The Next Step

The Medicare Prescription Drug Conference Committee’s first accomplishment this summer was agreeing on a package of Medicare regulatory and contracting reform provisions known as the “Medicare Contracting and Regulatory Reform Act.” A mixed bag for the HME industry, the regulatory reform provisions enjoy widespread bipartisan support in both the House of Representatives and the Senate.

Following is a summary of the provisions most relevant to HME providers.

Contractor Reform: In a significant departure from the government’s historical process for contracting with entities to process Medicare claims, for the first time the agreement would create a bidding process for Medicare contractors that would take place every five years. In addition, companies other than insurance companies would be able to compete for these contracts.

Regulatory Reform: Among the regulatory reform provisions, the agreement would prohibit the introduction of new material in final rules without an opportunity for public comment; would prohibit retroactive application of new regulations and policies; would require a waiting period of 30 days after the announcement of a substantive change before it becomes effective; and would prohibit sanctions if a provider follows erroneous guidance from the government and its agents.

Claims Review: The conference committee package would provide for a number of positive developments, including establishing standards for random prepayment reviews. Providers would have up to three years to repay overpayments. Medicare could not recover overpayments during an appeal until after an evaluation by an independent party. And, Medicare could not extrapolate to a larger number of claims overpayments based on a small number of claims, unless there is a sustained or high level of payment error.

In other provisions in the package, Medicare contractors would be required to notify providers in writing of post-payment audits, and a full review and explanation of all audits would be made available to providers except where fraud is suspected.

In addition, the Department of Health and Human Services would be required to create a standard method for probe sampling, and HHS would have to develop a process to allow providers to correct minor errors or omissions in submitted claims without having to initiate an appeal.

Appeals Reform: One change that would have potentially significant effects on HME providers is a provision that would transfer the Medicare administrative law judges, or ALJs, from the Social Security Administration to HHS by Oct. 1, 2005. The Secretary of HHS would ensure the independence of the ALJs by placing them in a separate administrative office that does not report either to CMS or to any other HHS officer.

Other Changes: The agreement would provide $25 million in fiscal years 2005 and 2006 and future funding for increased provider and supplier education under the Medicare Integrity Program. Medicare contractors also would be required to respond to provider and beneficiary inquiries within 45 business days, and providers would not be held liable for program overpayments if they resulted from written guidance issued by CMS.

Finally, HHS would be required to establish a Medicare Provider Ombuds-man office to assist providers, and provider prepayment reviews would be restricted. While, at press time, the House and Senate conferees generally agreed upon the regulatory reform package, one large and unresolved issue that remained was whether to provide funding for the regulatory reform provisions. The Senate regulatory section provides for $1 billion in funding, while the House measure essentially leaves the funding issue to the appropriations process. Senate Finance Committee Chairman Charles Grassley, R-Iowa, and House Ways and Means Committee Chairman Bill Thomas, R-Calif., have said they are committed to resolving the issue later in the conference.

A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is an attorney with the law firm of Epstein, Becker & Green in Washington, D.C. You can reach her by phone at 202/861-1825 or e-mail at [email protected].