CMS Releases Final 2019 Outpatient Prospective Payment System Rulemaking, Finalizing Site Neutral Payment Policy for Off-Campus Provider-Based Departments – On November 2, 2018, CMS issued the 2018 Hospital Outpatient Prospective Payment System (“OPPS”) Final Rule (“Final Rule”) in which it finalized its proposal to pay the lower Physician Fee Schedule (“PFS”) rate rather than the current OPPS rate for evaluation and management services performed at excepted off-campus provider-based departments (“PBDs”). CMS did not move forward with its proposal to limit excepted off-campus PBDs to previously provided clinical families of services. Finally, CMS finalized its proposal to dramatically cut payments rates for 340B drugs furnished at nonexcepted off-campus PBDs.

Off-Campus Provider-Based Departments and Site Neutral Payments

Under Section 603 of the Bipartisan Budget Act of 2015 (“BBA”), CMS reimburses hospitals for outpatient services provided at certain off-campus PBDs under the PFS, commonly referred to as a “site neutral” payment policy. However, certain off-campus PBDs furnishing services to Medicare beneficiaries prior to November 2, 2015, and freestanding emergency departments were excepted from the payment reductions and continued to be paid the applicable (and higher) OPPS rate. In the proposed rule, CMS expressed concern that the above policy has incentivized a shift of services to excepted off-campus PBDs in a way that was both clinically unnecessary and more costly. In the Final Rule, citing authority under Social Security Act § 1833(t)(2)(F), CMS finalized a policy to pay the lower site-neutral PFS payment rate for clinic visit services (HCPCS code G0463) billed with the “PO” claims modifier (now required for all off-campus PBDs of a hospital furnishing outpatient hospitals items and services). In other words, evaluation and management visits, even when provided in an excepted off-campus PBD, will be paid the lower PFS rate. This will reduce payments by $70 per visit, and CMS will implement this change without consideration of budget-neutrality (i.e., savings will not be redistributed across Medicare Part B). CMS will phase in the reduction over a two year period; in 2019, it will only apply 50 percent of the total reduction in payment. CMS expects this to save $380 million in 2019. Commenters objected that such moves exceed CMS’s statutory authority; CMS responded that § 1833(t)(2)(F) gives it “broad authority to develop a method for controlling unnecessary increases in the volume of covered outpatient department” services.

CMS also previously expressed concern about the ability of excepted off-campus PBDs to expand the number and types of services furnished (and thus paid under the OPPS), which would purportedly incentivize hospitals to purchase additional physician practices and expand services furnished by their existing excepted off-campus PBDs. CMS had proposed a policy by which excepted services were limited to the “clinical families of services” for which the off-campus PBD billed and was paid for at least one item/service from November 1, 2014, through November 1, 2015. If furnishing a service in a “new” clinical family of service, excepted off-campus PBDs would be paid the PFS rather than OPPS rate under the proposal. In other words, excepted off-campus PBDs could not expand their services and expect to be paid the higher OPPS rate. Ultimately, however, CMS declined to adopt this policy in the Final Rule, as it might “pose operational challenges and administrative burden for both CMS and hospitals.” Therefore, “an excepted off-campus PBD will continue to receive payments under the OPPS in Calendar Year (“CY”) 2019 for all billed items and services that are paid under the OPPS,” regardless of whether it furnished the services/items prior to enactment of BBA § 603. Nonetheless, CMS will continue to “monitor the expansion of services in excepted off-campus PBDs” and “may propose to adopt a limitation on the expansion of services” in the future.

Application of the 340B Drug Payment Policy to Nonexcepted Off-Campus Provider-Based Departments of a Hospital

Section 340B of the Public Health Service Act allows participating hospitals and other providers to purchase certain covered outpatient drugs (“340B drugs”) at discounted prices from manufacturers. Generally, covered outpatient drugs are reimbursed at average sales price (“ASP”) plus 6 percent in accordance with sections 1847A and 1842(o)(1)(C) of the Act. In the CY 2018 OPPS/ASC Final Rule (discussed here), CMS dramatically cut reimbursement for 340B drugs by paying for 340B drugs under the OPPS system at ASP minus 22.5 percent, rather than ASP plus 6 percent. However, that payment cut applied only to excepted off-campus PBDs. Sections 1833(t)(1)(B)(v) and (t)(21) of the Act, as amended by BBA § 603, excluded nonexcepted off-campus PBDs from the OPPS and instead made payment “under the applicable payment system” under Medicare Part B. In other words, because nonexcepted off-campus outpatient PBDs were no longer payable under the OPPS, they were outside the scope of the OPPS payment cuts and could continue to be paid at ASP plus 6 percent.

In this Final Rule, however, CMS finalized its proposal to apply the ASP minus 22.5 percent payment formula to nonexcepted off-campus PBDs. CMS’s rationale is that the difference in the payment amounts for 340B drugs for excepted off-campus PBDs versus nonexcepted off-campus PBDs purportedly creates a “perverse incentive” for hospitals to move drug administration services for 340B drugs to nonexcepted off-campus PBDs to receive a higher payment amount for these drugs. Many commenters contended that extending the ASP minus 22.5 percent payment policy to nonexcepted off-campus PBDs would “effectively eviscerate” the 340B program. CMS disagreed with these comments.

Many commenters also challenged CMS’s legal authority to cut 340B drug payments to nonexcepted off-campus PBDs. Commenters indicated that Congress, in BBA § 603, did not give CMS the authority to deviate from the default payment rules for 340B drugs under 1847A and 1842(o)(1)(C) of the Act. CMS responded that it believes the agency has the flexibility to pay for 340B drugs for nonexcepted off-campus PBDs at an amount other than the amount dictated by sections 1842(o)(1)(C) and 1847A of the Act (i.e. ASP plus 6 percent). CMS cited Section 1833(t)(21)(C) of the Act as its authority to identify the PFS as the “applicable payment system” for 340B drugs instead of under Sections 1847A and 1842(o).

Removal of Quality Measures under Quality Reporting Programs

The Quality Reporting Program is a pay-for-reporting quality program that requires providers to meet certain quality reporting measures. Failure to meet these measures results in payment reductions e.g., a 2.0 percentage point to the fee schedule increase factor. The quality measures affected by the Final Rule are highlighted, in part, below.

Hospital Outpatient Quality Reporting (“OQR”) Program

For the CY 2020 payment determination and subsequent years, CMS finalized its proposal to remove the OP-27: Influenza Vaccination Coverage Among Healthcare Personnel measure. For the other nine measures proposed for removal, beginning with the CY 2021 payment determination and subsequent years, CMS has removed seven measures:

  • OP-5: Median Time to ECG;
  • OP-9: Mammography Follow-up Rates;
  • OP-11: Thorax CT Use of Contrast Material;
  • OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into Their Qualified/Certified EHR System as Discrete Searchable Data;
  • OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus CT;
  • OP-17: Tracking Clinical Results between Visits; and
  • OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps - Avoidance of Inappropriate Use.

CMS did not remove OP-29, Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients or OP-31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.

Ambulatory Surgical Center Quality Reporting (“ASCQR”) Program

CMS removed the ASC-8: Influenza Vaccination Coverage Among Healthcare Personnel measure. Beginning with the CY 2021 payment determination and subsequent years, CMS removed the ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps - Avoidance of Inappropriate Use measure.

CMS did not finalize the removal the following ASCQR measures:

  • ASC-9: Endoscopy/Polyp Surveillance Follow-up Interval for Normal Colonoscopy in Average Risk Patients; and
  • ASC-11: Cataracts - Improvement in Patient's Visual Function within 90 Days Following Cataract Surgery.

CMS did not finalize the removal the following ASCQR measures, but is suspending data collection for them until further notice:

  • ASC-1: Patient Burn;
  • ASC-2: Patient Fall;
  • ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant; and
  • ASC-4: All-Cause Hospital Transfer/Admission.

PPS-Exempt Cancer Hospital Quality Reporting (“PCHQR”) Program

CMS announced that it would defer a final decision on its proposed removal of two measures in order to conduct additional data analyses to assess measure performance based on new information provided by the Centers for Disease Control and Prevention. Therefore, CMS is not removing Catheter-Associated Urinary Tract Infection Outcome Measure (CAUTI) (NQF #0138) and Central Line-Associated Bloodstream Infection Outcome Measure (CLABSI) (NQF #0139).

Additional Key Takeaways

Other key takeaways from the Final Rule include:

  • 2019 Rates: CMS will increase OPPS rates by 1.35 percent for CY 2019. This includes a market basket increase of 2.9 percent, a negative 0.8 percent adjustment for multi-factor productivity, and a 0.75 percent point adjustment as required by the Affordable Care Act. Altogether, CMS anticipates increasing OPPS payment by approximately $5.8 billion over what it paid in CY 2018. ASC payment rates will increase by 2.1 percent, which also includes a market basket increase of 2.9 percent and a negative multi-factor productivity adjustment as required by the Affordable Care Act of 0.8 percent. Altogether, ASC payments will increase by approximately $200 million over last year.
  • C-APCs: CMS is adding three new comprehensive APCs, which packaged payment for “adjunctive and secondary items, services, and procedures into the most costly primary procedure under the OPPS” starting in 2015. The new C-APCs effective CY 2019 are C-APC 5163 (Level 3 ENT Procedures; ENTXX clinical family), C-APC 5183 (Level 3 Vascular Procedures; VASCX clinical family), and C-APC 5184 (Level 4 Vascular Procedures; VASCX clinical family), bringing the total C-APCs to 65.
  • New Technology APC: CMS is finalizing a “smoothing methodology” policy for New Technology Ambulatory Payment Classifications (“APCs”) with fewer than 100 OPPS claims, allowing the agency to use up to 4 years of claims data (instead of only two) to establish the payment rate. These APCs are typically new procedures lacking sufficient claims history to establish accurate payment and assignment to a clinical APC. New Technology APCs are also excluded from bundling under the C-APC procedures.
  • Inpatient Only: CMS is removing four procedures from the inpatient-only list (Current Procedural Terminology (“CPT”) Code 31241, nasal/sinus endoscopy, surgical, with ligation of sphenopalatine artery; CPT Code 01402, anesthesia procedure on the knee and popliteal area; CPT 0266T, implantation or replacement of carotid sinus baroreflect activation device; and CPT 00670, anesthesia for extensive spine and spinal cord procedures). CMS is also adding one inpatient-only procedure: CPT C9606, percutaneous transluminal revascularization of acute total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary artery bypass graft.
  • ASC Covered Surgical Procedures: CMS is revising the definition of “surgery” in the ASC payment system to allow certain “surgery-like” procedures. Specifically, CMS will include any procedure described with the Category 1 CPT codes that the AMA defines as surgery (CPT codes 10000 through 69999), as well as procedures described by Level II HCPSC codes or Category I/Category III CPT codes “that directly crosswalk or are clinically similar to procedures in the CPT surgical range” that do not pose significant risk when performed in the ASC, do not typically require an overnight stay, and are separately paid under the OPPS. This new policy results in CMS adding 17 new cardiovascular codes to the ASC Covered Procedure List (CPT codes 93451, 93452, 93453, 93454, 93455, 93456, 93457, 93458, 93459, 93460, 93461, 93462, 93566, 93567, 93568, 93571, and 93572).
  • Non-Opioid Pain Management: In part a response to the President’s Commission on Combating Drug Addiction and the Opioid Crisis, CMS is changing the packaging policy for non-opioid pain management drugs when functioning in as a supply in a surgical procedure, administered in the ASC setting. Under the Final Rule, CMS will unpackage the ASC payment for such drugs and pay separately as ASP plus 6 percent to encourage their use over prescription opioids. No such changes were made in the hospital setting for payments under the OPPS, though CMS will continue to consider whether unpackaging is appropriate in future rulemaking.
  • Pain Communication Survey Questions: CMS will remove the Communication About Pain questions from the Hospital Consumer Assessment of Healthcare Providers and Systems, a patient satisfaction survey required to be given to inpatients that feeds into the Hospital inpatient quality reporting (“IQR”) program. The questions asked whether patients were in pain, how often hospital staff discussed their pain with them, and how often staff discussed pain treatment, and commenters expressed concern that such questions (though revised in prior years) placed pressure of staff to prescribe more opioids to achieve higher scores. The removal will be effective with October 2019 discharges for FY 2021 payment determinations onward.
  • Partial Hospitalization Program (“PHP”): After applying certain trims, exclusions, and adjustments, CMS finalized a PHP APC geometric meant per diem cost at $121.62 for all Community Mental Health Centers providing more than three services per day. This is a fifteen percent decrease from 2018. Hospital-based PHPs are paid at $222.76 per day, an increase over 2018.

The agency’s press release is available here; the fact sheet is available here; the full text of the Final Rule is available here. It is scheduled to be published in the Federal Register on November 21, 2018.

CMS Releases Final Rule for Medicare Physician Fee Schedule and Quality Payment Program – On November 1, 2018, CMS issued a final rule (“Final Rule”) which finalizes numerous changes to the Medicare Physician Fee Schedule (“PFS”), the Quality Reporting Program, and the Medicare Shared Savings Program (“MSSP”). The changes made in the Final Rule will generally become effective January 1, 2019.

PFS Changes

The Final Rule includes several updates to payment policies and payment rates under the PFS for calendar year (“CY”) 2019. The key provisions in the Final Rule concerning the PFS include the following:

  • Payment Update: For CY 2019, the conversion factor will be $36.04, which represents an increase to the CY 2018 conversion factor of $35.99.
  • Evaluation and Management Rates and Documentation Requirements: There are currently four levels of evaluation and management (“E&M”) billing with different documentation requirements needed to support each level. CMS previously proposed eliminating the different levels in exchange for a single E&M coding level. The Final Rule will continue the current coding and payment structure for E&M visits through the end of CY 2020. Beginning in CY 2021 there will be a single rate for E&M visit levels 2 through 4 for established and new patients. The rate for more complex level 5 E&M visits will be maintained. CMS is also relaxing certain documentation requirements for CY 2019 and CY 2020, with further changes to taking effect in CY 2021.
  • Telehealth
    • The Final Rule adds two newly defined physicians’ services: (1) brief communication technology-based service (e.g., a virtual check-in by telephone or other device to determine whether an office visit or service is necessary); and (2) remote evaluation of recorded video or images submitted by an established patient.
    • Beginning July 1, 2019, the home of an individual will be a permissible originating site for telehealth services furnished for purposes of treating substance abuse disorders and co-occurring mental health disorders.
    • Codes for prolonged preventive services are being added to the list of telehealth services.
    • Mobile stroke units, renal dialysis facilities and homes of end-stage renal disease (“ESRD”) beneficiaries are being added as originating sites. CMS is also relaxing geographic originating site requirements for certain facilities for certain ESRD and dialysis treatments, as well as for certain acute stroke treatments.
    • Communication technology-based services and remote evaluation services furnished by a rural health clinic (“RHC”) or federally qualified health center (“FQHC”) involving medical discussions or remote evaluations of conditions will be payable so long as they are not related to a service provided within the previous seven days, within the next 24 hours, or at the soonest available appointment.
  • Radiologist Assistants: The Final Rule relaxes requirements for certain diagnostic tests performed by radiologist assistants to be furnished under personal supervision. CMS will allow these tests to be furnished under a direct level of supervision to the extent permitted by state law.
  • Outpatient Therapy
    • The Final Rule discontinues functional status reporting requirements for outpatient therapy.
    • There are two new modifiers for services furnished in whole or in part by Physical Therapy Assistants (“PTA”) and Occupational Therapy Assistants (“OTA”).
  • Practice Expense: The PFS inputs for practice expense (“PE”) are being updated to include new inputs for supply and equipment pricing. PE includes direct expenses such as clinical labor, medical supplies, and medical equipment, as well as indirect expenses such as administrative labor, office expense, and all other expenses (excluding malpractice). The current inputs for supply and equipment pricing were developed in 2004–2005.
  • Rates for Non-Excepted Off-Campus Provider-Based Hospital Departments: The PFS Relativity Adjuster—which applies a percentage to the OPPS rate to determine payment rates for items and services furnished in non-excepted off-campus provider-based hospital departments—will remain at 40 percent in CY 2019.
  • Clinical Laboratory Fee Schedule (“CLFS”): CMS is changing the treatment of Medicare Advantage payments for purposes of determining which laboratories are required to report data to be used in calculating payments for clinical diagnostic laboratory tests under the CLFS. This change will result in a greater number of laboratories meeting the Medicare revenue threshold that potentially qualifies them to be required to report data.
  • Reduction in Add-On Amount for New Part B Drugs: Part B drugs that are paid based on wholesale acquisition cost (“WAC”) during the first quarter of sales (when average sale price is unavailable) will be subject to an add-on percentage of three percent, which represents a reduction from the current six percent.
  • Appropriate Use Criteria (“AUC”) for Advanced Diagnostic Imaging
    • The significant hardship criteria in the AUC program is being updated to include insufficient internet access, electronic health record (“EHR”) or clinical decision support mechanism (“CDSM”) vendor issues, and “extreme and uncontrollable” circumstances.
    • Independent diagnostic testing facilities (“IDTFs”) are being added to the definition of “applicable setting” under the AUC program.
    • The Final Rule permits ordering professionals to self-attest their hardship status, and will allow AUC consultations to be performed by clinical staff under the direction of the ordering professional.

Quality Payment Program Updates

The Final Rule also finalizes various changes to the Quality Payment Program, where clinicians have the ability to participate in the program through two pathways – Merit-Based Incentive Payment System (“MIPS”) and Advanced Alternative Payment Models (“APMs”). The Final Rule makes various adjustments to requirements for both MIPS and APM, including the following:

  • Expansion of Practitioners Eligible to Participate in MIPS: For Year 3, CMS is expanding the participations eligible to participate in MIPS to include physical therapists, occupational therapists, qualified speech-language pathologists, qualified audiologists, clinical psychologists, and registered dieticians and nutrition professionals.
  • MIPS Low Volume Threshold Changes
    • For CY 2019, CMS added an additional avenue for clinicians and groups to be excluded from MIPS under the low volume threshold. Beginning in 2019, a clinician or group can be excluded from MIPS if they provide 200 or less covered professional services under the PFS. This threshold is being added to the two existing low volume threshold criterion. Thus, for CY 2019, a clinician or group may be excluded from MIPS if they meet one or more of the following three criterion:
      • Have $90,000 or less in Part B allowed changes for professional services;
      • Provide care to 200 or less Part B-enrolled beneficiaries; or
      • Provide 200 or less covered professional services under the PFS.
    • The Final Rule also finalizes an opt-in policy which allows some clinicians who otherwise would have been excluded under the low-volume threshold to participate in MIPS. Under this opt-in policy, starting in CY 2019, clinicians or groups who meet at least one of the low-volume threshold criteria, but not all three, may opt-in to participate in MIPS.
  • Revision to MIPS Final Score Weighting: For CY 2019, CMS is decreasing the weight of the quality performance category to 45 percent (a reduction of five percent compared with CY 2018) and increasing the cost category performance weight to 15 percent (an increase of five percent compared to CY 2018).
  • Revision to MIPS Performance Threshold: CMS is increasing the performance threshold to 30 points (as compared to 15 points from CY 2018). The additional performance threshold for exceptional performance will also be increased to 75 points (up 5 points as compared to CY 2018). CMS indicates it expects these changes to result in an evolving distribution of payment adjustments for high performing clinicians.
  • Increase in Advanced APMs Minimum Certified Electronic Health Record Technology (“CEHRT”) Use Threshold: For CY 2019, CMS is increasing the CEHRT use threshold for Advanced APMs so that at least 75 percent of eligible clinicians at each APM entity must use CEHRT to document and communicate clinical care with patients and other health care professionals. By comparison, for CY 2018, CMS only required 50 percent of eligible clinicians to use CHERT.

Medicare Shared Savings Program (MSSP) Updates

The Final Rule also finalizes certain changes proposed in CMS’s August 17, 2018 proposed rule, which addressed efforts to redesign the Accountable Care Organizations (“ACOs”). Additional information regarding the prior proposed changes is available here.

Although CMS is waiting to address numerous aspects of the ACO proposed rule in separate rulemaking, CMS addresses a subset of the proposals in the Final Rule. Specifically, CMS is finalizing a voluntary six-month extension for existing ACOs whose participation agreements will expire on December 31, 2018. This extension is necessary to ensure continuous participation given CMS’s decision to forgo an application cycle in 2018 for January 1, 2019 agreement start dates. CMS is also finalizing a prorated method for determining shared savings and shared losses for this six month performance period (January 1, 2019 through June 30, 2019).


To view the Final Rule, click here. To view CMS’s fact sheet regarding the Medicare Physician Fee Schedule, click here. To view CMS’s fact sheet regarding the Quality Payment Program, click here and here.


HHS Proposes to Halt Further Delays of 340B Oversight and Enforcement Rules – The Department of Health and Human Services (“HHS”) has proposed to accelerate the implementation of regulatory changes designed to protect hospitals from being overcharged for drugs purchased under the 340B Drug Pricing Program. The new rules will impose civil monetary penalties (“CMPs”) on drug manufacturers that knowingly charge hospitals more than the statutory ceiling price for covered drugs. These rules were originally slated to take effect on March 6, 2017, but the Trump administration delayed their effective date to July 1, 2019. Last week, in an abrupt reversal, HHS proposed to move up the effective date of the 340B CMP rules to January 1, 2019. The proposed rule is available here.

The 340B Drug Pricing Program requires private drug manufacturers, as a condition of having their outpatient drugs covered by Medicaid, to sell outpatient drugs to certain covered hospitals and clinics at or below statutorily determined ceiling prices. Prompted by a slew of reports from the Office of the Inspector General (“OIG”) that drug manufacturers often do not provide the mandated 340B discounts, Congress added certain oversight and enforcement provisions to the 340B statute in the Affordable Care Act (“ACA”). The ACA changes require HHS to verify and make public the applicable ceiling prices for outpatient drugs, and to adopt standards for imposing civil monetary penalties against drug companies that “knowingly and intentionally” overcharge covered hospitals.

The ACA changes were finally implemented in a rule issued in the waning days of the Obama administration. But on January 24, 2017, before the 340B CMP rules were scheduled to take effect, the Trump administration froze all pending regulations. Since that initial freeze, HHS has repeatedly extended the delay of the effective date of the 340B CMP rules, most recently to July 1, 2019. HHS has proffered various explanations for these delays, including the need “to align with the Administration priorities of analyzing final, but not yet effective, regulations and removing or minimizing unwarranted economic and regulatory burdens related to the [ACA].” See 82 Fed. Reg. 45511, 45512 (Sept. 29, 2017). Most recently, when the delay was extended to July 1, 2019, HHS explained that further delay was necessary because the agency is developing new comprehensive policies to address the rising cost of prescription drugs. See 83 Fed. Reg. 25943, 25944 (June 5, 2018).

On September 11, 2018, the American Hospital Association and several 340B hospitals sued HHS in the United States District Court for the District of Columbia. See American Hospital Association v. Azar, No. 18-cv-02112-JDB, (D.D.C. Sept. 11, 2018). That same day, the plaintiffs filed a motion for summary judgment asking the court to declare that HHS’ repeated delays of the 340B CMP rules violate the Administrative Procedure Act, and to order HHS to make the 340B CMP rules effective within 30 days after judgment.

On November 2, 2018, HHS issued a rulemaking in which it proposed “to cease any further delay of the [340B CMP rules] and to change the effective date from July 1, 2019 to January 1, 2019.” 83 Fed. Reg. 55135 (Nov. 2, 2018). HHS explained that further delays are not necessary because it has determined that the 340B CMP rules will not interfere with the development of comprehensive policies to address the rising cost of prescription drugs. Id. Stakeholders have 21 days to comment on the proposed rule.

On October 15, 2018, HHS filed a motion to stay American Hospital Association v. Azar pending the outcome of the forthcoming proposed rulemaking, which HHS believed would give the plaintiffs all of the relief they requested, thereby mooting the case. The plaintiffs opposed this motion because there is no guarantee that HHS will finalize the proposed rulemaking. The court agreed with the plaintiffs, and issued a ruling on Friday, November 2, 2018 denying HHS’ request for a stay. The court opinion is available here.

District Court Orders HHS to Clear Medicare Appeals Backlog By 2022 – On November 1, 2018, in response to a 2014 lawsuit filed by several individual hospitals and the American Hospital Association (“AHA”), the U.S. District Court for the District of Columbia ruled that the Department of Health and Human Services (“HHS”) must eliminate all of its more than 426,000 unresolved Medicare disputes by 2022, including 19% by the end of fiscal year 2019, and almost half by the end of fiscal year 2020.

In a statement issued last Thursday, AHA said it is “extremely pleased” with the ruling, which will bring providers who have been waiting years to resolve Medicare disputes closer to having their cases heard. “The court’s mandamus order will serve to keep HHS accountable in reducing the backlog,” AHA General Counsel Melinda Hatton said.

The case has been bouncing between federal district courts and circuit courts for four years as judges weighed whether HHS has the ability to resolve the appeals within a set timeframe. In March, however, Congress allocated $182.3 million toward the Office of Medicare Hearings and Appeals to hire judges and support staff. HHS then set its own deadline, which the court believed it should be able to adhere to. District Court Judge James E. Boasberg said the federal funding was a “deus ex machina” in the case. Had it not come through, a judge would have been required to determine the appropriate deadlines and impose them, something Judge Boasberg said the courts are not necessarily positioned to do. The court noted that “[s]hould a change in circumstances — not limited to an appropriations shortfall — render lawful compliance with the order impossible,” HHS can come back to court to request an extension.

While the ruling is a win for providers, the court declined several additional requests from AHA, including a request that the court order HHS to lower interest rates on disputed payments it had yet to receive from providers as it cleared the backlog, and a request to allow providers to rebill claims that were miscoded. Judge Boasberg decided neither request related directly to the timeline issue at hand. The court also declined to order a third AHA request that would explicitly require HHS to continue all current programs aimed at reducing the backlog. Doing so, he argued, would hinder HHS’ ability to devise innovative ways to chip away at the appeals.

The full opinion in American Hospital Association et al. v. Azar, case number 1:14-cv-00851, can be found here.

CMS Issues Home Health Prospective Payment System Final Rule – On October 31, 2018, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule (CMS-1689-FC) (the “Final Rule”) that makes significant changes to the Home Health Prospective Payments System (“PPS”). These changes include updates to the rates and wage index for 2019. Specifically, the Final Rule results in a 2.2 percent increase in payments to home health agencies in 2019. CMS estimates that this increase will result in $420 million in increased payments in 2019.

Further, the Final Rule finalizes the methodology used to determine the rural add-on payment for 2019 through 2022. The rural add-on payment is a modifier to reimbursements for services provided in rural and underserved areas continues to be crucial to maintaining access to care. Unlike previous rural add-ons, which were applied to all rural areas uniformly, the extension provides varying add-on amounts depending on the rural county classification by classifying each rural county into one of three categories: (1) high utilization; (2) low population density; and (3) all other.

Finally, through the Final Rule, CMS states that its aim is to improve the home health care delivery system, and reduce the regulatory burden placed on certifying physicians. In furtherance of this goal, the Final Rule eliminates the requirement that the certifying physician estimate how much longer skilled services are required when she is recertifying the need for continued home health care. CMS anticipates that this change could reduce claims denials that solely result from an estimation missing from the recertification statement. CMS estimates that this would result in annualized cost savings to certifying physicians of $14.2 million beginning in 2019.

CMS Releases Contract Year (CY) 2020 Medicare Advantage and Part D Flexibility Proposed Rule

On October 26, 2018, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule revising Medicare Advantage program (MA or Part C) and Prescription Drug Benefit program (Part D) regulations, implementing certain provisions of the Bipartisan Budget Act of 2018. The 362- page proposed rule includes changes that expand telehealth benefits under MA plans, improve the quality and accountability of MA plans and Part D sponsors, and change certain program integrity policies to permit CMS to more easily identify and recover overpayments from MA plans.

CMS states the proposed rule, “Contract Year (CY) 2020 Medicare Advantage and Part D Flexibility” (“Proposed Rule”), meets the “Administration’s priorities to reduce burden across the Medicare program by reducing unnecessary regulatory complexity, and improve the regulatory framework to facilitate development of Part C and Part D products that better meet the individual beneficiary’s healthcare needs.”

To better meet MA beneficiaries’ healthcare needs, the Proposed Rule would permit MA plans to offer telehealth services “as basic benefits for purposes of bid submission and payment by CMS” starting in 2020 – including telehealth services that are not reimbursable under original Medicare. The new rule would provide “greater ability for [MA] enrollees to receive telehealth from places like their homes, rather than requiring them to go to a health care facility to receive telehealth services. Plans would also have greater flexibility to offer clinically-appropriate telehealth benefits that are not otherwise available to Medicare beneficiaries.”

The Proposed Rule seeks to improve accountability and bolster program integrity by including changes to the calculation of Star Ratings and a policy to adjust the methodology for Star Ratings for affected MA and Part D plans in the event of extreme and uncontrollable circumstances, such as hurricanes. Star Ratings provide information to consumers on plan quality and CMS believes that the proposed changes on how Star Ratings would be calculated will increase “stability and predictability” for plans.

The Proposed Rule also includes “critical updates” regarding plan integrity. For example, in April 2018, CMS announced that they would “prohibit payment for Part D drugs and MA items or services that are prescribed or furnished by prescribers and providers on a ‘preclusion list’.” The Proposed Rule would clarify the preclusion list process to explain the expectations for stakeholders.

Additional proposed changes would help CMS recover overpayments made to MA plans. Specifically, the Proposed Rule would allow CMS to extrapolate audit recovery findings under Risk Adjustment Data validation audits. CMS notes that this would result in an estimated $4.5 billion in savings to the Medicare Trust Funds over a ten year period.

CMS is soliciting comments from stakeholders on the various aspects of its proposal. The Proposed Rule is available in its entirety here. CMS’ fact sheet on the Proposed Rule can be found here and CMS’s press release can be found here. Comments on the Proposed Rule must be received by CMS by December 31, 2018 and may be submitted electronically here.