CAH Update: December 2011 Issue

CAH Update: December 2011 (PDF)

The Budget Control Act of 2011 created the Joint Select Committee on Deficit Reduction or "supercommittee," a bipartisan 12-member panel tasked to craft a far-reaching plan to reduce the national deficit by at least $1.2 trillion. The co-chairs recently announced that they failed to come to an agreement on a deficit reduction strategy. With less than three weeks before the end of the year, Congress is facing a full slate of issues that it must address before the end of the year. including deficit reduction, funding the federal government and several key programs of critical importance to critical access hospitals (CAHs) and the patients and communities they serve. In addition, several regulations have been finalized with serious implications for CAHs.

This issue of CAH Update highlights the latest legislative events on Capitol Hill and rulemaking by CMS and others.


Deficit Reduction
Following the failure of the supercommittee to reach an agreement on deficit reduction, sequestration is invoked.  As a result, automatic spending cuts totaling $1.2 trillion split between defense spending and non-defense programs will take effect in January 2013. Under the trigger, reductions in Medicare payments to hospitals and other providers of 2 percent over nine years (2013 to 2021) will take effect. 

Prior to their announcement, AHA hosted two Advocacy Days emphasizing among other issues the threats to rural and small hospitals particularly critical access hospitals (CAH), sole community hospitals (SCH), Medicare-dependent hospitals (MDH), and Rural Referral Centers (RRC). The President's Plan for Economic Growth and Deficit Reduction proposed three changes to payments for rural providers of concern to the hospital field including eliminating add-on payments for hospitals and physicians in low-population frontier states, reducing payments to CAHs and eliminating the CAH designation for hospitals that are fewer than 10 miles from the nearest hospital. Earlier this year, the Congressional Budget Office offered a budget cutting option that would eliminate CAH, SCH, and MDH programs all together.

More than 300 people participated in Advocacy Days briefings and visits to their members of Congress reminding our legislators that enough is enough - no additional cuts to hospital care. Protecting Medicare and Medicaid funding for hospital services means protecting access to critical health care services and protecting much needed jobs in every community.

In addition, AHA worked with our member hospitals to rally support for an effort by Reps Jo Ann Emerson (R-MO) and Ron Kind (D-WI). They penned a "Dear Colleague" letter in the House to the supercommittee co-chairs Sen. Patty Murray (D-WA) and Rep. Jeb Hensarling (R-TX) asking them to carefully consider the potentially devastating consequences of cuts to CAHs on access to care for patients and economic development in rural communities. The outcome was a respectable 68 members cosigning the letter from a potential 198 congressional districts that are home to CAHs. BACK TO TOP

Funding the Federal Government
The federal fiscal year (FY) 2011 budget was completed in May, but Congress has yet to fund the FY 2012 budget. On November 17, Congress gave final approval to H.R. 2112, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. The minibus appropriations bill of $182 billion in domestic spending covers major science agencies and five Cabinet departments. President Obama signed the bill that includes a continuing resolution funding the remaining federal programs through December 16.

On Dec. 14, The House Committee on Appropriations announced a FY 2012 Appropriations bill package that includes three separate pieces of legislation (H.R. 3671, H.R. 3672, and H.Con.Res. 94): a consolidated bill that includes the remaining nine FY 2012 Appropriations bills that have yet to be enacted; a bill providing funding for disaster emergencies; and a bill containing offsets for the disaster funding.  On Dec. 15, the House approved the budget bill to fund the federal government through September 2012 with a vote of 296-121. It now goes to the Senate where approval is likely and a government shutdown is avoided. Congress continues to negotiate a fix for Medicare payments to physicians. At issue are length (2 month, 1-year or 2-year) and how it will be funded.BACK TO TOP

On December 15, the joint House-Senate Appropriations Conference on H.R. 2055 that includes funding of appropriations for the Department of Health and Human Services and related agencies reported its conference agreement. In September, the Senate Labor, Health and Human Services, and Education, and Related Agencies Appropriations Subcommittee reported its $158 billion FY 2012 appropriations bill (S. 1599). Also in September, the House Appropriations Committee for Labor, Health and Human Services, Education, and Related Agencies reported  its $153.4 billion draft FY 2012 funding bill (H.R. 3070). 

Following are the proposed spending levels for select programs of interest to small or rural hospitals.

Senate Appropriations Committee
House Appropriations Committee for Labor, HHS, Education, and Related Agencies
FY 2012 Recommended Funding Levels - Select HHS Programs
(in millions of dollars)


FY 2011

FY 2012




Rural Health Outreach Grants+






Rural Health Research






Rural Hospital FLEX grants






Rural AED






State Offices of Rural Health












National Health Service Corps





2012 not specified

+includes the Delta States Network Grant Program
*The House Draft bill provides that $15 million from the Rural Hospital FLEX grant program shall be available for the SHIP Grant
**These funds are in addition to $295.0 million which was provided for the National Health Service Corps in FY 2012 under the ACA. 



The AHA's Rural Hospital Advocacy Agenda
In addition to advocating on behalf of CAHs against deficit cuts and for spending on vital programs, the AHA has continued its pursuit of its advocacy agenda for extending expiring Medicare payment provisions. In September, AHA President and CEO Rich Umbdenstock testified before the House Ways and Means Health Subcommittee at a hearing on "Expiring Medicare Provider Payment Provisions." In November, AHA sent letters to the chairman and ranking members of the House Committee on Ways and Means and Senate Committee on Finance asking them to extend funding of critical Medicare payment programs. The AHA's 2011 advocacy agenda for small or rural hospitals focuses on ensuring all hospitals have the resources they need and advocates extending Medicare funding for programs such as: 

" Including provider taxes as allowable costs for CAHs
" Expanding cost-based reimbursement of ambulance services to additional CAHS
" Extending the HUD 242 hospital mortgage insurance program for CAHs
" Eliminating the Inpatient Provider Advisory Board (IPAB)

The AHA continues its support of free-standing legislation that has the promise of improving access and enhancing quality of care to the communities served by small or rural hospitals. Such bills include:

" The Craig Thomas Rural Hospital and Provider Equity Act (R-HoPE) (S.1680)
" The Rural Health Care Capital Access Act (S. 1431)
" The Protecting Access to Rural Therapy Services Act (S. 778)
" Health Care Bureaucrats Elimination Act (S. 668)
" The 340B Drug Improvement Program (H.R. 2674)
" The Rural Protection Act (H.R. 1398)
" Medicare Decisions Accountability Act (H.R. 452)

While Congress continues to debate how to fund the federal government and reduce the debt, the Centers for Medicare & Medicaid Services (CMS) has issued several regulations that affect CAHs. The Summer CAH Update reported on the changes for CAHs included in the Medicare inpatient prospective payment system (PPS) final rule. Discussed below are the changes to CAHs in the final rules for Medicare outpatient PPS, physician fee schedule, shared savings program, and conditions of participation.  In addition, the Health Resources and Services Administration (HRSA) published a report on the designation process for Health Professional Shortage Areas (HPSAs) and Medically Underserved Areas /Populations (MUA/Ps).Finally, the Medicare Payment Advisory Commission (MedPAC) has begun deliberations on its next report to Congress on rural health care access and hospital payments.

On Nov. 1, CMS released its final rule with changes for the calendar year (CY) 2012 outpatient PPS. CMS extends through 2012 the period of non-enforcement of the direct supervision requirements for outpatient therapeutic services for CAHs and small rural hospitals while expanding its Advisory Panel on Ambulatory Payment Classifications Groups. The changes are summarized AHA's Dec. 13 Regulatory Advisory.
Direct Supervision of Outpatient Therapeutic Services: CMS will use the federal Advisory Panel on Ambulatory Payment Classifications Groups (APC Panel) as an independent review body that will evaluate individual services for a potential change in supervision level. On Nov. 25, CMS published a notice on the changes to the Panel and a request for nominations to add four new members to the Panel, two from CAHs and two from non-CAH small rural hospitals.

CMS estimates that policy decisions on many key services will not be completed until sometime in 2012. Thus, the agency will extend through CY 2012 its enforcement moratorium on the direct supervision policy for outpatient therapeutic services provided in CAHs and in small and rural hospitals with 100 or fewer beds. BACK TO TOP

On Nov. 1, the CMS released its final rule for CY 2012 with changes to the Medicare physician fee schedule (PFS) and other Medicare Part B payment policies. These regulations are summarized in AHA's Dec. 6 Regulatory Advisory

By law, CMS is required to develop separate Geographic Practice Cost Indices (GPCIs) to measure the differences in resource costs associated with physician work, practice expense and malpractice among localities compared to the national average. CY 2012 is the second year of the two-year transition to the latest GPCI rates that began in CY 2011.

CMS finalized its proposal that Medicare payments for physicians' services subject to the three-day payment window delivered in a hospital's wholly owned or operated physician practice will be made at the lower facility rate (rather than non-facility), but delays the implementation date from Jan. 1, 2012 to July 1, 2012 to allow hospital and physician practices more time to coordinate their billing practices.

In addition, CMS is modifying its approval process for Medicare telehealth services. Specifically, beginning January 1, 2013, CMS will modify its Category 2 approval so that services that meet a new "clinical benefit standard" may be approved. Currently, and throughout CY 2012, services must meet a "comparability standard," which requires providers to demonstrate that the clinical outcomes of a service delivered via telehealth are comparable to the outcomes of the in-person service.

Last year, CMS indicated that it would require a physician's or non-physician practitioner's signature on a requisition for clinical diagnostic laboratory tests paid under the clinical laboratory fee schedule beginning Jan. 1, 2011.  At the urging of AHA and others, CMS delayed implementation of this provision.  In the PFS final rule, CMS formally rescinds this policy and reinstates its prior policy that the signature of the physician or non-physician practitioner is not required on a requisition for a clinical diagnostic laboratory test.

CMS will continue to pay independent laboratories for the technical component of physician pathology services for Medicare beneficiaries who are hospital inpatients or outpatients through CY 2011. Unless this provision is further extended by Congress, beginning Jan. 1, 2012, independent laboratories will have to bill hospitals directly for technical component services. BACK TO TOP

CMS published in the Nov. 2 Federal Register the final rule for the Medicare Shared Savings Program (MSSP), which encourages the voluntary formation of accountable care organizations (ACOs). An ACO must have the 5,000 minimum-beneficiary threshold each year to participate and only CAHs that bill under Method 2 or the Optional method are eligible to form an ACO. Otherwise, CAHs may participate in an ACO. The rule is summarized by the AHA in a Regulatory Advisory

In the final rule CMS states that it will assign patients on a preliminary prospective basis based on historical claims. Also, CMS is creating an Advance Payment ACO Model to assist organizations participating in the MSSP whose success would be improved with better access to capital. The model is open only to two types of ACOs: (1) those that do not include any inpatient facilities AND have less than $50 million in total annual revenue; and (2) those in which the only inpatient facilities are CAHs and/or Medicare low-volume rural hospitals AND have less than $80 million in total annual revenue. BACK TO TOP

On October 24, CMS published in the Federal Register a proposed rule to revise the existing Medicare and Medicaid Conditions of Participation (CoPs) for hospitals and CAHs. The rule is summarized in AHA's Dec. 5 Regulatory Advisory

Of particular interest to CAHs are key provisions of the proposed rule that include changes to the following requirements:

CAH Services: CMS proposes to allow CAHs to provide certain services, such as diagnostic, therapeutic, laboratory, radiology and emergency services, under service arrangements. Current regulations require CAHs to provide these services directly.

Advanced Practice Practitioners: CMS proposes several changes that would allow advanced practice practitioners (physician assistants, nurse practitioners) to serve in an expanded role. For example, the proposed changes would allow advanced practice practitioners to order medications for patients and to document and sign those orders.

Elimination of Paperwork: CMS proposes to eliminate the current criteria around infection control logs and allow hospitals flexibility in their approach to the tracking and surveillance of infections.

Outpatient Services: CMS intends to remove the requirement for a sole director over all outpatient services.  BACK TO TOP


Regulations governing electronic health records and goals for meaningful use have been published. In addition, HHS has received a final report on the negotiated rulemaking process for designation of Health Professional Shortage Areas (HPSAs) and Medically Underserved Areas/Populations (MUA/P), and MedPAC's discussions of rural health care access and payment are underway. 

Meaningful Use. The Department of Health and Human Services (HHS), announced on Nov. 30, that the department intends to delay the proposed start of Stage 2 meaningful use requirements for the Medicare electronic health record (EHR) incentive programs until fiscal year (FY) 2014 (October 1, 2013 for hospitals). Hospitals can begin later but will incur penalties if they do not achieve meaningful use in FY 2015 or later years. CAHs must first demonstrate meaningful use in FY 2012 to receive all four consecutive years of incentives. Proposed rules for Stage 2, including a proposal for the delay, are expected in February 2012. The announcement is summarized AHA's Special Bulletin.

For CAHs, payments will depend on the reasonable costs incurred for purchase of depreciable assets, such as computers and associated hardware and software necessary to administer certified EHR technology, excluding any depreciation and interest expenses. If the cost cannot be included as a depreciable asset under normal Medicare cost reporting principles, it cannot be included in the EHR incentive payment. Lease arrangements do not apply. CAHs must keep documentation supporting their demonstration of meaningful use and use of a certified EHR for six years. CMS directs CAHs to their Medicare contractors to answer questions on reasonable costs.

Health Professional Shortage Areas and Medically Underserved Areas/Populations. The ACA directed the Secretary of HHS to establish a Negotiated Rulemaking Committee on Designation of MUA/Ps and HPSAs. The purpose was to reexamine the methodology for designating areas and populations that are experiencing medical underservice and/or health professional shortages. The mandate was for primary care and a committee was formed and deliberated 14 months to draft its recommendations to the Secretary. A final report with addenda was delivered by the Committee to the Secretary on Oct. 31.

HRSA published in the Nov. 3 Federal Register a notice listing all of the geographic areas, population groups and facilities designated as primary medical care, mental health, and dental HPSAs as of Sept. 1, 2011. Annually, lists of designated HPSAs are provided to all state Primary Care Offices (PCO) and others with a request to review and update the data on which the designations are based. Any designated HPSA on the HRSA Web site is subject to withdrawal if new information is not received from the PCO and confirmed by HRSA.

MedPAC. The ACA requires MedPAC to evaluate access to care, quality of care, special rural payments, and the adequacy of Medicare payments to providers in rural areas. Access to services was discussed in February.

At its September meeting, MedPAC Commissioners discussed Medicare rural payment adjustments such as CAH payments and low-volume adjustments that have an effect of increasing payments to rural providers. They also discussed Medicare payments for and use of telehealth in rural areas.

At its October meeting, MedPAC examined quality of care issues such as hospital mortality, readmission, and process measures. They also discussed mandatory reporting of quality data, developing rural-specific quality measures, and addressing the volume/outcomes relationship.

MedPAC will conclude its discussions with a presentation on the adequacy of rural payments. Their report to Congress is due June 15, 2012. BACK TO TOP

Jim Dickson, CEO of Copper Queen Community Hospital (CQCH) in Bisbee, AZ, is the 2011 recipient winner of the AHA's Shirley Ann Munroe Leadership Award. The award recognizes the accomplishments of small or rural hospital leaders who have improved health care delivery in their communities through innovative and progressive efforts. Dickson has formed coalitions seeking funding to care for the rural population, including a recent effort to pool monies with other rural hospitals in Arizona to receive matching federal funds. Dickson has greatly expanded CQCH's use of IT through electronic health records, securing funding for radiology diagnostic imaging and home health telemedicine.  Finalists include Ed Bruun, president and CEO of Sparrow Clinton Hospital, St. Johns, MI; Mark Herzog, president and CEO of Holy Family Memorial, Manitowoc, WI and Bryan Slaba, CEO of Wagner (SD) Community Memorial Hospital - Avera.

press release with a description of the winning application and finalists for the 2011 award is available. To learn more about submitting your organization's application for the 2012 award, contact Jihan Palencia Kim at 312-422-3345. BACK TO TOP


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