“Doc Fix” Bill Passes But Impact Goes Beyond Doctors

Yesterday the Senate passed H.R. 4302, a 12-month fix for the application of the sustainable growth rate (“SGR”) formula to the Medicare physician fee schedule. The bill is expected to be signed by President Obama today, just in time to head off the estimated 24% cut to payment rates that would otherwise be effective on April 1. Although the focus of the media coverage has been on the fact that H.R. 4302 represents yet another short-term fix to the SGR without any permanent solution, the bill carries significant long-term effects for other types of providers and suppliers. Chief among them: clinical laboratories; skilled nursing facilities (“SNFs”); hospitals; community mental health centers; and dialysis providers. Some of the key provisions are summarized briefly below.

Physician Fee Schedule

As has been widely reported, the bill does provide another 12 months of relief from the effect of the SGR on payments under the Medicare physician fee schedule. The bill continues the zero percent payment update presently in effect through March 31, 2015. The bill also continues the floor on geographic adjustments (the “GPCI”) to Work RVUs through April 1, 2015. Under the GPCI “floor,” the geographic adjustment cannot be lower than 1.0, resulting in higher fee schedule amounts for lower cost areas.

Additionally, the bill grants the Centers for Medicare & Medicaid Services (“CMS”) expanded authority in determining appropriate relative value units (“RVUs”) for services under the physician fee schedule. CMS is granted authority to collect data to support the determination of practice expense RVUs (“PE RVUs”), including the ability to provide incentive payments to practitioners who provide solicited data, and to use a new or different method to calculate the PE RVUs. In addition, CMS’ authority to revalue “misvalued” codes is substantially expanded, although CMS is required to phase in any changes in RVUs of more than 20% over two years. CMS also will have the ability, for the first time, to calculate RVUs for a group of similar services, rather than for each individual service.

Clinical Laboratory Reimbursement

Required Reporting of Laboratory Private Payor Pricing. By June 30, 2015, CMS must publish regulations requiring applicable clinical laboratories to report the payment rate paid by each private payor, including Medicare Advantage and Medicaid managed care plans, along with the applicable volume for each payor. Hospital laboratories, to the extent they receive the majority of their reimbursement through the outpatient prospective payment system (“OPPS”), will not be required to report private payor data, but physician-office laboratories will be required to report the data. Reporting begins January 1, 2016 and is due every three years thereafter. The reporting excludes capitated payment arrangements, but is inclusive of all discounts, rebates, coupons, price concessions or any other types of discounts. CMS may impose civil monetary penalties for failure to report or to report accurately of up to $10,000 per day or inaccuracy.

Medicare Payment to be Based on Private Payor Rates. Beginning January 1, 2017, Medicare payment rates for clinical laboratory services will be based on the private payor rates reported during the previous year. The Medicare rate will be the median payment rate, weighted based on volume, of the private payor payment rates reported in the previous reporting period for each code. For calendar years 2017 through 2019, any reduction in payment rates based on the new reported medians shall be limited to 10%, and for calendar years 2020 through 2022, any reduction is limited to 15%. The new payment rates will not be subject to budget neutrality adjustment, geographic adjustments or annual updates, and will apply until the year following the end of the last reporting period. The payment rates will apply to hospital laboratories if the laboratory is not reimbursed under the OPPS.

Advanced Diagnostic Laboratory Tests. By January 1, 2016, CMS must assign HCPCS billing codes to all existing advanced diagnostic laboratory tests, which are tests available from a single laboratory that: (a) are approved or cleared by the FDA; (b) analyze multiple biomarkers of DNA, RNA, or proteins to yield a patient-specific result; or (c) meet other, similar requirements established by CMS. For new advanced diagnostic laboratory tests, the initial payment rates will be based on the “list price” of the offering laboratory. Thereafter, the payment rates will be based on the market data reported; however, if the price based on the market data exceeds 130% of the list price, CMS may recoup the excess from the offering laboratory.

Coverage Decision Process. Beginning January 1, 2015, Medicare contractors must use the local coverage determination (“LCD”) process for announcing clinical laboratory coverage decisions.

Clinical Laboratory Administrative Contractors. CMS may select up to four administrative contractors for clinical laboratories only.

SNF Quality Reporting and Value-Based Payment System

New SNF Readmission Measures. SNFs will be required to report readmission information beginning with fiscal year 2016 (October 1, 2015). By October 1, 2015, CMS will specify an all-cause, all-condition readmission measure for SNFs and by October 1, 2016, CMS will specify a replacement measure that will reflect an all-condition risk-adjusted potentially preventable hospital readmission rate. Beginning October 1, 2016, CMS will begin giving quarterly confidential feedback reports to SNFs. As of October 1, 2017, the information on the readmission measures will be publicly available on the Medicare Nursing Home Compare website, although SNFs will have the opportunity to review and correct data beforehand.

Implementation of SNF Value-Based Purchasing Program. The new SNF value-based purchasing program will be based on the readmission measures reported and will begin October 1, 2018. The scores will be based on the higher of the SNF’s achievement or improvement and will be ranked from low to high. The existing per diem rates for all SNFs will be reduced by 2% (prior to application of the incentive payments). Of the overall reduction, between 50 to 70% will be paid back in incentive payments; however, the bottom 40% of SNFs will receive per diem rates lower than they would have otherwise received. Each year’s calculation is effective for that year only and will not affect the next year.

Hospitals: ICD-10, Two-Midnight Rule, and DSH Reductions

Delay of ICD-10. The implementation of ICD-10 is delayed until at least October 1, 2015. This is Congress’ response to CMS’ announcement earlier this year that it would not, under any circumstances, delay the implementation of ICD-10 again from its current October 1, 2014 go-live date.

Extension of Moratorium on RAC Short-Stay Audits. The bill permits CMS to continue reviews of short inpatient stays under its new “Two Midnight” rule, but continues the current moratorium on RAC audits through March 31, 2015. CMS’ moratorium on post-payment reviews under the new rule was subject to expire September 30, 2014.

Delay of DSH Reductions. The bill further delays the reductions of Disproportionate Share Hospital (“DSH”) funding mandated by the Affordable Care Act. The reductions had previously been delayed from 2014 to 2016; this bill pushes back the delay one year further and extends the phase-in time for the reductions from five years to eight years. MedPAC also is required to annually report to Congress on the state of the uninsured and unfunded care provided by each state.

Quality Incentives and “Appropriate Use” for CT Imaging

By November 15, 2015, CMS must publish rules establishing acceptable use criteria for CT scans in different settings—such as hospital outpatient, physician office or stand-alone facilities. By April 1, 2016, CMS must publish an initial list of qualified clinical decision support mechanisms that support the previously established acceptable use criteria. Beginning January 1, 2017, the ordering practitioner must report the clinical decision support mechanism used and whether the test meets the acceptable use criteria on each claim for a CT scan. CMS is mandated to use the data to identify outlier ordering practitioners, who will be made subject to one year of preauthorization for CT scans.