Healthcare Financial News

Voting is now open for Modern Healthcare magazine’s sixth annual 100 Most Powerful People in Healthcare recognition program. HFMA president and CEO Richard L. Clarke, DHA, FHFMA, has made the list each of the past five years. The magazine reports that nearly 12,600 nominations were submitted this year.

Click here to cast your vote for Dr. Clarke and other leaders worthy of this recognition. You must vote for 10 of the 300 names on the ballot. Voting will continue through June 29, and the final ranking will be published in the Aug. 27 issue of Modern Healthcare.

With rising interest in information about the quality of care delivered by healthcare providers, the Department of Health and Human Services’ Agency for Healthcare Research and Quality has developed a new web tool demonstrating a variety of approaches for health quality report cards.

The Health Care Report Card Compendium is a searchable directory of more than 200 samples of report cards produced by a variety of organizations. The samples show formats and approaches for providing comparative information on the quality of health plans, hospitals, medical groups, individual physicians, nursing homes, and other providers of care.

“Consumers and providers alike need better information if we’re to get the highest quality and value from our health care system,” said HHS Secretary Mike Leavitt. “We’re still learning how to gather and present that information in the best ways, and we can learn from one another. The new AHRQ web site will help with that learning.” Read the press release.

The Deficit Reduction Act includes a request that providers begin reporting by Jan. 1, 2008, the National Drug Code for certain drugs and biologicals provided to patients in an outpatient setting for claims paid by Medicaid. The purpose of the NDC reporting is to enable Medicaid to obtain rebates from the pharmaceutical companies that manufacture those drugs.

Although the provider community generally agrees that Medicaid is entitled to the rebates, there is much concern regarding the reporting of the NDC on institutional claims. For one thing, obtaining the NDC and then applying it to an institutional claim is currently a labor-intensive and manual process. However, the primary concern is that the NDC is issued by the drug manufacturer and does not always correspond with how the drugs were dispensed in the hospital setting; it is not a one-for-one match. Also, many pharmacy systems monitor their inventory through internal codes typically assigned through a chargemaster; these codes are not aligned with the NDC.

One option, identified in the DRA, is to report the J codes in place of the NDCs. (J codes, which consist of five alpha-numeric characters, were developed by CMS and identify certain drugs and biologicals.) The final rule is expected to be issued in July.

In today’s Federal Register, the Centers for Medicare and Medicaid Services has published a notice describing who may have access to data in the National Provider Identifier system (the National Plan and Provider Enumeration System). CMS states it will soon publish an updated System of Records notice that will further clarify its data dissemination policy described in today’s notice.

According to that notice, most of the data elements included in the application for an NPI will be disclosed on the Internet. Not to be disclosed are Social Security numbers, IRS individual taxpayer identification numbers, and dates of birth. The Department of Health and Human Services has determined that the remaining healthcare provider data elements contained in the NPPES (listed in a table in the notice) are required to be provided under the Freedom of Information Act.

Because of the need within the healthcare industry for providers to know the NPIs of other providers in order to submit claims transactions that are compliant with the Health Insurance Portability and Accountability Act, HHS will make the NPPES healthcare provider data available on the Internet in downloadable files and in a query-only database. The initial downloadable file and query-only database will be available 30 days after the publication of the notice (expected to be June 29), with the locations announced on the CMS NPI web page. Read the Federal Register notice.

HHS Secretary Mike Leavitt on Friday announced grants worth almost $125 million to help health centers increase access to health care for low-income and uninsured Americans. Grants totaling $45 million will be used to establish 86 new health center sites in 33 states and the District of Columbia.

Additional grants worth $55 million will expand medical capacity at 132 existing health centers; the remaining $25 million will supplement health centers’ base grant awards to offset rising costs associated with maintaining current service levels.

“The funds we’re announcing today will help almost 900,000 more low-income and uninsured patients access the key preventive and primary healthcare services that health centers offer,” said Leavitt. “The grants also bring us very close to completing President Bush’s multi-year initiative to provide health care to millions more Americans by expanding the health center system.”

Launched in 2002, the president’s health center initiative aimed to significantly increase access to primary healthcare services in 1,200 communities by supporting new or expanded health center sites.

Elderly Medicare patients at high risk for hospitalization for two common conditions--bacterial pneumonia and chronic obstructive pulmonary disease--were more likely to stay out of the hospital if treated by experienced physicians, according to a report of a study by researchers at the Center for Studying Health System Change and Memorial Sloan-Kettering Cancer Center. The report appears in the June issue of the journal Medical Care.

But patients of physicians reporting more difficulty accessing ancillary services for patients--for example, home oxygen or respiratory therapy--and physicians treating more poor patients were at higher risk of hospitalization for both conditions, the study found.

The article concludes, “making additional clinical resources available to subgroups of physicians who have less access to ancillary services and a high proportion of Medicaid patients may help reduce their patients’ risk of hospitalization from COPD and bacterial pneumonia.” Read the abstract.

The Centers for Medicare and Medicaid Services has placed on display at the Federal Register a notice that describes the methodology for re-allocating the 2004 and 2005 unspent State Children’s Health Insurance Program allotments.

In February 2007, an initial redistribution of unspent 2004 SCHIP allotments was made to five states that would have an SCHIP shortfall during the Jan. 1-March 31, 2007, period. These states were Illinois, Maryland, Massachusetts, New Jersey, and Rhode Island.

In March 2007, CMS received revised estimates from the states of projected expenditures; subsequently, the 2004 re-allotments were revised and the 2005 re-allotments were determined. The same five shortfall states, as well as Georgia, will now receive re-allotments. At $37,071,617, Illinois is set to receive the largest amount, followed by Georgia ($28,653,319), New Jersey ($27,708,720), Massachusetts ($21,616,185), Maryland ($16,638,268), and Rhode Island ($7,144,187).

CMS has released a notice establishing the data that are available from the national plan and provider enumeration system (NPPES), which houses healthcare providers’ national provider identifier (NPIs) numbers and information from their NPI applications and updates. The NPPES would also be capable of enumerating health plans and housing their standard unique health identifiers, once adopted.

Beginning May 23, 2007, covered entities under HIPAA are required to use NPIs to identify healthcare providers in standard transactions (small health plans have until May 23, 2008).

Due to extraordinary demand from the healthcare industry, the NPPES healthcare provider data will be available in downloadable files and in a query-only database on its NPI web page. CMS says that an update file will be available for download each month from the same web site. The query-only database will be refreshed each month also.

The Securities and Exchange Commission has unanimously approved interpretive guidance to help public companies strengthen their internal control over financial reporting while reducing unnecessary costs, particularly at smaller companies. The new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley Act of 2002 by focusing company management on the internal controls that best protect against the risk of a material financial misstatement.

“Congress never intended that the 404 process should become inflexible, burdensome, and wasteful,” said SEC Chairman Christopher Cox. “The objective of Section 404 is to provide meaningful disclosure to investors about the effectiveness of a company’s internal controls systems, without creating unnecessary compliance burdens or wasting shareholder resources.”

According to John W. White, director of the SEC’s Division of Corporation Finance, the commission’s interpretive guidance should reduce uncertainty about what constitutes a reasonable approach to management’s evaluation while maintaining flexibility for companies that have already developed their own assessment procedures and tools. Companies will be able to continue using their existing procedures as long as they meet the standards of Section 404 and SEC rules.

The effective date of the interpretive guidance and adopted rules will be 30 days from their publication in the Federal Register. The full text of the interpretive guidance and rules will be posted to the SEC web site as soon as possible. Read the release.

The Centers for Medicare and Medicaid Services has posted two notices and form instructions associated with a final rule (CMS-4105-F) published in the Federal Register on Nov. 27, 2006, that sets forth requirements for how hospitals should notify Medicare beneficiaries who are hospital inpatients about their hospital discharge rights.

Beginning on July 1, 2007, hospitals are required deliver a revised version of the “Important Message from Medicare” to inform Medicare beneficiaries who are hospital inpatients about their hospital discharge appeal rights. Notice is required both for Original Medicare beneficiaries and for those enrolled in Medicare health plans. Beneficiaries who choose to appeal a discharge decision will receive a more detailed notice.

Note: A Special Open Door Forum will be held on Tuesday, May 29, 2007, to discuss the final rule and the associated notices.

Women with heart disease and diabetes are less likely to receive several types of routine outpatient medical care than men who have similar health problems, according to the report of a RAND Corporation study issued last week. Although previous research has shown that women less frequently receive expensive medical care such as angioplasty for heart disease, few studies have evaluated gender disparities for routine care in managed care settings. The report is published in the May/June issue of Women’s Health Issues.

Researchers studied more than 50,000 men and women enrolled in both commercial and Medicare managed care plans in 1999. The study examined 11 different screening tests, treatments, or measurements of health status shown to be important to all people diagnosed with heart disease or diabetes. All the patients had either private insurance or were enrolled in Medicare managed care plans, had been diagnosed with heart disease and/or diabetes, and had visited healthcare providers to receive care.

Among people enrolled in commercial health plans, women were significantly less likely than men to receive the care evaluated in six of the 11 measures, while women enrolled in the Medicare plans were less likely to receive the care evaluated in four of the 11 measures. Access the report.

A competition has launched to find disruptive innovations that could dramatically reshape the health and healthcare marketplace. The online competition, “Disruptive Innovations in Health and Health Care: Solutions People Want,” is being sponsored by the Pioneer Portfolio of the Robert Wood Johnson Foundation and uses a unique open-source competition model that promotes enterprising solutions to social problems.

The “Disruptive Innovations” competition, which runs through July 18, expects to attract entrepreneurs from within and outside the healthcare field whose ideas might lead to new services, tools, and choices that consumers want but are currently out of reach because of cost or complexity or because the right idea hasn’t surfaced. Examples of disruptive innovations that are already transforming health care are home glucose monitors that give diabetics the ability to get blood glucose readings at home within seconds, and walk-in health clinics in retail stores.

Twelve competition finalists will be selected by a panel of judges, and the three winners will each receive a $5,000 cash prize. In addition, RWJF’s Pioneer Portfolio will review competition entries and may award up to $5 million to support projects with potential for the greatest impact. Read the news release.

Fitch Ratings issued a report yesterday focusing on the impact of modern facility design in the not-for-profit healthcare industry. In its report, titled Modern Facility Design and Its Impact on Operational and Capital Strategies, Fitch says that a disciplined operational plan, combined with leading evidence-based capital design, should result in tangible improvements in quality, patient safety, information connectivity, operational efficiency, and retention of labor, all of which will be a differentiating factor in hospital credit going forward.

Insufficient capital spending by most hospitals has been one of Fitch’s primary concerns over the past several years. According to Fitch, not-for-profit healthcare institutions must continue to invest in their core operations to ensure the highest value return on their capital investments. Greater scrutiny by state and federal regulators, increasing consumerism, and pay-for-performance programs have all resulted in increased emphasis on improving quality outcomes and patient safety. Additionally, aging hospital facilities have led to a modern building boom that some estimate will top $200 billion in the next 10 years.

Fitch says that hospitals that incur additional debt to fund projects geared at improving healthcare delivery and quality may be able to execute this strategy without harming their credit ratings. In balance with the overall financial health of an organization, Fitch will weigh the favorable aspects of capital improvement projects and care delivery strategies against any increase in debt. Although the effect may not be immediate, a hospital’s ability to both determine the trend of quality and patient safety and influence outcomes through evidence-based design and healthcare IT that fosters better decision making will have a direct impact on efficiency, labor recruitment and retention, and reimbursement, which ultimately influence financial outcomes.

The Centers for Medicare and Medicaid Services announced yesterday a decision, effective immediately, to provide coverage for Doppler monitoring of cardiac output in certain settings. CMS has determined that the current evidence is adequate to revise its longstanding ultrasound diagnostic procedures National Coverage Determination and remove the past noncoverage of this diagnostic test in these settings.

“As we developed this decision,” said CMS Acting Administer Leslie V. Norwalk, “we used the best available medical evidence--in the form of randomized controlled clinical trials--to re-evaluate our position on this important noninvasive method of caring for patients in intensive care situations.”

CMS was asked to reconsider its longstanding NCD on ultrasound diagnostic procedures because the existing NCD predated the commercial availability of new medical devices, much of the validation data, and all of the peer-reviewed, randomized controlled clinical trial data.

The Centers for Medicare and Medicaid Services released a proposed rule on May 18 that would clarify that costs and payments associated with graduate medical education programs are not expenditures for medical assistance that are federally reimbursable under the Medicaid program.

Under section 1903(a)(1) of the Social Security Act, federal grant funding, or federal financial participation, is available to states for a percentage of amounts “expended … for medical assistance under the state plan.” CMS has previously allowed states to include hospital GME activities as a component of the cost of Medicaid inpatient and outpatient hospital services.

Quoting CMS, “we do not believe that it is consistent with the Medicaid statute to pay for GME activities either as a component of hospital services or separately. GME is not a health service that is included in the authorized coverage package. Nor is GME recognized under the Medicaid statute as a component of the cost of Medicaid inpatient and outpatient hospital services. GME is not a health service (in contrast to the activities of disproportionate share hospitals). Therefore, we are proposing in this issuance to preclude FFP in state payments for GME.”

Comments must be received within 30 days from the date published in the Federal Register (that date is expected to be May 23). Read the proposed rule.

CMS has proposed strengthening its current oversight requirements and penalties for Medicare Advantage plans and Part D prescription drug plans. In its rule, CMS proposes clarifications to Medicare program provisions relating to contract determinations involving Medicare Advantage organizations and Medicare Part D prescription drug plan sponsors, including new steps to help expose potential fraud or misconduct through mandatory self-reporting, and changes to streamline the process relating to intermediate sanctions and contract determinations

The proposed rule will go through a 60-day period of public notice and comment and a final rule is expected to be released later this year.

CMS is also releasing another proposed rule which makes technical changes to the regulations implementing the Part D prescription drug benefit. In general, the proposal makes certain technical corrections and clarifications to the Jan. 28, 2005, final rule. Areas addressed in the regulation include inhaled insulin, coordination of benefits, and the retiree drug subsidy, among others.

CMS also proposes, effective 2009, to refine certain rules relating to the determination and reporting of prescription drug costs. CMS is also proposing to update the requirements of Part D sponsors to ensure adequate access to home infusion pharmacies. Read the notice.

A new house-to-house survey of people living in Orleans, Jefferson, Plaquemines, and St. Bernard parishes documents the impact Hurricane Katrina has had on the physical and mental health and economic well-being of New Orleans area residents. The Kaiser Family Foundation study found that in the aftermath of Katrina, the vast majority (81%) of those now living in Greater New Orleans have seen their quality of life deteriorate in at least one of seven critical aspects of their lives. More than half (55%) reported problems in two or more areas.

Getting and affording high-quality health care stands out as a particularly widespread challenge, with 49% of area residents saying they are facing a significant obstacle to getting needed care. Nearly as many (43%) reported that they are in fair or poor health or have a chronic health condition, while nearly one in five (18%) reported some type of mental health challenge.

The survey also found a sharp divide in the way that African Americans and whites in the New Orleans area experienced the storm and perceive the recovery efforts, especially in Orleans Parish. Seven in 10 African Americans in that parish (72%) reported a problem accessing health care--more than twice the rate reported by whites in the same parish (32%).

Future Kaiser surveys planned in 18 months and 36 months will monitor progress and changes.

Walgreen Co. said last week that it intends to acquire Take Care Health Systems, a leading operator of convenient care clinics. The clinics, combined with the drugstore chain’s nearly 5,700 pharmacies across the country, will form the core for the future rollout of a variety of patient-focused healthcare services. Take Care Health Systems operates 50 health care clinics in Chicago, Kansas City, Milwaukee, Pittsburgh, and St. Louis. The transaction is expected to close this week, subject to the completion of a definitive agreement. Financial terms weren’t disclosed.

With the acquisition, Walgreens expects to have more than 400 Health Corner Clinics operating within its stores by the end of 2008. Currently, the company has 59 Health Corner Clinics in Atlanta, Chicago, Kansas City, Las Vegas, Milwaukee, and St. Louis. Read the press release.

In determining the healthcare industry’s state of readiness to begin using the new UB04 form next week, the National Uniform Billing Committee has realized that several snags may cause headaches in the claims processing arena.

Although the Centers for Medicare and Medicaid Services has confirmed that as of May 23, 2007, it will be ready to accept the paper UB04 and will not accept the old UB92 form as of that date, not all state Medicaid programs are prepared to accept the new form. Many larger payers are accepting both forms to help with the transition; however, other payers, such as worker’s compensation and liability carriers, have indicated that they are not migrating to the new form. The NUBC strongly recommends that providers check with their individual payers and state Medicaid programs to determine which form will be accepted for claims processing.

Also, many providers have just begun testing the new format and have not yet created the new form. The NUBC is recommending that vendors work with their providers, payers, and clearinghouses to escalate the implementation and testing of the new format.

Finally, confusion surrounding several of the form locators has been identified. Clarification regarding the correct definitions and usage will be addressed in HFMA’s upcoming audio webcast on May 24. (HFMA is a member and one of the founders of the NUBC.) Read the fact sheet.

The Centers for Medicare and Medicaid Services has announced that it has recently discovered an error in the calculation of the diagnosis-related group relative weights in the FY08 inpatient prospective payment system proposed rule. CMS revised the relative weights to correct the error and recalculated the IPPS standardized amounts; these changes will increase the IPPS standardized amounts by $0.18.

Also, the proposed FY08 outlier threshold will decrease by $85 to $22,940. In addition, there will be some minor changes to the wage index in the fourth decimal place for some hospitals.

CMS has posted new tables on its web site, and expects to publish a correction notice with the revised information in the Federal Register shortly. Download the IPPS public use data files.

The Centers for Medicare and Medicaid Services recently discovered an error that was made in the calculation of the high-cost outlier fixed-loss amount in the rate year 2008 long-term care hospital prospective payment system final rule. Under the high-cost outlier policy, Medicare pays LTCHs an additional amount for unusually high-cost cases. To be eligible for this payment, the hospital’s estimated costs in treating the case must exceed the long-term care diagnosis-related group payment by an outlier fixed-loss amount. The final rule, published in the Federal Register on May 11, 2007, sets the outlier fixed-loss amount for RY08 at $22,954, up from $14,887 in RY07.

However, the final RY08 high-cost outlier fixed-loss amount should have been $20,738. CMS expects to publish a correction notice in the Federal Register shortly. Read the notice.

The U.S. healthcare system ranks last compared with five other nations on measures of quality, access, efficiency, equity, and outcomes, according to the third edition of a Commonwealth Fund report analyzing international health policy surveys. Although the United States did well on some preventive care measures, the nation ranked at the bottom on measures of safe care and coordinated care.

Another new Commonwealth Fund report comparing health spending data in industrialized nations reveals that despite spending more than twice as much per capita on health care as other nations ($6,102 versus $2,571 for the median of Organization for Economic Cooperation and Development countries in 2004), the United States spends far less on health IT--just 43 cents per capita, compared with about $192 per capita in the United Kingdom.

In Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care, Karen Davis, PhD, and colleagues compare surveys on physicians’ and patients’ experiences and views of their health systems conducted in Australia, Canada, Germany, New Zealand, the United Kingdom, and the United States between 2004 and 2006. On access measures, the United States ranked last overall, including last on timeliness of care: 61% of U.S. patients said it was somewhat or very difficult to get care on nights or weekends, compared with 25% to 59% in other countries. The nation also ranked last overall in efficiency, including last on percent of patients who have visited the emergency department for conditions that could have been treated by a regular physician if one had been available (26% versus 6% to 21% in other countries). On measures of quality, the United States overall ranked fifth out of six countries.

“The United States stands out as the only nation in these studies that does not ensure access to health care through universal coverage and promotion of a ‘medical home’ for patients,” said Commonwealth Fund President Karen Davis. “Our failure to ensure health insurance for all and encourage stable, long-term ties between physicians and patients shows in our poor performance on measures of quality, access, efficiency, equity, and health outcomes. In light of the significant resources we devote to health care in this country, we should expect the best, highest performing health system.”

Thirteen states and the District of Columbia will get more than $547 million in grants over five years to build Medicaid long-term care programs that will help keep people at home and out of institutions, Leslie V. Norwalk, Acting Administrator of the Centers for Medicare and Medicaid Services, announced earlier this week.

The awards are the second round of grants that will total $1.75 billion over five years (2007-11) to help shift Medicaid’s traditional emphasis on institutional care to a system offering greater choices that include home and community-based services.

This “Money Follows the Person” initiative is a component of the administration’s New Freedom Initiative, a nationwide effort to remove barriers to community living for people of all ages with disabilities or chronic illnesses. States expect to be able to move more than 14,000 people into community settings using these grant awards. States receiving grant funds will qualify for a higher percentage of federal matching dollars to help cover the costs of moving people out of nursing homes and into community settings. Read the overview.

The Medicare Modernization Act has succeeded in providing seniors with more “choice” among Medicare Advantage private health insurance plans. However, particularly in rural areas, much of the increased choice stems from a proliferation of private fee-for-service plans, which mimic traditional Medicare’s fee-for-service structure but receive reimbursements that exceed spending in the traditional program.

In a Health Affairs web exclusive, Marsha Gold documents the increase in PFFS plans and suggests that these new plans are not worth the cost. “The additional PFFS plan choices essentially allow firms to ‘piggyback’ on Medicare’s existing investment and policies and do relatively little to improve care management,” says Gold, a senior fellow at Mathematica Policy Research. “To the extent that PFFS enrollment grows, Medicare’s risk pool is fragmented, and the program’s purchasing power with providers is diluted.”

The nation’s healthcare sector is shifting rapidly to a system whereby patients can get better information about the quality and cost of their care, said Department of Health and Human Services Secretary Mike Leavitt last week at a roundtable of key business, union, government, community, and healthcare leaders.

Less than a year after launching his value-driven health care initiative, Leavitt announced that more than 100 million Americans are now served by health plans that are committed to providing consumers with transparent quality and cost information. The federal government, many states, about 775 employers, and numerous unions, communities, physicians, and hospitals have joined the movement.

Most plans that are committed to the value-based approach will embody the principles of value-driven care in their next contracting cycle, generally for 2008. And most enrollees in these plans are expected to have access to web-based “report cards” on quality or cost within the next 12 months.

“Consumers have extensive information to help them make good choices when they buy cars or get mortgages,” Leavitt said. “But when it comes to choices about their health care, little information about quality or cost has been available. The purpose of the value-driven healthcare movement is to make that information available, and then reward people for using it.” Read the press release.

Beginning Jan. 1, 2008, the Centers for Medicare and Medicaid Services will require the completion of a present-on-admission indicator for every diagnosis on an inpatient acute care hospital claim. Now that CMS has issued instructions, users will be able to begin developing implementation plans and move toward implementation.

Section 5001(c) of the Deficit Reduction Act of 2005 requires hospitals to begin reporting the secondary diagnoses that are present on the admission of patients effective for discharges on or after Oct. 1, 2007. By Oct. 1, 2007, the HHS Secretary must select at least two conditions that are high cost or high volume or both; assigned to a higher-paying DRG when present as a secondary diagnosis; and reasonably preventable through application of evidence-based guidelines. Effective for acute care inpatient PPS discharges on or after Oct. 1, 2008, the Secretary cannot assign cases with these conditions to a higher-paying DRG unless they were present on admission.

This instruction (Transmittal 1240) will require hospitals to begin reporting the POA code on claims with discharges beginning on or after Oct. 1, 2007. Although hospitals must report the POA code on the claim, the information will not be used by claims processing systems until Jan. 1, 2008. Beginning April 1, 2008, if hospitals do not report a valid POA code for each diagnosis on the claim, the claim will be returned to the hospital for correct submission of POA information.

On May 11, the IRS issued a memorandum for hospitals that provide their medical staff physicians with financial assistance to purchase and implement software used predominantly for creating, maintaining, transmitting, or receiving electronic health records.

In the memorandum, the IRS says it will not treat the benefits a hospital provides to its medical staff physicians “as impermissible private benefit or inurement in violation of section 501(c)(3) of the Internal Revenue Code” if the benefits fall within the range of health IT items and services that are permissible under the HHS EHR regulations. Last year, the Department of Health and Human Services issued final regulations allowing hospitals to provide, within specific parameters, EHR software and technical support services to their medical staff physicians without violating the federal anti-kickback and physician self-referral laws. Read the memorandum.

Major American employers announced last week that they were uniting with major physician groups to form a patient-centered primary care collaborative with the intention of transforming how primary care is organized and financed. By advancing a model of care--the patient-centered medical home--the collaborative hopes to provide better outcomes to patients, more appropriate payment to physicians, and better value, accountability, and transparency to purchasers and consumers.

As of May 8, members of the collaborative included the American Academy of Family Physicians, the American Academy of Pediatrics, the American College of Physicians, the American Osteopathic Association, the National Association of Community Health Centers, the ERISA Industry Committee, Exelon Corp., General Motors, IBM, the National Business Group on Health, Walgreens Strategic Health Initiatives, and Wyeth.

The Centers for Medicare and Medicaid Services has confirmed that it will honor the May 23, 2007, implementation date for the UB-04 claim form. On that date, CMS will reject hard-copy claims. Look for more news next week on this subject.

Gov. Christine Gregoire signed legislation last week that may make Washington the first state to endorse the benefit of physicians and patients using shared decision making when confronted with important treatment choices.

In shared decision making, the physician shares with the patient all relevant risk and benefit information on all treatment alternatives, and the patient shares with the physician all relevant personal information that might make one treatment or side effect more or less tolerable than others. Studies have indicated that when decision aids (such as brochures, DVDs, or online tools) are available to patients and they have the opportunity to participate in medical decision making with their physician, the patient-physician dialogue, as well as patient well-being, improves.

The bill enables the state Health Care Authority to implement a shared decision-making demonstration project in partnership with multispecialty group practices. The demonstration project will incorporate decision aids into clinical practice to assess their effect on healthcare quality, cost, and patient satisfaction, according to a statement from Gov. Gregoire's office.

Calling the legislation “groundbreaking,” John E. Wennberg, MD, co-founder and senior policy advisor, Foundation for Informed Medical Decision Making, said in a statement that it “empowers patients with relevant medical information to enable them to make treatment decisions based on their individual preferences.” Read the governor’s press release.

Children’s exposure to alcohol advertising during early adolescence appears to influence both beer drinking and their intentions to drink a year later, according to a RAND Corporation study issued last week.

The study of children in the sixth and seventh grades found that those exposed to alcohol advertising at high levels--from television, magazines, in-store displays, and promotional items like T-shirts and posters--were 50 percent more likely to drink and 36 percent more likely to intend to drink than children whose exposure to alcohol advertising was very low. The study is based on a RAND survey of 1,786 South Dakota sixth graders about their exposure to alcohol advertising and marketing, and a second survey of the same children a year later about drinking intentions and behavior. It will be published in the June issue of the Journal of Adolescent Health.

Besides being illegal, underage drinking has been linked to an increased probability of motor vehicle crashes, sexually transmitted diseases, suicide, and disability. The U.S. surgeon general issued a call to action in March to prevent and reduce underage drinking.

The mortality risks posed by Vioxx to treat arthritis and Tysabri to treat multiple sclerosis--drugs that have recently received scrutiny--are comparable to or exceed the risk of dying in a car, working as a truck driver, or rock climbing, according to a new study published in Health Affairs. Even the widespread prophylactic use of aspirin poses a fatality risk on par with the risk associated with driving a car or working as a firefighter, say study coauthors Joshua Cohen and Peter Neumann of Tufts-New England Medical Center. The study compares mortality risks posed by drugs with risks related to work, transportation, and recreation.

The authors argue that risks cannot be properly evaluated without also considering the associated benefits. They point out that some surveys of patients who take Tysabri indicate that they would tolerate considerably higher risks to alleviate their multiple sclerosis symptoms. The need for the FDA to systematically and quantitatively evaluate both the risks and benefits of drugs may soon grow. The Institute of Medicine has recommended that the FDA undertake more intensive postmarket surveillance of medications, and Congress is considering legislation in this area. Cohen and Neumann suggest that such surveillance would likely reveal that many more drugs have serious, although relatively rare, side effects. Read the abstract.

As many as two of five U.S. adults have reported that they or a loved one has experienced a medical injury. But in a Commonwealth Fund-supported study of patient-reported medical errors, researchers at the Dana-Farber Cancer Institute found that although one of five patients treated on a chemotherapy infusion unit reported an unsafe experience, only 31 percent of these patients actually identified a close call, medical error, or injury.

Instead, the researchers categorized most reports as service quality problems: long waits, miscommunication with clinicians, or dissatisfaction with the environment and amenities. “Patients may perceive that these inconveniences signal problems with the overall process of care,” write the authors, and conclude that the link between safety and service quality merits further study.

Medicaid documentation requirements enacted by Congress in 2006 are already having a major and measurable impact on health centers and their patients, according to a new analysis issued by The George Washington University School of Public Health and Health Services. Results from this initial national impact assessment, the first study to systematically study the effects of documentation, show that more than 90 percent of all health centers report enrollment difficulties for patients of all ages, including newborn children; also, more than 43 percent of health centers report that patients are experiencing a longer enrollment and/or application process.

The immediate estimated impact of the new documentation requirements is the loss of Medicaid coverage for some period of time for between 2.2 percent and 6.7 percent of all Medicaid enrolled patients. This estimate is considered conservative and does not take into account the impact of the changes on newborn children or new applicants. Between 105,100 and 319,500 Medicaid patients, including up to 212,400 children and 107,100 adults, are expected to be affected.

However, Centers for Medicare and Medicaid Services spokeswoman Mary Kahn said that CMS “cannot substantiate the claims in the study as we have not gotten any supporting data from the states.” She added that CMS has “worked cooperatively with partners and interest groups in writing regulations that give states as much flexibility as possible under a fairly proscriptive piece of legislation” and that states have been instructed to help individuals having problems obtaining items such as birth records. Download the report.

People who lack health insurance and those who pay for care out of their own pockets were charged on average 2.5 times more for hospital services in 2004 than what health insurers pay and three times more than Medicare-allowable costs, a leading health policy researcher reported in the May-June 2007 issue of Health Affairs. The gap between rates hospitals charge to self-pay patients and other payers has widened greatly since 1984, study author Gerard F. Anderson reports.

“Over time, the uninsured have been paying higher and higher prices for hospital care compared to what the insured population pays,” said Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health in Baltimore, Md. “The markup on hospital care for these individuals, especially for those who can afford it least, is unjustifiable.”

The ratio of what hospitals asked self-pay patients to pay and Medicare-allowable costs was 3.07 in 2004. Thus, for every $100 in Medicare-allowable costs, the average hospital charged a self-pay patient $307. For-profit hospitals had the highest charge-to-cost ratio, at 4.10, while public hospitals had a charge-to-cost ratio of 2.49. The markup of charges over costs was much greater in small urban hospitals than in rural hospitals--3.25 compared with 2.42.

Despite broad interest among employers and health plans, a nascent move to steer patients to physician specialists who score well on efficiency and quality measures is off to a slow start, according to a study released by the Center for Studying Health System Change.

So-called high-performance networks are a recent addition to the tools that health plans and purchasers are using in an attempt to curb costs and improve quality, the study found. The hope is that if these networks influence enough enrollees to shift to higher-performing providers, physicians losing market share might be motivated to improve efficiency and quality to better compete.

Based on interviews with about 20 organizations between May and September 2006, the study found that physicians typically responded to high-performance networks with skepticism, with the most common complaint being lack of communication from health plans. Physicians also had issues with the methodologies used to determine high-performance designations, questioning the data quality and whether sufficient sample sizes were used.

“High-performance networks have gained a toehold in such markets as Boston, Milwaukee, and Seattle only when large employers have been aggressive in pushing them,” said Paul B. Ginsburg, PhD, co-author of the study and president of HSC. Read the study.

The Government Accountability Office was asked to examine hospital processes to collect and submit quality data, the extent to which IT facilitates hospitals’ collection and submission of quality data, and whether the Centers for Medicare and Medicaid Services has taken steps to promote the use of IT systems to facilitate the collection and submission of hospital quality data. GAO addressed these issues by conducting case studies of eight hospitals with varying levels of IT development and interviewing relevant officials at CMS and the Department of Health and Human Services.

GAO recommends that the secretary of HHS identify the specific steps the department plans to take to promote the use of health IT for the collection and submission of data for CMS’s hospital quality measures and inform interested parties about those steps, the expected time frame, and associated milestones. In commenting on a draft of this report on behalf of HHS, CMS concurred with these recommendations.

Medicare cuts in the FY08 inpatient prospective payment system proposed rule “would weaken hospitals’ ability to provide needed services,” says a letter to Centers for Medicare and Medicaid Services Acting Administrator Leslie V. Norwalk from the American Hospital Association and five other national hospital groups.

The groups highlight two aspects of the proposed rule for criticism. The first is a 2.4% cut for coding changes that CMS expects to occur because of modifying DRGs to better reflect patients’ severity of illness. The letter says there are “no relevant data or experiences to support a prospective…cut.” The second aspect of the rule the groups object to is eliminating the annual update for capital payments to hospitals in urban areas.

The letter was signed by leaders of the AHA, the Association of American Medical Colleges, the Federation of American Hospitals, the National Association of Public Hospitals and Health Systems, Premier, Inc., and VHA Inc.

On May 8, HFMA holds an audio webcast to prepare members for the dramatic changes to the DRG system in the proposed rule. Click here to register.

President Bush has nominated Kerry N. Weems, a 24-year veteran of the Department of Health and Human Services, to be administrator of the Centers for Medicare and Medicaid Services. Currently, Weems is deputy chief of staff to HHS Secretary Mike Leavitt. Previously, Weems was acting assistant secretary for budget, technology, and finance and chief financial officer at HHS. Weems’ “wealth of experience as an advisor to several HHS secretaries and as a manager of large budgets and organizations will make him successful in the role,” says Leavitt. Weems would replace Leslie V. Norwalk, who has been CMS acting administrator since October 15, 2006—close to the statutory limit for a non-permanent occupant of the position. Weems’ nomination is subject to senate confirmation. 

CMS has issued a proposed rule for the inpatient rehabilitation facility prospective payment system that is estimated to increase Medicare payments in FY08 by approximately $150 million.

The proposed rule would continue the existing phase-in to a 75% compliance threshold, a requirement that when fully implemented will require that at least 75% of an inpatient rehabilitation facility’s total inpatient population has one of the 13 designated medical conditions for which intensive inpatient rehabilitation services are considered medically necessary. The compliance threshold increases to 65 percent for cost-reporting periods beginning during the 12-month period starting on July 1, 2007. For cost reporting periods beginning on and after July 1, 2008, of the compliance percentage is 75%.

The proposed rule also would increase the high-cost outlier threshold to $7,522 from $5,534 in FY 2007, based on an analysis of 2005 data that indicates that this threshold would maintain estimated outlier payments at 3% of total payments under the inpatient rehabilitation facility PPS. Although the higher threshold would mean that fewer cases would qualify for outlier payments, a lower outlier threshold would require an across-the-board reduction in the base payment for an inpatient rehabilitation facility stay in order to maintain budget neutrality. The high-cost outlier threshold may be updated for the final rule based on analysis of 2006 data. The proposed rule would also clarify that short-stay transfer cases that meet the criteria to qualify for outlier payments are eligible to receive the additional payments.

Comments on the proposed rule will be accepted until July 2. Download the proposed rule (129 pages).

The proposed rule for the FY08 inpatient prospective payment system, containing significant changes to the DRG system, has been published in the May 3 Federal Register. As reported previously in HFMA News, the rule includes proposals to improve the accuracy of Medicare’s payment while providing additional incentives for hospitals to engage in quality improvement efforts. The rule also proposes restructuring inpatient diagnosis related groups to account more fully for the severity of patients’ conditions.

Download the proposed rule from the Federal Register (457 pages). Read the HFMA News story describing the proposed rule.

Nominations are now being accepted for Modern Healthcare magazine’s 6th annual 100 Most Powerful People in Healthcare recognition program. HFMA president and CEO Richard L. Clarke, DHA, FHFMA, has made the list each of the past five years. Click here to nominate Dr. Clarke and other leaders worthy of this recognition. The deadline for nominations is May 11. Take this opportunity to recognize the people in health care who make a difference.

CMS has revised Medicare’s policies for graduate medical education payments to a teaching hospital when its residents are being trained in a nonhospital site. The revision is included in the final rule for the long-term care hospital prospective payment system. Under current rules, if residents are training in a nonhospital setting, a teaching hospital may count those residents in calculating their graduate medical education payments if, in part, the teaching hospital pays “all or substantially all of the costs for the training program in the nonhospital setting.” The final rule amends this, effective July 1, 2007, to only require that the teaching hospital pay at least 90 percent of the total costs of training residents in the nonhospital setting (including residents’ salaries, fringe benefits, travel and lodging expenses when appropriate, plus the portion of the cost of teaching physicians’ salaries attributable to direct graduate medical education). To reduce the administrative burden of documenting those costs, CMS is allowing hospitals to use specified proxies to determine those costs. Download the final rule for the long-term care hospital PPS; see section XII.

Seventy-four percent of large U.S. employers surveyed want to provide their retired employees with access to health insurance, but they no longer want to fund the coverage, according to findings of a new PricewaterhouseCoopers Management Barometer Survey. The survey also found that to cut health costs among their current workforce, employers are looking for greater accountability among employees for their health. Nearly two-thirds of employers surveyed agree that employees with unhealthy lifestyles, such as smoking, poor diet and inadequate exercise, should pay more for their health insurance coverage. This sentiment is up significantly from 2005.

The Centers for Medicare and Medicaid Services issued a final rule under which Medicare total payments to long-term care hospitals are expected to exceed $4 billion for rate year 2008. The rule is designed to assure appropriate payment for treatment of severely ill or medically complex patients, while providing incentives for more efficient care.

CMS is updating the long-term care hospital prospective payment system federal rate by 0.71% to $38,356.45 for RY08. This update reflects the rehabilitation, psychiatric, and long-term care market basket of 3.2% and an adjustment of 2.49% to account for coding practices. CMS analysis of the latest available long-term care hospital claims data indicates that a significant portion of the estimated 3.49% increase in observed case mix between FY04 and FY05 is due to changes in coding practices and documentation rather than to the treatment of more resource-intensive patients. Therefore, the standard federal rate for RY08 has been adjusted by the most recent estimate of the market basket for RY08 (3.2%) and -2.49%, the difference between the observed case mix increase in FY05 (3.49%) and the real case mix increase (1%) due to increases in patient severity. The payment per discharge to long-term care hospitals is significantly higher than the federal rate for acute care hospitals paid under the inpatient PPS, which for FY07 is about $5,300 per discharge.

The final rule sets the outlier fixed-loss amount for RY08 at $22,954, up from $14,887 in rate year 2007. According to CMS, this revision to the threshold is necessary to limit estimated aggregate outlier payments to 8 percent of total estimated payments under the long-term care hospital PPS. The final rule does not revise the long-term care DRGs and relative weights.

Access the fact sheet on the final rule. Download the final rule (779 pages).

Consumerism has already arrived in the orthopedic implant business, according to John Brown, current chairman of the board and past CEO of Stryker Corporation, in an interview published on the Health Affairs web site. Stryker makes a diverse line of products including artificial hips and knees and other orthopedic implants. “Because of the knowledge gained through the Internet, sophisticated patients and their families know who are the manufacturers, who are the leading surgeons, and they insist on getting the best surgeon and best product,” Brown tells Rob Burns, a professor of health care systems and management at the Wharton School.

Regarding cost medical devices, Burns says, “I think that the American public feels that technology has been good for them. The average Joe doesn’t complain about the cost of his hip, the cost of his knee, or the cost of his pacemaker or defibrillator. On the other hand, you hear countless complaints that someone just came back from the drugstore and they had to plunk down fifty dollars for their prescription.” Brown adds, “Part of it is that a high-cost device is a one-time incident, whereas pharmaceuticals are recurring, long-term costs.”

Medicare payments to skilled nursing facilities would increase by an estimated $690 million in FY08 according to a proposed rule issued by the Centers for Medicare and Medicaid Services. The 3.3 percent increase would affect payment rates to nursing facilities that furnish certain skilled nursing and rehabilitation care to Medicare beneficiaries recovering from serious health problems.

Under Medicare’s skilled nursing facility prospective payment system prospective payment system, each facility is paid a daily rate based on the relative needs of individual Medicare patients, adjusted for local labor costs. The daily rate covers the costs of furnishing all covered nursing facility services, including routine services such as room, board, nursing services, and some medical supplies together with related costs such as therapies, drugs and lab services; and capital costs including land, buildings and equipment.

The proposed rule will be available soon on the CMS web site. Public comments on the proposal will be accepted until June 29, 2007.

The Centers for Medicare and Medicaid Services announced the availability of a second round of grants to fund research and design of ways to transform state Medicaid systems and to increase quality and efficiency of care. States will receive nearly $52 million over 2007 and 2008. Funds for the Medicaid “transformation grants” were authorized by section 6081 of the Deficit Reduction Act of 2005 and are aimed at state adoption of innovative systems to get more value out of the money they spend providing healthcare to their citizens who are low-income elderly, children, and people with disabilities. The DRA provided $150 million in grants, and CMS already has awarded 32 Medicaid transformation grants to 26 states totaling over $98 million. The remaining $51,940,306 will be awarded through this second solicitation.