Medicare Reform Advisor, May 4, 2004

May 4, 2004 Vol. 1, No. 11 Weekly news and analysis

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© 2004 HCPro, Inc.

AIDS care costs prompt Medicare to boost payments
Costs to care for residents with AIDS have soared, so Medicare has increased pay to skilled nursing facilities and swing-bed providers 128%, according to section 511 of the Medicare-reform law. The new resource utilization group payment level takes effect for discharges on or after October 1, 2004. Use diagnosis code 042.

Gov't scrutinizes coverage of powered wheelchairs
There are reform implications connected to Medicare's coverage of motorized wheelchairs and powered-operated vehicles/scooters. While they have meant improved mobility for many Medicare beneficiaries, their use has come with a higher than expected pricetag that has attracted the attention of the Office of Inspector General (OIG) and the General Accounting Office (GAO). At an April 28 Senate Finance Committee hearing, it was revealed that this medical equipment area has been rife with fraud and higher-than-average costs.

According to Herb Kuhn, director of CMS's Center for Medicare Management, CMS is aware of the problem. When all remaining claims for items furnished in 2003 are received and processed, total allowed charges for power wheelchairs in 2003 will be about $1.2 billion-up from $289 million in 1999 (an increase of more than 300% over the past 5 years). In 1998, he noted that CMS issued a fraud alert to durable medical equipment regional carriers (who process the wheelchair claims) when "inappropriate and potentially fraudulent" use of the power wheelchair benefit was noticed.

However, the GAO said in its report that despite "multiple warning signs over a 6-year period" that growth in claims and payments for power wheelchairs may have been excessive, CMS did not lead a full-scale coordinated effort to address the issue until September 2003. It was then that CMS initiated Operation Wheeler Dealer (OWD) to focus on coverage, payment, and quality of motorized wheelchair suppliers.

The OIG found that the median price to consumers for one power wheelchair model (the K0011) provided to Medicare beneficiaries was $3,888-with prices ranging from a low of $2,000 to a high of $5,995. If the Medicare reimbursement amount for the power wheelchairs were set at the median price available to consumers, Medicare and its beneficiaries would have saved $224 million in 2002, and beneficiaries would have saved $45 million in copayments.

Changes could be afoot. Under the Medicare Modernization Act (MMA), CMS is given the authority to begin using the competitive bidding process to set payment rates for durable medical equipment (along with off-the-shelf orthotics and supplies) in at least 10 of the largest metropolitan areas by 2007 and 80 of these areas by 2009. The MMA will allow CMS to use information from the competitive bidding process to adjust payment rates in other localities, the GAO report said.

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Drug importation panel hears pros and cons from providers
In the fourth of six listening sessions conducted by HHS's Task Force on Drug Importation April 27 in Rockville, MD, three of the panelists representing Canadian pharmaceutical groups said they foresaw problems in permitting importation of cheaper prescription drugs from Canada to the U.S.

"Canada gets less than 5% of the pharmaceuticals in the world and [the U.S.] gets around 50%," said Barbara Wells of the National Association of Pharmacy Regulatory Authorities, a voluntary umbrella organization representing pharmacy licensing bodies in 9 of the 10 Canadian provinces. "We know that pharmacists are now having trouble getting supplies. But the supplies issue hasn't quite reached the public in Canada yet because pharmacists are scrambling to come up with supplies."

Ronald Guse of the Manitoba Pharmaceutical Association, a regulatory board, said "introducing more and cheaper drugs does not necessarily equate to better or enhanced care." Relying on the Canadian drug supply system cannot provide for all "Americans requiring catastrophic medications nor the cost-saving needs for private- and/or state-run drug benefit programs," Guse said. "The plan that is needed therefore is to carve out the cross-border movement of drugs to initially benefit those need it the most and also address the needs of others."

Iain Cockburn, PhD, a professor of finance and economics at the Boston University, told the panel that the large scale importation of drug products into the U.S. "would put downward pressure on drug prices and drug company revenues...and generally limit the ability of drug companies to maximize revenues from global sales of their products."

Elena Rios, MD, president and CEO of the National Hispanic Medical Association in Washington, DC, suggested that importation of pharmaceutical should be limited to be able to better track the products-like the blood supply in the U.S.

Report from Washington correspondent Jan Simmons.

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Hospitals can apply for extra resident positions
Some hospitals have fewer residents than their graduate medical education (GME) programs allow, so Medicare plans to shift these slots to rural hospitals, urban hospitals not located in large urban areas, and residency programs that are the only ones of their kind in their state. These hospitals can apply to receive the unused slots. CMS will announce application procedures in its Inpatient Prospective Payment System rule proposal expected August 1. No hospital can receive more than 25 new full-time equivalent (FTE) positions, says a CMS official.

Hospitals with unused slots can calculate the number eligible for redistribution by doing the following:

GME

1. See worksheet E-3 Part IV of your Medicare cost report (CMS-2552-96), line 3.05 to find the direct GME unweighted allopathic/osteopathic FTE count.
2. Subtract this number from your hospital's GME FTE resident cap. You can find this on line 3.04. If your direct GME count is less than your cap, CMS will reduce your cap by 75% of the difference.

1. See worksheet E, Part A of your Medicare cost report (CMS-2552-96), line 3.08, to find the IME unweighted allopathic/osteopathic FTE count.
2. Subtract this number from your hospital's IME FTE resident cap. You can find this on line 3.07. If your direct IME count is less than your cap, CMS will reduce your cap by 75% of the difference.

Coming next week: How to apply for cost report changes if your hospital has added a residency training program since the September 2002 cost report period. We'll provide instructions on how to ask CMS to use a more recent cost report for its redistribution calculation.

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Managed care companies risk false claims for bad data
Under Medicare reform, the government will rely heavily on data, claims, and certifications that managed-care plans submit for reimbursement. Plans that make inaccurate disclosures risk significant liability under the False Claims Act and similar statutes: over $11,000 per claim, plus an assessment of three times the amount of damages sustained by the government. Factual errors in these claims are inevitable, given the complexity of the data plans must submit, says Max Reynolds, an attorney with McDermott Will & Emery. Don't be surprised if aggressive whistleblowers-known as qui tam relators- allege and prove that these errors are a function of recklessness, he says.

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Inpatient treatment intensity among Medicare beneficiaries
Trends for patients at the end of life

Inpatient treatment intensity for all Medicare fee-for-service beneficiaries increased between 1985 and 1999, regardless of survivorship status, according to new research released in April from Amber E. Barnato, M.D., M.P.H., M.S., assistant professor of medicine and health policy and management at the University of Pittsburgh. The following is a breakdown of the study findings:

1. Absolute changes in per-capita hospital expenditures, intensive care unit admissions, and intensive inpatient procedure use were much higher among decedents.
2. Relative changes were similar except for intensive care unit (ICU) admissions, which grew faster among survivors. The secular decline in in-hospital deaths has not resulted in decreased per capita utilization of expensive inpatient services in the last year of life. "This could imply that net hospital expenditures for the dying might have been even higher over this time period if the shift toward hospice had not occurred," Barnato said in the study's analysis.
3. Those undergoing one or more intensive procedures increased from 20.9% to 31% among decedents and from 5.8% to 8.5% among survivors.
4. The majority of intensive procedures in the U.S. were performed in the more numerous survivors, although in 1999 50% of feeding tube placements, 60% of intubations/tracheostomies, and 75% of cardiopulmonary resuscitations were in decedents.
5. The proportion of beneficiaries dying in a hospital decreased from 44.4% to 39.3%, but the likelihood of being admitted to an ICU or undergoing an intensive procedure during the terminal hospitalization increased from 38.0% to 39.8% and from 17.8% to 30.3%, respectively.
6. One in five Medicare beneficiaries who died in the hospital in 1999 received mechanical ventilation during their terminal admission.

Editor's note: For the purposes of the analysis, admissions to both coronary care units (CCUs) and traditional ICUs were considered ICU admissions.

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Educational opportunity for hospitals, device companies
Medicare will cover some expenses for Category A clinical trials involving experimental medical procedures, according to the Medicare-reform law. Take implantable hearts, for example. "This is a risky operation, especially for seniors," says Linda Bentley, a partner at the law firm of Mintz Levin, who follows the life-sciences industry. "The federal government is likely to pay for the tests and procedures required to prove that such devices are effective."

The changes in category A and B device coverage will help hospitals determine whether to pursue certain trials for promising technologies. Learn more about these changes and their affects under the Medicare-reform law-including deemed coverage v. routine costs, the process for securing coverage, and two ways your organization may qualify for reimbursement-by signing up today for HCPro's new audioconference.

Join us Wednesday, May 12 for "Clinical Trials Changes Under Medicare Reform: New Device Coverage Rules and Other Opportunities," beginning at 1:00 p.m. (Eastern). For more information, or to register, please call 800/650-6787 and mention source code EZ27405A, or go to this Web site: www.hcmarketplace.com/Prod.cfm?ID=2467&S=EZ27405A

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Bryan Cote
Executive Editor
E-mail address: bcote@hcpro.com