IN THIS WEEK’S ISSUE:
- Healthcare Donations Increased in FY04
- Inpatient PPS and SNF Wage Index Corrections
- OIG Reports Providers Misuse Modifiers 59 and 25
- Hospitals Reuse One-Time Use Medical Devices
- CMS Finalizes Part B Inherent Reasonableness Provisions
- MedPAC Says More Work Needed on Home Health Payments
- Hospital Charges Complex and Varied, Rarely Go Down
- Consumers Less Satisfied with Consumer-Directed Health Plans
- Quick Links
- New in the Resource Center
1. HEALTHCARE DONATIONS INCREASED IN FY04
Charitable giving to U.S. healthcare organizations increased by 3.5 percent in FY04, reported 300 respondents to the Association for Healthcare Philanthropy’s (AHP’s) annual survey. Funds raised by AHP member institutions and organizations in the United States in 2004 are estimated to be $6.1 billion, up from $5.9 billion estimated in 2003.
Of the total funds raised:
- Cash contributions constituted 67 percent
- Pledges: 20.5 percent
- The sale of securities: 5.1 percent
- Planned gifts: 4.2 percent
- Other assets: 1.8 percent
- Non-monetary gifts: 1.4 percent
The number of donors grew by 2.7 percent from FY03 to FY04. Individuals provided 60 percent of all funds raised. Of that group, board members accounted for 52.6 percent of individual donors, employees comprised 15.9 percent of the donors, patients made up 7.1 percent, and physicians 5.9 percent. Businesses, including corporate foundations, were the next largest donor group, comprising 19.4 percent of the donors.
2. INPATIENT PPS AND SNF WAGE INDEX CORRECTIONS
CMS has outlined several changes for inpatient PPS hospitals and skilled nursing facilities (SNFs) for FY05 and FY06. According to CMS transmittal 197, most of the SNF FY06 wage index corrections involve the core-based statistical area and transition wage index values. However, several typographical errors to other entries are also highlighted for clarity.
The transmittal also includes limited retroactive changes to the FY05 wage index values for certain hospitals meeting criteria specified in the FY06 inpatient PPS final rule. CMS notes that both the wage index values and geographic adjustment factors must be corrected for identified areas for discharges occurring on or after October 1, 2004, through December 31, 2004. The changes become effective January 9, 2006.
3. OIG REPORTS PROVIDERS MISUSE MODIFIERS 59 AND 25
Providers’ misuse of modifiers 59 and 25 resulted in a total of $597 million in improper Medicare payments, according to two OIG reports published in November. The first report showed that 40 percent of code pairs did not meet the criteria for the use of modifier 59, which is used to indicate that a provider performed a distinct procedure or service for a beneficiary on the same day as another procedure or service. Modifier 59 was used inappropriately with 15 percent of the code pairs because the services were not distinct from each other. Twenty-five percent of code pairs billed with modifier 59 were not adequately documented. These errors resulted in $59 million in improper payments in 2003, the OIG said.
The second report found 35 percent of claims using modifier 25, which may be used to allow additional payment for a separate evaluation and management (E&M) service, did not meet the program requirements in 2002, resulting in $538 million in improper payments. The report showed that the E&M services were not significantly separately identifiable, and above and beyond the usual preoperative and postoperative care associated with the procedure.
CMS concurred with the OIG’s recommendations to work with carriers to reduce the number of claims inappropriately submitted with modifiers 59 and 25.
4. HOSPITALS REUSE ONE-TIME USE MEDICAL DEVICES
A growing number of U.S. hospitals are saving money by reusing medical devices designated for one-time use, ignoring the warnings of manufacturers, the Washington Post reported December 11. The Post examined a number of documents, including FDA records, court filings, and internal company reports and recorded “dozens of cases of patient injuries and device malfunctions after single-use devices were reused over the past decade.”
According to the article, hospitals that reprocess devices in-house are increasingly sending their used devices to outside companies to clean and resterilize. Last year, the article reports, “the big three reprocessors said they refurbished approximately 4.6 million single-use devices, which were used in medical procedures involving almost every part of the body.”
5. CMS FINALIZES PART B INHERENT REASONABLENESS PROVISIONS
CMS adopted as final the process described in an interim final rule published in the December 13, 2002, Federal Register regarding establishing realistic and equitable payment amounts for Medicare Part B services when existing payment amounts are inherently unrealistic because they are either grossly excessive or grossly deficient. The rule does not apply to physician services, or those paid under a prospective payment system.
This issue goes back to 1985, when the Consolidated Omnibus Budget Reconciliation Act (COBRA) authorized the HHS secretary to deviate from the usual payment methodologies if their use produced payments determined to be grossly excessive or deficient (i.e., not inherently reasonable). CMS and the carriers must meet as many as 11 criteria (depending on applicability) in determining whether a payment should be modified. Under this final rule, a payment amount will not be considered grossly excessive or deficient if it is determined that an overall payment adjustment of less than 15 percent is necessary to produce a realistic and equitable payment amount.
6. MEDPAC SAYS MORE WORK NEEDED ON HOME HEALTH PAYMENT
In a Congressionally mandated report on the relationship between home health agencies’ (HHAs’) case mix and their profit margins on Medicare patients, the Medicare Payment Advisory Commission (MedPAC) says “neither case mix nor other key variables explain much of the variation in HHA margins.” The conclusion was that the commission should continue to analyze the HHA prospective payment system and develop reforms to improve payment accuracy.
In another December release, MedPAC has summarized each of the payment processes Medicare uses. Called “Medicare payment basics,” this series of documents should prove helpful to many in health care charged with educating staff, or even boards of directors, on how payments are made in various healthcare delivery settings (including through Medicare Advantage).
7. HOSPITAL CHARGES RARELY GO DOWN
While “hospital charge setting practices are complex and varied,” hospitals were unlikely to respond to falling costs of equipment and technology with lowered charges, concludes a recent report by the Lewin Group for MedPAC.
MedPAC asked Lewin to examine hospital charge-setting practices and the nature of hospital markups across services lines. A key MedPAC concern is the extent to which charges have become less relevant to hospitals as more payments are being based on prospective payment systems and various other arrangements, yet Medicare’s PPS assumes charges are indicative of the relative resources for an item or service.
The analysis covered:
- Charge-setting goals and processes at each facility
- Actual changes made to the charge master (why, when, how, and based on what information)
- Charge-setting processes for cardiology and cardiac services
- The development and maintenance of pharmaceutical charges
8. CONSUMERS LESS SATISFIED WITH CONSUMER-DIRECTED HEALTH PLANS
While consumer-directed health plan (CDHP) enrollees seem to exhibit more cost-conscious behavior in their healthcare decisions, they are more likely than those covered by comprehensive insurance to avoid or delay getting needed medical care, according to a new survey sponsored by the Employee Benefits Research Institute (EBRI) and the Commonwealth Fund. The survey also found that individuals in CDHPs and high-deductible health plans are less satisfied with various aspects of their health plans than individuals with comprehensive health insurance, are less satisfied overall with their health plans, and are less likely to recommend the plans to a friend or work colleague.
In another healthcare coverage study, the Commonwealth Fund reports that workers in “nonstandard” jobs—people employed on a part-time, temporary, or contractual basis—are far more likely than regular, full-time employees to lack healthcare coverage, experience gaps in their coverage, or depend on their spouse's employer coverage or public insurance programs.
9. QUICK LINKS
SAFE HARBOR, SPECIAL FRAUD ALERT RECOMMENDATIONS. The OIG seeks proposals and recommendations to assist in the development of new safe harbor and special fraud alert provisions under the federal antikickback statute. Comments are due February 7, 2006.
MEDICATION COPAYMENT RATES FOR VETERANS. Effective January 1, 2006, the medication copayment rate will increased from $7.00 to $8.00, and the total amount of copayments in a calendar year for veterans enrolled in certain priority groups shall not exceed the new cap amount of $960.00, according to a December 2 Department of Veterans Affairs notice.
TRICARE MENTAL HEALTH RATE UPDATES. The Department of Defense has published FY06 updates to the mental health per diem rates under the TRICARE payment system, effective for services occurring on or after October 1.
DRAFT OIG GUIDANCE EXTENSION. The OIG is extending the comment period for its draft compliance guidance for recipients of Public Health Service research awards. The draft guidance is to encourage the use of internal controls to monitor adherence to regulations and to ensure that program requirements are met. Comments are due January 30, 2006
10. NEW IN THE RESOURCE CENTER
UPDATED: KEY HOSPITAL FINANCIAL STATISTICS AND RATIO MEDIANS. HFMA’s popular compilation of national key financial statistics has been updated for 2005. The document includes figures for operating margin, days cash on hand, average payment period, and more.
Copyright 2005 Healthcare Financial Management Association, all rights reserved. HFMA Express News ISSN: 1540-0689. Volume 12, Number 49. Editor: Rob Fromberg, rfromberg@hfma.org, (800) 252-HFMA, ext. 385.
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