Hospital self-audits of provider-based status. Lawrence W. Vernaglia and Jeffrey R. Bates

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1 Compliance TODAY October 2012 a publication of the health care compliance association Meet Robert Hussar Perspective from someone who has played 4 different compliance roles: Compliance Officer Consultant Health Law Attorney State Medicaid First Deputy IG See page A timeline for change: A discussion of the Affordable Care Act provisions Bruce A. Johnson and Joseph T. Van Leer 33 Hospital self-audits of provider-based status Lawrence W. Vernaglia and Jeffrey R. Bates 41 Reimbursement for quality-of-care issues: What s a signature worth? Susan Nance 45 HIPAA Notice of Privacy Practices: Don t forget the basics Elizabeth A. Kastner This article, published in Compliance Today, appears here with permission from the Health Care Compliance Association. Call HCCA at with reprint requests.

2 by Bruce A. Johnson, Esq. and Joseph T. Van Leer, Esq. A timeline for change: A discussion of the Affordable Care Act provisions»» All health care providers need to prepare for quality reporting and implement integral systems to reduce compliance burdens and to protect future reimbursement.»» Skilled nursing facilities (SNFs) need to begin developing compliance plans immediately.»» EHR incentive payments are available until 2015 under Medicare, after which physicians will be subject to penalties for lack of EHR meaningful use.»» By 2015, up to 3.5% of physician reimbursement could be at risk for a failing to report on and poor performance on quality and cost-related variables.»» The value-based payment modifier program will begin evaluating physician performance in 2013 and impact physician reimbursement in Bruce A. Johnson (brucejohnson@polsinelli.com) is a Shareholder in Denver and Joseph T. Van Leer (jvanleer@polsinelli.com) is an Associate in Chicago at Polsinelli Shughart PC. A previous article published in the June 2012 issue of Compliance Today 1 addressed how the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA) is transforming hospital provider incentives to a system based on value, not volume. Continuing the discussion on value, this article will examine many regulatory changes facing non-hospital providers as a result of the ACA. Although many of the items addressed here are discussed in 2012 and 2013, most of the programs will continue in later years and grow in significance. The timeline below shows the implementation schedule for many of these programs Bundled payments On January 1, 2012 and running through December 31, 2016, The Centers for Medicare & Medicaid Services (CMS) initiated a new Medicare demonstration project using bundled payments for episodes of care that may include hospitalizations, post-acute care, and physician services. Under the bundled payment pilot program, participating entities can opt to receive a single payment Johnson for an entire episode of care. Bundled payments align the financial incentives of those delivering care, and are intended to improve quality, reduce cost, and eliminate the fragmented delivery of care for services covered by a bundled payment. The program will utilize four models, which vary in scope and Van Leer type of payment. These models were addressed in the June article on hospitalspecific requirements. In Models 2 and 3, the bundle would include physicians services, care by the post-acute provider, related readmissions, and other Medicare Part B services proposed in the episode definition, such as

3 clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); and Part B drugs. We briefly outline each model and reiterate information on the program below: Model 1 Retrospective bundled payment for the acute inpatient stay only; Model 2 The episode of care would include the inpatient stay and post-acute care, and would end (at the applicant s option) either a minimum of 30 or 90 days after discharge; Model 3 The episode of care would begin at initiation of post-acute care with a participating skilled nursing facility (SNF), inpatient rehabilitation facility (IRF), long-term acute care hospital, or home health agency within 30 days of discharge from the inpatient stay and would end no sooner than 30 days after the initiation of the episode; Model 4 Prospective bundled payment for hospitals and physicians for the acute inpatient hospital stay only. issued by the Congressional Budget Office indicates that bundled payments can result in significant savings to the Medicare program. 2 CMS published a Request for Applications, which includes more detail on the models and their specific criteria ( cms.gov/files/x/bundled-payments-for-care- Improvement-Request-for-Applications.pdf). Hospital-Acquired Conditions program Under current payment policy, hospitals do not receive the additional payment for treating a patient s complications if one of several hospital-acquired conditions (HACs) was not present on admission and occurs during a hospital stay. The ACA directed CMS to deliver a study to Congress on expanding this program to other provider settings (e.g., rehabilitation facilities, ASCs, etc.) by January 1, However, as of August 2012, this study has not been released. Providers should follow this issue closely, because an expansion of the HAC program will significantly impact other provider facilities. The models using a retrospective payment allow for the payment of the traditional fee-for-service amounts during the delivery of care, which CMS will reconcile against a pre-determined target amount for the entire episode after it is completed. The target price would consider the base MS-DRG payment, including payment adjustments and outlier payments. The episode of care may be defined by the participating entity seeking to participate in the bundled payment initiative and may vary depending on the model. In some cases, applicants may define both the length of the episode and types of beneficiaries included. Providers and suppliers selected for the pilot will be required to enter into agreements for a period of 3 years, with the possibility of an additional 2-year extension. A recent report Accountable Care Organizations Beginning in 2012, health care organizations may apply to become accountable care organizations (ACOs) to participate in the Medicare Shared Savings Program. ACOs are intended to be integrated, shared-savings programs where participants agree to be accountable for the quality and the cost of care provided to Medicare fee-for-service beneficiaries. If they succeed, the participants in the ACO will be rewarded for keeping costs down while achieving quality and patient satisfaction goals, and then can share in a portion of savings achieved by the ACO. An ACO may consist of many independent providers and suppliers, including hospitals, physicians, post-acute care providers, etc. We do not address ACOs in detail here, but it is important that non-hospital providers consider

4 the benefits of ACOs and the shared savings program. ACOs offer a significant opportunity for non-hospital providers to participate in innovative care models with reduced risk because of available waivers under applicable fraud and abuse laws. Although these waivers do not apply to state laws, some states are enacting legislation and/or policies to encourage the formation of ACOs. Skilled nursing facilities Before 2010, providers were strongly encouraged by the Office of Inspector General (OIG) to establish compliance programs. Now, the ACA mandates that certain types of providers, including SNFs, implement compliance programs by March 23, Furthermore, SNFs will be required to have quality assurance and performance improvement plans in place by no later than December 31, There is also a separate statutory provision calling for a complimentary ethics program as a condition of participation in the Medicare, Medicaid, and CHIP programs by the end of A SNF compliance program must be reasonably designed, implemented, and enforced so that it will be generally effective in preventing and detecting criminal, civil, and administrative violations and in promoting quality of care. 3 There are eight required components of the compliance program, including: Specific individuals with authority and sufficient resources must be assigned the responsibility to oversee compliance with the standards and procedures; The organization must take steps to educate its employees and agents about the compliance program and to achieve compliance with its standards; and In the event that an offense is detected, the organization must take all reasonable steps to respond appropriately and to prevent similar offenses. The organization must also periodically reassess the compliance programs and revise as necessary to reflect changes within the organization. HHS and the OIG were required to issue regulations outlining additional criteria by March 23, 2012, but they have not been issued as of August Given the upcoming December 31, 2012 deadline, SNFs should immediately begin developing a compliance plan in collaboration with all staff. The plan should clearly address ongoing compliance concerns and risks. Long-term acute care hospitals Long-term acute care hospitals (LTACHs) provide hospital care to select patients who require a longer length of stay than is feasible for acute care hospitals. Patients treated at an LTACH must have an average length of stay of more than 25 days. Although this is the shortest length of stay among post-acute providers (including SNFs, home health agencies, and inpatient rehabilitation facilities), LTACHs play a vital part in the post-acute continuum of care. Beginning in FY 2014, the ACA requires CMS to reduce the market basket of an LTACH by 2% if it does comply with the quality data submission requirements. For the FY 2014 payment determination, LTACHs must report on three quality measures: Urinary catheter-associated urinary tract infection Central line catheter-associated blood stream infection Percent of residents with pressure ulcers that are new or worsened The data collection period for these measures is October 1 through December 31, Thus, LTACHs should begin collecting data on these measures now and ensure timely submission to CMS to avoid a reduction in their market basket update. CMS anticipates adding additional measures in future years

5 Physicians As part of its focus on value over recent years, CMS implemented the Physician Quality Reporting System (PQRS), the Electronic Health Record (EHR) incentive program, and the Physician Feedback Program. These provide foundation for the VBP payment modifier, as discussed below. Ultimately, CMS s primary interest is to provide a common basis to increase the quality of care for Medicare beneficiaries without increasing reporting burdens, and to deliver fair and meaningful information to physicians on ways to improve the quality of care they furnish. Electronic Health Record Incentive Program One of the most important components to measuring quality and implementing VBP programs is the ability to effectively collect data. EHR systems enable providers to collect and report data in a less burdensome manner. CMS has identified the public benefit associated with widespread adoption of EHR systems. The Medicare and Medicaid EHR incentive programs provide payments to eligible professionals (EPs) and eligible hospitals (addressed in June article) to adopt, implement, upgrade, and demonstrate meaningful use of certified EHR technology. Under the Medicare EHR program, the definition of EP includes a doctor of medicine, doctor of osteopathy, dental surgeon, doctor of dental medicine, podiatrist, optometrist, or chiropractor. For the Medicaid program, an EP may be a physician, pediatrician, dentist, certified nurse midwife, nurse practitioner, or physician assistant. Under the Medicare program, EPs can receive up to $44,000 over 5 years if they begin participation in Under the Medicaid program, EPs can receive up to $63,700. However, EPs may not participate in both the Medicare and Medicaid programs. EPs must comply with the Stage 1 meaningful use requirements in FY CMS plans to implement Stage 2 in 2013 and Stage 3 criteria in future years, both of which are more onerous. The last year to initiate participation in the Medicare or Medicaid EHR incentive programs is 2014 and 2016, respectively. Under the Medicare program, EPs who do not successfully demonstrate meaningful use will receive a 1% reduction to their Medicare reimbursement beginning in There is no penalty as part of the Medicaid program. Physician Quality Reporting System The PQRS began in 2007 as a voluntary program known as the Physician Quality Reporting Initiative which made incentive payments to physicians who successfully reported on certain quality measures. Under the Medicare Improvement for Patients and Providers Act of 2008, the program became permanent and authorized increased incentive payments of 2% for successful participation in both the 2009 and 2010 program years. The ACA required the implementation of timely feedback and an informal appeals process by 2011, extended incentive payments through 2014, and imposes a penalty for not successfully reporting, beginning in Physicians who do not successfully report data for 2013 will receive a 1.5% payment penalty in 2015, and 2% thereafter. The ACA also authorized an additional 0.5% each year for physicians who: satisfactorily report; participate in a Maintenance of Certification Program more frequently than is required to qualify for or maintain board certification status; and successfully complete a qualified Maintenance of Certification Program practice assessment for such year. A list of qualified Maintenance of Certification Programs can be found CMS s website

6 EPs may use many methods to report quality measures, but an EP will only receive one incentive payment. EPs may choose to report information on individual or group quality measures to: CMS on their Medicare Part B claims, a qualified Physician Quality Reporting registry, CMS via a qualified EHR product, or a qualified Physician Quality Reporting data submission vendor. There are specific requirements for each option. As outlined in more detail below, it is important that physicians successfully report under this program in order to avoid payment reductions under this program and others in future years. Physician Feedback Program Reporting for the Physician Feedback Program (PFP) started prior to the ACA, but the ACA expanded it by requiring CMS to provide information to physicians and medical practice groups about the costs and quality of care they provide to their Medicare patients. The information consists of quantified data as well as comparisons of usage and costs patterns among physicians and medical practice groups. The ACA mandates that CMS include cost and quality data to calculate payments as part of the VBPM, as discussed below. CMS noted in the CY 2012 Medicare Physician Fee Schedule final rule that it closely reviewed the PFP and plans to improve and expand the program to use more methodological approaches to increase the number of physicians eligible to receive a report, conduct statistical analyses of the impact of key methodological decisions on reliability, identify factors that may have prevented physicians from accessing their reports, and develop strategies to improve the process for distributing and facilitating access to reports. Each of these programs relate to the VBPM in that they provide the measurement data with which CMS will evaluate physician performance. Ambulatory surgical centers Beginning on October 1, 2012 (for a 2014 payment determination), ambulatory surgery centers (ASCs) will be required to report on various quality measures including patient burns, surgeries on the wrong site, and hospital transfers/admissions following an operation. ASCs that fail to report on quality measures may incur penalties up to 2%, but CMS will not determine how penalties will be imposed until the 2013 ASC final rule is published Independent Payment Advisory Board One of the more controversial provisions of the ACA was the creation of the Independent Payment Advisory Board (IPAB) which was designed to stem the growth of Medicare spending. The IPAB is intended to be responsible for recommending reductions in spending growth. The ACA requires the 15-member board to make specific recommendations annually to reduce spending growth if the projected Medicare growth rate exceeds the projected annual target determined by the chief actuary of CMS. In the absence of Congressional action, these recommendations by the IPAB automatically become law. The ACA requires that the IPAB begin its work in 2013 with 2015 targeted as the first year that its recommendations would be implemented. However, the future of the IPAB is uncertain and several attempts to repeal have been made. 4 To date, President Obama

7 has not appointed any members to the IPAB, and it is unlikely IPAB will make recommendations before ,6 Figure 1: How the Value Modifier is assessed Groups of physicians with 25 eligible professionals Physicians Electronic Health Record Incentive Program Under the Medicare program, EPs are eligible for $39,000 to be paid thru 2016 if they begin participation in FY Under Medicaid, EPs are still eligible for the full $63,750 if they begin in 2013 or subsequent years. CMS is expected to implement the Stage 2 meaningful use requirements in FY 2013 for many providers. However, HHS recently announced they may delay implementation of the Stage 2 requirements for providers that successfully demonstrated meaningful use in Value-Based Payment Modifier Similar to the hospital VBP program, CMS plans to implement the Value-Based Payment Modifier (VBPM), which will adjust payments for many physicians based upon performance on cost and quality measures. This program was first conceptualized to provide differential payments to a physician or a group of physicians under the physician fee schedule based upon the quality of care furnished. It is part of a growing shift in payment incentives towards the value, rather than the volume, of care provided to patients. As mentioned above, the VBPM will rely on several quality reporting programs, including PQRS, the EHR incentive program, and the E-Prescribing incentive program. Initially, it will apply only to groups of physicians with 25 or more eligible professionals reporting under a single tax identification number, and will assess the quality of care furnished compared to cost during the performance period. The first performance period is the full calendar year (CY) This information will be used to determine the VBPM adjustment for payments in CY CMS installed a oneyear gap between the performance year and Satisfactory PQRS Reporters (using GPRO web-interface, claims, registries, EHRs, or administrative claims) Elect QualityTiering calculation Upward or downward adjustment based on quality tiering No Election 0.0% (no adjustment) Non-satisfactory PQRS Reporters (including groups not participating in any PQRS reporting mechanism) -1.5% adjustment for not reporting -1.0% (additional downward adjustment) Source: CMS Proposals for the Physician Value-Based Modifier under the Medicare Physician Fee Schedule, VBPM-NPC-Presentation.pdf the payment adjustment to allow enough time to collect performance data, assess performance, and construct and compute the VBPM. The diagram set forth in figure 1 gives a broad overview of the VBPM process. Notably, in the CY 2013 Medicare Physician Fee Schedule proposed rule, CMS proposed that those physician groups who satisfy the PQRS reporting requirements for 2013 and 2014 or the proposed criteria for satisfactorily reporting using the administrative claims-based reporting mechanism, may avoid any VBPM adjustment. However, these groups can still elect to participate in the program. CMS will allow these groups to review their VBPM adjustment based upon 2012 data prior to the election deadline. By contrast, those who do not satisfy the PQRS reporting requirements for 2013 and 2014 will be automatically subject to a reimbursement reduction of 1%. This is in addition to the 1.5% penalty for not complying with the PQRS requirements. CMS will calculate the VBPM based upon performance on two domain composite scores during the applicable performance period : (1) the quality of care composite and (2) the cost composite: Quality domain The quality score is derived from two areas: the PQRS measures and certain VBPM measures including the rates of potentially preventable hospital admissions for heart failure, chronic obstructive pulmonary disease, and diabetes. These

8 Figure 2: Domain composite scores used to calculate the Value-Based Payment Modifier Clinical care Patient experience Population/Community health Patient safety Care coordination Efficiency Total overall costs Total costs for beneficiaries with specific conditions Quality of Care Composite Cost Composite VALUE MODIFIER SCORE Source: 77 Fed. Reg. 45,007 (July 30, 2012) measures will be placed in separate subdomains to determine the quality composite score, as outlined in figure 2. Cost domain For the FY 2013 performance year cost measures, CMS will evaluate physicians on total per capita costs measures and per capita cost measures for beneficiaries with chronic pulmonary disease, heart failure, coronary artery disease, and diabetes. Adjustment amount In CY 2013 (the first payment year), the ACA provides for a downward adjustment cap of 1%. The modifier is required to be budget neutral, so payments will increase for some physicians and decrease for others, but the aggregate amount of Medicare spending in any given year for physician services will not change due to the modifier. CMS has proposed a Quality Tiering model to compare the quality of care and cost domains. CMS is, however, seeking comment on a Total Performance Score model similar to that of the hospital VBP program. Under the Quality Tiering model, CMS will classify groups of physicians into high, average, and low cost and quality categories based upon whether they are significantly above or below the benchmark (national mean). A physician group s score must be a least 5% different from the mean to be classified as high or low. CMS has proposed an additional 1% incentive for groups that furnish care to high-risk Medicare beneficiaries if their reporting measures and the average beneficiary risk scores are in the top 25% of all risk scores. Figure 3 demonstrates the point allocations. CMS plans to establish the adjustment factor ( x ) after the performance period has ended, based upon the aggregate amount of downward payment adjustments (i.e., penalties). The compliance costs and burden associated with this program could be significant, because a failure to successfully report on the PQRS will result in a 2.5% penalty. There are additional penalties for failure to demonstrate meaningful use in 2015 for the EHR incentive program. As such, it is important that physician groups prepare to comply with these and related programs. Medicare/Medicaid payment parity The ACA mandated that Medicaid agencies pay at least the Medicare physician fee schedule rates in effect in CYs 2013 and 2014, or if higher, the rate using the CY 2009 conversion factor for primary care services furnished by a practitioner of family medicine, general internal medicine, or pediatric medicine. Federal matching funds will be available for any increase in payment above the amounts that would be due for these services under the provisions of the state plan as of July 1, This means that states will be fully reimbursed for these increased payments by the federal government. Figure 3: CMS point allocations for the Quality Tiering model Quality/Cost Low Cost Average Cost High Cost High quality +2.0x^ +1.0x^ +0.0% Average quality +1.0x^ +0.0% --0.5% Low quality +0.0% --0.5% --1.0% Source: CMS Fact Sheet, Physician Value-Based Modifier and the Physician Feedback Program 7 ^ Additional +1 adjustments for sicker patients w/gpro web, claims, registries, or EHR reporting

9 CMS is proposing to make all sub-specialists recognized by the American Board of Medical Specialties eligible for increased payment for primary care services. CMS also proposed that, if a physician is not board certified as a primary care specialist, at least 60% of the codes billed by the physician must be for evaluation and management (E&M) codes and vaccine administration codes. Physicians will receive increased payments for primary care services not directly performed by the physician (incident to) if properly supervised. Notably, physicians furnishing care at FQHCs and RHCs are not eligible for increased payments. Additionally, CMS will review Medicaid managed care payments to ensure that they are at the minimum Medicare primary care payment levels and that physicians receive a direct benefit of the payment increase for each of the services specified. Physician Payment Sunshine Act The ACA also mandated that, beginning on March 31, 2013, drug and device manufacturers and group purchasing organizations must report to the HHS Secretary any payment or transfer of value made to a physician or teaching hospital during the preceding calendar year (i.e., CY 2012). Although the original start date for the collection of data was January 1, 2012, CMS recently announced (in a proposed rule meant to provide necessary details on the Sunshine Act) that it would not require manufacturers and GPOs to begin collecting data until publication of the final regulations. Some planned exceptions to this reporting requirement include transfers of value less than $10 and product samples intended for patient use. Manufacturers must also report physician ownership or investment interests (excluding a publicly traded security or mutual fund) which will be available for public access, but excluding National Provider Identifiers. CMS has asked for assistance finding ways to reduce compliance costs for such data collection and should provide more clarity in the final rule later this year Physicians Electronic Health Record Incentive Program Under the Medicare program, EPs are eligible for $24,000 to be paid thru 2016 if they begin participation in FY Under Medicaid, EPs are still eligible for the full $63,750 if they begin in 2013 or subsequent years. Value-Based Payment Modifier Reporting for the 2016 payment period begins in 2014 for some physicians. The VBPM will adjust payments to physicians based on the quality of care they provide and how much cost they incur relative to their peers. It is anticipated that physicians will be evaluated on a broader array of measures in later years Physicians Electronic Health Record Incentive Program Beginning in 2015, EPs that do not successfully demonstrate meaningful use will receive a 1% Medicare payment reduction each year, up to a maximum of 5%. Again, there is no penalty under the Medicaid program. Additionally, EPs that successfully participate in 2015 are still eligible for up to $63,750 in incentive payments. Value-Based Payment Modifier The VBPM will be applied to the physician fee schedule for specific physicians starting on January 1, It will affect payment rates for physicians based upon the quality and cost of care they furnish to Medicare beneficiaries. All physicians will be subject to the VBPM beginning in 2017, which means reporting on quality and cost data will likely begin in 2015 (as the performance year) for all physicians. Individual physicians and smaller physician groups must prepare to address this increased burden

10 Feature Quality Reporting System In 2015, if a practice does not satisfactorily participate in the PQRI, a 1.5% penalty is applied to the practice s total estimated Medicare Part B allowed charges for covered professional services furnished during the reporting period. In 2016 and beyond, if a practice does not satisfactorily participate in the PQRI, a 2% penalty is applied to the practice s total estimated Medicare Part B allowed charges for covered professional services furnished during the reporting period. The authors would like to thank Lindsay Kessler for her valued assistance in completing this article. 1. Janice Anderson and Joseph Van Leer: A timeline for change: A discussion of the Affordable Care Act provisions. Compliance Today, June 2012, pp Lyle Nelson: Lessons from Medicare s Demonstration Projects on Value-Based Payment. Working Paper Series, Congressional Budget Office, January Available at files/cbofiles/attachments/wp _nelson_medicare_vbp_ Demonstrations.pdf U.S.C. 1320a-7j(b)(3)(A) (2012) 4. See, for example, Medicare Decisions Accountability Act, H.R. 451, 112th Cong. (2012). 5. The Commonwealth Fund website: Washington Health Policy Week in Review Administration Vetting IPAB Candidates, Though Panel Likely Won t Make Recommendations Until March 5, Available at Newsletters/Washington-Health-Policy-in-Review/2012/Mar/ March /Administration-Vetting-IPAB-Candidates.aspx 6. Health Affairs website: The Independent Payment Advisory Board, updated April 5, Available at healthpolicybriefs/brief.php?brief_id=67 7. CMS Fact sheets: Physician Value-Based Payment Modifier and the Physician Feedback Program. July 6, Available at Counter=4401&intNumPerPage=10&checkDate=&checkKey= &srchtype=1&numdays=3500&srchopt=0&srchdata= &keywordtype=all&chknewstype=6&intpage=&showall=&pyear= &year=&desc=&cboorder=date Start planning now for HCCA s upcoming Regional Conferences Mid Central Southeast Midwest Desert Southwest South Atlantic North Central South Central Southwest East Central Alaska Hawaii Upper North Central Mountain Jan 25 Atlanta, GA Nov 16 Phoenix, AZ Feb 8 Orlando, FL Nov 30 Nashville, TN Feb 22 Dallas, TX New Upper West Coast Dec 7 Oakland, CA HCCA s regional, one day Feb 28 Mar 1 Anchorage, AK May 10 Columbus, OH Sep 27 Overland Park, KS Oct 4 Indianapolis, IN Oct 11 Pittsburgh, PA Oct 18 Honolulu, HI Oct 25 Denver, CO Upper Northeast May 17 New York, NY Mid Central high quality, convenient, inexpensive education & Pacific Northwest Desert Southwest West Coast South Central New England Upper West Coast Upper Midwest Gulf Coast conferences provide networking opportunities. Don t miss the opportunity to attend one in your area! Jun 14 Seattle, WA Jun 21 Newport Beach, CA Sep 9 Boston, MA Sep 20 Minneapolis, MN Nov 8 Louisville, KY Nov 15 Phoenix, AZ Nov 22 Nashville, TN Dec 6 San Francisco, CA Dec 13 Houston, TX Learn more & register at Compliance Today October 2012 Nov 9 Louisville, KY 31