Medicare's hospital outpatient prospective payment system rates will increase by a net 2.6% in 2020.

Despite successful legal challenges by stakeholders, hospitals will see continued cuts to the 340B drug savings program and reductions in reimbursements for off-campus clinic visits in 2020 under a final rule issued Friday by the Centers for Medicare & Medicaid Services.

In addition, CMS said it will issue a separate final rule on its requirement that hospitals disclose payer-specific negotiated rates, which was proposed under the Outpatient Prospective Payment System rule.

Overall, Medicare's hospital outpatient prospective payment system rates will increase by a net 2.6% in 2020, compared with 2019.

However, CMS will push ahead with its ongoing 22.5% payment rate cuts for some drugs under the 340B program, even though the policy was vacated by a federal court in May.

In addition, the second year of the two-year phase-in of the site-neutral cuts – which CMS says will save Medicare about $800 million in 2020 –  will continue even though a federal court in September vacated the policy.

"I've never seen anything like what we are seeing now from CMS with OPPS payment policy, where the agency continues to double and triple down on cutting reimbursement to hospitals even when the legal system has spoken in favor of what providers have been saying for years," Jugna Shah, MPH, CHRI, president of Nimitt Consulting Inc., told Revenue Cycle Advisor. 

“Given this, it is quite remarkable that the agency pushed its controversial price transparency proposals to a separate, yet-to-be released final rule,” Shah says.

Site-neutral Payments

The final rule completes the two-year phase-in of the site-neutral rate, which is 40% of the OPPS rate provided for grandfathered off-campus clinics in 2020.

CMS says the site-neutral policy will reduce cost-sharing by Medicare beneficiaries to $9, saving them about $14 for each off-campus clinic visit in 2020.

CMS may appeal the September ruling but said it will ensure that 2019 claims for clinic visits will be paid consistent with the court order.

"We do not believe it is appropriate at this time to make a change to the second year of the two-year phase-in of the clinic visit policy," CMS said. "The government has appeal rights, and is still evaluating the rulings and considering, at the time of this writing, whether to appeal from the final judgment."

American Hospital Association Executive Vice President Tom Nickels said the site-neutral cuts "not only threatens access to care, especially in rural and other vulnerable communities, but it goes against clear congressional intent to protect the majority of clinic services."

"There are many real and crucial differences between hospital outpatient departments and the patient populations they serve and other sites of care," Nickels said.

"Now that a federal court has sided with the AHA and found that these cuts exceed the Administration's authority, CMS should abandon further illegal cuts," he said. "Instead, as we urged in a letter to the Department of Justice (Thursday), CMS should promptly repay the affected hospitals the full OPPS rate to support the work they do for the patients they serve. And CMS should pay the full OPPS rate for all clinic visit claims going forward."

340B Cuts Continue

In May, U.S. District Court Judge Rudolph Contreras again ruled that the 340B drug reimbursement rate under Medicare Part B that Health and Human Services set in the 2019 OPPS rule was unlawful and "in contravention of the Medicare Act's plain text."

CMS has acknowledged the ruling, which it has appealed, but said the cuts would continue even as it "solicited comments for a potential remedy for CYs 2018 and 2019 in the event of an unfavorable decision."

"We also announced in our intent to conduct a 340B hospital survey to collect drug acquisition cost data for CY 2018 and 2019, and data from that survey may be used to craft a remedy," CMS said.  

After finalizing the policy without precise data regarding hospital acquisition costs for 340B drugs in this program, the agency is crowdsourcing ideas for how to reimburse hospitals as ordered by the court, though an appeal is currently pending, Revenue Cycle Advisor reports.

Health and Human Services Secretary Alex Azar says the cuts are needed because the 340B program has created a large profit margin between the price that hospitals pay for 340B drugs and the reimbursement paid by Medicare, which he said incentivizes hospitals to overprescribe the discounted drugs.

That concern was validated by a Government Accountability Office report in 2015 which showed that Medicare Part B drug spending was substantially higher at 340B hospitals.

Maureen Testoni, president and CEO of 340B Health, said CMS has for three years "ignored the needs of patients and the safety-net hospitals that care for them to pursue an unlawful reduction in Medicare payments to 340B hospitals."

"A federal court has ruled repeatedly that these cuts are inconsistent with the Medicare statute and must be reversed," she said. "A bipartisan majority in both houses of Congress has agreed. It's time to stop this unfunny version of 'Groundhog Day' and restore Medicare payments for 340B hospitals to their legal, statutory level."

Beth Feldpush, senior vice president of policy and advocacy at America's Essential Hospitals, blasted CMS for "plowing ahead with damaging cuts to hospitals in the 340B Drug Pricing Program and ignoring clear congressional intent by expanding cuts to grandfathered provider-based outpatient clinics.

"CMS undermines the foundation of care for the nation's most vulnerable people," Feldpush said. "The agency also prolongs confusion and uncertainty for hospitals by maintaining unlawful policies it has been told to abandon in clear judicial directives."

In the 2020 OPPS proposed rule, CMS solicited comment from stakeholders on methods to devise a remedy for hospitals if its appeal is denied. With CMS redistributing money saved from the reimbursement cut throughout the OPPS since 2018, the agency does not want to simply reimburse hospitals at the more traditional ASP plus 6%. CMS says it will consider stakeholder comments and the survey data as it weighs possible new policies and remedies, Revenue Cycle Advisor reports. 

Therapy Services

CMS is also finalizing its proposal to change the required level of supervision for all outpatient therapeutic services provided in outpatient and critical access hospitals from direct to general, according to Revenue Cycle Advisor.

General supervision means that the procedure is furnished under the physician's overall direction and control, but that the physician's presence is not required during the performance of the procedure.

"This is one of the few things that CMS proposed and finalized that should receive three cheers from the hospital community," Shah told the publication.

Hospitals may choose to require higher levels of supervision for certain services as it deems appropriate.

Among the allegations, former executives at Outcome lied to outside auditors about revenue for 2015 and 2016 in order to secure debt financing.

Outcome Health, the Chicago-based healthcare digital advertiser, will pay $70 million to resolve allegations that it lied to drug companies and investors about the reach of its advertising inventory, the Department of Justice said.

The privately held company – which provides physician waiting rooms with video screens featuring health tips and drug ads – admitted that from 2012 to 2017 former executives and employees perpetrated a scheme that under-delivered on its advertising campaigns, but continued to bill its clients, mostly drug makers, as if it had delivered in full.

To conceal the fraud, Outcome employees falsified affidavits and proofs of performance to make it appear the company was delivering advertising content to the number of screens in its clients' contracts, DOJ said.  

The company also inflated patient engagement metrics with Outcome devices, and altered studies given to clients to make it appear that the campaigns were more effective than they were.

To cover their tracks, the former executives at Outcome lied to outside auditors about revenue for 2015 and 2016. The auditor signed off on the numbers because the schemers fabricated data to conceal the fraud. 

In the resolution agreement, Outcome admitted that former executives used the bogus revenue figures to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017.

Outcome Health co-founders Rishi Shah and Shradha resigned in 2018 after the company reached a fraud settlement with investors.

"Outcome Health deceived its lenders and investors, and overbilled its clients, by fraudulently misrepresenting both the quality and quantity of its advertising services and concealing those misrepresentations from auditors," Principal Deputy Assistant Attorney General John P. Cronan said in a media release.  

As described in the agreement, after reviewing the Company's cooperation and remediation efforts, among other considerations, the DOJ determined not to prosecute Outcome Health for the past misconduct of the Company's founders and select former employees, all of whom are no longer affiliated with the Company.

Outcome CEO Matt McNally said the company is "thrilled to resolve this matter, as it enables us to move forward and focus on our mission to be the indispensable partner to patients, providers and industry partners during moments of care."

For the past two years, Outcome has overhauled its compliance and campaign-reporting policies, McNally said.

"These actions included engaging third-party auditors to ensure reporting accuracy, investing in partnerships with organizations like BPA Worldwide to validate key performance indicators, overhauling internal controls to improve the reliability of reporting, and forming an all-new leadership team, myself included," he said.

Outcome has already repaid drug makers about $65.5 million using cash payments and in-kind services, and has set aside $4.5 million to compensate any other claimants.

The resolution doesn't require Outcome to compensate scammed lenders and investors   because many of them now own the company.

Medicare patients treated by clinicians who are later banned for fraud and abuse are 14% to 17% more likely to die than patients treated by non-excluded clinicians.

New research shows that Medicare fraud and abuse costs more than wasted tax dollars.

Johns Hopkins researchers estimate that Medicare fee-for-service patients treated by clinicians who later are banned from the federal healthcare program for fraud were as much as 17% more likely to die than patients treated by non-excluded clinicians.

In 2013, that fraud and abuse contributed to 6,700 premature deaths, and study lead author Lauren Nicholas says that number is a low-ball estimate because it does not factor in other government-sponsored health insurance, commercial health insurance or the uninsured.

"The biggest take home message for us was the extent to which fraud and abuse should really be thought of not only is a financial problem, but as a public health challenge," says Nicholas, an assistant professor in the Johns Hopkins Bloomberg School’s Department of Health Policy and Management.

The findings were published this week in JAMA Internal Medicine.

The study also found that patients treated by later-banned providers were 11% to 30% more likely to experience an emergency hospitalization within a year.

Nicholas says the higher mortality rates of patients of later-banned clinicians are "directly related to the crimes that these perpetrators are committing in order to bill Medicare for additional revenue."

"A lot of these perpetrators do things like illegally disseminate dangerous drugs. There are cases where they're doing medically contraindicated surgery because surgery is a lucrative thing to bill for, or they're using fraudulent make-your-own chemotherapy," she says. "It's hard to believe some of the things that people will do to be able to bill for it, and these things are incredibly dangerous for the patients who then get exposed to it."

“We found that even a single visit with a provider later excluded for fraud and abuse increased the risk of dying compared to someone who lived in the same county and had the same health status but did not see an excluded provider,” Nicholas says.

In the analysis, the Johns Hopkins researchers looked at providers banned from Medicare for fraud and abuse by the Department of Health and Human Services’ Office of the Inspector General between 2012 and 2018.

The researchers linked the banned providers to a random sample of the Medicare patients treated by excluded providers.

The study sample included 8,204 Medicare FFS patients who were first treated by a provider later banned for fraud and abuse in 2013 and a comparison group of 296,298 patients treated by a randomly selected provider who had not been banned for fraud and abuse.

Before the fraud exposure, the two groups were in similar health. Nicholas and her colleagues followed patients for up to three years to identify differences in mortality and hospitalization.  

Nearly one-quarter—23%—of patients seen by banned providers were non-white while 16.5% of patients treated by non-excluded providers were non-white.

Patients treated by banned providers were more likely to be disabled, (27.2% vs. 18.6%) and dually enrolled in Medicare and Medicaid, (34.7% vs. 21.9%).

More than 47,000 clinicians have been banned from Medicare and Medicaid, and the fraud and abuse associated with the program costs as much as $140 billion a year.
 
A further breakdown of the patient-clinician mix shows that 60% of patients in the sample were treated by providers committing fraud. Of those patients, 14% were treated by providers who had committed patient harm, and 24% were treated by providers practicing with a revoked license.

Providers excluded for fraud had the highest mortality rate. Their patients were 17.3% more likely to die than patients not treated by a banned provider.

Patients treated by providers banned for patient harm were 13.7% more likely to die, and patients who were treated by providers banned for revoked licenses were 14.8% more likely to die.

Chronic Disease Fund, Inc., and Patient Access Network Foundation allegedly worked with drug makers to funnel money to Medicare patients taking drugs the companies sold.

Two foundations will pay a combined $6 million to settle allegations that they enabled pharmaceutical companies to pay kickbacks to Medicare patients, the Department of Justice said.

The foundations – Chronic Disease Fund, Inc. doing business as Good Days from CDF, and Patient Access Network Foundation – will pay $2 million and $4 million, respectively, to resolve the alleged violations of the False Claims Act, federal prosecutors in Boston said.

The government alleged that the two foundations worked with several drug makers to design and operate funds that funneled money from the companies to patients taking the specific drugs the companies sold.

"These schemes enabled the pharmaceutical companies to ensure that Medicare patients did not consider the high costs that the companies charged for their drugs," DOJ said. "The schemes also minimized the possibility that the companies' money would go to patients taking competing drugs made by other companies." 

Federal prosecutors said that, from 2010 through 2014, CDF conspired with five pharmaceutical companies – Novartis, Dendreon, Astellas, Onyx, and Questcor – to pay kickbacks to Medicare patients taking their drugs.

 Prosecutors also allege that, from 2011 through 2014, PANF permitted four pharmaceutical companies – Bayer, Astellas, Dendreon, and Amgen – to use PANF as a conduit to pay kickbacks to Medicare patients taking their drugs.

The settlements were determined based on analysis of each foundation's ability to pay.

The Anti-Kickback Statute bans drug makers and third-party co-pay foundations from paying any remuneration to induce Medicare patients to purchase the companies' drugs.  

Andrew E. Lelling, U.S. Attorney for the District of Massachusetts, said the government's allegations made plain that "CDF and PANF functioned not as independent charities, but as pass-throughs for specific pharmaceutical companies to pay kickbacks to Medicare patients taking their drugs."

"As a result, CDF and PANF enabled their 'donors' (the pharmaceutical companies) to undermine the Medicare program at the expense of American taxpayers," Lelling said.