United States: HHS To Apply Medicare Rates For Physician, Other Health Services Purchased By IHS-Funded Programs

Philip Baker-Shenk is a Partner and Kayla Gebeck is a Public Affairs Advisor in our Washington, D.C. office.

HIGHLIGHTS:

  • The U.S. Department of Health and Human Services has issued a final rule (42 CFR Part 136) to apply Medicare payment rates on medical charges associated with non-hospital-based care and the payment for physician and other healthcare professional services contracted by the Indian Health Service, tribal Purchased/Referred Care programs or urban Indian organizations, pursuant to Title V of the Indian Health Care Improvement Act.
  • The final rule establishes payment rates that are consistent across federal health care programs, aligns payment with inpatient services and enables the Indian Health Service, tribes, tribal organizations and urban Indian organizations to increase patient access to medical care.
  • The final rule is effective on May 20, 2016. But it applies to a tribal provider only if that provider "opts-in."

Sylvia Mathews Burwell, Secretary of the U.S. Department of Health and Human Services (HHS), on March 21, 2016, issued a final rule to apply Medicare payment methodologies to all physician and other health professional services and non-hospital-based services contracted by the Indian Health Service (IHS), tribally administered Purchased/Referred Care (PRC) programs or urban Indian organizations, pursuant to Title V of the Indian Health Care Improvement Act. The final rule amends 42 CFR Part 136 by adding subpart I.

Effective on May 20, 2016, the final rule establishes payment rates that are consistent across federal healthcare programs and enables IHS providers to increase patient access to medical care. To take advantage of this new authority, a tribally administered program must "opt-in" through an amendment to its compact or contract.

Final Rule Background

The final rule comes in response to an increasing demand for PRC care, which in recent years has consistently exceeded available funding. Typically, PRC care involves specialty care. In Fiscal Year (FY) 2013, because of shortfalls in funding in about 147,000 cases, IHS and tribal PRC programs were denied an estimated $760 million for services that were needed by eligible beneficiaries.

At its most basic level, PRC care is medical care that an IHS-funded facility cannot provide with its existing staff and must therefore purchase in the private sector medical services market. IHS and tribally administered health programs have historically had to pay rates to physician and other health providers that were substantially higher than Medicare allowable rates or the negotiated rates paid by private insurers for the same services. These higher rates have compounded the shortfalls in funding and restricted the level of services that are provided.

GAO Recommendation and Analysis

A study released by the U.S. Government Accountability Office (GAO) in April 2013 suggested a solution to this issue. GAO recommended that Congress and the Obama Administration authorize IHS-funded PRC programs to pay the same rates for physicians' services that the federal government has negotiated for all Medicare-funded services.

While this authority has long existed for hospital-based services that are purchased under PRC, non-hospital-based medical services purchased under PRC were often charged the full "rack rate" without the discount customarily negotiated by insurance companies or set by Medicare. GAO said that, in FY 2010, this authority would have saved an estimated $32 million that could have been used to pay for additional services that were otherwise denied for lack of funds.

In 2014, IHS performed a similar analysis with a focus on North Dakota and South Dakota. This report concluded that if payments for professional services and non-hospital-based care had been capped at the Medicare rates, IHS could have saved $2.1 million in North Dakota and $5.5 million in South Dakota.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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