CMS addresses wound care payment exceptions, rural and urban designations

Various regulatory changes, including allowing certain long-term care hospitals (LTCH) temporary exceptions to the application of the site neutral payment rate for specific wound care discharges under the LTCH prospective payment system (PPS), were issued in an advance release of an interim final rule with comment (IFC). In addition to the site neutral payment rate exceptions, as required by Section 231 of the Consolidated Appropriations Act of 2016 (CAA), CMS amended current regulations to allow hospitals, starting in fiscal year (FY) 2018, to reclassify based on their acquired rural status. Hospitals with an existing Medicare Geographic Classification Review Board (MGCRB) reclassification would also have the opportunity to seek rural reclassification for inpatient (IPPS) payment and other purposes and keep their existing MGCRB reclassification. The IFC will be effective on April 21, 2016; however, CMS will accept comments on the rule through June 17, 2016.

The regulatory changes address the recent decisions in Geisinger Community Medical Center v. Secretary (see Geographic classification statute says what it means and means what it says, Health Law Daily, July 24, 2015) and Lawrence + Memorial Hospital v. Burwell (see A hospital can be rural and urban at the same time, Health Law Daily, February 5, 2016) and apply those rulings in a nationally consistent manner. By implementing the CAA provision through an IFC rather than through the normal notice and comment rulemaking cycle and waiving the 60-day delay of effective date, CMS noted it was ensuring the period of relief granted was consistent with its interpretation of the statute.

Site neutral payment exceptions

Social Security Act Sec. 1886(m)(6)(E)(i)(II), as added by the CAA, provides for a temporary exclusion of certain discharges from the site neutral payment rate for LTCHs when “the individual discharged has a severe wound.” According to CMS, the use of the present tense in “has” a severe wound was internally inconsistent. A strictly literal read of the statute would require exception from the site neutral payment rate only for an individual who, presently, “has a severe a wound” at the time of discharge from the LTCH, and thus payments for patients whose wounds were either healed or no longer severe at the time of their discharge would be made under existing CMS regulations.

In essence, prior to the IFC, LTCHs would receive payment at the site neutral payment rate unless they met the existing exclusion criteria. CMS did not believe it was Congress’ intent to exclude only discharges where the patient, at the time of discharge, still “has” a severe wound from the site neutral payment rate while making site neutral payment rate payments for discharges of patients whose wounds healed during the course of their treatment in the LTCH. To resolve the inconsistency, discharges for patients who received treatment for a “severe wound” at the LTCH will meet the criteria for exclusion from the site neutral payment rate under Soc. Sec. Act Sec. 1886(m)(6)(E)(i)(II), regardless of whether the wound was still present and severe at the time of discharge.

Appellate decisions and reclassification

In Geisinger, an HHS regulation that prohibited reclassified urban hospitals from seeking additional reclassification for such reasons as securing a better wage index ran afoul of the plain language of a statute that allowed urban hospitals to be reclassified as rural for Medicare payment purposes. The Third Circuit ruled that the regulation was unlawful and in direct conflict with plain statutory language that required such hospitals to be treated the same as other rural hospitals.

Similarly, in Lawrence + Memorial Hospital, the Second Circuit struck down an HHS regulation limiting hospitals’ ability to be designated as “urban” for one purpose and “rural” for another. The court reasoned that HHS overstepped when it issued a regulation prohibiting a hospital that had been reclassified from urban to rural under Section 401 of the Medicare statute from receiving an additional reclassification by the MGCRB. The Second Circuit held that the two sections were not ambiguous or in conflict and, therefore, HHS’ “reclassification rule” conflicted with the plain language of the statute.

While these decisions currently apply only to hospitals located within the jurisdictions of the appellate courts in question, CMS determined that maintaining the regulations at 42 C.F.R. Sec. 412.230(a)(5)(iii) in other places nationally would constitute inconsistent application of reclassification policy based on jurisdictional regions. In the interest of creating a uniform national reclassification policy, the regulation text at Sec. 412.230(a)(5)(iii) was removed. In addition, CMS would allow more than one reclassification for those hospitals redesignated as rural under Sec. 412.103 and simultaneously seeking reclassification through the MGCRB. Specifically, a hospital may not be redesignated to more than one area, except for an urban hospital that has been granted redesignation as rural under Sec. 412.103 and receives an additional reclassification by the MGCRB.