March 2015 Monthly RAC Report: Hearing on Examining the FY 2016 HHS Budget

March 23, 2015

On February 26, 2015, the Subcommittee on Health — a committee of the Department of Health and Human Services (“HHS”) — held a hearing examining the Fiscal Year 2016 HHS Budget (the “Budget”). The sole witness at the hearing was the Secretary of HHS, Sylvia Mathews Burwell. Before the hearing, the Committee on Energy and Commerce Democratic Staff issued a memorandum in support of the Budget. According to the memo, the Budget for HHS totals $1.1 trillion, with an expected $249.9 billion in savings over ten years while also ending sequestration. The total budget for discretionary programs, however, would increase by $4.8 billion to $83.8 billion.

The memo in support of the Budget also provides several other noteworthy proposals:

  • Medicare Program: The Budget repeals the “flawed” sustainable growth rate formula in favor of a more value-based system in which physicians could choose between (i) alternative payment and delivery models and (ii) performance-based, fee-for-service payments. For post-acute care providers, the Budget will target payments to those providers to improve efficiency and care management, which, if successful, would allow hospital outpatient departments to receive the same reimbursement rates as physicians’ offices and ambulatory surgical centers. And for inpatient rehabilitation facilities, the Budget increases the classification standard (otherwise called the 60% rule) from 60% to 75%, in which 75% of the facility’s patients would be required to meet certain severity conditions.
  • Medicaid Program: The Budget requires that Medicaid cover preventative health services, including tobacco cessation services, without cost-sharing, for all adult beneficiaries. Further, to prevent coverage gaps for those beneficiaries who fall in and out of Medicaid coverage, the Budget expands access to Medicaid by creating an option for states to provide 12-month, continuous eligibility for adults.
  • Program Integrity: To prevent waste, fraud, and abuse in the Medicare and Medicaid Programs, the Budget includes an additional $201 million in new funding for CMS’s Health Care Fraud and Abuse Control program. According to the memo, the investment “will yield $21.7 billion in savings over 10 years.”

At the hearing, Secretary Burwell’s testimony further explained the benefits the Budget offers: “The Budget builds on savings and reforms in the [Affordable Care Act] with additional measures to strengthen Medicare and Medicaid, and to continue the historic slow-down in health care cost growth.” Secretary Burwell also addressed the Medicare appeals process, noting that between Fiscal Years 2009 and 2014 the number of appeals received by the Office of Medicare Hearings and Appeals increased by more than 1300%, which “led to a backlog that is projected to reach 1 million appeals by the end of FY 2015.” Because of the backlog, HHS has undertaken a “three-prong strategy” to improve the appeals process:

  1. Take administrative actions to reduce the number of pending appeals and prevent new cases from entering the system;
  2. Request new resources to invest at all levels of appeal to increase adjudication capacity and implement new strategies to alleviate the current backlog; and
  3. Propose legislative reforms that provide additional funding and new authorities to address the appeals volume.

Hospitals may be aware of a few of the initiatives undertaken by HHS to reduce the backlog of appeals—including the Part B Rebilling Program and the more recent settlement proposal of 68% of the net payable amount on patient-status denials. Neither the memo nor Secretary Burwell’s testimony, however, explains whether the backlog is still expected to reach 1 million considering the recent settlement of claims with providers. In any case, hospitals should continue to update their compliance initiatives in anticipation of Recovery Auditors kick-starting their denials this year.

If you have any questions or comments about this Report, please contact Jeff Moore at jeff.moore@phelps.com.