HFMA Express News - December 3, 2004

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IN THIS WEEK’S ISSUE:

Psych PPS Implementing Instructions Issued
SEC Delays Deadline for Small Issuers’ Internal Controls Reports
Expedited Review Rule Creates New Provider Responsibilities
CMS Issues Billing Updates for Pathology Services
Dollars Play Large Role in Proposed ASC List Changes
HHS Leaders Reiterate Information Technology Is A Top Priority
Uncompensated Care Costs Grow To $25 Billion
Health Plans Expand Web Site Functionality
Quick Links
In the HFMA Resource Center

1. PSYCH PPS IMPLEMENTING INSTRUCTIONS ISSUED

On December 1, fiscal intermediaries received payment processing instructions for the implementation of the Medicare inpatient psychiatric facility (IPF) PPS, which goes into effect with cost reporting periods starting on or after January 1, 2005. The instructions (transmittal 384 to the Medicare Claims Processing Manual, CR 3541) are based on the policies of a CMS final rule published in the November 15, 2004, Federal Register.

Among facilities excluded from the IPF PPS are Veterans Administration hospitals, critical access hospitals, and hospitals that do not participate in the Medicare program but provide emergency services to Medicare beneficiaries.

The IPF PPS starts with a standardized federal per diem base rate of $575.95. The labor and nonlabor shares of the rate are $416.11 and $159.84, respectively. There are patient-level adjustments (for DRG, comorbidity, age, and the days of the patient’s stay), as well as facility-level adjustments (wage index, rural location, teaching status, and emergency department).

2. SEC DELAYS DEADLINE FOR SMALL ISSUERS’ INTERNAL CONTROLS REPORTS

The Securities and Exchange Commission (SEC) extended the deadline by 45 days for internal controls reporting for smaller issuers. The SEC stated that it was sensitive to resource constraints at accounting firms and smaller public companies. The delay affects certain “accelerated filers” that are trying to meet the requirements of Section 404 of the Sarbanes-Oxley Act.

An accelerated filer is defined as any company that has a public float of at least $75 million, has been subject to the SEC’s periodic reporting requirement for at least 12 months and has filed one annual report, and is not eligible to use the SEC’s small business reporting forms.

All other information required in annual reports, including audited financial statements, must be filed on the original due date for the annual reports. The delay applies to accelerated filers that have a fiscal year ending between November 15, 2004, and February 28, 2005, with a public equity float of less than $700 million at the end of its second fiscal quarter in 2004.

3. EXPEDITED REVIEW RULE CREATES NEW PROVIDER RESPONSIBILITIES

In a November 26 final rule with comment period, CMS published regulations for implementing new expedited Medicare determinations and reconsiderations associated with provider discharges and service terminations. The final rule responds to comments received on a November 15, 2002, proposed rule to implement changes to the Medicare appeals process required by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000.

According to the rule, the new expedited process closely models the process currently in effect for Medicare Advantage (MA) enrollees, as established under an April 4, 2003, final rule. Although the final rule builds on the provisions contained in the proposed rule, some of the changes are fairly significant, such as the introduction of a standardized coverage termination notice that providers must send to beneficiaries notifying them of impending termination of Medicare-covered services and their right to an expedited review of this decision, rather than the use of the existing advance beneficiary notice (ABN).

In situations where a beneficiary requests an expedited determination, a detailed notice, similar to the existing ABN, will still be furnished before termination of services. As under the MA expedited review process, the notice will also be furnished to the quality improvement organization (QIO) in order for it to make its determination.

The final rule is effective July 1, 2005. Comments on the changes set forth in the final rule are due January 25, 2005.

4. CMS ISSUES BILLING UPDATES FOR PATHOLOGY SERVICES

CMS has updated the Medicare claims processing manual to include the policy that allows hospital laboratories to bill for the technical component of service to nonhospital patients. The update also implements a provision of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) that extends to 2005 and 2006 the requirements for carriers to continue to pay independent laboratories for the technical component of physician pathology services furnished to patients of a covered hospital.

Independent laboratories that have an arrangement with a covered hospital that was in effect July 22, 1999, can continue to bill for the technical component of physician pathology services under the Medicare fee schedule, according to CMS. This policy also applies to independent laboratories that have acquired other laboratory facilities with arrangements with a covered hospital on or after July 22, 1999. However, to receive payments, laboratories must provide a copy of the documentation substantiating that an arrangement was in effect between the hospital and the independent laboratory during this time.

5. DOLLARS PLAY LARGE ROLE IN PROPOSED ASC LIST CHANGES

CMS expects to realize substantial program savings through proposed changes to the Medicare ambulatory surgical center (ASC) list of procedures, published November 26. The agency proposes deleting 105 procedures and adding 25 more. The additions are mostly procedures performed predominantly by hospitals, but CMS wants to encourage delivery of the services in ASCs because their payments are lower for most services than the hospital outpatient PPS.

For some of the codes being deleted, CMS expects savings because the payments to the hospital or doctor’s office are less than to ASCs. Other criteria for deletions included:

The procedure is performed in a physician’s office more than 50 percent of the time
Medical specialty organizations recommended the procedures for deletion
The procedure is performed predominantly in the inpatient setting
Deletion was recommended by the OIG and CMS medical advisors concurred

The changes to the list become effective July 1, 2005. Comments must be received by CMS by January 25, 2005.

6. HHS LEADERS REITERATE INFORMATION TECHNOLOGY IS A TOP PRIORITY

Addressing a meeting in Washington D.C., November 30, CMS administrator Mark McClellan, Dr. David Brailer, head of the Office of the National Coordinator for Health Information Technology (ONCHIT), and Dr. Carolyn Clancy of the Agency for Healthcare Research and Quality (AHRQ) affirmed the Bush administration’s plans for health information technology (IT) to be one of its top priorities.

Clancy reported that AHRQ pilot projects should facilitate information sharing and quality improvement. McClellan emphasized the CMS commitment to rewarding providers for adding value and lowering costs through enhanced IT. He cited as examples CMS pilot programs and demonstration projects aimed at chronic care improvement programs under Medicare fee-for-service and the support for physician practice adoption of care delivery-related IT through payment bonuses.

7. UNCOMPENSATED CARE COSTS GROW TO $25 BILLION

U.S. hospitals provided $24.9 billion dollars of uncompensated care in 2003, an increase of $2.6 billion over 2002, the American Hospital Association reports. This figure, which represented 5.5 percent of total hospital expenditures in 2003, is the estimated cost of bad debt and charity care for the 4,895 community hospitals that participate in AHA's Annual Survey of Hospitals, but does not include contractual allowances or Medicaid or Medicare shortfalls.

Uncompensated costs as a percentage of total hospital expenses has remained relatively constant over the last two decades, ranging from 5.1 to 6.1 percent. The change in total dollars spent on uncompensated care, however, has increased dramatically from the $3.9 billion level of 1980.

More information is available from the book AHA Hospital Statistics, available from AHA's online store.

8. HEALTH PLANS EXPAND WEB SITE FUNCTIONALITY

A majority of health plans have expanded online services for providers, physicians and their staffs, and other constituencies, according to a study released November 10 by Capgemini US LLC.

While enrollees are the plans’ focal point, plans significantly increased online services for providers, with the greatest increases in the ability to:

Check eligibility (79 percent, up from 66 percent last year)
Check claim status (78 percent, vs. 66 percent last year)
Submit referral authorizations (47 percent, vs. 36 percent last year)
Check referral authorization status (60 percent, vs. 50 percent last year).

Eighty-nine percent of the sites provided access to formulary information, down slightly from 94 percent last year. Most payer web sites also provide information such as medical and administrative policies and clinical guidelines.

The study includes several case studies highlighting payers that have implemented interesting portal functionality.

9. QUICK LINKS

ESRD 2005 COMPOSITE PAYMENT RATES. Effective January 1, 2005, the wage adjusted composite Medicare payment rates for end-stage renal disease (ESRD) services will increase by 1.6 percent. There will be an additional increase of 8.7 percent as a drug add-on adjustment. The add-on applies to both independent and hospital based ESRD facilities.

HOME HEALTH PPS FINAL RULE CORRECTED. CMS has published corrections to the wage index values that were part of the October 22 CY05 update to the home health PPS final rule.

2005 STANDARD MILEAGE RATES. The 2005 optional standard mileage rate used in computing the tax deductible costs of operating an automobile for business purposes is 40.5 cents per mile (up from 37.5 cents in 2004), the IRS announced.

RESIDENT CAP APPLICATION DEADLINE EXTENDED. The deadline has been extended to December 15 for hospitals to submit applications for increases to the full-time equivalent resident caps for graduate medical education (GME) payment purposes. The Medicare FY05 hospital inpatient update originally set a December 1, 2004, deadline.

IRS ISSUES 2005 HSA AMOUNTS. The Treasury Department and IRS issued the 2005 cost-of-living adjustments for the maximum contribution levels for Health Savings Accounts (HSAs) and out-of-pocket spending limits for high-deductible health plans (HDHPs) that are used in conjunction with HSAs.

10. IN THE HFMA RESOURCE CENTER

PPS ROUNDUP: FINAL 2005 MEDICARE OUTPATIENT UPDATE. Use this summary as a quick reference to key changes in the PPS rates for outpatient services in 2005.

READY-TO-USE PRESENTATION: MEDICARE OUTPATIENT PPS FINAL RULE FOR CY05.Use this convenient presentation to brief board members and/or staff on the calendar year 2005 changes to the Medicare outpatient payment system for 2005.

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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