December 18, 2014: A Very Sunny Day in Healthcare

On December 18, the Centers for Medicare & Medicaid Services (CMS) made available to the public through its Hospital Compare website new data on the quality of care furnished by hospitals. By posting this data, CMS intends to “empower consumers with information to help with health care decisions, encourage providers to strive for higher levels of quality, and drive overall health system improvement.” 

For the first time, CMS is releasing hospital performance results on Hospital-Acquired Conditions (HACs). This data compares hospitals’ rates of avoidable complications such as central line-associated bloodstream infections, catheter associated urinary tract infections, pressure ulcers, and accidental punctures or lacerations. 

Beginning in 2008, under the statutorily mandated HAC Reduction Program, CMS has not paid hospitals for the costs associated with treating HACs. For example, if a patient admitted for pneumonia experiences a catheter-associated urinary tract infection during the hospital stay, (as opposed to having this condition upon his or her admission), CMS will not pay the hospital for treating that condition (although the hospital will be paid for treating the admitting diagnosis). 

As part of the HAC Reduction Program, hospitals have been required to report on HACs. Now, under a related program authorized by the Affordable Care Act, CMS is using public reporting of this data (sunshine) and the threat of financial penalties to encourage hospitals to implement programs that reduce HACs and improve patient safety.

Under the new program, CMS assigns each hospital a Total HAC Score based on its rate of avoidable complications as compared to other hospitals. Hospitals with higher Total HAC Scores have experienced higher complication rates than other hospitals. Like the game of golf, higher scores equate to poorer performance.

CMS has identified and now publicized the list of hospitals that rank in the top quartile of Total HAC Scores.  In addition to being labeled poor-performing hospitals with regard to patient safety, these hospitals will see a 1% payment reduction on their Medicare inpatient claims. Each year, CMS will calculate hospitals’ Total HAC scores based on the most recent data and assess the penalty against the hospitals in the top quartile. 

Thus, even those hospitals not in the top quartile must focus on preventing HACs, at the risk of being pushed into the top quartile by other hospitals’ performance improvement efforts. If you are standing still, so they say, you are moving backwards.  

Also December 18, CMS released information on the Hospital Value-Based Purchasing (VBP) Program 2015 payment adjustments. Each year, CMS withholds a specified amount from hospital payments and then re-distributes that money to hospitals based on their scores on certain performance measures. For example, if $10 was withheld from each hospital, a hospital with the lowest score would receive no VBP payment (thus losing its $10 withhold) while the hospital with the highest score would receive a $20 payment. 

For 2015, the third year of the VBP Program, the amount of the withhold increased by 0.25% over the prior year, resulting in a redistribution pool of $1.4 billion. Also in 2015, the number of measures considered in calculating a hospital’s VBP score increased. They now include clinical process of care (20%), patient experience of care (30%), efficiency (20%), and patient outcomes (30%). 

More hospitals will experience a positive change in their payments (1,714) in 2015 compared to the number of hospitals that will experience a negative change (1,375) – a reversal from 2014.  This change indicates many hospitals are improving the quality of care delivered to patients, or at least learning to maximize their performance against the VBP metrics measured by CMS.
The VBP Program is about more than money, however. In addition to releasing how much each hospital will gain or lose under the program in 2015, CMS also posted to the Hospital Compare website each hospital’s score on each measure used to calculate its VBP score. Now consumers (both patients and referring physicians) have significantly more objective information available at their fingertips to use in selecting a hospital.

CMS is committed to even more “sunshine” in the coming years, believing that “transparency is critical to transforming the health care delivery system to achieve the three aims of better care for patients, better health for communities and spending dollars wisely.”


New Chronic Care Management Fee Dashboard

The Office of the National Coordinator for Health IT (ONC) has just released a new Health IT Dashboard for chronic care management (CCM) payments.

As ONC explains, the only direct economic reward for the use of certified electronic health record (EHR) technology has been meaningful use incentive payments offered through the Centers for Medicare & Medicaid Services' (CMS) EHR Incentive Programs.  Beginning on January 1, 2015, however, CMS will pay for CCM services furnished by a provider using a certified EHR technology. For a detailed discussion of the rules for providing and billing Medicare for CCM, please refer to our white paper

Providers who meet all the requirements may bill CMS approximately $40 per patient per month for chronic care management services. ONC’s new tool allows a practitioner to estimate how much that payment could amount to on a monthly and annual basis, based on the number of Medicare beneficiaries with chronic conditions in the practitioner’s patient panel.    

ONC is eager to demonstrate the value of EHR adoption, and sees CCM as an important part of that proposition. Here’s an example of the tool in action, assuming 100 eligible beneficiaries: 

As new payment models and revenue sources continue to emerge, look for other tools such as these to continue surfacing.



Observations from the Back Row at the 2014 mHealth Summit

I spent two days among the 4,000 attendees at the 2014 mHealth Summit last week. Here’s the “official” description of the conference from its website:

The mHealth Summit, the largest event of its kind, convenes a diverse international delegation to explore the limits of mobile and connected health, including every aspect and every audience. Technology, business, research and policy. Mobile, wireless, digital, wearable, telehealth, gaming, connected health and consumer engagement.

In prior years, the summit has focused on what technology can do, i.e., “we can build an app for that.” This year, the focus shifted to how to integrate technology, i.e., we built the app, now why aren’t they coming?  

There are roughly four categories of mHealth solutions now available:  (1) health and fitness support tools, (2) self-diagnosis and testing tools; (3) acute care tools; and (4) chronic care management tools. Products in the first two categories of solutions are intended for direct consumer use, while the others are tools designed for providers.

There were several presentations on research relating to consumer adoption of these tools. From them, I gleaned the following conclusions: (1) most consumers recognize the value of these tools; (2) many consumers express interest in using them; (3) some consumers have purchased them; (4) only a few consumers still use the tools several weeks after purchasing them. 

Certainly I’m no marketing guru, but it seems to me the direct-to-consumer approach with the first two categories of mHealth tools may require adjustment. Many, if not most, people still look to their doctors for actionable healthcare advice. We may look to WebMD for a preliminary diagnosis for our symptoms, but we most often rely on our doctors for a definitive diagnosis and treatment plan.

Similarly, while the public seems to find new mHealth tools intriguing, most of us are not fully embracing the promise of better health through self-directed therapies and treatment. Could it be we are waiting for our doctors’ advice on how to use these tools to maintain and improve our health? Speaking for myself, I would be far more likely to strap on a wearable device or download an app if I saw it as something prescribed by my doctor.      

With respect to the mHealth tools designed for provider use – especially the chronic care management tools – it appears many vendors (and even venture capitalists) are moving forward based on the assumption there is a ready market for these products. Because payment to providers now includes consideration for patient outcomes, these vendors and their investors assume providers will be eager to invest in technology to manage patients.

While mHealth companies may see value-based purchasing as a fait accompli, healthcare providers, by necessity, are still firmly entrenched in the fee-for-service world. And in that world, there is little economic incentive to effectively manage patients with chronic conditions, and thus little appetite for high-priced technology tools. 

However, if these tools can be used to generate fee-for-service reimbursement – as well as improve patient outcomes – it seems providers’ appetites for these technologies should grow. With the advent of Medicare payment for chronic care management services, and with other payers likely to follow, these technologies can help bridge the chasm between volume- and value-based payment models.

mHealth companies would do well to study how current payment models incentivize provider behavior and how emerging models turn those incentives on their heads.   It is the opinion of this conference participant that mHealth companies should present their products as a way to ease what we know will be a painful transition, rather than just waiting on the other side for the surviving providers to “arrive.”  


CMS Celebrates Cyber Monday by Releasing ACO Proposed Regs

CMS Celebrates Cyber Monday by Releasing ACO Proposed Regs

If you happened to surf over to the Federal Register Electronic Public Inspection Desk while doing some online shopping late Monday afternoon, you would have found new proposed regulations regarding the Medicare Shared Savings Program (MSSP) published by the Centers for Medicare & Medicaid Services (CMS).  On December 1, CMS released its long-anticipated proposal to overhaul the MSSP.  The agency is intent on making the program more attractive to providers, hoping to increase the number of participating accountable care organizations (ACOs) significantly in the next few years.

Individuals and organizations will have until the first week in February to submit comments on the proposed rule.  Back in 2011, when CMS finalized the current rule, the agency significantly revised its initial proposal based on an avalanche of critical public comments.  In the latest proposed rule, CMS requests comments on dozens of specific proposals, making clear its intention to respond to and make adjustments based on well-reasoned criticisms. 

Assuming CMS takes another 60 days to process the comments received, we can expect to see a final rule around Easter.  That will give providers about two months to study the final rule before deciding whether to submit a Notice of Intent (NOI) to file an application to participate in the MSSP starting New Year’s Day 2016.  If CMS follows past practice, those NOIs will be due around Memorial Day, with the full application to be filed by the end of July.   

CMS’ press release hits the highlights of the proposed rule, including the much-heralded decision to permit current MSSP participants to remain on Track 1 for a second three-year term (albeit at a lower rate of shared savings).  We’re still pouring over our printout of the advance electronic copy of the proposed rule, which is set to be published in the Federal Register December 8.   

Stay tuned:  our more in-depth look at the proposed rule is coming soon.  We’ve already spotted a few stocking stuffers worth closer consideration.  

Ten Key Payment Policies in the Final 2015 Medicare Physician Fee Schedule

While the rest of us were heading out the door for trick-or-treating, the Centers for Medicare & Medicaid Services (CMS) in the late afternoon of October 31 posted the final 2015 Medicare Physician Fee Schedule.  

The Protecting Access to Medicare Act of 2014 provides for a 0% payment update for services furnished during the first quarter of calendar year 2015. After March 31, 2015, fee schedule rates will be reduced by an average of 21.2% from 2014 rates, absent Congressional action to address the impact of the sustainable growth rate (SGR) formula

The payment policies finalized by CMS in the 1,195-page document, however, will have a direct and lasting impact on Part B providers’ day-to-day operations. From this point forward, there is no turning back on the road to value-based purchasing in the Medicare program.

(1) Chronic Care Management

As promised last year, CMS will move forward with payment for non-face-to-face chronic care management (CCM) services. Beginning January 1, 2015, Medicare will make a per-beneficiary-per-month payment at a rate of $40.39 for CCM services provided to patients with two or more significant chronic conditions. CMS had proposed a rate of $42.91 back in July, but the rate was reduced due to a mandated adjustment to the conversion factor, as opposed to any change in CMS’ valuation of the service.

Rather than create a new G code as proposed, CMS is using the new CPT code 99490[1], with the following description: 

Chronic care management services, at least 20 minutes of clinical staff time directed by a physician or other qualified health care professional, per calendar month, with the following required elements: multiple (two or more) chronic conditions expected to last at least 12 months, or until the death of the patient; chronic conditions place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline; comprehensive care plan established, implemented, revised, or monitored.

CMS finalized its proposal to eliminate the requirement that CCM services (as well as transitional care management services) be furnished under direct physician supervision (i.e., physician present in the office suite), opting instead for general supervision (no physician presence requirement). CMS also clarified the requirements for use of a certified electronic health record (EHR) in providing CCM services, as well as the requirements for an electronic care plan.  

PYA will provide an in-depth discussion of CCM services during the final webinar in its four-part series on physician value-based purchasing entitled Providing and Billing Medicare for Chronic Care Management. The webinar is scheduled for Wednesday, November 19, at noon EST. You can register for this complimentary webinar and access recordings of the other webinars in the series here.

(2) Value Modifier

Over the last three years, CMS has introduced the value-based payment modifier for the Medicare Physician Fee Schedule. The value modifier provides for differential payment to solo practitioners and physician groups based on the quality of care they provide to Medicare beneficiaries compared to the cost of that care over a specified period of time. 

Based on their relative scores on specified quality and efficiency measures, solo practitioners and physician groups will be placed in one of nine quality tiers ranging from high quality/low cost to low quality/high cost. Each tier will have a corresponding upward, downward, or neutral payment adjustment.

CMS has made available to providers resources detailing the calculation and application of the value modifier. The payment differentials go into effect in 2015 for groups with 100 or more eligible professionals (based on 2013 performance) and in 2016 for groups with ten or more (based on 2014 performance).

In the final rule, CMS expands the value modifier to apply to all physicians in 2017 (based on 2015 performance) and to include non-physician practitioners in 2018 (based on 2016 performance).  CMS also increases the maximum upward and downward adjustments from -2.0%/+2.0% in 2015 and 2016 to -4.0%/+4.0% in 2017 (with one exception discussed below). Physicians who fail to report quality measures as required under the Physician Quality Reporting System (PQRS) in 2015 will be subject to the -4.0% adjustment, in addition to the 2% PQRS reporting penalty.

For 2017, solo practitioners and physicians in groups with less than 10 eligible professionals shall be subject to a -2.0%/+2.0% adjustment. Also, these physicians also will not be subject to any downward adjustments in 2017 so long as they meet PQRS reporting requirements. Those that do not meet those requirements, however, will be subject to the full negative 2% payment adjustment (in addition to the 2% PQRS reporting penalty). 

At noon EST this Wednesday, November 5, PYA will be presenting the third webinar in its four-part series on physician value-based purchasing entitled Study Guide for the Value Modifier. Again, you can register for this complimentary webinar and access recordings of the other webinars in the series here.

(3) Physician Feedback Program/QRURs

On September 30, CMS made available on its portal customized Quality and Resource Use Reports (QRURs) for all solo practitioners and group practices based on 2013 data. Each QRUR includes the recipient’s performance on the quality and cost measures used to calculate the value modifier as well as the specific performance tier to which the recipient would be assigned based on its scores on those measures.

For those groups subject to the value modifier in 2015 (those with 100+ eligible professionals), the QRUR shows how the group’s payments will be affected. CMS strongly encourages all providers to access their QRURs to better understand their current performance levels and how to improve their scores on quality and cost measures. CMS will make available the QRURs based on 2014 data in the fall of 2015. These reports will show how groups with ten or more eligible professionals will be impacted by the value modifier in 2016.

In the final rule, CMS states it will make available informal review mechanisms for providers to request certain limited corrections to their QRURs. For 2015, such requests will have to be made by the end of February 2015. CMS intends to formalize and expand the review process in 2016 and beyond.  

(4) Physician Quality Reporting System

After years of bonus payments for physicians who reported specific quality information to CMS, PQRS switches gears in 2015. Now, physicians who did not report in 2013 will be subject to a downward payment adjustment. Failure to report in 2014 will mean a downward adjustment in 2016. 

For 2015, CMS will add 20 new individual measures and 2 measures groups to fill existing measure gaps.   CMS also will be removing 50 measures from PQRS reporting, bringing the number of individual measures to 255. Generally speaking, physicians need only report on nine measures covering three of the six National Quality Strategy domains.[2] 

The final rule includes several changes to the methods and manner in which quality data is to be submitted. These are included in a three-page chart included in the rule, which details the various reporting options and the requirements associated with each. 

Finally, CMS continues its phased approach for public reporting of PQRS data on the Physician Compare website. By 2016, the number of group-level and individual measures to be publicly reported will be expanded significantly, giving beneficiaries more information on which to base treatment decisions.      

(5) Open Payment Act

The Open Payments program requires applicable manufacturers of covered drugs, devices, biologicals, and medical supplies to report payments or other transfers of value they make to physicians and teaching hospitals to CMS. This information will be made available to the public on CMS’ website through searchable databases. 

As part of the final rule, CMS has eliminated the Continuing Education Exclusion in its entirety, noting this will create a more consistent reporting requirement. CMS also refined certain reporting requirements for applicable manufacturers.

(6) Elimination of Global Surgery Periods

CMS will eliminate all 10-day global codes in 2017 and all 90-day global codes in 2018, noting that many providers are not performing the number of post-surgical visits contemplated by these codes. To address this potential for misvaluation of surgical services, CMS plans to make one payment for all services rendered on the day of surgery and to pay separately for visits and services actually furnished any subsequent day.

(7) Expanded Telehealth Services

CMS includes four new services to the list of services that can be furnished to Medicare beneficiaries under the telehealth benefit. These include annual wellness visits, psychoanalysis, psychotherapy, and prolonged evaluation and management services.   

(8) Medicare Shared Savings Program Quality Measures

The final rule includes updates to parts of the Medicare Shared Savings Program regulations. First, CMS will reward accountable care organizations (ACOs) that make year-to-year improvements in quality performance scores by adding a quality improvement measure that adds bonus points to each of the four quality measure domains based on improvement.

Second, CMS has made revisions to the quality measures reporting requirements to reflect up-to-date clinical guidelines and standards of practice, reduce duplicative measures, increase focus on claims-based outcome measures, and reduce the ACO reporting burden. New measures have been added to focus on avoidable admissions for patients with multiple chronic conditions, heart failure, and diabetes; depression remission; all-cause readmissions to a skilled nursing facility; and stewardship of patient resources. Also, the existing composite measures for diabetes and coronary artery disease have been updated.

 (9) Off-Campus Hospital Departments

CMS will begin collecting data on services furnished in off-campus provider-based departments by requiring hospitals to report a modifier for those services furnished in an off-campus, provider-based department and by requiring physicians and other practitioners to use a new site of service code on professional claims. Hospital reporting will be voluntary for 2015 and mandatory in 2016. The new site- of-service code will not be effective until after January 1, 2016. 

(10) Adjustments for Misvalued Codes

CMS continues its statutorily mandated hunt for misvalued codes, i.e., those codes for which work and/or practice expense (PE) relative value units (RVUs) are overstated based on comparison to actual practice. In the proposed rule, CMS had identified that special building requirements to house linear accelerators do not represent a direct cost in its PE methodology; instead, it is accounted for in the indirect PE methodology. CMS, therefore, proposed to remove these building requirements as a direct PE input from radiation treatment procedures. This seemingly minor change was expected to result in a 4% reduction in Part B payments for radiation oncology and an 8% reduction for radiation therapy centers. 

In response to comments, CMS decided not to finalize this proposal. Instead, the agency will reconsider whether the vault is a direct or indirect cost sometime in the future. Two other adjustments CMS had proposed – payment reductions for hip and knee replacements and code changes for gastroenterology and radiation therapy services – also were delayed. CMS did finalize proposals relating to epidural pain injections and x-ray services (to account for discontinued use of analog film).

The 1000+ page final rule covers far more ground than is summarized here. The days of minor tweaks to the Medicare Physician Fee Schedule are over, as CMS works to implement significant payment reforms in the Medicare program. The final rule demonstrates CMS is considering public comments as it moves forward with this implementation, even if it does not always incorporate those recommendations.


PYA’s Opportunity Forecasting & Positioning Team can assist your organization in analyzing the impact of new payment policies and preparing comments for submission to CMS on future proposals. Additionally, our consultants can support your organization in developing CCM services, maximizing performance under the value modifier, complying with PQRS and Open Payment Act requirements, and establishing and expanding a successful telehealth program. For more information, please contact Marty Brown, Nancy McConnell, or Martie Ross at PYA, (800) 270-9629. 

[1] Current Procedural Terminology (CPT)- a registered trademark of the American Medical Association.

[2] All PQRS measures are assigned to one of six quality improvement domains: (1) Patient and Family Engagement; (2) Patient Safety; (3) Care Coordination; (4) Population/Public Health; (5) Efficient Use of Healthcare Resources; and (6) Clinical Process/Effectiveness.


Lessons Learned from Year 1 MSSP Performance: Care Management Is Crucial


On October 29, the data analytics contractor hired by CMS to evaluate Year 1 performance by accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) shared its findings during a participant-only webinar.  The purpose of the webinar was to provide the 220 ACOs that joined the MSSP in April and July 2012 and January 2013 with detailed explanation of the Year 1 quality and financial performance reports these ACOs recently received.   

As CMS reported publicly September 16, 58 of the 220 ACOs generated savings in excess of the 2% minimum savings rate.  Of those 58, 52 will receive a total of $315 million in shared savings.  The other six ACOs failed to report quality data, and thus were not eligible for shared savings. 

According to the data presented during the webinar, another 60 ACOs generated savings, but were not eligible for shared savings because they did not meet the minimum savings rate.  Finally, the remaining 102 ACOs did not realize savings, and 43 of those ACOs would have had to pay a penalty if they had been participating in the two-sided model (which they were not). 

While the ACOs’ Year 1 financial performance may seem underwhelming, their quality performance was impressive.  As compared to their counterparts, physicians in ACOs are scoring higher on more than 75% of the MSSP quality measures.  Also, ACOs with 2012 start dates have shown improvement on more than 90% of those measures. 

CMS maintains the MSSP is a “learning lab,” with participating ACOs identifying and implementing best practices over time.  According to CMS, judging the program solely on Year 1 financial results is short-sighted, as many of these best practices are just now taking hold.  

The webinar delved into these best practices, taking a close look at how the 58 ACOs achieved savings.  This included the following findings: 

  • On average, the 58 ACOs lowered inpatient costs by 9.5%.  The ACOs with the poorest financial performance saw a 6% increase in inpatient costs. 
  • The top-performing ACOs reduced skilled nursing facility costs by nearly 20%, while the poor performers had a 15% increase in this category. 
  • There appears to be little correlation between the size of the ACO and the savings generated.  The ACOs with the smallest number of attributed beneficiaries performed as well as those with the highest number.

The most interesting results, however, are found by analyzing the 58 ACOs’ scores on MSSP quality metrics.  These ACOs were top performers on a multitude of expenditure and utilization measures, which is indicative of strong care management programs.  While the data does not prove a causal link between care management and cost savings, it clearly demonstrates a strong correlation. 

Based on these results, those evaluating strategies for success under value-based payment models should focus on developing care management capabilities.  This is especially true given Medicare will begin paying a per-beneficiary-per-month chronic care management fee in January 2015 at a proposed rate of about $42.00 per month.  Commercial payers are likely to follow suit in the near future. 

These payments will assist providers in building the infrastructure, including staff and supportive technology, which is necessary to manage high-risk, high-cost (and rising-risk and rising-cost) patients, including staff and supportive technology.  It’s like having your cake (fee-for-service payments for chronic care management) and eating it, too (generating savings).  “So, let them eat cake!”   


Surgery Robot Research Highlights Emerging Executive-Level Tension

Tension in the healthcare executive suite continues to rise as our clients face difficult decisions at the intersection of increasing transparency and an emphasis on evidence-based medicine.  With the transition from fee-for-service payment and care delivery to value-based payment and population health programs, health systems and physicians are confronted with the need to reconcile care that is labeled – through peer-reviewed publication or advanced data analysis – as too costly or possibly medically unnecessary, with the investments and practices that have historically supported margins and sustainability.  Robotic surgery, a practice embraced by most hospital systems, offers an instructive example of this tension.

A new study published recently in Obstetrics & Gynecology adds to the growing body of evidence that robotic surgery will face increased scrutiny.   This Columbia University study included 90,000 women who had undergone surgery to remove ovaries or ovarian cysts between 2009 and 2012.  The results found that using a robot added $2,500 and $3,300 to the cost of removing the ovaries and cysts, respectively, when compared to laparoscopic approaches without a robot.  There were also slightly more complications such as bladder injury, bowel obstruction, and excessive bleeding in patients who underwent robot-assisted surgery.

In February 2013, the same group of Columbia investigators reported in the Journal of the American Medical Association (JAMA) on costs associated with surgeries performed on 260,000 hysterectomy patients.   The group found that the median hospital cost for robot-assisted hysterectomy was $8,868, and the median hospital cost for laparoscopic hysterectomy without robot was $6,679.  In March 2013, the American College of Obstetrics and Gynecology (ACOG) issued the following policy statement:  “There is no good data proving that robotic hysterectomy is even as good as—let alone better—than existing and far less costly, minimally invasive alternatives.” 

A 2010 New England Journal of Medicine analysis of 20 robot-assisted surgical procedures performed in 2007 found that the robot added 13% or $3,200 to the average cost of the surgery; the investigators were unable to demonstrate with the limited data available that robotic surgery is superior to less expensive, alternative procedures. 

With the Affordable Care Act and the private market advocating for transparency, measurable outcomes, and cost effectiveness, healthcare executives will continue to face difficult d ecisions.  Thoughtful decision making in response to publications surrounding historically reliable investments and practices, such as these recent analyses of surgery robots, will be critically important for healthcare executives. 


Spreading Perspective on Ebola

On a day when the announcement of the second Dallas nurse infected with the Ebola virus frightened Americans, Carl Zimmer, the New York Times science journalist and author of the book A Planet of Viruses, provided some much-needed perspective to a Philadelphia audience. 

Zimmer was the keynote speaker on October 15, 2014, for the Penn’s Vet Center for Host-Microbial Interaction two-day symposium on Microbial Communities in Health and Disease. 

Zimmer started by discussing the Ebola epidemic, which started in December 2013 in West Africa and as of October 14, 2014, had infected 8,914 people and claimed the lives of 4,447 people. The current epidemic is serious, and public health experts warn that by December 2014 there could be 5,000 to 10,000 new cases a week. 

However, Zimmer contrasted the current problem with well-known viral infections such as flu, HIV, and rabies which every year kill 250,000, 1.6 million, and 69,000 people, respectively. Americans who are not healthcare workers have little to fear from the Ebola virus, according to Zimmer. Past Ebola epidemics have been contained by basic public health strategies, and the current crisis can be controlled with sufficient resources.    

Mass psychology experts worry that the current environment in the United States may result in public hysteria and an overwhelming of emergency rooms with the “worried well.” With the reporting of the inadequate response by the Dallas hospital that treated Thomas Eric Duncan, the Centers for Disease Control is having trouble keeping the public’s trust that experts know what they are doing. Unless there is competence and fairness with each case reported accurately and quickly and each patient treated with the maximum level of care, unnecessary public panic is possible. (

Using the Ebola virus as a starting point, Zimmer discussed how each human being hosts 100 trillion bacteria and about a trillion viruses. He stunned the Philadelphia audience by estimating that if you built a virus tower containing all the viruses on earth it would stretch 200,000,000 light years long. Although we have identified the viruses that cause human disease, we have just begun to understand other viruses. For example, Zimmer recently wrote in the New York Times about a Columbia study of 133 New York City rats, which identified 18 new species of viruses previously unknown to scientists. Most of the viruses in humans are attacking bacteria, and many of them may play an important role in controlling harmful microbes. 

Zimmer ended his lecture by describing ways that viruses can benefit humans. He described how our understanding virus biology has enabled us to make Flublok vaccine against influenza, cure x-linked severe combined immunodeficiency disease, and create an animal model to study Hepatitis C, which had previously only been identified in humans.

Since humans live in a universe with many bacteria and viruses, Zimmer emphasized how important it will be for mankind to learn to co-exist with its microbial neighbors.


68 Cents on a Dollar - What CMS' Settlement Offer on Denied Inpatient Claims Means for You

On August 29, 2014, the Centers for Medicare & Medicaid Services (CMS) released a statement that it is offering a settlement option to acute care and critical access hospitals with currently pending appeals of inpatient status claim denials.  If hospitals elect to accept the settlement, then they will receive a lump payment for 68% of the net allowable amount on all eligible claims. The intent of this offer is to alleviate the administrative burden for both the provider and Medicare, and to reduce the current backlog of appeals that are being disputed due to inappropriate patient status determinations.  CMS believes that the changes in Final Rule 1599-F, the “two-midnight rule,” will reduce future appeal volumes.

Background on Inpatient Status Reviews

Inpatient stays of two days or fewer have been a target by Medicare as it is believed that the services provided should be billed as an outpatient versus inpatient status. To clear up confusion, CMS issued a revision to the  2014 Inpatient Prospective Payment System (IPPS) Final Rule reimbursement criteria and instituted the two-midnight rule for Part A inpatient hospital claims, thus creating new guidelines for establishing the medical necessity of inpatient hospital admissions, as well as documentation requirements, inpatient admission orders, and certifications. The two-midnight rule clarifies that the decision to admit a patient should be based on an expectation that the patient will require a hospital stay with a duration of at least two midnights. 

The enforcement of the two-midnight rule will not begin until October 2014. However, CMS initiated a pre-payment medical review program, known as the “probe-and-educate” medical review program, designed to identify improperly billed claims and provide education to hospitals implementing the requirements of the 2014 IPPS Final Rule.  There is a current backlog of claims in the Medicare appeal process as a result of the audits initiated by the probe-and-educate medical review program.  Pending claim appeals are backlogged to 2009 and in some cases, further.

Eligible Claims

Eligible claims must satisfy all the following criteria to be considered for the settlement offer:

  • The claim has a date of admission prior to October 1, 2013.
  • The claim was denied due to a patient status audit conducted by a Medicare contractor on the basis that services may have been reasonable and necessary, but treatment on an inpatient basis was not.
  • The hospital timely appealed the denial, and the appeal was still pending at the MAC, QIC, ALJ or DAB in which the provider has not exhausted its appeal rights.
  • The claim was denied by an entity that conducted a review on behalf of CMS.
  • The hospital did not receive payment for the service as a Part B claim.
  • The claim was not for items/services provided to a Medicare Part C enrollee.
  • The facility is an acute care hospital or critical access hospital.

Settlement Process

Hospitals that choose to accept the settlement must agree to settle all eligible claims and must complete and file with CMS an Administrative Agreement along with a spreadsheet containing all eligible claims by October 31, 2014.

Once the Administrative Agreement and Eligible Claim Spreadsheet are reviewed and confirmed by CMS, a copy of the signed agreement will be returned to the provider; all claims identified will be dismissed from the appeal process; and, a payment in the amount of 68% of the net allowable will be issued. Payment will be made 60 days after the execution of the Administrative Agreement by CMS.  The agreement states that hospitals are not allowed to collect the remaining balance from the patient for the services included in the settlement, including their coinsurance.

Where there is a discrepancy between the claim information submitted by the hospital and CMS’ records, the hospital will have the opportunity to submit a revised spreadsheet and Administrative Agreement within two weeks of receiving notice of the discrepancy.


Hospitals should determine if they want to take advantage of this offer, as the deadline is quickly approaching. Providers may request an extension; however, if they take advantage of this settlement by the deadline, then they should be able to receive their settlement by the end of this year.  Items to consider include:

  • Do they have the resources to quickly apply for settlement and isolate all claims that are eligible for this settlement offer? If not, then do they want to consider requesting an extension?
  • What is the current appeal success rate (net amount received less expenses compared to 100% payment for denied inpatient claims) for their organization relative to the 68% settlement being offered by CMS?
  • Which is more advantageous—waiting out the appeal process for the payment turnaround vs. receiving payment within 60 days of filing the settlement agreement to CMS?
  • Is the reduction of the administrative cost and burden worth the reduction in payment--which amounts to the difference of collecting 0.68 per each dollar on the denied inpatient claims compared to expected net payments based on historical or projected success of pursuing the pending denials?

Additional information can be located on CMS’ website here.

If you have questions about CMS’ settlement option or need assistance filing the requirements for the settlement, contact Denise Hall or Nancy McConnell at PYA, (800) 270-9629.

ACO Growing Pains - Not Death Throes

Last week, San Diego-based Sharp HealthCare announced its withdrawal from the Pioneer ACO program.  Sharp joins 9 other ACOs that opted out of the program last year, leaving 22 ACOs still participating.

The Pioneer ACO program is an alternative to the Medicare Shared Savings Program (MSSP) for organizations with greater experience operating in ACO-like arrangements.  Unlike MSSP ACOs, Pioneer ACOs are required to share downside risk.  If actual total cost of care for the attributed population exceeds the established baseline, the Pioneer ACO must repay a percentage of that difference back to CMS.  A Pioneer ACO that reduces total cost of care, however, receives a higher percentage of the savings. 

 While the idea behind a shared savings program is relatively straightforward, the execution has proven less so.  In Sharp’s case, it stood to lose millions due to the formula used to calculate the baseline.  Initially, the baseline is calculated based on historical cost of care for the attributed population.  In the first year of its three-year performance period, a Pioneer ACO works to lower total cost of care as compared to those historical numbers. 

During the second and third years, an ACO is not trying to beat its prior year’s performance.  Instead, the ACO’s goal is to lower costs as compared to what would have been expected absent the ACO’s interventions.  That includes accounting for anticipated increases in healthcare costs by adjusting the baseline for inflation. In the Pioneer ACO Program, the baseline is trended forward each year using a hybrid inflationary factor based on national average growth and absolute dollar growth. 

In the San Diego area, however, Medicare spending has increased at a rate significantly above these national averages due to the area’s higher labor costs.  Here’s how it works:  to establish the national Medicare payment rate for a specific inpatient or outpatient hospital service each year, CMS multiplies the assigned relative weight for that service by an annually adjusted conversion factor.  The relative weight is based on the resource requirements for that service, including labor. 

Then, to account for geographic differences in labor costs, CMS adjusts the national payment rate by the local wage index rate.  Thus, the amount Medicare pays a hospital for providing  certain services will be higher in those areas of the country with higher labor costs.  As a result, the total cost of care for beneficiaries residing in these areas is higher. 

Because a Pioneer ACO’s initial baseline was calculated based on historical cost of care for the attributed population, these payment differences were taken into consideration.  However, the annual adjustment to an ACO’s baseline has been based on national averages.  For those Pioneer ACOs in areas where labor costs have increased more than the national average, the adjusted baseline does not accurately reflect the expected cost of care absent the ACO’s interventions.

In the case of Sharp, the San Diego wage index rate increased by 8.2%, meaning that Medicare payments for hospital inpatient and outpatient services in that area increased by more than the national average.  But the ACO’s adjusted baseline assumed those payments only increased at the lower national average.  Stated another way, the fact that Sharp was receiving higher than average fee-for-service payments for its hospital services meant that it could not generate the savings needed to beat the baseline based on national fee-for-service rates, even though it had been successful in reducing readmissions and utilization while improving quality performance.   

Contrary to some of the hyped-up commentary from last week, Sharp’s decision to pull out of the Pioneer ACO Program does not prove the ACO concept is doomed to fail.  Instead, it highlights the need to use local data – not national or even regional averages – to establish spending targets for shared savings programs as well as bundled and capitated payments. 

More broadly, Sharp’s decision reminds us there is no proven path from fee-for-service to value-based purchasing.   Instead, there will be many wrong turns and detours along the way.  Following the plan-do-study-act model, we will need to re-evaluate and recalibrate strategies on an ongoing basis.  But simply throwing up our hands and declaring defeat at each setback will get us nowhere.  Or, worse yet, we will remain in the unsustainable cycle of increasing costs until the wheels come off our healthcare system and, in turn, our economy.

As the Sharp decision demonstrates, new payment models will succeed only if they create incentives for providers to change their behaviors.  If the annual adjustments to Sharp’s baseline had taken into consideration higher Medicare payment rates, for example, the organization likely would have continued its participation in the Pioneer ACO Program as it would have had a realistic opportunity to earn shared savings. 

Despite defections, CMS claims the Pioneer ACO Program has been successful.   As the agency reported last summer, “[c]osts for the more than 669,000 beneficiaries aligned to Pioneer ACOs grew by only 0.3 percent in 2012 whereas costs for similar beneficiaries grew by 0.8 percent in the same period. 13 out of 32 pioneer ACOs produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million to the Medicare Trust Funds.  Pioneer ACOs earned over $76 million by providing coordinated, quality care.” 

However, CMS cannot rest on reported success; it must address the identified shortcomings – the misaligned incentives –in the Pioneer ACO Program.  Overcoming these growing pains by appreciating and being sensitive to these incentives will drive progress in all value-based payment models.