CMS Regulations Aim to Save Money By Streamlining Medicare, Medicaid Rules

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By Mindy Yochelson

The Centers for Medicare & Medicaid Services Oct. 18 unveiled delivery system regulatory revisions for hospitals and other providers in response to an executive order.

The agency said the changes—in the form of two proposals and one final rule—would help facilitate providers' operations and potentially save money. The rules, expected to be published in the Oct. 24 Federal Register, would save money by reallocating medical staff “energy” from paperwork to patient care, CMS Administrator Donald Berwick said during a teleconference.

In a statement, the Department of Health and Human Services said the rules from CMS would save hospitals and health care providers nearly $1.1 billion each year and over $5 billion over 5 years. “President Obama has been clear: it's time to cut the red tape,” HHS Secretary Kathleen Sebelius said in a statement, adding: “Our new proposals eliminate unnecessary and obsolete standards and free up resources so hospitals and doctors can focus on treating patients.”

The goal of the changes is to reduce private sector burden in accordance with an executive order signed by President Obama in January. The order told executive branch departments and independent agencies to review regulations for unnecessary burden and to eliminate or modify those that are outdated and costly (12 HCDR, 1/19/11).

CMS said that any savings from the three rules would not come from cutting provider reimbursements or eliminating private sector jobs.

The proposed rule “Medicare and Medicaid Program; Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction” (CMS-9070-P), would cut down on various requirements that agency staff has viewed as unnecessary and that take away time from patient care in non-hospital settings.

Various Programs Affected

The proposal affects a variety of health care facilities, including end-stage renal disease (ESRD) facilities, organ procurement, and ambulatory surgical centers (ASCs).

It also would eliminate automatic deactivation from Medicare of a provider or supplier that has not submitted a claim in 12 consecutive months.

Currently, a provider or supplier's enrollment billing privileges are deactivated—made ineligible for Medicare billing purposes—if they have not submitted a claim for 12 consecutive months. If the deactivated provider attempts to submit a claim after the date of deactivation, the claim would be denied.

Once deactivated, a new provider or supplier enrollment application must be submitted and processed by the Medicare contractor before the billing privileges can be reactivated, which increases the workload and administrative costs of Medicare contractors, CMS said.

Under the proposal, deactivation would apply only to those providers and suppliers who do not submit the enrollment form.

“We have issued guidance that requires our contractors to conduct certain verification activities to guard against physician and non-physician practitioner identity theft,” the proposal said. “We believe that this would lessen the danger that the unused billing numbers of these individuals would be accessed by others to submit false claims.”

Other parts of the proposed rule include eliminating the specific list of emergency equipment ambulatory surgical centers must have on hand, which the proposal said would offer a “one-time savings of $18.5 million to ASCs.”

A regulatory impact analysis on the proposed rule said it would reduce costs to regulated entities and patients by more than $100 million, “perhaps as much a $200 million in the first year.”

Conditions of Participation

In the other proposed rule, “Medicare and Medicaid Programs; Reform of Hospital and Critical Access Hospital Conditions of Participation” (CMS-3244-P), CMS said that the conditions—health and safety requirements that hospitals must meet to participate in Medicare and Medicaid—should be tweaked to ease operations.

“CMS had not reviewed the entire set of Conditions of Participation for Hospitals in many years,” the proposal said. “These requirements had grown over time and, while often revised, had not been subject to a complete review.”

Proposed changes include removing the requirement for a single director of outpatient services, allowing one body to oversee multiple hospitals in a single health system, and allowing critical access hospitals (which serve rural areas) to contract for laboratory and radiology services.

The proposal also seeks to clarify that being a member of a hospital's medical staff is not a prerequisite to being granted privileges in the hospital, regardless of whether a practitioner is a physician or a nonphysician.

Citing the requirement of the single outpatient services director, Sebelius said during a news conference that having a single director might have made sense during a time when inpatient services dominated a hospital's workload. Now, she called it an unnecessary burden and said that hospitals should be allowed to decide how to oversee their own management.

Also, allowing critical access hospitals to arrange with another entity for lab services could lower their costs, she said.

Savings Depend on Decisions

The proposal said that “the amount of savings actually realized through these reforms will depend on the individual decisions of about 6,100 hospitals (including CAHs), over time.”

Rich Umbdenstock, president and chief executive officer, American Hospital Association, said that the conditions of participation proposal offers “much-needed regulatory relief to a health system choked with paperwork.”

He particularly singled out the provision that would allow multihospital systems to have one governing board that can provide comprehensive oversight across their hospitals.

The final rule, “Medicare Program; Changes to the Ambulatory Surgical Centers Patient Rights Conditions for Coverage” (CMS-3217-F), would change the date that patients need to be told their rights—from in advance of the procedure date to the same day as the surgical procedure.

The Ambulatory Surgery Center Association said that the final rule will eliminate the requirement that patients wait 24 hours or seek an alternative site of service to receive care, and “clears the way for same-day surgeries without a need to document an emergency procedure for these patients.”

Comments on the two proposals are due Dec. 23.


The proposed program efficiency rule is at http://op.bna.com/hl.nsf/r?Open=bbrk-8mrm5a . The proposed hospital conditions of participation rule is at http://op.bna.com/hl.nsf/r?Open=bbrk-8mrm2y . The final ASC rule is at http://op.bna.com/hl.nsf/r?Open=bbrk-8mrlzz .