Archives for July 2015

Kusserow on Compliance: OIG reports most ACA CO-OPs not meeting goals

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) established health insurance exchanges (commonly referred to as “marketplaces”) for individuals and small businesses to shop for health insurance in all 50 States and the District of Columbia. To expand the number of health insurance plans available in the marketplaces, the ACA established the Consumer Operated and Oriented Plan (CO-OP) program for consumer-governed, nonprofit health insurance issuers. HHS provided loans to help establish CO-OPs in every state that were expected to become profitable after the initial start-up period. CMS awarded loans totaling $2.4 billion and by January 1, 2014, there were 23 CO-OPs offering health coverage in 23 states. Four of the 23 CO-OPs are or will be offering coverage to neighboring states. Loans were to be awarded only to entities that demonstrated a high probability of becoming financially viable and must be repaid with interest. However, the Office of Inspector General (OIG) found that most of the 23 CO-OPs had not met their initial program enrollment and profitability projections as of December 31, 2014.

A prior OIG audit examined the selection process for CO-OP loans and identified factors that could adversely affect the CO-OP program, including some CO-OPs having limited private monetary support and having budgeted start-up expenditures that exceeded available funding. The agency reported on their progress during the start-up phase and the CMS strategy for overseeing them during the start-up phase and after the launch of the exchanges. The 2015 OIG Work Plan included additional audits at 19 of the 23 CO-OPs to verify their eligibility for federal funding and their use of start-up and solvency loans. During those audits, the OIG identified concerns related to low enrollment and financial losses and identified factors such as low enrollments and net losses, which were limiting the ability of some CO-OPs to repay start-up and solvency loans and to remain viable and sustainable. Specific findings included:

  • Member enrollment for 13 of 23 CO-OPs was considerably lower than initial annual projections.
  • 21 of the 23 CO-OPs had incurred net losses.
  • The Iowa/Nebraska CO-OP was liquidated in March 2015 due to financial problems.

The OIG performed a more limited review of enrollment and profitability for the four remaining CO-OPs.

CMS has authority under the law to place a CO-OP on an enhanced oversight plan and/or terminate the loan agreement if it failed to meet quality and performance standards, including implementation of milestones and enrollment targets. If a CO-OP’s loan agreement is terminated, the organization forfeits all unused loan funds received under the CO-OP program as well as the remaining loan funds, interest, and, if applicable, a penalty must be repaid in accordance with the terms of the loan agreement. A CO-OP must resolve any outstanding debts or other accommodation of outstanding claim obligations before repaying the loan funds to CMS.

The OIG noted CMS had recently placed four CO-OPs on enhanced oversight or corrective action plans and two CO-OPs on low-enrollment-warning notifications; however it also noted that CMS had not established guidance or criteria to assess whether a CO-OP was viable or sustainable. As such, the OIG recommended further CMS action, including:

  • continuing to place underperforming CO-OPs on enhanced oversight or corrective action plans, in accordance with federal requirements;
  • working with state insurance regulators to identify and correct underperforming CO-OPs;
  • providing guidance or establishing criteria to determine when a CO-OP is no longer viable or sustainable; and
  • pursuing available remedies for recovery of funds from terminated CO-OPs, in accordance with the loan agreements.

CMS concurred with the recommendations and stated it has taken a number of steps to further oversee CO-OP compliance by requiring external audits, site visits, and additional financial reporting. The OIG stated they will be continuing to review other aspects of the CO-OP operations.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2015 Strategic Management Services, LLC. Published with permission.


Unanimous Senate sends NOTICE Act to President

On July 27, 2015, the Senate passed the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act by unanimous consent, without any amendment to the bill passed by the House on March 16, 2015. The bill has been sent to President Obama for signature. Effective one year from that date, hospitals will be required to explain to patients in observation status for more than 24 hours the effects and financial consequences of that status and the reason hospital has not admitted them.

Extended observation services. The legislation addresses a burden experienced by many Medicare patients who spent several days in the hospital in outpatient status, for “observation.” Although they were at the hospital for more than three days, they did not qualify for Medicare coverage of post-discharge services because did not have a three-day inpatient stay. Therefore, they were required to spend thousands of dollars more for the care they received at the hospital and, afterward, from home health agencies or nursing or rehabilitation facilities (See Whether two midnights or more, observation is costly for patients, Health Law Daily, September 9, 2014).

The legislation

The bill adds subparagraph (Y) to Soc. Sec. Act sec. 1866 to require that any hospital or critical access hospital at which a Medicare patient receives observation services for more than 24 hours must notify the patient in writing that: (1) he or she has is receiving observation services as an outpatient and has not been admitted to the hospital as an inpatient; (2) the reasons for the patient’s outpatient status; (3) the implications of outpatient status for the beneficiary’s cost sharing obligations for the hospital services; and (4) the implications for the patient’s eligibility for Medicare coverage of skilled nursing facility services after the hospital stay. The notice must be given to the patient or patient representative within 36 hours of the beginning of the outpatient status or at discharge, whichever occurs earlier.

Highlight on Michigan: $5.5M awarded for health emergency preparedness

Michigan is set to receive $5.5 million in funds to support the state’s Special Pathogen Response Network (SPRN) to strengthen responses to public health emergencies. According to an announcement made by the Michigan Department of Health and Human Services (MDHHS), the funds will be made available to hospitals and life support agencies by the department and the Bureaus of EMS, Trauma and Preparedness (BETP), and Disease Control, Prevention, and Epidemiology. The Centers for Disease Control and Prevention (CDC) provided $3.2 million of the funding and the HHS Office of the Assistant Secretary of Preparedness and Response (ASPR) provided $2.3 million of the funding that must be used to support planning for the next five years.

According to Nick Lyon, Director of MDHHS, the funding, “will help promote continued situational awareness and state of readiness among our closest partners in the health and preparedness communities.”

Health emergency preparedness

The Division of Emergency Preparedness & Response (DEPR) is the emergency preparedness section of the MDHHS. The purpose of the DEPR is to protect Michigan residents during health emergencies by integrating health and medical preparedness initiatives and by creating diverse partnerships. The DEPR is involved in preparedness planning and in responding to emergencies, which include natural disasters, bioterrorism, outbreaks of infectious diseases, and other public health emergencies.

The DEPR works with local health departments and tribal governments and the MDHHS Bureau of Laboratories and the Bureau of Disease Control, Prevention, and Epidemiology. The state has also established the Michigan Health Alert Network (MIHAN) for tactical communication and the Michigan Prepares website, for risk communication. Additionally, the state participates in the Michigan Strategic National Stockpile Program (MISNS), through which it stockpiles life-saving pharmaceuticals and medical supplies. Michigan schools also have an established preparedness and response curriculum, which provides students the resources and tools to prepare for and respond to emergencies.

Special Pathogen Response Network

In addition to the DEPR, Michigan established the SPRN in 2014 to strengthen its response to public health emergencies such as the Ebola virus disease. The network includes a collaboration between MDHSS, various Michigan hospitals, local health departments, life support agencies, and health care coalitions.

The state developed a four-tiered approach to ensure that patients proceed to the correct facilities in the event of a public health emergency. The tiered approach is based on a hospital’s ability to “detect, isolate, notify, and treat or safely transfer patients,” who have or are suspected to have pathogens like Ebola. According to MDHHS, all hospitals in the state have engaged in robust emergency preparedness and response structure. Every hospital that has an emergency department in the state will have a designated tier in the SPRN. Hospitals will be receiving funding to strengthen the SPRN in relation their tier level.

All Tier 1 hospitals have the ability to conduct testing, identification, isolation, and treatment of patients with Ebola. Those hospitals are also eligible to receive transfers from other facilities. The Tier 1 hospitals in Michigan’s system include Detroit Receiving Hospital in Detroit, Spectrum Health-Butterworth Hospital in Grand Rapids, and St. Joseph Mercy Hospital in Ann Arbor. These hospitals will provide backup and support to the University of Minnesota Medical Center, which is the HHS Region V Center. The state is also working with remaining Michigan hospitals to set up assessment visits to confirm the remaining 2 through 4 tier levels.

Tier 2 hospitals are treatment centers, like those in Tier 1, but can only accept in-network transfers. This is in contrast to Hospitals in Tier 3 that can only provide care and isolate and identify pathogens while awaiting results of tests. Tier 4 hospitals are limited to identifying, isolating, and transferring individuals for testing.

Dr. Eden Wells, Chief Medical Executive for MDHHS said in a released statement that, “MDHHS is proud to recognize all Michigan hospitals for their partnership, as well as the training and education undertaken to protect against the spread of infectious diseases.” She added, “The recent Ebola outbreak in West Africa serves as a reminder of the importance of having prepared healthcare facilities and partners for quickly responding to new, emerging threats.”


Kusserow on Compliance: CMS proposes modifying rules on meaningful use requirements

CMS is proposing changes to how Medicare covers stays in the hospital for observation under the “meaningful use” program. The original concern by CMS and the Office of Inspector General (OIG) was that hospitals could potentially use the differences in payment rules to game the system. The proposed changes would allow inpatient coverage of some short hospital stays based on a doctor’s judgment instead of requiring a hospital stay to span at least two midnights to be considered an inpatient stays.

The current policy, known as “the two-midnight rule” has been criticized because it can result in higher costs for seniors. Under Medicare, coverage for inpatient and outpatient care is determined under very different payment rules. In some cases, a hospital admission classified as inpatient can result in lower bills for beneficiaries. The problem arises when patients are admitted for short observation stays. Medicare policy generally requires a hospitalization to span at least two midnights to qualify as an inpatient case. The proposed rules would allow for case-by-case exceptions. Based on a doctor’s judgment, certain short hospital stays could be covered under inpatient payment rules. The two-midnight rule has been on the books since 2013, but is not being enforced because of the controversy surrounding it.

The proposal would also change the Medicare and Medicaid Electronic Health Record (EHR) Incentive Program reporting period in 2015 to a 90-day period aligned with the calendar year, and align the EHR reporting period in 2016 with the calendar year. It also would modify the patient action measures in the Stage 2 objectives related to patient engagement. Additionally, the proposed changes would streamline the program by removing reporting requirements on measures which have become redundant, duplicative, or topped out through advancements in EHR function and provider performance for Stage 1 and Stage 2 of the Medicare and Medicaid EHR Incentive Programs.

This action by CMS is underscored by the fact that the final date by which they would adopt the final rule on the issue remains open. The proposed rule-making period allows for public comments and permits CMS to modify the rule before it is adopted in final form.


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2015 Strategic Management Services, LLC. Published with permission.