On January 15, the Department of Health and Human Services (HHS) announced two final rules that will facilitate the ongoing transition to an electronic health care environment through adoption of a new generation of diagnosis and procedure codes and updated standards for electronic health care and pharmacy transactions.

The first rule adopts the ICD-10 code sets to replace the ICD-9-CM code sets used to report health care diagnoses and procedures in electronic health care transactions. The new codes sets, known as ICD-10-CM/PCS, are expanded and more precise. The final rule set the compliance date at October 1, 2013, which is two years later than proposed.

The second rule adopts standards that covered entitities must use in electronically conducting certain health care administrative transactions. The current versions of the standards, the Accredited Standards Committee X12 Version 4010/4010A1 for healthcare transactions, and the National Council for Prescription Drug Programs Version 5.1 for pharmacy transactions, are widely recognized as outdated and lacking certain functionality. The final rule replaces the current versions with Version 5010 and Version D.0, respectively. The date for implementation will be January 1, 2012.

The final rule can be accessed under Health and Human Services (HHS) at http://www.access.gpo.gov/su_docs/fedreg/a090116c.html.

The Centers for Medicare & Medicaid Services (CMS) announced site selections for the Acute Care Episode (ACE) demonstration. The ACE is a new hospital-based demonstration that will test the use of a bundled payment for both hospital and physician services for 28 cardiac and 9 orthopedic inpatient surgical services in order to improve the quality of care delivered through Medicare fee-for-service. CMS has selected five hospitals to participate in a three-year bundled payment demonstration that will be launched early this year. The Acute Care Episode Demonstration will combine hospitals’ and physicians’ Medicare payments for 28 cardiac and 9 orthopedic inpatient surgical services in an effort to better align incentives for quality and efficient care.

The press release can be found at http://www.cms.hhs.gov/.

The Medicare Payment Advisory Commission (MedPAC) recommended that Congress provide hospitals with a full Medicare payment update for 2010 inpatient and outpatient services, based on the rate of change in the market-basket index, concurrent with implementation of a quality incentive program. MedPAC also recommended reducing indirect medical education payments by 1 percentage point, and using the estimated $1 billion in savings to help fund the quality incentive program.

MedPAC has also recommended freezing Medicare payments for skilled nursing facilities, inpatient rehabilitation facilities and home health agencies in 2010. MedPAC also recommended providing long-term care hospitals with a full market basket update minus an adjustment for productivity growth, for an estimated update of 1.6%. In addition, commissioners said the Centers for Medicare & Medicaid Services should accelerate a 2.71% coding reduction planned for home health agencies in 2011, which was contained in the 2008 home health prospective payment system final rule. The rule reduced case mix payments in 2008 through 2011 to account for a change in coding behavior that occurred from 2000 to 2005. Accelerating the 2011 coding reduction would result in a 5.5% payment reduction for home health agencies in 2010. Commissioners also recommended that CMS rebase home health agency payment rates for 2011 to reflect the average cost of providing care.

For further information, visit http://www.medpac.gov.

The Centers for Medicare & Medicaid Services (CMS) has named the final five Medicare administrative contractors (MAC) to process and pay Part A and B claims in 14 states. The MACs, the last to be named under contracting reform provisions of the 2003 Medicare Modernization Act, will assume full responsibility for processing Medicare fee-for-service claims no later than March 2010. The five MACs are: Noridian Administrative Services, who will process claims in Illinois, Minnesota and Wisconsin; National Government Services, who will process claims in Indiana and Michigan; Cahaba Government Benefit Administrators, who will process claims in Alabama, Georgia and Tennessee; Palmetto Government Benefits Administrators who will process claims in North Carolina, South Carolina, Virginia and West Virginia; and Highmark Medicare Services, who will process claims in Kentucky and Ohio.

The press release announcing the MACs can be found at http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3396&intNumPerPage=10&checkDa.

The Centers for Medicare & Medicaid Services (CMS) has published an interim final rule implementing certain provisions of the 2008 Medicare Improvements for Patients and Providers Act (MIPPA) related to the Medicare competitive bidding program for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). As required by the Act, CMS will terminate the first round of contracts previously awarded and will reopen the bidding process this year. The second round of bidding will occur in 2011. Under the interim final rule, which will take effect on February 17, hospitals that furnish certain types of competitively bid equipment and supplies to patients during their stay or on the date of discharge will be exempt from the program. CMS will accept comments on the rule through March 17.

The rule can be found by going to http://edocket.access.gpo.gov/2009/pdf/E9-863.pdf.