An Uncertain Future for ICD-10

On February 14, 2012, Marilyn Tavenner, the acting Administrator of CMS, told reporters that CMS will “re-examine the timeframe” of the planned conversion to the ICD-10 code standard.  Presently, covered entities under HIPAA must fully convert from the ICD-9 coding system to ICD-10 by October 1, 2013.

ICD-10, which stands for the International Classification of Diseases, 10^th Revision, is a coding system that providers use for billing purposes and medical researchers also use for statistical analysis.  ICD-10 consists of 68,000 codes that will expand upon the 13,000 codes currently being used with ICD-9. The codes, each representing a separate medical service or diagnosis, are used by providers and hospitals when they submit their bills to the insurer. The providers receive payment for their services based upon the codes and the terms of their reimbursement agreement. From these codes, medical researchers are able to evaluate kind and frequency of care; with more than five times as many descriptive codes in the new system, many researchers and evidence based medicine proponents are said to look forward to the far greater depth of analysis the new coding system will offer. The United States already lags behind many countries in ICD-10 implementation and it is said that this compliance extension will widen the gap even further.

Two days after Ms. Tavenner’s announcement, HHS issued a news release stating that “HHS will initiate a process to postpone the date by which certain health care entities have to comply with ICD-10.” Kathleen G.  Sebelius, the Secretary of HHS, states in the news release that “we have heard from many in the provider community who have concerns about the administrative burdens they face in the years ahead. We are committing to work with the provider community to reexamine the pace at which HHS and the nation implement these important improvements to our health care system.”

HHS’s news release leaves a lot of questions unanswered. There is no hint at which “certain health care entities” will be granted an extension for compliance and how far off the new deadline will be. HHS claims they will “initiate a process,” which leads many to believe a formal rule making process with public comments will occur. This process could possibly take years to complete, which undoubtedly has caused a giant sigh of relief for providers and institutions across the country that feel ill-prepared for the 2013 deadline. Analysts at Health Care IT News estimate that the deadline could be pushed off a year or two if there is a formal rule-making process.

As the news of Ms. Tavenner’s announcement spread, members of the industry sent out messages cautioning that a complete overhaul of the current plan is unlikely.  Ms. Tavenner’s announcement, which happened at the American Medical Association (AMA) Advocacy Conference in Washington, D.C., was fittingly met with applause by AMA members. The AMA has publicly and vehemently opposed the current October 1, 2013 deadline.  In a January 17, 2012 letter addressed to Speaker of the House John A. Boehner, the Executive Vice President and CEO of the AMA James L. Madara M.D. pleaded with Speaker Boehner to stop the implementation of ICD-10. In the letter, Dr. Madara argues that the conversion “will create significant burdens on the practice of medicine with no direct benefit to individual patient care, and will compete with other costly transitions associated with quality and health IT reporting programs.” Of course, Dr. Madara is referring to the task of implementing an electronic health records (EHR) system in accordance with CMS’s meaningful use criteria, which entitles a covered entity to receive incentive payments from CMS. Dr. Madara also cites to what he deems to be the competing tasks of dealing with financial penalties for non-participation in Medicare programs, including e-prescribing and the Physician Quality Reporting System.

ICD-10 opponents also cite to the industry’s recent failure to comply with the January 1, 2012 deadline to comply with the transition to Version 5010, a HIPAA electronic transactions upgrade that is necessary to support ICD-10, as evidence that the industry is not ready for the ICD-10 change. In November 2011, CMS gave in to industry pressures to extend the 5010 compliance deadline an additional ninety days. It is undeniable that providers are already subject to tremendous demands under HIPAA and the HITECH Act, on top of Medicare cuts, which are placing significant financial stress and compliance burdens on the industry. It is not surprising that ICD-10 has met a lot of resistance from providers. However, it is no secret that providers and institutions are consistently successful lobbyists for their concerns and beliefs and it remains to be seen how CMS will proceed with the scheduled ICD-10 implementation and what compromises will be made.

Proponents of the ICD-10 system argue that the new coding system will create significant positive changes in the industry because it will help collect important data that will improve the quality of patient care, decrease costs, and collect statistics for medical research.  CMS and the Center for Disease Control and Prevention believe that the new codes will create more accurate and exact descriptions of diagnoses and inpatient procedures, which will improve efforts to track care, detect emerging health issues and improve quality. A report from Deloitte, a consulting firm, reported that the increased size and scope of the ICD-10 codes is expected to provide potential benefits in cost and quality measurement, public health, research, and organizational monitoring and performance measurement.  Whether a provider supports the change or not, Deloitte echoes the sentiment of many that advance planning is essential. Providers and institutions that have already invested time and money into the ICD-10 implementation are frustrated and upset by CMS’s decision to “reexamine” the current compliance deadline.  After all, no provider wants to see its large investment in the ICD-10 system put to waste.

The fact is that no one, perhaps even CMS and HHS, is certain about the date of the future ICD-10 implementation plan so perhaps the smartest choice for providers is to proceed with steps to continue the ICD-10 implementation. Considering the prospect of the financial disincentives attached with non-compliance, it seems like a risky choice for any provider to sit around and wait and see what may happen, especially when the ICD-10 implementation cannot happen overnight.  There are providers that started the ICD-10 conversion process back in 2009 when it was first introduced and they still have not completed the task. Unfortunately for providers, the ICD-10 conversion requires time, manpower, training, testing with payers, and significant technological changes that will carry high administrative and financial costs.  The Medical Group Management Association (MGMA), which opposes the ICD-10 implementation, estimates that it will cost a ten doctor practice more than $285,000 to convert to ICD-10, with software upgrades accounting for only $15,000 of that amount. According to the MGMA, the bulk amount would be for increases in claims queries, reductions in cash flow, and increased documentation time.  What it comes down to is that if a provider wants to be paid for its services, noncompliance with ICD-10 is not an option. The risk for successful claims processing and receiving payments in a timely fashion is present, but adequate preparation and testing well before the compliance deadline is the best way to combat this significant risk.

One thing is certain – until HHS releases a new rule and schedule for ICD-10 implementation, opponents will continue to argue that the costs to adopt the new system are too high, the task too onerous, and the rewards too speculative to justify such an undertaking.  Unless the industry comes together to find a solution for an easy transition, this could be a bumpy road until the ICD-10 transition is complete.

Final Value-Based Purchasing Rule Released

On April 29, the Department for Health & Human Services (HHS) announced the launch of the Hospital Inpatient Value-Based Purchasing (Hospital VBP) program under the Medicare Inpatient Prospective Payment System (IPPS).  According to HHS, the Hospital HVP program “marks the beginning of an historic change in how Medicare pays health care providers and facilities-for the first time, 3,500 hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.”

As a part of the launch of the Hospital VBP program, authorized under § 3001(a) of the Patient Protection and Accountable Care Act of 2010 (ACA, codified at 42 U.S.C. § 1886(o)), the Centers for Medicare & Medicaid Services published the final rule outlining the measures, performance standards, scoring methodology, and methodology for translating hospitals’ Total Performance Scores into value-based incentive payments.

Why Should I Care?

Value-based purchasing has been called a “fast-approaching, mandatory competition with millions of dollars on the line.”  The program is aimed to fix two previously identified problems: (1) preventable medical errors and (2) resulting health care costs.  According to CMS:

One in seven Medicare patients will experience some “adverse” event such as a preventable illness or injury while in the hospital.  One in three Medicare beneficiaries who leave the hospital today will be back in the hospital within a month.  Every year, as many as 98,000 Americans die from errors in hospital care.

…

In addition to adding to the suffering of patients and their caregivers, these errors lead to significant unnecessary health care spending. Medicare spent an estimated $4.4 billion in 2009 to care for patients who had been harmed in the hospital, and readmissions cost Medicare another $26 billion.

The Hospital VBP program marks a shift in CMS reforms, from “pay-for-reporting” to “pay-for-performance.”  In 2003, the Hospital Inpatient Quality Reporting (IQR) Program introduced the core-measures concept.  Hospitals that did not successfully report data under the IQR program were penalized by a 2.0 percentage point reduction in their applicable percentage increase.   The Hospital VBP program continues using payment incentives and takes the next logical step “in promoting higher quality care for Medicare beneficiaries and transforming Medicare into an active purchaser of quality health care for its beneficiaries.”  The Hospital VBP program now directly ties payment amounts to a hospital’s performance score.  CMS will begin measuring hospital performance for incentive payments this July.

To fund the Hospital VBP incentive program, CMS will reduce the base operating diagnosis-related group (DRG) payment by 1% in FY 2013 and increase withholding by 0.25% each year until it peaks at 2% in FY 2017.  As a result, approximately $850 million will be allocated for the Hospital VBP program in FY 2013.  Since overall Medicare spending for inpatient stays at acute care hospitals will remain constant, the new payment scheme will benefit some hospitals and hurt others.  As the Hospitalist writes, “[i]t’s also a zero-sum game. That means there will be winners and losers, with the entire cost-neutral program funded by extracting money from the worst performers to financially reward the best.”

How It Works

As summarized by our very own Kate Greenwood:

[§ 3001(a)], which applies to patients discharged on or after October 1, 2012, establishes “value-based purchasing,” meaning that the government will make “value-based incentive payments” to hospitals that provide care to Medicare patients that meets or exceeds certain performance standards to be established by the Secretary of Health and Human Services.  Initially the standards must relate to at least the following five conditions: heart attack, heart failure, pneumonia, surgery, and healthcare-associated infections.  Eventually (by fiscal year 2014) the standards are to incorporate “efficiency measures,” that is Medicare spending per beneficiary must be a factor.

Beginning in FY 2013 (October 1, 2012), hospitals will receive incentive payments “based on how well they perform on each measure or how much they improve their performance on each measure compared to their performance on the measure during a baseline performance period.”  The final rule adopts twelve clinical process of care measures and one patient experience measure, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey.  These measures overlap or align with the Hospital Inpatient Quality Reporting (IQR) Program measures.

FY 2013 Objective Measures

Acute Myocardial Infarction
AMI-7a	Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival
AMI-8a	Primary PCI Received Within 90 Minutes of Hospital Arrival
Heart Failure
HF-1	Discharge Instructions
Pneumonia
PN-3b	Blood Cultures Performed in the ED Prior to Initial Antibiotic Received in Hospital
PN-6	Initial Antibiotic Selection for CAP in Immunocompetent Patient
Healthcare-associated Infections
SCIP-Inf-1	Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision
SCIP-Inf-2	Prophylactic Antibiotic Selection for Surgical Patients
SCIP-Inf-3	Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time
SCIP-Inf-4	Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose
Surgical Care Improvement
SCIP-Card-2	Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period
SCIP-VTE-1	Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered
SCIP-VTE-2	Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery

In FY 2014, CMS will add thirteen more measures.

FY 2014 Objective Measures

Acute Myocardial Infarction
Mortality-30-AMI	Acute Myocardial Infarction (AMI) 30-day Mortality Rate
Mortality-30-HF	Heart Failure (HF) 30-day Mortality Rate
Mortality-30-PN	Pneumonia (PN) 30-Day Mortality Rate
Hospital Acquired Condition Measures
	Foreign Object Retained After Surgery
	Air Embolism
	Blood Incompatibility
	Pressure Ulcer Stages III & IV
	Falls and Trauma:  (Includes:  Fracture, Dislocation, Intracranial Injury, Crushing Injury, Burn, Electric Shock)
	Vascular Catheter-Associated Infections
	Catheter-Associated Urinary Tract Infection (UTI)
	Manifestations of Poor Glycemic Control
AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs), and Composite Measures
	Complication/patient safety for selected indicators (composite)
	Mortality for selected medical conditions (composite)

Hospitals will be scored according to achievement (compared to all other hospitals) and improvement (over each hospital’s baseline) for each applicable measure.  Achievement points will be awarded if the hospitals performance during the measurement period (quarterly) exceeds the 50^th percentile of hospitals measured during the baseline period (the “threshold”).  Improvement points will be awarded to the extent that a hospital’s current performance exceeds baseline period performance.

Baseline scores for improvement measurement have already been set, during the period from July 1, 2009 to June 30, 2010.  The FY 2013 performance period for clinical process of care measures will be July 1, 2011 through March 31, 2012.  July 1, 2011 will also mark the beginning of a 12-month performance period for the FY 2014 30-day mortality measures.

The Total Performance Score (TPS) is calculated “for each hospital by combining the greater of its achievement or improvement points on each measure to determine a score for each domain, multiplying each domain score by the proposed domain weight and adding the weighted scores together.”  In 2013, clinical measures will account for 70% of a hospital’s performance score and the HCAHPS survey for 30%.  Over time, scoring methodologies will be “weighted more heavily towards outcome, patient experience, and functional status measures.”

Future Changes

Moving forward, CMS will implement other ACA provisions designed to improve care and reduce costs.  For instance, hospitals will begin receiving reduced payments in FY 2015 if they are unable to prevent certain hospital acquired infections or if the hospital fails to “meaningfully use information technology to communicate within the hospital to deliver better, safer, more coordinated care.”  Check prior posts to learn more about HITECH’s “Meaningful Use” Rule.

ACOs: OIG Guidance, CMS regulations, and Interpretive Tasks

Tim Greaney has already posted on the FTC/DOJ Joint Policy Statement on antitrust scrutiny of ACO applicants, and Jordan Cohen posted on the  CMS’s draft regulations on the Medicare Shared Savings Program (“MSSP”) for ACOs.   In this post, I’ll describe some interesting structural issues presented by the OIG’s notice on proposed waivers, which cross-references the CMS MSSP draft regulations. The fundamental issue for the OIG is how “virtual organizations” — those not fully integrated in a corporate or financial sense — can serve the integrative goals of the Affordable Care Act while staying on the right side of the web of federal laws prohibiting physician self-referral, kickbacks, and payments to reduce care to Medicare beneficiaries.  The OIG notice proposes to square this circle in two steps.

The OIG two-step; Step One

The Fraud & Abuse problem with ACOs is that they are intended to achieve the efficiency and quality gains of formally integrated delivery systems (Geisinger, Mayo Clinic)  through contract-based aggregation of providers.  This less formal integration, of course, implicates the dealings generally prohibited by the Physician Self-Referral Law (“Stark”), Anti Kickback Statute (“AKS”), and the Prohibition on Hospital Payments to Physicians to Induce Reduction in Services law (which provides for civil money penalties for violations) (“CMP”).  The OIG notice proceeds very incrementally.  In large part, the OIG proposes to affirm that a CMS determination that an ACO qualifies for participation in the MSSP signifies the adoption of quality and fiscal protections sufficient to allow a waiver of Stark, AKS, and CMP enforcement for purposes of the distribution of shared savings.  In addition, and to the extent “necessary for and directly related to” the ACOS’s participation in the shared savings plan, the OIG proposes to waive enforcement under the AKS and CMP provisions with respect to conduct that falls within a Stark exception.  In outline form, then, the OIG proposes as its initial waiver guidance:

• Stark. The OIG proposes to waive enforcement of Stark for
  • The actual distribution of MSSP to and among ACO participants, and ACO providers/suppliers for conduct during a year in which shared savings were earned; and
  • “activities necessary for and directly related to the ACO’s participation in and operations under the” MSSP.

• AKS. The OIG proposes to waive enforcement of AKS under two scenarios:
  • The distribution of shared savings under the MSSP
    • to and among ACO participants, and ACO providers/suppliers for conduct during a year in which shared savings were earned; and
    • for any financial relationships between ACO participants and ACO providers/suppliers necessary for and directly related to the ACO’s MSSP participation that implicate Stark, but fall within a Stark exception.

• CMP. The OIG proposes to waive enforcement of the CMP provisions under two scenarios:
  • Distribution of shared savings from a hospital to a physician so long as
    • “the payments are not made knowingly to induce the physician to reduce or limit medically necessary items or services”; and
    • the hospital and physicians were ACO participants or providers/suppliers during the year in which the shared savings were earned.
  • In the context of financial relationships among ACO participants and/or providers/suppliers necessary for and directly related to the ACO’s MSSP operations, that implicate Stark but that fall within a Stark exception.

The OIG two-step; Step Two

In Step One, the OIG proposes waivers for arrangements that are central to the MSSP gain distributions, or that are central to the ACO enterprise and are structurally within Stark exceptions.  The OIG goes on to solicit input on the need for additional waiver guidance, for conduct that is “beneficial” to ACO participation in the MSSP, but that also protects “patients and programs from harms caused by fraud and abuse.”  The OIG solicits input on:

• Arrangements related to establishing the ACO;
• Arrangements between or among ACO participants or providers/suppliers related to ongoing operations of the ACO and achieving ACO goals;
• Arrangements between the ACO, its ACO participants and/or providers/suppliers and outside individuals or entities;
• Distributions of shared savings or similar payments from private payers;
• Other financial arrangements for which a waiver would be necessary;
• Miscellaneous: duration of waivers, scope of the waivers listed above in “Step One,” and additional safeguards; and
• Arrangements in which providers are subjected to risk, particularly in the “two-sided risk model” in the CMS draft regulations on the MSSP.

“Necessary for and directly related to”

It is pretty clear that the lion’s share of the OIG’s waiver work will be done by determining whether or not an ACO has been qualified by CMS for the MSSP.  There will be waivers, however, even under Step One, that will require the OIG to evaluate the proposed arrangements.  Stark enforcement regarding the actual distribution of shared gains, for example, will be waived under the proposal for CMS-qualified ACOs.  But Step One proposes additional waivers “for activities necessary for and directly related to the ACO’s participation in and operations under the” MSSP.  Similarly, AKS and CMP waivers are proposed for dealings between ACO participants that are within Stark exceptions so long as they are “necessary for and directly related to the ACO’s MSSP participation.”  A standard based on what is “necessary for and directly related to” an ACO’s MSSP participation will, then, do a lot of the waiver work.  It is not a self-defining standard, and further elaboration from the OIG (by providing examples, perhaps) will lend clarity to the OIG’s waiver guidance.

Attribution, assignment, and patient notice

ACO commentators (here (subscription required) and here)  have observed that the method by which patients are “attributed” to ACOs is central to ACOs’ financial and structural planning.  Attribution was the term used in the literature to refer to the formal determination that a particular Medicare patient should “count” for assessing the gain (and possibly the loss) experienced by the ACO.  The CMS draft regulations on the MSSP, consistent with the terms of the Affordable Care Act, use the term “assignment” rather than attribution.  The CMS proposal’s treatment of assignment, or attribution, will engender much discussion here and elsewhere in the coming weeks.

One important issue, however, seems to have been resolved.  In the literature on ACOs, it has not been clear whether Medicare beneficiaries would know whether or not they had been assigned or attributed to an ACO; consistent with continuing commitment to beneficiaries’ right to choose providers within the Medicare fee for service system, the discussion contemplated the possibility that ACOs would organize a beneficiary’s care, gain payments as a result of efficiencies, but never inform the beneficiary of his “attribution” to an ACO.

Donald Berwick highlighted the requirement of patient notice in his Perspective published in the New England Journal of Medicine on the day of the regulations’ release.  The CMS draft regulations on the MSSP explain the requirement of patient notice in the following terms:

[W]hile the statute refers to the assignment of beneficiaries to an ACO, we would characterize the process more as an “alignment” of beneficiaries with an ACO as the exercise of free choice by beneficiaries in the physicians and other health care providers and suppliers from whom they receive their services. . . .  Therefore, an important component of the Shared Savings Program will be timely and effective communication with beneficiaries concerning the Shared Savings Program, their possible assignment to an ACO, and their retention of freedom of choice under the Medicare FFS program.

That piece of consumer protection regulation was absolutely essential.  It would be odd indeed, after decades of struggle with patient protection in managed care systems, were patients to be engaged without their knowledge in a system built on economic incentives to providers directed to care management.  We’ll post more about assignment and other ACO issues in the coming weeks.

Summary of CMS Proposed Rule on Accountable Care Organizations

CMS recently released the proposed rule that will regulate PPACA’s Medicare Shared Savings Program (MSSP). The MSSP relies on the accountable care organization (ACO) model in order to generate and distribute savings. HealthReformWatch.com has discussed the general framework for ACOs before. Clocking in at nearly 500 hundred pages, the proposed rule helps to flesh out what was largely a philosophical exercise in cooperative health care delivery. Below are what I believe to be a number of key pieces of the proposed rule.

Proposed Rule Highlights

The 2 ACO Models – (425.7)

There will be two ACO models. The choice between models appears to be largely geared towards minimizing ACO risk while hospitals and providers are first bringing their ACOs online.

• One-Sided Model: A one-sided ACO shares in the savings, but is not on the hook to share in any of the losses (i.e., costs surpassing the ACO’s benchmark as determined by CMS, see below).
• Two-Sided Model: A two-sided ACO shares in both the savings as well as the losses.

Basic Time frame and Structure

Not surprisingly, ACO hopefuls must form an agreement with CMS directly. ACOs under the MSSP must last for not less than three years after the application has been approved. (425.18).  The performance period will be 12 months. The ACO must have at least 5,000 beneficiaries, and must include a sufficient number of primary care physicians to treat the ACO beneficiary population.

• First 3 years of ACO life: Choose a Track – 425.5(d)(6).
  • Track 1:  ACO operates under a one-sided model for two years, and under a two sided model for the third year. With the exception of quality performance, the third year of this track will be measured using the methodologies that measure the first year of the Track 2 ACOs.
  • Track 2: ACO operates under the two-sided model, sharing both savings and losses with the Medicare program for three years.
• After 3 years
  • ACOs operate under the 2-sided model, thus sharing both gains and losses with Medicare.

Regulating Risk and Payment — 425.5(d)(6)(b)(4)

ACOs must obtain reinsurance, place funds in escrow, obtain surety bonds, establish a line of credit that Medicare can draw upon, or establish other repayment mechanisms that will provide for payment of losses to Medicare under the 2-sided model.

Legal Structure — 425.5(d)(7)

ACO must be constituted as a legal entity for the purposes of, among other things, receiving and distributing shared savings, repaying shared losses, and establishing reporting.

Governance — 425.5(d)(8)

The ACO must establish and maintain a governing body to fulfill and execute ACO functions. It must be comprised of ACO participants or their representatives, as well as representatives of the Medicare beneficiaries in the ACO. At least 75 percent of the governing body must consist of ACO participants. ACO participants and ACO providers/suppliers must have a meaningful commitment to the ACO’s clinical integration, which may consist of a financial investment or a meaningful human investment in the ongoing operations of the ACO, such that potential loss or recoupment is likely to motivate that participant.

Overseeing Quality and Performance — Accountability Internally Enforced by Physician-directed Committee — 425.5(d)(9)(v)

ACOs will be required to have a physician-directed committee tasked with overseeing a quality assurance and improvement program. This program must establish internal performance standards for quality of care, cost-effectiveness, and process and outcome improvements. The committee must hold the ACO providers/suppliers accountable for meeting these standards. The program must have processes and procedures to identify and correct poor compliance.

Evidence-Based Medicine — 425.5(d)(9)(viii)

The ACOs are required to implement evidence-based medicine or clinical practice guidelines and processes in an effort to improve individual care, better the health of the population, and lower the growth of health care expenditures. The guidelines and processes must cover diagnoses with “significant potential” for the ACO to achieve quality and cost improvements, taking into account the circumstances of individual beneficiaries. All ACO participants and suppliers/providers must agree to abide by these guidelines and processes, and must be evaluated for their compliance. Remedial actions must be a possibility for non-compliance, and ACOs must have policies and procedure for ACO expulsion of participants and/or providers/suppliers.

Health Information Technology — 425.5(d)(9)(viii) & 425.11

ACOs are required to have an infrastructure, such as information technology (which may include EHR technology that is certified for the meaningful use program) that enables the ACO to collect and evaluate data and provide feedback to ACO participants and ACO providers/suppliers across the entire ACO, including providing information to influence care at the point of care.

By the second year, at least 50 percent of an ACO’s primary care physicians must be meaningful users of EHR technology. Failure to fulfill this obligation could lead to ACO termination.

Assigning Beneficiaries to ACOs — 425.6

The general approach of the CMS is to assign beneficiaries to ACOs based on the utilization of primary care. 425.6(a). Beneficiaries are assigned based on their utilization of primary care services by a primary care physician who is an ACO provider/supplier during the performance year for which shared savings are to be determined. Assignment to an ACO in no way diminishes or restricts the right of the beneficiaries assigned to an ACO to exercise free choice in determining where to receive health benefits.

More specifically, beneficiaries will be assigned to the ACO where they receive a plurality of their primary care services. 425.6(b). CMS will establish a fixed benchmark which will be adjusted for overall growth and beneficiary characteristics, including health status. This benchmark will be updated annually based on the absolute growth in national per capita expenditures for Medicare Part A and Part B services under the original Medicare fee-for-service program.

Payment and Treatment of Savings — 425.7

• Shared Savings under One-Sided Model — Each year, CMS will determine whether the estimated per capita Medicare beneficiary expenditures under the ACO are below the benchmark for Medicare fee-for-service. To qualify for savings, an ACO in this model must have costs below the benchmark by more than a “minimum savings rate,” as determined by CMS.  ACOs in the one-sided model that exceed this minimum savings rate (as determined by CMS calculations) are eligible to  share savings net 2 percent of its benchmark.  One sided ACOs can share in a maximum of 50 percent of the savings, with an additional 2.5 percent being allowed for rural hospitals or federally qualified health centers–in certain circumstances. Payment is capped at 7.5 percent of the ACOs benchmark. However, ACOs will not be able to blindly slash costs in an effort to obtain savings. Rather, eligibility of the shared savings will be contingent on the reaching of certain minimum quality performance measures. These measures will focus on five areas, including patient/care giver experience, care coordination, patient safety, preventative health, and at-risk population/frail elderly health. In addition to determining general eligibility for savings, the quality performance measures will also determine the actual percentage of savings that the ACO is eligible to take home.
• Shared Savings under Two-Sided Model – In the two-sided model, CMS will also determine a benchmark of Medicare Part A and Part B costs. This benchmark will determine whether the ACO is eligible for savings payments or — as is unique to the two-sided model — whether they are liable for losses. To trigger savings or losses, the ACO must be below or above their benchmark by more than a minimum savings rate, or alternatively, a minimum loss rate when considering losses. Unlike one-sided ACOs whose minimum savings rates are calculated based on the beneficiary population, the minimum savings rates for two-sided ACOs are capped at 2 percent below the benchmark rate. Likewise, to be subject to loss, the ACO’s expenditures must be above 2 percent of its benchmark. Two-sided models also use the quality performance measures to determine eligibility as well as the rate of shared savings. Two-sided ACOs can share in a maximum of 60 percent of the savings, with an additional 2.5 percent being allowed for rural hospitals or federally qualified health centers–in certain circumstances. In addition, whereas the shared savings of the one-sided model caps out at 7.5 percent of the ACO’s benchmark, the two-sided model caps out at 10 percent.

Preventing Cherry Picking — 425.12(b)

CMS will use the methodologies it applies to analyzing ACO performance in an effort to prevent ACOs from “cherry picking” the healthiest individuals for their ACOs. CMS reserves the right to terminate an ACO for avoiding at-risk beneficiaries. Other less drastic options are also at the option of CMS.

Ensuring quality performance — 425.12(c)

CMS will be monitoring ACO compliance by analyzing the data provided by the ACO to determine its eligibility for, and its percentage of, shared savings. If the ACO fails to meet CMS performance standards it will be given a warning. An ACO given a warning will be reevaluated the following year. If the ACO is still failing to meet the performance measures CMS may terminate the ACO immediately or take alternative actions as specified in the rule. If the ACO does not submit the requested quality performance data, CMS will request submission of the data, allow for a correction of the data, or allow for a written explanation of why the data was not provided. ACOs that continue to fail in providing the requested data will be terminated immediately.

Beneficiary Data Sharing – 425.19(d)

CMS will provide ACOs with monthly claims data for potentially assigned beneficiaries. CMS makes clear that HIPAA protections will apply to this data sharing. More notably, ACOs must provide the beneficiary with the opportunity to opt-out of sharing his or her personal health information for the purposes of ACO activities.

Public Reporting and Transparency – 425.23

ACOs will be required to publicly report a variety of information, including quality performance standard scores, shared savings or losses information, the total amount of shared savings distributed among ACO participants, and the total proportion that was used to support quality performance.

Resources:

1. CMS [Proposed Rule]: Medicare Program: Medicare Shared Savings Program:  Accountable Care Organizations on ACOs. For those wanting the rule without the preamble, I have uploaded it here. It is only 59 pages.

2. CMS and HHS Office of the Inspector General [Notice with Comment]: Medicare Program; Waiver Designs in Connection with the Medicare Shared Savings Program and the Innovation Center.

3. DOJ and FTC [Proposed Statement]: Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.

4. IRS [Notice]: Notice 2011-20: solicitation for comments regarding what guidance, if any, is needed for tax-exempt organizations participating in Medicare Shared Savings Programs through an ACO.

Health Affairs: Innovations Across the Nation in Health Care Delivery

Health Affairs recently convened a day-long conference entitled “Innovations Across the Nation in Health Care Delivery.” Dr. Richard Gilfillan, the acting director of the Center for Medicare and Medicaid Innovation, keynoted the event as one of a number of stops on his recent “listening tour” across the states in an effort to garner input for the Center’s quest to eliminate waste and to create “a sustainable system” in health care.

The Center’s mandate under the law is “to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished.” But as Dr. Gilfillan mentioned, perhaps the most interesting aspect of the law is that if the Center can show that it has found a way to fulfill its mandate– demonstrating such and proving it to the CMS actuaries, then the Secretary can sign into effect new regulations to effectuate  new payment models for CMS.

An underlying guidance, if not a mantra, for Dr. Gilfillan is the notion that, as contained in an Institute of Medicine study, there is 30%  waste in medical services. Much of this, he believes, is attributable to our fragmented health care system; thus, the emphasis going forward should be on implementing “seamless coordinated care.” An interesting example of something that works, is a chronic care “hotline.” Dr. Gilfillan described the innovation–where a chronic disease patient, suffering from both COPD and diabetes, cold call a particular nurse, Mary, to express concerns she might have about some aspect of her health– be it weight gain, increased shortness of breath, or anything else. The patient’s daughter could Mary as well. They did. The patient’s hospitalizations are down– and the patient attributes to the program the fact that she’s still alive.

According to Health Affairs, “The program also featured several panels of CEOs and program leaders from institutions that have innovated at the patient care level; in the creation of more highly coordinated patient care systems; and at the population level, in terms of improving population health.”

It’s an interesting conference. You can find the panel videos, including Dr. Richard Gilfillan’s address  here.

FDA and CMS Propose Parallel Review of Medical Products

On September 17, the Centers for Medicare and Medicaid Services (CMS) and Food and Drug Administration (FDA) announced their consideration of a parallel review “process for overlapping evaluations of premarket, FDA-regulated medical products,” and their intention to create a pilot program for parallel review of medical devices.

According to the request for comments published in the Federal Register, the new process would be initiated when “the product sponsor and both agencies agree to such parallel review.”  This collaboration is among the first fruits of a June memorandum of understanding between both departments of Health and Human Services (HHS),which is intended to “promote initiatives related to the review and use of FDA-regulated drugs, biologics, medical devices, and foods, including dietary supplements.”

Among the goals set out by the agreement, the FDA and CMS sought to “[b]uild infrastructure and processes that meet the common needs for evaluating the safety, efficacy, utilization, coverage, payment, and clinical benefit of drugs, biologics and medical devices.”  The proposed parallel review process would do just that.

The proposed process is intended to reduce the time delay between “FDA marketing approval or clearance decisions and CMS national coverage determinations.”  Currently, medical products are first reviewed by the FDA for safety and effectiveness; then, CMS begins the process of making its coverage determination and payment rate, which can take up to a year.  Although CMS is only one of many third-party payors, many others follow CMS’ lead in making their own coverage decisions.  A reduction in the approval-to-payment time by CMS will positively impact the rate at which all coverage decisions are made.

The parallel process will potentially benefit patients and sponsors.  A parallel process that reduces the “approval-to-payment” time will produce savings for sponsors and lead to timely patient access to new products.   Furthermore, by reducing the time to return on investment, the parallel process may be an incentive for increased investment in innovation.

Hurdles to a Parallel Process

There are significant differences between FDA and CMS review that must be overcome.  The FDA generally reviews safety and effectiveness through various application processes (premarket approval, premarket notification, etc.).  CMS, on the other hand, must make multiple decisions regarding a medical product under the “reasonable and necessary” standard, including: “what items and services it can and should pay for; how it should accomplish the payment; and how much to pay.”

Because the FDA and CMS apply different standards in their review processes, a clinical study that demonstrates the FDA requirements of safety and effectiveness may neglect to address CMS’ “questions concerning the impact of the technology on Medicare beneficiary health outcomes.”  Ideally, the parallel process will guide sponsors to design clinical studies that simultaneously address both FDA and CMS questions.

Moving from a serial to parallel process must be carefully staged in order to preserve agency resources.  There is the potential for CMS waste if coverage decisions are begun (or even worse, completed) for products that are subsequently denied approval or clearance by the FDA.

The Call for Comments

The FDA has asked the public to comment on seventeen different issues, including:

• How parallel review should be implemented and when in the FDA review process it should start
• Whether anyone other than the product sponsor should be able to initiate a request for parallel review
• Which classes of products would benefit most from parallel review
• Whether there exist regulatory, legal or scientific barriers to review, and how they may be overcome.
• The criteria for granting a parallel review request

The FDA and CMS will publish their decisions regarding the proposed parallel review process after December 16, when the comment period closes.

CMS Regulations: In the Best Interest of Patient Care or the Industry?

By James Hlavenka

Suppose you are an uninsured individual who has been severely injured in a car accident.  After the accident, you are rushed to a hospital with a dedicated emergency room, subject to the requirements of the Emergency Medical Treatment and Active Labor Act of 1986 (“EMTALA”).  Upon being screened, the hospital learns that you need further, immediate treatment to be stabilized.  After admitting you as an inpatient for further stabilization purposes, the hospital discovers that you have severed a critical nerve in your spine.  The hospital is incapable of stabilizing your emergency medical condition and appropriately attempts to transfer you to an available specialty hospital two towns over that specializes in nerve repair.  Under EMTALA and the 2003 Centers for Medicare and Medicaid Services (“CMS”) regulations, there was no direct answer addressing whether the specialty hospital was required to accept your transfer from the original hospital and stabilize your emergency medical condition.

In 2008, CMS proposed rule 73 FR 23669 containing significant policy changes relating to the requirements of EMTALA to address the obligations of specialty hospitals.  Under the proposed 2008 CMS rule, the answer would have been clear: assuming the specialty hospital was subject to EMTALA, it must accept your transfer.  The proposed rule would have clarified the interaction of EMTALA’s transfer provisions with the 2003 CMS regulations that hold EMTALA obligations cease when an individual is admitted into a hospital as an inpatient.  The proposed 2008 CMS rule ensured that EMTALA’s primary purpose of patient stabilization under its transfer provisions would not be contravened by the 2003 CMS regulations.  After solicitation of comments on the proposed 2008 rule, however, CMS ultimately declined to adopt this critical policy clarification in its 2009 Final Rule, CMS-1390-F.

Background

In general, EMTALA imposes specific obligations on certain Medicare-participating hospitals to both screen and stabilize individuals who visit those hospitals’ emergency departments.  For a comprehensive, attorney-prepared EMTALA FAQ page, please click here. After a hospital screens an individual and determines that the individual has an emergency medical condition, it is obligated to provide that individual with necessary stabilizing treatment or provide an appropriate transfer to another medical facility that can achieve stabilization.

EMTALA’s transfer provisions are contained within the “specialized care” requirements of Section 1395dd(g).  Section 1395dd(g) requires a receiving hospital with specialized capabilities to accept a request to transfer an individual with an unstable emergency medical condition as long as the hospital has the capacity to treat that individual and regardless of whether the individual had been an inpatient at the admitting hospital.  These provisions would seem to answer the above hypothetical without the need for any further clarification.  In 2003, however, CMS muddied the answer with a new Final Rule.

In 2003, CMS published Final Rule 68 FR 53263 regarding the applicability of EMTALA requirements to inpatients.  The 2003 CMS rule amended section 489.24(d)(2)(i) of CMS regulations to state that a hospital’s obligations under EMTALA cease when the hospital admits an individual with an unstable emergency condition as an inpatient, so long as the admission is in good faith.  CMS reasserted that EMTALA was not intended to be a federal malpractice statute and that after admission inpatients are protected by State malpractice laws and Medicare Conditions of Participation (“CoPs”).  The 2003 CMS rule was entirely silent, however, as to how EMTALA’s specialized care requirements would continue to apply to inpatients, if EMTALA obligations cease upon admission.

As a result, in 2008, CMS proposed a rule amending Section 489.24(f) of the CMS regulations.  The amendment added a provision requiring a receiving hospital with “specialized capabilities or facilities” to accept an unstabilized inpatient with an emergency medical condition from an admitting hospital, thereby continuing the specialty hospital’s obligation under Section 1395dd(g) of EMTALA.  Thus, when the 2008 proposed CMS rule was analyzed in conjunction with the 2003 Final Rule, EMTALA obligations would not end for all hospitals once an individual is admitted as an inpatient.  Rather, EMTALA obligations would cease only at the hospital where the individual is first admitted as an inpatient.  EMTALA’s transfer provisions would continue to apply, however, to all other participating hospitals with higher levels of care, should an inpatient need to be transferred for stabilization of the original emergency medical condition.

2009 CMS Final Rule 1390-F

Upon review of solicited comments, CMS ultimately decided not to adopt the 2008 proposed rule clarifications in its 2009 Final Rule regarding transfer and inpatient care requirements under EMTALA.  Instead, in the 2009 Final Rule, CMS stated that under EMTALA individuals can only be appropriately transferred to another hospital for specialized stabilizing care where two requirements are met: (1) The individual must have an emergency medical condition that requires specialized stabilizing treatment not available at the hospital where the individual is first screened, and (2) The individual has not already been admitted as an inpatient.

Understandably, commenters disagreed about the possible effects of the proposed 2008 CMS rule.  Both opponents and proponents ultimately offered patient-centered rationales for their  policy perspectives.  When read in conjunction with EMTALA as a whole, however, those in favor of the proposed 2008 rule seem to have stayed most true to EMTALA’s original intent–to provide emergency care to all individuals who are determined to have an emergency medical condition.  The commenters’ statements below can be found within the final rule, here.

Opponents of the proposed 2008 CMS rule

The majority of the concerns raised by the dissenting commenters, which ultimately swayed CMS not to adopt the proposed 2008 rule, can be placed into three categories, each to be discussed in turn:

(1) Patient Dumping

Commenters highlighted the danger of patient dumping at hospitals with specialized facilities.  Of particular concern to one commenter was that a hospital, acting in bad faith, could choose to transfer only “medically complex patients requiring extensive lengths of stay, patients who are uninsured, and patients who have been subject to a medical error” and unresolved medical conditions.  Also of concern was that such transfers would be made as a “convenience measure and not a necessity.”  These particularly strong arguments were not overlooked by CMS when proposing the 2008 rule.  It is true that hospitals can act in bad faith, however such actions would violate both EMTALA and the CMS regulations.  Commenters also emphasized that allowing transfer of inpatients may allow hospitals to transfer unstable individuals before using all available resources in an attempt to stabilize the individual.  Again, while entirely possible, this argument is based in an assumption of bad faith, which in itself is a violation of EMTALA and medical ethics.

(2) Patient Care

Commenters expressed concern about how the proposed rule would affect patient health and safety.  Specifically, commenters were concerned that patients’ physical and psychological health could deteriorate as a result of the potential increase in inappropriate and unnecessary transfers mentioned above.  Commenters noted that referring hospitals may transfer patients who deteriorate following admission, thereby risking the life of the patient.  These arguments must raise concern, as any increase in danger to an individual already suffering an emergency medical condition is unwarranted.  These arguments do not seem overly persuasive, however, when read in conjunction with the safety measures already in place under EMTALA to ensure that transfers only occur when the benefit outweighs the risk to an individual.

(3) Futility

Commenters also asserted that the proposed 2008 rule was largely unnecessary for various reasons.  First, it was stated that it is unlikely that a hospital would knowingly admit an individual with an unstabilized emergency medical condition if the hospital did not have the capability to stabilize the individual.  This argument is not particularly strong.  While it is likely that a hospital would not knowingly do so, in daily practice errors can easily occur.  Therefore, there is no harm to ensuring that if such a mistake does occur, it will not adversely affect the suffering individual.  Along the same lines, a commenter stated that “all hospitals which have emergency departments are capable of evaluating an individual who presents to the emergency department and if the hospital does not have the capability to appropriately care for the individual, the hospital should transfer, rather than admit the individual.”  For the same reasons stated above, while a hospital may have the capability to do so, that does not mean that the hospital will make a correct decision every time.

Proponents of the proposed 2008 CMS rule

Commenters in favor of the proposed 2008 CMS rule focused upon the stabilization and safety of individuals suffering from emergency medical conditions.  Overall, commenters in favor of the proposed 2008 rule stated that the policy clarifications were in the best interests of patient care and should be implemented.  A particularly strong argument by one commenter was that inpatient admission status should be irrelevant in determining whether the individual has an emergency medical condition and whether the admitting hospital has the capability to provide the necessary care. The commenter noted that such requirements are “the only operative criteria to whether the transfer is justified under EMTALA” and as a result, EMTALA and CMS regulations must be read in harmony to achieve such a result.  The commenter stressed that EMTALA was enacted because “Congress recognized that patients needing transfers were being denied access to higher levels of care.”  This argument is very strong.  By failing to adopt the proposed 2008 rule clarifications, the will of Congress was hindered in part.

Of particular concern to other commenters were individuals who suffer emergency medical conditions in rural areas.  Such commenters stated that the proposed rule was “especially important for individuals living in rural areas because those individuals are routinely denied transfer to a regional facility for definitive care based on the conclusion that the individuals are already at a ‘hospital.’”  Given that much of our country is comprised of rural areas, such concerns should not have been minimized.  Last, a proponent addressed the concern of inappropriate transfers by suggesting that the clarified process could be adequately monitored for abuse and bad faith.  This suggestion is sound, as such monitoring is already required under the 2003 Final Rule regarding admission into hospitals to end EMTALA requirements.

Did CMS Get it Right?

CMS should have adopted the proposed 2008 rule.  Although finalizing the proposed 2008 rule may have resulted in an increase in inappropriate transfers to hospitals with specialized capabilities, arguments based on an assumption of bad faith should not outweigh the legitimate concerns voiced by many commenters.  Hypothetical risks of inappropriate transfers are always a possibility.  Regardless of whether an individual is admitted as an inpatient, both the admitting/transferring hospital and receiving hospital must comply with the stringent transfer requirements under EMTALA, namely, the requirements contained within 42 USC § 1395dd(c)(1), (2).  These provisions require a treating physician to certify that the medical benefits of the transfer to another medical facility will outweigh the increased risks to the individual.  Further, the receiving hospital must have both available space and qualified personnel for the treatment of the individual, and must have agreed to accept transfer of the individual and to provide the appropriate medical treatment.

As a result of these safeguards, the argument that individuals could suffer greater physical and psychological harm as a result of inappropriate transfers under the proposed rule equally falls flat.  If both hospitals follow the strict transfer requirements already contained within EMTALA, the risk of patient harm should be no greater or less than already present. Contrary to what CMS and industry commenters have stated, CMS has arguably increased the potential for individual physical and psychological harm by failing to adopt the proposed 2008 rule.

The primary concern of physicians within emergency departments should be focused on patient care, and not whether admitting that patient for crucial stabilizing treatment may extinguish the individual’s right under EMTALA to be transferred to an appropriate hospital.  Surely it is not always possible to give a thorough examination and attempt to stabilize a patient in the emergency room setting and thus, a hospital’s attempt to stabilize a patient through admission (even if ultimately futile because the hospital lacks the ability to do so) should not detrimentally extinguish the ability to appropriately transfer that individual under EMTALA.  As the rule currently stands, once a hospital decides to admit a patient for stabilization purposes, it automatically extinguishes its right to transfer that inpatient.  This right is extinguished even if the hospital later learns it is incapable of stabilizing a potentially life threatening emergency medical condition.

Commenters argue that a hospital should know whether or not it has the capacity to stabilize an individual prior to admission.  Theory, however, does not always equal practice.  In the fast paced, hectic setting of emergency rooms across the country, such accurate assessments may not always be possible for obvious reasons.  CMS was wrong to render this crucial transfer provision of EMTALA inoperable simply because of the technicality of inpatient admission.  Patient care and stabilization must be the focal point of this statute, and not a bright line test of patient admission and hospital liability.  CMS should reconsider harmonizing EMTALA’s original transfer provisions with its 2003 Final Rule regarding EMTALA requirements after inpatient admission.

Low Income Benchmark Methodology for Drug Plans Under Medicare

By Jason Halpin

Each year, Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug (MA-PD) plans submit bids to the Centers for Medicare and Medicaid Services to determine what their beneficiary premia will be. And each year, Medicare calculates the Part D premium low-income subsidy (LIS or the “benchmark premium”) for low-income beneficiaries based on the new premiums.

The upshot of the annual change in both the beneficiary premium and the LIS is that one year, the subsidy could pay for a low-income beneficiary’s premium in its entirety, but the next year, the premium could increase or the subsidy could decrease, leaving the beneficiary with the possibility they could have to pay a monthly premium equal to the difference between the premium and the subsidy.

Fortunately for low-income beneficiaries, Medicare seeks to avoid this scenario. If full-benefit dual eligible beneficiaries do not actively choose a plan when they first enroll in Medicare, they are enrolled into a PDP plan where they would not pay a premium. If, in the following year, they would have to pay a premium, LIS-eligible beneficiaries may “elect,” by doing nothing, to be reassigned to a PDP with no premium. LIS-eligible beneficiaries can also choose to stay in their plan and pay a premium or pick another plan with or without a premium.

Unfortunately for low-income beneficiaries, those who are subject to reassignment may also be subject to the complexity and hassle of having to change their pharmacy and their medications, and perhaps having to get new prescriptions from their doctors. Congress and CMS, therefore, have adopted a policy of seeking mechanisms to avoid reassignment.

When establishing the guidelines for determining the LIS, Congress mandated, in 42 U.S.C. § 1395w-114(b), that weighted averages should be used, presumably to ensure that the benchmark premium accurately reflects the actual average premium for an individual PDP or MA-PD beneficiary in the region and is not skewed by outliers, such as a comparatively lightly subscribed PDP with abnormally low premiums. Maintaining stability in the benchmark premium helps to promote continuity for beneficiaries and cost predictability for the government.

Figuring out the precise formula for the benchmark premium is in the hands of CMS, pursuant to its authority to administer the Medicare program under 42 U.S.C. § 1395hh. Accordingly, on April 3, 2008, CMS issued a final rule, Modification to the Weighting Methodology Used to Calculate the Low-Income Benchmark Amount.

While 42 U.S.C. § 1395w-114(b) states that Part D premium amounts must be “weighted,” to calculate the benchmark premiums, it says nothing about what that weight should be. Prior to the promulgation of the rule the weight given a particular PDP or MA-PD plan equaled a percentage, with the numerator being the number of Part D eligible beneficiaries enrolled in the plan and the denominator being the number of Part D eligible beneficiaries enrolled in all PDP and MA-PD plans in the PDP region.

The new regulations change the formula such that the weight given a particular PDP or MA-PD plan now equals a percentage, with the numerator being the number of Part D LIS-eligible beneficiaries enrolled in the plan and the denominator being the number of Part D LIS-eligible beneficiaries enrolled in all PDP and MA-PD plans in the PDP region.

By changing the formula to reference only LIS-eligible beneficiaries, the rule gives more weight to the premiums of plans that serve more low-income beneficiaries. Proponents of this formulation argue that it stabilizes and, in general, increases the benchmark premium, thereby reducing the risk of reassignment.

As CMS suggested in its response to comments on the rule, PDPs typically support a greater share of LIS enrollment, thanks to auto and facilitated enrollment. PDPs also typically have higher premiums than MA-PDs because MA-PDs can apply Part A and B rebates to lower their Part D premiums. The rule’s proponents argued that giving more weight to the higher PDP premiums–due to their higher LIS enrollment–would push the benchmark higher, bring more plans under the line, and protect more beneficiaries from reassignment. CMS estimated that if  LIS-enrollment weighting were used in 2008, reassignments would have been reduced by 850,000 from 2.1 million.

Critics still cried foul. Because the rule, and its predecessor regulations, dictated that MA-PD post-rebate premiums (which are about $20 less than PDP premiums on average) be factored into the benchmark formula, MA-PD premiums exerted downward pressure on the benchmark regardless of the weight given PDPs, leaving more PDP plans than necessary above the line and forcing more reassignments than the critics would tolerate.

In 2009, the critics’ views were largely borne out. The predicted benchmark increases were less dramatic than anticipated; though 28 out of 34 regions experienced increases (CMS predicted 27 out of 34), the increases in six of these regions were negligible (50 cents or less). Six regions saw decreased benchmarks. In addition, 1.6 million LIS-eligible beneficiaries were reassigned to new PDPs, and 620,000 were notified they would need to either pick a new plan or start paying a premium; the anticipated reduction was not as large as CMS expected.

To its credit, however, CMS responded appropriately in 2009, establishing a Medicare Demonstration to use pre-rebate MA-PD premiums in the benchmark formula. This greatly reduces the skewing effect of low post-rebate MA-PD premiums. According to the Kaiser Family Foundation, the pre-rebate MA-PD premiums  are actually slightly higher than PDP premiums. The weight of LIS-heavy PDP premiums thus pushed benchmark premiums up in all but one region for 2010, and 1.1 million beneficiaries were reassigned.

While some critics maintain that CMS could do more to reduce reassignments, the methods they suggest have rightly been rejected by CMS. Critics suggest the similar options of either allowing plans to waive the difference between their premiums and the benchmark, or reinstituting CMS’ de minimis policy, whereby an LIS-eligible beneficiary left with a premium that is less than a de minimis amount after recalcuation and application of the subsidy would not have to pay that de minimis amount.

CMS rejected both ideas because both provide a disincentive to plans keeping their bids low. If plans knew they could reduce their premiums for LIS-eligible premiums regardless of the premium their bids produced, they would not even try to keep their bids low. Also, if a plan had to write off a large amount of its premium, the revenue estimates in its bid would be undermined.

While recrafting the benchmark formula has not eliminated all reassignments, it has been very successful in reducing them. The new formula has reduced reassignments by half since 2008 and assured that less than 10 percent of LIS-eligible beneficiaries are reassigned. While CMS must work on reducing this number further, the reformulation of the benchmark premium is a good start.

Who’s the New Guy? – Obama Announces Choice for Next CMS Director

President Obama has announced his choice for the position of director of the Centers for Medicare & Medicaid Services (CMS), Dr. Donald Berwick, a pediatrician, professor, and advocate of improving patient care.  The CMS has been without a permanent administrator since 2006.  Berwick, whose appointment must be approved by the Senate before he may assume the position, certainly has the credentials for the important role the CMS director will surely play in the coming years.  Still, whether Republican Senators will be basing their confirmation decision on credentials or resentment of health care reform’s passage is yet to be seen.

Berwick is best known for founding the Institute for Health Care Improvement.  The Institute for Health Care Improvement is a non-profit think tank that is dedicated to helping hospitals improve their patient care delivery.  As attested to by the Institute’s co-founder Dr. Paul Batalden, Berwick takes incremental approaches to improving patient care that are cost-effective and do not lead to the rationing of care.  For example, Berwick finds that reducing the prevalence of hospital-acquired infections through something as small as keeping medical equipment sterile can help to bring down the rate of medical errors.

Berwick is also a proponent of utilizing medical information sharing, and is often called blunt in regard to how he finds the American health care system inefficient in delivering patient care.  Additionally, Berwick has advocated for patient rights on numerous levels, using a philosophy of patient-centered medicine.  He wants doctors to be rewarded based on the health care outcomes of their patients instead of how many procedures a doctor has performed. Having a leader interested in implementing infrstructural changes which incentivize outcomes as opposed to procedures as paydays without regard to outcome, is, many think, a step in the right direction. It is also worth noting that Berwick himself will be taking more than a 66% pay cut if he is appointed as the director of the CMS.

While Berwick may not have functioned as the head of a health care system in his career, he is not new to the world of national health policy.  In 1998, he was on President Clinton’s advisory commission that recommended ways to reduce medical mistakes and ensure consumer protection in the American health care system.  And also served at that same time as  Chair of the agency that is now known as the Agency for Healthcare Research and Quality. Berwick has also played a part in improving Britain’s National Health Service, for which he was given an honorary knighthood by Queen Elizabeth II.

Since Obama’s health care overhaul “contemplates key roles for both programs in extending insurance coverage to 32 million people at a cost of $938 billion over 10 years,” if selected to be the CMS’s director, Berwick will certainly need to bring his A-game in helping change the way our current health care system consumes Medicare and Medicaid resources.  Many also hope that good Medicare reforms will start a trend, motivating private insurance companies to also make cost-saving changes.  Before that challenge, Berwick will have to get past a Senate confirmation.  Republican Senators are likely going to make the process a rigorous one, where they will grill Berwick on how exactly he plans to effect the new health care reform legislation.

Given the importance of the CMS and the fact that it currently has no director, it would behoove the Senate to quicken the process of Berwick’s selection, considering his credentials and commitment to the rights and needs of American patients.  As the Washington Post said, “supporters and opponents of the new health-care legislation ought to be able to agree that leaving the agency without a confirmed head is not healthy.”  The job needs to be filled, and instead of using political tactics through rehashing the health care reform debate, the Senate should focus on the many qualities that Berwick has to offer.

Rationing or Cost Effectiveness?

In today’s Wall Street Journal, Scott Gottlieb, a former senior official with both the FDA and the Centers for Medicare and Medicaid Services (CMS), warns that “Government Health Plans Always Ration Care.” Aside from recasting the same old aspersions about “rationing,” Gottlieb warns that if reform efforts can’t tame health care costs, the “government will turn to a less appealing but more familiar tool to cut costs: the regulation of access to drugs and medical services.”

Of course, “access” can mean many things. Theoretically, Americans have “access” to the best medical technologies in the world. But practically, most Americans-including those with health insurance-don’t actually access this type of care and couldn’t even if they tried. The bottom line is that every health insurer in the world, public or private, has to “ration” for the simple fact that health care resources are not unlimited. Only wealthy citizens truly have “access” to the best medical care money can buy, regardless of the country they live in or the health system they live under. That won’t change with or without major health reform.

Gottlieb is worried that reformers might formally embrace recommendations by the Medicare Payment Advisory Committee (MedPAC), which currently has a broad statutory mandate to advise Congress on the Medicare program. He also warns that rationing is “a European import,” as if no health insurer in the United States has ever had to draw the line somewhere and decide what not to pay for. For example, Gottlieb warns about organizations like the Committee for the Evaluation of Medicines in France and the Institute for Quality and Efficiency in Health Care in Germany. He doesn’t mention the National Institute for Health and Clinical Excellence (NICE) in the United Kingdom, but it drew similar scorn after the economic stimulus package funded comparative effectiveness research here in the United States. Gottlieb cautions that European countries “aren’t shy about rationing.”

Gottlieb is correct in one aspect: these organizations are prevalent in Europe. However, he misses three important points.

First, the countries in Europe that Gottlieb warns about spend considerably less than we do on health care (and don’t suffer negative health consequences for it).

Second, wealthy residents in pretty much all of these countries can purchase services and technologies over and above what the organizations that Gottlieb warns us about approve.

And third, we’re not exactly strangers to these organizations in the United States. Gottlieb is concerned about European imports, but he’s ignoring our home grown organizations, like the Agency for Healthcare Research and Quality (AHRQ), which makes new technology assessments for Gottlieb’s old agency, CMS, and supports comparative effectiveness research. Or the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC), which also performs new technology assessments. In fact, it’s no secret in Washington that Medicare has long considered some amalgam of cost effectiveness and comparative effectiveness in its coverage decisions, even if nothing in the Medicare statute explicitly allows it to do so. (CMS has long stretched the definition of “reasonable and necessary” in section 1862(a)(1)(A) of the Social Security Act to fit its fiscal realities, even if CMS or its precursor, HCFA, haven’t been successful in cementing cost effectiveness as a formal criterion, as evidenced through failed rulemaking in 1989 (54 Fed. Reg. 4,302) and 2000 (65 Fed. Reg. 31,124)).

And just as importantly, private insurers make cost and comparative effectiveness determinations too, either by following Medicare’s lead, as expressed through national and local coverage determinations (NCDs and LCDs), or by setting up their own new technology evaluation systems, like BlueCross BlueShield has with its Technology Evaluation Center. Though the offical duties and decisionmaking processes of these organizations differ, the health care community generally understands these decisions as implicitly factoring in cost effectiveness or at least clinical effectiveness-thus doing precisely what the anti-reformers like Gottlieb warn about.

Home Health Area Especially Vulnerable To Medicare Fraud And Abuse

American Health Lawyers Association reports that the increased amount of federal spending on home health benefits has led to the rise of fraud and abuse issues.  AHLA reports that federal “spending on home health grew approximately 44% from 2002 through 2006 ….”

AHLA states:

Gaps in the Centers for Medicare and Medicaid Services’ (CMS’) administration of the $12.9 billion Medicare home health benefit have left the program vulnerable to improper payments, including payments for claims resulting from fraudulent and abusive practices, the Government Accountability Office (GAO) found in a recent report.

The opportunities for fraud and abuse issues concerning home health care are manifold.  AHLA states that  the “common types of upcoding and billing for unnecessary care in home health were: billing for outlier cases when that level of care was not required, billing for beneficiaries who were not homebound, and billing for therapy visits that may have been medically unnecessary. ”

The Department of Justice defines upcoding as “the practice of improperly assigning a diagnosis code to a patient discharge that is not supported by the medical record for the purpose of obtaining a higher level of reimbursement for that hospital discharge than the hospital would otherwise receive.”

AHLA also reports that Home Health Agencies (HHAs) “are not routinely subject to revalidation and that CMS generally does not include physicians, who are in a position to detect certain types of improper billing, in the agency’s efforts to detect improper payments.”

AHLA reports that CMS is considering adopting two of the four actions recommended by GAO:

CMS stated that it would consider two of GAO’s four recommendations–to amend regulations to expand the types of improper billing practices that are grounds for revocation of billing privileges and to provide physicians who certify or recertify plans of care with a statement of services received by beneficiaries. The agency “neither agreed nor disagreed with our other two recommendations,” GAO explained.

AHLA reports that the four recommendations for CMS are:

• Assess the feasibility of verifying the criminal history of all key officials named on an HHA enrollment application.
• Provide physicians whose identification number was used to certify or recertify a plan of care with a statement of services the HHA provided to that beneficiary based on the physician’s certification.
• Direct CMS contractors to conduct post-payment medical reviews on claims submitted by HHAs with high rates of improper billing identified through prepayment review.
• Amend current regulations to expand the types of improper billing practices that are grounds for revocation of billing privileges. Read more

HHS OIG Report Finds Part D Private Insurers Overcharged for Billions, Lack of CMS Oversight

According to a recent report by the Department of Health & Human Services, Office of Inspector General, private insurance companies that operate plans under the Medicare prescription drug benefit have overcharged Medicare beneficiaries and the program by several billion dollars since the program began in 2006.

According to the report, 80% of health insurers that operate plans under the Medicare prescription drug benefit overcharged the program by about $4.4 billion in 2006 alone. In addition, The McClatchy/Raleigh News & Observer reports that the Centers for Medicare & Medicaid Services (CMS) remains unaware of the total impact of the practice because of its failure to perform required audits.

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New Bill to Create Prescription Drug Benefit Through Original Medicare as CMS Expansion of Off-Label Drugs for Cancer Treatment Draws Criticism

Yesterday, Congressional Democrats introduced legislation (HR 684, S 330) that would allow Original Medicare to establish one or more plans to compete with private plans under the Part D prescription drug benefit, according to CQ HealthBeat. The legislation would also require the Secretary of Health and Human Services to negotiate directly with pharmaceutical companies for the prices of medications under Part D.

Additionally, it would strengthen the ability of Medicare beneficiaries to appeal denials of coverage for medically necessary medications under all Medicare Part D plans.

The bill was sponsored by Senate Majority Whip Richard Durbin (D-Ill.) and Reps. Marion Berry (D-Ark.) and Jan Schakowsky (D-Ill.). According to Berry, the plans established by Medicare would have the ability to obtain discounts on medications that private plans could not match.

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CMS Ruling May Pose Serious Problems for New York Seniors

Federal law protects married couples from having to choose between divorcing and becoming impoverished when one spouse needs expensive nursing home care. For 20 years, this law allowed the healthier spouse to retain income and assets while the sicker spouse is covered by Medicaid.

In New York State, the same benefit has been extended to people with illnesses like Alzheimer’s disease or cancer who receive care at home, which is both less expensive and less disruptive to relationships.

That benefit may no longer be available to the spouses of those patients receiving care at home, according to The New York Times. Last fall, the Centers for Medicare and Medicaid Services sent a letter to New York health officials outlining a legal ruling declaring that couples in which both partners live at home are not entitled to the same protection as those couples where one spouse is in a nursing home.

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Is the Medicare Advantage Program Really Advantageous

CQ Politics reports that President-elect Obama is committed to the elimination of Medicare Advantage plans. Obama told ABC’s “This Week” that Medicare Advantage plans are an example of cost-cutting government initiatives that do not work.

This is especially interesting in light of the Centers for Medicare and Medicaid Services ordering WellPoint to temporarily suspend enrollment and marketing efforts for its Medicare plans on Monday. The Los Angeles Times reports that the sanctions followed a “sharp” increase in complaints. Reportedly, some customers of WellPoint were unable to receive their prescription drugs while others were overcharged because of computer mistakes.

Along with President-elect Obama, Senate Majority Leader Harry Reid (Nev.) has signaled his intent to “scale back” the Medicare Advantage Program, according to The Hill. Medicare Advantage plans offer health insurance to more than 10 million of the 45 million Medicare beneficiaries. However, the Medicare Payment Advisory Committee reports that Medicare Advantage plans cost the government 13% more per beneficiary on average than Original Medicare in 2008.

Democrats say that $15 billion of the annual $94 billion in subsidies granted to Medicare Advantage plans are the result of “overpayments.”

Surely, any attempt to eliminate Medicare Advantage plans from the Medicare program will be met with fierce opposition from private insurance companies. In response to the threat of elimination, America’s Health Insurance Companies said that the so-called “overpayments” are used to help purchase prescription drug coverage, vision care, and chiropractic services for which Original Medicare does not pay.

There may be some merit to this argument as Original Medicare is lacking in many crucial coverage areas, including dental services which left untreated can be fatal. Thus, it is quite possible that the elimination of Medicare Advantage plans could result in many seniors facing reduced benefits, limited health care choices and higher out-of-pocket costs, according to America’s Health Insurance Companies.

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