Health Headlines – January 5, 2015

FEATURED ARTICLES

The Treasury Department and the IRS Release Final Regulations Interpreting Internal Revenue Code Section 501(r)’s Requirements for Charitable Hospital Organizations – On December 29, 2014, the Treasury Department and the IRS (collectively, the IRS) released final regulations under Internal Revenue Code Section 501(r) after taking into account comments received in response to proposed regulations published in 2012 and 2013, temporary regulations published in 2013, and various notices. The 261 double-spaced pages (64 pages in the December 31 Federal Register) of final regulations and accompanying preamble clarify and, in some cases, change prior guidance regarding the Section 501(r) requirements. The final regulations also provide guidance about the reporting obligations relating to, and the consequences of failing to satisfy, the Section 501(r) requirements.

The effective date of the final regulations is December 29, 2014, although the final regulations continue to allow reliance on both the 2012 and 2013 proposed regulations until a hospital organization’s first taxable year beginning after December 29, 2015. The statutory requirements of Section 501(r) (except for Section 501(r)(3), relating to community health needs assessments) apply to taxable years beginning after March 23, 2010. Section 501(r)(3) applies to taxable years beginning after March 23, 2012.

Section 501(r) was added to the Internal Revenue Code by the Patient Protection and Affordable Care Act in 2010, and imposes additional requirements on charitable hospital organizations. Section 501(r)(1) provides that a hospital organization described in Section 501(r)(2) will not be treated as a tax-exempt organization described in Section 501(c)(3) unless the organization meets the requirements of Sections 501(r)(3) through 501(r)(6):

• Section 501(r)(3) requires a hospital organization to conduct a community health needs assessment (CHNA) at least once every three years and to adopt an implementation strategy to meet the community health needs identified through the CHNA;
• Section 501(r)(4) requires a hospital organization to establish a written financial assistance policy (FAP) and a written policy relating to emergency medical care;
• Section 501(r)(5) requires a hospital organization to not use gross charges and to limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the organization’s FAP (FAP-eligible individuals) to not more than the amounts generally billed to individuals who have insurance covering such care (AGB); and
• Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is FAP-eligible before engaging in extraordinary collection actions (ECAs).

Section 501(r)(2)(B) requires a hospital organization to meet each of these requirements separately with respect to each hospital facility it operates.

The final regulations and preamble contain a great deal of useful guidance, and this article does not attempt to capture every aspect of the guidance. Set forth here, however, are some highlights.

To view the final regulations and related preamble, click here.

Reporter, Constance Fore Dotzenrod, Atlanta, + 1 404 572 3585, cdotzenrod@kslaw.com. 

OIG Soliciting New Anti-Kickback Safe Harbor Suggestions – In the December 30, 2014 Federal Register, the OIG solicited comments on potential new or modified safe harbors under the federal Anti-Kickback Statute. Comments are due by March 2, 2015, and the OIG requested that any suggested safe harbor be accompanied by logical justifications and empirical data.

The OIG must annually solicit proposals to modify and create new safe harbors to identify new potential areas of fraud and abuse, and this solicitation is in fulfillment of that obligation. The OIG is also requesting suggestions on new “Special Fraud Alerts,” which the OIG uses to provide general guidance to practitioners on potential fraudulent arrangements that are considered to be widespread.

In considering suggestions for both safe harbors and Special Fraud Alerts, the OIG will specifically assess whether the proposals increase or decrease:

• Access to healthcare services;
• Quality of healthcare services;
• Patient freedom of choice among healthcare providers;
• Competition among healthcare providers;
• Cost to federal healthcare programs;
• Potential overutilization of healthcare services; and
• The ability of healthcare facilities to provide services in medically underserved areas or medically underserved populations.

Furthermore, the OIG will consider factors including the existence of financial benefits that may affect a provider’s decision to order a healthcare item or services or arrange for a referral.

The Federal Register announcement is available here.

The OIG responded to proposals received last year in its October 2014 Semi-Annual Report to Congress, available here (Appendix F). The OIG stated that it does not want feedback on the proposals discussed in that report at this time.

Reporter, Elizabeth N. Swayne, Washington, D.C., + 1 202 383 8932, eswayne@kslaw.com.

AHA Responds to House Bill Concerning RACs and Two-Midnight Rule – In a December 18, 2014 letter to U.S. Representative Kevin Brady, the American Hospital Association (AHA) voiced its opinion on a discussion draft of the Hospital Improvements for Payment Act of 2014 (HIP). The House Ways and Means Subcommittee on Health announced Representative Brady’s unveiling of HIP in November 2014. According to the subcommittee, HIP “address[es] the problems associated with Medicare’s two-midnights policy, short inpatient stays, outpatient observation stays, auditing, and appeals” and “retains the needed oversight of auditors while offering reforms to the RAC process and appeals.” 

Summarizing its views on the discussion draft, AHA stated in its letter that it agrees with HIP’s proposed “repeal of the 0.2 percent payment reduction associated with the two-midnight policy; the continued enforcement delay of the two-midnight policy for an additional six months and the more limited enforcement delay until fiscal year 2020; and a transition period for developing a short-stay payment solution.” Nevertheless, AHA emphasized that HIP’s “proposed short-stay payment solution is complex, confusing and administratively burdensome” and that “the proposed reforms of the [RAC] program fall far short of what will be necessary to reduce excessive and inappropriate denials by RACs and alleviate the administrative and financial burden the RAC program imposes on hospitals and the administrative appeals process.”

View a copy of AHA’s letter by clicking here.

Reporter, Ramsey Prather, Atlanta, + 1 404 572 4624, rprather@kslaw.com.

Texas Adopts Standard Prior Authorization Form – In an effort to reduce the number of different prior authorization forms with which providers must contend, the Texas Department of Insurance (TDI) has adopted a single, standard form for requesting prior authorization of health care services beginning September 1, 2015. On December 12, 2014, TDI published the form along with the rule that requires all health benefit plan issuers, and their agents and administrators, to accept and use this form when submitted by a provider to request prior authorization of a health care service. TDI anticipates that the use of a single form by all health plan issuers, including Medicaid and CHIP, will lower provider administrative costs and provide patients greater access to necessary care. Health plan issuers are required to have this form available in paper as well as on their websites. The new form is not for use for requesting prior authorization of a prescription drug. TDI is currently developing a separate standard form for that purpose. TDI is required by statute to develop standardized forms for prior authorization of both health care services and prescription drugs. The agency has been working with an advisory committee to develop the contents and format of the forms. The link to the standard health benefits prior authorization form is available here and the rule is available here.

Reporter, Kathy Poppitt, Austin, +1 512 457 2004, kpoppitt@kslaw.com.

 ALSO IN THE NEWS

MACS to Hold Certain 2015 Date-of-Service Claims – CMS announced on December 29, 2014, that Medicare Administrative Contractors will hold claims containing 2015 services paid under the Medicare Physician Fee Schedule (MPFS) for the first 14 calendar days of January 2015 (i.e., from January 1 through January 14). The claims are being held to implement corrections to technical errors discovered after the CY 2015 MPFS final rule was published on November 13, 2014. The hold is expected to have minimal impact on provider cash flows in light of the typical paid claims timeline. Additional information about the hold can be found here.

MedPAC Two-Day Meeting Focuses on Payment Adequacy – Last month the Medicare Payment Advisory Committee (MedPAC) hosted a two-day meeting assessing payments provided under Medicare for acute care hospitals, long-term care hospitals, physician services, ambulatory surgical centers, hospices, skilled nursing facilities, home health, dialysis, and inpatient rehabilitation facilities. Among the proposals discussed at the meeting, MedPAC discussed its draft payment recommendations for hospitals that would reduce certain outpatient rates to rates similar to those provided for services at physician offices, reduce long-term care hospital payments and instead apply those funds to additional outlier payments to acute care hospitals, and increase payments generally to acute care hospitals. The net increase in payments of 2.5 percent in 2016 would amount to 2.25 percent over current law. MedPAC will vote on the recommendations in January and publish its final report in March. Slides from the meeting are available here.

MedPAC Reports that Home Health Rebasing is Unlikely to Affect Access or Quality – On December 14, 2014, the Medicare Payment Advisory Commission (MedPAC) released a report addressing the impact of Affordable Care Act mandated home health payment rebasing on beneficiary access and quality of care. The required rebasing began in 2014, which was the first of four years of base-payment reductions in the home health prospective payment system. The Affordable Care Act required MedPAC to submit the report to Congress no later than January 1, 2015 – a deadline which hindered MedPAC from directly assessing the impact of rebasing because claims and quality data for 2014 was not yet available to MedPAC. MedPAC therefore examined data from 2001 through 2012 to assess whether past changes in the average payment per home health episode impacted quality or access and concluded that prior payment reductions did not have a negative effect on home heath quality or beneficiary access to care. 

Lawmakers Urge HHS to Shorten 2015 Meaningful Use Reporting Period – In a letter to HHS, a group of lawmakers requested that HHS shorten the full-year reporting period for EHR meaningful use in 2015 to 90 days. Noting that data from CMS indicates that less than 35 percent of eligible hospitals have demonstrated stage 2 capabilities in 2014 with a 90-day reporting period, the lawmakers asked that HHS respond to the request by mid-January.

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice.

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