DMEPOS suppliers accept adjusted fee schedule rates

Durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers in non-competitive bidding program areas are accepting adjusted payment rates that were phased in beginning in 2016. CMS posted quarterly monitoring data suggesting that the adjusted rates are adequate to cover the costs of furnishing DMEPOS and have had no negative impact on beneficiary access. The fully adjusted billing rates will take effect in non-competitive bidding areas beginning July 1, 2016.

Competitive bidding program

CMS has operated the DMEPOS competitive bidding program (CBP) since January 2011 to improve upon the prior DMEPOS fee schedule, which was based on historic supplier charges from the 1980s and resulted in excessive payments. Medicare saved more than $580 million upon the completion Round 1’s three-year contract period, which lasted from 2011 through 2013. After the first two years of Round 2 and the national mail-order programs, which began in July 2013, it saved approximately $3.6 billion.

Non-CBP areas

Section 1834(a)(1)(F) of the Social Security Act requires CMS to adjust fee schedule amounts for durable medical equipment (DME) on January 1, 2016, in non-CBP areas. Section 1842(s)(3)(B) authorizes adjustments to the fee schedule amount for enteral nutrients, equipment and supplies based on information from CBPs. To combat stakeholder concerns that the adjustment might negatively impact quality and access to items and services, CMS decided to phase in the adjustments to the fee schedule amounts for claims with dates of service January 1, 2016, through June 30, 2016, with each fee schedule amount based on a blend of 50 percent of the fee schedule amount that would have gone into effect on January 1, 2016, if not adjusted based on information from the CBP, and 50 percent of the adjusted fee schedule amount.

Data

Suppliers in non-CBP areas are not required to accept assignment of Medicare claims for items subject to competitive bidding and may instead collect the extra money needed to cover their costs directly from the beneficiary. However, the data for 2016 show that suppliers in non-CBP areas have accepted the new, adjusted rates as payment in full. Overall, there was no change in the rate of assignment for the first four months of 2015 (99.87 percent) compared to the first four months of 2016 (99.88 percent). The data are also broken down by geographic regions, rural versus non-rural classification, and DMEPOS item category. CMS will continue to monitor data for the second quarter of 2016 and after the fully adjusted payment rates are implemented beginning in the third quarter.

Dollar signs tip the scales of medical judgment, physician-owned distributorship study finds

Physician-owned distributorships (PODs) will most certainly continue to be subject to increased government scrutiny after a recent Senate Finance Committee (SFC) investigation confirmed its suspicions that “PODs present an inherent conflict of interest that can put the physician’s medical judgment at odds with the patient’s best interests.” The report, “Physician Owned Distributorships: An Update on Key Issues and Areas of Congressional Concern,” provided more fuel for the argument that PODs have a distinct potential to violate fraud and abuse laws.

Kathleen McDermott, a partner at Morgan Lewis’ Washington, D.C. office, commented, “the findings of the SFC update are not a surprise but are important. PODs pose classic fraud and abuse risks for companies, physicians and hospitals and the SFC update shows most of all that the heat is on and should be to assure protection to the Medicare program and patients.”

Focus

The SFC requested the report based on its concerns that physician ownership of and self-referral to PODs result in:

  • anti-kickback statute (AKS) (42 U.S.C. §1320a-7b) and Stark law (42 U.S.C. §1395nn) violations;
  • physician conflicts of interest;
  • evidence of overutilization and higher health care costs;
  • danger to patients; continued medical industry confusion over legality; and
  • lack of transparency of physician ownership, including failure of PODs to meet their legal obligations to report under the Sunshine Act.

The report focused on PODs operating in the field of spinal surgery, but noted, “the POD business model could be used to market any type of medical device, and there are indications that PODs have started to appear in other fields beyond spinal surgery.”

Overutilization

The SFC reports a significant amount of overutilization by PODs, noting that “POD doctors see more patients, perform more surgeries, and perform more complex surgeries . . . [which] come at a cost, not only by increasing costs for the entire health care system, but also by harming patients who receive unnecessary treatment.” Having identified the continuing trends, McDermott said, “The Senate Finance Committee’s update assures continued scrutiny because it has confirmed over-utilization trends.”

Risks

According to the report, although a POD is taking some steps to try to mitigate the risks associated with its business model does not mean that the risks no longer exist. Hospitals face serious risks when they do business with PODs, and the only way to completely eliminate those risks is to not conduct business with any POD or any entity like a POD. This may not be as easy as it sounds. McDermott noted, “more troubling is the transparency findings where it appears many PODs are not disclosed to hospitals, preventing hospitals from managing a clear conflict of interest in the interests of patients.” She recommends that “hospitals should pro-actively collect information from its surgeons on participation in PODs and undertake policies that manage the conflict as well as the fraud and abuse risk. Some hospitals manage the risk by prohibiting PODs.”

Recommendations

The report recommended that the Government Accountability Office (GAO) evaluate the costs and benefits of requiring hospitals that purchase from PODs to perform enhanced utilization review. It also noted that CMS should consider withholding reimbursement from hospitals that have not adopted POD-specific policies and do not document that they consider the Sunshine Act database in making procurement decisions involving medical devices. Larger scale recommendations involved revising federal law to require doctors to disclose any interest they have in a POD to the hospital where they practice and to patients and expanding law enforcement efforts to investigate and prosecute hospitals and PODs that violate the law.

Witnesses before committee largely opposed to Part B drug model

The Medicare Part B drug pricing demonstration continues to prompt a variety of strong opinions. At the House’s Energy and Commerce Committee hearing regarding legislation that would prohibit further testing of the new prescription drug reimbursement model, H.R.5122, witnesses who expressed support for the pricing changes voiced their confidence in CMS and HHS but were met by those who vehemently opposed the matter. Some raised concerns that the pricing structure may limit the availability of drugs, while others noted that addressing the add-on price and the value based payments does not get to the root of the problem of rising drug costs: the manufacturer’s average sales price (ASP).

Demonstration

CMS created the Part B Drug Payment Model though a Proposed rule in order to address rising drug costs (see Will alternative drug payment models reduce Part B expenditures?, Health Law Daily, March 9, 2016). Currently, providers are reimbursed the ASP with a 6 percent add-on (ASP+6). HHS believes that there is little incentive under this reimbursement structure for providers to make cost-effective treatment decisions. The demonstration will proceed in two phases, beginning with switching some providers to ASP+2.5 percent, plus a flat fee. This would result in a smaller difference in the add-on payment. The second phase would result in value based purchasing (VBP) strategies, such as discounting patient cost sharing, indications-based pricing, and outcome-based risk-sharing agreements. Providers will be split into different groups based on geographic areas for the phases.

Witness testimony

At the hearing, Joe Baker, the President of the Medicare Rights Center, expressed support for the change. He noted that many of the beneficiaries his organization helps are concerned about affording their care. Rising costs have affected both beneficiaries and Part B itself. Medicare Rights particularly supports lowering or eliminating cost sharing for high-value medications in Phase II of the demonstration but gave some recommendations for particular actions it believes CMS should take, such as incorporating program evaluation surveys and working with interested groups when designing model communications.

Marcia Boyle, President of the Immune Deficiency Foundation, expressed extreme concerns about the demonstration’s impact on the availability of drugs for patients with primary immunodeficiency (PI). She noted that reimbursement for PI medications was significantly reduced by past legislation, which caused patients and pharmacies to experience extreme difficulties obtaining immunoglobulin (Ig). Patients lost access to Ig both in office and at home, resulting in hospital stays. In addition, specialty pharmacies already state that they are nearly underwater with the ASP+6 payment model. The foundation worries that the new payment structure will force stabilized patients to switch to a different product, negatively impacting their health, and will worsen the supply problem.

Similarly, the Dr. Debra Pratt, an oncologist representing a number of professional organizations, believed that the demonstration “will be devastating to the advancements made in our continued fight against cancer.” While there are many concerns among oncologists regarding the rising costs of care, Pratt believed that the demonstration lacked a patient-centered focus. She expressed disappointment in the agency’s suggestion that physicians are prescribing more expensive drugs for profit, and stated that the agency was incorrect in assuming that reducing Part B drug reimbursements would lower costs. Dr. Michael Schweitz, representing the Coalition of State Rheumatology Organizations, found the demonstration “misguided” and noted that the proposal does not impact the real problem: manufacturer ASPs. He emphasized that physicians do not make clinical decisions according to the add-on percentage, but noted that rheumatology practices will be hard pressed to absorb the cost reduction. He noted that patients will lose access to in-office infusion services that are vital to their care, and request that CMS withdraw the model.

Do patient safety indicators provide the full picture?

Common indicators used to rate hospital safety, such as the Agency for Healthcare Research and Quality’s (AHRQ) Patient Safety Indicators (PSIs) and CMS Hospital-acquired Conditions (HACs) may not accurately portray quality of care, according to a new study.  The study, which comes from Johns Hopkins Armstrong Institute for Patient Safety and Quality was published in Medical Care, and found that only one out of 21 measures used by these agencies met the criteria for being a true indicator of hospital safety. The problem is, however, that they are being used more and more frequently, despite concerns over their accuracy.

The study found that these indicators are being used for pay-for-performance and public reporting, including Leapfrog’s Hospital Safety Score and CMS’ Star Ratings.  Because of their  potential to misinform patients and wrongly classify hospitals serious harm could ensue. Hospitals could experience financial problems and also harm to their reputations if the wrong data are projected. The study emphasized that the indicators need to be rigorously evaluated because of these issues.

Part of the problem, the study suggests, is that the measures were created more than a decade ago. Further, that data is pulled from billing data and not actual clinical data, which could be traced back to patient health records. The researchers also pointed out that certain factors tied to medical coding and human error could potentially make the results unreliable.

The researchers looked at studies run from between January 1, 1990 and January 14, 2015 that addressed the validity of the HAC measures and PSIs.  They found that in 80 percent of cases the data used in the studies matched. Of the 21 measures created by AHRQ and CMS, 16 of those did not have enough data to be evaluated. Only five of the measures contained enough data for it to have a positive predictive value, meaning it could evaluate a useful measure in an accurate manner. Out of those five, however, only one was valid for use today.

With the odds being a 21 and one record, the bet is against the hospitals when it comes to the usefulness of these indicators. Should these types of indicators remain in use, they will need to be thoroughly evaluated and tied to measures that are also checked over time.