Medicare Update for Critical Access Hospitals

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Medicare Update for Critical Access Hospitals
Presented by Tom Watson, CPA, FHFMA
June 24, 2009
TORCH Foundation CAH Conference
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Agenda

• Legislation
• American Recovery Reinvestment Act of 2009
  (ARRA or Stimulus Bill)
• Medicare Improvements for Patients Providers
  Act of 2008 (MIPPA)
• Proposed regulations
• 2010 IPPS Proposed Rule
• TriCare Proposed Rule
• HPSA RHC Proposed Rules

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Agenda

• Cost Report Changes
• CRNA Pass-Through Reimbursement Issues
• Other Regulatory Issues
• Avoid CAH Financing Trap
• Other Matters

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Stimulus Bill - EHR Funding

• Bill includes the Health Information Technology
  for Economic Clinical Health Act (HITECH) for
  electronic health records (EHR)--53 pages of
  details in bill
• Creates new bureaucracies
• Mandates nationwide electronic exchange/use of
  health information
• EHR for each person in the US by 2014

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Stimulus Bill - EHR Funding

• Key pointthe Bills EHR funding for PPS
  hospitals, CAHs physicians is paid only after
• Provider is a meaningful user of
• Certified EHR technology

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Stimulus Bill - EHR Funding

• Meaningful EHR user
• Uses certified EHR technology in meaningful
  manner, as determined by Secretary (HHS)
• Connected in manner to provide for electronic
  exchange of health information to improve
  quality/care coordination
• Using EHR to report clinical quality other
  measures required by Secretary

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Stimulus Bill - EHR Funding

• Reporting clinical quality other measures
• The Secretary shall seek to improve the use of
  EHR and health care quality over time by
  requiring more stringent measures of meaningful
  use selected under this paragraph

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Stimulus Bill - EHR Funding

• Certified EHR technology
• . . . a qualified electronic health record . . .
  certified . . . as meeting standards . . .
  applicable to the type of record involved (as
  determined by the Secretary, such as an
  ambulatory electronic health record for
  office-based physicians or an inpatient hospital
  electronic health record for hospitals).

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Stimulus Bill - EHR Funding

• Certification Commission for Healthcare
  Information Technology (CCHIT)
• An independent, nonprofit organization . . .
  recognized by the federal government as an
  official certification body for EHR products.
  Its mission is to accelerate the adoption of HIT
  by creating a credible, sustainable product
  certification program. The certification
  requirements are based on widely accepted
  industry standards and involve the work of
  hundreds of expert volunteers and input from a
  variety of stakeholders throughout the health
  care industry. (from CCHIT website)

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Stimulus Bill - EHR Funding

• CCHIT history - launched in July 2004 by
• American Health Information Management
  Association (AHIMA)
• Health Information Systems Society (HIMSS)
• The National Alliance for Health Information
  Technology
• September 2005 CMS first awarded CCHIT a 3-year
  contract

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Stimulus Bill - EHR Funding

• For more on CCHIT, certification process list
  of certified systems
• http//www.cchit.org/
• http//www.hhs.gov/healthit/

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Stimulus Bill - EHR Funding

• PPS hospitals
• Base amount 2 million
• Discharge amount 200/discharge, discharges
  1,150 - 23,000
• Sum of these amounts x Medicare share gross
  annual amount
• Gross annual amount x transition factor actual
  payment

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Stimulus Bill - EHR Funding

• Medicare share (percent)
• Numerator - Part A days Part C days
• Part C days documented based on no-pay bills?
• Denominator - Total days x (charges net of
  charity total charges)
• CMS to decide what constitutes charity care?

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Stimulus Bill - EHR Funding

• PPS hospital transition factors
• No payment if first year eligible is after 2015

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Stimulus Bill - EHR Funding

• Critical Access Hospitals (CAH)
• First eligible for special funding for cost
  reporting periods (CRP) beginning in 2011
• Paid depreciable costs in year incurred x
  Medicare share (same as PPS) 20
• Whats depreciable costs?
• Medicare share limited to 100
• CAH 1 add-on also applies

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Stimulus Bill - EHR Funding

• Critical Access Hospitals
• Undepreciated cost at start of first payment year
  is added to costs incurred that year
• Payment for up to 4 eligible years, but no
  payment for CRP beginning after 2015
• Other allowable costs paid through cost report
• CMS to define specifics in regulations?

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Example Payment -2011 Expenditures
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Example Payment -2012 Expenditures
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PPS Hospital Payment with 1,000 total discharges
and 60 Medicare
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Stimulus Bill - EHR Funding

• Physicians
• 75 add-on to Medicare fee schedule payments for
  up to 5 years
• This is only on 1500 claims for in-office
  services
• No ER docs, not hospitalists
• Excludes services with hospital as service site
• 10 bonus if in HPSA
• No payment if first adopting after 2014

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Stimulus Bill - EHR Funding

• Physicians
• Aggregate payment per physician (excluding 10
  HPSA bonus) based on year first eligible
• 2011-2012 - 44,000
• 2013 - 41,000
• 2014 - 26,000
• 2015 - 0

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Stimulus Bill - EHR Funding

• Rural health clinics (RHCs) federally qualified
  health centers (FQHCs) can be paid EHR costs
  through Medicaid
• Must provide 30 of services to needy individuals
  - Medicaid, charity or sliding fee scale patients

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Stimulus Bill - EHR Funding

• RHCs FQHCs paid no more than 25,000 in first
  year (no later than 2016) 10,000 per year
  thereafter, for up to 5 years
• Pediatricians with 20 medical assistance volume
  eligible for 2/3 of these amounts
• Eligible professionals must forego Medicare EHR
  payments to receive Medicaid payments

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Stimulus Bill - EHR Funding

• Childrens hospitals or acute-care hospitals with
  at least 10 Medicaid volume can also receive
  Medicaid payment
• Unclear if this includes CAHs
• Computed same as Medicare gross payment over 4
  years, if Medicare percent was 100
• Total above times Medicaid percent
• Payment spread over at least 3 years

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Stimulus Bill - EHR Funding

• Penalties start in 2015 for non-using PPS
  hospitals, CAHs or professionals
• CAHs gradually lose 1 add-on by 2017
• Hardship exception available up to 5 years
• Secretary to issue study by 6/30/10 on whether
  EHR funding should be made available to other
  providers - SNFs, home health agencies, etc.

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Stimulus Bill - Other

• Massive other health related funding for programs
  infrastructure creation
• Bank-qualified tax-exempt bond limit increased
  from 10 million to 30 million in 2009 2010
• Borrower is considered issuer so many more issues
  will qualify

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MIPPA Physician Provisions

• Reverses 10.6 physician fee schedule cut enacted
  7/1/08
• 0.5 fee increase extended throughout 2008
• 1.1 fee increase for 2009
• Doomsday delayed until 1/1/10

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MIPPA Physician Provisions

• Last 3 budget bills specify that legislated
  increases not be considered by CMS in computing
  the next years rates
• Thus, 5 cut in 2007 would have been 10.6 cut in
  2008 16 cut in 2009
• Will be 21 cut in 2010, absent further
  legislation in 2009
• How will Congress pay for legislation?

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MIPPA Physician Provisions

• Physician quality reporting initiative (PQRI)
  extended through 2010
• 1.5 payment in 2007 2008
• 2.0 payment in 2009 2010
• Report on value-based purchasing due 5/1/10

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MIPPA Physician Provisions

• Incentives for electronic prescribing
• 2.0 in 2009 2010
• 1.0 in 2011 2012
• 0.5 in 2013
• Penalties for not prescribing electronically
  starting in 2012

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MIPPA Physician Provisions

• Physician fee schedule has work, practice, i.e.,
  office malpractice components
• Geographic practice cost index (GPCI) adjusts fee
  schedule for area cost differences
• 1.0 floor on work component of GPCI (established
  in 2004) is extended through 12/31/09
• Other reimbursement provisions extended

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MIPPA CAH Provision

• Outpatient patient lab for CAHs
• Cost reimbursed regardless of whether patient is
  at CAH when specimen is collected, or at a
  skilled nursing facility or clinic (including a
  rural health clinic) that is operated by the CAH
• Effective 7/1/09

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2010 IPPS Proposed Rule

• CAHs paid 101 of cost for lab tests 7/1/09
  after, even if patient is not at CAH when the
  specimen is collected, if
• Patient receives outpatient services at CAH on
  the same day, or
• Specimen is collected by a CAH employee
• SNF consolidated billing rules unchanged
• Comment letter question please confirm this
  does not have to be provider based locations

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2010 IPPS Proposed Rule

• Lab outpatient definition, continued
• CMS instructed FIs/MACs to implement 7/1/09
• Transmittal 1729 and MLN 6935 dated 5/8/09
• CMS will consider comments received
• CMS will develop a billing modifier to identify
  claims paid under this provision issue related
  guidance (not in 5/8/09 guidance)

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2010 IPPS Proposed Rule

• CAH-specific provider-based rule provisions
• Apply provider-based rules to offsite CAH labs
• Should provider-based rules apply to ambulances
  for which CAHs get cost reimbursement?
• CMS requests comments

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2010 IPPS Proposed Rule

• MMA 03 increased CAH reimbursement 1
• CMS has identified apparent drafting error is
  revising regulations accordingly
• Providers electing optional or Method II
  outpatient reimbursement lose the 1 add on for
  CAH outpatient facility reimbursement
• Specifies no effective date for this change

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TriCare Proposed Rule-Change to CAH Reimbursement

• Issued 5/8/08, still pending
• 101 cost reimbursement
• References Alaska demonstration
• Compute overall inpatient outpatient ratio of
  costs to charges
• Proposed to impose lower of costs or charges
  limitation, unlike Medicare

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HPSA RHC Regulations

• HRSA proposed new MUA/HPSA definitions 9/1/98 -
  nearly 800 comments
• Decided to study further reissue proposed rule
• New proposed rule issued 2/29/08
• 7/17/08 published notice of intent to reissue
  proposed rule, again! Stay tuned . . .

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HPSA RHC Regulations

• Enacted 8/5/97, BBA 97s RHC provisions
• Terminate RHC status if no longer meet location
  rules-non-urbanized, shortage area
• Shortage designation must be current
• Updated within last 3 years (now 4 years)
• CMS to define criteria for grandfathered RHCs
• Required final implementing rules be effective
  1/1/99

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HPSA RHC Regulations

• Implementing Proposed Rule was issued
• Final Rule was issued 12/24/03
• Final Rule was never implemented, then withdrawn
• Reissued a new Proposed Rule 6/27/08
• Comment period closed 8/26/08
• Status of final rule?

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Cost Report Changes

• New cost report, effective for periods beginning
  middle of 2009
• Numerous changes proposed, mostly clean up
• New cost center-implantable devices
• Report revenue codes 275 (Pacemaker), 276
  (Intraocular Lens), 278 (Other Implants) 624
  (Investigational Devices)
• Capture charges costs

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CRNA Reimbursement

• Issue CRNA on call cost allowable?
• PRRB ruled the cost is allowable, twice
• CMS Administrator reversed both decisions
• Administrator rulings state the only allowable on
  call costs are for
• Physicians, PAs, NPs clinical nurse specialists
  who are
• Off site on call for the ER
• Meet other criteria

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CRNA Reimbursement

• CMS Administrator rulings appear to affect much
  more than just CRNA on call cost
• The cost for any other on call personnel . . .
  is not an allowable cost.
• Seems counter to allowing costs related to
  patient care of efficiently operating provider
• St. Luke Community Healthcare, decision dated
  4/27/09

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CRNA Reimbursement

• Second issue CAH location
• CMS prohibits CAHs that otherwise qualify for
  CRNA pass-through payments, if the CAH
• Is located in a Lugar county, or
• Is located in an urban area redesignated as
  rural
• H.R. 3066 to fix the location and on call issues
  died in the last Congress

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Other CAH Regulatory Issues

• Survey Certification Letter 08-16
• Subject Observation services in a CAH
• Effective on issuance (4/4/08)
• A CAH may have a reasonable number of observation
  beds that do not count in the 25-bed maximum
• Provides guidance on counting beds

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Other CAH Regulatory Issues

• SC 08-16 includes guidance on providing
  observation services
• Requires surveyors to evaluate
• Whether number of observation beds is excessive
• Observation service policies procedures
• Observation services are appropriately provided
  through medical record review

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Other CAH Regulatory Issues

• Relocation issues remain
• 42 CFR 485.610(d) implements 3 - 75 tests -
  services, patients, staff
• Transmittal 32 added to CMS State Operations
  Manual 1/18/08

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Other CAH Regulatory Issues

• CAH regulations included in 2008 Outpatient PPS
  Final Rule
• 2 CAH provisions effective 1/1/08
• Co-location with any other hospital providers
• Provider-based facilities located off campus

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Other CAH Regulatory Issues

• Co-location prohibition applies only to necessary
  provider CAHs
• No new co-location arrangements after 1/1/08
• Cant change type scope of services offered for
  existing arrangements
• Change of ownership is not considered a new
  co-location arrangement

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Other CAH Regulatory Issues

• New provider-based locations off campus must meet
  federal location requirements effective 1/1/08
• Over 35 miles from any other hospital or CAH
• Over 15 miles if only mountainous terrain or
  secondary roads
• Does not apply to new RHCs
• Exception process if under development at 1/1/08

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Other CAH Regulatory Issues

• Applies to therapy facilities, clinics, etc.
• Effectively eliminates prospects of new or
  changed provider-based locations for CAHs
• Co-location prohibition new off campus facility
  provisions are conditions of participation
• Violation risks termination from the Medicare
  program jeopardizes CAH status

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Avoid CAH Financing Trap

• Typical financing structure (revenue bonds)
  provides level debt service
• Medicare cost reimbursement is front-loaded
• Interest heavier in early years
• Depreciation heavier in early years
• Less cash to pay debt service in later years

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Avoid CAH Financing Trap

• Assumptions
• 7,000,000 project
• 20-year amortization
• 5 average interest rate
• Depreciable lives range from 5 40 years
• 50 Medicare utilization

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Avoid CAH Financing Trap
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Avoid CAH Financing Trap

• Financial forecasts may look rosy in early years
• In early years, almost all cash payment are
  eligible for Medicare cost based payment
• In later years, the higher principal payments are
  not reimbursed and MUST be funded from cash
  reserves or profits from other payers
• Hospital should be funding depreciation in early
  years

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Unnecessary Borrowing

• Medicare will not reimbursement hospitals for
  unnecessary costs. Consider
• Funded depreciation of 5,000,000
• Project of 10,000,000
• Borrowing of 8,000,000
• Impact
• a) Offset all interest income earned
• b) Interest on 3,000,000 of debt is not allowed

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Emergency Room Availability

• Time studies
• Technical requirements vs. practice
• Two two-week time studies per year is common
  practice
• Affects mid-levels, too
• Make sure providers understand the impact
• Can me 1,000s for your hospital
• Coverage by RHC physicians
• Be sure addressed in your contract
• Be consistent and have back-up for allocation
• Where is it better to have these physicians
  costs?

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Emergency Room Availability

• Contract and Documentation Requirements
• Be careful of the wording in contracts
• Carve-outs for Part A time?
• Requirement to prepare time studies?
• Compare contract language to Medicare
  regulations, especially on minimum guarantee
  contracts
• Evidence of attempt to obtain alternate coverage?
• Medicare requires this for the payments to be
  eligible for reimbursement

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Overhead Allocations

• Allocation of non-allowable time
• Foundations, physician recruiting, community
  relations
• Carefully draft job descriptions
• Be careful of impact on cost report statistics
  (i.e., square feet)
• Fragmenting AG time
• May allow for more cost to be allocated to
  inpatient areas
• Split general administrative costs, accounting,
  business office, communications, IT, purchasing,
  etc.
• Can prevent allocating to areas that dont
  receive services
• Need advance Medicare approval with 90 days
  notice prior to year end

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Overhead Allocations

• Re-evaluate statistics on a regular basis
• Housekeeping, medical records, nursing
  administration, etc.
• Re-measure square feet if it has not been done in
  some time

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Medicare Bad Debts

• 5/2/08 CMS memorandum
• Contractors to disallow bad debts if not returned
  from collection agency
• Settlements issued after 5/2/08

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2010 Administration Budget

• Where its going
• 630 billion reserve fund over 10 years as down
  payment on health care reform
• 330 billion for additional expected Medicare
  physician payments
• 9 billion for nurse home visitation program
• 73 million (wow!) to improve both access to
  quality of health care in rural areas

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2010 Administration Budget

• Where it comes from
• 177 billion from establishing competitive
  bidding for Medicare Advantage
• 37 billion from home health payment cuts
• 20 billion from increasing Medicaid drug rebates
  related efforts
• 8 billion from means-testing Medicare drug
  benefit

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2010 Administration Budget

• Where it comes from
• 18 billion from bundling Medicare payments
  covering hospital post-acute settings
• Services during 30 days following hospitalization
• 12 billion from creating hospital quality
  incentive payments
• 8 billion from reducing hospital readmission
  rates for Medicare patients
• 18 are readmitted within 30 days

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2010 Administration Budget

• Where it comes from
• 2 billion from private sector enhancements to
  ensure Medicare pays accurately - RACs?
• 620 million from Medicaid payments using correct
  coding edits
• 260 million from use of radiology benefit
  managers

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Senate Finance Committee Plans

• Value-Based Program
• Funds withheld from hospitals, redistributed
  based on quality results 2 in 2013, increasing
  to 5 in 2016 and beyond
• No incentive below 26th percentile, full
  incentive above 75th percentile, sliding-scale in
  between
• Hospital Readmissions
• Starting in 2013, hospitals with readmission
  rates above 75th percentile would see 20
  withhold of payments for readmissions within 30
  days

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Senate Finance Committee Plans

• Bundling Policy
• IPPS payments and post-acute services within 30
  days of discharge bundled into one payment
• Post-acute services include home health, skilled
  nursing, inpatient rehabilitation and long-term
  care hospital services
• Effective October 2014 for top 20 of admission
  categories October 2016 for next 30 full
  implementation October 2018

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Questions? Thank you!

• Tom Watson
• BKD,LLP
• 713.499.4628
• twatson_at_bkd.com