Category: CMS

THIRD CIRCUIT CALLS wRVU COMPENSATION INTO QUESTION

Recently, the United States Court of Appeals for the Third Circuit issued a decision calling into question the work relative value unit (“wRVU”) compensation structure commonly utilized by hospitals.

In U.S. ex rel. Bookwalter v. UPMC, the University of Pittsburgh Medical Center’s (“UPMC”) subsidiary physician practice entities employed neurosurgeons who performed procedures at UPMC’s affiliated hospitals. The neurosurgeons’ employment agreements provided them with a base salary based upon an annual wRVU threshold.  If a neurosurgeon exceeded the threshold, the neurosurgeon would be paid a productivity bonus of $45.00 per wRVU.  Also, if a neurosurgeon failed to achieve the annual wRVU threshold during a contract year, UPMC had the right to reduce the physician’s future base salary accordingly.

The relators argued that the wRVU compensation structure violated the Stark Law because it was an indirect compensation arrangement that did not meet any exception under the Stark Law. There were additional allegations that the Third Circuit looked at closely.  First, it was alleged that the neurosurgeons claimed to assist on surgeries when they did not, that they billed for parts of surgeries that were never performed and that they performed medically unnecessary procedures.  Second, some of the neurosurgeons recorded wRVUs that were two to three times the 90th percentile nationally.  Third, some of the neurosurgeons were compensated at or above the 90th percentile nationally, including one whose bonus alone exceeded the 90th percentile.  The Third Circuit also noted that the neurosurgical department at UPMC was among the leaders in gross revenue nationally.

The federal government previously settled with UPMC on physician billing claims for $2.5 million, but did not intervene as to allegations of false claims on the hospital side. Below, the United States District Court for the Western District of Pennsylvania dismissed the complaint for failure to state a claim, and the relators consequently appealed to the Third Circuit.

In reversing the District Court’s decision, the Third Circuit ruled in favor of the relators adopting an interpretation of the Stark Law previously utilized by the U.S. Court of Appeals for the Fourth Circuit in U.S. ex rel. Drakeford v. Tuomey. The Third Circuit held that the relators had provided enough evidence to plausibly allege a violation of the Stark Law to allow the case to move forward to the discovery phase. The relators argued that because a neurosurgeon’s aggregate compensation varied with the volume or value of the surgeon’s referrals to UPMC’s hospitals, each time the surgeon performed a procedure at a UPMC hospital, the surgeon generated a referral for the associated hospital services that could potentially constitute a violation of the Stark Law.

The Third Circuit also noted that in some instances, the compensation paid exceeded collections received by UPMC and, in fact, in other instances, the wRVU conversion factor exceeded what UPMC collected. The court opined that a healthcare provider would not want to pay a physician compensation for the physician’s professional services that exceeded collections unless the provider was making up the revenue in another way, namely, referrals for hospital services.

The decision in this case would appear to contradict previous guidance issued by the Centers for Medicare and Medicaid Services (“CMS”) that stated that productivity-based compensation is permitted under the Stark Law.

Given the Third Circuit’s decision that the relators pled a plausible cause of action, the case will now proceed to discovery to allow the relators to more fully develop their claims.

Hospitals should not necessarily rush to discontinue the use of the wRVU compensation model.  This decision allows the case to proceed to discovery, but is not a final decision on the merits of whether the conduct in question constituted a Stark Law violation.  Additionally, it should not be ignored that this decision contravenes CMS guidance and that any ultimate ruling would likely be rendered moot if the current proposed rule from CMS to amend the Stark Law becomes final.  Nonetheless, hospitals must be careful to ensure that all compensation is fair market value, that documentation of fair market value is clear and that commercial reasonableness in all such arrangements exists as well.  Hospitals should not hesitate to obtain opinions on commercial reasonableness.

CMS Rule Reducing Medicare Payments for Off-Campus Hospital Based Clinics Vacated

In November 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule (the “Rule”) reducing payments for evaluation and management services provided at off-campus hospital based clinics, to the same rates as when provided in a physician’s office.  The Rule, which CMS described as a method to control what it viewed as unnecessary increases in the volume of outpatient services at off-campus hospital based clinics, became effective on January 1, 2019.

Prior to adoption, the Rule went through the formal notice-and-comment rulemaking process during which CMS received nearly 3,000 comments. Many of the comments suggested that CMS lacked statutory authority to implement the Rule.  CMS considered and rejected those arguments.

Almost immediately following the publishing of the Rule, the American Hospital Association, the Association of American Medical Colleges and various hospital systems from across the country filed suit seeking to vacate the Rule.  The suit was filed in the United States District Court for the District of Columbia and was captioned The American Hospital Association, et al. v. Azar, Case No. 1:18-CV-2841.

The plaintiffs in the case argued that, pursuant to 42 U.S.C. § 1396l(t)(9)(A)-(B), if CMS wanted to reduce payment rates for a particular outpatient service, it should have changed the relative payment weights and adjustments through the annual review process in a budget neutral manner. The Rule did not take budget neutrality into account.

Conversely, CMS argued that it has authority to develop a “method” for controlling unnecessary increases in volume under 42 U.S.C. § 1396l(t)(2)(F), without regard for budget neutrality. CMS further argued that the term “method” is not explicitly defined in the statute, that its approach satisfied the generic definitions of the term and deference should be given to that approach.

The plaintiffs moved for summary judgment, and the Court addressed these issues in its September 17, 2019 opinion.  Therein, the Court reviewed the context of the statutory reference to “method” and found “[t]hat context does not make clear what a ‘method’ is, but it does make clear what a ‘method’ is not:  it is not a price setting tool, and the government’s effort to wield it in such a manner is manifestly inconsistent with the statutory scheme.”  Thus, the Court found the Rule was ultra vires, vacated the applicable portions of the Rule and remanded the matter for further proceedings consistent with its opinion.

While the decision certainly benefits hospital systems across the country, this battle appears to be far from over.  Since the issuing of the Court’s opinion, CMS has filed a motion to modify the order to a remand without vacatur, or in the alternative, for the Court to stay the portion of its order vacating the Rule for sixty days to allow the Solicitor General time to determine whether to authorize an appeal.  That appeal is likely to be filed and the battle will wage on.

CMS’ New Rule Targets “Bad Actors” and Anyone That Associates With Them

On September 4, 2019, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule allowing it to revoke health care providers’ and suppliers’ Medicare enrollment if they are affiliated with targeted “bad actors.” This first of its kind rule, issued as part of CMS’ Program Integrity Enhancements to the Provider Enrollment Process (CMS-6058-PC), will go into effect on November 4, 2019. According to CMS, this rule will “strengthen the agency’s ability to stop fraud before it happens by keeping unscrupulous providers out of our federal health care insurance programs.”

The new rule provides for several new tools in CMS’ arsenal against fraud, waste and abuse in the federal health care programs. First, it allows CMS to identify individuals and organizations that pose an undue risk based on their relationships with other previously sanctioned entities. CMS, in its press release, provides an example: “[a] currently enrolled or newly enrolling organization that has an owner/managing employee who is ‘affiliated’ with another previously revoked organization can be denied enrollment in Medicare, Medicaid and CHIP or, if already enrolled, can have its enrollment revoked based on the problematic affiliation.” Consistent with this approach, providers and suppliers are going to be required to disclose current or previous direct or indirect affiliations with a provider or supplier that has been suspended, excluded or had their enrollment revoked. The goal is to prevent those found to be involved in criminal and fraudulent conduct from continuing to reappear as part of new organizations or working with new individuals hiding behind their names.

Second, the rule will also permit CMS to now block providers and suppliers who are revoked from re-entering the Medicare program for 10 years, versus the historic 3 year revocation period before allowing re-enrollment. And, for those with second revocations, the provider or supplier can now be blocked from the federal programs for up to 20 years.

CMS believes that this new rule will help put a stop to the “pay and chase” approach that has been the historic model in addressing federal health care fraud.

As a result of this new rule, providers and suppliers will need to be even more mindful of who they do business with and understand that CMS will be taking an even more critical look at their Medicare enrollment if they affiliate with anyone who has had an issue with CMS. Given CMS will arguably be able to now act to revoke a provider or supplier based on a perception of a potential risk due to an affiliation with a “bad actor,” providers and suppliers will need to be even more vigilant given their enrollment could be targeted before they even realize there is any sort of issue. Thus, the onus is on providers and suppliers to be careful who they employ, hire, or otherwise do business with because CMS may lump you in with that “bad actor’s” reputation.

DSH UNCOMPENSATED CARE COSTS LITIGATION CONTINUES

On January 10, 2010, the Centers for Medicare and Medicaid Services (“CMS”) posted answers to frequently asked questions (“FAQ”) regarding disproportionate share hospital (“DSH”) audit reporting requirements on its website. In those FAQs, CMS indicated that revenues received from private insurance companies (FAQ 33) and Medicare (FAQ 34) for Medicaid eligible patients must be deducted from costs when determining “uncompensated care costs.”

As a result of the policies enunciated in these FAQs, a deluge of litigation was commenced. Numerous hospitals asserted challenges, in various courts across the nation, asserting that FAQs 33 and 34 were unlawful amendments to the existing regulations which made no reference to the inclusion of Medicare and private insurance payments in the calculation of uncompensated care costs.  Each court that has addressed the issue has found the FAQs invalid, and issued either preliminary or permanent injunctions prohibiting their enforcement, on the basis that CMS violated the Administrative Procedure Act (“APA”) by failing to properly adopt the policies embodied therein in accordance with the notice and comment provisions of the APA. See Texas Children’s Hospital v. Burwell, 76 F. Supp.3d 224 (D.D.C. 2014); New Hampshire Hospital Ass’n v. Burwell, 2017 WL 822094 (D.N.H. Mar. 2, 2017); Children’s Hosp. of the King’s Daughters, Inc. v. Price, 258 F.Supp.3d 672 (E.D. Va. 2017); Tennessee Hosp. Ass’n v. Price, 2017 WL 2703540 (M.D. Tenn. June 21, 2017); Children’s Health Care v. Centers for Medicare & Medicaid Servs., 2017 WL 366758 (D. Minn. June 26, 2017).

Thereafter, on June 2, 2017, following a notice and comment period, CMS issued a final rule which incorporated the policies enunciated in the previously issued FAQs (the “Final Rule”). The Final Rule provides that uncompensated care costs “[a]re defined as costs net of third-party payments including, but not limited to payments by Medicare and private insurance.” 42 C.F.R § 447.299(c)(10)(i).

The adoption of the Final Rule, however, has not stopped the challenges to CMS’ policy. Since the Final Rule’s adoption, two additional courts have addressed the calculation of uncompensated care costs. These courts not only found that CMS’ failure to follow the notice and comment provisions of the APA made the policies in FAQs 33 and 34 unenforceable, they also held the Final Rule invalid because it contradicts the plain language of the Medicaid statute. See Missouri Hospital Ass’n v. Hargan, 2018 WL 814589 (W.D. Mo. Feb. 9, 2018); Children’s Hosp. Ass’n of Texas v. Azar, 300 F. Supp.3d 190 (D. D.C 2018).  

Both courts looked to the Medicaid statute, which states that DSH payments cannot exceed:

[t]he costs incurred during the year of furnishing hospital services (as determined by the Secretary and net of payments under this subchapter, other than under this section, and by uninsured patients) by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year. 42 U.S.C. § 1396f-5(g)(1)(A).

The courts found that the Medicaid statute’s reference to “payments under this subchapter” was a specific reference to payments made by Medicaid. Because the Medicaid statute makes no reference to subtracting any other payments made on behalf of Medicaid eligible patients (other than payments by uninsured patients) from the total costs incurred, the courts concluded that CMS exceeded its authority in adopting the Final Rule.  Accordingly, the Missouri Hospital Ass’n court enjoined the enforcement of the Final Rule, and the Children’s Hosp. Ass’n of Texas court vacated the Final Rule in its entirety. Missouri Hospital Ass’n, 2018 WL at *10-13; Children’s Hosp. Ass’n of Texas, 300 F. Supp.3d at 205-211. 

In light of these court decisions, as of December 30, 2018, CMS has withdrawn FAQs 33 and 34 and will accept revised DSH audits that cover hospital services furnished before June 2, 2017, when the Final Rule was adopted.  Moreover, CMS has indicated it will not enforce the Final Rule as long as the decision in Children’s Hospital Ass’n of Texas remains in effect.  That decision is currently pending appeal before the United States Court of Appeals for the D.C. Circuit. We will be keeping a close eye on the Children’s Hospital Ass’n of Texas case and will provide an update once a decision is issued.

New Bundled Payment Initiatives From CMS

Although a new Secretary of Health and Human Services has yet to be confirmed, Centers for Medicare and Medicaid Services Administrator Seema Verma is putting her fingerprints on a course change in handling bundled payment initiatives for beneficiaries covered by traditional Medicare.

The Trump Administration had previously pulled back from the Obama Administration movement toward mandatory programs, in favor of voluntary initiatives. On August 17, 2017, the new administration proposed a rule that among other things scrubbed a mandatory Episode Payment Model finalized on January 3, 2017 in the last days of the Obama administration.

In that proposed rule change, CMS said “if at a later date we decide to test these models, or similar models, on a voluntary basis, we would not expect to implement them through rulemaking, but rather would use methods of soliciting applications and securing participants’ agreement to participate consistent with how we have implemented other voluntary models.”

On January 9, 2018, CMS did just that, soliciting applications for voluntary participation in 29 Inpatient Clinical Episodes and three outpatient clinical Episodes in what it is calling “Bundled Payments for Care Improvement Advanced (BPCI Advanced)”.

The 29 Inpatient Clinical Episodes are:

  • Disorders of the liver excluding malignancy, cirrhosis, alcoholic hepatitis
  • Acute myocardial infarction
  • Back & neck except spinal fusion
  • Cardiac arrhythmia
  • Cardiac defibrillator
  • Cardiac valve
  • Cellulitis
  • Cervical spinal fusion
  • COPD, bronchitis, asthma
  • Combined anterior posterior spinal fusion
  • Congestive heart failure
  • Coronary artery bypass graft
  • Double joint replacement of the lower extremity
  • Fractures of the femur and hip or pelvis
  • Gastrointestinal hemorrhage
  • Gastrointestinal obstruction
  • Hip & femur procedures except major joint
  • Lower extremity/humerus procedure except hip, foot, femur
  • Major bowel procedure
  • Major joint replacement of the lower extremity
  • Major joint replacement of the upper extremity
  • Pacemaker
  • Percutaneous coronary intervention
  • Renal failure
  • Sepsis
  • Simple pneumonia and respiratory infections
  • Spinal fusion (non-cervical)
  • Stroke
  • Urinary tract infection

The three Outpatient Clinical Episodes are:

  • Percutaneous Coronary Intervention (PCI)
  • Cardiac Defibrillator
  • Back & Neck except Spinal Fusion

Seven quality measures will apply.

Acute Care Hospitals and Physician Group Practices can participate as “Convener Participants” or “Non-Convener Participants”. Other entities that are either Medicare-enrolled or not Medicare-enrolled providers or suppliers may participate as “Convener Participants” only. A “Convener Participant” is a Participant that brings together multiple downstream entities, facilitates coordination among those downstream entities, and bears and apportions financial risk under the Model.  A Non-Convener Participant is a downstream entity that bears financial risk only for itself.

Under the program, Medicare Fee-for-service payments are made for services delivered, with a retrospective reconciliation. CMS will compare aggregate Medicare Fee-For-Service spending for all items and services included in a Clinical Episode against the Target Price for that Clinical Episode to determine whether the Participant is eligible to receive a payment from CMS, or is required to pay a repayment amount to CMS.

Clinical Episodes are measured from the first day of the triggering inpatient stay or outpatient procedure, and extend through the 90-day period starting on the day of discharge from the inpatient stay or the completion of the outpatient procedure, as applicable.\

BPCI Advanced will qualify as an Advanced Alternative Payment Model under the Medicare access and CHIP Reauthorization Act (MACRA) Quality Payment Program.

Interested participants have until March 12 to apply.

CMS Releases CY 2018 OPPS and ASC Payment System Final Rules Slashing Reimbursement for the 340B Program

On November 1, 2017 the Centers for Medicare and Medicaid Services (CMS) issued its final rule updating payment rates and policy changes for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System.

The most controversial aspect of the Rule is the significant reductions to reimbursement for drugs purchased through the 340B program. The final Rule reduces reimbursement for such drugs from the Average Sale Price (ASP) plus 6% to ASP minus 22.5%.  CMS indicated that it selected this reimbursement rate based on an analysis previously performed by the Medicare Payment Advisory Commission (MedPAC).  However, this reduction greatly exceeds that suggested by MedPAC who when commenting on the proposed Rule recommended a reduction of only 10% of the ASP.  Thus, it is unclear exactly what CMS ultimately relied upon to determine the appropriateness of the ASP minus 22.5% rate.

These reductions exclude certain facilities including Rural Sole Community Hospitals, Children’s’ Hospitals and PPS-Exempt Cancer Hospitals. The Rule also does not apply to Critical Access Hospitals and non-excepted provider based sites under Section 603 of the Bipartisan Budget Act.  Each of these facilities will continue to be paid at the prior rate of ASP plus 6%.

CMS anticipates this policy will result in a decrease of $1.6 billion in drug payments which will be redistributed to non-drug items and services throughout the OPPS to maintain budget neutrality. CMS indicates that overall OPPS payments will increase in 2018 by 1.4%.  Nevertheless, 340B facilities will see significant decreases in drug reimbursement in CY 2018.

Unsurprisingly, the reductions in 340B reimbursement have been met with great criticism from the impacted parties. Indeed, within two weeks of the issuance of the final rule several hospital associations and hospitals filed suit seeking to enjoin the implementation of this provision in the CY 2018 OPPS Rule.  The government has moved to dismiss and a hearing on the matter is scheduled for December 21, 2017.

While the reduction in 340B payments is the most significant change in the final Rule, there are several other aspects of the Rule worth commenting on:

  • The Rule increases OPPS payment rates by 1.35% and ASC payment rates by 1.2%.
  • The Rule removes Total Knee Arthroplasty from the Medicare inpatient only list, thereby allowing reimbursement for such procedures performed on an outpatient basis.
  • The Rule also establishes a new modifier, “FY” to be used to identify X-rays taken using computed radiography technology. Claims submitted with this modifier will be subject to phased-in payment reductions of 7% for services provided in CY 2018 through CY 2022 and 10% for services provided in or after CY 2023.
  • The Rule will also allow laboratories to bill Medicare directly for molecular pathology tests and advanced diagnostic laboratory tests in order to reduce concerns that the current date of service policy known as the “14 Day Rule” creates operational burdens for hospitals and laboratories.

Absent the Court issuing a preliminary injunction in the previously mentioned lawsuit, each of these rule changes will become effective January 1, 2018.

CMS Issues The 2018 MACRA Quality Payment Program Final Rule

The Centers for Medicare and Medicaid Services (“CMS”) recently published the 2018 Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) Quality Payment Program (“QPP”) final rule.  CMS maintained that it is listening to feedback and concerns from providers and that what it has heard is reflected in many of the provisions of the rule.

Among the many changes in the final rule are the following:

  • For 2018, CMS will exempt providers and groups with less than $90,000 in Medicare Part B allowed charges or that care for less than 200 Medicare Part B patients. These providers would be exempt from participating in the QPP altogether.
  • Small practices (those with fifteen or fewer practitioners) can earn five additional points to their Merit-Based Incentive Payment System final score if they submit data on at least one performance category. Further, CMS will award providers up to five bonus points if their patient population is deemed particularly complex, as measured by a combination of Hierarchical Conditions Category risk scores and the number of dually eligible patients treated.
  • Providers are allowed to continue using 2014 Edition Certified Electronic Health Record Technology (“CEHRT”), rather than upgrading to 2015 Edition technology, to report the Advancing Care Information (“ACI”) transition measures.  Providers that exclusively use 2015 CEHRT to report the ACI objectives and measures (the Stage 3 equivalent measure set) could be eligible for a ten percent bonus score.
  • The reporting period for quality performance, which was ninety days during 2017, which was the transition year, is now the full calendar year.
  • Solo practitioners and small practices can form a virtual group without specialty or location limitations to participate in MIPS.  While it was previously known that virtual groups would be an option, more detail on how those groups can be formed and can apply for treatment as virtual groups is now available.
  • CMS will implement a MIPS measurement option that allows hospital-based clinicians to use their hospital’s value-based purchasing results for the MIPS cost and quality categories.  However, this option will not be available until calendar year 2019.
  • Providers will be assessed on cost measures for 2018.  This was originally a 2019 requirement under the proposed rule.  The cost category will be weighted at ten percent of the MIPS final score in 2018 and will increase to thirty percent in 2019.

The 2018 final rule is emblematic of CMS’ continued approach to tinker with MACRA’s obligations and burdens on providers of all sizes.  From the beginning, it has been clear that MACRA would be a work in progress that would evolve, especially in the early years.  Thus, it is important that providers continue to pay attention to additional MACRA-related rules to ensure that they are current on the latest requirements, especially those that may be beneficial.

Beware CMS’ Ability to Preemptively Suspend or Revoke a Provider’s License

Most providers primarily worry about the financial impact of fraud and abuse and other compliance issues. However, as occurred recently in Dallas Texas, federal and state agencies can also come for a provider’s license either via a limitation, suspension or revocation causing far greater long-term and permanent damage to the institution. And, what is most troubling, is that the authority to take such action does not necessarily require the right of the provider to receive a hearing or even an opportunity to refute the allegations.

On August 18th a Dallas laboratory filed suit against federal and state officials and agencies seeking to temporarily restrain them from suspending or revoking the company’s federal laboratory licenses. This lawsuit was prompted as a result of federal inspectors allegedly finding regulatory violations in the way the laboratory operated and conducted business. It is believed that the federal and state investigations came as a result of a lawsuit filed by the private insurer, UnitedHealthcare, against the laboratory. In that lawsuit UnitedHealthcare claims that there were bribes and kickbacks to doctors and other providers during a five year period for overpriced and unnecessary drug and genetic tests.

According to a letter sent on May 10th from CMS to the laboratory’s officials, there were “systemic and pervasive problems throughout the laboratory which [] led to the findings of immediate jeopardy.” A finding of immediate jeopardy provides CMS with the authority under federal law to suspend, limit or even revoke a laboratory’s license to operate arguably without any right to a hearing or opportunity for the laboratory to refute the allegations.

These events demonstrate the broad authority held by CMS to pull licenses if it is believed that the ongoing actions are likely to cause patients injury, harm, impairment or death. This further underscores the critical importance of maintaining an effective compliance program and having proper protocols in place to perform internal audits/investigations and to respond to and remediate any outside audits/investigations. Furthermore, this laboratory is just the latest example of situations where claims and disputes with a private payer can quickly pivot to investigations and claims by the federal or state governments. Providers must be diligent in addressing the allegations of private payers and always be mindful of how those allegations may impact on federal or state health care programs. Failing to do so can place a provider in a detrimental position. And, for most providers, having their licenses suspended or revoked, even if just for the period of time the investigation is occurring, can be catastrophic to their business.

Changes to MACRA to Hopefully Lessen the Burdens

The Centers for Medicare & Medicaid Services (“CMS”) recently published a proposed rule, which included modifications to the final rule that implemented the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) in 2017.  Some of the changes are detailed in this blog post.

The proposed rule increases the required participation threshold for providers from Medicare Part B annual charges of $30,000 to $90,000 and 100 or less Medicare patients annually to 200 or less Medicare patients annually.

CMS also finally provided proposed guidance on how to participate in virtual groups.  A virtual group is a combination of two or more federal tax identification numbers (“TIN”), with each TIN consisting of ten or fewer eligible clinicians.  The virtual group must form itself and provide written notice of this election to CMS by December 1 of the calendar year preceding the performance period.  Clinicians can only participate in one virtual group.  All eligible clinicians in a TIN must participate in the virtual group except for those who participate in the Alternative Payment Model (“APM”) scoring.  Virtual groups can opt to receive a determination as to whether the participants qualify to form a virtual group and will then be required to establish a formal agreement amongst the members.  Virtual groups will be subject to the same reporting and performance standards as non-virtual Merit-Based Incentive Payment System (“MIPS”) track groups.

Another part of the proposed rule is the creation of a new partial group reporting option.  Under this option, some clinicians under a TIN could use the APM reporting standard while the remaining participants would collectively report under MIPS.

CMS also proposed a Facility Based Measurement for the 2018 MIPS performance year.  Facility-based clinicians who have at least seventy-five percent of their professional services furnished in the emergency department or other hospital inpatient setting would qualify for this option.  The hospital Total Performance Score from the facility where the clinician treats the highest number of Medicare beneficiaries during the measurement period would be converted into the MIPS quality performance category and cost performance category score.

By proposing these changes and others, CMS has indicated a willingness to continually examine the impact of MACRA on providers and make adjustments to help with compliance while preserving the goals of the program. While 2017 is the transition year, 2018 is fast approaching, and providers need to be prepared for a full year of MACRA implementation.  Providers of all sizes, including institutional providers that employ clinicians, should continue to ramp up their readiness for full MACRA performance.

Say Goodnight To The Two Midnight Rule’s Payment Reductions

The Two Midnight Rule, which was introduced as part of CMS’ FY 2014 Inpatient Prospective Payment System (“IPPS”) rule, dictates that when a physician expects a beneficiary to require care that crosses two midnights and admits the beneficiary based on that expectation, Medicare Part A payment is generally appropriate.  Conversely, if the beneficiary’s hospital stay is expected to be less than a period spanning two midnights, payment under Medicare Part A is generally inappropriate.

Because CMS anticipated significant increases in expenditures as a result of the Two Midnight Rule, CMS exercised the Secretary’s “broad authority” under 42 U.S.C. 11395ww(d)(5)(I)(i) to impose a 0.2% reduction to the national capital federal rate in FY 2014 to offset the anticipated increase in expenditures.  That same reduction was applied to the national capital federal rate in FY 2015 and FY 2016 as well.

In connection with the adoption of the Two Midnight Rule numerous commenters questioned the validity of the Secretary’s prediction of increased expenditures, upon which the decision to reduce rates was based. However, CMS never addressed these comments in detail when adopting its final rule except to say that the reductions were an appropriate use of the Secretary’s statutory exceptions and adjustments authority.

Having not received an adequate response to their comments during the rule making process, numerous hospitals filed suit challenging the 0.2% reduction. Several of those suits were consolidated before the United States District Court for the District of Columbia under the caption Shands Jacksonville Medical Center, et al. v. Burwell, Consolidated Civil Case Nos. 14-263, 14-503, 14-536, 14-607, 14-976, 14-1477 (the “Shands Litigation”).

On September 21, 2015 the Court in the Shands Litigation found that the Secretary’s failure to disclose critical assumptions made by the actuaries who calculated the alleged increase in expenditures, which was relied upon to impose the 0.2% reduction, failed to meet the standards of the Administrative Procedures Act by depriving the public of a meaningful opportunity to comment on the proposed rule. As a result, the Court remanded the matter back to the agency for further proceedings regarding the adequacy of the 0.2% reduction.

After remand, CMS issued public notice of the basis for the 0.2% reduction and its underlying assumptions.  As a result of the comments received to that public notice, CMS eliminated the 0.2% reduction for FY 2017 in connection with the FY 2017 IPPS final rule.  Additionally, CMS adjusted the FY 2017 capital IPPS rate to effectively eliminate the impact of the 0.2% reduction to rates in previous years by implementing a one-time prospective adjustment of 1.006 in FY 2017 to the national capital Federal rate.

Despite implementing this adjustment, CMS denies any error and continues to maintain that “the assumptions underlying the 0.2% reduction to the rates put in place beginning in FY 2014 were reasonable at the time we made them in 2013.”  Nevertheless, whether CMS recognized its error, or felt compelled to make this change as a result of the Shands Litigation, the end result is the same for hospitals throughout the country.  They have been relieved of the burden imposed by the 0.2% reduction associated with the adoption of the Two Midnight Rule.