Cuts averted (but no permanent reform)
First and foremost, the deal averts a 24% reduction in Medicare physician reimbursements that was slated to go into effect on March 31. Specifically, it postpones the cuts for 12 months.
However, the deal comes in place of permanent reform to the widely panned payment formula, known as the Sustainable Growth Rate (SGR). Lawmakers seemed so close to achieving SGR reform in February, when they announced a bipartisan deal to replace the payment formula. But they have not yet agreed on how to pay for the plan.
The lack of permanent reform is one of the reasons why the American Medical Association (AMA) has opposed the deal. "By extending the Medicare provider sequester and 'cherry picking' a number of cost savings provisions included in the bipartisan, bicameral framework, the (bill) actually undermines future passage of the permanent repeal framework," says AMA President Ardis Dee Hoven, adding that the deal "would perpetuate the program instability that now impedes the development and adoption of healthcare delivery and payment innovation that can improve healthcare and strengthen the Medicare program."
Boehner says the latest "doc fix" will not halt work on permanent SGR reform.
ICD-10 pushed back
As Christopher Kerns notes, the "doc fix" legislation also proposes pushing back the start of ICD-10 adoption by another year.
Currently, CMS is set to begin using the new diagnostic and procedural codes starting Oct. 1, 2014, and CMS Administrator Marilyn Tavenner has said the agency has no plans to delay that start date.
Congress' move might cause many physician practices to breathe a sigh of relief: Research suggests that as few as 10% of practices were ready for the shift as of January. The Medical Group Management Association's Robert Tennant says the bill is "recognition that the industry is simply not ready for the transition."
But the issue isn't so simple for providers. Many organizations have spent millions of dollars getting ready for this year's deadline—and are already allocating resources toward dual coding in the interim—which is why some groups are lobbying Congress to change course on the ICD-10 delay.
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DSH cuts delayed
The "doc fix" would further delay the start of funding cuts to the Medicaid Disproportionate Share Hospital (DSH) program, which offers additional funding to hospitals with high levels of uncompensated care.
The cuts were developed as an offset for the cost of the Affordable Care Act's (ACA) Medicaid expansion and are based on the assumption that the ACA's coverage expansions would reduce a larger portion of hospitals' uncompensated-care costs. Altogether, the ACA requires $18.1 billion in total reductions from fiscal year (FY) 2014 through FY 2020, effectively halving the size of the safety-net program.
However, the Supreme Court's ruling on the ACA allowed states to opt out of the expansion. In theory, this meant that hospitals in states that do not expand Medicaid would lose DSH funding without benefiting from an influx of new Medicaid patients.
The DSH cuts have already been delayed once. The 2014 budget deal pushed the cuts back to the start of FY 2016. If this "doc fix" deal becomes law, the cuts will be pushed back to the start of FY 2017.
Two-midnight timeline altered (again)
The deal would again alter the timeline of Medicare's controversial two-midnight rule, which assumes a hospital admission to be admissible for payment if a physician expects a beneficiary's treatment to require a two-night hospital stay and admits the patient under that assumption. Shorter inpatient stays are deemed legitimate if they are coded as outpatient observation stays.
The rule aims to limit the growth in extended observation stays at hospitals, which have skyrocketed in recent years. Although the rule was set to take effect Oct. 1, 2013, pushback from health care providers prompted CMS to alter its enforcement timeline.
According to Modern Healthcare, the "doc fix" deal would extend a moratorium on recovery auditors intended to prevent them from aggressively overturning claims under the new standard. Currently, the moratorium goes until Sept. 30, 2014, but the bill would extend it until March 31, 2015.
The "doc fix" deal also gives Medicare the leeway to extend the probe and education period for administrative contractors until March 31, 2015, according to Modern Healthcare.
So far, hospital groups have supported the effort to alter the rule's timeline.