HHS Exploring Ways to Promote Innovation, Investment in Healthcare Sector

The Department of Health and Human Services (HHS) is considering forming a workgroup aimed at facilitating “constructive, high-level dialogue between HHS leadership and those focused on innovating and investing in the healthcare industry.”  The goal of the initiative is to “spur investment, increase competition, accelerate innovation, and allow capital investment in the healthcare sector to have a more significant impact on the health and wellbeing of Americans.”  In particular, HHS wants to engage with “healthcare innovation-focused companies, healthcare startup incubators and accelerators, healthcare investment professionals, healthcare-focused private equity firms, healthcare-focused venture capital firms, and lenders to healthcare investors and innovators.”  HHS seeks comment on the potential structure and scope of the workgroup or other potential forms of interaction.  The notice was published June 7, 2018; comments will be accepted for 30 days.

CMS Finalizes CJR Extreme and Uncontrollable Circumstances Policy

CMS has finalized an “extreme and uncontrollable circumstances policy” for the Comprehensive Care for Joint Replacement (CJR) payment model.  Under this policy, which was prompted by severe hurricanes and wildfires, CMS will exercise flexibility in the determination of episode spending for CJR participant hospitals located in areas impacted by extreme and uncontrollable circumstances for performance years 3 through 5.  As in the earlier interim final rule with comment period published on December 1, 2017, this policy caps actual episode payments at the episode target prices for (1) a non-fracture episode with a date of admission to the anchor hospitalization that is on or within 30 days before the date that the emergency period (as defined), or (2) a fracture episode with a date of admission to the anchor hospitalization that is on or within 30 days before or after the date that the emergency period. 

HHS Delays 340B Ceiling Price/CMP Rule Implementation for Another Year — until July 1, 2019

The Health Resources and Services Administration (HRSA) is once again delaying the effective date of its January 5, 2017 rule on 340B drug pricing program ceiling price calculation and civil monetary penalties (CMPs). Specifically, under a final rule published June 5, 2018, HRSA is pushing back the 340B ceiling price/CMP rule’s effective date for an additional year, to July 1, 2019. In addition to providing regulated entities with more time to implement the 2017 rule, HRSA states that the Department of Health and Human Services “intends to engage in additional or alternative rulemaking on these issues.” HRSA also points out that the Trump Administration is “developing new comprehensive policies to address the rising costs of prescription drugs,” which will address the 340B program and other government drug pricing policies.

CMS Considering Home Health Claims Review Demonstration

CMS is considering implementing a Medicare home health claims review demonstration project intended to help identify, prevent, and prosecute Medicare fraud, waste, and abuse and reduce Medicare appeals. Under this initiative, CMS would offer home health agencies (HHAs) in the demonstration area the choice of demonstrating their compliance with Medicare home health policies through 100% pre-claim review or 100% postpayment review. The claims review would continue until the HHA reaches a “target affirmation or claim approval rate,” at which point the HHA may choose to be relieved from claim reviews except for a “spot check” to ensure continued compliance. An HHA may choose not to participate in either the pre-claim or postpayment reviews, but the provider will receive a 25% payment reduction on all home health claims and may be subject to Recovery Audit Contractor review. CMS proposes to implement the demonstration initially in Illinois, Ohio, North Carolina, Florida, and Texas, with the option to expand to other states in the Palmetto/JM Medicare Administrative Contractor (MAC) jurisdiction. CMS will accept comments on the demonstration until July 30, 2018.

CMS Adds 31 Power Mobility Device Codes to Nationwide Prior Authorization Program

CMS is adding 31 power mobility device Healthcare Common Procedure Coding System (HCPCS) codes to the list of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items that require prior authorization as a condition of Medicare payment. All of the new codes are currently included in the Medicare Prior Authorization for Power Mobility Devices (PMDs) Demonstration, a 19-state demonstration with similar, but not identical, prior authorization requirements that runs through August 31, 2018. The expanded code list is effective September 1, 2018.

Reed Smith Analysis: Trump Administration’s Drug Pricing Blueprint

As previously reported, the Trump Administration has released its “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.”  Many of the recommendations in the Blueprint were previously made in President Trump’s fiscal year 2019 budget proposal, while numerous others are framed as open-ended questions rather than policies.  While the near-term impacts on drug pricing based upon the contemplated policy changes are questionable, the wide-ranging reforms under consideration — if enacted — could significantly impact virtually every segment of the health care industry involved in the drug distribution system.  The public has an opportunity to comment formally on the Blueprint through July 16, 2018.

Reed Smith has prepared a Client Alert that provides a summary and analysis of the Blueprint.  Please click here to read more.

IRF PPS Payments Set to Increase by $75 Million in FY 2019 under Proposed CMS Rule

The Centers for Medicare & Medicaid Services (CMS) has published a proposed rule to update Medicare rates for inpatient rehabilitation facility (IRF) services for fiscal year (FY) 2019. CMS estimates that IRF prospective payment system (PPS) payments would increase by a total of $75 million under the proposed rule compared to FY 2018 levels. Specifically, CMS proposes to update IRF PPS payment rates by 1.35%, which reflects an IRF market basket update of 2.9%, which is reduced by a 0.8 percentage point multifactor productivity adjustment and a statutory 0.75 percentage point reduction. The proposed FY 2019 standard payment conversion factor is $16,020, compared to $15,838 in FY 2018. An IRF that does not submit required quality data to CMS is subject to a 2.0 percentage point decrease in its annual update. The proposed outlier threshold amount would be increased from $8,679 for FY 2018 to $10,509 for FY 2019, which would decrease aggregate payments by approximately 0.4%. CMS also proposes updates to the IRF wage index and case-mix group relative weights in a budget-neutral manner.

In addition, CMS proposes to reduce the regulatory burden for IRFs by: removing the Functional Independence Measure instrument and associated Function Modifiers from the IRF-Patient Assessment Instrument; allowing the post-admission physician evaluation to count as one of the required face-to-face physician visits; allowing the rehabilitation physician to lead the interdisciplinary meeting remotely without any additional documentation requirements; and removing the admission order documentation requirement. Furthermore, CMS requests comments regarding removing the face-to-face requirement for rehabilitation physician visits and expanding the use of nonphysician practitioners in meeting the IRF coverage requirements. CMS also proposes to update the requirements for the IRF Quality Reporting Program, including adding a new quality measure removal factor and removing two measures from the measure set.

Consistent with other proposed FY 2019 payment rules, CMS includes a Request for Information (RFI) seeking input on ways to promote interoperability and electronic healthcare information exchange, including through possible new or revised conditions of participation. CMS will accept comments on the proposed rule and RFI through June 26, 2018.

CMS Announces First Rural Health Strategy

 CMS has released an-agency-wide Rural Health Strategy that seeks to “better serve individuals in rural areas and avoid unintended consequences of policy and program implementation.” The Strategy has five objectives:

  1. Apply a rural lens to CMS programs and policies (e.g., apply a new checklist to relevant policies, procedures, and initiatives that impact rural communities)
  2. Improve access to care through provider engagement and support (e.g., maximize scope of practice)
  3. Advance telehealth and telemedicine (e.g., address reimbursement, cross-state licensure issues, and administrative/financial burdens)
  4. Empower patients in rural communities to make decisions about their healthcare (e.g., support adoption of health information technology)
  5. Leverage partnerships to achieve the goals of the CMS Rural Health Strategy (e.g., work with state partners, federal agencies, and health plan representatives).

Congressional Hearings Focus on 340B Program, Health Workforce, Other Health Policy Issues

In addition to the numerous hearings and markups on the opioid crisis discussed in a separate post, Congressional committees are examining the following health policy topics:

In addition, the Senate HELP committee is holding a May 22, 2018 hearing on the health care workforce.

Congressional Committees Approve Legislation to Address Opioid Crisis

Congress is considering a wide range of legislative proposals that seek to address the continuing opioid crisis. The following committees have tackled this topic recently:

  • Senate Committee on Health, Education, Labor and Pensions (HELP) approved S. 2680, the Opioid Crisis Response Act of 2018, comprised of 40 proposals to address the opioid crisis through such mechanisms as grants to states for prevention, response and treatment of the opioid crisis; accelerating research on non-addictive pain medication; and revisions to FDA authorities.
  •  On May 9, 2018, the House Energy and Commerce Committee approved 25 bills to address the opioid crisis. Specific areas addressed by the legislation include funding for National Institutes of Health research on new non-addictive pain medications, establishment of Comprehensive Opioid Recovery Centers, the use of electronic health records by behavioral health providers, an evaluation of the use of abuse-deterrent opioids in Medicare plans, and Medicare drug plan drug management programs for at-risk beneficiaries, among many others. A second full Committee markup is scheduled on May 17, 2018 to consider another 34 opioid-related bills. Earlier, the Energy and Commerce Health Subcommittee approved 56 bills focused on addressing the opioid crisis and held hearings on the privacy of substance use disorder treatment records and opioid distribution practices.

On May 16, the Ways and Means Committee is marking up an additional package of bills to address the opioid crisis (HR 5774, Combatting Opioid Abuse for Care in Hospitals (COACH) Act; HR 5775, Providing Reliable Options for Patients and Educational Resources (PROPER) Act; HR 5776, Medicare and Opioid Safe Treatment (MOST) Act; HR 5773,“Preventing Addiction for Susceptible Seniors (PASS) Act; HR 5676, Stop Excessive Narcotics in our Retirement (SENIOR) Communities Protection Act; HR 5723, Expanding Oversight of Opioid Prescribing and Payment Act; and HR __, Synthetics Trafficking and Overdose Prevention (STOP) Act of 2017). In addition, on May 17, the Senate Judiciary Committee will consider the following bills: S 2645, Access to Increased Drug Disposal Act of 2018; S 2535 Opioid Quota Reform Act; S 2789 Substance Abuse Prevention Act; S 207, Synthetic Abuse and Labeling of Toxic Substances Act of 2017; S.__, Using Data to Prevent Opioid Diversion Act of 2018; and S_ Preventing Drug Diversion Act of 2018.

Trump Administration Releases Drug Pricing “Blueprint” and Request for Comments on Reducing Drug Costs

The Trump Administration has launched a high-profile initiative aimed at reducing prescription drug prices, including release of a blueprint containing a series of short- and long-term policy proposals and a request for public comments on additional reforms.

First, on May 11, 2018 the Department of Health and Human Services released its “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” which sets forth proposals in four broad areas: improved competition; lowering out-of-pocket costs; enhanced negotiation; and incentives for lower list prices. A number of the proposals were previously included in the President’s FY 2019 budget proposal, such as changes to the 340B discount drug program and inflation limits for Medicare Part B drugs. The Administration potentially could implement some of the new proposals under its current policymaking authority (e.g., reviving the Part B Competitive Acquisition Program; updating CMS’s drug-pricing dashboard to make price increases and generic competition more transparent; developing demonstration projects to test innovative ways to encourage value-based care and lower drug prices; and prohibiting Part D contracts from preventing pharmacists from telling patients when they could pay less out-of-pocket by not using insurance). Many of the most significant proposals would require Congressional action, however, such as reforms to the 340B program and Medicaid drug rebate program; moving certain classes of drugs from Part B to Part D to realize savings; and giving Medicare Part D plan sponsors significantly more power when negotiating with manufacturers. It is still unclear the extent to which the Blueprint will be translated into specific legislative proposals, or the schedule for Congress considering any such legislation.

Note that many of the Blueprint proposals are framed as questions for consideration rather than actual proposals at this point, such as:

  • Do pharmacy benefit managers’ rebates and fees based on the percentage of the list price create an incentive to favor higher list prices (and the potential for higher rebates) rather than lower prices?
  • Should manufacturers of drugs who have increased their prices over a particular lookback period or have not provided a discount be allowed to be included in the Part D protected classes?
  • How could indication-based pricing support value-based purchasing?
  • What policies should CMS consider to ensure inpatient and outpatient providers are neither underpaid nor overpaid for a drug, regardless of where it was administered?
  • What can be done to reduce the pricing disparity and spread the burden for incentivizing new drug development more equally between the U.S. and other developed countries?

On May 14, 2018, HHS released a request for information (RFI) seeking public input on the Blueprint. The RFI restates the questions in the Blueprint, covering such topics as: underpricing/cost shifting; biosimilar development; “fixing global freeloading”; site neutrality; fiduciary duty for pharmacy benefit managers; reducing the impact of rebates; incentives to lower or not increase list prices; inflationary rebate limits; exclusion of certain payments, rebates, or discounts from the determination of average manufacturer price and best price; and copay discount cards. HHS will accept comments until July 16, 2018. Reed Smith is preparing a more comprehensive analysis of the Administration’s drug pricing blueprint.

CMS Proposes Payment and Policy Changes Impacting SNFs for FY 2019 – Plus a New “Patient-Driven Payment Model” Case Mix System for FY 2020

The Centers for Medicare & Medicaid Services (CMS) has issued its annual proposed update to Medicare skilled nursing facility (SNF) PPS rates and policies for fiscal year (FY) 2019. In addition to providing a $850 million boost to Medicare payments for FY 2019, CMS proposes a new case mix classification system to replace the existing Resource Utilization Groups, Version IV (RUG–IV) model beginning in FY 2020. CMS will accept comments on the proposed rule until June 26, 2018.

With regard to the annual payment update, CMS proposes to increase rates by 2.4%, as mandated by the Bipartisan Budget Act of 2018; CMS estimates that in the absence of legislation, the update would have been 1.9%. The annual update is reduced by 2 percentage points for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP).  CMS does not propose adding any new SNF QRP measures at this time; instead, CMS proposes to establish as a factor for removing measures that the costs of a measure outweighs its benefit.  CMS also proposes various updates to the SNF Value-Based Purchasing Program (VBP), which adjusts a SNF’s payments up or down based on its performance on a 30-day hospital readmissions measure.

The proposed new Patient-Driven Payment Model (PDPM) case mix classification system builds on the proposed Resident Classification System, Version I (RCS-I), that CMS set forth in a May 2017 Advanced Notice of Proposed Rulemaking. Like the RCS-I, the PDPM seeks to base Medicare payment on resident needs rather than the amount of therapy a resident receives, but CMS believes the PDPM better accounts for verifiable resident characteristics while reducing systemic and administrative complexity.  In short, the proposed PDPM would identify and adjust the following five case-mix components to characterize a resident’s care:  Physical Therapy (PT), Occupational Therapy (OT), Speech-Language Pathology, Non-Therapy Ancillary (NTA), and Nursing.  Within these components, the patient is assigned to one of 10 clinical categories based on their primary diagnosis (determined by ICD-10 codes recorded in MDS item I8000).  CMS would apply variable per diem payment adjustments to account for changes in resource use over the course of a stay for the PT, OT, and NTA components.  The sum of each of five components would be combined with the non-case-mix component to determine the full SNF PPS per diem rate for that resident.  CMS proposes implementing the PDPM effective October 1, 2019.

CMS expresses concerns that its proposed change in how therapy services would be used to classify residents under the PDPM could incentivize the use of group and concurrent therapy rather than individual therapy. CMS therefore proposes to establish a combined 25% limit on concurrent therapy and group therapy for each discipline of therapy provided.  CMS also proposes to implement an interrupted stay policy beginning FY 2020, in conjunction with implementation of the PDPM.  Under this policy, if a resident is discharged from a SNF and returns to the same SNF by 12:00 a.m. at the end of the third day of the “interruption window,” the treating the resident’s stay as a continuation of the previous stay for purposes of both resident classification and the variable per diem adjustment schedule.  If the resident’s absence from the SNF exceeds this 3-day interruption window, or if the resident is readmitted to a different SNF, CMS proposes treating the readmission as a new stay.  Also effective October 1, 2019, CMS proposes to revise the current SNF PPS assessment schedule to require only two scheduled assessments (instead of the current five) for each SNF stay:  a 5-day scheduled PPS assessment and a discharge assessment.  A separate “Interim Payment Assessment” would be used to capture changes in the resident’s condition in certain situations.  CMS seeks comments on these proposed policies.

CMS Announces Temporary Fee Schedule Increase for Certain Medical Equipment Furnished in Rural Areas

Today the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period that will provide a temporary Medicare rate hike for certain durable medical equipment (DME) and enteral nutrition furnished in rural and non-contiguous areas of the country (Alaska, Hawaii, and U.S. territories) that are not included in competitive bidding.

By way of background, the Affordable Care Act mandated that CMS use pricing information from the DME, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program (CBP) to adjust fee schedule amounts for items furnished in areas where the CBP is not implemented. A highly-technical CMS rule implemented these adjustments, with a transition period during January 1, 2016 – June 30, 2016, during which CMS used 50/50 blended rates. The 21st Century Cures Act extended the transition period through December 31, 2016, mandated that CMS study the impact of the CBP on beneficiary access to DME, and established additional factors for CMS to consider in making fee schedule adjustments effective beginning January 1, 2019. Fully-adjusted fee schedule rates went into effect January 1, 2017, with rates that were on average 50% lower than the unadjusted rates for all of the items and services subject to the adjustments (“Adjusted Rates”). Continue Reading

CMS Proposes $340 Million Increase in Medicare Hospice Payments for FY 2019

The Centers for Medicare & Medicaid Services (CMS) has published a proposed rule to establish FY 2019 Medicare hospice reimbursement rates and policies. The proposed rule would increase FY 2019 hospice rates by 1.8% ($340 million), based on the 2.9% inpatient hospital market basket update, which is reduced by both a 0.8 percentage point multifactor productivity adjustment and a 0.3 percentage point adjustment mandated by the Affordable Care Act. The annual update is reduced by 2 percentage points for hospices that fail to report required quality data. CMS proposes to update the FY 2019 hospice cap to $29,205.44, an increase of 1.8% over the 2018 level.

The proposed rule also would: codify a Bipartisan Budget Act of 2018 provision expanding the definition of attending physician to include physician assistants; make technical revisions to the regulatory definition of ‘‘cap period”; and revise hospice quality reporting program requirements, including the timeline for data submission, the measures reported, and how measures are displayed on Hospice Compare. CMS also describes monitoring activities to assess the impact of hospice reform policies finalized in the FY 2016 hospice final rule, and it reports on trends in hospice utilization and expenditures. Furthermore, as with the other FY 2019 Medicare payment proposed rules, CMS includes a Request for Information (RFI) on ways to promote interoperability and electronic healthcare information exchange, including through possible new or revised conditions of participation. CMS will accept comments on the proposed rule and the RFI until June 26, 2018.

Medicare OPPS Advisory Panel to Hold Annual Meeting August 20-21, 2018

CMS is holding its annual Advisory Panel on Hospital Outpatient Payment meeting on August 20-21 2018.  The Panel advises CMS on ambulatory payment classification clinical integrity and weights, along with hospital outpatient therapeutic services supervision issues.  The deadline for presentations and comments is July 23, and registration runs through July 30.

CMS Proposes FY 2019 Medicare IPPS/LTCH Rates and Policy Changes

The Centers for Medicare & Medicaid Services (CMS) has published its proposed rule updating the Medicare acute inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2019. The proposed rule also includes a request for information (RFI) on ways CMS can enhance interoperability in the health care system, along with a comment solicitation on ways to improve price transparency.  The agency will accept comments on the proposed rule and RFI through June 25, 2018.  The following are highlights of the sweeping regulation.

1.75% Increase in Medicare Acute Hospital Rates. CMS projects that total IPPS payments will increase by about $4.1 billion in FY 2019 compared to FY 2018 levels under the proposed rule.  The IPPS national standardized amount would increase by 1.75%, based on a projected 2.8% market basket update that is reduced by a 0.8% multifactor productivity adjustment; further reduced by 0.75% as mandated by the Affordable Care Act (ACA); and increased by 0.5% as required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). CMS also proposes to boost uncompensated care payments, capital payments, and low-volume hospital payments. Continue Reading

CMS Proposes FY 2019 Medicare Inpatient Psychiatric Facility Rates, Requests Feedback on Future IPF PPS Refinements

CMS has issued a proposed rule to update rates for Medicare services furnished by inpatient psychiatric facilities (IPFs) during FY 2019. CMS estimates that the proposed rule would increase payments by $50 million (0.98%) compared to FY 2018 levels. This projected increase is a result of a 2.8% market basket update, reduced by both a 0.80 percentage point productivity adjustment and a statutorily-mandated 0.75 percentage point reduction, which is further reduced by 0.27 percentage points due to an outlier fixed-dollar loss threshold adjustment. CMS proposes to update the IPF prospective payment system (PPS) federal per diem base rate from $771.35 to $782.01; the base rate would be $766.56 for providers who fail to report required quality data. Among other things, CMS provides an update on the status of IPF PPS refinements and solicits comments about differences in the IPF labor mix, patient mix, and provision of drugs and laboratory services to inform these refinements.

As in the acute inpatient PPS proposed rule, CMS includes a Request for Information to obtain feedback on policies to promote interoperability and electronic healthcare information exchange, including through possible revisions to hospital conditions of participation. CMS will accept comments on the proposed rule until June 26, 2018.

Congress Approves Novel Use of Congressional Review Act to Invalidate Agency Guidance Document; Potential New Avenue of Relief for Health Industry?

As we reported on April 20, 2018, the Senate recently approved a joint resolution of disapproval under the Congressional Review Act (CRA) invalidating a five-year-old guidance document issued by the Consumer Financial Protection Bureau. It marked the first time in which a House of Congress invoked the CRA to invalidate something other than a formal regulation recently promulgated by an agency.

Moments ago, the House of Representatives followed suit by approving the joint resolution of disapproval. The White House has signaled that President Trump will sign the measure.

Given federal agencies’ widespread use of guidance documents in policy making, members of the health care industry should take note that the CRA now represents an additional tool for those looking to invalidate agency guidance documents that exceed the issuing agency’s statutory authority and/or impose unnecessary burdens.

HHS Weighing Additional 1-Year Delay in 340B Ceiling Price/CMP Rule Implementation

The Department of Health and Human Services (HHS) is seeking comments on an additional delay in the effective date of the January 5, 2017 Health Resources and Services Administration (HRSA) final rule addressing calculation of the ceiling price and application of civil monetary penalties under the 340B drug pricing program. Specifically, HHS proposes to push back the rule’s effective date from July 1, 2018 to July 1, 2019. HHS is proposing this action “to allow a more deliberate process of considering alternative and supplemental regulatory provisions and to allow for sufficient time for additional rulemaking.” However, the agency only provided a 15-day comment period, through May 22, 2018.

In a related development, HHS has withdrawn from White House Office of Management and Budget consideration a proposed rule that would have amended certain provisions of the January 5, 2017 340B ceiling price regulations.

CMS Floats Concept of Direct Provider Contracting Innovation Model, Posts Comments on “New Direction” RFI

Last fall, CMS requested public comments on the CMS Innovation Center’s “New Direction,” under which CMS will seek to “promote patient-centered care and test market-driven reforms.” In the interest of transparency and to facilitate discussion, CMS has posted a summary of the more than 1,000 comments it received from medical societies, providers, manufacturers, and other organizations in response to this solicitation.

CMS also has outlined its next potential innovation model — the “direct provider contracting” (DPC) model. Under this concept, CMS would directly contract with primary care or multi-specialty group practices that would agree to be accountable for the cost and quality of care of a defined beneficiary population. For instance, under a primary care-focused DPC model, CMS could pay primary care practices a fixed per beneficiary per month (PBPM) payment to cover applicable primary care services (e.g., office visits, certain office-based procedures, and other non-visit-based services covered under the physician fee schedule), and CMS would provide “flexibility in how otherwise billable services are delivered.” In addition to the fixed PBPM payment, practices could earn performance-based incentives linked to cost and quality. CMS also could test ways to reduce administrative burden through changes to claims submission processes for related services. CMS notes that it could consider multiple models, including Medicare Advantage and Medicaid models. CMS poses a series of detailed questions intended to guide development of the DPC model in a request for information (RFI); comments on the RFI are due May 25, 2018.

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