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Medicare Reform Advisor, February 24, 2004

Medicare Reform Advisor, February 24, 2004

February 24, 2004
Vol. 1, No. 3

Weekly news and analysis


Health information leaders hope to change section 503

  1. Prediction: Physician payments will drop again in '06

  2. Exec Corner

  3. Mutual of Omaha looking for change in law

  4. Providers: How to sign up for repayment plans

  5. Pharma: Expect shift in sales focus to hospital pharmacists

  6. Pharmacy group challenges drug card program

    to Medicare Reform Advisor


    President Bush's nominee for CMS Administrator, Mark McClellan, appears to be unopposed and his appointment should win "hasty" approval by the Senate, predicts Thomas Gustafson, acting director, CMS. But physician groups who want to start making their appeals for regulatory changes to the nominee, now head of the Food and Drug Administration, may have to cool their heels for a month or two. The Senate's version of "hasty" means he'll probably be approved by the Senate by the end of March or mid-April, Gustafson said.

    --Report from Correspondent Sue Darcey

    New regulation possible for home health


    Send letters to Include tips, ideas, questions, and problems related to Medicare reform. The editors reserve the right to edit letters for clarity.


    February 25-CMS Administrator nominee Mark McClellan, Sen. Kennedy (D-MA), and other notables are expected to speak at a conference on Medicare reform in Washington, DC. Medicare Reform Advisor will have a report in the March 2 issue.

    April 1-Attention physicians, pharmacies, hospitals, home health agencies, and durable medical equipment suppliers: Medicare will pay for Immune Globulin delivered intravenously to patients in their homes starting on this day. Once the physician prescribes the drug, Medicare will pay only for the drug's cost. The drug must be medically appropriate as a treatment for primary immune deficiency diseases.

    © 2004 HCPro, Inc.


    Prediction: Physician payments will drop again in '06
    Physicians who were hoping that passage of the MMA would boost their payments beyond 2005 should think again. Because the Act did not amend the way sustainable growth rate (SGR) targets are calculated by CMS, "payments under the Physician Fee Schedule will most certainly go down in 2006" unless Congress enacts a legislative fix before then, Marc Hartstein, acting director of CMS's Division of Practitioner Services told a physician's advisory panel Feb. 23. Some members of the Practicing Physicians Advisory Council suggested that the agency remove the ever-escalating costs of drugs from the equation, or recalculate the formula to take into account that most physicians do not inject drugs as part of the services they provide to Medicare patients. But while the SGR formula did not change under MMA and must take into account all "items and services" provided in a doctor's office, Hartstein did hint that the HHS Secretary has the flexibility to determine what those items and services are.

    --Report from Washington Correspondent Sue Darcey

    Exec Corner: Software could ease quality compliance

    Several new software applications have hit the market to help hospitals identify their high-risk patient populations, such as patients diagnosed with heart attack, heart failure, and pneumonia--the three core-measure categories that are part of Medicare's quality project under the MMA. The latest software, announced Friday by MercuryMD, eliminates the time-consuming process of manually compiling and maintaining lists of patients with specific conditions, according to Alan Ying, the company's chief executive officer. The software, called SmartCare, builds profiles using real-time clinical-data elements, such as demographics, lab values, medications, diagnoses, or microbiology and pathology results. Hospitals that fail to submit their quality data to CMS by July 1 will not receive a reimbursement increase in 2005.

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    Contractor Reform Analysis

    Mutual of Omaha looking for change in law

    Mutual of Omaha, a Part A intermediary, may pick a new consulting group to help it convince Medicare officials to rescind a provision in the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) that will affect large health systems and contractors. Until now, providers such as HCA and Tenet that did not want to work with Medicare's prime contractor, BlueCross BlueShield, could choose Mutual of Omaha. But a provision in the MMA will end that practice; providers will instead have to choose from Medicare-approved independent contractors picked by the government.

    But hold on: A consultant has allegedly promised Mutual of Omaha "face-to-face access to CMS [the Centers for Medicare & Medicaid Services]" to pitch to remain the back-up Part A contractor, says a source close to the negotiations. However, contractors cannot talk directly to CMS. "Doing so is a conflict of interest and possible violation of contractor law," says the source. At this point, no one at CMS could confirm whether a Mutual of Omaha official had been in contact with them regarding this issue.

    It's unlikely that the provision will be rescinded regardless of the intermediary's pitch, says New York-based healthcare attorney Tim Brockton. Under the MMA-mandated contractor reforms, Medicare officials will divvy up contracts. "This means providers won't be able to submit their billing globally to one spot; instead, they'll have to deal with more contractors by regions," the source predicts. Expect CMS to finalize the contractor bidding plan to Congress by December. Bidding for these independent contracts starts in 2005.

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    Section 934 limits targeted reviews

    Medicare contractors cannot initiate a targeted review of claims simply because the provider or supplier in question may have taken part in improper billing practices. There are limits now as to the number of these so-called "non-random prepayment reviews" that a contractor may conduct. Contractors could, however, justify a nonrandom prepayment review if they prove that the physician is likely to continue submitting questionable payment errors. Each review must have a stopping-point, and the Department of Health and Human Services (HHS) will draft new regulations outlining what this is. HHS has until December, when the regulation goes in effect, to do so.

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    Inside the Reforms

    Providers: How to sign up for repayment plans

    A physician who pleads "extreme hardship" would receive up to five years to repay Medicare money he or she billed improperly. Contractors must offer these repayment plans any time physicians request them. Follow these nine rules, according to Medicare reform:

    1. Plans can be set from six months up to three years, depending on the case
    2. For extreme hardship cases, the physician has five years
    3. The Department of Health and Human Services (HHS) will analyze the provider's current cost reports to determine hardship and set the payment plan
    4. If the amount to be repaid is more than 10% of what Medicare first paid the provider or supplier for the service or item, then it's a hardship
    5. HHS will look only at the cost reporting periods covered by the most recently submitted reports
    6. But if the contractor has evidence that the provider or supplier may go bankrupt, close their practice, or has committed billing fraud, they have the authority to collect the full balance, including any interest
    7. If a provider wants the contractor to reconsider the overpayment first, the contractor cannot collect a single penny until the decision is made
    8. If the decision favors the contractor, the provider or supplier must pay interest from the date they were notified about the overpayment
    9. If the decision favors the provider or supplier, the contractor must pay them interest at the same rate from the time of notice to the determination

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    Pharma: Expect shift in sales focus to hospital pharmacists

    The Office of Inspector General (OIG) isn't enamored with how pharmaceutical companies use and market their patient-assistance programs, and the agency's view may darken as the 2006 Medicare drug benefit approaches. Look for the OIG to set some tougher boundaries through an advisory opinion, predicts Elizabeth Carder-Thompson, a partner at the law firm of Reed Smith, based in Washington, DC. "If manufacturers are really applying the program consistently [and] evaluating patients based on financial hardship, then they're okay," she says. "Some, though, are really doing more for patients of high-volume prescribers." It's still unknown how these programs will work beginning in 2006 with the drug benefit. For now, some pharma attorneys are advising their clients to tell providers that their copay-assistance programs should be available "as a condition of a purchase." Some companies are retooling their plans to work more with hospitals than physician practices. Marketing directors for at least two companies said they are shifting more sales reps to detail hospital pharmacists.

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    Pharmacy group challenges drug card program

    Medicare officials are learning daily about more reports of fake drug cards. But that's not all they have to worry about. Officials at the Academy of Managed Care Pharmacy (AMCP) are not happy about the drug discount-card program. The list of 209 drug categories that drug-card sponsors must cover is "excessive and unnecessary," says Judith Cahill, the AMCP director. "Private sector formulary managers provide quality drug therapy to patients with far fewer than 209 categories," she said in a statement. AMCP wrote in a letter to CMS this month that a comprehensive prescription drug list should be designed to adequately cover a disease state, not a multitude of chemical entities. This vast array of categories, classes, and subclasses will dilute a card sponsor's ability to gain discounts from aggregate drugs purchased, incurring greater expense for enrollees. What's more, CMS' interim final rule on the drug cards defines a formulary as "the list of specific drugs for which an endorsed sponsor offers negotiated prices." This is not a formulary, Cahill says. "It's a list of discounted medications." AMCP is worried the discount-card design will influence what CMS designs for the Part D outpatient prescription-drug plan starting in 2006.

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    New regulation possible for home health

    Medicare-approved home-health agencies (HHA), including hospital-owned groups, will no longer have to collect and submit their private-pay patients' health outcome assessment information to the Centers for Medicare & Medicaid Services--at least not for the next 15 months. Section 704 of the MMA temporarily suspends the requirement until a new regulation and guidelines are announced by mid-2005. Until then, the Department of Health and Human Services will conduct a study on how HHAs gather and use OASIS data for non-Medicare/Medicaid patients. Smaller agencies may not have to collect this info under the new regulations if the study suggests it's too great a financial burden for them to do so.

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    Health information leaders hope to change section 503
    Part I of II

    One provision of the Medicare Modernization Act of 2003 came as a surprise to most health information management (HIM) professionals. This provision, Section 503, requires the secretary of the Department of Health and Human Services to provide for the addition of new diagnosis and procedure codes on April 1 of each year. Starting in fiscal year 2005, new ICD-9 codes will go into effect twice a year, on April 1 and Oct. 1.

    This part of the bill falls under the new technology section and responds to past criticism that the coding system doesn't reflect the latest medical technology as quickly as it could.

    "I know there's been concern expressed for some time that we don't get new technologies recognized in our coding reimbursement system [quickly] enough so people can be reimbursed for beneficial, but possibly more expensive technologies closer to when they [become] available," says Sue Bowman, RHIA, CCS, director of coding policy and compliance for the American Health Information Management Association (AHIMA) in Chicago.

    Bowman doesn't think the Centers for Medicare & Medicaid Services (CMS) worked out answers to all the questions raised by more frequent ICD-9 code updates. For example, which codes would go into effect on April 1? If the provision is intended just for new technologies, that could limit April 1 new codes to those for which there is a compelling reason to implement earlier than October 1.

    "Or should the April 1 update include all the codes that [the National Center for Vital and Health Statistics] and CMS are ready to go with on the diagnosis and procedure side in time for the April 1 date?" Bowman asks.

    This uncertainty is one reason AHIMA is currently working to see what it can do to amend this section of the bill, but there are several other reasons as well. "There are just a lot of logistical issues," says Bowman. For example, if a hospital has to update its system twice a year rather than just once, and vendors are doing double the work, they will most likely increase their fees. Many vendors aren't prepared for the new ICD-9 codes when they are updated only once a year. "If they don't find out until January or February about changes going into effect April 1, are they going to be ready on time?" asks Bowman.

    Coding manuals could also be problematic. Bowman doubts that code book vendors are going to publish new manuals twice a year. Addenda sheets would help, but coders would have to remember to look there until the next annual code book arrives in their offices.

    The provision retains the practice of only updating diagnosis related groups (DRGs) on October 1. DRGs are the only ICD-9 coding element that affect reimbursement, and AHIMA members object to the potential financial impact of the changes without any benefits, Bowman says. "It's only six months earlier than October and the DRGs aren't going to change until October anyway, so there isn't going to be any real reimbursement value."

    However, not everyone in the industry agrees with Bowman. Darice M. Grzybowski, MA, RHIA, FAHIMA, national industry relations manager for 3M Health Information Systems, supports the change. "I think restricting changes when coding is dynamic and supposed to reflect changes in new diagnoses, symptoms, procedures, and technology is a contradiction. If we update APCs every quarter, why not allow the same for ICD coding?"

    But Bowman points out that the OPPS-related changes to HCPCS codes and other updates are extremely problematic for hospitals. "Every time you make a system change, somebody's got to go into the computer system and update it," she says. "Obviously, the more often you have to do that, the more labor intensive and costly it is."

    More frequent coding updates with fewer changes in each could be a good thing, says Grzybowski. "It certainly appears easier to update a little at a time than a massive amount at once."

    However, Bowman isn't convinced that fewer code changes would really lighten the load. She compares biannual ICD-9 changes to implementing ICD-10 one chapter a time throughout the year. "Sometimes when you have more it's actually easier because then at least you have a reason for training and a reason for system changes," Bowman says. "If you have three codes implemented in April and all the rest in October, I'm not sure how much that really helps people."

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    Bryan Cote
    Executive Editor
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