July, 2004 Bill Finerfrock Capitol Associates cms issues Physician Payment Proposed Rule

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Washington Report – July, 2004
Bill Finerfrock

Capitol Associates

CMS Issues Physician Payment Proposed Rule
The Centers for Medicare and Medicaid Services (CMS) released for public comment a proposed rule making numerous changes in physician payments. The proposed rule, if adopted, recommends changes in the following areas:

  • the resource based practice expense relative value units (RVUs)

  • supplemental survey data for practice expense

  • geographic practice cost indices for physician work and practice expense

  • malpractice RVUs

  • requirements for supervision of therapy assistants

  • payment rules for low osmolar contrast media

  • payment policies for physicians and practitioners managing dialysis patients

  • care plan oversight requirements

  • requirements for supervision of diagnostic psychological testing services

  • policies affecting therapy services

  • requirements for assignment of Medicare claims

  • proposed additions to the list of telehealth services

  • coding issues

In addition to the above referenced items, the proposed rule seeks public comment on provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) signed into law by President Bush last December. The rule also outlines coverage policy for several new benefits authorized by MMA, including:

Coverage of an initial Preventive Physical Exam for all beneficiaries becoming Medicare eligible after 1/1/05:
Effective for services furnished on or after January 1, 2005, subject to certain eligibility and other limitations, Medicare will pay for a routine physical examinations. Coverage of initial preventive physical examinations is provided under Medicare Part B only. The MMA permits payment for one initial preventive physical examination within the first 6 months after the effective date of the beneficiary’s first Part B coverage period, but only if that coverage period begins on or after January 1, 2005. In the rule, CMS identifies the services it expects would be part of the initial preventive examination, including review of the individual’s functional ability and level of safety. Specifically, the exam would include a review of the following areas: hearing impairment, activities of daily living, fall risk, and home safety, based on the use of an appropriate screening instrument. The screening instrument may be selected by the physician or non-physician (PA, NP, etc.) practitioner.
Cardiovascular Screening Tests
MMA will provide Medicare coverage of cardiovascular screening blood tests, including tests for total cholesterol, high density lipoprotein, and triglycerides.  Beneficiaries will be allowed to be screened every five years in keeping with recommendations from the Unites States Preventive Services Task Force.  There will be no deductible or co-pay for these tests.
Diabetes Screening Tests.   
The tests to be covered under the proposed rule include a fasting plasma glucose test and post-glucose challenges.  Beneficiaries eligible for this screen will not have to meet a deductible or co-pay for the test.  MMA allows for diabetes screening tests up to twice a year.
In addition to the changes listed above, the rule also makes recommendations in the following areas:
Physician Fee Schedule Updates
In the rule, CMS announces that the payment update to the physician fee schedule will be 1.5 percent for 2005. This action was not required, but rather reflects a Congressional mandate adopted as part of the MMA. Absent a formula change, CMS is currently projecting payment reductions beginning in 2006
Clinical Conditions for Coverage of Durable Medical Equipment
The MMA requires CMS to establish clinical conditions for payment of covered items of durable medical equipment (DME). Specifically, CMS must determine the items that require a face-to-face examination of the individual by a physician or practitioner and those that require a prescription for the items.
The rule proposes to make a face-to-face exam by the physician or other appropriate practitioner to determine medical necessity a requirement for all initial orders of DMEPOS. A similar requirement would go into place for a renewal for a continuing need for that item. CMS seeks specific comments about whether specific items of DMEPOS should be exempt from the face-to-face examination requirement. The rule also stipulates that the ordering/prescribing practitioner must be “independent from the DME supplier and may not be an employee or contractor of the supplier.”
To verify the medical necessity for the item, the prescribing physician’s or practitioner’s records must document the need at the time the physician or practitioner examines the beneficiary. 
CMS is proposing numerous other provider requirements for DMEPOS that should be reviewed by those interested in this area.
Home Health and Care Plan Oversight (CPO) and Non-physician Practitioners
Care Plan Oversight (CPO) refers to the supervision of patients under Medicare-covered home health or hospice care requiring complex multi-disciplinary care modalities, including regular development and review of plans of care. In the 1994 physician fee schedule final rule, CMS established separate payment for CPO when performed by physicians. The Balanced Budget Act (BBA) of 1997 extended CPO coverage to PAs, NPs and Clinical Nurse Specialists (CNSs) if the services fall within their scope of practice under State law. In 2000, CMS clarified that services of, PAs, NPs and CNSs practicing within the scope of State law applicable to their services, could be billed as CPO services.
To certify a patient for home health services, a physician must review the patient records and sign the plan of care. CMS’ policy has been that the physician who bills for CPO must be the same physician who signs the plan of care and that, according to the statute (sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Act), only a physician can sign the plan of care for home health services. The effect of these two provisions, both of which were in place prior to the BBA of 1997, created a problem with respect to an PA, NP and CNS billing for CPO in the home health setting.
To fix this conflict, CMS is proposing to revise §414.39 to clarify that PAs, NPs and CNSs can perform home health CPO even though they cannot certify a patient for home health services and sign the plan of care.
In order for a CPO service to be covered, the PA, NP or CNS must have seen and examined the patient and the appropriate relationship must exist between the physician who certifies the patient for home health services and the PA, NP or CNS who will provide the home health care plan oversight.
Outpatient Therapy Services Performed “Incident to” Physicians Services
CMS is proposing to establish education and credentialing standards for individuals who would provide therapy services “incident to” a physician. Specifically, CMS proposes that Medicare Part B only pay for “incident to” outpatient physical therapy services, if the services are furnished by a PT. This would require that individuals providing outpatient physical therapy services to Medicare beneficiaries in physicians’ offices have graduated from a accredited PT program.
This would appear to be the first time CMS would establish specific education and credentialing standards for “incident to” services. In the past, the person performing an incident to service merely needed to be under the direct supervision of a physician.
Geographic Practice Cost Indices (GPCIs)
Medicare requires that payments under the physician fee schedule vary based on locality adjustments. The locality adjustment is made through the Geographic Practice Cost Indices (aka GPCIs). There are three components that blend together to make up the total physician payment: physician work, overhead and malpractice. CMS reviews and adjusts the GPCIs at least every three years. The last review was in 2001; therefore, CMS proposes in this rule to revise and update the GPCIs.


The HBMA leadership and staff are in the process of reviewing this entire rule (it’s nearly 500 pages) and will be drafting comments on behalf of the Association and it’s members. If you would like to review the rule and prepare and submit your own comments, you are encouraged to do so. To review and/or download a copy of the proposed rule, go to:

In order to be considered, comments must be received by CMS by September 24th.
New IG Nominated
On July 19, 2004, President Bush nominated Daniel R. Levinson, of Maryland, to be the Inspector General at the Department of Health and Human Services. Mr. Levinson currently serves as Inspector General of the General Services Administration. Before becoming the IG at GSA, Mr. Levinson served as Chief of Staff for that agency. Earlier in his career, Mr. Levinson was appointed Chairman of the Merit Systems Protection Board. In addition to his government work Mr. Levinson maintained a private law practice. Mr. Levinson earned his bachelor's degree from the University of Southern California, his master's degree from The George Washington University and his J.D. from Georgetown University.
The HHS IG’s position has been vacant for over a year. Dara Corrigan has been serving as the Acting IG. With the confirmation of Mr. Levinson as the new IG, Ms. Corrigan will return to her previous position as Deputy IG.
Medicare Changes Interest Rate Calculation

CMS is changing its method for calculating interest on incorrect payments by Medicare to providers, suppliers, and other health care entities.

On July 30, the Centers for Medicare and Medicaid Services published a final rule making changes in the way interest is calculated on overpayments or underpayments. According to the rule, the goal is to “be more reflective of current business practices.” Specifically, the new rule would reduce the amount of interest assessed on overpayments and underpayments and simplify the way the interest is calculated. The new rule will be effective October 1, 2004.
According to a CMS Press release announcing this change:

“Under current rules, a partial period of interest owed, even one day, is considered a full 30-day period for calculating interest. The new rule no longer considers partial periods as full periods. Interest will be charged for each 30 days that expire after the overpayment was due.

  • Example: A physician receives a demand letter and repays the overpayment in full on the 45th day. Under our current regulations, the physician would have to pay interest for two 30-day periods. Under the new rule, the physician would pay interest for only one 30-day period.

A health care entity will have the first 30 days to pay the amount without interest being assessed. For MSP recoveries, the provider or other entity will have the time specified in the letter from CMS, either 30 or 60 days, to pay the debt without any interest being assessed.”

To view the rule, you can go to:

For additional information on this rule, the CMS Contact is: Nancy Braymer, (410) 786-4323.
CMS releases money to help hospitals and others recoup unpaid emergency room costs.
On July 22nd, the Centers for Medicare & Medicaid Services (CMS) announced a new program to provide $1 billion over four years to help hospitals and other providers recoup the costs of providing medical care to uninsured patients, regardless of their citizenship status. 


In a statement accompanying the announcement, CMS Administrator Mark B. McClellan, M.D., Ph.D said:

“Emergency services are a critical part of public health for everyone in our communities, including undocumented immigrants. Hospitals and health professionals on the front lines of providing emergency care for everyone need our support.  With $250 million a year in new funding, the new Medicare law gives us a greater ability than ever to provide that support.”


$250 million a year for the next four years has been set aside by CMS to help hospitals and certain other emergency care providers recoup a portion of their costs associated with providing emergency services to qualified individuals who are uninsured or cannot afford emergency care.    The money will be distributed through the states based on a legislatively prescribed formula.  Payments will be made directly to hospitals, physicians, and ambulance providers, including Indian Health Service facilities and Indian tribes and tribal organizations, as long as the provider did not receive payment from the person treated or an insurance company. 


Two-thirds of the funds will be distributed to all 50 states (including DC) with the remaining third going to those states with the largest number of apprehensions of undocumented aliens.


CMS developed a policy paper that outlines the proposed implementation approach.  The proposed policy paper can be viewed at, http://www.cms.hhs.gov/providers/mma1011.pdf. If you would like to comment on this proposed policy paper, you must do so by August 16th. Instructions for submitting comments can be found at the CMS web site referenced above.


Comments should be addressed to

Jim Bossenmeyer,

Center for Medicare Management, Hospital and Ambulatory Group

Mail stop C5-01-14

7500 Security Boulevard

Baltimore, Maryland 21244-1850.
Because of staff and resource limitations, CMS will not accept comments by facsimile (FAX) transmission. E-mail comments should be submitted to: section 1011@cms.hhs.gov
HIPAA Simplification – Unrealized Goals?
Mention to most people the word HIPAA and they will probably think you are referring to the latest music craze. Unless, of course, they’ve been to the doctor’s office or had a family member in the hospital and then there might be a note of recognition. But even then, most people only think about the privacy requirements.
For those involved in the business side of health care, however, there was another equally important part to the HIPAA statute, which had to do with simplification. At the time HIPAA was passed, we were assured that the Health Insurance Portability and Accountability Act of 1996 was going to lead to a great revolution in the way health care claims were submitted and handled. The multitude of forms and paperwork was going to be simplified and standardized.
Each person will have to make a determination of whether any or even some of the HIPAA simplification goals have been achieved. A new paper by WebMD sheds some interesting light on this subject and points out how the reality of simplification has not been realized.
According to the authors of this insightful (or should that be inciteful) paper, ”HIPAA Administrative Simplification, as it is currently being implemented, is increasing complexity and cost for health care providers and payers.” The authors go on to state, “the statutory HIPAA goals of reducing administrative costs and increasing efficiency are in jeopardy.”
To a view a copy of this interesting report, go to:
CMS Program Transmittals
As previously announced, CMS is no longer issuing Program Memoranda to announce policy changes. The only on-line information available along these lines are Program Transmittals. The following is a listing of Program Transmittals issued since July 1, 2004.
Program transmittals are used to communicate new or changed policies, and/or procedures that are being incorporated into a specific CMS program manual. The cover page (or transmittal page) summarizes the newly changed material, specifying what is changed.





Medicare Program-Update to the Hospice Payment Rates, Hospice Cap, Hospice Wage Index and the Hospice Pricer for FY 2005



Number of Drug Pricing Files That Must Be Maintained Online for Medicare



Update to the Frequency of Billing



Notice of New Insterest Rate for Medicare Overpayments and Underpayments



Notice of New Interest Rate for Medicare Overpatments and Underpatyments



Standard Terminology for Claims Processing Systems



Islet Cell Transplantation



Blood-Derived Products for Chronic Non-Healing Wounds



October 2004 Outpatient Prospective Payment System Code Editor (OPPS OCE) Specifications Version 5.3



October Update to the Medicare Outpatient Code Editor (OCE) Version 20.0 for Bills From Hospitals that are not Paid Under the Outpatient Prospective Payment System (OPPS)



Use of Group Health Plan Payment System/MMCS to Pay Capitated Payments to Chronic Care Improvement Organizations Serving Medicare Fee-For-Service Beneficiaries under Section 721 of the MMA



Shared Systems Changes for Medicare Part B Drugs for ESRD Independent Dialysis Facilities



New Waived Tests - October 1, 2004



Scheduled Release for October Updates to Software Programs and Pricing/Coding Files



Cryosurgery of the Prostate



Billing and Requirements for Islet Cell Transplantation for Beneficiaries in a National Institutes of Health (NIH) Clinical Trial



Inpatient Rehabilitation Facility (IRF) Annual Update: Prospective Payment System (PPS) Pricer Changes for FY 2005



Medicare Program-Update to the Hospice Payment Rates, Hospice Cap, Hospice Wage Index and the Hospice Pricer for FY 2005



Medicare Part A Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Pricer Update FY 2005



Unsolicited/Voluntary Refunds



Modification to Post-payment Adjustment Process for Home Health Prospective Payment System Claims Failing to Report Prior Inpatient Discharges



Change of the Premera Blue Cross Medicare Part A Plan Under Contract to BCBSA to a Part A Fiscal Intermediary Contract with Noridian Mutual Insurance Company in the States of Washington and Alaska



Update to the Healthcare Provider Taxonomy Codes (HPTC)/Medicare Specialty Code Crosswalk



ANSI X12 Transaction 835 Flat File and Companion Document Correction for Carriers and DMERCs, and Deletion of a Hard Coded Reason Code A2 that Has Been Deactivated



Processing Part B Claims for Indian Health Services (HIS



Expansion of the Existing Interrupted Stay Policy Under Long Term Care Hospital (LTCH) Prospective Payment System



Update to the Claims Status Codes



Indian Health Service (IHS) or Tribal Critical Access Hospital (CAH) Payment Methodology for Inpatient and Outpatient Services



Standardized Responses to Provider Inquiries Regarding the Negotiated Laboratory National Coverage Determinations (NCDs) Edit Software



Instructions for Downloading the Medicare Zip Code File



2005 DMEPOS Pricing File Record Layout Expansion and New Pricing Procedures for Certain DMEPOS Items Based on Modifiers



Implementation of Patient Status Code 65, Discharged/Transferred to a Psychiatric Hospital or Psychiatric Distinct Part Unit of a Hospital



Health Insurance Portability and Accountability Act (HIPAA) X12N 837 Institutional Health Care Claim Implementation Guide (IG) Additional Updates



Update to the Frequency of Billing



Quarterly Update to Correct Coding Initiative (CCI) edits, Version 10.3, Effective October 1, 2004.



Patient Status Code and Reason for Patient Visit for the Hospital Outpatient Prospective Payment System (OPPS)



Number of Drug Pricing Files That Must Be Maintained Online for Medicare



DMERC/Local Carriers/SADMERC - Drug Pricing Limits as of January 1, 2005



New Medicare Summary Notice Message 31.18



Coordination of Benefits Agreement (COBA) Claims Selection Options



Editing Of Hospital And Skilled Nursing Facility Part B Inpatient Services



Paper Remittance Advice format change to accommodate the forced balancing amount to balance at the claim level as well as the provider level, a flat file change, and a change in the companion document for fiscal intermediaries (FIs).



Fiscal Intermediary Shared System (FISS) Changes to Allow for Provider Liability Days on Skilled Nursing Facility (SNF) and Swing Bed Facility Inpatient Bills



Implementation of the Quarterly Strategy Analysis



Home Health Demand Bills



Implementation of the Business Segment Identifier (BSI) in the Healthcare Integrated General Ledger Accounting System (HIGLAS)



Shared System Maintainer Hours for Resolution of Problems Detected During Health Insurance Portability and Accountability Act (HIPAA) Transaction Release Testing



Annual Changes to the Amount in Controversy (AIC) Thresholds for the Administrative Law Judge (ALJ) and Judicial Review Levels of the Claim Appeals Process as Required by Section 940 of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003



Change to Previous Transmittal Regarding the Discontinued Use of Revenue Code 0910



This One-Time Notification is a Full Replacement for Transmittal 86 (CR 3142) Interface File from Recovery Management and Accounting System (ReMAS



This transmittal is rescinded and replaced with Transmittal 103, dated July 30, 2004



Additional Clarification of Bill Types 22x and 23x Submitted by Skilled Nursing Facilities (SNFs) With Instructions for Involuntarily Moving a Beneficiary Out of the SNF and Ending a Benefit Period



General Policy



Clarification of CR 3064



Procedures For Re-Issuance and Stale Dating of Medicare Checks



PIM Fraud and Abuse Complaint Screening Revisions



Changes to the Laboratory National Coverage Determination (NCD)Edit Software for October 2004



Quarterly Update of HCPCS Codes Used for Home Health Consolidated Billing Enforcement



October Quarterly Update to 2004 Annual Update of HCPCS Codes Used for Skilled Nursing Facility (SNF) Consolidated Billing Enforcement



Local Medical Review Policy/ Local Coverage Determination Medicare Summary Notice (MSN) Message Revision



This transmittal is rescinded and replaced with Transmittal 50, dated July 30, 2004.



Local Medical Review Policy/ Local Coverage Determination Medicare Summary Notice (MSN) Message Revision



Chapter 11



Temporary SNF Extension



Manualization of the Negotiated Clinical Diagnostic Laboratory National Coverage Determinations



SNF CB Requirements for DMEPOS



PET Scans and Related Claims Processing



Additional Instructions Related to the "Redistribution of Unused Resident Positions," Section 422 of the Medicare Modernization Act of 2003 (MMA), P.L. 108-173, for Purposes of Graduate Medical Education (GME) Payments


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