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March 2012

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Third-Party Reimbursements
for Medicare
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As is typical in the fall, many CMS notices affecting third-party reimbursements and Medicare payment policy are released.  These notices update payment and policy guidelines affecting a variety of provider types.  To recap several of these affecting 2012 reimbursements with anecdotal commentary as warranted, the following summaries are provided.

Skilled Nursing Facilities – Data accumulated by CMS related to SNF Medicare reimbursements since the implementation of the RUG-IV payment reductions that occurred 10/1/11 along with minimum data set (“MDS”) 3.0 modifications indicate that for the first RY quarter (September – December 2011) since the PPS overhaul, SNF providers have significantly altered the provision of rehab therapy services.  Rehabilitation therapy, particularly provided to those Medicare beneficiaries in need of complex and extensive services (typically high acuity treatment) generally dictate the higher levels of RUG-IV payments. 

According to a monitoring report by CMS, based on initial data, the distribution of rehab therapy has remained fairly consistent from RY 2011 to RY 2012 Q-1 amongst the main therapy categories (ultra-high, very-high, high, medium, and low).  However, first quarter data indicates that providers have significantly changed the mode of therapy, with group therapy now being almost nonexistent. 

SNFs are now almost always providing individual therapy (99%), with the remaining 1% in concurrent therapy.  The implication, in previous rate years, each individual in a group therapy setting (one therapist providing therapy to a group of individuals needing therapy for the same task) could be billed or minutes counted individually for the session.  But this billing procedure was modified last October which reduced substantially the therapy minutes that could be captured in a group session due to the imposition of limits on minutes billed. 

Home Health Agencies – Medicare prospective payments to HHAs were cut by 2.39% effective 1/1/12.  This is based on a MBI of +2.4%, less a 1% reduction as mandated by the ACA, and a 3.79% cut to account for the increase in case-mix that is unrelated to patient acuity changes.  With other policy changes per the final rule1, reimbursements to HHAs are expected to decline by about $430 million or a 2.31% reduction to aggregate payments compared to Medicare reimbursements HHAs are ultimately estimated to receive in for CY 2011 services.

In other news affecting the government’s initiates to combat fraud, arrests recently occurred in Texas whereby a Dallas-based physician and five owners of HHAs had allegedly fraudulently authorized certifications and deceitfully billed the Medicare and Medicaid programs.  The indictment involves nearly $375 million in ill-gotten reimbursements over a 5-year period.  Federal government agencies attribute the arrest to Medicare Fraud Strike Force operations, which are part of the Health Care Fraud Prevention & Enforcement Team (“HEAT”). 

HEAT is a joint initiative between the Department of Justice and HHS to prevent and deter fraud and enforce anti-fraud laws around the country.  It is also noted that the 2012 OIG Work Plan includes numerous initiatives for review and oversight of OASIS data and physician certs and detection of questionable billing characteristics of HHAs.

End-Stage Renal Disease (ESRD) Facilities – A final rule2 updated policy and payment rates for dialysis facilities for the 2012 calendar year, which essentially calls for a net 2.1% increase in payment rates (MBI of 3.0% less a -0.9% statutory productivity adjustment).  In addition, CMS intends to strengthen incentives for improved quality of care and better outcomes for beneficiaries diagnosed with ESRD through improvements in the ESRD Quality Incentive Program. 

Hospital Outpatient Prospective Payment System (OPPS) Rates – A final rule published in the Federal Register3 includes a net increase of 1.9% to OPPS rates that became effective 1/1/12.  The net increase consists of a MBI update of 3.0% less a 1.0% multifactor productivity adjustment as well as a -0.1% ACA reduction.  The net payment increase for Ambulatory Surgery Centers (“ASCs”) is 1.6%, and CMS projects that total Medicare reimbursements in CY 2012 for OPPS and ASC services will approximate $41.1 billion and $3.5 billion, respectively.

Medicare Physician Fee Schedule (MPFS) – CMS had announced as part of the CY 2012 final rule affecting Medicare payment rates to physicians would be cut by 27.4%.  In late February, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 which included a provision to freeze rates at their current levels until the end of 2012.  Again, this is a temporary fix and the permanent fix/overhauls of the SGR formula still remain an initiative of many. 

It is noted that SGR driven rate cuts have been averted through legislation in all but 2002 over the past 11 years.  The downside, one of the “pay-fors” for the rate cut freeze is a reduction of the Medicare percentage paid for allowable Medicare bad debt amounts as mentioned at the beginning of the Medicare section, which is expected to hit SNFs over the pay for period at approximately $4.5 billion in lost reimbursements.

1 Per a final rule published in the Federal Register dated 11/4/11.
2 Per the Federal Register dated 11/10/11.
3 Per the Federal Register dated 11/30/11.

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