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8 posts from November 2006

November 29, 2006

New York State Commission on Health Care Facilities in the 21st Century releases its final report recommending significant bed closures and mergers

The NY State Commission on Health Care Facilities in the 21st Century released its final report yesterday.  Its recommendations include the closure of nine hospitals, merger or other restructuring of about fifty hospitals and the elimination of 4,200 hospital beds (7% of the state's total supply), and the closure of 2,000 nursing facility beds (4% of the state total).

Many of the institutions welcome these recommendations and have been involved with their development. 

The press release accompanying the report notes:

The Commission’s recommendations will produce an estimated total benefit to payors and providers of over $1.5 billion annually, or $15 billion over ten years. Included in this figure is an estimated $806 million annually in savings to Medicaid and other payors. Thebenefits to providers in the form of reinvestment opportunities are estimated to be $721 million annually.

. . . .

The Commission’s report also includes recommendations for broad policy reform in the areas of reimbursement, the uninsured, primary care infrastructure, workforce development, the SUNY hospitals, county-owned nursing homes, and information technology. Such recommendations provide a blueprint for further efforts to fully reconfigure the health care system.

As the former CON lawyer for the Commonwealth of Massachusetts, I still have the central health planning gene somewhere in my makeup.  Even though I realize that the need to close and consolidate facilities is a result of market pressures from payors and specialized competitors, part of me reacts to this report by thinking: What a colossal waste of resources!  This could have been managed so much better with a little central health planning.  Those were the days . . . .

The approach to nursing facility bed reduction is philosophically similar to policies in play here in Massachusetts -- the idea is that many nursing facility residents could be cared for in community-based settings.  While this may be true for some residents, the advocate community is rightly concerned that perhaps too many residents may be displaced or may be left in the future without appropriate placements.

As other states consider undertaking studies such as the one New York has just completed (New Jersey comes to mind; I'm sure there are others), it will be very interesting to see how the implementation of the recommendations in this report unfold. 

-- David Harlow

November 27, 2006

Another cardiac surgery gainsharing opinion from the OIG

The OIG released another advisory opinion this month approving a cardiac surgery gainsharing program.  The key elements, as in the previously approved cardiac gainsharing programs (see the early 2005 opinions, 05-01 through 05-06, here), are "open-on-use" policies (thus reducing waste of unused OR supplies which have been opened in advance) and limiting the use of certain drugs to cases in which they are shown through benchmarking studies to be necessary and appropriate.

The OIG maintains that this opinion is consistent with the 1999 special advisory bulletin finding gainsharing arrangmenets genreally to be in violation of the anti-kickback statute.  The opinion lists the ways in which the proposed gainsharing program satisfies concerns about potentially improper limitation of services provided to beneficiaries, and potentially improper financial incentives.

Clearly, the OIG is getting more comfortable with gainsharing.  As more opinions are issued, and as the two series of gainsharing demonstration projects get under way next year (see earlier posts here and here), this is likely to become a more and more mainstream approach to aligning physician and hospital incentives, and to expand beyond cardiology services as well.

-- David Harlow

November 16, 2006

Federal appeals court: No private right of action to enforce HIPAA

Is there a private right of action to enforce HIPAA?  The answer is now more definitive than ever: No. 

This week, the Fifth Circuit Court of Appeals -- the first federal appeals court to decide this issue -- went along with every federal district court that has considered the issue (not to mention the regs themselves, which are pretty clear on the subject).  (See the decision here.  See HIPAA regs and more on OCR's HIPAA page here.)

Why has the plaintiff bar continued to assert a private right of action under HIPAA?  First of all, why not?  Throw it all against the wall and see what sticks. Second, if it were successful, it would bootstrap a state law claim into Federal court, which may be beneficial to the plaintiff.  (In Acara v. Banks, the 5th Circuit decision handed down November 13, the remaining state law claims were dismissed because there was no diversity jurisdiction.)  Third, from a broader perspective, one function of the private lawsuit is to effect social change.

Now that the government seems poised to actually enforce HIPAA, the third reason may go by the boards (I know, I know . . . we still need to wait and see).  If enforcement is truly stepped up for the benefit of the public, perhaps the plaintiff bar can make peace with its inability to rely on the first two reasons for pursuing the private right of action. 

In any event, those within the community of "covered entities" under HIPAA need to get with the program and come into full compliance, and I have seen a renewed interest in HIPAA compliance audits of late.

-- David Harlow

November 12, 2006

OIG advisory dings existing and proposed home oxygen arrangements of DME supplier

The OIG issued a negative advisory opinion earlier this month. A DME supplier requested confirmation that providing free home oxygen before patients qualify for Medcare coverage, and overnight oximetry testing services free of charge, would not be considered illegal remuneration to a person in a position to order or purchase covered goods or services.

At first blush, one wonders why this request was ever submitted in the first place.  Most advisories conclude -- unsurprisingly, based on the arrangements presented -- that while the arrangement technically is not within a safe harbor, the government believes that adequate safeuards against inappropriate overutilization/remuneration are in place and so the arrangement will be permitted.  The writing of the advisory is surely influenced by the ultimate outcome already determined by the OIG, but the arrangements described in this opinion seemed particularly doomed to failure from the outset.

CMS and Congress have come down hard on the DME suppliers in general, and oxygen suppliers in particular.  (The same may be said for various state Medicaid programs as well.)   

Consider, for example, the September OIG report on reimbursement for oxygen concentrator rentals.  Among other things, the report notes that the acquisition cost of an oxygen concentrator is under $600, yet DME suppliers are paid equipment rental payments for up to 36 months -- which may total over $7,000 (beneficiary copayments may exceed $1,300 over 36 months), and which are not justified by the industry position that the apparent unreasonable profit is appropriate and is required in part to cover inflation and maintenance costs. 

The industry position is further detailed here, and includes the typical complaints that the government is using old cost data, and that the sample of beneficiaries surveyed by OIG is too small to be statistically valid and is not representative.  In addition, the implication that most, if not all, oxygen concentrators are used by beneficiaries for more than 36 months is disputed.

The OIG report notes that 25% of all Medicare DME expenditures are oxygen-related.  And while DME expense pales in comparison to inpatient hospital expenditures (the industry offers the comparison of $7 and change per diem for home oxygen, vs. $4,500+ per diem for Medicare inpatient hospital expense; the numbers may be accurate, but are they comparable?), over the years CMS has focused on provider and supplier groups whose services consume successively smaller chunks of the Medicare dollar and at the aggregate level the DME dollars are significant.

There are industry- and CMS-supported changes on the legislative agenda for the future, and with the changed face of Congress it will be interesting to see what happens.

The background helps to contextualize the advisory request (oxygen suppliers seeing themselves as being under attack), but doesn't explain to my satisfaction the request itself. 

A better solution (which is already in place with respect to certain other covered services) -- perhaps one being pursued by the industry in tandem with the advisory request -- would be making determinations of medical necessity for home oxygen retroactive, so that beneficiaries who truly require home oxygen therapy may be provided the oxygen before the paperwork goes through.  Suppliers would then be at risk only for oxygen provided to those beneficiaries who do not eventually receive a finding of medical necessity.

-- David Harlow

November 09, 2006

2007 Medicare OPPS and ASC fee schedule finalized

CMS released the 2007 hospital outpatient prospective payment system (OPPS) and ASC rule and fee schedule last week.  It went on display November 1; it will be published in the coming weeks with an effective date of January 1, 2007.

UPDATE 11/27/06: The final rule was published Friday 11/24 in the Federal Register.

As is the case across many of CMS's activities lately, one overarching emphasis of the rule is quality.

An excerpt from the CMS press release, available in full here, follows:

CMS estimates that hospitals will receive an overall average increase of 3.0 percent in Medicare payments for outpatient department services in 2007 due to the changes in this final rule.

While the market basket update accounts for increases in the costs of providing a service, much of the growth in outpatient spending results from increases in utilization and complexity (volume and intensity).  CMS estimates that between 2005 and 2006, hospital outpatient expenditures increased by nearly 12 percent, mainly due to growth in the volume and intensity of services.  CMS projects that the expenditures under the OPPS in CY 2007 will be approximately 9.2 percent higher than the estimated CY 2006 expenditures.  That rate of growth in expenditures is of great concern to CMS, not only because of its impact on all taxpayers, but especially on beneficiaries whose monthly premiums cover 25 percent of Part B expenditures.

In order to promote greater value in the purchase of hospital outpatient services for Medicare beneficiaries, the final rule ties OPPS rate increases to the reporting of quality measures beginning in 2009.  The final rule announces CMS’ plans to develop additional quality measures that are specifically appropriate for hospital outpatient care, and will require hospitals to report the outpatient-specific measures beginning in CY 2009.

“In this final rule, we are taking one more step toward rewarding hospitals for providing quality care, not just in the inpatient setting, but also in the outpatient department,” said [Acting CMS Administrator Leslie] Norwalk.  “While our primary focus is on quality care for Medicare beneficiaries, we expect that our quality initiatives will stimulate better care for all patients who come to the hospital outpatient department.”

The final rule also includes an expansion of the hospital reporting of additional quality measures for inpatient services beginning in FY 2008, based on measures endorsed by the National Quality Forum (NQF) and supported by the privately-led Hospital Quality Alliance (HQA).

-- David Harlow

November 08, 2006

Can you say "interfacility"? SCT rule gets changed again

CMS has addressed the definition of specialty care transport (SCT) yet again in the recent final rule mostly devoted to the 2007 Medicare physician fee schedule (on display November 1, 2006, to be published December 1, 2006, effective January 1, 2007).  (See pp. 501-510 of the display copy of the rule, which includes a history of many of the definitions and guidance documents relating to SCT.)  SCT is the highest level of service provided by ground ambulance, as defined by CMS -- it includes interfacility ambulance services which may be provided only by a paramedic with additional training or a more highly-trained professional (e.g., nurse or physician).

The defintion of SCT in the regs (42 CFR 414.605) reads as follows:

Specialty care transport (SCT) means interfacility transportation of a critically injured or ill beneficiary by a ground ambulance vehicle, including medically necessary supplies and services, at a level of service beyond the scope of the EMT–Paramedic. SCT is necessary when a beneficiary's condition requires ongoing care that must be furnished by one or more health professionals in an appropriate specialty area, for example, nursing, emergency medicine, respiratory care, cardiovascular care, or a paramedic with additional training.

CMS and its public have struggled with the definition of interfacility (hospital-to-hospital? hospital-to-acute care hospital?) for over five years, and CMS included another stab at it in the draft version of the 2007 physician fee schedule rule.

Based on the comments received (including a suggestion to reconvene the negotiated rulemaking workgroup to decide what "critical care" means), CMS, in a measured tone that -- to my reading -- thinly veiled its exasperation, decided to withdraw its proposed clarification at the regulatory level, and to expand its "guidance" on the issue. 

The current CMS view goes beyond prior guidance: the word "interfacility" for SCT purposes now explicitly includes Medicare-certified SNF-to-hospital (AND hospital-to-SNF) ambulance runs (assuming clinical appropriateness/need for SCT-level service); this has already been permitted by liberal carriers, and CMS expects this will remain a small fraction of the total SCT volume.  "Hospital" is defined broadly to include anything that would be considered a "hospital-based facility" under CMS "provider-based" rules, 42 CFR 413.65.

Here's to a definition that should stick.

-- David Harlow

November 03, 2006

Is CMS overselling (and overpaying) Medicare Advantage plans?

The NY Times reports that Democrats in Congress have sent a letter to CMS regarding alleged inaccuracies in the 2007 Medicare handbook sent to all beneficiaries, noting that it's slanted in favor of Medicare Advantage plans (Medicare HMOs).  (See additional coverage here.) 

Congressman Pete Stark (one of those who signed the letter) has been after Medicare Advantage plans for a while; several months ago, he noted that a study called for by congressional committees found that MA costs were 11% higher than fee-for-service Medicare.

-- David Harlow

November 01, 2006

2007 Medicare physician fee schedule finalized

CMS is spinning the 5% cut in physician payments under the 2007 Medicare Physician Fee Schedule by emphasizing the increases in the RVU work component for E&M services. 

Formula-driven cuts have been mandated for each year since 2002, but Congress has overriden itself annually with one-time increases, and may well do so again after next week's elections.  (See earlier post here.)  The rule went "on display" today, is scheduled to be published December 1, and will be effective January 1.  The display copy is available here

Update 12/4/06: The rule was published Friday in the Federal Register.

See the CMS press release for other highlights, including:

  • Expanded coverage for certain preventive services, as required by the DRA
  • Physician office imaging reimbursement capped at hospital payment levels, per the DRA (these cuts could be rolled back by pending legislation; see earlier post here)
  • Adoption of IDTF supplier standards
  • Adoption of ambulance fee schedule inflation adjustment factor of 4.8%
  • Clarification of the Specialty Care Transport rules 

-- David Harlow