Washington Report - August, 2002
Bill Finerfrock
Capitol Associates
New Mechanism to Challenge National Coverage Decisions Proposed
The Center for Medicare and Medicaid Services (CMS) issued a proposed rule on August 22nd that would create a new process for allowing Medicare beneficiaries to challenge “national coverage decisions (NCDs) and local coverage determinations (LCDs).” The proposed rule was issued just two weeks after a coalition of consumer groups representing elderly, blind and disabled Medicare beneficiaries filed a lawsuit attempting to force the issuance of the proposed rule which took over 18 months to draft. This new process, mandated by the Benefits Improvement and Protection Act (BIPA) of 2000, would be separate from the existing appeals process available to Medicare beneficiaries. The existing Medicare appeals process allows beneficiaries to appeal an individual claim denial. This new appeals process would apply to policies.
This new process would allow the beneficiary to challenge either the LCD or NCD policy. The LCD term is new to the Medicare program and should not be confused with a local medical review policy or LMRP. The LCD is limited to questions of reasonableness or necessity and is a subset of the LMRP category. Therefore, under this proposed new appeals process, the beneficiary could challenge the underlying policy that lead to the denial as long as the denial was because the claim did not meet the reasonable or necessary standard for Medicare. Whereas a claims appeal would only affect that particular claim, an LCD/NCD challenge would affect other beneficiaries because it could result in a change in Medicare policy. The ability to bring an LCD/NCD challenge would be restricted to beneficiaries. This right can not be assigned to another (i.e. the treating physician or provider).
Another important distinction between this new appeals process and the traditional appeals process has to do with the timing of the appeal. Under the existing medicare policy, an appeal can only be filed after the claim has been denied. The new policy creates a mechanism for the beneficiary to appeal the policy before the service is delivered. In order for the claimant to have standing, he or she must “receive the item or service after filing a challenge.”
Although providers will not have standing to file the appeal, providers will want to be familiar with the process so they can advise their patients on this option should they recommend an item or service that Medicare might not cover because it would be considered “unnecessary” or “unreasonable”.
To obtain a copy of the proposed rule, go to:
Individuals interested in submitting comments must have them in to the Centers for Medicare and Medicaid Services by October 21, 2002.
Individually Identifiable Health Info Rule Issued
On August 14th, the Department of Health and Human Services Office of Civil Rights (OCR) published the final modifications to the privacy rule. According to President Bush and HHS Secretary Thompson, the new rule, “provides strong privacy protection without hindering access to quality health care.” Information on the new rule was sent out by HBMA at the time of the announcement. If you did not receive that information and would like to view the final rule, you can go to:
The final rule makes several modifications to the standards previously published on April 14, 2001. The new standards affect:
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Medicare sets new Payment System for Long-Term Care Hospitals
On August 29, 2002, the Centers for Medicare and Medicaid Services announced the issuance of a final rule creating a prospective payment system (PPS) for long-term care hospitals. It is estimated that the new payment system will apply to nearly 300 hospitals defined as “long-term”. According to the CMS press release announcing the new payment system, long-term care hospitals are defined as “hospital(s) that have an average inpatient length of stay greater than 25 days. These hospitals typically provide extended medical and rehabilitative care for patients who are clinically complex and may suffer from multiple acute or chronic conditions.”
The new payment system is modeled after the existing DRG payment system for hospitals. However, these groups have been modified to recognize the greater costs associated with caring for these more acutely ill patients that require a longer length of stay. Unlike the traditional DRG payment system, no differentiation is made for urban or rural long-term care hospitals. Instead, payment is more closely tied to patient acuity.
Although the system is scheduled for a 5-year phase in, long term care hospitals qualifying for these new payments may elect to be paid immediately at 100% of the new rate. For hospitals making this election, the new payments would start at the beginning of their next cost reporting period.
The final rule appears in the August 30th Federal Register. If you would like to view a copy of the rule, go to:
and scroll down to the Centers for Medicare and Medicaid Services. You will see the long-term care document listed in this section. Because of the size of the document, it is broken up into four parts of approximately 50 pages per part. The new system will be effective for cost reporting periods beginning on or after October 1, 2002.
Be Careful What You Ask For
When the Department of Health and Human Services announced the HIPAA transaction standards, many providers expressed concern that they could not meet the October 16, 2002, deadline for compliance. Consequently the Department announced that providers could apply for a one year extension. According to Inside CMS, more than 17,000 health care providers, clearinghouses and health plans have applied for an extension and new requests are coming in at a rate of 600 requests per day.
Entities requesting an extension will have until October 2003, to be compliant with the new transaction standards. Entities that do not request an extension are expected to be in compliance by October 16, 2002.
HBMA members are reminded that HIPAA compliance will be a major topic of discussion at the Fall meeting in Washington, DC September 13 and 14.
Provider Payment Reform Tops Senate Agenda
Democrat and Republican Senate leaders have indicated that one of their top legislative initiatives for September will be enactment of Medicare provider payment reforms. The House of Representatives previously adopted provider payment reforms as part of the prescription drug legislation passed by the House in July. It is not clear how much new money will be put into improving provider payments but estimates range from $30 - $50 billion over 5 years. It is expected that included in the provider payment reform initiative will be administrative and contracting reforms discussed in previous issues of the HBMA Washington Report.
If the Senate is able to reach a consensus on these issues and pass a bill, it is expected that the House and Senate will attempt to reach a compromise before the Congress adjourns. However as of the end of August, it was not clear how the Senate would attempt to proceed. Many Senators and the White House, are insisting that any Medicare reform initiative approved by Congress include a prescription drug benefit. Under the rules of the Senate, that may prove difficult, if not impossible.
Can You Say Lame Duck?
It appears increasingly likely that the 107th Congress will not end in mid-October as originally planned. There are strong indications that leaders of both houses are planning for a lame duck session. While lame duck sessions are becoming increasingly common, they have tended to produce little in the way of substantive legislation.
One issue that could be ripe for consideration during a lame duck session would be Medicare reform. Under the Senate’s budget rules, the current budget agreement expires on October 1st. This means that the legislative path for consideration of a Medicare reform bill could be much smoother after October 1st than the parliamentary situation that would exist prior to October 1st. Under current budget rules, any Medicare bill not reported out by the Senate Finance Committee must obtain a super majority of 60 votes. However, after October 1st, it would only require a simple majority.
Traditionally a lame duck session is a session of Congress that meets after the election that will decide who will serve in the next Congress. In effect, those members who have been defeated or opted to retire are “lame ducks”. They can vote with some degree of political impunity as their electoral fate has already been decided. These sessions can sometimes be tricky politically because elected officials who have been defeated can often cast votes tinged with spite or an air of political retribution. They also tend to be unproductive because invariably one political party will make gains as a result of the election. As a consequence, the political dynamic of the next Congress could change and thereby affect the desireability/necessity for political compromise.
For example, if your party is the minority party in the current Congress and as a result of the election will achieve majority status in the next Congress, what incentive do you have to help pass legislation during the lame duck session? You would be better off stalling all legislation until the next Congress when you get to write the bills as the new majority. Similarly, if your party is already in the majority and as a result of the election the size of your majority increases, you have little incentive to pass legislation during the lame duck. Why pass a bill that was the result of a political compromise that may not be necessary in the next Congress when your majority will be larger?
Even though the parliamentary situation governing consideration of a Medicare reform bill may be more favorable in late November compared to September, the politics of a lame duck session still argue against approval of a major reform bill during a lame duck session.
CMS creates Office of Strategic Operations & Regulatory Affairs
Some government reorganizations have been derisively compared to an attempt to rearrange the deck chairs on the sinking Titanic. It may look nice but the outcome is still a disaster.
By appearances, this proposed reform could be significant. CMS is changing the Office of Communications and Operations Support to the Office of Strategic Operations and Regulatory Affairs. According to the August 23rd Federal Register announcement, some of the tasks the office will undertake are:
Managing the Agency’s decision making and regulatory processes
Serving in a neutral broker coordination role which includes:
Scheduling meetings and briefings for the Administrator; and,
Coordinating communications between the CMS Central Office and Regional
Offices
Providing leadership, direction and advocacy on behalf of top CMS officials in connection with official policy matters
Managing meeting requests for or on behalf of the Administrator and Deputy Administrator
Managing the agency’s system for developing, clearing and tracking regulations, setting regulation priorities and corresponding work agendas
Managing the regulation development process to ensure timely decision making by the Administrator and Deputy Administrator
This reform is effective with the announcement and not subject to public comment. If you would like to view the entire announcement, you can go to:
CMS announces OPPS proposed rule
On August 9th, the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register the changes to the Hospital Outpatient Prospective Payment System and Calendar Year 2003 Payment Rates; and Changes to Payment Suspension for Unfiled Cost Reports. Individuals interested in commenting on this proposed rule must submit their comments to CMS by October 7, 2002.
According to a press release from CMS, “This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In addition, itwoulddescribeproposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2003. In addition, this rule proposes to allow the Secretary to suspend Medicare payments “in whole or in part” if a provider fails to file a timely and acceptable cost report.
According to CMS, hospitals would receive an increase of 3.5 percent in payment rates for outpatient services in 2003. Aggregate payments to hospitals are expected to rise by more than $500 million in 2003.
Medicare pays over 6,000 hospital outpatient departments for the services they provide based on the Outpatient Prospective Payment System (OPPS). The OPPS, which was mandated by the Balanced Budget Act of 1997, went into effect in August of 2000.
CMS is proposing to create a new APC for procedures that use drug eluting stents, if these devices are approved by the Food & Drug Administration. These stents are similar to the drug-coated stents that will be folded into the APCs in January, but where the existing stents were coated to prevent clotting during the insertion of the stent, the drug-eluting stents have been found useful in preventing the reclosing of the artery in which it is inserted.
The proposed rule would also allow separate payment for observation services for patientswith congestive heart failure, chest pains, and asthma who are directly admitted from a physician’s office. The rule proposes to create separate codes for use in the outpatient setting for payment to the hospital for evaluation and management (E&M) services. If included in the final rule, the new codes would take effect no earlier than 2004. Under current rules, outpatient departments have been using the E&M codes developed by the American Medical Association for physician services, even though they do not reflect the hospital resources involved in these services.
CMS is alsoestimates significantly higher payment for two key preventive screening tests – mammography and colonoscopy. Final payment rates for these and other services will be set in the final rule, based on the best data available and the requirements in the law.
Program MemosIssued by CMS
The following are Program Memos issued by the Centers for Medicare and Medicaid from August 1 through August 23. These issuance's are official agency transmittals used for communicating reminder items, request for action or information of a one time only, nonrecurring nature. To obtain a link to any of these documents, go to:
Program memo / Description / Effective DateAB02120 / Coding Instructions for IN111 Zevalin and Y90 Zevalin / 9/4/2002
A02079 / Data fields that the Fiscal Intermediaries are required to enter into the Provider Enrollment, Chain and Ownership System (PECOS) / 8/23/2002
AB02119 / Medicare Coordinated Care Demonstration (MCCD) Payment for Railroad Retirement Beneficiaries / 1/2/2003
A02080 / October Medicare Outpatient Code Editor (OCE) Specifications Version 18.0 for Bills From Hospitals That Are Not Paid Under the Outpatient Prospective Payment System (OPPS) / 10/1/2002
A02082 / October Outpatient Code Editor (OCE) Specifications Version (V3.2) / 10/1/2002
A02083 / System Tracking for Audit and Reimbursement (STAR) Instructions: End Stage Renal Disease (ESRD) Audits and Hospice Cost Reports / 10/1/2002
A02078 / Health Insurance Portability and Accountability Act (HIPAA) Institutional 837 Health Care Claim Direct Data Entry (DDE) Updates / 1/6/2003
A02077 / Intermediaries Must Adjust Their Translators for Reporting Line Item Dates, and HCPCS Codes for Part A Outpatient Claims / 10/16/2002
AB02118 / Notice of Interest Rate for Medicare Overpayments and Underpayments / 8/8/2002
A02066 / Department of Veterans Affairs Claims Adjudication Services Project: Systems Changes Needed / 1/1/2003
A02075 / Admitting Diagnosis for Observation Services for the Outpatient Prospective Payment System (OPPS) / 1/1/2003
AB02116 / Data Center Testing and Production Electronic Correspondence Referral System (ECRS) User Manual 5.0 / 10/7/2002
AB02115 / Expanded Coverage of Positron Emission Tomography (PET) Scans and Related Claims Processing Changes / 7/31/2002
A02074 / Hospital Outpatient Prospective Payment System (OPPS) Implementation Instructions / 8/14/2002
A02076 / October 2002 Update to the Hospital Outpatient Prospective Payment System (OPPS) / 10/1/2002
AB02117 / Transition Schedule for Implementation of the Ambulance Fee Schedule / 1/1/2003
B02055 / Updates to the Place of Service (POS) Code Set / 1/1/2003