Life Science Compliance Update

September 20, 2016

Legislation Introduced to Modify Hospital Quality Star Ratings Release


We have previously covered another of CMS’ transparency initiatives—its hospital star ratings—and some of the concerns industry has with the program. After a delay, CMS released the star ratings amid significant industry criticism. At the same time, a recent bipartisan bill would require CMS to take down overall hospital quality star ratings. Of note, according to a recent analysis, these rankings have been found to actually further confuse consumers, rather than provide actionable data to improve health care choices and the market overall.

Bill in Congress

Reps. Kathleen Rice (D-N.Y.) and James Renacci (R-Ohio) introduced the bill (Hospital Quality Rating Transparency Act of 2016, H.R. 5927) that would require CMS to remove its newly published overall hospital quality star ratings from its Hospital Compare website and delay the ratings' release for one year. On July 25, it was referred to the House Committee on Energy and Commerce.

Tom Nickels, the American Hospital Association’s executive vice president for government relations and public policy, in a statement said, "We continue to urge CMS to work with hospitals and health systems to provide patients with a rating system that accurately reflects the quality of care provided at their facilities, and will work with Reps. Renacci and Rice to move this legislation forward"

225 members of Congress previously wrote to CMS in April with their concerns over the hospital ratings system. Part of the letter states, “Many prominent hospitals that are in the top echelon of other quality rating reports, and handle the most complex procedures and patients, will receive one or two stars (out of possible five), indicating that they have the poorest quality in comparison to other hospitals".

The lawmakers' specific concerns included CMS' insufficient disclosure of its methodology and the possibility the rating system gives excessive weight to the "patient experience of care" category, as reported by patients, which accounts for 25 percent of a hospital's score, according to CMS's Quality Net website. The remaining criteria categories are outcome (40 percent), efficiency (25 percent), and clinical process of care (10 percent).

The Ratings

According to CMS, the methodology for the new Overall Hospital Quality Star Rating was developed with significant input form a Technical Expert Panel and refined after public input. CMS says it will continue to analyze the star rating data and consider public feedback to make enhancements to the scoring methodology as needed. The star rating will be updated quarterly, and will incorporate new measures as they are publicly reported on the website as well as remove measures retired from the quality reporting programs.

The agency notes it hosted two opportunities for public input and hosted two National Provider Calls with over 4,000 participants. Hospitals had an opportunity to review their Overall Hospital Quality Star Rating, ask questions, and provide feedback during a “dry run” in July and August 2015.

Ultimately, 3 out of a possible 5 stars was the most common rating, earned by 1,770 hospitals, or about 39 percent. The ratings summarize the findings from 64 existing quality measures already reported on the Hospital Compare website and summarize them into a unified rating of one to five stars. The ratings include measures for care provided when treated for heart attacks and pneumonia, as well as hospital-acquired infections.

Industry Reaction to Ratings

Hospital groups were strongly opposed to the ratings, writing in July to CMS the following: “We urge CMS to share additional information with hospitals and the public about how accurately star ratings portray hospital performance. We also urge CMS to address several significant underlying methodological problems with its star ratings. Until CMS has taken the time to address these problems and share information with hospitals and the public demonstrating that its star ratings methods offer a fair and accurate assessment of hospital quality, we strongly urge the agency to continue to withhold publication of the flawed star ratings.”

The letter was signed by the American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, and the Federation of American Hospitals.

Despite their objections, the ratings were released. Rick Pollack, President and CEO of the American Hospital Association released a statement strongly opposing CMS’ move. “The new CMS star ratings program is confusing for patients and families trying to choose the best hospital to meet their health care needs. Health care consumers making critical decisions about their care cannot be expected to rely on a rating system that raises far more questions than answers. And it adds yet another to a long list of conflicting rating and ranking systems,” said Pollack.

He added, “We are further disappointed that CMS moved forward with release of its star ratings, which clearly are not ready for prime time. As written, they fall short of meeting principles that the AHA has embraced for quality report cards and rating systems. We want to work with CMS and the Congress to fix the hospital star ratings so that it is helpful and useful to both patients and the hospitals that treat them.”

Lack of Utility and Fairness

A recent report in Health Affairs looks at the Hospital Compare ratings from the perspective of a 5-star hospital. The results are highly critical of the CMS program. While supportive of using public disclosure of provider quality data, the article notes, “as currently constructed the scores are unlikely to achieve this goal for the following reasons: roll-up scores across conditions/procedures obfuscate quality at the level of the condition or procedure where gains in quality could happen; grading on a curve fails to identify whether quality is good or bad; and measurement is incomplete and/or imbalanced both in terms of the application of existing measures across hospitals and the absence of important measures in the set.”

The continue by summarizing: “the current scores don’t help consumers pick a high-quality hospital for specific conditions or procedures and don’t promote meaningful quality improvement across hospitals. In fact, in a value-based market where financial rewards are given only to the highest performers rather than providers that achieve high quality, defining quality based on a curve rather than a meaningful threshold will prevent some high-quality hospitals from being rewarded and could discourage hospitals from sharing best practices.”

It has also been repeatedly pointed out that the CMS ratings unfairly penalize teaching and safety net hospitals. For example, the ratings fail to account for socio-demographic factors such as patients' education, race, economic status and regular access to medical care which all have a tremendous impact on health. As a result, many urban hospitals that provide stellar patient care and pioneer groundbreaking therapies, in addition to caring for large numbers of poor patients, received fewer stars than hospitals in affluent suburbs that treat fewer complex patients.

September 12, 2016

CMS Delay’s Full MACRA Implementation to the Next Administration

In a blog post, CMS announced changes to the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) that will allow physician practices to choose the level and pace at which they comply with the new payment reform model aimed at emphasizing quality patient care over volume. The announcement comes after pressure from industry stakeholders and policymakers to ease implementation of MACRA, which is set to start January 1, 2017. We previously reported that CMS was considering a potential MACRA delay, and this appears to be what the agency will finalize in its November rule.

The Announcement

Acting CMS Administrator Andy Slavitt announced that the final MACRA regulation will exempt physicians from any risk of penalties if they choose one of three distinct MIPS reporting options in 2017, in addition to the option of participating in an advanced APM:

  • Full-year reporting that begins on January 1;
  • Partial year reporting for a reduced number of days; and
  • A "test" option under which physicians can report minimal amounts of data.


Physicians who report in 2017 may be eligible for bonus payments in 2019, depending on which option they choose.  Those who opt for full-year reporting will be eligible to receive a "modest positive payment adjustment;" those who choose partial year reporting will be eligible for a "small positive payment adjustment."  Physicians who choose the "test" option will not be subject to any payment adjustments.  Qualified participants in advanced APMs will be eligible for 5 percent incentive payments in 2019.

Industry Reaction

Response to the announcement was largely positive. Many groups submitted comments to CMS for the proposed MACRA rule calling upon the agency to delay the start of MACRA or to offer flexibilities, especially for smaller and solo practices. This comes as a new report indicates that many physicians are worried about MACRA's new practice burdens. In general, most physicians still do not understand MACRA, despite the start of the first performance period in 2017.

American Medical Association President Andrew Gurman in a statement said, "By adopting this thoughtful and flexible approach, [CMS] is encouraging a successful transition to the new law by offering physicians options for participating in MACRA." He added, "This approach better reflects the diversity of medical practices throughout the country."

The American College of Physicians (ACP) issued a statement: "[ACP] is pleased that CMS plans to implement changes to give physicians more options to participate in the Quality Payment Program in 2017 without being at risk of negative adjustments. These changes are consistent with recommendations made by ACP and other physician stakeholders to exempt small practices from negative adjustments and to provide more flexible options for practices of all sizes to be successful"

The American Hospital Association (AHA) also applauded CMS' announcement. Ashley Thompson, AHA's senior vice president for public policy analysis and development, said, "We are pleased that CMS has responded to feedback asking for greater flexibility in meeting MACRA's aggressive timeline and reporting requirements." She added, "We look forward to reviewing the details of these options when CMS releases a final rule."

Congressman Michael C. Burgess, a Republican doctor from Texas and chair of the House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade said he was please CMS had heard his calls and the calls of his colleagues.

 "Today's announcement from CMS regarding the agency's dedication to flexibility in the implementation of MACRA is proof of the benefits of keeping Congress involved in policy implementation," Burgess said in a statement.

Moving Forward

The proposed changes by CMS still need to be finalized in the MACRA rule which is expected in early November. However, this does give physician groups more time to prepare their members and suggest options for the 2017 performance period. CMS essentially announced a compromise—providers who are more ready for MIPS can receive credit for participation and be eligible for bigger bonuses, whereas those who are not prepared can ease into the program and avoid penalties. This is especially welcome news for small and solo practices.

Not participating at all still is a bad choice for physicians, as they will receive a negative adjustment. It will make sense to pick at least the lowest level option; the details of how much participation is required to meet the lowest option are still unknown until the final rule is released. But CMS likely thinks there will be a pool of physicians that do not participate, thereby receiving a negative adjustment. This will help offset positive adjustments required by the law's budget neutrality. Expect positive adjustments to be small in order to compensate for the need to be both budget neutral and the increased number of pathways for physicians to receive at least some bonus payment.

Additionally, this is only for the first year of MACRA. By statute, the range of payment adjustments is poised to rise dramatically in subsequent years, so despite the first-year flexibility, providers should not slow efforts to prepare for MACRA. The race toward high performance in MIPS has already begun, and providers who wait to improve performance will find themselves behind the pack when the program takes full effect in subsequent years.

September 09, 2016

Industry Take on Proposed Hospital Outpatient Prospective Payment Changes for 2017


Earlier this summer, the Centers for Medicare and Medicaid Services (CMS) released the Calendar Year (CY) 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions, and payments rates proposed rule (CMS-1656-P).

One piece of this year’s proposal is to implement Section 603 of the Bipartisan Budget Act of 2015, which will affect how Medicare pays for certain items and services furnished by certain off-campus outpatient departments of a provider (off-campus “provider-based departments” (PBDs)).

Site Neutral Payments Provision (“Section 603”)

This provision, found in the Bipartisan Budget Act of 2015, requires that certain items and services furnished by certain off-campus PBDs shall not be considered covered outpatient department services for purposes of OPPS payment and shall instead be paid “under the applicable payment system,” beginning January 1, 2017. The proposed rule contains several proposals relating to which off-campus PBDs and which items and services are “excepted” from application of payment changes under the provision.

One such issue is the applicable payment system. For CY 2017, CMS proposes the Medicare Physician Fee Schedule (MPFS) to be the “applicable payment system” for the majority of the non-excepted items and services that are furnished in an off-campus PBD. Physicians who perform such services would be paid individually, based on the nonfacility rate under the MPFS for the services which they are permitted to bill. This means that physicians who perform services at an off-campus PBD would be paid directly by Medicare, while the hospital associated with the off-campus PBD, who provided the space, equipment, and staff for the doctor to provide that care, receives no payment from Medicare for their investment in their facility that allowed the physician to participate in the care of the patient (and get paid in the first place!).

CMS presently intends this payment structure to serve as a one-year transitional policy while other solutions are explored, including operational changes that would allow an off-campus PBD to bill Medicare for its services under a Part B payment system other than the OPPS, beginning in 2018.

According to CMS, as long as the hospital can meet all Federal and other requirements, it would have the option of enrolling the non-excepted off-campus PBD as the provider/supplier it wishes to bill in order to meet the requirements of that payment system (such as an Ambulatory Surgical Center (ASC) or group practice).

For CY 2018, CMS is soliciting comments on regulatory and operational changes that it could make to allow a non-excepted off-campus PBD to bill and be paid for its non-excepted items and services under an applicable payment system, other than OPPS.

Why is This a Problem?

This provision strikes us as being a bit problematic, to say the least, as it raises several issues as to fraud and abuse. As an example, these payment rules, if adopted, may force some hospital into financial arrangements with referring physicians that present a substantial compliance risk because essentially, “hospitals and treating physicians would be forced to choose between the substantial legal risk of entering into altered financial arrangement subject to scrutiny as well as potentially significant financial and criminal penalties under the fraud and abuse laws, on the one hand, or disrupting the delivery of patient care on the other.”

Under the Stark Law and the Anti-Kickback Statute, “CMS has long held that providing items or services to a physician of any value greater than $396 in a calendar year (adjusted annually for inflation), or leasing or providing office space, equipment or services to a physician for less than fair market value, can trigger the referral and billing prohibitions of that statute, regardless of intent.”

Typically, Medicare pays physicians at a lower “facility rate” when they practice at these PBDs, because the hospital pays and receives reimbursement for the overhead expenses of providing the service – the building, equipment, staff, medical supplies, etc. This proposed rule would make it so physicians at these PBDs would be paid as if they owned and operated the facility, even though they would not. Therefore, hospitals would be providing physicians with free benefits of reimbursement for PBD services, for which they paid nothing.

According to Jonathan Diesenhaus, a current partner at Hogan Lovells with more than twenty-five years of experience in prosecuting and defending healthcare and government program fraud cases, this is a problem because if the physician and hospital cannot reach an agreement on fair market value for the hospital’s portion, the doctor could be viewed as getting a lot for free. However, this proposal also makes it so that doctors have all the leverage, and in the end, it is possible that it will be patients who lose, as one of the few pieces of leverage the hospital may have it to close the clinic.

Sheree Kanner, also a current partner at Hogan Lovells and former General Counsel for the Centers for Medicare and Medicaid Services, believes that perhaps there is some way, other than through OPPS, for CMS to pay the hospitals directly so these issues of fraud and abuse are not encountered.


Proposed comments were due to CMS at close of business on Tuesday, September 6, 2016. It will be interesting to see how many comments CMS received, suggesting ways to improve the system without causing concerns about fraud and abuse, and whether CMS is able to make any changes before the January 1, 2017 deadline.


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