HFMA Express News -August 5, 2005

IN THIS WEEK’S ISSUE: 

1. Transfer Provisions Scaled Back in Final FY06 Inpatient PPS Rule
2. 2006 Physician Fee Schedule Update Proposed
3. CMS: 2006 IRF PPS Rule “Improves Distribution of Payments”
4. Final 2006 Nursing Home PPS Update Released
5. Excessive Medicare Payments Are the Target of New Edits
6. CMS to Enforce Hospital Inpatient Bundling on Ambulance Claims
7. Hospital Quality of Care Issues Lead to False Claims Settlement
8. New Financing the Future Report Examines Capital Structure
9. Quick Links
10. New in the Resource Center

1. TRANSFER PROVISIONS SCALED BACK IN FINAL FY06 INPATIENT PPS RULE

The Medicare hospital inpatient prospective payment system (PPS) final rule for services in FY06, posted by CMS on August 1, retains much of the controversial proposed expansion of the post-acute care transfer policy, but stops at 182 DRGs, rather than the proposed 231 DRGs. The expanded transfer policy is estimated to reduce FY06 payments by $780 million.

Under the final rule, hospitals that report quality indicators will receive payments at the full market basket update of 3.7 percent (up from 3.2 percent in the proposed rule); hospitals that don’t submit quality data will receive an adjustment of market basket minus 0.4 percent.

On average, the combined changes in the final rule are projected to produce a 3.5 percent payment increase for urban hospitals and a 3.3 percent increase for rural facilities. The final rule will be published in the August 12 Federal Register.

2. 2006 PHYSICIAN FEE SCHEDULE UPDATE PROPOSED

Physicians would receive a 4.3 percent reduction in 2006 Medicare payment rates, according to a proposed rule released by CMS this week. In addition to updating the physician fee schedule, the proposed rule also implements numerous MMA provisions and contains significant regulatory changes to existing payment policies. CMS estimates approximately $56.6 billion in outlays to 875,000 physicians and other health professionals in 2006.

The proposed rule includes provisions to:

• Expand glaucoma screening benefits to include Hispanic-Americans age 65 and older because they are identified as an ethnic group at high risk for the disease;
• Provide for supplemental payments to federally qualified health centers that contract with Medicare Advantage plans; and
• Revise the payment rate for separately billable drugs and biologicals furnished by end-stage renal disease facilities to be set at average sales price plus 6 percent.

The proposed rule will be published in the August 8 Federal Register, with comments due by September 9.

3. CMS: 2006 IRF PPS RULE “IMPROVES DISTRIBUTION OF PAYMENTS”

Under the final rule updating the inpatient rehabilitation facility (IRF) PPS for 2006, IRFs will get approximately $210 million more from Medicare in FY06 than in FY05; however, most of the changes are budget-neutral and redistribute payments depending on facilities’ case mix, teaching status, geographic location, and percentage of low-income patients.

The IRF market basket increase is 3.6 percent, but the standard payment amount is lowered by 1.9 percent (to adjust for case-mix increases CMS attributes to coding) and is adjusted upward based on facility characteristics.

More specifically, the changes include:

• A 21.3 percent increase in the rural facility payment adjustment, up from the current 19.14 percent;
• Adoption of core-based statistical areas (CBSAs), with a one-year transition using 50 percent of the previous wage index and 50 percent of the CBSA wage index, and a hold-harmless policy for IRFs hurt by their change from rural status;
• An adjustment for teaching facilities’ higher costs; and
• An outlier threshold of $5,132, which is more than the proposed $4,911 amount but far less than the FY05 amount of $11,211.

The final rule will be published in the August 15 Federal Register.

4. FINAL 2006 NURSING HOME PPS UPDATE RELEASED

Under the final rule published Thursday, FY06 Medicare skilled nursing facility (SNF) payment rates will include a market basket update increase of 3.1 percent, slightly more than the 3.0 percent estimate predicted in the proposed rule. Total program outlays to SNFs are estimated to increase by $20 million in 2006.

Among other changes, the final rule refined the resource utilization groups (RUGs), which are used to set daily payment rates for beneficiaries in nursing homes. CMS increased the number of RUGs from 44 to 53 and increased the rates of all RUG groups to reflect variations in nontherapy ancillary costs not fully captured in the RUG refinements. The RUG refinements will be implemented on January 1, 2006.

The new rule also updates the wage index structure used to adjust for local labor costs and adopts new core-based statistical area geographic designations, replacing the traditional metropolitan statistical area designations. The final rule also retains the 128 percent adjustment for SNF residents with AIDS that was enacted in MMA Section 511.

5. EXCESSIVE MEDICARE PAYMENTS ARE THE TARGET OF NEW EDITS

Intermediaries will edit Part B claims that meet or exceed a reimbursement of $50,000, beginning January 1, 2006. The edit is the result of an OIG recommendation included in a report that simple clerical billing errors resulted in $12 million in overpayment to institutional providers. According to CMS, the edits would apply to all providers. Claims receiving the threshold edit will be suspended and the provider will be notified. If the intermediary determines that the bill is accurate and the reimbursement is not excessive, then the intermediary may override the edit and submit the claim.

6. CMS TO ENFORCE HOSPITAL INPATIENT BUNDLING ON AMBULANCE CLAIMS

CMS will edit and deny claims for ambulance services furnished by independent providers during an inpatient hospital stay, effective January 3, 2006. The change is the result of reports from the Boston Regional Office of the HHS Inspector General that cited improper payments for ambulance services provided to hospital inpatients by independent providers. CMS is installing Common Working File edits to prevent payment to carriers for services that should be bundled in the hospital’s payment. Currently, the law excludes separate payment for ambulance services furnished to hospital inpatients within the admission and discharge dates unless billed directly by the hospital or furnished under arrangements.

According to CMS, with the exception of occurrences on the admission and discharge dates, all transportation provided to hospital inpatients must be bundled to the hospital. Carriers should not search their files to either retract payment or retroactively pay claims; however, they must adjust claims brought to their attention.

7. HOSPITAL QUALITY OF CARE ISSUES LEAD TO FALSE CLAIMS SETTLEMENT

Central Montgomery Medical Center (CMMC), a hospital located in Lansdale, PA, has reached a civil settlement with the U.S. Attorney’s Office over allegations that in 2002 it knowingly billed the government for patients that were improperly physically or chemically restrained. The settlement is the first in which an acute care hospital has faced False Claims Act allegations arising from violations of the 1999 federal restraint regulations.

CMMC has agreed to pay the government $200,000 and to hire a consultant to review restraint usage at the hospital, according to the Attorney’s Office. CMMC has denied any wrongdoing in agreeing to the settlement. U.S. Attorney Patrick Meehan acknowledged, “CMMC has taken significant steps in reducing restraint usage at the medical center.”

8. NEW FINANCING THE FUTURE REPORT EXAMINES CAPITAL STRUCTURE

The quality of a hospital’s capital structure (the combination of debt and equity that funds an organization’s strategic plan) can cost or save the organization millions of dollars, according to a new Financing the Future II report released today.

The report, Strategies for Effective Capital Structure Management, discusses eight strategies healthcare organizations should use consistently to increase capital access and provide a strategic financial competitive advantage.

This is the second report in the Financing the Future II series developed by HFMA in partnership with GE Commercial Finance Healthcare Financial Services and Kaufman, Hall & Associates, Inc.

9. QUICK LINKS

OIG REPORT ON DRUG REBATE PROGRAMS. This final report provides the results of the OIG’s audit of the Medicaid drug rebate programs to determine if the states had established procedures and internal controls in place for their Medicaid drug rebate programs.

TRICARE FY05 PUERTO RICO MENTAL HEALTH RATES. The Department of Defense has established region-specific per diem rates for Puerto Rico, for partial hospitalization under the FY05 TRICARE mental health per diem payment system, effective for services occurring on or after September 1.

10. NEW IN THE RESOURCE CENTER

2006 HOSPITAL OUTPATIENT PPS PROPOSED RULE HIGHLIGHTS. Use these highlights to quickly locate the key provisions of the proposed rule updating the outpatient PPS payments for 2006. 

IMPROVING CLINICAL, OPERATIONAL, AND FINANCIAL PERFORMANCE IN LAPAROSCOPIC CHOLECYSTECTOMY. This report, the last in a four-part series, addresses how hospitals can enhance performance on this common surgical procedure.

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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