Centers for Medicaid and Medicare Services Regulatory Issues

August 1, 2017 – Medicare Proposed Rules Include Massive Cuts to Payment for 340B drugs, off-campus hospital sites

Proposed rules recently issued by the Center for Medicare and Medicaid Services (CMS) would have significant impacts on hospitals, particularly those that serve significant underserved populations.

The Outpatient Prospective Payment System proposed rule includes a provision that would reduce payments for drugs purchased by 340B eligible hospitals by about 25 percent. The 340B program was enacted to enable hospitals and other entities that qualify based on care for underserved communities to benefit from discounted prices on outpatient drugs. Under the proposed rule, the bulk of the benefit of the discount would revert to the Medicare program. On a more positive note, the proposed rule would reinstate the moratorium on the enforcement of the direct supervision policy for critical access and small rural hospitals for 2018 and 2019.

The Medicare Physician Fee Schedule proposed rule includes an additional cut to services provides by off-campus hospital departments. Currently, off-campus hospital sites and services that were not billed as hospital services as of November 2015 are paid at 50 percent of the regular outpatient hospital payment rate. Under the proposed rule, for 2018 payment for these sites and services would be further reduced to 25 percent of the regular outpatient rate. CMS’s intent is to limit payment for new off-campus hospital departments to an amount comparable to the Medicare physician fee schedule. The proposed policy will hurt hospitals’ ability to provide access to services and locations that are not sustainable under regular fee schedule. As a positive development, the proposed rule includes new codes for behavioral health collaborative care model services provided by federally qualified health centers and rural health clinics.

WSHA will provide member hospitals with further analysis. We plan to comment on both. Comments for both rules are due September 11, 2017. (Andrew Busz,

March 8, 2017 – Medicare Outpatient Observation Notification Requirements in Effect

Requirements under the federal Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) are effective March 8, 2017. This includes including use of the Medicare Outpatient Observation Notification (MOON) form. The Act requires hospitals, including critical access hospitals, to notify Medicare patients who have been placed in observation status verbally and by use of the standard MOON form . The CMS website includes the MOON form, form completion instructions, and Medicare manual guidance.

On February 22, WSHA hosted a webinar providing an overview of the NOTICE Act requirements and the Medicare Outpatient Observation Notification (MOON) form. During the webcast, hospitals shared what they are doing operationally to meet the requirements. Webinar slides with an overview of the requirements and comments shared by hospitals are here.   (Andrew Busz,

October 31, 2016 – WSHA and Members of Congress Urge Changes to Medicare Site Neutral Proposal

The Centers for Medicare & Medicaid Services proposed outpatient rule included sweeping changes to payment for hospital outpatient departments that are located more than 250 yards from the main campus of a hospital.  Under the proposed rule, remote hospital departments and hospital clinics that were not already billing Medicare as of October 2015 as a hospital service would no longer receive hospital payment as of January 2017. The payment change would apply to new locations and would preclude hospital payment should an existing location relocate or expand services.

WSHA and other organizations submitted comments that the proposed rule lacked flexibility and threatened access to care for Medicare enrollees and other patients in many communities and urged delay in implementation.

WSHA has been actively working this issue with federal leaders. 261 members of the US. House of Representatives and 45 members of the Senate signed letters urging CMS to implement the site-neutral provisions of the Balanced Budget Act of 2015 in a more flexible manner to ensure access to care.  The next step will be for CMS to issue a final rule in the near future.  (Andrew Busz,

August 18, 2016 – WSHA and AHA Express Concerns with Proposed Medicare Outpatient Rule

The Centers for Medicare & Medicaid Services recently released its proposed rule for changes to the Medicare outpatient prospective payment system. The rule proposes to implement the site-neutral provisions of Section 603 of the Bipartisan Budget Act of 2015.

In an advisory to members, the American Hospital Association (AHA) expressed its dismay by the short-sighted proposals, which do not take advantage of flexibility provided by Congress. While Congress cut payments for newly established hospital-based clinics, it provided for flexibility in certain circumstances. For example, the law allows for payment for ancillary services provided in these clinics. In contrast, the agency is proposing that these clinics would get no Medicare payment. In addition, the agency would not allow exemptions for clinics that relocate or rebuild their outpatient facilities in order to provide needed updates.

WSHA has drafted a letter supporting AHA’s comments. Comments on the proposed rule are due by Sept. 6. We encourage hospitals to submit their own comments. Please send us a copy of your comments and let us know if you have suggestions on our proposed letter.(Andrew Busz,

August 15, 2016 – WSHA Comments on Proposed Changes to Critical Access Hospital Conditions of Participation

WSHA submitted comments on proposed rule changes to the conditions of participation (CoPs) for critical access hospitals (CAHs). The changes are designed to promote innovation, flexibility and improvement in patient care among CAHs. WSHA supported the technical corrections and the inclusion of new requirements in areas such as antibiotic stewardship. Supporting the American Hospital Association’s comments, WSHA expressed concern about rules related to three areas — antibiotic stewardship, medical records and quality measures. WSHA asked CMS to implement the rules with flexibility and make sure the rules supported providing additional resources to help hospitals meet the new guidelines. WSHA will make available a comparative analysis of the current and proposed CoPs to help CAHs prepare for the proposed changes. (Andrew Busz,

August 31, 2015 – WSHA Comments on Calendar Year 2016 Outpatient Medicare Rule, Short Inpatient Hospital Stays

WSHA submitted comments to the Center for Medicare & Medicaid Services’s (CMS) proposed rule for Medicare outpatient prospective payment hospital services for calendar year 2016. In its comments, WSHA opposed CMS’s proposal to cut to outpatient conversion factors by 2 percent to compensate for alleged duplicate lab payments, and also opposed the continuing 0.2 percent reduction to inpatient rates due to transition to the Two-Midnight rule.

WSHA supported CMS’s proposal for short stay inpatient reviews to be performed by quality improvement organizations (QIOs) rather than the recovery audit contractors (RACs). Under the proposal, hospitals with high denial rates can be referred by the QIOs to the RACs for recoupment. WSHA voiced concerns that the QIOs need to be given sufficient flexibility to approve exceptions to the Two-Midnight rule and that CMS needs to provide protections to hospitals during the transition period. (Andrew Busz,

July 27, 2015 – WSHA Urges CMS to Pay for Mental Health Services

In a comment letter, WSHA urged Centers for Medicare & Medicaid Services (CMS) to adopt federal payment for hospitalizations at large, freestanding standing psychiatric hospitals (known as Institutions for Mental Disease) in its final managed care rule. Since the creation of Medicaid, the federal government has not paid for services at these hospitals. If adopted, the federal government would pay for Medicaid managed care enrollee hospitalizations for up to 15 days.

July 7, 2015 – WSHA Comments on Telehealth for Fee-for-Service Medicaid

In response to a proposed rule on telehealth fee-for-service Medicaid client coverage, WSHA provided a comment letter to the Health Care Authority seeking clarity on the billing of facility fees, and urging the recognition of services provided through store and forward technology. The department revised its rule in mid-August to incorporate WSHA’s comments. WSHA believes the changes to recognize the fee-for-service Medicaid clients will eventually impact the Medicaid managed care contract. Most of the Medicaid clients in the state are enrolled in managed care. (Chelene Whiteaker,


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