Agenda

1. The FY 2014 Medicare Annual UpdateLarry GoldbergLarry Goldberg ConsultingLarry A OdayEsq, PLLCOctober 16, 2013

2. Agenda • Congressional Activity • President’s Budget • Sequester • FY 2014 Final PPS Updates • IPPS • SNF • IRF • IPF • Hospice

3. Agenda • CY 2014 Proposed PPS Updates • OPPS • ESRD • Physician • Home Health • Proposed FQHC PPS

4. Congress • Politics have made it difficult if not impossible to enact all legislation • FY 2014 Budget seems unlikely • Government shut down • Republicans in House have tried 42 times to repeal the ACA • Nice but it “ain’t” going to happen unless they get veto proof margins in both chambers • Trying to stop by defunding – hasn’t worked so far??? • Debt ceiling limits

5. President’s Budget

6. President’s FY 2014 Budget • 2 months late • Would avoid sequestration • Comment • Going nowhere • But do not ignore specifics • Does NOT fix the physician payment problem • Does suggest where Medicare is heading

7. President’s FY 2014 Budget • Includes a package of Medicare legislative proposals that will “save” $371.0 billion over 10 years • Reduce Medicare Coverage of Bad Debts: Starting in 2014, this proposal would reduce bad debt payments to 25 percent over 3 years for all providers who receive bad debt payments[$25.5 billion in savings over 10 years] • Better Align Graduate Medical Education (GME) Payments with Patient Care Costs:Would reduce GME payments by 10 percent, beginning in 2014 [$11.0 billion in savings over 10 years]

8. President’s FY 2014 Budget • Reduce Critical Access Hospital (CAHs) Reimbursements to 100% of Costs: Would reduce rate to 100 percent beginning in 2014. [$1.4 billion in savings over 10 years] • Prohibit Critical Access Hospital Designation for Facilities that are Less Than 10 Miles from the Nearest Hospital: Beginning in 2014. [$690 million in savings over 10 years]

9. President’s FY 2014 Budget • Adjust Payment Updates for Certain Post-Acute Care Providers:  Would gradually realign payments with costs by reducing the market basket updates for Inpatient Rehabilitation Facilities (IRFs), Long-Term Care Hospitals (LTCHs), SNFs and Home Health agencies, by 1.1 percentage points beginning in 2014 through 2023. Payment updates for these providers would not drop below zero under this provision. [$79.0 billion in savings over 10 years] • “Encourage” Appropriate Use of Inpatient Rehabilitation Facilities (IRFs): Beginning in 2014, this proposal would reinstitute the 75 percent standard. [$2.5 billion in savings over 10 years]

10. President’s FY 2014 Budget • Equalize Payments for Certain Conditions Treated in Inpatient Rehabilitation Facilities and Skilled Nursing Facilities:Would adjust payments for three conditions involving hips, knees, and pulmonary conditions, as well as other conditions selected by the Secretary. Beginning in 2014, would reduce the disparity in Medicare payments between the settings.[$2.0 billion in savings over 10 years] • Adjust Skilled Nursing Facilities Payments to Reduce Hospital Readmissions: Would reduce payments by up to three percent for SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2017. [$2.2 billion in savings over 10 years]

11. President’s FY 2014 Budget • Implement Bundled Payment for Post-Acute Care Providers: Beginning in 2018, this proposal would implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and home health providers. [$8.2 billion in savings over 10 years] • Reduce Overpayment of Part B Drugs: Lowers reimbursement to 103 percent of ASP.[$4.5 billion in savings over 10 years] • Modernize Payments for Clinical Laboratory Services: Would lower the payment rates under the Clinical Laboratory Fee Schedule (CLFS) by -1.75 percent every year from 2016 through 2023[$9.5 billion in savings over 10 years]

12. President’s FY 2014 Budget • Introduce Home Health Copayments for New Beneficiaries: Would create a co-payment for new beneficiaries of $100 per home health episode, starting in 2017. [$730 million in savings over 10 years] • Align Medicare Drug Payments with Medicaid Policies for Low-Income Beneficiaries: Would require manufacturers to pay the difference between rebate levels they already provide Part D plans and the Medicaid rebate levels. [$123.2 billion in savings over 10 years]

13. President’s FY 2014 Budget • Increase Income-Related Premiums under Medicare Part B and Part D: Would restructure income-related premiums under Medicare Parts B and D by increasing the lowest income-related premium five percentage points, from 35 percent to 40 percent, and also increasing other income brackets until capping the highest tier at 90 percent. The proposal maintains the income thresholds associated with these premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. [$50.0 billion in savings over 10 years]

14. Final FY 2014 PPS Updates • IPPS • SNF • IRF • IPF • Hospice

15. IPPS Update for FY 2014

16. FY 2014 IPPS • Personal Comments • Reg is simply too long • Display copy is 2,225 pages • Original law was only 138 pages • Too much history • Too much redundancy • Supposedly for lawyers and to ward off law suits • Hard to find changes being proposed • Does not have clear final decision making summaries

17. FY 2014 IPPS • Posted on 8/2/2013 • Published in 8/19/13 Federal Register • Tables on CMS website • Copy at: • http://www.gpo.gov/fdsys/pkg/FR-2013-08-19/pdf/2013-18956.pdf • Tables at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html • Effective 10/1/13 • Correction Notice published 10/3/13

18. IPPS Update • MB is 2.5 percent (0.5 percent for “non-quality” providers)( same as proposed) • Offsets: • (0.5%) for productivity [up from proposed amount of 0.4] • (0.3%) for ACA mandate • (0.8%) for documentation & coding (per ATRA) • (0.2%) for new policy proposal on I/P criteria • CMS says net Increase is 0.7% (-1.3% for non-quality providers) • Increase in total payments ??????

19. IPPS Update • There are more offsets: • Budget neutrality items • Readmissions (reductions increase to 2.0%) • DSH • Value-Based Purchasing (increases to 1.25%) • ACA law said updates could be less than current may now become “real” • Impact of sequester

20. IPPS Update • Revising the MB • Using 2010 data in lieu of 2004 • Results in new labor-related share values • “Large” Urban areas – those with wage index greater than 1.000 – from 68.8 to 69.6 percent • “Other” areas with wage index values equal to or less than 1.000 will remain at 62.0 percent by law • If no law, would be 63.2 percent

21. IPPS Budget Neutrality • Budget neutrality adjustments for: • DRG recalibration • Wage index changes • Geographic reclassification • Rural community hospital demonstration program • Removing the FY 2013 outlier offset • Documentation and coding to date • Offsetting the cost of the policy proposal on admission and medical review criteria

22. National Adjusted Operating Standardized Amounts69.6 Percent Labor Share/30.4 Percent Nonlabor Wage Index Is Greater Than 1.0000 Rates Currently in Effect

23. National Adjusted Operating Standardized Amounts62 Percent Labor Share/38 Percent Nonlabor Wage Index Equal to or Less Than 1.0000 Rates Currently in Effect

24. IPPS Rate Comparison (w/Quality) • FY 2013 FY 2014Difference • Large $3,679.95 $3,737.71 1,668.811,632.57 $5,348.76 $5,370.28 $21.52/ 0.4% • Other $3,316.23 $3,329.57 2,032.532,040.71 $5,348.76 $5,370.28$21.52/ 0.4% Proposed was an increase of $27.28

25. IPPS Documentation & Coding • American Taxpayers Relief Act changes the game • Requires CMS recoup $11 billion over 4 years starting in FY 2014 • CMS will reduce payments by 0.8 percent reduction • This amount will recover about $1 billion in FY 2014 • How do you get the remaining $10+ billion? • Will this item ever be settled?

26. Documentation & Coding • Compound the reductions; • 2014 0.8% = $1 billion = 1.0000-.008=0.992 • 2015 $2 billion .992 X .992= 0.984 • 2016 $3 billion .984 X .992= 0.976 • 2017 $4 billion .976 X .992= 0.968 • Total $10 billion

27. Documentation & Coding • CMS’ Addendum table

28. Documentation & Coding

29. Documentation & Coding

30. Documentation & Coding

31. Documentation & Coding

32. Documentation & Coding • FY 2013 Documentation & Coding Adjustment was 0.9478 • Multiply 0.9478 X 0.992 = 0.9402176 • Cited FY 2014 adjustment = 0.9403* (Rounding??) • Next year 0.9403 X 0.992= 0.9328??

33. Wage Index • Not using the revised OMB CBSAs released on 2/28/13 • To be used for FY 2015 • Copy at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf • Data is from FY 2010 CRPs (including OCC mix adjustment) • Comment • CMSis changing (via an instruction) the wage index data corrections due date for FFY 2015.  November 21st is now the due date when traditionally it was the first Monday in December

34. Wage Index • No change to the statewide budget neutrality adjustment factor – federal versus state specific • Massachusetts continues to be “big” winner

35. Wage Index – Rural Floor

36. More on Floors • Frontier Floor • Montana, North Dakota, South Dakota, and Wyoming, covering 46 providers, will receive a frontier floor value of 1.0000 • Imputed Floor • Extended till September 30, 2014 • Benefits • 25 providers in New Jersey • 4 providers in Rhode Island

37. Occupational Mix • FY 2014 occupational mix adjusted national average hourly wage is $38.3698 [ Proposed at $38.2094]

38. Reclassifications • FY 2014 – 296 approved • FY 2013 – 169 approved • FY 2012 – 214 approved • CMS says there are 679 hospitals reclassified for FY 2014 • Applications to MGCRB due by September 3rd • There is a typo in the original display copy – 169 shown as 196. Has been corrected

39. Outliers • Outlier fixed-loss cost threshold for FY 2014 equal to the prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $21,748 • Proposed at $24,140 • The current amount is $21,821

40. Outliers • CMS currently estimates that actual outlier payments for FY 2013 will be approximately 4.77 percent of actual total MS-DRG payments • The proposed estimated amount was 5.17 percent • CMS continues to fail to recognize the amount it underestimates for outlier payments • “No one seems to object” Why???

41. Redesignations • “Lugar” Hospitals – by statute • List available on the CMS Web site. • Waiving Lugar for the Out-Migration Adjustment • Becomes rural for all purposes • FY 2014 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees • Refer table 4J

42. MDH/ Low-Volume/ CAH Hospitals • MDH and Low-Volume Hospital programs expire FY 2014 • Low-Volume reverts to 200 discharges • CAHs must provide I/P care on-site

43. Capital • Rate will increase from $425.49 to $429.31

44. Excluded Hospitals • Rates will increase 2.5 percent • Cancer and Children’s Hospitals

45. IME / GME • IME multiplier unchanged at 1.35 – by law • Hospital cannot count a resident training at a CAH for either IME or GME • Revising yet again the policy concerning the counting of labor / delivery room days • Will include labor and delivery days as inpatient days in the Medicare utilization calculation, effective for cost reporting periods beginning on or after October 1, 2013.

46. DRGs • Will use 4 new cost centers for calculating CCRs • Implantable devices • MRI • CT scans • Cardiac cath • There will now be 19 CCRs • See Table 5 for new weights

47. DRGs • Minor changes to specific coding procedures, etc

50. New Technology Add-ons • For FY 2014 continuing 3: • Voraxase® (max pay of $45,000) • Dificid™ (max of $868) • Zenith® AAA Graft (max of $8,171) • 2 new for FY 2014 • Argus® II Retinal Prosthesis System; Responsive Neurostimulator (RNS®) System (max pay of $72,028) • Zilver® PTX® Drug Eluting Peripheral Stent (max of $1,705)