HFMA Express News - August 19, 2005

IN THIS WEEK’S ISSUE:

1. IRS to Review 501(c)(3) Bond Compliance
2. Medicare Cardiac DRG Modifications Signal Shift Toward Reform
3. Enrollment Begins For Undocumented Alien Service Payments
4. FASB Proposes Clarifications on Servicing, Transferring Assets
5. “Patient Navigators” to be Hired Under New Bill
6. Medicaid Commission Finishes $10 Billion Cut Plan
7. Medicare Urged to Help Make Prices More Relative to Costs
8. Marketing Rules Issued to Medicare Drug Plans
9. Medicare Coding and Billing Update
10. Quick Links

1. IRS TO REVIEW 501(c)(3) BOND COMPLIANCE

The IRS is expected to announce a new initiative to review post-issuance compliance with 501(c)(3) bonds that were issued in 1995 and 1996, according to Wayne Henry, partner with the law firm of Stinson Morrison Hecker LLP. Details are unavailable, but comments from IRS officials suggest that the primary focus of the program will be on whether there have been changes in the private use of funds that exceed the limits permitted by law. Thirty to forty bond issues will be reviewed in the first phase, which will likely start in 2006. While the initiative applies to all tax-exempt entities, in view of recent IRS and Congressional examination of not-for-profit hospitals, exempt healthcare providers with bonds issued in that time period may wish to conduct proactive compliance audits.

2. MEDICARE CARDIAC DRG MODIFICATIONS SIGNAL SHIFT TOWARD REFORM

In the Medicare inpatient PPS FY06 final rule, published August 12, CMS has replaced the cardiovascular DRGs commonly billed by specialty hospitals (Major Diagnostic Category 5, diseases and disorders of the circulatory system) with 12 new DRGs that better recognize severity of illness. These modifications are part of an effort to address the issue of specialty hospitals taking less-costly cases within DRGs.

The changes are also the first steps toward more sweeping payment change ahead. According to a CMS fact sheet, by January 2008, the agency also intends to reform the ambulatory surgery center (ASC) payment system to level rates that are higher for hospital outpatient departments than ASCs. CMS will also look more closely at further refinements and consider the Medicare Payment Advisory Commission’s recommendation to adopt comprehensive reform, such as all-patient refined DRGs.

3. ENROLLMENT BEGINS FOR UNDOCUMENTED ALIEN SERVICE PAYMENTS

As of August 15, online enrollment became available for providers to receive payments for services to undocumented aliens, announced TrailBlazer, the claims processor and payer for Medicare Modernization Act Section 1011. The MMA provided $250 million each year for 2005 through 2008 for payments to hospitals, ambulance services, and physicians for unreimbursed costs of providing EMTALA and certain other services to undocumented aliens, aliens paroled into the United States at a U.S. port of entry for the purpose of receiving such services, and Mexican citizens permitted temporary entry to the U.S. with a laser visa.

Providers who have submitted paper enrollment application forms must also complete the electronic application. Those who wish to seek Section 1011 reimbursement but do not wish to enroll in the Medicare program must have their form 855 application acknowledged before submitting a Section 1011 enrollment application.

Providers also can sign up to receive TrailBlazer’s Section 1011 listserv by completing the online form on their web site.

4. FASB PROPOSES CLARIFICATIONS ON TRANSFERRING, SERVICING ASSETS

The Financial Accounting Standards Board (FASB) has issued a revised exposure draft, Accounting for Transfers of Financial Assets. The proposed statement seeks to clarify the de-recognition requirements for financial assets that were developed initially in FASB Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and revised in Statement 140. It is also meant to change and simplify the initial measurement of interests related to transferred financial assets that are held by a transferor. The proposed changes principally apply to securitizations and loan participations.

Also, FASB issued two additional exposure drafts, Accounting for Servicing of Financial Assets and Accounting for Certain Hybrid Financial Instruments, to provide optional accounting treatments intended to simplify the accounting in these complex areas. All three proposed statements would amend Statement 140. The exposure draft on certain hybrid financial instruments also would amend FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Comments are due by October 10, 2005.

5. “PATIENT NAVIGATORS” TO BE HIRED UNDER NEW BILL

A new bill authorizing $25 million in demonstration project grants to improve healthcare access for underserved populations was enacted July 1. Providers may use grant money awarded under the “Patient Navigator, Outreach, and Chronic Disease Prevention Act” (PL 109-18) to recruit, train, and employ “patient navigators,” who will help patients overcome a variety of barriers to access for basic healthcare services. Patient navigator duties include:

• Helping patients coordinate health services and provider referrals,
• Working with health insurance ombudsman programs to help patients find coverage through existing programs,
• Helping patients find and enroll in clinical trials,
• Facilitating relevant services of other community organizations, and
• Identifying at-risk groups and conducting outreach to help patients—especially populations with health disparities—locate and use available preventive services.

The demonstration grants, which will be administered through the Health Resources and Services Administration, become available in fiscal year 2006 and continue through 2010.

6. MEDICAID COMMISSION FINISHES $10 BILLION CUT PLAN

The Medicaid Commission put the finishing touches on their recommendations to Congress for $10 billion in Medicaid cuts on Thursday. The Commission was charged by the Bush administration with proposing the five-year cuts by September 1 and then recommending a Medicaid reform plan. The recommendations are as yet unpublished, but former Tennessee governor Don Sundquist, chairing the meeting, suggested at the beginning of their two-day deliberations on Wednesday that they should first look for federal budget savings by closing loopholes. The loophole category may include enforcing the upper payment limit regulations and restriction of intergovernmental transfers for generation of matching funds (approximately $6 billion of the $10 billion needed).

The National Governors Association voiced clear opposition to these and any other restrictions on state funding options that might also be put on the table by Congress or the Administration.

7. RESEARCHERS URGE MEDICARE ROLE IN MAKING PRICES MORE RELATIVE TO COSTS

Medicare should take a major role in developing healthcare payment rates that reflect services’ costs, urged Center for Studying Health System Change president Paul Ginsburg and senior researcher Joy Grossman in a new study. Providers generally lack incentives to set charges that accurately reflect their services’ relative costs, the authors note, but the issue of specialty hospitals’ development around the more profitable services may help create the “political constituency” needed to drive improvements in payment mechanisms.

One way of getting at hospital services’ relative costs, the paper recommends, would be for Medicare to subsidize cost accounting systems for a sample of hospitals. “As the medical system continues to become more competitive and technology opens up increasing opportunities to exploit inadvertent payment system incentives, the need increases to make payment rates more accurate,” the authors caution.

8. MARKETING RULES ISSUED TO MEDICARE DRUG PLANS

CMS has established strict marketing guidelines that companies must follow to offer prescription drug plans to beneficiaries as part of Medicare’s new prescription drug benefit beginning January 1, 2006. The guidelines will govern the marketing activities for stand-alone prescription drug plans (PDPs), Medicare Advantage plans, and Medicare Advantage prescription drug plans. Plans that don’t comply with the guidelines are subject to sanctions. For instance, the marketing guidelines prohibit door-to-door sales or unsolicited e-mails. If plans use brokers or independent agents, those individuals must adhere to state licensing requirements. Plans that employ marketing representatives must ensure that those representatives meet all state requirements, including state licensure and certification or registration.

Plans can begin to market their packages on October 1, 2005; Medicare beneficiaries can begin to enroll in the drug program on November 15, 2005.

9. MEDICARE CODING AND BILLING UPDATE

New transmittals recently posted to the CMS web site include radiopharmaceutical diagnostic imaging agent codes applicable to PET scan services, improvements to streamline place of service (POS) code set updates, and a list of locality codes for purchased diagnostic tests.

10. QUICK LINKS

FLU SHOTS IN NURSING HOMES. Under a new proposed rule, nursing home conditions of participation in Medicare would require facilities to ensure that each Medicare or Medicaid patient receives annual flu shots and lifetime pneumonia immunization, unless the resident refused for medical reasons. Comments are due by August 30, 2005.

JULY MEDICAL CONSUMER PRICE INDEX. The Consumer Price Index (CPI) for medical care increased 0.4 percent in July and 4.2 percent over the last 12 months, the Bureau of Labor Statistics reports. The CPI increased 0.6 percent for hospitals, 0.4 percent for professional services, and 0.1 percent for drugs and supplies.

FINAL FY06 IRF PPS RULE. The final FY06 PPS rule for inpatient rehabilitation facilities was published in the August 15 Federal Register.

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