California Weighs Further Curtailment of Physician Self-Referrals

This post was written by Paul Pitts.

California State Senator Ed Hernandez, O.D., Chair of the Senate Health Committee, has introduced legislation that would close an exception in state law that currently permits physicians to provide advanced imaging, anatomic pathology, radiation therapy, and physical therapy within their office or the office of their group practice.  Under current law, the so-called “in-office exception” permits physicians to refer patients to their own practice for these services, which are typically ancillary to the primary service of the referring physician. If this legislation is adopted, California’s self-referral law would be more restrictive than the federal physician self-referral law, commonly referred to as the Stark law. Physicians in California residing outside of rural areas would be prohibited from referring any patients, regardless of source of payment, for advanced imaging, anatomic pathology, radiation therapy, and physical therapy performed by the referring physician’s own practice. The proposed legislation, Senate Bill 1215, is scheduled for an April 21, 2014 hearing before the Senate Business, Professions and Economic Development Committee. Comments on the legislation may be sent to the committee at State Capitol, Room 2053 Sacramento, California 95814.

MedPAC Issues 2014 Report to Congress on Medicare Payment Policy

The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on Medicare payment policy, including payment update recommendations for all the major Medicare fee-for-service payment (FFS) systems, limited recommendations related to the Medicare Advantage (MA) program, and a status report on the Medicare Part D program. The following are highlights of the recommendations for 2015 (many of which were recommended previously):

  • MedPAC recommends a 3.25% update to inpatient and outpatient hospital payment rates, concurrent with two changes that would institute site-neutral payments among settings. First, Congress should direct the HHS Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for long-term care hospital (LTCH) services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients.
  • Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory updates that includes a higher update for primary care services than for specialty care services. MedPAC also endorsed the collection of data to establish more accurate work and practice expense values; budget-neutral changes to improve data on which relative value unit weights are based and to redistribute payments from overpriced to underpriced services; and relative value unit reductions to achieve fee schedule savings.
  • Congress should eliminate the ambulatory surgical center (ASC) payment update for 2015, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
  • Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the prospective payment system for SNFs and begin a process of rebasing with an initial reduction of 4% and subsequent reductions until Medicare’s payments better align with providers’ costs. Moreover, Congress should direct the Secretary to reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization during Medicare-covered stays.
  • MedPAC reiterates previous recommendations to rebase home health rates, eliminate the market basket update, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use. In addition, Congress should direct the Secretary to reduce payments to home health agencies with relatively high risk-adjusted rates of hospital readmission.
  • Congress should eliminate the update to hospice rates for FY 2015 and adopt a series of previous MedPAC payment reform recommendations.
  • Congress should eliminate the 2015 updates for outpatient dialysis services and direct the Secretary to establish a quality measure that assesses poor outcomes related to anemia in the End-Stage Renal Disease Quality Incentive Program, revise the low-volume adjustment, and audit dialysis facilities’ cost reports.
  • Congress should eliminate the FY 2015 payment updates for inpatient rehabilitation facilities and LTCHs.
  • With regard to Medicare Advantage (MA), MedPAC recommends that Congress: (1) direct the Secretary to determine payments for employer-group MA plans in a manner more consistent with the determination of payments for comparable non-employer group plans; and (2) include the Medicare hospice benefit in the MA benefits package beginning 2016.

Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.

MACPAC Issues Annual Report to Congress on Medicaid, CHIP Policy

On March 14, 2014, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommended that Congress take steps to promote continuity in Medicaid coverage, such as by providing states with an option for 12-month continuous eligibility for adults and extending the current transitional medical assistance program. Among other things, the report also discusses at length the policy implications of Medicaid non-disproportionate share hospital supplemental payments, and calls for additional data collection related to these payments to promote transparency, support program integrity efforts, and facilitate assessments of Medicaid payment adequacy. In addition, the report includes a statistical supplement containing detailed Medicaid data.

D.C. District Court Rules Internal Compliance Investigations Are Not Privileged

On March 6, 2014, the U.S. District Court for the District of Columbia ruled that documents related to internal investigations of possible violations of corporate codes of conduct are not protected from disclosure under either the attorney-client privilege or attorney work product doctrine. The court instead concluded that the company’s investigations were conducted pursuant to “regulatory law and corporate policy,” rather than for the purpose of obtaining legal advice. As discussed in a recent Reed Smith client alert, the ruling serves as timely reminder for health care companies to review internal procedures relating to internal corporate compliance program or code of conduct investigations to maximize the likelihood that appropriate privileges will be honored. For details and analysis, read the full Reed Smith alert.

Advisory Panel Recommends Access Standards for Medical Diagnostic Equipment

The Access Board's Medical Diagnostic Equipment Accessibility Standards Advisory Committee has issued its final report on “Advancing Equal Access to Diagnostic Services: Recommendations on Standards for the Design of Medical Diagnostic Equipment for Adults with Disabilities.” The report includes detailed recommendations on standards for access to equipment such as examination tables and chairs, weight scales, and diagnostic equipment. Among other things, the report address transfer access, armrests, lift compatibility, and other features for accessibility. The standards, which are being developed as directed under the ACA, still must be approved by the full Access Board.

2013 MedPAC Data Book Released

The Medicare Payment Advisory Commission (MedPAC) has released its 2013 Data Book on Health Care Spending and the Medicare Program. The publication provides information on national health care and Medicare spending and utilization, Medicare and dual-eligible beneficiary demographics, Medicare quality, Medicare beneficiary and other payer liability, and related issues.

Hard Drives on Used Photocopiers Result in HIPAA Violations and $1.2M Settlement to the OCR

As covered on Reed Smith’s Life Sciences Legal Update blog, Affinity Health Plan, Inc. (Affinity) recently reached a $1.2 million settlement with the HHS Office for Civil Rights related to potential violations of the Health Information Portability and Accountability Act of 1996 (HIPAA). Affinity self-reported a breach after learning from a CBS Evening News investigative report that electronic protected health information (PHI) was stored on the hard drives of photocopiers formerly leased to Affinity. Since almost every business uses photocopiers, Affinity serves as a reminder that all covered entities and business associates should implement policies and procedures to ensure that all hard drives are scrubbed of PHI before leaving their possession.  For more information, please see the full post.

China Life Sciences Regulatory Crackdown Spreads to Medical Device Sector

As reported on Reed Smith's Life Sciences Legal Update blog, the local Beijing office of the Ministry of Health (MOH) of the People's Republic of China recently announced that it has started a three-month review of the use of high-value medical consumables and large-scale medical equipment in Beijing. Noting that prior inspections of hospitals had found continuing problems with the misuse and overuse of medical devices to increase profits, the investigation is intended to strengthen hospitals’ management of the use of medical devices and to regulate the use of high value medical consumables.  The Beijing MOH will also develop a database that will track the price and model of devices implanted in each patient, require hospitals to improve their purchasing management systems, and conduct periodic inspections of hospitals’ purchasing and management of medical consumables.  For more information about this recent investigation and increased life sciences regulatory enforcement in China, see the full post.

MedPAC Report to Congress on Delivery Reform

The Medicare Payment Advisory Commission (MedPAC) has released its June 2013 Report to the Congress on Medicare and the Health Care Delivery System. The report examines a number of potential ways to reform Medicare, including the following: 

  • Redesigning the Medicare benefit. MedPAC continues to discuss the concept of competitively determined plan contributions (CPC), under which Medicare beneficiaries could receive care through either a private plan or traditional fee-for-service, but the premium paid by the beneficiary could vary depending on the coverage option chosen. The federal government’s payment for a beneficiary’s care would be determined through a competitive process comparing the costs of available options for coverage. The report identifies key issues to be addressed if the Congress wishes to pursue a policy option like CPC, such as how benefits could be standardized for comparability, how to calculate the Medicare contribution, and the structure of subsidies for low-income beneficiaries.
  • Reducing Medicare payment differences across sites of care. MedPAC notes that Medicare payment rates often vary for similar services provided to similar patients, simply because they are provided in different sites of care (e.g., physician’s office vs. hospital outpatient department). The report identifies services that may be eligible for equalizing or narrowing payment differences across settings.
  • Bundling post-acute care services. MedPAC explores the implications for quality and program spending for different design features of post-acute care payment bundles, such as the services included, the length of time covered by the bundle, and the method of payment.
  • Reducing hospital readmissions. MedPAC suggests further refinements to improve incentives for hospitals and generate program savings through reduced readmissions, including proposals to address the effect of random variation on hospitals with small numbers of cases, the inability of the industry to reduce average penalties with improved performance, the correlation of patient income and readmission rates, and the inverse relationship between readmissions and mortality for cardiac patients.
  • Payments for hospice services. MedPAC presents information on the prevalence of long-stay patients and the use of hospice services among nursing home patients to inform future hospice payment reforms. MedPAC also provides additional information supporting its March 2009 recommendations to revise the hospice payment system.
  • Improving care for dual-eligible beneficiaries. MedPAC discusses the potential role that federally qualified health centers and community health centers can play in coordinating care for Medicare-Medicaid dual-eligible beneficiaries.

In addition to discussing these delivery reforms, the MedPAC report addresses Congressionally-mandated reviews of the following topics: Medicare ambulance add-on payments; geographic adjustment of fee schedule payments for the work effort of physicians and other health professionals; and Medicare payment for outpatient therapy services.

MACPAC Report Addresses Medicaid and CHIP Policies

The Medicaid and CHIP Payment and Access Commission (MACPAC) has released its June 2013 Report to the Congress on Medicaid and CHIP, covering issues such as Medicaid and CHIP eligibility, coverage for maternity services, increased Medicaid payment for primary care physicians services, access to care for persons with disabilities, Medicaid and CHIP data for use in oversight and program monitoring, and program integrity efforts. This report also includes the latest MACStats data supplement.

Obama Administration's Proposed FY 2014 Budget Includes $401 Billion in Health Program Savings

Today, the Obama Administration released its proposed federal budget for fiscal year 2014. As widely reported, the budget incorporates an offer the President made to Congress in December 2012 to achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, including $401 billion in health savings (the Administration observes that this level of cuts would “provide more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration”).

Virtually all provider types – and drug manufacturers – would be impacted by the budget provisions, if adopted as proposed. The budget proposal is certainly subject to change during the legislative process, particularly as the House and Senate leadership pursue alternative budget frameworks, and indeed, gridlock could prevent significant action on entitlement reform this year. Nevertheless, the proposals bear careful monitoring because they could eventually be included in any long-elusive “grand bargain” to reform the Medicare program and reduce the federal debt.

Highlights of the Administration’s Medicare and Medicaid proposals include the following:

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MedPAC's March 2013 Report to Congress

MedPAC has released its annual report to Congress on Medicare Payment Policy, including payment update recommendations for all the major Medicare FFS payment systems and limited Medicare Advantage (MA) recommendations. The report also includes data on the status of the MA and Medicare Part D programs, including information about enrollment, plan options, and beneficiary cost-sharing. Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies. Major recommendations include the following (many of which were included in previous reports):

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MACPAC 2013 Report to Congress on Medicaid/CHIP

The Medicaid and CHIP Payment and Access Commission (MACPAC) has released its “March 2013 Report to the Congress on Medicaid and CHIP,” including both policy recommendations and data updates. The policy recommendations address implementation of ACA provisions designed to expand health insurance coverage. First, MACPAC recommends that Congress create a statutory option for states to implement 12-month continuous eligibility for children enrolled in CHIP and adults enrolled in Medicaid, in conformance with policies in effect for children in Medicaid (the report notes that the option will otherwise be removed under new income-counting eligibility standards). Second, MACPAC recommends that Congress permanently fund Transitional Medical Assistance (TMA), while allowing states to opt out of the program if they expand to the new adult group added by the ACA. The report also includes a discussion of various policy issues involving the dually eligible Medicare and Medicaid population, and it provides an update to its MACStats data supplement.

Recent Reed Smith Analyses of Sunshine Act Rule, ACA Qualified Health Plans, HITECH Final Rule

In case you missed them, Reed Smith attorneys have recently prepared the following Client Alerts on major regulatory issues:

OCR Announces First HIPAA Breach Settlement Involving Less than 500 Individuals

The HHS Office for Civil Rights recently announced its first settlement and corrective action plan following a HIPAA breach affecting fewer than 500 individuals. Additional information about the settlement is available on Reed Smith’s Life Sciences Legal Update blog.

Massachusetts Issues Final Drug/Device "Sunshine" Rules

On November 21, 2012, the Massachusetts Public Health Council finalized amendments to the State’s Marketing Code of Conduct, which restricts certain payments by pharmaceutical and medical device manufacturers to Massachusetts health care practitioners and imposes other disclosure requirements regarding such payments. The rules, which are effective December 7, 2012, are summarized on the Reed Smith’s Life Sciences Legal Update blog.

Affordable Care Act and the Post-Election Implications for Radiology

On the Reed Smith Life Sciences Legal Update blog, Health Care team members Thomas Greeson and Paul Pitts have written about post-election implications for the radiology industry.  The report describes their assessments of the short and mid-term time horizon for a number of health policy developments such as integration (e.g., accountable care organizations), government enforcement, antitrust, and self-referrals.  For additional details, see our full post.

Massachusetts Approves Emergency Amendments on State "Sunshine Act" Drug/Device Manufacturer Reporting Requirements

On the Reed Smith Life Sciences Legal Update blog, there is a recent post regarding the Massachusetts Public Health Council’s approval of emergency amendments to the State’s Marketing Code of Conduct regulations. The underlying regulations restrict certain gifts and payments by pharmaceutical and medical device manufacturers to Massachusetts health care practitioners (HCPs) and require disclosure of payments and transfers of value to HCPs. The emergency amendments, which follow state legislative amendments, now allow manufacturers to provide modest meals and refreshments to HCPs at non-CME educational presentations and modify applicable reporting requirements. The amendments also address the interaction of state requirements and federal law, including the ACA’s Physician Payment Sunshine Act provisions. For additional details, see our full post.

Vermont Offers Limited Amnesty to Device and Biologic Manufacturers who Failed to Report Payments to Health Care Providers

This post was written by Katie C. Pawlitz.

Today the Office of the Vermont Attorney General announced that the Vermont Attorney General is offering limited amnesty to medical device and biologic manufacturers who have failed to report pursuant to Vermont’s Prescribed Products Gift Ban and Disclosure Law. The offer will remain open until October 1, 2012. In order to take advantage of the offer, manufacturers must email with the following information: (1) manufacturer name; (2) reporting periods not reported; and (3) name, address, email, and phone number of the representative with whom Vermont should communicate.

The reporting obligation under the Vermont Law became effective July 1, 2009 and, to date, manufacturers have been required to report to Vermont with respect to three reporting periods. The amnesty offer is limited to financial penalties authorized under the Law and does not apply to back-payment of registration fees or penalties for violations of other aspects of the Law, such as gift ban violations. The Office of the Attorney General has indicated that it does not anticipate seeking full disclosure for unreported activity, but that it does anticipate requiring at a later date, disclosure of aggregate information regarding the activity.

Congressional Hearings

The Senate Health, Education, Labor and Pensions Committee held a field hearing in Connecticut on “Lyme Disease: A Comprehensive Approach to an Evolving Threat.”  On September 11, 2012, the House Ways and Means Oversight Subcommittee is holding a hearing on the Internal Revenue Service’s implementation of various ACA tax provisions. Also on September 11, the House Small Business Healthcare Subcommittee is holding a hearing on "Medicare's Durable Medical Equipment Competitive Bidding Program: How Are Small Suppliers Faring?"

Older Entries

August 31, 2012 — U.S. District Court Decides Whistleblower Cannot Rely on Stolen Patient Records

August 20, 2012 — Fifth Circuit Upholds Ability of Government Employee Fraud Investigators to Bring Qui Tam False Claims Actions

July 31, 2012 — PCORI Seeks Comments on Draft Outcomes Research Methodology Standards

July 31, 2012 — Justice Department Announces ADA "Barrier-free Health Care Initiative"

July 27, 2012 — MedPAC Issues 2012 Data Book

July 17, 2012 — Massachusetts Loosens Drug/Device Manufacturer Gift Ban and Disclosure Law, Allows Certain Drug Coupons and Vouchers

June 27, 2012 — MACPAC Report to Congress

June 18, 2012 — MedPAC Examines Medicare Benefit Redesign, Dual Eligible Policy Options

May 31, 2012 — PCORI Announces ACA Comparative Effectiveness Funding

May 23, 2012 — Hospital Readmissions Reduction Program May Impact Post-Acute Providers

April 23, 2012 — OSHA Announces National Emphasis Program for Nursing and Residential Care Facilities

April 2, 2012 — Supreme Court Hears Oral Arguments on ACA Challenges

April 2, 2012 — MedPAC Issues March 2012 Medicare Recommendations

April 2, 2012 — MACPAC Report to Congress on Medicaid, CHIP Policy

January 25, 2012 — PCORI Issues Draft National Priorities for Research and Research Agenda

January 25, 2012 — CBO Examines Raising Medicare Eligibility Age

January 5, 2012 — Justice Department FCA Recoveries Top $3 Billion in FY 2011

November 30, 2011 — Supreme Court to Review Constitutionality of the ACA

November 7, 2011 — IRS Guidance on ACA Branded Prescription Drug Fee for 2012

October 14, 2011 — IOM Issues ACA Essential Health Benefits Recommendations

October 14, 2011 — MedPAC Endorses Medicare SGR Proposal, With Offsetting Medicare Cuts

October 14, 2011 — Updated Resources for DMEPOS Competitive Bidding

September 30, 2011 — Obama Administration Seeks Supreme Court Review of the ACA

September 30, 2011 — MedPAC Offers Medicare SGR Proposal, With Offsetting Medicare Cuts

August 16, 2011 — PCORI Seeks Comments on Topics for Pilot Project Grants

July 29, 2011 — PCORI Proposes Definition of Patient-Centered Outcomes Research

July 29, 2011 — IOM Issues Recommendations for Women's Clinical Preventive Services

July 29, 2011 — MedPAC 2011 Data Book Released

June 27, 2011 — MACPAC Report on Medicaid Managed Care

June 23, 2011 — MedPAC Recommends Changes to Medicare Ancillary Services Policies

June 14, 2011 — IRS Invites Comments on Insurance Fee to Finance PCORI Trust Fund

May 31, 2011 — PCORI Executive Director Appointed

May 31, 2011 — CMS Guidance to States on the Medicaid EHR Incentive Program

May 31, 2011 — IRS Extends to June 10 the Deadline for Submitting Error Reports on Branded Prescription Drug Sales

May 13, 2011 — IRS Notice on ACA Employer Shared Responsibility Payments

April 29, 2011 — BLS Report on Employer-Sponsored Health Insurance Coverage

April 29, 2011 — MedPAC Issues Recommendations on the Use of Diagnostic Services

March 29, 2011 — MedPAC Report to Congress on 2012 Payment Recommendations

March 29, 2011 — First MACPAC Report To Congress on Medicaid Issues

March 29, 2011 — CBO Presents Budget Options, Including Potential Health Policy Savings

March 29, 2011 — PCORI Meetings Underway

March 29, 2011 — IOM Issues Comparative Effectiveness Standards Reports

February 17, 2011 — FTC Issues FAQs on Medical Identity Theft

February 17, 2011 — IOM Work on Development of ACA Essential Health Benefits Package

January 28, 2011 — President Obama Issues Regulatory Reform Strategy

January 13, 2011 — MedPAC Reports on Regional Variation in Medicare Service Use

January 12, 2011 — President Signs Alzheimer's Legislation into Law

December 28, 2010 — President Signs into Law Physician Fee Schedule Fix/Extenders Bill, Red Flag Rule Relief, Health Policy Bills

November 29, 2010 — DOJ Announces Health Fraud Recovery Amounts for FY 2010

November 15, 2010 — Upcoming Congressional Hearings, Markups

September 29, 2010 — National Supplier Clearinghouse (NSC) Updates DMEPOS Supplier Standards

September 17, 2010 — MedPAC Policy Meeting

July 28, 2010 — MedPAC Data Book

July 28, 2010 — Guidance on Medical Care Services for People with Mobility Disabilities

July 12, 2010 — DEA Notice and Solicitation of Information on Dispensing of Controlled Substances to LTC Facility Residents

June 17, 2010 — MedPAC Report On Aligning Incentives In Medicare

June 2, 2010 — FTC Again Delays Red Flags Rule Enforcement

May 27, 2010 — DOJ Health Fraud Activities, Focus on Pharmaceutical Companies

May 13, 2010 — Occupational Exposure to Infectious Diseases

March 30, 2010 — MedPAC Part D Data

March 15, 2010 — MedPAC Issues 2011 Medicare Payment Recommendations

March 15, 2010 — White House Anti-Fraud Initiative

January 27, 2010 — MedPAC Votes on 2011 Medicare Provider Update Recommendations

January 27, 2010 — FTC Report on Drug Company "Pay-for-Delay" Agreements

December 4, 2009 — MedPAC Report on Regional Variation in Service Use

December 4, 2009 — CBO Report on Pharmaceutical Manufacturer Spending on Prescription Drug Promotion

November 11, 2009 — Red Flag Rule Enforcement Extended Until June 1, 2010

October 13, 2009 — MedPAC Meeting

August 17, 2009 — FTC Further Postpones Identity Theft Red Flags Rule

August 17, 2009 — AHRQ Comparative Effectiveness Developments

July 28, 2009 — MedPAC Data Book

July 28, 2009 — Hip & Knee Replacement Registry Solicitation

July 7, 2009 — Comparative Effectiveness Research Priorities

July 7, 2009 — FTC Report on "Authorized Generic" Drugs

June 16, 2009 — MedPAC Report on Medicare Payment Policy

June 10, 2009 — FTC Issues Report on Follow-On Biological Drug Competition

June 8, 2009 — Comparative Effectiveness Review Methods

June 1, 2009 — NSC Supplier News on Accreditation, Surety Bonds, Enrollment

May 27, 2009 — OPPS for TRICARE Program

May 27, 2009 — Medicare Trustees' Report

May 7, 2009 — IOM Report on Conflicts of Interest in Medicine

May 1, 2009 — Identity Theft Red Flag Rule Further Postponed

April 30, 2009 — HHS Reporting of ARRA Lobbying Contacts

April 24, 2009 — White House Executive Order Creating Health Reform Office

April 23, 2009 — NIH High-Impact Research Funding

April 22, 2009 — HHS Announces Free Software to Connect Health IT Systems to the NHIN

April 22, 2009 — Solicitation for Nominations for Members of the U.S. Preventive Services Task Force

April 6, 2009 — FTC Identity Fraud Red Flag Guidance

April 6, 2009 — HIT Policy Committee Members Named

March 6, 2009 — Federal Regulatory Review

March 6, 2009 — IRS Nonprofit Hospital Study

March 5, 2009 — Obama Administration Revisions to Federal Procurement Policy

February 27, 2009 — MedPAC Report to Congress -- Medicare Payment/Transparency Provisions

February 11, 2009 — TRICARE Hospital Outpatient Services Rule Delayed

December 22, 2008 — IRS Rule on Withholding of Taxes from Medicare & Other Government Payments

December 22, 2008 — APC Panel Nomination Solicitation

December 19, 2008 — Congressional Budget Office Reports on Health Care Budget Options, Insurance Reform

December 8, 2008 — TRICARE Hospital Outpatient Services Rule

November 25, 2008 — DOJ Health Fraud Statistics

October 28, 2008 — MedPAC Member Solicitation