MEDICARE PHYSICIAN PAYMENTS
June 21, 2011
Posted by Frank Ciesla
In a prior blog, we discussed the CMS report regarding the projected solvency of the Medicare Program. As we previously reported, CMS has projected the solvency of Medicare through 2024. However, a reading of the report shows that to accomplish this goal, payments to physicians as of January 1, 2012 need to be reduced by approximately 30%, and Medicare would need to follow the current statutory requirements of reducing payments to all other providers, resulting at some point with those providers receiving less than Medicaid. Since the issuance of a CMS report, an analysis has been conducted by the Congressional Budget Office (CBO) which confirms that portion of the CMS Report dealing with the necessity for a reduction in physician compensation.
Since 2012 is a federal election year (for the President, Senate and House members), it is highly likely that a stop gap measure will be enacted and signed into law, kicking the can down the road, to January 1, 2013, after the election. From the provider point of view, this Damocles sword presented by the threat of reduced future payments from the Medicare program (whether the providers are physicians or non-physician providers) clouds the ability of the providers to commit resources to their current practice. Providers may be reluctant to bring on additional employees, whether physicians or other employees, to otherwise expand their practices, or to acquire practices.
Even the delay of implementation of a physician payment reduction until January 1, 2013, while it will provide relief during the election year of 2012, is not a solution to the problem.
Medicare Solvency: A Continuing Challenge
May 26, 2011
Posted by Frank Ciesla
The Medicare Board of Trustees recently projected that the Medicare program will be insolvent in 2024. Unfortunately, the news may be even worse than that. If you read pages 265-267 of the Trustee’s report which is the Actuarial Opinion, there are two (2) critical assumptions being made by the Trustees in order for the Medicare Trust Fund to remain solvent until 2024. The first assumption is that the proposed cut in physician payments (effective January 1, 2012) of approximately 30% will go into effect, and the second assumption is that additional reductions in payments to other providers, presently provided for in the Patient Protection and Affordable Care Act (PPACA), will be implemented. As the Actuary states:
“Without major changes in health care delivery systems, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law.”
Regrettably, as can be seen by the Actuarial statement, radical changes will have to be undertaken to maintain the solvency of the Medicare program, and the question is whether those changes will be at the expense of the providers.
Accountable Care Organizations
May 20, 2011
Posted by Frank Ciesla
Dr. Donald Berwick, Administrator of CMS, has recently written about the potential benefits of Accountable Care Organizations (ACO’s), ( as is set forth in the attached article one of the hurdles facing the provider community is that ACOs will cost millions of dollars that are unlikely to be recouped (at least in the short term). Society has yet to design a methodology for encouraging investment of these millions for the creation of ACOs. As we pointed out in our prior blogs posted on May 10, 2011 and on May 12, 2011, these costs currently pose a significant barrier to ACO implementation.
As Dr. Berwick has acknowledged, providers have let the Administration know that they have concerns about the amount of capital needed for ACO implementation, the amount of shared savings that will be available and the complexity of the proposed ACO regulations. It is likely that CMS will need to redesign the regulations and set forth a methodology that appropriately meets the Administration’s objective of higher quality and cost containment, in a way that encourages providers to invest in and create ACOs. This may set the process back a year or more in light of the amount of time taken to create the initial draft regulations, which many providers have found unacceptable.
Sustainable Growth Rate
May 20, 2011
Posted by Frank Ciesla
Attached is an article from the American Medical News in regard to the Sustainable Growth Rate (SGR) formula and its application to the Medicare physician fee schedule. This issue is still on the table and is moving to the forefront again. The result of the application of the SGR would be a 29.5% cut in fees paid to physicians under the Medicare physician fee schedule in calendar year 2012.
There is clear opposition to the proposals previously made and covered in:
As pointed out by Representative Frank Pallone, patients cannot be expected to negotiate prices for complex care. Therefore SGR continues to be a festering issue which will only get worse, until it is actually resolved and society comes up with a way of paying for the physician care that is being rendered to the Medicare beneficiaries.
Beth Christian Elected Chair of the Health & Hospital Law Section
May 20, 2011
Posted by Frank Ciesla
Beth Christian of our Health Care Department has been elected Chairman of the New Jersey Bar Association’s Health and Hospital Law Section. This election is clearly a recognition by her peers of her contributions in the legal field of Health Care.
Beth joined us in January of 1990. Prior to that, Beth spent a number of years as an Assistant Regional Counsel with the United States Department of Health and Senior Services’ New York Regional Office. While there, Beth provided legal services to the Medicare and Medicaid programs, as well as the regional Office of the Inspector General and the U.S. Public Health Service.
MEDICAL LOSS RATIO
May 20, 2011
Posted by Frank Ciesla
At the presentation given by Frank Ciesla, Sharlene Hunt and Beth Christian at the New Jersey Medical Society’s Annual Meeting on Friday, May 13, 2011, in New Brunswick, we discussed the potential impact on fees paid by third party payors to providers in light of the medical loss ratio limitations set forth in the Patient Protection and Affordable Care Act (PPACA). As part of the discussion, there was some feeling that as a result of the 85/15 or 80/20 medical loss ratio rules, third party payors would be willing to pay providers more for the services that they rendered. I am attaching an article which indicates that States are requesting waivers from the medical loss ratio limits. In a previous blog, we have discussed companies and unions that have requested and received waivers from the medical loss ratio. As set forth in the article, it would appear that the future applicability of the medical loss ratio across the board is not a sure thing.
CMS Proposals for Accountable Care Organizations Are Described As Unworkable By Healthcare Organizations
May 12, 2011
Posted by Frank Ciesla
Today’s Associated Press article contains comments from the medical community that the Obama administration’s proposals for Accountable Care Organizations (ACOs) are unworkable. The American Medical Group Association, which represents entities such as the Mayo Clinic, the Geisinger Health System, the Cleveland Clinic, and Intermountain Health Care (among others) wrote to CMS this week and indicated that more than 90 percent of its membership would not participate in the Medicare Shared Savings program because the draft ACO regulations are too onerous. A link to the American Medical Group Association’s letter can be found here.
For PPACA to accomplish its cost containment objectives, a significant reorientation of the delivery of healthcare is essential. The accountable care organization proposal was an attempt to accomplish this purpose, but as can be seen in the Associated Press article, the complexity of the proposed ACO regulations may thwart that purpose. Without significant, meaningful participation by the healthcare provider community, ACOs are unlikely to achieve their shared savings objectives. If CMS is forced to undertake a substantial and substantive re-draft of the proposed ACO regulations in response to industry comments, this will set the process back, from a time point of view, and will require a reengineering and reconsideration of how to accomplish the objectives of the Medicare Shared Savings program.
If additional legislation is required, that may change the entire ballgame, since that legislation will require cooperation between the Republican controlled House and the Democratic controlled Senate.
Regulations Regarding Accountable Care Organizations
May 12, 2011
Posted by Frank Ciesla
The proposed regulations in regard to Medicare Accountable Care Organizations (ACOs) have been issued by the Centers for Medicare and Medicaid Services (CMS). The position paper of the Internal Revenue Service (IRS) regarding ACOs, the combined position paper of the Federal Trade Commission and the Justice Department in regard to ACOs, and the combined notice with comment period regarding antikickback waiver designs issued by CMS and the Office of Inspector General (OIG), have now been issued. It is indisputable that there will be a significant amount of comments submitted to the government in regard to the proposed ACO regulations. These may or may not result in modifications to the proposed ACO regulations. The proposed ACO regulations set forth a framework for a proposed Medicare Shared Savings program.
One of the issues clearly not resolved in the proposed CMS regulations is the method of obtaining the funding necessary to set up the ACOs. As set forth in the CMS preamble to the regulations:
In order to participate in the program we realize that there will be costs borne in building the organizational, financial and legal infrastructure that is required of an ACO as well as performing the tasks required (as discussed throughout the preamble) of an eligible ACO, such as quality reporting, conduct new patient surveys and investment in the infrastructure for effective care coordination. While provider and supplier participation in the Shared Savings Program will be voluntary, we have examined the potential costs that the program participation will create.
While the preamble goes on to discuss the various costs and various estimates, what is not clear is where is the funding for ACOs and their infrastructure will come from and what the methodology is for a return on that investment to the source from which the funds originate. As one reads through the proposed obligations imposed upon the ACO under the regulations, it is clear that a significant overhead expense will be created. It is also clear that payment for direct patient care services to the Medicare beneficiaries, will not be made to the ACOs, but will be made directly to the providers of care, whether or not they are participants in the ACO. It appears that the source of revenue for the ACO will be the Shared Savings that they will be eligible to earn as a result of the ACO’s participation in the Medicare Shared Savings program. What is not clear is whether or not, the revenue from the Shared Savings program will be adequate to provide a return on the investment, as well as a return, to the extent necessary, of the initial capital investment and capital infusions for upgrades.
One concern is that investors who will be receiving referrals from the primary care physicians or others who are participants in the ACOs, cannot realistically expect a fair market value return on their investment in the short term. The question will then arise as to whether or not they made their investment in exchange for referrals. The potential application of the Court’s analysis in U.S. v. Greber, 760 F.2d 68 (3rd Cir. 1985) cert. den. 474 US 988 (1985) arises under this scenario. In Greber, the Court of Appeals for the Third Circuit held that the federal antikickback statute was violated where “one purpose” of the remuneration was to induce referrals. If one of the reasons for making an investment in an ACO is to encourage the referral of patients either to a hospital or a specialist, that motivation subjects the investors to the possibility of criminal liability exposure under Greber.
Another concern for ACOs that intend to do business not only with federal payor programs but also with commercial payors, is the potential exposure under state antikickback laws. A similar waiver under the state laws may be necessary for each state where the ACO will be doing business.
Going forward, we may or may not see the methodologies for addressing this issue as part of the final ACO regulations in order to encourage investment into an ACO (essential for the success of the program), without exposing the participants to criminal activity. Frank Ciesla, Sharlene Hunt and Beth Christian have worked together to submit a public comment to the Centers for Medicare and Medicaid Services and the Office of Inspector General as these agencies work to structure the final iteration of the ACO antikickback waiver process.
CMS Concern Regarding ACOs
May 10, 2011
Posted by Frank Ciesla
The Congressional Quarterly Health Law Daily of May 6, 2011 quoted CMS Administrator Dr. Donald M. Berwick as stating, in regard to the comments regarding the proposed Accountable Care Organizations, “. . .that the Agency is interested in working with providers and wants the program to live up to the potential of transforming medical care,” but that the fact that “even the institutions that were the inspiration for the program are reluctant to participate unless big changes are made shows that CMS officials face a tough task.”
It is becoming clear that if CMS intends the Accountable Care Organizations to be a workable activity, to accomplish the purposes set forth in PPACA, significant changes will need to be made in the proposed regulations, as well as by other applicable regulatory authorities, such as the anti-trust laws.
Medicare Balance Billing
May 9, 2011
Posted by Frank Ciesla
A bill was introduced in the House of Representatives last Wednesday, which would permit physicians to balance bill Medicare patients, between what Medicare will pay and what the physician’s charges are for his services. This legislation is being considered by the House Energy and Commerce Committee, as a potential solution to the issue regarding Medicare sustainable growth rate formula, which we have pointed out in prior blogs:
- The Confluence of the Sustainable Growth Rate and the Deficit
- Medicare Trust Fund Solvent thru 2029 – Maybe
would require a significant expenditure on the part of the federal government. The American Medical Association’s, President Cecil Wolfson, M.D., indicated that such an approach would increase the number of physicians who would be willing to accept Medicare patients. It is clear that a reduction of 20% to 25% in the Medicare fees paid to physicians will result in a significant number of physicians no longer caring for Medicare patients. That obviously, is a major political problem, in that the Medicare population will not have access to healthcare services. However, it is highly unlikely that permitting physicians to balance bill their Medicare patients, will be politically tenable to either the Senate or to the current Administration.
« go back — keep looking »