Archive for September, 2013

UPS Denies Insurance Coverage of Spouses and Cites ACA as Reason

The United Parcel Service (“UPS”) recently made a big statement when they decided to drop 15,000 working spouses eligible for health coverage through their own employers from the UPS plan in 2014. The shipping conglomerate explained the change in a memo to its workers and repeatedly cited the Affordable Care Act (“ACA”) as the reason for the new policy. Rising medical costs “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost,” the memo stated. The new policy will not affect union workers, as their health benefits are already spelled out in labor contracts, but will apply to about a quarter of the UPS U.S. workforce.

Some proponents of the ACA say that the new health care law will have little effect on companies, but do not tell UPS that. By dropping the eligible spouses, it is estimated that they will save $60 million a year. While UPS may be the most well-known company to drop spouses, they are not the first. Other companies have increasingly explored ways to eliminate spouses from plans as a cost-saving measure. Some have paid employees a bonus if spouses get coverage elsewhere; others have even imposed penalties on employees who enroll working spouses. Now that UPS, a household name, has taken this measure, it is likely that more companies will follow their lead.

The ACA requires large employers to cover employees and dependent children, but not spouses or domestic partners. Among the ACA-related costs is a research fee and a temporary fee of $63 per member that will be used to stabilize online marketplaces. In addition, the ACA bans annual and lifetime coverage limits and requires dependent children to now be covered up to age 26. Beginning in 2018, companies will have to pay a “Cadillac tax” on high value plans. Because of the law’s individual mandate, employees who may have previously opted out of enrollment will now be more likely to sign up for coverage. All of these factors, according to UPS, contribute to rising costs. By making spouses ineligible for enrollment, the company hopes to keep insurance premiums at or below current levels for its employees.

The law is aimed at providing affordable health care insurance to all, but by eliminating spousal coverage, UPS is making it clear they will not be footing the bill.

 

Molly Lewis

 

 

 

 

 

 

 

Molly Nicol Lewis is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Lewis concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at mlewis@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

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The ACA Loophole Of Which Providers Should Be Aware, Part II

Earlier this week, we discussed the three-month grace period afforded to enrollees of qualified health plans (“QHPs”). To recap that article, the ACA requires that QHPs pay claims for the first thirty days of the grace period during which premium payment remains unpaid, but issuers may pend claims for the final sixty days of the grace period. If the balance remains unpaid, the issuer may deny any claims submitted within the final sixty days.

During the second and third months of payment delinquency, providers are entitled to notice of the potential that an enrollee’s claims may be denied, but the U.S. Department of Health and Human Services (“HHS”) has not fully explained the timing and substance of such notice.

State exchanges such as the one operated in Kentucky allow insurers to develop their own notification protocol. Kentucky establishes its notification procedure in 900 KAR 10:010E, Section 13(4)(a)(2)(c), simply stating that QHP issuers “shall notify providers of the possibility for denied claims for services provided to an enrollee in the second and third months of the grace period.”

When participating in federally-facilitated exchanges, “[i]ssuers should notify all potentially affected providers as soon as is practicable when an enrollee enters the grace period…”. The notice should include (1) purpose of the notice; (2) a notice-unique identification number; (3) the name of the particular plan and affiliated issuer; (4) names of all individuals affected by the policy and possibly under the care of this provider; (5) a grace period explanation with applicable dates, including whether the enrollee is in the second or third month of his or her grace period; consequences of grace period exhaustion for the enrollee and the provider; and further options for the provider; and (6) any customer service telephone number specifically designated for the providers’ use.

A recent survey conducted by a physician staffing agency found that approximately two-thirds of physicians were “not at all familiar” with either the contracted rates for exchange products or the coverage terms for exchange patients, including the grace period terms.[1] This little-known loophole can lead to big financial problems. Further, little can be done to reduce the potential for debt incurred during the two month period to pend or deny claims.

Providers should understand how and to what extent they will receive notice of a patient’s grace period. Providers should also ensure that any personal guarantees of payment required of patients at the point-of-service are being properly issued, signed, and collected by staff. The grace period loophole has the potential to strain provider-patient relationships, significantly impact a provider’s bottom line, and even limit access to care if providers choose to withdraw from the exchanges.

HHS has acknowledged that nonpayment of premiums would “increase uncertainty for providers and increase the burden of uncompensated care.” The first step to closing the loophole is to make providers aware of it. In August, hospital trade groups  such as the American Hospital Association, the Federation of American Hospitals, and the Association of American Medical Colleges asked CMS to require that qualified health plans pay for all services rendered during the three-month grace period. Educate yourself on the loophole and take action to minimize the risks associated with it. If you need assistance, please contact the health care attorneys at McBrayer.


[1] Dan Mangan, Even doctors are clueless on Obamacare, poll finds, CNBC News (July 22, 2013).

Anne-Tyler Morgan

 

 

 

 

 

 

Anne-Tyler Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Morgan concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at atmorgan@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

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The ACA Loophole Of Which Providers Should Be Aware

Providers contracting with state health insurance exchanges may find themselves shortchanged for services provided due to a little-known loophole in the Affordable Care Act (“ACA”).

Under the ACA, an individual who fails to pay his or her insurance premiums has a three-month grace period before the policy is cancelled. Insurers, however, are only responsible for paying claims during the first month of that grace period. The ACA will allow exchange plan, also known as “qualified health plan” (“QHP”), issuers to pend claims submitted by providers during the last two months of a federally subsidized patient’s three-month grace period for premium payment delinquency. If the patient is terminated at the end of the three months, the QHP is free to deny all claims submitted for that patient within the final two months.

Here’s what providers can expect during the three-month grace period:

First month of delinquency:

  • Claims are paid normally. The QHP treats this month as paid even if the enrollee is eventually terminated for non-payment.
  • Providers are not notified of the patient’s delinquency.

Second and third months of delinquency:

  • The QHP has the option to pend claims for services performed until the enrollee pays his or her outstanding premium balance.
  • Providers submitting claims during these two months are notified of the potential that claims submitted for services performed for the enrollee may be denied.
  • If the enrollee pays off the premium balance, providers’ claims are paid at that time.

Terminated after three months of delinquency:

  • The QHP has the option to deny all claims for services performed in the second and third months of delinquency.

Note that the timing of an enrollee’s grace period is based upon the date when a service was rendered, not the date of claim submission. In fact, a patient may enroll in a different QHP during the next open enrollment period regardless of whether they have paid off an outstanding premium balance with their previous insurer.

Providers have the option to seek payment from the patient for denied claims, but a patient who is unable to pay their insurance premium is also unlikely able to pay a provider’s bill. Further, the legal action necessary to recover payment is a costly endeavor for any provider. Check back on Thursday for more information on this topic.

Anne-Tyler Morgan

 

 

 

 

 

 

Anne-Tyler Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Morgan concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at atmorgan@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

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Clarifying the “Two-Midnight Rule” and Part A Payments, cont.

Earlier this week, I discussed CMS’ final rule on the prospective payment for acute care and long-term care hospital inpatient services for fiscal year 2014. The final rule provides guidance to physicians on how to designate a patient as inpatient or outpatient and the impact of the designation on Medicare Part A or Part B coverage. This blog will discuss the two midnight rule.

Basically, the final rule clarifies that if a physician admits a Medicare beneficiary as an inpatient with an expectation that the beneficiary will require care that “crosses two midnights,” payment by Medicare Part A is “generally appropriate.” This rule changes Medicare policy and is expected to increase Medicare reimbursements for hospitals’ inpatient stays by $220 million annually. However, CMS will offset that increase with a 0.2% pay reduction for hospital services.

Under the Medicare rules, the time a patient spends in the hospital before inpatient admission is formally ordered is considered outpatient time. However, hospitals and physicians can take into consideration the pre-inpatient admission time when determining if a patient’s care will reasonably be expected to cross two midnights.

As a result of the final rule, inpatient admissions are expected to rise, with less services being billed as Part-B related costs. While the final rule does provide some clarification, many provider groups and advocates are seeking even more action on the observation stay issue. According to opponents, the rule will result in confusion (especially if a hospital does not designate between their inpatient/outpatient areas) and may lead to increased scrutiny by auditors regarding inpatient visits that result in less than two midnights.

Physicians must take great care to provide clear documentation and detailed analysis in a patient’s medical record so as to support an inpatient admission, because auditors will carefully review these records.

If you have questions regarding the final rule and appropriate practices for designating a patient as outpatient or inpatient, contact the health care attorneys at McBrayer, McGinnis, Leslie & Kirkland, PLLC.

Emily Hord

 

 

 

 

 

 

 

Emily M. Hord is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Hord concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at ehord@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of newly enacted federal and state law and does not constitute legal advice.

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Clarifying the “Two-Midnight Rule” and Part A Payments

In August, the Centers for Medicare and Medicaid Services (“CMS”) announced a final rule regarding the prospective payment for acute care and long-term care hospital inpatient services for fiscal year 2014. This rule becomes effective on October 1, 2013.

This final rule provides clarification to hospitals and physicians for determining when a patient should be designated as an inpatient. Physicians often hesitate to order an inpatient admission stay for fear of denial of the costly inpatient reimbursement claim. When a Medicare review contractor denies a Medicare Part A inpatient admission, the hospital loses a significant amount of reimbursement due to Medicare Part B only covering a small proportion of ancillary services provided during inpatient admission.

If, on the other hand, a patient is designated as an outpatient from the beginning of his/her episode of care, Part B covers all of the services. However, a hospital cannot retroactively change a patient’s status as inpatient to outpatient. Thus, hospitals may benefit financially from treating admitted patients as outpatients under extended observation.

Under the final rule, CMS specified the circumstances under which an inpatient admission is appropriate and reimbursable under Medicare Part A. An inpatient admission is reimbursable under the following conditions:

  • The patient is formally admitted to the hospital pursuant to an order for inpatient admission by a physician or other qualified practitioner.
  • The admission order is in the medical record and is supported by the physician’s admission and progress notes; and,
  • The physician certifies that the services are required on an inpatient basis and includes the following in the medical record:
    • An order for inpatient admission;
    • A documented reason for the inpatient hospitalization for either inpatient medical treatment or a diagnostic study, or special or unusual services for cost outlier cases; and,
    • A statement that inpatient hospital services were provided in accordance with the admission order.

Further, the final rule clarifies that if a physician admits a Medicare beneficiary as an inpatient with an expectation that the beneficiary will require care that “crosses two midnights,” Medicare Part A payment is “generally appropriate.” However, if a physician expects the patient to require hospital care for less than two midnights, Medicare Part A payment is generally inappropriate. Check back on Thursday for a continued discussion about this final rule.

Emily Hord

 

 

 

 

 

 

Emily M. Hord is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Hord concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at ehord@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of newly enacted federal and state law and does not constitute legal advice.

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New IRS Guidance for Charitable Hospitals

The Patient Protection and Affordable Care Act added section 501(r) to the Internal Revenue Code, which imposes new requirements on 501(c)(3) organizations (nonprofit hospitals) that operate one or more hospital facilities. Under section 501(r), each hospital facility operated by a 501(c)(3) organization must meet four general requirements on a facility-by-facility basis in order for the nonprofit hospital to maintain its tax exempt status:

1)         Establish written financial assistance and emergency care policies;

2)         Limit amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital’s financial assistance policy;

3)         Make reasonable efforts to determine whether an individual is eligible for financial assistance before engaging in extraordinary collection actions; and

4)         Conduct a community health needs assessment (“CHNA”) and adopt an implementation strategy at least once every three years.

Section 501 (r) became effective for tax years beginning after March 23, 2010, except for the CHNA requirement which became effective for tax years beginning after March 23, 2012.

The CHNA is a written report and implementation plan that identifies and ranks the community’s needs in the area where the hospital is located. If a tax-exempt hospital fails to conduct a CHNA, a $50,000 excise tax could be imposed. On August 14, 2013, the IRS issued final regulations outlining the excise tax filing process for tax-exempt hospitals that do not meet the CHNA requirement.

According to the newly-released guidance by the IRS, a tax-exempt hospital that is liable for excise tax must file a return on Form 4720 with its excise tax payment. Form 4720 must be filed by the 15th day of the fifth month after the end of the organization’s taxable year in which the liability was incurred. For tax-exempt facilities that inadvertently failed to comply with the CHNA requirement, there is relief as long as the hospital takes corrective measures. Tax-exempt status will only be revoked when a hospital’s failure to meet a requirement is willful or egregious.

The new requirements ushered in by the ACA are time-consuming and complicated. According to the American Hospital Association, satisfying the proposed requirements could take “thousands of hours and cost tens of thousands of dollars or more.” If your hospital facility needs more information about how to maintain your tax-exempt status, contact the health care attorneys at McBrayer.

 

Chris Shaughnessy

 

 

 

 

 

 

 

 

 

Christopher J. Shaughnessy is an attorney at McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Mr. Shaughnessy concentrates his practice area in health care law and is located in the firm’s Lexington office.  He can be reached at cshaughnessy@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

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Nearly Two-Thirds of CAHs’ Status in Jeopardy

On August 15, 2013, the Office of the Inspector General of the Department of Health and Human Services (“OIG”) released a report entitled “Most Critical Access Hospitals Would Not Meet the Location Requirements if Required to Re-enroll in Medicare” (“Report”). If the recommendations in the Report are fully executed, it would cause a detrimental blow to rural hospitals. There are approximately 1,300 critical access hospitals (“CAHs”) currently in operation.

To be designated as a CAH, a hospital must meet the CAH conditions of participation, which include being located in a rural area and at least 35 miles (or 15 miles in the case of secondary roads or mountainous terrain) from any other hospital. This is known as the “location requirement.” However, if prior to December 31, 2005, a facility was designated as a “necessary provider” pursuant to a state plan and was approved by Medicare as meeting the CAH conditions of participation, the facility is permanently exempt from the location requirement. Medicare officials lack statutory authority to investigate CAHs which have been given the necessary provider status by state governments.

As a result of their findings, OIG made, and CMS concurred with, three recommendations in its Report:

1)         CMS should “seek legislative authority to remove necessary provider CAHs’ permanent exemption from the distance requirement, thus allowing CMS to reassess these CAHs;”

2)         CMS should “ensure that it periodically reassesses CAHs for compliance with all location-related requirements;” and,

3)         CMS should “ensure that it applies its uniform definition of ‘mountain terrain’ to all CAHs.”

OIG also recommended that CMS “seek legislative authority to revise the CAH conditions of participation to include alternative location-related requirements.” CMS did not concur with this suggestion. The Report found that if CAHs less than 15 miles from the nearest hospital were removed from the program, savings would be more than $268 million a year.

CAHs are reimbursed by Medicare for 101% of their reasonable costs. In addition to limiting geographic eligibility, CAHs must also worry about Obama’s proposed federal budget for 2014 which would trim Medicare payments to 100% of the CAHs’ costs. Losing CAH status could also mean these providers would become ineligible to participate in the 340B Program, which gives smaller hospitals the ability to get discounts of up to 50% on prescription drug prices.

It is questionable what real savings would be realized by eliminating CAHs, as many patients without a local provider would have to seek care at a more urban hospital or delay care until it reached emergency status. Proponents of CAHs also maintain that these hospitals provide important jobs in rural areas, benefit other local healthcare providers, and bring critical services to high poverty areas where chronic illnesses are prevalent.

CAHs will no doubt lobby against implementation of the Report’s recommendations. McBrayer health care attorneys will continue to track this issue and inform you of any changes to the CAH program.

Chris Shaughnessy

 

 

 

 

 

 

 

Christopher J. Shaughnessy is an attorney at McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Mr. Shaughnessy concentrates his practice area in health care law and is located in the firm’s Lexington office.  He can be reached at cshaughnessy@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

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