HFMA Express News November 4, 2005

IN THIS WEEK’S ISSUE:

1. Uninsured Class Action Settlement Announced
2. Hospital Outpatient Rule Provides 3.7 Percent Update
3. Final 2006 Update Cuts 4.4 Percent from Physician Payments
4. Home Health Payments to Rise 2.8 Percent in 2006
5. HFMA to Work with Patient Safety Foundation on Decision-Making Templates
6. Long-Term Care Facilities Required to Post Nursing Staff Data
7. CMS Announces New Physician Voluntary Reporting Program
8. New Law Extends TANF and Part B Aid; Provides Hurricane Assistance
9. Medicare Coding and Billing Update
10. Quick Links

1. UNINSURED CLASS ACTION SETTLEMENT ANNOUNCED

Providence Health Systems Portland, Oregon, has settled a state class action lawsuit that claimed uninsured patients were charged higher hospital rates than insured patients, The Oregonian reported on November 2. The settlement in state court, believed to be the first in the nation for the series of billing-related lawsuits generally rebuffed by federal courts, stated no dollar amount as it provides for both retroactive and prospective discounts. The newspaper did, however, note that plaintiff attorneys are to receive $350,000.

According to the report, Providence would provide an average discount of 31 percent for uninsured patients in the Portland area, applicable to the past four years and to the next two years of services. Discounts to uninsured patients in four of the system’s other service areas will amount to approximately 11 percent.

On the Providence Oregon web site, CEO Russ Danielson stated, “While we disagree with the allegations made in the lawsuit, settling it made sense to avoid the tremendous costs associated with a trial and allow us to focus on our mission. The content of the settlement affirms our efforts over the past several years to make our charity care and financial assistance policies clearer and more consistent.” The county circuit judge still must approve the settlement, expected to occur by July.

2. HOSPITAL OUTPATIENT RULE PROVIDES 3.7 PERCENT UPDATE

On Wednesday, CMS posted the final rule for the 2006 Medicare hospital outpatient PPS update. As with the proposed rule, the final rule is influenced heavily by demographics. The 3.7 percent market basket adjustment for inflation is tempered by APC and wage index changes. There will also be a 7.1 percent adjustment for rural sole community hospitals resulting from a study called for by the Medicare Modernization Act. CMS estimates that under the final rule, 2006 program payments for outpatient services will increase $1.4 billion, or 5.2 percent, over 2005.

The final rule, which is expected to be published in the November 10 Federal Register, implements the proposed reduction in the maximum beneficiary coinsurance rate for any services to 40 percent of the total payment to the hospital for the APC. CMS will not implement the controversial proposed limit on diagnostic imaging payments when there are multiple procedures of the same “family” performed together, but will continue to study the approach.       

3. FINAL 2006 UPDATE CUTS 4.4 PERCENT FROM PHYSICIAN PAYMENTS

The Medicare 2006 physician fee schedule final rule, posted on the CMS web site November 2, applies the update formula required by current law, which means physicians’ payments will be reduced by 4.4 percent for 2006. In recent years, Congress has enacted legislation to reverse formula-driven cuts and provide a small annual increase, but has not done so yet for 2006. A 1 percent payment increase has been proposed as part of the current Senate budget reconciliation package.

Other provisions include:  

• A voluntary competitive acquisition program (CAP) for drugs administered in physicians’ offices (addressed in large part by the physician payment rule, but with a separate interim rule for exclusions from the CAP)
• Expansion of Medicare coverage for glaucoma screening
• Extending access for rural beneficiaries enrolled in Medicare Advantage plans to include services of federally qualified health centers (FQHCs)
• Several changes to Medicare payments for separately billable drugs and biologicals furnished by ESRD facilities
•  Adoption of a modified approach to reforming payment for multiple imaging procedures performed on a beneficiary at one session

The rule, scheduled to be published in the November 21 Federal Register, goes into effect January 1.  

4. HOME HEALTH PAYMENTS TO RISE 2.8 PERCENT IN 2006

Home health agencies will receive a 2.8 percent increase in their 2006 Medicare payment rates, CMS announced in a November 2 final rule. Under the rule, the CY06 payment rate update will be the home health market basket increase of 3.6 percent, minus 0.8 percent. Rural and urban home health agencies will receive an estimated 3.4 and 2.5 percent payment increase, respectively. Aggregate payments to the facilities would increase by $370 million next year.

The final rule also adopts the Office of Management and Budget’s revised metropolitan statistical area (MSA) definitions. In implementing the new MSA designations, CMS will use a one-year transition period of a blended wage index consisting of both the old and new wage index values, with the wage index based entirely on the new MSA definitions  in 2007.

CMS is also reducing the fixed dollar loss ratio, used to calculate outlier payments, from 0.70 to 0.65 for CY06. CMS believes that the change preserves a reasonable degree of cost sharing and continues to meet the statutory requirements while still allowing a greater number of episodes to qualify for outlier payments.

5. HFMA TO WORK WITH PATIENT SAFETY FOUNDATION ON DECISION-MAKING TEMPLATES

HFMA has agreed to partner with the National Patient Safety Foundation (NPSF) in a new project aimed at improving the adoption and integration of patient safety solutions. The NPSF Value Proposition Template Initiative seeks to create templates to describe the value proposition and the business case for various patient safety solutions in terms that are relevant to chief clinical and administrative executives, so that the whole management team can have an informed dialogue around such decisions. Michael D. Rowe, FHFMA, CPA, vice president of finance/CFO for SCL Health System in Lenexa, Kansas, will represent HFMA on the work group.

6. LONG-TERM CARE FACILITIES REQUIRED TO POST NURSING STAFF DATA

Effective December 27, skilled nursing facilities and nursing facilities will be required to follow new data collection, posting, and recordkeeping requirements, as specified in the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), according to an October 28 final rule published by CMS. Under the final rule, the facilities must display daily the number of licensed and unlicensed nursing staff providing direct care to residents, and the actual hours worked by staff during each shift. Daily facility resident census information also must be posted.

CMS says that providing both census information and nursing staff data gives families and residents a basis for understanding the number of nursing hours available to patients. The final rule is part of broader communication outreach efforts developed under the Nursing Home Quality Initiative to provide beneficiaries, their families, and the public with access to current information that can help them make informed decisions about nursing home care options, CMS explains.      

7. CMS ANNOUNCES NEW PHYSICIAN VOLUNTARY REPORTING PROGRAM

In January 2006, CMS will launch the first phase of a new program that allows physicians to voluntarily report information on the quality of care they provide to Medicare beneficiaries. Physicians, physician organizations, and other experts have been involved in developing the 36 evidence-based measures to be reported in the first phase of the program.

For this phase, CMS will collect information through the use of a dedicated set of HCPCS codes, called G-codes, which will supplement the claims data doctors currently submit to CMS with clinical data. This clinical data will then be used to measure the quality of services provided to Medicare patients. The agency anticipates that these G-codes will serve as an interim step until the electronic submission of data through electronic health records replaces this process.

CMS will provide feedback to the physicians who submit the data by the summer of 2006 about the level of their performance based on the submitted data. However, the data will not be made available to the public, the agency says. 
 

8. NEW LAW EXTENDS TANF AND PART B AID, PROVIDES HURRICANE ASSISTANCE

President Bush has signed legislation that renews the federal program providing Medicare Part B premium coverage for low-income beneficiaries and extends through December 30 the Temporary Assistance for Needy Families (TANF) program, which provides transitional Medicaid coverage for low-income individuals who have obtained jobs after they received welfare assistance. The final version of the legislation did not include a provision from the original House bill that would have allowed Alabama, Mississippi, and Louisiana to access TANF funds to help cover the cost of emergency welfare benefits for Hurricane Katrina evacuees, but does provide $500 million in federal unemployment funds for hurricane-affected states.       

9. MEDICARE CODING AND BILLING UPDATE  

CMS has published new transmittals that affect your coding and billing of Medicare claims. This week’s transmittals include:  

• Locality codes for purchased diagnostic tests
• New ICD-9-CM codes for chronic kidney disease
• Source of admission code D  

HFMA staff review CMS notices regularly for transmittals that affect healthcare financial managers, and post links to those transmittals on HFMA’s web site.  

10. QUICK LINKS

FORUM ON EHRs AND E-PRESCRIBING. CMS will host a special open door forum November 9, 2005, from 2 p.m. to 4:30 p.m. (Eastern), to discuss proposed rules, published October 11, pertaining to aspects of electronic prescribing and electronic health records information technology. CMS is particularly interested in information on the benefits, risks, costs, and savings for entities donating and using these technologies.

TRICARE SUBACUTE CARE PROGRAM. The Department of Defense has published a final rule establishing a subacute care program under TRICARE with skilled nursing facility and home health care benefit structures, payment methods, and coverage requirements modeled after the Medicare program.

EMPLOYERS’ HEALTH INSURANCE COSTS. Employers’ hourly costs for health insurance rose an estimated 6.7 percent for the year ending September 2005, according to the Bureau of Labor Statistics. BLS also provides a table breaking down employer costs for healthcare and social assistance workers.

NEW INTEREST RATE FOR MEDICARE OVERPAYMENTS AND UNDERPAYMENTS. Effective November 3, 2005, the interest rate for Medicare overpayments and underpayments is 12.25 percent, CMS announced in transmittal number 81.

PREMIUM INCREASES SLOW DOWN. Premiums in 2005 increased 8 percent over 2004, the smallest increase in five years, according to health plans that responded to a Milliman survey. PPO premiums for a standard benefit plan also increased 8 percent, while premiums for high-deductible PPO plans increased 1 percent.

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