On December 7, 2016, Congress passed the 21st Century Cures Act (the “Act”). The Act began as a proposal to increase funding to the National Institutes of Health (“NIH”) and streamline the Food and Drug Administration’s (“FDA”) drug and device review process. However, soon after the 2016 election, the Act turned into a major health care bill. This Alert will address the key changes to the Medicare and Medicaid programs. 

One of the seemingly minor provisions in the Act is worth noting because it portends major changes in how Medicare reimburses providers for services. House Speaker Paul Ryan (R-WI) has proposed the adoption of broader site-neutral reimbursement methodologies. Site-neutral payment methodologies require the Medicare program to reimburse providers or suppliers for services, supplies, or drugs without regard to whether services were provided in an inpatient hospital, outpatient facility, or physician’s office.

The implementation of broader site-neutral payment methodologies could reduce Medicare spending by tens of billions of dollars each year. As Congress and the new Administration look for “savings,” either to pay for other priorities or simply to reduce the size of the Medicare program, there is a very high probability that over the next two years Congress (through legislation) and the Centers for Medicare and Medicaid Services (“CMS”) (through regulation) will broaden the use of site-neutral payments. Although many health care providers and suppliers have anticipated this change in payment methodologies, many providers are unprepared.

Hospital Outpatient Department Site-Neutral Payments — Section 16001

Congress began the transition to site-neutral reimbursement several years ago. For example, Section 603 of the Bipartisan Budget Act of 2015 requires the Medicare program to reimburse certain hospital outpatient departments (“HOPDs”) under a payment mechanism other than the Hospital Outpatient Prospective Payment System (“OPPS”), such as the Medicare Physician Fee Schedule, effective January 1, 2017. Section 603 provides for several “grandfathering” provisions allowing some HOPDs to continue billing Medicare under the OPPS. The Act clarified Section 603 and the grandfathering provisions for HOPDs.

• For calendar year 2017, an HOPD will be deemed to have been billing under OPPS for covered HOPD services furnished prior to Section 603’s enactment on November 2, 2015, and, therefore, not be subject to the site-neutral payment policy if the hospital submitted a provider-based attestation for the HOPD prior to December 2, 2015.

• HOPDs that satisfy the mid-build requirement are exempt from site-neutral payments for covered HOPD services furnished in 2018 and later years. To qualify, hospitals must submit a provider-based attestation for the HOPD, include the HOPD on their Medicare enrollment form, and submit a written certification stating that, before November 2, 2015, the hospital had a binding written agreement with an outside party to construct the HOPD. CMS must receive the provider-based attestation and mid-build certification no later than 60 days after the enactment of the Act.

• Medicare will exempt some cancer hospitals from Section 603 site-neutral payment. Off-campus cancer HOPDs must submit a provider-based attestation to CMS to receive the exemption.

LTCH Technical Corrections — Sections 15004, 15006, 15007, 15009 & 15010

The Act amends Medicare policies related to certified long term care hospitals (“LTCHs”). The Act clarifies the scope of the five-year moratorium on the establishment of Medicare-participating LTCHs and LTCH satellite facilities and on the increase of LTCH beds in existing LTCHs and satellite facilities. The Act permits LTCHs to qualify for a mid-build exception to the expansion moratorium if the hospital demonstrates that certain agreements or approvals were in place before the moratorium took effect in May 2014. In addition, the Act:

• Modifies the standard federal payment rate for LTCH high-cost outlier payments beginning October 1, 2017;

• Extends the prohibition on CMS’s enforcement of the LTCH 25-percent rule through September 30, 2017;

• Extends the carve-out for Medicare Advantage (“MA”) and site-neutral discharges from the calculation of the 25-day average length of stay requirement to LTCHs taking advantage of the moratorium exception;

• For fiscal years 2018 and 2019, temporarily excepts LTCH site neutral criteria for certain hospitals that treat patients with brain and spinal cord injuries; and

• For grandfathered LTCHs in fiscal year 2018, temporarily excepts LTCH site-neutral criteria for hospitalizations for severe wounds.

Direct Supervision Requirements for CAHs — Section 16004

The Act prohibits CMS from enforcing the “direct supervision” regulation applicable to hospital outpatient therapeutic services furnished in critical access hospitals (“CAHs”) and rural hospitals through the end of 2016. In general, the direct supervision regulation requires a physician or non-physician practitioner to be immediately available to furnish assistance and direction throughout the performance of any procedure performed at a CAH. Many rural health care providers believe that enforcing the direct supervision requirements is impractical, does not reflect the real world realities of staffing a rural facility, and limits patient access to care.

Durable Medical Equipment — Sections 16007, 16008 & 5002

The Act delays the application of competitively bid prices for durable medical equipment (“DME”) suppliers in non-competitively bid areas retroactively from July 1, 2016 through December 31, 2016. It requires CMS to consider average travel time, the cost associated with furnishing items, the average volume of items and services furnished in the area, and the number of suppliers in the area when determining adjustments in the use of competitively bid prices for DME items and services furnished on or after January 1, 2019. The Act moves up the implementation date of the provision limiting federal Medicaid reimbursement to states for durable medical equipment, prosthetics, orthotics, and supplies to Medicare reimbursement rates by one year from January 1, 2019 to January 1, 2018.

Home Infusion Therapy — Sections 5004 & 5012

The Act modifies payments for infusion drugs furnished by DME suppliers from 95 percent of the average wholesale price to the average sales price plus a six percent add-on effective January 1, 2017. This provision is estimated to reduce payments to suppliers by $660 million over a ten year period.

Effective January 1, 2021, the Medicare program will reimburse “qualified home infusion therapy suppliers” for providing infusion therapy services in a beneficiary’s home. The Act establishes a broad list of new requirements and standards for suppliers of home infusion. Further, it requires the Medicare program to reimburse home infusion therapy suppliers based on a single, all-inclusive payment.

Medicare Advantage — Sections 17001, 17005 & 17006

Starting in 2019, during the first three months of any year, individuals eligible for MA may change a previous election to receive benefits through original Medicare or an MA plan and elect coverage under Part D. Starting in 2021, individuals with end-stage renal disease (“ESRD”) may enroll in any MA plan. The Act calls for adjustments to the ESRD risk adjustment model by directing CMS to take into account the total number of diseases, multiple years of data, and dual eligibility status. The Act also partially limits CMS’s ability to terminate MA plans based solely on minimum quality ratings.

Other Key Medicare Provisions

• Requires CMS to develop HCPCS versions for MS-DRG codes that are similar to ICD-10-PCS by January 1, 2018; CMS is required to do this for at least ten surgical MS-DRGs (Section 15001);

• Reduces inpatient prospective payment system payments by not applying documentation and coding adjustments authorized in the Medicare Access and CHIP Reauthorization Act for 2018 (Section 15005);

• Requires CMS to revise the “Welcome to Medicare” package to contain information about MA and Part D drug coverage (Section 17003);

• Requires CMS to consider socioeconomic factors when determining hospital payment adjustments under the Hospital Readmissions Reduction Program beginning in 2019 (Section 15002);

• Exempts services provided within ambulatory surgery centers from the Meaningful Use and Merit-Based Incentive Payment System requirements for electronic health records (Section 16003);

• Extends the Rural Community Hospital Demonstration Program for five years and allows additional facilities to participate (Section 15003); and

• Modifies beneficiary assignment for accountable care organizations participating in the Medicare Shared Savings Program to reflect primary care services furnished in federally qualified health centers and rural health clinics (Section 17007).