HFMA Express News - August 26, 2005

IN THIS WEEK’S ISSUE:

1. Draft Form 990 Asks New Compensation Questions
2. FY06 Hospice Payments Increase 3.7 Percent
3. Aetna to Post Negotiated Physician Fees
4. CBO Predicts Strong U.S. Economic Outlook
5. Report Sees Spread of Safety Net Responsibilities
6. Medicaid Commission Recommendations Go Easy on States
7. Many Medical Groups Operate at a Loss
8. GAO: CMS Should Extend Schedule for Contracting Reform
9. Long-Term Care Support Program Grants Released
10. Quick Links
11. New in the Resource Center

1. DRAFT FORM 990 ASKS NEW COMPENSATION QUESTIONS

The IRS has released for public comment a draft Form 990 Schedules A and B* and Form 990EZ for 2005 that includes new questions about compensation, driven by Congressional, IRS, and public concerns about excessive executive compensation among tax-exempt organizations. The changes are noteworthy not only because of the potential for triggering additional agency scrutiny, but because many not-for-profit healthcare organizations use the Form 990, Return of Organization Exempt from Income Tax, as a communication tool to highlight the ways they fulfill their missions.

The draft Form 990 makes new distinctions between compensation of contractors for professional services and contractors for other services; previously, only professional services contractors were listed. Other new questions on the Form 990 include those related to conservation easements. Comments are due by September 5.

2. FY06 HOSPICE PAYMENTS INCREASE 3.7 PERCENT

Hospices will receive a 3.7 percent increase in FY06 Medicare payment rates, according to an August 19 CMS transmittal. This increase, CMS reported, is the total market basket percentage increase. The payment updates, effective for care and services on or after October 1, will be implemented through the hospice pricer software found in the intermediary standard systems. The new pricer module will not contain new calculation logic, but will apply the existing calculations to the updated payment rates.

The latest hospice cap amount for the cap year ending October 31, 2005, is $18,963.47. CMS notes that the hospice cap amount for the cap year ending October 31, 2004, was incorrectly computed, and additional instructions regarding this issue will be published in a separate transmittal. The FY04 cap was determined to be $19,635.67.

The hospice wage index final rule, published in the August 4 Federal Register, uses a blended wage index value comprised of 50 percent of the wage index had the metropolitan statistical area designations remained in effect and 50 percent of the wage index under the newly adopted core-based statistical area designations. Providers will receive this blended rate for FY06 only.

3. AETNA TO POST NEGOTIATED PHYSICIAN FEES

Some healthcare consumers will soon be able to compare prices for medical visits before going to the doctor. Aetna, a national health insurer, has launched an on-line pilot program that posts the exact prices it has negotiated with Cincinnati-area physicians for the 25 most common office-based services. The resource will initially provide information on 5,000 physicians and physician groups in Cincinnati, Dayton, and Springfield, Ohio; northern Kentucky; and southeast Indiana. Aetna said it would continue to seek feedback from physicians and consumers before rolling out the program in other markets.

4. CBO PREDICTS STRONG U.S. ECONOMIC OUTLOOK

The U.S. economy will continue to expand at a healthy pace during the second half of 2005 and in 2006, the Congressional Budget Office (CBO) predicts in its latest economic outlook. According to CBO’s projections, inflation (as measured by the consumer price index for urban consumers) is expected to be 3.1 percent in 2005 and 2.5 percent in 2006, compared with 2.7 percent in 2004, and it is projected to average 2.2 percent annually in 2007 through 2015. The unemployment rate will remain at a steady average 5.2 percent from 2005 through 2015, slightly lower than the 5.5 percent rate in 2004.

The rate on three-month Treasury bills is expected to be 3.0 percent in 2005, up from 1.4 percent in 2004. It’s expected to rise to 3.7 percent in 2006, then average 4.7 percent through 2015. The rate on 10-year Treasury notes is expected to remain at 4.3 percent through 2005, increase to 4.7 percent in 2006, then average 5.4 percent through 2015.

5. REPORT SEES SPREAD OF SAFETY NET RESPONSIBILITIES

Public hospitals are closing at a higher rate than those in the for-profit and not-for-profit ownership categories, according to a study of American Hospital Association data. The report, prepared by SUNY Downstate Medical Center, found that from 1996 to 2002, the number of public hospitals dropped by 16 percent in cities and 27 percent in suburbs, compared to 11 percent in cities and 11 percent in suburbs for for-profit hospitals, and 11 percent in cities and 2 percent in suburbs for not-for-profit hospitals.

This trend, the authors say, could result in serious implications for the safety net provider network. They also suggest “ultimately, regional cooperation may be required to ensure financing and access to hospital care for the area’s poor and uninsured.”

6. MEDICAID COMMISSION RECOMMENDATIONS GO EASY ON STATES

The Medicaid Commission largely heeded the National Governors Association’s plea to steer clear of adding more financial burden to the states when recommending ways to achieve $10 billion in Federal savings over the next 5 years. The one exception was the reform of provider tax regulations to restrict the return of taxes on Medicaid managed care organizations to the MCO after federal matching funds are generated, a savings to the federal government of $1.2 billion. The reforms, which totaled an estimated $11 billion in program savings, also included:

• Increase the time from the transfer of personal assets to the time they qualify for Medicaid ($1.5 billion)
• Reform the drug reimbursement formula to use the average manufacturer price ($4.3 billion)
• Require tiered copayments for prescription drugs ($2.0 billion)
• Extend the drug rebate program to Medicaid managed care ($2.0 billion)

The Medicaid Commission will formally submit their recommendations to HHS Secretary Mike Leavitt by September 1. The proposals will be forwarded to the Congressional committees that have budget authority for Medicaid and that will propose legislation using these and other cut options.

7. MANY MEDICAL GROUPS OPERATE AT A LOSS

The rate of increase in physician compensation for most specialties barely surpassed the rate of inflation in 2004, according to the American Medical Group Association’s (AMGA) 2005 Medical Group Compensation & Financial Survey. The survey also found that, on the average, groups in the Northern and Eastern regions operated at a loss--$1,365 and $784 per physician per year, respectively, while groups in the southern region made a scant profit of $40 per physician and Western region groups made $479 per physician.

In 2004, three specialties experienced the largest increase in compensation: general surgery increased by 8.89 percent, pediatrics and adolescent by 8.76 percent, and hematology and oncology at 8.52 percent. Other primary care specialties saw increases as well: family medicine increased by 6.81 percent and internal medicine by 7.57 percent. General cardiology and cardiac/thoracic surgery were among the specialties with the lowest increases: 0.07 percent and 1.13 percent respectively.

8. GAO: CMS SHOULD EXTEND SCHEDULE FOR CONTRACTING REFORM

CMS implementation plans for contracting reform lack details, and its anticipated savings are uncertain, the Government Accountability Office (GAO) said in an August 17 report. The reform, mandated by the Medicare Modernization Act of 2003 (MMA), requires CMS to change its contracting for claims administration and to transfer the work to Medicare administrative contractors (MACs) by October 2011.

However, CMS has accelerated its schedule to transfer the current contractor claims workload to MACs by 2009, more than two years ahead of the MMA’s time frame. The GAO argues that CMS’s plan is ambitious and does not comprehensively detail steps to address potential risks, such as failing to pay providers or paying them improperly during the transition of the claims workload from the current contractors. In addition, cost and savings estimates are uncertain because they are based on unpredictable future events, the GAO said. The GAO recommends that CMS extend its implementation schedule from 2009 to 2011.

9. LONG-TERM CARE SUPPORT PROGRAM GRANTS RELEASED

New grants totaling $15 million were released to help 19 states create centers that provide a centralized source of information and assistance for individuals and families seeking long-term care services available in their communities, according to the Administration on Aging (AoA). The Aging and Disability Resource Center (ADRC) grants, jointly administered by CMS and AoA, are part of the New Freedom Initiative to help achieve barrier-free community living for the elderly and disabled. Because the ADRC grants give states flexibility when developing and administering their programs, states may choose to have one agency provide long-term care support services, or establish several centers with multiple coordinated sites to ensure uniform access to support options.

10. QUICK LINKS

MEDICARE PHYSICIAN FEE SCHEDULE UPDATE. CMS has published the October update to the 2005 Medicare physician fee schedule database. Contractors will give providers 30 days notice before implementing the payment changes. Contractors should not search their files to retract payments already made, but will adjust any claims brought to their attention.

OUTPATIENT PPS PROPOSED RULE CORRECTION. CMS published corrections to errors in the 2006 hospital outpatient PPS proposed rule involving the budget neutrality factor scalar and conversion factor. The corrections affect various other information in the proposed rule. The errors were reported in August 12 HFMA Express News.
 
ONCHIT ORGANIZATIONAL STRUCTURE. The HHS secretary has described the structure of the Office of the National Coordinator for Health Information Technology (ONCHIT), naming the positions and responsibilities related to the office’s tasks of coordinating health IT initiatives across federal programs, the adoption of a healthcare IT infrastructure, and developing incentives to adopt health IT.

JULY CRIMINAL ENFORCEMENT ACTIONS. OIG has posted to its web site the listing of criminal enforcement actions for July.

MEDICAID BENEFIT DATABASE UPDATED. The Kaiser Commission on Medicaid and the Uninsured provides updated and enhanced information on Medicaid benefit coverage and limitations, copayment requirements, and reimbursement methodologies searchable by state or service in its on-line database of Medicaid benefits.

11. NEW IN THE RESOURCE CENTER

FYO6 INPATIENT PPS FINAL RULE HIGHLIGHTS. Use this summary as a quick reference to key changes in the latest inpatient PPS update final rule.

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