Washington Report – May, 2004

Bill Finerfrock

Capitol Associates

PECOS Problems Continue

Despite assurances from senior CMS officials that increased resources were being directed at resolving the Medicare enrollment backlogs that had been occurring as a result of implementation of the new PECOS system, the date for resolving the backlog seems to get further and further away. During a March meeting with HBMA leaders, CMS officials indicated that their goal was to have all backlogs cleared up by June. As March came to a close, that deadline appeared to shift to “summer”, then “late summer” and now, the most recent indications are that the backlogs may not be cleared up until November.

The November date was offered by Leslie Aronovitz, Associate Director of Health Financing Issues during a presentation at the May, HBMA NE Regional meeting. According to Aronovitz, CMS officials had told GAO that they felt they would have the backlog cleared up by the end of November. Fearful that this moving target would only get further and further away if additional pressure were not brought to bear on CMS enrollment staff, HBMA decided to “turn up the heat”.

On June 1, HBMA President Bob Burleigh traveled to Washington to join HBMA Washington Representative Bill Finerfrock for a meeting with the staff of the Senate Finance Committee responsible for CMS oversight issues. Earlier that day, Finerfrock talked with Herb Kuhn, Director of the Center for Medicare Services to inform him of the change in the dates. Kuhn expressed surprise as he had just recently been assured that the problems would be cleared up by the “end of the 3rd quarter”. That would have been the end of September, 2004. In just a few days, CMS staff appears to have added two months to their timeline.

Congressional staff were equally dismayed at the on-going nature of the enrollment problems. While a few physicians from limited states had expressed concern about the delays, the staff was not aware of the breadth of the problem until the HBMA meeting. Burleigh and Finerfrock took copies of the spreadsheet they had previously prepared for CMS in March and added additional examples provided by HBMA members just prior to the meeting. The information was dramatic and compelling. The Senate Finance Committee staffer Burleigh and Finerfrock met with, Mollie Zito, JD, indicated that she would follow-up with CMS and see what the Committee could do to help clear up the backlog.

In addition, Zito expressed an interest in learning more about the billing business. On behalf of HBMA, Burleigh and Finerfrock offered to host a visit to an HBMA member company located either in the DC metropolitan area or in Iowa (Zito works for Finance Committee chairman Chuck Grassley R-IA). Zito agreed to take HBMA up on this offer and we are in the process of searching dates and locations.

While it is clear CMS has fulfilled its commitment to provide more resources to the Carriers to expedite the enrollment process and establish a triage system to move along those less complicated changes, the goal of eliminating the backlog has clearly not been achieved.

HBMA will continue to keep the political pressure on CMS to expedite a cleaning up of the backlog.

Learning the Lessons of PECOS

Getting CMS to clear up the immediate problems associated with implementation of the new PECOS system is important, but it does not deal with the systemic shortcomings that led to these problems. If CMS fails to deal with these systemic issues, the same types of problems will occur again, the next time CMS attempts to role out a major change.

For these reasons, HBMA leadership has talked with CMS officials and Congressional staff not only about ways to resolve the immediate backlog, but also ways to prevent these types of problems from recurring in the future.

For example, CMS has already announced plans to establish a National Provider Identifier (NPI) for all providers. It is not inconceivable that if CMS fails to do proper planning for this rollout, the same types of delays we’ve experienced with PECOS will be replicated with NPI.

A preliminary assessment of the PECOS problems indicates that with better planning, many of the delays that have occurred could have been completely avoided. This message has been delivered to both Congress and CMS and HBMA has offered to work with CMS on these planning problems in order to prevent these types of delays when CMS rolls out NPI.

It remains to be seen whether CMS will take HBMA up on this offer of assistance, but we are working on this.

HBMA Endorses Association Health Plans Legislation

The Board of Directors of the Healthcare Billing and Management Association has sent a letter to Congress indicating the organizations support for Association Health Plan (AHP) legislation currently pending in Congress.

In a letter to Senator Olympia Snowe (R-ME), the sponsor of the Small Business Health Fairness Act of 2003, HBMA has asked the Senator to add the Association’s name to the list of organizations supporting this important insurance reform.

Snowe’s bill, S. 545, would authorize the establishment of national and/or regional association health plans. Under these arrangements, organizations such as HBMA could create a health plan that could be offered for enrollment to HBMA member companies and their employees.

The following is a summary of the major provisions of the Small Business Health Fairness Act of 2003:

RULES GOVERNING ASSOCIATION HEALTH PLANS

Association Health Plans

  • association health plans are defined as group health plans whose sponsors are trade, industry, professional, chamber of commerce, or similar business associations

Certification of Association Health Plans

  • AHP is one that offers fully-insured and/or self-insured medical benefits and has been certified by the Labor Department

Requirements Relating to Sponsors and Boards of Trustees

  • AHP must be operated by a board of trustees with complete fiscal control and responsibility for all operations of the plan
  • association sponsoring the plan must have been in existence for at least three years for substantial purposes other than providing health insurance coverage

Participation and Coverage Requirements

  • employers participating in the AHP are to be members or affiliated members of the sponsor
  • individuals under the plan must be active or retired employees, owners, officers, directors, partners, or their beneficiaries
  • for plans that are in existence on the date of enactment, no unaffiliated employer may participate unless they were affiliated on the date of certification or did not maintain or contribute to a group health plan for the previous 12-month period
  • employers who are association members are eligible for participation
  • all geographically available coverage options are made available to eligible employers
  • individuals cannot be excluded from enrolling because of health status

Other Requirements Relating to Plan Documents, Contribution Rates and Benefit Options

  • contribution rates must be non-discriminatory
  • premium contribution rates for any small employer cannot be based on the health status or claims experience of plan participants or beneficiaries, or on type of business or industry in which the employer is engaged
  • to be certified by the Labor Department, a “self-insured” AHP must have at least 1,000 participants and beneficiaries

Maintenance of Reserves and Provisions for Solvency for Plans Proving Health Benefits in Addition to Health Insurance Coverage

  • AHPs must also obtain aggregate and specific stop-loss insurance, indemnification insurance for any claims if the plan is terminated, and make annual payments to an AHP fund to guarantee that indemnification insurance is always available
  • AHP must maintain surplus reserves of between $500,000 and $2 million
  • if an AHP is unable to provide benefits when due or is otherwise in a financially troubled condition, the Secretary of Labor must act as a trustee to administer the plan for the duration of the insolvency
  • establishes a Solvency Standards Working Group within 90 days after enactment to recommend initial regulations

Requirements for Application and Related Requirements

  • $5,000 application filing fee for AHP certification

Notice Requirements for Voluntary Termination

  • certified AHP may terminate only if the trustees provide 60 days advance written notice to participants and beneficiaries and submit a plan for timely payment of all benefit obligations

Corrective Actions and Mandatory Termination

  • if the board determines there is reason to believe that there is or will be a failure to meet all plan requirements, the board shall immediately notify the actuary engaged by the plan and he/she shall make recommendations to the board for corrective action

Trusteeship by the Secretary of Insolvent Association Health Plans Providing Health Benefits in Addition to Health Insurance Coverage

  • defines the powers of the Secretary of Labor upon appointment as trustee of the AHP
  • Secretary must apply to appropriate U.S. district court for appointment

State Assessment Authority

  • state may impose a contribution tax on AHP, if the plan commenced operations in such state after the date of enactment of the Act
  • rate of tax shall not exceed the rate of any tax on premiums or contributions received by insurers or HMOs for health insurance coverage offered in the state in connection with a group health plan

Definitions and Rules of Construction

  • gives certified AHPs freedom from costly state-mandated benefit packages by exempting them from those benefit mandates (but not state health insurance consumer protection laws and regulations) AHPs must comply with any federal and state laws that require coverage of specific diseases, maternal and newborn hospitalization, and mental health issues
  • states may regulate self-insured multiple employer welfare arrangements providing medical care which do not elect to meet the certification requirements for AHPs

Miscellaneous Provisions

  • requires the Secretary of Labor to consult with the states about the regulation of AHPs located in their state
  • establishes criminal penalties for willful misrepresentation as an exempt AHP or collectively bargained status
  • authorizes the Department of Labor to issue cease activity orders against fraudulent AHPs
  • outlines the responsibility of the board of trustees for meeting required claims procedures
  • requires Secretary of Labor to report Congress no later than January 1, 2008, on the impact of AHPs on reducing the number of uninsured

HBMA will be establishing a link on the Association’s website where member companies and obtain sample letters they can send to their individuals Senators indicating their support for this legislation.

The House of Representatives has already passed this legislation on two occasions. Currently the bill is being held up in the Senate by those insurance companies that are fearful of losing business as result of this legislation, as well as state insurance regulators who fear loss of oversight of these insurance plans.

Discounts for Uninsured are OK – CMS and OIG reiterate

On June 1, representatives of the of the Centers for Medicare and Medicaid Services (CMS), the Department of Health and Human Services, and the HHS Office of the Inspector General convened a special Open Door Forum to discuss the issue of offering discounts to low-income patients.

Previously the OIG had issued a paper indicating that for Hospitals, discounting was perfectly permissible as long as they were:

  • reasonable
  • objective
  • appropriate
  • uniform

While it was assumed that these policies could be universally applied to all Medicare providers and practitioners, the failure to have anything in writing cause many physicians and billing companies to seek additional clarification. At the June 1 meeting, all of the government officials in attendance assured the more than 1,000 participants that discounting was permissible. Links to several documents were provided and shared below:

A Frequently Asked Questions document that attempts to answer questions about what is and is not permissible. Although the questions speak specifically about hospitals, the answers are equally applicable to other providers.

A copy of the letter HHS Secretary Tommy Thompson sent to AHA President Dick Davidson outlining the HHS position on discounting.

A copy of the OIG paper on discounting.

In addition to addressing issues of discounts for uninsured individuals, both the OIG staff and CMS staff addressed the issue of prompt pay discounts and “courtesy” discounts.

With respect to both forms of discounting, the OIG and CMS were in agreement that these arrangements were permissible. The only issue that caused some discomfort had to do with courtesy discounts where there might be the potential for referrals and a case could be made that these were de facto kick-backs. Providers offering “courtesy” discounts to other providers must take care to ensure that there is not either the appearance or reality of those discounts being related to referrals from those providers to whom the courtesy discount is provided.

With regard to discounting, the point was also made that if discounting is too pervasive, this could affect the “usual” charge for that provider. Medicare payments are the lower of the actual charge or the fee schedule amount. If discounting constitutes more than 50% of the patients or more than 50% of charges, this could potentially result in a determination that the “actual” charge is the discount amount and therefore impact on the providers Medicare payments. While this is considered unlikely, it is possible.

Medicare Legislative Changes – Nothing this year, but wait ‘til Next Year

The Bush Administration confirmed what everyone knew: there will be no major legislative changes in Medicare in 2004. The President had the opportunity to request “technical” corrections to the Medicare bill passed last year. While such technical amendments are not uncommon, these efforts often become the pretext for more sweeping changes.

Rather than run the risk of opening up the Medicare law to changes, a decision was made to not deal with Medicare this year. However in a recent meeting with HBMA Washington Representative Bill Finerfrock, a senior member of one the Congressional Committee staff that handles Medicare issues confirmed that next year will be a big year for Medicare.

Beginning later this summer, the Congress will begin holding a series of hearings on issues that will need to be addressed next year, including a change in the way the physician payments are updated.

For the past two years, Congress has had to step in and override the statutorily prescribed formula that determines physician payments under Medicare because that formula would have resulted in reductions in physician payments. Some of the most contentious battles in Congress often occur over formula changes. This one is not going to be any different.

HBMA will follow this debate closely and where appropriate, seek to influence the discussions in Congress.

The first step in the reform process was taken during the Senate’s consideration of the FY 2005 budget when Senator Jim Bunning (R-KY) was successful at getting an amendment adopted authorizing congress to make the necessary changes. Some Senators and Representatives have encouraged CMS to make the formula adjustments administratively in order to avoid a difficult Congressional battle. No decision has been made, but it is likely that the Congressional path will be the course of action.

If the formula isn’t changed, the CMS actuaries estimate that physician payments will drop an average of 5% per year between 2006 and 2012. Until then, Congress has pre-set the adjustments to avoid the problems encountered during the past two budget cycles.

CMS issues new instructions for Medicare contractors

On Friday, May 28, 2004, the Centers for Medicare and Medicaid Services (CMS) issued instructions to Medicare contractors who process claims under the hospital outpatient prospective payment system (OPPS) on how to pay for new drugs that have been approved by the FDA but have not yet been assigned a product-specific HCPCS billing code. These instructions implement a provision of the Medicare, Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). A new code has been created. This new code is

C9399, Unclassified drug or biological.

The payment rate for such drugs will be set at 95% of the average wholesale price. Medicare will pay for 80% of this payment rate and the beneficiary will pay the rest as a copayment. Before these new instructions were given, hospitals did not receive separate payment for newly approved drugs by the FDA for which a healthcare common procedure coding system (HCPCS) code was not assigned although rare exceptions to this were sometimes the case.

CMS will assign a C-code to drugs approved by the FDA after January 1, 2004, if they are eligible for pass-through status. Medicare contractors will have until July 6, 2004, to make the necessary changes to their claims processing systems. Hospitals may bill for these drugs and biologicals retroactively to January 1, 2004.