Bowing to physician pressure, CMS delays visit code changes

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Yesterday the Center for Medicare & Medicaid Services (CMS) finalized the 2019 Physician Fee Schedule (PFS), announcing they will delay implementation of changes to physician evaluation and management (E&M) codes until 2021. CMS had proposed to collapse five E&M codes into two, and to streamline physician documentation requirements.

The delay is a win for the thousands of physicians who submitted comments opposing the changes, complaining that the proposal would penalize doctors who see more complex patients. Doctors also expressed concern that the rates assigned to the proposed codes were too low, discouraging doctors from seeing Medicare patients and creating access challenges.

Along with the two-year delay, CMS also raised base rates, and created an additional code for complex visits. These changes are a win for doctors—and provide time for continued lobbying to permanently forestall implementation.

The 2019 rule also includes several other noteworthy changes that were largely lost in hubbub surrounding E&M visit coding, most of which will be well-received by doctors.

At the top of our list: CMS significantly expanded telemedicine coverage, and will now reimburse for telemedicine and telephone visits for brief check-ins, evaluation of patient-submitted images or remote monitoring data, as well as more comprehensive and preventive care visits. This is a substantial step toward increasing access for the two-thirds of Medicare beneficiaries who are ineligible for telemedicine coverage today. 

We will be continuing to make our way through the details of the rule, and sharing our thoughts on its impact for doctors and health systems. In the longer term, it is worth watching whether continued pressure from doctors postpones further action, and whether the administration will enact changes that could upset the physician base—significantly, the 2021 PFS rule will likely drop in the weeks just before the 2020 Presidential election.

Feds are ready to claw back billions from Medicare insurers

A person picks up a medical chart from a long row in a cabinet.

The Centers for Medicare & Medicaid Services is ready to charge ahead with broad audits of Medicare Advantage plans, which could result in companies paying back billions of taxpayers dollars to the federal government.

The big picture: The threat of these federal audits has existed for several years, but the audits haven’t led to large clawbacks yet. CMS now has an estimate of those improper payments to insurers: almost $14.4 billion in 2017, or 7% of Medicare Advantage spending from that year.

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How it works: The federal government pays Medicare Advantage companies monthly amounts based on how sick their enrollees are. Insurers code the conditions people have, and the more health problems someone has, the more insurers get paid.

  • But regulators are conducting “risk adjustment data validation” (RADV) audits that compare patient medical codes submitted by health insurers with the actual codes that doctors put in patient medical records.
  • The goal is to see if Medicare Advantage insurers are exaggerating people’s health conditions to get higher payments.
  • An investigation from the Center for Public Integrity detailed how the industry has manipulated these so-called “risk scores.”

Driving the news: New proposed regulations lay out the federal government’s legal authority for the audits.

  • CMS says it will audit the diagnoses of about 200 people in any given health plan and then extrapolate the results across the insurer’s entire Medicare Advantage population — leading to potentially large clawbacks for insurers that improperly code conditions.
  • An accompanying federal analysis separately found that coding errors in the traditional Medicare program have no bearing on how Medicare Advantage insurers are paid, and thus RADV audits should not adjust for those discrepancies. The analysis, in essence, pokes a hole in a recent federal ruling that favored insurers.

The bottom line: CMS appears ready to step on the gas and recoup money it believes the industry has bilked from taxpayers. Health insurers have long been frightened of RADV audits — every major publicly traded insurer lists the audits as a top “risk factor” in their annual filings to investors.

  • “CMS has a strong requirement to ensure accuracy of payments because of the magnitude of dollars flying around,” said Jessica Smith, a consultant at Gorman Health Group who studies risk adjustment.

Between the lines: Health insurers have successfully fought off or watered down these audits since they were first proposed. The industry almost certainly will work to weaken any final regulation.

  • America’s Health Insurance Plans — the industry’s leading lobbying group, which has made Medicare Advantage a priority as more insurers rely on the program for revenue — has already warned the audits must be “sound” and “legally appropriate.”




Even if the Trump administration were to delay its proposed site-neutral payments policy for outpatient facilities another year or longer, the political debate isn’t going away.


Prominent hospital groups have said the rule, as proposed, would be illegal.

Lawmakers from both sides of the aisle in both chambers of Congress have voiced opposition.

Hospitals should do their long-term budgeting and strategizing with site-neutrality in mind.

A controversial proposal to cut reimbursement rates for hospital outpatient departments could be finalized this week if the Centers for Medicare & Medicaid Services hits its target date to publish the final rule.

The proposed change to the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System unveiled last July has drawn criticism from the American Hospital Association (AHA), America’s Essential Hospitals (AEH), lawmakers in both houses of Congress, and others who contend the so-called “site-neutral” payment policies fail to account for the added burden hospital-owned facilities shoulder.

Both AHA and AEH said in formal comments last month that the OPPS/ASC proposal for 2019 appears to be illegal. And lawmakers raised related concerns in two separate letters to CMS Administrator Seema Verma, suggesting the proposal flouts congressional intent.

A bipartisan group of 48 senators signed a letter last month urging CMS to rethink its approach, and a bipartisan group of 138 representatives followed suit this month with a letter of their own.

The political pressure could very well leave an imprint on the final version of the rule, which has been under review by the Office of Management and Budget since October 10. A spokesperson for CMS told HealthLeaders that the agency would not speculate on the potential outcome of the review process, reiterating the agency’s plan to publish the final version on or about Thursday, November 1.

But even if the Trump administration were to postpone the site-neutral payments policy another year or longer, hospitals should still be preparing for site-neutrality, since this political debate will play itself out over the next several years one way or another, says Greg Hagood, a senior managing director with the financial advisory firm SOLIC Capital.

That preparation for site-neutrality should include an ambulatory strategy with investments in outpatient settings, Hagood said, with a word of caution for hospitals and health systems.

“I think they need to do their budgeting, though, with an eye toward the fact that certain areas that have historically been anchors to the hospital—whether that’s the emergency room, cardiac care, or some of these hospital outpatient departments—are likely to see diminished margins,” he said.

Basing a budget around more-conservative revenue estimates for these service lines could prompt hospitals to rationalize their cost structures or even adjust their infrastructure, such as by reducing their number of clinics or inpatient beds, Hagood said.

Although the concept of site-neutrality “makes a ton of sense” on the surface, there’s also a complex history in how American reimbursement models have evolved over the past few decades, and hospitals provide expensive services that other outpatient facilities often don’t, such as indigent care, Hagood said. Switching to a site-neutral system would have “a very economically disruptive impact on a lot of large health systems,” he added.

The debate gains another layer of intrigue when you consider how any action taken by lawmakers will be perceived by their constituents.

“If you want to make a congressman vulnerable,” Hagood said, “you’ll say he was supportive of a policy that results in a closure of a hospital in your district.”



CMS announces new waiver flexibility in ACA market


States will have the ability to allow individuals to use ACA subsidies when buying short-term limited duration plans.

States are getting new flexibility in waivers to the Affordable Care Act, including being able to target ACA subsidies for individuals who want to buy short-term, limited duration plans, Centers for Medicare and Medicaid Services Administrator Seema Verma said today.

What is not flexible is protecting access to coverage to those with pre-existing conditions.

Verma gave no specifics on the types of waivers that will be considered, but said the agency was preparing to release a series of waiver concepts. More specifics are expected to be released in the coming weeks.

The policy goes into effect today but is expected to impact states next year, for the 2020 plan year.


The effect of the waivers will likely not be known until next year.

But the allowance of short-term insurance as an ACA alternative could have a more immediate effect as consumers choose plans during open enrollment starting November 1.

The Trump Administration this year extended the length of short-term plans from three months to one year, with an extension allowed for up to three years. Because these plans would not be obligated to cover the essential benefits mandated under the ACA, premiums are expected to be lower.

Opponents have said this would cause an exodus of healthy consumers from the traditional ACA market and rising prices for those left behind.


CMS has been taking credit for stabilizing the ACA market and lowering premiums through the use of waivers and by easing regulations.

For instance, reinsurance waivers have helped reduce premium costs, CMS said. To date, CMS has approved eight state waivers, and all but one have been a reinsurance waiver for states to develop high-risk pools to help pay the cost of high claims.

The reason for the lack of other approved waivers is due to the previous Administration limiting the types of state waiver proposals that the government would approve, CMS said.

The new Section 1332 waivers, called state relief and empowerment waivers, will allow states to “get out from under onerous rules of Obamacare,” Verma said.


Under Section 1332 of the ACA, states can waive certain provisions of the law as long as the new state waiver plan meets specific criteria, or “guardrails,” that help guarantee people retain access to coverage that is at least as comprehensive and affordable as without the waiver; covers as many individuals; and is deficit neutral to the federal government.

The new waivers should aim to provide increased access to affordable private market coverage; encourage sustainable spending growth; foster state innovation; support and empower those in need; and promote consumer-driven healthcare, CMS said.


“Now, states will have a clearer sense of how they can take the lead on making available more insurance options, within the bounds of the Affordable Care Act, that are fiscally sustainable, private sector-driven, and consumer-friendly,” said Health and Human Services Secretary Alex Azar.

“The Trump Administration inherited a health insurance market with skyrocketing premiums and dwindling choices,” said CMS Administrator Seema Verma. “Under the president’s leadership, the Administration recently announced average premiums will decline on the federal exchange for the first time and more insurers will return to offer increased choices.

“But our work isn’t done. Premiums are still much too high and choice is still too limited. This is a new day — this is a new approach to empower states to provide relief. States know much better than the federal government how their markets work. With today’s announcement, we are making sure that they have the ability to adopt innovative strategies to reduce costs for Americans, while providing higher quality options.”


Three-fourths of Medicare Advantage denials overturned on appeal, OIG finds

Dive Brief:

  • An investigation by the HHS Office of Inspector General found large numbers of overturned denials upon appeal from Medicare Advantage organizations, raising concerns that some needed payments and services aren’t going to providers and patients.
  • Between 2014 and 2016, MAOs reversed 75% of their own denials, or about 216,000 a year, according to a report released Thursday. Additional denials were overturned by independent reviewers at higher levels of the appeals process.
  • The numbers are particularly troubling because of the infrequency with which beneficiaries and providers used the appeals process — for just 1% of denials at the initial appeal level, according to the report. 

Dive Insight:

The findings are important in light of the growing popularity of Medicare Advantage. Payers like the stability of the marketplace, and it’s popular with patients, too. In a recent Avalere Health study, MA beneficiaries with chronic conditions had 23% fewer inpatient stays and 33% fewer emergency department visits than people enrolled in Medicare fee-for-service plans.

That said, neither providers nor patients want to feel like they regularly have to appeal payment or service denials, especially with out-of-pocket costs on the rise.

Of the roughly 216,000 overturned denials, more than 80% were payments to providers for services the beneficiary had already received. The remainder — 18% — were for preauthorization of services not yet rendered.

But while some denials are justified, filing and processing appeals puts a burden on providers, MAOs and beneficiaries, especially those needing immediate care, OIG says. 

“Further, although overturned payment denials do not affect access to services for the associated beneficiaries, the denials may impact future access,” the report states. “Providers may be discouraged from ordering services that are frequently denied — even when medically necessary —to avoid the appeals process.”

OIG also points to CMS audits that show “widespread and persistent” problems with MAO denials of payment and care. In 2015, for instance, CMS cited more than half of audited contracts for inappropriate denials and 45% for sending incomplete denial letters. The latter could hinder efforts to successfully appeal a denial, the report notes.

While the agency imposed penalties and sanctions against the affected MAOs, more action is needed, the HHS watchdog says.

Specifically, OIG recommends CMS boost oversight of MAO contracts, with an eye toward identifying those with high overturn rates, and take enforcement actions when needed. The report also calls on CMS to address chronic issues around inappropriate denials and deficient denial letters and inform beneficiaries of serious MAO violations. 

CMS agreed to all three suggestions.


Hospitals prepare for uncompensated care payment change


Hospitals will soon get paid for uncompensated care differently, and though supporters of the change say it will create a fairer measurement, hospitals are leery about how the move will affect their bottom lines.

Starting Oct. 1, CMS will begin a three-year phase-in for how it pays hospitals for uncompensated care. No longer will they get paid based solely on a Medicaid, dual-eligible and disabled patient headcount. Instead, hospitals will need to provide patient-level detail of the services performed, as well as total uncompensated care totals.

Rita Numerof, co-founder and president of Numerof & Associates, told Healthcare Dive that counting heads is easier for hospitals, but it’s not always accurate. That distortion can result in institutions having an “unfair advantage” in terms of payments under the Disproportionate Share Hospital program. Instead, CMS will now gauge the actual care experience.

Numerof said the move looks to target flaws in the current payment model and improve transparency and accountability. “I think that looking at the services that are provided rather than just looking at the number of people and making an assumption about what their utilization is is a lot more accurate,” she said.

Chuck Alsdurf, director of healthcare finance policy and operational initiatives at Healthcare Financial Management Association, told Healthcare Dive the change “levels the playing field” for hospitals. However, several issues and concerns remain.

Worksheet S-10 and uncompensated care

CMS recently released its hospital inpatient prospective payment system final rule for fiscal year 2019, which included a provision that will require hospitals to use Worksheet S-10 to provide patient-level compensated care information that can be used to make payments to disproportionate share hospitals.

That patient-level data includes forms in which hospitals must attest to a patient’s eligibility, such as whether the person meets the criteria through disability, dual eligibility or Medicaid.

At the same time, CMS will audit Worksheet S-10 data in the fall and says it will continue provider education efforts and look to improve Worksheet S-10 instructions.

CMS made the change to improve the accuracy in the way that DSH payments are made. “Historically, the approach has been a head-count approach, essentially taking a look and totaling up the number of Medicaid patients, dual patients and those that are disabled,” Numerof said.

The new method isn’t as easy as a headcount, but it improves accuracy and is closer to what a hospital is actually owed.

According to the agency, about half of hospitals that receive uncompensated care payments felt the need to modify their S-10 data. Alsdurf said that’s not a large enough number to assume the data is accurate or reliable. “HFMA members view this as half of the hospitals possibly submitted imprecise data based on vague instructions that impact their hospital payments. So, at the current time, we do not feel this model is clear or accurate enough to utilize for such a significant distribution of funds,” he said.

Critics charge that the change might hurt Medicaid expansion states and help hospitals in states that didn’t expand the program. Now, hospitals calculate Medicaid Patient Days and send that information along to CMS. However, supporters of the change say that non-expansion states with fewer Medicaid recipients now lose out on uncompensated care payments compared to expansion states.

In a letter to CMS about the change, Dallas-based Parkland Memorial Hospital CEO Frederick Cerise said his facility is one of the largest providers of uncompensated care in Texas, which has not expanded Medicaid.

He said Parkland supports the change and called using S-10 data a “more exact measure.” The system provided $2.37 billion in uncompensated care in FY 2015. More than three-fourths of the system’s payer mix is unfunded (nearly half) or Medicaid (almost one-third).

The American Hospital Association agrees that Worksheet S-10 has the potential to provide a more accurate measure of uncompensated care costs. However, Erika Rogan, senior associate director of policy at AHA, told Healthcare Dive in a statement the group has concerns about the “accuracy and consistency of the S-10.”

Meanwhile, America’s Essential Hospitals, which represents more than 325 member hospitals with much of the country’s uncompensated care, sent a 44-page letter to CMS in June listing a series of concerns and recommendations to resolve the issues.

“The high cost of providing complex care to struggling Americans leaves our hospitals with limited resources, driving them to find increasingly innovative strategies for high-quality care,” AEH CEO Bruce Siegel said. “But improving care coordination and quality while staying true to a mission of helping those in need can be a delicate balance. This balance is threatened by payment cuts to hospitals.”

What does the change mean for hospitals?

Uncompensated care costs in community hospitals are on the rise after years of decreases following the Affordable Care Act.

Uncompensated care is bad debt charges plus financial assistance charges. This includes caring for uninsured patients unable to pay their bills. Uncompensated care doesn’t include underpayments from Medicare or Medicaid.

The AHA earlier this year said 4,840 community hospitals provided a total of $38.3 billion in uncompensated care in 2016, up from $35.7 billion at 4,862 community hospitals in 2015. And uninsured numbers have increased in the years since 2016, so those numbers are likely higher now.

Hospitals are concerned about any change that might result in them losing out on uncompensated care funding. However, what the change will mean for hospitals depends on multiple factors, including patient mix, location and how much the facility already relies on uncompensated care payments.

The AHA had hoped CMS would put into place protections to shield hospitals hurt by the change. In its comments to CMS, the hospital group requested a stop-loss policy that would kick in if hospitals lost more than 10% of DSH payments in a year after using the S-10 worksheet. AHA estimated that nearly one-fifth of hospitals might face that problem in FY 2019. AEH also requested a stop-loss policy.

Ultimately, CMS didn’t put in that provision. Numerof said she understands the agency’s choice. Hospitals need to understand where the market is headed and build infrastructure and systems to meet those demands accordingly. She added that no other business would request stop-loss protection based on changes like the S-10.

Concerning community relations, Alsdurf doesn’t expect the change will have an impact. “Hospitals will continue to provide care to those who cannot afford it, so I don’t think this change will have any impact on the community, positive or negative,” he said.

How should hospitals prepare?

There are still questions about the S-10, but hospitals can’t wait for CMS to provide all answers and clarifications. The change is here and hospitals need to move forward with the information available to them.

This process means maximizing uncompensated care payments in the new system. One step is for hospitals to make sure their charity care and bad debt policies are updated and that those policies are followed, so they receive the level of payments they’re owed.

Alsdurf said hospitals are already collecting Medicaid days data. Now they’ll have to add another piece. He expects the change will be minor for reporting and data gathering practices.

“Until they receive feedback from CMS on their data, it’s hard to do much other than make sure they feel good about the data … I’d suggest they begin running reports from their billing systems and reconciling the data (if they haven’t already) to the S-10 worksheet for FY 2014 to present,” Alsdurf said.

He added that hospitals should also continue to review their data as CMS provides more explicit instructions about S-10 in the coming months.



Two major hospital groups suggested separately that CMS had overstepped its legal authority in proposals for next year.


The administration has touted site-neutral payment policies as a way to rationalize reimbursement.

Industry groups contend that site-specific costs should be considered when calculating rates.

The proposals intersect with administration efforts to reduce drug costs.

The deadline to comment on proposed changes to the Medicare outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) payment system for next year passed Monday evening.

Hospital groups did not pass up the opportunity to make their displeasure known, and they hinted that legal action to block the proposal could be warranted.

Among the more than 2,800 comments received, there were some unsurprisingly unhappy responses from the American Hospital Association (AHA), America’s Essential Hospitals (AEH), and others who had already expressed their general opposition the government’s plan when it was announced in July.

Both groups added detail to their feedback Monday and accused the Centers of Medicare & Medicaid Services (CMS) of pursuing changes beyond its legal authority.

“The AHA is deeply disappointed in certain proposals that CMS has chosen to set forth in this rule, which run afoul of the law and rely on the most cursory of analyses and policy rationales,” AHA Executive Vice President Thomas P. Nickels wrote. “Taken together, they would have a chilling effect on beneficiary access to care and new technologies, while also dramatically increasing regulatory burden.”

The AHA objects specifically to three items in the CMS proposal:

  1. A payment reduction for hospital outpatient clinic visits in certain off-campus provider-based departments (PBD). These visits would be reimbursed at the physician fee schedule rate, which equals 40% of the OPPS rate.
  2. A payment reduction for “services from expanded clinical families” in certain off-campus PBDs. This would also be set at 40% of the OPPS rate.
  3. A continuation of the policy that pays for 340B program separately payable drugs at 22.5% less than the average sales price and an expansion of that policy to certain PBDs.

The AEH comment, signed by organization President and CEO Bruce Siegel, MD, MPH, made similar points.

“We are deeply concerned about several provisions of the proposed rule that exceed the agency’s statutory authority and would have a disproportionately negative impact on essential hospitals—those that provide stability and choice for people who face barriers to care,” Siegel wrote.

CMS Administrator Seema Verma has touted the so-called “site-neutral” payment proposal as an effort to rationalize the way the federal government reimburses services, saying it doesn’t make sense for taxpayer-funded healthcare programs to pay different rates depending upon the site of service.

“It’s a great example of some of the bizarre things in the Medicare program that just don’t make sense and that are actually having a perverse incentive on the entire healthcare delivery system,” Verma said.

In a comment on behalf of about 4,000 hospitals and 165,000 other providers, Premier Senior Vice President of Public Affairs Blair Childs contended that there are key differences between PBDs and physician practices that should be taken into account in CMS reimbursement decisions.

“At a time when providers are adopting population health strategies that seek to limit inpatient care when it is safe and medically appropriate, we are concerned that CMS’ over-reach is counterproductive and will have negative consequences for beneficiaries,” Childs wrote. “In lieu of expansive site-neutral payment policies, CMS should focus on methods to encourage providers to adopt risk-based alternative payment models”

Less than 20% of the comments received by CMS had been released publicly as of Tuesday morning, but major industry groups released their comments publicly on their own, reflecting a variety of concerns beyond the site-neutral payment policy. The Pew Charitable Trusts, for example, focused on a request for information in the proposal pertaining to the Competitive Acquisition Program.