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Washington Outlook

July 21, 2006

House and Senate send resounding message to CMS to delay proposed changes to DRG payments

More than 180 House Representatives and a majority of Senators have urged Centers for Medicare and Medicaid Services (CMS) to delay changes to the diagnosis-related group (DRG) system contained in the FY'07 proposed Inpatient Prospective Payment System (IPPS) rule.   Senate Finance Committee leaders also wrote to CMS urging the agency to push back until FY '08 the implementation date for that provision of the rule.

Two separate letters, one from 189 House members, spearheaded by Reps. Phil English (R-PA) and Earl Pomeroy (D-ND) and the other signed by Sens. Rick Santorum (R-PA) and Kent Conrad (D-ND) and 51 other Senators were sent to CMS last week, asking CMS to delay the DRG changes to give hospitals time to adjust and for CMS to address methodological issues. The letters also ask that CMS give full consideration to the Medicare Payment Advisory Commission's ( MedPAC) recommendation to phase in the new payment system over several years.

In commenting on the July 13 House letter, Rep. English said, "If we are going to actively pursue improving the accuracy of Medicare's inpatient payment policies then we need to do it right the first time around.   While updating the hospital inpatient payment plan is a necessary and beneficial endeavor we must be careful to craft a proposal that harnesses the benefits of change while not disrupting access to care for American's seniors."

The July 7 letter from Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) called into question CMS' methodology and whether it would achieve a more accurate payment system.   "Given that CMS' proposed changes differ significantly from those offered by MedPAC last year, more time is needed to assure an orderly and appropriate implementation of these changes," the letter said.  

CMS Administrator Mark McClellan responded yesterday to the letter sent by Sen. Santorum and other Senators that raised concerns about the CMS timetable for implementing proposed changes to the DRG payment system. "We are acutely aware of the disruptions that could occur if major changes are made too quickly or inappropriately.   The final rule, which will be issued on August 1, will reflect modifications as appropriate to achieve the goal of smooth and effective implementation based on our thorough review and analysis of these comments," McClellan stated in the letter.

Addressing another provision in the proposed IPPS, CMS has signaled its intent to modify the reporting period for the expanded hospital quality measures to address retroactive extraction of files. During a July 13 CMS Rural Health Open Door Forum, Barry Straube, director of the CMS Office of Clinical Standards and Quality, said CMS will develop a policy in the final IPPS rule that balances concerns about retroactive extraction of data while promoting greater quality reporting in keeping with requirements of the Deficit Reduction Act. In the IPPS proposed rule, CMS would require hospitals to report the expanded quality measures for patients discharged beginning in January 1, 2006 to receive a full market basket payment update.  

In its comments to the proposed IPPS rule, Premier calls for CMS to delay the DRG provisions and also requests that CMS push back the discharge date for reporting of expanded hospital quality measures. CMS is expected to issue a final rule, in which its decision in these two areas will be announced, by August 1.  

 

Senate Finance Committee Chairman Grassley seeks timeline for tax guidance on nonprofit hospitals

Senate Finance Committee Chairman Charles Grassley (R-IA) released a statement on July 14 requesting that a timeline be established for new guidance from the Internal Revenue Service (IRS) on charity care by nonprofit hospitals. The Senator's remarks came during a Senate Finance Committee hearing on the U.S. Department of Treasury nominee for tax policy, Eric Solomon.   Sen. Grassley asked for a commitment from the administration's nominee that the IRS would issue new guidance that "puts real teeth to charity care, community benefit, charges to the uninsured and other important issues in this area."   Sen. Grassley also charged that the 1969 IRS regulation that required nonprofit hospitals to provide community benefit for tax-exempt status was "based on extremely inaccurate information." Solomon indicated to Sen. Grassley that he is committed to working on the issue.   A transcript of the hearing is not available, but the proceedings of the hearing can be viewed on the Finance Committee Web site.

In a special report on taxes and banking in The Hill, a publication covering congressional activities, Sen. Grassley also elaborated on his outlook of the nonprofit sector and identified key areas of concern, based on his congressional investigation. Sen. Grassley outlined his legislative package of reforms and indicated that "nonprofit organizations must earn the privilege to keep their tax-exempt status."

The Senate Finance Committee recently approved provisions intended to increase accountability by tax-exempt organizations that were attached to an unrelated bill, S. 1321, addressing telephone excise taxes. The legislation would require nonprofit organizations to file tax returns electronically, increase disclosure of information and increase penalties for groups that engage in improper political activity. In pressing for the measures to be included in the telecommunications bill, Sen. Grassley appears to be signaling his desire to move forward with reforms.

 

House panel examines adequacy of Medicare drug pricing with focus on IVIG

Chairwoman Nancy Johnson (R-CT) and other members of the Ways and Means Subcommittee on Health heard from patient and physician groups that providing Medicare Part B drugs often exceeds the cost of Medicare reimbursement. Numerous witnesses at the July 13 hearing centered on the unique problems involved with Intravenous Immune Globumin (IVIG) treatments. Based on the subcommittee's discussion during the hearing, it is possible that Congress could take action this fall to address problems relating to IVIG , depending on the outcome of several studies by HHS that are currently underway.

Herb Kuhn, Director of Medicare Management at the Centers for Medicare and Medicaid Services (CMS) headed a government panel that maintained the pricing for Medicare Part B drugs, developed from the new average sales price (ASP) formula, was adequate.

In a September 16, 2005 letter to CMS Administrator Mark McClellan, Premier expressed concern about the significant changes in reimbursement levels CMS proposed for prescription drugs in the proposed Hospital Outpatient Prospective Payment System (OPPS) for FY'06 and the unfair burden it would place on hospitals. Premier asked that the reimbursement levels for items with the most significant inadequacies in reimbursement, such as IVIG, be changed to more accurately reflect hospital acquisition costs, and supported an initiative to promote channel integrity for drugs and biologicals in short supply.  

Testifying at the hearing on behalf of patients who depend on IVIG treatment, the president of the Immune Deficiency Foundation reported to the subcommittee that it had received" thousands of calls, emails and letters from Medicare patients and physicians, who have not been able to receive their IVIG infusions at their physicians' offices, outpatient infusion suites, home care settings and hospitals." 

CMS has heard repeatedly from others in the hospital community and from patient advocacy groups and physicians that some physicians appear to refer Medicare patients to hospital outpatient departments because reimbursement for IVIG drugs does not cover the cost of providing the treatment. Although CMS established in the final FY'06 OPPS rule an add-on payment to physicians and hospitals that administer IVIG drugs to cover the cost of locating and obtaining the products and scheduling patient infusions, Premier and other stakeholders argue that these payments will not begin to offset the loss in revenue that hospitals will see for IVIG.

Spurred by House healthcare subcommittee chairs Reps. Nathan Deal (R-GA) and Nancy Johnson (R-CT), the Department of Health and Human Services Office of Inspector General (OIG) is conducting a study on the availability and pricing of IVIG drugs.   An OIG representative, reporting to the subcommittee on the progress of its study into Medicare Part B drug pricing, said that a final report that provides prospectives on the supply and distribution and makes recommendations, will be issued in the near future.   Premier responded to the OIG survey, addressing Premier's concerns with availability of IVIG drugs.

In addition to the forthcoming OIG study, Kuhn reported during the hearing that CMS is evaluating the impact of the add-on payment to determine if extending it would be appropriate.   He also noted that the Assistant Secretary for Planning and Evaluation within HHS is conducting an independent study of the IVIG issue that is expected to be completed this fall and will help to inform future actions that may need to be taken by Congress and the department.

 

House committee renews focus on healthcare pricing transparency

This week, t he House Ways & Means Health Subcommittee held a hearing on pricing transparency in the healthcare sector to examine current initiatives in this area, as well as the impact on and benefits for competition, costs and spending growth. The administration has supported pricing transparency as a way to empower consumers to be more aware of health care spending, enabling them to make better, more informed choices regarding their health care.

Testifying at the hearing were academics, hospital and health plan representatives and researchers.   Subcommittee members and witnesses testifying at the hearing agreed that activity in this area is at the early stages and only the beginning of a potentially lengthy process.  

Ranking Member Pete Stark (D-CA) said in his opening statement that transparency discussions should start with physician fees or drug prices, rather than hospital services.   Stark noted that most consumers do not shop for or compare hospital services. Mirroring this sentiment, a researcher from the Center for Studying Health System Change, Ha T. Tu, said that many patients' healthcare needs are too urgent to price shop. " We need to be realistic about the magnitudes of potential gains from more effective shopping by consumers," Tu said.  "For one thing, a large portion of medical care may be beyond the reach of patient financial incentives.  Most patients who are hospitalized will not be subject to the financial incentives of either a consumer-driven health plan or a more traditional plan with extensive patient cost sharing."

Steve Brenton, president of the Wisconsin Hospital Association (WHA) ,  reported on the price transparency initiative, PricePoint Web, that WHA initiated three years ago.   Brenton described the interactive tool WHA developed for helping employers and consumers make informed healthcare decisions.   "Standing alone, however, our initiative is not the total answer to fully addressing the needs of the three audiences identified above," Brenton said.   "Similarly, a focus totally on hospitals fails to generate necessary information from physician offices, freestanding diagnostic centers and pharmacies," he added.

 

Senate Appropriations Committee approves HHS spending bill

The Senate Appropriations Committee approved yesterday an FY'07 spending bill for the Departments of Health and Human Services (HHS), Labor and Education yesterday that includes funding for discretionary health programs for hospitals.  

The bill includes $142.8 billion in discretionary spending, about $1.3 billion more than FY'06 and $5 billion more than President Bush requested in his budget earlier this year. However, it is less than the $7 billion increase that Labor-HHS-Education Appropriations Subcommittee Chairman Arlen Specter (R-PA) and Ranking Member Tom Harkin (D-IA) had sought. Specter said Labor/HHS spending is about $10.4 billion less than it was in FY'05 and does not go far enough in addressing funding for the National Institutes of Health, children's hospital graduate medical education (GME), Medicare operations, construction projects for the Centers for Disease Control and Prevention and spending for diseases such as kidney and epilepsy.

An amendment similar to a provision that was approved by the House Appropriations Committee that would prohibit the administration from issuing regulations to reduce or phase down the allowable provider tax rate for Medicaid was not offered due to issues of jurisdiction.

The Senate bill includes about $1 billion more in discretionary spending than a House version that was reported out of committee but has yet to reach the House floor. Major health-related features of the Senate bill are:  

 

Lawmakers and hearing witnesses protest Medicare imaging cuts

At a July 19 Energy and Commerce Health Subcommittee hearing, subcommittee members and witnesses argued that the scheduled Medicare cuts for imaging services should be delayed to allow time to study the impact of the reductions on patient care. Several witnesses also called for broader quality standards as a means of ensuring that utilization for imaging services is appropriate.   Subcommittee Chairman Deal (R-GA) said the hearing was intended to examine what is driving spending for imaging services, what is appropriate and inappropriate spending and how best to control utilization.

Scheduled reductions in payments to imaging services, mandated in the Deficit Reduction Act (DRA) would yield $2.8 billion in savings over 5 years and $8.1 billion over 10 years. Effective January 1, 2007, the DRA caps Medicare payment for the technical component of imaging services at the Hospital Outpatient Prospective Payment System rate. The DRA also codifies a policy CMS adopted in the FY'06 Medicare Physician Fee Schedule that reduces payments for subsequent scans done on contiguous body parts.

Herb Kuhn, Director of Medicare Management at the Centers for Medicare and Medicaid Services (CMS), testified that spending on imaging services has been increasing rapidly, with an annual growth rate of 15.7 percent between 2000 and 2005, vastly outpacing the 9.6 percent overall growth in Medicare physician services. Kuhn said that CMS will address the impact of DRA cuts and seek comments on that issue from stakeholders in its forthcoming physician fee schedule rule, adding that CMS wants to make sure that its payment policies reimburse providers appropriately without rewarding overutilization.

A witness representing the American College of Obstetricians and Gynecologists (ACOG) stated that ultrasound should be exempt from the cuts because it is safer and is growing at a slower rate than other imaging services. MedPAC and CMS officials were unable to provide details on overutilization of imaging services by modality or medical procedure when asked by subcommittee members.   Both the ACOG witness and a representative from the American College of Cardiology argued that the imaging services their specialties provide should be exempt from quality standards because extensive training is integrated into the specialties' practice protocols and each have developed their own appropriateness criteria.

In the House, Rep. Joe Pitts (R-PA) has introduced a bill (H.R. 5704) that would impose a two-year moratorium on the DRA imaging cuts, while Rep. Carolyn McCarthy (D-NY) has sponsored a bill (H.R. 5238) that would repeal the imaging provision.   Rep. Charles Pickering (R-MS) has also introduced a bill (H.R. 1426) that would set minimum education standards for non-physicians who perform imaging procedures.

Chairman Deal said the different perspectives expressed by witnesses demonstrate the difficulty of addressing the issue.   The committee is expected to continue monitoring imaging services in Medicare, though it is not clear if it will act on legislation this year or whether the DRA cuts will be delayed or repealed.

Also this week, the OIG released a report that found services that independent diagnostic facilities provided to Medicare beneficiaries in 2001 were not always reasonable and necessary, ordered by a physician, or adequately documented.   The report cited $71.5 million that was paid to 10 carriers for services that did not comply with federal laws, regulation and guidelines.   It further found that 94 independent diagnostic facilities were improperly reimbursed $164,839 for diagnostic services.

 

From the desk of Premier corporate vice president Margaret Reagan...

The Institute of Medicine released this week its findings of a study funded by CMS which found that errors in prescriptions and failures to prescribe prescriptions result in pain, suffering, and deaths, as well as billions of dollars in unnecessary expenses.  Sen. Grassley continues his campaign examining nonprofit hospitals and House committees this week have focused again on hospital pricing transparency. This confluence of events clearly indicates that we need to continually spread the word on the many initiatives that nonprofit hospitals are undertaking to improve quality of patient care and lower costs.  

To share positive stories about hospital quality improvement, Premier presented today the findings of the CMS/Premier Hospital Quality Incentive Demonstration pay-for-performance project to congressional health staff.   The data presented shows that hospitals are making great strides in reducing readmissions, preventing avoidable deaths and complications and shortening hospitals stays and that this can result in remarkable cost savings.  CMS also participated in today's briefing and said the agency will be looking to the Premier experience as a test-bed for national payment policy changes regarding pay-for-performance.

 

Weekly legislative and regulatory round-up

The round-up for the weeks of July 15 - 21, 2006 is available here.

The round-up for the weeks of July 8 - 14, 2006 is available here.

 

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