LTACH ALERT
The SGR Act contained substantial changes to LTACH development.
On December 29, 2007, the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) established a three year moratorium on the designation of new LTACHS or satellites and on an increase of beds in an existing LTACH. The passage of the Affordable Care Act extended the duration of the moratorium to December 2012, exactly 5 years after it began. At the expiration of the moratorium, conventional wisdom anticipated a 12-24 month period of re-ignition of the LTACH market, which has since plummeted.
Not much latitude was so accorded. At the end of 2013, the Bipartisan Budget Act of 2013 was signed into law by President Obama on December 26, 2013, nearly a year after the removal of the LTACH moratorium. The Budget Act scheduled the reinstatement of a moratorium on the establishment of LTACHs from January 1, 2015 to September 30, 2017 and by introducing changes to the way Medicare pays for LTACH services.
As identified in Murer's previous LTACH ALERT of March 28th, the initial moratorium effective date for LTACH development was set to begin January 1, 2015 and end on September 30, 2017. The new law reinvigorates the spirit of 2007 by writing similar exceptions to the 2007 moratorium. More importantly, the law now eliminates the January 1, 2015 deadline and changes the moratorium effective date to the date of the enactment of the law - April 1, 2014.
Section 112 of the new law delineates exceptions for certain long term care hospitals:
"The moratorium ... shall not apply to a long term care hospital that -
(a) Began its qualifying period for payment as a long term care hospital under section 412.23(e) of title 42, Code of Federal Regulations, on or before the date of enactment of this paragraph;
(b) Has a binding written agreement as of the date of the enactment of this paragraph with an outside, unrelated party for the actual construction, renovation, lease, or demolition for a long-term care hospital, and has expended, before such date of enactment, at least 10 percent of the estimated cost of the project (or, if less, $2,500,000); or
(c) Has obtained an approved certificate of need in a State where one is required on or before such date of enactment."
In other words, between January 1st and April 1st, an institution had to:
(a) Begin or be in the midst of a 6 month data collection;
(b) Expend a minimum of $2.5 million dollars; or
(c) Received a CON.
"TWO MIDNIGHT" RULE ALERT
The SGR Act contained an additional component that delayed the implementation of a significant change in healthcare payment provision. Implementation of the "two midnight" rule was delayed from March 31, 2014 to March 31, 2015. The rule also suspends the Recovery Audit Contractor (RAC) Program's post-payment audits under the policy through March 2015.
A. Policy Background
CMS wants to cut down on the utilization of "observation stays" to limit the financial burden on Medicare. Observation stays are a type of outpatient stay in which short term treatment and assessments are used to determine whether beneficiaries require further treatment or can be discharged. According to CMS, Medicare Part B pays hospitals pursuant to the Outpatient Prospective Payment System (OPPS) for outpatient stays for the various services provided at a rate of about 80%, while the beneficiary is responsible for the remaining 20%. Part A pays hospitals for inpatient stays under the Inpatient Prospective Payment System (IPPS), which pays different rates based on the severity diagnosis related group (MS-DRG) and is not contingent on the number of services provided or the length of stay.
CMS's principal concern is that it found that patients were spending long periods of time in observation stays as outpatients without being admitted as inpatients, likely billing Medicare more under an OPPS than if the patient was admitted initially under an IPPS. CMS notes that the increase in stays for observation cases of more than 48 hours have increased from 3% in 2006 to 8% in 2011 and do not count toward the 3-day eligibility requirement for Medicare skilled nursing facility (SNF) coverage. Patients who do not qualify for SNF may opt to receive such services, but are then subsequently held responsible for the charges incurred in the course of care.
B. The Rule
(42 CFR Parts 412, 413, 414, 419, 424, 482, 485, and 489)
The CMS final rule attempts to address this problem by presuming, as a matter of fact, that admission as an inpatient is medically necessary when the stay is of a duration of at least "two midnights". The expectation is that a physician should be able to determine at the time of admission that a two midnight stay is appropriate, despite potential unforeseen circumstances such as transfers or self-discharge that may shorten the length of stay. This is a rule of assumption based on best medical knowledge and practice.
Given the art of the two midnight rule prognostication, CMS permits hospitals to rebill a retrospectively determined inappropriate admission as an outpatient visit under Part B for up to a year after the admission to remove some of the previous financial disincentive for inpatient admission.
Further, RACs cannot conduct post-payment audits of two midnight rule compliance until March of 2015.
There are significant gaps still remaining on how the two midnight rule will be applied and interpreted under the CMS final rule. CMS clarified that if a patient stays one midnight in observation and the physician expects that the patient will require at least another midnight in the hospital, the patient can be appropriately admitted despite the fact that it is a one-day inpatient stay. If a patient is admitted but ultimately doesn't stay two midnights, clear physician documentation supporting the order and expectation of two midnights is required.
Key Implementation Concerns
Physician documentation. If a facility is audited, the MAC and RAC reviewer will look for a codified physician order and documentation supporting the observation period and the decision to admit. CMS requires that a medical record indicates why a physician found an inpatient stay necessary, supported by patient history, risk, comorbidity, symptoms, etc.
Hospital Patient Admission Policies and Procedures. Under the modified Part B rebilling rules, hospitals should have processes in place to identify cases that were inappropriately admitted before auditors do. The rebilling regulation accords one year for filing, so recourse is available for hospitals that have systems in place to identify inappropriate admission in time to recoup costs.
ICD-10 ALERT
The SGR Act contained an additional component that delayed the implementation of a significant change in healthcare payment provision. Implementation of ICD-10 was effectively delayed from October 2014 to October 2015.
Section 212 of the SGR Law states, in relevant part, that "[t]he Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD-10 code sets as the standard for code sets..." ICD-10 is the 10th revision of the medical classification and coding list for the World Health Organization completed in 1992, entitled the International Statistical Classification of Diseases and Related Health Problems (ICD).
The shift from ICD-9 to ICD-10, which has been subject to multiple previous delays, expands codification for new diseases and procedures from about 14,000 codes to approximately 69,000 codes.
The cost of another delay is not insignificant. CMS itself put the cost of delaying the code set conversion between $1 billion and $6.6 billion. Many medical students and health information management professionals have already been educated on these new codes and so, too, have many healthcare institutions been providing guidance and education on compliance with the new coding scheme. As such, the delay may be seen as undermining the considerable investment made by many institutions to modernize healthcare delivery. However, the cry from the field, which has been heard by CMS, is that many institutions were simply not ready to proceed with the shift.
Please reach out to Murer Consultants with any questions, comments, or strategic positioning opportunities related to the new law or other issues or problems you may be facing.
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