OUTLOOK 2016: Hospital Payments, Medicare Reforms Among Top Concerns

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Nathaniel Weixel, Michael D. Williamson, Mindy Yochelson , Alex Ruoff and Eric Topor

The Centers for Medicare & Medicaid Services will face a host of challenges in 2016 in its ongoing attempt to modernize Medicare, particularly in the area of physician payment.

This being a presidential election year, Congress is unlikely to approve sweeping reforms in the program, although some tinkering is possible.

For example, incoming House Ways and Means Committee Chairman Kevin Brady (R-Texas) is interested in Medicare reforms, and developed a broad package of hospital and post-acute care reforms in draft form earlier in 2015.

Brady also is expected to work with both parties in the House on a way to revisit the site-neutral payment provisions of the debt ceiling legislation approved in early November 2015.

But it is unclear if these reforms will emerge from Congress in an election year because partisan politics often prevent meaningful legislation from being considered.

The CMS also may get a Senate-approved administrator as the Senate Finance Committee is expected to hold a confirmation hearing for Andy Slavitt to lead the agency. He is currently serving as acting administrator.

While Congress may not take much action to change the structure of Medicare in 2016, the CMS will be busy taking steps to change how Medicare pays physicians as directed by lawmakers in 2015.

Rulemaking offering details on the new physician payment system will be the major agency activity in the coming year, one source told Bloomberg BNA.

The CMS says it will unveil a proposed rule on the new payment program this spring, to be finalized in early fall.

On the legal front, Medicare attorneys are watching litigation involving a 0.2 percent Medicare Part A rate cut included in the two-midnight rule and anticipating release in 2016 of the final rule, which could negatively impact hospitals nationwide.

Congressional Outlook

Congress surprised everyone in 2015 by working together to permanently fix the Medicare sustainable growth rate (SGR) formula. Had Congress not acted, doctors would have faced a 21 percent payment cut.

It was an example of bipartisanship that some hoped would be a sign of a positive working relationship between the parties in the future, but additional Medicare reforms are unlikely to attract the bipartisan support needed to get them enacted.

Analysts expect 2016 will serve mostly as a bridge year to 2017, as lawmakers will be reluctant to put forward too many controversial proposals in a presidential election year.

Congress is scheduled to be in session fewer than 120 days in 2016 because of the summer's presidential conventions, leaving little time for major legislation to be considered.

House Speaker Paul Ryan (R-Wis.) said his plan to have House Republicans offer specific detailed proposals for overhauling the U.S. health-care system in 2016 may not include offering legislation.

Speaking to reporters in December 2015, Ryan declined to commit on putting those proposals in legislative language, saying the issue would be discussed at the joint House-Senate Republican retreat set for Jan. 13-14 in Baltimore.

Details Forthcoming

“That's going to be decided by our members. So that's why I say I don't want to presume to have it all figured out because we haven't as a team decided exactly when and under what context we're going to be rolling our agenda out,” Ryan said. “So, those are details to be decided jointly as a House Republican caucus, in concert with our friends over in the Senate.”

The Senate Health, Education, Labor and Pensions Committee will take up its precision medicine bill, the Senate version of the House-passed 21st Century Cures legislation to speed the introduction of new medicines.

There has been some disagreement over funding sources, but Sen. Lamar Alexander (R-Tenn.), HELP Committee chairman, said he expects the panel will quickly take up the bill in January.

The Senate is also expected to hold a confirmation hearing on Andy Slavitt to lead the Centers for Medicare & Medicaid Services, and to vote on Robert Califf to lead the Food and Drug Administration.

Budget Battles

President Barack Obama is scheduled to release his budget priorities during the first week of February.

The fiscal 2016 budget proposal included broad policy ideas, such as allowing Medicare to negotiate drug prices. In 2015, Obama proposed about $400 billion in cuts to government health spending, much of it in the form of recycled policies from past budgets that weren't adopted by Congress. Large parts of the savings came from adjustments to provider rates and Medicare structural reforms.

For example, the budget proposed to save approximately $100 billion through 2025 by adjusting payment updates for certain post-acute care providers and to align Medicare drug payment policies with Medicaid for some low-income patients.

Julius Hobson, a senior policy advisor at Polsinelli PC in Washington, told Bloomberg BNA he expects more of the same types of broad-reaching proposals, including a co-pay for home health visits and a hospital site-neutral payment provision.

A presidential budget proposal is frequently dead on arrival, though “it still sets the tone” for the year ahead, Hobson said.

The proposals are often ignored by Congress, even when the legislature is controlled by the president's own party. While the document is the first step in negotiations over the government's annual spending plan, it often serves more as a statement of ideals and priorities than as a basis for policy.

“I don't think it behooves anyone to legislate” with the 2016 budget, Andrew Shin, senior director, policy and strategic partnerships at the Schwartz Center for Compassionate Healthcare in Boston, told Bloomberg BNA. “Budgets have become less and less actual legislative proposals and more and more political statements. They'll hit drug companies on transparency, investment into mental health and public health, support primary care, telehealth. But we'll see if any of that gets any traction. Probably not this year.”

Site-Neutral Payment

The final 2015 bipartisan budget agreement, which Obama signed Nov. 2, 2015, is paid for in part by $6.25 billion in health-care offsets. One of the health-care offsets equalizes Medicare payment rates for hospital outpatient departments and hospital-owned physician offices.

The provision is meant to address the practice of hospitals acquiring physician offices and then billing patients under the outpatient prospective payment system, which has higher reimbursement rates than the Medicare physician fee schedule.

Analysts expect Congress to act to alter the provision in some way. Rep. Pat Tiberi (R-Ohio), chairman of the House Ways and Means Health Subcommittee, told Bloomberg BNA he's worried the effective date of the policy is too soon for hospitals that have already started construction on new outpatient facilities.

But it's unclear if there's a legislative vehicle Congress can use to alter the provision. Lobbying efforts to include a change of the policy in the omnibus appropriations bill fell short, as well as efforts by House Democrats to include it in the Electronic Health Fairness Act of 2015 signed by the president at the end of 2015.

“There's no real must-pass health reform legislation that will happen between now and the election, unless it's appropriations, which isn't the right vehicle for it. There's no logical place for the provision to go in,” Shin said.

Under the provision, all new hospital acquisitions of providers that don't serve patients on the main campus of a hospital would be eligible for reimbursement from either the ambulatory surgical center prospective payment system or the Medicare physician fee schedule not the higher reimbursed outpatient prospective payment system.

The reimbursement changes will apply to hospital-owned physician practices acquired or opened since the date the law was signed and farther than 250 yards from a hospital's main campus.

The American Hospital Association has decried the “site neutral” payment proposal.

Thomas Nickels, AHA's executive vice president of government relations, said in a statement when the law was signed that the “untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments. Moreover, rural communities will be most adversely impacted, as hospitals will no longer be able to help physicians in these communities continue to provide access to their patients.”

Yet the Federation of American Hospitals, which represents investor-owned hospitals, didn't see the proposal the same way.

Charles Kahn III, FAH president and chief executive officer, told Bloomberg BNA the provision is narrowly tailored and focused only on specific physician-hospital arrangements. Kahn said he's not thrilled with any proposal that could cut hospital payments, but the budget agreement as proposed was the best deal the industry was going to get.

Hospital lobbyists have been calling for an exemption for hospitals that are already under development.

“We are concerned there's not enough of a transition” in the law for hospitals already under construction, Kahn said.

Shin said the provision could be a “huge deterrent for hospitals when they're considering acquiring outpatient practices. If there's any way to get it reversed or delayed [in 2016], they're going to try.”

Medicare Reforms

Rep. Brady said in late 2015 that the House Ways and Means Committee's health panel was crafting a hospital bill and was prepared to advance it to the floor if time permitted. Other issues took precedence, and so Brady said he'll be looking for opportunities early in 2016.

Brady said the package would have included previously introduced legislation that changes the post-acute care delivery system, reforms graduate medical education and creates a site-neutral payment policy for certain inpatient and outpatient surgeries.

Brady is also pursuing a “premium support” model for Medicare, though that long-controversial policy is aimed at 2017, not 2016.

But like the hospital site-neutral payment issue, there's no real indication how much traction the policies could get or whether they'd be able to pass as standalone legislation. He said reforming Medicare's sustainable growth rate for physicians took too long, and bipartisan Medicare reforms shouldn't wait.

“We can't afford to wait 15 years, like the SGR. We really need to make some progress now,” Brady said at a recent conference.

Len Marquez, the director of government relations at the Association of American Medical Colleges (AAMC), said now is the time for Congress to address hospital payment issues because it no longer needs to be concerned with replacing the SGR. However, Marquez acknowledged the timing of a hospital payment bill remains uncertain.

Any hospital payment bill would likely contain several subparts, and it may include language from several hospital payment bills introduced by members of the Ways and Means Committee introduced in July, according to Marquez.

Marquez said that among previous bills AAMC expects to see in a larger hospital bill is the Medicare Crosswalk Hospital Code Development Act of 2015 (H.R. 3291), introduced by Ryan.

The legislation would allow the Medicare program to compare what it pays for similar surgical services in different payment systems.

Marquez also expects a hospital payment bill to include language from the Medicare IME (indirect medical education) Pool Act of 2015 (H.R. 3292).

Introduced by Brady, the legislation would instruct the health and human services secretary to give each teaching hospital a lump-sum payment to reimburse indirect medical education costs, instead of paying the hospital an additional percentage based on each inpatient case.

Brent V. Miller, director of federal relations at the Marshfield Clinic, told Bloomberg BNA that Brady also introduced a post-acute care bill (H.R. 3298), known as the Medicare Post-Acute Care Value-Based Purchasing Act, in the summer of 2015. The legislation would establish a shared incentive pool in four distinct Medicare settings—home health agencies, skilled-nursing facilities, inpatient-rehabilitation facilities and long-term-care hospitals

However, Miller said it's not certain the four separate bills will be successfully combined into a single hospital payment bill in 2016.

“It will be a challenge to bring all of this together,” Miller said.

Graduate Medical Education

The AAMC also would like to see any hospital payment legislation include graduate medical education (GME) proposals outlined in the Resident Physician Shortage Reduction Act of 2015 (H.R. 2124; S. 1148), Marquez said. The bill would add thousands of residency training positions at hospitals.

However, Marquez said it's not clear there would be an opportunity to include GME proposals in a hospital payment legislation package that comes out of Ways and Means.

Miller said Congress should commit to consistent GME funding to ensure that the program can meet the future needs of the newly insured and aging population.

“The purpose and value of residency training in clinical settings and the financial support needed to sustain physician education will only increase as the U.S. population lives longer with more complex health conditions,” Miller said.

Observation Status

Max Richtman, president and chief executive officer of the National Committee to Preserve Social Security & Medicare, told Bloomberg BNA he urged the House Ways and Means Committee to include an observation status proposal in a hospital payment bill that would make it possible for all beneficiaries to receive skilled nursing facility (SNF) care they need following hospitalization, whether they are classified as an outpatient in observation status or an inpatient.

Under current CMS policy, time spent in observation status doesn't count toward Medicare's minimum stay requirement for SNF coverage.

A June report to Congress from the Medicare Payment Advisory Commission found hospitals increasingly are classifying patients under outpatient observation, causing concern about beneficiaries’ financial liability.

In addition, Ivy Baer, regulatory and policy senior director at the AAMC, told Bloomberg BNA that the CMS will likely publish a proposed rule on the the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act. Signed by President Obama in August, the law requires hospitals to notify patients that time in outpatient observation status may affect their eligibility for Medicare nursing home coverage.

The CMS held a December teleconference to gather input on how it should implement the law, Baer said. Feedback received during that call will inform future CMS rulemaking on the law, according to Baer.

Over the course of the call, she said, some hospitals said that notifying patients of their outpatient status could prove burdensome.

Wait Until 2017?

FAH's Kahn told Bloomberg BNA that while the Ways and Means Committee is doing good work, it would be better if they held their hospital payment package.

“We want them to wait until 2017,” or when there's a new agenda from the next presidential administration, Kahn said.

There will be a lot of legislative activity when the new administration takes power, Kahn said, adding that by waiting, “we can take a comprehensive view” of the marketplace and political landscape at that time.

In fact, Kahn said he hoped there wouldn't be much Medicare legislation in 2016.

“We really need a breather to digest” all the changes the administration has put in place since the signing of the Affordable Care Act in 2010, Kahn said.

Small, Technical Bills

Shin told Bloomberg BNA that until Congress gets sidetracked with repealing the Affordable Care Act, there will be room for “smaller, technical bills to find their way through.” He said it's not clear whether some of Brady's Medicare reforms would qualify as small enough. It would depend on if he was willing to modify them.

The NCPSSM said it will oppose “so-called Medicare reform proposals that are likely to receive a great deal of attention in 2016, in preparation for action in the 115th Congress following the election.”

These proposals, the group said, include benefit restructuring that would increase costs for most beneficiaries and premium support/vouchers that would undermine and eventually end traditional Medicare.

“Medicare beneficiaries already have high out-of-pocket health care costs even with Medicare. We should be expanding Medicare coverage, for example by providing vision, dental and hearing coverage, not asking people whose average annual income is $24,150 to pay more to see the doctors of their choice and to receive the health care services they need,” the group said.

Physician Payment

On the regulatory front, CMS staff will be scrambling in 2016 to develop two programs that impact doctors: the new physician payment methodology and a diagnostic imaging system described by the agency as “massive impact.”

Rulemaking that offers details on the payment system “will be the major CMS activity in the coming year,” the Marshfield Clinic's Miller said.

With the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) in April 2015, which ended the SGR payment system, “Congress has put to rest the constant threat of inappropriate cuts to Medicare physician fees,” Miller said.

Now it's up to the CMS to flesh out the details as Medicare Part B physician payments are transitioned to an incentive-based system. Agency staff have published a request for information, the 2016 physician fee schedule rule outlined the upcoming system and asked for comments and feedback was requested on a clinician quality measure development plan to support the program.

The CMS has said it will unveil a proposed rule on the new payment program this spring, to be finalized in early fall.

Performance-Based Scoring

Starting in 2019, Medicare physician reimbursements will be based on the Merit-Based Incentive Payment System (MIPS).

“Physicians who perform well on quality, value and [information technology] metrics will be rewarded with higher pay rates and those who perform poorly will face penalties,” Miller said.

For Part B services furnished on or after 2019, the CMS is developing a methodology for assessing the performance of each MIPS-eligible professional to provide an individual composite score.

“Because the language of the statute is not specific,” Miller said, the CMS “must develop specific metrics that will be used to determine the bonus payments and penalties.”

Scoring will be based on quality, resource use, clinical practice improvement activities and EHR use.

The Medicare agency “will have to work quickly to get policies and regulations in place before the critical benchmarking year” of 2017, Miller said.

Although MIPS begins in 2019, performance in 2017 will be used for scoring.

While “2016 will be the pivotal year for rulemaking,” he said, “2017 will be the pivotal year for physicians, providers, and accountable care organizations to position themselves for engagement as a MIPS doctor” or one who is foregoing MIPS scoring through association with an alternative payment model.

Alternative Payment Models

Under MACRA, providers in the “most advanced” alternative payment models (APMs) that assume financial risk won't be judged under MIPS and will receive 5 percent bonuses between 2019 and 2024.

Mara McDermott, vice president of federal affairs for CAPG, told Bloomberg BNA that stakeholders are anxious to know which APMs will be considered the most advanced and bonus-eligible.

CAPG is an association of physicians who are part of capitated, coordinated care arrangements.

McDermott said she thinks the CMS's Next Generation Model of ACOs will be a focus for the APM aspect of the program.

Medicare ACOs are comprised of groups of doctors, hospitals and other health-care providers and suppliers who come together to provide coordinated, high-quality care at lower costs to their patients.

Unveiled in March 2015, the Next Generation Model is intended for ACOs experienced in coordinating care. It will allow groups to assume higher levels of financial risk and rewards than under other ACO programs.

McDermott predicts that some solo practitioners will want to align themselves with risk bearing groups due to the forthcoming changes.

Committee Help

Along with public comments from its RFI and the 2016 fee schedule rule, the CMS also should receive help with program details from the 11 members of the Physician-Focused Payment Model Technical Advisory Committee.

Named in October 2015, the goal is to review, comment on and provide recommendations on APMs. Once the committee completes charter approval, the first meeting will be posted in the Federal Register.

The committee will initially meet on a quarterly basis but once it starts receiving payment model proposals (anticipated in early 2017), the frequency of meetings will in large part be driven by the number and complexity of the payment models that have been proposed, the CMS said.

McDermott said she hopes to see more APM options than just ACOs coming out of the committee.

Current Quality Programs

While the CMS is working to develop the details of the new system, providers are still subject to payment cuts under the current set of quality programs, including the physician quality reporting system (PQRS) and the value-based payment modifier.

Under PQRS, those who didn't satisfactorily report data on quality measures in 2014 will be subject to a 2 percent cut in 2016, up from 1.5 percent in 2015.

During 2016, quality reporting will be used to determine whether providers receive a 2 percent cut in 2018, the final year for PQRS.

The last year for the value-based payment modifier will also be 2018. During 2016, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists, in addition to physicians, will be subject to a 2 percent cut in 2018 based on performance in 2016.

If these providers are in groups of 10 or more, they can receive a 4 percent cut in 2018 under the value modifier program.

Appropriate Use Criteria

The CMS will face more heavy lifting in its development of another new Part B program for doctors—Appropriate Use Criteria (AUC) for Advanced Diagnostic Imaging Services—a method for providers to consult guidelines before a test is ordered.

The Protecting Access to Medicare Act (PAMA) (Pub. L. No. 113-93) directed the agency to develop the infrastructure to help providers who order and furnish imaging services to make the most appropriate treatment decisions through evidence-based criteria.

The CMS said the 2014 PAMA “includes rapid timelines for establishing a new Medicare AUC program” and that “the number of clinicians impacted by the scope of this program is massive.”

The new program “crosses almost every medical specialty and could have a particular impact on primary care physicians since their scope of practice can be quite vast,” the agency said.

The CMS is required to designate AUC from among those that have been developed or endorsed by national medical professional specialties societies and other provider-led entities.

Provider-Led Entities

The CMS has proposed that only AUC developed by societies, such as the American College of Radiology and the American College of Cardiology, be part of the program.

Provider-led entities must apply to CMS to become qualified to provide AUC. The first group of applications was due Jan. 1, 2016, and a list of those that CMS determines to be qualified will be posted on the agency website.

“We expect by the summer to know which AUC are approved,” Cynthia R. Moran, executive vice-president of government relations, American College of Radiology, told Bloomberg BNA.

Clinical Decision Support

A main component of the program is for providers to use a clinical decision support (CDS) mechanism, an approved software, to access the AUC.

“The ordering professional would input information regarding the clinical presentation of the patient into the CDS tool, which may be a feature of or accessible through an existing system, and the tool would provide immediate feedback to the ordering professional on the appropriateness of one or more imaging services,” the CMS said.

Moran said primary care doctors and others who order could use a web-based portal or one embedded in their electronic medical record to access the AUC.

Adherence to Criteria

Doctors have to report that they consulted with the AUC, although Tim Trysla, executive director of the Access to Medical Imaging Coalition, told Bloomberg BNA they can ignore the criteria.

However, under PAMA, he pointed out, ordering doctors considered outliers, who have low rates of AUC adherence, would be subject to prior authorization beginning in 2020.

The Medicare Payment Advisory Commission, which advises Congress on Medicare policy, has for years recommended controlling the volume of imaging through prior authorization and other methods.

The new program will make imaging more transparent and perhaps change the debate on utilization, Trysla said.

Deadline Pushed Back

Initially, the CMS said that beginning Jan. 1, 2017, doctors would have to consult AUC during 2017, as required by PAMA.

But because of the complexities of the program and the timing of the fee schedule rule in which the program is detailed, the deadline was pushed back.

The CMS anticipates that the initial list of the CDS tools will be published late in 2016.

Durable Medical Equipment

Also new for 2016 under Medicare Part B is the use of competitive bidding prices for many more durable medical equipment (DME) suppliers than in 2015.

For the first time, Medicare will use information gathered from competitive bidding to pay suppliers in areas in which bidding has never taken place.

The single payment amounts for these areas will be derived using bids from competitive bidding programs conducted in each region, limited by a floor and a ceiling.

The CMS said that taking this road provides savings for the program and beneficiaries without having to actually conduct bidding throughout the nation.


Prior to full implementation, for the first six months—from January to June—reimbursements will be based on a 50-50 blend of current rates and adjusted rates.

While the CMS contends that moving from a fee schedule to competitive bidding has saved hundreds of millions of dollars, bidding is disliked by some suppliers and beneficiary groups who say the lower rates have led to access problems.

Industry Consolidation

Tom Ryan, president and chief executive officer for the American Association for Homecare, predicted to Bloomberg BNA that the spread of the lower reimbursement rates will lead to further consolidation in the industry.

Suppliers with good customer service records are being “gobbled up” by national chains, he said.

If suppliers are participating in Medicare, they must accept assignment of the reimbursement rate.

Ryan predicted that more suppliers will become non-participating, leading to more beneficiaries paying for their DME out-of-pocket. If suppliers don't accept assignment, there's no limit on the amount they can charge a beneficiary.

Ryan called the expansion of the lower bidding prices, which could discourage participation, as counterintuitive in a time when caring for patients with chronic illnesses in their own homes is encouraged.

Hospital Regulation

For hospitals in 2016, Medicare rulemaking is expected to fall broadly into three categories, Rich Bajner, a managing director for the consulting firm Navigant Healthcare, told Bloomberg BNA They are:

• cost-saving measures to maintain or expand the life of the Medicare trust fund;
• defining quality standards; and
• aligning payments between hospitals and doctors.


The CMS could align payments through rulemaking on ACOs or the Payments for Care Improvement initiative, Bajner said.

The AAMC's Baer told Bloomberg BNA that the CMS will likely publish several rules on payment bundling. In particular, Baer noted that the AAMC is expecting a rule that would bundle Medicare payments for oncology care.

Moreover, Bajner said it will be interesting to see if the CMS makes some bundled payment demonstration projects permanent in 2016.


As for ACOs, Bajner predicted there will be a “doubling down of the ACO program.”

Many of the Pioneer model ACOs will likely graduate into the next generation ACO program that the CMS proposed in March, Bajner said. However, he forecasted that many of the mainstream providers who don't have experience in coordinating care may find the next generation program “interesting.”

The CMS may also need to make changes to the various ACO programs to attract more providers, Bajner said. He indicated that, right now, the ACO programs don't provide enough shared savings payment, which may discourage some providers from joining the program.

Nonetheless, Bajner told Bloomberg BNA he expects the CMS will solve this problem.

In addition to the next generation program, the HHS's regulatory agenda published in November said the CMS plans to propose modifications to the Medicare Shared Savings Program (MSSP).

The proposed rule would revise benchmarking methodology, which affects Medicare payments to providers of services and suppliers participating in MSSP ACOs.

“These changes would apply to existing ACOs and approved ACO applicants participating in the program beginning January 1, 2017,” the regulatory agenda said.

To date, the CMS hasn't issued a notice of proposed rulemaking on the matter. The regulatory agenda said the CMS would release the proposed rule in November 2015.

Short Hospital Stays

Also on the watch list for hospitals in 2016, according to Baer, are changes to auditing of short-term hospital stays.

Changes to the CMS two-midnight policy included in the 2016 hospital outpatient final rule will allow inpatient admissions that span fewer than two midnights to be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician.

Under the old policy, Medicare Part A generally wouldn't pay for hospital stays that weren't expected to span at least two midnights.

The FAH's Kahn appeared pleased with changes to the two-midnight policy. Those changes “were very constructive” and hopefully, when everything's implemented, hospitals won't have to hear about short-stay issues again, he said.

In a related move, the CMS said in the outpatient final rule that, starting in 2016, certain quality improvement organizations (QIOs), and not recovery auditor contractors, will review two-midnight cases.

The AAMC will be monitoring if the reviews by QIOs are working, Baer told Bloomberg BNA.

“We want to make sure that stays less than two midnights are going the through the system and getting paid appropriately,” she said.

However, the transition could be rocky, at least according to Baer.

She said there are only two QIOs conducting short-stay reviews and they're not sending out consistent information to hospitals.

John Kelliher, a managing director the Berkeley Research Group, a consulting firm, characterized the short stay changes as a positive for hospitals in an interview with Bloomberg BNA.

Furthermore, the auditing changes seem to make clear that the CMS wants RACs to focus their attention all providers, and not just hospitals, Kelliher said.


Also on the auditing front, the HHS' regulatory agenda indicated that the CMS may soon issue the so-called 60-days overpayments final rule. The rule that would require the HHS secretary to establish a process for a provider or supplier to return an overpayment to the Medicare program, as well as establish a process for the CMS and its contractors to receive and apply the overpayment.

The CMS issued the proposed rule, which the ACA required, in February 2012 and comments were due two months later. A final rule is due out by the CMS in February, the regulatory agenda said.

CMS Leadership

The CMS will head into 2016 under the leadership of Andy Slavitt, who became acting administrator in March, after the departure of former CMS Administrator Marilyn Tavenner.

In July, Obama formally nominated Slavitt to serve as the CMS administrator. However, the Senate hasn't confirmed him yet. Moreover, there aren't any public plans to hold hearings in the Senate on his nomination.

The AAMC's Baer told Bloomberg BNA that Slavitt's status as acting administrator doesn't appear to be affecting his ability to lead the agency. “While it's always preferable to have someone confirmed we look forward to working with Andy Slavitt,” she said, adding, “At this point there seems to be no slow-down in CMS because he is acting.”

The FAH's Kahn said Slavitt brings great management skills and “a wealth of knowledge to his position at CMS” and his leadership has made a material difference at the agency.

“Unfortunately, with the current political mix, it seems unlikely that his nomination to be CMS administrator will be confirmed,” he told Bloomberg BNA, adding, “Andy is respected and making the best of it, but it is always preferable to be a confirmed administrator.”

Meaningful Use Program

Despite calls from the industry for an overhaul, health IT industry observers said it's unlikely the CMS will make major changes to the meaningful use program in 2016.

“My prediction is that MU in 2016 will remain on track and more or less unchanged,” Jim Oakes, an executive consultant with Arlington Health Group, told Bloomberg BNA.

The American Medical Association and the American Hospital Association, which collectively represent the bulk of the country's doctors and hospitals, asked the CMS in December 2015 to shorten the meaningful use program's reporting periods and remove its “all or nothing” approach.

The AMA told Bloomberg BNA it plans to continue its Break the Red Tape campaign, focused on getting support from federal lawmakers to delay the final stage of the meaningful use program, set to begin in 2017.

One key AMA request—that the CMS be empowered to grant blanket hardship exceptions for providers who failed to meet the requirements of the meaningful use program—was granted late in 2015.

Congress Dec. 18, 2015, passed the Patient Access and Medicare Protection Act, which gave the CMS the ability to create automatic exceptions from Medicare penalties for failing to comply with the meaningful use program. Currently, the CMS can only approve hardship exceptions on a case-by-case basis, making it difficult for providers and hospitals in the program to know ahead of time whether they'll be hit with a Medicare penalty.

A blanket hardship exception would allow providers that struggled to meet requirements of the meaningful use program in 2015 to avoid a Medicare reimbursement penalty, the AMA said.

Oakes said there's not enough support in Congress for other major changes to the meaningful use program.

However, he said he expects lawmakers to “exhibit more and more concern” about the meaningful use program to pressure the CMS to make changes.

This concern is likely to be prompted by an expected increase in dropouts from the program, Oakes said.

Industry groups, such as the AHA and Medical Group Management Association have warned that many hospitals and providers still aren't ready to meet the requirements of Stage 2 of the program and are likely to file for hardship exemptions to avoid Medicare reimbursement penalties for failing to comply with program requirements (26 MCR 1378, 12/11/15).

Participation in the meaningful use program peaked in 2014, with 305,018 providers and 4,379 hospitals collecting Medicare or Medicaid incentive payments through the program (26 MCR 740, 6/12/15).

However, industry researchers said participation only surged because CMS late in 2014 issued a final rule that allowed providers and hospitals to stay in Stage 1 of the program. Many have said there's little evidence that providers and hospitals will be better prepared to tackle the challenges of Stage 2.

Consumer Engagement

While hospitals push to lessen the requirements of Stage 2 and delay Stage 3, consumer advocates will counter with a push to keep the meaningful use program's patient and consumer engagement requirements.

Shannah Koss, a health policy consultant and president of Koss on Care LLC, told Bloomberg BNA that this “continued watering down of consumer engagement” would be the only major change for the program.

The CMS's final rule establishing Stage 3 requirements also eased a controversial requirement that hospitals and health-care providers in Stage 2 of the meaningful use program get a portion of their patients to download a copy of their health record through a patient portal.

Stage 2 originally required providers and hospitals to get 5 percent of their patients to download a copy of their health record through a patient portal. The CMS's final rule dropped that requirement to just a single patient in 2015 and 2016 but restored it to 5 percent of all patients for 2017.

A consortium of patient advocacy groups will work in 2016 to ensure the CMS doesn't continue to reduce this requirement.

The Consumer Partnership for eHealth told the CMS in a Dec. 15, 2015, letter they're concerned about the “chilling effect” of lowering patient engagement requirements.

The group said these requirements are “critical to prepare for an effective transition into new models of payment and delivery in 2018.”

“Patients need tools to set health care goals, make informed decisions and communicate with providers and this is where health IT makes a critical difference: It helps connect 21st century patients with 21st century care,” Deborah Ness, president of the National Partnership for Woman & Families, said in a statement.

New Payment Models

However, Harry Greenspun, director for Deloitte's Center for Health Solutions, told Bloomberg BNA there remains a gap between health-care organizations with the resources to install these new technologies and those that do not. He said wealthier organizations will adopt new technologies and payment models faster and thrive under Stage 2 and Stage 3 of the meaningful use program.

“The adoption of population health and value-based care is pretty spotty around the country,” Greenspun said. “I think in the next couple of years, starting next year (2016), we'll see pockets of great alignment and adoption and some pretty drastic misalignment with meaningful use.”

The CMS itself expects 30 percent of Medicare payments to be linked to “alternative payment models,” namely accountable care organizations, the agency announced early in 2015. However, the CMS does expect 85 percent of all its fee-for-service payments to be based on the quality of efficiency of health-care delivery in 2016.

Medicare Advantage

Despite a potential negative impact due to increased market consolidation, the outlook for Medicare Advantage in 2016 appears healthy, with continued enrollment and a net increase in plan entry.

Industry eyes will be focused on the CMS as staff prepares policies that attempt to make quality ratings and payment more equitable for MA plans that enroll a higher proportion of beneficiaries who are lower on the socioeconomic scale.

The Market

With the announcement in the April 2015 rate notice that Medicare Advantage rates will rise by an average 1.25 percent in 2016, observers expect the program to have another good year.

In its annual analysis released in mid-December, the Medicare Payment Advisory Commission found that MA enrollment grew 6 percent in 2015, a few percentage points lower than in previous years, but significantly higher than fee-for-service enrollment.

“Since 2006, enrollment has more than doubled and plans project continued growth for 2016,” MedPAC said.

Ins and Outs

The Kaiser Family Foundation (KFF), in its end-of-year study, said 203 plans that were available in 2015 will be exiting the Medicare Advantage market, and 259 plans will be offered for the first time.

As examples, Cigna has a new zero-premium plan in Kansas City, Mo. In Colorado, Anthem Blue Cross Blue Shield has a new health maintenance organization and a special needs plan for beneficiaries dually eligible for Medicare and Medicaid. On the West Coast, Stanford Health Care is launching a new plan in Santa Clara County, Calif.

Net Increase

In 2016, 2,001 Medicare Advantage plans will be available for individual enrollment, 56 more than in 2015, KFF said.

“With steady growth and higher payment rates, 2016 will be a good time for health plans to be in the Medicare Advantage business, John Gorman, a health care consultant, said.

Sean Cavanaugh, CMS's deputy administrator and director of the Center for Medicare, characterized the 2016 outlook for the program as bright with a projected 17.4 million enrollees, up by 1 million from 2015.

Tom Kornfield, a vice president at Avalere, and a health-care consultant, told Bloomberg BNA that although the exact 2016 enrollment won't be known until February, it appears that plans have weathered Affordable Care Act cuts well, with a good percentage offering zero-premium plans.

This indicates they were able to tweak their benefit packages to make them more efficient, he said.

MA Concerns

In February, the CMS will release its proposed rate notice for 2017.

Although the agency in December 2015 released underlying numbers that showed a possible increase for 2017, Mara McDermott, a vice president of federal affairs at CAPG, told Bloomberg BNA that the growth numbers indicated in the notice are preliminary. CAPG is a trade association for accountable physician organizations.

She said she's concerned about other factors that could negatively impact rates, such as risk adjustment, coding intensity, and a curtailment of the use of home health risk assessments.

Kornfield, a former CMS staffer, said once final payment rates are unveiled in April it will determine how the agency may alter its policies. A rate increase might lead to a policy change that could have a negative impact on overall plan payments.

Consolidation Impact

Others see possible darkening clouds in the MA market created by pending large mergers in the industry.

“The aggregation of this program has really multiplied very quickly,” Gorman said. With the pending mergers between Aetna and Humana and Anthem and Cigna, other companies in the MA industry will be “fighting against much bigger entities,” he said.

The Kaiser Family Foundation said that, while the four firms’ products differ from one another, their combined share of the Medicare Advantage market means that the acquisitions could have important implications for the MA program.

Aetna and Humana accounted for 26 percent of MA enrollees in 2015, while Anthem and Cigna accounted for about 6 percent, KFF said.

George Strumpf, of EmblemHealth, told Bloomberg BNA that approval of the proposed mergers would consolidate commercial and MA enrollment into a handful of plans that would have significant leverage over providers.

“Additionally, regional MA plans will be competitively disadvantaged in negotiating provider contracts,” he said.

Market Variation

Kornfield said the impact of merger activity depends on the market. In some cases, fewer plans could mean more negotiating leverage over hospitals.

KFF said that although the average Medicare beneficiary will be able to choose from many plans, in some areas these plans will be offered by just a handful of firms.

UnitedHealthcare, Humana, Blue Cross Blue Shield and its affiliated companies, Kaiser Permanente, Aetna, Cigna and Wellcare accounted for almost three-quarters MA enrollment in 2015, KFF said.

Regulatory Changes

In the policy arena, Vanessa D. Pawlak, a principal at Ernst & Young LLP, told Bloomberg BNA that “CMS needs to make sure that plans are not unfairly penalized for enrolling dual eligible and low-income beneficiaries, which has been a challenge for most health insurers nationwide.”

The CMS stated in 2015 that it will “continue to work diligently” to address complaints from plans with high enrollment of the low income that they are disadvantaged in receiving bonuses that stem from star quality ratings.

The star ratings on the Medicare Plan Finder website inform beneficiaries about the performance of MA and Part D prescription drug plans, as well as serve as the basis of quality bonus payments for MA organizations that score at least four stars on a one-to-five scale.

Request for Comments

In the last quarter of 2015, the agency released a request for comments on changes to the 2017 star ratings system, including asking about assistance for MA organizations and prescription drug plan sponsors that contend that enrolling a high percentage of low-income enrollees or those who are disabled and under 65 hurts their ability to achieve high star ratings.

The CMS has engaged the National Committee for Quality Assurance and the Pharmacy Quality Alliance to examine measure specifications to determine if changes are needed.

In addition, the IMPACT Act (P.L. 113-185) instructed the HHS Office of the Assistant Secretary for Planning and Evaluation to conduct a study before October that would examine the effect of individuals’ socio-economic status on quality measures and resource use in Medicare.

Concerns About Underpayments

Also in the last quarter of 2015, the CMS said that, in response to concerns, it has undertaken an evaluation to assess how well its risk adjustment model predicts plan costs for dual eligible and other low income beneficiaries.

Under risk adjustment, the Medicare program reimburses managed care plans based on the health status of their members as well as other demographic factors.

“In recent years, there has been an increased focus among some plans on exclusively serving the dual eligible population and CMS feels it is an appropriate time to revisit the model,” the agency said.

Rather than looking at all beneficiaries the same, the CMS is considering separate segments for six population groups. These include full benefit dual eligibles, who are eligible for full Medicaid benefits, and beneficiaries who are eligible for partial benefits.

“Our analyses indicate that this revised model would improve predictive performance for aged and disabled full benefit dual, partial benefit dual, and non-dual beneficiaries in the community,” the CMS said.

Seeking Value in MA

Also during 2016, the CMS will review applications and prepare plans for a new program that will be tested in seven states starting in 2017.

The five-year Medicare Advantage Value-Based Insurance Design, or MA-VBID, is intended to allow plans to offer benefit packages to improve quality of care and reduce costs for beneficiaries with certain conditions.

Applications are due to the CMS on Jan. 8 and participants will be named in March.

“The MA-VBID model will test whether the flexibility to offer clinically-nuanced VBID elements in Medicare Advantage plan benefit designs will lead to higher quality and more cost-efficient care for targeted enrollees,” the CMS said.

Currently, requirements for uniformity in MA benefit design bar approaches based on health status or other enrollee characteristics.

Value-Based Modifier

Provisions on MA comprise a relatively small percentage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which ended the physician sustainable growth rate payment system. However, the law does require the CMS to submit to Congress a study on the feasibility of integrating alternative payment models in Medicare Advantage.

Due by July 1, the study would discuss the feasibility of including a value-based modifier and whether such a modifier should be budget neutral.

Congress wants to know on “how we align what is happening in Medicare fee-for-service alternative payment models with what's going on in Medicare Advantage,” CMS's Cavanaugh said.

The agency will be asking for suggestions from the industry, he said.

MACRA also requires the Government Accountability Office to compare the use of quality measures under fee-for-service Medicare, the Medicare Advantage program, and private payer arrangements. It will make recommendations on how to reduce the administrative burden involved in applying quality measures.

Part D Drug Program

The new year ushered in a new regulatory requirement for disclosing drug pricing that one pharmacy representative described as huge. Pharmaceutical prices remain the major topic for Medicare beneficiaries, and the CMS will try to ignite interest in medicine counseling programs through a new model that offers a prospective payment for more extensive interventions.

Generic Drug Reimbursement

Starting Jan. 1, Part D drug plan sponsors and their pharmacy benefit managers (PBMs) must offer their network contracted pharmacies regular updates of reimbursement limits for generic drugs.

The change is a “huge deal” for drugstores, Susan Pilch, vice president of policy and regulatory affairs at the National Community Pharmacists Association (NCPA), told Bloomberg BNA.

Part D plans will have to disclose the maximum allowable cost (MAC)—the most a plan will reimburse a contracted pharmacy for a generic drug.

The disclosure has to be every seven days so pharmacies have current data on the amount of reimbursement they can expect. NCPA is pleased but waiting to see how it will be carried out by plan sponsors.

Time to Implement

Although the requirement was in a 2014 CMS final rule, implementation wasn't to start until 2016, giving plans time to consider the layout and delivery method for conveying the data to pharmacies.

NCPA said that MAC lists are created by the PBMs, but the methodology to create these lists isn't disclosed.

The PBMs have contended that requiring public disclosure of MACs and MAC methodologies is likely to lead to collusion and higher prices.

NCPA said pharmacists have had to wait at times months to get updates, frequently resulting in reimbursements below acquisition cost for various medications.

The change will also allow accurate updates for beneficiaries who use the CMS's Medicare plan finder website, Pilch said.

When pharmacies can't “determine whether their reimbursement is consistent with their contractual arrangements, the accuracy of the prices displayed in the Medicare Prescription Drug Plan Finder is questionable,” the rule said.

Data Access

Pilch said NCPA members are waiting to see how the sponsors will offer access to the data and how the CMS enforces the new requirement.

The agency said in the 2014 rule that, despite a request for a requirement that MAC prices be disclosed for easy analysis, it would leave those details up to the parties.

“We decline to require a certain format layout and delivery method for disclosure of maximum allowable cost prices, but note these matters can be addressed by the parties in their negotiations,” the rule said.

Pilch said plans might utilize “user friendly” portals—such as Wisconsin's ForwardHealth Portal that includes interactive Medicaid Maximum Allowable Fee Schedules—or merely a PDF document that's not in real time.

Access ‘Outliers.'

Another issue that will likely be discussed in 2016 is beneficiary access to Part D preferred cost-sharing pharmacies (PCSP).

Under a PCSP system, enrollees must fill their prescriptions from a subset of network pharmacies to receive lower cost sharing. The CMS has said that such a system may not be beneficial to all of a plan's enrollees depending on where they reside.

An April 2015 study by the agency concluded that while plans' preferred cost sharing pharmacies met convenient access standards in suburban and rural areas, that wasn't always the case in urban areas.

“Particularly concerning is that a number of plans provide extremely low access to their urban beneficiaries, such as the six plans that require a beneficiary living in an urban ZIP Code to travel an average distance of 30 miles or more to reach a PCSP,” the study said.

Analyzing Access

In a November 2015 memo, the CMS said it would provide drug plan sponsors with an analysis of their 2016 retail pharmacy access and use the data to identify sponsors that the agency considers “access outliers.”

The CMS also said it will require plans with PCSP networks considered outliers—set at the bottom 10th percentile compared with all Part D plans in a given “geographic type”—to disclose this in their marketing materials.

The information also would be posted on the agency's website.

The CMS said in the November memo that it will review sponsors’ marketing materials to determine if the required PCSP outlier disclaimer was used appropriately.

Plans sponsors identified as outliers and don't use the outlier disclaimer will receive compliance or enforcement actions, the Medicare agency said.

Drug Prices

The backdrop of most conversations about Part D is rising drug prices.

Sean Cavanaugh, deputy administrator and director of the Center for Medicare at the CMS, said this fall that while total Medicare costs per capita grew by 1 percent, Part D drug benefit costs grew by 8 percent and are forecast to grow by 15 percent in 2016.

The issue is being examined in various government sectors.

HHS Secretary Sylvia Mathews Burwell held a pharmaceutical forum in November 2015 for consumers, providers, employers, manufacturers, health insurance issuers and government representatives on the growing cost of drugs, and particularly the cost of specialty medications.

The goal was to gather information to “develop innovative purchasing strategies and incorporate value-based and outcomes-based models into purchasing programs in both the public and private sectors.”

Congressional Inquiry

On Capitol Hill, five Democratic senators in mid-December 2015 asked CMS acting Administrator Andrew Slavitt about the agency's efforts to contain drug prices.

The questions dealt with how the agency plans to use its Center for Medicare and Medicaid Innovation (CMMI) to “examine the potential of alternative payment mechanisms,” including methods to increase the use of generics.

Impact of Prices on Beneficiaries

A Kaiser Family Foundation study released in October 2015 said the Part D average prescription drug plan premium, weighted by 2015 plan enrollment, will increase by 13 percent.

This marks “a significant departure from recent years when premiums were essentially flat,” KFF said. “Even if a number of beneficiaries switch or are reassigned to lower-premium plans, the average premium increase for 2016 is likely to be the largest since 2009.”

The biggest concern for the Part D program “for 2016 is the uptick in premiums and deductibles,” Vanessa D. Pawlak, a principal at Ernst & Young LLP, told Bloomberg BNA.

“This is stemming from high cost specialty drugs and other breakthrough drug costs,” she said.

Fixed income beneficiaries will need to plan for the increases, she said.

Out-of-Pocket Costs

The National Committee to Preserve Social Security and Medicare's Richtman said many beneficiaries will experience an increase in out-of-pocket costs as a result of the spike in prices.

The top 10 stand-alone prescription drug plans are expected to increase premiums in 2016 as a result of increased drug costs, he said.

“Compared to 2015, more prescription drug plan enrollees will pay at least $60 per month in premiums in 2016,” Richtman said, adding that deductibles are also rising.

KFF said found that about two-thirds of PDPs will charge a deductible in 2016, up from 58 percent in 2015.

“High drug costs can also have a significant impact on the quality of care,” Ritchman said.

Research indicates relatively small changes in monthly costs can cause seniors to delay or discontinue using drugs.

Medication Therapy Management

The CMS will be choosing participants in 2016 for a model intended to control Part D costs through medication therapy management.

The Part D Enhanced Medication Therapy Management model will offer stand-alone prescription drug plans in 11 states the chance to design and implement strategies to improve medication use and care coordination, the agency said.

The five-year model will begin in 2017 in Virginia, Florida, Louisiana, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wyoming and Arizona.

MTM programs target individuals who have multiple chronic diseases, are taking multiple covered Part D drugs and are identified as likely to incur annual costs for covered Part D drugs that exceed a certain threshold.

The Medicare Modernization Act required that every Part D plan offer an MTM program but participation has been much lower than expected, both by enrollees and clinicians.

More Consultations

PDPs participating in the new model could offer enrollees “higher-touch services, such as more frequent person-to-person consultations” after transitions of care or other changes in risk status, the CMS said.

Plans have until Jan. 8 to submit applications and the CMS will name the participants in March.

Applicants will be lured with a prospective payment for more extensive MTM interventions beyond a plan's annual Part D bid as well as performance payment, in the form of an increased direct premium subsidy, for plans that successfully reduce expenditures and fulfill other requirements.

Litigation Outlook

Among important legal developments that Medicare attorneys are watching is litigation involving a 0.2 percent Medicare Part A rate cut included in the “two-midnight” rule.

Kenneth Marcus with Honigman Miller Schwartz and Cohn LLP in Detroit said that the anticipated release in 2016 of the final “two-midnight” rule would negatively impact hospitals nationwide.

The rate cut portion of the rule was remanded back to the CMS by the U.S. District Court for the District of Columbia in September for failure to adequately explain the cut in reimbursements (Shands Jacksonville Med. Ctr. v. Burwell, 2015 BL 305589, D.D.C., No. 1:14-cv-00263-RDM, 9/21/15) (26 MCR 1106, 9/25/15).

The two-midnight rule states that inpatient admissions will generally be payable under Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supports that reasonable expectation, and that Medicare Part A payment is generally not appropriate for hospital stays not expected to span at least two midnights.

However, the CMS in a late October 2015 final rule said it was changing how it reviews short stays.

The CMS issued a notice of proposed rule on Nov. 30 seeking comments on the Part A rate cut in line with the court's order (26 MCR 1315, 12/4/15). The rate cut was originally justified by the CMS on the grounds that hospital admissions would actually increase under the two-midnight policy.

Marcus said that Shands may return to federal court once the CMS issues a final rule on the rate cut and could be “major litigation in 2016.”

Self-Disallowance Regulation

Another Medicare legal case to watch in 2016 involves the Medicare “self-disallowance rule.”

That rule requires a Medicare provider to self-disallow an item on its cost report if it believes the item may be denied reimbursement to preserve a later right to appeal. A potential decision in 2016 on this “will have a major impact if the [U.S. District Court for the District of Columbia] invalidates” the rule, said Marcus.

A group of 11 hospitals is challenging the HHS's self-disallowance regulation in Banner Heart Hosp. v. Burwell ( D.D.C., No. 1:14-cv-01195-BAH, filed 7/15/14), arguing that the rule (which is a jurisdictional bar to provider appeals to Provider Reimbursement Review Board) violates a provider's statutory right to Medicare claim appeals.

The parties are currently litigating cross-motions for summary judgment in the matter, and Marcus said a decision in 2016 is “likely.”

DSH Payment Calculations

Disproportionate share hospital (DSH) calculations are currently being litigated in two cases in which any decision rendered in 2016 will have significant impact on hospital Medicare reimbursements.

A long running legal battle between the HHS and a group of plaintiff hospitals continues in Allina Health Servs. v. Sebelius (D.C. Cir., No. 13-5011, 4/1/14) (Allina I), in which a group of hospitals are challenging the treatment of Medicare Advantage patient days for 2004 and later cost years.

The U.S. Court of Appeals for the District of Columbia Circuit held in an April 2014 ruling that the trial court was correct in vacating the secretary's 2004 rule on Part C DSH calculations, but said the matter should be sent back to the agency for additional adjudication (25 MCR 400, 4/4/14).

That final adjudication came down Dec. 1, 2015, in a 46-page decision from the CMS administrator that upheld the secretary's position that Part C patients are deemed “entitled” to Medicare Part A, even though the hospitals are reimbursed through Part C for those patient days.

The administrator said the Medicare statute and past agency practice made clear that Part C beneficiaries remain entitled to Part A even when choosing coverage through Part C, and therefore should be counted in the Medicare fraction of the DSH calculation, rather than the Medicaid fraction as the plaintiff hospitals had argued.

Marcus said he expected the case to head back to federal district court “[i]n light of the investment made in appealing this issue by the numerous hospitals in the Allina case itself, and the many more hospitals nationwide appealing this issue.”

He added that the D.C. Circuit's remand back to the administrator didn't accomplish much, given that the administrator “essentially took the same position that the Secretary of HHS took in litigation, and which the Secretary of HHS likely will continue to take in the event of further litigation.”

Marcus also noted that the remand orders to the HHS by the D.C. Circuit in Allina I and the U.S. District Court for the District of Columbia in Shands “might signal a trend in which, to achieve payment recovery, it may not be sufficient for hospitals to simply succeed in challenging CMS regulations but, instead, prevail in a second follow up challenge after the court permits CMS to take remedial action.”

In Allina Health Servs. v. Burwell (D.D.C., No. 1:14-cv-01415-GK, motion to dismiss denied 10/29/15) (Allina II), a group of hospitals alleged that a June 2014 Medicare rule for calculating the DSH payment improperly applied provisions regarding Medicare Advantage patients from a 2004 DSH rule that was vacated by a federal appeals court in April 2014 (25 MCR 400, 4/4/14).

The district court in Allina II denied the government's motion to dismiss the action in an Oct. 29, 2015, ruling (26 MCR 1250, 11/6/15), and the government subsequently filed a motion for summary judgment on Dec. 15, 2015, as well as a brief in opposition to the plaintiffs' own previously filed motion for summary judgment.

Marcus said Allina II will have “widespread implication” with a 2016 decision.

To contact the reporters on this story: Nathaniel Weixel in Washington at nweixel@bna.com, Michael D. Williamson in Washington at mwilliamson@bna.com, Mindy Yochelson in Washington at myochelson@bna.com, Alex Ruoff in Washington at aruoff@bna.com and Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Steve Teske at steske@bna.com

Top 10 Medicare Issues in 2016

According to BNA's Medicare Report Advisory Board, the following are the top issues to watch in 2016:


1. Implementation of the new physician payment system.
2. Two-midnight reimbursement policy.
3. Claims audits and the final 60-day payment rule.
4. Possible Congressional action on site-neutral payment policy.
5. Escalating prescription drug costs.
6. Possible Congressional action on hospital payment bill.
7. Development of appropriate use criteria for advanced diagnostic imaging services.
8. Implementation of competitive bidding for durable medical equipment.
9. Quality issues.
10. Changes in the accountable care organization model.


MACRA Timeline for 2016

The Medicare Access and CHIP Reauthorization Act of 2015 replaces the sustainable growth rate formula for Medicare physician payment with the Merit-Based Incentive Payment System.

Although many of the provisions aimed at replacing the SGR as a formula to reimburse physicians unfold over the next few years, medical professionals can look to some requirements during 2016, as reported by the Congressional Research Service ( http://www.fas.org/sgp/crs/misc/R43962.pdf ).




• The CMS is required to have a draft plan that includes how coordination of quality measure development would occur and how clinical guidelines should be used. (Published Dec. 18, 2015)




• The CMS must make information on the number and characteristics of practitioners who opt out of Medicare available through a public website and update the information annually.




• Comments are due March 1 on the quality measure draft plan.




• CMS is required to post the final operational plan for development of quality measures, to be updated yearly.




• HHS is to submit to Congress a study examining the feasibility of integrating APMs in the Medicare Advantage payment system.
• The CMS, in consultation with stakeholders, is required to establish interoperability metrics to measure progress toward widespread interoperability of certified electronic health record technology.
• The CMS must provide, upon request, Medicare claims data to qualified clinical data registries.




• The CMS is to establish through rulemaking criteria for physician-focused payment models, including APMs for specialists.
• The Physician-Focused Payment Models Technical Advisory Committee, named in October, will make recommendations.
• During the comment period for the proposed rule, the Medicare Payment Advisory Commission may submit comments on the proposed criteria.


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