Special Bulletin: PFS Final Rule Issued, TKA Being Added to PEPPER, NCD Changes for Artificial Hearts

Federal officials recently announced a flurry of regulatory changes.

Recent federal regulatory changes governing the Physician Fee Schedule (PFS), reporting on total knee arthroplasty (TKA), and coverage of the use of artificial hearts have all made headlines during recent weeks – matters that may have flown under the radar considering the looming fast-track approval of several forms of COVID-19 vaccines. 

PFS Final Rule

First, and arguably most critically, the new PFS final rule was issued this week by the Centers for Medicare & Medicaid Services (CMS), with officials saying the move prioritizes the agency’s investment in primary care and chronic disease management by increasing payments to physicians and other practitioners for the additional time they spend with patients – especially those with chronic conditions. The rule also includes provisions prioritizing the expansion of telehealth.

“(There has been an) explosion in telehealth innovation (amid the COVID-19 pandemic), and we’re now moving to make many of these changes permanent,” U.S. Department of Health and Human Services (HHS) Secretary Alex Azar said in a statement. “Medicare beneficiaries will now be able to receive dozens of new services via telehealth, and we’ll keep exploring ways to deliver Americans access to healthcare in the setting that they and their doctor decide makes sense for them.”

CMS Administrator Seema Verma added that the COVID-19 pandemic has “accentuated just how transformative it (telehealth) could be, and several months in, it’s clear that the healthcare system has adapted seamlessly to a historic … expansion that inaugurates a new era in healthcare delivery.”

Before the COVID public health emergency (PHE) began, only 15,000 fee-for-service beneficiaries received a Medicare telemedicine service each week, CMS reported. But after 144 telehealth services were added to the coverage list – such as emergency department visits, initial inpatient and nursing facility visits, and discharge day management services – between mid-March and mid-October 2020, more than 24 million out of 63 million beneficiaries and enrollees received a Medicare telemedicine service.

The new final rule adds more than 60 additional services to the telehealth list, all of which will continue to be covered even beyond the expiration of the PHE, and officials pledged to “continue to gather more data and evaluate whether more services should be added in the future.”

In addition, coming on the heels of last year’s increases in payment rates for office/outpatient face-to-face evaluation and management (E&M) visits, which go into effect in 2021, CMS said that its final rule will similarly increase the value of many services that are “similar” to those performed during such visits, including maternity care bundles, emergency department visits, end-stage renal disease capitated payment bundles, and physical and occupational therapy evaluation services. The moves come amid continuing increases in Medicare enrollment, which rises by more than 10,000 new beneficiaries daily. 

“This finalized policy marks the most significant updates to E&M codes in 30 years, reducing burden on doctors imposed by the coding system and rewarding time spent evaluating and managing their patients’ care,” Verma said. “In the past, the system has rewarded interventions and procedures over time spent with patients – time taken preventing disease and managing chronic illnesses.”

CMS said the changes are expected to save clinicians 2.3 million hours in administrative burden annually, allowing them to spend more time with their patients.

For a fact sheet on the 2021 Physician Fee Schedule Final Rule, go online to: https://www.cms.gov/newsroom/fact-sheets/final-policy-payment-and-quality-provisions-changes-medicare-physician-fee-schedule-calendar-year-1   

To view the Final Rule in its entirety, go to: https://www.cms.gov/files/document/12120-pfs-final-rule.pdf


As reported by RACmonitor contributor Dr. Ronald Hirsch, another recent development saw TKA added to the quarterly Program for Evaluating Payment Patterns Electronic Report (PEPPER), with the percentage of such procedures being performed under inpatient status to be reported going forward.

“Amid great controversy, total knee arthroplasty was removed from the Medicare Inpatient-Only List on Jan. 1, 2018, and the moratorium on Recovery Audit Contractor (RAC) audits of those admissions expired on Jan. 1, 2020, although permission for the RACs to audit for status has not yet been granted,” Hirsch wrote. “Prior to the second pause in the short-stay inpatient audits conducted by the Quality Improvement Organizations (QIOs), many one-day inpatient admissions were audited, and anecdotally, many were denied. This addition to the PEPPER now gives hospitals an opportunity to peer behind the curtain and see how they perform relative to others.”

Hirsch noted that the PEPPER provides not only raw numbers, but also comparative data, allowing hospitals to see how they perform in comparison to hospitals in their Medicare Administrative Contractor (MAC) jurisdiction, their state, and the nation.

Hirsch called the timing of the addition “interesting,” in that the first batch of data was from the period of April 1, 2020 to July 31, 2020 – smack in the middle of the peak of the first COVID-19 surge, when many hospitals stopped performing all elective surgery altogether, with joint replacements being one of the first such procedures to be cancelled.

“How should this new PEPPER measure be used? As with other PEPPER measures, hospitals can use the comparative data to determine if their admission pattern is different from others, but they cannot use it to determine if they are getting admission status correct,” Hirsch wrote. “While the many audit agencies do not access PEPPER directly, they have access to similar data in other databases, so hospitals that are outliers on the PEPPER may end up in the crosshairs of an auditor.”

On the other hand, Hirsch added, a hospital with a small percentage of inpatient admissions may be missing opportunities for ensuring complaint revenue.

“In a recent audit of a high-volume hospital, I found many more missed inpatients than inappropriate inpatients. I then met with the orthopedic team, including the surgeons, service line leaders, and physician assistants, and we developed a plan to ensure that every patient was placed in the right status,” Hirsch said. “And as CMS has proposed to eliminate the Inpatient-Only List over the next several years, getting the process right for total joint arthroplasty will set them up for success in the future for all surgeries.”  

To read Dr. Hirsch’s article in its entirety, go online to: https://www.racmonitor.com/news-alert-total-knee-replacement-added-to-pepper.

NCD Changes for Artificial Hearts

Finally, CMS also announced that it is making changes to two separate but medically related National Coverage Determinations (NCDs) – citing “new evidence in the peer-reviewed medical literature,” officials said they are removing the NCD for Artificial Hearts and Related Devices and revising the NCD that provides coverage for Ventricular Assist Devices (VADs) for Bridge-to-Transplant and Destination Therapy. 

For the artificial heart NCD reconsideration, CMS said it focused on the question: is the evidence sufficient to end coverage, considering developments regarding the use of artificial hearts?

“Based on the totality of the limited evidence generated through coverage with evidence development and peer-reviewed articles and varying patient characteristics, CMS finds that a national coverage determination for artificial hearts is no longer necessary or appropriate, and will allow MACs (Medicare Administrative Contractors) to determine coverage of artificial hearts in particular cases,” officials said. “Research on artificial hearts has shown improved survival for patients with severe biventricular failure. For certain patients, an artificial heart may be reasonable and necessary to treat the patient’s heart disease. However, due to the very low number of procedures, less than 1 percent of the Medicare population, and the need for careful patient selection, CMS believes coverage of artificial hearts is an appropriate determination made by the MACs.”

CMS noted that MACs are structured to be able to take into account a beneficiary’s particular clinical circumstances, which are “especially important when overall prevalence is very low.” 

For the LVAD NCD reconsideration, CMS said it sought to answer a) whether the evidence was sufficient to conclude that modifying the current patient selection criteria for LVAD implantation would improve health outcomes for Medicare beneficiaries and b) whether it could conclude that modifying the current facility criteria for LVAD implantation would improve health outcomes for Medicare beneficiaries.

“With respect to LVADS, this decision is limited to durable, intracorporeal LVADs, and does not include temporary VADs or extracorporeal membrane oxygen (ECMO). The evidence is adequate to assess which patient selection criteria predict the most successful patient outcomes,” officials said. “We are updating the final coverage criteria to align with patient inclusion criteria derived from large, randomized controlled trials. This will expand coverage to a greater number of LVAD candidates who are likely to benefit from LVAD use while maintaining an adequate safety profile.” 

To read the decision memo memorializing these changes in its entirety, go online to: https://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=298&type=Closed&bc=AIgAAAAACAAA&

Programming Note: Register now to attend the exclusive RACmonitor webcast, “Master the 2021 Inpatient-Only List: Get Surgery Status Determinations Right,” led by Ronald Hirsch, MD, tomorrow, Thursday, Dec. 3, at 1:30 p.m. Eastern.


Mark Spivey

Mark Spivey is a national correspondent for RACmonitor.com, ICD10monitor.com, and Auditor Monitor who has been writing and editing material about the federal oversight of American healthcare for more than a decade.

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