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Health Industry Companies Rally for Payment Policy Extensions

By Rebecca Adams, CQ HealthBeat Associate Editor

December 3, 2010 -- Health industry lobbyists representing hospitals to physical therapists have descended on Capitol Hill to remind lawmakers that for many providers, New Year's Eve may not be a time to celebrate. That's when a wide range of targeted payment provisions that benefit health care companies expire.

In the past few weeks, the campaigns have intensified as the end of session and the expiration of many provisions approach. The American Hospital Association, joined by 13 other trade associations, is asking congressional leaders to prioritize the passage of nine different reimbursements. A coalition of groups representing long-term care facilities and occupational, physical and other therapists is running ads pushing for two changes that could affect patients and provider profits. The National Rural Health Association sent e-mail to every member of Congress pleading for action and, coordinating with the Senate Rural Health Caucus and House Rural Health Coalition, flew in top officials to make its case in person.

Compared with the battle being waged by the American Medical Association for a yearlong payment change to stave off a 25 percent Medicare physician payment cut at a cost of about $15 billion in 2011, the myriad provisions that lobbyists want tucked into must-pass legislation in the next four to six weeks is not a big deal. Of the nearly two dozen requests lawmakers are discussing, at least six can be drafted in a way that won't count as a cost by Congressional Budget Office standards. But the potential package's $4.5 billion or so price tag doesn't minimize their importance to the companies that are waiting for more federal funds to come their way.

"Sure, the amount of money involved is not at the level of some of the other things like the physician fix," said Tom Nickels, senior vice president for federal relations at the American Hospital Association. "But for the facilities that are impacted, it's significant."

Competing Interests

The lobbying push comes as lawmakers are trying to figure out ways to pay for legislation that would prevent payment cuts to doctors, who for nearly a decade have been fending off a series of reductions that kick in under a statutory formula. This week, Congress cleared a bill that holds off scheduled cuts for one more month.

Advocates are hoping that their wish lists will be included in any new "doc fix" legislation, a continuing budget resolution or any tax cut measure that moves this month.

The doc fix bill would be a natural vehicle, but it may not actually move to President Obama's desk until later this month or perhaps even January, which makes some groups nervous because the provisions that apply to them are expiring.

The Centers for Medicare and Medicaid Services (CMS) can hold off on paying claims for a week or two to give lawmakers some time to take care of these payments retroactively. But that's not much of a cushion given a new Congress with a crowded agenda.

Providers are worried that even if Congress eventually restores the higher payments, they may have the hassle of waiting for payments or accepting lower ones that will later have to be adjusted. In fact, Congress went through this exercise earlier this year: Some provisions had expired in January and Congress did not renew them until the health care overhaul passed in March. One of the changes likely to be added to the list of newly expiring provisions is a request to give CMS funding for reprocessing claims made during that January to March gap—at a cost of about $175 million.

There's also always a risk that Congress will not change some of the provisions the industry wants.

With both the physician payment schedule adjustment and the other requested Medicare policy extensions, Congress has fallen into a routine of regularly passing short-term patches to continue policies that are expiring—largely to avoid paying the bill all at once. Executives at companies have come to expect congressional drama over expiring provisions to be followed by relief when the quasi-permanent policies are ultimately extended, often as part of the final legislation of the year. Then the cycle is repeated when the next expiration date approaches.

But now, as the cost of the physician payment fix grows increasingly higher with every delay, and worries about Medicare's fiscal unsustainability mount, companies that have seen Congress renew their preferred policies every year for a decade are now worrying that their payments will be targeted to help pay for another "doc fix" round or other cost-cutting measures that become a priority for the 112th Congress.

Executives are now starting to fear that at some point, as fiscal conservatives take charge in the House, Congress might not only fail to restore their higher payments but may look to their companies for deeper cuts. That's because every provision that hands more money to one interest group must be paid for by cutting another.

Therapy Cap at Issue

The cap on therapy services is one example. Since 1979, federal policy has imposed a limit on the amount of money Medicare will spend on occupational, speech or physical therapy for seniors. The cap on expenses for physical therapy and speech language pathology services together was $1,860 for 2010. For occupational therapy services, a separate limit of $1,860 applied.

But for more than a decade, companies that are affected by the cap have almost always successfully beaten back the limits—initially by delaying them through a series of moratoria. Since 2006, they've persuaded Congress to approve a process that will exempt seniors from the cap. Industry executives say the vast majority of patients hit the cap within a month or two of getting the services. But exceptions are routinely granted to patients whose doctors say the senior still needs therapy. The authority for the exemption process runs out Dec. 31.

If the exceptions process disappears, the limits will suddenly become real.

Additionally, in the most recent one-month physician fix, payments for those services were sliced by 20 percent as a way to fund the higher physician payments. To be sure, that cut was not as severe as what the Centers for Medicare and Medicaid services wanted to do. In June, CMS proposed halving payments for therapy and had only recently backed down with a plan to cut them by 25 percent.

Still, lobbyists for long-term care facilities such as those run by RehabCare, Kindred Healthcare, Inc., Sun Health, Genesis HealthCare and Golden Living are not satisfied. They worry that the cut is a harbinger of deeper reductions in the future. Trade associations for therapists—the American Occupational Therapy Association (AOTA), the American Physical Therapy Association (APTA), and the American Speech-Language-Hearing Association—have joined forces with trade groups representing long-term care and nursing facilities, such as the American Health Care Association, to fight further cuts and press for the continuation of the exceptions process.

Holly Feraci, vice president of government affairs with MSLGroup, which represents a post-acute care provider, said the fear is that therapy payment cuts will continue. "We want to make sure that doesn't happen," she said.

Feraci has one message for Capitol Hill: "Everyone's focused on docs now, but don't forget about therapy."

The groups also want a new payment policy to go in place. Under current law, implementation of a new version of a reimbursement schedule for therapy at skilled nursing facilities has been delayed until Oct. 1, 2011. Both Medicare officials and the skilled nursing facility industry want to move ahead with it now because the new policy will take care of some problems that have been identified.

"If the delay is not removed, it creates a lot of havoc for providers as well as CMS," said David Hebert, senior vice president of policy and government relations of the American Health Care Association, which represents nursing homes and assisted living facilities.

But whether they will get these changes depends on identifying an offset for the therapy caps process and finding a legislative vehicle that lawmakers will open up to the Medicare changes.

Feraci said it is only fair that Congress act to protect patients who will hit the cap and the providers who want seniors to keep receiving their services.

"If the docs get a one-year extension then so, too, should the therapy caps exceptions process," she said. "I am just saying that now that the AMA has used therapy dollars for their short-term fix, that in their efforts to get a longer-term fix, they also [should] ask that Congress extend the exceptions process."

Lobbyists for physicians aren't necessarily quick to embrace that idea.

"Everything you add on is something you have to find money for," said one lobbyist representing physicians who asked not to be named because he is not authorized to speak officially. "There are not a lot of easy pay-fors left. The other thing you're up against is the clock in this environment . . . If you start making things more complicated, friction is the enemy of the goal line."

More on the Table

Other payment fixes under consideration include:

  • Addition of an inpatient component to the 340B drug discount program. Under current law, drug manufacturers are required to provide certain hospitals and other facilities that treat low-income and uninsured patients (including certain public hospitals, critical access hospitals, children's hospitals, and cancer hospitals) with discounts that mirror the Medicaid rebate price for the same drug. The bill would extend these discounts for certain 340B-eligible entities to inpatient drugs for use by patients who are uninsured or who do not have prescription drug coverage. A provision would make a technical correction to ensure the continued inclusion of orphan drugs in the definition of covered outpatient drugs for children's hospitals under the 340B drug discount program. Earlier this year, the provision was estimated to cost $35 million over 10 years.
  • Extension of Section 508 reclassifications. Hospital geographic reclassifications that gave some hospitals extra money under section 508 of the Medicare Modernization Act expired Sept. 30. The bill would extend these reclassifications through fiscal 2011. The provision was estimated to cost $300 million over 10 years.
  • Funding for claims reprocessing. Extensions of Medicare payment policies for calendar year 2010 were enacted into law on March 23, 2010, as part of the health care overhaul law (PL 111-148, PL 111-152). That required CMS to reprocess Medicare claims back to Jan. 1. The bill would provide funding for CMS to reprocess these claims. This provision costs $175 million over 10 years.
  • Clarification of the effective date of Part B special enrollment period for disabled TRICARE beneficiaries. Under current law, disabled Medicare beneficiaries who are also eligible for TRICARE military health care are eligible for a 12-month special enrollment period for Medicare Part B, which pays for outpatient services. That is to ensure that they properly enroll in Medicare Part B and retain their TRICARE eligibility. The provision would clarify the effective date of the enrollment period to make sure that beneficiaries can use it. This provision was estimated to cost $3 million over 10 years.
  • Adjustment to California Medicare payment localities. Under current law, the boundaries of payment localities in the state of California are determined using data that is almost 20 years old. This provision, which is more controversial than others because it affects just one state, was estimated to cost $400 million over 10 years. It would update the method used to determine the localities used for Medicare's physician geographic adjustment factor in California, utilizing an approach that is based on Metropolitan Statistical Areas.
  • Extension of payment for the technical component of certain physician pathology services. This extends a provision that allows independent laboratories to bill Medicare directly for certain clinical laboratory services.
  • Extension of ambulance add-on payments. This extends bonus payments made by Medicare for ground and air ambulance services in rural and other areas.
  • Extension of payment rules for long-term care hospital services and of the moratorium on the establishment of certain hospitals and facilities. Extends Sections 114 (c) and (d) of the Medicare, Medicaid and SCHIP Extension Act of 2007.
  • Extension of physician fee schedule mental health add-on. This increases the payment rate for psychiatric services delivered by physicians, clinical psychologists and clinical social workers by 5 percent.
  • Extension of existing outpatient hold-harmless provision. This would allow Sole Community Hospitals with more than 100 beds to also be eligible to receive this adjustment.

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