On September 23, 2009, we published a Client Alert discussing changes to the Method II Billing Election ("Method II Change") for critical access hospitals ("CAHs").  These changes were implemented in the August 27, 2009 Inpatient Prospective Payment System Final Rule.  We recently became aware that some FI/MACs have been telling hospitals that the Method II Change has been "cancelled."  This is incorrect.  

Although the Method II Change is not "cancelled," it may be the case that its implementation is being delayed.  During a recent CMS Hospitals Open Door Forum call, CMS indicated verbally that it would be delaying implementation of the Method II billing change pending publication of more detailed implementation guidance.  Absent any such guidance in writing, however, it is unclear whether or not CMS will in fact be delaying implementation of the Method II Change and, if so, exactly when and how that change will be implemented.

As indicated in our last bulletin on this subject, CMS and FI/MACs may accept Method II rescissions if received prior to the beginning of an impacted cost reporting period.  In light of the uncertainty surrounding this issue, we now recommend that hospitals who have previously submitted an election to be paid as a Method II CAH (and who would not elect Method II billing if the Method II Change were implemented) submit a "conditional" rescission of that Method II election.  This conditional rescission is intended to take effect when and in the event CMS implements the Method II Change.  Hospitals may consider using the following language in a letter to its FI/MAC:

In light of verbal guidance from the Centers for Medicare and Medicaid Services indicating that the change in "Method II" payment under 42 C.F.R. § 413.70 (the "Change") will be delayed pending the publication of guidance addressing detailed Change implementation, [INSERT HOSPITAL NAME] hereby elects to rescind its Method II election only in the event that CMS chooses to implement the Method II Change as contemplated and detailed in the August 27, 2009 Inpatient Prospective Payment System Final Rule.

We can give no assurance that CMS and the FI/MACs will accept this approach.  However, given the uncertainty surrounding the Method II Change, we believe this is the best approach to minimize any negative impact that the Method II Change may have.  Affected CAHs will want to monitor this situation closely as it develops.

If you would like additional information about this issue, please contact your regular Hall Render attorney, David Snow (414-721-0447; dsnow@hallrender.com) or Todd Nova (414-721-0464; tnova@hallrender.com).