CMS Quality Measures0

iStock_000016711099Small-300x225This Health Law e-Bulletin, published on March 20, 2015, summarizes the 2015 National Impact Assessment of CMS Quality Measures Report (the “2015 Impact Report”) (as mandated by section 3014(b), as amended by section 10304, of the Affordable Care Act (the “ACA”)).

What if one day the Internal Revenue Service (“IRS”) changed the ways in which the Federal Government taxed individuals? For example, rather than assessing tax liability on the basis of income, what if the IRS assessed taxes on the basis of an individual’s contribution to society, or on his or her general demeanor or overall perception as “good” or “bad”? Under the ACA, Medicare has started to transform in such an historical manner, reimbursing hospitals now (and physicians soon) on the basis of performance, efficiency, and patient satisfaction, gradually replacing the previous system that structured reimbursement on the costs involved in the delivery of health care. The 2015 Impact Report represents the second assessment by CMS since the ACA became the law in 2010, this time focusing on 25 CMS reporting programs and nearly 700 quality measures (using data from 2006 to 2013).

The ACA mandated a push toward high-quality, evidence-based care for patients, with top priorities including (1) making care safer, (2) ensuring that each person and family are engaged, (3) promoting effective communication and coordination of care, (4) promoting the most effective prevention and treatment practices, (5) working with communities to promote wide use of best practices to enable healthy living and (6) making quality care affordable. The 2015 Impact Report provides a 262-page scorecard for those who may be interested in the ACA’s success during its first few years.

CMS is committed to quality measurement as it transforms the very nature of modern American health care. The 2015 Impact Report illustrates how providers, private payers, and communities can work together to achieve the greatest impact on quality. As stated in the 2015 Impact Report: “Everyone receiving healthcare in the nation is likely to benefit from CMS programs and initiatives, as healthcare professionals engage in delivery system reform to achieve better care for patients, better health for the U.S. population and lower costs through quality improvement.” The complete 2015 Impact Report can be found here.

OIG Report on Medicare and CAHs0

The following E-Bulletin discussing a recent OIG Report on Medicare and CAHs was published on March 18, 2015, by the State Bar of California, Business Law Section’s Health Law Committee.

iStock_000009499779SmallThe following summarizes a recent report by the Office of Inspector General (OIG) that found Medicare could have saved billions over a 6-year period at Critical Access Hospitals if swing-bed services were reimbursed using the skilled nursing facility prospective payment system rate.

To ensure that beneficiaries in rural areas have access to a range of hospital services, Congress established the Rural Flexibility Program, which created Critical Access Hospitals (CAHs). CAHs have broad latitude in the types of inpatient and outpatient services they provide, including “swing-bed” services, which are the equivalent of services performed at a skilled nursing facility (SNF). Medicare reimburses CAHs at 101 percent of their reasonable costs for providing services to beneficiaries rather than at rates set by Medicare’s prospective payment system (PPS) or Medicare’s fee schedules.

For a hospital to be designated as a CAH, it must meet certain Conditions of Participation (CoPs). Some of these CoP requirements include: (1) being located in a rural area; (2) either being at a certain distance from other hospitals or being grandfathered as a State-designated necessary provider; (3) having 25 or fewer beds used for inpatient care or swing-bed services; and (4) having an annual average length of stay for a patient that does not exceed 96 hours.Read more →

Cadillac Tax Coming Soon0

This E-Bulletin was first published by the Business Law Section of the California State Bar on March 2, 2015.

iStock_000004290636LargeAdded to the Internal Revenue Code (“IRC”) by the Affordable Care Act (“ACA”), Section 4980I begins after December 17, 2017, and the new regulation imposes a 40 percent excise tax (the “Cadillac Tax”) on employer-sponsored coverage that has an aggregate cost in excess of a statutory dollar limit (revised annually). The excise tax applies to “the excess, if any, of the aggregate cost of the applicable coverage of the employee for the month over the applicable dollars limit for the employee for the month.” Under Section 4980I(d)(3), the term “employee” includes “a former employee, surviving spouse, or other primary insured individual.” The 2018-baseline dollar limit per-employee in 2018 for self-only coverage is $10,200 and for other-than-self-only coverage is $27,500. [§ 4980I(b)(3)(C)]

Other adjustments to increase the applicable dollar limits include a “health cost adjustment percentage,” such as cost-of-living adjustment, agent and gender adjustments, if applicable, an adjustment for a “qualified retiree” or for someone “who participates in a plan sponsored by an employer the majority of whose employees covered by the plan are engaged in a high-risk profession or employed to repair or install electrical or telecommunication lines.” The entity obligated to pay the excise tax includes (1) the “health insurance issuer” under an insured plan, (2) “the employer” if the applicable coverage “consists of coverage under which the employer makes contributions to” an HAS or Archer MSA, and (3) “the person that administers the plan” in the case of any other applicable coverage. In each instance, the employer must prepare the calculations for the excise tax and notify the responsible entity.

Pursuant to Section 4980I(f)(10), the excise tax is not deductible for federal tax purposes. Certain types of coverage excluded from applicable coverage include accident or disability income insurance, liability insurance (such as automobile liability insurance), worker’ compensation insurance, dental and vision insurance (if provided under a separate policy) and credit-only insurance, among others.

The IRS has invited comments on the issues no later than May 15, 2015. Additional information can be found here.

Advancing Health Care The Old-Fashioned Way0

This article, Advancing Health Care the Old-Fashioned Way, was first published by Healthcare Innovation News on February 8, 2015.

Stethoscope and hourglass with book.“Nothing recedes like progress.”
— Edward Estlin (e.e.) Cummings

Though cutting-edge technology serves as the foundation for modern American healthcare, an accurate measure of progress must consider the occasional conflict between society and science. Even as yesterday’s medical miracles give way to what are now considered “state of the art” practices, it is the duty of health care providers to remain mindful of both sides of the equation, balancing the capabilities of today’s technologies with the needs of today’s patient. If society and science are not in sync, patient care will suffer, and sometimes we can only advance healthcare through old-fashioned methods. For example, radiology information systems (RIS) and picture archiving and communication systems (PACS) collaborate to deliver dynamic and brilliant medical images to any healthcare provider around the globe with access to a desktop computer or mobile device. And yet, if these technologically advanced tools of the trade fail to employ the appropriate methods of encryption as they transmit digital health information to a doctor’s iPad as he or she vacations on the island of Tristan da Cunha, or worse, send this sensitive information to the hard drive of any one of the island’s 297 permanent residents living in the recesses of the Atlantic Ocean, a data breach occurs. This is no small matter for the hospital of today, and could easily result in a series of fines that could force the shutting of its doors for a single infraction.

Read more →

A Brave New Medicare0

This article, A Brave New Medicare, was first published in California Healthcare News on February 4, 2015. 

Caduceus background“Consistency is contrary to nature, contrary to life. The only completely consistent people are dead.” —Aldous Huxley

Next month the Affordable Care Act turns five, and by all accounts the influence of this historic legislation will forever change the landscape of health care in the United States, regardless of its ultimate fate. As each passing year introduces thousands of new regulatory pages to an already expansive body of federal and state law, praise for what has come to be known as health care reform is only rivaled by the relentless partisan calls for its repeal.

Recognition of the Affordable Care Act’s more laudable accomplishments should not be overlooked, especially the elimination of preexisting conditions, an overall reduction in the number of uninsured, and, according to some experts, findings that point to an actual slowing in health care spending at a national level. On the other hand, we as a nation must also be mindful of any collateral damage caused by reform, especially when considering that the immediate statistical data used to document the success of reform tends to present itself easily, while the longer-term, potentially less favorable information upon which the Affordable Care Act can also be judged may take decades to unfold.Read more →

Revisions to Certain Patient’s Rights, Conditions of Participation and Conditions of Coverage0

iStock_000017988429SmallThis State Bar of California Health Law E-Bulletin was published on December 16, 2014.

Medicare and Medicaid Program; Revisions to Certain Patient’s Rights Conditions of Participation and Conditions of Coverage

Last year the U.S. Supreme Court held that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional because it violated the Fifth Amendment. United States v. Windsor, 133 S. Ct. 2675, 2695 (2013).  Section 3 defined the word “marriage” to mean only a legal union between one man and one woman, and so “spouse” could only refer to a person of the opposite sex who was a husband or wife.  1 U.S.C.  § 7.  The Supreme Court argued that the federal prohibition of same-sex marriages that states had lawfully recognized “undermined both the public and private significance of state sanctioned same-sex marriages,” and that Section 3’s ‘‘purpose and effect [was] to disparage and to injure those whom the State, by its marriage laws, sought to protect’’ 133 S. Ct. at 2694-95. … Read more →

The Poor Get Poorer: the Fate of California’s Hospitals Under the Affordable Care Act0

iStock_000013550840SmallThis article appeared in California Health Law News, Volume XXXII, Issue 3, Fall 2014/Winter 2015

[1] By Samuel R. Maizel[2] and Craig B. Garner[3]


Distressed hospitals in California operate on small or non-existent profit margins.[4] For many of these hospitals, Medicare and Medicaid (Medi-Cal in California) are the largest payors.[5] The Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”)[6] was designed in part to increase the number of insured nation-wide,[7] the result of which logically should have been positive for California hospitals. Any cause for celebration, however, must first prevail over the cost containment provisions firmly entrenched in the Affordable Care Act, as these regulations created new concerns for California’s financially distressed hospitals.[8] Included among the multitude of threatening provisions in the Affordable Care Act are:

  1. A complete recalibration of Medicare disproportionate share payments (“DSH”) to hospitals[9];
  2. A reduction in Medicare revenue up to 1.5% during Fiscal Year 2015 (and 2.0% by Fiscal Year 2017) for hospitals which perform poorly under the Hospital Value Based Purchasing (“VBP”) Program[10]; and
  3. A penalty of as much as 3.0% for the hospitals which fail to meet the standards set forth in the Hospital Readmission Reduction Program (“RRP”).[11]

In addition to a penalty up to 2% for lapses in inpatient quality reporting and similar penalty relating to outpatient quality reporting, [12] a 2% cut in Medicare due to sequestration[13] as well as a penalty for those hospitals which fail to attest for “Meaningful Use”,[14] collectively the potential for any hospital to lose more than 10% of its Medicare revenue creates daunting challenges, especially with those institutions in California already struggling financially not to mention lacking the resources to establish the necessary infrastructure to compete in this era of change.[15]Read more →

The Nexus Between Compliance and Reputation0

This article first appeared in Corporate Compliance Insights on December 11, 2014.

reputation conceptual meter“It is easier to cope with a bad conscience than with a bad reputation.” — Friedrich Nietzsche

The past few years have been fraught with litigation for the health care industry, with major companies feeling the sting of compliance in both their reputations and their pocketbooks. In early November, Stryker settled hip implant litigation for more than $1 billion. In 2012, GlaxoSmithKline paid $3 billion to settle claims of overcharging, kickbacks and other health care transgressions, while, Abbott Laboratories paid $1.5 billion and Johnson & Johnson $1.2 billion, both for alleged violations of law. Even so, during the first week of November 2014, Stryker traded at its 52-week high, as Abbott and Johnson & Johnson traded near their 52-week high, though GlaxoSmithKline dipped near its 52-week low. GlaxoSmithKline’s downward trend began before a court in Changsha, China fined the company $500 million after a bribery conviction, coupled with the company’s pending bribery charges in the United Arab Emirates, Syria, Jordan, Iraq and Poland. Sadly, bribery charges are not uncommon in today’s health care market, as can be seen by the events of 2013, when prosecutors in Poland investigated Stryker, and those in 2014, when Abbott settled claims in India. China also fined Johnson & Johnson in 2014 for bribery charges, with a penalty of just over $3 million.Read more →

HIPAA Privacy in Emergency Situations0

iStock_000019241379SmallThis State Bar of California Health Law E-Bulletin was published on November 19, 2014.

In response to concerns about the spread of Ebola Hemorrhagic Fever, the United States Department of Health and Human Services (“HHS”), Office of Civil Rights (“OCR”) issued a bulletin clarifying the ways in which the HIPAA Privacy Rule applies in emergency situations. Designed to protect the privacy rights of patients’ protected health information (“PHI”), OCR is mindful that in certain events health care providers must balance privacy rights with the need to protect the nation’s public health. The Privacy Rule provides for certain exceptions on a daily basis:

*  The Privacy Rule permits covered entities to share patient information without authorization when it is necessary to treat the patient (or to treat different patients).

*  Public health authorities and other parties responsible for ensuring public health and safety have access to PHI. This includes possible disclosure to a public health authority, at the direction of a public health authority, or to individuals at risk of contracting or spreading a disease or condition.

Read more →

Medicare’s Hospital Readmissions Reduction Program0


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).