Proposed Medicare Fee Schedule Changes Acknowledge Compliance Realities and Focus on Value

In the wake of the SGR's demise and the rise of alternative payment models, the Centers for Medicare and Medicaid Services' latest proposed revisions to the Medicare fee schedules support those developments. As we reported in June, the repeal of SGR via passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was only the first step and now the hard work of actually effecting the transition to value-based reimbursement begins.

"CMS is building on the important work of Congress to shift the Medicare program toward a system that rewards physicians for providing high quality care," said Andy Slavitt, acting administrator of CMS, in a statement regarding the proposed physician fee schedule update. "Thanks to the recent landmark Medicare and children's health insurance program legislation, CMS and Congress are working together to achieve a better Medicare payment system for physicians and the American people."

Clinical Laboratory Fee Schedule Focuses on Drugs
The July 16 Public Meeting for the new Clinical Laboratory Fee Schedule addressed, most notably, drug testing codes. "We stated our concern about the potential for overpayment when billing for each individual drug test rather than a single code that pays the same amount regardless of the number of drugs that are being tested," CMS said in its explanation that accompanied the codes, referencing its 2015 laboratory fee schedule final determinations. For 2016, it has proposed to delete G-codes G0431, G0434 and G6030 through G6058 and create two G-Codes for drug screens (any number of drugs/classes) per day, and drug tests (any number of drugs/classes) per day. CMS indicated final determinations will be issued this fall.

Physician Fee Schedule Seeks Public Comment
The Proposed CY 2016 Physician Fee Schedule Rule was published July 15 in the Federal Register and CMS seeks public comment in the 60-day comment period, on many issues, including the following:

• MIPS, the merit-based incentive payment system included in MACRA, including the appropriate low-volume threshold to be used to exclude eligible professionals from MIPS.

• A proposal to provide separate Medicare payment for advance care planning services.

• Implementation of alternative payment models under MACRA and incentive payments for eligible professionals participating in alternative payment models. CMS indicates it will publish questions on this issue for public comment through a future Request for Information.

• Information regarding typical batch size and block size for pathology services and "approaches to obtaining accurate information that can facilitate our establishing payment rates that best reflect the relative resources involved in furnishing the typical service, for both pathology services in particular and more broadly for services across the PFS." CMS indicates that "given the high volume of many pathology services" it is concerned about accuracy of block number assumptions which affect the PE RVUs for PFS services.

• Issues raised by potential expansion of the Comprehensive Primary Care Initiative which promotes coordination of care for Medicare beneficiaries. The initiative is currently implemented in seven regions using a payment model involving "non-visit based per beneficiary per month care management payments and shared savings opportunities." Note this request for information is for planning purposes and CMS emphasized that it isn't proposing an expansion at this time.

• Stark Self-Referral prohibitions and their impact on alternative payment methods— see the next page for further discussion of self-referral issues.

A fact sheet and link to the final rule can be found on CMS website.

Self-referral discussion recognizes complexity
Noting the Affordable Care Act established a requirement for a self-referral disclosure protocol allowing providers to self-disclose "actual or potential violations of the physician self-referral law," CMS indicated the goal of the proposed fee schedule update was to "accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance." CMS said it had learned from self-disclosures and other inquiries "that additional clarification of certain provisions of the physician self-referral law would be helpful." It also intends to "expand access to needed health care services" so proposes two exceptions and clarifies other provisions.

Here are some highlights of the proposals concerning the self-referral law.

Physician recruitment and retention. CMS proposes new provisions allowing hospitals (and FQHCs and RHCs) to assist physicians in employing nonphysician practitioners. CMS cites the increase in number of insureds, the growing aged population, "alarming trends in the primary care workforce shortage projections," and changes in health care delivery and payment as reasons supporting this change. CMS also proposes revisions to the definition of geographic areas served by FQHCs and RHCs for purposes of recruitment of physicians to those areas. Finally, CMS suggests changing language in compensation exceptions to make sure the phrase "taking into account" referrals is consistently used rather than other phrases such as "based on" referrals.

Requirement for written agreements. CMS notes that the self-disclosure protocol has yielded "numerous submissions" regarding requirements for written agreements— specifically failure to have a written agreement, failure to get signatures, and failure to renew expiring agreements. Apparently the self-disclosures reveal confusion about the writing requirements for leasing and other compensation exceptions, including whether the writing must be in one document or contract. While it says one written document is "the surest and most straightforward means of establishing compliance" with the exceptions, CMS says there is no requirement that all terms of an arrangement be in one formal contract. Instead a collection of documents including "contemporaneous documents evidencing the course of conduct" can meet the requirements. Finally, it proposes revising holdover provisions to allow indefinite holdovers if certain safeguards are met.

Definition of remuneration. CMS has also proposed clarifications on some definitions such as remuneration. In one exception, the self-referral regulations exclude from the definition of remuneration any items, devices or supplies "used solely" to collect, transport, process or store specimens for the entity providing those items or to order or communicate test results. But CMS was concerned that "used solely" was being misinterpreted to mean that if an item, device or supply could not be used for two or more of six purposes named in the statute without being deemed a compensation arrangement. So it proposes clarification that the item must be used for the purposes listed in the statute—so an item need not be used for only one purpose; it simply must only be used for the purposes stated in the statute. Potential violations will arise if the item, device or supply is used for purposes other than those listed in the statute.

CMS also addressed a 3rd circuit court of appeal interpretation of remuneration, which held that when a physician uses hospital resources such as exam rooms or supplies or nursing staff while treating hospital patients, that use of resources constitutes remuneration even if the hospital bills for its resources and the physician separately bills for his services. CMS didn't propose any regulatory changes but explained that such arrangement wasn't remuneration as long as the physician and hospital don't provide benefits to one another and separately bill. But if one party billed globally for both physician services and hospital resources then a benefit is conferred on the party billing globally.

Timeshare arrangements. CMS created a new exception for timeshare arrangements, described as arrangements in which one entity provides a license to another provider to use its office space and staff and resources but doesn't transfer dominion and control as would occur in a lease. CMS recognized such time share arrangements don't fit within the lease exceptions but said it believes such arrangements can be structured so they don't pose a risk of abuse. So it proposed a new exception for time share arrangements requiring they be in writing and specify the items and resources covered in the arrangement. Such arrangements cannot involve clinical or pathology laboratory equipment other than equipment used to perform CLIA-waived laboratory tests. Instead they must be between a hospital or physician organization and a physician licensee and relate to resources predominantly used to provide evaluation and management services to the licensee's patients.

Alternative payment models. Citing the "significant changes in the delivery of health care services and the payment for such services" since the self-referral law was enacted, the rise of ACOs, the Medicare Shared Savings Program, innovative payment and service delivery models, and the overall shift to value-based reimbursement, CMS solicits comments about how the self-referral law impacts these reforms. Specifically, CMS noted that the self-referral law "by design, separates entities furnishing DHS from the physicians who refer Medicare patients to them." However, the new shift to value-based reimbursement is "premised on the close integration of a variety of different health care providers in order to achieve the goals of improving the experience of care, improving the health of populations, and reducing per capita costs of health care, often referred to as the 'three-part aim.'" CMS expressed concern that outside of the Medicare Shared Savings program waivers and Center for Medicare and Medicaid Innovation models, the integration needed for the reform underway would be prohibited by self referral laws. Thus, CMS seeks public comment "regarding the impact of the physician self-referral law on health care delivery and payment reform." Specifically, CMS wants to hear about barriers to integration as well as need for guidance regarding self-referral law applicability to compensation arrangements that are not part of alternative payment models. To generate conversation, CMS posed 10 questions: including whether new exceptions are needed or which existing exceptions could be expanded to accommodate alternative payment models, and "what aspects of alternative payment models are particularly vulnerable to fraudulent activity."

Takeaway: The journey to value-based health care delivery and payment methods is about to get fully underway and could potentially cause significant change to the way the government seeks to prevent abusive arrangements under the self-referral law.