February 6, 2023

Volume XIII, Number 37

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February 03, 2023

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Healthcare Regulatory Check-Up August 2022: CMS Regulatory Updates

Nondiscrimination in Health Programs and Activities

On August 4, 2022, CMS issued a proposed rule on Section 1557 of the ACA, which prohibits discrimination on the basis of race, color, national origin, sex, age or disability in certain health programs and activities. CMS proposes to revise its interpretation regarding whether Medicare Part B constitutes federal financial assistance for purposes of civil rights enforcement, and to revise nondiscrimination provisions to prohibit discrimination on the basis of sexual orientation and gender identity in regulations issued by CMS. The proposed rule would also reinstate the rule clarifying that Section 1557 generally applies to many health insurance issuers and also prohibits discrimination in health insurance and other health-related coverage. In the preamble to the proposed rule, CMS noted that the reinstatement would further a central goal of the ACA to increase access to health-related coverage. The proposed rule also seeks to create consistent procedural requirements for covered health programs and activities by requiring grievance procedures (for employers with 15 or more employees), the designation of a responsible employee (for employers with 15 or more employees) and the affirmative provision of civil rights notices. The absence of such consistency leaves individuals with different procedural protections in covered programs and activities depending on whether their complaint is based on race, color, national origin, sex, age and/or disability. For more information, see our On the Subject on this proposed rule.

2023 OPPS and ASC Payment System Proposed Rule

On July 15, 2022, the CMS released the CY 2023 Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems Proposed Rule, which was published in the Federal Register on July 26, 2022. The proposed rule includes proposals to update payment rates, policies and regulations affecting Medicare services furnished in hospital outpatient and ambulatory surgical center (ASC) settings beginning in CY 2023.

For CY 2023, CMS proposes to increase payment rates for the outpatient prospective payment system (OPPS) and ASC payment system by 2.7%. CMS also proposes to expand the categories of services subject to prior authorization, outlines proposals to ensure continued access to mental health services via telehealth following the end of the COVID-19 public health emergency (PHE), and proposes numerous changes for hospital outpatient departments, including maintenance of the site neutrality process for exempt rural sole community hospitals and quality reporting policies for rural emergency hospitals (a new provider type that will be introduced in CY 2023). For additional information and analysis on rural emergency hospitals, see our On the Subject.

In the CY 2023 proposed rule, CMS proposes a payment rate of average sales price minus 22.5% for drugs and biologicals acquired through the 340B program. However, CMS notes that it plans to apply a rate of average sales price plus 6% to such drugs and biologicals in the final rule for CY 2023 and make a corresponding adjustment to the conversion factor to preserve budget neutrality, in light of the Supreme Court’s June 15, 2022, decision in American Hospital Association v. Becerra, which held that US Department of Health and Human Services (HHS) may not vary payment rates for drugs and biologicals among groups of hospitals without conducting a survey of hospitals’ acquisition costs. CMS notes that it did not have time to adjust payment in the proposed rule. CMS also states that it is evaluating how to apply the Supreme Court’s recent decision to prior calendar years, including CYs 2020–2022, which were not subject to the Supreme Court decision. This means that CMS is determining whether additional dollars need to be provided back to hospitals that lost reimbursement because of the CY 2018 OPPS rule.

For additional analysis on the CY 2023 OPPS and ASC proposed rule, see McDermott+Consulting’s article on the topic. Comments on the proposed rule are due September 13, 2022.

CY 2023 IPPS Final Rule

On August 1, 2022, CMS released the FY 2023 Inpatient Prospective Payment System (IPPS) Final Rule updating Medicare payment policies and quality reporting programs relevant for hospital inpatient services, and building on key priorities to address health disparities and improve the safety and quality of maternity care.

For additional analysis on the CY 2023 IPPS final rule, see McDermott+Consulting’s article on the topic.

2023 SNF Payment Rate Increases

On July 29, 2022, CMS issued a final rule updating Medicare payment policies and rates for skilled nursing facilities (SNFs) under the SNF prospective payment system for FY 2023.

In April 2022, CMS had proposed cutting Medicare Part A payments to nursing homes by $320 million. The transition to a new nursing home payment model in 2019 inadvertently led to a 5% pay increase in FY 2020, requiring a decrease in payments the following year, according to the proposed rule. For additional analysis on the proposed rule, see our April 2022 On the Subject.

CMS changed course in the final rule and will phase in the payment correction over two years to ease the burden on providers still struggling with the COVID-19 pandemic. In FY 2023, nursing homes will receive a 2.7% increase in Medicare rates. This does not factor in value-based purchasing reductions for certain nursing homes, according to a CMS fact sheet.

The April 2022 proposed rule had also requested public comments on various quality issues, including minimum staffing requirements, SNF quality reporting measures and principles for measuring health equity. While CMS did not respond to all comments in the final rule, the agency indicated that will take the comments into consideration as it continues to work to increase transparency and quality in SNFs as part of its recent regulatory focus on nursing homes. For additional information on the Biden administration’s focus on nursing homes, see our March 2022 On the Subject.

CY 2023 Physician Fee Schedule Proposed Rule

On July 7, 2022, CMS released the CY 2023 Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Medicare Part B Proposed Rule, which was published in the Federal Register on July 29, 2022. The proposed rule includes proposals related to Medicare physician payment and the Quality Payment Program. Physicians face proposed cuts of more than 4% under the proposed fee schedule, along with significant proposed changes to accountable care organizations. The proposed rule also includes the following proposals:

  • Launch the Merit-based Incentive Payment System (MIPS) Value Pathways as a voluntary option to the MIPS in 2023

  • Permanently maintain certain services added to the telehealth list during the PHE; maintain certain services added as covered telehealth services but not given permanent or Category 3 status until 151 days post-PHE; and add several codes as Category 3 telehealth codes, which are slated to remain covered until the end of CY 2023

  • Delay the in-person requirements for telehealth services furnished for purposes of diagnosis, evaluation or treatment of a mental health disorder until the 152nd day after the PHE ends

  • Expand access to, and address shortages of, behavioral services and health providers by allowing licensed professional counselors and licensed marriage and family therapists to bill Medicare under general supervision, and create a new billing code for general behavioral health integration services for clinical psychologists and clinical social workers when they are the focal point of integration

  • Implement initiatives promoting health equity

For additional analysis of the CY 2023 Medicare Physician Fee Schedule proposed rule, see McDermott+Consulting’s article. Comments on the proposed rule are due by September 6, 2022.

Clincal Laboratory Improvement Amendments of 1988 Fees Proposed Rule

On July 26, 2022, CMS issued a proposed rule that would update the Clinical Laboratory Improvement Amendments of 1988 (CLIA) fee regulations. This proposed rule, if finalized, would provide sustainable funding for the CLIA program through a biennial two-part increase in CLIA fees. The proposed rule would ensure ongoing quality and safety of laboratory testing for the public by clarifying the methodology used to determine program compliance fees. The proposed rule also includes the following proposals:

  • Incorporate limited/specific laboratory fees, including fees for follow-up surveys, substantiated complaint surveys and revised certificates

  • Distribute the administrative overhead costs of test complexity determination for waived tests and test systems with a nominal increase in Certificate of Waiver (CoW) fees

  • Amend histocompatibility and personnel regulations under CLIA to address obsolete regulations and update the regulations to incorporate technological changes

  • Amend the provisions governing alternative sanctions (including civil money penalties, a directed plan of correction, a directed portion of a plan of correction and onsite state monitoring) to allow for the imposition of such sanctions on CoW laboratories.

FY 2023 Inpatient Rehabilitation Facility Prospective Payment Rates

On August 1, 2022, CMS issued a final rule that updates the prospective payment rates for inpatient rehabilitation facilities for federal FY 2023 for discharges occurring on or after October 1, 2022, and on or before September 2023.

FY 2023 Inpatient Psychiatric Facilities Prospective Payment System Final Rule

On July 29, 2022, CMS issued a final rule that updates the prospective payment rates for inpatient psychiatric facilities, which include psychiatric hospitals and exclude psychiatric units of acute care hospitals and critical access hospitals. The final rule will be effective on October 1, 2022, and applies to discharges occurring on or after October 1, 2022, and on or before September 30, 2023.

© 2023 McDermott Will & EmeryNational Law Review, Volume XII, Number 249

About this Author

Tony Maida Health Care Attorney McDermott WIll Law Firm

Tony Maida is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  Tony has extensive experience in health care fraud and abuse and compliance issues, including the federal Anti-Kickback and Physician Self-Referral/Stark laws, false claims and overpayments, and government investigations.    He works closely with our health and white collar teams on criminal, civil, and administrative investigations and counseling clients on corporate transactions and compliance programs.

Tony previously served...

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Emily J. Cook, McDermott Will Emery Law Firm, Health Care Attorney

Emily J. Cook is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Los Angeles office.  She focuses her practice on Medicare provider certification, reimbursement and regulatory compliance.

Monica Wallace regulatory counseling lawyer McDermott Will Emery Law Firm

Monica A. Wallace is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on complex regulatory and transactional counseling to health care organizations such as health systems, hospitals, physician groups, integrated delivery systems, durable medical equipment prosthetics and orthotics suppliers, home health agencies, and other health care providers. Monica’s regulatory practice focuses on the Anti-Kickback and Stark laws; Medicare and Medicaid reimbursement and billing; legal assessments and compliance...

Amanda Enyeart Healthcare and Life Sciences Attorney Mcdermott WIll Emery Law Firm

Amanda Enyeart is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Amanda focuses her practice on general regulatory health law matters. 

Previously, Amanda was an associate at a national law firm in its Chicago office where she provided guidance on regulatory issues, such as practitioner licensure; telehealth; Medicare and Medicaid reimbursement; and compliance with Stark Law and the Anti-Kickback Statute and state fraud and abuse laws.

Additionally, Amanda has...

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Cathy Ren Regulatory & Transactional Attorney McDermott Will & Emery Los Angeles, CA

Cathy Ren focuses her practice on regulatory and transactional matters affecting a wide range of clients in the healthcare industry, including hospitals, health systems, and other healthcare providers.

While in law school, Cathy was a legal intern at the National Health Law Program in Los Angeles and served as Co-President of the Harvard Health Law Society.

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