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Healthcare Reform Compliance - Provisions Impacting Hospitals

> Healthcare Reform Timeline - Changes Affecting Hospitals

HIPAA Uniform Standards

The Act requires the Department of Health and Human Services ("HHS") to adopt uniform standards and operating rules for HIPAA-governed electronic transactions between health care providers and insurers.

Nondiscrimination for Euthanasia or Premium Tax Credit

The measure prevents any provider (or government) from discriminating against any individual or other health care provider because "the institution" does not provide euthanasia services.
All employers are prohibited from discriminating against or discharging any employee because the employee has received a premium tax credit or in retaliation for the employee reporting a violation of the insurance reform provisions of the Act.
Hospitals will now be allowed to make presumptive eligibility determinations for all Medicaid eligible populations, if they choose to be a "qualified entity."

Hospital Quality and Efficiency Data Registry for Physicians

The Act requires physicians to report their quality data to Medicare with various payment incentives, and by January 1, 2012 this reporting and "meaningful use of electronic health records" will be "integrate[d]." HHS will now use claims data to compare resources utilized by different physicians as part of the physician feedback program. The methodology for resource comparison will be made public and be used in value-based purchasing.
HHS must implement quality measure reporting programs for long-term care hospitals, inpatient rehabilitation hospitals, inpatient psychiatric hospitals and hospice programs.
By 2012, HHS will establish quality reporting measures for cancer hospitals and reporting is required to begin, and be publicly reported, beginning Fiscal Year ("FY") 2014.
Beginning in FY 2015, hospitals in the top 25th percentile for certain hospital-acquired conditions will be penalized.
HHS will develop measures for rating acute and chronic disease treatment within 24 months of enactment, and preventative measures within 36 months of enactment, as well as identifying clinical "best practices."
The Act adjusts inpatient PPS payments, beginning in FY 2012, based on a hospital's percentage of potentially preventable Medicare readmissions.

New Payment Provisions

Physicians Assistants - Physician assistants are authorized to order skilled nursing care services and bill it to Medicare as of January 1, 2011.
Certified Nurse Midwives - Medicare is now required to pay the same rate for certified nurse midwives and physicians for covered services.
Market Basket Updates - Effective immediately, the Act changes the market basket updates for inpatient hospitals, inpatient rehabilitation facilities, inpatient psychiatric hospitals and outpatient hospitals for 2012 and 2014, and for long-term care hospitals for 2011, 2012 and 2014, for home health providers for 2013 and for hospice providers for 2013 through 2019 by imposing a "productivity adjustment."
Wellness - The changes require Medicare to cover an annual wellness visit and personalized prevention plans. Insurers are prohibited from charging co-pays for most preventive services.
Tobacco Cessation - Medicaid programs must cover tobacco cessation programs for pregnant woman with no cost-sharing.

Accessible Medical Diagnostic Equipment

Within two years of enactment, the Architectural and Transportation Barriers Compliance Board must establish standards for accessibility of medical diagnostic equipment by the disabled.

Residency Programs

Beginning July 1, 2011, a percentage of residency positions that have been unfilled for the prior three cost reports will be redistributed to training primary care physicians, giving special preference to programs located in states with a low resident to population ratio and states with the highest ratio of population living in health professional shortage areas. Any residency slots from closed hospitals, including hospitals that were closed two years before enactment, will also be redistributed.

Physician Owned Hospital/Ancillary Exception

Physician Owned Hospitals - The Act imposes limitations on physician-owned hospitals, including a prohibition on expansion (unless the hospital can meet certain exceptions, e.g. "rural provider" or highest percentage of Medicaid patients in their county) and requirements for submission of an annual report detailing compliance with conflict-of-interest measures. The Act also prohibits physician-owned hospitals without a Medicare provider agreement as of December 31, 2010 from participating in Medicare.
Ancillary Exception - The Act changes the in-office ancillary services exception to Stark by requiring that the referring physician inform the patient in writing that he or she may obtain the specified service elsewhere.

Program Integrity

The Act requires the imposition of new enrollment requirements for Medicare, Medicaid and Children's Health Insurance Program ("CHIP") within 6 months of enactment, which potentially include unscheduled and unannounced site visits and increased enrollment and re-enrollment fees. Providers will also be required to disclose "any current or previous affiliation (directly or indirectly) with a provider of medical or other items or services or supplier that has uncollected debt, has been or is subject to a payment suspension under a Federal health care program [or] has been excluded from participation [in Medicare, Medicaid or CHIP]." Finally, HHS will be issuing requirements for compliance programs which providers that participate in Centers for Medicare & Medicaid Services ("CMS") programs will be required to implement.

Overpayments - Any overpayments from CMS must be returned by the later of 60 days after the overpayment was identified or the date the corresponding cost report is due. The use of Civil Monetary Penalties ("CMPs") of up to $50,000 is expanded to include those who know of an overpayment and fail to return it.
New Claims Filing Dates - Providers must submit their Medicare claims within twelve months of service, beginning as of January 2010.
Exclusions - HHS may now exclude physicians from Medicare, for up to one year, if they fail to maintain documentation of referrals to programs at high risk of waste and abuse. These programs will include, at a minimum, Durable Medical Equipment ("DME") and certification for home health services.
DME/Home Health Certification - Before DME or home health services are certified, there must be a face-to-face encounter with the patient.
Civil Mandatory Penalties - The Office of the Inspector General ("OIG") may now impose a $15,000 CMP for failing to provide "timely" access to documents requested for purposes of audits, investigations, evaluations or other statutory functions, and potential CMPs are increased to $50,000 for any violation of the False Claims Act.
Self Referral Disclosure Protocol - The Act requires CMS to establish a "self-referral disclosure protocol" ("SRDP"), which would allow providers to disclose actual or potential Stark violations in return for potentially receiving reduced penalties.

340B Drug Discount Program

The Act expands access to the 340B Drug Discount Program to certain children's hospitals, cancer hospitals, critical access and sole community hospitals and rural referral centers.

Changes to Treatment of Hospital Employee Benefits

Health Insurance - Hospitals that provide health insurance to their employees are required to include the cost of this coverage on their W-2s. Hospitals that provide health savings accounts ("HSA"), health flexible spending arrangements ("FSA") and health reimbursement arrangements ("HRA") for their employees must change the definition of qualified medical expenses for these accounts to the same one previously used for the medical expense itemized deduction. Hospitals that offer health flexible spending arrangements under cafeteria plans must limit the amount of contributions to $2,500 per year beginning in 2013.
Filing Form 1099 - Hospitals will be required to file 1099s for any services or goods to corporate or non-corporate providers of property and services for payments beginning January 1, 2012.
Prescription Drugs - Hospitals that maintain prescription drug plans for their Medicare Part D eligible retirees will no longer be able to deduct for the federal subsidy related to the plan for taxable years beginning after December 31, 2012.
Free Choice Voucher - Hospitals that offer insurance to their employees must offer any employee whose contribution to the plan would be between 8 and 9.8% of their income the opportunity to receive a free choice voucher to enable the employee to purchase a qualified plan through an Exchange.

New Tax Exemption Requirements

The Act imposes new requirements for hospitals to qualify for non-profit status. Hospitals must now submit, at least every three years, a "community health needs assessment" that includes input from public health professionals and is made available to the public, and have adequate policies on financial assistance, charges and billing and collection. Hospitals will be charged a penalty of $50,000 for each year they fail to meet the new requirements.

New Fraud and Abuse Provisions

New Funding - The Act provides for $700 million over the next decade in funds to fight fraud. In addition to Medicare trust fund monies currently made available, extra trust fund monies will be appropriated in the amount of $100 million per fiscal year for each fiscal year beginning 2011.
Improved Screening - CMS is now authorized to conduct background checks, site visits and engage in other enhanced oversight activities prior to admitting new providers and suppliers to the Medicare or Medicaid program. There will be a national pre-enrollment screening program for all providers, which will require disclosure of prior associations with "delinquent providers or suppliers."

If the Secretary determines that there are "high risk areas such as home health care or DME" the Secretary may by regulation impose additional controls on these areas. This will include enhanced screening, an oversight period and the Secretary may declare a moratorium on enrollment of new providers.
Strengthen Medicare and Medicaid Program Requirements - The Act requires providers and suppliers to adopt compliance programs as a condition of participation in Medicare and Medicaid.
New and Enhanced Penalties to Deter Fraud and Abuse - The Act creates new penalties for submitting false data on applications, false claims for payments, or for obstructing audits and investigations, including audits, investigations, evaluations, or other statutory functions of the Inspector General related to Medicare and Medicaid. Second, the Act provides for new penalties for Medicare Advantage (Medicare HMO) and Part D plans that violate marketing regulations or submit false bids, rebate reports or other submission to CMS. There are also enhanced penalties for excluded persons, including a penalty of $50,000 for each order or prescription for an item or service submitted on behalf of an excluded individual.
Aggressively Monitor Medicare and Medicaid for Evidence of Fraud Waste and Abuse - The Act creates a comprehensive Medicare and Medicaid providers/suppliers databank to enable oversight of suspect utilization, prescribing patterns and complex business arrangements that may conceal fraudulent activity.
Narrowing the Window for Submitting Medicare Claims for Payment and Requiring Electronic Bill Submission to Decrease the Opportunities for "Gaming" the System - The Act shortens the time for claims submission to one year and creates a new data sharing process with other agencies to help CMS and other agencies identify fraudulent providers.
Exclusion of Certain Individuals and Entities from Participation in Medicare and State Health Care Programs - The Act clarifies that no payment may be made by a Federal Health Care program funded by an excluded individual or entity, or at the direction or presentation of a physician or other authorized individual where the person submitting the claim had reason to know of the exclusion of such individual. Repayment is excused if the individual or entity that submitted the claim took reasonable steps to learn of the exclusion and reasonably relied upon inaccurate or misleading information from the Federal health care program or its contractor.

Accountable Care Organizations

The Act provides funding for the creation of new models of health care delivery known as accountable care organizations ("ACO"). The key elements of this model involve: (1) a team of hospitals, physicians and other professionals; (2) a designated Medicare fee for service population that accepts the ACO as its caregiver; (3) a set of performance and quality benchmarks against which the ACO's financial performance is measured; and (4) a formula for sharing savings among the professionals when the ACO performs better than the agreed upon performance and quality benchmarks. There is no specific requirement that hospitals or other institutional providers participate in an ACO. ACOs may consist of only physicians, nurse practitioners, physician assistants and other healthcare practitioners. There is a separate provision for Pediatric Accountable Care Organizations.

Entities that are eligible to be an ACO include professionals in group practice arrangements, networks of individual practices or independent practice associations, partnerships or joint ventures between hospitals and physicians and other professionals, hospitals employing physicians and other professionals, and any other groups that the Secretary of Health and Human Services ("HHS") deems appropriate.

Other significant provisions under this section are that: the ACO (1) enter into a three (3) year agreement with the Secretary of HHS; (2) create a structure that is legally authorized to receive and distribute payments for shared savings to professionals, hospitals and other service providers; (3) have the necessary leadership and management structure that includes clinical and administrative systems; (4) define processes that promote evidence based medicine and patient engagement; (5) collect data on cost and quality; and (6) coordinate the delivery of patient care using telehealth, remote patient monitoring, and other types of distance medicine. Finally, (7) the ACO must perform patient and caregiver assessments to demonstrate to the Secretary of HHS that the ACO is patient centered.

The ACO is required collect data and to report on utilization and costs, clinical processes, clinical outcomes, patient and caregiver care experience. The data to be reported will also include information concerning care transitions between and among providers and follow up by ACO professionals. The Secretary of HHS will establish quality standards and benchmarks for high quality performance for ACOs. Achievement of the benchmarks will result in incentive payments according to a formula approved by the Secretary of HHS.

Value-Based Incentive Payments to Hospitals under Inpatient Prospective Payment System ("PPS")

This Act provides for additional payments to hospitals based on their performance in connection with measures selected by the Secretary, beginning in federal fiscal year 2013. The measures must cover at least acute myocardial infarction, heart failure, pneumonia, surgeries as measured by the surgical care improvement project, and healthcare-associated infections as measured by prevention metrics and targets in the HHS action plan to prevent such infections. For each federal fiscal year, the Secretary is to establish performance standards for the measures and a hospital that meets or exceeds those performance standards for the performance period will receive an additional payment for each discharge in the fiscal period. The additional payment is determined by multiplying the base operating DRG payment by the hospital's value-based incentive payment percentage. That percentage in turn is based on the hospital's performance score. The value-based incentive payments are funded by reducing base operating DRG payment amounts by a specified percentage that increases each year from fiscal year 2013-2017.

Disproportionate Share Hospital ("DSH") Adjustment

The Act revises the formula for computing Medicare DSH adjustment payments to hospitals. Beginning in federal fiscal year 2014, a hospital will receive 25% of the amount of payment it would otherwise have received under the existing DSH adjustment statute as a base "empirically justified" DSH payment. A hospital will receive an additional DSH payment based on the product of the following factors:

The difference between the aggregate amount of payments that would have been made under the existing DSH statute and the aggregate amount of 25% base payments;
One minus (a) the percent change in the percent of uninsured individuals in 2013 compared to the percent of uninsured for the most recent period for which data is available (essentially, a deduction based on the decrease in the percent of uninsured individuals) and (b) 0.1 percentage points for 2014 and 0.2 percentage points for 2015, 2016; 2017, 2018, and 2019;
the ratio of the amount of uncompensated care for the hospital to the aggregate amount of uncompensated care for all hospitals receiving DSH payments.

Resident Count Rules for Graduate Medical Education ("GME") and Indirect Medical Education ("IME")Adjustment Payments

Resident Time at Non-provider Settings – The Act allows a hospital to count time spent by a resident in a non-provider setting in its resident FTE count if the hospital incurs the cost of the resident's stipend and fringe benefits for that time. The Act also allows more than one hospital to share the costs and count a "proportional share of the time" at the non-provider setting. These rules apply to cost reporting periods beginning on or after July 1, 2010 for GME payments and to patient discharges on or after July I, 2010 for IME payments.
Resident Time for Approved Leave - The Act requires that all of the time spent by a resident in a residency program on vacation, sick leave, or other approved leave is to be included in the GME and IME resident FTE counts. The legislation states that the Secretary generally is to implement this provision "so as to apply to cost reporting periods beginning on or after January 1, 1983."
Resident Time for Didactic Activities – The Act requires that time spent at a non-provider setting "in non-patient care activities, such as didactic conferences and seminars is to be included in the GME resident FTE count, except for time related to "research not associated with the treatment or diagnosis of a particular patient." The primary activity of the non-provider setting must be the care and treatment of patients. For the IME resident FTE count, time spent in such non-patient care activities "that occurs in the hospital" is to be included, and all time spent in "research activities that are not associated with the treatment or diagnosis of a particular patient" is to be excluded. The provision allowing non-patient care activities at a non-provider setting to be included in the GME count applies to cost reporting periods beginning on or after July 1, 2009. The IME provision on exclusion of time spent on research activities not associated with the care of a particular patient applies to cost reporting periods beginning on or after October 1, 2001.

For additional information on any of the issues referenced on this page, please contact C. Mitchell Goldman, David E. Loder or the Duane Morris attorney with whom you are regularly in contact.