August 7, 2023

Health Headlines – August 7, 2023

CMS Issues IPPS and LTCH PPS Final Rule for FY 2024

On August 1, 2023, CMS issued its annual Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule for FY 2024 (the Final Rule). In the Final Rule, CMS, among other things, updates the IPPS and LTCH payment rates, overhauls its methodology for calculating the rural wage index, reverses its policy denying capital Disproportionate Share Hospital (DSH) payments to reclassified rural hospitals, and adds various health equity impacts, including reclassifying homelessness as a complication or comorbidity. The Final Rule ends the New COVID-19 Treatments Add-on Payments and makes several changes to the Hospital Value-Based Purchasing (VBP) Program. This article provides an overview of the key provisions in the Final Rule. The Final Rule is scheduled to be published in the Federal Register on August 28, 2023.

IPPS and LTCH PPS Payment Provisions

CMS increased the operating payment rates for acute care hospitals by 3.1% (down from 4.2% in FY 2023). This reflects a projected FY 2024 IPPS hospital market basket update of 3.3%, reduced by a 0.2 percentage point productivity adjustment. This update reflects the most recent data available, and as a result, is 0.5 percentage point higher than the proposed update for FY 2024.

Overall, CMS will increase hospital payments by $2.2 billion compared to FY 2023, which also includes a $957 million decrease in DSH payments and a $364 million decrease in new medical technology payments. The decrease in DSH payments is a result of CMS’s Office of the Actuary’s estimate that the rate of uninsured will decline from 9.2% in FY 2023 to 8.3% in FY 2024. The decrease in new medical technology payments is a result of the expiration of new technology add-on payments for several technologies.

Hospitals may be subject to payment adjustments under the IPPS, including:

Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program;
A payment reduction of 1% for the worst-performing quartile of hospitals under the Hospital Acquired Condition Reduction Program; and
Upward and downward adjustments under the Hospital VBP Program.

For FY 2024, CMS expects the LTCH standard payment rate to increase by 3.3% and the LTCH PPS payments to increase by approximately 0.2%, or $6 million. This is due to a projected 2.9% decrease in high-cost outlier payments. In response to public comment, CMS modified the methodology used to determine this high-cost outlier threshold and finalized a threshold markedly lower than in the proposed rule.

Continuation of Low-Wage Hospital Policy

To mitigate growing wage index disparities between high and low wage hospitals, CMS implemented a policy in the FY 2020 IPPS and LTCH PPS Rule to increase wage index values for certain hospitals with low-wage index values in the lower 25th percentile, doing so in a budget-neutral manner through an adjustment applied to the standardized amounts for all hospitals.

CMS stated that it only has one year of relevant data (from FY 2020) to evaluate potential impacts of this data, and as a result, in the Final Rule, CMS continues these policies through FY 2024 while it obtains and reviews additional data to evaluate its potential impacts. The 25th percentile for FY 2024 will be 0.8667.

This policy is the subject of pending litigation before the D.C. Circuit in Bridgeport Hospital v. Becerra and the Ninth Circuit in Kaweah Delta Health Care District v. Becerra. The lower courts in both cases ruled that CMS does not have authority to adopt the low-wage hospital policy.

Rural Emergency Hospitals and Graduate Medical Education

Under Section 125 of the Consolidated Appropriations Act, 2021, certain rural hospitals may apply for a new hospital designation as a rural emergency hospital (REH).

CMS made changes to graduate medical education (GME) payments for training in REHs, allowing REHs to be considered non-provider settings for GME payment purposes similar to critical access hospitals (CAHs). Specifically, effective for portions of cost reporting periods beginning on or after October 1, 2023, an REH may decide to be a non-provider site and can either (1) include the full-time equivalent (FTE) residents training at the hospital in its GME and indirect graduate medical education (IME) FTE counts for Medicare payment purposes, or (2) incur direct GME costs and receive payment based on reasonable costs for those training costs.

Health Equity Impacts

CMS has added fifteen new health equity hospital categorizations for the FY 2024 IPPS payment impacts. It will track and analyze the percentages of discharges for beneficiaries who are American Indian or Alaska Native, Asian or Pacific Islander, Black, Hispanic, multiracial, White, dual enrolled, low-income subsidy enrolled, homeless, with a behavioral health diagnosis, who come from rural areas, with end-stage renal disease coverage, with a disability, and who live in an area with an Area Deprivation Index greater than or equal to 85. As part of the CMS Framework for Health Equity 2022-2032, CMS will expand the collection, reporting, and analysis of standardized health equity data.

CMS Assigns Homelessness Social Determinants of Health Diagnoses Codes a Severity Designation of “Complication or Comorbidity”

CMS has finalized a change to the severity designation of three ICD-10-CM diagnosis codes describing homelessness: unspecified (Z59.00), sheltered (Z59.01), and unsheltered (Z59.02). These codes were previously assigned a “non-complication or comorbidity” (NonCC), but after a review of the impact on hospital resources used in the treatment of unhoused individuals, CMS has changed the severity designation of these codes to “complication or comorbidity” (CC), based on the higher than average resource costs for cases with these diagnosis codes compared to similar cases without these codes.

As social determinants of health (SDOH) diagnoses codes are increasingly added to billed claims, CMS will continue to analyze the effects of SDOH on severity of illness, complexity of services, and consumption of resources.

New COVID-19 Treatments Add-On Payments End October 1, 2023

In response to the COVID-19 Public Health Emergency (PHE), CMS established an add-on payment for new COVID-19 treatments. In the FY 2022 IPPS/LTCH PPS final rule, CMS extended this add-on payment through the end of the fiscal year in which the PHE ends.

As the PHE ended on May 11, 2023, inpatient discharges involving eligible COVID-19 treatments will be eligible for the add-on payment through September 30, 2023, i.e. the end of FY 2023. The New COVID-19 Treatments Add-On Payment will expire at the end of FY 2023, and no add-on payments will be made for discharges on or after October 1, 2023.

Changes to New Technology Add-On Payment Policies

CMS finalized changes to the New Technology Add-on Payment (NTAP) program and application process:

For technologies that are not already FDA market authorized, NTAP applicants must have a complete and active FDA market authorization request pending at the time of the NTAP application submission. Such applicants must provide documentation of FDA acceptance or filing with their NTAP application.
For applications beginning FY 2025, in order to be eligible for consideration for the new NTAP, an applicant must have received FDA approval or clearance by May 1, rather than July 1, of the year prior to the beginning of the fiscal year for which the application is being considered.

Changes to Rural Wage Index Calculation Methodology

Under Section 1886(d)(E) of the Social Security Act, implemented in regulations at 42 C.F.R § 412.103, a hospital in an urban area may be reclassified as a rural hospital if it meets certain conditions. Previously, hospitals reclassified as rural pursuant to this regulation were not treated the same as geographically rural hospitals for purposes of calculating the wage index. The impact of this meant that the “rural floor”—the rule providing that the area wage index for urban hospitals may not be less than the area wage index applicable to rural hospitals in a given state—did not take into account hospitals reclassified as rural pursuant to 42 C.F.R. § 412.103.

Beginning with FY 2024, CMS will now treat hospitals reclassified as rural the same as geographically rural hospitals for purposes of calculating the wage index. The data of all 42 C.F.R. § 412.103 reclassified hospitals will be included in the calculation of the wage index for the rural area of the state and the calculation of the rural floor for urban hospitals in the state.

CMS, however, will continue to exclude from the rural wage index “dual reclass” hospitals, i.e. hospitals with simultaneous 42 C.F.R. § 412.103 and Medicare Geographic Classification Review Board reclassifications, in accordance with the hold harmless provision at Section 1886(d)(8)(C)(ii) of the Act.

Treatment of Section 1115 Demonstration Days for Purposes of DSH Payments

Hospitals that serve a disproportionate number of low-income patients are entitled to additional Medicare payments under the IPPS. The most common method by which a hospital may qualify for a DSH payment is based in pertinent part on the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: the “Medicare fraction” and the “Medicaid fraction.” As relevant here, the Medicaid fraction is computed by dividing the number of inpatient days furnished to patients who, for such days, were eligible for Medicaid but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days for the same period.

Section 1115 of the Act gives HHS the authority to approve experimental, pilot, or demonstration projects that are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program. States use Section 1115 demonstrations (also called “waivers”) to provide “medical assistance” to groups that statutorily are not eligible for Medicaid benefits.

Since 2000, CMS has included patient days for these Section 1115 expansion groups (also called “expansion populations” or “expansion waiver groups”) in the Medicaid fraction for the DPP calculation. In 2020, the United States Court of Appeals for the D.C. Circuit held that the Secretary must include patient days associated with individual who receive “medical assistance” in the form of direct-to-hospital payments from uncompensated care pools matched by the Secretary as part of a Section 1115 waiver. These patient days are commonly referred to as Section 1115 UCC waiver days. Bethesda Health v. Azar, 980 F.3d 121 (D.C. Cir. 2020). CMS, however, continues to maintain that it is permitted to exercise its discretion to define which expansion groups are eligible for consideration in the Medicaid fraction. CMS previously proposed excluding Section 1115 UCC waiver days from the Medicaid fraction in the FY 2022 and FY 2023 IPPS proposed rules, but ultimately did not move forward with finalizing those proposals due to negative comments it received.

For FY 2024, however, CMS has decided to limit the universe of Section 1115 demonstration beneficiaries that may be included in the Medicaid fraction for purposes of the Medicare DSH calculation. Pursuant to the Final Rule, only the days of those patients who receive from the Section 1115 demonstration (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100% of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services will be counted in the numerator of the Medicaid fraction.

The new rule effectively excludes patient days for which hospitals received funds from an uncompensated or undercompensated care pool authorized through Section 1115 demonstrations—i.e. Section 1115 UCC waiver days. This new regulation is effective for discharges occurring on or after October 1, 2023.

Stark Law Exemptions from Prohibition on Expansion of Facility Capacity

The Physician Self-Referral Law (also known as the Stark Law) prohibits a physician or immediate family member who has a financial relationship with a healthcare entity from making patient referrals to the entity for certain designated health services (DHS) covered by Medicare. Section 1877(d)(2) of the Social Security Act, the rural provider exception, establishes that an ownership or investment interest in an entity does not constitute a financial relationship where the entity is a “rural provider,” furnishing substantially all of the DHS it furnishes (at least 75%) to residents of a rural area. Section 1877(d)(3) of the Social Security Act, the whole hospital exception, allows for a physician to have an ownership or investment interest in a hospital to which the physician refers DHS, when the physician is authorized to perform services at the hospital and the ownership or investment interest is in the hospital itself.

Section 6001(a)(3) of the Affordable Care Act amended the rural provider and whole hospital exceptions to prohibit hospitals with physician ownership or investment from increasing the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010.

CMS has clarified the process for requesting an exception from the prohibition on the expansion of facility capacity. To be eligible to request an expansion exception, a hospital must first meet the criteria as an applicable hospital or a high Medicaid facility. CMS will not consider an expansion exception request from a hospital for which CMS had previously approved an expansion exception that would allow the hospital’s facility capacity to reach 200 percent of its baseline facility capacity if the full expansion is utilized. A hospital may only request an exception up to once every two years.

When deciding whether to approve or deny an expansion request, CMS will consider four factors:

The specialty of the hospital or the services furnished by or to be furnished by the hospital if CMS approves the request;
Program integrity or quality of care concerns related to the hospital;
Whether the hospital has a need for additional operating rooms, procedure rooms, or beds; and
Whether there is a need for additional operating rooms, procedure rooms, or beds in the county in which the main campus of the hospital is located, in any county in which the hospital provides inpatient or outpatient hospital services as of the date the hospital submits the expansion exception request, or in any county in which the hospital plans to provide inpatient or outpatient hospital services.

CMS may also consider any other factors it deems relevant to its decision to approve or deny an expansion exception request.

CMS made technical and clarifying changes to the information that must be submitted for an expansion exception request. These changes include: (1) providing an email address as well as a hard copy mailing address for the contact person for the hospital; (2) providing the names of any counties in which the hospital provides inpatient or outpatient hospital services, in addition to the name of the county in which the main campus of the requesting hospital is located; (3) providing a statement and, if available, supporting documentation regarding the hospital’s compliance with the requirement that it does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries; and (4) providing information regarding whether and how the hospital has used any expansion facility capacity approved in a prior request.

CMS eliminated the option to mail hard copy requests and the requirement to mail an original hard copy of the signed certification statement. CMS is requiring electronic submission of requests following the instructions posted on the CMS website.

Hospital Inpatient Quality Reporting Program

CMS previously implemented the Hospital Inpatient Quality Reporting (IQR) Program to measure the quality of hospital inpatient services. In the Final Rule, CMS added three new electronic clinical quality measures (eCQMs) that hospitals can select to meet the eCQM reporting requirements for a given year for both the Hospital IQR and Medicare Promoting Interoperability Programs:

Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Hospital Harm — Pressure Injury eCQM, which assesses the proportion of inpatient hospitalizations for patients 18 years and older who suffer the harm of developing a new stage 2, stage 3, stage 4, or unstageable pressure injury.
Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Hospital Harm — Acute Kidney Injury eCQM, assessing the proportion of inpatient hospitalizations for patients 18 years and older who have an acute kidney injury (stage 2 or greater) that occurred during the encounter.
Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level — Inpatient) eCQM, providing a standardized method for monitoring the performance of diagnostic CT to discourage unnecessarily high radiation doses while preserving image quality.

CMS also modified three measures currently in the Hospital IQR Program:

Beginning with the FY 2027 payment determination, CMS expanded the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality measure to include MA patients.
Beginning with the FY 2027 payment determination, CMS likewise expended the Hybrid Hospital-Wide All-Cause Readmission measure to include MA admissions.
Beginning with the FY 2025 payment determination, CMS revised the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure to replace the term “complete vaccination course” with the term “up to date.” The prior version of this measure reported on the primary vaccination series only, while the updated version of the measure reports the cumulative number of HCP who are up to date with recommended COVID-19 vaccinations to align CMS programs with the Centers for Disease Control and Prevention’s (CDC’s) definition of “up to date” vaccination, keeping the measure relevant if future vaccination guidance evolves.

Finally, CMS removed three measures from the Hospital IQR Program:

Beginning with the April 1, 2025, through March 31, 2028, reporting period/FY 2030 payment determination, CMS removed the Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty measure. This is removed in conjunction with the adoption of the recent updates to this measure in the Hospital VBP Program.
Beginning with the CY 2026 reporting period/FY 2028 payment determination, CMS removed the Medicare Spending Per Beneficiary (MSPB) Hospital measure. This is removed in conjunction with the adoption of the recent updates to this measure in the Hospital VBP Program.
Beginning with the CY 2024 reporting period/FY 2026 payment determination, CMS removed the Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies Electively Delivered Prior to 39 Completed Weeks Gestation measure. CMS removed this measure because measure performance has been topped out for the last six performance periods.

Medicare Promoting Interoperability Program

CMS finalized the following changes to the Medicare Promoting Interoperability Program for eligible hospitals and CAHs:

Beginning with the Electronic Health Record (EHR) reporting period in CY 2024, CMS modified the requirements for the Safety Assurance Factors for EHR Resilience (SAFER) Guides measure to require eligible hospitals and CAHs to attest “yes” to having conducted an annual self-assessment of all nine SAFER Guides at any point during the calendar year in which the EHR reporting period occurs.
CMS amended the definition of “EHR reporting period for a payment adjustment year” for participating eligible hospitals and CAHs to define the EHR reporting period in CY 2025 as a minimum of any continuous 180-day period within CY 2025.
Beginning with the EHR reporting period in CY 2025, CMS amended the definition of “EHR reporting period for a payment adjustment year” such that eligible hospitals that have not successfully demonstrated meaningful EHR use in a prior year will not be required to attest to meaningful use by October 1st of the year prior to the payment adjustment year.
CMS modified the response options related to unique patients or actions for objectives and measures for the Medicare Promoting Interoperability Program for which there is no numerator and denominator, and for which unique patients or actions are not counted. The response option for these objectives and measures would read “N/A (measure is Yes/No).”
Beginning with the CY 2025 reporting period, CMS adopted new eCQMs eligible hospitals and CAHs can select as one of their three self-selected eCQMs: (1) Hospital Harm — Pressure Injury eCQM; (2) Hospital Harm — Acute Kidney Injury eCQM; and (3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level — Inpatient) eCQM.

PPS-Exempt Cancer Hospital Quality Reporting Program

CMS finalized the following changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) program for the eleven cancer hospitals that are statutorily exempt from the IPPS:

CMS will begin public display of the Surgical Treatment Complications for Localized Prostate Cancer measure beginning with data from the FY 2025 program year.
CMS has adopted the following new measures for the PCHQR Program:

Facility Commitment to Health Equity beginning with the FY 2026 program year.
Screening for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
Screen Positive Rate for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
Documentation of Goals of Care Discussions Among Cancer Patients beginning with the FY 2026 program year.

CMS has modified the COVID-19 Vaccination Coverage among HCP measure, in alignment with the Hospital IQR Program and LTCH QRP.
CMS has modified the data submission and reporting requirements for the HCAHPS survey measure beginning with the FY 2027 program year.

Hospitals Readmissions Reduction Program

CMS did not implement any changes to the Hospital Readmissions Reduction Program. All previously finalized policies under this program will continue to apply in FY 2024.

Reconsideration of Validation Results Under Hospital Acquired Condition Reduction Program

Section 1886(p) of the Act establishes the Hospital Acquired Condition (HAC) Reduction Program under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions. Specifically, the HAC Reduction Program reduces Medicare fee-for-service payment by 1% for the lowest-performing quartile of hospitals on the measures of hospital-acquired conditions.

Beginning with the FY 2025 program year (affecting calendar year 2022 discharges), CMS will allow hospitals that fail validation to request reconsideration of their validation results before use in HAC Reduction Program scoring calculations. Only hospitals that fail to meet the passing threshold for the end-of-year confidence interval calculation will receive an opportunity to request reconsideration of their validation results.

CMS will notify a hospital that failed the HAC Reduction Program validation requirement via certified mail. A hospital requesting validation reconsideration must submit a reconsideration request form within 30 days.

A hospital’s request for validation reconsideration must include, among other things, a basis for requesting reconsideration, as well as all documentation and evidence that supports the hospital’s request for reconsideration.

CMS will limit the scope of the HAC Reduction Program data validation reconsideration reviews to information already submitted by the hospital during the initial validation process, and will not abstract medical records that were not submitted during the initial validation process. CMS will expand the scope of review only if it is determined during the review that the hospital correctly and timely submitted the requested medical records.

Beginning in FY 2027, affecting CY 2024 discharges, CMS modified the criteria for data validation to include hospitals that received an Extraordinary Circumstances Exception (ECE). CMS modified the validation targeting criteria to include any hospital with a estimated reliability upper bound of the two-tailed confidence interval that is less than 75 percent and received an ECE for one or more quarters beginning with the FY 2027 program year, affecting validation of calendar year 2024 discharges.

Changes to the Hospital VBP Program

The Hospital VBP Program reduces base operating DRG payments each fiscal year by 2% and redistributes that amount back to the hospitals as value-based incentive payments. The total amount available for value-based incentive payments for FY 2024 is approximately $1.7 billion.

The FY 2024 Final Rule will implement several changes to the VBP Program. The Final Rule adopts the Severe Sepsis and Septic Shock: Management Bundle measure in the Safety Domain beginning in FY 2026. To qualify for the value-based payment, hospitals must demonstrate provision of certain patient interventions within 3 or 6 hours, respectively, when patients present with certain symptoms of severe sepsis or septic shock. This is the same Severe Sepsis and Septic Shock: Management Bundle measure already in place for the Hospital IQR Program.

The Final Rule also revises the Hospital VBP Program scoring methodology to add a new adjustment that rewards hospitals based on their performance and the proportion of their patients who are dually eligible for Medicare and Medicaid. CMS will add Health Equity Adjustment (HEA) bonus points to a hospital’s Total Performance Score (TPS) that will be calculated using a methodology that incorporates a hospital’s performance across all four domains for the program year and its proportion of patients with dual Medicaid and Medicare eligibility. The number of HEA bonus points will be capped at 10 points. CMS will increase the TPS maximum from 100 to 110. Beginning with FY 2026 Program Year, the TPS score range will be 0 to 110.

The Final Rule adopts three substantive measure updates to the Medicare Spending per Beneficiary (MSPB) beginning with the FY 2028 Program Year. Readmissions may trigger new episodes to account for episodes and costs that are currently not included in the measure but that could be within the hospital’s reasonable influence. A new indicator variable is in the risk adjustment model for whether there was an inpatient stay in the 30 days prior to episode start date. In addition, an updated MSPB amount calculation methodology changes one step in the measure calculation from the sum of observed costs divided by the sum of expected costs (ratio of sums) to the mean of observed costs divided by expected costs (mean of ratios).

The Final Rule updates the data collection and submission requirements for the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) beginning with the FY 2027 Program Year. The changes to the data collection and submission requirements, beginning with January 2025 discharges, are as follows:

CMS will add three new modes of survey administration (web-mail; web-phone, and web-mail-phone) in addition to the current mail only, telephone only, and mail-phone modes.
CMS will remove the requirement that only the patient may respond to the survey to allow a patient’s proxy to respond to the survey.
CMS will extend the data collection period for the HCAHPS Survey from 42 to 49 days.
CMS will require hospitals to collect information about the language that the patient speaks while in the hospital and will require the official CMS Spanish translation of the HCAHPS Survey to be administered to all patients who prefer Spanish.
CMS will remove two currently available options for administration of the HCAHPS Survey: active interactive voice response survey (IVR) and the multiple sites option, neither of which were ever widely used.

The Final Rule also finalizes substantive measure updates to the Hospital-level Risk-Standardized Complication Rate (RSCR) following elective primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (known as the THA/TKA Complication measure), beginning with the FY 2030 program year. The substantive updates are the inclusion of index admission diagnoses and in-hospital comorbidity data from Medicare Part A claims. Adopting these substantive measure updates will expand the measure outcome to include 26 additional mechanical complication ICD-10 codes. The additional ICD-10 codes capture the following diagnoses: fracture following insertion of orthopedic implant, joint prosthesis, or bone plate of the pelvis, femur, tibia or fibula, and periprosthetic fracture around internal prosthetic hip, hip joint, knee, knee joint, and other unspecified internal prosthetic joint. These substantive updates were previously adopted for use in the Hospital IQR Program in FY 2023.

Additionally, the Final Rule codifies at 42 C.F.R. § 412.164(c) eight measure removal factors as well as the policies for updating measure specifications and retaining measures. The Final Rule also codifies at 42 C.F.R. § 412.165(a)(1)(i) the minimum number of cases for the Hospital VBP Program measures.

LTCH Quality Reporting Program

The LTCH Quality Reporting Program (QRP) creates LTCH quality reporting requirements. LTCHs that do not meet the reporting requirements are subject to a two-percentage-point reduction in their Annual Increase Factor.

CMS finalized the following proposals:

Beginning with the FY 2026 LTCH QRP, CMS added the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident level COVID-19 Vaccine) measure, which reports the percentage of stays in which patients in an LTCH are up to date with their COVID-19 vaccinations per the latest guidance of the CDC.
Beginning with the FY 2025 LTCH QRP, CMS added the Functional Discharge (DC Function) measure, which assesses functional status by assessing the percentage of LTCH patients who meet or exceed an expected discharge function score and uses mobility and self-care items already collected on the assessment tool. In tandem, CMS removed the Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) measure.
Beginning with the FY 2025 LTCH QRP, CMS removed the Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan that Addresses Function (Functional Assessment/Care Plan) measure.
Beginning with the FY 2025 LTCH QRP, CMS finalized to update the COVID-19 Vaccination Coverage among HCP measure, in alignment with the Hospital IQR and PCHQR Programs.
Beginning with the FY 2026 LTCH QRP, CMS increased the LTCH QRP Data Completion Thresholds for the LCDS Data Items, requiring LTCHs to report 100% of the required quality measure data and standardized patient assessment data collected using the LCDS on at least 85% of the assessments they submit. Failure to do so will result in a reduction of two percentage points to the applicable FY APU beginning with FY 2025.
Beginning with the September 2024 Care Compare refresh or as soon as feasible, finalization of public reporting of the Transfer of Health Information to the Provider — PAC Measure (TOH-Provider) and the Transfer of Health Information to the Patient — PAC Measure (TOH-Patient) measures, which report the percentage of patient stays with a discharge assessment indicating that a current reconciled medication list was provided to the subsequent provider and/or to the patient/family/caregiver at discharge or transfer.

The Final Rule is available here, and a CMS fact sheet is available here.

Reporters, Ariana Fuller, Los Angeles, +1 213 443 4342, afuller@kslaw.com, and Elizabeth Key, Sacramento, +1 916 321 4821, ekey@kslaw.com.

CMS Issues Final Rule for Skilled Nursing Facility Prospective Payment System for 2024

On July 31, 2023, CMS issued its final rule updating the rates and Medicare payment policies under the Skilled Nursing Facility Prospective Payment System (SNF PPS) for FY 2024 (the Final Rule). The Final Rule also includes updates to the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program starting in FY 2024. Additionally, the Final Rule includes a measure intended to address staff turnover and a constructive waiver process meant to improve administrative burdens associated with CMS’s processing of Civil Monetary Penalty appeals.

Updates to SNF Payment Rates for FY 2024

According to CMS, the aggregate impact of the payment policies in the Final Rule will be a net increase of 4%, approximately $1.4 billion, in Medicare Part A payments to SNFs in FY 2024. The estimated impact is the result of several adjustments: a $2.2 billion increase stemming from the 6.4% net market basket update to payment rates (which is based on a 3% SNF market basket increase plus a 3.6% market basket forecast error adjustment, minus a 0.2% productivity adjustment), along with a decrease of 2.3% (or approximately $789 million) in the FY 2024 SNF PPS rates, which stems from the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration.

CMS implemented the PDPM, which was a new case-mix classification system, on October 1, 2019. The PDPM was supposed to be budget-neutral, such that it would not increase or decrease aggregate SNF spending. Since PDPM was implemented in FY 2020, however, CMS’s data analysis indicated an unintended payment increase of 5%, or $1.7 billion annually. To correct the unintended increase, CMS recalibrated the PDPM parity adjustment by a factor of 4.6% over a two-year phase-in period. The recalibration will result in a reduction to the SNF PPS payment rates of 2.3% in FY 2023 and 2.3% in FY 2024. CMS stated that it considered stakeholder feedback and sought to mitigate the financial impact of the recalibration on providers.

Notably, these impact figures do not include reductions in payments to SNFs subject to the SNF Value-Based Purchasing Program. The impact of those adjustments is estimated to be $184.85 million in FY 2024.

Changes to PDPM ICD-10 Code Mappings

The PDPM uses ICD-10 codes in several ways. CMS announced it is finalizing several changes to the PDPM ICD-10 code mappings to improve consistency between ICD-10 code mappings and ICD-10 coding guidelines. The ICD-10 code mappings and PDPM lists are available on the PDPM website here.

Marriage and Family Therapist and Mental Health Counselor Services Excluded from SNF Consolidated Billing

Under the Consolidated Appropriations Act of 2023, Medicare is required to exclude from SNF consolidated billing both marriage and family therapy (MFT) services and mental health counseling (MHC) services. These exclusions allow performing clinicians to bill separately for these services, rather than including them in the consolidated Medicare Part A SNF payment. CMS announced it is finalizing regulatory text changes to codify these required exclusions from consolidated billing for these services. The new requirement will apply to services furnished on or after January 1, 2024.

Changes to the Skilled Nursing Facility Quality Reporting Program (SNF QRP)

The SNF QRP is a required reporting program. SNFs that fail to meet the SNF QRP reporting requirements are subject to a 2% reduction in their Annual Payment Update (APU). The Final Rule includes changes to the SNF QRP, including the adoption of two measures, removal of three measures, and modification of one measure. The Final Rule also includes policy changes and the public reporting of four measures.

Measures Adopted

Discharge Function Score (DC Function) – CMS is adopting the DC Function measure beginning with the FY 2025 SNF QRP. The DC Function evaluates residents’ functional status by assessing what percentage of SNF residents meet or exceed an expected discharge function score. It also uses mobility and self-care items collected on the Minimum Data Set. The DC Function will replace the topped-out process measure (discussed below).
COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) – CMS is adopting the Patient/Resident COVID-19 Vaccine measure beginning with the FY 2026 SNF QRP. The measure reports the percentage of stays where SNF residents have been vaccinated for COVID-19 in accordance with CDC guidelines.

Measures Modified

COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) – CMS is modifying the HCP COVID-19 Vaccine measure beginning with the FY 2025 SNF QRP. The measure tracks the percentage of healthcare personnel who have been vaccinated for COVID-19 and are up to date with that vaccination in accordance with CDC guidelines. Previously, SNFs only had to report whether healthcare personnel had received the primary vaccination series for COVID-19. This measure requires reporting of the cumulative number of healthcare personnel who are up to date with COVID-19 vaccinations per CDC guidelines.

Measures Removed

Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) – CMS is removing the Application of Functional Assessment/Care Plan measure beginning with the FY 2025 SNF QRP. CMS is removing this measure because (1) performance among SNFs is so high and consistent that CMS can no longer distinguish meaningful improvements in performance and (2) the DC Function measure is more strongly associated with desired resident functional outcomes.
Application of the IRF Functional Outcome Measures: Change in Self-Care Score for Medical Rehabilitation Patients (Change in Self-Care Score) measure; and the Application of the IRF Functional Outcome Measures: Change in Mobility Score for Medical Rehabilitation Patients (Change in Mobility Score) – CMS is removing these measures beginning with FY 2025 SNF QRP because the costs associated with them outweigh the benefits of their use to the program. Also, they are similar to or duplicative of other measures in the SNF QRP.

Other Changes

Beginning with the FY 2026 SNF QRP, CMS will increase the SNF QRP Data Completion Thresholds for the Minimum Data Set (MDS) Data Items. SNFs are required to report 100% of the required quality measure data and standardized resident assessment data gathered using the MDS for at least 90% of the assessments they submit to CMS. SNFs that fail to meet this requirement will be subject to a 2% reduction on the applicable FY annual payment starting in FY 2026.
Transfer of Health Information to the Provider PAC Measure and the Transfer of Health Information to the Patient PAC Measure – CMS will begin public reporting of these measures with the October 2025 Care Compare refresh (or as soon as technically feasible). These measures report the percentage of patient stays where the discharge assessment indicates that a current reconciled medication list has been provided to the subsequent provider or caregiver. CMS initially delayed implementing these measures in response to the COVID-19 Public Health Emergency. Data collection will now begin for patients discharged on or after October 1, 2023.
CoreQ: Short Stay Discharge (CoreQ: SS DC) – CMS is not adopting this measure following consideration of public comments it received.

Changes to the SNF Value-Based Purchasing (SNF VBP) Program

All SNFSs that are paid under the Medicare SNF PPS are included in the SNF VBP Program, which pays SNFs incentive payments for quality of care they provide. The Final Rule includes the following policy changes to the SNF VBP Program.

Nursing Staff Turnover Measure – CMS is adopting this measure beginning in FY 2026. This measure uses nursing staff turnover to assess the stability of SNF staffing. Facilities must begin reporting in FY 2024; payment effects will begin in FY 2026.
Discharge Function Score Measure – CMS is adopting this measure beginning in the FY 2027 program year. It assesses functional status by determining the percentage of SNF residents who meet or exceed an expected discharge function score. It also uses self-care and mobility items collected on the MDS.
Long Stay Hospitalization Measure per 1,000 Resident Days – This measure assesses the hospitalization rate of long-stay residents. CMS is adopting it beginning with the FY 2027 program year.
Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) – CMS is adopting this measure beginning with the FY 2027 program year. This measure assesses the number of falls from which long-stay residents suffer from major injuries.
SNF 30-Day All-Cause Readmission Measure – CMS is replacing the SNF 30-Day All-Cause Readmission Measure (SNF RM) with the Skilled Nursing Facility Within Stay Potentially Preventable Readmissions (SNF WS PPR) measure beginning in the FY 2028 program year.
Health Equity Adjustment – This payment adjustment rewards SNFs whose resident population includes at least 20% of residents with dual eligibility status during the applicable performance period. It will begin in the FY 2027 program year. SNFs that provide care to a higher proportion of dual eligible residents will receive bonus points.
Audit Portion of Validation Process for MDS-Based Measures – CMS will adopt the audit portion of the validation process for MDS-based measures beginning with the FY 2027 program year.

Changes to Civil Money Penalties (CMP): Waiver of Hearing, Consideration of Reduction of Penalty Amount (§ 488.436)

CMS is adopting a constructive waiver process for facilities that waive their right to a hearing when contesting CMPs imposed following survey findings of noncompliance. Under prior CMS regulations, SNFs who affirmatively waived their right to an administrative hearing when contesting CMPs received a 35% penalty reduction. CMS observed that most facilities on which CMPs were imposed did not request an administrative hearing in connection with their appeals. In the Final Rule, CMS is adopting a constructive waiver process whereby facilities that do not request an administrative hearing within the required 60-day timeframe will be deemed to have waived their right to a hearing. Given this new policy of no longer requiring facilities to actively waive their right to a hearing, CMS stated that it considered modifying the penalty reduction. But it ultimately decided to revisit the penalty reduction in a future rulemaking, if warranted.

A copy of the Final Rule is available here.

Reporter, Doug Comin, Atlanta, +1 404 572 3525, dcomin@kslaw.com.

CMS Issues Civil Monetary Penalties for Hospital Price Transparency Non-Compliance

Last month, CMS issued three civil monetary penalty (CMP) notices for violations of the hospital price transparency regulations (HPT Rule), which requires hospitals to make public the standard charges of the items and services they provide. CMS has now issued CMP notices to seven different hospitals.

The HPT Rule took effect on January 1, 2021, and requires hospitals to publish five types of standard charges for each item and service: (1) gross charges (i.e., the chargemaster), (2) discounted prices that apply to patients who pay cash, (3) payer-specific negotiated rates, and the de-identified, (4) minimum and (5) maximum charges that a hospital has negotiated with third-party payers. If CMS concludes that a hospital is noncompliant with one or more of the requirements of the HPT Rule, CMS may take any of the following actions, which typically will occur in the following order:

Warning letter: CMS will provide a written warning notice to the hospital with instructions to correct the deficiencies within ninety days of the specific violation(s).
Corrective Action Plan (CAP): If the hospital does not come into compliance after ninety days, CMS will issue a CAP request with a forty-five-day deadline for hospitals to submit a CAP. Hospitals must be in full compliance within ninety days from when CMS issues the CAP request. Furthermore, if a hospital has not made any attempt to satisfy the requirements of the HPT Rule, CMS will immediately request that the hospital submit a CAP without first issuing a warning letter.
Civil Monetary Penalty (CMP): CMS will impose a CMP on the hospital and publicize the penalty here if the hospital (1) fails to respond to CMS's request to submit a CAP at the end of the forty-five-day CAP submission deadline or (2) fails to comply with the terms of the CAP by end of the ninety-day deadline. A hospital’s maximum daily penalty will scale based on the number of beds reported by the hospital in its most recently settled Medicare cost report:

$300 per day for a hospital with 30 beds or less (annual maximum of $109,500);
$310-$5,500 per day ($10/bed/day) for 31-550 beds (annual maximum of $113,150 - $2,007,500); and
$5,500 per day for a hospital with over 550 beds (annual maximum of $2,007,500).

To date, CMS has issued seven CMP notices to seven different hospitals in the following amounts:

$883,180.00
$847,740.00
$117,260.00
$214,320.00
$102,660.00
$70,560.00
$63,900.00

CMS issued these CMP notices for a variety of reasons, including:

Failure to make public a machine-readable file containing a list of all standard charges for all items and services online as required at 45 C.F.R. § 180.40(a) and 45 C.F.R. § 180.50(a).
Failure to make available a consumer-friendly list of standard charges for a limited set of shoppable services described in 45 C.F.R. § 180.60, as required by 45 C.F.R. § 180.40(b).
Failure to include all corresponding data elements in the list of standard charges, as applicable, as provided in 45 CFR §180.50(b).
Failure to follow the naming convention specified by CMS, specifically: __standardcharges.[json|xml|csv] as required at 45 CFR §180.50(d)(5).
Failure to update the standard charge information described in 45 CFR §180.50(b) at least once annually as required at 45 CFR §180.50(e).

The CMP notices also describe the timing of CMS’s initial review, CMS’s initial outreach to the hospital to correct violation(s), and any subsequent communications between CMS and the hospital, including who CMS contacted, the extension numbers CMS called, and the response (or lack of response) the hospital provided CMS.

Hospitals have sixty calendar days from the date of notice to pay the CMP. A hospital may appeal CMS’s CMP determination by requesting a hearing before an Administrative Law Judge of HHS’ Departmental Appeals Board (DAB). To request a hearing, the hospital must submit its hearing request within thirty calendar days of the issuance of the notice of imposition of CMP.

More information on the HPT Rule, including CMS guidance, is available here.

Reporter, Ahsin Azim, Washington, D.C., + 1 202 626 5516, aazim@kslaw.com.

White House Expected to Sign Law Opening Competitive Bidding for Organ Procurement and Transplantation Network Activities

On July 27, 2023, the U.S. Senate passed H.R. 2544 - Securing the U.S. Organ Procurement and Transplantation Network Act, which would allow competitive bidding for federal contracts under the Organ Procurement and Transplantation Network (OPTN). Significantly, the legislation allows multiple contracts for various OPTN tasks rather than the current single contract, which has been held by the same private non-profit organization, United Network for Organ Sharing (UNOS), for 37 years. Additionally, the legislation contemplates that contracts will be awarded to both public and private entities. President Biden is expected to sign the bill into law.

Background on the OPTN

Regulation of organ procurement and transplant activities first occurred when Congress passed the National Organ Transplant Act of 1984 (the Transplant Act). 42 U.S.C. § 273 et seq. The Transplant Act authorizes HHS to provide grants and other payments to a national network of nonprofit organizations tasked with acquiring, preserving and transporting donated organs, and allocating each donated organ to the highest priority patient on the transplant waiting list for that organ.

The Transplant Act established the OPTN for the purpose of coordinating and operating the nation’s organ procurement, allocation, and transplantation system with the aim to increase access to donor organs for patients with end-stage organ failure. The Transplant Act requires the OPTN to operate a national waiting list of individuals needing transplants to be matched with organs from living and deceased donors. The OPTN is a private, nonprofit entity established by Congress to perform essential functions in implementing the Transplant Act. The OPTN operates and acts through its board of directors and several committees. Often at the recommendation of its specialized committees, the board establishes and maintains transplant policies and membership bylaws that govern the OPTN.

UNOS is a private, non-profit organization that manages the OPTN under contract with the federal government. UNOS was awarded the initial OPTN contract award in 1986 to develop the requirements for the operation of the OPTN, and has served as the OPTN contractor ever since.

The last several years have seen increased scrutiny on the OPTN. Most recently, the Senate Finance Committee released a report critical of OPTN’s performance and held an oversight hearing in 2022 into UNOS operations. The Committee found that:

The OPTN is failing to provide adequate oversight of the nation’s 57 Organ Procurement Organizations (OPOs), resulting in fewer organs available for transplant.
The lack of oversight by UNOS causes avoidable failures in organ procurement and transplantation resulting in risks to patient safety. These failures include testing procedure errors, transportation issues resulting in life saving organs being lost or destroyed in transit, and process and procedure failures.
UNOS lacks technical expertise to modernize the OPTN IT system, resulting in risk of system interruption or technical failure with the potential to harm patients across the country.

Organ Transplantation Network Modernization Initiative

HRSA’s Organ Transplantation Network Modernization Initiative, announced earlier this fall, set off a wave of reforms that, according to the agency, aim to improve accountability and transparency in the OPTN. These actions include:

Data dashboards detailing individual transplant center and OPO data on organ retrieval, waitlist outcomes, and transplants, and demographic data on organ donation and transplant;
Modernization of the OPTN IT system in line with industry-leading standards, improving OPTN governance, and increasing transparency and accountability in the system to better serve the needs of patients and families;
HRSA’s intent to issue contract solicitations for multiple awards to manage the OPTN in order to foster competition and ensure OPTN Board of Directors’ independence;
The President’s Fiscal Year 2024 Budget proposal to more than double investment in organ procurement and transplantation with a $36 million increase over Fiscal Year 2023 for a total of $67 million; and
A request to Congress included in the Fiscal Year 2024 Budget to update the nearly 40-year-old National Organ Transplant Act to take actions such as:

Removing the appropriations cap on the OPTN contract(s) to allow HRSA to better allocate resources; and
Expanding the pool of eligible contract entities to enhance performance and innovation through increased competition.

Securing the U.S. Organ Procurement and Transplantation Network Act

H.R. 2544 is the first legislative step to give the Secretary of HHS the statutory authority to grant multiple contracts to various public and private entities to perform OPTN functions. This legislation likely ends UNOS’ run as the exclusive OPTN contractor. Transplant hospitals and organ procurement organizations may have to reconfigure their processes in order to coordinate, implement, and perhaps even reconcile, information from multiple organizations under the new multi-contract OPTN model.

The text of the legislation is available here.

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.

Federal Court Vacates 600% Fee Hike to No Surprises Act IDR Fees

On August 3, 2023, the Texas Medical Association (TMA) was granted summary judgment in its challenge to (1) the $350 CY 2023 administrative fee for the No Surprises Act’s Independent Dispute Resolution (IDR) process and (2) a portion of the regulations regarding batching of claims under the IDR process. Judge Kernodle of the Eastern District of Texas ruled that the Departments of Health and Human Services, Labor and the Treasury (the Departments) violated the Administrative Procedure Act (APA) by skipping regular notice and comment rulemaking. In response, CMS has “temporarily suspended the Federal IDR process, including the ability to initiate new disputes, until the Departments can provide additional instruction.”

Background

The No Surprises Act, enacted in December 2020, prohibits balance billing patients for out-of-network emergency services and non-emergency services rendered by out-of-network providers at in-network facilities. When the No Surprises Act applies, the out-of-network rate payable by the plan is determined by an All-Payer Model or specified state law, if applicable. In the absence of an All-Payor Model or specified state law, reimbursement is determined by the IDR process when the payor and provider cannot agree on a negotiated out-of-network rate. In the IDR process, after that process is initiated, both parties must submit final offers for payment along with supportive written material to an IDR entity who is required to select between the two offers (“baseball-style” arbitration).

On September 30, 2021, the Departments issued the second set of implementing regulations (the IDR Rule) which, in part, provided significant additional detailed rules regarding the IDR process. The IDR Rule was promulgated as an interim final rule, skipping the regular notice-and-comment rulemaking required by the APA. Relevant here, under the IDR Rule, in order to batch items and services into a single IDR process, the items or services must each be “billed under the same service code or a comparable code under a different procedural code system.”

Contemporaneously with the IDR Rule, the Departments also issued “Fee Guidance” setting the fee at $50 for calendar year 2022. In October 2022, the Departments issued guidance for calendar year 2023, which again set the fee at $50. Then, in December 2022, the Departments issued new Fee Guidance for calendar year 2023 and dramatically raised the fee for 2023 to $350, a 600% increase, citing the volume of disputes and the costs associated with making disputed eligibility determinations (Fee Guidance).

Following the issuance of the Fee Guidance, TMA filed suit in federal district court alleging that the Fee Guidance and the batching regulations in the IDR rule were unlawfully issued without notice and comment and therefore must be set aside under the Administrative Procedures Act. This is the fourth lawsuit by TMA against the Departments regarding the IDR Rule. In its moving papers for summary judgment, TMA explained that the substantive impact of the $350 administrative fee, in combination with the IDR Rule permitting batching only by service code, was to make engaging in IDR very costly and often cost-prohibitive for certain healthcare providers with lower dollar claims (e.g., radiologists).

Eastern District of Texas Grants Summary Judgment

The Eastern District of Texas granted summary judgment in favor of the Texas Medical Association, vacating the Fee Guidance’s $350 administrative fee and challenged portions of the IDR Rule regarding batching.

The court held that the Department’s failure to provide notice and comment as required by the APA provided a basis to set aside the 2023 $350 administrative fee and challenged portions of the IDR rule regarding batching. The APA requires that agencies publish a notice of proposed rulemaking and give interested parties an opportunity to participate through the submission of comments. A rule promulgated without notice-and-comment is contrary to law and must be set aside unless the agency can show an exception to the requirement.

Here, the court held that Fee Guidance was a substantive rule and, therefore, the Departments were not excused from regular notice and comment rulemaking. The court also found that the good cause exception to notice and comment did not apply, as it was not “impracticable” for the Departments to seek notice and comment for the yearly notice and comment to occur regarding any updates to the administrative fee. Moreover, the court found that the error was not harmless, because the Fee Guidance had elected to include, for the first time, costs of pre-eligibility review in their projected IDR costs.

The court reached similar conclusions in addressing the challenges to the portions of the IDR Rule regarding batching. As with the administrative fee, the court found the challenged portions of the IDR rule to be substantive, given that the level of the fee made it unviable to submit claims into the IDR Process for certain providers and thus altered “regulated parties’ substantive rights and interests,” and found that the failure to have regular notice and comment was not harmless.

Impact of Judgment

The court rejected the government’s arguments for more limited relief and vacated the challenged portions of the IDR Rule. Specifically, the court vacated:

The Fee Guidance’s $350 administrative fee;
45 C.F.R. § 149.510(c)(3)(i)(C);
26 C.F.R. § 54.9816-8T(c)(3)(i)(C); and
29 C.F.R. § 2590.716-8(c)(3)(i)(C).

The vacatur issued by the court is not limited to the plaintiffs and will have national effect. In the interim, CMS has “temporarily suspended the Federal IDR process, including the ability to initiate new disputes, until the Departments can provide additional instruction.”

The government may appeal this ruling to the U.S. Court of Appeals for the Fifth Circuit, but the vacatur will stand while the appeal is pending. The summary judgment order is available here.

Reporters, Amanda Hayes-Kibreab, Los Angeles, + 1 213 443 4375, ahayes-kibreab@kslaw.com; Christopher C. Jew, Los Angeles, + 1 213 443 4336, cjew@kslaw.com; and Alana Broe, Atlanta, + 1 404 572 2720, abroe@kslaw.com.

CMS Issues Fiscal Year 2024 Hospice Payment Rate Update Final Rule

On July 28, 2023, CMS issued a final rule (CMS-1787-F) updating Medicare hospice payment rates and the aggregate cap amount applicable to fiscal year 2024 (the Final Rule). According to CMS, the Final Rule is part of CMS’s efforts to more closely examine the hospice industry for fraud, waste, and abuse, and includes a requirement that physicians who certify patient eligibility for hospice services must be enrolled in Medicare or validly opted out in order for the hospice services to be eligible for payment.

2024 Rate Setting Changes

The fiscal year 2024 hospice update percentage is 3.1%, which is an estimated $780 million increase in payments over fiscal 2023. This 3.1% increase is a result of the 3.3% inpatient hospital market basket percentage increase reduced by a 0.2 percent productivity adjustment. The payment reduction for a failure to meet hospice quality reporting requirements was increased from 2 to 4 percentage points beginning in fiscal 2024, meaning that hospices that do not submit the required quality data would suffer a 0.9% decrease in rates in fiscal 2024 compared with 2023.

The Final Rule also includes a statutory aggregate cap limiting the total annual payments per patient to $33,494.01, which is 3.1% higher than the 2023 annual cap.

Hospice Quality Reporting Program

The Final Rule codifies the Hospice Quality Reporting Program data completion threshold and provides updates relating to the development of a patient assessment instrument. CMS also updated the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Hospice Survey based on the results of a survey experiment conducted in 2021. CMS is still accepting comments on the proposal for the establishment of an SFP for poor-performing hospices through August 29, 2023.

Hospice Certifying Physician Enrollment

Under existing regulation, the hospice medical director or the physician member of the hospice interdisciplinary group and the patient’s attending physician must certify the patient’s terminal condition in order for the patient’s hospice treatment to be eligible for payment. Under CMS’s new rule, both of these physicians must be either enrolled in or validly opted out of Medicare in order for the hospice services to be paid. According to CMS, this requirement will allow CMS to ensure that these physicians are qualified to certify the terminal condition.

The text of the Final Rule is available here. CMS’s fact sheet on the Final Rule is available here.

Reporter, David Tassa, Los Angeles, +1 213 442 8848, dtassa@kslaw.com.

Compliance Column

False Claims Act Qui Tam Complaint Filed by Data Analytics Company is Unsealed and Subsequently Voluntarily Dismissed

On July 18, 2023, the United States District Court for the Central District of California unsealed a qui tam complaint alleging violations of the False Claims Act filed by Lincoln Analytics, a company that uses data and investigations to detect health care fraud. The complaint was filed against Global Integrated Medical Group, a company that provides home health services, its Chief Executive Officer, and its Chief Financial Officer. The complaint included allegations that the defendants billed the Medicare program for excessive care plan oversight (CPO) services. The Department of Justice declined to intervene in the case on July 18, 2023. On July 28, 2023, Lincoln Analytics filed a notice of voluntary dismissal, dismissing the action without prejudice as to the United States.

The relator in the case, Lincoln Analytics, relied on its analysis of Medicare data and one interview of a medical director at Global Integrated Medical Group to support its claims as an original source under the False Claims Act. Lincoln Analytics contended that Medicare guidance requires physicians to spend at least thirty minutes supervising services for patients receiving complex and/or multidisciplinary care as part of Medicare-covered services provided by a participating home health agency. The relator alleged that its data analysis shows that a Global Integrated Medical Group medical director billed CPO claims in 2019 that would be the equivalent of approximately 419.5 24-hour days. Similarly, the relator alleged in 2020, the CPO claims for the medical director would be equivalent to approximately 295 continuous 24-hour days solely on care plan oversight services. Lincoln Analytics also analyzed CPO claims submitted regarding a second medical director and similarly alleged that the “numbers are infeasible” and “higher than every other physician billing Medicare nationwide, except [the first medical director].”

As noted, the Department of Justice declined to intervene in the case and Lincoln Analytics voluntarily dismissed the case. Nevertheless, this case is part of a growing trend of both the Department of Justice and whistleblowers relying on data analytics to advance allegations under the False Claims Act.

The case is captioned United States ex rel. Lincoln Analytics, Inc. v. Global Integrated Medical Group, Inc., No. 2:22-cv-06501 (C.D. Cal.), and the Complaint is available here.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com.

Also in the News

CMS Announces Medicare Dementia Care Model

On July 31, 2023, CMS announced the Guiding an Improved Dementia Experience (GUIDE) Model. The GUIDE Model will test alternative payment for participants who deliver key supportive services to people with dementia, including comprehensive, person-centered assessments and care plans, care coordination, and 24/7 access to a support line. Under the GUIDE Model, people with dementia and their caregivers will have access to a care navigator who will help them access services and support, including clincial services and non-clinical services such as meals and transportation through community-based organizations. Model participants will also help caregivers access respite services. GUIDE will be a voluntary, nationwide model. The application will be released in the fall of 2023, but prior to the application release, CMS is encouraging interested organizations to submit letters of intent by September 15, 2023. The model will run for eight years beginning July 1, 2024. More information regarding the GUIDE Model is available here.

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