Health Care Reform Update [12-31-09]

Filed under: Industry Updates — Editor @ 11:45 am

The Senate Passed the Patient Protection and Affordable Care Act making health care reform almost a certainty.  Here is a summary of what is going on at present culled down to items that are more relevant to our business of Rehab and Home Health.


On December 24, 2009, the Senate passed the “Patient Protection and Affordable Care Act” (H.R. 3590) by a 60-39 vote, after a series of procedural votes stretching over five days. The considerable differences between the Senate bill and the House-passed proposal, H.R. 3962, the Affordable Health Care for America Act, must be reconciled and the House and Senate must pass the compromise agreement before the final bill can be sent to President Obama for signature into law. The President and Democratic Congressional Leaders would like to complete the legislation before the State of the Union Address in early February.

Physician Fee Schedule

The version of the Senate health care reform bill reported out of the Senate Finance Committee (S. 1796) and brought to the Senate floor (H.R. 3590) provided for a .5% increase in the physician fee schedule for calendar 2010, thereby avoiding a scheduled 21.2% cut in payment rates that would have taken effect on January 1, 2010 as a result of the sustainable growth rate mechanism. However, this provision was ultimately dropped from the Senate bill when it was passed on Christmas Eve. It was removed because it only provided for a one year “fix” for the fee schedule that would result in a 27 percent reduction in the fee schedule on January 1, 2011. Perhaps more importantly, the Senate Democratic Leadership wanted to avoid including the cost of permanently fixing the SGR—approximately $210 billion over 10 years—in the cost of the health care reform proposal. Doing so would inflate the cost health reform to a trillion dollars. However, in order to avoid the 21 percent reduction scheduled for January 1, 2010, the House and Senate included a provision in the “Department of Defense Appropriations Act, 2010” (H.R. 3326) which provided for a temporary extension of the current physician fee schedule rates until February 28, 2010. This bill was passed by the House on December 16, 2009, passed by the Senate on December 18 and signed into law on December 19, 2009.   As a result, the fee schedule reduction will now not occur until March 1, 2010 unless Congress acts to provide a more permanent fix—a step with House and Senate Democratic leaders have pledged to take in the near future.

Therapy Caps

Despite the efforts of stakeholders, the DOD Appropriations bill did not contain a temporary extension of the exceptions process for therapy caps. However, Section 1231 of the House’s health care reform bill, “Affordable Health Care for American Act”, (H.R. 3962), would extend the exceptions until December 31, 2011, and Section 3103 of H.R. 3590 would defer the expiration date until December 31, 2010. Accordingly, the final health care reform bill will likely contain an extension provision although it is unclear at the moment whether it will be for one or two years. As noted above, this legislation is likely to be sent to President Obama before he gives the State of the Union speech and hence the delay in the exceptions process provision should be relatively short-lived.

Senator Majority Leader Harry Reid’s Manager’s Amendment

On December 19, 2009l Senate Majority Leader Senator Harry Reid (D-NV) unveiled a Manager’s Amendment that contained a number of revisions to H.R. 3590, including several which are of interest to rehabilitation providers. A Manager’s Amendment is a package of changes to the underlying bill that usually reflect compromises worked out with other Members and stakeholders and a number of non-controversial amendments. This amendment was included in the final bill passed by the Senate on December 24th. Notable provisions include the following.

Making Accountable Care Organizations Eligible for Savings- The Manager’s Amendment gives the Department of Health and Human Services (HHS) more flexibility to install and operate new payment systems for Accountable Care Organizations (ACOs), which could be models currently used in the private practice. As originally drafted, the bill would permit ACOs to receive a share of the savings created by reducing costs and hitting quality-of-care targets relative to a spending benchmark under the Medicare system. Eligible ACOs include groups of health care providers (e.g. hospitals, physician groups, physician assistants, nurse practitioners, etc.)

Bundled Payment Pilot Program- The Manager’s Amendment grants greater discretion to HHS to expand a voluntary, national Medicare pilot for bundling payments designed to cut costs and improve care that H.R. 3590 would create. The new language requires HHS to experiment with bundling payments for “continuing care hospitals.” The pilot would implement methods to encourage hospitals, physicians and post-acute care providers to cooperate in the provision of more effective care. HHS would begin the five-year pilot no later than January 1, 2013 and would face a January 1, 2016 deadline to determine whether the pilot should be expanded on the basis of improved patient care and reporting its findings to Congress.

Rebased Home Health Payments- The Manager’s Amendment pushes back the date of implementation one year to 2014, at which point HHS would begin a new rebased payment system for home health care according to an analysis of the mix of services and intensity of care that patients receive. Under the new regime, outlier payments could constitute no more than 10% of total reimbursement for home health agencies, and rural providers would receive an add-on payment between 2010 and 2015. By March 1, 2011, HHS must send a report to Congress recommending how the payment structure could be restructured to increase a beneficiary’s access to care and better serve patients with varying severity of illness. Moreover, the Manager’s Amendment requires the HHS to conduct a study on enhancing access for certain patients, namely those residing in underserved areas, living on low incomes and experiencing high-severity illnesses. The new provisions would also grant the HHS the discretion to use the results of the study to run a demonstration program.

Productivity Adjustment Added to Revised Market Basket Update- The Manager’s Amendment alters the market basket update provisions in H.R. 3590 such that the adjustments will be changed for outpatient and inpatient hospitals, inpatient rehabilitation facilities, inpatient psychiatric hospitals in 2012 and 2013. Similarly, market basket updates were changed for long-term care hospitals for 2011-13, home health providers in 2013 and hospice providers from 2013-19. Under the original provision, market basket updates not subject to productivity updates would be revised to include a productivity adjustment, and this alteration would cover home health providers, nursing homes, hospice providers, inpatient hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities and long-term care hospitals. Part B providers not currently subject to productivity adjustments would have future payment updates adjusted thusly.

Prohibition on Certain Physician Referrals for Hospitals-The Manager’s Amendment changes the date by which physician-owned hospitals must implement a provider agreement from February 1, 2010 to August 1, 2010 as a condition for participating in Medicare. Physician-owned hospitals with provider agreements will be allowed to take part in Medicare so long as they meet requirements pertaining to conflicts-of-interest, expansion limitations, patient safety issues and bone fide investments.

Health Care Fraud Enforcement- The Manager’s Amendment adds language, which increases sentencing guidelines for health care fraud, lowering the intent requirement for proving health care fraud under the anti-kickback statute, and expands subpoena powers for alleged health care fraud.

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