On March 23, 2010, President Obama signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPACA) (Pub. L. No. 111-148). Subsequently, on March 30, 2010, President Obama signed a companion bill, H.R. 4872, to amend certain provisions contained in H.R. 3590 and to reconcile the Senate and the House versions of the legislation. The health care reform bills include a number of significant provisions that impact physicians such as provisions relating to Medicare Part B services, fraud and abuse provisions, provisions relating to self-disclosure, and provisions that impose extensive restrictions on physician-owned hospitals. This article focuses on significant provisions of PPACA as they relate to physician issues. While this article summarizes provisions of the health care reform bills, it is not intended to be a comprehensive summary of provisions of the bills.  

I. PROVISIONS RELATING TO MEDICARE PART B  

A. Physicians’ Services  

1. Resource-based feedback program for physicians in Medicare1  

Section 3003 of PPACA requires new types of reports and data analysis under the physician feedback program. By January 1, 2012, the Department of Health and Human Services (HHS) would be required to develop an episode grouper that combines separate but clinically related items and services into an episode of care for an individual, as appropriate. Beginning with 2012, HHS would provide reports to physicians that compare patterns of resource use of the individual physician to such patterns of other physicians.  

2. Misvalued Codes Under the Physician Fee Schedule  

Section 3134 of PPACA requires HHS to identify relative value units (RVUs) for potentially misvalued Current Procedural Terminology (CPT) codes and to review them and make appropriate adjustments. Further, the bill requires HHS to establish a process to validate RVUs. With respect to potentially misvalued codes, the bill requires HHS to (1) periodically identify services as being potentially misvalued using specific criteria; and (2) to review and make appropriate adjustments to the RVU for services identified as potentially misvalued. The bill specifies the activities that HHS could undertake to review and adjust the codes, which include using existing processes, conducting surveys, undertaking other data collection activities, studies, or other analyses, or using analytic contractors to perform these tasks.  

3. Value-based payment modifier under the physician fee schedule  

Section 3007 of PPACA requires HHS to establish a payment modifier that provides for differential payment to a physician or a group of physicians under the Medicare physician fee schedule. The separate payment modifier would be based on the relative quality and cost of the care provided by physicians or physician groups. Quality of care would be evaluated on a composite of risk-adjusted measures of quality established by HHS, such as measures that reflect health outcomes. Costs, defined as expenditures per individual, would be evaluated based on a composite of appropriate measures of costs established by HHS that eliminate the effect of geographic adjustments in payment rates and take into account risk factors (such as socioeconomic and demographic characteristics, ethnicity, and health status of individuals and other factors determined appropriate by HHS).  

4. Modifications to the Physician Quality Reporting Initiative (PQRI)2  

Section 3002 of PPACA provides an additional 0.5 percent Medicare payment bonus to physicians who successfully report quality measures to CMS via a qualified Maintenance of Certification program. Eliminates the MA Regional Plan Stabilization Fund.  

5. Bundling Pilot Program  

Section 3023 of PPACA directs HHS to develop a national, voluntary pilot program encouraging hospitals, physicians, and post-acute care providers to improve patient care and achieve savings for the Medicare program through bundled payment models. Requires HHS to establish this program by January 1, 2013 for a period of five years. Before January 1, 2016, HHS is also required to submit a plan to Congress to expand the pilot program if doing so will improve patient care and reduce spending.  

B. Sustainable Growth Rate (SGR)  

  • PPACA did not address SGR payment fixes. Separate legislation is expected to address SGR.  

C. Payment for Imaging Services  

  • Section 3135 of PPACA changes the utilization rate assumption for calculating the payment for advanced imaging equipment from 50% to 65% for 2010 through 2012. The rate would be further increased to 70% for services provided in 2013 and 75% for services provided during and after 2014. By January 1, 2013, the CMS Chief Actuary would conduct and make publicly available an analysis of whether the cumulative expenditure reductions attributable to these adjustments are projected to exceed $3 billion for the period 2010 through 2019. The legislation also contains a similar proposal for single session imaging, however it would apply starting July 1, 2010. Section 1107 of the companion bill, H.R. 4872, amends Section 3135(a) with respect to fee schedules established in 2011 and subsequent years, in the methodology for determining practice expense relative value units for expensive diagnostic imaging equipment, HHS is required to use a 75% assumption instead of the utilization raters otherwise established under the final rule by HHS in the Federal Register on November 25, 2009. Further, the companion bill amends § 3135(a) of H.R. 3590 by adding a provision for the change in utilization rate for certain imaging services.  

D. Ensuring Medicare Sustainability  

  • Section 3401 of PPACA as modified by § 10319, incorporates a productivity adjustment into the market basket update for inpatient hospitals, home health providers, nursing homes, hospice providers, inpatient psychiatric facilities, long-term care hospitals and inpatient rehabilitation facilities beginning in various years and implements additional market basket reductions for certain providers. The bill also incorporates a productivity adjustment into payment updates for Part B providers who do not already have such an adjustment. Notably, Section 1105 of the companion bill, H.R. 4872, amends §§ 3401(a)(4) and 10319(a) of H.R. 3590 by revising the market basket update.  

E. Primary Care Physicians  

  • Section 5501 of PPACA creates a five-year, 5% Medicare bonus payment for select evaluation and management codes furnished by physicians and other primary care providers beginning on January 1, 2011. The bonus will increase 10% for providers in health professional shortage areas. Further, all general surgeons who perform major procedures (with a 10- or 90-day global service period) in a health professional shortage area will be eligible for a 10 percent bonus payment for these services from 2011–16. Section 1202 of H.R. 4872 provides that Medicaid payment rates to primary care physicians providing primary care services can be no less than 100% of Medicare Part B payment rates for 2013 and 2014 and further provides 100% federal funding for the incremental costs incurred by states in meeting this requirement.  

II. TRANSPARENCY AND PROGRAM INTEGRITY  

A. Physician Ownership and Transparency  

1. Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals  

Section 6001 of PPACA Includes strict limits and restrictions to the Physician-Self Referral Law (Stark) exception that allows physicians to have ownership interests in hospitals as long as their interests are in the whole hospital (Whole Hospital Exception) and effectively bars future physician investment in hospitals. Notably, § 6001 grandfathers existing hospitals that had physician investment as of a qualifying date set forth in the legislation, while prohibiting hospitals from increasing the percentages of the total value of the ownership interests held in the hospital by physicians. Section 6001 also imposes restrictions on the ability of a physician-owned hospital to add operating rooms, procedure rooms, and beds. These restrictions similarly apply to hospitals with physician ownership that are currently qualifying under the rural provider exception. The qualifying date for physician ownership is August 1, 2010. However, under H.R. 4872 the qualifying date is December 31, 2010, which gives facilities currently under development more time to comply with the Act and maintain physician investment. Notably, the companion bill, H.R. 4872 changes the date from August 1, 2010 to December 31, 2010, after which physician ownership of hospitals to which physicians self-refer is prohibited. There is a limited exception for grandfathered physician-owned hospitals that are not the sole hospital in a county and treat the highest percentage of Medicaid patients in their county.  

2. Physician Payments Sunshine Provisions  

Section 6002 of PPACA would require that by March 31, 2013, applicable manufacturers that make a payment or another transfer of value to a covered recipient to report annually, in electronic form, specified information on such transactions to HHS. A covered recipient is defined to only include a physician or a teaching hospital. A payment or transfer of value means a transfer of anything of value, including but not limited to, consulting fees, honoraria, gifts, entertainment, food, travel, compensation for serving as faculty. Transfer of value does not include a transfer of anything of value that is made indirectly to a covered recipient through a third party in connection with an activity or service, where the applicable manufacturer is unaware of the identity of the covered recipient. Note that certain information is excluded from the reporting requirements (i.e., transfers of $10 or less). In addition, beginning on March 31, 2013, manufacturers and group purchasing organizations (GPOs) must submit information to HHS identifying any ownership or investment interests (other than interests in a publicly traded security or mutual fund) held by a physician (or the physician’s immediate family member) in the manufacturer or GPO during the preceding year.  

3. Penalties for failure to disclose payment or ownership or investment interest  

PPACA also provides for civil money penalties of not less than $1,000, but not more than $10,000, for each payment or ownership or investment interest that is not reported. The total civil penalties imposed cannot exceed $150,000 annually. A company that knowingly fails to make a required report is subject to civil penalties of not less than $10,000, but not more than, $100,000, for each payment not reported. The total annual civil penalties imposed for knowing violations are capped at $1 million, or, if greater, 0.1 % of the total annual revenues of the reporting company.  

4. Disclosure Requirements for In-Office Ancillary Services Exception to the Prohibition on Physician Self-Referral for Certain Imaging Services  

Section 6003 of PPACA amends the in-office ancillary services exception under the Stark Law by requiring a referring physician to inform patients in writing, at the time of a referral, that the patients may obtain specified imaging services (MRI, CT, and PET), or other designated health services as designated by HHS, from a person other than the referring physician, a physician who is a member of the same group practice as the referring physician, or an individual directly supervised by the physician or by another physician in the group practice. Further, the provision specifically requires the referring physician to provide the patient with a written list of suppliers who furnish such services in the area in which the patient resides. Although the law specifies that this provision is effective for any service provided after January 1, 2010, physicians obviously could not have complied with the provision until the law was passed and signed by President Obama.  

B. Medicare, Medicaid, and CHIP Program Integrity Provisions  

1. Provider Screening and Other Enrollment Requirements Under Medicare, Medicaid, and CHIP (Section 6401)  

a) Mandatory Compliance Programs  

Requires certain providers and suppliers to establish a compliance program by a date determined by HHS. The requirements for the compliance program would be developed by HHS and the Office of Inspector General (OIG).  

b) Provider Screening  

Requires HHS to determine the level of screening according to the risk of fraud, waste, and abuse with respect to each category of provider or supplier. At a minimum, all providers and suppliers would be subject to licensure checks. Further, HHS would have the authority to impose additional screening measures based on risk, including fingerprinting, criminal background checks, multi-state data base inquiries, and random or unannounced site visits.  

c) Disclosure Requirements  

Providers and suppliers enrolling or re-enrolling in Medicare, Medicaid, or CHIP would be subject to new disclosure requirements. Applicants would be required to disclose current or previous affiliations with any provider or supplier that has uncollected debt, has had their payments suspended, has been excluded from participating in a federal health care program, or has had their billing privileges revoked. Further, HHS would be authorized to deny enrollment in these programs if these affiliations pose an undue risk to a program.  

2. Enhanced Medicare and Medicaid Program Integrity Provisions  

a) Overpayments3  

Section 6402(d) of PPACA provides that if a person knows of an overpayment, the person must: (1) report and return the overpayment to HHS, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address, and (2) notify HHS, the State, intermediary, carrier, or contractor to whom the overpayment was returned in writing of the reason for the overpayment. An overpayment must be reported and returned by no later than the date that is 60 days after the date the person knows of the over payment or the date any corresponding cost report is due, if applicable. Any known overpayment retained later than the applicable date specified in this paragraph creates an obligation as defined in § 3729(b)(3) of Title 31 of the United States Code. This provision is effective as of March 23, 2010.  

b) National Provider Identification (NPI)  

Section 6402 of PPACA requires HHS to issue a regulation mandating that all Medicare, Medicaid, and CHIP providers include their NPI on enrollment applications.

 c) Medicaid Exclusions  

Section 6402 of PPACA requires Medicaid agencies to exclude individuals or entities from participating in Medicaid for a specified period of time if the entity or individual owns, controls, or manages an entity that: (1) has failed to repay overpayments during the period as determined by HHS; (2) is suspended, excluded, or terminated from participation in any Medicaid program; or (3) is affiliated with an individual or entity that has been suspended, excluded, or terminated from Medicaid participation.  

3. Elimination of Duplication between the Healthcare Integrity and Protection Data Bank (HIPDB) and the National Practitioner Data Bank (NPDB)  

Section 6403 of PPACA requires HHS to maintain a national health care fraud and abuse data collection program for reporting certain adverse actions taken against health care providers, suppliers, and practitioners, and submit information on the actions to the NPDB and terminate the HIPDB and transfer data in the HIPDB to the NPDB.  

4. Maximum Period for Submission of Medicare Claims Reduced to Not More Than 12 Months  

Section 6404 of PPACA reduces the time period for filing a written request for payment from three calendar years to one calendar year for services provided under Medicare Parts A and B. HHS would have the authority to specify exceptions to this one year period.  

5. Physicians Who Order Items or Services Required to be Medicare Enrolled Physicians or Eligible Professionals  

Section 6405 of PPACA as modified by Section 10604 provides that for written orders and certifications made on or after July 1, 2010, physicians or eligible professionals who order DME or home health services would be required to enroll in the Medicare program. HHS would have the authority to extend these requirements to physicians and eligible professionals that order other categories of Medicare items and services, including covered Part D drugs, if HHS determines that it would help reduce fraud, waste, and abuse.  

6. Requirement for Physicians to Provide Documentation on Referrals to Programs at High Risk of Waste and Abuse  

Section 6406 of PPACA permits HHS to disenroll, for no more than one year, a Medicare enrolled physician or supplier that fails to maintain and provide access to written orders or requests for payment for durable medical equipment (DME), certification for home health services, or referrals for other items and services to HHS. Medicare providers would be required to maintain and provide access to documentation relating to these written orders or requests for payment. The provision would also extend the OIG’s permissive exclusion authority to include individuals or entities that order, refer, or certify the need for health care services that fail to provide adequate documentation to HHS to verify payment.  

7. Enhanced Penalties  

a) Enhanced Penalties for False Statements on Provider or Supplier Enrollment Applications

Section 6402(d)(2)(A) of PPACA subjects any provider or supplier that knowingly makes or causes to be made any false statement, omission, or misrepresentation on an application, agreement, bid, or contract to participate or enroll in a federal health care program to a civil monetary penalty (CMP) of $50,000 for each misrepresentation. The provision would apply to Medicaid managed care organizations, Medicare Advantage (MA) plans, Prescription Drug Plan (PDP) plans, and providers and suppliers that participate in such managed care organizations and plans. In addition, such a person may be subject to an assessment of not more than 3 times the amount claimed as the result of the false statement, omission, or misrepresentation. Section 6402(d)(2) also imposes CMPs on: (1) excluded providers or suppliers that knowingly order or prescribe a medical item or service, and (2) persons who know of an overpayment and do not report and return the overpayment.  

b) Enhanced Penalties for Submission of False Statements Material to a False Claim

Section 6408(a) ofPPACA imposes CMPs on persons who knowingly make, use, or cause to be made or used any false statement or record material to a false or fraudulent claim submitted for payment to a federal health care program. These persons would be subject to a CMP of $50,000 for each false record or statement. This amendment would apply to violations committed on or after January 1, 2010.  

c) Enhanced Penalties for Delaying Inspections

Section 6408(a) and (b)(1) imposes CMPs for knowingly making, using, or causing to be made or used, a false record or statement material to a false claim and for delaying inspections.  

8. Self-Disclosure  

Section 6409 of PPACA instructs HHS to develop and implement a disclosure protocol for actual and potential Stark violations within six months from the date of enactment, March 23, 2010. Further, HHS must collaborate with the OIG in developing the self-referral disclosure protocol (SRDP) and, in accordance with the law instructions for the SRDP must be displayed on the CMS website. Further, the instructions must specify the person, officer, or office to whom such a disclosure is to be made and the effect of such disclosure on corporate integrity agreements and corporate compliance agreements. Moreover, the law clarifies that the SRDP process is to be separate and distinct from the Stark advisory opinion process established under 42 U.S.C. § 1395nn(g). Significantly, § 6409 authorizes HHS to compromise payment and penalty amounts due and owing for violations of the Stark Law. In determining whether to reduce amounts owed, HHS must consider the nature and extent of the improper or illegal practice, the timeliness of a disclosure, the provider’s cooperation in supplementing information as needed, and any other factors HHS deems appropriate. Notably, section 6409 lacks any requirement that other agencies, such as the U.S. Department of Justice (DOJ) or OIG, be involved in settling cases under the SRDP, although it is likely that the agencies will consult with each other. Additionally, section 6409 contains no discussion regarding the potential interplay of the newly established SRDP with the OIG Self-Disclosure Protocol in matters involving potential or actual liability under both the Stark Law and Anti-Kickback statute, 42 U.S.C. § 1320a-7b. Moreover, the SRDP provision does not address its interaction with a separate provision of the law that requires identified overpayments to be refunded in 60 days. Hopefully the SRDP protocol will create a mechanism for tolling of the time for any repayment upon the filing of a self-disclosure under the SRDP. Providers should stay tuned for more detailed instructions, which, by law, must appear on the CMS website by late September 2010.

9. Medicare Prepayment Review Limitations  

Section 1302 of the companion bill, H.R. 4872, repeals § 1874A(h) of the Social Security Act to streamline Medicare prepayment medical review limitations. It also permits HHS to deny applications of Medicare enrollment submitted by providers or suppliers owing tax debt.  

10. Increased Funding to Fight Fraud, Abuse, and Waste  

Section 1303 of the companion bill, H.R. 4872, provides additional funding starting in 2011 for both the Health Care Fraud and Abuse Fund under Medicare and the Medicaid Integrity Program fraud.  

C. Additional Integrity Provisions  

1. Termination of Provider Participation Under Medicaid if Terminated Under Medicare or Other State Plan

Section 6501 of PPACA requires States to terminate individuals or entities from their Medicaid programs if the individuals or entities were terminated from Medicare or another state’s Medicaid program.  

2. Medicaid Exclusion from Participation Relating to Certain Ownership, Control, and Management Affiliations

Section 6502 of PPACA requires State Medicaid programs to exclude individuals or entities from participating in Medicaid for a specified period of time if the entity or individual owns, controls, or manages an entity that: (1) has failed to repay overpayments during the period as determined by HHS; (2) is suspended, excluded, or terminated from participation in any Medicaid program; or (3) is affiliated with an individual or entity that has been suspended, excluded, or terminated from Medicaid participation.  

III. COMPARATIVE EFFECTIVENESS RESEARCH AND GRADUATE MEDICAL EDUCATION  

A. Comparative Effectiveness Research (CER) (Section 6301 as modified by § 10602)  

  • Among other things PPACA:  
  1. Establishes an independent non-profit CER institute tasked with supporting research on comparative clinical effectiveness.  
  2. Provides that an Independent Board of Governors appointed by U.S. Comptroller would be responsible for all CER activities and would include physician representation.  
  3. Allows the institute to issue recommendations concerning practice guidelines, coverage recommendations, or policy, but prohibits construing recommendations as mandates.  
  4. Requires the Agency for Healthcare and Research Quality (AHRQ) to expand CER capacity through training grants for researchers, coordination of access to federal health care program data in order to build data capacity, including support for clinical registries and health outcomes research data networks.  
  5. Requires AHRQ to consult with medical and clinical associations and to obtain regular, structured feedback to promote uptake of CER findings in clinical practice. AHRQ is prohibited in this capacity from issuing either mandates or recommendations concerning clinical guidelines, payment policy, or reimbursement policy.  
  6. Authorizes the use of CER findings in Medicare National Coverage Determinations (NCD), but prohibits HHS from using CER findings as the sole basis for such determinations and clarifies that the “reasonable and necessary” standard used to make NCDs is not modified by this legislation.  
  7. Disbands the Federal Coordinating Council for CER established by the American Recovery and Reinvestment Act of 2009 (ARRA).  
  8. Funding would be based on trust fund; $100 million transfer of funds appropriated to HHS in the ARRA and annual fees from public and private health insurance companies. Funding will terminate in 2019.  
  9. Prohibits the utilization of methodology that discounts value of life because of a person’s disability.  

B. Graduate Medical Education (GME)  

  • PPACA authorizes the redistribution of current unused GME residency slots to qualifying hospitals to address physician shortages in rural and other underserved areas, especially in the areas of primary care and general surgery. Includes provisions that would provide more flexibility in the GME program to allow for training in outpatient settings and would preserve GME positions from closed hospitals based on certain criteria. Also authorizes qualified teaching hospitals to be eligible for GME payments and would allow for teaching health centers development grants to enable newly accredited or to expand primary care medical residency programs meeting certain criteria. Also would establish a graduate nurse education demonstration program in Medicare.  

IV. INDEPENDENT MEDICARE ADVISORY REVIEW BOARD AND MEDICAL LIABILITY  

A. Independent Medicare Advisory Review Board  

  • Section 3403 of PPACA establishes an Independent Medicare Advisory Board (IMAB) to reduce Medicare payment updates for physicians and other providers under a new spending target system and fast track legislative approval process. H.R. 3590 also modifies the procedures for consideration of the Medicare Advisory Board (MAB) recommendations, including provisions that would make it difficult for Congress to repeal or otherwise change Board recommendations or the process for Congressional consideration of Board recommendations via separate legislation. The bill also clarifies that the physician fee schedule would not qualify for an exemption from the Board’s payment recommendations.4  

B. Medical Liability  

  • Section 6801 of PPACA provides that it is the sense of the Senate that health care reform presents and states should be encouraged to develop and test alternatives to the existing civil litigation system as a way of improving patient safety, reducing medical errors, encouraging the efficient resolution of disputes, increasing the availability of prompt and fair resolution of disputes, and improving access to liability insurance, while preserving an individual’s right to seek redress in court. The bill further provides that Congress should consider establishing a State demonstration program to evaluate alternatives to the existing civil litigation system with respect to the resolution of medical malpractice claims.  

V. OTHER PROVISIONS  

Other provisions in the new health reform law that will likely impact physicians include the requirement for employers to offer coverage and provisions that relate to Medicare prescription drug coverage. With respect to the prescription drug coverage, H.R. 4872 provides a $250 rebate for all Medicare Part D enrollees who enter the “donut” hole (i.e., where the beneficiary must pay for all prescription drug spending out of pocket) in 2010, and will receive their payment no later than the 15th day of the third month following the end of the quarter. Each enrollee is limited to one payment.