Category: Centers for Medicare and Medicaid Services

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CMS Finalizes Reimbursement Cuts for 340B Hospitals

In a striking blow to 340B hospitals, the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) released a final Medicare Outpatient Prospective Payment System (OPPS) rule adopting its earlier proposal to significantly reduce Medicare reimbursement for separately payable outpatient drugs purchased by hospitals under the 340B program.  The final rule confirms that CMS will drop the reimbursement rate from the average sales price (ASP) plus 6 percent to ASP minus 22.5 percent.  The payment changes are scheduled to take effect on January 1, 2018.

Citing the large growth in provider participation in the 340B Program and the increasing prices for drugs administered under Medicare Part B to hospital outpatients, CMS’ stated goal is to align Medicare payment with the amounts hospitals are actually spending to acquire the drugs.  CMS relied on a May 2015 Medicare Payment Advisory Commission (MedPAC) Report to Congress to determine the new formula.  While MedPAC estimated that the ASP minus 22.5 percent figure that CMS ultimately adopted was the “lower bound of the average discount” on drugs paid under the Medicare OPPS, MedPAC’s March 2016 Report to Congress recommended a reduction in payment to ASP minus 10%, which would have allowed 340B hospitals to realize, on average, a financial benefit for participating in the 340B program.

The Financial Impact of the Changes to 340B Hospitals

The OPPS  changes will have a significant impact on 340B participating hospitals.  CMS estimated that the change will result in a $1.6 billion reduction in OPPS payments to 340B hospitals for separately payable drugs—an additional estimated reduction of $700 million over the $900 million estimate from the proposed rule.  While CMS had requested comments in the proposed rule on how to redistribute the savings to target hospitals that treat low-income patients, the final rule instead redistributes the amounts saved by the 340B payment reductions by increasing OPPS payments for non-drug services

CMS is exempting rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals from the new drug payment reductions for calendar year 2018; they will continue to be paid at ASP + 6%. The exempted hospitals will need to report 340B utilization to Medicare for information and tracking purposes.

Litigation is Expected

The changes to Medicare payment are likely to be challenged in court by one or more groups of stakeholders, including the American Hospital Association.  In comments submitted on the proposed rule, multiple groups contended that CMS lacks authority to implement such large payment changes or to single out 340B hospitals for reductions, and may not otherwise contravene the intent and scope of the 340B Program without further Congressional action.  These challenges will likely play out in courts as CMS implements the new rule and while Congress continues to debate the future of the 340B Program.

No Impact on Non-Excepted Hospital Outpatient Departments 

The changes to Medicare’s reimbursement also create new incentives for off-campus hospital outpatient departments(HOPD).  Since January 1, 2017, new off-campus hospital outpatient departments that do not fall within an exception (non-excepted HOPDs) are not eligible for payment under the OPPS, and instead receive a reduced reimbursement rate.  CMS has confirmed in the final rule that the new payment reductions for 340B drugs will not be applied to non-excepted HOPDs, as their drugs are not reimbursed under OPPS.  As a result, the use of 340B drugs by a non-excepted HOPD will not impact the HOPD’s Medicare reimbursement.

Implementation Challenges

In light of the new rule, 340B hospitals should prepare to come into compliance, which will require the use of a new modifier on each drug billed to Medicare OPPS that was purchased under the 340B Program. In some cases, this will require greater coordination between the hospital’s billing and pharmacy divisions to ensure the modifier is accurately applied.

We will continue to monitor the 340B Program and will update you on any further changes that may arise.

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Joint Commission Introduces New Accreditation Standards for Telehealth Services

The Joint Commission has proposed changes to its accreditation standards to account for direct-to-patient telehealth services. The new standards will apply to Joint Commission-accredited hospitals and ambulatory health care organizations offering direct-to-patient telehealth services. Accredited hospitals and organizations, as well as entrepreneurial telemedicine companies that contract with such hospitals, should be mindful of these proposed rule changes and how they will affect their telehealth services and operations. The changes are not yet final, so interested providers may want to consider contacting the Joint Commission with comments or feedback.

What Are the Proposed Telehealth Accreditation Standards?

The Joint Commission’s proposed telehealth changes involve revisions to two existing Standards and creation of one new Standard.

Provision of Care (PC) Standard PC.01.01.01

The Joint Commission proposes a new Element of Performance #35 to this Standard, which states:

For hospitals providing direct-to-patient telehealth services: The hospital has a process to confirm the location of the patient in order to assign a provider in accordance with licensure requirements and law and regulation.

Rights and Responsibilities of the Individual (RI) Standard RI.01.03.01

The Joint Commission proposes a revised Element of Performance #7 to this Standard, which states:

The informed consent process includes a discussion about the patient’s proposed care, treatment, and services. Note: For hospitals providing direct-to-patient telehealth services: The discussion about the patient’s proposed care, treatment, and services includes the type of modality that will be used (for example, telephone, video, asynchronous communication).

New Standard RI.01.08.01

The Joint Commission proposes a new Standard, containing three Elements of Performance, which states:

For hospitals providing direct-to-patient telehealth services: The hospital informs the patient about his or her direct-to-patient telehealth services.

  1. The hospital informs the patient about the care, treatment, and services that the hospital provides either directly or by contractual arrangement.
  2. Patients receive information about charges for which they will be responsible prior to the provision of care, treatment, and services.
  3. Information provided to the patient prior to the provision of care, treatment, and services includes the following:
    1. Provider name
    2. Provider credentials
    3. Provider hospital’s contact information

What Do the New Standards Mean for Hospitals and Other Telehealth Providers?

The new Standards apply only to those providers accredited by the Joint Commission, in this case hospitals and ambulatory health care organizations (the two types of telehealth providers most commonly accredited by the Joint Commission). Moreover, the Standards only apply to those accredited providers that deliver direct-to-patient telehealth services. While the proposed changes do not define the term “direct-to-patient,” the Joint Commission most likely interprets it as any service offered by the accredited organization where the healthcare professional is directly delivering medical care to a patient. That is why the revised PC.01.01.01 standard centers around ensuring the healthcare professional is appropriately licensed to practice in the state where the patient is located “in accordance with licensure requirements and law and regulation.”

In this regard, the Joint Commission’s use of the term “direct to patient” is likely an effort to differ from, for example, physician to physician consultative telehealth services (also known as curbside consults) which can often be structured to meet the peer to peer consultation exception to physician licensure in most (but not all) states.

How Will the Proposed Telehealth Standards Affect Hospitals and Other Telehealth Providers?

The Joint Commission’s new Element of Performance #35 under PC.01.01.01 requiring appropriate licensure of the treating physician for direct to patient telehealth services is reasonable and consistent with state laws across the United States. However, the same cannot be said for the other proposed changes.

The new Element of Performance #7 under RI.01.03.01 would require the hospital to obtain patient informed consent to telehealth services for all patients, as well as require a discussion with the patient about the “type of modality that will be used” in the service. Telehealth informed consent is an issue of notable debate currently, and is not universally required across all states. Indeed, many states have deliberately elected not to impose a telehealth informed consent requirement. Other states, like Oklahoma, have eliminated their prior informed consent requirement, realizing it can be cumbersome and largely unnecessary, as most patients who choose to obtain a telemedicine service are fully capable of realizing the treating physician is, by definition, not physically in-person in the same room as the patient. Unfortunately, the new Element of Performance #7 would essentially require all Joint Commission-accredited bodies to obtain patient consent to telehealth services, a requirement more restrictive than many state laws.

The new Standard RI.01.08.01 might warrant the most serious consideration of the three proposed changes because it compels providers to take steps not required under many state laws or CMS Conditions of Participation. The Elements of Performance under RI.01.08.01 are not well-defined and therefore may generate potential confusion during surveys. For example, it is unclear if the Joint Commission expects a hospital to fully disclose to a patient the nature of the hospital’s contracted telehealth arrangements. While hospitals and healthcare providers should always provide their patients with information about financial responsibility, the current confusion and inconsistency regarding coverage of telehealth service (particularly among commercial health plans) can make it difficult for a hospital to readily predict a patient’s financial responsibility (to say nothing of assessing in-network vs. out-of-network benefits for telehealth services). Moreover, requiring a hospital to inform a patient about their financial responsibility before delivering telehealth services can directly conflict with federal Emergency Medical Treatment and Active Labor Act (EMTALA) requirements (under which a hospital must treat/stabilize the patient without regard to the patient’s ability to pay). Hospitals are allowed to utilize telehealth in their emergency department services, and it is unclear if the Joint Commission has reconciled these proposed Standards with other applicable federal laws such as EMTALA.

It may be better if Standard RI.01.08.01 were to simply defer to current laws, and instead require the accredited organization to adhere to all applicable state and federal laws regarding these issues. Otherwise, the Standard imposes a burden on hospitals and providers above and beyond what is required under state and federal laws.

The Joint Commission has previously issued telehealth accreditation Standards that are more restrictive than the law of the land. For example, CMS’ regulations on credentialing by proxy allow an acute care hospital and a critical access hospital to use the streamlined credentialing process for telemedicine services. Credentialing by proxy is a time- and cost-saving approach to reduce administrative burdens, particularly on small hospitals who serve as originating sites and purchase telehealth services from distant site organizations. CMS’ regulations do not require the originating and distant site organizations to be accredited by the Joint Commission as a prerequisite to using credentialing by proxy. However, under the Joint Commission’s Standard MS.13.01.01, if the originating site hospital is accredited by the Joint Commission, the only way the originating site hospital can use credentialing by proxy is if the distant site is also a Joint Commission-accredited organization.

We will continue to monitor for any changes to these proposed Joint Commission Standards.

For more information on telemedicine, telehealth, digital health, and virtual care innovations, including the team, publications, and other materials, visit Foley’s Telemedicine Industry Team.

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Mandatory Cardiac Episode Payment Program: CMS Proposes Cancellation

Also Changes Required Participation in the CJR Model

 

On August 15, 2017, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (Proposed Rule) that, if finalized, would (1) reduce the number of Metropolitan Statistical Areas (MSAs) in which there is mandatory participation in the Comprehensive Care Joint Replacement model (CJR) from 67 to 34, and (2) cancel the mandatory Episode Payment Models and Cardiac Rehabilitation incentive payment program.  The action reflects a change in course for CMS, de-emphasizing and significantly reducing mandatory participation in Alternative Payment Programs.

Reduced Mandatory Participation in CJR Model

The CJR model originally became effective on April 1, 2016 and mandated that hospitals in 67 specified MSAs must participate in an episode-based payment program for hip and knee joint replacements.  The Proposed Rule, anticipated to be effective as of February 1, 2018, reduces the mandatory participation in the CJR essentially by one half to 34 MSAs (see Table 1 below taken from the proposed rule for the remaining MSAs).

The remaining MSAs have the highest average wage-adjusted historic episode payments, that is, the counties with the highest average expense cost for the episodes involved. Under the Proposed Rule, hospitals in the other 33 MSAs would no longer be required to participate in the CJR model, but they may elect voluntarily to participate in that program by submitting a participation election letter to CMS by January 31, 2018. In addition, within the 34 MSAs for which participation is mandatory, identified low volume or rural hospitals also would no longer be required to participate, but they may elect voluntarily to do so.

According to CMS, the remaining 34 MSAs for which participation is mandatory will provide sufficient information to evaluate the effects of the CJR model across a broad range of providers.  The higher costs in these MSAs also allows the participating hospitals a greater opportunity for showing improvement through participation in the CJR model.

Cancellation of EPM and Cardiac Rehabilitation Incentive Program

The Proposed Rule also seeks to cancel the Episode Payment Model (EPM), that would have expanded mandatory participation in an episode-based payment to hospitals in a number of MSAs for acute myocardial infarctions, coronary artery bypass grafts and surgical hip/femur fracture treatment, and a Cardiac Rehabilitation Incentive payment model that was to be implemented simultaneously with the EPM. Regulations for both models were originally issued on July 25, 2016 and are described here.

What Does All This Mean?

The Proposed Rule shows CMS does not favor mandatory participation in Alternative Payment Programs. As CMS states in the commentary to the Proposed Rule “requiring hospitals to participate in episode payment models at this time is not in the best interests of the agency or affected providers.”  CMS further explained that large mandatory episode-based payment models “may impede [the] ability to engage providers, such as hospitals, in future voluntary efforts.”

While CMS and the Center for Medicare and Medicaid Innovation have introduced many Alternative Payment Programs which move reimbursement to providers away from fee-for-service reimbursement toward reimbursement models focused on efficiency, delivery of value, and quality care, some have thought the pace of the transition to value-based care has been slower than anticipated.  Since Alternative Payment Models are viewed as an effective way to restrain health care cost increases, some view that such slower pace will mean providers will not be required to take steps necessary to be more efficient and reduce costs.  Cancellation of and reductions in mandatory programs will allow providers to avoid, at least for the near term, preparing themselves for such models given the lack of any requirement to do so.

At the same time, voluntary participation ensures participants in such models are committed to and engaged in the value-based models. The continued evaluation of such models with voluntary participants also helps ensure that access to care, quality, and favorable outcomes are not adversely affected by mandatory participation of providers not ready for such programs.

Commercial payor arrangements and market incentives aimed at helping providers to become more efficient are not directly affected by the Proposed Rule. Their presence may still encourage providers to voluntarily participate in Alternative Payment Models.

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Medicare Payments for Telehealth Increased 28% in 2016: What You Should Know

Telehealth providers can celebrate another successful year of growth, as CMS reported a 28% increase over total 2016 payments for telehealth services under the Medicare program. Providers continue to successfully integrate telehealth services into their traditional health care delivery approaches, and are realizing payment opportunities both within the Medicare FFS program and in other sources of revenue.  Our thanks to POLITICO Pro Morning eHealth Reporter, David Pittman, who first reported on the story and shared the claims data.

2016 Medicare Telehealth Claims Data

Let’s review the numbers. In CY 2016, Medicare paid a total of $28,748,210 for telehealth services, spread across a total of 496,396 claims. This includes payments to distant site providers and originating site payments. Compare this amount to last year, in which Medicare paid a total of $22,449,968 for telehealth services, spread across a total of 372,518 claims. (The figures are slightly different than reported in prior years, as CMS changed its data collection and calculation methodology this year.)

The result: 2016 saw a 33% increase in the number of Medicare telehealth claims submitted and a 28% increase in total payments. This uptick in total payments is not attributable to fee schedule rate increases, but rather to more providers using telehealth services with their traditional Medicare FFS beneficiaries.

More Originating Site Claims Filed Than Ever Before

Perhaps the most interesting element in the new data is the significant increase in originating site claims (HCPCS Code Q3014)..  Before 2015, approximately half of all distant site claims did not have a corresponding originating site claim.  This gap has closed in the last two years, and in 2016, 66% of all distant site claims had a corresponding originating site claim.  The remaining gap could be due to providers not bothering to bill for the $25 originating site facility fee, or it could be that some claims were billed when the patient was located at home (a different site of service for which a facility would not bill).  The federal Office of Inspector General at the Department of Health & Human Services has announced a new audit project to review Medicare payments for telehealth services and understand the reason(s) for this gap.

Despite the increase, Medicare’s $28.7 million payments in 2016 remains a small portion of the $600+ billion overall Medicare program budget. Remember: in 2001, the Congressional Budget Office estimated it would cost the Medicare program $150 million to cover telehealth services for the first five years ($30 million a year).  Fifteen years later, total payments (2011-2016) still have not cracked that $150 million forecast and annual spend has not hit $30 million.

Medicare Coverage of Telehealth Services is Limited

Coverage of telehealth services under Medicare remains limited, with the restrictions established via statute under the Social Security Act.  Any notable expansion of telehealth coverage under Medicare would require legislation by Congress. There are several bills pending in Congress to remove these limitations, but until such time, there are five main conditions for coverage for telehealth services under Medicare.

  1. The beneficiary is located in a qualifying rural area (providers can check if the originating site is in a qualifying rural area by using the Medicare Telehealth Payment Eligibility Analyzer);
  2. The beneficiary is located at one of eight qualifying originating sites (i.e., the offices of physicians or practitioners; Hospitals; Critical Access Hospitals; Rural Health Clinics; Federally Qualified Health Centers; Hospital-based or CAH-based Renal Dialysis Centers (including satellites); Skilled Nursing Facilities; and Community Mental Health Centers);
  3. The services are provided by one of ten distant site practitioners eligible to furnish and receive Medicare payment for telehealth services (i.e., physicians; nurse practitioners;™physician assistants;™nurse-midwives;™ clinical nurse specialists;™ certified registered nurse anesthetists; clinical psychologists; clinical social workers; registered dietitians; and nutrition professionals);
  4. The beneficiary and distant site practitioner communicate via an interactive audio and video telecommunications system that permits real-time communication between them (store and forward is covered in Alaska and Hawaii under demonstration programs); and
  5. The CPT/HCPCS (Current Procedural Terminology/Healthcare Common Procedure Coding System) code for the service itself is named on the CY 2017 (or current year) list of covered Medicare telehealth services.

In order to bill Medicare for telehealth services, the distant site practitioner must fully comply with each of these requirements. If the service does not meet each of these above requirements, the Medicare program will not pay for the service.  If, however, the conditions of coverage are met, the use of an interactive telecommunications system substitutes for an in-person encounter (i.e., it satisfies the “face-to-face” element of a service).

How to Request Additional Medicare Telehealth Services

Providers and other interested parties need not wait on federal legislation to pass. Anyone may send CMS a request to add services (HCPCS codes) to the list of covered Medicare telehealth services. This can include medical specialty societies, individual physicians or practitioners, hospitals, state and federal agencies, telehealth companies, vendors, and even patients. Requests may be submitted at any time on an ongoing basis. The requests will be consolidated and considered during the CMS rulemaking cycle that establishes the physician fee schedule rates.

Each request should address the following:

  • Name(s), address(es) and contact information of the requestor.
  • The HCPCS code(s) that describes the service(s) proposed for addition or deletion to the list of Medicare telehealth services. If the requestor does not know the applicable HCPCS code, the request should include a description of services furnished during the telehealth session.
  • A description of the type(s) of medical professional(s) providing the telehealth service at the distant site.
  • A detailed discussion of the reasons the proposed service should be added to the definition of Medicare telehealth service.
  • An explanation as to why the requested service cannot be billed under the current scope of telehealth services, for example, the reason why the HCPCS codes currently on the list of Medicare telehealth services would not be appropriate for billing the service requested.
  • Evidence that supports adding the service(s) to the list on either a category 1 or category 2 basis as explained in the section labeled “CMS Criteria for Submitted Requests.”

Email your request to Telehealth_Review_Process@cms.hhs.gov and title it “Telehealth Review Process.” Alternatively, you can mail the request to: Division of Practitioner Services, Mail Stop: C4-03-06, Centers for Medicare and Medicaid Services, 7500 Security Boulevard Baltimore, Maryland 21244-1850. Attention: Telehealth Review Process.

Continued expansions in reimbursement mean providers should make enhancements to telehealth programs now, both for the immediate cost savings and growing opportunities for revenue generation, to say nothing of patient quality and satisfaction.

For more information on telemedicine, telehealth, and virtual care innovations, including the team, publications, and other materials, visit Foley’s Telemedicine Practice.

 

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