Medicare Update

CMS Publishes Final Hospital Outpatient Prospective Payment Rule for 2008

On November 27, 2007, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule (with comment period) in the Federal Register, which updates the Medicare hospital outpatient prospective payment system (OPPS) for calendar year 2008.  In conjunction with the OPPS Final Rule, CMS also:

• issues rate changes for the Medicare hospital inpatient prospective payment system (IPPS) final rule for FY 2008, which resulted from the TMA, Abstinence Education and QI Programs Extension Act of 2007 (Act).  Specifically, the Act's provisions that reduced the documentation and coding adjustment from -1.2 percent to -0.6 percent for 2008.
• changes the IPPS final rule for FY 2008 by retroactively adopting a policy of not applying the documentation and coding adjustment to the FY 2008 hospital-specific rates for Medicare dependent, small rural hospitals and sole community hospitals.
• includes a new interim final rule (with comment period) that modifies regulations relating to graduate medical education payments made to teaching hospitals that have Medicare affiliation agreements for certain emergency situations.
• updates the payment rates and other pertinent rate information for the ambulatory surgical center payment system beginning in CY 2008.

CMS Releases Final Hospital Outpatient Prospective Payment Rule for 2008

On November 1, 2007, the Centers for Medicare & Medicaid Services (CMS) released a display copy of the Final Rule (with comment period) updating the hospital outpatient prospective payment system (OPPS) for calendar year 2008. 

According to CMS, Medicare payments (including beneficiary coinsurance) under the OPPS Final Rule will increase by about 10 percent to approximately $36 billion in calendar year (CY) 2008.  CMS also estimates that hospitals will receive an overall average increase of 3.8 percent in Medicare payments for outpatient services in CY 2008.

As part of the OPPS Final Rule, CMS also issues a notice implementing rate changes for the hospital inpatient prospective payment system (IPPS) final rule for FY 2008, which resulted from the TMA, Abstinence Education and QI Programs Extension Act of 2007 (Act).  Specifically, the Act's provisions that reduced the documentation and coding adjustment from -1.2 percent to -0.6 percent for 2008.  In the notice, CMS also changes the IPPS final rule for FY 2008 by retroactively adopting a policy of not applying the documentation and coding adjustment to the FY 2008 hospital-specific rates for Medicare dependent, small rural hospitals and sole community hospitals.

In the OPPS Final Rule, CMS also includes a new interim final rule (with comment period) that, among other things, extends the effective period for emergency Medicare graduate medical education (GME) affiliations from 3 academic years to up to 5 academic years.  For a hospital with a valid emergency Medicare GME affiliation agreement, the interim final rule also provides for extended time frames to meet the regulatory requirement for submitting the written agreement that allows a hospital to count residents training in non-hospital sites.

Finally, the OPPS Final Rule updates the payment rates for the revised ambulatory surgical center payment system beginning in CY 2008. The OPPS Final Rule is scheduled to appear in the Federal Register on November 27, 2007.

OIG Releases Advisory Opinion No. 07-13

On October 19, 2007, the Department of Health and Human Services' Office of Inspector General (OIG) released OIG Advisory Opinion No. 07-13 (Advisory Opinion). 

In the Advisory Opinion, a group of ophthalmologists and optometrists, and a wholly-owned subsidiary of a nonprofit hospital system (hospital) owed 100 percent of a group practice.  The ophthalmologists and hospital also had ownership interests in a surgical center, which operated Medicare certified single specialty ophthalmology ambulatory surgical centers (ASCs). Under the proposed arrangement, the hospital intended to sell some of its ownership interest in the surgical center to the optometrists.  Therefore, the group practice and surgical center inquired whether the addition of the optometrists as owners of the single specialty ophthalmology ASCs would violate the Federal anti-kickback statute and constitute grounds for related sanctions, including civil monetary penalties and program exclusions.   

Based on the facts presented, the OIG concluded that the proposed arrangement could potentially generate prohibited remuneration under the Federal anti-kickback statute and that the OIG could potentially impose related sanctions.  In reaching that conclusion, the OIG found that the proposed arrangement did not satisfy the safe harbor for investment interests in hospital/physician-owned ASCs.  The OIG pointed out that the safe harbor requires, among other things, that ownership be limited to physicians who perform ASC procedures on a regular basis (as demonstrated by meeting a one-third practice income test) and other investors who are not in a position to generate referrals to the ASC or its investors.  However, the OIG found that the optometrists would perform no ASC procedures, but would generate referrals to other investors (e.g., ophthalmologists) and, indirectly, to the surgical center ASCs. 

Because no safe harbor would protect the addition of the optometrists as owners of the surgical center, the OIG next examined whether the proposed arrangement would pose a minimal risk under the Federal anti-kickback statute.  In doing so, the OIG found that there were no safeguards to minimize the risk that the optometrists' investment in the surgical center would be for the purpose of inducing or rewarding referrals.  The OIG also found that the ophthalmologists and optometrists were in distinctly different positions. In particular, the OIG determined that the ophthalmologists personally performed surgical procedures at the surgical center ASCs as an extension of their office practices, but that the surgical center ASCs were not a comparable extension of the optometrists' office practices. Further, the OIG concluded that the likelihood that the optometrists would use their investment in the surgical center as a vehicle for receiving remuneration for referrals to the ophthalmologists increased significantly. Therefore, the OIG concluded that the proposed arrangement did not pose a minimal risk.

MedPAC Releases Updated Medicare Basics Documents

On October 5, 2007, the Medicare Payment Advisory Commission (MedPAC) released updated documents for its Medicare Basics and Medicare Payment Basics series.  The documents include a document entitled Medicare Benefit Design and the following documents which provide an overview of individual Medicare payment systems:

• Oxygen and Oxygen Equipment 
• Skilled Nursing Facilities
• Physician Services
• Psychiatric Hospital Services
• Rehabilitation Facilities
• Medicare Part D
• Outpatient Therapy Services
• Medicare Advantage Program
• Outpatient Dialysis Services
• Outpatient Hospital Services
• Home Health Care Services
• Hospice Services
• Hospital Acute Inpatient Services
• Long-Term Care Hospitals
• Clinical Laboratory Services
• Critical Access Hospitals
• Durable Medical Equipment
• Ambulatory Surgical Centers

MedPAC is an independent federal body established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program.

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 Revises Payment System for Ambulatory Surgical Centers and Proposes Payment Changes for Hospital Outpatient Services

On July 16, 2007, the Centers for Medicare & Medicaid Services (CMS) released a display copy of a Final Rule revising the Medicare payment system for services furnished in ambulatory surgical centers (ASC).  In conjunction with the release of the Final Rule, CMS also released a display copy of a Proposed Rule that would update payments for services in hospital outpatient departments under the Medicare outpatient prospective payment system (OPPS), and set new payment rates for ASCs under the revised system in calendar year (CY) 2008.

The Final Rule adopts payment policies for the revised ASC payment system, which will be implemented January 1, 2008.  CMS will be accepting comments on the Proposed Rule until September 14, 2007.  CMS expects to publish the final ASC payment rates for CY 2008 in a combined final OPPS/ASC rule in November 2007.  Both the Final Rule and Proposed Rule are scheduled to appear in the Federal Register on August 2, 2007.

CMS will also host a Special Open Door Forum on the revised ASC payment system.  The Special Open Door Forum will take place at 2:00 p.m.- 3:30 p.m. (EDT) on July 31, 2007.  To participate, one must dial (800) 837-1935 and reference conference ID 6982411.  CMS will post an audio replay of this special forum on the Special Open Door Forum website, which may be downloaded beginning August 3, 2007.

GAO Report: Medicare Payments to ASCs Should Be Based On OPPS

In a recent Report, the U.S. Government Accountability Office (GAO) recommended that the Centers for Medicare & Medicaid Services (CMS) implement a Medicare payment system for procedures performed in ambulatory surgical centers (ASC) based on the hospital outpatient perspective payment system (OPPS), taking into account the lower relative costs of procedures performed in ASCs compared to hospital outpatient departments.

Currently, Medicare pays for surgical procedures performed at ASCs and hospital outpatient departments through different payment systems.  The Medicare Prescription Drug, Improvement and Modernization Act of 2003 directed the GAO to compare the relative costs of procedures furnished in ASCs to those furnished in hospital outpatient departments.   As reflected in the Report, the GAO found that the payment groups in the OPPS, known as ambulatory payment classification groups, accurately reflect the relative cost of procedures performed in ASCs.   

In comments on the Report, CMS stated that the GAO's recommendation is consistent with its August 2006 proposed revisions to the ASC payment system.  According to CMS, the proposed revisions would more closely align payments in the ASC and OPPS payment systems to encourage the most efficient and appropriate choices of outpatient settings for ambulatory surgical procedures.