Washington Report –November/December, 2010

Bill Finerfrock, David Connolly, Melinda Stellaccio and Zhaneta Mansaku

SGR Fixed – For NowOther Medicare “fixes” Just What is the SGR and what are some ways to fix it?Funding for claims reprocessingIt’s Not Just the Temperature That’s FreezingMedicare Premiums, Deductibles For 2011HHS issues guidance on Medical Loss RatiosTell Me Again Why Insurance Rates Are Going Up?Medicare Materials Specifically For Billing and Coding ProfessionalsMedicare Fraud and Abuse Efforts Set to ExpandCMS Delays enforcement of the Ordering/Referring policy.Elections Have ConsequencesWho’s In Charge Around Here?Order in the CourtCMS Transmittals

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SGR Fixed – For Now

On December 15, 2010, President Obama signed into law the Medicare and Medicaid Extenders Act of 2010. Among other things, this legislation avoided a draconian 25% reduction in physician fee schedule payments that was slated to go into effect on January 1, 2011. In lieu of the 25% negative update that was scheduled to occur, Congress mandated that there be a 0% update for 2011. Although this was welcome news for the physician community (and their patients), this is only a temporary fix. Another SGR-related cut will occur on January 2012 unless the next Congress intervenes to fix the SGR problem.

There has been considerable confusion about the meaning of the Congressional action and what will happen to physician fee schedule payments for services provided on or after January 1.

The Congressional action avoiding the SGR related reduction that was slated to occur on January 1 effectively froze the update factor for 2011 for NOT the Conversion Factor.  Instead of a negative 25% update, the Congress directed that there be a 0% update. However, in the physician fee schedule final rule, CMS made a variety of administrative changes that will have an effect on physician fee schedule payments for 2011, including the 2011 Conversion Factor.  By law, if CMS makes any administrative changes that result in Medicare outlays going up or down by more than $20 Million, the agency must make additional administrative changes that “offset” those adjustments so that the financial effect of all changes is “budget neutral”.  A change

resulting in spending going up or down by less than $20 Million is considered “budget neutral”.  The 2010 review process resulted in a number of changes in both the practice expense component of the RVU as well as adjustments to the way CMS calculates the Medicare Economic Index (MEI) also known as medical inflation.  The net effect of these changes would have been an increase in Medicare outlays for 2011 well above the $20 Million threshold.   In order to adhere to the Budget Neutrality requirement, CMS had to make corresponding reductions to offset the additional costs associated with the RVU and MEI changes.  In the physician fee schedule final rule, CMS opted to make an adjustment to the 2011 Conversion Factor (CF) to maintain budget neutrality.   The Conversion Factor for 2011 has been adjusted downward by CMS in order to offset the increases adopted elsewhere by CMS in the physician fee schedule.  This is unrelated to the SGR debate but will ultimately affect what physicians will be paid by Medicare. Keeping in mind that the adjustment is to maintain budget neutrality, the NET effect on Medicare outlays of adjusting the CF is minimal.  However, it is possible that individual codes or specialties could see a change either up or down as a result of the cumulative effect of these changes. There still may be some additional adjustments to the conversion factor that could occur as a result of certain Congressional actions during the lame duck session. However, the CF for 2011 should be approximately 34.0053.

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Other Medicare “fixes”

In addition to “fixing” the SGR problem for 2011, Congress enacted additional changes to prevent other Medicare policies from expiring. These include:

Extension of Medicare work geographic adjustment floor

Under current law, the Medicare fee schedule is adjusted geographically for three factors to reflect differences in the cost of resources needed to produce physician services: physician work, practice expense, and medical malpractice insurance. The provision would extend the existing 1.0 floor on the “physician work” index through December 31, 2011.

Extension of exceptions process for Medicare therapy caps

Current law places annual per beneficiary payment limits for all outpatient therapy services provided by non-hospital providers. The Secretary was required to implement an exceptions process for cases in which the provision of additional therapy services was determined to be medically necessary. The provision would extend the therapy caps exception process through December 31, 2011.

Extension of payment for technical component of certain physician pathology services

The provision would extend the ability of independent laboratories to receive direct payments for the technical component for certain pathology services through December 31, 2011.

Extension of ambulance add-ons

The provision would extend the increased Medicare rates for ambulance services, including in super rural areas, through December 31, 2011.

Extension of physician fee schedule mental health add-on payment

The provision would extend the five percent increase in payments for certain Medicare mental health services through December 31, 2011.

Extension of outpatient hold harmless provision.

Under current law, the outpatient hold harmless provision expires on December 31, 2010. This provision extends the outpatient hold harmless provision through December 31, 2011.

Extension of Medicare reasonable costs payments for certain clinical diagnostic laboratory tests furnished to hospital patients in certain rural areasUnder current law, laboratory services provided by certain rural hospitals receive reasonable cost reimbursement though July 1, 2011.

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Just What is the SGR and What are Some Ways to Fix It?

Mention the letters S-G-R to just about any physician or billing company and they are likely to role their eyes and groan. It has proven to be the bane of the existence of most healthcare providers. But just what is SGR and why has it become the Medicare equivalent of a four-letter word?

Beginning in 1992, Congress sought to put some formula in place to help control the growth in spending in the Medicare program. Originally called a Volume Performance Standard (VPS) the VPS was soon replaced by the Sustainable Growth Rate formula (SGR). The purpose of the SGR is to keep Medicare spending for physician services in line with growth in the nation’s per capita gross domestic product (GDP).  The SGR is part of the formula that updates the fees for physician services based on annual expenditure targets.  As the economy grows so should the SGR target, but when the economy drops, so does that target. There are three major steps that CMS must follow to financially update physician services each year:

1) Calculate the SGR target based on four spending allowances (per capita GDP growth, beneficiary enrollment, inflation in practice costs (shown through the Medicare Economic Index (MEI), and changes in law and regulation that affect volume.

2) Compare that amount with the cumulative amount that was actually spent.

3) Set the update for the next year.  If actual spending is above the target, then the update is reduced.  If actual spending is below the target, then the update is higher.

 In fee-for-service, volume is very closely tied to spending growth. The SGR formula allows for volume growth through new benefits or through per capita GDP.  Price, too, is allowed to grow through MEI.   What updates has the SGR produced? 

In the early years, volume growth for physician services was below per capita GDP, so updates were at or above MEI.  In the mid-90s, physicians were generally happy with the SGR because it was resulting in increases in the Medicare fee-schedule at rates higher than the general inflation rate. However, beginning in the early part of this decade, volume growth for physician services increased and per capita GDP slowed.  Since 2002, the SGR has called for rate cuts because the rate of growth in physician spending was outpacing the growth in the GDP. 

Between 2003 and 2010 Congress has enacted several bills shielding physicians from the cuts the SGR formula dictated. However, rather than coming up with a way to pay for these higher payments, the Congress passed the legislative equivalent of an IOU to the Medicare trust fund, payable at the end of the following year. As physician payments continue to outpace GDP, the SGR formula dictated further cuts in physician fee schedule payments and when these cuts were combined with the growing IOU from accumulated SGR related debts, the magnitude of the cuts became larger and larger. This culminated in a projected SGR related cut on January 1, 2011 of nearly 25%.As in previous years, Congress has written a legislative IOU to the Medicare Trust Fund to “pay for” the latest SGR “fix”. This, when combined with the expected SGR formula cut expected for 2012, could result in a cut in physician fee schedule payments on January 1, 2012 of approximately 30%.

Critics of the SGR formula point out that it is seriously flawed and that part of the reason the formula is producing these large cuts is a result of those flaws. For example, some critics point out that that SGR formula is unable to differentiate updates by provider type. The formula cannot distinguish between physicians who exercise self-restraint with regard to volume and those physicians or specialties that largely contribute most to volume increases.

Advocates for the SGR (yes there are some) argue that the SGR is necessary because it

1) Restrains Medicare spending by regularly alerting policymakers to growth in Medicare spending for physician services.2) Draws attention to other healthcare system problems and shows the need for payment reform. Some possible options for changing the SGR include:

1) Adjust updates by type of service.  This will cause the formula to calculate growth rates and targets for each service category separately and thus apply separate updates to each.2) Create two categories of services: E/M and preventative and then all others.  The E/M and preventative services would grow at a rate of per capita GDP plus two percent, and all others would grow at a rate of GDP plus one percent.

3) Create a broad expenditure target that would cover all fee-for-service Medicare.  This would allow for more flexibility when setting targets among different settings and types of services.  It is not clear which way the new Congress may go in considering SGR options but it is sure to be a hotly debated topic during the 1st session of the 112th Congress.

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Funding for claims reprocessing

As part of the Medicare and Medicaid Extenders Act of 2010 Congress approved the release of $200 Million from the Medicare Trust Fund to pay claims that had to be reprocessed due to an earlier SGR fix bill enacted in mid-March. HBMA has been in touch with CMS on the timetable for processing these claims now that the money is available.

According to CMS, they intend to send formal guidance to the Contractors (MACs, Carriers and FIs) on how to handle these claims. We expect that this guidance will go out to the Contractors in the near future. Once the guidance is available, HBMA will notify the membership about how the Contractors are being directed to clear up this backlog.

HBMA has been advocating for a release of these monies for many months. It is unfortunate that the failure of Congress to resolve the SGR problem in a timely fashion resulted in the need to re-file claims and caused this problem in the first place.

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It’s Not Just the Temperature That’s Freezing

The ICD-9-CM Coordination & Maintenance Committee has finalized their decision to implement a partial freeze for both ICD-9-CM codes and ICD-10-CM and ICD-10-PCS codes prior to implementation of ICD-10 on October 1, 2013.

The partial freeze will be implemented as follows:

• The last regular annual update to both ICD-9 and ICD-10 code sets will be made on October 1, 2011.

• On October 1, 2012 there will be only limited code updates to both ICD-9- CM and ICD- 10 code sets to capture new technology and new diseases.

• There will be no updates to ICD-9 -CM on October 1, 2013 as the system will no longer be a HIPAA standard.

On October 1, 2014 regular updates to ICD-10 will begin. The ICD-9 Coordination & Maintenance Committee will continue to meet twice a year during the freeze.  At these meetings the public will be allowed to comment on whether or not requests for new diagnosis and procedure codes should be created based on the need to capture new technology or disease. Any code requests that do not meet

the criteria will be evaluated for implementation within ICD-10 on or after October 1, 2014, once the partial freeze is ended.

Return To Top Medicare Premiums, Deductibles For 2011

The Centers for Medicare and Medicaid Services (CMS) has set the Medicare premiums, deductibles and coinsurance amounts to be paid by Medicare beneficiaries in 2011.

For Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some home health care, the deductible paid by the beneficiary when admitted as a hospital inpatient will be $1,132 in 2011. This covers day 1 – 60 for a hospital inpatient stay. If beneficiaries are in the hospital for longer than 60 days, the beneficiaries must pay an additional $283 per day for days 61 through 90 in 2011, and $566 per day for hospital stays beyond the 90th day in a benefit period.

Beneficiaries enrolled a Medicare Advantage plan may have different cost-sharing arrangements.

The standard Medicare Part B monthly premium will be $115.40 in 2011, a $4.90 increase over the 2010 premium.  However, the majority of Medicare beneficiaries will continue to pay the same $96.40 premium amount they have paid since 2008. According to HHS, the “Part B premiums are increasing because of growth in the use of services like outpatient hospital care, home health and physician-administered drugs.”  The agency also blames the increases on “likely Congressional action to avert a precipitous decrease in physician payments”.

Most Medicare beneficiaries do not pay a premium for Medicare Part A because they have paid into the Medicare Trust Fund the required 30 quarters. By paying into the Part A trust fund for 30 quarters, the beneficiary is entitled, to obtain “free” Part A coverage. Those who do not have sufficient quarters of payment into the Part A Trust Fund, can obtain Part A by paying a monthly premium. This premium will be $450 per month for 2011, a decrease of $11 from 2010. According to an HHS press release, “Individuals who have between 30 and 39 “quarters of coverage” may buy into Part A at a reduced monthly premium rate of $248 in 2011.”

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HHS issues guidance on Medical Loss Ratios

As part of the healthcare reform legislation enacted earlier this year, insurance companies must demonstrate that 80 – 85 percent of premium dollars collected by the insurer go to pay for “direct care for patients and efforts to improve care quality”. Beginning in 2012, if an insurance company fails to meet the appropriate threshold (it is different for the individual and group markets), the company must provide a premium rebate back to the customer.

In late November, HHS issued new regulations outlining what health insurers must report in order for the agency to determine if the insurer met the appropriate threshold amount.

What an insurer spends on healthcare for the lives covered by the plan is referred to as the “medical loss ratio”. The goal of Congress when enacting this provision was to “make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money.”

In announcing these new rules, HHS Secretary Kathleen Sebelius said, “These new rules are an important step to hold insurance companies accountable and increase value for consumers.”

Beginning in 2011, the new regulations require that insurance companies publicly report how they spend premium dollars, providing meaningful information to consumers.  Also beginning in 2011, insurers are required to spend at least 80 percent of the premium dollars they collect on medical care and quality improvement activities.  

The National Association of Insurance Commissioners (NAIC) assisted HHS in the development of uniform definitions and methodologies for calculating insurance companies’ medical loss ratios.  On October 27, the NAIC submitted recommendations to the Secretary on how this new law should be implement. The regulations adopted by HHS codify the recommendations submitted to the Secretary by the NAIC. 

If you would like to get more information about the Medical Loss Ratio requirements and the recommendations made by NAIC, go to Medical Loss Ratio.

In addition to the financial reporting, the regulation specifies a comprehensive set of “quality improving activities” that allows for future innovations and may be counted toward the 80 or 85 percent standard.  According to HHS, the quality improving activities must be grounded “in evidence-based practices, take into account the specific needs of patients and be designed to increase the likelihood of desired health outcomes in ways that can be objectively measured.”

Finally, in order to maintain incentives for innovation, insurers will not be required to present initial evidence in order to designate an activity as “quality improving” when they first begin implementing it.  However, to ensure value, the insurer will have to show measurable results stemming from the quality improvement activity in order to continue claiming that it does in fact improve quality.

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Tell Me Again Why Insurance Rates Are Going Up?

In addition to the new Medical Loss Ratio requirements, HHS is proposing new federal regulations intended to “bring new transparency and scrutiny to proposed health insurance rate increases.” Historically insurance rate issues have been exclusively within state authority. The Affordable Care Act establishes new federal authority to demand information on the justification for insurance rate hikes. Under the proposed rule, HHS proposes to work with states to require insurers to publicly disclose and justify “unreasonable” rate increases. In announcing the proposed rule, HHS Secretary Kathleen Sebelius said, "Year after year, insurance company profits soar, while Americans pay more for less health care coverage." "The Affordable

Care Act is bringing unprecedented transparency and oversight to insurance premiums to help reign in the kind of excessive and unreasonable rate increases that have made insurance unaffordable for so many families." In materials released by HHS, since 1999, average premiums for family coverage have risen 131 percent. The new regulations, if adopted, would build on earlier efforts by the Obama Administration to require insurers in all states to publicly justify any unreasonable rate increases. Beginning in 2011, proposed rate increases of 10 percent or higher would have to be publicly disclosed and thoroughly reviewed by Obama Administration officials to determine if the rate increase is reasonable. After 2011, state-specific thresholds would be set using data and trends that better reflected cost trends particular to each state. Insurance company's justifications for their rate increases would be posted on www.HealthCare.gov and the insurance plan's website. The newly established federal Office of Consumer Information and Insurance Oversight (OCIIO) will oversee this new rule. Speaking on behalf of the Obama Administration, Jay Angoff, Director of OCIIO stated that the “proposed rate review policy will empower consumers, promote competition, encourage insurers to do more to control health care costs and discourage insurers from charging premiums which are unjustified."

Under the proposed regulation, if the OCIIO determines that a state has an effective rate review system, then the state would be permitted to conduct the reviews. If, however, Mr. Angoff and his staff conclude that a state lacks the resources or authority to do thorough actuarial reviews, the federal government would step in and conduct the rate review. In 2014, the Affordable Care Act empowers states to exclude health plans that show “a pattern of excessive or unjustified premium increases from the new health insurance exchanges.” For more information on the proposed regulation, go to: Insurance Rate Review.

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Medicare Materials Specifically For Billing and Coding Professionals

Earlier this year CMS introduced a new suite of products and resources for medical billing and coding professionals. These were added to the Medicare Learning Network website. These materials are an outgrowth of the outreach efforts HBMA has been making to the CMS central office staff over the past few years.

Although many HBMA member companies and staff have visited the website and accessed the materials available on the site, CMS has asked HBMA to remind member companies about the information available on the MLN Matters website for billing and coding professionals.

CMS and HBMA share the view that one of the best ways to ensure that Medicare claims are submitted and paid in a timely fashion is be ensuring that billing and coding professionals have access to timely and accurate information.

To access a detailed listing of all of the products you need to correctly submit claims the first time, visit the MLN Educational Web Guides web page at

MLN for Billing and Coding Professionals

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Medicare Fraud and Abuse Efforts Set to Expand

The Centers for Medicare and Medicaid Services (CMS) issued proposed rules in late September, soliciting public input on the development of new efforts to combat fraud and abuse in the Medicare program. HBMA and many other organizations submitted comments in response to the request.

Below are the highlights of the HBMA comments:

While pointing out the organization’s long support for efforts to combat fraud and abuse, HBMA noted, “that in our zeal for preventing fraud and abuse we do not embrace policies that make it more costly for providers to submit legitimate claims for services rendered to Medicare and Medicaid patients.” HBMA went on to note that eliminating fraud and abuse from the Medicare, Medicaid and S-CHIP programs ensures that there are sufficient funds to pay the legitimate claims of physicians and other providers of services. However, HBMA also cautioned CMS that establishing anti-fraud and abuse policies that are onerous to legitimate providers will discourage participation in both the Medicare and Medicaid programs and could result in less access to care by Medicare and Medicaid patients.

CMS proposes to establish three levels of risk categories corresponding to the potential for fraud by each category of provider or supplier: Limited, Moderate and High. HBMA agreed that different providers should be treated differently to reflect the relative risk associated with that provider category.

Regardless of their status, CMS proposes to subject all provider types to:

1. Verification of any provider/supplier-specific requirements established by Medicare.2. Conduct license verifications (may include licensure checks across states).3. Database Checks (to verify Social Security Number (SSN), the National Provider Identifier

(NPI), the National Practitioner Data Bank (NPDB), licensure, an OIG exclusion, taxpayer identification number, tax delinquency, death of individual practitioner, owner, authorized official, delegated official, or supervising physician)

Providers classified as “Limited Risk” would only be subject to the above standards or checks.

Providers deemed a greater risk (classified as “Moderate”) would be subject to unannounced visits. Finally, those providers deemed to be the greatest risk for fraud (classified as “High”) would be subject to all of the above tests, as well as criminal background checks and fingerprinting.

HBMA endorsed this type of tiering, although the organization’s comments did raise questions about the classification of some providers.

CMS expects to announce the new Fraud and Abuse rules in mid-2011. At this point it appears that most of the new requirements will apply to providers newly enrolling in the Medicare program.

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CMS Delays enforcement of the Ordering/Referring policy.

Early in 2010, CMS announced that if a provider was not enrolled in the Medicare PECOS system, any provider to whom that physician referred a patient or ordered a service, would not get paid. HBMA and other provider organizations objected to this policy arguing that it was unfair to penalize the provider to whom a patient was referred for the failure of the referring provider to be properly enrolled in PECOS.

In addition to the inherent unfairness of the policy, HBMA pointed out that there were numerous on-going problems with getting providers efficiently enrolled in Medicare. Many HBMA member companies were reporting that it was taking upwards of 120 days to guide a provider through the PECOS system.

As a result of these concerns, CMS announced that it would delay the enforcement of the policy until they had a higher level of confidence that the enrollment process was working smoothly. It was suggested that the provider edits that would reject the claims would be turned on in early January.

CMS has recently notified HBMA and other organizations that it does not plan to begin enforcing the new ordering/referring policy until sometime later in 2011. CMS has established a “placeholder” date of July 5, 2011. A placeholder date is just as the name would imply, a placeholder. There is no firm commitment that the edits will begin on this date, it is merely being identified for possible planning purposes.

HBMA will continue to monitor this issue and express the concerns we’ve heard from the membership about the impact this policy could have on access to care.

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Elections Have Consequences

When President Barack Obama first met with Congressional Leaders shortly after his victory in 2008, he made the now famous statement, “elections have consequences, we won.” In effect he was telling Congressional Leaders of both parties that he had a mandate from the American people to pursue the agenda he ran on and they better not get in his way.

Well a funny thing happened on the way to the 112 th Congress, the American people elected dozens and dozens of new Members of Congress who had a vision and an ideology vastly different from the one the President articulated during the 2008 campaign.

As a result, on January 3, John Boehner (R-OH) will be elected as the new Speaker of the House of Representatives replacing Nancy Pelosi (D-CA). Boehner, like President Obama, has been heard repeating President Obama’s phrase – “elections have consequences, we won.”

The election of 2010 was an emotion filled contest that resulted in a significant change in the balance of power in Washington and throughout the nation. The 112 th Congress, which will convene in early January, will have a Republican majority in the House of Representatives as a result of Republicans enjoying a net gain of 61 seats in the House of Representatives.

Although the Senate will still be controlled by the Democrats, the size of their majority will be smaller. During the 111th Congress, the Senate make-up has been 57 Democrats, 2 Independents (both caucus with the Democrats) and 41 Republicans. The Senate make-up beginning in January will be 51 Democrats, 2 Independents (again caucusing with the Democrats) and 47 Republicans.

In addition, several states will see the Governor’s office change to a Republican officeholder and numerous state legislatures will be controlled by the GOP. This, when combined with the new census figures that will cause a shift in Congressional seats from Democratic leaning states to GOP leaning states, suggests that the shift to the GOP could last longer than one or two election cycles.

Under the rules of the House of Representatives, it is not very difficult for the majority party, whether it was the Democrats in 111th Congress or the Republicans in the 112th Congress, to pass bills without any help or support from the minority party. That is not the case, however, in the Senate.

Under the Senate’s rules, Senators opposed to the legislation up for consideration have the ability to filibuster. Although most legislation only needs a simple majority to pass, it takes 60 votes to end debate on a bill in the U.S. Senate. So even though a bill may enjoy the support of 58 Senators, the 42 Senators who oppose the bill can prevent a vote on the legislation through seemingly endless debate.

With the reduction in the Democratic majority securing the 60 votes necessary to end debate will be more difficult. However, to the extent the Democratic Majority in the Senate truly reaches out to incorporate Republican Senators and GOP ideas in legislation, you could find it easier to reach the 60 vote threshold or even find that Senators opposed to bills would be willing to allow them to come to a vote.

It is expected that the agenda of the 112th Congress will be dominated by economic issues, such as job creation and reducing government spending. However as noted above, the new Congress will have to deal with the SGR problem before the end of 2011.

In addition, the new Congress will most assuredly put the recently enacted Affordable Care Act under close scrutiny. Many of the candidates who were just elected pledged to repeal and replace the health bill. This will prove easier said than done.

It is highly unlikely that we will see an outright repeal of the Affordable Care Act during the 112 th

Congress. Even if both the House and Senate were able to pass legislation to repeal the law and replace it with something more palatable to the GOP, it would surely be vetoed by President Obama and the Congress would not be able to override his veto.

This does not mean, however, that the new Congress will be impotent when it comes to affecting changes to the Affordable Care Act.

Earlier in this issue of the Washington Report, we identified various regulatory initiatives intended to bring about the changes promised by the supporters of the Affordable Care Act. Although many regulations have been written to give federal agencies greater control over healthcare and health insurance companies, many more are yet to be written. It takes staff to write these regulations and those staff expect to get paid for their work. The GOP controlled House will have principle responsibility for federal appropriations. The new GOP House majority can effectively “starve” the federal agencies of the resources they will need to write the rules and regulations that the Affordable Care Act requires.

Appropriations show-downs are not new. President Clinton and House Speaker Newt Gingrich had a famous stare down over federal appropriations bills in the mid-90s which led to a temporary shut-down of the federal government. It is too early to tell whether a similar stand-off will occur between Speaker-designate John Boehner and President Obama but it is certainly possible.

We anticipate that the agenda of the 112th Congress will be dominated by economic issues, such as job creation and reducing government spending.

Two emotional, economic policy areas which may be taken up are attempts to cut back the steady growth of entitlement programs, particularly Social Security and Medicare. A significant part of the growth in federal spending is in these two programs and the new members of Congress may find that the act of reducing this growth is a difficult goal to achieve.

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Who’s In Charge Around Here?

Below are some of the key Congressional and Committee Leaders for the 112th Congress.

House Leadership ChangesSpeaker: John Boehner (OH) Minority Leader: Nancy Pelosi (D-CA)Majority Leader: Eric Cantor (VA) Minority Whip: Steny Hoyer (D-MD)Majority Whip: Kevin McCarthy (CA)

Key House Committee Chairs

Ways and Means - Dave Camp (Michigan) Budget - Paul Ryan (Wisconsin) Appropriations - Hal Rogers (Kentucky), Energy and Commerce - Fred Upton (Michigan)Oversight and Government Reform - Issa (California)

House Democrats will not officially select their “Ranking Members” for the Committees until after the 112th Congress convenes.

Senate Leadership:

Majority Leader: Harry Reid (D-NV) Minority leader: Mitch McConnell (D-KY)Majority Whip: Dick Durbin (D-IL) Minority Whip: Jon Kyl (R-AZ)

In the Senate, major Committee Chairmanships will remain the same:

Finance – Baucus (D-Montana)Health, Education, Labor and Pensions – Harkin (D-Iowa)Appropriations – Inouye (D-Hawaii)Budget – Conrad (D-North Dakota)

However in the GOP side, due to Republican Caucus Rules that prevent a Senator from serving more than 6 consecutive years as Chair/Ranking Member, Senator Chuck Grassley (R-Iowa) will no longer be the Ranking Republican on the Finance Committee. Senator Orrin Hatch (Utah) will assume that position when the 112th Congress convenes.

The new Congress will be sworn in on January 5 th and you can expect them to move quickly on a variety of measures, including debate and vote on repealing the Affordable Care Act.

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Order in the Court

The future of the Patient Protection and Affordable Care Act (ACA) will not only be fought out in the halls of Congress but it is being fought over in courtrooms around the country.

Shortly after the ACA was enacted, numerous lawsuits were brought challenging various aspects of the law as being unconstitutional. Perhaps the two most notable lawsuits – and the ones worth watching – are the case brought by the Attorney General of Virginia and the case brought by the Attorney General of Florida (in which he has been joined by 20 other states).

While there are other suits that have been brought by various individuals and institutions (several of which have been decided in favor of the federal government) the Virginia and Florida suits are the most important not only because of the substantive issues they raise but the fact that they are being brought on behalf of the states.

The Virginia and Florida cases are similar in that they both seek to challenge the individual mandate to buy insurance that was included in the ACA. In addition the, Florida, et al case seeks to challenge some of the Medicaid provisions as well.

Federal Judge Henry Hudson, sitting in the Eastern District of Virginia (Alexandria) recently ruled in favor of Virginia and concluded that the individual mandate is unconstitutional. The federal judge hearing the Florida case has yet to make a ruling. It is expected that he will announce his decision in late January or early February.

In many respects, these early court cases are merely a prelude to what will ultimately come before the Supreme Court (SCOTUS). The U.S. Justice Department has already announced that they will appeal Judge Hudson’s decision and both parties in the Florida case have said that they will appeal regardless of the outcome.

It is expected that it could take as long as 2 years for these cases to make their way to the Supreme Court, although an expedited process is available if both sides were to agree to by-pass the Appellate Court. At this point expedited Supreme Court review does not appear likely.

Should either Virginia or Florida prevail at the SCOTUS, the entire Affordable Care Act would be jeopardized. There is a significant legal issue regarding the fate of the entire bill should one part of the ACA be deemed unconstitutional but more importantly, all of the insurance provisions – pre-existing condition, lifetime limits, guaranteed issue, etc. – are economically predicated on some type of insurance mandate. If the mandate is ruled unconstitutional, the economic foundation upon which the legislation is built, crumbles.

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CMS Transmittals

The following Transmittals have been released by CMS within the past 60 days.

Transmittal Number Subject Effective

Date:

R827OTN Medicare Fee-For-Service (FFS) National Council for Prescription Drug Programs (NCPDP) Version D.0 Companion Guide

01/25/2011

R179FM Medicare Financial Management Manual, Chapter 7 - Internal Control Requirements 01/25/2011

R2125CP Instructions for Downloading the Medicare ZIP Code File for April 2011 04/04/2011

R2124CP Updates to the Internet Only Manual Pub. 100-04, Chapter 1 - General Billing Requirements, Chapter 15 - Ambulance, and Chapter 26 - Completing and Processing Form CMS-

01/25/2011

1500 Data Set

R2123CPAnnouncement of Medicare Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) Payment Rate Increases

01/03/2011

R826OTN Multiple Procedure Payment Reduction (MPPR) for Selected Therapy Services 01/03/2011

R2123CPAnnouncement of Medicare Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) Payment Rate Increases

01/03/2011

R2122CPWaiver of Coinsurance and Deductible for Preventive Services in Rural Health Clinics (RHCs), Section 4104 of Affordable Care Act (ACA).

04/04/2011

R2120CP Claim Status Category and Claim Status Codes Update 04/04/2011

R2114CP January 2011 Integrated Outpatient Code Editor (I/OCE) Specifications Version 12.0 01/03/2011

R2121CP Reporting of Service Units With HCPCS 03/21/2011

R362PI Implementation of Home Health Agency (HHA) Payment Safeguard Provisions 01/01/2011

R824OTNAdditions To and Revisions of Existing G-Codes for the Reporting of Skilled Nursing Services and Skilled Therapy Services in the Home Health or Hospice Setting

01/03/2011

R825OTN

Expansion of the Current Scope of Editing for Ordering/Referring Providers for Claims Processed by Medicare Carriers and Part B Medicare Administrative Contractors (MACs)

01/03/2011

R823OTN

Expansion of the Current Scope of Editing for Ordering/Referring Providers for Durable Medical Equipment, Prosthetics, Orthotics, and Supplier (DMEPOS) Suppliers Claims Process by Durable Medical Equipment Medicare Administrative Contractors (DMEMACs)

N/A

R69SOMARevisions to Chapter 2, The Certification Process, Sections 2080 - 2089- Hospices, and Appendix M, Guidance to Surveyors, Hospices

10/01/2010

R822OTN

NPI Verification for Physician and Non-Physician Practitioner Providers for Critical Access Hospital (CAH) Claims Processed by Medicare Fiscal Intermediaries and Part A Medicare Administrative Contractors (A/B MAC).

01/03/2011

R2119CP Medicare Physician Fee Schedule Database (MPFSDB) 2011 01/03/2011

File Layout Manual

R2115CP Pharmacy Billing for Drugs Provided Incident to a Physician Service 03/14/2011

R135BP Implementation of Changes in End Stage Renal Disease (ESRD) Payment for Calendar Year (CY) 2011 01/03/2011

R2117CPRevisions to the Medicare Code Editor (MCE) and Integrated Outpatient Code Editor (IOCE) Reporting Requirements

01/12/2011

R2113CPPayment for 510k Post-Approval Extension Studies Using 510k-Cleared Embolic Protection Devices during Carotid Artery Stenting (CAS) Procedures

01/12/2011

R361PI Face Validity Assessment of Advance Beneficiary Notices (ABN) for Complex Medical Record Reviews 01/12/2011

R360PI Corrective Action Reporting 01/12/2011

R821OTNRevision to Common Working File (CWF) Edit for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Provided During an Inpatient Stay

04/04/2011

R2118CP CY 2011 Fee Schedule Update for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) 01/03/2010

R129NCD Ventricular Assist Devices (VAD) as Destination Therapy 12/09/2011

R2109CP Annual Wellness Visit (AWV), Including Personalized Prevention Plan Services (PPPS) 04/04/2011

R2081CP

Primary Care Incentive Payment Program (PCIP), Section 5501(a) of the Patient Protection and Affordable Care Act (the ACA), Payment to a CAH Paid Under the Optional Method

04/04/2011

R134BP Annual Wellness Visit (AWV), Including Personalized Prevention Plan Services (PPPS) 04/04/2011

R2110CP Clinical Laboratory Fee Schedule- Medicare Travel Allowance Fees for Collection of Specimens 01/03/2011

R2112CP

Common Working File (CWF) Unsolicited Response Adjustments for Certain Claims Denied Due to an Open Medicare Secondary Payer (MSP) Group Health Plan (GHP) Record Where the GHP Record was Subsequently Deleted or Terminated

N/A

R94MCM Chapter 4, Benefits and Beneficiary Protections 12/03/2010

R178FM Add Physician Specialty Codes for Cardiac 07/05/2011

Electrophysiology (21) and Sports Medicine (23) to CROWD Form "";F""; (ParDoc) and "";8""; (Output).

R177FMAdd Supplier Specialty Code 95 (Advanced Diagnostic Imaging (ADI) Accreditation) to CROWD Form F (Participating Physician/Supplier Report)

12/03/2010

R820OTN Request for Common Working File (CWF) System to Support the Automated Edit Project Field Test 07/05/2011

R819OTN Currently Not Collectable (CNC) Type Development for 93 Appealed Claims 01/04/2011

R2111CP

Outlier Reconciliation and other Outlier Manual Updates for the Inpatient Prospective Payment System (IPPS), Outpatient Prospective Payment System (OPPS), Inpatient Rehabilitation Facility (IRF) PPS, Inpatient Psychiatric Facility (IPF) PPS and Long Term Care Hospital (LTCH) PPS

04/04/2011

R818OTN Health Insurance Portability and Accountability (HIPAA) 5010/D.0 Fixes 01/03/2011

R817OTN

J11 Part A and Part B Medicare Administrative Contractor (A/B MAC) New Workload Numbers for the South Carolina, Virginia and West Virginia Part A and Part B Workloads, the North Carolina Part B Workload and the Regional Home Health Intermediary (RHHI) Region C Workload, as well as the Split of the Customer Information Control System (CICS) Production and UAT Regions for the Ohio and West Virginia Part B Workloads

01/24/2011

R2108CPCY 2011 Fee Schedule Update for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule

01/03/2011

R2106CPCalendar Year (CY) 2011 Annual Update for Clinical Laboratory Fee Schedule and Laboratory Services Subject to Reasonable Charge Payment

01/03/2011

R2105CP Dermal Injections for Treatment of Facial Lipodystrophy Syndrome (LDS) N/A

R2107CPInstructions for Retrieving the 2011 Pricing and HCPCS Data Files through CMS Mainframe Telecommunications Systems

01/03/2011

R816OTNImplementing the Re-competition Award for the Jurisdiction B DME Medicare Administrative Contractor (MAC) Workload

12/30/2010

R68SOMA Chapter 9, Exhibits and Table of Contents 11/24/2010

R815OTN New HCPCS Q-codes for 2010-2011 Seasonal Influenza Vaccines 01/03/2011

R2104CP Ambulance Inflation Factor for CY 2011 and Productivity Adjustment 01/03/2011

R2096CPBilling Clarification for Positron Emission Tomography (Sodium Fluoride -18) (NaF-18) PET for Identify Bone Metastasis of Cancer in Context of a Clinical Trial

02/22/2011

R65GI Update to Medicare Deductible, Coinsurance and Premium Rates for 2011 01/03/2011

R2098CP New Physician Specialty Codes for Cardiac Electrophysiology and Sports Medicine 04/04/2011

R2100CP Reasonable Charge Update for 2011 for Splints, Casts, and Certain Intraocular Lenses 01/03/2011

R2103CP Fractional Mileage Units Submitted on Ambulance Claims 01/03/2011

R2097CP Quarterly Update to Correct Coding Initiative (CCI) Edits, Version 17.0, Effective January 1, 2011 01/03/2011

R128NCD Ventricular Assist Devices (VAD) as Destination Therapy 01/06/2011

R2102CPSystems Changes Necessary to Implement "";Technical Correction Related to Critical Access Hospital Services,""; Section 3128 of the Affordable Care Act, Pub. 111-148

04/04/2011

R2101CP Medicare Physician Fee Schedule Database (MPFSDB) 2011 File Layout Manual 01/03/2011

R814OTN

Analyze, Design, Maintain and Provide Implementation Instructions for a Modification of the Part A and Part B Common Edits and Enhancement Modules (CEMs), to Allow 277C Edits to be Turned On/Off by the Encounter Data Front-End System (EDFES) Contractor Only

04/04/2011

R76MSP

Common Working File (CWF) Medicare Secondary Payer ( MSP) Coordination of Benefits Contractor (COBC) Number Update and Implementation of MSP Group Health Plan (GHP) COBC Hierarchy Rules as related to Mandatory Insurer Reporting.

04/04/2011

R2094CPRevisions to the End Stage Renal Disease (ESRD) Medicare Benefit Policy Manual to Reflect the Implementation of the ESRD Prospective Payment System (PPS)

01/03/2011

R812OTN Instructions for PLB Code Reporting on Remittance Advice and a Crosswalk Between the HIGLAS PLB Codes and ASC

11/12/2010

X12 Transaction 835 PLB Codes, and RAC Recoupment Reporting on Remittance Advice for VMS

R2092CP Update to the Frequency Billing Requirements 04/04/2011

R2093CPWaiver of Coinsurance and Deductible for Preventive Services in Rural Health Clinics (RHCs), Section 4104 of Affordable Care Act (ACA)

04/04/2011

R801OTNHealth Insurance Portability and Accountability Act (HIPAA) 005010 837 Institutional (837I) Edits and 005010 837 Professional (837P) Edits - April 2011 Version

04/04/2011

R808OTNGuidance on Implementing System Edits for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

N/A

R2089CPImplementation of edits for the Emergency Department (ED) adjustment policy under the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS)

04/04/2011

R809OTN Additional Editing for Disaster Related Claims 04/04/2011

R2091CP Correct Reporting of Modifiers and Revenue Codes on Claims for Therapy Services 04/04/2011

R807OTNExpansion of Inpatient Prospective Payment System Transfer Policy to Include Critical Access Hospitals (CAHs) and Non-Participating Hospitals

04/04/2011

R813OTN April Common Edits and Enhancements Module (CEM) and Receipt, Control, and Balancing Updates 04/04/2011

R811OTN Medicare Remit Easy Print (MREP) Compatibility Enhancement N/A

R810OTNIntegrated Data Repository (IDR) Claims Sourcing from Shared Systems -Implementation Based on Further Conference Calls and Further Research

N/A

R176FM Clarification for Data Entry on Health Professional Shortage Area Reports 12/13/2010

R2090CPImplementation of Errata for version 5010 of Health Insurance Portability and Accountability Act (HIPAA) transactions, and updates in 837I, 837P, and 835 flat files

04/04/2011

R806OTN Implementation of the PWK (paperwork) segment for X12N Version 5010 N/A

R66DEMO Method of Payment for Extended Stay Services under the Frontier Extended Stay Clinic Demonstration, Authorized by Section 434 of the Medicare Modernization Act. This

10/01/2009

Change Request is adds additional information to CR 6057.

R799OTN Provider Education for Handling National Provider Identifier (NPI) Issues Related to Deceased Providers Who Had an NPI 04/04/2011

R2088CP January 2011 Quarterly Update for the DMEPOS Competitive Bidding Program. 01/03/2011

R2087CPImplementation of Errata for Version 5010 of Health Insurance Portability and Accountability Act (HIPAA) Transactions, and Updates in 837I, 837P, and 835 Flat Files

04/04/2011

R2084CP New Waived Tests 01/03/2011

R802OTN Health Insurance Portability and Acccountability (HIPPA) 501/D.0 Fixes. 04/04/2011

R803OTN National Council for Prescription Drug Programs (NCPDP) code set updates. N/A

R798OTNMerge of the Daily CMS-1522 PULSE Report for Reporting Transitioned Wisconsin Physicians Service (WPS) Legacy Workloads.

02/21/2011

R804OTNCommon Working File (CWF) Informational Unsolicited Response (IUR)for claims that have line item dates of service after the date of death of a beneficiary

04/04/2011

R797OTN

J11 Part A and Part B Medicare Administrative Contractor (A/B MAC) New Workload Numbers for the South Carolina, Virginia and West Virginia Part A and Part B Workloads, the North Carolina Part B Workload and the Regional Home Health Intermediary (RHHI) Region C Workload, as well as the Split of the Customer Information Control System (CICS) Production and UAT Regions for the Ohio and West Virginia Part B Workloads

01/24/2011

R800OTN Multiple Procedure Payment Reduction (MPPR) for Selected Therapy Services 01/03/2011

R795OTN

Edit to Deny Payment to Physicians and Other Suppliers for the Technical Component (TC) of Pathology Services Furnished on Same Date as Inpatient and Outpatient Services and Implements New Messages

04/04/2011

R2083CPImplementation of the Interrupted Stay Policy under the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS)

01/03/2011

R796OTN Clarification of Payment Window for Outpatient Services Treated as Inpatient Services 04/04/2011

R793OTN National Uniform Billing Committee NUBC) Point of Origin Code Updates 04/04/2011

R2080CP Changes to the Laboratory National Coverage Determination (NCD) Edit Software for January 2011 01/03/2011

R2079CP New Specialty Code for Advanced Diagnostic Imaging Accreditation 04/04/2011

R792OTNMove the Physician Specialty Code to the FISS Claim Record and Forward to the Common Working File (CWF) and National Claims History (NCH)

04/04/2011

R75MSP

Process 5010 Professional Medicare Secondary Payer (MSP) and Paper Claims Where Claim Adjustment Reason Code (CARC) Amounts Appear at the Claim Level and Not at the Detail Line

04/04/2011

R794OTN

Accumulation of Informational Only Claims with Condition Code 04 from Critical Access Hospitals (CAH) and Maryland Waiver Hospitals on the Provider Statistical and Reimbursement Report (PS and R)

04/04/2011

R2075CP

Implementation of Section 2902 of the Patient Protection and Affordable Care Act (the Affordable Care Act) for Indian Health Service (IHS) Part B Services and All Inclusive Rate (AIR) Billing for Return Visits

01/28/2011

R789OTN

Revision to Common Working File (CWF) Edit 729K to Deny Claims for Durable Medical Equipment (DME) Furnished to Beneficiaries in a Non-Part A Skilled Nursing Facility (SNF) Stay

04/04/2011

R2076CPModifications to the National Coordination of Benefits Agreement (COBA) Crossover Process Stemming Principally From the Affordable Care Act (ACA)

04/04/2011

R358PIIndian Health Service (IHS)Facilities and Tribal Provider';s Use of Internet-based Provider Enrollment, Chain and Ownership System (PECOS)

11/29/2010

R788OTN Processing Claims Spanning More than Ten Years with Unlimited Occurrences Span Codes (OSCs): Phase II 04/04/2011

R175FMChange the Name of Physician Specialty Code 12 from Osteopathic Manipulative Therapy to Osteopathic Manipulative Medicine

04/04/2011

R2034CPAffordable Care Act (ACA) Mandated Collection of Federally Qualified Health Center (FQHC) Data and Updates to Preventive Services Provided by FQHCs

04/04/2011