OIG Moving Ahead on Changes to Anti-Kickback Safe Harbor Protection for Drug Rebates to Plans, PBMs

On July 18, 2018, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) submitted to the Office of Management and Budget (OMB) for regulatory review a proposed rule entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.” This proposed rule, if released, appears to follow through on various statements made by HHS Secretary Azar suggesting that safe harbor protection under the Federal Anti-Kickback Statute should be removed for prescription drug rebates—a potential action on which HHS requested comment in the Administration’s Drug Pricing Blueprint.

At this stage we have a few initial observations:

  • While a proposed rule could be at OMB for hours or for months before being released (or might never be released), we note that the period for submission of comments on the Drug Pricing Blueprint ended on July 16, 2018, only two days prior to the submission of this proposed rule to OMB.  As such, this rule must have been in the works for some time, and the Administration does not appear to have waited to review and consider comments before deciding to move forward with it.
  • We will of course need to see the text of the proposed rule to evaluate it from a substantive perspective.  It is noteworthy that the title refers not only to the removal of safe harbor protection but also to “creation of new safe harbor protection.”  Secretary Azar and the Drug Pricing Blueprint have referred to replacing rebates with “a fixed price for a drug over the contract term”; while we’re not aware of the Administration providing any explanation of what that means or how it would work, the idea may be that rebates would still be paid to payors, but in an amount equal to the difference between the contracted-for fixed (net) price and the drug’s list price.  That said, it is not clear whether the proposed new safe harbor will contain those or other requirements.
  • The title in the OMB submission does not refer to which safe harbor(s) would be modified to “remove” safe harbor protection—e.g., OIG may propose to modify the shared risk exception at 42 CFR 1001.952(t) and/or the discount safe harbor at 42 CFR 1001.952(h).
  • There are significant questions relative to OIG’s authority to effectively prohibit manufacturer rebates to payors through changes to the anti-kickback safe harbor regulations.  These include:
    • The Anti-Kickback Statute contains a statutory exception for “a discount or other reduction in price obtained by a provider of services or other entity under a Federal health care program if the reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or other entity under a Federal health care program.”  Manufacturers and payors may seek to rely upon this statutory exception as permitting rebates, even if the regulatory safe harbor promulgated by OIG is more restrictive.
    • The “non-interference clause” included in the part of the statute establishing the Medicare Part D program provides that the Secretary of HHS, “[i]n order to promote competition under this part and in carrying out this part … may not interfere with the negotiations between drug manufacturers and pharmacies and [Part D plan] sponsors.”   OIG regulations which would mandate “fixed price” contracts of the sort described in the Blueprint, or which otherwise proscribe discounting structures, might be deemed to run afoul of this statutory restriction.
  • The rule would apparently be subject to a comment period before it is finalized, inasmuch as it is identified in the OMB notice as a proposed rule.  If and when the rule would be finalized is unclear, as is the effective date of any final rule.

Given the importance of payor rebates to the current drug pricing system, these types of regulatory changes could potentially have significant impacts on various parts of the health care industry, depending upon the specifics.  One thing that is certain is that industry and observers will be watching closely for the release of this proposed rule—as will we.

CMS Proposes Medicare DMEPOS Rate Changes and Competitive Bidding Reforms

Agency Anticipates Temporary Lapse in Competitive Bidding Program after 2018

CMS is proposing a number of changes to Medicare durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) reimbursement policies for 2019, including fee schedule adjustments to account for a “temporary lapse” in the competitive bidding program (CBP). Consistent with the Administration’s stated goal of reducing regulatory burdens on providers and suppliers, CMS also proposes changes to CBP bidding rules for future rounds of bidding and other policy changes that generally have been welcomed by industry.  CMS will accept comments on the proposed rule until September 10, 2018.

Provision of DMEPOS During Competitive Bidding Gap.  With regard to DMEPOS competitive bidding, CMS acknowledges that there will be a lapse in the competitive bidding program (including the national mail-order program for diabetic testing supplies) because the agency has not begun the recompete process for current contracts that end on December 31, 2018.  Therefore beginning January 1, 2019, beneficiaries may receive DMEPOS items from any Medicare-enrolled supplier until such time as new CBP contracts are awarded.  CMS anticipates that the next round of bidding “could potentially be delayed until January 1, 2021.”

Future Competitive Bidding Program Rules.  CMS proposes a number of “market-oriented reforms” and technical policy changes that would apply to future rounds of competitive bidding, including the following: Continue Reading

CMS Proposes Updates to Medicare Home Health Payment Policies for 2019 and 2020

The Centers for Medicare & Medicaid Services (CMS) has proposed its annual update to Medicare home health prospective payment system (HHS PPS) rates for calendar year 2019, along with a broader case-mix methodology reform proposal that would be implemented beginning in 2020.

With regard to the 2019 update, CMS proposes a 2.1% rate increase ($400 million) based on a home health agency (HHA) market basket update of 2.8%, minus a 0.7 percentage point multifactor productivity adjustment.  Payments would also reflect a 0.1% increase tied to outlier payment spending and a 0.1% decrease stemming from a new statutory rural add-on classification policy. The proposed 2019 national, standardized 60-day episode payment rate is $3,151.22, compared to the 2018 rate of $3,039.64; the rate for an HHA that does not submit required quality data would be $3,089.49.

The proposed rule includes numerous proposals that would impact home health benefit and payment policies.  For instance, the proposed rule would define remote patient monitoring in the Medicare home health benefit and add the cost of remote patient monitoring as an allowable HHA administrative cost.  It also would provide a temporary transitional payment for home infusion therapy services in 2019 in advance of full implementation of a new home infusion therapy benefit in 2020.  CMS proposes new safety and accreditation standards for home infusion therapy suppliers, and seeks comments regarding payment for home infusion therapy services beginning in 2021.  CMS also proposes changes to Home Health Quality Reporting Program policies, including removal of seven quality measures under a new measure removal factor, in addition to proposed refinements to Home Health Value-Based Purchasing Model measures and performance scoring.  A number of provisions of the rule are designed to reduce regulatory burdens, including changes to the physician certification/recertification process to eliminate the requirement that certifying physicians estimate how much longer skilled services will be needed when recertifying patient eligibility for home health care. Continue Reading

Ways and Means Committee to Examine Ways to Modernize Stark Law to Promote Value-Based Reforms

The House Ways and Means Health Subcommittee has scheduled a July 17, 2018 hearing on “Modernizing Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program.”  In announcing the hearing, Subcommittee Chairman Peter Roskam stated that “the lack of Stark modernization is a clear barrier to reforms that reward better outcomes and higher value care.”  This echoes CMS Administrator Seema Verma’s recent blog post acknowledging that “[i]n its current form, the physician self-referral law may prohibit some relationships that are designed to enhance care coordination, improve quality, and reduce waste.”  As previously reported, CMS is accepting comments through August 24, 2018 on the Stark Act’s impact on participation in integrated delivery models, alternative payment models, and other coordinated care arrangements.  The Ways and Means hearing will review the Administration’s efforts in this area and examine stakeholder recommendations for Congressional action.

CMS Proposes $220 Million Boost in Medicare ESRD PPS Payments in 2019

The Centers for Medicare & Medicaid Services (CMS) has released its proposed rule to update the Medicare end-stage renal disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2019.  CMS proposes to increase the ESRD PPS base rate from $232.37 in 2018 to $235.82 in 2019 as a result of a proposed 1.5% market basket increase and a proposed wage index budget-neutrality adjustment factor of 0.999833.  CMS also expects to increase payments by $30 million as a result of updates to the outlier threshold amounts.  Overall, CMS estimates that its proposed ESRD PPS policies would increase payments to ESRD facilities by approximately $220 million in CY 2019.

The proposed rule also would, among other things: update the drug designation process for new renal dialysis drugs and biologicals and change the basis for determining transitional drug add-on payment adjustments; update the wage index; revise the low-volume payment adjustment regulations; update the acute kidney injury dialysis rate (which would be the same as the ESRD PPS base rate); and modify ESRD Quality Incentive Program (QIP) reporting requirements and measures.  CMS also includes requests for information on (1) promoting interoperability and electronic healthcare information exchange through possible revisions to patient health and safety requirements; and (2) price transparency/improving beneficiary access to provider and supplier charge information.  Furthermore, as part of this rulemaking, CMS is proposing a number of changes to Medicare policies related to rate setting for durable medical equipment, prosthetics, orthotics and supplies, which we will address in a separate post. CMS will accept comments on the proposed rule until September 10, 2018.

CMS Proposes Tightening Medicaid Provider Reassignment Rules

The Centers for Medicare & Medicaid Services (CMS) is proposing to rescind the authority of states to make Medicaid payments to a third party on behalf of an individual provider, rather than directly to the provider, “for benefits such as health insurance, skills training, and other benefits customary for employees,” under certain circumstances.  This authority, which was adopted in a 2014 rule, was originally intended to “enhance state options to provide practitioners with benefits that improve their ability to function as health care professionals.”

CMS now explains that after further review, it believes “the new exception created by the 2014 rule is not consistent with the statute, may have resulted in provider payments being diverted in ways that do not comport with the law, and, in some cases, may have occurred without the express knowledge of the provider.”  While the agency does not have details on the amount of reimbursement currently being reassigned to third parties by states, CMS believe it is likely in excess of $100 million.  For instance, CMS estimates that unions may currently collect as much as $71 million under arrangements in which states reassign homecare workers’ dues to unions – an arrangement that would not be permitted under the proposed rule scheduled to be published on July 12, 2018.

CMS seeks comments on how it could provide further clarification on the types of payment arrangements that would be permissible assignments of Medicaid payments, and whether additional flexibilities are needed to support self-directed service models.  CMS will accept comments for 30 days after publication.

CMS Considering New Medicare Advantage Payment Arrangement Incentive (MAQI) Demonstration

CMS is planning a new “Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) Demonstration” that would allow clinicians who participate in certain Medicare Advantage (MA) plans that involve taking on risk to be treated as Advanced Alternative Payment Model (Advanced APM) participants under the Medicare physician fee schedule. By way of background, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established two tracks for Medicare physician fee schedule/Quality Payment Program updates:

  1. The Merit-based Incentive Payment System (MIPS), which adjusts Medicare payments based on performance on quality, cost, improvement activities, and advancing care information measures, or
  2. Advanced APMs, under which eligible clinicians may earn incentive payments for sufficient participation in certain payment arrangements that coordinate care, improve quality, and reduce costs.

Continue Reading

MedPAC Issues Annual Report to Congress on Medicare and the Health Delivery System

The Medicare Payment Advisory Commission (MedPAC) has released its annual report to Congress on “Medicare and the Health Care Delivery System.” This year’s report includes recommendations for changes to emergency department services policies, along with analyses of potential changes that would impact physicians, medical equipment suppliers, post-acute care providers, and others.  Highlights include the following: 

  • The only formal recommendations in this year’s report involve the appropriate access to and use of hospital emergency department (ED) services. MedPAC calls on Congress to:  (1) allow isolated rural stand-alone EDs to bill standard outpatient prospective payment system facility fees; and (2) provide such EDs with annual payments to assist with fixed costs.  Furthermore, MedPAC recommends reducing by 30% Type A ED payment rates (for EDs open 24 hours a day, 7 days a week) for off-campus stand-alone EDs that are within six miles of an on-campus hospital ED.
  • MedPAC describes a budget-neutral approach to rebalancing the Medicare physician fee schedule to increase ambulatory evaluation and management (E&M) services rates while reducing rates for other services (e.g., procedures, imaging, and tests). For instance, MedPAC modeled the impact of a 10% payment rate increase for E&M services, which would cut rates for all other services by 3.8%. 
  • MedPAC examines Medicare payment policies for medical devices. First, MedPAC considers potential expansion of competitive bidding for durable medical equipment, prosthetic devices, prosthetics, orthotics, and supplies.  Second, MedPAC examines physician-owned distributors (PODs) of devices and medical equipment and suggests “ways in which Medicare and policymakers can constrain the risks posed by PODs” (e.g., through revisions to the Stark physician self-referral law and by requiring all PODs to report under the Open Payments program).
  • MedPAC discusses ways Medicare could revise coverage policies to reduce the use of “low-value care,” which MedPAC defines as the provision of a service with little or no clinical benefit or for which the risk of harm outweighs its potential benefit. MedPAC focuses on six tools that Medicare could use:  expanding prior authorization; implementing clinician decision support and provider education; increasing cost sharing for low-value services; establishing new payment models that hold providers accountable for the cost and quality of care; revisiting coverage determinations on an ongoing basis; and linking clinical effectiveness and cost-effectiveness to Medicare coverage and payment policies.
  • The report also includes analyses regarding: the effects of the Hospital Readmissions Reduction Program on beneficiary care and Medicare spending; potential refinements to a unified post-acute care (PAC) prospective payment system to account for sequential stays; approaches to helping hospitals encourage Medicare beneficiaries to use higher-quality PAC providers; principles to measure hospital quality (and application of those principles to population-based outcomes measures and a potential new hospital quality incentives program); the impact of Medicare ACO models on cost and quality; and ways to encourage the development of managed care plans that integrate care dual-eligible individuals.

CMS Schedules July 13 Focus Group Meeting on Provider Compliance Issues

Citing an interest in improving its processes and eliminating unnecessary requirements, CMS is hosting July 13, 2018 “Provider Compliance Focus Group” meeting regarding Medicare fee-for-service compliance topics, including medical review, targeted probe and educate, and Recovery Audit Contractors.  CMS states that it wants “to ensure claims are paid appropriately and preserve the Medicare Trust Fund for future generations,” while making it easier for providers “to submit claims accurately and manage the audit process if you’re audited.”  The target audience for the session is physicians, non-physician practitioners, billing specialists, suppliers, and associations.  Registration is required.

Roundup of Recent Congressional Hearings, Markups on Health Policy Issues

Congressional committees have held numerous hearings and markups in recent weeks on health policy topics, including several hearings focused on health care costs.  Highlights include the following:   Continue Reading

House Approves Sweeping Opioid Prevention/Treatment Legislation

The House of Representatives has overwhelmingly approved bipartisan legislation, HR 6, the SUPPORT for Patients and Communities Act, intended to bolster opioid prevention and treatment programs and strengthen law enforcement efforts.  Among many other things, the wide-ranging legislation would: Continue Reading

CMS Invites Comments on Ways to Ease the Burden of Stark Physician Self-Referral Rules on Coordinated Care Arrangements

As part of its “Regulatory Sprint to Coordinated Care,” the Centers for Medicare & Medicaid Services (CMS) is seeking input on how it can address “unnecessary obstacles to coordinated care, real or perceived, caused by the physician self-referral law.” CMS Administrator Seema Verma acknowledged in a recent blog post that “[i]n its current form, the physician self-referral law may prohibit some relationships that are designed to enhance care coordination, improve quality, and reduce waste.”  To that end, CMS has published a notice soliciting comments on the effect the physician self-referral law, also known as the Stark Act, may have on participation in integrated delivery models, alternative payment models (APMs), and other coordinated care arrangements.

The notice poses 20 detailed questions covering such areas as:

  • The structure of existing or potential arrangements that involve designated health services (DHS) and referring physicians that participate in APMs or other novel financial arrangements, including how risk is apportioned.
  • Whether/how “the arrangement mitigates the financial incentives for inappropriate self-referrals, and/or overutilization of items and services, and patient choice.”
  • The need for revisions or additions to the Stark exceptions to apply to APMs and novel financial arrangements, including whether any such exceptions should address individual DHS referrals, ownership or investment interests, and/or compensation arrangements.
  • Terminology under the physician self-referral law, including both new definitions for such terms as APMs and care coordination, and possible modifications to exiting terminology (e.g., fair market value, and how, in the context of APMs, compensation should be considered to ‘‘take into account” the volume or value of referrals or other business generated).
  • The appropriate role of transparency in the context of the physician self-referral law.

CMS will accept comments until August 24, 2018.  CMS does not commit to undertaking future rulemaking in response to this request for information.  However, Administrator Verma does expect the input will “help the agency better understand provider concerns and target its regulatory efforts to address those concerns.”

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).
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