News / Resources

Topics covered in today’s issue of the Health Law Update include:

• Treasury and IRS Offer Interim Guidance on Community Health Needs Assessment
• HHS Publishes Long-Awaited Guidance on Insurance Exchanges
• CMS Publishes Proposed Physician Fee Schedule Rule
• CMS Publishes Proposed Rule Regarding Hospital Outpatient Prospective Payments and Ambulatory Surgical Center Payments
• CMS Announces Demonstration Project on Complex Diagnostic Lab Tests
• Employers Be Forewarned: Medicare Part D Annual Notices Must Be Provided Earlier
• Reminder: Deadline for Advanced Diagnostic Imaging Accreditation
• Are You Ready for a Data Breach?

TREASURY AND IRS OFFER INTERIM GUIDANCE ON COMMUNITY HEALTH NEEDS ASSESSMENT

The Patient Protection and Affordable Care Act of 2010 (PPACA) imposes several new mandates on § 501(c)(3) organizations that operate hospital facilities. One is the requirement that, every three years, the organization perform a “community health needs assessment” (CHNA) and adopt an implementation strategy to meet the needs identified in the CHNA. The CHNA and implementation strategy must be done for each hospital facility operated by the organization, must take into account input from persons representing the broad interests of the community and must be made widely available to the public. The mandate is effective for taxable years beginning after March 23, 2012. Thus, affected § 501(c)(3) organizations with a calendar year must satisfy the mandate by December 31, 2013.

In Notice 2011-52 (Notice), released July 7, 2011, the Treasury Department and Internal Revenue Service give interim guidance on the CHNA mandate and related implementation strategy in advance of the release of proposed regulations. The guidance covers several topics, such as (1) how and when a CHNA is considered conducted; (2) who are persons representing the broad interests of the community; and (3) what it means to make the CHNA widely available to the public. Taxpayers are permitted to rely on the guidance in the Notice with respect to any CHNA made widely available to the public and any implementation strategy adopted on or before the date that is six months after the time at which additional guidance is issued. The Notice also seeks comments on the guidance offered in the Notice to be used in crafting the proposed regulations.

The charitable hospital community has been anxiously awaiting this type of guidance, as there is a $50,000 excise tax for each failure of a hospital facility to meet the CHNA mandate. The Notice makes clear that this means an organization with multiple hospital facilities can face multiple excise taxes for a given year.

For more information, please contact Christopher J. Swift, or 216.861.7461, or Michael K. Gall, or 216.861.7842.

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HHS PUBLISHES LONG-AWAITED GUIDANCE ON INSURANCE EXCHANGES

On July 11, 2011, the U.S. Department of Health and Human Services (HHS) issued a proposed rule on the establishment of health insurance exchanges and qualified health plans. Published in the July 15, 2011, Federal Register, the proposed rule identifies (1) the requirements states must meet if they establish and operate a health insurance exchange; (2) the requirements health insurance issuers must meet to offer qualified health plans through an exchange; and (3) the standards employers must meet to participate in the Small Business Health Options Program. The proposed rule also discusses the enrollment process for moving qualified individuals into qualified health plans offered on an exchange. HHS invites comments to the proposed rule through September 28, 2011.

Please contact your Baker Hostetler contact or Baker Hostetler’s Health Care Reform Team with any questions about this proposed rule or for assistance in drafting and submitting your comments to HHS.

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CMS PUBLISHES PROPOSED PHYSICIAN FEE SCHEDULE RULE

The Centers for Medicare and Medicaid Services (CMS) has issued a proposed rule addressing changes to the physician fee schedule and other Medicare Part B payments for services to be furnished in calendar year (CY) 2012. Pursuant to the statutory formula used to determine the physician payment update imposed by Congress in 1997, payment under the physician fee schedule would be reduced 29.5 percent. As was the case in prior years, however, it is expected that Congress will intervene to prevent the proposed reduction. The proposed rule addresses several payment issues, including the following:

Potentially Misvalued Services

The proposed rule discusses CMS’s progress in identifying and reviewing potentially misvalued codes, a task undertaken annually on a historical basis and required with respect to seven specific categories of codes by PPACA. The categories specified in PPACA include codes with the fastest growth and codes established for new technology.

Multiple Procedure Payment Reduction

The proposed rule also would expand the multiple procedure payment reduction (MPPR) policy, pursuant to which payments are reduced for second and subsequent procedures on the same day, to the professional component of advanced imaging services consisting of CT, MRI and ultrasound tests. The MPPR already applies to the technical component of these tests.

Additional Covered Services

CMS proposes to add smoking cessation services to the list of covered telehealth services. The rule also addresses the annual wellness exam mandated by PPACA.

Quality Reporting Initiatives

A significant portion of the proposed rule is devoted to physician quality reporting and incentive payment issues. For example, in addressing eligible participants under the Physician Quality Reporting System, one proposal involves the definition of a group practice. The rule proposes to define group practice as a taxpayer identification number (TIN) to which at least 25 eligible professionals have assigned billing rights, a significant increase over the number applicable in the 2011 reporting year, which was only two or more eligible professionals. A process for group practices to participate in the reporting system is also set forth in the proposed rule. 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 professional. The rule also sets forth the proposed 2012 quality measures.

Electronic Prescribing Incentives

The proposed rule addresses payment incentives for electronic prescribers, setting forth the criteria for being a successful electronic prescriber and reporting requirements to participate in the incentive program.

Comments to the proposed rule are due by August 30, 2011.

For more information about this proposed rule or for assistance in drafting and submitting your comments to CMS, please contact Donna S. Clark, or 713.646.1302.

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CMS PUBLISHES PROPOSED RULE REGARDING HOSPITAL OUTPATIENT PROSPECTIVE PAYMENTS AND AMBULATORY SURGICAL CENTER PAYMENTS

On July 18, CMS published a proposed rule governing hospital outpatient prospective payments, ambulatory surgical center (ASC) payments and hospital value-based purchasing (VBP) program measures for CY 2012. Highlights of the proposed changes contemplated by the rule follow below.

Hospital Outpatient Rate Increases

The 2012 outpatient department fee schedule for hospital outpatient departments, other than cancer hospitals, will increase by 1.1 percent for CY 2012 for hospitals reporting quality data. Hospitals that do not report quality data will experience a 0.9 percent decrease. CMS computed the rate by using a market basket increase of 2.8 percent plus a 0.2 percent increase to maintain budget neutrality for community mental health center partial hospitalization rate changes less a productivity adjustment and a minor adjustment to comply with PPACA and a 0.6 percent reduction to ensure that the proposed cancer hospital payment adjustment will be budget neutral.

CMS proposes to adjust the outpatient department fee schedule payments to cancer hospitals in 2012 for cancer hospitals with a payment-to-cost ratio that is below the weighted average of other cancer hospitals. The aggregate net payment increase to cancer hospitals for 2012 is estimated to be approximately nine percent.

Finally, ASC payments will increase by 0.9 percent for 2012.

Outpatient Therapy Supervision

A process for providers to submit requests for changes in the minimum required level of supervision is being proposed for individual outpatient therapeutic services.

Quality Measures

CMS plans to add nine quality measures to the current list of 23 being reported by hospital outpatient departments, thus bringing the total number of measures to be reported in 2012 for determining payment in 2014 to 32. These new quality measures include:

• National Healthcare Safety Network Healthcare Associated Infection Measure for Surgical Site Infection;
• Five diabetes care chart-abstracted measures;
• Cardiac rehabilitation patient referrals from outpatient settings based upon chart-abstracted data;
• Use of a safe surgery checklist; and
• Hospital outpatient department volume for selected surgical procedures.

The agency also proposes applying new weights to the four quality domains for 2014. Additionally, changes to the Electronic Health Record Incentive Program addressed by the proposed rule include allowing hospitals to continue reporting clinical quality measures via attestation or, alternatively, participate in a proposed Electronic Reporting Pilot program.

Quality measures added to ASC payment determinations for 2014 based on data from a 2012 reporting period include (1) patient fall in the ASC; (2) patient burn; (3) hospital transfer/admission; (4) wrong site, side, patient, procedure or implant; (5) prophylactic IV antibiotic timing; (6) appropriate surgical site hair removal; (7) selection of prophylactic antibiotic—first or second generation cephalosporin; and (8) surgical site infection rate. Quality measures based on the use of a safe surgery checklist and volumes of selected surgical procedures would be added for 2015.

CMS also proposes adding a measure for influenza vaccination coverage among healthcare personnel to the payment determinations for hospital outpatient departments in 2015 and for ASCs in 2016.

Hospital Value-Based Purchasing Changes

Under the VBP program, CMS will make value-based incentive payments to hospitals that meet certain performance standards for discharges occurring on or after October 1, 2012. A new measure will be added to the existing list of 13 hospital VBP measures for the timely removal of urinary catheters post surgery. New domains for efficiency and outcomes will expand the total number of domains from two to four.

For 2014 payment determinations, CMS plans to adopt a nine-month performance period (April 2012 to December 2012) to measure the clinical process of care and patient experience of care domains and a seven-month performance period (March 2012 to September 2012) for hospital-acquired conditions and Agency for Healthcare Research and Quality measures.

For 2014, CMS proposes to weight the VBP measure domains as follows: outcome domain—30 percent; clinical process of care domain—20 percent; patient experience of care domain—30 percent; and efficiency domain—20 percent. For 2013, the clinical process of care domain’s 12 measures are weighted 70 percent and the patient experience of care domain is weighted 30 percent.

Other Items of Note

The proposed rule includes provisions, which largely track the statutory language in PPACA, implementing the process for physician-owned hospitals to expand the number of beds, procedure rooms and operating rooms.

Finally, a proposal to reduce the types of outpatients who must be notified that the hospital does not have 24/7 on-site physician coverage was included. This proposal also would permit notice to be provided to emergency department patients through a conspicuous posting.

Comments on the proposed rule must be submitted by August 31, 2011. For more information or assistance with submitting comments on the proposed rule, please contact Robert M. Wolin, or 713.646.1327.

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CMS ANNOUNCES DEMONSTRATION PROJECT ON COMPLEX DIAGNOSTIC LAB TESTS

On July 5, 2011, CMS issued a notice of the Treatment of Certain Complex Diagnostic Laboratory Tests Demonstration (Demonstration) mandated by PPACA. The Demonstration is directed at hospital-based and independent labs that perform “complex diagnostic” tests, such as gene protein expression, topographic genotyping or cancer chemotherapy sensitivity assay, for which there has been determined not to be an alternative test having equivalent performance characteristics. The Demonstration is for a two-year period, beginning on January 1, 2012, subject to the $100 million limit, and will allow direct payment to a lab for these complex diagnostic tests. CMS expects no more than nine entities to be eligible to meet the criteria.

Under current practice, any lab tests ordered within 14 days of a patient’s discharge from a hospital are considered part of the bundled Medicare payment as part of that associated hospital stay and are paid only to the hospital where the patient was admitted. The hospital must bill Medicare for the lab test, and the hospital then pays the lab if the test was furnished under arrangement. Under the Demonstration, the lab may bill Medicare directly for complex lab tests ordered within 14 days of discharge.

Labs choosing to bill Medicare directly under the Demonstration also must obtain temporary codes assigned by CMS for the complex diagnostic lab tests. CMS requires that information about utilization, the lab’s CLIA certificate number, current codes used and costs be submitted to CMS by August 1, 2011, for labs wishing to participate in the Demonstration. The Demonstration is intended to test the impact of direct lab payments on Medicare costs and the quality of the complex tests.

Should you require any assistance with the Demonstration project, please contact Donna Clark at or 713.646.1302, or Lynn Sessions at or 713.646.1352.

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EMPLOYERS BE FOREWARNED: MEDICARE PART D ANNUAL NOTICES MUST BE PROVIDED EARLIER

Each year, employers (and other plan sponsors) that provide prescription drug coverage are required to provide Medicare-eligible participants with notices of creditable or noncreditable coverage regarding their prescription drug coverage. This Medicare Part D annual notice is required to be provided prior to the annual enrollment period for Medicare Part D (Medicare’s prescription drug coverage program). Among the many changes instituted by healthcare reform last year, the annual enrollment period for Medicare Part D plans was moved forward from November 15 (through December 31) to October 15 (through December 15). As a result, beginning this year, employers (and other plan sponsors) providing prescription drug benefits to Medicare-eligible participants must disclose to those participants whether their prescription drug coverage is creditable or noncreditable prior to October 15. Previously, these notices had to be provided each year prior to November 15.

As a bit of background, creditable coverage pays as much as or more than the standard Medicare Part D prescription drug plan, and participants with such coverage can enroll in Medicare Part D plans after the initial enrollment period without premium penalties. Noncreditable coverage pays less than the standard Medicare Part D prescription drug plan, and participants with such coverage may still enroll in Medicare Part D plans but may face significant premium penalties if enrolling after the initial enrollment period. Due in part to this potential of premium penalties, employers (and other plan sponsors) have been tasked, by law, with notifying their Medicare-eligible prescription drug plan participants as to whether their prescription drug coverage is creditable.

The practical effect of moving the start of the Medicare Part D annual enrollment period to October 15 is the acceleration of the planning process associated with delivering these creditable and noncreditable coverage notices. Employers (and other plan sponsors) should begin planning now for this shortened timetable by determining whether coverage for the upcoming year is creditable and preparing the notices of creditable coverage and/or noncreditable coverage. Also, many employers (and other plan sponsors) are accustomed to delivering these creditable and noncreditable coverage notices with their open enrollment materials; however, the new October 15 deadline will require such employers (and other plan sponsors) to consider separately delivering the creditable and noncreditable coverage notices ahead of other open enrollment materials or, alternatively, moving up their entire open enrollment schedule.

For further information regarding the accelerated Medicare Part D notice requirements, please contact Jennifer A. Mills at or 216.861.7874, or Chad W. Makuch at or 216.861.7535.

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REMINDER: DEADLINE FOR ADVANCED DIAGNOSTIC IMAGING ACCREDITATION

The Medicare Improvement for Patients and Providers Act of 2008 requires accreditation of physicians, other practitioners and independent diagnostic testing facilities that bill for the technical component of advanced diagnostic imaging tests by January 1, 2012. This sounds like quite some time away but CMS estimates that the average time to become accredited after the provider submits all the necessary application requirements is as much as five months, when only one location is involved. A more complex organization with multiple locations could take longer.

Specifically, physicians and other providers who conduct MRIs, CT scans and nuclear medicine imaging, such as PET scans, must be accredited by the American College of Radiology, Intersocietal Accreditation Commission or The Joint Commission, to continue to bill for the technical component for Medicare beneficiaries. Hospitals are excluded, but physician practices and diagnostic imaging centers must be accredited.

If you need assistance in accrediting your practice, please contact Lynn Sessions at or 713.646.1352, or Donna Clark at or 713.646.1302.

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ARE YOU READY FOR A DATA BREACH?

Join us for a Webinar on Wednesday, August 10, 2011
1:00 - 2:00 PM EST

With multimillion-dollar penalties assessed against healthcare institutions and the exponential increase in the use of mobile technology within the healthcare industry, HIPAA/HITECH regulations have created a minefield of compliance issues. This informative webinar, which highlights insights from data breach experts Jerry Ferguson, Lynn Sessions, John Mulhollan and Craig Hoffman will assist in-house counsel, compliance, risk management and IT officers in forming a strong response to a data breach incident. In addition, our speakers will offer timely, practical tips and processes that can help covered entities and business associates prevent a data breach in the first place.

REGISTER NOW!

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