How the Health Care Reform Bills Differ

Three major health care reform proposals have been introduced in Congress in the last year. The bills differ significantly in approach and the issues they choose to emphasize. All of the bills, however, could significantly impact how providers furnish services to patients and how those services are reimbursed – both by public health care programs and private insurers.

CMS Issues Warning in Letter to Insurers Regarding Potentially Misleading Communications

The Centers for Medicare & Medicaid Services (CMS) issued a Memorandum September 21, 2009, to health care insurers that have contracted with Medicare as part of Medicare Advantage or the Part D prescription benefit, requiring them to stop making statements in mailings to plan enrollees regarding health care reform. CMS is concerned that some of the statements may be misleading to enrollees.

The CMS Memorandum was prompted by a mailing from a Medicare Advantage plan to its enrollees, warning that health care reform bills being considered by both houses of Congress could result in cuts to benefits and services under Medicare Advantage as well as traditional Medicare and Medicaid. The mailing also encouraged enrollees to contact their members of Congress to voice opposition to such cuts. CMS stated that the mailer appears to convey official and “legitimate Medicare program information” but instead only “offer[s] misleading and/or confusing opinion and conjecture by the plan about the effect of health care reform on the [Medicare Advantage] program…[and] that such communications are potentially contrary to federal regulations and guidance.”

Organizations and plans were also instructed to remove any such material from their websites. The Memorandum further states that CMS is researching whether such communications are contrary to federal regulations and guidance for the MA and Part D programs, and other federal law, including HIPAA. Based on its investigation, CMS could pursue compliance and enforcement actions against insurers that have issued such mailers.

In response, Republican lawmakers have warned that they would not allow President Obama to fill health positions until CMS reverses its position barring insurers from telling the elderly how Democrats' health overhaul could affect their benefits. View more information.

CMS Proposes New Prospective Payment System for Renal Dialysis Facilities

CMS has proposed a new prospective payment system (PPS) for facilities that provide dialysis services to Medicare beneficiaries who have end-stage renal disease (ESRD). The proposed PPS provides a single bundled payment to dialysis facilities that would cover the items and services used in providing outpatient dialysis services, including dialysis treatment, prescription drugs and clinical laboratory tests. The new payment system – required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) – is designed to improve the efficiency of care while promoting high quality services.

Under the proposed rule, CMS would establish a base bundled payment rate of $198.64 for all of the services related to a dialysis session, including the services in the current composite rate as well as items, including oral drugs, that are billed separately. The proposed base rate was derived from 2007 claims data for both composite rate and separately billable services and updated to reflect projected 2011 prices. It would also be adjusted for case-mix factors such as the patient’s age, gender, body size and time on dialysis. A special case-mix adjustment would apply to pediatric patients. Additional adjustments to the payment rate would be made for specific conditions, or co-morbidities, that have a significant impact on a course of treatment.

ESRD is the only category for Medicare eligibility that is based on a specific diagnosis, without regard to the age of the patient. Patients diagnosed with ESRD must rely on dialysis or receive a kidney transplant for survival. ESRD services are furnished on an outpatient basis in independent or hospital-based dialysis facilities. Currently, Medicare pays for certain dialysis services under a partial bundled rate, known as the composite rate. Payments for these composite rate services represent about 60 percent of total Medicare payments to ESRD facilities. The remainder of Medicare spending for dialysis services is for separately billed items such as drugs, but may also include laboratory services, supplies and blood products.

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Medicare Funds Made Available for Medical Home Demonstration

The Department of Health and Human Services (HHS) announced that CMS will start soliciting state applications later this year for medical home demonstrations that will include Medicare funding. The demonstrations are expected to begin in early 2010 and last approximately three years. Among other things, the Medicare demonstrations would test whether these projects: 1) reduce unjustified variations in utilization and expenditure across delivery systems; 2) improve the safety, effectiveness, timeliness and efficiency of health care; and 3) reduce overall utilization and expenditures under the Medicare program.

Under the Advanced Primary Care Model (APC), physicians receive supplemental payments for achieving nationally recognized quality standards, coordinating care across a multidisciplinary team and monitoring patients’ care outside the physician’s office or hospital using health information technology, regardless of whether the patient is insured by Medicare, Medicaid or a private insurer.

The APC model was developed by the four leading primary care physician specialty societies – the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Physicians and the American Osteopathic Association. It has been endorsed by other health care provider groups, private health care purchasers, labor unions and consumer organizations.

It is being tested in practice demonstrations by public and private insurers, including at least 30 state Medicaid programs, Blue Cross and Blue Shield, United Healthcare, CIGNA and Aetna, along with systems such as Geisinger, Kaiser and Group Health.

States wishing to participate in the new demonstration must:

  • Certify they have already established similar cooperative agreements between private payers and their Medicaid program;
  • Demonstrate a commitment by a majority of their primary care doctors to join the program;
  • Meet a stringent set of qualifications for doctors who participate; and
  • Integrate public health services to emphasize wellness and prevention strategies.

The demonstration’s design will include mechanisms to assure it generates savings for the Medicare trust funds and the federal government overall.

$120 Million for States Made Available as Part of Recovery Act Community Prevention and Wellness Initiative

HHS has made available $120 million in American Recovery and Reinvestment Act (ARRA) funds for prevention and wellness programs for states and territories. In all, the comprehensive Communities Putting Prevention to Work initiative will make $650 million available for public health efforts to address obesity, increase physical activity, improve nutrition, and decrease smoking. The $120 million in cooperative agreements will be awarded to states and territories for three components: statewide policy and environmental change, tobacco cessation through quitlines and media campaigns, and special initiatives to create health-promoting policies and environments. For the first two components, dollar amounts awarded to each state and territory will be based on population size and number of smokers. For the third component, states will apply for special funds through a competitive process based on the potential health impact of the proposed activities. States and territories will have two years to complete their work.

CMS Publishes Final Rule on Recoupment of Provider and Supplier Overpayments

CMS released a final rule (74 Fed. Reg. 47458) that limits recoupment of alleged overpayment and provides for the payment of interest to a provider/supplier whose overpayment determination has been reversed on appeal. The rule implements Section 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Providers have 41 days to file a redetermination request or 60 days to file a reconsideration request before recoupment may start. The rule could be significant as many providers/suppliers may be subject to Recovery Audit Contractor audits.

The rule sets forth specific timetables based on the level of the appeals process. At the first level of appeal, a provider/supplier must request redetermination from the Medicare contractor within 30 days of the claims determination to prevent recoupment. If it does not prevail at the first level of appeal, the provider/supplier must request reconsideration within 60 days to avoid recoupment during the second level of appeal. Providers/suppliers can forestall recoupment by not repaying alleged overpayments and appealing the disputed claims within the deadlines provided for the redetermination and reconsideration appeal levels. Interest does continue to accrue during those periods. In other words, should a provider/supplier lose at either level of appeal, and did not pay the overpayment, it will then owe the overpayment amount plus the accrued interest.

Significantly, if an overpayment determination is overturned at the third level of appeal (ALJ) or higher, CMS will be liable for interest that has accrued on the recouped overpayments. View the entire rule.

HITECH Act Medicare Incentive Payments

The Health Information Technology for Economic and Clinical Health Act (HITECH Act) under Title XIII of ARRA, provides incentives for the adoption and meaningful use of certified electronic health records (EHR) technology. Specifically, the HITECH Act contains financial incentives for physicians and hospitals to implement and adopt EHRs. The financial incentives are based on the concept of "meaningful use" of certified EHRs by physicians and hospitals. "Meaningful use" is broadly defined as follows: i) use of "EHR technology in a meaningful manner" (which for physician incentives shall include the use of e-prescribing); ii) electronic exchange of health information to improve the quality of care such as promoting coordination of care; and iii) reporting on clinical quality measures (which shall become more stringent over time).

Certified EHR technology is defined as a qualified electronic health record that is certified as meeting the standards for hospital settings as adopted by the Office of the National Coordinator for Health Information Technology (ONCHIT). Products certified by the Certification Commission for Health Information Technology (CCHIT) are likely to meet this definition. Notwithstanding the definitions, there has been much controversy and uncertainty regarding the more specific definition of “meaningful use” that will be detailed in a proposed regulation to be published in December 2009.

Medicare Hospital Incentives

Under ARRA, eligible hospitals will receive enhanced reimbursement starting in fiscal year (FY) 2011 and will be assessed penalties beginning in FY 2015 for hospitals that are not “meaningful users” of EHRs. The incentives are to be distributed over a four-year transition period through the formula described below. Unless hardship is demonstrated, hospitals that are not meaningful EHR users will see 75 percent of their market-basket update reduced by the following: 33.33 percent for 2015; 66 percent for 2016; and 100 percent for 2017 and beyond.

The incentive payment for each eligible hospital would be calculated based on the product of (1) an initial amount, (2) the Medicare share and (3) a transition factor.

  • The initial amount is the sum of a $2 million base-year amount plus a dollar amount based on the number of discharges for each eligible hospital.
  • The Medicare share is a fraction based on estimated Medicare fee-for-service and managed care inpatient bed days divided by estimated total inpatient bed days and modified by charges for charity care.
  • The transition factor phases down the incentive payments over the four-year period. The factor equals one for the first payment year, three-quarters for the second payment year, one-half for the third payment year, one-quarter for the fourth payment year and zero thereafter.

Medicare Physician Incentives

Non-hospital based physicians are eligible for incentive payments if they become meaningful users of certified EHRs starting in FY 2011. There is a total of $44,000 in Medicare payments available per eligible individual physician:

  • Year 1 - $18,000 (if the first payment year is 2011 or 2012)
  • Year 2 - $12,000
  • Year 3 - $8,000
  •  Year 4 - $4,000
  • Year 5 - $2,000

There are no incentive payments for physicians that first adopt EHRS in 2014. It is currently unclear whether the incentive payments will be in the form of a single consolidated payment or in the form of periodic installments.

Fee schedule reductions will apply to physicians not using certified EHR technology starting in 2015 as follows:

  • 1 percent in 2015;
  • 2 percent in 2016; and
  • 3 percent in 2017 (and after)

The Secretary may exempt an eligible professional from the fee reductions if the requirement for being a meaningful EHR user would be a significant hardship.

Definition of Meaningful Use

The Office of the National Coordinator for Health Information Technology Health IT Policy Committee has submitted recommendations, including a matrix of what constitutes “meaningful use” of health information technology, in order for providers to obtain incentive payments from federal stimulus funds.

The Policy Committee recommended that incentives be paid according to an “adoption year” rather than a calendar year. This means the 2011 measures will apply to a provider’s first adoption year even if that adoption occurs after 2011. For example, if a provider first adopts HIT in 2013, the 2011 measures (not the 2013 measures) would nevertheless apply under the Policy Committee’s recommendation. Accordingly, in order to qualify for the first-year incentive payment, an eligible provider must meet the established 2011 measures, including the ability to report quality measures to CMS relating to diabetes, hypertension, cholesterol, smoking cessation and obesity, as well as reporting on the percentage of orders entered directly by physicians through computerized physician order entry (CPOE) and various screening measures.

The matrix measures that the Policy Committee has recommended be adopted in order to be considered a “meaningful user” of Health Information Technology (HIT) correspond with the HIT Policy Committee Health Outcomes Policy Priority Objectives. The 2011 and 2013 goal is to “electronically capture in coded format and to report health information and use that information to track key clinical conditions.” The 2015 goal is to “achieve and improve performance and support care processes and on key health system outcomes.” The matrix outlines the Policy Committee’s recommended “meaningful use” requirements for both providers and hospitals. The criteria required in 2011 include the following:

  • using computerized physician order entry (computer-based entry required by 2011, but electronic interfaces are not required by 2011);
  • implementing drug-to-drug, drug-to-allergy and drug-to-formulary checks;
  • maintain up-to-date problem list of current and active diagnoses based on ICD-9 or SNOMED;
  • e-prescribing capability;
  • maintain active medication lists;
  • maintain active medication allergy list;
  • record demographics;
  • record advance directives; 
  •  record vital signs;
  • record smoking status;
  • incorporate lab test results;
  • generate lists of patients by specific conditions to use for quality improvement;
  • report ambulatory quality measures to CMS;
  • send reminders to patients for follow-up care;
  • implement one clinical decision rule;
  • document a progress note for each encounter;
  • check insurance eligibility;
  • submit claims electronically to payers;
  • provide patients with an electronic copy of their health record;
  • provide patients with electronic access to health information;
  • provide access to patient-specific education resources;
  • provide clinical summaries for patients for each encounter;
  • ability to exchange key clinical information;
  • perform medication reconciliation;
  • capability to send electronic data to immunization registries;
  • capability to provide electronic syndromic surveillance data to public health agencies;
  • compliance with HIPAA privacy and security rules; and
  • compliance with fair data sharing practices set forth in the Nationwide Privacy and Security Framework.

CMS will issue a proposed regulation by the year end and will issue a final rule in the spring of 2010.

New York Governor Signs Three Health Care Bills

New York Gov. David Paterson recently signed three health care bills that are aimed at reforming managed care and expanding COBRA coverage.

The managed care bill (A. 8402) is a comprehensive reform bill. The bill prohibits health plans from treating in-network providers as out-of-network because the referring provider was out-of-network. The majority of the bill takes effect January 1, 2010, with some provisions having varying effective dates. Effective immediately, however, the bill requires health plans to notify providers before making any adverse reimbursement changes to provider contracts and allows the provider to terminate the contract within 30 days of this notice. The bill also shortens the payment timeframe to providers from 45 days to 30 days for electronically submitted claims; prohibits health plans from denying payments due to coordination of benefits, unless there is a reasonable basis to believe an insured has other coverage; allows for provisional credentialing of new health care professionals; extends the requirements currently applicable to health maintenance organizations regarding grievance procedures and access to care to preferred provider organizations, exclusive provider organizations and HMO look-alike plans; establishes a new external appeal standard for rare diseases; and reduces the time health plans have to review a request for post-hospital home health care.

The “mini-Cobra” bill (A. 8400) extends the continuation of coverage from 18 to 36 months. The bill covers employers that have less than 20 employees and will affect all contracts issued, renewed, modified, altered or amended on or after July 1, 2009. The third bill (A. 9038), effective September 1, 2009, requires health plans to offer an option to continue coverage for unmarried young adults through age 29 under a parent’s health insurance policy.

New York Hospitals Required to Implement Compliance Programs

New York state regulations effective October 1, 2009, will require health care providers in New York to have an effective compliance program in place if they receive more than a $500,000 from the state’s Medicaid program. These regulations will expand the reach of the Deficit Reduction Act of 2005, which requires providers who receive more than $5 million from the Medicaid program to enact compliance plans regarding the False Claims Act and whistleblowers.

A required provider’s compliance program must include the following elements: (1) written policies and procedures that describe compliance expectations; (2) designation of an employee vested with responsibility for the day-to-day operation of the compliance program; (3) training and education of all affected employees and persons associated with the provider; (4) communication lines to the employee designated in (2) above; (5) disciplinary policies that outline sanctions for: (i) failing to report suspected problems; (ii) participating in non-compliant behavior; or (iii) encouraging, directing, facilitating or permitting either actively or passively non-compliant behavior; (6) a system for routine identification of compliance risk areas specific to the provider type; (7) a system for responding to and investigating compliance issues as they are raised; and (8) a policy of non-intimidation and non-retaliation for good faith participation in the compliance program.

The New York Commissioner of Health and its Medicaid Inspector General will have the authority to determine if a compliance plan is effective. A provider may be subject to sanctions or penalties for failing to have an effective compliance plan, including revocation of the provider's agreement to participate in Medicaid.

New York Medicaid Inspector General Cracks Down on Providers Billing for Deceased Patients

Effective October 1, 2009, the New York Medicaid Inspector General will begin posting on its web site the names of providers who bill Medicaid for services provided to deceased patients. Penalties also include fining such providers and requiring them to repay the Medicaid program. Enforcement has been made easier because the Office of Medicaid Inspector General now receives death information from the state within a few weeks, instead of the six-month waiting period to receive such information from the Social Security Administration.

Source: Health Law Regulatory Update