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Insights and Trends

Headlines from the Hill: July Edition

Stay ahead of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.

In this month’s edition you will find:

Inpatient Rehabilitation Review Choice Demonstration: Update Amid August Implementation.

The review choice demonstration (RCD) subjects all inpatient rehabilitation facilities (IRFs) within the selected state to 100% medical review of their traditional Medicare claims. First proposed at the end of 2020, the agency paused implementation of the demonstration during the COVID-19 public health emergency (PHE).

Last month, CMS announced that the IRF RCD would begin in Alabama on Aug. 21, 2023, and then expand to additional states at an undetermined time.

Although CMS was commended for delaying the demonstration until after the end of the PHE, as well as shortening the timeframe for pre-claim determinations, it remains widely refuted by post-acute providers across the nation. Reasons for this backlash include:

  • There are numerous ongoing and systematic shortcomings in Medicare contractors’ reviews of IRF claims that lead to a high rate of erroneous denials. Medicare contractors consistently lack the clinical expertise and familiarity with IRF services and rules to properly review IRF claims.

  • Within the past few months, it has been noted that numerous Medicare contractors who have conducted post-payment reviews have denied IRF claims based on incorrect and/or outdated coverage rules. As CMS knows, these erroneous IRF denials have historically led to a backlog of appeals at the Administrative Law Judge level of appeal. In addition, the scope and scale of the demonstration is unwarranted and threatens access to care.

  • CMS is subjecting 100% of claims to review for at least six months. This places an excessive and cumbersome burden on hospitals at a time when they continue to struggle to adjust to the new normal of operations following the PHE. IRFs may not be able to provide the resources necessary to process all these claims and may need to limit the number of traditional Medicare patients admitted to their hospitals as a result of this demonstration.

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Disappointment in CMS Outpatient Prospective Payment System (OPPS) Proposed Rule Update

Similar to the FY 2024 IPPS rule update - CMS proposed a disappointing OPPS Proposed rule update of 2.8 percent (3.0 percent market basket minus 0.2 productivity adjustment).

To help spark change in CMS’ decision, organizations continue to highlight the impact of inflation and other operating pressures, such as the workforce shortage, that the update ignores, and demand that CMS adopt a one-time forecast error adjustment to the operating update based on the 3.0 percentage point documented shortfall in the FY 2022 market basket. 

Among other data points, the Federation of American Hospitals (FAH) and American Hospital Association (AHA) will highlight their analysis of the shortcomings of the Bureau of Labor Statistics’ Employment Cost Index, which has not adequately captured the shift from salaried employees to the extraordinary growth in labor costs associated with hospitals’ increasing reliance on nursing personnel that are contracted through staffing agencies during a time of labor supply shortage.

Beyond the payment update, the heightened Congressional scrutiny and pending legislation on the hospital price transparency program appear to have moved CMS to propose a number of changes focusing on various facets of the program. Most are focused on hospitals’ online display of standard charges (e.g., mandating use of new CMS templates) and compliance enforcement (e.g., CMS publication of compliance actions against hospitals, outcomes, and notifications sent to health system leadership.)  Proposed policies would be effective January 1, 2024, with enforcement beginning March 1, 2024.

    • Payment Update:  Based on the proposed update of 2.8 percent and other changes in the rule, CMS estimates total OPPS payments will be approximately $88.4 billion, an increase of approximately $6.0 billion compared to CY 2023.  Payments to taxpaying hospitals are estimated to increase 3.4 percent.

    • Inpatient-Only (IPO) List: CMS did not propose to remove any services.

    • Intensive Outpatient Program (IOP):  CMS is proposing to establish an Intensive Outpatient Program– a distinct and organized outpatient program of psychiatric services for individuals who have an acute mental illness or substance use disorder, consisting of a specified group of behavioral health services paid on a per diem basis under the OPPS or other applicable payment system when furnished in hospital outpatient departments, CMHCs, FQHCs and RHCs.  CMS proposes two IOP APCs for each provider type: one for days with three services per day and one for days with four or more services per day.

    • Dental Services:  CMS is proposing Medicare payment rates under the OPPS for approximately 230 dental codes to align with the dental payment provisions in the CY 2023 Physician Fee Schedule final rule by assigning them to clinical APCs.

    • Quality:  No new measures beyond what was proposed in the IPPS rule.

    • Ambulatory Surgery Centers (ASCs):  Rate update of 2.8 percent resulting in estimated payments of $6 billion. To address patient access issues for dental services under anesthesia in the ASC setting, CMS is proposing to add 26 separately payable dental surgical procedures to the ASC Covered Procedures List (CPL) and 78 ancillary dental services to the list of covered ancillary services.

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Medicare Payment Advisory Commission (MedPAC): Addressing IRF coverage and payment issues.

The report is released annually and fulfills the Commission’s legislative mandate to evaluate Medicare payment issues and make recommendations to the Congress.

Following a thorough review of the report, most of the relevant issues were captured in Chapter 10 - Mandated report: Evaluation of a prototype design for a post-acute care prospective payment system.

This chapter represents the conclusion of MedPAC’s work on a unified post-acute care (UPAC) prototype, as mandated by the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014. AMRPA has engaged extensively with MedPAC and other stakeholders as MedPAC (and CMS) shifted their positions on a UPAC coverage and payment system over the past nine years.

The June chapter and Commission discussions during the 2022/2023 cycle, however, indicate that MedPAC may pursue other PAC reforms in upcoming cycles, with a potential renewed focus on the IRF benefit. MedPAC’s next public meeting cycle will begin in September 2023, and AMRPA will assess whether and how the UPAC prototype work shapes MedPAC’s future recommendations related to IRF coverage and payment issues.

Key takeaways from the report include:

    • MedPAC’s unified PAC prototype chapter was generally aligned with its past analyses and Commissioner discussion and differs from the CMS prototype in significant ways (for example, excluding numerous setting and patient-based adjusters).

    • In addition to outlining MedPAC’s preferred prototype components, the chapter also makes several broader policy recommendations, including changes to the way that activity not attempted (ANA) codes are currently reported and assigned.

    • IRFs would face the highest payment cuts (-17%) under MedPAC’s prototype, followed by LTCHs (-6%) and HHAs (-3%). SNFs are estimated to see a 7% payment increase across the board.

    • MedPAC spends considerable time discussing the changes in the PAC landscape since 2014, ranging from both policy changes (e.g., significant payment reforms in the LTCH, SNF, and HHA programs) and the impact of the COVID-19 PHE. Due in large part to the payment reforms that have already been made and the “controversial” nature of other “companion” reforms that would be needed to transition to a UPAC, MedPAC does not ultimately recommend that policymakers implement a UPAC payment system. Instead, MedPAC recommends that policymakers consider “smaller-scale site-neutral policies” that would address some of the perceived “overlap” in the patients treated in different settings.  

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Prior Authorization Rule: Bipartisan Congressional members urge CMS to change proposed rule.

CMS’ December proposal would require Medicare Advantage plans and other public payers, such as those managing state Medicaid plans, to implement an electronic process for approving treatments.

The regulation was expected to be less expensive for the government than the legislation. A bipartisan group of legislators sent a letter to CMS calling on the agency to incorporate provisions from the Improving Senior’s Timely Access to Care Act into its final rule – legislation that is also supported by the American Hospital Association (AHA).

The Improving Senior’s Timely Access to Care Act aims to expedite the prior authorization process used by Medicare Advantage Plans though:

  • Real-time prior authorization for routine matters
  • A 24-hour deadline for Medicare Advantage plans to answer prior authorization requests for “urgently needed care”.
  • More detailed transparency metrics

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