Email Alert
June 2, 2011
By Brent Rawlings, Kimberly Kannensohn, Amanda Enyeart, and Anna Timmerman*
On June 1, 2011, the Centers for Medicare and Medicaid Services (CMS) issued a display copy of a final rule that prohibits Medicaid state plans from making payments to providers for reasonably preventable conditions by requiring them to adopt, at a minimum, Medicare's nonpayment policy for preventable conditions.1 The rule implements Section 2702 of the Patient Protection and Affordable Care Act (PPACA)2 and is effective on July 1, 2011. In order to comply with the new regulations, states are required to amend their state plans and states that have Medicaid managed care plans are required to amend their managed care contracts, no later than July 1, 2012, to prohibit payment for certain "provider-preventable conditions (PPCs)."
Section 2702 of PPACA required the Secretary, effective July 1, 2012, to prohibit payments to states for any amounts expended for providing medical assistance for "healthcare acquired-conditions (HCACs),"3 which are defined as medical conditions for which an individual was diagnosed that could be identified by a secondary diagnostic code described in Section 1886(d)(4)(D)(iv) of the Social Security Act,4 i.e., secondary diagnostic codes that would have a high cost or high volume, or both; result in the assignment of a case to a diagnosis-related group that has a higher payment when the code is present as a secondary diagnosis; and describe such conditions that could reasonably have been prevented through the application of evidence-based guidelines.5
The rule uses the umbrella term PPCs to cover two categories of conditions included within the new regulation: HCACs, which apply to all inpatient hospitals under Medicaid, and "other provider-preventable conditions" (OPPCs), which apply more broadly to inpatient and outpatient settings. HCACs include the full list of Medicare's hospital-acquired conditions.6 OPPCs include, at a minimum, three Medicare National Coverage Determinations for surgery on the wrong patient,7 wrong surgery on a patient,8 and wrong site surgery.9 States are permitted to identify additional OPPCs, subject to CMS approval through the state plan amendment process.
Section 2702 of PPACA also required the Secretary to identify current state practices that prohibit payment for HCACs.10 The results of CMS' research are discussed in the rule and show that twenty-one states currently have HCACs-related nonpayment policies that use Medicare's hospital-acquired conditions for non-payment in hospitals. At least half of these states exceeded Medicare's requirements and policies. CMS suggested that many of these policies were implemented in response to State Medicaid Director Letter #08-004, which provided guidance on adoption of nonpayment policies similar to Medicare's by Medicaid State plans.11
The rule also mandates that state plans require providers to identify and report PPCs that are associated with claims for Medicaid payment or with courses of treatment furnished to Medicaid patients for which Medicaid payment would otherwise be available. In addition, for states with Medicaid managed care plans, contracts must be amended to mandate identification and reporting by providers as a condition of payment and submitted for CMS approval.
While the effective date of the rule is July 1, 2011, CMS intends to delay compliance action until July 1, 2012, which gives states some additional time to implement changes and complete the state plan amendment process, and if applicable, to amend managed care contracts. States that have not adopted nonpayment policies will need to submit state plan amendments and managed care contracts for approval by CMS. States that have already adopted non-payment policies pursuant to the State Medicaid Director Letter through a state plan amendment and amendments to managed care contracts will need to ensure that those nonpayment policies are in compliance with the rule, and if they are not they will need to submit state plan amendments and amended managed care contracts for approval by CMS. Some of the states that adopted non-payment policies pursuant to the State Medicaid Director Letter implemented these policies through state law or administrative procedures instead of through the state plan amendment process as instructed by CMS. These states will need to complete the state plan amendment process for their non-payment policies in order to comply with the regulations and amend managed care contracts as necessary.
CMS has issued a press release regarding the new rule.
*We would like to thank R. Brent Rawlings, Esquire (McGuireWoods LLP, Richmond, VA), Kimberly J. Kannensohn, Esquire (McGuireWoods LLP, Chicago, IL), Amanda Enyeart, Esquire (McGuireWoods LLP, Chicago, IL), and Anna M. Timmerman, Esquire (McGuireWoods LLP, Chicago, IL) for writing and reviewing this summary.
1 Medicaid Program; Payment Adjustment for Provider-Preventable Conditions Including Health Care-Acquired Conditions [CMS-2400-F].
2 Pub. L. No. 111-148 (H.R. 3590), § 2702.
3 Id. at § 2702(a).
4 Id. at § 2702(b).
5 42 U.S.C. § 1395ww(d)(4)(D)(iv).
6 See 75 Fed Reg 50084-85 (Aug. 16, 2010) for a current list.
7 CMS, Coverage Decision Memorandum for Surgical or Other Invasive Procedures Performed on the Wrong Patient, CAG-00403N (Jan. 15, 2009).
8 CMS, Coverage Decision Memorandum for Wrong Surgery Performed on a Patient, CAG-00401N (Jan. 15, 2009).
9 CMS, Coverage Decision Memorandum for Surgical or Other Invasive Procedures Performed on the Wrong Body Part, CAG-00402N (Jan. 15, 2009).
10 Supra, footnote 2 at § 2702(a).
11 CMS, State Medicaid Director Letter, SMDL #08-004 (July 31, 2008).