On March 30, 2010, President Obama completed the enactment of federal health reform law by signing a package of reconciliation amendments to the Patient Protection and Affordable Care Act. The final version of the law includes many provisions that will significantly revise the way that the Medicare program reimburses providers. The Secretary of Health and Human Services (Secretary) is required to promulgate regulations to implement many of these provisions. In some cases, the provisions will not become effective until 2011 or several years later. In other cases, they will be phased in over a number of years.
This Legal News Alert highlights some of the key provisions of the new law affecting Medicare reimbursement. This alert uses the term PPACA to refer to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the reconciliation amendments).
Linking Medicare Payment to Quality of Care and Patient Outcomes
PPACA contains a number of provisions that are intended to significantly increase the link between the Medicare payments to providers and the quality of the services furnished and patient outcomes. Some of these provisions require the Secretary to implement payment adjustments that take into account quality measures and patient outcomes, while others require the Secretary to begin evaluating such payment adjustments and to submit reports to Congress regarding value-based purchasing programs that could be implemented in the future. The collection of quality data is the first step on the path to the development of value-based purchasing programs. Information regarding the performance of individual providers on the quality measures will be made available to the public.
Value-Based Purchasing Program for Acute Care Hospitals
Reduction in Medicare Payment for Physicians Who Do Not Submit Quality Data
Value-Based Purchasing Program for Physician Services
Quality Reporting for Long-Term Care Hospitals, Inpatient Rehabilitation Facilities, Inpatient Psychiatric Hospitals, and Hospice Programs
Quality Reporting for Prospective Payment System (PPS)-Exempt Cancer Hospitals
Quality Reporting for Skilled Nursing Facilities, Home Health Agencies, and Ambulatory Surgery Centers
Payment Adjustment for Conditions Acquired in Hospitals
Payment Adjustments for Conditions Acquired in Other Providers
Hospital Readmissions Reduction Program
Community-Based Care Transitions Program
Extension of "Gainsharing" Demonstration
Medicare Disproportionate Share Hospital Payments
Beginning on October 1, 2013, Medicare Disproportionate Share Hospital (DSH) payments will be reduced by 75 percent pursuant to PPACA Section 3133. Hospitals qualifying for DSH payments may receive additional DSH payments based on a formula that includes certain factors, including the hospital's reduction in DSH funds, the percentage change in the uninsured under-65 population, and the relative share of uncompensated care provided by the hospital. The expectation is that there will be fewer uninsured patients, and that hospitals will have lower uncompensated care costs. Many hospitals receive substantial Medicare DSH payments, and it remains to be seen whether the increase in reimbursement as a result of additional persons being covered by insurance and Medicaid will offset the large reduction in Medicare DSH payments.
PPACA Section 3133 also provides that:
[t]here shall be no administrative or judicial review of either (A) any estimate of the Secretary for purposes of determining the factors described in PPACA that are used to calculate the DSH payment, or (B) any period selected by the Secretary for such purposes.
The preclusion of any administrative or judicial review of the factors estimated by the Secretary to calculate DSH payments is very significant and in stark contrast to the current DSH payment statute and regulations, regarding which there has been a tremendous amount of litigation. The current DSH payments have been subject to successful litigation by many providers, because the Centers for Medicare and Medicaid Services (CMS) Administrator has been held to have made many errors in determining the DSH payments. It is possible that the increased complexity created by PPACA could result in more errors that would not be subject to judicial review.
Medical Education Provisions
Medical Education Payments for Residents Training in Jointly Operated Residency Programs
Redistribution of Unused Medical Education Residency Positions
Resident Time Spent on Didactic and Training Activities
The preceding paragraph applies to IME, except that time spent by an intern or resident in an approved medical residency training program in research activities that are not associated with the treatment or diagnosis of a particular patient, in either an inpatient or outpatient setting, shall not be counted toward the determination of full-time equivalency.
There have been appeals on the research issue in the past. The above IME and GME provisions may be closing the door on the possibility of success in these appeals after the new law's effective date.
PPACA also provides that in determining the hospital's number of full-time equivalent residents for both GME and IME purposes, all the time that is spent by an intern or resident in an approved medical residency training program on vacation, sick leave, or other approved leave, as such time is defined by the Secretary, and that does not prolong the total time the resident is participating in the approved program beyond the normal duration of the program, shall be counted toward the determination of full-time equivalency.
The foregoing GME and IME provisions have the following effective dates:
- Except as otherwise provided, the Secretary will implement the amendments made by this section in a manner so as to apply to cost reporting periods beginning on or after January 1, 1983.
- The GME provisions apply to cost reporting periods beginning on or after July 1, 2009.
- The IME provisions apply to cost reporting periods beginning on or after October 1, 2001. With respect to IME, PPACA provides that the IME section should not give rise to any inference on how the law in effect prior to such date should be interpreted.
Medicare Prescription Drug Program — Closing the "Donut Hole"
PPACA Section 1101 provides for the gradual elimination of the so-called donut hole in the Medicare prescription drug program under Medicare Part D. PPACA provides that every senior who participates in the Medicare Part D prescription drug program and who enters the donut hole in 2010 will receive a $250 rebate to begin to offset each beneficiary's prescription drug costs in the donut hole. In 2011, beneficiaries will also receive a 50 percent discount on brand name drugs and the size of the donut hole will begin to shrink. The goal is to have the donut hole completely eliminated by 2020.
Medicare Advantage Program
PPACA provides for a gradual decrease in funding to certain popular private insurance plans offered in the Medicare Advantage Program. These plans generally offer lower out-of-pocket costs to beneficiaries than traditional Medicare. As payments by the government to these plans are scaled back, it is possible that senior citizens will begin an exodus from the Medicare Advantage Program if beneficiary out-of-pocket expenses rise. PPACA also provides for incentive payments to high-quality Medicare Advantage plans.
Accountable Care Organizations
PPACA Section 3022 requires the Secretary to establish by January 1, 2012 a Shared Savings Program to (1) promote accountability for a patient population, (2) coordinate services and items under Medicare Parts A and B, and (3) encourage investment in infrastructure and redesigned care processes for high quality service delivery. Accountable Care Organizations (ACOs) are the vehicle through which the Medicare Shared Savings Program will be implemented. To qualify as an ACO, a group of eligible providers of items and services covered by Medicare Parts A and B must:
- Agree to participate in the program for at least three years
- Agree to be accountable for the overall care provided to at least 5,000 Medicare fee-for-service beneficiaries assigned to the ACO
- Establish a formal legal structure that allows the ACO to receive and distribute Shared Savings payments to its participating providers and suppliers
- Include enough primary care physicians to care for the Medicare fee-for-service population assigned to the ACO
- Have in place a leadership and management structure that includes clinical and administrative services
An ACO will be responsible for defining processes to promote evidence-based medicine and to coordinate care through the use of tele-health, remote patient monitoring, and other enabling technologies. The Secretary is required to establish appropriate measures to assess the quality of care furnished by the ACO, including regularly updated performance standards.
ACO providers will submit claims and directly receive Medicare reimbursement in the same manner as they would if they were not in an ACO. In addition, an ACO may receive an additional payment representing a percentage (defined by the Secretary) of Shared Savings achieved by the ACO. Shared Savings will be measured by the difference between (1) the estimated average per capita Medicare expenditures in a year for services and items provided to the ACO's assigned Medicare beneficiaries, and (2) a benchmark set by the Secretary based on the historical cost of providing Medicare services and items to such beneficiaries. PPACA gives the Secretary authority to waive the provisions of the Civil Monetary Penalties law, the Anti-kickback Statute, and any provisions under Title XVIII (including the Stark law) as the Secretary deems necessary to implement an ACO Shared Savings Program. However, there are other legal issues that the Secretary is not authorized to waive, in particular antitrust laws, that will have a significant effect on structuring a legally compliant ACO.
Establishment of Center for Medicare and Medicaid Innovation
PPACA Section 3021 creates a Center for Medicare and Medicaid Innovation (CMI) within CMS. The purpose of CMI is to test innovative payment and service delivery models to reduce costs and to improve the quality of care and submit periodic reports to Congress. CMI is to be functioning by January 1, 2011. Payment reform models for CMI to consider include rural tele-health expansions and the development of a rapid learning framework.
National Pilot Program on Payment Bundling
PPACA Section 3023 requires the Secretary to develop a voluntary pilot program for hospitals, doctors, and post-acute care providers to improve patient care and achieve savings for the Medicare program through bundled payment modes. The program is required to be established by January 1, 2013 and is to run for a period of five years. Before January 1, 2016, the Secretary must submit a plan to Congress to expand the program if that would improve patient care and reduce spending. The Secretary is authorized to expand the pilot if it is found to improve quality and reduce costs.
Revision of Certain Market Basket Updates and Incorporation of Productivity Improvements Into Market Basket Updates That Do Not Already Incorporate Such Improvements
PPACA Section 3401 contains many changes to the Medicare Market Basket updates for inpatient hospital services, home health providers, nursing homes, hospice providers, inpatient psychiatric facilities, long-term care hospitals, and inpatient rehabilitation facilities. Various effective dates are specified. A productivity adjustment also is incorporated into payment updates for Part B providers who do not already have such an adjustment. Other modifications to the Medicare Market Basket updates for various providers are contained in this section.
Independent Payment Advisory Board
PPACA Section 3403 creates a 15-person Independent Payment Advisory Board that is responsible for presenting annual recommendations to the President, Congress, and private entities on actions they can take to improve quality and constrain the rate of health care cost growth in the private sector. The Board must make non-binding Medicare recommendations to Congress in years where Medicare growth is below the targeted growth rate. In years when Medicare costs are projected to be unsustainable, the Board's proposals will take effect unless Congress passes an alternative measure that achieves the same level of savings. Beginning in 2020, the Board may make binding recommendations to Congress only every other year if the growth in overall health spending exceeds growth in Medicare spending.
Conclusion
As the foregoing indicates, the already complex Medicare payment policy will become much more complex under PPACA. The vast number of regulations and demonstration and pilot projects required by PPACA, as well as inevitable future statutory changes, will contribute to this increased complexity. There will continue to be much need and many opportunities for hospitals to plan in advance for Medicare reimbursement policies and potential appeals. Areas on which hospitals should focus their advance planning include:
- Quality issues, such as reporting quality data, quality measures' effect on Medicare payments, and availability of quality data to the public through the Hospital Compare Web site.
- ACOs and similar multi-provider clinically integrated networks are being planned and implemented by many providers to best respond to demands of the new law and the commercial marketplace. These networks, if structured properly, will change the nature of both Medicare and non-Medicare payments, improve quality, and reduce overall costs.
- The methodology for medical education payments and per-resident FTEs is substantially changed. Most changes are prospective in nature, and teaching hospitals should focus on understanding and planning in advance for these significant changes.
- Medicare DSH payments will decrease substantially. There are options for a hospital to increase its DSH payment somewhat, but this will require the hospital to prepare the necessary data to qualify for the adjustment.
There are several years of cost reports that will continue to be settled under existing law, most of which have not been changed by PPACA. Even as various provisions of the reform legislation become effective, many of the adjustment factors will continue to create the possibility for administrative and judicial review. However, many other provisions, such as quality payments and DSH payments, have sections that limit the extent of judicial review of the Secretary's actions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.