Medicare Update

CMS Releases Proposed Inpatient Rehabilitation Payment Rule for Fiscal Year 2009

On April 21, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release announcing the release of a display copy of a proposed rule (Proposed Rule) that would update the prospective payment rates for inpatient rehabilitation facilities (IRF) for fiscal year (FY) 2009. In brief, the proposed changes include:

• CMG Relative Weights.  The current case mix group (CMG) relative weights are based on FY 2003 data.  For FY 2009, CMS proposes to update the CMG relative weights and average length of stay values using FY 2006 data. 
• Outlier Threshold.  For FY 2009, CMS proposes an outlier threshold of $9,191, which is estimated to maintain outlier payments equal to 3.0 percent of the total estimated payments for FY 2009.
• Wage Index Adjustment. To determine FY 2009 rates, CMS proposes to continue using the pre-reclassification and pre-floor hospital wage indexes. 
• Policy Clarifications. In the Proposed Rule, CMS also seeks to clarify policies regarding "New England deemed counties" and multi-campus hospitals to be consistent with IPPS and other post acute care settings.  CMS will update the IRF wage index tables based on the OMB bulletins used to update the hospital wage data.
  
• MMSEA. The Proposed Rule would implement aspects of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) by setting the compliance percentage at 60 percent for cost reporting periods beginning on or after July 1, 2006 and by continuing to count comorbidities when determining IRF compliance with the threshold. CMS would also update the IRF payment rates by 0 percent for FY 2009.

According to CMS, the Proposed Rule is expected to result in a decrease in aggregate IRF payments of $20 million for FY 2009.  The Proposed Rule is scheduled to be published in the Federal Register on April 25, 2008.  CMS expects to publish a final rule on or before August 1, 2008.

MedPAC Releases Medicare Payment Policy Report for 2009

On February 29, 2008, the Medicare Payment Advisory Commission (MedPAC) issued a News Release announcing the release of its Report to Congress: Medicare Payment Policy for 2009 (Report).  In the Report, MedPAC makes updates and policy recommendations for certain Medicare fee-for-service payment systems for 2009.  In brief, MedPAC recommends the following updates:

• Hospital Inpatient & Outpatient Services. MedPAC recommends that Congress increase payment rates in 2009 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.  The Centers for Medicare & Medicaid Services' (CMS) current projection of the market basket increase for fiscal year 2009 is 3.0 percent.  MedPAC also recommends that Congress reduce the indirect medical education adjustment by 1 percent to 4.5 percent per 10 percent increment in the resident-to-bed ratio. 
• Physician Services. MedPAC recommends that Congress increase the physician fee schedule conversion factor by the projected change in input prices less MedPAC's adjustment for productivity growth.  With the current estimate of input cost changes in 2009 of 2.6 percent and MedPAC's productivity adjustment of 1.5 percent, MedPAC's recommended 2009 update would be 1.1 percent.  MedPAC also recommends that Congress enact legislation requiring that CMS establish a process for measuring and reporting physician resource use on a confidential basis for a period of 2 years.
• Outpatient Dialysis Services. MedPAC recommends that Congress update the composite rate in calendar year 2009 by the projected rate of increase in the end-stage renal disease market basket index (2.5 percent) less MedPAC's adjustment for productivity growth (1.5 percent).  This would update the composite rate by 1 percent.  MedPAC also recommends that Congress implement a quality incentive program for physicians and facilities that treat dialysis patients.
  
• Skilled Nursing Facility Services. MedPAC recommends that Congress eliminate the update to payment rates for skilled nursing facility (SNF) services for fiscal year 2009 and that Congress establish a quality incentive payment policy for SNFs.  Further, to improve quality measurement for SNFs, MedPAC recommends that CMS:
  • add the risk-adjusted rates of potentially avoidable rehospitalizations and community discharge to its publicly reported post-acute care quality measures;
  • revise the pain, pressure ulcer, and delirium measures currently reported on CMS' Nursing Home Compare website; and
  • require SNFs to conduct patient assessments at admission and discharge.
• Home Health Services. MedPAC recommends that Congress eliminate the update to payment rates for home health care services for calendar year 2009. 
• Inpatient Rehabilitation Facility Services. MedPAC recommends that the update to the payment rates for inpatient rehabilitation facility services be eliminated for fiscal year 2009.
• Long-Term Care Hospital Services.  MedPAC recommends that the payment rates for long-term care hospital (LTCH) services be updated by the market basket index less MedPAC's adjustment for productivity growth (1.5 percent).  MedPAC reports that, under current market basket assumptions, this recommendation would update LTCH payment rates by 1.6 percent.

MedPAC is an independent Congressional agency established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program.  MedPAC meets publicly to discuss policy issues and formulate its recommendations to Congress.  Two reports, issued in March and June each year, are the primary outlets for MedPAC's recommendations.

President Bush Signs Medicare, Medicaid and SCHIP Extension Act of 2007

On December 29, 2007, President Bush signed the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) into law, extending the State Children's Health Insurance Program (SCHIP) and temporarily addressing a number of Medicare program issues.

As widely reported, the Act prevents the 10.1 percent reduction in Medicare physician payments that was scheduled for 2008 and gives physicians a 0.5 percent increase through June 30, 2008.  The 10.1 percent reduction in Medicare physician payments is driven by the statutory sustainable growth rate (SGR) formula, which is intended to control the growth in aggregate Medicare expenditures for physician services. Therefore, Congress will have to revisit the issue before July 1, 2008 or the 10.1 percent reduction will take effect at that time.  The 109th session of Congress passed similar legislation averting a 5 percent reduction in Medicare physician payments for 2007. The 5 percent reduction for 2007 was also driven by the SGR formula.

The Act also extends the Medicare therapy cap exception process through June 30, 2008.  The Balanced Budget Act of 1997 required that the Centers for Medicare & Medicaid Services (CMS) impose the therapy caps on Medicare payments for outpatient physical therapy (OPT), speech-language pathology (OSP) and occupational therapy (OOT) services in all settings, except hospital outpatient departments.  However, the Deficit Reduction Act of 2005 directed CMS to create a clinically-based exception process to the therapy caps for 2006. The Tax Relief and Health Care Act of 2006 extended that exception process through 2007. If Congress had not acted to extend the exception process through June 30, 2008, the Medicare Physician Fee Schedule Final Rule for 2008 would have imposed a combined therapy cap of $1,810 per beneficiary for OPT and OSP, and a separate cap of $1,810 for OOT, beginning January 1, 2008.  Unless Congress repeals the therapy caps or further extends the therapy cap exception process prior to July 1, 2008, the therapy caps will take effect when the Act's extension expires on June 30, 2008.

The Act also contains a number of other provisions impacting Medicare providers and suppliers, such as provisions freezing the inpatient rehabilitation facility compliance threshold at 60 percent and allowing certain comorbidities to count toward that threshold.

UPDATE: House Passes Medicare, Medicaid and SCHIP Extension Act of 2007

Today, the U.S. House of Representatives passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) in a 411-3 vote,  On December 18, 2007, the U.S. Senate passed the Act by unanimous consent.  The Act contains a number of Medicare provisions, including a provision that would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008, and instead gives physicians a 6-month 0.5 percent increase through June 30, 2008.

UPDATE: Senate Passes Medicare, Medicaid and SCHIP Extension Act of 2007

On December 18, 2007, the U.S. Senate passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) by unanimous consent.  Among other things, the Act would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008 and instead gives a 6-month 0.5 percent increase for physicians through June 30, 2008.  Under the Act, the physician payment changes would be offset, in part, by  an adjustment to the  Medicare  Advantage  stabilization fund.  The Act has been sent to the U.S. House of Representatives.

Congress to Consider Medicare Legislation Blocking Physician Payment Cuts

Today, Senate Finance Committee Chairman Max Baucus announced in Press Release that Congress will consider the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) this week.

If enacted, the Act would block the 10.1 percent reduction in the Medicare payment rates for physician services in 2008 for a period of 6 months.  In fact, the Act would replaced the scheduled 10.1 percent reduction with a 0.5% increase through June 30, 2008.  As reflected in the Press Release, the Act is expected to contain the following Medicare provisions:

• Increase in physician payment update; extension of the physician quality reporting system. Replaces the scheduled 10.1% cut to the Medicare physician reimbursement rate in 2008 with a 0.5% increase through June 30, 2008. Extends the physician quality reporting system. Revises the Physician Assistance and Quality Initiative fund.
• Extension of incentive payment program for physician scarcity areas. Extends a provision that provides a 5% bonus payment to physicians practicing in physician shortage areas through June 30, 2008.
• Extension of the floor on work geographic adjustment. Extends for six months the work geographic index (GPCI) floor of 1.0 through June 30, 2008.
• Extension of treatment of certain physician pathology services. Extends for six months the provision that allows independent laboratories to continue to bill Medicare directly for the technical component of certain physician pathology services provided to hospitals as authorized by the Balanced Budget Act of 1997 through June 30, 2008.
• Extension of exceptions process for therapy caps. Ensures Medicare beneficiaries access to therapy services through June 30, 2008.
• Extension of payment rule for brachytherapy; extension to therapeutic radiopharmaceuticals. Extends the current “charges to cost” methodology which provides a separate payment for brachytherapy services through June 30, 2008. Includes therapeutic radiopharmaceuticals in this provision.
• Extension of reasonable costs payments for certain clinical diagnostic laboratory tests in rural areas. Provides reasonable cost reimbursement for clinical lab tests performed by certain small rural hospitals as part of their outpatient services through June 30, 2008.
• Extension of authority of specialized Medicare Advantage plans for special needs individuals. Extends the authority of specialized plans to target enrollment to certain populations through 2009. Includes a moratorium on new plans and expanded service areas through December 31, 2009.
• Access to Medicare reasonable cost contract plans. Extends section 1876 authority for cost contracts through December 31, 2009.
• Adjustment to the Medicare Advantage stabilization fund. Removes $1.5 billion from the stabilization fund for regional preferred provider organizations in 2012.
• Medicare secondary payer reporting requirements. Requires the submission of data by group health plans and liability insurers to the Secretary of Health and Human Services that is necessary to appropriately identify individuals for whom Medicare is the secondary payer.
• Payment for Part B drugs. Implements HHS OIG recommendation to require CMS to adjust its Average Sales Price (ASP) calculation to use volume-weighted ASPs based on actual sales volume. Establishes an appropriate reimbursement rate for generic albuterol.
• Payment rate for certain diagnostic laboratory tests. Reimburses certain diabetes laboratory tests that are approved for home use at the same rate as other glycated hemoglobin tests beginning April 1, 2008.
• Long-term care hospitals. Provides regulatory relief for three years to ensure continued access to current long-term care hospital services, while also imposing a limited moratorium on the development of new long-term care facilities. Establishes new facility and medical review requirements to ensure patients are receiving appropriate levels of care at these facilities and freezes the market basket update for the last quarter of rate year 2008. Requires the Secretary to conduct a study on long-term care hospital facility and patient criteria.
• Payments for inpatient rehabilitation facility (IRF) services. Permanently freezes the inpatient rehabilitation services compliance threshold at 60%, effective for cost reporting periods starting July 1, 2006, and allows comorbid conditions to count toward this threshold. Sets the market basket update factor at 0% from April 1, 2008 through FY09. Requires the Secretary to study beneficiary access to inpatient rehabilitation services and care at IRFs and to make recommendations for classifying inpatient rehabilitation facility hospitals and units.
• Accommodation of physicians ordered to active duty in the Armed Services. Extends until June 30, 2008 a provision that permits physicians in the armed services to engage in substitute billing arrangements for longer than 60 days when they are ordered to active duty.
• Treatment of certain hospitals for payment under Medicare. Extends until September 30, 2008, provisions that have allowed certain hospitals to be eligible for wage index reclassification that were otherwise unable to qualify for administrative wage index reclassification.
• Medicare enrollment assistance. Provides $15 million to State Health Insurance Assistance Programs and $5 million for Area Agencies on Aging and Aging Disability Resource Centers for beneficiary outreach and assistance.

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 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 Releases Final Inpatient Rehabilitation Facility Payment Rule for 2008

On July 31, 2007, the Centers for Medicare & Medicaid Services (CMS) released a display copy of the Final Rule updating the payment rates and modifying the policies of the inpatient rehabilitation facility prospective payment system (PPS) for fiscal year (FY) 2008.

In the Final Rule, CMS increases inpatient rehabilitation facilities (IRF) payments by 3.2 percent, based on the rehabilitation, psychiatric and long-term care hospital market basket.  The Final Rule also increases the high cost outlier threshold to $7,362 (from $5,534 in FY 2007), which means that fewer cases are expected to qualify for outlier payments in 2008.  However, the Final Rule clarifies existing policy to indicate that short stay transfer cases that meet the criteria to qualify for outlier payments will be eligible to receive the additional payments.

The Final Rule also updates the IRF PPS wage index by establishing a policy in which the average wage index from all contiguous counties may be used in the future as a reasonable proxy for the rural area within a state.  However, CMS reports that the Final Rule does not revise the current policy on the 75 percent rule. The 75 percent rule is used by CMS to classify a provider as an IRF.  Currently, in addition to a patient's principal diagnosis, a patient's comorbidities may be used to determine whether a provider satisfies the 75 percent rule.  However, for cost reporting periods beginning on or after July 1, 2008, comorbidities can no longer be used.

The Final Rule is expected to be published in the Federal Register on August 7, 2007.