News / Resources

Topics covered in this week's edition of the Health Law Update include:

• Antitrust Enforcement and ACOs
• CMS Finalizes Several Payment Rules for 2012
  • Final Physician Fee Schedule Rule
  • Final Outpatient PPS Rule
  • Final Home Health PPS Rule
  • Final ESRD PPS and Quality Rules
• Patient Care Ombudsman in Bankruptcy: When is it Necessary?
• California Moves to Eliminate Manual Lifting of Patients in Acute Care Facilities
• Holiday Publication Notice
• Events Calendar

ANTITRUST ENFORCEMENT AND ACOs

On October 28, 2011, the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) issued their final joint antitrust enforcement policy for Accountable Care Organizations (ACOs) that participate in the Medicare Shared Savings Program, a policy which also expressly applies to ACOs that negotiate jointly with private payers. Please see our overview of the final ACO rules in the October 27 issue of the Health Law Update. The most notable change from the policy that the antitrust enforcement agencies originally proposed in April is that they unceremoniously jettisoned the burdensome proposed system of mandatory antitrust review for ACOs with high market shares and substituted an opportunity for ACOs to voluntarily apply for expedited antitrust review.

As welcome as the demise of mandatory antitrust review is to providers considering forming an ACO, the final policy leaves unanswered numerous questions for ACOs and their advisers:

• When should an ACO ask for voluntary antitrust review? Consider whether the ACO would have been required to obtain mandatory review under the now-superseded proposed policy, i.e., if its market share exceeds 50 percent for any common service that two or more of its participants provide to patients in the same Primary Service Area (PSA). The agencies dropped mandatory review because of concerns about burden and administrative feasibility, but they will likely continue to regard high shares as a threshold for concern.
• Is forgiveness easier to get than permission? The agencies have a history of bringing suit only against egregious healthcare offenders, such as sham physician "networks" that lack any meaningful financial or clinical integration but exist solely to enable their members to gain bargaining power against payers. Rather than choosing to embark on a public and uncertain antitrust review process with the FTC or the DOJ, ACOs may well prefer to rely on private legal advice, secure in the knowledge that the agencies sue mostly in extreme cases. If the majority of ACOs prefer not to request voluntary review, however, the agencies will be unable to develop a body of interpretations to guide ACOs through potential antitrust issues.
• What lawful conduct should an ACO avoid? The policy sets out four broad categories of conduct "that may raise competitive concerns" for ACOs with high PSA shares "or other possible indicia of market power." While the conduct may not be independently illegal, ACOs are left to guess at what might concern the agencies. For example, the policy warns generally against exclusive contracting with providers, even though exclusivity often has procompetitive benefits and may not significantly foreclose private payers’ access to alternatives. Similarly, the policy discourages "tying sales" without distinguishing between tying arrangements that exploit market power and mere combination sales that have the potential to benefit payers.

In short, the final ACO antitrust enforcement policy is a big step in the right direction. The devil, however, is always in the details, and those details are likely to remain uncertain for some time to come.

For more information, please contact Lee H. Simowitz, or 202.861.1608.

top of page

CMS FINALIZES SEVERAL PAYMENT RULES FOR 2012

On November 1, 2011, the Centers for Medicare and Medicaid Services (CMS) issued its final rules related to the physician fee schedule, outpatient prospective payment system (PPS), home health PPS, and end-stage renal disease PPS for calendar year (CY) 2012. These payment and policy changes which are effective January 1, 2012, are discussed in turn.

Final Physician Fee Schedule Rule

CMS issued its final rule addressing changes to the physician fee schedule and other Medicare Part B payments for services to be furnished in CY 2012. CMS anticipates a 27.4 percent cut in payment rates in 2012 due to the sustainable growth rate formula. Historically, Congress has intervened and reversed these cuts, but with the congressional impasse earlier this year over budget cuts and the debt ceiling, CMS is concerned that Congress will not make this correction, and substantial reductions in physician reimbursement are possible.

The final rule addresses several additional payment issues, including the following:

Potentially Misvalued Services

CMS requests input from providers regarding the methodology to identify and review potentially misvalued codes. In the proposed rule, CMS had requested input from providers on data sources and methodology for developing a validation process for review of code values. In the final rule, CMS declined to establish the validation process and anticipates the process will be proposed in a future rule. CMS did adopt a proposed public nomination process for identification of potentially misvalued codes for annual review, including the requirement that there must be documentation to support a submission.

Multiple Procedure Payment Reduction

The final rule expands the multiple procedure payment reduction (MMPR) policy to include the professional component of advanced diagnostic imaging services when multiple procedures occur in the same session. The MMPR already applied to the technical component of these tests.

Additional Services

The final rule adds smoking cessation to covered Medicare telehealth services and creates new criteria for the health risk assessment to be utilized with the annual wellness visits mandated by the Patient Protection and Affordable Care Act (PPACA).

Physician Quality Reporting and Electronic Prescribing Initiatives

The final rule allows eligible providers and group practices who wish to voluntarily participate in the CY 2012 Physician Quality Reporting System (PQRS) to submit data by the following methods: (1) claims-based reporting mechanism, (2) registry-based reporting system, and (3) via an electronic health record-based reporting tool. CMS will include 26 new quality measures, including a core measure set on cardiovascular condition prevention. CMS finalized its proposal to consolidate the two current group practice reporting options and defined a "group practice" as one that has 25 or more eligible professionals. Eligible professionals and group practices that participate in the reporting system can qualify for an incentive payment equal to 0.5 percent of the total estimated allowed charges for covered services furnished by the group or eligible professional. The final rule similarly establishes incentives and criteria for providers to participate in e-prescribing. Providers wishing to participate in CY 2012 should self-nominate by January 31, 2012.

Comments to the final physician fee schedule rule are due January 31, 2012.

For more information about this final rule with comment period or assistance in drafting and submitting comments to CMS, please contact Donna S. Clark, at or 713.646.1302 or Lynn Sessions at or 713.646.1352.

top of page

Final Outpatient PPS Rule

CMS issued its final rule for the Outpatient PPS (OPPS) for CY 2012. The rule generally was either positive or neutral news for hospitals. Highlights of the final rule include:

• A fee schedule increase of 1.9 percent for hospitals that publicly report certain quality data. The change reflects a market basket increase of 3 percent, with a PPACA-mandated 1 percent productivity reduction and 0.1 percent market basket reduction. Ambulatory surgery center payment rates will increase by 1.6 percent in CY 2012.
• PPACA mandated a study of costs for PPS-exempt cancer hospitals. As a result of the study, certain exempt cancer hospitals will receive an additional payment to equalize their payment-to-cost ratio to the weighted average of other hospitals. This will result in an increase of approximately $71 million, or 11.3 percent. When originally proposed, budget neutrality adjustments would have required a 0.7 percent decrease to hospitals’ outpatient reimbursements to offset the cancer hospital payment increase. However, due to certain adjustments by CMS, the reduction was only 0.2 percent in the final rule.
• CMS finalized three additional quality measures out of the ten proposed for the Hospital Outpatient Quality Reporting program.
• CMS also finalized the process by which physician-owned hospitals may request an exception to the prohibition on facility expansion under PPACA.
• Finally, the committee that will review supervision requirements for outpatient therapeutic services was modified, indicating that it is likely new supervision requirements will be issued.

CMS will accept comments on issues open for comment if received by January 3, 2012, and will respond to them in the CY 2013 rule.

For more information about this final rule with comment period or assistance in drafting and submitting comments to CMS, please contact Steven A. Eisenberg, or 216.861.7903.

top pf page

Final Home Health PPS Rule

CMS issued the final rule establishing the home health PPS rates (HH PPS) for CY 2012. Changes to the HH PPS rates, wage index and case-mix coding adjustments will result in a significant decrease in overall payments to home health agencies (HHAs) in CY 2012. The following paragraphs highlight the main features of the HH PPS changes.

PPACA Reduction to Home Health Payments for CY 2012

In a press release, CMS stated that the final rule reflects its efforts to maintain a balance between supporting Medicare beneficiary access to home health services and improving payment accuracy. A primary feature of the final rule is the one percent reduction to the CY 2012 home health market basket amount required under PPACA. As a result, the overall payment update for HHAs in CY 2012 is 1.4 percent. The HH PPS rates also were reduced to address continuing growth in the "nominal" aggregate case-mix, or that portion of growth in HH costs that are not related to changes in patients’ health status. The reduction in HH PPS rates resulting from nominal case-mix growth is 3.79 percent for CY 2012, with an additional reduction of 1.32 percent for CY 2013. Applying all market basket, wage index and case-mix adjustments will result in an estimated 2.3 percent, or $430 million, overall reduction in HH PPS payments for CY 2012.

Budget-Neutral Changes to Case-Mix Components and Weighting

In addition to payment updates, the final rule makes changes to the HH PPS methodology by removing two hypertension codes from the case-mix system, lowering payment for high therapy episodes, and recalibrating the case-mix weights to ensure that the changes result in a budget-neutral aggregate change.

Flexibility for Certifying Eligibility for Home Health Services

Current CMS policy requires a participating physician or permitted nonphysician practitioner (NPP) to have a face-to-face encounter with a patient prior to certifying the patient’s eligibility for the Medicare home health benefit. Under the HH PPS final rule, CMS will allow a physician who cared for a patient in an acute or post-acute facility to inform the certifying physician of his or her encounters with the patient, similar to that which is currently allowed for NPPs to satisfy the face-to-face encounter requirement.

Changes to Quality Measures, OT Policy and Other Rates

The final rule for HH PPS in CY 2012 makes additional changes to the home health quality reporting measures, first required in 2007. Additionally, the rule provides further clarification of the occupational therapy (OT) policy regarding when OT is considered a dependent service versus a qualifying service under the Medicare home health benefit. Finally, the rule provides updates to the national standardized 60-day episode rates, national per-visit rates, low utilization payment amount and outlier payments.

For more information, please contact John S. Mulhollan, or 216.861.7484.

top of page

Final ESRD PPS and Quality Rules

CMS issued the final rule that updates payment policies and rates for dialysis services furnished to Medicare beneficiaries under the end-stage renal disease PPS (ESRD PPS) during CY 2012. CMS is projecting that payment rates for dialysis treatments will increase by 2.1 percent, due to a market basket increase of 3 percent, reduced by a productivity adjustment of 0.9 percent. The final rule made changes and clarifications to the ESRD PPS outlier policy and low-volume policies, among other items. CMS projects that payments to ESRD facilities in 2012 will reach $8.3 billion.

The final rule also includes provisions to strengthen the ESRD Quality Incentive Program (QIP), by reducing payments to dialysis facilities if they do not achieve a threshold performance score on measures that assess the quality of dialysis care. Payments will be reduced on a sliding scale basis, up to a maximum of two percent, to ensure that reductions are proportionate to the extent a facility’s total performance score fails to meet the minimum total performance score needed to avoid a payment reduction.

CMS will measure facility performance on two measures for the payment year (PY) 2013 program -- an anemia management measure and a hemodialysis adequacy measure. The performance standard is the lesser of:

• The facility’s own performance in the year that was selected for purposes of the ESRD PPS based on lowest per patient utilization (CY 2007); or
• A standard based on the national performance rates in a selected period (CY 2009).

CMS will weight each of the measures at 50 percent and use CY 2011 as the performance period.

CMS also finalized three clinical measures and three reporting measures for the PY 2014 ESRD QIP. The three clinical measures are the anemia management measure, dialysis adequacy measure and the type of vascular access measure. The three reporting measures are whether a facility:

• Reports dialysis infection events to the Centers for Disease Control and Prevention’s National Healthcare Safety Network;
• Surveys patients to learn about their experience of care; and
• Monitors patients for abnormalities in phosphorus and calcium levels.

CMS will score facilities on both achievement and improvement for each of the three clinical measures. A facility’s achievement score will be determined by comparing its score to facilities in the 15th to 90th percentiles during the baseline period. A facility’s improvement score will be based on where the facility’s performance falls on a scale ranging between the facility’s performance during the baseline period, and the 90th percentile (the national benchmark).

Scores from the three clinical measures will be weighted equally to make up 90 percent of the facility’s total performance score. Scores from the reporting measures will be weighted equally to make up the remaining ten percent of the facility’s total performance score. If a facility is eligible for only one type of measure, that measure will comprise 100 percent of the total performance score. The sliding scale analysis of performance scores discussed above will determine the PY 2014 reductions.

Moreover, facilities will be required to display certificates containing their performance scores prominently in the facility. ESRD QIP performance information also will be published online at CMS’ Dialysis Facility Compare website.

For more information, please contact David L. Schick, or 407.649.4084 or Jessica L. Captain, or 407.649.4025.

top of page

PATIENT CARE OMBUDSMAN IN BANKRUPTCY: WHEN IS IT NECESSARY?

Patient care ombudsmen are sometimes appointed to monitor the care provided to patients of medical facilities that have filed for bankruptcy. Courts, however, weigh a number of factors in determining whether an ombudsman should be appointed, and whether the patients and the facility’s creditors would benefit from the appointment. The Bankruptcy Court for the District of South Carolina, which is overseeing the bankruptcy of Bamberg County Memorial Hospital, recently analyzed these factors in the case of In re Bamberg County Memorial Hospital and concluded that a patient care ombudsman was not necessary in that case.

Bamberg County Memorial Hospital, located in Bamberg, South Carolina, filed for Chapter 9 bankruptcy in June 2011. On the same day, the hospital requested that a patient care ombudsman not be appointed because it was not necessary for the protection of patients. If a debtor is in the healthcare business and files for bankruptcy, a patient care ombudsman must be appointed under section 333(a)(1) of the Bankruptcy Code no later than 30 days after filing for bankruptcy to monitor the quality of patient care and to represent the interests of the debtors’ patients unless the court finds that the appointment is not necessary for the protection of patients under the specific facts of the case. Section 333 was added to the Bankruptcy Code in 2005 to protect patients who are not necessarily creditors and do not otherwise have a voice in a bankruptcy case. Prior to the 2005 addition, patients did not have a role in healthcare bankruptcy cases even though the patients have a stake in the case. Given the implications to patients, Congress saw fit to give patients a role.

The Bankruptcy Court in the Bamberg County Memorial case analyzed a number of factors and concluded that an ombudsman was not necessary. First, the hospital did not file bankruptcy because there were allegations of deficient patient care, but rather due to a shortfall of revenue to pay debts. Second, the hospital already was subject to monitoring by a number of governmental agencies, and it was in compliance with all regulations. In fact, the court found that the hospital had internal procedures in place for handling complaints, and the patients were informed in writing of their rights. Third, since its inception in 1952, there was no evidence that the hospital had a history of issues with regard to patient care. Plus, the hospital was exceeding national staffing ratios. Fourth, because the hospital rendered medical and surgical care on an inpatient, outpatient and emergency room basis, the average length of stay was three to four days and, therefore, the level of patient dependency was low. Finally, on an economic level, given the level of internal control and governmental oversight, the services of a patient care ombudsman would have been redundant.

Courts will look at a number of factors to determine whether a patient care ombudsman should be appointed. In this regard, it is important for hospitals to be keenly aware of their patient safety guidelines to determine whether they are in compliance with local, state and federal standards. If there is reason to think that a healthcare debtor is not in compliance with its regulatory responsibilities or the court otherwise finds that patients' interests are in need of protection, the court will likely appoint an ombudsman to speak on behalf of patients.

For more information, please contact Marc E. Hirschfield, or 212.589.4610; Marc Skapof, or 212.847.2864 or George Klidonas, or 212.589.4625.

top of page

CALIFORNIA MOVES TO ELIMINATE MANUAL LIFTING OF PATIENTS IN ACUTE CARE FACILITIES

In January 2012, California will join six other states that have eliminated or restricted the use of manual lifting of patients in hospitals. Under the terms of SB 1136, signed by Governor Brown on October 7, 2011, general acute care facilities must replace manual lifting with the use of powered transfer and lifting devices and trained lift teams. No employee may be disciplined for refusing to lift, reposition or transfer a patient due to concerns about patient or worker safety, or about the lack of a trained lift team or lifting equipment.

California hospitals should expect to see employee demands in connection with the new law, particularly from nurses and groups representing them. The law provides that patient lifts and "mobilization" shall be observed and directed by registered nurses. This may trigger calls to further reduce patient/staffing ratios to accommodate the response times of lift teams. In addition, a hospital may require a nurse to participate in patient handling "in accordance with the nurse’s job description and professional judgment." This vague standard likely will result in discussions, either at the bargaining table or in contract grievances, about what it means to "lift, reposition or transfer" a patient. Finally, the new law may affect hospitals’ obligations reasonably to accommodate nurses and other employees whose physical limitations render them unable to assist with patient handling.

For more information, please contact Ellen J. Shadur, or 310.442.8816.

top of page

HOLIDAY PUBLICATION NOTICE

Please be advised that the Health Law Update will not publish Thursday, November 24, due to the Thanksgiving Day holiday. We will resume publication Thursday, December 8.

top of page

EVENTS CALENDAR

November 17

Cleveland partner Tom Campanella will speak on "Health Care Policy Update" at the meeting of the Healthcare Executive Association of Northeast Ohio in Cleveland, Ohio.

December 1

Houston partner Susan Feigin Harris will speak at a webinar on "Follow the Money: Understanding the Payment Implications of the Final ACO Regulation" sponsored by the American Health Lawyers Association.

top of page

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the Firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience. © 2011 Baker & Hostetler LLP