Rural Provider Types and Payment Models

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Rural Provider Types and Payment Models

Emily Jane Cook, JD, MSPH McDermott Will & Emery LLP American Health Lawyers Association

Institute on Medicare and Medicaid Payment Issues Baltimore, MD

March 28, 2014

Overview

 What is Rural?

 Rural Provider Types

 Emerging Issues

– Expired and expiring provisions

– On-going payment/reimbursement issues

What is Rural?

 Most Common Rural Definitions for Federal Healthcare Programs

• Office of Management and Budget

(http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf)

– In MSA, but treated as non-MSA (Geographic Reclass) (42 C.F.R. §412.103)

• Goldsmith/Rural-Urban Commuting Area (ftp://ftp.hrsa.gov/ruralhealth/Eligibility2005.pdf)

• State definition/designated

• Otherwise qualifies as Rural Referral Center/Sole Community Hospital

• Historically special rules for transition when MSA designations change – Outside of “urbanized area” (42 C.F.R. §491.5(c))

• US Census Bureau (http://www.census.gov/geo/reference/ua/urban-rural-2010.html)

• Generally city and surrounding area of less than 50,000

 Frontier definitions

– Less consistency or consensus

Rural Provider Types

 Critical Access Hospital (CAH)

 Medicare Dependent Hospital (MDH)

 Rural Referral Center (RRC)

 Sole Community Hospital (SCH)

 Other rural provider payment provisions

Critical Access Hospital

 SSA §1820(c)(2)(b); 42 C.F.R. §§ 413.70, 485.601-647

 Medicare State Operations Manual (Pub. 100-07)- Appendix W

 Approximately 1,330 in 45 states (~25% of acute care hospitals)

 Eligibility

– Located in rural area (non-MSA or treated as non-MSA) – More that 35 miles from closest hospital

• 15 miles if mountainous terrain/secondary roads

• State-designated necessary provider (designated pre-2006) – 25 beds or less

– 24 emergency services (on-call or on-site)

– 96 hour or less average length of stay (excluding DPUs and swing beds)

 Medicare Payment

– Cost plus 1% for most Medicare-covered services

• Includes on-call emergency room and clinical labs to CAH outpatients (and some other patients)

• Ambulance services (if no other ambulance provider within 35 miles)

– May qualify for cost-based CRNA pass-through payments

– 115% of fee schedule for services paid under physician fee schedule (must be eligible for and select “Method II” reimbursement)

– Distinct part units (rehab and psych) paid under applicable PPS

 Some states provide enhanced Medicaid payments

Critical Access Hospital

Medicare Dependent Hospital

 SSA §1886(d)(G)(iv); 42 C.F.R. §412.108

 Medicare Claims Processing Manual (Pub. 100-04)- Ch. 3, § 20.6

 Eligibility

– Located in rural area (non-MSA or treated as non-MSA) – Less than 100 beds

– Not a Sole Community Hospital

– At least 60% of inpatient days or discharges were attributable to Medicare Part A stays during at least two of the last three most recent cost reporting periods

 Medicare Payment

– Payment designation is for inpatient only – Payment at highest of:

• “Federal rate” (otherwise applicable IPPS rate); or

• Federal rate plus 75% of the difference between the Federal rate and the

“hospital-specific” rate for:

– FY 1982;

– FY 1987; or – FY 2002

– Additional payments if drop in volume of 5% or more

– Not subject to Disproportionate Share Hospital (DSH) cap of 12%

Medicare Dependent Hospital

Rural Referral Center

 SSA §1886(d)(5)(C); 42 C.F.R. §412.96

 Medicare Claims Processing Manual (Pub. 100-04)- Ch. 3,

§20.5

• http://www.cms.gov/manuals/downloads/clm104c03.pdf

Rural Referral Center

 Eligibility

 Option 1:

– Located outside of an MSA or reclassified as rural under §412.103 – 275 or more beds

 Option 2:

– At least 50 percent of Medicare patients are referred from other hospitals or from physicians not on the staff of the hospital;

– At least 60 percent of Medicare patients live more than 25 miles from the hospital; and

– At least 60 percent of all the services furnished to Medicare beneficiaries are furnished to beneficiaries who live more than 25 miles from the hospital

Rural Referral Center

 Option 3:

– Located outside of an MSA or reclassified as rural under §412.103;

– Case mix equal to or greater than the national case-mix index value or the median case-mix index value for urban hospitals located in the hospital’s region;

– At least 5,000 discharges or the median number of discharges for urban hospitals located the hospital’s region (3,000 discharges for osteopathic hospitals); and

– At least one of the following:

• More than 50 percent of the hospital's active medical staff are specialists who meet one of the following conditions:

– Certified as specialists by one of the Member Boards of the American Board of Medical Specialties or the Advisory Board of Osteopathic Specialists;

– Have completed the current training requirements for admission to the certification examination of one of the Member Boards of the American Board of Medical Specialties or the Advisory Board of Osteopathic Specialists; or

– Have successfully completed a residency program in a medical specialty accredited by the Accreditation Council of Graduate Medical Education or the American Osteopathic Association

• At least 60 percent of all its discharges are for inpatients who reside more than 25 miles from the hospital; or

• At least 40 percent of all inpatients treated at the hospital are referred from other hospitals or from physicians not on the hospital's staff

Rural Referral Center

 Medicare Payment

– Not subject to DSH cap of 12%

– Do not have to meet proximity or wage requirements for geographic

reclassification

Sole Community Hospital

 SSA 1886(d)(5)(D)(iii); 42 C.F.R. §412.92(a)

 Medicare Claims Processing Manual (Pub. 100-04)- Ch. 3,

§20.6

– http://www.cms.gov/manuals/downloads/clm104c03.pdf

Sole Community Hospital

 Eligibility

– More than 35 miles from other like hospitals

– Located outside of an MSA or reclassified as rural under §412.103 and meets one of the following criteria:

• 25-35 miles from other like hospitals (short-term, acute care hospitals, excluding CAHs) and meets one of the following criteria:

– No more than 25% of residents of the hospital’s service area who become hospital inpatients or no more than 25% of Medicare beneficiaries in the service area (lowest number of zip code from which the hospital draws 75% of its patients) who become hospital inpatients are admitted to other like hospitals located within a 35-mile radius of the hospital (or within the service area, if the service area is larger than a 35-mile radius);

– Less than 50 beds and the hospital’s MAC certifies that the hospital would have met the criteria above if some beneficiaries or residents were not forced to seek care outside the service area due to the unavailability of necessary specialty services at the hospital; or

– Because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years

• 15-25 miles from other like hospitals, but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years.

• Because of distance, posted speed limits, and predictable weather conditions, the travel time between the hospital and the nearest like hospital is at least 45 minutes.

Sole Community Hospital

 Inpatient payment at higher of:

– Otherwise applicable rate under IPPS (“Federal rate”); or – Updated hospital-specific rate based on cost per discharge from:

• FY 1982;

• FY 1987;

• FY 1996; or

• FY 2006

 Eligible for additional payments if decrease in volume ≥5%

 Eligible for outpatient hold-harmless payments (if 100 or fewer beds)

 DSH capped at 12%

 Do not have to meet proximity requirements for geographic reclassification

Selected Other Payment Provisions

 Swing Beds (SSA §1883; 42 C.F.R. §§482.66, 485.(b))

 Low Volume (SSA §1886(d)(12); 42 C.F.R. §412.101)

 Physician Payments

– Work Geographic Adjustment floor (SSA §1848(e)(1)(E)) – Practice Expense Frontier floor (SSA §1848(e)(1)(I); 42 C.F.R.

§414.26(c))

– HPSA Bonus Payments (SSA §1833(m); 42 C.F.R. §414.67)

 Section 508 Reclassifications- Expired

 Outpatient Hold Harmless- Expired

 Cost Reimbursement for Clinical Labs- Expired

 Air Ambulance Add-ons- Expired

 Medicare Dependent Hospitals- March 31, 2014

 Low Volume Hospital Adjustment- March 31, 2014

 Work Geographic Adjustment Floor- March 31, 2014

 Ground Ambulance Add-ons- March 31, 2014 Expired and Expiring Provisions

Low Volume and MDH Extension

 Federal Register- March 18, 2014

 Low Volume Hospital

– Must apply or verify distance in writing to FI/MAC by March 31, 2014 – Requires action by all eligible hospitals by deadline

 Medicare Dependent Hospital

– Automatic extension retroactive to October 1, 2013- IF hospital took no action as a result of the expected expiration of MDH status

– If cancelled rural classification or redesignated as Sole Community Hospital

• Retroactive MDH status to date of change if after October 1, 2013

• Must reapply for rural classification or cancel SCH status and reapply for MDH status for future effective date

• If apply note, will not be effective before the expiration MDH status extension

On-going Issues

 Sequestration Cuts

 Critical Access Hospitals

– President’s Budget – Therapy Cap

 Rural Health Clinics

– Delayed regulations (since 2003)

 Supervision/Staffing

Emerging Issues

 Consolidation and Acquisition Activity

 Re-evaluation of Eligibility for Provider Designations

 Strategic Planning for Eligibility and Designation Changes

 340B Eligibility and Compliance (Orphan Drugs)

 CAH August 2013 OIG Report

(http://oig.hhs.gov/oei/reports/oei-05-12-00080.pdf)

 CAH 96 Hour Condition of Payment (42 C.F.R. § 424.15)

– http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

Payment/AcuteInpatientPPS/Downloads/IP-Certification-and-Order-

01-30-14.pdf

FY 2014 OIG Workplan

 Critical access hospitals—Payment policy for swing-bed services

 Critical access hospitals—Beneficiary costs for outpatient services

 Rural health clinics—Compliance with location requirements

 Part B payments for drugs purchased under the 340B Program

 Physicians—Place-of-service coding errors

Emily Jane Cook, JD, MSPH McDermott Will & Emery LLP 2049 Century Park East, 38th Floor

Los Angeles, CA 90067 [email protected]

(310) 284-6113

Questions