New Legislation Seeks to Narrow Stark Law Exceptions for Certain Complex Non-Ancillary Services

Representatives Jackie Speier (D-California) and Dina Titus (D-Nevada) have introduced HR 2143, the Promoting Integrity in Medicare Act of 2019 (PIMA), which – if enacted – would narrow the “Stark” law’s exceptions and have a direct impact on the services provided by physicians who self-refer for the performance of certain designated health services. The 2019 bill is similar to previous proposals introduced by Representative Speier in prior years.

PIMA would strengthen the Stark law by excluding specified complex “non-ancillary services” from the Stark law’s in-office ancillary services (IOAS) and physicians’ services exceptions, increasing penalties for violations, and adding compliance review provisions. With certain exceptions, PIMA would define non-ancillary services as:  advanced diagnostic imaging studies; anatomic pathology services; radiation therapy services and supplies; physical therapy services; and any other service the Secretary determines “is not usually provided and completed as part of the office visit to a physician’s office in which the service is determined to be necessary.”  Note that the definition of specified non-ancillary service would not include: (1) services furnished in an urban area to an individual who resides in a rural area on the same day as the patient’s initial office visit; (2) services furnished as part of a Medicare shared savings program or accountable care organization; (3) services provided under a CMS Innovation Center model; or (4) services provided by an integrated multi-specialty group practice (as defined in the legislation).

Furthermore, for purposes of the Stark law and the Medicare anti-markup rule, PIMA would restrict the exclusion contained in the current definition of the term “entity” in the Stark rules from applying to the technical component or the professional component of a specified non-ancillary service. Such a change would essentially bar referring physician practices from billing Medicare for remote interpretations of advanced diagnostic imaging studies provided by contractors via teleradiology.

The proposed legislation would provide for increased penalties for Stark law violations involving these specified non-ancillary services, providing that:

  • Any person that presents or causes to be presented a bill or a claim for a service that such person knows or should know is for a service for which payment may not be made… or for which a refund has not been made… shall be subject to a civil money penalty of not more than $15,000 for each such service unless such bill or claim included a bill or claim for a specified non-ancillary service, in which case the civil money penalty shall be not more than $25,000 for each such service….
  • Any physician or other entity that enters into an arrangement or scheme… which the physician or entity knows or should know has a principal purpose of assuring referrals by the physician to a particular entity which, if the physician directly made referrals to such entity, would be in violation of this section, shall be subject to a civil money penalty of not more than $100,000 (or $150,000 if such referrals are for specified non-ancillary services)….

These amendments would apply to services furnished approximately one year after enactment.  The legislation also would direct the Secretary, in consultation with the Office of Inspector General, to review compliance of referrals for certain non-ancillary services within 180 days of the bill’s enactment.  The compliance review must:  (1) target certain types of entities that are considered a “high risk of noncompliance” with respect to billing for non-ancillary services and (2) include prepayment reviews, claims audits, focused medical review, and computer algorithms designed to identify payment or billing anomalies.

CMS Proposes $540 Million Increase in Medicare Hospice Payments in FY 2020; Agency Seeks Comments on Integrating Hospice Benefit in Coordinated Care Models

The Centers for Medicare & Medicaid Services (CMS) has proposed a 2.7% increase in Medicare hospice payment rates for fiscal year (FY) 2020, which the agency estimates would result in a $540 million increase in Medicare payments to hospices compared with 2019 levels.  The annual update would be reduced by 2 percentage points for hospices that fail to report required quality data.  The proposed FY 2020 hospice cap is $29,993.99, compared with the FY 2019 cap amount of $29,205.44.

This proposed rule also would:

  • Rebase the continuous home care, general inpatient care, and inpatient respite care per diem payment rates; to maintain budget neutrality, CMS proposes to reduce routine home care payment amounts.
  • Use the current year’s hospital wage data (rather than data from the prior year) to establish the hospice wage index.
  • Modify the hospice election statement requirements to notify beneficiaries if there are services that the hospice will not cover.
  • Revise various Hospice Quality Reporting Program requirements.

CMS includes within the proposed rule a “Request for Information Regarding the Role of Hospice and Coordination of Care at End-of-Life.” Specifically, CMS solicits comments on the potential incorporation of hospice care outside of the Medicare fee-for-service program, such as in the Medicare Advantage program and through accountable care organizations.

The proposed rule is scheduled to be published in the Federal Register on April 25, 2019.  CMS will accept comments on the proposed rule until June 18, 2019.

CMS Expands DMEPOS Items Subject to Prior Authorization Due to “Unnecessary Utilization”

The Centers for Medicare & Medicaid Services (CMS) is expanding the types of durable medical equipment (DME), prosthetic, orthotics, supplies (DMEPOS) that are subject to Medicare prior authorization requirements on the basis of being “frequently subject to unnecessary utilization.”  Specifically, CMS announced that it is adding to the Required Prior Authorization List:

  • Seven power wheelchair codes (K0857, K0858, K0859, K0860, K0862. K0863, and K0864), effective July 22, 2019.
  • Five support surface codes (E0193, E0277, E0371. E0372.and E0373), to be implemented in two phases to allow CMS “to identity and resolve any unforeseen issues. . . before nationwide implementation.” During phase one, which begins July 22, 2019, CMS will limit the prior authorization requirement to one state in each of the DME Medicare Administrative Contractor (MAC) jurisdictions, as follows:  California, Indiana, New Jersey, and North Carolina.  In phase two, which begins October 21, 2019, CMS will expand the program to the remaining states.

Separately, CMS announced that it is adding the following items to its “Master List of Items Frequently Subject to Unnecessary Utilization”: Continue Reading

CMS Proposes $887 Million Boost in Medicare Payments to Skilled Nursing Facilities in FY 2020 While Floating Expanded Group Therapy Definition

The Centers for Medicare & Medicaid Services (CMS) recently released its 232-page proposed rule to update the Medicare skilled nursing facility (SNF) prospective payment system (PPS) for federal fiscal year (FY) 2020, which begins on October 1, 2019. Overall, CMS projects that SNF PPS payments would rise by $887 million under the proposed rule. Specifically, CMS proposes a 2.5% increase factor, based on a SNF market basket update of 3.0% reduced by a 0.5 percentage point multifactor productivity adjustment.

As we have reported previously, FY 2020 will mark the implementation of the new Patient-Driven Payment Model (PDPM) first announced during last year’s SNF PPS rulemaking cycle. PDPM focuses on a resident’s clinical condition and care needs rather than the volume of care provided. In structuring PDPM last year, CMS finalized a combined 50% limit on group and concurrent therapy furnished to a SNF resident, such that for each therapy discipline (i.e., physical therapy, occupational therapy, and speech-language pathology), no more than 25% of the therapy services furnished to a SNF resident during a covered Medicare Part A stay may be in a group or concurrent setting. At the time, CMS stated that it intended to define group therapy as exactly four residents performing the same or similar therapy activities.

Now, however, CMS proposes that group therapy would include treating at the same time two to six residents who are performing the same or similar activities. CMS states that it believes this proposed change “would offer therapists more clinical flexibility when determining the appropriate number for a group, without compromising the therapist’s ability to manage the group and the patient’s ability to interact effectively and benefit from group therapy.” Nevertheless, the proposed rule cautions that CMS continues to believe that “individual therapy is the preferred mode of therapy provision and offers the most tailored service for patients.” Moreover, CMS emphasizes that

when group therapy is used in a SNF, therapists must document its use in order to demonstrate why it is the most appropriate mode of therapy for the patient who is receiving it. . . . SNFs should include in the patient’s plan of care an explicit justification for the use of group, rather than individual or concurrent, therapy. This description should include, but need not be limited to, the specific benefits to that particular patient of including the documented type and amount of group therapy; that is, how the prescribed type and amount of group therapy will meet the patient’s needs and assist the patient in reaching the documented goals.

CMS will accept comments on the proposed rule until June 18, 2019. A final rule is expected to be published on or before August 1, 2019.

CMS Proposes $195 Million Boost in Medicare Payments to Inpatient Rehabilitation Facilities in FY 2020

The Centers for Medicare & Medicaid Services (CMS) has released its proposed rule to update the Medicare inpatient rehabilitation facility (IRF) prospective payment system (PPS) for fiscal year (FY) 2020.  CMS projects that IRF PPS payments would rise by $195 million under the proposed rule.  Specifically, CMS proposes a 2.5% increase factor, based on an IRF market basket update of 3.0% reduced by a 0.5 percentage point multifactor productivity adjustment.  CMS proposes to rebase and revise the IRF market basket to use a 2016 base year rather than 2012.  CMS also proposes to increase the outlier threshold amount from $9,402 for FY 2019 to $9,935 for FY 2020, which would have the effect of decreasing aggregate payments by approximately 0.2%.  The proposed FY 2019 standard payment conversion factor is $16,573, compared to $16,021 in FY 2019.  An IRF that does not submit required quality data to CMS would be subject to a 2.0 percentage point decrease in its annual update.

To align with other post-acute care settings and support the eventual transition to a unified post-acute care system, CMS proposes to use the concurrent (rather than prior year) FY inpatient prospective payment system (IPPS) wage index beginning with FY 2020.  CMS requests comments on the appropriateness of the wage index used to adjust IRF payments.  Other proposed updates include:  revisions to case-mix groups based on FY 2017 and FY 2018 data, and updated relative weights and average length of stay values for the revised case-mix groups; revisions to interoperability and IRF Quality Reporting Program (QRP) measures; expansion of QRP data collection to all patients, regardless of payer; and clarification that the determination as to whether a physician qualifies as a rehabilitation physician is made by the IRF.

CMS will accept comments on the proposed rule until June 17, 2019.

 

HHS Announces Extended Comment Period for Healthcare Interoperability Proposed Rules, Releases New HIPAA FAQs

Today the U.S. Department of Health and Human Services (HHS) announced that it would extend until June 3, 2019 the comment periods for the Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC) proposed interoperability and information blocking rules.  CMS also announced that as a result of public comments, it “will adjust the effective dates of our policies to allow for adequate implementation timelines as appropriate.”

In related developments, the ONC also released the second draft of the Trusted Exchange Framework and Common Agreement, along with a related Notice of Funding Opportunity.  In addition, HHS released a set of frequently asked questions (FAQs) from the Office for Civil Rights (OCR), addressing HIPAA’s right of access as related to apps designated by individual patients and application programming interfaces (APIs) used by a healthcare provider’s electronic health record (EHR) system.  The FAQs clarify, among other things, that once protected health information (PHI) has been shared by a HIPAA covered entity with a third-party app, as directed by the individual, the covered entity will not be liable under HIPAA for subsequent use or disclosure of electronic PHI, provided the app developer is not itself a business associate of a covered entity or other business associate.  Continue Reading

Medicare Inpatient Psychiatric Facility Payments Would Increase by $75 Million under FY 2020 Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) is proposing to increase Medicare inpatient psychiatric facility (IPF) payments by $75 million – a 1.7% boost – in fiscal year (FY) 2020.  Specifically, CMS proposes a net market basket update of 1.85%, reflecting a 3.1% market basket update reduced by two statutory reductions. CMS estimates that payments will be further reduced by 0.15 percentage points due to a proposed outlier fixed-dollar loss threshold adjustment.  If finalized, the IPF prospective payment system (PPS) federal per diem base rate would increase from $782.78 in FY 2019 to $803.48 in FY 2020 (with a $787.70 per diem base rate for providers who fail to report quality data).

Other proposed provisions include:  rebasing the IPF market basket using a 2016 base year (instead of 2012) base year; the addition of a new medication continuation measure for the FY 2021 payment determination; and elimination of the current one-year lag in wage index data.  CMS will accept comments on the proposed rule until June 17, 2019.

Congressional Committees Continue Focus on Prescription Drugs, Insurance Coverage Policy

Recent Congressional hearings and markups have concentrated on prescription drug pricing, insurance access, and other health topics.  For instance, last week the House Ways and Means Committee unanimously approved H.R. 2113, the Prescription Drug Sunshine, Transparency, Accountability and Reporting Act of 2019 (STAR Act).   The legislation would, among other things:

  • Require drug manufacturers to report their “justification” for drug price increases that exceed certain thresholds.
  • Mandate that manufacturers of drug, biologicals, devices, and medical supplies publicly report on the Open Payments database the value and quantity of free samples given to providers.
  • Extend to manufacturers without a Medicaid rebate agreement the requirement to report average sales price for drugs covered under Medicare Part B, and authorize civil money penalties for failure to report such information or for reporting false information.
  • Direct the Secretary of Health and Human Services to publicly disclose certain rebates, discounts, and other price concessions achieved by pharmaceutical benefits managers (PBMs) and to report on drugs furnished in the inpatient hospital setting.

Earlier this month the House Energy and Commerce Committee approved 12 bills aimed at reducing prescription drug and other health care costs, including legislation intended to:  bolster generic drug competition; support Affordable Care Act insurance enrollment programs and state-based insurance marketplaces; reverse Trump Administration policies on short-term, limited duration health insurance and State Relief and Empowerment Waivers; and establish an “Improve Health Insurance Affordability Fund” to help states lower premiums in the individual health insurance market.

In addition to these markups, Congressional panels have held hearings various health policy issues, including the following: Continue Reading

Medicaid Legislation with Medicaid Rebate Misclassification Penalty Heads to President Trump

The House and Senate have both approved H.R. 1839, the Medicaid Services Investment and Accountability Act of 2019, clearing it for President Trump’s signature.  Notably, the legislation would: subject drug manufacturers to a new civil monetary penalty (CMP) for knowingly misclassifying or misreporting covered outpatient drugs under a Medicaid drug rebate agreement (such as by knowingly submitting incorrect drug product information).  The penalty would equal up to two times the difference between the rebate amount the manufacturer paid and the amount the manufacturer would have paid if the drug had been correctly classified.  The CMP would be imposed in addition to any other penalties or recoveries.  Furthermore, the legislation would strengthen requirements for recovery of unpaid rebate amounts, without regard to whether the manufacturer knowingly made the misclassification or should have known that the misclassification would be made, and it dedicates funding to improve oversight and enforcement of drug rebate obligation compliance.  These provisions would take effect on the date of enactment, and would apply to covered outpatient drugs supplied by manufacturers under rebate agreements on or after the enactment date.

The bill also would: Continue Reading

CMS Clarifies Regulatory Requirements for Line Extension Drug Medicaid Rebate Calculations

The Centers for Medicare & Medicaid Service (CMS) has issued regulations to address revised statutory requirements related to manufacturer calculation of Medicaid drug rebates.  Specifically, CMS recently published an interim final rule with comment period that revises the regulatory text at 42 CFR § 447.509(a)(4) to reflect Bipartisan Budget Act (BBA) of 2018 language revising the rebate calculation for line extension drugs.  CMS notes that the BBA of 2018 provisions are self-implementing and apply to rebate periods beginning on or after October 1, 2018.  CMS is “exercising no discretion in this interim final rule with comment period,” and emphasizes that the regulatory language “is intended solely to ensure there is no confusion as to the rebate calculations that apply for such drugs for rebate periods beginning on or after October 1, 2018, as required by statute.”  CMS will accept comments on the interim final rule until May 31, 2019.

In the same document, CMS adopts a final rule that responds to comments the agency solicited in a February 1, 2016 covered outpatient drug (COD) final rule with comment period regarding the definition and identification of line extension drugs.  After the additional comment period closed, Congress passed the Comprehensive Addiction and Recovery Act of 2016, which exempts certain abuse-deterrent formulations from the definition of line extension for purposes of the Medicaid drug rebate program, so the public comments “were not informed by the current statutory framework.”  CMS therefore is not finalizing a definition of line extension in this rulemaking; instead, CMS is “reiterating guidance provided in the COD final rule that manufacturers are to rely on the statutory definition of line extension at section 1927(c)(2)(C) of the Act, and where appropriate are permitted to use reasonable assumptions in their determination of whether their drug qualifies as a line extension drug.”  If CMS decides to develop a regulatory definition of line extension drug in the future, the agency will issue a proposed rule.

In the Regulatory Impact Analysis accompanying the rulemaking, CMS provides an updated estimate of the expected fiscal effect of the BBA of 2018 line extension drug provision on rebates paid by manufacturers to the federal government.  While the Congressional Budget Office (CBO) initially estimated that the revised line extension rebate calculation would save about $5.7 billion over 10 years, using more current data CMS now estimates that the policy will save about $3.65 billion over 10 years.

CMS Proposes Federal Funding Methodology for ACA Basic Health Program for 2019-2020

CMS has published a proposed rule setting forth its methodology for determining federal payment amounts to states that elect to establish a Basic Health Program (BHP) under the Affordable Care Act (ACA).  Through the BHP, states may offer health benefits to low-income individuals otherwise eligible to purchase coverage through an Affordable Insurance Exchange/Marketplace.  CMS will accept comments on the proposed methodology through May 2, 2019.

CMS Announces Plans to Kick Off 2020 Medicare Clinical Lab Test Update Process

The Centers for Medicare & Medicaid Services (CMS) has scheduled a June 24, 2019 public meeting on calendar year (CY) 2020 Medicare Clinical Laboratory Fee Schedule (CLFS) payments for new or substantially revised clinical lab codes.  Specifically, the June meeting will provide an opportunity for the public to submit comments on the appropriate basis — the crosswalk or gapfill methodology — for establishing payment amounts for clinical laboratory codes being considered for 2020 CLSF payment.  The meeting also will address reconsideration requests regarding final payment determinations made last year.  Additional information, including a listing of CLFS test codes to be considered at the meeting, is posted on the CMS website.

In addition, CMS has announced that the Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests will meet on July 22-23, 2019 to make recommendations on test codes presented at the CLFS public meeting.  The panel also may consider other CY 2020 CLFS policy issues; a detailed agenda will be posted here prior to the meeting.

Supreme Court poised to decide important agency-deference question

In litigation challenging the actions of any federal agency, the level of deference a court must show to the agency often dictates the outcome. This is especially true in cases challenging an agency’s interpretation of its own regulations. In practice, it is extremely difficult to convince a court to reject an agency’s regulatory interpretation. Earlier today, however, the Supreme Court of the United States heard oral argument in a case that asks whether the Court should overrule its existing precedent and establish a new deference standard that might, in effect, give private parties more of a fighting chance when challenging an agency’s interpretation of its own regulations. Based on the tenor of today’s oral argument, it appears that a majority of the Court may be willing to significantly refine the regulatory deference standard without officially overruling past precedent.

The case currently before the Supreme Court (Kisor v. Wilkie, No. 18-15) involves the Department of Veterans Affairs (VA) and its interpretation of a regulation governing disability benefits. Under the so-called Seminole Rock / Auer standard—so named because of Supreme Court decisions issued in 1945 and 1997, respectively—a court generally defers to an agency’s interpretation of its own regulation unless the interpretation is “plainly erroneous or inconsistent with the regulation.” That is a tough standard for a private litigant to meet. Moreover, a private party may not even have advance notice of what the agency’s regulatory interpretation is. In Auer, for example, the Supreme Court granted deference to a regulatory interpretation asserted for the first time in an amicus brief filed by an agency at the request of the Supreme Court.

In a surprising twist, the Solicitor General of the United States (SG) in Kisor filed a merits brief on behalf of the VA agreeing that the Supreme Court should clarify and narrow the deference standard applied to agency regulatory interpretations. Among other things, the SG argued that courts must first determine that a regulation is ambiguous before deciding whether the agency’s interpretation of the regulation is reasonable and therefore entitled to deference. Some readers will recognize that such a two-part standard echoes the deference standard applied to agency statutory interpretations contained in codified regulations (so-called Chevron deference). Importantly, the SG also argued that courts should defer to the agency’s regulatory interpretation “only if the interpretation was issued with fair notice to regulated parties; is not inconsistent with the agency’s prior views; rests on the agency’s expertise; and represents the agency’s considered view, as distinct from the views of mere field officials or other low-level employees.”

The questions asked by the Justices during today’s oral argument reflected a range of concerns, including that principles of stare decisis and the fact that Congress has not deemed it necessary to alter the Seminole Rock / Auer standard counseled against the Court overruling either decision. At the same time, a number of Justices—particularly Justices Alito, Gorsuch, and Kavanaugh—expressed skepticism regarding the actual underpinnings of the Seminole Rock / Auer standard and the practical ability of courts to apply the SG’s proposed clarification of that standard. It has been argued, for example, that there is no statutory basis for the Seminole Rock / Auer standard and that it conflicts with the judicial-review provision of the Administrative Procedure Act, which was enacted one year after Seminole Rock was decided.

Predicting the outcome of a Supreme Court case based on the events of oral argument is often a fool’s errand. This case is no different. However, it is safe to say that with the SG advocating a clarification and narrowing of the Seminole Rock / Auer standard, there is a material possibility that a majority of the Supreme Court will agree to do so even if there are insufficient votes to overrule Seminole Rock and Auer altogether. A decision is expected before the Court recesses in June.

Trump Administration Calls for Medicare/Medicaid Cuts, Program Reforms in FY 2020 Budget Proposal

The Trump Administration’s proposed fiscal year (FY) 2020 budget includes extensive health policy provisions – as evidenced by the 162-page Department of Health and Human Services (HHS) “Budget in Brief.”  This summary focuses on the major Medicare and Medicaid proposals most directly impacting providers and suppliers; note that we discuss the Administration’s proposed prescription drug reimbursement provisions in a separate blog post.

Medicare, Value-Based, and Related Reforms

The Administration estimates that its Medicare policy reforms would save approximately $811 billion over 10 years.  The Administration states that these proposals are “designed to improve value-based systems of care, exercise fiscal integrity, promote competition, reduce provider burdens, improve the appeals system, and address high drug prices.”  Budget provisions that would result in significant Medicare savings include the following (savings are over the 10-year period of FYs 2020-2029): 

  • A new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt. [$98.0 billion net]
  • Site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits). [$131.4 billion]
  • Payment for all off-campus hospital outpatient departments under the physician fee schedule (PFS) effective CY 2020. [$28.7 billion]
  • A unified post-acute care system for skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in 2025. [$101.2 billion]
  • An increase in the intensive care unit minimum stay threshold from three days to eight days in order to qualify for payment under the LTCH prospective payment system. [$10.0 billion]
  • A reduction in Medicare reimbursement of bad debt from 65% to 25% over three years beginning in FY 2020. [$38.5 billion]
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to all areas of the country. The proposal also would reimburse contract suppliers based on their own bids rather than a single payment amount.  [$7.1 billion]
  • Consolidation of federal spending for graduate medical education (GME) programs. [$211.8 billion in Medicare savings].

Other legislative proposals intended to promote value-based care that are not expected to have a budget impact include the following: Continue Reading

Trump Administrations’ Proposed FY 2020 Budget Targets Prescription Drug Prices

Reducing prescription drug prices is a major theme in the Trump Administration’s fiscal year (FY) 2020 budget proposal, with policies intended to increase competition, encourage better negotiation, incentivize lower list prices, and cut out-of-pocket costs for beneficiaries.  The Administration’s projected savings from its designated prescription drug budget proposals top $69 billion over 10 years, although that does not include savings for provisions for which the budget impact was not available or that were included in other sections of the budget (e.g., a Medicaid State Drug Utilization Review provision within the Medicaid budget section).

We summarize below the major prescription drug pricing and related proposals in the President’s proposed budget, covering Medicare Parts B and D, Medicaid, and the 340B discount drug program.  All budget savings reflect the 10-year period of FYs 2020-2029.  Note that while most of these provisions would require legislative approval, Congressional committees have already held several hearings this year on prescription drug pricing.  Stay tuned for more action in this area.

Major Medicare Part B Proposals

The proposed Trump budget would: Continue Reading

Senate Committee Calls for Sunshine Act/Open Payments Enforcement

The Senate Finance Committee recently called for federal agencies to begin investigating physician owned distributors’ (PODs) alleged noncompliance with the U.S. Physician Payment Sunshine Act (Sunshine Act, or Open Payments). The letter is addressed to the head of the Office of Inspector General (OIG) and the Administrator of the Centers for Medicare & Medicaid Services (CMS). If acted upon, the OIG/CMS investigations could change the landscape of the Sunshine Act in an important way: any resulting public enforcement would most likely be a first.

How the Sunshine Act Applies to PODs

The Sunshine Act requires applicable manufacturers and group purchasing organizations (GPOs) to annually disclose payments or transfers of value to covered recipients (physicians and teaching hospitals), as well as to disclose ownership or investment interests held by U.S. physicians or their immediate family members (with an exception for publicly traded companies).

PODs, which distribute revenue to their physician owners in a variety of ways, generally have obligations to file such reports under the Sunshine Act in one of two ways:

  1. The POD falls within the definition of a “GPO.” CMS defines a GPO as “an entity that (1) Operates in the United States; and (2) Purchases, arranges for or negotiates the purchase of a covered drug or device, biological, or medical supply for a group of individuals or entities, but not solely for use by the entity itself.”1 CMS has been clear that it intends this definition to include PODs.2
  2. The POD qualifies as an “applicable manufacturer.” To the extent that a POD takes title to a product, the Sunshine Act implementing regulations make clear that PODs are “subject to the same requirements as all other applicable manufacturers.”3

Sunshine Enforcement Landscape

Under the Sunshine Act, the knowing failure to disclose reportable payments or ownership interests is punishable by a civil monetary penalty of up to $10,000 for each item not timely reported. However, despite nearly a decade since enactment and five cycles of data reporting (this year will be the sixth), there have been no public enforcement actions. (We must acknowledge, however, the possibility that investigations may be ongoing and merely not yet publicly disclosed, or were resolved without penalty and therefore not publicly announced.)

Interestingly, the March 19, 2019, letter, written by Senators Chuck Grassley and Ron Wyden (Chairman and Ranking Member, respectively, of the U.S. Senate Finance Committee), appears to imply that the authors have knowledge of specific violations by PODs: “It has come to our attention that some physician owned distributorships (PODs) may be failing to disclose physician ownership or investment interest as required by the Physician Payment Sunshine Act (Sunshine Act).” Continue Reading

MedPAC Recommends Medicare Payment Updates for 2020

The Medicare Payment Advisory Commission (MedPAC) has issued its annual report to Congress with recommendations for updates to Medicare fee-for-service rates for 2020.

With regard to hospital services, MedPAC recommends that Congress update Medicare inpatient and outpatient prospective payment system (PPS) rates by 2% in 2020.  MedPAC also proposes a new hospital value incentive program (HVIP) to replace Medicare’s current inpatient hospital quality programs.[1]  In short, the HVIP would include a small set of population-based outcome, patient experience, and value measures; score all hospitals based on the same prospectively-set performance targets; and account for social risk factors by distributing payment adjustments through peer grouping.  MedPAC believes the HVIP “will be simpler and will produce more equitable results compared with existing quality payment programs.”

MedPAC recommends no change to Medicare physician fee schedule rates in 2020, in accordance with the Medicare Access and CHIP Reauthorization Act of 2015.  MedPAC reiterates its criticism of current Merit-based Incentive Payment System measures, stating that they “are neither effective in assessing true clinician quality nor appropriate for Medicare’s value-based purchasing programs.”

MedPAC continues to call for implementation of a unified PPS for post-acute care (PAC) providers, including skilled nursing facilities (SNFs), home health agencies (HHAs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs).   Acknowledging that implementation of a unified PAC PPS “is on a longer timetable,” MedPAC recommends the following setting-specific interim payment updates for 2020: Continue Reading

HHS Finalizes Updates to State Medicaid Fraud Control Unit Rules

The Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG) have finalized changes to State Medicaid Fraud Control Unit (MFCU) regulations to reflect statutory changes and policies adopted since the MFCU rules were first issued in 1978.  Among other things, the regulations incorporate statutory policies that:  authorize a federal matching rate of 90% for the first 3 years of MFCU operation and 75% thereafter; establish standards under which MFCUs must be operated; allow MFCUs to investigate and prosecute Medicare or other federal health care fraud cases as long as the fraud is primarily related to Medicaid, with the approval of the relevant Inspector General; and allow MFCUs to investigate and prosecute patient abuse or neglect in board and care facilities, regardless of whether the facilities receive Medicaid payments.

Additionally, the rule addresses, among other things:  the OIG’s delegated authority and MFCU/OIG coordination; definition of terms; MFCU organizational requirements; MFCU prosecutorial authority; provisions of agreements with state Medicaid agencies; staffing requirements; limits on federal financial participation for data mining activities that duplicate surveillance and utilization review responsibilities of State Medicaid agencies; and disallowance procedures.  The agencies are not finalizing a proposal that would have made mandatory the review of complaints of misappropriation of patients’ or residents’ funds; the final rule retains that as an optional authority.

The final rule is effective May 21, 2019.

CMS Seeks Input on How to Promote the Sale of Individual Health Insurance Coverage Across State Lines

The Centers for Medicare & Medicaid Services (CMS) has requested public comments on ways to remove barriers to the sale of health insurance coverage across state lines in order to expand consumer choice.  In particular, CMS is interested in how states can utilize Section 1333 of the Affordable Care Act (ACA), which authorizes two or more states to enter into a “Health Care Choice Compact” to allow a health insurance issuer to offer qualified health plans (QHPs) in the individual health insurance market in any state included in the compact.  Under this authority, the QHP generally would be subject only to the laws and regulations of the state in which the health insurance coverage was written or issued.  To date, no states have passed legislation to enter into an ACA Health Care Choice Compact.

In a request for information (RFI) published March 11, 2019, CMS solicits comments on whether and how the Administration should promote the sale of QHPs across state lines through Health Care Choice Compacts.  The RFI seeks input on numerous operational considerations associated with Health Care Choice Compacts, along with the potential impact on consumers and the insurance market.  CMS will accept comments until May 6, 2019.

CMS Spells Out New Standards for State Surveyors on Immediate Jeopardy Citations

The Centers for Medicare & Medicaid Services (CMS) recently revised its guidance to states on standards for citing “immediate jeopardy” during surveys of all provider and supplier types and laboratories, including health, emergency preparedness, and life safety code surveys.  CMS Administrator Seema Verma observed in a blog post that the changes were made in response to stakeholders who “have voiced concerns that the guidance needs to be clearer and more consistent to identify serious quality concerns across states.”  Administrator Verma added that the updated policy “is just the beginning of upcoming efforts to strengthen oversight of healthcare settings.”

Under the new policy, which is set forth in an update to Appendix Q to the State Operations Manual (SOM), surveyors must identify the following “key components” in order to cite immediate jeopardy:

Noncompliance: An entity has failed to meet one or more federal health, safety, and/or quality regulations. CMS removed a previous requirement of culpability to cite immediate jeopardy. 

AND

Serious Adverse Outcome or Likely Serious Adverse Outcome: As a result of the identified noncompliance, serious injury, serious harm, serious impairment or death has occurred, is occurring, or is likely to occur to one or more identified recipients at risk.  In its guidance to state survey agency directors, CMS points out that the potential for that level of harm does not constitute immediate jeopardy.

AND

Need for Immediate Action: The noncompliance creates a need for immediate corrective action by the provider/supplier to prevent serious injury, serious harm, serious impairment or death from occurring or recurring.

CMS created a new “Immediate Jeopardy Template” that must be used by surveyors to document evidence of each component of immediate jeopardy.  CMS also clarifies that each immediate jeopardy citation must be decided independently (i.e., there are no automatic immediate jeopardy citations).  Additionally, the updated guidance addresses determinations of whether noncompliance has caused or made likely serious mental or psychosocial harm to recipients.  CMS drafted separate subparts to Appendix Q focusing on nursing homes and clinical laboratories, since those provider types have specific policies related to immediate jeopardy.

CMS issued the Appendix Q update on March 5, 2019; the changes are effective immediately.

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