This installment of Hall Render's Health Law Broadcast series on health care reform is designed to provide you with the insight, analysis and practical suggestions with respect to the various reform initiatives that will affect your organization.

HEALTH CARE REFORM: IMPLICATIONS FOR PROVIDERS IN RURAL AND UNDERSERVED AREAS

Part I of II

Much ink has been spilled as of late on provisions impacting larger providers, payors and patients found in the Patient Protection and Affordable Care Act of 2010 and its amendments, enacted on March 23, 2010, commonly referred to as the "Health Care Reform Bill" (the "Act").  Not as much attention has been paid, however, to the numerous, important, and potentially paradigm shifting provisions impacting rural, shortage area, primary care and similar providers found in the Act.  This series is intended to serve as an introduction to the issues that will alter landscape for these providers in coming years. 

In this first rural and underserved provider series installment, we address below major hospital and practitioner-related provisions of the Act that impact general coverage, payment, 340B Drug Discount Program participation, and rural graduate medical education.  In the second forthcoming installment of this series, we will address those provisions of the Act that impact Federally Qualified Health Centers, new Community Health Center delivery models, and changes to the National Health Service Corps Loan Repayment Program.

Although the Act's provisions raise as many questions as answers, these questions will be addressed in published regulations and guidance over the coming years.  What is clear today, however, is that the provisions addressed below are going to provide substantial opportunities for these providers.

1. General Access and Coverage Enhancements

Many rural and underserved area providers are often responsible for serving as the sole provider of primary care for their community. As a result, it is significant that the Act provides a number of general coverage and payment enhancements that, while not exclusive to rural and underserved area providers, will result in increased coverage and payment for many of the services and populations that these providers address. 

Increased Access to Care - New Medicaid Eligibility Category and Coverage

As many disproportionate share¹  hospitals ("DSH Hospitals") are likely aware, the Act institutes a reduction in DSH Hospital payments as one funding mechanism for the increased coverage provided for by the Act.  This payment reduction, beginning in fiscal year 2014, calls for DSH Hospitals to be paid 25% of the normally calculated DSH Hospital payment amount, plus a formula-based add-on. 

The concerns expressed by many key stakeholders regarding this payment reduction were, at least in part, addressed by a variety of coverage enhancements, most notably an entirely new mandatory Medicaid eligibility category.  Beginning January 1, 2014, this new category provides Medicaid coverage for all individuals who are not otherwise covered (such as certain infants, children, and pregnant women) with an income less than or equal to 133% of the Federal Poverty Level.  The Act also changes the mandatory Medicaid income eligibility level for children (6 to 19) from 100% to 133% of the Federal Poverty Level. 

When considered in concert with the private health insurance coverage enhancements also mandated by the Act, the Congressional Budget Office has estimated that the percentage of non-elderly uninsured people will drop from 19% to 8% (or from 50 million to 23 million people).

Increased Preventive Care Coverage

Beyond general coverage access, the Act will also reduce the potential for uncompensated care by requiring that all group and individual health plans cover, without cost sharing: a) certain preventive services and immunizations as determined by the Centers for Disease Control (CDC), b) certain child preventive services as determined by the Health Resources and Services Administration (HRSA), and certain women's preventive care and screening, also as determined by HRSA.

Continued Payment to Indian Hospitals and Clinics

Prior to passage of the Act, Medicare would reimburse Indian Health Service or tribal organization hospitals for all Part B services through January 1, 2010.  The Act, however, makes permanent Medicare Part B coverage for services provided by these entities.

2. General Payment Enhancements

In addition to the coverage enhancements noted above, the Act implements a variety of fee schedule and payment rate enhancements that will benefit small, rural and other providers.

Extension of Physician Fee Schedule Mental Health Add-On

The Act provides for a 5% psychiatric physician fee schedule bonus payment, which bonus payment will be in effect through December 31, 2010.

Extension of Therapy Cap Exceptions

For those that rely on exceptions to the Medicare therapy payment cap (currently $1,860 for calendar year 2010), the Act extends the exception process for medically necessary occupational and physical therapy in excess of the cap until December 31, 2010.

3. Practitioner Issues - Payment Bonuses and Extended Primary Care Coverage

You likely have heard about the desire of the Act's drafters to provide for enhanced primary care coverage and payment.  Although also not exclusive to rural or underserved areas, these changes are of particular interest due to the challenges of maintaining adequate services of this type.  Some of the provisions in the Act intended to address this goal include: 

Primary Care Payment Bonus

For a five year period beginning January 1, 2011 and ending on January 1, 2016, the Act provides for a new 10% Medicare primary care service payment bonus.  Providers eligible for this payment bonus include physicians (in certain primary care specialties), nurse practitioners, physician assistants and  clinical nurse specialists whose practice has consisted of at least 60% primary care services in a preceding period (which period has yet to be defined). 

It is important to note that this bonus is cumulative.  As a result, eligible providers providing services in a health professional shortage area (HPSA) would be eligible for two cumulative 10% bonus payments, or 121% of the usual amount.

General Surgery - Rural Bonus Payments

Similar to the new 10% primary care bonuses noted above, the Act also provides for a 10% Physician Fee Schedule bonus payment for physicians who furnish a surgical service in a HPSA from January 1, 2011 to January 1, 2016.  This 10% surgical service bonus payment is to be made in addition to the current 10% HPSA physician bonus payment.

Improved Payment for Certified Nurse-Midwife Services

Next, the Act permanently increases the payment rate for Certified Nurse Midwives from 65% to 100% of the applicable Physician Fee Schedule rate.

Permitting Physician Assistants to Order Extended Care Services

Effective January 1, 2011, the Act now allows Physician Assistants to order skilled nursing facility (SNF) services.  Previously, only certain physicians, nurse practitioners and clinical nurse specialists were permitted by Medicare to order SNF services.

Annual Wellness Visit & Personalized Prevention Plan Services Covered

Medicare coverage will be available beginning January 1, 2011 for a "comprehensive health risk assessment."  The Act states that the content of this assessment "may" include:  family history, vitals, detection of cognitive impairment, a 5 to 10 year screening schedule, a list of risk factors (and list of treatment options with risks/benefits), and other facts to be listed by the Health and Human Services (HHS) Department Secretary as listed in guidelines that will be published.  Continuing on the theme of electronic medical/health record incentives that have become prevalent over the past few years, the Act goes on to provide that a web-based assessment methodology is to be developed.

From a payment perspective, the risk assessment is to be payable under the Physician Fee Schedule (and not via the APC system).  There will be no copay or deductible obligation for beneficiaries.

Medicare Coverage of Screening and Preventive Services

Also beginning January 1, 2011, consistent with the requirement noted above that health plans cover certain preventive services, the Act requires that Medicare cover various vaccines (including pneumonia, flu, and hepatitis B), mammography, obstetrical preventive services, colorectal screening, diabetes training and more.  These preventive services will be covered by the Physician Fee Schedule system and will also have no copay or deductible obligations for certain of the covered preventive services.

4. Rural Hospital Issues (CAHs, MDHs, SCHs, Rural Hospitals and 340B)

Technical Correction Related to CAH Method II Services

The Act clarifies that CAHs that have elected Method II (or optional method) billing that allows for payment of outpatient physician services at 115% of the Physician Fee Schedule rate may continue to receive 101% of reasonable costs even with the Method II Election.  CMS had previously indicated that they would take the position that the Method II election required reimbursement of facility fees at 100% (and not 101%) of reasonable costs.  Also significant is the CMS proposal in the Proposed 2011 Inpatient PPS Rule to make the Method II election a one-time (rather than annual) election.

Medicare Dependent Hospitals - Extension of MDH Program

Prior to passage of the Act, the Medicare Dependent Hospital (MDH) Program was set to expire on October 1, 2011.  The Act Extends the MDH program through October 1, 2012.

Reasonable Cost Payments - Hospital Clinical Lab Tests

The Act also extends the Medicare payment of reasonable costs for certain clinical diagnostic laboratory tests furnished to hospital patients in certain rural areas.  Specifically, reasonable costs will be paid for Part B clinical diagnostic laboratory services "furnished by" Hospitals with less than 50 beds in a rural area for the period from July 1, 2010 to July 1, 2011.

340B Program Drug Discount Program - Extension of Eligible Providers

Given the substantial benefit provided by the 340B Drug Discount Program, many providers have been discussing the opportunities presented by extension of the Program to new rural specialty providers.  These opportunities include certain joint ventures, extension of limited resources and an ability to provide substantially enhanced care (especially in the oncology realm).  

Although the details of the 340B Program are beyond the scope of this Alert, it generally provides substantial savings as compared to a drug's Average Manufacturer Price (with costs about 20% less than the average wholesale - a/k/a pharmacy sticker-price).  Ultimately, the Program provides for a minimum discount of 15.1% for prescription drugs and an 11% discount for generic and OTC drugs.  The Program also provides for an additional discount if the price of a drug has increased faster than inflation.  Beyond these price discounts, the Program also allows for participation in the "Prime Vendor Program."  The Prime Vendor Program effectively functions as a sanctioned Group Purchasing Organization (GPO) since external GPO participation is prohibited for Program participants.

Importantly, effective January 1, 2010, the Act extends the ability to participate in the 340B Program to additional rural providers.  Currently, the Program applies to (among others) FQHCs and certain government or non-profit acute care hospitals (that have a contract with state or local government to provide care to non-Medicare/caid patients and that have a DSH percentage greater than or equal to 11.75%).  Going forward, the 340B Program will also apply to:

• Children's hospitals (that meet all requirements applicable to acute care hospitals noted above);
• Critical Access Hospitals (CAH) (that have a contract with state or local government to provide care to non-Medicare/caid patients); and
• Sole Community Hospitals (SCH) or Rural Referral Centers (RRC) (that have a contract with state or local government to provide care to non-Medicare/caid patients and who have a DSH Percentage that is greater than or equal to 8%).

5. Rural Graduate Medical Education Issues

Rural teaching hospitals, or hospitals in rural areas who are considering becoming teaching hospitals, will be interested in several provisions in the Act.   First, rural teaching hospitals with fewer than 250 acute care beds are exempt from the upcoming redistribution of unused FTE cap slots.   Generally, the Act directs CMS to take away from hospitals who are not using them 65% of the hospital's "unused cap" (please see our other Hall Render publication on GME issues).  However, the Act expressly exempts rural hospitals with fewer than 250 beds from that redistribution.

Further, hospitals located in rural areas are in the second preference tier of hospitals who are eligible to receive FTE cap counts being taken away from other hospitals.  Current industry estimates are that approximately 900 FTE cap slots will be subject to redistribution, and 30% of those slots (about 270) are reserved for distribution to hospitals which meet one of two criteria: 1) located in a rural area  and 2) located in the 10 states with the highest percentage of HPSAs.   Eligibility criteria will be established through CMS rules, but the law requires CMS to consider the likelihood that the recipient hospital will be able to fill the slots in the first three cost reporting years after July 1, 2011 and whether the hospital has an accredited rural track program.   No hospital may receive more than 75 slots. 

If you would like additional information about any of these issues, please contact David Snow (414-721-0447, dsnow@hallrender.com); Scott Geboy (414-721-0451; sgeboy@hallrender.com); Todd Nova (414-721-0464, tnova@hallrender.com); or your regular Hall Render attorney.

Visit our Health Law Broadcast at hallrender.com/reform for a comprehensive listing of health care reform resources.  Also sign up for health care reform alerts and periodic updates as we continue to monitor this important issue.  

¹Generally speaking, disproportionate share hospitals are those serving high numbers of Medicare and Medicaid patients, as determined based on a formula.