The Centers for Medicare and Medicaid Services has announced steps to reduce unnecessary, obsolete or burdensome regulations on American hospitals and healthcare providers. CMS said these steps would save nearly $1.1 billion across the healthcare system in the first year for a total of $5 billion over five years.

CMS proposed two sets of regulatory reforms today and finalized a third. All are designed to improve transparency and help providers operate more efficiently by reducing their regulatory burden. One set proposes updates to the Medicare Conditions of Participation for hospitals and critical access hospitals. The second set addresses regulatory requirements for a broader range of healthcare providers and suppliers who are regulated under Medicare and Medicaid. CMS also finalized a third rule reducing regulatory burden for ambulatory surgical centers.

CMS estimates annual savings to hospitals from the proposed revisions to the Conditions of Participation could exceed $900 million in its first year as hospitals increasingly use this new flexibility. The Medicare Regulatory Reform rule could save up to $200 million in the first year. The final rule for ASCs could generate an extra $50 million in savings per year.

Taken together, these three rules would reduce hospital and other healthcare provider costs by nearly $1.1 billion the first year. These cost savings would come directly from reduced regulatory burdens, and are not accompanied by reimbursement reductions. As such, according to CMS, all of these savings would be available to help providers improve the quality of care they provide to Medicare beneficiaries and all Americans.

Medicare Conditions of Participation

The Conditions of Participation are federal health and safety requirements ensuring high-quality care for all patients. Hospitals and critical access hospitals must meet these conditions to participate in the Medicare and Medicaid programs.

The proposed rule is designed to reduce the regulatory burden on hospitals by:

• Enabling hospitals to have a single, interdisciplinary care plan that supports coordination of care instead of requiring a separate stand-alone nursing care plan.

• Eliminating burdensome requirements that do not permit hospital patients or their caregivers to administer certain medications.

• Allowing hospitals to determine the best ways to oversee and manage outpatients by removing the unnecessary requirement for a single director of outpatient services.

• Increasing flexibility for hospitals by allowing one governing body to oversee multiple hospitals in a single health system.

• Allowing critical access hospitals to provide certain services, including laboratory and radiology services, under arrangement.

Medicare Regulatory Reform

The Medicare Regulatory Reform rule would identify and begin to eliminate duplicative, overlapping, outdated, and conflicting regulatory requirements for healthcare providers and suppliers, including hospitals, ambulatory surgical centers, end-stage renal disease facilities, durable medical equipment suppliers and various others regulated under Medicare and Medicaid. The goal is to both reduce regulatory burdens and help providers improve care for patients.

This rule would help reduce unnecessary burdens on healthcare providers, according to CMS, allowing them to dedicate more resources to improving patient care. Some of the more than two dozen proposed regulatory changes include:

• Eliminating obsolete regulations, including expired OMB paperwork control numbers, outmoded infection control instructions for ambulatory surgical centers, outdated Medicaid qualification standards for physical and occupational therapists and duplicative requirements for governing bodies of organ procurement organizations.

• Clarifying which higher-risk end stage renal disease facilities are required to comply with the full federal life safety code requirements. CMS estimates that this burden reduction could save an estimated $108.7 million for the ESRD program.

• Eliminating the current Medicare requirement that automatically deactivates a provider or supplier who has not submitted a claim for 12 consecutive months, keeping providers from inadvertently being barred from re-enrolling in Medicare for a certain period. CMS projects savings from this regulatory reform at $26.7 million annually.

• Eliminating the specific list of emergency equipment ambulatory surgical centers must have on hand, and allowing facilities, in conjunction with medical staff and their governing bodies, to develop policies and procedures that specify emergency equipment appropriate to the services they provide.

• Replacing inflexible time-limited agreements that govern participation in Medicaid of Intermediate Care Facilities for the Mentally Retarded with open-ended agreements and a reduction in states' paperwork burden by requiring inspection of these facilities once a year. The regulation also takes up a recommendation from stakeholders to replace the term "mental retardation" with "intellectual disability," which has gained public acceptance in recent years.

• Updating e-prescribing technical requirements so Medicare prescription drug plans meet current standards.

Ambulatory Surgical Centers

The announcement also includes a final rule from CMS that would update the conditions for coverage regulations for ambulatory surgical centers based on a proposed rule CMS issued in April 2010.

This new final rule simplifies requirements that ASCs must follow in notifying patients about their rights. Specifically, the final rule will allow ASCs to provide the patient, the patient's representative or the patient's surrogate with patient rights information before the start of the surgical procedure.

Before this final rule, ASCs were required to notify patients in advance of the date of the procedure. This requirement caused particular logistical problems and inconveniences for patients who needed ASC services on the same day they received a physician referral.