2007 Health Law Year in Review

Another year is coming to a close, and it is time again for my year-end review of healthcare events and legal changes for Alabama healthcare providers. As I reflect back over 2007, I am reminded of a quote by Albert Einstein: “Learn from yesterday, live for today, hope for tomorrow.” The changes of 2007 will have a profound effect on the healthcare industry and will undoubtedly create many challenges and uncertainties in the year ahead. However, there is always opportunity in change, and those who embrace the pending challenges through careful understanding and planning will no doubt have a successful 2008. With that in mind, following are my top 10 health law developments for 2007. 10. Stark Law Audit Surveys of Hospitals. On May 18, 2007, the Centers for Medicare and Medicaid Services (CMS) published a reporting worksheet called the Disclosure of Financial Relationships Report (DFRR). The DFRR, which was initially sent to 500 hospitals, requests comprehensive information on financial relationships with physicians to determine Stark Law compliance. Hospitals that receive a DFRR have only 45 days to respond, with a fine of $10,000 per day for late responses. CMS has indicated that the DFRR will become an annual reporting requirement for hospitals. In addition, CMS has stated that it may share the information collected with other federal agencies and congressional committees. Given all of the Stark Law developments in 2007 (see item 1 below) hospitals are encouraged to review their existing financial relationships with physicians to verify Stark Law compliance. 9. New JCAHO Standards. On July 10, 2007, the Joint Commission issued final revisions to JCAHO Standard MS. 1.20. To be effective July 1, 2009, the new Standard has created significant uncertainty and concern within hospitals and medical staffs. While a detailed discussion of the Standard is beyond the scope of this editorial, the new Standard requires that the Medical Staff Executive Committee (MEC) address only non-substantive and procedural details. The medical staff as a whole would make substantive decisions and would retain authority to override actions of the MEC. The Standard also requires that many items historically addressed in rules and regulations (such as specialty specific credentialing requirements) be placed in the medical staff bylaws. 8. Pay-for-Performance. In 2007, CMS continued to pursue pay-for-performance (or P4P) programs with hospitals and physician groups. Hospitals received up to 2 percent of annual payments based on compliance with 10 reporting measures under the Reporting Hospital Quality Data for Annual Payment Update program. In addition, physicians were provided the opportunity to earn up to 1.5 percent more on their Medicare billings through the Physician Quality Reporting Initiative program. While these financial incentives are more correctly called “pay for reporting,” expect to see a transition in 2008 to payment based on compliance with defined quality indicators. Accordingly, some providers will receive an increase in reimbursement while others a reduction. A criticism levied against P4P is that providers with significant resources will be able to obtain the additional reimbursement by meeting the quality indicators. Conversely, those providers with fewer resources (and arguably the ones most in need of additional Medicare funds) will not be able to meet the indicators. Therefore, those providers will see a reduction (or no increase) in reimbursement, arguably making it more difficult for them to meet the indicators in the future. 7. Medicaid Tamper-Resistant Prescription Pads. On May 25, 2007, federal legislation was passed to require that all non-electronic prescriptions for Medicaid recipients be written on tamper-resistant pads. Originally scheduled to begin October 1, 2007, the new law will now go into effect on April 1, 2008. To be considered tamper resistant a prescription pad must initially contain at least one of the following three characteristics: (1) one or more industry-recognized features designed to prevent unauthorized copying of a completed or blank prescription form; (2) one or more industry-recognized features designed to prevent the erasure or modification of information written on the prescription by the prescriber and (3) one or more industry-recognized features designed to prevent the use of counterfeit prescription forms. As of October 1, 2008, to be considered tamper resistant a prescription pad will need to contain all of the foregoing three characteristics. For more information, please see http://www.cms.hhs.gov/SMDL/downloads/SMD081707.pdf. 6. IDTF Performance Standards. As part of the final 2008 Medicare Physician Fee Schedule published on November 1, 2007, CMS revised several of the 14 existing conditions of participation for Independent Diagnostic Testing Facilities (IDTF) and added additional requirements. The new standards, which go into effect January 1, 2008, with one notable exception, address liability insurance, reporting of changes in enrollment information to CMS, beneficiary questions and complaints, supervising physician standards, effective date of enrollment and sharing of space with other Medicare-enrolled individuals or organizations. It is this last requirement that has proven to be the most controversial; it states that a fixed-based IDTF must not: (1) share a practice location with another Medicare-enrolled individual or organization; (2) lease or sublease its operation or its practice location to another Medicare-enrolled individual or organization or (3) share diagnostic equipment used in the initial diagnostic test with another Medicare-enrolled individual or organization. Because this last standard will require many IDTFs to restructure their existing arrangements, for existing IDTFs CMS has delayed the implementation date for this standard until January 1, 2009. 5. Electronic Health Records. With an Anti-Kickback Safe Harbor and Stark Law exception in place for electronic health records (EHR), 2007 saw a continued push by the government and private sector to encourage healthcare providers to switch to EHR. On May 11, 2007, the Internal Revenue Service issued a memorandum stating that a non-profit hospital can provide its physicians EHR software and support as long the benefits comply with the Anti-Kickback Safe Harbor and other specific requirements. On October 30, 2007, Health and Human Services Secretary Mike Leavitt announced a five-year demonstration project to encourage small to medium physician practices to adopt EHR. The Blue Cross Blue Shield Association recently announced that it would launch an incentive program to pay doctors for using EHR. Finally, on November 16, 2007, CMS proposed uniform standards for an electronic prescription drug program. If you have not already explored EHR for your practice, 2008 is a good time to evaluate the many available options. 4. New Statewide Trauma System. In response to a study that ranked Alabama 49th for both board-certified emergency physicians per 100,000 people and trauma centers per 1 million people, the Alabama legislature in June established a statewide trauma system. The new system, which will be implemented by the Alabama Department of Public Health, will include a centralized dispatch for participating trauma centers and emergency medical services, a statewide trauma registry and a State Trauma System Fund. In July, Senator Shelby announced $500,000 in funding to the University of Alabama at Birmingham Trauma Care System Research and Development to “enhance and expand the existing infrastructure of the Birmingham Regional Emergency Medical Services System and to facilitate the development of a comprehensive statewide trauma system.” 3. New Diagnostic Testing Anti-Markup Provisions. When a physician practice purchases the technical component of a diagnostic test from a third party, Medicare regulations historically require the physician to bill Medicare the lesser of: (1) the fee paid by the physician for the test; (2) the physician’s actual charge or (3) the Medicare fee schedule amount. This billing restriction is commonly referred to as the “anti-markup” provision. On November 1, 2007, CMS published as part of its final 2008 Medicare Physician Fee Schedule a revised “anti-markup” provision that applies to both the technical and professional component of diagnostic tests (other than clinical lab tests) that are ordered by a billing supplier, if: (1) the technical or professional component is purchased by the billing supplier or (2) the technical or professional component is performed outside of the office of the billing supplier. The term “office of the billing supplier” is defined by CMS as space where the physician or other supplier regularly furnishes patient care. 2. SCHIP. The State Children’s Health Insurance Program (SCHIP) authorizes states to provide healthcare coverage to “targeted low-income children” who are not eligible for Medicaid and who are uninsured. Since 1997, states have received an enhanced federal match (approximately $20 billion over ten years) to provide such coverage. Congress passed compromise legislation to reauthorize the SCHIP program, which expired on September 30, 2007. However, President Bush vetoed the compromise bill on October 3, 2007. A revised SCHIP bill was recently passed in the House but fell short of a veto-proof majority. The Senate also passed SCHIP-related legislation. President Bush has said he will veto the new bill. 1. Stark II, Phase III (and beyond). On September 5, 2007, CMS issued the long-awaited “Phase III” regulations to the federal Stark Law. The Phase III regulations, which are effective December 4, 2007, clarify several Stark Law definitions and provide additional guidance on various “exceptions” used by physicians and other healthcare providers to permit referral relationships otherwise subject to the Stark Law restrictions. Although Phase III was supposed to be the last of the Stark Law regulations, in July 2007 CMS issued additional (and arguably more significant) proposed changes to the Stark Law. If the proposals are adopted they will prohibit many current healthcare arrangements and require significant restructuring of others, particularly “under arrangements” joint ventures and percentage and “per-click” compensation models. May each of you have a happy and healthy 2008! December 2007