As reported last week, the House of Representatives has passed the Deficit Reduction Act of 2005 (DRA 2005), which is expected to be signed by President Bush in the very near future. When ultimately passed, we will provide a more detailed explanation of the critical issues, but the following are additional reimbursement issues impacted by DRA 2005:

1.Ambulatory Surgery Center and Imaging Fees. Medicare payments to ambulatory surgery centers and for certain imaging services performed in physician offices will be capped to eliminate the situations in which these services are reimbursed at a higher rate than in hospital facilities. This legislation is projected to affect primarily ophthalmologists, urologists, and radiologists. The intended effective date is January 1, 2007.

2.Gainsharing Demonstration Projects. Gainsharing is receiving new found attention by healthcare providers. The Office of Inspector General has issued several recent advisory opinions permitting gainsharing in defined circumstances. DRA 2005 requires CMS to conduct two demonstration projects on gainsharing, each for two years, to better identify opportunities and compliance issues.

3.Therapy Payment Caps. Therapy caps of $1,500 per beneficiary were first enacted in 1997, but have been delayed through a series of legislative extensions. DRA 2005 will enact the therapy caps for physical therapy, occupational therapy, and speech pathology services for non-hospital outpatient providers. The new legislation will provide an exception process for beneficiaries that can establish the medical necessity for additional therapy. These legislative changes are expected to encourage arrangements whereby therapy is provided by hospital operation providers which are not subject to these caps.

4.Specialty Hospital Referrals. The Stark Regulations established a moratorium on referrals to specialty hospitals by physicians with ownership relationships thereto. Although the initial period for the prohibition has expired, it has been extended by interim legislation, and DRA 2005 extends this prohibition for an additional six months to allow CMS to complete its analysis of these issues.