CMS ISSUES OUTPATIENT PROSPECTIVE SYSTEM AND PHYSICIAN FEE SCHEDULE FINAL RULE 2010 FINAL RULES: IMPORTANT CHANGES FOR PHYSICIANS AND HOSPITALS

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1 November 2009 Health Care Attorneys Janice A. Anderson Douglas K. Anning Mary Beth Blake Teresa A. Brooks Jared O. Brooner Anne M. Cooper Fredric J. Entin Rebecca L. Frigy Randy S. Gerber C. Jason Hannagan (continued) CMS ISSUES OUTPATIENT PROSPECTIVE SYSTEM AND PHYSICIAN FEE SCHEDULE FINAL RULE 2010 FINAL RULES: IMPORTANT CHANGES FOR PHYSICIANS AND HOSPITALS O n October 30, 2009, the Centers for Medicare and Medicaid Services released the final rules for 2010 addressing the Outpatient Prospective Payment System (OPPS Final Rule) and the Physician Fee Schedule (PFS Final Rule). Combined, the two final rules comprised over 3,500 pages and address a variety of issues related to the payment system for hospital outpatient departments and physician practices. This article addresses important changes for both physicians and hospitals, including: Significant clarification of the definition of direct supervision for hospital outpatient services Expansion of quality reporting for both physicians and hospitals KANSAS CITY ST. LOUIS CHICAGO DENVER PHOENIX WASHINGTON DC NEW YORK WILMINGTON DE OVERLAND PARK ST. JOSEPH SPRINGFIELD TOPEKA EDWARDSVILLE

2 Health Care Attorneys (continued) Jay M. Howard Joan B. Killgore Jason T. Lundy Jane K. McCahill Matthew J. Murer Thomas P. O'Donnell Daniel S. Reinberg Randal L. Schultz Charles P. Sheets Sandy J. Smith Valerie S. Smith Carey Gehl Supple Mark R. Woodbury Available bonuses to be paid to physicians who can use e prescribing technology effectively Planned expansion of the hospital acquired conditions payment penalty beyond the inpatient setting Clarification to certain Stark Law exceptions THE 2010 OPPS FINAL RULE CMS ISSUES AN IMPORTANT CLARIFICATION OF THE DEFINITION OF DIRECT SUPERVISION FOR HOSPITAL OUTPATIENT SERVICES The 2010 OPPS Final Rule included changes and clarifications to the definition of direct supervision, an issue that had been confusing since November 18, 2008, when CMS issued the 2009 OPPS Final Rule. Direct supervision, as defined by the 2009 OPPS Final Rule, required the physician to be present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure; however, it did not require that the physician be present in the room when the procedure was performed. It was the interpretation of this definition in the 2009 OPPS Final Rule that radically changed what hospitals needed to do in order to meet the direct supervision requirement a change that sparked considerable controversy among hospitals. In the 2010 OPPS Final Rule, CMS responded favorably to the industry concerns regarding the 2009 interpretation. Prior to the issuance of the 2009 OPPS Final Rule, hospitals believed that the definition of direct supervision, as it applied to rendering certain therapeutic services in the hospital or in on campus provider based departments, was relatively easy to meet. Since 2000, CMS had stated that the physical presence of a physician, as required for those services requiring direct supervision by a physician, was met for therapeutic services rendered in the hospital or in an on campus provider based department since physicians generally were present at all times on the campus of a hospital. Page 2 of 14

3 The 2009 OPPS Final Rule changed all that. For the first time, CMS retracted from its long held view that direct supervision was assumed to be met for in hospital and on campus provider based departments, and instead interpreted direct supervision to require the physical presence of a physician in the specific hospital or on campus provider based department at all times in order to satisfy the physician presence requirement for direct supervision. Needless to say, hospitals, caught off guard by the change in the requirements for direct supervision, were scrambling to restructure outpatient therapeutic services to meet the new requirements. In the 2010 OPPS Final Rule, CMS retracted from its restrictive interpretation of the definition of direct supervision espoused in the 2009 OPPS Final Rule as it applies to both therapeutic and diagnostic services, particularly those rendered in the hospital or in on campus provider based departments in ways favorable to hospitals (the rule applies to critical access hospitals as well). Specifically related to outpatient therapeutic services, the 2010 OPPS Final Rule clarified the meaning of direct supervision in two significant ways. First, CMS expanded the practitioners who are qualified to provide the appropriate level of supervision to include nonphysician practitioners who are qualified within the scope of their practice under applicable state law to perform the specific outpatient therapeutic service. This means that clinical psychologists, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives and licensed clinical social workers may directly supervise most hospital outpatient services so long as they may perform the specific services themselves under state law and the services are within their scope of practice in accordance with their hospital granted privileges. In providing the supervision, however, these nonphysician practitioners must remain in compliance with all state collaboration and supervision requirements. Additionally, CMS has provided that these nonphysician practitioners may not supervise the provision of cardiac rehabilitation, intensive cardiac rehabilitation, and pulmonary rehabilitation services. Second, CMS clarified that direct supervision exists so long as the physician or qualified nonphysician practitioner is present anywhere in the hospital and immediately available to furnish assistance during the performance of the service, including all recovery room care. Importantly, CMS explained that, so long as the physician is immediately available, direct supervision may be provided from a physician s office that is on campus, or from an on campus skilled nursing facility, rehabilitation hospital center or other nonhospital space located on the same campus as the hospital. For Page 3 of 14

4 purposes of direct supervision, in the hospital means the areas in the main building(s) of the hospital that are under the ownership, financial, and administrative control of the hospital; that are operated as part of the hospital; and for which the hospital bills for the services. For therapeutic services provided in an off campus provider based department, CMS kept in place its historical direct supervision requirements. In off campus therapeutic departments, direct supervision means that the supervising physician/nonphysician practitioner must be physically present in the off campus provider based department and immediately available to furnish assistance and direction throughout the performance of the service. Because the physician/nonphysician practitioner must be physically present in the specific outpatient therapeutic department, a hospital may not contract with a physician or nonphysician practitioner to provide direct supervision services at multiple off campus provider based departments at the same time. CMS does not explicitly define immediately available in the 2010 OPPS Final Rule; but clarifies that immediately available does not require the physician to be in the same room as the patient; however, the physician must be close enough such that he or she would be available to the patient without delay. This means that the physician may not be performing procedures or treating patients at the same time he or she is providing direct supervision to an outpatient therapeutic department. Immediately available also means that the physician or nonphysician practitioner must be prepared to step in and perform the service, not just respond to an emergency. This would require that the physician or nonphysician practitioner have the knowledge, skills, licensure and hospital granted privileges to perform the therapeutic services he or she is supervising. As to outpatient diagnostic services, CMS clarified that all hospital outpatient diagnostic services furnished directly or under arrangement, whether provided in the hospital, in a provider based department or at a non hospital location, such as an IDTF, will be required to follow the Medicare Physician Fee Schedule supervision requirements for individual diagnostic tests conducted at the specific location. The 2010 OPPS Final Rule clarifies, however, that in cases where direct supervision of diagnostic services is required, the definition of direct supervision shall be the same as that for therapeutic services, as described above (except that nonphysician practitioners generally are not given the authority to supervise diagnostic services). This means that in the case of outpatient diagnostic services furnished directly by the hospital, or under Page 4 of 14

5 arrangement in the main hospital building or on campus in either a providerbased department or other on campus location, a supervising physician must be present on the same campus and immediately available to furnish assistance and direction throughout the performance of the service; and in the case of diagnostic services furnished in an off campus provider based department, the physician must be physically present in the off campus provider based department and immediately available to furnish assistance and direction throughout the performance of the service. Although, in general, only physicians may supervise the provision of diagnostic tests, there is a limited exception for psychological and neuropsychological testing which a clinical psychologist may supervise. REPORTING QUALITY DATA FOR ANNUAL PAYMENT RATE UPDATES UNDER THE HOP QRDP Under the 2010 Hospital Outpatient Quality Reporting Data Program (HOP QRDP), CMS will reduce the annual inflation update factor by 2 percentage points for most outpatient services furnished by hospitals that failed to meet the CY 2009 reporting requirements of the HOP QDRP. The reduction will not apply to payments for certain separately payable pass through drugs, biologicals and devices. In 2010, CMS will continue to require hospitals subject to HOP QDRP requirements to report quality data for the current seven chart abstracted emergency department and surgical care measures and four claims based imaging efficiency measures. This means that there are no new reporting measures under HOP QRDP for However, CMS will implement a HOP QDRP validation requirement to ensure that hospitals are accurately reporting measures using chart abstracted data. Under this requirement, CMS will select a sample of reported cases, request the corresponding medical records, re abstract the HOP QDRP chartabstracted measures, and compare the results with the measures reported by the hospital. This validation process actually will begin in Hospitals will be required to return paper copies of requested medical records within a 45 calendar day timeframe, however, the validation results will not affect a hospital s CY 2011 OPPS payment. This initial validation procedure in 2011 provides hospitals with an opportunity to become familiar with the validation process for future years when validation results will affect the final annual update amount. Page 5 of 14

6 CMS is establishing procedures to make HOP QDRP quality measure data publicly available as early as June Under the HOP QDRP, CMS will publish quality data by the corresponding CMS Certification Number (CCN). For CY 2010, hospitals sharing the same CCN must combine data collection and submissions for the clinical measures across their multiple campuses for public reporting purposes. CMS is finalizing its proposal to promptly retire measures under circumstances in which CMS receives evidence that continued collection of a measure that has been adopted for the HOP QDRP raises patient safety concerns. Upon prompt retirement of a measure, CMS will notify hospitals and the public of the retirement of the measure and the reasons for its retirement through the usual means by which CMS communicates with hospitals, including, but not limited to, hospital e mail blasts and the Quality Net Web site, and to confirm the retirement of measures retired in this manner in the next rulemaking cycle. No outpatient measures have been retired in the 2010 OPPS Final Rule. EXPANSION OF HOSPITAL ACQUIRED CONDITIONS In the 2009 OPPS Final Rule, CMS opened the door to expanding the inpatient hospital acquired conditions (HACs) reporting and payment restrictions to a variety of outpatient settings in the future. CMS goal for this initiative is to reduce preventable medical errors in all care settings, not just in the inpatient hospital setting. In the 2010 OPPS Final Rule, CMS reiterated this goal and noted that there are 530,000 preventable drug related injuries to Medicare beneficiaries each year in outpatient clinics. CMS intends to increase injury surveillance and prevention via reporting of these conditions using ICD 9 E codes and external cause of injury codes. CMS believes the current definition of Present On Admission (POA) needs to be refined for use in an outpatient setting and it will work with the National Uniform Billing Committee to explore the expansion of POA reporting beyond the inpatient setting. CMS is currently accepting comments on how this expansion would occur. Page 6 of 14

7 THE 2010 PFS FINAL RULE PHYSICIAN FEE SCHEDULE FINAL RULE EMPHASIZES PHYSICIAN BONUSES FOR QUALITY REPORTING AND E PRESCRIBING The Physician Quality Reporting Initiative (PQRI) is a voluntary reporting program that provides an incentive payment to eligible professionals who satisfactorily report data on quality measure for covered professional services during a specified reporting period. The program began in 2007 and has been expanded annually by CMS every year thereafter. For 2010, the PFS Final Rule made several changes to the PQRI program, expanding both the number of measures and measure groups available for reporting, the ways in which reporting can occur and implementing for the first time an option for reporting by group practices rather than individually. Final specifications for the 2010 PQRI measures are not yet available but should be posted on the CMS website by the end of the year. Like the 2009 program, professionals can report data for a full year, or for some of the reporting options, the last six months of the year, to qualify for the bonus. Successful reporters earn a bonus equal to 2 percent of the allowed charges during the reporting period, which includes beneficiary copayments and deductibles and therefore is not limited to the 80 percent paid for by Medicare. As to the number of measures and measure groups, the 2010 PQRI program expands the number of individual measures from 153 in 2009 to 175 in 2010 and the number of measure groups from 7 in 2009 to 13 in As to the ways of reporting, the 2009 program allowed for both claims based and registry reporting, but did not allow reporting through electronic health records. The 2009 program did provide for testing of electronic health record reporting with the goal of implementing that method of reporting in The 2010 PFS Final Rule includes electronic health record reporting as an option if the 2009 testing program ultimately is deemed successful. Options for reporting through an electronic health record is more limited than the claims based or registry methods of reporting. Only 10 measures can be reported from an electronic health record in 2010, and the option to report only for the last six months of the year is not available if electronic health record reporting is used. CMS is limiting its ability to accept quality data electronically so that it can gain experience with that method of reporting in a more controlled fashion and can evaluate the feasibility of expanding electronic health record reporting in the future. As of the display date of the 2010 PFS Final Rule, the electronic health record vendors who have qualified for reporting PQRI data have not yet been identified. The Page 7 of 14

8 2010 PFS Final Rule also details specific requirements that registries must meet in 2010 in order to be qualified to report information for purposes of PQRI. Like electronic health record vendors, the registries that meet the new requirements have not yet been identified as of the display date of the 2010 PFS Final Rule. For purposes of PQRI, a group practice that is allowed to report as a group rather than individually is defined by a single Tax Identification Number (TIN) with at least 200 or more individual eligible professionals who have reassigned their billing rights to the TIN. CMS recognized that this definition would effectively preclude many group practices from reporting as a group. However, CMS decided to use this restrictive definition in the initial implementation year of group practice reporting to refine the group reporting option with the stated goal of expanding the option to group practices less than 200 individual eligible professionals in future years. It is noteworthy that CMS retracted from its proposed requirement that group practices would have to agree to publicly report its data in order to take advantage of the group reporting option. Thus the public reporting for group practices, like all other eligible professionals, is confined to identification of successful reporters only. CMS cautions, however, that public reporting of the quality data results for group practices is likely to occur in the 2011 PQRI program year. The group practice reporting option is significantly different than the individual PQRI reporting program in that group practices that qualify and opt to report as a group must complete a data collection tool submitted to them by CMS. The tool includes 26 measures, and must be completed for the first 411 consecutively ranked beneficiaries assigned by CMS in the order in which they appear in the group s sample for each of the disease modules or preventive care measures in the tool. Group practice reporting applies only to a full calendar year. The 2010 PFS Final Rule also addresses the Physician Resource Use Measurement and Reporting Program authorized by Congress in the Medicare Improvements for Patients and Providers Act of MIPPA mandated CMS to submit to each physician a confidential report of the physician s use of resources beginning in Phase I of this program has resulted in CMS disseminating approximately 310 resource use reports (a sample report can be found at mpr.com). Phase II of the program is focused on expanding reporting to target specific performance areas for physicians and adding reporting to groups of physicians rather than just individuals. For purposes of reporting on resource use however, the definition of group practice is significantly different from the definition used for PQRI purposes. For resource use purposes, a group practice is defined as more than one physician practicing medicine together. Page 8 of 14

9 The commentary to the 2010 PFS Final Rule provides a lengthy discussion regarding CMS activities in moving physician reimbursement towards its goal of implementing Value Based Purchasing. A day long listening session was held in December, 2008 to gather input from stakeholders. Based on that input, the Physician and Other Health Professional Value Based Purchasing (PVBP) Steering Team has begun to design various approaches for performance based payment that will address the goals and objectives for different practice arrangements. In the 2010 PFS proposed rule CMS specifically sought guidance regarding two topics related to the PVBP plan: (1) the appropriate level at which to hold practitioners accountable, such as at the individual level or group level, and (2) the appropriate data submission mechanisms. Significant comment was provided to CMS regarding these two topics, which is summarized in the commentary to the 2010 PFS Final Rule. The 2010 PFS Final Rule discusses important changes to the E Prescribing Incentive Program first implemented in The e Prescribing incentive program provides successful e prescribers with an additional incentive bonus equal to 2 percent of the total estimated Medicare Part B Physician Fee Schedule allowed charges for all covered professional services furnished during the year. The bonus payment is unchanged for The 2010 PFS Final Rule describes in detail, however, the requirements that apply to gain the bonus payments under the e Prescribing Incentive Program. Group practices that select the PQRI group practice option may, but are not required, to also select to participate as a group practice in the e Prescribing Incentive Program. Like the PQRI program, CMS will publicly report the names of eligible professionals and group practices that are successful electronic prescribers for the 2010 program on the Physician and Other Health Care Professionals Directory to be made available in CMS CLARIFIES STAND IN THE SHOES DOCTRINE AND SEEKS COMMENT ON THE DEFINITION OF ENTITY While CMS did not finalize any substantive revisions to the Stark Law regulations, it clarified application of the stand in the shoes doctrine to certain Stark Law exceptions, and requested comments regarding interpretation of a Stark Law definition of entity. The Stark Law currently treats a physician who has ownership or investment interest in a physician organization as standing in the shoes of the Page 9 of 14

10 physician organization. Consequently, for purposes of applying many Stark Law exceptions, a physician who stands in the shoes of his or her physician organization is deemed to have the same compensation arrangements with the same parties on the same terms as the physician organization. The current Stark Law regulations provide (emphasis added): For purposes of applying [certain Stark Law exceptions] to arrangements in which a physician stands in the shoes of his or her physician organization, the parties to the arrangements are considered to be the entity furnishing [the Stark Law s designated health services (DHS)] and the physician organization (including all members, employees, or independent contractor physicians). Based upon varying uses of the of the word parties in the Stark Law regulations, there has been some confusion in the industry regarding who or what is a party when the stand in the shoes doctrine is applied. For example, many Stark Law exceptions require that an arrangement be signed by the parties and/or focus on referrals or other business generated between the parties. The 2010 PFS Final Rule clarifies that all of a physician organization s members, employees and independent contractor physicians are not required to be signatories when a Stark Law exception requires an arrangement be signed by the parties. It also confirms that the relevant referrals and other business generated between the parties, are the referrals and other business generated between the entity furnishing the DHS and all physicians in the physician organization (including all members, employees and independent contractors), and not only the referrals made by each physician who stands in the shoes of the physician organization. In the 2010 PFS Final Rule, CMS also sought comment on certain aspects of the definition of entity. As of October 1, 2009, an entity furnishing DHS includes the person or entity that has presented a claim to Medicare for the DHS, as well as any person or entity that has performed services that are billed as DHS, notwithstanding that another person or entity actually billed the services as DHS. This expansion of the definition of entity for purposes of the Stark Law prohibition has required many physicians and DHS providers to restructure their arrangements (including many under arrangements ) in order to meet the additional restrictions imposed by the expansion. There was expressed concern to the 2010 PFS proposed rule about the potential ambiguity of the meaning of performs, and the impact such ambiguity has had in restructuring arrangements affected by the new definition of entity. Acknowledging these concerns in the 2010 PFS Final Rule, CMS is soliciting specific comments, as follows: Page 10 of 14

11 Whether CMS should define or clarify performed services that are billed as DHS, and, if so, how. Whether performed services that are billed as DHS should be analyzed in the same manner for inpatient and outpatient services provided under arrangements. Whether performance of a service billed as DHS should be determined based on how many of the following elements are provided: Lease of space used for performance of the service Lease of equipment used for the performance of the service Supplies that are not separately billable but used in the performance of the service Management services Billing services Nonphysician services that are not separately billable. If so, whether certain of these elements should be weighed more heavily than others in determining whether DHS are performed. Whether an interpretation of medical work was relied upon in restructuring arrangements and, if so, how. The degree to which the amount and nature of services provided by physician and nonphysician personnel (for example, technicians) should influence the determination of whether a person or organization has performed services billed as DHS. The degree to which the ability to bill separately for the service should influence the determination regarding whether a person or organization has performed services that are billed as DHS. Whether there are other comments or alternative approaches or criteria that would address CMS policy concerns about over utilization and other abuse while minimizing the impact on legitimate non abusive arrangements. Page 11 of 14

12 The CMS comment period is open until December 29,2009. The issues discussed above are only some of the many issues addressed in the over 3,500 pages of comment and regulation issued by CMS on October 30, 2009 focused on outpatient hospitals and physicians. They are, however, in our view, some of the most important sections for hospitals and physicians to become aware. More information about these or other sections in these Final Rules can be obtained by contacting a Polsinelli Shughart PC attorney listed below. Janice Anderson janderson@polsinelli.com Joan Killgore jkillgore@polsinelli.com Tom O Donnell todonnell@polsinelli.com Page 12 of 14

13 Health Care Attorneys Mary Beth Blake, Chair Randal L. Schultz, Vice-Chair Janice A. Anderson Douglas K. Anning Teresa A. Brooks Washington, D.C Jared O. Brooner St. Joseph Anne M. Cooper Fredric J. Entin Rebecca L. Frigy St. Louis Randy S. Gerber St. Louis C. Jason Hannagan Jay M. Howard Joan B. Killgore St. Louis Jason T. Lundy Jane K. McCahill Matthew J. Murer Thomas P. O Donnell todonnell@polsinelli.com Daniel S. Reinberg dreinberg@polsinelli.com Charles P. Sheets csheets@polsinelli.com Sandy J. Smith ssmith@polsinelli.com Valerie S. Smith vsmith@polsinelli.com Carey Gehl Supple cgehlsupple@polsinelli.com Mark R. Woodbury St. Joseph mwoodbury@polsinelli.com About Polsinelli Shughart s Health Care Group Our health care group has the depth and breadth of experience to provide a full spectrum of legal services for health care providers, including mergers and acquisitions, capital financing, facility licensing, accreditation and certification, compliance counseling, responding to fraud and abuse investigations, operational issues relating to patient care, HIPAA and health privacy, information systems, administrative hearings before state and federal agencies, EMTALA matters, third party payment and coverage disputes, and relationships between physician and affiliated institutions. Our clients include community hospitals, academic medical centers, integrated health systems, children s hospitals, behavioral health facilities, rehabilitative service facilities, longterm care facilities, as well as home health agencies, diagnostic facilities and more than 200 physician practice groups. To learn more about our services, visit us online at Page 13 of 14

14 If you know of anyone who you believe would like to receive our updates, or if you would like to be removed from our e-distribution list, please contact Sarah Blair via at Polsinelli Shughart PC provides this for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship. Polsinelli Shughart is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements. Polsinelli Shughart is a registered trademark of Polsinelli Shughart PC. About Polsinelli Shughart PC With more than 470 attorneys, Polsinelli Shughart PC is a national law firm that is a recognized leader in the areas of business litigation, financial services, bankruptcy, real estate, business law, labor and employment, construction, life sciences and health care. Serving corporate, institutional and individual clients regionally, nationally and worldwide, Polsinelli Shughart is known for successfully applying forward-thinking strategies for both straightforward and complex legal matters. The firm can be found online at Page 14 of 14