No Summer Vacation for CMS: Multiple Significant Developments

03 September 2009 Publication
Authors: Maria E. Gonzalez Knavel Shirley P. Morrigan Chris E. Rossman Anil Shankar Lawrence W. Vernaglia Judith A. Waltz

Legal News Alert: Health Care

CMS issued a series of important rules, guidance documents, and announcements during late July and throughout the month of August, including:

  • Final rules affecting the Hospital Inpatient Prospective Payment System (IPPS), the hospital quality reporting system, the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS), the Skilled Nursing Facility (SNF) Prospective Payment System, and hospice payment amounts and terminal illness certification requirements
  • Guidance regarding the applicability of the Emergency Medical Treatment and Active Labor Act (EMTALA) in disasters causing surges in emergency department (ED) volume
  • An announcement regarding the bidding period for durable medical equipment, prosthetics, and supplies (DMEPOS) under the Medicare DMEPOS Competitive Bidding Program
  • A Manual Change affecting the use of DMEPOS consignment closets and stock and bill arrangements by physicians and non-physician practitioners
  • An announcement that CMS will begin a limited provider revalidation effort
  • A proposed rule updating the Home Health Prospective Payment System

Provided below are summaries of each of these developments, with a link following each summary to a more comprehensive discussion prepared by Foley for the American Health Lawyers Association (AHLA). We thank the AHLA for its reprint permission.

Policy and Payment Rate Changes for Inpatient Stays in Acute Care and Long-Term Care Hospitals

In a final rule issued July 31, 2009, CMS made changes to IPPS applicable to inpatient stays in acute care hospitals and to the rates paid to long-term care hospitals (LTCH). These changes include, among others:

  • Final regulations implementing a more than $1 billion increase in Medicare IPPS payments to acute care hospitals for the federal fiscal year beginning October 1,2009 (FY 2010), and a $153 million increase in payments to LTCHs for the rate year beginning January 1, 2010 (RY 2010), each as a result of changes in inflation adjustments
  • CMS announced it is finalizing a proposal to reduce RY 2010 LTCH rates by 0.5 percent to account for the effects of documentation and coding changes that occurred during FY 2007
  • CMS announced it would consider phasing in reductions due to documentation and coding changes for IPPS over an extended period beginning in FY 2011
  • CMS continued to apply the full capital indirect medical education (IME) adjustment to teaching hospital rates for FY 2010
  • CMS clarified the definition of a new medical residency training program for graduate medical education (GME) purposes to make clear that the program must truly be new and not simply the re-accreditation of a prior program
  • CMS specified that a new hospital that begins training residents for the first time after July 1, 2009 will be able to submit a GME affiliation agreement prior to the earlier of the end of its cost-reporting period or end of the academic year

For the full text on this topic as originally published by AHLA, please see

Update on 2010 Hospital Inpatient Quality Reporting Requirements

In a final rule issued July 31, 2009, CMS made changes to the increasingly important quality reporting system. Hospitals that do not report through the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) system are subject to a two-percent reduction in their annual payment update. The following are notable elements of the final rule effective for hospital discharges occurring on or after October 1, 2009:

  • CMS added four new RHQDAPU measures, two of which related to surgical care improvements and reduction of infections and two of which related to participation in registries for stroke and nursing sensitive care
  • CMS has not added to the list of Hospital-Acquired Conditions (when acquired post-admission, a hospital cannot receive payment for the costs of treating these conditions)
  • Reported RHQDAPU data is available to the public through the Hospital Compare Tool
  • CMS discusses when a quality measure should be removed from RHQDAPU
  • CMS will randomly validate the RHQDAPU data of 800 hospitals that submitted chart-abstracted data in 2009; hospitals will have to meet a 75-percent (down from 80-percent) level of valid data, and can appeal a finding that they did not meet this level
  • Hospitals assessed a penalty and losing their two-percent adjustment must request reconsideration by November 1, 2009
  • CMS is now requiring hospitals to electronically “acknowledge the completeness and accuracy” of data submitted to the RHQDAPU system, a process that should increase compliance considerations associated with such reporting

For the full text on this topic as originally published by AHLA, please see

EMTALA Requirements and Options for Hospitals and Their Communities in Disasters

On August 14, 2009, CMS issued guidance regarding the applicability of EMTALA in a disaster such as pandemic flu that may cause a surge in ED volume. CMS also reiterates in the guidance that all Medicare participating hospitals with specialized capabilities (including those without EDs) may not refuse an appropriate transfer if they have the capacity to treat patients.

Options for hospitals that experience “extraordinary ED surges” include: (1) the hospital setting up alternative screening sites on the hospital campus or at off-campus, hospital-controlled sites; (2) the community setting up screening clinics at sites not under the control of the hospital; or (3) in a disaster, the hospital obtaining an EMTALA waiver that would permit, provided consistent with a state preparedness plan, redirection of patients to alternative sites or transfers that otherwise would not comply with EMTALA requirements. EMTALA waivers cannot start before the waiver effective date and the duration differs depending on the reason for the waiver.

For the full text on this topic as originally published by AHLA, please see

Inpatient Rehabilitation Facility Payment Rate Updates and Coverage Requirements Clarifications

In a final rule issued July 31, 2009, CMS made changes to the IRF PPS payment rates and coverage provisions. The payment rate changes apply to discharges occurring on or after October 1, 2009 and include a new requirement for submission of Medicare Advantage Patient Assessment Data (to be used to determine compliance with 60 Percent Rule, which requires that at least 60 percent of the IRF's patients have at least one of 13 specified conditions as the principal admitting diagnosis or as a secondary diagnosis).

Changes to the coverage provisions are more substantial, and are effective January 1, 2010. They include the following: (1) a rehabilitation physician (who has specialized training and experience in rehabilitation services) must review and concur with each admission; (2) each candidate for IRF admission must undergo (or have updated) a comprehensive screening no more than 48 hours before admission; (3) the rehabilitation physician must perform a post-admission assessment within 24 hours of admission to verify and update the pre-admission screening; (4) within four days of admission, the rehabilitation physician, with input from the interdisciplinary team, must develop an individualized plan of care; and (5) a rehabilitation or treating physician must visit the patient at least three days per week throughout each patient’s stay. CMS intends to rescind its ruling, HCFAR 85-2-1, which reflected prior IRF coverage policies.

For the full text on this topic as originally published by AHLA, please see

2010 Changes to Prospective Payment Rates for SNFs

In a final rule issued July 31, 2009, CMS made changes to the SNF PPS for FY 2010 that will result in an overall net reduction in payments to SNFs for caring for Medicare beneficiaries of $360 million, or negative 1.1 percent, as compared to payments in FY 2009. This decrease is an effort by CMS to correct for its past projection errors in the utilization rate of previously created higher-paying Resource Utilization Groups (RUGs) into which a greater number of patients have been classified than initially projected. The decrease is offset in part by an increase in the market basket update.

The final rule also sets forth that starting October 1, 2010, CMS intends to implement both RUG-IV and Minimum Data Set (MDS), Version 3.0, as replacements for existing RUG-III and MDS 2.0. Version 3.0 of the MDS, which is a resident assessment instrument used to determine the RUG category for each resident, will no longer take into consideration services provided prior to a resident’s admission to an SNF.

For the full text on this topic as originally published by AHLA, please see

Hospice Wage Index Changes for FY 2010 and Changes to Terminal Illness Certification Requirements

In a final rule issued July 30, 2009, CMS increased hospice payments for Medicare beneficiaries by 1.4 percent for FY 2010. The final rule also added to the existing physician certification and recertification of terminal illness requirements (Certification).

Starting October 1, 2009, the hospice Certification rule will require that the certifying physician (and not other hospice personnel) compose a brief narrative explaining each individual patient’s clinical findings and circumstances that support a life expectancy of six months or less. Check boxes and standardized language are not acceptable. The narrative must be included either directly in the Certification form or in a signed addendum to such form. Whether in the form or in an addendum, the narrative must immediately precede the physician’s signature, and such signature must be followed by a statement attesting that by signing, the physician confirms that he or she composed the narrative based on his or her review of the patient’s medical record or, if applicable, his or her examination of the patient.

For the full text on this topic as originally published by AHLA, please see

Late October Start Date for Certain Equipment and Supplies in Medicare Competitive Bidding Program

On August 3, 2009, CMS announced the 60-day supplier bidding period will begin in late October for the round-one rebid of the Medicare Competitive Bidding Program for DMEPOS. As part of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), enacted on July 15, 2008, Congress delayed the Medicare DMEPOS Competitive Bidding Program originally slated to be implemented on July 1, 2008, and mandated limited changes to the program. MIPPA required CMS to terminate contracts that had been awarded for round one and to rebid the contracts in 2009.

CMS has identified nine competitive bidding areas in which the round-one rebid will be rolled out, and the equipment to be included in the round-one rebid is the same as the original program, except that negative pressure wound therapy items and Group Three complex rehabilitative power wheelchairs will be excluded. Suppliers must register before they may submit bids when bidding starts in October. CMS is launching an extensive education and outreach effort to guide suppliers through the competitive bidding process.

For the full text on this topic as originally published by AHLA, please see

CMS Limits Consignment Closets

On August 7, 2009, CMS issued Change Request 6528 (CR) on the subject of Compliance Standards for Consignment Closets and Stock and Bill Arrangements. The CR makes changes to the Medicare Program Integrity Manual, Chapter 10, Section 21.8, 2009, which significantly limit consignment closets or “stock and bill” arrangements with physicians/practitioners. Arrangements with hospitals and other facilities are, at least as of now, not affected by these changes. The CR was originally to be effective September 8, 2009, but CMS has delayed the effective date until March 1, 2010.

Specifically, the CR affects the enrollment standards for enrolled physicians or non-physician practitioners as well as enrolled suppliers of DMEPOS. The CR permits consignment closets only where the following requirements are met: (1) title to the DMEPOS transfers to the physician/practitioner at the time the DMEPOS is furnished to the beneficiary; (2) the DMEPOS is billed for by the physician/practitioner using his or her own DMEPOS billing number; (3) fitting or other services related to the DMEPOS are performed by individuals associated with the physician/practitioner and not by the DMEPOS supplier; and (4) beneficiaries are instructed to contact the physician/practitioner and not the DMEPOS supplier for problems or questions with the DMEPOS.

Despite the CR’s statement that the physician may bill for DME under the conditions specified above, physicians and other health care providers need to be aware of the significant limitations the Stark Law and its regulations impose. Although there is an exception from the general Stark prohibition against physician self-referrals for “designated health services,” which include DME, the exception covers a very limited number of items of DME (i.e., canes, crutches, walkers and folding manual wheelchairs, and blood glucose monitors, all of which are subject to certain specified requirements, as well as infusion pumps that constitute DME). 42 C.F.R. § 411.355(b)(4). CMS expects to issue a provider education article that will be released through the MLN Matters Listserv providing more information regarding the CR changes.

For the full text on this topic as originally published by AHLA, please see

New CMS Provider Revalidation Effort for Top-Billing Providers and Suppliers

On August 21, 2009, CMS announced that it will begin a limited Medicare Provider revalidation effort. The effort requires each carrier and Medicare Administrative Contractor (MAC) to begin revalidation proceedings for each of the top 50 billers in each state for each of the following categories: Part B organizational suppliers, individual practitioner suppliers, SNFs, and the approximately 50 Slide Preparation Facilities (SPFs) currently enrolled in Medicare nationwide.

The effort includes only those entities that do not have an established record in the Provider Enrollment Chain and Ownership System (PECOS) or do not have an Electronic Funds Transfer (EFT) agreement. The PECOS system provides an alternative to the use of the CMS-855 forms used for enrollment, re-enrollment, or change of information, and this revalidation effort is consistent with CMS’s previously stated goals to establish a record for all Medicare providers and suppliers in PECOS. As described in four separate change requests, all carriers and MACs will compile lists of the affected suppliers and providers and begin the revalidation proceedings on September 22, 2009.

For the full text on this topic as originally published by AHLA, please see

CMS Proposed Rule for Home Health Prospective Payment System Seeks to Protect Beneficiaries in the Medicare Program from Potential Fraud and Abuse

In the August 6, 2009 edition of the Federal Register, CMS published a proposed rule updating the Home Health Prospective Payment System (HH PPS). Effective January 1, 2010, the proposed rule will update the national standardized 60-day episode rates; national per-visit rate; non-routine medical supply conversion factor; and low utilization payment adjustment (LUPA) add-on payment amount.

The proposed rule also seeks to change the HH PPS outlier policy and to require the submission of OASIS data as a condition of payment under the HH PPS. CMS proposes additional program safeguards to improve the provider enrollment process for home health care agencies (HHAs) in an effort to improve the quality of care that Medicare beneficiaries receive from HHAs and reduce Medicare’s vulnerability to fraud. Further, the proposed rule seeks to clarify the meaning of the term “skilled services” in making eligibility decisions for coverage under the home health benefit and the Conditions of Participation for HHAs.

Additionally, CMS is proposing to: (1) apply a 2.2-percent home health market basket update to the HH PPS rates for calendar year (CY) 2010; (2) cap outlier payments at 10 percent per agency and target total aggregate outlier payments at 2.5 percent of total HH PPS payments; (3) reduce the fixed dollar loss (FDL) ration to 0.67 for CY 2010; (4) add a new version of OASIS, called OASIS-C, to collect data on all episodes of care beginning on or after January 1, 2020.

For the full text on this topic as originally published by AHLA, please see

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

Jeffrey R. Bates
Los Angeles, California

Lawrence C. Conn
Los Angeles, California

Maria E. Gonzalez Knavel
Milwaukee, Wisconsin

Michael Scarano
San Diego/Del Mar, California

Shirley P. Morrigan
Los Angeles, California

Chris E. Rossman
Detroit, Michigan

Anil Shankar
Los Angeles, California

Robert E. Slavkin
Orlando, Florida

Heidi A. Sorensen
Washington, D.C.

Lawrence W. Vernaglia
Boston, Massachusetts

Cheryl L. Wagonhurst
Los Angeles, California

Judith A. Waltz
San Francisco, California














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