Kusserow on Compliance: Controls working to prevent Medicare Advantage capitation payments after beneficiaries’ death

The OIG released a report that stated CMS policies and procedures were generally effective in ensuring that capitation payments to Medicare Advantage (MA) organizations for Medicare Parts A and B services were not made on behalf of deceased beneficiaries after their death. The Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015 requires CMS to establish policies to ensure that payments are not made for Medicare services rendered after death of beneficiaries. In prior audits, the OIG identified problems in controls to prevent these kinds of Medicare payments. In this case, the OIG conducted an audit to determine effectiveness of CMS’s policies and procedures to prevent capitation payments to Medicare Advantage (MA) organizations for Medicare Parts A and B services after individuals’ dates of death.

Details of the audit report noted that during calendar years 2012 through 2015, CMS received updated beneficiary date-of-death information and then made approximately 1.8 million adjustments to capitation payments, thereby recouping $2.96 billion from MA organizations for Parts A and B capitation payments that had been made on behalf of beneficiaries who had died.  However, the OIG found that CMS did not identify and recoup all improper capitation payments. As of March 7, 2017, CMS had not recouped $2.4 million associated with 1,817 capitation payments that were made on behalf of 978 beneficiaries. The OIG noted these improper payments represented .0004 percent of the total capitation payments made to MA organizations and .08 percent of the total adjustments that CMS made after receiving information on beneficiaries’ dates of death.

The OIG recommended CMS (1) move to recoup the $2.4 million in capitation payments made to MA organizations on behalf of deceased beneficiaries and (2) implement system enhancements to identify, adjust, and recoup improper capitation payments in the future. CMS concurred with both of these recommendations and described corrective actions that it had implemented.

 

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.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.

CMS cut to 340B spending overshadows OPPS update; associations threaten suit

Reimbursement to outpatient departments in 2018 will increase $5.8 billion compared to 2017, according to the hospital outpatient prospective payment (OPPS) and ambulatory surgical center (ASC) PPS Final rule for calendar year 2018. However, CMS will drastically reduce reimbursement for drugs under the 340B Program, much to the ire of providers and associations, which have already threatened to sue. (Final rule, 82 FR 52356, November 13, 2017).

340B program 

In calendar year (CY) 2018, CMS will change its reimbursement for separately payable drugs and biologics (other than pass-through drugs and vaccines) acquired through the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. Rural sole community hospitals, PPS-exempt cancer hospitals, and children’s hospitals will be exempt from this policy for CY 2018. This change, said CMS, addresses recent trends of increasing drug prices and will save beneficiaries about $320 million on copayments in 2018. CMS will offset the projected $1.6 billion decrease in drug payments by redistributing this amount for non-drug items and services across the OPPS.

The 340B Program (see 42 U.S.C. §256b, as expanded by Secs. 2501, 7101, and 7102 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148)), has been controversial, as critics have accused hospitals of abusing the program (see Participants in drug delivery system testify to impacts on patient prescription drug costs, Health Law Daily, October 18, 2017). However, the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals criticized the cut to 340B spending as contrary to Congressional intent and a threat to safety net hospitals (see, e.g., Testimonies focus on benefits of 340B Drug Program, Health Law Daily, October 12, 2017).

Further, said the AHA, the policy “does nothing to address the stated goal of reducing the cost of pharmaceuticals” and could cause increases in beneficiaries’ out-of-pocket costs for non-drug Part B benefits. American’s Essential Hospitals predicted that, “given their fragile financial position, essential hospitals will not weather this policy’s 27 percent cut to Part B drug payments without scaling back services or jobs.” The three associations plan legal action to stop CMS from cutting 340B spending.

OPPS update

For CY 2018, CMS increased the payment rates under the OPPS by an increase factor of 1.35 percent, which is based on the hospital inpatient market basket percentage increase of 2.7 percent, minus the multifactor productivity adjustment of 0.6 percentage point, and minus a 0.75 percentage point adjustment required by Sec. 3401(i) of the ACA.

Direct supervision requirement

42 C.F.R. Sec. 410.27(a)(1) requires therapeutic outpatient services to be furnished under the direct supervision of a physician or nonphysician practitioner. Sec. 16004 of the 21st Century Cures Act (P.L. 114-255) delayed enforcement through 2016 of this requirement for therapeutic hospital services provided by critical access hospitals and small rural hospitals with fewer than 100 beds. The CY 2018 OPPS Final rule continues the nonenforcement of the direct supervision requirement for hospital outpatient therapeutic services for CAHs and small rural hospitals having 100 or fewer beds for CYs 2018 and 2019.

Inpatient only list

Services that typically would be paid in an inpatient setting will not be paid by Medicare under the OPPS (see 42 C.F.R. Sec. 419.22(n)). These are services that require inpatient care because of (1) the invasive nature of the procedure; (2) the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged; or (3) the underlying physical condition of the patient. Effective for CY 2018, CMS will remove total knee arthroplasty (TKA) and five other procedures from the inpatient only list and will add one procedure to the list. CMS is also prohibiting recovery audit contractors from reviewing TKA procedures for “patient status” for two years to give providers time to gain experience with the procedure in the outpatient setting.

Packaging

CMS will conditionally package low-cost drug administration services assigned to Ambulatory Payment Classifications (APCs) 5691 and 5692 effective January 1, 2018. In addition, CMS assigned skin substitutes with a geometric mean unit cost (MUC) or a per day cost (PDC) that exceeds either the MUC threshold or the PDC threshold to the high cost group. For CY 2018, a skin substitute product that was assigned to the high cost group for CY 2017, but does not exceed either the CY 2018 MUC or PDC threshold for CY 2018, will be assigned to the high cost group for CY 2018.

OQR program

CMS removed six measures from the Outpatient Quality Reporting (OQR) program beginning with the CY 2020 payment determination (CY 2018 reporting). CMS stated that the removal of these measures results in a burden reduction of 457,490 hours and a saving of $16.7 million in CY 2020 for hospitals. CMS also delayed the mandatory implementation of the Consumer Assessment of Healthcare Providers and Systems Outpatient and Ambulatory Surgery Survey under the Hospital OQR Program beginning with the CY 2018 data collection.

Laboratory tests

A new exception to the laboratory date of service policy will generally permit laboratories to bill Medicare directly for advanced diagnostic laboratory tests and molecular pathology tests excluded from OPPS packaging policy if the specimen was collected from a hospital outpatient during a hospital outpatient encounter and the test was performed following the patient’s discharge from the hospital outpatient department.

ASCs

For CY 2018, payments to ASCs will increase 1.2 percent, or $4.62 billion, based on a projected consumer price index of 1.7 percent minus a multifactor productivity adjustment required by the ACA of 0.5 percentage point. For CY 2018, CMS added three procedures to the ASC covered procedures list. In addition, CMS removed three measures from ASC Quality Reporting program for the CY 2019 payment determination and later and added two measures of hospital events following specified surgical procedures for the CY 2022 payment determinations and later (see Approximate 2 percent increase in OPPS, ASC payments proposed for 2018; cuts to 340B drug discount pay, Health Law Daily, July 20, 2017).

Health care regulatory burdens costs $39B per year, AHA says

To quantify the level and impact of the regulatory burden on America’s health care system, the American Hospital Association (AHA) in conjunction with Manatt Health conducted a comprehensive study of federal law and regulations in nine regulatory domains from four federal agencies. Among the findings of the study were that health systems, hospitals and post-acute care (PAC) providers must comply with 629 discrete regulatory requirements across nine domains, that the average size hospital dedicates 59 full time employees (FTEs) to regulatory compliance, the cost to providers for regulatory compliance is nearly $39 billion, and, perhaps most significant: some of the rules do not improve patient care but all of them raise costs.

Background

Every day, health systems, hospitals and post-acute care (PAC) providers—such as long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities and home health agencies—confront the daunting task of complying with a growing number of federal regulations. Federal regulation is largely intended to ensure that health care patients receive safe, high-quality care. In recent years, however, clinical staff, including doctors, nurses and caregivers, find themselves devoting more time to regulatory compliance, thereby taking them away from patient care. Some of these rules do not improve care, and all of them raise costs. Patients are adversely affected through less time with their caregivers, unnecessary hurdles to receiving care, and a growing regulatory morass that fuels higher health care costs.

Why the AHA conducted the review

The AHA conducted a comprehensive review of federal law and regulations in nine regulatory domains from four federal agencies in order to quantify the level and impact of regulatory burden. Their report seeks to inform policymakers, lawmakers, and the public about the administrative impact federal regulatory requirements have on the ability of health systems, hospitals, and PAC providers to furnish high quality patient care, and to offer a starting point for discussions on implementing meaningful regulatory reform. Reducing regulatory requirements that do not contribute to improved patient care will enable providers to focus on patients, not paperwork, and reinvest resources in improving care, improving health, and reducing costs.

How the AHA conducted the study

The study included interviews with 33 executives at four health systems, and a survey of 190 hospitals that included systems and hospitals with PAC facilities. The researchers examined the Federal Register and the U.S. Code of Federal Regulations for regulations impacting hospitals and PAC providers across the nine domains. They then reviewed each section of the regulations and identified discrete regulatory requirements that generate one or more administrative activities, such as:

  • creating, revising or expanding administrative policies and work flows;
  • documenting and monitoring compliance with policies and work flows;
  • hiring staff, consultants and vendors to support administrative compliance activities, such as extracting and reporting data;
  • developing and conducting trainings on administrative requirements for clinical and nonclinical staff;
  • issuing or revising and disseminating new patient notices; and
  • interpreting and identifying the compliance risks associated with new regulations; and, purchasing or upgrading health IT.

Significant findings

Among the major findings of the study were the following:

1. Health systems, hospitals and PAC providers must comply with 629 discrete regulatory requirements across nine domains, including 341 hospital-related requirements and 288 PAC-related requirements.
2. Health systems, hospitals and PAC providers spend nearly $39 billion a year solely on the administrative activities related to regulatory compliance in these nine domains. An average-sized community hospital (161 beds) spends nearly $7.6 million annually on administrative activities to support compliance with the reviewed federal regulations.
3. An average size hospital dedicates 59 FTEs to regulatory compliance, over one quarter of which are doctors and nurses.
4. The timing and pace of regulatory change make compliance challenging, while the frequency and pace with which regulations change often results in the duplication of efforts and substantial amounts of clinician time away from patient care.

Review recommendations

The AHA study identified specific activities which Congress and the Administration should take immediately to reduce regulatory burden and enhance care coordination, without negatively impacting patient care. These include:

  • Suspend the faulty hospital star ratings from the Hospital Comparewebsite.
  • Cancel Stage 3 of meaningful use of electronic medical records.
  • Suspend all regulatory requirements that mandate submission of electronic clinical quality measures.
  • Rescind the long-term care hospital 25 percent rule and instead rely on the site-neutral payment policy to bring transformative change to the field.
  • Restore compliant codes that count to the inpatient rehabilitation facility 60 percent rule.
  • Eliminate the “96-hour rule” as a condition of payment for critical access hospitals.
  • Modify Medicare conditions of participation to allow hospitals to recommend post-acute care providers.
  • Create a new exception that protects any arrangement that meets the terms of an Anti-Kickback Statute safe harbor for clinical integration arrangements.

The AHA’s recommendations were more fully described in letters sent to President Trump, CMS, and Congress.

Expiration of federal funding threatens state CHIP programs

In light of the fact that federal funding for the Children’s Health Insurance Program (CHIP) expired on September 30, 2017, the Kaiser Family Foundation (KFF) analyzed the impact upon states and potential outcomes. Without an extension of federal funding for CHIP, KFF reported that states have or will run out of federal CHIP funding and may face budget shortfalls for CHIP, which covered 8.9 million children in 2016.

According to KFF under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) the enhanced federal funding matching rate was further increased by 23 percent. With this, the CHIP federal matching rate ranged from 88 percent to 100 percent. Because nearly all the states included federal funding for CHIP when creating their FY 2018 state budgets, nearly all the states will face a budget shortfall if the federal funding is not extended.

In the absence of an extension of federal funding for CHIP, some states will have to reduce CHIP coverage. States that have CHIP-funded Medicaid expansions must maintain the underage under the ACA “maintenance of effort” requirement, leaving state costs to increase in the face of lower federal Medicaid match rate. However, states with separate CHIP coverage are not required to maintain it, and states may freeze enrollment or discontinue CHIP coverage altogether.

In the short run, states can continue to use federal funding accrued through the September 30 expiration. Eleven states reported that they would run out of federal funding for CHIP by the end of FY 2017, and at least one state reported that their funding would be depleted at the expiration date. By redistribution of unspent CHIP funds, the Centers for Medicare and Medicaid Services (CMS) was able to provide enough additional funding to allow that state to maintain coverage without a budget shortfall through October. CMS was also able to provide redistributed funds to several other states that were close to running out of funds.

In order to address the expected states’ budget shortfalls, Congress is working on legislation for continued funding. Both the Senate and the House have reported bills out of committee to provide an extension of federal funding for CHIP. The bills from the House and Senate contain many of the same provisions, including a five-year extension for federal funding of CHIP and a transition down from the enhanced 23 percent match provided by the ACA. However, the House bill includes some additional provisions not included in the Senate bill. Both bills still need to be debated and voted upon by the full House and Senate, and if both are passed, Congress will have to reconcile the difference between the two bills.