Baker Tilly healthcare update April 28, 2014

At the agencies

On April 14, the Congressional Budget Office (CBO) released findings that show a rise in the cost estimate for a permanent repeal of the sustainable growth rate (SGR) formula, which is the Medicare formula that determines physician payments. This formula has prompted Congress to pass a temporary fix seventeen times, also known as a “doc-fix,” in order to avoid steep Medicare payment cuts to physicians every year. Although there is widespread support for a permanent repeal that would avoid the annual doc fix scramble, there is little agreement on how to pay for the cost of the repeal. These new findings from CBO estimate an $8 billion increase in the cost of permanent repeal, and this cost increase will make developing a final agreement more difficult.

On April 22, CMS announced that Jonathan Blum, CMS’s Principal Deputy Administrator, will be leaving his post on May 16. Blum joined CMS in 2009 and oversaw major reforms in the Medicare program, including those related to the Medicare prescription drug benefit and the development of Accountable Care Organizations (ACOs).  It has not been announced where he is going next. Sean Cavanaugh, the current deputy director at the Centers for Medicare and Medicaid Innovation (CMMI), will take Blum’s position.

On April 25, Danielle Moon, the head of the Medicare Advantage program at CMS, also announced that she would be leaving her post at the end of May. Kathryn Coleman, the current Deputy Director of the Medicare Drug & Health Plan Contract Administration Group, will become the acting director of CMS’s Medicare Advantage program after Moon’s departure.

On the Hill

On April 14, the CBO and the Joint Committee on Taxation (JCT) reported their findings that show a smaller rise in insurance premium costs under the ACA than previously expected. According to these new estimates, premiums will rise less than 3 percent in 2015 and will cost the federal government nearly $5 billion less than expected over the course of this year. The CBO and JCT also found that the ACA’s coverage costs over the next 10 years are $104 billion less than expected. These findings showed that the risk corridor program, a provision of the law that is intended to assist health plans with the financial cost of the transition under the ACA, will now be budget neutral as opposed to the prior expectation that it would result in $8 billion in savings.

In the courts

On April 14, the American Hospital Association (AHA) filed two related lawsuits in the US District Court for the District of Columbia challenging HHS’s “two midnight rule” for inpatient hospital admissions. Under the rule, CMS will only pay the higher Medicare inpatient rate if a physician expects that a patient will be hospitalized for more than two midnights. Otherwise, hospital stays for less than two midnights will be reimbursed at the lower Medicare hospital outpatient rate. The two midnight rule was to take effect on October 1, 2013, but enforcement has been delayed until March 2015. In the first suit, the AHA and others contend that the rule is arbitrary and capricious, contrary to law, and undermines medical judgment. In the second suit, the AHA and others challenge CMS’s decision to reduce payments to hospitals by 0.2 percent based on CMS’s claim that the two midnight rule and other related policy changes would increase the number of hospital stays that the Medicare program covers.

In third parties

On April 24, Premier Inc., an association of publicly traded hospitals, sent a letter to CMS encouraging them to ensure the implementation of the ICD-10 coding system by October 1, 2015. Current law mandates that ICD-10 be implemented by that date; however, CMS has extended the ICD-10 implementation deadline in the past. Premier’s letter expressed its concern over another possible extension and asked that CMS provide early guidance to stakeholders on best practices for the ICD-10 conversion. Premier also recommended a “thorough testing period” for providers in advance of the deadline.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.