CMS issues final rule streamlining Medicare regulatory requirements for hospitals and other providers

June 2014
BY Mary M. Bearden and Elizabeth H. Jepson, Brown & Fortunato , P.C.

On May 12, 2014, the Centers for Medicare and Medicaid Services (CMS) published a final rule in the Federal Register intended to promote program efficiency and transparency, as well as to reduce unnecessarily burdensome requirements, for hospitals and other health care providers. The final rule made changes for numerous providers, including hospitals, long-term care facilities, ambulatory surgical centers (ASCs), transplant centers, and critical access hospitals (CAHs). The rule was issued in response to President Obama’s 2011 Executive Order that required governmental agencies to conduct retrospective reviews of rules in order to reduce red tape and modify or eliminate excessively burdensome and unnecessary regulations. According to CMS, the reforms in this final rule are estimated to save close to $660 million annually and up to $3.2 billion over five years. The majority of the changes will be effective 60 days from the date of publication of the final rule (July 11, 2014), with the exception of one provision concerning long term care facilities, which was effective on the date of publication.

A number of the provisions in the rule are applicable to hospitals, including several provisions for medical staff and governing bodies. Importantly, the final rule reinterprets the current regulations to allow multi-hospital systems to have either unique medical staffs in each hospital or a unified and integrated medical staff shared by multiple hospitals within the system. CMS no longer requires each hospital within a system to have a separate organized and individual medical staff.

Initially, CMS had proposed to strengthen the requirement that each hospital have a separate medical staff. During the comment period, several hospital systems that have adopted integrated and unified medical staffs objected to the proposed rule. These hospital systems provided evidence demonstrating that integrated medical staffs enable hospitals to more effectively implement evidence-based best practices. Such practices are linked to reduced healthcare-associated infections, hospital-acquired conditions, and readmissions. Other benefits of integrated medical staffs sited by the systems included improved peer review processes and better call coverage for physician specialties.

Some groups argued that a unified and integrated medical staff would impede medical staff governance. CMS disagreed with these comments. Nevertheless, CMS determined that certain limitations on the use of an integrated medical staff were necessary to “ensure due consideration of the unique aspects of each involved hospital.” Accordingly, the Conditions of Participation (CoPs) now include the following specific requirements for the use of a unified and integrated medical staff: (1) a vote by the majority of the medical staff of each hospital to accept a unified and integrated medical staff or to opt out; (2) bylaws, rules, and requirements that describe the processes for self-governance, appointment, credentialing, privileging, peer review, and oversight that include a process for members of the medical staff of each hospital to be advised of their rights to opt out of the unified and integrated medical staff model; (3) consideration of each hospital’s unique circumstances, including differences in patient population between the hospitals within the system; and (4) establishment of mechanisms for a unified and integrated medical staff to ensure that issues localized to particular hospitals are addressed. The final rule emphasizes that for multi-hospital systems utilizing a unified and integrated medical staff, each separately participating hospital must be able to demonstrate its compliance with all other hospital CoPs.

The Joint Commission (TJC) does not currently have standards requiring multi-system hospitals to allow each hospital to vote on the adoption of a unified and integrated medical staff. Regardless, hospital systems should take steps to implement the new CoPs for integrated medical staffs. Those CoPs are likely to be incorporated into TJC’s accreditation manual in the future.

The final rule adds a provision to the medical staff standard of the hospital CoPs that requires a hospital’s governing body to consult with the individual responsible for the organized medical staff of the hospital (or his/her designee) periodically throughout the year concerning quality of care. For multi-system hospitals using a single governing body, the single governing body is required to consult with the individual responsible for the medical staff of each hospital within the system.

This change eliminates the requirement that a member of the medical staff sit on the hospital governing board, which had resulted in a number of complications and conflict of interest issues for hospitals. The periodic consultation requirement is intended to provide hospitals with flexibility as to how often the consultations occur, but CMS stated it expected the consultations to occur at least twice per calendar or fiscal year. Factors that hospitals should consider when determining how often the consultations should occur include the scope and complexity of hospital services offered, the patient population served, and issues of patient safety and quality care requiring the attention of the governing body.

However, hospitals should note that simply having a member of the medical staff on the governing body does not necessarily meet the consultation requirement. In this case, the requirement would only be met if the medical staff member on the governing body is the same individual responsible for the organization and conduct of the medical staff and if the membership includes meeting with the board periodically throughout the year to discuss matters related to quality of care.

Beyond changes to medical staff and governance, the final rule also changes current hospital requirements that therapeutic diets may only be prescribed by the practitioner(s) responsible for the patient’s care. The final rule permits registered dietitians and qualified nutrition professionals (as defined under state law) to order patient diets under the hospital CoPs. This change will give patients better access to timely nutritional care while achieving significant cost savings for hospitals.

The final rule also allows long term care facilities to apply for an extension of up to two years to comply with the deadline for installation of automatic sprinkler systems that was originally published in a final rule on August 13, 2008. The deadline for installation had been August 13, 2013, but the May 12, 2014, final rule allows long term care facilities to apply for deadline extensions of up to two years (plus the potential for a one year extension renewal) if certain conditions are met.

Under the final rule, ASCs are not required to comply with hospital CoPs requirements for supervision of radiologic services. The hospital CoPs require that a radiologist supervise the provision of radiologic services; however, ASCs typically provide limited radiologic procedures. In accordance with the final rule, an ASC does not have to have radiologic services supervised by a radiologist, if those services are supervised by an individual with appropriate qualifications in accordance with state law and the ASC’s governing body’s requirements.

The requirement for physician presence at CAHs, rural health clinics, and federally qualified health centers is also modified under the final rule. The final rule eliminates the requirement that a physician be on-site at the facility at least once every two weeks. Under the final rule, physicians must be present as necessary to meet the facility and patient needs and review outpatient records periodically.

Other provisions of the final rule revise regulations concerning a number of matters, including ordering of outpatient services; inclusion of non-physician practitioners on a hospital’s medical staff; and evaluation of long-term care swing beds during a deemed status survey by an accrediting organization rather than a separate survey by a state agency. Because of the myriad of provisions in the final rule affecting many different types of health care providers, it is important for all health care providers to review and understand the relevant provisions of the final rule.