Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

On January 23, 2011, the ACA's Patient-Centered Outcomes Research Institute (PCORI) released its first draft National Priorities for Research and Research Agenda, which will be used to guide funding announcements for comparative clinical effectiveness research. The proposed national priorities for research are as follows:

Comparative Assessments of Prevention, Diagnosis, and Treatment Options -- determining which options work best for distinct populations with specific health problems.

• Improving Healthcare Systems – focusing on ways to improve healthcare services, such as the coordination of care for patients with multiple chronic conditions.
• Communication and Dissemination – examining ways to provide information to patients so that they can make informed healthcare decisions with clinicians.
• Addressing Disparities – assuring that research addresses the healthcare needs of all patient populations since treatments may not work equally well for everyone.
• Accelerating Patient-Centered and Methodological Research – including patients and caregivers in the design of research that is quick, safe, and efficient.

Note that PCORI is not specifying or prioritizing any particular condition or disease for research, although it may do so in the future. Public comments on the priorities and agenda will be accepted until March 15, 2012, or at various public forums planned during the comment period, including a "National Patient and Stakeholder Dialogue" in Washington D.C. scheduled on February 27. After the comment period closes, PCORI will report on the public feedback and the PCORI Board of Governors will vote on the priorities and agenda. PCORI expects to issue its first funding announcements in May.

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The Congressional Budget Office (CBO) has issued a report on options for raising the Medicare and Social Security eligibility ages. CBO estimates that gradually raising the Medicare eligibility age to 67 would reduce federal Medicare outlays, net of premiums and other offsetting receipts, by $148 billion from 2012 through 2021, although Medicaid and health insurance subsidy spending could rise somewhat.

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The Department of Justice (DOJ) has announced more than $3 billion in False Claims Act (FCA) recoveries in FY 2011, including $2.4 billion in recoveries involving federal health care program fraud. The pharmaceutical industry was the source of the largest recoveries -- the DOJ reports almost $2.2 billion in civil claims against the pharmaceutical industry in FY 2011. 

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The Supreme Court has granted review of the decision of the Court of Appeals for the 11th Circuit striking down the ACA’s individual health insurance mandate as unconstitutional. The Supreme Court will consider whether the mandate is unconstitutional and, if so, if it may be severed from the remainder of the law, along with whether the challenge to the mandate is premature under the Anti-Injunction Act. In addition, the Court will consider whether the ACA is constitutional because “it coerces States into accepting onerous conditions that it could not impose directly by threatening to withhold all federal funding” under Medicaid. There has been a split in the holdings among the various federal courts of appeals that have opined on the constitutionality of the individual mandate. The Supreme Court has not yet scheduled arguments on the ACA cases, but the decision is expected to be issued in the midst of next year’s Presidential election campaign.

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This post was written by Ruth Holzman and Joe Metro.

The IRS has issued updated guidance to drug manufacturers on the Affordable Care Act’s annual fee imposed on covered entities engaged in the business of manufacturing or importing branded prescription drugs. The guidance addresses submission of required information, IRS notification of covered entities of their preliminary fee calculation; submission of error reports for the dispute resolution process, and notification of final fee calculations. Among other things, the guidance provides that:

• Each covered entity that elects to submit a completed Form 8947, “Report of Branded Prescription Drug Information,” for the fee year 2012 (reporting sales for the sales year 2010) must do so by December 15, 2011.
• IRS will mail each covered entity a paper notice of its 2012 preliminary fee calculation by April 2, 2012. This mailing will include an NDC attachment that lists the covered entity's NDCs and the sales data reported to the IRS by each governmental program.
• A covered entity may request a CD-ROM with the NDC attachment in an Excel spreadsheet. The request must be made by March 1, 2012 by telephone or by e-mail.
• If a covered entity wishes to submit an error report regarding its preliminary fee calculation it must do so by May 16, 2012. To file an error report, the covered entity must use the template on a CD-ROM that was mailed to it with its preliminary fee calculation.
• IRS will notify each covered entity of its final fee calculation for 2012 by August 31, 2012.
• The covered entity must pay this fee by September 30, 2012.

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Under the ACA, certain insurance plans, including those participating in new purchasing exchanges, must cover, at a minimum, a package of items and services that the Secretary has defined as essential. The Institute of Medicine (IOM) has released recommendations to HHS on a process to define what benefits should be included in the “essential health benefits” (EHB) package under the ACA. Note that the IOM has not weighed in on specific benefits to be covered in the EHB, but rather it proposes a set of criteria and methods that should be used in deciding what benefits are most important for coverage. According to the report, the IOM “committee saw its primary task as finding the right balance between making a breadth of coverage available for individuals at a cost they could afford.” For instance, criteria to guide content of the aggregate EHB package include: ensuring that the package is affordable for consumers, employers, and taxpayers; maximizing the number of people with insurance coverage; addressing the needs of the most vulnerable patients and populations; promoting the right care to the right patient in the right setting at the right time; focusing on high value services; addressing the medical concerns of greatest importance to enrollees as identified through a public deliberative process; and protecting against the greatest financial risks due to catastrophic events or illnesses. With regard to specific components of the EHB package, the individual service, device, drug generally must: be safe, with expected benefits greater than expected harms; be medically effective and supported by a sufficient evidence base or credible standard of care; demonstrate meaningful improvement in outcomes over current effective services/treatments; be a medical service; and be cost effective. The IOM notes that failure to meet any of these criteria should result in exclusion or significant limits on coverage, and inclusion does not mean that an item or service is appropriate for every person. The IOM also sets forth criteria for defining updating the EHB package, focusing on the use of a transparent, participatory, equitable, and consistent process that is sensitive to the value of services, responsive to new information, cognizant of budget constraints, encouraging to innovation, and data-driven. 

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On October 6, 2011, the Medicare Payment Advisory Commission (MedPAC) voted to recommend that Congress repeal and replace the statutory sustainable growth rate (SGR) formula for updating the Medicare physician fee schedule (MPFS). Without legislative action, CMS estimates that the SGR formula would result in an almost 30% MPFS cut in 2012. As discussed in a previous blog posting, the controversial MedPAC plan – which would require Congressional approval -- would freeze current Medicare MPFS rates for primary care services for 10 years, while other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze. MedPAC offered a list of options for Congress to consider if it decides to offset SGR repeal costs (estimated at about $200 billion over 10 years) within the Medicare program. In addition to the SGR proposal, MedPAC endorsed budget-neutral changes to improve data on which MPFS relative value unit (RVU) weights are based and to redistribute payments to underpriced services. MedPAC also recommended that CMS increase the shared savings opportunity for physicians and health professionals who join or lead “two-sided” risk ACOs (where providers can receive bonuses or financial penalties based on performance).

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The Competitive Bidding Implementation Contractor (CBIC) has released additional resources for suppliers interested in the DMEPOS competitive bidding program. The CBIC website now has an updated interactive U.S. map that displays the Round 1 Rebid, Round 2, and national mail-order competition competitive bidding areas (CBAs). The CBIC website also features a ZIP code look-up tool with the ZIP codes for Round 2 and the national mail-order competition. In addition, to assist suppliers with complying with the bidding requirement to have all required licenses on file with the National Supplier Clearinghouse (NSC), the NSC has updated its DMEPOS licensure database to include licensure requirements for each state and territory, along with contact information for state licensing agencies. Suppliers can verify licenses have on file with the NSC via the internet-based Provider Enrollment, Chain, and Ownership System (PECOS).

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On September 28, 2011, the U.S. Department of Justice (DOJ) filed a cert petition requesting Supreme Court review of the 2-1 decision of the Court of Appeals for the 11th Circuit striking down the ACA as unconstitutional. This action potentially accelerates Supreme Court review of the constitutionality of requiring Americans who can afford it to maintain basic health insurance coverage, a provision that has generated conflicting opinions by various courts. The legal uncertainties associated with this mandate in turn has complicated implementation efforts at the state level. The DOJ has compiled information related to legal challenges to the ACA.   
 

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At a recent meeting, the Medicare Payment Advisory Commission (MedPAC) discussed a recommendation to repeal and replace the statutory sustainable growth rate (SGR) formula for updating the Medicare physician fee schedule (MPFS). In recent years, the SGR formula has produced steep cuts in the MPFS update, which Congress has repeatedly blocked through legislation, For 2012, CMS estimates that the SGR formula would result in an almost 30% MPFS cut in the absence of Congressional action. MedPAC is considering an SGR reform proposal that would repeal the SGR and replace it with 10-years of statutory fee schedule updates. The plan would freeze current Medicare payment levels for primary care services, and all other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze.  MedPAC also has released a list of potential offsetting Medicare cuts that would raise $235 billion over 10 years to finance the reforms.  The proposals include, among others: reduced Medicare payments for many Medicare provider types and services; expanded DMEPOS competitive bidding; various reductions in payments to Medicare Advantage plans; prior authorization for certain imaging services; changes to certain Part D cost sharing; prepayment review of power wheelchairs; drug manufacturer rebates for dual eligibles; bundled payments for hospitals and physicians; payment of hospital outpatient evaluation and management visits at MPFS rates; establishment of least costly alternative authority; expansion of readmissions policies for additional provider types, and validation of physician orders for high cost services.

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The Patient-Centered Outcomes Research Institute (PCORI), which was established by the ACA, is seeking public feedback on eight initial topics for a series of “Tier 1” pilot projects. The pilot projects are intended to help PCORI set national priorities for research, support the development of novel methods or collection of preliminary data that can advance patient-centered outcomes research (PCOR), and inform the development of a future PCORI research agenda. The eight initial topics for the PCORI pilot projects include developing/identifying, testing, and/or evaluating:

1. Methods to inform the process of establishing and updating national priorities for PCOR.
2. Methods for bringing together patients, caregivers, clinicians and non-traditional partners in all stages of a multi-stakeholder research process, from the generation and prioritization of research questions to the conduct and analysis of a study to dissemination of study results.
3. Approaches for translating research findings into changes in health care practices.
4. Approaches that could systematically, without bias, identify gaps in evidence that most affect low-income populations; minorities; children; elderly; women; people with disabilities, multiple medical conditions, rare conditions, and other vulnerable populations.
5. Predictive outcomes instruments of interest to patients.
6. Methods for researching behaviors, lifestyles, and choices within patient control that may influence outcomes.
7. Methods for studying the patient-clinician interaction in situations where multiple options for prevention, diagnosis, or treatment exist.
8. Methods to assess strategies that respect patient autonomy and promote informed decision-making, incorporating the best healthcare knowledge into the application of care.

Note that this request is for input on the pilot project topics, not a request for applications (RFA) for pilot project grants; PCORI expects to issue an RFA for pilot project grants in late September. Comments on the topics will be accepted until August 31, 2011. 

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The Patient-Centered Outcomes Research Institute (PCORI), established by the ACA, is seeking public comment on its working definition of "Patient-Centered Outcomes Research" (PCOR) to help focus the panel's comparative effectiveness efforts. Under the working definition, PCOR “helps people make informed health care decisions and allows their voice to be heard in assessing the value of health care options.” PCOR answers the following patient-focused questions: Given my personal characteristics, conditions and preferences, what should I expect will happen to me? What are my options and what are the benefits and harms of those options? What can I do to improve the outcomes that are most important to me? How can the health care system improve my chances of achieving the outcomes I prefer?” Under the working definition, in order to answer these questions, PCOR: (1) assesses the benefits and harms of preventive, diagnostic, therapeutic, or health delivery system interventions to inform decision making, highlighting comparisons and outcomes that matter to people; (2) is inclusive of an individual's preferences, autonomy and needs, focusing on outcomes that people notice and care about such as survival, function, symptoms, and health-related quality of life; (3) incorporates a wide variety of settings and diversity of participants to address individual differences and barriers to implementation and dissemination; and (4) investigates (or may investigate) optimizing outcomes while addressing burden to individuals, resources, and other stakeholder perspectives. Comments will be accepted until September 2, 2011.

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The Institute of Medicine recommended to the HHS Secretary that eight additional preventive services for women be added to the preventive services that health plans cover at no cost to the patient under the ACA. The eight services include:  screening for gestational diabetes; human papillomavirus (HPV) testing as part of cervical cancer screening for women over 30; counseling on sexually-transmitted infections; counseling and screening for HIV; contraceptive methods and counseling to prevent unintended pregnancies; lactation counseling and equipment to promote breast-feeding; screening and counseling to detect and prevent interpersonal and domestic violence; and yearly well-woman preventive care visits to obtain recommended preventive services.

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MedPAC has released its 2011 Data Book on “Healthcare Spending and the Medicare Program.” The Data Book provides information on national health care and Medicare spending, Medicare beneficiary demographics, Medicare quality and access, and Medicare beneficiary and other payer liability. It also includes data on various provider types, such as data on Medicare spending, beneficiary utilization of the service, number of providers, volume, length of stay, and margins.

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The Medicaid and CHIP Payment and Access Commission (MACPAC) has released its June 2011 “Report to the Congress: The Evolution of Managed Care in Medicaid.”  The report describes what is known about the current use of managed care in Medicaid, including information on the populations enrolled; Medicaid managed care plan arrangements; payment policy; access and quality; and program accountability, integrity, and data. The report also includes updated “MACStats,” featuring national and state-level information on Medicaid enrollees, spending, and the use of managed care.

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The Medicare Payment Advisory Commission (MedPAC) has released its June 2011 "Report to the Congress: Medicare and the Health Care Delivery System." Most notably, the report includes a number of recommendations that have generated much controversy to address the growing use of ancillary services, particularly non-hospital diagnostic imaging services. According to the report, MedPAC seeks to “improve payment accuracy to reduce providers’ financial incentives to order more ancillary services, while strengthening clinical support tools to improve appropriate use of these services.” Recommendations in this area include the following: (1) the Secretary should accelerate and expand efforts to package discrete services in the physician fee schedule into larger units for payment; (2) Congress should direct the Secretary to apply a multiple procedure payment reduction to the professional component of diagnostic imaging services provided by the same practitioner in the same session; (3) Congress should direct the Secretary to reduce the physician work component of imaging and other diagnostic tests that are ordered and performed by the same practitioner; and (4) Congress should direct the Secretary to establish a prior authorization program for practitioners who order substantially more advanced diagnostic imaging services than their peers. In addition to the ancillary services recommendations, the report includes chapters examining: the Medicare physician fee schedule Sustainable Growth Rate formula; Medicare's fee-for-service benefit design; enhancing Medicare's technical assistance to and oversight of providers; coordinating care for dual-eligible beneficiaries; federally-qualified health centers; and variation in private-sector payment rates. Note that while MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.  

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The Internal Revenue Service (IRS) is seeking comments on the funding mechanism for the ACA’s Patient-Centered Outcomes Research Trust Fund. The Trust Fund will finance the work of the Patient-Centered Outcomes Research Institute (PCORI), which is charged with conducting comparative clinical effectiveness research. The Trust Fund is to be financed in part by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans, effective for policy and plan years ending after September 30, 2012. The IRS has issued Notice 2011-35, which requests comments regarding how these fees should be calculated and paid, including several possible rules and safe harbors. Comments on the notice will be accepted until September 6, 2011. 

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On May 16, 2011, the Patient-Centered Outcomes Research Institute (PCORI) -- created by the ACA to spearhead federal comparative effectiveness research -- announced the selection of Joe V. Selby, M.D., M.P.H., as the first PCORI executive director.   Dr. Selby is a family physician, clinical epidemiologist and health services researcher.  

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CMS has provided guidance to state Medicaid agencies on state use of administrative funds to support health information exchange as part of the Medicaid EHR Incentive Program.

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This post was originally written for the Life Sciences Legal Update blog by Ruth N. Holzman, Angelo Ciavarella, Joseph W. Metro and Vicky G. Gormanly.

On Friday, May 27, 2011, the Internal Revenue Service ("IRS") issued Notice 2011-46 (the "New Notice"), which extended to June 10, 2011 the deadline to submit error reports in accordance with the dispute resolution process established with respect to the preliminary fee calculation of the 2011 fee imposed on certain manufacturers and importers of branded prescription drugs.

To read the full blog post, please click here.

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Under the ACA, certain employers must offer health coverage to their full-time employees or make a “shared responsibility” payment, starting in 2014. The ACA exempts small firms with fewer than 50 full-time employees from this requirement. The IRS has issued Notice 2011-36, which provides information on the ACA shared responsibility payment provision and requests comments on approaches for determining who is a full-time employee for purposes of this requirement. Comments will be accepted until June 17, 2011.

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The Bureau of Labor Statistics (BLS) has released new data on employer-sponsored health insurance coverage, as required by the ACA. Specifically, the report examines the extent of employer coverage of the following 12 medical benefits (these benefits were not included in a previous compensation survey): emergency room visits; ambulance services; diabetes care management; kidney dialysis; physical therapy; DME; prosthetics; maternity care; infertility treatment; sterilization; gynecological exams and services; and organ and tissue transplantation.

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This post was written by Paul Pitts.

On April 7, 2011, the Medicare Payment Advisory Commission (MedPAC) approved new recommendations to Congress regarding Medicare payment for imaging and other diagnostic tests. The recommendations reflect a shift in MedPAC’s policies from advocating for tighter controls on physician in-office services to addressing what MedPAC views as inaccuracies in payment and inappropriate use of diagnostic imaging. MedPAC approved the following recommendations: (1) the Secretary should accelerate and expand efforts to package discrete services in the physician fee schedule into larger units for payment; (2) the Congress should direct the Secretary to apply a multiple procedure payment reduction to the professional component of diagnostic imaging services provided by the same practitioner in the same session; (3) the Congress should direct the Secretary to reduce the physician work component of imaging and other diagnostic tests that are ordered and performed by the same practitioner; and (4) the Congress should direct the Secretary to establish a prior authorization program for practitioners who order substantially more advanced diagnostic imaging services than their peers. The recommendations will appear in MedPAC’s June report to Congress.

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On March 15, 2011, MedPAC released its annual report to Congress on Medicare Payment Policy. The report includes MedPAC’s recommendations on payment rate updates and other policies, such as distribution of payments and program integrity, for Medicare fee-for-service payment systems. It also includes an overview of the status of the Medicare Advantage and Medicare Part D prescription drug programs. Major recommendations include the following: 

• Congress should increase acute care hospital inpatient and HOPPS payment rates by 1% in 2012, and require the HHS Secretary to adjust inpatient payment rates in future years to fully recover all overpayments due to documentation and coding improvements.
• Congress should provide a 1% update to Medicare physician payments and outpatient dialysis services for 2012.
• Ambulatory surgical center (ASC) payments should increase by 0.5% for 2012, and ASCs should submit cost and quality data.
• Congress should: eliminate the update to payment rates for skilled nursing facility (SNF) services for FY 2012; revise payment for nontherapy ancillary services; establish a quality incentive payment program for SNFs; and strengthen SNF reporting requirements.
• Congress should: eliminate the home health update for 2012 and direct the Secretary to: begin a two-year rebasing of home health rates in 2013 (and protect beneficiaries from lower quality of care in response to rebasing); revise the case-mix system; establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use; and expand certain program integrity efforts.
• Congress should eliminate the update for inpatient rehabilitation facilities and long-term care hospitals for 2012.
• Congress should increase hospice rates by 1% for FY 2012 and adopt a series of recommendations from March 2009 addressing payment and program integrity reforms.

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On March 15, 2011, the Medicaid and CHIP Payment and Access Commission (MACPAC) released its first Report to the Congress on Medicaid and CHIP. The report: provides an overview on the Medicaid and CHIP programs, their roles in the U.S. health care system, and the key policy and data issues to be addressed; describes the analytic framework that the Commission will use in future work on policy issues outlined in its statutory charge on access to care and Medicaid payment policy; examines factors for assessing access to care, evaluating payment policies, and identifying key data sources for policy analysis and program accountability; and introduces Medicaid and CHIP Program Statistics, MACStats, a compilation of national and state-specific program information on eligibility, benefits, and Medicaid spending.

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The Congressional Budget Office (CBO) has issued a report entitled "Reducing the Deficit: Spending and Revenue Options," a compendium of budget options to reduce the federal deficit. Many of the proposals would impact the Medicare and Medicaid programs and health insurance provided under the ACA. Highlights of the options include: adding a “public plan” to the ACA health insurance exchanges; repealing the individual health insurance mandate; limiting medical malpractice torts; converting the federal share of Medicaid’s payments for long-term care services into a block grant; reducing the floor on federal Medicaid matching rates; expanding cost-sharing for beneficiaries receiving SNF and home health services; reducing Medicare rates across the board in high-spending areas; eliminating the Medicare critical access hospital, Medicare-dependent hospital, and sole community hospital programs; and requiring manufacturers to pay a minimum rebate on Medicare Part D drugs for low-income beneficiaries. For each option, the CBO presents the potential fiscal impact and policy ramifications. 

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The Patient-Centered Outcomes Research Institute (PCORI) has begun to meet to discuss its strategy for comparative effectiveness research under the ACA. Several reports also have been posted to the PCORI website, including a Program Development Committee report that highlights planned actions, such as an environmental scan of current comparative effectiveness research initiatives and "tier 1" planning grants.

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The Institute of Medicine has issued two reports mandated by the Medicare Improvement for Patients and Providers Act that are designed to enhance the quality and reliability of clinical practice guidelines and systematic reviews of the evidence base for health care services. In “Clinical Practice Guidelines We Can Trust,” the IOM recommends eight standards intended to ensure the objective, transparent development of trustworthy clinical practice guidelines. In “Finding What Works in Health Care: Standards for Systematic Reviews,” the IOM recommends 21 standards to ensure scientifically-valid, high-quality systematic reviews of the comparative effectiveness of medical or surgical interventions. The goal of the reports is to improve health quality and outcomes by improving the information available on which to base health-related decisions.

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The FTC recently released "Medical Identity Theft FAQs for Health Care Providers and Health Plans". The publication addresses how providers and insurers can minimize the risk of medical identity theft and help patients if they are victimized.

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The Institute of Medicine (IOM) has begun work on advising the HHS Secretary on how to define EHBs for purposes of the ACA insurance package provisions. The IOM Board on Health Care Services held a workshop on this topic in January 2011, and the next meeting is scheduled for March 2-3 in Costa Mesa, CA.  

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On January 18, 2011, President Obama signed an Executive Order directing federal agencies to improve their processes for promulgating and reviewing regulations. The President calls on agencies to design flexible, cost-effective, and evidence-based regulations through a transparent, public process. Existing regulations also must be reviewed periodically, with agencies directed to modify, expand, or repeal rules that are “outmoded, ineffective, insufficient, or excessively burdensome.” As part of this initiative, the President also is requiring federal enforcement agencies to post on-line data concerning their regulatory compliance and enforcement activities, such as information on administrative inspections, examinations, reviews, warnings, citations, and revocations (but excluding law enforcement or other sensitive information about ongoing enforcement actions). 

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The Medicare Payment Advisory Commission (MedPAC) has released a report, "Report to the Congress: Regional Variation in Medicare Service Use," with related appendices. The report looks at regional variation in Medicare spending and in the use of Medicare-covered services. According to MedPAC, service use in higher-use areas (90th percentile) is 30% greater than in lower-use areas (10th percentile), and spending is about 55% greater in higher spending areas compared to lower spending areas. Regional variation is particularly high for post-acute sector services, although areas that are high use in one sector (such as inpatient, ambulatory, and post-acute) tend to be high use overall. The MedPAC report does not include policy recommendations, but MedPAC warns policymakers that "[e]xtremely high levels of service use in certain areas may be driven by overuse and, possibly, fraud and abuse. Additional policy measures may have to be taken in those areas beyond those used to address variation in general."

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On January 4, 2011, President Obama signed into law S. 3036, the National Alzheimer's Project Act, which establishes a National Alzheimer’s Project within HHS and an advisory council on Alzheimer’s research, care, and services to coordinate related research, health care, and treatment efforts.

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On December 15, 2010, President Obama signed into law H.R. 4994, the “Medicare and Medicaid Extenders Act of 2010.” The new law averts a 25% Medicare physician fee schedule cut previously scheduled to take effect January 1, 2011 under the statutory “sustainable growth rate” formula. The law also continues a variety of expiring Medicare provisions and makes other health policy changes, funded primarily through a change in limits on recoveries of excessive tax credits provided to subsidize insurance premiums under the ACA. A CMS summary of the new law with additional implementation details is available here. In addition, on December 18, the President signed into law the “Red Flag Program Clarification Act of 2010,” which is intended to clarify that health care providers and other non-financial businesses are not subject to the Federal Trade Commission’s (FTC) “Red Flag” identity theft rule simply because they extend credit to patients who do not pay for all services at the time services are received. The President also has signed into law H.R. 2941, to reauthorize and enhance Johanna's Law to increase public awareness and knowledge with respect to gynecologic cancers, and S. 3199, the “Early Hearing Detection and Intervention Act.” More information on these bills is available here. 

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The U.S. Department of Justice (DOJ) recovered $3 billion in False Claims Act civil settlements and judgments in fiscal year (FY) 2010 – a record $2.5 billion of which involved health care fraud recoveries -- the DOJ announced November 22, 2010. Most of the FY 2010 settlements and judgments (over $2.3 billion) were recovered in qui tam (whistleblower) lawsuits, resulting in $385 million in awards to relators. The largest FY 2010 False Claims Act recoveries involved the pharmaceutical and medical device industries, which accounted for $1.6 billion in settlements. 

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On November 17, 2010, the Senate Finance Committee is holding a hearing on "Strengthening Medicare and Medicaid: Taking Steps to Modernize America’s Health Care System," at which CMS Administrator Donald Berwick, M.D. is scheduled to testify.  Also on November 17, the Senate Health, Education, Labor and Pensions Committee is scheduled to consider a number of health policy and other bills, including the following: H.R. 5710, the National All Schedules Prescription Electronic Reporting Reauthorization Act of 2010; H.R. 2941, to reauthorize and enhance Johanna's Law to increase public awareness and knowledge with respect to gynecologic cancers; S. 3199, the Early Hearing Detection and Intervention Act of 2010; S. 3036, the National Alzheimer's Project Act; and S. 259, the Vision Care for Kids Act.

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As previously reported, on August 27, 2010, CMS published a final rule that clarifies and expands the requirements that suppliers of DME, prosthetics, orthotics, and supplies (DMEPOS) must meet to establish and maintain Medicare billing privileges.  Among many other things, the rule prohibits suppliers from sharing a practice location with any other Medicare supplier or provider (with certain exceptions), imposes new physical facility requirements on suppliers, and generally prohibits suppliers from contracting with another individual to perform licensed services. The effective date of the rule is September 27, 2010 (although there are separate deadlines for compliance with the physical facility standards for existing suppliers with leases that expire after that date). The NSC has released an updated version of the supplier standards, along with an abbreviated version that can be distributed to Medicare beneficiaries. Note that key operational issues associated with the new rule still have not been clarified; further guidance is expected to be forthcoming.

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On September 13 and 14, 2010, MedPAC met to discuss a variety of Medicare policy issues, including the following: the context for Medicare payment policy; Medicare’s shared savings program for accountable care organizations (ACOs); recent changes that affect Medicare beneficiaries’ financial liability; retainer-based physician practice; Medicare’s authority to apply least-costly alternative policies; growth in hospital observation care; the growth of ancillary services in physicians’ offices; and accountability for DME, home health, and hospice services.

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MedPAC has released its June 2010 Data Book on “Healthcare Spending and the Medicare Program.” The Data Book provides information on national health care and Medicare spending, Medicare beneficiary demographics, Medicare quality and access, and Medicare beneficiary and other payer liability. It also includes data on various provider types, such as data on Medicare spending, beneficiary utilization of the service, number of providers, volume, length of stay, and margins.

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The Department of Justice’s Civil Rights Division and the HHS OCR have issued technical assistance guidance for medical providers on requirements for providing accessible medical services to people with mobility disabilities. Specifically, “Access to Medical Care for Persons with Mobility Disabilities” describes how the Americans with Disabilities Act and Section 504 of the Rehabilitation Act of 1973 apply to providers, including an overview of requirements, answers to, commonly asked questions, and illustrated examples of accessible facilities, exam rooms, and medical equipment. 

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On June 29, 2010, the Drug Enforcement Administration (DEA) published a notice requesting public comment on whether revisions to the DEA regulations are feasible and warranted to facilitate residents of long-term care facilities to receive controlled substance medications, while adhering to the framework of the Controlled Substances Act. Comments will be accepted until August 30, 2010.

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On June 15, 2010, the Medicare Payment Advisory Commission (MedPAC) issued a report to Congress on “Aligning Incentives in Medicare.” Among other things, the report addresses: Medicare payment accuracy and moving away from volume incentives in fee-for-service Medicare; the Stark law in-office ancillary exception policy and options to change incentives that induce physicians to provide more ancillary services; performance-based payments; impediments to coordinated care for beneficiaries dually eligible for both Medicare and Medicaid; improvements to graduate medical education; ways to redesign Medicare benefit to encourage beneficiaries to seek higher value services; informing beneficiaries about their health care choices; and the role of CMS in a reformed delivery system.

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This post was written by Brad Rostolsky.

On May 28, 2010, just shy of the June 1st compliance deadline, the Federal Trade Commission (FTC) announced that it would again be postponing enforcement of the Red Flags Identity Theft Prevention Rule through December 31, 2010. This delay comes at the request of Congress, which has been considering legislation that would affect the scope of entities covered by the Rule. The FTC "urges Congress to act quickly to pass legislation that will resolve any questions as to which entities are covered by the Rule and obviate the need for further enforcement delays." If Congress passes legislation that limits the scope of the Red Flags Rule with an effective date earlier than December 31, 2010, the Commission will begin enforcement as of the legislation's effective date.

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Deputy Attorney General Gary G. Grindler addressed the National Institute on Health Care Fraud on May 13, 2010 to discuss Obama Administration efforts to combat health fraud. In addition to discussing health reform legislation and the Health Care Fraud Prevention and Enforcement Action Team, he highlighted other ways DOJ “is seeking to combat crimes relating to the healthcare and pharmaceutical industries.” For instance, according to Mr. Grindler, the DOJ expects to increase the use of the Foreign Corrupt Practices Act (FCPA) to prosecute kickbacks and bribes paid to foreign government officials by pharmaceutical companies, given that “in some foreign countries, nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product may involve a “foreign official” within the meaning of the FCPA.” He warned that DOJ “will not hesitate to charge pharmaceutical companies and their senior executives under the FCPA if warranted to root out foreign bribery in the industry.” The DOJ also will continue to focus on intellectual property theft involving the pharmaceutical industry, including efforts to combat the sale of counterfeit and dangerous drugs.

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The Occupational Safety and Health Administration (OSHA) is soliciting comments on strategies being used to mitigate the risk of occupationally-acquired infectious diseases in health care settings (e.g., hospitals, outpatient clinics, and laboratories that handle potentially infectious biological materials). Specifically, OSHA seeks data on: the facilities and the tasks potentially exposing workers to this risk; successful employee infection control programs; control methodologies being utilized; medical surveillance programs; and training. OSHA will use such information to determine whether it should take action to further limit the spread of occupationally-acquired infectious diseases in these types of settings. OSHA will accept comments until August 4, 2010. 

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The Medicare Payment Advisory Commission (MedPAC) has released its March 2010 Data Book on the Medicare Part D Program. Among other things, the report includes data on Part D enrollment, spending and utilization, Part D risk scores, top therapeutic classes, generic dispensing levels, and pharmacy participation levels.

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On March 1, 2010, the Medicare Payment Advisory Commission (MedPAC) issued its recommendations to Congress regarding Medicare provider payment updates for 2011. Among other things, MedPAC recommends: 

• Increasing acute inpatient and outpatient prospective payment system reimbursement in 2011 by the projected rate of increase in the hospital market basket index (MBI), coupled with implementation of a quality incentive payment program. MedPAC also proposes an offset of up to 2 percentage points in 2011 through 2013 to recover payments attributable to hospital documentation and coding changes.
• Increasing payments for physician services in 2011 by 1.0%, and establishing a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary-care-focused practitioners.
• Increasing ambulatory surgical center (ASC) rates by 0.6% and requiring ASCs to submit cost and quality data.
• Updating the end stage renal disease (ESRD) composite rate by the ESRD MBI increase minus a productivity growth adjustment (a net updated of approximately 0.7%).
• Updating hospice rates by the projected MBI for 2011, minus an adjustment for productivity gains (a net update of approximately 1.1%). MedPAC also reiterated a series of hospice recommendation from March 2009 addressing broader payment and policy reforms.
• Eliminating the 2011 payment update for skilled nursing facilities (SNFs) and adopting previous recommendations for reforms to SNF payments, including proposals to better account for nontherapy ancillary costs, update quality measures, and promote SNF reporting of more accurate diagnostic and service-use information. 
• Providing no inflation update for home health services in 2011, rebasing home health rates with provisions to protect quality of care, developing quality outcomes measures, and implementing certain program integrity safeguards.
• Eliminating the payment update in 2011 for inpatient rehabilitation facilities and long-term care hospitals.

The MedPAC report also reviews the status of MA plans and Part D prescription drug plans, and it provides recommendations on comparing quality among MA plans and between MA and fee-for-service providers. Note that while MedPAC’s recommendations are not binding, policymakers often consider MedPAC’s assessments when updating Medicare payment policies.  

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On March 10, 2010, the White House released a “Presidential Memorandum Regarding Finding and Recapturing Improper Payments.” Under this initiative, all federal departments and agencies are directed to expand and intensify their use of “payment recapture audits” under their current authority to combat fraud and abuse in federal programs. As under the Medicare Recovery Audit Contractor program, private auditors will review government payments and receive compensation based on the amount of improper payments they identify and are reclaimed. The White House estimates that using payment recapture audits will save at least $2 billion over the next three years. The President also is calling for enactment of legislation to expand the government’s authority to use such audits to additional circumstances. 

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The Medicare Payment Advisory Commission (MedPAC) recently voted on recommendations it will make to Congress regarding Medicare payment updates for 2011. At the meeting, MedPAC voted to recommend increasing acute inpatient and outpatient prospective payment system reimbursement in 2011 by the projected rate of increase in the hospital market basket index (MBI). This rate increase would be coupled with implementation of a quality incentive payment program, along with an offset in 2011 through 2013 to recover payments attributable to hospital documentation and coding improvements. MedPAC also recommends that Congress increase payments for physician services in 2011 by 1.0%. For ambulatory surgical centers (ASCs), MedPAC recommends a 0.6% increase in rates, together with a requirement that ASCs to submit cost and quality data. MedPAC recommends updating the end stage renal disease (ESRD) composite rate by the ESRD MBI increase minus a productivity growth adjustment. MedPAC approved a series of recommendations regarding home health services, including elimination of the inflation update for 2011, rebasing of home health rates with provisions to protect quality of care, development of quality outcomes measures, and implementation of certain program integrity safeguards. With regard to other post-acute services, MedPAC recommends no payment update in 2011 for skilled nursing facilities, inpatient rehabilitation facilities, or long-term care hospitals. MedPAC also recommends updating hospice rates by the projected MBI for 2011, minus an adjustment for productivity gains. These recommendations will be included in MedPAC's March 2010 report to Congress. While the recommendations are not binding, MedPAC’s assessments often help shape federal policy. 

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The Federal Trade Commission has released a “staff study” entitled “Pay for Delay: How Drug Company Pay-Offs Cost Consumers Billions.” The report examines agreements in patent litigation settlements in which a brand-name pharmaceutical company compensates a generic pharmaceutical company for delays in generic entry. According to the study, over the past six years, such agreements delayed generic entry by an average of 48 months. Over the next 10 years, the study concluded that pay-for-delay agreements will cost American consumers an estimated $35 billion ($3.5 billion per year). While the FTC intends to continue litigating pay-for-delay cases under antitrust laws, the report contends that “a legislative solution offers the quickest and clearest way to deter these agreements and obtain the benefits of generic competition for consumers.”

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The Medicare Payment Advisory Commission (MedPAC) has issued a report to Congress on “Measuring Regional Variation in Service Use.” The report is designed to help policymakers compare differences in the use of health care services in Medicare across the country, adjusted to remove the effects of differing wages, payment rates, and health status among geographic areas. Among other things, MedPAC found that while regional variation in service use is smaller than regional variation in Medicare spending, it is substantial: Service use in higher use areas (90th percentile) is about 30% greater than in lower use areas (10th percentile); according to MedPAC, “fraud and abuse may drive some of the highest reported service use.” 

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The Congressional Budget Office has issued an Economic and Budget Issue Brief on "Promotional Spending for Prescription Drugs." The report discusses trends in how pharmaceutical manufacturers market to consumers and prescribers, in such areas as detailing, sponsorship of meetings, direct-to-consumer (DTC) advertising, and journal advertising. The report also discusses how market factors (e.g., size of the market, current competition in that market, and the time that has elapsed since FDA approval) affect a manufacturer’s decision to use marketing tools, particularly DTC advertising and detailing. The report does not make formal recommendations for policy changes.

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The Federal Trade Commission (FTC) has announced it is extending its enforcement date for its Red Flag identity theft rules from November 1, 2009 until June 1, 2010. This extension, which was made at the request of members of Congress, will provide affected industries – including certain health care providers and suppliers -- with additional time to develop identity theft protection programs. Additional background information is available on our web site. 

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The Medicare Payment Advisory Commission (MedPAC) met on October 8 and 9, 2009 to discuss a variety of Medicare payment and policy issues, including the in-office ancillary exception to the physician self-referral law, provider consolidation, physician fee schedule prices, and medical education. 

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The Federal Trade Commission (FTC) has announced that it is delaying until November 1, 2009 enforcement of its Identify Theft Red Flags Rule. According to the FTC, this three-month delay will “give creditors and financial institutions more time to review this guidance and develop and implement written Identity Theft Prevention Programs.” The FTC staff also will "redouble" its education efforts and seek to ease compliance by providing additional resources and guidance to clarify whether businesses are covered by the Rule and what they must do to comply.

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The Agency for Healthcare Research and Quality (AHRQ) has announced plans to solicit contracts for comparative effectiveness research projects with $300 million in ARRA funding. Separately, AHRQ has added two new chapters to its "Methods Guide for Comparative Effectiveness Reviews" under the AHRQ Effective Health Care Program: (1) Principles for Developing Guidance for Comparing Medical Interventions; and (2) Grading the Strength of a Body of Evidence when Comparing Medical Interventions. Other topics under development include: Avoiding Potential Biases when Comparing Medical Interventions; Updating Reports Comparing Medical Interventions; and Comparing Diagnostic Technologies.

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The Medicare Payment Advisory Commission (MedPAC) has released its June 2009 Data Book on Healthcare Spending and the Medicare Program, which includes detailed data for various provider settings .

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The Agency for Healthcare Research and Quality (AHRQ) has announced the availability of funding for the development of a clinical registry of orthopedic devices, drugs, and procedures, with an initial focus on hip and knee replacements.  The initiative seeks to enable comparative effectiveness and safety studies regarding various orthopedic procedures and devices.

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The American Recovery and Reinvestment Act (ARRA) included a major expansion of federal efforts to compare the effectiveness of different medical treatments, including more than $1 billion in funding for comparative effectiveness research (CER). Two federal panels recently released reports on CER priorities under the ARRA. First, the Federal Coordinating Council for Comparative Effectiveness Research issued its recommendations for a strategic framework for CER activity and investments. The Council recommended that the primary investment for CER funding should be data infrastructure (e.g., linking current data sources to enable answering CER questions, development of distributed electronic data networks and patient registries, and partnerships with the private sector). Other key areas for research identified by the Council are:

• Medical and assistive devices (e.g., comparing rehabilitative devices).
• Procedures and surgery (e.g., evaluating surgical options or surgery versus medical management).
• Diagnostic Testing (e.g. comparing imaging modalities for evaluating certain types of cancer).
• Behavioral change (e.g., developing and assessing smoking cessation programs).
• Delivery system strategies (e.g., testing two different discharge process care models on readmission rates or testing two different medical home models on preventing hospital admissions and improving quality of life).
• Prevention (e.g., comparing two interventions to prevent or decrease obesity, comparing strategies for reaching populations that do not access the health care system with prevention efforts).

Separately, on June 30, 2009, the Institute of Medicine (IOM) released its ARRA-mandated report on "Initial National Priorities for Comparative Effectiveness Research," which identifies 100 heath topics that should get priority attention and funding under federal comparative effectiveness efforts. Priority topics include health delivery, health disparities, cardiovascular care, geriatrics, psychiatry, endocrinology, and oncology/hematology, among many others. The IOM cautions, however that comparative effectiveness research “will not yield real improvements unless the results are adopted by health care providers and organizations and integrated into clinical practice.”   A Washington Legal Foundation “Critical Legal Issues Working Paper Series” article by Reed Smith attorneys Areta Kupchyk and Kathleen McGuan entitled “Comparative Effectiveness: Refining the Standards for FDA Approval & CMS Coverage,” is available here.   

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The Federal Trade Commission (FTC) has issued an interim report on the impact of authorized generic drugs on competition in the prescription drug marketplace. Authorized generics are drugs sold by a pharmaceutical manufacturer under both a brand-name and generic label. In short, the FTC found that retail drug prices average 4.2% lower when authorized generics are marketed against a single generic drug during the 180-day marketing exclusivity period than when they are not. Authorized generic entry during this period also reduces the revenues of a first-filer generic firm by 47% to 51% – much greater than the price decline for consumers. To prevent this loss of revenue, generic firms may agree to delay entry in return for a brand manufacturer’s agreement not to launch an authorized generic during the 180-day marketing exclusivity period. According to the report, between fiscal years 2004-08, about 25% of the final patent settlements reviewed by the FTC contained provisions related to authorized generics. 

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MedPAC has issued its June 2009 "Report to the Congress: Improving Incentives in the Medicare Program."   Among other things, the report addresses follow-on biologicals, chronic care management, physician self-referrals involving imaging services, physician resource use measurement, graduate medical education, accountable care organizations, Medicare benefit design, and Medicare Advantage payment policy.

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A lengthy new FTC report on “Follow-on Biologic Drug Competition" issued June 10, 2009 concludes that:

• Competition between a biologic drug and a follow-on biological (FOB) is much more likely to resemble brand-to-brand competition than the dynamics of brand-generic competition under Hatch-Waxman.
• Existing incentives that support brand-to-brand competition among biologic drugs – patent protection and market-based pricing – are likely to be sufficient to support FOB competition and biologic innovation.
• A 12-14-year exclusivity period is unnecessary to promote innovation by pioneer biologic drug manufacturers.
• Special procedures to resolve patent issues between pioneer and FOB drug manufacturers prior to FDA approval are unnecessary and they could undermine patent incentives and harm consumers.
• FOB drug manufacturers are unlikely to need additional incentives to develop interchangeable FOB products.

The FTC paper will be the subject of a June 11 Energy and Commerce Health Subcommittee hearing.

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AHRQ has posted a draft chapter 5 of the "Methods Guide for Comparative Effectiveness Reviews." The topic of the chapter is "Using Existing Systematic Reviews to Replace de Novo Processes in CERs," in which AHRQ proposes a five-step process to standardize the approach that Evidence-based Practice Centers use to decide whether existing systematic reviews might provide value. Comments will be accepted until June 26, 2009.

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The May 2009 National Supplier Clearinghouse (NSC) newsletter includes DMEPOS supplier accreditation and surety bond information (including a chart comparing the different exemptions for the two requirements), a review of the supplier appeals process, and the requirements for completing the revised CMS-855S enrollment application, among other things.

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The Department of Defense (DoD) has published a notice that it is proceeding with implementation of its December 10, 2008 final rule establishing a prospective payment system (PPS) for TRICARE hospital outpatient services, similar to the Medicare hospital outpatient PPS (OPPS). The effective date had been extended from February 9, 2009 until May 1, 2009 as part of the Obama Administration's broader regulatory review. After review of public comments, the DoD is making no changes to the final rule and the effective date continues to be May 1, 2009. Background material is posted here. 

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On May 12, 2009, the Social Security and Medicare Boards of Trustees released their annual assessment of the financial condition of the Social Security and Medicare trust funds. According to the report, Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in benefits and other expenditures this year than it receives in taxes and other dedicated revenues. HI reserves are expected to be exhausted in 2017, two years earlier than projected last year. For the third consecutive year, a “Medicare funding warning” is being triggered, signaling that non-dedicated sources of revenues (primarily general revenues) will soon account for more than 45% of Medicare’s outlays. Federal law requires the President to submit a plan in response to this warning. Balancing the HI Trust Fund over the next 75 years would require changes equal to an immediate 134% increase in the payroll tax or an immediate 53% cut in program outlays, or combination of the two, with larger changes needed to make the program solvent beyond 75 years. Part B of the Supplementary Medical Insurance Trust Fund and Part D are both projected to remain adequately financed indefinitely, but rising costs will result in rapidly growing general revenue financing needs (rising from 1.3% of gross domestic product in 2008 to about 4.7% in 2083) and substantial increases in beneficiary premiums.

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On April 28, 2009, the Institute of Medicine (IOM) issued a report endorsing new voluntary and regulatory measures to strengthen protections against financial conflicts of interest in medicine. The report addresses conflicts of interest in a number of settings, including biomedical research, clinical care, physician training, and continuing medical education. Among other things, the IOM recommends improving disclosure of financial ties between the medical community and the pharmaceutical, biotechnology, and medical device industry; limiting company payments and gifts; stemming industry influence in medical education and the development of practice guidelines; and adopting safeguards pertaining to consulting arrangements.  

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This post was written by Carol Loepere.

On April 30, 2009 the Federal Trade Commission (FTC) issued a News Release announcing that it is granting industries under the FTC's jurisdiction an additional 3 months to develop and implement their identity theft prevention programs as required under the FTC's so-called Identify Theft Red Flag Rule. The FTC also stated that that some entities, particularly those that are small, non-traditional creditors, would benefit from the availability of a template Red Flags program in developing their programs. The Commission staff intends to publish such a template for low-risk entities shortly. The FTC said that the extension, coupled with the release of the template, should be sufficient to enable low-risk entities to prepare their programs without undue burden. The announcement of the extension is also available at www.ftc.gov.

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To promote transparency, HHS has established a new searchable database of communications with registered lobbyists on ARRA issues. HHS is reporting verbal and written communications within three business days of their occurrence.  

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On April 8, 2009, President Obama signed an Executive Order establishing a White House Office of Health Reform within the Executive Office of the President. The goal of the office is to provide leadership to the executive branch in establishing policies, priorities, and objectives for the federal government's comprehensive effort to improve access to health care, the quality of such care, and the sustainability of the health care system. The order also directs the HHS Secretary to establish within HHS an Office of Health Reform to coordinate closely with the White House Office of Health Reform.

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The NIH is highlighting a new funding opportunity under the ARRA that will support approximately $200 million in large-scale research projects that have a high likelihood of enabling growth and investment in biomedical research and development, public health, and health care delivery. The purpose of this new program, the Research and Research Infrastructure "Grand Opportunities" (GO), is to support high-impact ideas that lend themselves to short-term funding and may lay the foundation for new fields of scientific inquiry. Grant applicants may propose to address either a specific research question or the creation of a unique infrastructure/resource designed to accelerate scientific progress in the future.   NIH examples of the types of projects that could be funded under this program include the identification and validation of biomarkers in human genetics and biology that indicate the risk for disease or that could serve as a marker of disease progression and/or responsiveness to treatment, or research on information technology to enable physicians to share radiological images across health care institutions.  

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The “Federal Health Architecture” within HHS has announced the availability of “CONNECT” software to help public and private health information technology systems communicate to the Nationwide Health Information Network (NHIN), a federal initiative to facilitate the electronic exchange of health information. 

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On April 10, 2009, the Agency for Healthcare Research and Quality (AHRQ) announced that it is seeking nominations of individuals qualified to serve as members of the U.S. Preventive Services Task Force (USPSTF). The USPSTF is a standing panel of outside experts that makes evidence-based recommendations to the health care community and the public regarding the provision of clinical preventive services. Nominations are due by May 15, 2009. 

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The Federal Trade Commission (FTC) issued sweeping regulations in 2007 aimed at preventing identity theft. Two provisions of these rules, known as the “Red Flag Rules,” can apply to health care entities. The first provision, requiring address checks for anyone who uses “consumer reports” for employment, insurance or credit purposes, became effective November 1, 2008. A second major component of the Red Flag Rules requires any business that is a “creditor or financial institution” to have written processes and procedures in place to detect, prevent, and mitigate identity theft in relation to accounts covered under the regulations. Enforcement of this provision has been delayed until May 1, 2009. Health care providers can be impacted by this provision if they do not require payment at the time services are provided, or if they are paid by an insurer after services are rendered. The FTC has issued a “How-To-Guide for Business” with information on how to determine if the Red Flag rule applies to your business; tips on compliance; and information on how to put in place a written identity theft prevention program.

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The GAO has announced the appointment of 13 members to the Health Information Technology Policy Committee, a new advisory body established by the ARRA. The panel is charged with making recommendations on creating a policy framework for the development and adoption of a nationwide health information technology infrastructure, including standards for the exchange of patient medical information. Note that additional members will be appointed by HHS, Congress, and the President. 

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On February 26, 2009, the Office of Management and Budget (OMB) published a notice announcing that it is developing a set of recommendations to the President for a new Executive Order on Federal Regulatory Review. The recommendations are expected to address:

• The relationship between the White House Office of Information and Regulatory Affairs and the agencies;
• Disclosure and transparency;
• Encouraging public participation in agency regulatory processes;
• The role of cost-benefit analysis;
• The role of distributional considerations, fairness, and concern for the interests of future generations;
• Methods of ensuring that regulatory review does not produce undue delay;
• The role of the behavioral sciences in formulating regulatory policy; and
• The best tools for achieving public goals through the regulatory process.

OMB invites public comments on how to improve the process and principles governing regulatory review; comments will be accepted until March 16, 2009.  

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The Internal Revenue Services (IRS) has issued a final report on its tax-exempt hospital project, which was designed to ascertain how nonprofit hospitals benefit their communities. The project also reviewed executive compensation practices of nonprofit hospitals. The final report is based on the responses to questionnaires the IRS received from almost 500 hospitals.

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This post was written by Lorraine Mullings Campos.

On March 4, 2009, the White House ordered what some believe are significant changes in federal contracting practices. The White House memorandum shows an intent to reduce federal outsourcing and the use of cost-reimbursement contracts. However, federal acquisition policy already embraces the values set forth in the memorandum. For example, the Federal Acquisition Regulation (FAR) requires agencies to issue written findings to support the use of “other than full and open competition” (i.e. sole source contracts) in awarding contracts. Similarly, cost-reimbursement contracts are to be used only where, for example, “the work to be performed is such that it is neither feasible nor effective to devise predetermined objective incentive targets applicable to cost, technical performance, or schedule . . . .” Thus, the FAR already implements the policy objectives expressed in President Obama’s memorandum. A Reed Smith alert regarding the policy is available here.

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On February 27, 2009, MedPAC released its March 2009 Report to the Congress: Medicare Payment Policy. The report includes a series of recommendations for Medicare payments designed to assure beneficiaries’ access to care and preserve Medicare’s long-term sustainability, particularly through reductions in payment updates for 2010. The report also includes recommendations to increase transparency of physician financial relationships. A listing of key recommendations follows after the jump. 

Continue Reading...

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On February 6, 2009, the Department of Defense published a notice delaying the effective date of its December 10, 2008 final rule implementing a prospective payment system (PPS) for TRICARE hospital outpatient services, similar to the Medicare hospital outpatient PPS. The effective date has been extended from February 9, 2009 until May 1, 2009 as part of the Obama Administration's broader regulatory review. A new comment period also has been announced; comments will be accepted until March 9, 2009.  

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On December 5, 2008, the Internal Revenue Service (IRS) issued a proposed rule to implement a tax withholding requirement of the Tax Increase Prevention and Reconciliation Act of 2005 that requires federal, state, and local government entities to withhold income tax when making payments to persons providing property or services. The tax withheld will equal 3% of payments made after December 31, 2010. The statute provides an exception for payments made in connection with a public assistance/welfare programs for which eligibility is determined based on needs or income, but not based on age. Therefore, while Medicaid payments are exempt, Medicare payments would be subject to the withholding requirements. The withholding requirement also would not apply to payment amounts below a $10,000 threshold. Multiple payments made to a person generally would not be aggregated for determining if the threshold has been met, but an anti-abuse rule would be established to prevent payment manipulation to avoid required withholding. The IRS will accept comments on the proposed rule until March 5, 2009.  

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CMS is soliciting nominations of five new members to the Advisory Panel on Ambulatory Payment Classification (APC) Groups to fill five vacancies that will exist as of August 16, 2009. Nominations will be accepted until March 13, 2009.  

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On December 18, 2008, the Congressional Budget Office (CBO) released a major report entitled “Budget Options, Volume 1: Health Care,” which sets forth 115 policy options for Congress to consider as it addresses health care system reform. The CBO points out that Medicare is expected to grow from 2.8 percent of gross domestic product (GDP) in 2008 to nearly 9 percent of GDP in 2050. This spending growth will be fueled primarily by growth in per capita medical costs, according to the CBO, with the aging of the population playing a secondary role. In light of these trends, the CBO offers specific options addressing such areas as: health insurance (market reforms, tax treatment, access to federal programs); health care quality and efficiency; geographic variation in Medicare spending; paying for Medicare services (including hospital, physician, imaging, and post-acute care, and Medicare Advantage plan services, among others); financing and paying for services in Medicaid (including drug payment revisions) and SCHIP; premiums and cost sharing in federal health programs; long-term care; health behavior and health promotion; and closing the gap between Medicare’s spending and receipts.  The CBO also issued a separate report focusing on insurance reform, “Key Issues in Analyzing Major Health Insurance Proposals.” The CBO warns that without changes in policy, a substantial and growing number of nonelderly people are likely to be without health insurance. This issue cannot be addressed without making major changes in the financing or provision of health insurance and health care, which will involve "difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care." The report describes the assumptions that CBO would use in estimating the effects of key elements of proposals to modify the health insurance system on federal costs, insurance coverage, and other outcomes. In particular, it considers the types of issues that would arise in estimating the effects of proposals to: provide tax credits or other types of subsidies to make insurance less expensive to the purchaser; require individuals to purchase health insurance; require firms to offer health insurance to their workers or pay into a fund that subsidizes insurance purchases; replace employment-based coverage with new purchasing arrangements or provide strong incentives for people to shift toward individually purchased coverage; and provide individuals with coverage under, or access to, existing insurance plans such as the Medicare program, either as an additional option or under a “Medicare-for-all” single-payer arrangement.

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On December 5, 2008, the Department of Defense released a final rule implementing a prospective payment system (PPS) for TRICARE hospital outpatient services, similar to the Medicare hospital outpatient PPS. The official version of the rule will be published on December 10, 2008.

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The U.S. Department of Justice recently announced that the federal government had secured $1.34 billion in settlements and judgments in federal fraud and abuse cases in FY 2008, with almost 78% were associated with False Claims Act whistleblower suits. Health care fraud accounted for the bulk of the settlements and judgments, totaling $1.12 billion. The largest recoveries were associated with pharmaceutical companies, including cases involving "off-label" marketing, kickbacks, marketing drug “spreads,” and knowingly failing to report a company’s true "best price" for a drug to reduce Medicaid rebates. 

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On October 27, 2008, the GAO published a notice soliciting nominations for Medicare Payment Advisory Commission (MedPAC) members for appointments effective May 1, 2009. Letters of nomination should be submitted between January 1 and March 31, 2009. 

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CMS is encouraging hospitals and other health care providers to review a new publication, “Community Pan-Flu Preparedness: A Checklist of Key Legal Issues for Healthcare Providers," which is the result of a public interest dialogue session convened by the American Health Lawyers Association, the HHS Office of Inspector General, and the U.S. Centers for Disease Control. The guide is designed to assist providers and public health communities as they consider the legal impediments and implementation challenges to community pan-flu preparedness, and it offers practical solutions to such challenges.

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The Department of Justice (DOJ) has revised its Principles of Federal Prosecution of Business Organizations, which govern how federal prosecutors investigate, charge, and prosecute corporate crimes, including health care fraud. A number of the revisions address the area of cooperation credit, including providing that credit for cooperation will not depend on a corporation’s waiver of attorney-client privilege or work product protection, but rather on the disclosure of relevant facts. The guidelines also instruct prosecutors not to consider a corporation’s advancement of attorneys’ fees to employees when evaluating cooperativeness, and specify that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. Moreover, prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation. 

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MedPAC met on September 4 and 5, 2008 to discuss a range of Medicare policy issues, including physician financial relationships, MIPPA provisions on DME bidding and ESRD payment, imaging policy, Medicare Advantage, and Part D.  Details regarding the meeting, including a transcript, are available at the MedPAC web site. 

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The GAO has released two reports involving prescription drugs. The first report, "Prescription Drugs: FDA's Oversight of the Promotion of Drugs for Off-Label Uses," found a number of shortcomings in the FDA's review process, including FDA's failure to prioritize its reviews in a systematic manner or consistently track the receipt and review of submitted materials. The second report, "Medicare Part D: Complaint Rates Are Declining, but Operational and Oversight Challenges Remain,” includes a number of recommendations to improve oversight of the Medicare Part D grievances process and provide added assurance that beneficiaries’ grievances are being resolved.

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The Government Accountability Office (GAO) has issued a report entitled "Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices." The GAO found that from 2000 through 2006, Medicare spending for imaging services paid for under the physician fee schedule more than doubled, with spending rising particularly fast for advanced imaging services. The GAO recommends that CMS consider adding prior authorization requirements and other payment safeguards for imaging services.

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MedPAC has released its June 2008 Data Book, which provides information on national health care and Medicare spending and other related data, including detailed data for various provider settings. 

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On June 13, 2008, the Medicare Payment Advisory Commission (MedPAC) released its June 2008 report to the Congress on "Reforming the Delivery System." MedPAC discusses a variety of payment and delivery reforms to improve Medicare quality, coordinate care, and reduce cost growth. 

Continue Reading...

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The Federal Trade Commission (FTC) issued a report May 21, 2008 summarizing agreements filed with the FTC in FY 2007 by generic and branded drug manufacturers, as mandated by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. During this period, there were 33 final settlements, nearly half of which included both compensation to the generic company (such as through an agreement by the branded firm not to sponsor or compete with an authorized generic product for some period of time) and a restriction on the generic’s ability to market its product.

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The HHS Office of Inspector General (OIG) has released a report comparing prescription drug average sales prices and average manufacturer prices for the third quarter of 2007.

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HHS has posted new information about its HIPAA privacy enforcement efforts, including state-specific case investigation results and complaint and enforcement data.

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On March 25, the Medicare Trustees released their annual report on the financial status of the Medicare program. The Trustees report that Medicare Hospital Insurance (HI) Trust Fund and Supplementary Medical Insurance Trust Fund expenditures were $432 billion in 2007, or 3.2% of gross domestic product (GDP), and are projected to increase to nearly 11% of GDP in 75 years. They also project that the HI Trust Fund will become insolvent earlier in 2019 than reported last year. On the other hand, expenditures for Part D continue to be lower than projected, primarily due to a significant reduction in bids, although costs are still expected to increase an average of about 11.1% annually through 2017. 

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On April 1, the Department of Defense (DOD) published a proposed rule to implement an outpatient prospective payment system (OPPS) for the TRICARE military health care program. The system will be based on the Medicare OPPS, with certain modifications to reflect existing TRICARE benefit structure and claims processing procedures and to mitigate the financial burden on beneficiaries. Comments will be accepted until June 2.

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The Medicare Payment Advisory Commission (MedPAC) has issued its annual report to Congress on Medicare payment policy. Key recommendations include the following:

• For inpatient and outpatient hospital services, updates equal to the hospital market basket, implemented concurrently with a quality incentive payment program. MedPAC also recommends reducing indirect medical education (IME) payment by 1 percentage point.
• An update to the physician fee schedule equal to the increase to "input prices" less MedPAC’s adjustment for productivity growth (1.5% for 2009). In addition, Congress should require CMS to establish a process to measure and report physician resource use on a confidential basis.
• For the outpatient dialysis payment system, an update equal to the projected market basket change less a 1.5% adjustment for productivity growth. MedPAC continues to recommend that Congress implement a quality incentive program for dialysis providers and expand the dialysis payment bundle to include dialysis drugs and other commonly-furnished services.
• No payment increase for three of the four post-acute care payment systems: skilled nursing facilities (SNFs), home health agencies, and inpatient rehabilitation facilities. In addition, MedPAC recommends a quality incentive program and improved public quality reporting for SNFs. For the fourth post-acute payment system, long-term care hospitals, MedPAC recommends an increase of the market basket index less a productivity growth adjustment.
• MedPAC makes a series of recommendations with regard to private plans, including Medicare Advantage plans and special need plans. With regard to Part D drug plans, the Commission recommends that the Congress should direct the Secretary to make Part D claims data available regularly and in a timely manner to congressional support agencies and selected executive branch agencies for purposes of program evaluation, public health, and safety (for example, post market surveillance).

While MedPAC’s recommendations are not binding on Congress, lawmakers are expected to consider the recommendations as they seek to develop a plan to avert the 10.1% Medicare physician reimbursement cut now scheduled to go into effect July 1, 2008. 

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The HHS Office of Inspector General (OIG) has issued a report entitled “Los Angeles County Suppliers’ Compliance with Medicare Standards: Results from Unannounced Visits,” which found that many suppliers inspected did not meet basic Medicare supplier standards (see ). While recognizing recent CMS steps to address vulnerabilities in the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) benefit, the OIG recommends more unannounced site visits, expanded background checks, increased prepayment review of DMEPOS claims, more frequent reenrollment of high-risk suppliers, and minimum hours of operation. In addition, the OIG endorsed supplier enrollment fees to finance inspections and background checks, along with legislative authority to impose temporary moratoriums on supplier enrollment in high-fraud areas.

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The Government Accountability Office (GAO) has issued a number of health policy reports recently, including “Medicare Advantage: Increased Spending Relative to Medicare Fee-for-Service May Not Always Reduce Beneficiary Out-of-Pocket Costs”; “Medicaid Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost and Oversight Concerns”; and “Reprocessed Single-Use Medical Devices: FDA Oversight Has Increased, and Available Information Does Not Indicate That Use Presents an Elevated Health Risk “.

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On February 20, the Food & Drug Administration (FDA) proposed guidelines for manufacturers of drugs and devices who would like to distribute scientific and medical articles that discuss off-label uses of approved products. The draft guidance is entitled “Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices." The document proposes that distribution be limited to peer-reviewed scientific or medical articles that are published by an with an editorial board that has a policy of disclosure of conflicts of interest. The publication should not be written for, edited by, or funded by the manufacturer, and it cannot be false or misleading or pose a significant risk to public health. Letters to the editor, abstracts of a publication, reports of Phase 1 trials in healthy subjects, or reference publications that contain insufficient substantive discussion of the data would not be acceptable. The draft guidance also proposes guidelines on the manner in which companies should distribute scientific and medical information. For instance, a company should not abridge, highlight, or summarize the article. In addition, FDA would expect that the article be accompanied by numerous disclosures and addendums, including: the approved labeling of the drug or medical device; a comprehensive bibliography of related information; a disclosure about the unapproved use being discussed, a disclosure of the manufacturer's interest in the product, a disclosure of any financial interest held by the author, and, a representative publication of any articles that call into question the conclusions of the article being disseminated. The journal article should also be distributed separately from promotional materials. Comments on the guidance are due April 21, 2008. The draft guidance document is posted here; details regarding comment submission are available here. Reed Smith has prepared a bulletin analyzing the draft; the bulletin is available here. 

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The HHS Office of Inspector General (OIG) has released its annual analysis of the top HHS management and performance challenges. For FY 2007, areas of significant challenge for HHS include: oversight of Medicare Part D; integrity of Medicare payments; appropriateness of Medicaid and SCHIP payments; quality of care; public health emergency preparedness/response; oversight of food, drug, and medical device safety; grants management; integrity of information technology systems; and ethics program oversight. In addition, the OIG has released the Health Care Fraud and Abuse Control Program Annual Report for FY 2006. During FY 2006, the federal government won or negotiated approximately $2.2 billion in judgments and settlements, and U.S. Attorneys' Offices opened 836 new criminal health care fraud investigations and 915 civil health fraud investigations. Separately, the OIG has analyzed payments for outpatient hospital, laboratory, and radiology services made on behalf of beneficiaries in skilled nursing facility (SNF) stays covered under Medicare Part A. The OIG found Medicare Part B made almost $107 million in potential overpayments for these services during 2001 and 2002. While payment edits implemented in 2003 reduced potential overpayments to $22.7 million, most of the overpayments have not yet been recovered.

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The Government Accountability Office (GAO) has released a report entitled "Medicare Part D: Plan Sponsors' Processing and CMS Monitoring of Drug Coverage Requests Could Be Improved," which recommends that CMS and Part D drug plan sponsors take steps to improve the appeals process for beneficiaries seeking coverage for a drug not included in their plan. In addition, another GAO report reviewed the results of the Physician Group Practice (PGP) Demonstration, which is testing hybrid payment methodology for physician groups that combines Medicare fee-for-service payments with new incentive payments for achieving cost savings and meeting quality targets. The GAO found that few participating plans have been eligible for bonus payments because they did not achieve the required cost savings.

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On February 4, 2008, the Bush Administration released its proposed federal budget for fiscal year (FY) 2009, which begins October 1, 2008. The President is calling for $178 billion in Medicare savings over 5 years (growing to $556 billion in 10 years and $10 trillion over 75 years) and $18 billion in Medicaid savings over 5 years. The following are highlights from the sweeping proposal impacting Department of Health and Human Services (HHS) programs. Continue Reading...

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The FDA Center for Drug Evaluation and Research has posted its industry guidance agenda for calendar year 2008. Planned guidance documents address, among many other issues, drug advertising, clinical trial design, drug safety information, and labeling. 

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The Congressional Budget Office (CBO) has released a report on “Technological Change and the Growth of Health Care Spending." The CBO warns that if Medicare spending per beneficiary grows at the rate currently projected, “future budget deficits will rise to levels that could severely jeopardize long-term economic growth unless policymakers sharply reduce other projected spending, substantially increase revenues as a share of gross domestic product (GDP), or do some of both." Since the CBO has determined that about half of all growth in health care spending in the past several decades was associated with changes in medical care associated with advances in technology, future spending growth will depend largely on how the health care system responds to future technological changes.

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The HHS Office of Inspector General (OIG) has released a report summarizing a joint OIG-industry roundtable meeting on ways long-term care organization boards of directors can address quality-of-care issues

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The Medicare Payment Advisory Commission (MedPAC) met January 10 – 11 to vote on Medicare payment policy recommendations that will be included in its annual report to Congress to be issued in March 2008. Among other things, the panel voted to recommend a freeze in Medicare skilled nursing facility, home health agency, and inpatient rehabilitation facility rates, a 1.6 percent update in LTCH rates, a 1.1 percent increase in physician payments, and a 1 percentage point reduction in hospital indirect medical education payments. Lawmakers are expected to consider MedPAC’s recommendations as they attempt to craft legislation that would avert a 10.1 percent cut in Medicare physician fee schedule payments that is scheduled to go into effect July 1, 2008. For more information, see www.medpac.gov.

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The OIG has issued a report on Medicare Part D payments to community pharmacies. Among other things, the OIG found that Medicare Part D payments (excluding dispensing fees) exceeded the pharmacies’ drug acquisition costs by about 18.1 percent when drug wholesalers rebates to pharmacies were included. Excluding rebates, Part D payments exceeded drug acquisition costs by an estimated 17.3 percent, with a much larger difference for generic drugs than for brand-name drugs.   A separate OIG report addresses the ability of physician-owned specialty hospitals to manage medical emergencies. The OIG found that about half of all physician-owned specialty hospitals have emergency departments, with the majority having one emergency bed. Not all physician-owned specialty hospitals had nurses on duty and physicians on call during the review period, and 66 percent use 9-1-1 as part of their emergency response procedures. In addition, the OIG has issued a report entitled "National Institutes of Health: Conflicts of Interest in Extramural Research," which includes a series of recommendations to increase oversight of grantee institutions to ensure their compliance with federal financial conflicts-of-interest regulations.

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CMS has released detailed health care spending statistics for 2006. Health care spending growth in the United States increased 6.7 percent in 2006, reaching a total of $2.1 trillion, or $7,026 per person, and equaling 15 percent of the nation’s Gross Domestic Product. Medicare spending grew 18.7 percent in 2006, compared to 9.3 percent in 2005, fueled in part by the Medicare Part D drug benefit. Total Medicaid spending declined for the first time ever, falling 0.9 percent, which is attributable to the shift of drug coverage for dual eligibles from Medicaid to Medicare Part D, state cost-containment efforts, and slower enrollment growth. For details, click here.   

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The FDA Center for Biologics Evaluation and Research (CBER) is inviting biologics facilities to participate in its Regulatory Site Visit Training Program, which is intended to allow CBER staff to directly observe routine biologics manufacturing practices. Interested parties should contact CBER by February 21. For details, click here. 

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HHS has announced its recognition of certain Healthcare Information Technology Standards Panel Interoperability Specifications as interoperability standards for health information technology. For details on recognized interoperability standards, click here. 

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The Government Accountability Office (GAO) has issued a report concluding that CMS has not allocated sufficient resources to keep pace with recent increases in contract awards and adequately perform contract and contractor oversight, resulting in as much as $90 million in questionable payments. The GAO made a series of recommendations regarding how CMS could improve internal controls and accountability in the contracting process. 

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The HHS Office of Inspector General (OIG) has issued a report profiling Medicare patients receiving Medicare hospice care in the nursing home setting. Among other things, the OIG points out that beneficiaries in nursing facilities typically spend more time in hospice care and are associated with higher Medicare reimbursements for hospice care than beneficiaries in other settings. The OIG also released a report comparing prescription drug ASPs and average manufacturer prices for the second quarter of 2007.

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