Conference Committee Actions Impact Medicare Payment

We are reproducing yesterday’s letter from American Health Care Association (AHCA) President Mark Parkinson addressing actions of the Conference Committee.

February 16, 2012

Dear AHCA Member,

As we reported to you this morning, the Conference Committee has reached an agreement on the payroll tax cut and doc fix. This afternoon, the Conferees met on the Hill and officially signed the Conference report.  The final language of the report includes several areas that affect our profession:

1.    The SGR is fixed until the end of this year.  In addition, the therapy cap exceptions process continues until the end of the year. 

Section 3005 - Outpatient Therapy Caps – This provision extends the therapy caps exceptions process through December 31, 2012, with modifications that will require that the physician reviewing the therapy plan of care be detailed on the claim, reject all claims above the spending cap that do not include the proper billing modifier, and provide for a manual review of all claims for high cost beneficiaries to ensure that only medically necessary services are being provided.  Furthermore, the spending caps ($1,880 in 2012), which have been in effect since 2006, would be extended to the hospital outpatient department setting to prevent a shift in the site of service to higher cost settings once enforcement of the current exceptions process begins.  Exempting these services in the HOPD setting made sense when the hard therapy cap was in place, but it no longer makes sense with the exceptions process.  Additionally, HHS is required to collect data to assist in reforming the payment system for therapy services.  MedPAC is required to recommend improvements to the outpatient therapy benefit to reflect the individual needs of patients.  CBO estimates this provision would increase spending by $700 million from 2012 through 2022.

2.    SNFs are a pay-for through the reduction of bad debt coverage.  The federal reimbursement for bad debt for dual eligibles will be reduced over three years. For FY 2013 the coverage will be 88%, FY 2014 will be 76% and then ultimately, in FY 2015 it will be reduced to 65%. Reimbursement for non-duals will be reduced this year from 70% to 65%. Per the legislation:

Section 3201 - Reducing Bad Debt Payments – Under current law, Medicare reimburses hospitals and skilled nursing facilities (SNFs) for 70 percent of the beneficiary cost-sharing they are unable, or unwilling, to collect (“bad debt”).  Certain other providers, such as federally qualified health centers (FQHCs) and dialysis centers, are reimbursed 100 percent for the bad debt.  SNFs are reimbursed 100 percent for the bad debt resulting from the treatment of “dual eligible” beneficiaries, those enrolled in both Medicare and Medicaid.  Although CMS requires providers to take reasonable steps to collect bad debt, this generous reimbursement policy is believed to discourage providers from doing as much as they could.  This provision would phase down the bad debt reimbursements to 65 percent beginning in FY2013 for providers who are currently being reimbursed at 70 percent, while phasing in the reduction to 65 percent over three years for those who are reimbursed at 100 percent of their bad debt.  President Obama recommends that bad debt payments be reduced to 25 percent.  CBO estimates this provision would reduce spending by $6.9 billion from 2012 through 2022.

I can say without question that we have fought a strong fight during this battle. Time and again, as recently as this morning, you rose to the call and the voices of our profession were heard.  We are disappointed that we are a pay-for, but we recognize that the original House language would have had more detrimental outcome.

We will not back down. We will continue to advocate for you, our members, and work to prevent any future reduction to our reimbursement.

Mark Parkinson

AHCA/NCAL President & CEO

With respect to the Medicare bad debt payment reductions, the estimated fiscal impact for Virginia SNFs is $5.9 million reduction in the first year (federal fiscal year 2013), $11.9 million reduction in the second year and $17.8 million reduction in year three.  The year three amount represents payment reduction for the fully-phased in provision and is expected to continue in federal fiscal years 2016 and after.