Budget Neutrality AppealRelated to the Wage Index Rural Floor

Presented By

T.Giovanis & Company: Ted GiovanisVinson & Elkins: Chris Keough

March 2007

T. GIOVANIS & COMPANYHealth Policy and Regulatory Consultants

Who We Are:

Ted Giovanis Started T. Giovanis & Co. (TGC) in 1990 –

specializes in a wide variety of health policy, advocacy, and reimbursement services

Prior to 1990 - Director of Health and Industry Services for the firm Deloitte and Touché and was the Director of Regulatory Issues for the Healthcare Financial Management Association in Washington, D.C.

Chairman of the Maryland Community Services Reimbursement Rate Commission

Who We Are:

Chris Keough Partner at Vinson & Elkins (V&E)

Vinson & Elkins’ health care law practice ranked fourth

largest in the U.S. by Nightingale’s Healthcare News Mr. Keough’s principal area of focus is on

Medicare and Medicaid reimbursement

Regularly represents hospitals before the Provider Reimbursement Review Board and in the federal court

Background

Annually, CMS makes changes to the payment variables in the Medicare acute care PPS system

Some changes are required to be Budget Neutral

Estimated aggregate payments may not change from one year to the next because of policy changes

Background Continued

Budget Neutrality required for: DRG weights; reclassification of cases; and the Area Wage Index (AWI)

All are adjusted in a single factor

The annual budget neutrality factor is permanently included in the PPS rates

AWI budget neutrality adjustment includes the impact of the Rural Floor

The Issue

Rural Floor - no hospital in a State will have a wage index less than the statewide rural wage index

The number of hospitals subject to the Rural Floor has increased More than half the states include at least some hospitals

subject to the Rural Floor

A flaw has been discovered in the method and variables used to estimate the effect of the Rural Floor within the Budget Neutrality calculation

The Issue continued

The method and variables have a duplicating effect for years after the initial year of Rural Floor applicably

Based on this approach, the duplication has been occurring over a series of years

The issue is not the level of or eligibility for the Rural Floor but rather the associated cost of the Rural Floor being removed, through budget neutrality from the standardized rate

Approach

FY 2007 will be appealed in early 2007

Prior years would be appealed based on NPRs

If not resolved, future years will be appealed based on the Federal FY

Approach continued

Remedies - retrospective relief (for the years under appeal) and a prospective correction of the payment rates

Resolution - an increase in payments (for the period prior to correction) and prospectively (from the point of correction forward)

Deadline

There are a variety of publication dates August 1 – CMS posting display version of the Federal

Register on its web site August 18 – Publish date of the Federal Register September 29 – CMS posts Standard Rate and Wage

Indexes to web site October 11 – Publish date of the final Federal Register

The deadline date for submitting information to TGC is March 21

Fee Approach

There are potential payment gains in pursuing this issue

But the issue is legally and technically complex and will take considerable time, effort, and expense

The fee structure selected offers hospitals a 100% risk free approach

Fee Approach continued

The fee structure: a Performance Fee PLUS a Fixed Fee

Performance Fee - 25% of the increase in payment effect for all years under appeal; no prospective effect of the fee

Fixed Fee - $10,000 per hospital

Both the Performance Fee and Fixed Fee would only apply if the appeals were successful

Fee Approach continued

Approach allows: litigating the issue and protecting years prior to resolution

Without the risk related to a legally and technically complex and protracted PBBR and court effort

Issues You Should Consider

TGC discovered the issue and has direct evidence of the CMS error: TGC has vetted the evidence within our firm, its

advisors, and with multiple independent experts

Based on early knowledge of the issue, V&E has developed complex legal strategy that will utilize “expert” analysis of the issue

The risk free approach protects hospitals from extensive legal fees regardless of outcome and is based only on years under appeal

Next Steps

Contact Ted Giovanis at TNGiovanis@AOL.com or (301) 854-2496 for questions or expression of interest

Hospitals will be sent a Letter of Agreement and related Attachments

Next Steps

To Participate Hospitals must, by March 21: Sign the letter of acceptance Complete Attachment I - contact information Sign representation letter - Attachment II Edit information on Attachment III Submit all documents to Ted Giovanis at TGC

Ted GiovanisT. Giovanis & Co.

301-854-2496tngiovanis@aol.com