"Doc Patch" Bill Passes Senate; Includes ICD-10 and Two-Midnight Rule Delays

The Senate voted Monday evening to approve HR 4302, Protecting Access to Medicare Act of 2014, more commonly known as the “doc patch.”  The bill averts a nearly 24% cut to Medicare physician payments that was set to take effect on April 1, 2014, and extends the 0.5% update for providers for the remainder of 2014. 

The vote followed a failed effort earlier in the day by Senate Finance Committee Chairman Ron Wyden (D-Ore.) to repeal the flawed SGR formula and replace it with a new value-based payment methodology.  That legislation, HR 4015, SGR Repeal and Medicare Provider Payment Modernization Act of 2014, more commonly known as “repeal-and-replace,” enjoys nearly universal support – except on the issue of how to pay for its $18 billion price tag.

In the end, Republicans and Democrats could not agree on the “pay for” for repeal-and-replace prior to the April 1 deadline, and thus another short-term fix – the seventeenth such fix since the SGR was enacted in 1997 – was the only alternative.  A long-term solution (or yet another fix) will be needed by April 1, 2015, when once again rates are projected to be cut by 24%.

The doc patch contains good news for hospitals:  unlike prior SGR fixes, the doc patch is not funded by immediate cuts to hospital reimbursement.   The doc patch’s $20 billion price tag is paid for with a number of new policies, including revaluing Medicare physician payments, establishing a new nursing home value-based payment program, imposing new market-based clinical laboratory payment rates, and making changes to Medicare sequestration in out years.

The doc patch also breathes another year of life into the Medicare extenders, a package of policies that fund rural hospitals, therapy services, and ambulance providers.

The following summarizes key provisions in the 122-page bill, which the President is expected to sign later this week:

Delay in Transition from ICD-9 to ICD-10 Code Sets – Requires the Secretary to establish a new compliance deadline no earlier than October 1, 2015.  Presumably, this provision was included to appease providers, but no industry group is claiming credit for having successfully championed it.   

Two-Midnight Policy – Delays Recovery Audit Contractor enforcement of the “two-midnight rule” through March 31, 2015, unless there is evidence of systematic gaming, fraud, abuse, or delays.  Allows CMS to continue use of the Medicare Administrative Contractor “probe and educate” program to assess provider understanding and compliance with the “two-midnight rule,” on a pre-payment basis, through March 31, 2015.  

Medicare Work Geographic Adjustment – Boosts payment for the work component of physician fees in areas where labor cost is lower than the national average.  Existing 1.0 floor on the “physician work” price index is extended through April 1, 2015.

Ensuring Accurate Valuation of Services Under the Physician Fee Schedule – Increases payment accuracy by improving the valuation of services under the physician fee schedule through the voluntary collection of information from professionals and other sources.  Establishes an annual target for the reduction of misvalued services in each of 2017-2020.  If the target (0.5% of the estimated amount of fee schedule expenditures) is met, the amount is redistributed to other services within the physician fee schedule.  If the target is not met, fee schedule payments for the year are reduced by the difference between the target and the amount of misvalued services identified in a given year.

Advanced Diagnostic Imaging Quality Incentives and Appropriate Use Criteria – Requires the Secretary to establish a program that promotes the use of appropriate use criteria (AUC) for advanced diagnostic imaging.  By April 1, 2016, the Secretary will publish a list of qualified clinical decision support (CDS) mechanisms.  Beginning January 1, 2017, payment will only be made to the furnishing professional for an applicable advanced diagnostic imaging service if the claim for such service includes certain representations regarding CDS consultation. 

Reduces payments (5% in 2016 and 15% thereafter) for specific hospital outpatient or physician office CT services that are furnished using equipment that does not meet dose optimization and management standards.

Medicare Dependent Hospitals – Extends through March 31, 2015, the special payments for rural hospitals (with no more than 100 beds) that serve a high percentage of Medicare beneficiaries.

Low-Volume Hospital Adjustment – Extends through March 31, 2015,  the current distance and volume requirements for low-volume hospitals to receive add-on payments based on the number of Medicare discharges. 

Extension of Therapy Cap Exceptions Process – Extends the therapy cap exceptions process that allows patients to exceed annual per-patient therapy expenditures based on medical necessity through March 31, 2015.

Medicare Ambulance Add-On Payments – Extends the add-on payment for ground ambulance services, including those in “super rural” areas, until April 1, 2015.

Skilled Nursing Facility (SNF) Value-Based Purchasing – Implements a new skilled nursing facility value-based purchasing program to begin in fiscal year 2019.  Facilities will face a 2% withhold of SNF payments.  SNFs will receive VBP incentive payments based on the higher of their performance or improvement on an SNF readmission measure. 

Improving Policies for Clinical Diagnostic Laboratory Tests – Bases Medicare clinical laboratory payments on private sector payment rates starting in 2017.

Medicaid DSH – Medicaid Disproportionate Share Hospital (DSH) payments provide additional funding to hospitals that serve a disproportionate number of low-income patients.  Currently, reductions in state DSH allotments are scheduled to begin in fiscal year 2016.  This policy would delay Medicaid DSH cuts until fiscal year 2017 and add another year of DSH cuts in 2024.  To offset the cost of the one-year delay, additional reductions are made in the out year allotments. 

Realignment of the Medicare Sequester for Fiscal Year 2024 – Changes the timing of the 2024 Medicare sequester so that there will be a 4.0% sequester for the first six months and a 0.0% sequester for the second six months, instead of a 2.0% sequester for the full twelve-month period.  While the overall amount of the 2024 sequester remains basically unchanged, this provision allows more of the sequestered amounts to be counted as savings in the ten-year budget window used for scoring the fiscal effects of this Act.

Elimination of Limitation of Deductibles for Employer-Sponsored Health Plans – Repeals sections of the Affordable Care Act which place limits on deductibles in employer-sponsored health plans in the small group market, subject to the law’s actuarial value requirements.  These limits on deductibles are not in effect for the 2014 and 2015 plan years.

Demonstration Programs to Improve Community Mental Health Services – Creates a new type of mental health provider called a “certified community behavioral health clinic,” which is intended to coordinate care across settings and providers to ensure seamless transitions for patients across the provision of acute, chronic, and behavioral health services.  Allows eight states to take part in a two-year demonstration program to receive enhanced Medicaid matching funds for mental health services provided by such clinics.

Medicare Advantage Special Needs Plans – Medicare Advantage special needs plans may limit enrollment to certain populations, such as dual eligibles.  This provision extends authority for these plans through 2016.

Extension of Qualifying Individual (QI) Program – Extends through March 31, 2015, the QI Program that assists Medicare beneficiaries with incomes between 120% and 135% of the federal poverty level (FPL) by covering the cost of their Medicare Part B premiums. 

Temporary Extension of Transitional Medical Assistance (TMA) – Extends through March 31, 2015, the program that provides Medicaid insurance coverage for families transitioning from welfare to work.

Extension of Medicaid and CHIP Express Lane Option – Extends through September 2015, Express Lane Eligibility (ELE), which allows states to rely on eligibility findings of other assistance programs to determine Medicaid and CHIP eligibility for children or adults.

Extension of Maternal, Infant, and Early Childhood Home Visiting Programs — Extends the program with $400 million in funding through March 31, 2015.

Extension of Health Workforce Demonstration Project for Low-Income Individuals – Extends this program for one year at the current funding level of $85 million, which provides funding to help low-income individuals obtain education and training in healthcare jobs.

Extension of Special Diabetes Program for Type 1 Diabetes and for Indians – Extends both the Type I Diabetes and Type II Indian Health Service programs through 2015 at $300 million total.

Extension of Abstinence Education – Extends abstinence-only programs and associated funding through 2015 at $50 million per year.

Extension of Personal Responsibility Education Program – Extends the PREP program for one year through fiscal year 2015 at $75 million.  PREP provides grants to implement evidence-based, or evidence-informed, innovative strategies for teen pregnancy and HIV/STD prevention, youth development, and adulthood preparation for young people.

If you have questions about any provisions of the “doc patch” bill, contact Martie Ross or Jeff Ellis at PYA, (800) 270-9629.

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