CMS solicits applications for Rural Community Hospital Demonstration

CMS is soliciting applications for additional hospitals to participate in the Rural Community Hospital Demonstration Program, which tests payment under a reasonable cost-based methodology for Medicare inpatient hospital services furnished by eligible rural hospitals. No more than 30 hospitals can participate in the program at the same time. Applications are due May 17, 2017, and CMS’ goal is to finalize selections by June 2017.

Section 410A of the Medicare Modernization Act (MMA) (P.L. 108-173) originally authorized the demonstration for five years, and Sections 3123 and 10313 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) extended it for another five-year period. Section 15003 of the 21st Century Cures Act (P.L. 114-255) again amended section 410A to require another five-year extension of the demonstration (see 21st Century Cures clears House, now set for Senate vote, December 1, 2016).

Eligibility

To be eligible to participate in the program, a hospital must: (1) be located in a rural area or be treated as such pursuant to Soc. Sec. Act Sec. 1886(d)(8)(E); (2) have fewer than 51 acute care inpatient beds, as reported in its most recent cost report; (3) make available 24-hour emergency care services; and (4) not be designated or eligible for designation as a critical access hospital pursuant to Soc. Sec. Act Sec. 1820.

Hospitals that were participating in the demonstration as of the last day of the initial five-year period or as of December 30, 2014 may participate in this second extension period, unless the hospital elects to discontinue participation. A newly selected hospital may be located in any state; however, priority will be given to hospitals located in one of the 20 states with the lowest population densities.

Payment

For discharges occurring in the first cost reporting period on or after the implementation of the extension, hospitals participating in the demonstration will receive payment for their reasonable costs of providing covered inpatient hospital services (except for services furnished in a psychiatric or rehabilitation unit that is a distinct part of the hospital). For discharges occurring during the second or later cost reporting period, hospitals will be paid the lesser of their reasonable costs or a target amount.

For most of the previously participating hospitals, there is a gap between the end date of the hospital’s participating in the first five-year extension and the enactment of the Cures Act on December 13, 2016 that the legislation did not address. In the fiscal year 2018 hospital inpatient prospective payment system (IPPS) Proposed rule, CMS solicited comments on proposed terms of continuation for previously participating hospitals (see IPPS spending to increase $3B, LTCH PPS to decrease $173B, April 17, 2017).

The MMA requires the demonstration to be budget neutral. The IPPS proposed rule detailed the status of the demonstration and the methodology for ensuring budget neutrality.

Equities rest with agency in administrative enforcement actions

Administrative enforcement is quicker than an investigation but still “deadly” for the provider or supplier, concluded Judith Waltz, partner at Foley & Lardner LLP, at the American Health Lawyers Association’s 2017 Institute on Medicare and Medicaid Payment Issues. “Administrative enforcement” means the tools available to HHS, CMS, and the HHS Office of Inspector General (OIG) without or with limited formal involvement of the Department of Justice, including civil money penalties (CMPs), payment suspensions, and billing privilege or enrollment denials and revocations. In administrative enforcement actions, the equities and more discretion may rest with the agency, and a lesser burden of persuasion applies for the agency to prove its case.

Exclusion regulations

In December 2016 the OIG revised its exclusion regulations (see 81 FR 88334) in part to implement the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Waltz explained that the Final rule did the following: (1) expanded its permissive exclusion authority for convictions related to obstruction of an investigation to include audits; (2) added permissive exclusion authority for making false statements, omissions, or misrepresentations in enrollment applications; (3) added early reinstatement for loss of license in a different state; and (4) added a 10-year look-back period for exclusions.

Inflation

Waltz noted that CMPs are being updated annually for inflation pursuant to a final rule issue in December 2016 (see 45 C.F.R. Part 102). For example, a CMP for failing to grant timely access is up to $15,000 per day, $16,312 after inflation, and the CMP for false statements, omissions, or misrepresentations in enrollment or similar documents is up to $50,000 per false statement, $54,732 after inflation. Waltz said, “After inflation, numbers are unbelievable.”

Owner of compounding company at the center of the 2012 meningitis outbreak acquitted of murder

A Boston jury convicted Barry Cadden, the owner and head pharmacist of the New England Compounding Center (NECC), of racketeering and mail fraud in connection with the 2012 nationwide fungal meningitis outbreak but acquitted him of 25 second-degree murder charges. His sentencing is scheduled for June 21, 2017; he faces a statutory maximum sentence of up to 20 years’ imprisonment on each of the mail fraud and racketeering counts.

Outbreak. In September 2012, the Centers for Disease Control and Prevention (CDC) began investigating a multistate outbreak of fungal meningitis and other infections among patients who received contaminated preservative-free methylprednisolone acetate (MPA) steroid injections from NECC. The CDC reported that 753 patients in 20 states were diagnosed with a fungal infection after receiving injections of NECC’s MPA. Of those 753 patients, the CDC reported that 64 patients in nine states died.

Indictment. In December 2014, the U.S. Attorney’s Office in Massachusetts announced a 131-count federal criminal indictment in connection with the outbreak. Cadden and NECC’s supervisory pharmacist, Glenn A. Chin, were charged with 25 acts of second-degree murder in Florida, Indiana, Maryland, Michigan, North Carolina, Tennessee and Virginia. Twelve other individuals associated with NECC, including six other pharmacists, the director of operations, the national sales director, an unlicensed pharmacy technician, two of NECC’s owners, and one other individual were charged with additional crimes.

Prosecutors alleged that Cadden directed and authorized the shipping of contaminated MPA nationwide. In addition, he authorized the shipping of drugs before test results confirmed their sterility, failed to notify customers of nonsterile results, and compounded drugs with expired ingredients. NECC also used fictional and celebrity names on fake prescriptions to dispense drugs.

 

CMS delays implementation of bundled payment models

CMS has further delayed the implementation date of the Cardiac Rehabilitation (CR) Incentive Payment model and modifications to the Comprehensive Care for Joint Replacement (CJR) model by three months. This additional delay, CMS said, is necessary to allow time for additional review, to ensure that the agency has adequate time to undertake notice and comment rulemaking to modify the policy if modifications are warranted, and to ensure that in such a case participants have a clear understanding of the governing rules and are not required to take needless compliance steps due to the rule taking effect for a short duration before any potential modifications are effectuated.

CMS issued a final rule on the two models January 3, 2017. Pursuant to the Trump Administration’s “Regulatory Freeze Pending Review” memorandum, on February 17, 2017, CMS issued a final rule that delayed the effective date of the January 3, 2017 final rule, for provisions that were to become effective on February 18, 2017, to March 21, 2017. CMS’ March 21, 2017, interim final rule postponed the effective date of the January 3, 2017 final rule from March 21, 2017, until May 20, 2017. The applicability date of the new regulations at 42 C.F.R. Part 512 and specific CJR regulations are delayed from July 1, 2017, until October 1, 2017. CMS sought comments on a longer delay of the model start date, including to January 1, 2018.

Under the CJR model, which began April 1, 2016, acute-care hospitals in certain areas receive retrospective bundled payments for episodes of care for hip and knee replacements. All related care within 90 days of hospital discharge from the joint replacement procedure is included in the episode of care. The January 3, 2017, final rule made several changes to the model.

Under the CR Incentive Payment model, acute care hospitals in certain geographic areas will receive retrospective incentive payments for beneficiary utilization of cardiac rehabilitation/intensive cardiac rehabilitation services during the 90 days following hospitalization for an acute myocardial infarction or coronary artery bypass graft surgery.

The American Hospital Association criticized the pace of these mandatory demonstration projects as “too much, too soon” and said, “We will continue to urge that any new bundled payment programs be of a voluntary nature.” In addition, HHS Secretary Tom Price has asserted that CMS exceeded its authority with bundled payment initiatives like the CR and CJR models.