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.

Kusserow on Compliance: More on the new OIG guidance on exclusions

The HHS Office of Inspector General (OIG) has authority under the Social Security Act to exclude any individual or entity from participation in the federal health care programs for engaging in prohibited conduct. Those programs may not pay for any items or services furnished, ordered, or prescribed by an excluded party. Going back to 1997, the OIG published a policy statement with non-binding criteria to be used by the OIG in assessing whether to impose exclusion under its authorities and has used this in evaluating whether to impose exclusion ever since. This policy has also been used as an OIG authority in the creation of Corporate Integrity Agreements (CIAs), or the use of some other approach to mitigate risks of future misconduct with OIG oversight. The OIG has now published a revised superseding policy.

The OIG position in favor of sanctions is rooted in the idea that some period of exclusion should be imposed against a person who has defrauded Medicare or any other federal health care program. The new OIG guidance document sets forth circumstances in which this presumption may be rebutted and the non-binding factors that the OIG will use to make such a determination, as well as describing how they will evaluate risk to the federal health care programs in using its other available remedies. The OIG outlined a “risk spectrum” range of options when settling a civil or administrative health care fraud case that includes the following remedies: (1) exclusion; (2) heightened scrutiny (e.g., implement unilateral monitoring); (3) integrity obligations; (4) take no further action; or (5) in the case of a good faith and cooperative self-disclosure, release exclusion with no integrity obligations.

The OIG often concludes that exclusion is not necessary if there is agreement to appropriate integrity obligations, in exchange for a release of exclusion, such as with a CIA. The CIAs are designed to strengthen and promote an entities’ compliance program so that future issues can be prevented or identified, reported, and corrected. Integrity obligations also enhance the OIG’s oversight of the entity. Failure to agree to terms of a CIA may result in pursuing exclusion or the exercise of other administrative actions, as deemed appropriate to “unilaterally monitor” compliance with federal health care programs. If the OIG determines a party presents a relatively low risk to federal health care programs, neither exclusion nor integrity obligations will be deemed necessary. These situations include the absence of egregious conduct, such as patient harm or intentional fraud, relatively low financial harm, and where a successor owner, after the misconduct, is resolving the matter.

There are two limited circumstances in which OIG will usually give a person a release of exclusion without requiring integrity obligations: (1) when the person self- discloses the fraudulent conduct, cooperatively and in good faith, to the OIG; or (2) when the person agrees to robust integrity obligations with a state or the Department of Justice (DOJ) and OIG determines these obligations are sufficient to protect the federal health care programs.

It is worthwhile to review the revised exclusion policy statement and evaluate how your compliance programs, self-disclosure protocols, and other practices measure against the standards described by the OIG.

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 © 2016 Strategic Management Services, LLC. Published with permission.