Medicare’s Hospital Readmissions Reduction Program0

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This November 10, 2014, e-Bulletin is from the Health Law Committee of the Business Law Section of the California State Bar.

In its third year, Medicare’s Hospital Readmissions Reduction Program (“RRP”) penalized hospitals for certain excess readmissions, including those relating to acute myocardial infarction (AMI), heart failure (HF), pneumonia (PN), total hip arthroplasty (THA) and total knee arthroplasty (TKA). On October 1, 2014 (the beginning of the new fiscal year for the federal government), the total amount for which a hospital may be penalized increased to 3 percent (up from 2 percent in fiscal year 2014 and 1 percent in fiscal year 2013). In addition to the increased penalty, this year Medicare also introduced four new measures for inclusion in the Hospital RRP: (1) coronary artery bypass grafts (CABG) surgery; (2) chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI); and (4) other vascular conditions.

For 2015, the formula employed by CMS to calculate the readmissions penalty is:

Aggregate payments for excess readmissions =

[(sum of base operating DRG payments for AMI) x (Excess Readmission Ratio for AMI-1)] + [(sum of base operating DRG payments for HF) x (Excess Readmission Ratio for HF-1)] + [sum of base operating DRG payments for PN x (Excess Readmission Ratio for PN-1)] + [(sum of base operating DRG payments for COPD) x (Excess Readmissions Ratio for COPD-1)] + [(sum of base operating DRG payments for THA/TKA) x (Excess readmissions Ratio for THA/TKA-1)].

Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1 – (Aggregate payments for excess readmissions/Aggregate payments for all discharges.) Readmission Adjustment Factor for 2015 is the higher of the ratio or 0.9700, all of which is based on claims data from July 1, 2010 to June 30, 2013.

In California, 223 hospitals (64 percent) were penalized, with the average penalty being 0.41 percent. By comparison, 307 hospitals nationwide lost the maximum amount (1 percent) of their patient reimbursements in fiscal year 2013, and only 18 hospitals lost the maximum amount (2 percent) in fiscal year 2014. This year, 39 hospitals will receive the largest penalty (3 percent).  A complete listing of hospital results for fiscal year 2014–2015 is available at this link (courtesy of Kaiser Health News).

California’s Annual Data Breach Report0

statebarlogoThis November 7, 2014, e-Bulletin is from the Health Law Committee of the Business Law Section of the California State Bar.

In the October 2014 California Data Breach Report, Attorney General Kamala D. Harris offers a number of recommendations to protect the 38 million consumers in California, the same state where 17 percent of 2012 data breaches in the United States occurred and with a 28 percent increase in 2013. Some key findings from the AG’s report include:

  • In 2013 the AG’s Office received 167 data breach reports.
  • The retail industry reported the most breaches in 2013 (26 percent). Health care made up for 15 percent of statewide breaches in 2013.
  • More than half of the 2013 breaches (53 percent) were caused by computer intrusions (malware and hacking). The remaining breaches resulted from physical loss or theft of laptops or other devices containing unencrypted personal information (26 percent), unintentional errors (18 percent) and intentional misuse by insiders (4 percent).
  • Between 2012 and 2013, lost or stolen hardware or portable media containing unencrypted data made up the majority of breaches in the health care sector (70 percent).

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The Problem With Value-Based Purchasing0

This article first appeared in AHLA Weekly on October 31, 2014.

1379617_thumbnailFrom its inception on October 1, 2012,[1] the Hospital Value-Based Purchasing (VBP) Program shifted Medicare’s paradigm to emphasize performance over costs in determining hospital reimbursement.[2] Reducing the overall Medicare reimbursement to hospitals by an estimated $1.4 billion for Fiscal Year (FY) 2015,[3] the VBP Program was quick to secure the attention of the nation’s health care providers. Technically “budget neutral,”[4] the VBP Program will return this same $1.4 billion to hospitals the following year in the form of performance incentives.[5] According to the federal government: The program’s “benefits will be seen in improved patient outcomes, safety, and in the patient’s experience of care. However, [the federal government] cannot estimate these benefits in actual dollar and patient terms.”[6]

As the federal government waits to assess the accuracy of its prediction, the FY 2015 reduction of 1.50% will finally level off at two percent (2%) in 2017.[7] An additional two years, however, are unnecessary to evaluate the VBP Program under fundamental accounting principles when using a general overview into the ways in which successful and profitable companies operate. Viewed from this perspective, the VBP Program is fundamentally flawed, and data from 2015, 2016, or 2017 will not present opportunities for correction. This article suggests that while smaller hospitals may bear the greatest collateral damage from the VBP Program, larger systems may suffer as well. The number of hospitals forced into financial distress or insolvency by the Hospital VBP Program remains to be seen, although consideration should be given to the number of hospitals lost to their communities it would take to undermine the projected benefits relating to outcomes, safety, and the overall patient experience. … Read more →

Just As Fragile As A Patient0

This article was first published on October 30, 2014 in the Los Angeles Daily Journal.

iStock_000036113648Large“Where there is a why, there is a how.” — Friedrich Nietzsche

The American hospital has evolved greatly over the past 100 years, from the almshouse once visited mainly by the desolate and poor as a last resort to that enigmatic, cutting edge institution which today forms the foundation of modern American health care. Advances in technology and medical science have transformed what were once terminal illnesses into minor health inconveniences, with the real battles against serious health threats typically occurring inside the four walls of a patient’s local hospital. The modern hospital has become such a beacon of hope that in 1986 Congress passed laws granting nearly everyone an unrestricted entitlement to emergency medical treatment at most acute care facilities.

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Safeguarding the Pharmaceutical Distribution System0

This October 23, 2014, e-Bulletin is from the Health Law Committee of the Business Law Section of the California State Bar.

statebarlogoIn November 2013, Congress passed and President Obama signed into law the Drug Quality and Security Act (the “2013 Act,” Public Law 113-54), which intended to create uniform, national licensing standards for wholesale distributors and third-party logistics providers for the purpose of safeguarding the pharmaceutical distribution system.  In passing this new law, Congress recognized the need for clarity in distinguishing between manufacturers, wholesalers and distributors. To this end, the 2013 Act established uniform, national licensing standards that specifically preempted existing state licensing requirements for participation in the supply chain of pharmaceutical products. … Read more →

Medicare: The Gift That Keeps On Giving0

This article was first published at Corporate Compliance Insights on September 5, 2014.

iStock_000010996009Small“The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis.”  — Dante Alighieri

The end of summer brings with it change across the United States.  Children and many young adults prepare themselves for the new school year, professional baseball players set their sights on what has come to be known as the Fall Classic, and foliage undergoes the first stages of fall’s impending metamorphosis. For America’s health care professionals, August has also become synonymous with the release of the final rule from the Centers of Medicare & Medicaid Services (“CMS”), which covers the Medicare Program’s Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals (“IPPS”), and sets the rules of the game for those in the field, at least for another year.

Including such updates to the hospital IPPS for operating and capital-related costs as CMS continues to implement the Affordable Care Act, changes relating to graduate medical education (“GME”) and indirect medical education (“IME”) payments, revisions to the Hospital Value-Based Purchasing (“VBP”) Program, the Hospital Readmissions Reduction Program (“HRRP”), and the Hospital-Acquired Condition (“HAC”) Reduction Program, technical corrections to the provider administrative appeals and judicial review process, expanded use of Medicare Advantage (“MA”) risk adjustment data, not to mention the alignment of reporting and submission timelines for quality measures within the Medicare E.H.R. Incentive Program and IQR Program, this is one millenary regulation not to be missed. For those who may shy away from such Federal Register epics, the following is a brief overview of two critical topics. … Read more →

Medicare: The Perpetual Balance Between Performance and Preservation0

This article was first published in the Journal of Contemporary Health law & Policy on August 1, 2014.

iStock_000039923254Medium“Confusion is a word we have invented for an order which is not understood.” — Henry Miller, Tropic of Capricorn

Passed by Congress and signed by President Lyndon Johnson into law in 1965, Medicare has weathered storms from all directions, growing to be the preeminent standard for health insurance in the United States.  The idea of losing Medicare as a vital public benefit still remains the single greatest fear with which each passing generation of Americans must contend, and yet, these challenges over the past fifty years, designed to fortify Medicare’s foundation and ensure its longevity, continue to take a toll on the program.

The most recent climate of reform includes changes implemented by the Patient Protection and Affordable Care Act (“PPACA”).  The PPACA is designed to expand coverage for a broader group of people, yet it adds unprecedented layers of complexity such that it may be but a matter of time before the confusion experienced by today’s providers proves to be Medicare’s undoing altogether.  The decades of trial and error upon which health care in the United States have been built, at least from the point of view of both physicians and lawmakers who watch from the sidelines, may give way to confusion and disruption industry-wide as a result of newly enacted regulations.

Today, Medicare is the preeminent standard for health insurance in the United States, expanding despite fluctuations in the economic, political and social climate since its initial passage.  However, in its struggle toward sustainability, the Medicare Program must understand the resulting consequences as it distances itself further and further from its original simplicity in 1965.

Medicare’s original cost-based system gave way in the 1980s to the Prospective Payment System (“PPS”), an event noted by many with great concern.  Under PPACA, the Medicare system takes another monumental step as it incorporates elements of performance into the PPS.  Formulaic and confusing, Medicare’s recent approach to provider reimbursement has been likened to Finnegan’s Wake by James Joyce, a book that some critics warn requires “skeleton keys” to understand.  In many ways, the need for hospitals and physicians to understand these performance-based measures may seem less important when fear of Medicare insolvency looms in the distance,13 especially as it relates to Medicare Part A (hospital insurance benefits for inpatient services) and Medicare Part B (supplemental insurance for outpatient services, among other things).  Irrespective of the fleeting grasp providers may have over PPACA’s new Medicare system, hospitals and physicians alike are mindful that the PPS as they once knew it is gone, replaced in part with the beginnings of a performance-based Medicare in which they may lose precious revenue, one percentage point at a time.

The entire article can be viewed here.

Health Care Reform Without a Revolution0

This article was first published in the Los Angeles Daily Journal on July 9, 2014.

iStock_000003498126MediumHealth care reform is insignificant in comparison to the fundamental purpose of the system it must change. Unlike a terminal illness, which doubles as a harbinger to remind us of the inescapable permanence of death, much of the influence of health care reform over which the nation has debated these past four years will prove to be fleeting at best. Time will shape and reshape the Affordable Care Act (ACA) in ways outside today’s imagination, but the hospital bed, that symbolic and functional centerpiece of American health care, will never be anyone’s destination of choice.

The transformation of Medicare from its humble origins in 1965 into the template for American health care’s payer system was certainly no small feat, although maintaining the Part B premiums at Medicare’s original price tag of $3.00 per month never stood a chance. Whether as a result of Medicare’s effect or in spite of it, advances in medicine since 1965 have played a large part in the program’s evolution, with today’s emphasis on performance in lieu of costs standing as a reflection of an inherent expectation that modern medicine should have the twofold intention to never do harm and excel at all times. Perhaps ACA’s greatest achievement is that it has granted an aura of entitlement to all hospital patients, for now society has not only come to expect quality medical care at any time, it also expects this service free of charge. … Read more →

The Light at the End of the Tunnel . . . or Cliff0

 This article was published on June 5, 2014, in Corporate Compliance Insights.

iStock_000000261863Small“Truth emerges more readily from error than from confusion.”  — Francis Bacon

With each passing day health care reform in America gains momentum, even as the chasm between successful and unsuccessful providers continues to expand. Earlier this month, the Federal Government tested the fortitude of the system when it released thousands of regulatory pages explaining the many ways in which Medicare providers will get paid and penalized over the next few years.  Eagerly awaited by those in the field, the 2015 Hospital Inpatient Prospective Payment System regulations for acute care hospitals lives up to all expectations as it journeys through the labyrinth created by such diffuse entities as the Hospital Value-Based Purchasing Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Conditions Reduction Program.  Not to disappoint its devoted readers, the Powers That Be issued regulations the same week for skilled nursing facilities, inpatient psychiatric facilities, inpatient rehabilitation facilities, hospices, and federally qualified health centers. … Read more →

Lessons Learned from Dial-Up0

This article was first published in the Daily Journal on May 15, 2014.

iStock_000013044243MediumIn the largest cities across the U.S., locating an Internet connection has become as easy as finding a cup of coffee. In modern times, however, the ability to effectively communicate in business is inextricably connected to the rate by which one is able to transfer data. Like a bad cup of coffee, we may tolerate a slow connection when options are limited, but no one really enjoys it. Lessons from both support the notion that we not only prefer quality speed, but it also improves our performance at work.

If bit rates are the standard measurement for telecommunications, hospital beds present the equivalent in health care. … Read more →