accuracy for non-therapy ancillary services and therapy services, direct the Secretary to analyze payment for non-therapy ancillary services for inclusion in a future SNF case mix reclassification system, and create an outlier payment for non-therapy ancillary services.
Disclosure of Ownership. H.R. 3200 would require SNFs and nursing facilities (NF) to disclose information on ownership and facility organizational structure and require the Secretary to develop a standardized format for such information.
Accountability Requirements. H.R. 3200 would require SNFs and NFs to operate compliance and ethics programs and direct the Secretary to develop a quality assurance and improvement program no later than December 31, 2011.
Civil Monetary Penalties. H.R. 3200 would authorize the Secretary to impose civil monetary penalties (CMP) for a deficiency that results in the direct proximate cause of death and would provide additional authority to the Secretary to raise or adjust CMPs under certain circumstances.

DMEPOS Suppliers

Productivity Adjustment. Beginning in 2010, H.R. 3200 would incorporate a productivity adjustment into the market basket update for durable medical equipment (DME) not subject to competitive bidding.
Power Driven Wheelchairs. H.R. 3200 would eliminate the option for Medicare to purchase power driven wheelchairs with a lump sum payment at the time the chair is supplied. However, Medicare would continue to make the same payment for power driven wheelchairs over a 13 month period, and the purchase option for complex rehabilitative power wheelchairs would be maintained.
Program Improvements. H.R. 3200 would provide protections for patients receiving oxygen therapy in the event an oxygen supplier goes out of business. H.R. 3200 would also exempt certain pharmacies from the surety bond requirement and need to be accredited to sell diabetic testing supplies and certain other items.

Comparative Effectiveness Research

Center for Comparative Effectiveness Research. H.R. 3200 would establish a Center for Comparative Effectiveness Research (Center) within the Agency for Healthcare Research and Quality to conduct, support and synthesize research related to comparative effectiveness.
Comparative Effectiveness Research Commission. H.R. 3200 would establish a public/private stakeholder commission to oversee the Center, determine national priorities for research, identify research methods and standards of evidence, support forums to increase stakeholder feedback, appoint advisory panels on specific national priorities to advise on questions and methods, and make recommendations for the dissemination of findings.

Fraud, Waste and Abuse

Sunshine Provision. H.R. 3200 would require manufacturers or distributors of certain drugs, devices, biologicals or medical supplies to electronically report to HHS's Office of Inspector General (OIG) any payments or other transfers of value above a $5 de minimis made to a "covered recipient" and require hospitals or entities that bill Medicare to report any ownership share by a physician. Failure to report would be subject to CMPs ranging from $1,000 to $10,000 per payment (with a $150,000 maximum per year), transfer of value, or investment interest not disclosed. Penalties for a knowing failure to report would range from $10,000 to $100,000 per payment (not to exceed $1,000,000 in 1 year or .1% of revenues for that year).
Limitations on Physician Referrals. H.R. 3200 would close a co-called "loophole" in the self-referral rules that allows physicians to refer patients to hospitals in which they have a direct financial interest. H.R. 3200 would also prohibit physician ownership in hospitals that are new as of January 1, 2009 and would provide for the growth of existing physician-owned hospitals within certain parameters.
Increased Funding. H.R. 3200 would provide an additional $100 million in annual funding for the Health Care Fraud and Abuse Control Fund and provides for expanded use of the funds by the Centers for Medicare & Medicaid Services Medicare Integrity Program.
Compliance Programs. H.R. 3200 would require all providers and suppliers (other than physicians) to adopt compliance programs and would authorize the Secretary to disenroll a supplier or impose CMPs or other intermediate sanctions for the failure to establish such a program.
Billing Agents and Others. H.R. 3200 would require billing agents, clearinghouses, and other alternative payees to be registered under Medicare in a form and manner specified by the Secretary.
Medicare Overpayments. H.R. 3200 would require a provider or supplier that becomes aware of a Medicare overpayment to report and return it within 60 days.
Medicare Enrollment. H.R. 3200 would require that physicians ordering DME or home health services billable to Medicare be Medicare-enrolled physicians and would allow the Secretary to expand this requirement to other areas.
Face-to-Face Encounters. H.R. 3200 would require a face-to-face (or telemedicine) encounter with a patient before a physician could certify home health services or DME and would allow the Secretary to expand this requirement to other areas.
Enhanced Penalties and Enrollment Applications. H.R. 3200 would establish CMPs of $50,000 per violation for providers and suppliers that knowingly make false statements or misrepresentation of material fact on enrollment applications.
Enhanced Penalties and False Claims. H.R. 3200 would establish CMPs of $50,000 per violation for the knowing submission of false statements or misrepresentation of material fact in information submitted to support a claim for payment.
Enhanced Penalties for Delaying Inspections. H.R. 3200 would establish CMPs of $15,000 per day for delaying or refusing to grant timely access to OIG audits, investigations or evaluations.
Enhanced Penalties for Excluded Individuals. H.R. 3200 would establish CMPs of $50,000 per violation for any person who orders or prescribes an item or service while excluded from a Federal health care program if that person knows or should know that the program from which they are excluded will be billed for the item or service.
Enhanced Penalties for Obstructing Audits. H.R. 3200 would allow for the permissive exclusion of individuals or entities found to have obstructed an investigation into or audit for fraud.
Enhanced Protection Authority. H.R. 3200 would allow the Secretary to designate areas of "significant risk" in which enhanced oversight could be applied to prohibit waste, fraud or abuse. H.R. 3200 calls for the Secretary to establish screening procedures for new providers (such as licensing board checks, screening lists of those excluded from Federal/State programs, background checks, unannounced pre-enrollment or other site visits). H.R. 3200 also allows for enhanced oversight periods (to include site visits, prepayment review, enhanced claims review) for new providers or suppliers in high risk areas, and allows for a moratorium on the enrollment of new providers or suppliers in high risk areas.

H.R. 3200 also contains a number of provisions pertaining to Medicare Parts C and D. It should also be noted that H.R. 3200 would make a number of tax code changes, including:

Establishing a 2.5% tax on the modified adjusted gross income of an individual who does not obtain acceptable health coverage for the individual or dependents claimed on an individual's tax return.
Establishing a payroll roll tax of 8% of the wages that an employer pays to its employees for employers who choose not to offer health coverage.
Requiring households with adjusted gross income in excess of $350,000 (married filing a joint return) and $280,000 (single) to pay a new progressive health care surcharge. For example, married household incomes in excess of $500,000 and below $1 million would be subject to a 1.5% surcharge and income in excess of $1 million would be subject to a 5.4% surcharge. However, such rates could increase in the event that certain health cost savings are not achieved.

It has been reported that H.R. 3200 is not a finished product and that it will be subject to changes by the House Ways and Means, Energy and Commerce, and Education and Labor Committees.

The House Ways and Means Committee has released a section-by-section analysis of H.R. 3200, a list of top line changes from the June 19, 2009 discussion draft, and an implementation timeline.

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