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U.S. Centers for Medicare & Medicaid Services (CMS) Issues Second Set of Proposed Rule in Response to Executive Order 13563

On February 7, 2013, the U.S. Centers for Medicare & Medicaid Services (CMS) issued a proposed rule in response to President Obama’s Executive Order (EO) 13563, “Improving Regulation and Regulatory Review,” and consistent with the U.S. Department of Health and Human Services’ Plan for Retrospective Review of Existing Rules.  Among the goals of EO 13563 is the reduction of health care delivery costs by streamlining Medicare and Medicaid regulations for hospitals and other providers.  This proposed rule represents the second package of Medicare rules reviewed by CMS under EO 13563; the first set of final rules, referred to herein as Burden Reduction I, was published May 16, 2012.  CMS is accepting comments on this second proposed rule through April 8, 2013.  Click herefor information on submission of comments.

The proposed rule, “Medicare and Medicaid Programs; Part II Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction,” would make reforms to existing Medicare regulations applicable to hospitals, ambulatory surgical centers (ASCs), intermediate care facilities for individuals who are intellectually disabled (ICF/ID), transplant centers and organ procurement organizations (OPOs), long-term care facilities, critical access hospitals (CAHs), rural health clinics (RHCs), federally qualified health centers (FQHCs) and laboratories (under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) regulations) in order to improve efficiency, improve transparency and reduce regulatory burdens for these provider types.  The overall cost savings in the proposed rule is estimated to be between $231 million and $676 million in the first year.

A brief summary of the proposed changes for each provider type is provided below.


A significant number of the proposed rules apply specifically to hospitals and cover a wide variety of issues for that provider type. 

First, and of great interest to hospitals, CMS proposes to formally rescind one of the final rules regarding governing body composition that was part of Burden Reduction I.  Burden Reduction I included a rule that would have required a multi-hospital system with one governing body to have on that governing body at least one member of one hospital medical staff, as a way to ensure communication and coordination.  This final rule, which had not been part of the proposed rules that preceded it, caused concern in the hospital provider community, particularly among public and governmental hospitals, where the membership of the governing body is often specified by state or local law.  Shortly after Burden Reduction I was published, CMS issued guidance indicating that it would not enforce that aspect of the final rule pending further review. 

The language of the proposed rule provides that the medical staff membership requirement be rescinded and replaced by a requirement for a hospital’s governing body to directly consult with the individual responsible for the organized medical staff of the hospital regarding the quality of medical care provided to patients at least twice per fiscal or calendar year.  For multi-hospital systems with a unified governing body, this consultation requirement would apply to the governing body and each hospital within the multi-hospital system.  Factors to consider in determining the frequency of such communications would include the scope and complexity of hospital services offered, specific patient populations served by the hospitals, and any issues of patient safety and quality of care that a hospital’s quality assessment and performance improvement program might identify.

Second, the proposed rule reinforces the position of CMS in relation to certain medical staff matters.  The proposed rule confirms CMS’s position that each hospital must have an organized and individual medical staff that is distinct to that particular hospital.  CMS acknowledges the arguments of the hospital industry in favor of combined medical staffs among affiliated hospitals, but opines that separate medical staffs are the best model for overseeing care delivery and moving forward with quality improvement initiatives.  In addition, the proposed rule clarifies certain aspects of Burden Reduction I regarding which providers may be part of a hospital’s medical staff.  The revised language would provide that a hospital’s medical staff must be composed of physicians and may also include, in accordance with state laws, other categories of non-physician practitioners determined to be eligible for appointment by the hospital’s governing body.  Such non-physician practitioners would include advanced practice nurses, physician assistants, registered/licensed dieticians (RDs) and pharmacists.

Third, the proposed rule addresses aspects of a hospital’s food and dietetic services program.  Under current interpretations, RDs cannot order specialized diets for patients.  RDs consult with the patient’s physician, who may write or co-sign a diet order based on that consultation.  CMS has determined that hospitals should be permitted, if state law allows, to extend order-writing privileges to RDs, thereby avoiding the redundant process.  The proposed rule would give hospitals the flexibility to either appoint RDs to the medical staff and grant them specific privileges to write orders, or to authorize such ordering privileges without appointment as provided by the medical staff bylaws, rules and regulations.  Dietary needs could then be ordered by the practitioner responsible for the care of the patient or by the RD.

The fourth aspect of the proposed rules applicable to hospitals would permit the preparation of radiopharmaceuticals under the supervision (rather than the “direct” supervision) of an appropriately trained pharmacist or physician.  This change would reduce the burden of having a trained individual physically present for such preparation on a 24-hour basis.

The fifth proposed rule change that would affect hospitals would revise current regulations to match recent guidance available in the interpretive guidelines (IGs) to the conditions of participation (CoPs) pertaining to the ordering of outpatient services.  The proposed revisions would permit orders for outpatient services to be made by any practitioner who is responsible for the care of the patient, licensed in the state to provide care, acting within his or her scope of practice, and authorized by the medical staff (and approved by the governing body) to order such services.

Finally, the proposed rule would permit hospitals with long-term care “swing beds” to have such beds evaluated during a deemed status survey by an accrediting organization, rather than through a separate survey by the state agency acting on behalf of CMS.  This change would streamline the survey process for those bed types.

Critical Access Hospitals, Rural Health Clinics and Federally Qualified Health Centers

CMS proposes to remove the requirement that CAHs develop policies and procedures in consultation with a non-CAH staff member.  CMS considers this requirement to be no longer necessary and to have the potential to create compliance challenges for some CAHs.

Current regulations require that a physician be present at a CAH, RHC or FQHC at least once every two weeks.  Because of the wide variety in the staffing and clinical care provided at these types of facilities, CMS proposes to remove the requirements establishing the frequency of physician presence and instead require physician involvement as appropriate and necessary given the services provided at the facility.

For RHCs and FQHCs, CMS proposes to expand the definition of “physician” to conform to the definition used more broadly by the Medicare program.  As proposed, the definition would include doctors of dental surgery or dental medicine, doctors of optometry, doctors of podiatry and surgical chiropody, and chiropractors, in addition to doctors of medicine and osteopathy.

CMS also proposes to correct a long-standing technical error in the RHC regulations and update the rule regarding nurse practitioner, physician assistant or certified nurse-midwife availability to furnish patient care to reflect that such a practitioner must be available at least 50 percent of the time the RHC is open.

In addition to proposing the above changes to rules affecting RHCs, CMS is also specifically requesting comments regarding reduction of barriers to the provision of telehealth, hospice, home health and other services by RHCs.

Ambulatory Surgical Centers

The proposed rule would significantly streamline the requirements that ASCs must meet in order to provide radiologic services.  Currently, ASCs must comply with the CoPs for radiologic services that are applicable to hospitals, particularly the requirement for supervision by a radiologist, which has been identified as burdensome for non-hospital facilities such as ASCs.  Under the proposed rules, an ASC would continue to be limited to performing radiologic procedures that are integral to the services it otherwise provides at the facility, but would be permitted to have radiologic services supervised by a doctor of medicine or osteopathy on the ASC’s staff with appropriate education and experience, rather than by a radiologist.  The proposed rule also corrects a typographical error in a cross-reference.

Long-Term Care Facilities

The proposed rule would provide a means to extend the August 2013 deadline to have all buildings (including hospitals) containing long-term care facilities install automatic sprinkler systems.  CMS acknowledges that not all facilities will be able to meet the deadline and proposes temporary deadline extensions of up to two years (with a potential one-year renewal) in limited instances where a facility can prove that it is delayed because of the process of replacing its current building or undertaking major modifications to comply, it has financially committed to the replacement or modification, it has submitted plans to state and local authorities, and it has agreed to comply with interim fire safety measures until sprinkling is complete.

Transplant Centers and Organ Procurement Organizations

The most significant proposed change to the transplant center rules is to remove the automatic three-year re-approval process and onsite review of CoPs.  CMS believes that transplant center compliance is effectively monitored and enforced through the current offsite surveys, onsite complaint surveys and, when appropriate, onsite full re-approval surveys.  CMS also proposes to add an example of a set of mitigating factors to be used in evaluation of non-compliance with the transplant center outcomes CoPs.

CMS proposes to eliminate the requirement for transplant centers to report to CMS when the number of transplants or survival rates could result in non-compliance with transplant center CoPs, as this information is already reported to CMS through other data sources (in the case of transplant numbers) or not always known to the transplant center at the time notification is required (in the case of survival rates).

CMS also proposes to make clarifying revisions to requirements related to review of lung transplant outcomes and the reporting period for transplant volume and clinical experience to conform the regulations to current review and reporting practices and to make various technical corrections to address typographical errors in the OPO conditions for coverage.

Intermediate Care Facilities for Individuals Who Are Intellectually Disabled

For ICF/ID facilities, the proposed rule would carry through and make consistent language regarding a change included in Burden Reduction I that removed the concept of a time-limited certification and replaced such certifications with open-ended agreements, and which placed ICF/ID facilities on equal footing with nursing facilities and other providers with open-ended certification periods.


CMS proposes to make two changes to the current rules governing proficiency testing (PT) to address concerns related to circumstances under which laboratories may violate the prohibition on sending PT samples to other laboratories for additional or confirmatory testing.  CMS would add language to clarify that the requirement to treat PT samples in the same manner as patient samples does not include referring PT samples to another laboratory, even if such a referral is standard practice for patient samples.  Further, CMS would provide for a narrow exception to the prohibition on referral of PT samples to allow for intermediate sanctions short of revocation of a CLIA certificate in the event of certain limited referrals for “reflex” or confirmatory testing.  CMS believes such an exception is necessary to ensure adequate access to laboratory services.  CMS is also seeking comments on appropriate owner/operator sanctions in the event of a CLIA certificate revocation due to an intentional PT referral.

© 2018 McDermott Will & Emery


About this Author

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.

Sandra DiVarco, Hospitals Attorney, Health Systems Lawyer, McDermott Will Emery, Chicago Law Firm

Sandra DiVarco is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. Sandy focuses her practice on the representation of hospitals and health systems. She has counseled health care facility and system clients regarding all aspects of health law transactions and health system restructurings. As a registered nurse, Sandy regularly advises clients on the legal aspects of clinical issues and policy/procedure matters. Sandy also has significant experience in assisting clients with regulatory, licensure and accreditation issues, including state-level and CMS survey responses, formulation of successful Plans of Correction, Joint Commission complaint responses and EMTALA/regulatory investigations. Sandy is a member of the Firm’s Catholic Organizations Practice Group, and has experience working with Catholic organizations within health care and other business areas. She is also co-leader of the Firm’s General Institutional Provider affinity group.