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From Health Law Daily, September 19, 2013

CMS proposes prospective payment system for Federally Qualified Health Centers

By Harold M. Bishop, JD

On September 23, 2013, CMS will publish a proposed rule in the Federal Register that would establish a Medicare prospective payment system (PPS) for Federally Qualified Health Centers (FQHCs). The proposed rule would: (1) establish methodology and payment rates for a PPS for FQHC services under Medicare Part B, beginning on October 1, 2014, in compliance with Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) amendments to section 1834(o) of the Social Security Act; (2) establish a policy allowing rural health clinics to contract with non-physician practitioners when statutory requirements for employment of nurse practitioners and physician assistants are met; and (3) make changes to the Clinical Laboratory Improvement Amendments regulations regarding enforcement actions for proficiency testing referral. The proposed PPS contains no change to FQHC covered services for Medicare beneficiaries. Comments on the proposed rule must be submitted by November 18, 2013.

Encounter-based rate. Under the proposed PPS, CMS would establish a national, encounter-based rate for all FQHCs and pay FQHCs a single encounter-based rate for professional services furnished per beneficiary per day. Currently, FQHC services are not reimbursed based on a PPS, but on the basis of the reasonable costs of furnished services, as prescribed by the HHS Secretary (Soc. Sec. Act sec. 1833(a)(3)).

CMS would calculate the encounter-based rate based on an average cost per visit using Medicare cost report and claims data. CMS believes that this system will both provide appropriate payment to FQHCs while remaining simple to administer. The encounter-based payment rate is also consistent with CMS’ commitment to greater bundling of services, and will give FQHCs the flexibility to implement efficiencies to reduce over-utilization of services. The encounter-based payment system is also similar to Medicaid payment systems, which is the predominant FQHC payer.

Encounter-based rate adjustments. CMS is also proposing to adjust the encounter-based rate: (1) for geographic differences in the cost of inputs by applying an adaptation of the geographic practice cost indices used to adjust payment under the Medicare Physician Fee Schedule; and (2) when a FQHC furnishes care to a patient that is new to the FQHC or to a beneficiary receiving a comprehensive initial Medicare visit (i.e., an initial preventive physical examination or an initial annual wellness visit).

Payment increase projected. CMS estimates that the encounter-based rate will increase Medicare payments to FQHCs by approximately 30 percent. The annualized cost to the federal government is estimated to be between $183 and $186 million.

Treatment of multiple same-day visits. Since the option to bill for more than one visit per day is rarely utilized by FQHCs, CMS is proposing to eliminate the various multiple visits per day exceptions and limit FQHCs to one encounter payment per day. CMS believes this approach is consistent with an all-inclusive methodology and reasonable cost principles, and would not significantly impact FQHC reimbursement. CMS, however, welcomes comments that address whether there are factors that it has not considered, particularly in regards to mental health services and access to services in underserved communities.

The transition process. The statute requires implementation of the FQHC PPS for FQHCs with cost reporting periods beginning on or after October 1, 2014. Under the proposed rule, FQHCs would transition into the PPS based on their cost reporting periods. The current claims processing system and the PPS would be maintained until all FQHCs have transitioned. CMS is proposing to transition the proposed PPS to a calendar year update for all FQHCs, beginning January 1, 2016, to be consistent with many of the Medicare Physician Fee Schedule files that are updated on a calendar year basis.

Annual PPS adjustments. CMS will also adjust the FQHC PPS by the Medicare Economic Index (MEI) in the first year after implementation, and either the MEI or a FQHC market basket in subsequent years.

Contracting with non-physician practitioners. CMS is proposing to allow Rural Health Centers (RHCs) to contract with non-physician practitioners, consistent with statutory requirements that require at least one nurse practitioner (NP) or physician assistant (PA) be employed by the RHC. According to CMS, the ability to contract with NPs, PAs, certified nurse midwives, clinical psychologists, and clinical social workers would provide RHCs with additional flexibility and assist with recruitment and retention of non-physician practitioners.

Discretion in CLIA enforcement actions. The “Taking Essential Steps for Testing Act of 2012” (P.L. 112-202) amended section 353 of the Public Health Service Act to provide the Secretary of HHS with discretion as to which enforcement sanctions may be applied to cases where a laboratory intentionally refers its proficiency testing (PT) samples to another laboratory for analysis. Prior sanctions included automatic revocation of the offending laboratory’s Clinical Laboratory Improvement Amendments (CLIA) certificate and a subsequent ban preventing the owner and operator from owning or operating a CLIA-certified laboratory for two years. Based on this discretionary authority, CMS is proposing an amendment to the CLIA regulations by adding three categories of sanctions for PT referral based on the severity and extent of the violation.

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