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From Health Law Daily, November 24, 2014

Medicare reform draft includes repeal of ‘ObamaCare Bay-State Boondoggle’

By Danielle H. Capilla, J.D.

A discussion draft of the Hospitals Improvements for Payment (HIP) Act of 2014 was released by the Chairman of the House Ways and Means Subcommittee on Health, Rep. Kevin Brady (R-Texas), with a request for all stakeholders to provide comment. The HIP Act, which calls for the repeal of certain provisions of the Patient Protection and Affordable Care Act (ACA)(P.L. 111-148), including the national budget neutrality provision relating to the Medicare hospital wage index (which Brady referred to as the “ObamaCare Bay-State Boondoggle”) is part of the Committee’s efforts to reform Medicare by addressing problems with the two-midnight policy, short inpatient stays, outpatient observation stays, and the auditing and appeals process. The HIP Act is split into two titles, Title I covering solutions to the aforementioned problems; Title II includes 19 policies introduced by various members of the Committee that pertain to hospital reform generally.

In regards to the draft, Rep. Brady stated “The complex challenges facing hospitals require a comprehensive solution. This draft legislation retains the needed oversight of auditors while offering reforms to the recovery audit contractor (RAC) process and appeals, and an additional option to the CMS settlement proposal. It also includes a number of proposed health care policies developed by both Republican and Democrat members of Congress. To determine the best solutions going forward we need all stakeholders to review this discussion draft carefully and provide timely, real-world feedback.”

Title I. Title I of the HIP Act draft includes:

  • a new hospital prospective payment system;

  • a new per diem rate for short lengths of stay;

  • repeal of the two-midnight payment reduction;

  • RAC program improvements including an extension of the RAC audit moratorium.

The new per diem rate for short lengths of stay would require the Secretary to compute the base operating diagnosis related group (DRG) at 80 percent for each DRG and derive a per diem payment rate based off the newly calculated 80 percent rate. The first two days in any discharge would be reimbursed at a higher rate than other days within the discharge, and the Secretary would be required to refer to existing post-acute care transfer policies when making it determination whether an individual discharge will qualify for the per diem reimbursement.

Among other RAC improvements, the HIP Act reduces the current statutory look-period for RAC audits from four to three years and RAC auditors would be required to make a 30-day discussion period available to providers and suppliers prior to issuing a full or partial payment denial.

Title II. The HIP Act also seeks to address the ongoing issues in the Medicare appeals process, which currently includes an estimated 800,000 backlogged appeals (see HHS seeks ideas on ways to address the backlog of appeals requests, November 5, 2014). The HIP Act, if passed, would direct the Secretary, within 60 days of enactment, to establish an alternative voluntary settlement process allowing hospitals to settle claims in exchange for waiving future appeal rights. Hospitals would have 60 days to accept a settlement offer, which they could accept or deny on an individual discharge.

Furthermore, the Secretary would be required to establish a voluntary rebilling process for surgical discharges in the appeals backlog going back to dates of service beginning July 1, 2007. The HIP Act would also allow the Secretary to establish a voluntary settlement process for Part B claims in the backlog, while requiring the Secretary to implement an electronic system for managing appeals by July 1, 2015.

The HIP Act would require hospitals to report data on actual amounts collected from uninsured and insured patients for the 50 most common DRGs, and the Secretary would be required to publically report the data. Standardized assessment data would also be required to be reported by hospitals beginning October 1, 2018.

ACA repeal. The HIP Act also includes provisions to repeal the ACA’s moratorium on physician-owned hospitals, as well as what the draft refers to as the “ObamaCare Bay-State Boondoggle,” the national budget neutrality methodology used in implementing the Medicare hospital wage index. Brady has previously referred to this provision as a “boondoggle” because it “allowed hospitals in the state of Massachusetts (MA) to increase their payments by $257 million, resulting in hospitals in 40 states having their payments cut.” The HIP Act would repeal budget neutrality on a nationwide basis and replace it with a state-specific adjustment to the area wage index.

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