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September 10, 2020

CMS Establishes New Hospital Reimbursement Policies and Requirements

In recent Regs & Eggs posts, I have delved into the Centers for Medicare & Medicaid Services’ (CMS) proposed changes to Medicare physician payment policies for calendar year (CY) 2021 and their potential effect on emergency medicine reimbursement. However, although most of our attention has been focused on those proposals (and rightly so), CMS has also been busy proposing and finalizing policies that affect hospital payments for both outpatient and inpatient services provided to Medicare beneficiaries.

In early August—the day after CMS issued the CY 2021 Medicare physician fee schedule proposed regulation—the agency released the CY 2021 Outpatient Prospective Payment System (OPPS) proposed regulation, the major annual Medicare regulation that sets rates for hospital outpatient services. Although CMS does not propose any changes to current emergency department (ED) payment policies, CMS does include a proposal that could indirectly affect your patients.

In the reg, CMS is proposing to eliminate the Inpatient Only (IPO) list over a three-year transitional period with the list completely phased out by CY 2024. This is a list of procedures which currently can only be performed in a hospital inpatient setting. CMS will begin with the removal of nearly 300 musculoskeletal-related services, which would make these procedures eligible to be paid by Medicare in the hospital outpatient setting in addition to the inpatient setting. Procedures removed from the IPO list will eventually become subject to the “two-midnight rule.”

ACEP has long expressed concerns about the two-midnight rule and its implications on beneficiary cost-sharing. Under the two-midnight rule, patients that spend less than two midnights in a hospital are treated as an outpatient, while patients that spend more than two midnights in a hospital are treated as an inpatient. The difference between having an “inpatient” and “outpatient” status on patients is profound, as Medicare generally covers most of the cost of inpatient services, while forcing beneficiaries to pick up a significant portion of the tab for outpatient services (beneficiaries generally face a 20 percent coinsurance for most outpatient services). Unfortunately, many beneficiaries don’t know that they are actually outpatients. If they are in the hospital, they assume they are inpatients and subject to the inpatient Medicare rules. Hospitals are required to provide a Medicare Outpatient Observation Notice (MOON) to Medicare beneficiaries informing them that they are outpatients receiving observation services and are not inpatients. However, it is still confusing for beneficiaries, and this new IPO policy in the OPPS proposed reg will only add to that confusion. All in all, the onus will be on CMS to ensure that Medicare beneficiaries clearly understand their cost-sharing obligations if they receive one of these procedures being removed from the IPO list.

In addition to proposing policies for outpatient services, CMS also finalized proposals for hospital inpatient services in the Fiscal Year (FY) 2021 Inpatient Prospective Payment System (IPPS) final reg. In this final reg, CMS is requiring hospitals to report their median negotiated inpatient services charges for Medicare Advantage organizations and commercial payors. CMS is planning on using this information to set hospitals’ Medicare payment rates in the future. This new requirement builds off a price transparency policy that CMS finalized last year and aligns with President Trump’s executive order on “Improving Price and Quality Transparency in American Healthcare to Put Patients First.”

There is another policy in the IPPS final reg that will benefit all residents. CMS is revising its policies regarding resident transfers when hospitals close and/or announce that their residency programs are ending. Specifically, instead of linking temporary funding for the affected residents to the day prior to or on the day the hospital and/or residency program closes, the determining day will instead be the day that the closure was publicly announced. Further, CMS is allowing funding to be transferred temporarily for residents who are not physically at the closing hospital/closing program but the facility they had intended to train at, or return to train at.

ACEP strongly supports these policies as a means to protect our residents and provide sufficient funding to teaching hospitals that take in displaced residents. The Emergency Medicine Residents' Association (EMRA), a national association that represents emergency medicine residents, shares our strong support for the policies, which address some of the issues that came up with the closing last year of Hahnemann University Hospital (HUH) in Philadelphia. When HUH unexpectedly closed, residents had to physically return to the hospital regardless of their individual circumstance to "sign in." Some residents had scheduled time off or were out on rotation and therefore this policy had created an additional burden to the trainees and to the receiving hospitals that wanted to begin to orient available transferring residents. If CMS’ new policies had been in place at the time of the HUH closing, it would have been a much smoother transition and experience for residents.

Finally, I would be remiss if I didn’t mention that CMS also separately established new COVID-19 reporting requirements for hospitals. Hospitals are now required to report COVID-19 data to the White House’s COVID-19 Task Force. CMS is tying this requirement to the "Conditions of Participation" requirements for Medicare and Medicaid—meaning that if hospitals do not report these data elements, they could be kicked out of both programs. The American Hospital Association (AHA) has already come out in opposition to this new requirement, saying that the penalty for not complying is too harsh. 

Please reach out to me with any questions. Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.

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