March 4, Electronically Submitted to

Transcription

1 Charles N. Kahn III President & CEO March 4, 2016 Electronically Submitted to Honorable Sean Cavanaugh Deputy Administrator, Centers for Medicare and Medicaid Services Director, Center for Medicare 7500 Security Boulevard Baltimore MD Re: Advance Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2017 Call Letter Dear Deputy Administrator Cavanaugh: The Federation of American Hospitals ( FAH ) is the national representative of more than 1,000 investor-owned or managed community hospitals and health systems throughout the United States. Our members include teaching and non-teaching hospitals in urban and rural parts of the United States, as well as inpatient rehabilitation, psychiatric, long-term acute care, and cancer hospitals. Many of our members contract with Medicare Advantage Organizations ( MAOs ) to provide services to Medicare Part C beneficiaries. We believe that the views of direct providers of patient care to these beneficiaries is important for the Centers for Medicare and Medicaid Services ( CMS ) to consider in structuring the Part C program to best serve beneficiary interests. We are pleased to provide CMS with our views in response to the Advance Notice of Methodological Changes for Calendar Year 2017 for Medicare Advantage, Part C, and Part D Payment Policies and the 2017 Call Letter ( Call Letter ). In particular, the FAH is pleased that th Street., NW, Suite 600 Washington, DC FAX

2 CMS is proposing a material increase in MAOs baseline payment rates for The development and adoption of adequate payment policies is critical for ensuring MAO enrollees access to quality health care services, and CMS s proposed base rate helps achieve that goal. Below we discuss additional provisions in the Call Letter that we believe also will promote enrollee access to quality medical care, including adequate provider networks offered to MAO enrollees. I. The Growth of the Medicare Part C Program is Unprecedented and Compels a More Rigorous Process to Establish Policy The Kaiser Family Foundation reports that private health plan enrollment in Medicare has grown dramatically, more than tripling from 5.3 million beneficiaries in 2006 to 16.8 million enrollees in Current monthly enrollment data from CMS indicates that enrollment as of February 2015 stands at million people. Medicare Advantage now constitutes 31 percent of total Medicare enrollees, as compared to 13 percent in Medicare Advantage may outstrip the size of original Medicare within the next decade: In fact, from data made available monthly by CMS, enrollment in Medicare Part C as of February 2016 is 17,633,663 of the 54,845,951 Medicare eligible population, or 32.2 percent of the eligible population for a year over year growth rate of 2.1 percent. 1 Under the Call Letter, baseline Medicare Advantage payment rates for 2017 will rise by 1.35 percent on average. 2

3 While Medicare Advantage enrollees represent more than 32 percent of all Medicare beneficiaries, in several large states Medicare Advantage enrollment significantly exceeds the national average: And as we noted last year, Medicare Part C s primary three contractors now represent more than half of all beneficiaries. From the available CMS enrollment data for each MAO as of February 2016, if the planned mergers of health plans with significant Part C business are allowed to be completed, the three 3

4 remaining organizations would control 9.5 million of the 17.6 million enrollees, or 54 percent of enrollees, and in certain states they would control significantly more than that. Given these dynamics, major policy decisions affect not just health plans, but also beneficiaries and providers, and should be given adequate notice and opportunity for comment. Commencing next year CMS is required by law to provide at least 30 days of comment from the draft Call Letter. Securing Fairness In Regulatory Timing Act of 2015, Pub. L. No Section 2. We note that most of the public, particularly Medicare beneficiaries, are completely unaware of this process. Therefore, we respectfully request that for the CY 2018 process, CMS utilize a more inclusive process that gives notice to beneficiaries and an adequate period of time for stakeholders to consider these important matters before public comment is due. The Administrative Procedure Act considers 60 days notice before comment as adequate for this purpose. II. MAOs Misuse Medical Necessity Determinations to Reclassify Hospital Stays as Observation Status, Threatening Beneficiary Access to Care and Increased Cost- Sharing, and Potentially the Quality of Inpatient and Outpatient Data Reported by Managed Care Organizations to CMS (Attachment VI: 2017 Call Letter, Section I, p. 154) In the comments we provided last year in response to the 2016 Advance Notice of Methodological Changes and 2016 Draft Call Letter, we highlighted our concerns about MAO patient status changes. Below we address those concerns again. A number of our member health systems and hospitals are reporting that billed hospital inpatient stays meeting Interqual criteria and those identified as inpatient-only services by CMS, are being reclassified as outpatient observation stays by the MAOs. 2 When hospitals appeal cases with patient status conflicts, MAO initial determinations are overturned by the MAOs themselves approximately 40 percent of the time in favor of inpatient status for these claims. The vehicle for this wholesale reclassification of patient status as observation rather than inpatient, is a selective application of the Medicare two-midnight rule that was intended to provide clarity as to whether a particular hospital stay should be considered inpatient or outpatient, not to arbitrarily reduce the overall number of inpatient hospital stays. MAOs have selectively integrated elements of the two-midnight rule in their medical review practices in an effort to reduce the number of inpatient stays. Since the two-midnight rule was adopted, the number of inpatient stays reclassified by MAOs as outpatient observation status has increased dramatically such that for calendar 2015 that status appears in the MAO population at a rate 70 2 In markets where MAOs have risk arrangements with organized physician groups, delegated medical groups or downstream management service organizations (collectively, downstream organizations ), these relationships often involve sub-capitation contracts that shift financial risk where some or all of the Part A and Part B premium is funded to the downstream organization. Those downstream organizations substantially over-utilize outpatient observation status due to the financial incentives inherent in their risk arrangements with MAO s regardless of patient condition or status. 4

5 percent higher than for the traditional Medicare population. 3 In fact, the October 2015 revisions to the two-midnight rule that utilize a QIO process to evaluate observation status using Interqual criteria has not found its way to MAO utilization management processes. Rather than apply the presumption that any hospital stay lasting at least two midnights is an inpatient stay, many MAOs also will apply hybrid criteria using InterQual and/or Milliman standards to unilaterally justify continued use of observation status with no predictable clinical patterns to MAO decisions. This has led MAOs to deny claims for medically necessary inpatient stays at an alarming rate. These practices undoubtedly confuse enrollees. This is particularly problematic when an MAO requires an enrollee to have a prior qualifying three-day hospital stay for SNF coverage, like original Medicare. Indeed, the two-midnight rule was designed in part to reduce confusion among beneficiaries regarding inpatient status and allow a beneficiary to predict whether he or she would be eligible for SNF care subsequent to a hospital stay. When applied in the Medicare Advantage setting, the rule should have the same effect. It is certainly confusing for a beneficiary to understand that after spending several days in a hospital bed, he or she has not satisfied the three-day hospital stay requirement for a SNF stay if the plan has not waived that condition to SNF coverage. It is even more problematic if the patient is in the SNF when the MAO decides to change a claim for an inpatient stay to observation status. See section of Chapter 4 of the Medicare Managed Care Manual. These denials have other financial consequences for patients and providers alike. Under many prevailing agreements between MAOs and hospitals, a hospital is permitted to bill patients for an inpatient stay if the claim is ultimately denied by the MAO, provided the hospital has provided the patient with appropriate notice of billing procedures. Given the frequency with which these changes of status from inpatient to observation are occurring, it is inevitable that some hospitals will provide such advance notice of potential non-coverage to beneficiaries. MAOs are thus putting enrollees at financial risk by deploying these cost-cutting tactics. More often than not, hospitals do not recoup these costs and are left with unpaid bills. These tactics can artificially inflate MAOs star ratings and thus their premium payment rates. By denying inpatient coverage, MAOs reduce the readmission rates that they report to Medicare, often resulting in higher star ratings and higher premium payments. Meanwhile, enrollees are burdened with increased costs and providers with shortfalls in payment for patient services and care provided in an inappropriate patient setting. Through these inappropriate denials of inpatient admissions, MAOs are denying enrollees access to medically necessary covered services and manipulating the payment system that calculates their MA premiums. Furthermore, after the initial implementation of the twomidnight rule, many MAOs began instituting RAC-like contingency-based retrospective reviews of authorized hospital inpatient stays. The two-midnight rule was modified on October 1, 2015, and with these modifications, QIOs generally will approve claims that meet InterQual criteria, and thus these claims will not be subject to further RAC review. MAOs that continue to 3 This is based on a review of patient status of almost 600,000 traditional Medicare cases and 300,000 Part C cases, almost the precise mix of MAO to traditional Medicare beneficiaries in the general population. 5

6 disregard InterQual criteria for determination of appropriate patient status and continue unilateral retrospective reviews, are manipulating the two-midnight rule. Additionally, MAO Provider Manuals often indicate that the MAOs employ Medicare/CMS payment guidelines. The above practices are in conflict with those Provider Manuals, and we urge CMS to exercise its oversight authority to ensure that MAOs are abiding by the guidance outlined in their Provider Manuals. Specifically, we urge CMS to clarify to MAOs that the practices noted above are a misapplication of the two-midnight rule, including reclassification of inpatient-only services as observation stays and denials of inpatient status even in the face of meeting clearly documented criteria, including InterQual criteria. \ CMS has indicated it will begin the audit process for CY 2017 by identifying its audit protocols in July. We encourage CMS to incorporate a review of MAO and downstream organizations use of observation status and the associated physician orders for patient status placement in its audits of MAOs for CY Call Letter at p.152. As CMS notes when discussing enforcement of its one-third financial audit program, which includes Medicare utilization and costs, certain findings with adverse beneficiary impact, such as incorrect or increased cost-sharing or copayments for beneficiaries, warrant further enforcement actions. Id. at p.154. III. Readmissions Should Not Factor into the CMS Payment Methodology for MAOs As CMS is no doubt aware, many MAOs make use of the CMS payment methodology to determine payment rates to providers for a variety of services. CMS integrates several factors into its determination of payment rates for inpatient services in the CMS PC Pricer, including whether a particular hospital has experienced excessive readmissions relative to a standard established under the Hospital Readmissions Reduction Program (the HRRP ). An analog of the PC Pricer is used by MAO plans to make payment to contracted hospital providers for inpatient hospital services. Some adjustments are made to the PC Pricer to accommodate payment by MAOs under Medicare Part C. For example, the software contains a choice to set the Pricer for traditional Medicare or Part C (i.e., HMO) via a software button. If HMO is selected, Medicare s indirect medical education payment adjustment is turned off because CMS otherwise makes that payment to providers for MAO patients. The HRRP is a success: a recent ASPE study published in the New England Journal of Medicine reports that readmissions have dropped significantly overall, and hospitals are not simply replacing inpatient admissions with outpatient stays. Rather, the incentives created by the HRRP have successfully encouraged hospitals to provide higher-quality care that reduces the need for further hospital care in either the inpatient or outpatient setting. The HRRP however, does not result in the denial of coverage for a readmission. Rather, it imposes a financial penalty for excessive readmissions on every admission. MAO plans not only take advantage of that adjustment through the analog of the CMS PC Pricer to reduce payments to hospitals, but they are denying patient readmissions after the fact. This is occurring whether the readmission was related or unrelated to the prior admission. Thus, MAOs apply the HRRP reduction, but do not follow the HRRP policy. In this regard, the MAOs generate a windfall by penalizing hospitals twice. Because MAOs are not following the HRRP, CMS 6

7 should also exclude the HRRP reduction from the Pricer when the HMO software button is selected as the patient financial class in the PC Pricer. We encourage CMS to take these steps quickly to avoid the MAO windfall and restore the appropriate payment level to providers under Medicare Part C. MAOs obviously can pursue their own recourse against providers for excessive readmissions, but they cannot apply multiple and inconsistent penalties. To preserve the integrity of the HRRP, we urge CMS to remove the readmissions factor from the CMS Payment Methodology as it applies to MAOs. IV. The Provider Network Adequacy Audit Protocols Should Evaluate Network Adequacy at the Sub-Network Level (Attachment VI: 2017 Call Letter, Section I, p ) We appreciate CMS s continued emphasis on provider network adequacy, and welcome the opportunity to provide input on the provider network adequacy ( PNA ) protocol. Through our members interactions with patients, we have witnessed firsthand the confusion that enrollees often experience when navigating provider networks and the challenges they can face when their access to care is restricted. We encourage CMS to target these problems in audits of MAO provider networks to ensure that enrollees can access the benefits to which they are entitled. In the comments we provided last year in response to the 2016 Draft Call Letter, we expressed our concern that an MAO s apparent compliance with network adequacy standards may obscure issues within the network if the MAO uses downstream organizations to provide administrative and health care services to beneficiaries. Downstream organizations are often affiliated with their own contracted or employed physician or provider groups, and the subcapitation arrangements create a financial motivation for downstream organizations to direct care to a particular physician or provider group. As a result, these provider groups often become the enrollees de facto provider network. CMS has made clear, however, that MAOs are responsible for ensuring that CMS provider network adequacy requirements are met for Part C benefits. These networks within a network are often far narrower than the provider network depicted in the provider directory or the Health Service Delivery ( HSD ) tables on which CMS based its approval of an MAO, thus creating a more narrow network as the beneficiary moves through the healthcare continuum. Ultimately, the use of these downstream organizations may be disingenuous. Enrollees may have selected a particular MA plan on the basis of its provider network, only to realize later that a downstream organization will discourage enrollees from accessing particular providers. This is especially problematic when a hospital is identified as innetwork in the provider directory, but the physicians affiliated with the hospital, while in the main network, are not a part of the physician or provider group to which the downstream organization directs enrollees. Moreover, the downstream organization s sub-network may not meet the network adequacy standards to which the MAO is subject. We encourage CMS to implement audit protocols that identify and review these downstream organizations to ensure that enrollees have adequate access to care. To that end, we encourage CMS to adopt specific requirements for MAO provider directories and use the audit protocols to ensure that these directories accurately depict the provider network. We encourage CMS to require that MAOs provider directories include the information referenced in the section of the Call Letter titled Guidance on the Future of 7

8 Provider Directory Requirements and Best Practices (pages ). In particular, we agree that MAO provider directories should include information regarding in-network physicians medical groups and institutional affiliations. This level of detail would allow CMS to identify and address the incongruities created by the use of downstream organizations while allowing beneficiaries to make informed plan selections. V. The Provider Network Adequacy Audit Protocols Should Evaluate Network Adequacy for Post Acute Care (Attachment VI: 2017 Call Letter, Section I, p ) As noted above, the fact of a provider s identification in a network directory does not necessarily mean the provider truly is available. Our MA patients also experience the situation where a patient stay no longer meets the standards of care for inpatient services, but there are no medically appropriate post-acute settings available for discharge. This occurs because the MAO has no additional financial cost to extend a patient s hospital length of stay under the MS-DRG system, but would have additional cost if they transferred the patient to the appropriate postacute provider of care. Patients have a right under the Medicare Act to be treated in an appropriate environment, and this includes a discharge from the inpatient hospital setting when appropriate. Therefore, we urge CMS to consider for purposes of network adequacy that MAOs demonstrate meaningful access, including a review of availability of listed postacute providers that are accepting MA patients. We also urge an audit of MAO practices associated with approving timely discharges to an appropriate post-acute care setting. Further, current CMS network adequacy standards do not include inpatient rehabilitation facilities ( IRFs ) as a provider type that requires a specific number or threshold for the provider network. Further, many MAOs have extremely high denial rates for IRF services. To the extent that post-acute care services are available, these factors result in MAOs providing rehabilitation services almost exclusively in skilled nursing facilities, which we do not believe meets the requirement that MA plans offer equal benefits as are provided under traditional fee-forservice ( FFS ) Medicare. We urge CMS to ensure that IRF coverage is equally available to MAO enrollees as is available to FFS beneficiaries, and specifically CMS should consider requiring MAOs to report denial rates by provider type. VI. Proposals to Tier Cost Sharing Must Be Scrutinized to Avoid Enrollee Confusion (Attachment VI: 2017 Call Letter, Section II, p. 171) In the comments we provided last year in response to the 2016 Advance Notice of Methodological Changes and 2016 Draft Call Letter, we highlighted our concerns that tiered networks may undermine meaningful access to health care and impose unexpected costs on enrollees. We understand that CMS intends to evaluate requests from MAOs to tier cost sharing for contracted providers. When evaluating these requests, we urge CMS to be cognizant of the difficulty enrollees may face in navigating such complex benefit designs and the negative impact that tiered cost sharing may have on access to care. In particular, we are concerned that MAOs may place safety net hospitals and teaching hospitals in the highest cost-sharing tier, simply because those hospitals payment rates based 8

9 upon the CMS PC Pricer are statutorily higher due to payments for empirical DSH and the uncompensated care fund add-on. While we acknowledge that innovative benefit designs play an important role in reducing overall health care spending, many of these hospitals play a critical role in serving low-income communities and training health care professionals. Allowing MAOs to steer enrollees away from these hospitals undermines the very purpose of Medicare s DSH program, which serves to ensure that these hospitals can continue to play a vital role in the community. Indeed, because the capitated rate at which CMS pays MAOs is not adjusted to reflect network tiering, these MAOs would receive a windfall if they cut costs simply by steering enrollees away from these hospitals by imposing higher copayments. Moreover, consumers often enroll in a plan because the provider directory includes a certain provider. With a tiered cost sharing structure, however, these enrollees only realize how significant their cost sharing responsibilities are after it is too late to choose a different health plan. We urge CMS to carefully consider these factors when evaluating a particular MAO s proposal for tiered cost sharing. VII. High Maximum Out-of-Pocket ( MOOP ) Limits and Enrollee Cost-Sharing Obligations Can Have Negative Consequences for Providers (Attachment VI: 2017 Call Letter, Section II, p ) As described above, MAOs have employed a variety of strategies to reduce costs, many of which involve passing on costs to beneficiaries. Unlike original Medicare, MAOs are not specifically required by regulation to reimburse providers for their uncollected beneficiary cost share (i.e., copayments, co-insurance, etc.), with narrow exceptions in the context of certain dualeligible beneficiaries. MAOs generally require providers to seek payment from patients, and reasonable efforts to collect these cost sharing amounts are often unsuccessful. The MAO sees no increased exposure from shifting the burden to the enrollee, so they have no incentive to evaluate or consider the affordability or collectability of their enrollees cost share. In 2014 alone, some of our member hospitals were only able to collect 60 percent of plan enrollee cost sharing. Concurrent with the decreasing ability to collect cost sharing, MOOP limits for enrollees continue to rise: from 2011 to 2015, the average MOOP for an enrollee in an MA plan has increased from $4,313 to $5,014. Additionally, increasing MAO flexibility in how it allocates the MOOP between inpatient and outpatient services has several serious consequences for beneficiaries. When MA plans allocate more of the MOOP to outpatient services, which appears to be the trend, it discourages Part C beneficiaries from using outpatient services when they might otherwise choose to do so. It also prompts MAO plans to change the status of an inpatient admission to an outpatient stay (as discussed on Section I above), which may cost the beneficiary more in cost sharing liability than an inpatient service. It is our experience that many enrollees simply do not understand their cost sharing obligations. Because MAOs maintain ongoing relationships with their enrollees, providers often seek to collaborate with MAOs to clarify these responsibilities and address enrollees debt. Pursuant to Medicare Advantage marketing requirements, MAOs seek approval from CMS before engaging in outreach and communication efforts that target enrollees. Our hospital members have been disappointed to learn that CMS has been inflexible in allowing MAOs to 9

10 correspond directly with enrollees on providers behalf regarding their outstanding cost sharing obligations. Given the absence of a requirement from CMS that MAOs pay providers uncollected member responsibility at the federal reimbursement rate, for which they are clearly funded in their monthly premium, our members would expect CMS to allow hospitals to partner with the MAOs to communicate with the enrollee to make strides in understanding their cost sharing obligations and reduce bad debt exposure. The MAO explanation of benefits is simply not an effective mechanism to facilitate enrollee engagement. While we understand that CMS is wary of communications to enrollees that may be deceptive or misleading, we hope that CMS will thoughtfully consider future requests for MAO enrollee communications that serve simply to clarify existing cost share obligations to our members. Without the ability to engage MAOs and enrollees in efforts to collect cost sharing obligations, providers are left with growing amounts of unpaid member responsibility. If enrollees are given even greater cost sharing responsibilities, providers will simply face even larger unpaid bills. If CMS adopts this proposal, CMS should require MAOs to reimburse providers for uncollected member responsibility at the then current federal reimbursement rate. This would place the burden for uncollected member responsibility where it should lie, with the MAO itself. We applaud CMS efforts to reduce or eliminate cost sharing flexibility in specific service categories for voluntary MOOP plans, and we urge CMS to consider leaving the voluntary and mandatory MOOPs at their current levels. VIII. Interoperability Requirements Should Not Undermine Efforts to Provide Patient- Centered Care (Attachment VI: 2017 Call Letter, Section II, p. 173) We appreciate the opportunity to comment on approaches to encouraging interoperability. Our members are industry leaders in using health information technology in order to coordinate care and improve quality. For example, many of our members have implemented electronic medical record ( EMR ) systems across large vertically integrated heath systems. While we recognize the benefits of interoperability between providers and MAOs, we urge CMS to exercise caution in mandating interoperability. With the advent of EMRs and other health information technology, most managed care plans, including commercial plans and MAOs, have transitioned away from providing case management services on site at a hospital, and now provide those services remotely, relying on hospital case management staff for clinical patient updates. This has shifted the cost of case management to hospitals and placed a significant burden on hospital case management personnel. For patients with complex medical needs, an MAO on-site case manager is essential to coordinating care and facilitating communication with hospital case management and other continuum of care providers and, of course, the patient. Paradoxically, a managed care plan that has electronic access to a patient s EMR may ultimately neglect its case management responsibilities. We urge CMS to consider these issues in determining whether to require interoperability between MAOs and contracted providers. If CMS engages in any rulemaking to require interoperability, we would recommend a provision that requires MAOs to provide on-site case managers at hospitals with a certain threshold census of MAO enrollees, even if EMRs are electronically accessible. 10

11 11 Sincerely,