Kusserow on Compliance: New CMS proposed outpatient rules

The 2020 annual rule cycle has been active for CMS with several proposed rules in the outpatient prospective payment system (OPPS) area. Hospitals and health system executives should monitor these annual rules carefully for provisions that will affect their organizations’ operations. Among the significant regulatory rule proposals for hospital and health system executives are the following:

  1. Mandated disclosure of negotiated charges between health plans and hospitals for all items and services for about 300 “shoppable” services
  2. Proposed penalties which would be over $100,000 a year for noncompliant hospitals
  3. The addition of several ASC procedures
  4. The removal of total hip arthroplasty from the inpatient-only list for 2020, allowing the procedure to be performed on an outpatient basis
  5. Reduction of supervision level for hospital outpatient department from direct to general for hospital outpatient departments
  6. A requirement for prior authorization of certain outpatient department services.
  7. Continued payment reduction for 340B purchased drugs
  8. Increased per-day cost threshold for separate payment for certain outpatient drugs
  9. The establishment a prior authorization process for five categories of services that often may be cosmetic: blepharoplasty, botulinum toxin injections, panniculectomy, rhinoplasty, and vein ablation
  10. Various updates to Hospital Outpatient Quality Reporting Program requirements

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.

Connect with Richard Kusserow on LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2019 Strategic Management Services, LLC. Published with permission.

CMS final rule reduces hospital administrative burdens


CMS issued a final rule to reduce unnecessary burden for health care providers, allowing them to focus on their priority—patients. Included in the rule is the removal of Medicare regulations identified as unnecessary, obsolete, or excessively burdensome. The rule removes the requirements for a facility to:


  • Request or allow swing-bed patients to perform services for the facility.
  • Provide an ongoing activities program that is directed by a qualified professional because the patient’s activity needs are addressed in the nursing care plan.
  • Employ a qualified social worker on a full-time basis because of the hospital swing-bed and Critical Access Hospital (CAH) bed limit requirements for those with more than 120 beds.
  • Assist residents in obtaining routine and 24-hour emergency dental care because of the existing requirement for hospitals and CAHs to provide care in accordance with the needs of the patient.
  • For CAHs, to perform a review of all their policies and procedures.
  • To disclose the names of people with a financial interest in the CAH.
  • For Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs), to review the patient care policies and facility evaluation annually, changing the frequency to every two years.
  • For a hospital’s medical staff, to attempt to secure autopsies in all cases of unusual deaths and of medical-legal and educational interest.


Hospitals, CAHs, and Home Health Agencies (HHAs) under the rule will be required to:


  • Have new discharge planning requirements—as mandated by the IMPACT act for hospitals, HHAs, and CAHs—which require facilities to assist patients, their families, or the patient’s representative in selecting a post-acute care (PAC) services provider or supplier by using and sharing PAC data on quality measures and resource use measures.
  • Have revised language that now requires a hospital (or CAH) to discharge the patient, and also transfer or refer the patient where applicable, along with his or her necessary medical information (current course of illness and treatment, post-discharge goals of care, and treatment preferences), at the time of discharge, to not only the appropriate post-acute care service providers and suppliers, facilities, agencies, but also to other outpatient service providers and practitioners responsible for the patient’s follow-up or ancillary care.
  • Have revised compliance language for HHAs that now requires these facilities to send all necessary medical information (current course of illness and treatment, post-discharge goals of care, and treatment preferences), to the receiving facility or health care practitioner to ensure the safe and effective transition of care, and that the HHA must comply with requests made by the receiving facility or health care practitioner for additional clinical information necessary for treatment of the patient.
  • Send necessary medical information to the receiving facility or appropriate PAC provider (including the practitioner responsible for the patient’s follow-up care) after a patient is discharged from the hospital or transferred to another PAC provider or, for HHAs, another HHA.
  • In the case of hospitals, ensure and support patients’ rights to access their medical records in the form and format requested by the patient, if it is readily producible in such form and format.
  • Allow multi-hospital systems to have unified and integrated Quality Assessment and Performance Improvement (QAPI) programs and unified and integrated infection control and antibiotic stewardship programs for all their member hospitals.
  • Allow hospitals the flexibility to establish a medical staff policy describing the circumstances under which a pre-surgery/pre-procedure assessment for an outpatient could be utilized, instead of a comprehensive medical history and physical examination.
  • Additionally, CMS is moving to clarify the requirement to allow the use of non-physician practitioners and doctors of medicine/doctors of osteopathy (MD/DOs) to document progress notes of patients receiving services in psychiatric hospitals.


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.

Connect with Richard Kusserow on LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2019 Strategic Management Services, LLC. Published with permission.

Annual report to HHS for improving Medicare, Medicaid, and related services

HHS should undertake steps to (1) guard against fraud, waste, and abuse, (2) help beneficiaries and providers, and (3) implement better payment policies, according to the Office of Inspector General’s (OIG) annual report on the top unimplemented recommendations from the previous year. While the report ranged far and wide in its recommendations, including a suggestion to the FDA to improve food safety inspections, the bulk of the report was dedicated to addressing fraud, waste, and abuse in Medicare and Medicaid (OIG Report, July 22, 2019).


Each year, the OIG creates a report that focuses on what it contends are the top recommendations for improvement in HHS programs that were not implemented over the past year. This report offers suggestions to both HHS and the FDA on where they should direct their reform efforts for maximum benefit.

The OIG made the following recommendation pertaining to fraud, waste, and abuse.

Inpatient rehab facilities 

In 2013, Medicare paid $5.7 billion to inpatient rehabilitation facilities (IRF) for care to beneficiaries that was not reasonable and necessary. The errors, the OIG said, were due in part to the fact that the payments to the IRFs were not properly aligned with the costs. The current system gives the IRFs a financial incentive to admit patients inappropriately. CMS is apparently evaluating the payment system, which includes a recently issued final year 2019 IRF prospective payment system final rule to update policies and payment rates for fiscal year 2019.

‘Least costly alternative’ Part B drugs

If the least costly alternative requirement had not been rescinded for Part B drugs, Medicare would have saved $33.3 million in one year ($264.6 to $231.3 million). Once the requirement was removed, utilization patterns shifted dramatically in favor of costlier products.

Part D drug oversight

Medicare Part D spending on compounded topical drugs soared from $13.2 million in 2010 to $232.5 million in 2016. Questionable billing practices seem to be concentrated in a few metropolitan areas. OIG has identified prescribers with troubling order patterns. States are hamstrung in their ability to prevent drug overpayments. State agencies need to know the 340B ceiling prices and which Medicaid claims are associated with 340B drugs to ensure that the claims are paid correctly.

Managed care organization improvements

OIG believes that a significant amount of underreporting of fraud and abuse is occurring in Medicaid involving managed care organizations. For example, even where a managed care organization discovers fraud or abuse, OIG says that it will handle the situation by itself (terminating the contract) rather than report it to CMS. CMS must do more to ensure that the organizations identify and refer fraud and abuse to the state.

Help beneficiaries and providers

In addition, the OIG recommended that CMS analyze the impact of counting time as an outpatient toward the 3-night requirement for skilled nursing facility services (SNF). Beneficiaries with similar post-hospital care needs have different access to SNF services depending upon whether they were outpatients or inpatients because of the requirement that the beneficiary spend at least three nights as an inpatient to obtain post-hospital SNF Medicare coverage. Furthermore, CMS paid an estimated $84.2 million in improper payments between 2013 and 2015 because SNFs incorrectly determined whether the 3-night requirement was met. CMS should consider changes to make the system fairer, which could include counting time as an outpatient.


The OIG had a single recommendation for the FDA, noting that deficiencies exist in the FDA’s electronic recall data system. The FDA relies too much on voluntary corrections by facilities. Just over half the facilities that were inspected and should have received warning letters actually received warning letters. The FDA also frequently fails to conduct timely follow-up inspections to ensure compliance. The OIG suggested that the FDA act to address these shortcomings.

U.S. pays nearly twice as much for drugs compared to other countries

A recent HHS analysis revealed that prices charged by drug manufacturers to wholesalers and distributors in the United States are 1.8 times higher than in other countries for the top drugs by total expenditures separately paid under Medicare Part B. U.S. prices were higher for most of the drugs included in the analysis, and U.S. prices were more likely to be the highest prices paid among the countries in the study (ASPE Report, October 25, 2018).

Medicare Part B

Drugs typically administered to patients by healthcare practitioners are covered and paid under Medicare Part B, which is part of the fee for service traditional Medicare benefit. Under Part B, providers buy and bill for these drugs. Medicare pays suppliers and providers based upon the Average Sales Price (ASP) for each product, as reported by manufacturers to CMS. Physician offices that buy and bill Part B drugs are paid 106 percent of the drug’s ASP, and hospitals are reimbursed either at 106 percent or 77.5 percent of ASP, depending on the hospital outpatient department’s participation in a safety net drug pricing program. Spending on Part B drugs has doubled since 2006.

The analysis and results

Data was compiled on the top drugs based on total Medicare reimbursement to either physician offices, hospital outpatient departments, or overall under Medicare Part B in 2016. Countries included in the analysis included: the United States, Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden, and the United Kingdom. The analysis identified thirty two Medicare Part B drugs among the top twenty drugs in spending for each setting. These thirty two drugs accounted for $18 billion in spending, out of a total $27 billion on Part B drugs across these settings. The main analysis reports on twenty seven Part B Drugs.

Across the twenty seven drugs in the study, the U.S. ex-manufacturer prices were 1.8 times than average international ex-manufacturer price. There was not any one country that consistently had the highest or lowest prices compared to the U.S. for twenty of the drug products; U.S. prices exceeded the average international price by more than twenty percent. In addition, for nineteen of the twenty seven products the U.S. prices were higher than any other country. Excluding the U.S., Germany and Canada had the highest prices for six drugs and Japan for five drugs. France and the United Kingdom had the lowest prices for four drug products. Japan, Sweden and Slovakia had the lowest prices for three drug products each. Finally, the analysis calculated that the Medicare program and its beneficiaries spent an additional $8.1 billion (47 percent more) on these twenty seven products that it would have, if payments based upon ASP were scaled by the international price ratios.

Overall, prices and reimbursement rates for Part B drugs are significantly higher for the U.S. providers than purchasers outside the U.S., except for a few outlier cases. The amount by which U.S. prices exceeded those of international comparators varied significantly by product, and there was no clear pattern as to which countries were consistently paying lower prices. The analysis suggests that Medicare Part B could achieve significant savings if prices in the U.S. were similar to those of other large market based economies.