CMS Proposed 2016 Medicare Payment Rules in the Pipeline

CMS recently sent several major proposed Medicare CY 2016 payment rules to the White House Office of Management and Budget (OMB) for regulatory clearance – the last step before publication in the Federal Register. Specifically, OMB is reviewing proposed rules to update the Medicare physician fee schedule, the hospital outpatient PPS/ambulatory surgical center payment update, and the home health PPS for CY 2016. The proposed rules are expected to be released this week.

CMS Releases CY 2016 ESRD PPS Proposed Rule

On June 26, 2015, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule to update the Medicare end-stage renal disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2016. CMS anticipates that the proposed rule would increase overall Medicare payments to ESRD facilities by 0.3% ($20 million) compared with CY 2015 payments. The proposed CY 2016 ESRD PPS base rate of $230.20 would be a $9.23 reduction from the CY 2015 base rate of $239.43. The proposed rule would, among other things, modify case mix and low-volume payment adjustments and update outlier Medicare Allowable Payment and fixed dollar loss amounts. CMS also proposes a variety of updates to the ESRD Quality Incentive Program (QIP) for payment years 2017 through 2019, including changes to the reporting measures and revisions to the Small Facility Adjuster. Furthermore, in conformance with the Protecting Access to Medicare Act of 2014 (PAMA), the proposed rule would establish a drug designation process for: (1) determining when a product would no longer be considered an oral-only drug; and (2) including new injectable and intravenous products into the bundled payment under the ESRD PPS (under current statutory provisions, payment for oral-only ESRD drugs cannot be made under the ESRD PPS prior to January 1, 2025). CMS will accept comments on the proposed rule until August 25, 2015. The official version of the rule will be published on July 1, 2015.

CMS Revises Expands ACO “Investment Model” Opportunities

As previously reported, CMS announced a Medicare Shared Savings Program/Accountable Care Organization (ACO) “Investment Model” last fall to better coordinate care in rural and underserved areas where inadequate access to capital could hinder infrastructure development needed for successful population care management. On June 25, 2015, CMS announced that it is modifying the eligibility criteria for this pre-paid shared savings model to include Medicare Shared Savings Program ACOs that started on January 1, 2015 and to provide opportunities for larger rural ACOs to participate.

Congressional Health Policy Hearings

A House Ways and Means Subcommittee on Oversight hearing recently reviewed the effects of the Affordable Care Act (ACA) on health insurance premiums.  In addition, a House Energy and Commerce Health Subcommittee hearing examined the Obama Administration’s approval of Medicaid demonstration projects.   The Energy and Commerce Health Subcommittee also reviewed three bipartisan bills that aim to improve health care for newborns, infants, and children. Specifically, members discussed:

  • HR 2820, the Stem Cell Therapeutic and Research Reauthorization Act, to reauthorize programs that promote bone marrow, adult stem cell, and cord blood donations, match donors and recipients, and link patients to care.
  • HR 1462, the Protecting Our Infants Act of 2015, to address the rise of prenatal opioid abuse and neonatal abstinence syndrome.
  • HR 1344, the Early Hearing Detection and Intervention Act of 2015, to reauthorize a program for early detection, diagnosis and treatment regarding deaf and hard-of-hearing newborns, infants, and young children.

House Passes Bills to Repeal ACA Medical Device Tax and IPAB, Revise Medicare Advantage Policy

The House of Representatives has taken action on a number of bills to modify certain Affordable Care Act (ACA) provisions, revise Medicare Advantage policies, and make other health policy changes.

On June 23, 2015, the House voted to approve H.R. 1190, a bill to repeal the Independent Payment Advisory Board (IPAB), by a vote of 244 to 154. The IPAB was established by the ACA to submit Medicare spending plans to Congress if projected spending growth exceeds specified targets. Under the ACA, future IPAB’s proposals would go into effect automatically unless Congress enacts alternative legislation achieving required savings levels. IPAB members have not been appointed, and the spending trigger for IPAB recommendations has not yet been reached. The Administration has expressed its opposition to the bill, noting that while the IPAB “is not projected to be needed now or for a number of years given recent exceptionally slow growth in health care costs, it could serve a valuable role should rapid growth in health costs return.”

This action follows House approval last week of H.R. 160, a bill to repeal the ACA medical device tax, applicable to sales in calendar quarters beginning after the date of enactment. The Administration also opposes enactment of this legislation on grounds that it would increase the deficit. In other action, the House also approved the following health policy bills last week:

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MedPAC Report to Congress on Medicare and the Health Care Delivery System

The Medicare Payment Advisory Commission (MedPAC) has released its June 2015 Report to the Congress on Medicare and the Health Care Delivery System. The report includes a series of recommendations on Medicare hospital short-stay policy, in response in part to hospital concerns about related Medicare Recovery Audit Contractor (RAC) Program audits and appeals and the financial impact on beneficiaries associated with the growing use of outpatient observation day status. Specifically, MedPAC recommends that:

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CMS Proposes HCPCS Changes for Miscellaneous DME

CMS is proposing to revise the coding used to describe miscellaneous durable medical equipment (DME). The agency notes that HCPCS code E1399, “durable medical equipment, miscellaneous,” is currently used to bill for inexpensive DME, other covered DME, and replacement parts, which are subject to different payment rules. Likewise, HCPCS code K0108 describes a “wheelchair component or accessory, not otherwise specified” and is currently being used to bill for inexpensive DME, other covered DME, and replacement parts of wheelchairs. To promote more accurate payment of Medicare DME claims, CMS is proposing replace HCPCS codes E1399 and K0108 with the following HCPCS codes, effective January 1, 2016:

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Obama Administration Announces Record Medicare Strike Force “Takedown”

On June 18, 2015, HHS Secretary Sylvia M. Burwell and Attorney General Loretta E. Lynch announced that a nationwide Medicare Fraud Strike Force sweep resulted in health fraud charges against 243 individuals involving approximately $712 million in false billings – the largest number of defendants and dollar amount in Strike Force history. Charges in the cases include conspiracy to commit health care fraud, anti-kickback violations, money laundering and aggravated identity theft involving a wide range of medical treatments and services, such as home health care, physical and occupational therapy, durable medical equipment, prescription drugs, and psychotherapy.

CMS Independence at Home Demonstration Yields $25 Million in Savings in First Year

The CMS Independence at Home Demonstration saved more than $25 million during its first performance year while delivering high-quality patient care, according to a June 18, 2015 CMS announcement. The Independence at Home Demonstration is an ACA innovation model testing the effectiveness of delivering comprehensive primary care services at home to Medicare beneficiaries with multiple chronic conditions. The 17 participating practices saved an average of $3,070 per participating beneficiary in the first year while meeting designated quality goals, such as reducing hospital readmissions and emergency department visits and improving medication reconciliation. CMS is awarding $11.7 million to nine participating practices that met the demonstration’s incentive payment thresholds.

OIG Report Assesses Accuracy of CMS Financial Assistance Payments to ACA QHP Issuers

According to a recent OIG report, CMS’s internal controls did not effectively ensure the accuracy of almost $2.8 billion in advance cost-sharing reduction (CSR) payments made to ACA qualified health plan (QHP) issuers during the period of January through April 2014. As a result, the OIG recommended that CMS take a series of steps to correct is internal control deficiencies, including: providing CMS Office of the Actuary review and validation of QHP issuers’ actuarial support for index rates that CMS identifies as outliers; implementing computerized systems to maintain confirmed enrollee and payment information rather than relying on QHP issuers’ attestations in calculating payments; implementing a computerized system so state marketplaces can submit enrollee eligibility data; improving calculation of estimated advance CSR payments; and developing interim reconciliation procedures to address potentially inappropriate CSR payments. In response, CMS detailed how it is addressing or has already addressed the OIG’s recommendations.  For details, see the full report, “CMS’s Internal Controls Did Not Effectively Ensure the Accuracy of Aggregate Financial Assistance Payments Made to Qualified Health Plan Issuers Under the Affordable Care Act.” 

HRSA Issues 340B Drug Discount Program Civil Money Penalty Proposed Rule

On June 17, 2015, the Health Resources and Services Administration (HRSA) issued a proposed rule to implement civil money penalty (CMP) provisions added to section 340B of the Public Health Service Act as part of the Affordable Care Act (ACA). The proposed rule addresses three primary issues: (i) the calculation of the 340B “ceiling price” that may be charged to covered entities; (ii) the substantive standards applicable to CMPs; and (iii) the procedures applicable to the imposition of CMPs. Although the proposed rule is relatively limited in scope, and additional 340B program subregulatory guidance is anticipated from HRSA in the future the proposed rule contains several noteworthy elements that may warrant public comment, as discussed in our Reed Smith Client Alert. HRSA will accept public comments submitted on or before August 17, 2015.

Senate Finance Committee to Vote on Bipartisan Health Bills

On June 24, 2015, the Senate Finance Committee is scheduled to vote on the following bipartisan health policy bills, described by Chairman Hatch as “common sense legislation that will improve the healthcare system for patients and taxpayers alike”: 

  • S. 607  – The Rural Community Hospital Demonstration Extension Act of 2015;
  • S. 1349 – The Notice of Observation, Treatment and Implication for Care Eligibility (NOTICE) Act of 2015; 
  • S. 1461 – A One Year Extension of the Enforcement Instructions on Supervision Requirements of Outpatient Therapeutic Services in Critical Access Hospitals (CAHs) and Small Rural Hospitals; 
  • S. 313 – Prevent Interruptions in Physical Therapy Act of 2015;
  • S. 1253 – Patient Access to Disposable Medical Technology Act of 2015; 
  • S. 1347 – Electronic Health Fairness Act of 2015; 
  • S. 704 – The Community Based Independence for Seniors Act;
  • S. 1362 – The PACE Innovation Act of 2015; 
  • S. 861 – Preventing and Reducing Improper Medicare and Medicaid Expenditures Act of 2015;
  • S. 349 – Special Needs Trust Fairness Act of 2015;
  • S. 466 – Quality Care for Moms and Babies Act; and
  • S. 599 – Improving Access to Emergency Psychiatric Care Act of 2015.

** June 25 update:  The bills were approved by voice vote.

Energy & Commerce Committee Hearing on Administration’s Approval of Medicaid Demonstrations

On June 24, 2015, the House Energy and Commerce Health Subcommittee is holding a hearing to examine the Obama Administration’s approval of Medicaid demonstration projects. According to a background memo, the panel will focus on the following questions:

  • To what degree does CMS consistently apply its criteria for assessing Medicaid demonstration proposals? How were these criteria developed?
  • What are the types of State programs being funded with Federal Medicaid dollars under demonstrations? How do they advance Medicaid objectives?
  • What is the overall net effect of Medicaid demonstrations on Federal expenditures?
  • How does the uncertainty a State experiences with the waiver application and approval process hamper State innovations in benefit and plan designs?
  • How the demonstration process can be improved and reformed to be more transparent, predictable, and accountable to Medicaid patients, taxpayers, States, and other stakeholders?

House Panel to Review Bipartisan Bills to Improve Health Care for Infants/Children

On June 25, 2015, the Energy & Commerce Health Subcommittee will review three bipartisan bills that aim to improve health care for newborns, infants, and children. Specifically, members will discuss:

  • H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act, to reauthorize programs that promote bone marrow, adult stem cell, and cord blood donations, match donors and recipients, and link patients to care.
  • H.R. 1462, the Protecting Our Infants Act of 2015, to address the rise of prenatal opioid abuse and neonatal abstinence syndrome.
  • H.R. 1344, the Early Hearing Detection and Intervention Act of 2015, to reauthorize a program for early detection, diagnosis and treatment regarding deaf and hard-of-hearing newborns, infants, and young children.

New Postings on the Reed Smith Health Industry Washington Watch Blog

The Reed Smith Health Industry Washington Watch blog has been updated to report on recent health policy developments, including the following:

  • Regulatory Developments. CMS has issued a number of proposed and final rules, including regulations addressing the Medicare Shared Savings Program, Medicaid/CHIP managed care, health insurance summary of benefits and coverage and uniform glossary requirements, and CMS oversight of national accrediting organizations, among others. For details. HHS has released its spring 2015 regulatory agenda and is soliciting comments on the use of the health plan identifier in electronic health care transactions.
  • Other CMS Developments. CMS has released updated Medicare drug payment files, guidance on Medicaid/CHIP provider fingerprint-based criminal background checks, Medicare provider payment data, and guidance on beneficiary drug plan disenrollments by long term care facilities. CMS also has announced a new Cardiovascular Risk Reduction Model and policy changes impacting ventilators.
  • OIG & GAO Developments.  The OIG has issued a fraud alert on physician compensation arrangements, and the OIG released its latest semiannual report and an update to its work plan.  The GAO has issued reports on the Medicare physician payment ratesetting process and Medicaid fraud controls.
  • Legislative Developments. Congressional panels have approved a series of health policy bills, including repeal of ACA medical device tax and the Independent Payment Advisory Board, changes to Medicare Advantage requirements and Medicare long-term care hospital policy, Medicare appeals reforms, and 21st Century Cures legislation. Congress also has been considering changes to Medicare sequestration policy as part of pending trade legislation. Congressional committees have held hearings on various health policy issues.
  • Health Industry Events. Upcoming CMS events will focus on the National Partnership to Improve Dementia Care, hospice quality reporting, Hospital Compare ratings, ICD-10 implementation, Medicare clinical laboratory fee schedule payments, and hospital outpatient payments.
  • Changes Coming to Health Industry Washington Watch. Our blog will soon have a new look and provide our readers with enhanced access to content and optimal readability across the wide variety of devices. We will also have a revised email notification system to alert subscribers to new content. If you don’t already receive email alerts from our blog, we invite you to subscribe (see "Subscribe" box to the left). 

An Apple a Day Keeps the OIG Away: Practical Guidelines for Structuring Physician Compensation Arrangements to Avoid Kickback Allegations

On June 9, 2015, the Office of the Inspector General of the Department of Health and Human Services (OIG) released a fraud alert warning physicians to scrutinize carefully the conditions and terms of any medical director or other compensation arrangement they enter into with potential recipients of Federal health care program business. The risks associated with these arrangements under the anti-kickback statute are not new. However, the fraud alert signals  the OIG’s current focus on physicians, which reportedly has also included hiring additional attorneys to handle investigative and enforcement activity involving physicians. Moreover, the government now has access to unprecedented amounts of data regarding financial arrangements between physicians and drug and device manufacturers.

The fraud alert follows on the heels of a dozen recent settlements between the OIG and individual physicians who allegedly received kickbacks disguised as medical directorships and other office staff arrangements. In those settlements, the OIG determined the physicians played an integral role in the schemes and specifically alleged that the agreements:

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House Rejects Contentious Trade Bill that Was Vehicle for Extension of Medicare Sequestration

As previously reported, Congress has been considering financing Trade Adjustment Assistance (TAA) reauthorization legislation in part through future Medicare provider cuts. Specifically, as approved by the Senate on May 22, 2015, H.R. 1314 would apply a 0.25% across-the-board cut, known as sequestration, to Medicare provider and plan payments during the second half of FY 2024, when current sequestration authority is scheduled to expire. The Congressional Budget Office estimates that the sequestration extension would reduce Medicare payments by $700 million. Bipartisan House leaders subsequently crafted an alternative financing plan to replace the Medicare sequestration provision through a separate trade bill (Trade Preferences Extension Act of 2015), which was approved by the House on June 11, while the underlying TAA reauthorization bill was rejected by the House on June 12 during complicated parliamentary proceedings. The fate of the trade legislation is still unresolved, but for now the House has rejected Medicare sequestration extension as part of the trade package.

Administration Releases Final ACA Summary of Benefits and Coverage and Uniform Glossary Rule

On June 12, 2015, the Internal Revenue Service, Employee Benefits Security Administration, and Centers for Medicare & Medicaid Services released final regulations regarding the summary of benefits and coverage (SBC) and the uniform glossary requirements for group health plans and health insurance coverage in the group and individual markets under the Affordable Care Act. The regulations are intended to make it easier for consumers and employers to compare health insurance coverage options, while streamlining processes for issuers and group health plans. The official version of the regulation will be published in the Federal Register on June 16, 2015.  A fact sheet with additional details is available here.

CMS Adopts Changes to Medicare Shared Savings Program/ACO Regulations

On June 9, 2015, CMS published a final rule revising the regulations governing the Medicare Shared Savings Program, which is intended to encourage physicians, hospitals, and certain other types of providers and suppliers to form Accountable Care Organizations (ACOs) to provide cost-effective, coordinated care to Medicare beneficiaries. According to CMS, the Shared Savings Program now includes more than 400 ACOs serving more than 7 million Medicare fee for service (FFS) beneficiaries.

Under current rules, ACOs can participate in two tracks: Track 1, a “one-sided” risk model under which ACOs qualify to share in program savings but are not responsible for losses; and Track 2, a “two-sided” model under which ACOs may qualify to share in savings with an increased sharing rate, but also must take on risk for sharing in losses. The final rule revises the schedule for ACOs to transition to performance-based risk arrangements and makes other changes in program regulations to emphasize primary care services, reduces the administrative burden on participants, and improves program function and transparency. Specifically, the final rule, among other things:

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Ways and Means Committee Approves Health Policy Bills, Including Repeal of ACA Medical Device Tax & IPAB, and Medicare Advantage/LTCH Policy Changes

On June 2, 2015, the House Ways and Means Committee approved ten health policy bills, including legislation to repeal the ACA’s medical device tax and the Independent Payment Advisory Board (IPAB). Other measures would make a series of changes to Medicare Advantage (MA) requirements and Medicare long-term care hospital (LTCH) policy. Specifically, the Committee approved the following bills:

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