HFMA Express News - August 20, 2004

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IN THIS WEEK’S ISSUE:

FHA Coordinating Hospital Relief Effort
New CMS Council To Speed Up Medicare Coverage of New Treatments/Technology
Hospital Inflation Through 2006 Questioned
Diagnostic Imaging Tops List of Fastest Growing Hospital Costs
2004 DMEPOS Fee Schedule Updated
OIG Addresses Hospitals-Within-Hospitals Readmission Policy
Lifepoint To Acquire Province Healthcare
Quick Links
New in the HFMA Resource Center
New in the Compliance Forum Library

1. FHA COORDINATING HOSPITAL RELIEF EFFORT

The Florida Hospital Association (FHA) is forming a relief fund to assist six hospitals damaged by Hurricane Charley. The August 13 hurricane caused the hospitals to close or provide only emergency services. FHA says staffing is the most immediate need for the hospitals. Organizations willing to offer nurses and other support staff for short-term staffing relief, or other types of assistance, should contact Katie Woodward at FHA (850) 222-9800.

Further information on the Hurricane Charley Disaster Relief Fund, including the address for sending contributions, is available on the FHA web site.

2. NEW CMS COUNCIL TO SPEED UP MEDICARE COVERAGE OF NEW TREATMENTS/TECHNOLOGY

CMS is launching a new council to increase access to new medical treatments and technologies, according to an August 18 announcement. The Council on Technology and Innovation (CTI) will enlist senior CMS staff and experts on clinical, coverage, and payment issues to provide information about clinical benefits of new technologies and to “make their transition to Medicare coverage as predictable and fast as possible,” according to CMS administrator Mark McClellan.

The CTI will be divided into two working groups—one focused on “effective innovation” and one focused on “better evidence.” The first working group will develop ways to improve the timeliness and efficiency of coverage, coding, and payment processes. The second group will help identify priorities for Medicare-supported research focusing on technology effectiveness or cost.

The CTI will replace the existing Medicare Technology Council and will be co-chaired by Herb Kuhn, director of the Center for Medicare Management, and Sean Tunis, director of the Office of Clinical Standards and Quality.

3. HOSPITAL INFLATION THROUGH 2006 QUESTIONED

Third-quarter year-to-year inflation is expected to jump from 3.6 percent in 2003 to 4.2 percent in 2004 and rise by a steady 0.1 percentage point through 2006, according to projections from R-C Healthcare Management Services, released July 12. These projections could rise, though, cautions the firm’s president, Arnold Silver, FHFMA, whose analysis of CMS wage data subsequent to the third quarter calculations suggests an understatement by CMS of 0.3 to 1.2 percentage points in the wage index used in their market basket calculations.

The jump between third-quarter 2003 and third-quarter 2004 is driven by the projected 8.9 percent inflation increases in utilities, up from 5.1 in 2003 (inflation in this expense category is expected to decline to 4.9 percent in 2006). Also, professional liability insurance is expected to rise 6.2 percent in 2004, over 4.3 percent for 2003.

4. DIAGNOSTIC IMAGING TOPS LIST OF FASTEST GROWING HOSPITAL COSTS

Diagnostic imaging and operating room costs had the fastest growth rates between 2000 and 2002, according to a study released by Solucient. The greatest average rates of increase for both surgical and non-surgical care combined were:

Diagnostic imaging: 36 percent
Operating room: 32 percent
Intensive and critical care units: 27 percent
Supplies: 26 percent
Prescription drug costs: 22 percent
Laboratory: 18 percent
Room and board: 16 percent
The study, which focused on the rate of growth for prescription drug costs, found that in general, inpatient drug costs have not outpaced increases in other hospital costs.

5. 2004 DMEPOS FEE SCHEDULE UPDATED

CMS has provided instructions for implementing the October quarterly update to the 2004 durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee schedule. The update removes several deleted HCPCS codes that were inadvertently included in the 2004 fee schedule file. These codes include A4363, E1400 through E1404, K0137 through K0139, K0168 through K0181, K0190 through K0192, K0277 through K0279, K0284, K0400, K0417, K0419 through K0439, and K0530. Codes E1019 and E1021 are invalid and are also being removed. The fee schedule amounts for codes K0630, K0631, K0632, K0634, K0635, K0636, K0637, K0639, K0640, K0642, K0644, K0645, and K0646 were based on incorrect pricing information and have been recalculated. Previously processed claims for these revised K06XX codes are to be adjusted if they are resubmitted. Codes K0650 through K0669 were added to the HCPCS effective July 1, but because data is not available, implementation of the fee schedule amounts for these items will be delayed until the January 2005 update.

The 2004 Puerto Rico schedule amounts for codes A4351 and A4352 were based on incorrect pricing information and DME regional carriers (DMERCs) must revise the base fee schedule amounts for these codes as part of the October quarterly update.

6. OIG ADDRESSES HOSPITALS-WITHIN-HOSPITALS READMISSION POLICY

In a recent OIG inspection report, the OIG found that 19 of 87 long term care hospitals-within-hospitals (HwHs) exceeded the annual 5 percent threshold for readmissions from their host hospitals at least once during the fiscal years ending in September 2000 through December 2002. Payment limits are imposed in the fiscal years the threshold is exceeded, but CMS has lacked a system to detect such occurrences. Many of the readmissions involved high-cost diagnosis-related groups. OIG called on CMS to develop a system to monitor HwHs’ compliance with the 5 percent readmission rule, and require HwHs to demonstrate their financial independence on a continuing basis.

According to the report, the number of HwHs increased, on average, from 32 to 132 between 1995 and 2002. CMS paid $817 million to those long term care hospitals, up from $135 million.

7. LIFEPOINT TO ACQUIRE PROVINCE HEALTHCARE

On August 16, LifePoint Hospitals, Inc., announced that it would acquire Province Healthcare Company for about $1.7 billion in cash, stock, and the assumption of debt. The transaction will create a hospital company focused on providing healthcare services in non-urban communities, with 50 hospitals, approximately 5,285 beds, and combined revenues of approximately $1.7 billion in 2003.

The boards of directors of LifePoint Hospitals and Province Healthcare unanimously approved the proposed transaction. Completion of the transaction now depends on the companies’ stockholders, required regulatory approvals, and receipt of necessary financing. The transaction is expected to close in the first half of 2005.

8. QUICK LINKS

SHORTER VERSION OF HOSPITAL 2005 OUTPATIENT RULE.
The proposed Medicare outpatient PPS rule for 2005 that appears in the August 16 Federal Register is a few hundred pages shorter than the version posted earlier on the CMS web site. (The rule is 547 pages in length.) The CMS version included separate addenda and data files.

STUDY ON THE RETURN OF MANAGED CARE PRACTICES. In response to rising healthcare costs, managed care plans are returning to practices of the 1990s such as utilization review, preauthorization, scrutinizing hospital lengths-of-stay, and more aggressive provider profiling, according to a report published on the Health Affairs web site.

PROPOSED UPDATE OF VA PATIENTS’ RIGHTS REGULATION. The Department of Veterans Affairs (VA) has proposed to update its patients’ rights regulation by conforming its provisions regarding the administering of medication, restraints and seclusion with current law and practice.

PROPOSED REVISION OF DoD RARE DISEASE DEFINITION. The Department of Defense (DoD) has proposed revisions to the TRICARE definition of rare diseases, clarifying the provision for review of benefits for rare diseases on a case-by-case basis and removing the partial list of examples of unproven drugs, devices, medical treatments, or procedures that are excluded from benefits.

9. NEW IN THE HFMA RESOURCE CENTER

PPS ROUNDUP: FINAL FY05 MEDICARE INPATIENT UPDATE. Use this summary as a quick reference to the key points of the final inpatient PPS rule for 2005, including implementation of important MMA provisions.

READY-TO-USE INPATIENT PPS PRESENTATION: Use this convenient presentation to brief your staff on the FY05 updates for Medicare inpatient PPS rates. This final rule also implements key MMA provisions.

10. NEW IN THE COMPLIANCE FORUM LIBRARY

UPDATED: OIG ADVISORY OPINIONS AND REPORT. Three new 2004 OIG Advisory Opinions have been added to the list posted on the HFMA's Healthcare Compliance Forum web site. The Library also now features an OIG report addressing long term care hospitals-within-hospitals’ excessive readmissions from the host hospital. (Available to Healthcare Compliance Forum members only.)

For customer service, send an e-mail to HFMA’s Member Service Center or call (800) 252-HFMA, and press 2.

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