2005

1. CMS and OIG propose regulations to promote E-Prescribing and Electronic Health Records
2. Extension of Implementation of Penalties for HIPAA Violations by Covered Entities
3. Bill to Ban Specialty Hospitals Introduced
4. HIPAA Enforcement Rules
5. Medicare Demonstration to Assure Accurate Payments

1.     CMS and OIG propose regulations to promote E-Prescribing and Electronic Health Records

On Oct. 11, 2005, the Center for Medicare and Medicaid Services (CMS) and the Office of the Inspector General of the Department of Health and Human Services (OIG) proposed regulations to help accelerate the adoption and use of e-prescribing and electronic health record (EHR) products. The proposals include Stark law exceptions and anti-kickback statute safe harbors that would allow hospitals and other health care organizations to provide physicians and medical staffs with the hardware.  The comment period closed Dec. 10, 2005.

View the AMA's comments to CMS (PDF, 13KB, requires Adobe® Reader®) and the OIG (PDF, 134KB).

2.     Extension of implementation of penalties for HIPAA violations by covered entities

On September 14, 2005, the Department of Health and Human Services (HHS) announced an extension to the interim final rule establishing procedures for imposing civil monetary penalties on covered entities that violate provisions of the Health Insurance Portability and Accountability Act (HIPAA).  The action extends the expiration date of the original rule from September 16, 2005 to March 16, 2006.  During this six month interim period, the HHS plans to complete rulemaking to develop “a more comprehensive enforcement rule.”

Interim final rule

3.     Bill to ban specialty hospitals introduced

The "Hospital Fair Competition Act of 2005" (S. 1002) has been introduced in the Senate to permanently extend the 2003 Medicare Modernization Act's (MMA) moratorium on referrals to specialty hospitals, which would otherwise expire on June 8, 2005.

The MMA established an 18-month moratorium on physician referrals to specialty hospitals in which the physician has a financial interest--referrals which had previously been permitted under the "whole hospital" or "rural hospital" exceptions to the "Stark law." While the hospital industry alleges a permanent ban is necessary to protect the financial viability of general hospitals, the President and the Centers for Medicare and Medicaid Services (CMS) have not indicated support for a permanent ban.

CMS stated that the Medicare Payment Advisory Commission (MedPAC)'s 2005 study of specialty hospitals did not indicate that a permanent ban was necessary, although MedPAC did support an extension of the MMA's moratorium through the end of 2006. CMS also indicated that, with or without Congressional action, it would informally uphold the moratorium through December 2005 by withholding processing of Medicare participation applications received from new specialty hospitals.

Looking forward, CMS has further indicated its intent to normalize Medicare payment levels between the specialty hospital staples: cardiac, orthopedic, and surgical care; and other care, in order to eliminate perceived overpayment incentives that have contributed to increasing development of specialty hospitals.

4.     HIPAA enforcement rules

On April 18, 2005, the Secretary of Health and Human Services published a proposed rule which would extend the current HIPAA privacy regulation enforcement procedures to apply to all the HIPAA administrative simplification rules. It would also amend the existing rules relating to the process for imposition of civil money penalties. Among other matters, the proposed rules would clarify and elaborate upon the investigation process, bases for liability, determination of the penalty amount, grounds for waiver, conduct of the hearing, and the appeal process.

5.     Medicare demonstration to assure accurate payments

On March 28, 2005, the Centers for Medicare & Medicaid Services (CMS) announced a demonstration project that will permit the use of recovery audit contractors (RACs) in assuring accurate payments to be assessed. This project is mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Three states will participate in the three-year demonstration: California, Florida, and New York. Each state will use RACs to identify previously undetected overpayments and underpayments. Each RAC will review claims that are at least one year old, using an audit plan developed especially for Medicare. The types of claims that will be scrutinized include those for which Medicare was not the primary payer, those with complicated payment calculations and complex procedure codes, and those that are bundled.

If necessary, the RACs will request claim history and medical records to determine if over or underpayments exist. If an overpayment is detected, the contractor will pursue payment and will be reimbursed a percentage of those recoveries. For underpayments, the RAC will provide the necessary documentation to the Medicare contractors for processing payment to the provider. Since RACs are reimbursed only for detected overpayments, physicians and their advocates have expressed concern that RACs will be overly eager in seeking out overpayments.

California and Florida will also have an audit contractor to determine if a patient's primary insurer and Medicare have both been billed for a single claim or if Medicare paid when a patient's primary insurer should have paid.