340B Drug Pricing Program Omnibus Guidance Notice Published by HRSA

On August 28, 2015, the Health Services Resources Administration (HRSA) published long-awaited 340B Drug Pricing Program Omnibus Guidance.  Although many aspects of the notice reiterate previous HRSA guidance, several elements will generate significant debate among program stakeholders regarding the scope of the 340B program, particularly because of its potential to narrow the scope of permissible 340B purchasing and dispensing.  The notice also presages a more robust – if somewhat ill-defined – oversight and enforcement environment for covered entities and manufacturers participating in the program.  HRSA will accept public comments through October 27, 2015. Reed Smith has prepared a Client Alert that provides an overview of the notice, highlights significant policy issues, and identifies potential areas for public comment.

To view the full client alert click here.

OMB Reviewing CMS Proposed Rule on PAMA Clinical Lab Test Payment Policy

CMS is finally taking steps to implement the Medicare clinical laboratory payment reforms mandated by the Protecting Access to Medicare Act of 2014 (PAMA).  Under PAMA, CMS must base Medicare payment rates for clinical laboratory tests on private payor rates beginning January 1, 2017. The statute requires that CMS establish the parameters for the private sector payment data collection under this provision through notice and comment rulemaking no later than June 30, 2015 – a deadline CMS has missed. On August 31, 2015, CMS submitted its Medicare clinical diagnostic laboratory test payment system proposed rule to the White House Office of Management and Budget (OMB) for regulatory clearance – the last stop before publication in the Federal Register. The text of the proposed rule is not available at this stage, but the clinical lab industry should soon see more details on this long-anticipated policy.

FDA Issues New Draft Guidance and Related Proposed Rule on Naming Biological Products

On August 28, 2015 the federal Food and Drug Administration (“FDA”) issued two important policies regarding naming biological products, including biosimilars.

First, FDA released a notice announcing the availability of draft guidance entitled “Nonproprietary Naming of Biological Products.” The draft guidance highlights FDA’s current thinking on the need for biological products licensed under the Public Health Service Act (“PHS Act”) to bear a nonproprietary name that includes an FDA-designated suffix. The new naming convention will be applicable to biological products previously licensed and newly licensed under the PHS Act. Specifically, the draft guidance proposes that reference biologics and biosimilars will have nonproprietary names that share a core substance name but are distinguished from each other with a unique four-lowercase letter suffix that FDA will assign at random, with no meaning attached. For example, the nonproprietary name of a reference product could be bioproduct-dkmy and a biosimilar of that product could be bioproduct-fzbs. According to FDA, the guidance is meant to clearly identify biological products to improve pharmacovigilance, and for the purpose of safe use, to clearly differentiate among biological products that have not been determined to be interchangeable. With respect to interchangeable biological products, FDA is soliciting comments on whether the nonproprietary name for such a product should include a distinct suffix, or should share the same suffix as its reference product. Comments to the draft guidance are due to FDA on or before October 27, 2015 and can be submitted here.

Alongside the draft guidance, FDA issued a proposed rule designating official names for six specific biological products. The names of these products would include distinguishing suffixes composed of four lowercase letters in accordance with the draft guidance. However, FDA indicates that the Agency is also considering, and seeks feedback on, an alternative nonproprietary naming format for biological products in which the suffix attached to the core name would be derived from the name of the license holder listed on the license. Comments to the proposed rule are due to FDA on or before November 12, 2015 and can be submitted here.

CMS Posts October 2015 Medicare Part B Drug Payment Update

CMS has posted the October 2015 update to the Medicare Part B drug average sales price (ASP) files, containing the payment rates that will apply for the fourth quarter of 2015. On average, prices for the top Part B drugs increased by 1.2% compared to the previous quarter (although CMS notes that prices for 16 of the top 50 drugs decreased).

CMS to Host Webinar on Medicaid HCBS Quality Measures (Sept. 9)

On September 9, 2015, CMS is hosting a webinar on the development of quality measures for Medicaid fee-for-service beneficiaries using home- and community-based services (HCBS).  Specifically, the webinar will discuss efforts to establish measures of potentially avoidable hospitalizations due to:  severe pressure ulcers; acute ambulatory care sensitive conditions (e.g., dehydration, urinary tract infections); and chronic ambulatory care sensitive conditions (e.g., diabetes, COPD, CHF).

CMS Publishes Corrections to Comprehensive Care for Joint Replacement Model Proposed Rule

On August 25, 2015, the Centers for Medicare & Medicaid Services (CMS) published technical and typographical corrections to its July 14, 2015 proposed rule to establish a Comprehensive Care for Joint Replacement Model. As explained in greater detail in our Client Alert, this initiative would provide a bundled payment to hospitals in selected geographic areas for an episode of care for lower extremity joint replacement (LEJR) surgery, covering all services provided during the inpatient admission through 90 days post-discharge. The Despite the revisions, the comment deadline for the proposed rule remains September 8, 2015.

CMS Seeks Feedback on Home Health Face-to-Face Encounter Clinical Templates

CMS is inviting comments on voluntary home health electronic and paper “progress note” templates intended to assist physicians with documenting a face-to-face examination for purposes of the Medicare home health benefit. Comments on the templates will be accepted until October 13, 2015.

OIG Reviews Overlap Between Physician-Owned Hospitals and Physician-Owned Distributors (PODs) of Spinal Devices

 The Office of Inspector General (OIG) of the Department of Health and Human Services has issued a report on “Overlap Between Physician-Owned Hospitals and Physician-Owned Distributors.”  The OIG reviewed 12 hospitals that self-identified as physician-owned and previously reported having purchased spinal devices from PODs.  The OIG attempted to determine whether physicians had an ownership interest in both a hospital and a POD that sold spinal devices to the hospital.  The OIG identified only one physician with an ownership interest in both a hospital and a POD, but noted that information about ownership interests is limited.  According to the OIG, ownership information transparency could have implications for patient safety and quality of care, since “[o]ne of the primary criticisms of PODs is that ownership may affect physicians’ clinical decisionmaking, such as influencing them to perform unnecessary surgeries or to choose a device in which they have a financial interest rather than another device that may be more appropriate for the patient.”  The OIG also observed that “Sunshine Act” reporting may improve available information going forward.  The OIG did not make any recommendations in this report, but noted that it intends to “monitor CMS’s Sunshine Act database and determine how best to assess its impact on transparency within Medicare.”

CMS Updates Inpatient Hospital “Two Midnight” Review Education/Enforcement Strategy

CMS recently provided an update on its education and enforcement strategies related to its “Two Midnight” policy, which addresses when surgical procedures, diagnostic tests and other treatments are generally considered appropriate for inpatient hospital admission under Medicare Part A. The Medicare Access and CHIP Reauthorization Act of 2015 generally bars recovery audit contractors (RACs) from conducting post-payment patient status reviews related to this policy until October 1, 2015. On August 12, 2015, CMS announced that it is extending this moratorium on inpatient status reviews to apply to dates of admission of October 1, 2015 through December 31, 2015.  CMS also set forth the responsibilities of Quality Improvement Organizations, Medicare Administrative Contractors, and RACs for various types of patient status reviews and the timeline for such reviews.

DOJ Win on ACA 60-Day Overpayment Rule in Kane v. Healthfirst FCA Case

In a post on our Life Sciences Legal Update blog here, we discuss the first judicial opinion interpreting the Affordable Care Act’s “60-Day Overpayment Rule” in a False Claims Act case, which was recently issued by the Southern District of New York. In Kane v. Healthfirst, Inc., et al. the court ruled in favor of the Department of Justice, rejecting the defendant hospitals’ motion to dismiss, finding that the hospital had failed to timely repay overpayments. As providers await further guidance from CMS, there are many questions at large, specifically how its holding will apply to providers who diligently investigate potential overpayments but fail to meet the 60-day reporting and repayment timeframe. Stay tuned for further analysis when the CMS final rule is released.

For more information on this decision and the potential effect it can have on providers, read the Client Alert written by Carol Loepere, Scot Hasselman and Nancy Bonifant.


CMS Announces Timeline for the DMEPOS Competitive Bidding Round 1 2017 Competition

On August 11, 2015, CMS announced the detailed timeline for “Round 1 2017” of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program. As previously reported, this round represents a recompete (with product category changes) of the current Round 1 Recompete contracts, which expire December 31, 2016. The following are the major anticipated dates for the Round 1 2017 competition: Continue Reading

President Signs Hospital Outpatient Observation Status “Notice” Act

On August 6, 2015, President Obama signed into law H.R. 876, the Notice of Observation Treatment and Implication for Care Eligibility Act.  The new law requires hospitals to provide written and oral notification to Medicare beneficiaries receiving observation status for more than 24 hours, rather than admitted as inpatients, beginning 12 months after the date of enactment.  The notice must include an explanation of the implications of observation status for beneficiary cost-sharing obligations and subsequent eligibility for SNF services, written using plain language and made available in appropriate languages. The notice must be provided no later than 36 hours after the beneficiary begins receiving the services (or, if sooner, upon release), and it must be signed by the beneficiary or a person acting on the beneficiary’s behalf (or signed by a hospital staff member if the beneficiary or his/her representative refuses to sign).

OIG Recommends Improvements to SNF Billing for Changes in Therapy

In FYs 2011 and 2012, CMS adopted new patient assessments for skilled nursing facilities (SNFs) that were intended to capture when beneficiaries start therapy, end therapy, and decrease or increase therapy. The HHS Office of Inspector General (OIG) has questioned the effectiveness of these complex policies, however, noting that SNFs reviewed often used the start of therapy assessment incorrectly, or used assessments differently when decreasing therapy than when increasing it. According to the OIG, to better ensure that beneficiaries are receiving the needed amount of therapy and that Medicare is paying appropriately, CMS should accelerate efforts to implement a new method for paying SNFs for therapy. In the meantime, the OIG recommends that CMS: (1) reduce the financial incentive for SNFs to use assessments differently when decreasing and increasing therapy and (2) strengthen the oversight of SNF billing for changes in therapy. CMS concurred with these recommendations.  For additional details, see the full report, “Skilled Nursing Facility Billing for Changes in Therapy: Improvements are Needed.”

CMS Issues Final FY 2016 Medicare IPPS/LTCH Rule

On July 31, 2015, the Centers for Medicare & Medicaid Services (CMS) released a major final rule to update the Medicare acute hospital inpatient prospective payment system (IPPS) and the long-term care hospital prospective payment system (LTCH PPS) for fiscal year (FY) 2016. The official version of the rule will be published in the Federal Register on August 17, 2015, and generally applies to discharges occurring on or after October 1, 2015.

With regard to the IPPS, CMS projects that the rate and policy changes in the final rule will increase IPPS operating payments by approximately 0.4%, or about $378 million in FY 2016. The rule provide a 0.9% operating payment rate update for hospitals that submit quality data and are meaningful users of Electronic Health Records (EHR). This update reflects a 2.4% market basket update, adjusted by a -0.5 percentage point multi-factor productivity (MFP) cut and an additional -0.2 percentage point cut (as mandated by the Affordable Care Act, or ACA), with an additional -0.8 percentage point documentation and coding recoupment adjustment required by the American Taxpayer Relief Act of 2012. Continue Reading

CMS Finalizes Medicare IRF PPS Rates/Policies for FY 2016

On August 6, 2015, CMS published its final rule to update Medicare PPS rates for inpatient rehabilitation facilities for FY 2016, which begins October 1, 2015.  CMS estimates that rates will increase by 1.8% overall ($135 million) under the final rule compared to FY 2015 levels.  This increase reflects a 2.4% market basket update (using a new IRF-specific market basket) that is reduced by a 0.5 percentage point multi-factor productivity adjustment and an additional 0.2 percentage point reduction required by the Affordable Care Act, with an additional 0.1% decrease resulting from an update to the outlier threshold.  The standard payment conversion factor for discharges for FY 2016 will be $15,478, compared to the FY 2015 conversion factor of $15,198. In this final rule CMS adopts for the first time a IRF-specific market basket to replace the 2008-based market basket for rehabilitation, psychiatric, and long-term care facilities. Continue Reading

CMS Publishes Final FY 2016 Update to SNF PPS Rates, Policies

On August 4, 2015, CMS published its final rule updating Medicare skilled nursing facility (SNF) PPS rates and policies for FY 2016.  CMS projects that the final rule will increase overall payments to SNFs by $430 million, or 1.2%, as compared to FY 2015 levels.  This update reflects a 2.3% market basket increase that is reduced by a 0.6 percentage point market basket forecast error adjustment and a 0.5 percentage point multifactor productivity adjustment. Continue Reading

First Meeting of Advisory Panel on Clinical Diagnostic Laboratory Tests on August 26, 2015

CMS has announced that the first meeting of the Advisory Panel on Clinical Diagnostic Laboratory Tests will be held on August 26, 2015. The Panel will recommend crosswalks for new laboratory codes, recommend an appropriate coding structure for drugs of abuse testing, and recommend crosswalks for such drugs of abuse testing. Registration for the meeting is open from August 7 through August 14, 2015.

Terminated Medicaid Providers Continue to Participate in Other State Medicaid Programs

According to the HHS Office of Inspector General (OIG), 12% of providers terminated for cause by a state Medicaid program in 2011 continued participating in other states’ Medicaid programs as of January 2014, despite an Affordable Care Act (ACA) requirement that states terminate any provider terminated for cause by another state Medicaid program.  The OIG acknowledges that states face challenges in complying with this requirement, including the lack of a comprehensive data source for identifying all such terminations, difficulty differentiating these terminations from other administrative actions, and data gaps related to states that do not enroll providers participating in Medicaid managed care organizations (MCOs).  The OIG recommends that CMS:  (1) work with states to develop uniform terminology to clearly identify for cause terminations, (2) require that state Medicaid programs enroll all providers participating in Medicaid MCOs, and (3) issue guidance that termination is not contingent upon the provider’s active licensure status. CMS concurred with these recommendations.  For details, see the full report, “Providers Terminated from One State Medicaid Program Continued Participating in Other States.”

GAO Examines Medicare Provider Eligibility Verification Safeguards

The Government Accountability Office (GAO) has issued a report examining the extent to which CMS’s enrollment screening procedures are designed and implemented to prevent enrollment of ineligible or potentially fraudulent Medicare providers. The GAO identified weaknesses in CMS’s verification of provider practice location and physician licensure status that have allowed potentially ineligible providers and suppliers to enroll in Medicare. GAO recommends that CMS incorporate flags into its software to help identify potentially questionable practice locations, revise its 2014 guidance for verifying practice locations (which requires fewer verification techniques to verify a practice location), and collect additional license information.

FDA Announces Medical Device User Fee Rates for Fiscal Year 2016

Earlier this week, the federal Food and Drug Administration (FDA) issued a notice in the Federal Register (80 Fed. Reg. 46033) announcing the fee rates and payment procedures for medical device user fees for fiscal year (FY) 2016, which apply from October 1, 2015 through September 30, 2016. The Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Medical Device User Fee Amendments of 2012 (MDUFA III), authorizes FDA to collect user fees for certain medical device submissions and annual fees both for certain periodic reports and for establishments subject to registration. For FY 2016, the standard premarket application (PMA) fee will be $261,388; by comparison, the PMA fee in FY 2015 is $250,895. Continue Reading