Health Care Reform Blog : Health Care Law Reform : McDermott Will & Emery Law Firm

The Facts
On May 18, 2009, the Senate Finance Committee released the last of its three anticipated health reform option papers.  The proposals under consideration would make significant changes in the obligations of tax-exempt hospitals to provide charitable patient care, as well as changes in Medicare provider payments, beneficiary cost-sharing and taxability of employer-sponsored health benefits.

Charity Care Obligations of Tax-Exempt Hospitals
Tax-exempt hospitals could be required to do a periodic community needs analysis, provide minimum amounts of free care to the poor, not refuse services to patients who are unable to pay and adhere to restrictions in patient collection practices.  Senator Charles Grassley (R-Iowa) has justified these proposed new requirements because making health insurance coverage available to everyone should, in theory, minimize the amount of hospital uncompensated care.  Under this proposal, in addition to revoking federal tax-exempt status, the Internal Revenue Service could impose significant excise taxes (intermediate sanctions) on exempt hospitals that fail to comply with these new requirements.

Click here for the comment letter from McDermott partner Douglas Mancino outlining reasons to reject the Finance Committee's proposals to require tax-exempt hospitals to regularly conduct a community needs analysis and to provide a minimum annual level of charitable patient care.  This letter includes a copy of the new schedule H for tax-exempt hospitals and Mr. Mancino's article, "The Charity Care Conundrum for Nonprofit Hospitals."

Payments to Providers and Drug Manufacturers
Medicare would propose “spending reductions in [regional] areas...above a certain threshold compared to the national average.”  Medicare would reduce graduate medical education or disproportionate share payments.  Physician payments could be tied to outcomes and productivity, and reduced by a panel of experts if determined to be “misvalued.”  There would also be adjustments made to beneficiary cost-sharing, including a single annual maximum or other combined approach.  Beneficiaries would also face higher Part D prescription drug premiums, perhaps based on income.  Prescription drug makers could be subject to higher Medicaid rebate requirements.  Home health agencies would also face significant reductions in their Medicare payments.

Taxability of Employer-Sponsored Health Benefits
Various proposals were advanced for eliminating deductions for, as well as taxing the value of, employee health benefits, for all or just higher-income taxpayers.  The taxable amount could be the full value of the benefits or just their value above a benchmark basic plan such as the Federal Employees Health Benefits Program.

What’s at Stake
Tax-exempt hospitals may be required to provide substantial additional amounts of free and heavily discounted care to patients who cannot afford to pay, or risk punitive excise taxes. Providers and pharmaceutical companies would face a wide variety of payment adjustments, which are likely to be adverse in many if not most cases.  Higher-income employees and perhaps all employees would face the elimination, in whole or in part, of the current tax exclusion for health benefits.

Steps to Consider

• Tax-exempt hospitals should examine their current approaches to charitable patient care and consider the financial impact of being required to expand their current federally mandated emergency room services obligations to include non-emergency care.
• Employers should carefully monitor taxable health benefits proposals and prepare to adapt to the elimination or reduction of the current tax exclusion

• Print
• Share Link

Guest commentary from Susan Reynolds, M.D., Ph.D., president and CEO of the Institute for Medical Leadership, and Jay Volk, president of Workflow.com.

The concept of interoperability is part of the definition of “meaningful use.”  Therefore, many hospitals and physicians that want to position themselves for the Medicare incentives are asking whether EHR systems will “talk” to each other, i.e., what standards will be set by the administration so that these information systems are easily integrated, and when those standards will be set.

The administration should carefully consider its ultimate goals when developing the standard for “meaningful use.”  If the administration’s goal is to get technology in the hands of doctors, it should consider writing rules that define meaningful use very liberally.  If the goal of the administration is return on investment, it should consider writing rules that define meaningful use with measurable goals.  A liberal standard may mean more practitioners buying, but not ultimately using EHRs as effectively as they could be used.  A stricter standard may mean fewer practitioners purchasing EHRs, but those practitioners will make the commitment to use them and likely see the metric benefits of EHR use.  Of course, the devil in the details of “meaningful use” is usability.  Vendors will need to respond to the new federal regulations to make their systems user-friendly for physicians and hospitals.

Susan Reynolds, M.D., Ph.D., can be contacted at sreynolds@medleadership.com or +1 800 361 5321. Jay Volk can be contacted at jay@workflow.com or +1 440 827 2020.

• Print
• Share Link

The Facts
The Health Information Technology for Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act of 2009, includes Medicare incentives for adoption and meaningful use of certified electronic health record (EHR) technology.   To be eligible for incentive payments, hospitals and physicians must use EHRs in a meaningful manner, exchange electronic health information to improve the quality of care, and report on clinical quality and other measures.  Additional guidance regarding these parameters is expected from the U.S. Department of Health and Human Services through the regulatory process.  The Health Information and Management Systems Society has published recommendations regarding the definition of “meaningful use”: 

• Recognize Certification Commission for Healthcare Information Technology (CCHIT) as the certifying body of EHRs.
• Adopt metrics that can be reasonably captured and reported beginning in 2011.  These metrics should then become increasingly stringent every two or more years to achieve incremental maturation of “meaningful use.”
• Coordinate with Health Information Technology Standards Panel and Integrating the Healthcare Enterprise to publish implementation guides and standards for output of EHR data to bridge existing gaps in interoperability of health information.
• Collaborate with CCHIT to fairly evaluate hospitals and physicians that use “best of breed” systems from multiple vendors or open source technologies.

What’s at Stake
Hospitals and physicians that meet the requirements of “meaningful use” of certified EHRs will be eligible for Medicare incentive payments beginning in 2011.   Medicare payments may be reduced to hospitals and physicians that do not meet the requirements for “meaningful use” of certified EHRs by 2015. 

Steps to Consider

• If your organization is considering acquiring an EHR system, seek counsel on the legal requirements of “meaningful use” (including interoperability) and anticipate the timeframe for your organization to meet these requirements before the eligibility dates. 
• Obtain a contractual commitment from the vendor that the system will permit usage in accordance with the federal definition of “meaningful use.”
• Conduct due diligence on and obtain contractual commitments from your vendor to make sure it is certified and can meet the requirements of certification panels.
• When selecting an EHR system, obtain stakeholder endorsements to support system success.

• Print
• Share Link

The Facts
On May 11, 2009, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) released the second of three health reform options papers.  The options seek to expand health insurance coverage to the nation’s 46 million uninsured through insurance market reform, a new public health insurance plan, expansion of public programs, insurance coverage mandates on both employers and individuals, and new premium subsidies and tax credits.

A Health Insurance Exchange would facilitate the purchase of coverage through a web portal on the internet.  Initially, only individuals and “micro-groups” would be able to purchase insurance through the exchange. 

Plan options would include:

• Medicare Like Program – Operated by the U.S. Department of Health and Human Services and offered through the exchange 
• TPA Administration – Public plan administered through regional third-party administrators (TPAs) 
• State-Run Public Plan – Flexible state plans that may allow individuals to purchase coverage available to state employees

Individuals ages 55 though 64 who do not have employer-sponsored insurance or Medicaid coverage could enroll in Medicare and pay a premium. Medicaid eligibility would be standardized, with parents, children and pregnant women with income below 150 percent of the Federal Poverty Level ($33,000 a year for a family of four) eligible for coverage. 

Individuals would have a “fair share” responsibility to purchase health care coverage, with certain exemptions.  Employers must offer qualified coverage to full-time employees or provide coverage that is the actuarial equivalent to the lowest coverage option.  Employers with total annual payroll of less than $250,0000 would be exempt.

Premium subsidies would be available on a sliding scale for individuals with incomes under 400 percent of the Federal Poverty Level.  These subsidies would take the form of a tax credit used to purchase health coverage through the exchange.  Tax credits would be available for small businesses with less than 25 workers and average employee earnings of $40,000.

What’s at Stake
The Finance Committee is proposing transformative changes to the health care sector in order to expand health insurance coverage to all Americans. The requirements on individuals to purchase coverage and the obligations of employers to provide coverage are key along with the creation of the exchange.

Steps to Consider

• Insurers should examine the impact of a Medicare-like public plan option on provider payments and the ultimate competitiveness of private plans.
• Insurers should also examine the concept of the exchange and assess the business impact of the proposed new rating rules and benefit structure.
• Employers should carefully monitor “pay or play” proposals and prepare to adapt to potential requirements.

• Print
• Share Link

The Facts
On April 29, 2009, the Senate Finance Committee released the first of three anticipated health reform option papers. The Committee’s white paper includes four proposals to “promote quality, efficiency and care management” in the Medicare Advantage (MA) Program: modifying the MA Plan payment system, increasing payments for chronic care management, linking payment to quality and simplifying the supplemental benefits offered to Members.

What’s at Stake
The Committee sets out two alternate reform proposals for the MA Plan payment system that would take effect beginning in 2012. One approach would reduce the existing benchmarks to which MA Plan bids are compared, and the other would change the methodology by which the benchmarks are determined to that used in the Medicare Part D Program. The Committee also proposes to pay bonuses for evidence-based care management programs for chronic conditions. A Medicare Advantage Organization (MAO) that does not currently target chronic illnesses with care management activities should consider implementing such programs now so that it only has to incorporate adjustments to receive the bonus payment. Finally, the Committee proposes to tie a portion of MA Plan payment rates to quality performance. An MAO would need to ensure that its processes for collecting and submitting data are refined to capture all relevant data that may affect quality measures, and thus payment. 

Steps to Consider
The changes are proposed to take effect in 2012, meaning MAOs would have to position themselves to respond to the changes in time for the June 2011 bid submission deadline. In anticipation of these or similar reforms, an MAO should begin to analyze its plan benefit packages, provider payment arrangements and member population, and to discern the extent to which the MAO can modify its operations and/or develop and implement new initiatives. Health care providers can identify those MA Plans that represent a material portion of the providers’ patient population and initiate a dialogue to explore potential new areas of collaboration that will help improve quality outcomes while managing costs.

• Print
• Share Link

The Facts
The proposals under consideration in the Senate Finance Committee’s first of three anticipated health reform option papers, released on April 29, 2009, would impose new transparency obligations on physicians, hospitals, nursing homes and pharmaceutical manufacturers. Transparency proposals include amending the Stark Law in-office ancillary services exception to require physicians to disclose financial interests in certain imaging services; eliminating the Stark Law “whole hospital” and rural provider exceptions with limited grandfather provisions; requiring manufacturers to disclose financial relationships with physicians; and requiring nursing homes to disclose ownership information, implement employee compliance programs and report staffing data. The Committee also proposes to strengthen compliance requirements and enforcement activity by increasing funding to federal enforcement programs, strengthening the screening process for Medicare program provider applications, requiring providers to implement compliance programs as a condition of participation in Medicare and Medicaid, and amending the Civil Monetary Penalties (CMPs) Law to increase penalties and extend the use of CMPs for certain violations.

What’s at Stake
The federal government may increase enforcement activities bolstered by easier access to publicly available information on existing arrangements and relationships. Providers could face increased penalties or suspension of payment for compliance failures. 

Steps to Consider

• Assess and audit current approaches to management of financial relationships, and closely evaluate the implications of publicly disclosing the details of these relationships.
• Evaluate the additional investment of time and resources to meet the proposed transparency requirements.
• Review and update compliance plans.

• Print
• Share Link

The Facts
The proposals under consideration in the Senate Finance Committee’s first of three anticipated health reform option papers, released on April 29, 2009, would make significant Medicare payment changes. Value-based purchasing would result in Medicare paying hospitals, home health agencies and skilled nursing facilities based on their actual performance against quality measures, rather than being paid for providing services and reporting on quality measures and activities, as they are now. Accountable care organizations would be established as a vehicle for groups of providers to voluntarily meet quality thresholds and share in cost savings achieved for the Medicare program. Bonus payments for primary care physicians and general surgeons of up to 5 percent of fee schedule amounts would be provided to physicians who furnish at least 60 percent of their services in specified ambulatory settings or practice in rural scarcity areas.

What’s at Stake
Providers will face increasing demands to shift the paradigm of patient care from a model based on fee-for-service payments to one oriented to quality measurements and care coordination. Providers also will be competing on the basis of quality and may experience changes in reimbursement individually, but the total pool of funds will not generally increase for many of the proposed reforms.

Steps to Consider

• Examine current approaches to patient care and consider internal and external steps necessary to manage the impending shift from traditional fee-for-service payments to payments based on quality measurements and care coordination.
• Explore relationships with management companies or better performing partners who can improve overall quality.
• Consider new relationships with physicians to invest doctors in quality outcomes.
• Continually evaluate ongoing business decisions in light of the direction and quick pace health reform is taking.

• Print
• Share Link