HFMA Express News - July 9, 2004

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IN THIS WEEK’S ISSUE:

CMS Warns About Delays for Noncompliant Payments
Medicare Increases Ambulance Service Payments
Financing The Future Report Identifies Core Capital Competencies
OIG Clears Former CMS Administrator Scully On Medicare Estimates
Provider Direct-Deposit Payment Criteria Revised
IRS Says Health Insurers Have More Time To Pay Provider Incentives
CMS: Hospital’s Development Qualifies As Exempt From Specialty Hospital Moratorium
States Steadily Increase Medicaid Payments To Nursing Homes
Healthcare Spending Growth Slows
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New In The HFMA Resource Center

1. CMS WARNS ABOUT DELAYS FOR NONCOMPLIANT PAYMENTS

Electronic Medicare claims that do not meet HIPAA standards will be treated as paper claims and paid more slowly than HIPAA-compliant electronic claims beginning July 6, according to CMS administrator Mark McClellan. Medicare will still accept non-compliant electronic claims, but payment will take an additional 13 days. Medicare pays compliant electronic claims no earlier than the 14th day after the date of receipt. Non-electronic claims will be paid no earlier than the 27th day after the date of receipt.

2. MEDICARE INCREASES AMBULANCE SERVICE PAYMENTS

On July 1, CMS published an interim final rule that provides an $840 million boost in Medicare payments for ambulance services over a five-year period. The interim final rule, which implements four provisions contained in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), will benefit both hospital-based providers and freestanding suppliers of ambulance services. The MMA provisions offer temporary additional funding to support ambulance services as they transition to full payment based on the ambulance fee schedule, which became effective April 1, 2002. Before the fee schedule, providers were paid based on a retrospective reasonable cost basis, and independent suppliers were paid based on reasonable charges.

The provisions of the new rule, effective July 1, include:

A payment rate increase of 1 percent for urban and 2 percent for rural ambulance services
A 25 percent increase in payments for ambulance transport mileage in excess of 50 miles during an ambulance transport
A regional fee schedule that establishes a floor amount for the ground ambulance base rate, resulting in payment increases by as much as 38.6 percent in some areas
A “super-rural bonus” of 22.6 percent of the base rate for the least populated rural areas (25th percentile) in the country

Comments on the rule are due August 30.

3. FINANCING THE FUTURE REPORT IDENTIFIES CORE CAPITAL COMPETENCIES

Over the next five years, hospital CFOs say they plan to increase capital spending by 14 percent per year, even though the capital supply for most hospitals appears to be decreasing. The latest Financing the Future report responds to that dilemma by identifying three competencies hospital financial leaders should master to stretch limited capital dollars and ensure maximized returns:

Integrate strategic and capital plans. All too often in health care, strategic and capital planning processes are conducted separately, with detrimental results.
Manage the balance sheet. Maintaining the balance sheet helps ensure that your organization is able to assume new debt when necessary for capital projects and has sufficient cash for other capital projects.

Select appropriate advisors. Outside advisors can help manage the complex processes of capital access and planning, so it’s important to know how to select the right advisors for various functions.

The Financing the Future project is led by HFMA in partnership with GE Healthcare Financial Services, with research by HFMA and PricewaterhouseCoopers.

4. OIG CLEARS FORMER CMS ADMINISTRATOR SCULLY ON MEDICARE ESTIMATES

Former CMS administrator Thomas Scully broke no laws in withholding estimates of the cost of the Medicare Prescription Drug, Improvement, and Modernization Act from Congress, according to the HHS Office of Inspector General. After a three-month investigation, the OIG concluded that the administration had used aggressive tactics to keep from Congress the much higher estimates of the legislation’s cost, but the efforts did not violate federal law. CMS has final authority to determine the flow of information to Congress, according to the OIG.

Earlier this year, the Congressional Research Service (CRS) came to a different conclusion, finding that the disciplinary threats against CMS chief actuary Richard Foster caused him to withhold from Congress projections of the bill’s costs.

The focus of the controversy now shifts to the General Accounting Office, which will make a legal determination as to whether the department may have violated federal appropriations law. In a related investigation, the OIG is still investigating other ethics issues involving the waiver granted to Scully to continue to work on Medicare legislation while he was looking for work with law firms with clients affected by the legislation.

5. PROVIDER DIRECT-DEPOSIT PAYMENT CRITERIA REVISED

On June 25, CMS clarified criteria for payments sent to a bank in the name of a provider. Effective July 25, Medicare payments due to a provider or supplier of services may be deposited directly into the provider’s account if the bank states in writing, in the loan agreement, that it waives its right of offset.

Additionally, the bank account must be in the provider’s name and only the provider may issue instructions on that account. No other agreement that the provider has with a third party would have any influence on the account, CMS said.

6. IRS SAYS HEALTH INSURERS HAVE MORE TIME TO PAY PROVIDER INCENTIVES

New IRS guidance gives health insurers additional time to make incentive payments to providers without losing the related tax deduction. The guidance affects insurers and HMOs that have arrangements with physicians, hospitals, and other providers in which, after the plan’s taxable year, the insurers make incentive payments based on a provider meeting specific quality objectives. Insurers will no longer be subject to a two and one-half month limit from the end of their tax year to make incentive payment and still take the related deduction. The IRS also outlined procedures for obtaining an automatic consent from the IRS when an insurer changes its method of accounting for the incentive payments.

7. CMS: HOSPITAL’S DEVELOPMENT QUALIFIES AS EXEMPT FROM SPECIALTY HOSPITAL MORATORIUM

CMS recently concluded in an advisory opinion that a hospital “under development” with a plan but no construction documents as of November 18, 2003, is exempt from the moratorium on physician ownership interests in specialty hospitals enacted in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). The specialty hospital requesting the opinion is a joint venture between orthopedic surgeons and neurosurgeons.

Additionally, CMS decided that the additional criteria on whole hospital exemption set forth in section 507 of the MMA did not apply to the hospital. However, CMS stated that a referring physician’s ownership or investment interest in the hospital must comply with the remaining terms of the hospital ownership exception in section 1877(d)(3) of the Social Security Act.

8. STATES STEADILY INCREASE MEDICAID PAYMENTS TO NURSING HOMES

States have steadily increased Medicaid nursing home payment rates by an annual average of 3.8 percent between 1999 and 2002, according to a June 16 Health Affairs article.

The increase in nursing home payments has occurred despite fears that states, given more flexibility to set payment rates as a result of the Balanced Budget Act repeal of the Boren amendment, would slash program payments to reduce spending. The average per-diem payment rate rose from $105.80 in 1999 to $117.73 in 2002. By comparison, between 1995 and 1998 (before the Boren amendment repeal), the inflation-adjusted average annual increase was 0.4 percent.

The study’s authors caution that the cost of caring for an increasing population of sicker and more disabled nursing home patients, along with other factors such as rising nursing staff wages, could undermine some of the increases.

9. HEALTHCARE SPENDING GROWTH SLOWS

Healthcare spending per privately insured American fell by 2.1 percent in 2003—the first major slowdown in spending growth in nearly a decade, according to a study by the Center for Studying Health System Change (HSC). However, the 7.4 percent growth in healthcare spending still was nearly twice the growth for the overall economy, which increased 3.8 percent in 2003 as measured by growth in per capita gross domestic product.

Although still high by historical standards, healthcare spending growth slowed for the second year in a row in 2003, down from 9.5 percent in 2002 and the 10 percent peak in 2001.
Spending category Percent increase in 2003 Percent increase in 2002
Total healthcare spending 7.4 9.5
Hospital inpatient care 6.5 8.4
Outpatient care (hospital-based and freestanding) 11 12.9
Physician services 5.1 6.5
Prescription drugs 9.1 13.2

10. QUICK LINKS

SNF PPS FINAL RULE CORRECTED. CMS has corrected a typographical error in the August 4, 2003, final rule containing FY04 updates to skilled nursing facility PPS rates.

UPDATED CALL CENTER DISCLOSURE DESK REFERENCE GUIDE. CMS released an updated reference guide for call centers on how to handle telephone requests for beneficiary-specific information, including information about deceased individuals and how to handle information transfers between business associates.

11. NEW IN THE HFMA RESOURCE CENTER

HFMA EXECUTIVE ROUNDTABLE: BEST PRACTICES IN REVENUE CYCLE SYSTEM IMPLEMENTATION. Read about lessons healthcare leaders have learned from revenue cycle implementation issues.

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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