CMS Delay in Issuing Payment Rules Puts Pressure on Providers, Stakeholders Say

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By Nathaniel Weixel with assistance from Mindy Yochelson  

Oct. 23 --As a result of the prolonged government shutdown, the Centers for Medicare & Medicaid Services Oct. 23 said it will be forced to delay until Nov. 27 the release of important final payment rules for providers that would normally be issued Nov. 1.

In a memo posted on the CMS website, the agency said that “although we are still assessing the impact of the partial government shutdown on completion of the calendar year 2014 Medicare fee-for-service payment regulations, we intend to issue the final rules on or before November 27, 2013, generally to be effective on January 1, 2014.”

The impacted regulations include:

• Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2014 Final Rule with Comment Period (CMS-1600-FC);

• CY 2014 Home Health Prospective Payment System Final Rule (CMS-1450-F);

• CY 2014 Changes to the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System (CMS-1601-FC); and

• Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (CMS-1526-F).


Hospital and home health industry representatives as well as health care attorneys told Bloomberg BNA that the delay means providers will face a truncated time period to comply with the requirements. Normally, providers have 60 days from the date of the final rule publication until the effective date. With the delay in release, providers will have about half of that time.

Providers Want Rules Issued ASAP

Joanna Hiatt Kim, vice president, payment policy at the American Hospital Association, in an Oct. 24 statement urged the agency to issue the final rules as soon as possible. “Such late issuance will put providers in the very difficult position of having to implement new policies, procedures and payment formulas with only five weeks' notice,” Kim said.

Andrew Shin, director, health care policy and life sciences at ML Strategies in Washington, told Bloomberg BNA Oct. 22 that the OPPS proposed rule in particular contains a variety of reimbursement and quality provisions that providers disagree with and that will take significant time to implement if they are finalized.

The OPPS rule “is one of the more controversial and complex to come out in some time,” Shin said. Even without the shutdown delay, “there was already concern with hospitals about the rule and the time of implementation.”

William A. Dombi, vice president for law at the National Association for Home Care and Hospice (NAHC), said the proposed home health rule would be devastating to home health providers if it were finalized, as it proposed a 14 percent reimbursement cut over the next four years .

Dombi said the home health community has no objections if the CMS were to use the extra time to give full attention to reviewing the provider comments and objections to the proposal. “It's a positive development,” Dombi said. “It will provide the opportunity to CMS and [the Office of Management and Budget] to carefully consider the final rule.”

The shutdown resulted in the furlough of 65 percent of CMS employees. The ones that remained at work were funded through nondiscretionary appropriations and were in charge of continuing to implement the Affordable Care Act and not rule-making. When the rest of the agency returned to work after the shutdown was resolved, Shin said it was doubtful the employees would overcome the backlog in time for Nov. 1.

The CY 2014 OPPS proposed rule was published in the Federal Register July 19. The proposed rule included eight significant packaging proposals that would shift the OPPS away from a per-service fee schedule to a prospective payment system with larger payment bundles, including introducing policies that could, over time, support movement toward bundled payment.

Objections to OPPS Rule Changes

In comments on the proposal, hospital groups and other stakeholders objected most strongly to changes in the CMS ambulatory payment classifications (APCs) as well as to changes in the outpatient supervision policy.

Objecting to the outpatient supervision change, provider groups said they were worried about the negative impact the proposal would have on critical access hospitals and small rural hospitals with fewer than 100 beds. The groups expressed concern that the policy would have serious consequences to Medicare beneficiary access to care .

Providers also said the CMS should delay implementing changes to its APCs to allow stakeholders more time to assess their impact.

In the proposed rule, the CMS said it would end its delay in enforcement of the direct supervision policy for critical access hospitals (CAHs) and small, rural hospitals. The moratorium currently allows certain types of nonphysician practitioners (NPPs) to provide direct supervision for hospital outpatient services.

For the APCs, the CMS proposed packaging payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services in the most efficient way. The agency in the rule proposed adding seven additional categories of supporting services and expanding the categories of related items and services packaged into a single payment for a primary service under the OPPS, thereby moving the OPPS closer to a prospective payment system.

Effective Date Concerns

All stakeholders contacted by Bloomberg BNA said the delay in releasing the final rules raises issues about whether the CMS will be in compliance with a host of legal statutes that govern when Medicare payment rules can be posted for public comment, the length of the notice and comment process and when the final rule is to become effective.

According to Shin, the Congressional Review Act (CRA) generally requires an agency to delay the effective date of a major rule by 60 days to allow for congressional review of the agency action. The Administrative Procedure Act also normally requires a 30-day delay in the effective date of a rule. Since the OPPS and home health rules are issued every calendar year, they always have an effective date of Jan. 1.

Shin noted that the CMS said the rules will “generally be effective Jan. 1,” which could indicate a delay in the effective date of the more controversial policy changes. Shin told Bloomberg BNA that the agency could issue a final rule effective Jan. 1 containing just the hospital marketbasket increase and then finalize the other provisions of the rule after the full 60-day period.

“So long as those more controversial items are given a longer effective date, I think the agency is on better ground to withstand industry blowback, legal or otherwise,” Shin told Bloomberg BNA. Shin added that he is not sure there ever has been a successful case of suing the CMS because “noncontroversial” payment rules were issued after Nov. 1.

Under the OPPS proposed rule, Medicare payments to outpatient hospitals would increase by 1.8 percent--or nearly $4.4 billion.

Compliance Risks

Eric Zimmerman, an attorney with McDermott Will & Emery LLP in Washington, said hospitals need time to train their employees and adjust their systems to be in compliance with the requirements under the final rule.

Zimmerman and Shin said the agency rarely pushes back an effective date of a final rule, even if the rule itself was issued more than a month behind schedule. However, Zimmerman said if the CMS won't allow extra time as a result of the delay, hospitals will be hard pressed to meet the compliance deadline.

“Practically, most stakeholders wait to see how CMS will resolve” the issues raised in the proposed rule before making changes, Zimmerman said. “They won't make internal process changes based on the proposed rule unless they're certain it's happening.”

Zimmerman echoed Shin's comments and said it is possible that the CMS could issue a “shell” final OPPS rule with an effective date of Jan. 1 and then issue a supplemental final rule later. “Then they're not as vulnerable” to potential legal action, Zimmerman said.

Yet one hospital association executive told Bloomberg BNA that hospitals should be preparing for the final rule by anticipating that the CMS will finalize the OPPS rule as proposed.

“If you're a hospital, you may be in a position to have 45 days [to comply with the rule] instead of 60,” the executive said, which is why getting out ahead of the final rule will be important. As for pursuing any potential legal options against the CMS, the executive said he doesn't think hospitals will have particularly strong standing. Instead of trying to find ways to sue, hospitals should try to anticipate any of the options the CMS could use to finalize the rule.

Home Health.

In the home health prospective payment system proposed rule, published July 3, CMS proposed to reduce Medicare home health funding by instituting a rebasing rate set at the maximum level permitted by law--3.5 percent annually from 2014 to 2017--totaling a 14 percent cut over the next four years.

NAHC's Dombi said he is advising providers to “prepare for the worst and hope for the best. The proposed rule is as bad as you can get.”

Dombi said the proposed rule was the first time the CMS mandated rebasing home health payment rates. He said the home health industry has been lobbying to delay the cuts, so he is hopeful the delayed final rule will mean the cuts are delayed as well, or at least reduced.

The CMS needs more time to fully review all the comments submitted on the proposal, Dombi said, so there is no reason for the agency to rush to issue a final rule. The delay sends a message to the home health community that they presented good reasons for the agency to analyze all the facts before moving forward with a final rule.

Physician Impact

Physician representatives speculated on the impact of a late publication on regulatory issues in the final physician fee schedule rule and the impending cut to physician payments required by the sustainable growth rate (SGR) formula.

Julius W. Hobson Jr., senior policy adviser, Polsinelli PC, said the delay shortens the time physicians and other providers have to react and prepare for changes in the regulation, which was published in proposed form on July 19.

“This also adds to the overall payment uncertainty because physician reimbursement under the SGR is expected to be reduced by 25 percent absent congressional action,” Hobson said.

The Medical Group Management Association “will urge CMS to do everything in its power to release the physician payment rule earlier than the 27th,” Anders M. Gilberg, MGMA's senior vice president for government affairs, told Bloomberg BNA.

“Given the complexity of the value based payment modifier and other policies in the proposed rule, physician practices will need more than just a month to digest the hundreds of pages of new requirements in the final rule,” he said.

Robert Doherty, senior vice president for government relations and public policy for the American College of Physicians, said in a statement that Congress needs 60 days to review the rates before they take effect.

“We're in uncharted territory,” Doherty said and speculated whether Congress would waive its 60-day review.

A CMS spokeswoman Oct. 24 confirmed that Congress needs 60 days to review the regulations.

Similarly, Ray Quintero, director of the Department of Government Relations, American Osteopathic Association, said that although a “60-days post-release is required before the effective date” of the rule, “this has been avoided in the past with delayed rules.”

On the issue of the SGR, Doherty remarked that the shutdown “tightened the congressional calendar, leaving fewer days available to deal with the SGR repeal legislation.”

If Congress fails to act on the bills, lawmakers will need to “pass another temporary band-aid measure that would delay SGR implementation,” Doherty said.


To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Ward Pimley at

The CMS announcement is at

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