Surprise Medical Billing:  Bipartisan Consensus on the Problem, but Finding an Effective Fix May be Harder

In a rare display of unity, President Donald Trump and bipartisan Congressional leaders have highlighted their shared commitment to tackling “surprise” medical billing – when an insured patient is subject to unexpectedly high out-of-pocket costs for out-of-network care that is beyond their control.  Such surprise billing can occur when a patient receives emergency care from an out-of-network provider but they could not choose their provider, or when a patient is treated at an in-network hospital but the anesthesiologist or another provider is out of network.

On May 9, 2019, the White House held an event to highlight the economic burden surprise billing can have on patients and set the following forth principles for a legislative solution, including:

  • Patients receiving emergency care should not be forced to shoulder extra costs billed by a care provider but not covered by their insurer. In emergency situations, balance billing for amounts above the in-network allowed amount should be prohibited.
  • Patients receiving scheduled care should have information about whether providers are in or out of their network and what costs they may face.
  • Patients should not receive surprise bills from out-of-network providers they did not choose.
  • Federal healthcare expenditures should not increase.

President Trump indicated in his remarks that the Administration would be releasing a more detailed “transparency” proposal over the next two weeks or so.  In response to the Administration’s announcement, key lawmakers in both parties expressed support for legislative action on this issue.  For instance, House Energy and Commerce Chairman Frank Pallone, Jr and Ranking Member Greg Walden released a joint statement committing to crafting bipartisan legislation to address surprise billing, and Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander stated his goal of having a bipartisan solution on the Senate floor by July.

Yet even with bipartisan recognition of the problem, crafting a federal solution is expected to be complex.  In addition to determining how to balance state and federal roles in regulation of insurance practices, it will be important for legislators to understand how reimbursement rates are set in the private sector, how charges may differ from actual costs, the complicated dynamics of negotiations between payers and hospital-based physicians, and the role cost shifting continues to play in the health care system as a whole.  Moreover, stakeholders – which include employers, patients, physicians, hospitals and insurers — are likely to be sharply divided on potential remedies, such as holding patients harmless for charges, banning balance billing, limiting reimbursement rates for out-of-network providers, prohibiting out-of-network/in-network distinctions for emergency care, and requiring binding arbitration to resolve disputes between payers and providers.  Even with the political will to act quickly, finding a legislative cure may take a more methodical approach.

CMS Releases Draft Guidance for Hospitals on Shared Space and Contracted Services

The Centers for Medicare & Medicaid Services (CMS) released a draft guidance for state survey agencies on May 3, 2019, impacting hospitals that share space, staff, and/or services with another co-located hospital or health care entity. The draft builds on informally followed principles by CMS employees which emphasized that certain payment rules, like those for hospitals-within-hospitals, should not override the requirement that every co-located hospital must independently meet Medicare hospital conditions of participation. The final guidance, when released, will provide an authoritative guidance for hospitals with co-location arrangements and result in greater consistency.

To read more on CMS’s draft guidance, please visit

CMS Finalizes Plan to Streamline Medicare Appeals Rules

The Centers for Medicare & Medicaid Services (CMS) has issued a final rule streamlining the process for Medicare Parts A and B claims appeals and for Medicare Part D coverage determination appeals in order to “reduce associated burden on providers, beneficiaries, and appeals adjudicators.”  In particular, the final rule:

  • Removes the requirement in Medicare Parts A and B claim and Part D coverage determination appeals that appellants sign appeal requests (CMS estimates that 284,486 appeal requests are dismissed annually for not containing a signature).
  • Specifies that the timeframe for vacating a dismissal is 180 days instead of 6 months, since the number of days in a 6 month timeframe can vary.
  • Provides that the date of receipt of the Administrative Law Judge or attorney adjudicator’s decision or dismissal is presumed to be 5 calendar days after the date of the notice of the decision or dismissal, unless there is evidence to the contrary.
  • Amends CMS’s January 17, 2017 final rule streamlining Medicare appeals procedures to revise “several provisions that, upon further review, pose unanticipated challenges with implementation.”  Consequently, the final rule makes certain regulatory changes concerning amount in controversy, notices of hearings, notices of intent to participate in hearings, extensions of time to request hearings, dismissals of hearing requests, and notices of remand.
  • Makes technical corrections to the regulatory text to address incorrect cross-references, inconsistent definitions, and confusing terminology.

The rule is effective on July 8, 2019.

CMS Blocks States from “Diverting” Provider Medicaid Payments to Third Parties

The Centers for Medicare & Medicaid Services (CMS) is revoking the authority of states to “divert” certain Medicaid provider payments to a third party (rather than make the payment directly to the provider) to fund other costs on behalf of the provider “for benefits  such as health insurance, skills training, and other benefits customary for employees.”  This reassignment authority, which was granted in a 2014 rule, had been intended to “enhance state options to provide practitioners with benefits that improve their ability to function as health care professionals.”  In a final rule published May 6, 2019, CMS has changed course and determined that this policy was “neither explicitly nor implicitly authorized by the statute.”  While individual practitioners may purchase or contribute to the items previously allowed under this authority through transactions separate from their Medicaid reimbursement, CMS contends that states may not redirect payment that the statute requires be made directly to the practitioner.  The rule is effective July 5, 2019.

CMS Details Bidding Timeline for Round 2021 of the DMEPOS Competitive Bidding Program

Medical equipment suppliers can submit bids for Round 2021 of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) from July 16 through September 18, 2019, the Centers for Medicare & Medicaid Services (CMS) has just announced.

As previously reported, Round 2021 of the CBP round will cover 16 product categories in 130 competitive bidding areas (CBAs), with contracts running from January 1, 2021 through December 31, 2023.  This will be the first round using the new “lead item” bidding methodology, under which suppliers will submit a single bid price for the item in the product category with the highest total nationwide Medicare allowed charges (instead of separate bid prices for each item in the product category).  Also new for Round 2021, CMS will calculate a single payment amount (SPA) for the lead item based on the highest amount bid within the winning bids in the CBA, rather than the median of winning bids.  The SPAs for non-lead items will be based on the historic differences in the fee schedule amounts for the lead item and non-lead items.

Major milestones in the Round 2021 bidding process include the following (though CMS notes that the dates are subject to change):

6/10/2019 — Registration window opens for the DMEPOS Bidding System (DBidS) and Connexion (the CBP secure portal)

7/16/2019 — Bid window opens

8/16/2019 — DBidS registration closes

8/19/2019 — Covered document review date for bidders to upload financial documents

9/18/2019 — Bid window closes

Fall 2019 — Preliminary bid evaluation notification

Summer 2020 — CMS announces SPAs and begins contracting process

Fall 2020 — CMS announces contract suppliers

1/1/2021 Implementation of Round 2021 contracts and prices

The Competitive Bidding Implementation Contractor (CBIC) is holding a series of webcasts later this month to educate suppliers on Bid Surety Bond and Lead Item Pricing, Preparing and Submitting Financial Documents, and Registering and Submitting a Bid.  The CBIC is compiling information on Round 2021 here.

CMS Rolls Out New Policies to Promote Medicare Beneficiary Access to Emerging Technologies

Agency Promises More Frequent Drug/Device HCPCS Code Update Opportunities, Bars MACs from Adopting New Blanket Noncoverage Policies without Evidence Review  

On May 2, 2019, Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma outlined new improvements to the HCPCS coding and local coverage decision processes that are intended to “ensure safe and effective treatments are readily accessible to beneficiaries without delaying patient care.”

First, CMS plans to move away from its single annual application opportunity for new Level II Healthcare Common Procedure Coding System (HCPCS) codes.  Instead, CMS intends to provide quarterly opportunities to apply for drug HCPCS codes and semi-annual opportunities to apply for device codes.  According to CMS, this move “will greatly improve the ability for technologies to move through the adoption curve.”  The agency will provide additional details in the future.  CMS previously announced a series of steps to improve transparency in its HCPCS decision-making and eliminate a market share requirement for non-drug applications.

Second, CMS is preventing Medicare Administrative Contractors (MACs) from subjecting new technologies to blanket noncoverage policies without consideration of the clinical evidence.  In a CMS “Q&A” document released on May 2, CMS addressed a question regarding whether MACs may issue local coverage determinations (LCDs) to non-cover a category or class of technologies (e.g., emerging technologies assigned to a Current Procedural Terminology (CPT) Category III codes or certain clinical laboratory codes) without an evidence review.  CMS responded that MACs are bound by recently-revised manual provisions if they make any coverage changes under an existing LCD.   That is, if a technology does not fall under an existing LCD, MACs must follow the revised requirements to issue an LCD, “including reviewing the evidence with respect to the technology.”  Administrator Verma reiterated in remarks to the Medical Device Manufacturers Association that “[t]his means the contractors cannot make local coverage decisions that automatically non-cover an item or service because it has a category III code.”

These announcements come on the heels of release of the Medicare acute inpatient prospective payment system (IPPS) proposed rule for fiscal year 2020, which also includes a number of provisions that aim to “unleash medical innovation” by expediting access to novel medical technology.  For instance, CMS proposes establishing an alternative IPPS new technology add-on payment (NTAP) pathway for medical devices that are granted FDA Breakthrough Devices Program designation and increasing IPPS NTAP payments. The agency also solicits comments on how it could clarify the substantial clinical improvement criteria for evaluating applications for both the IPPS NTAP and outpatient transitional pass-through payment for devices.  CMS will accept comments on the proposed rule through June 24, 2019.

Together, these are all encouraging developments for the medical technology industry, providers, and the patients who ultimately benefit when administrative barriers to the adoption of innovative medical devices are removed.

Be Careful What You Ask For: The FCA Implications of DOJ’s New ACA Stance

As many industry observers know, the Department of Justice (DOJ) recently filed an appellate brief arguing that the Affordable Care Act (ACA) should be struck down in its entirety following Congress’ 2017 decision to eliminate the financial penalty assessed when individuals fail to obtain health insurance. On its face, the case in question—Texas v. United States, No. 19-10011 (5th Cir.)—has nothing to do with the False Claims Act (FCA). DOJ’s new legal position, however, could have important ramifications under the FCA.

Section 10104(j)(2) of the ACA made significant revisions to the FCA’s public-disclosure bar, 31 U.S.C. § 3730(e)(4). The public-disclosure bar was originally designed to limit parasitic lawsuits filed by private individuals who had no personal knowledge of alleged fraud against the United States but who brought bounty-seeking lawsuits based on allegations contained in such things as government indictments and press reports. See, e.g., United States ex rel. Marcus v. Hess, 317 U.S. 537, 545 (1943) (addressing case where qui tam relator allegedly copied portions of a federal indictment filed against certain contractors and used the indictment as the basis for an FCA complaint filed against the contractors a few weeks later).

The ACA amended the public-disclosure bar by, among other things, giving DOJ discretion to waive the bar and eliminating the ability of state and local government disclosures to trigger the bar. The former amendment turned what had been an absolute jurisdictional defect requiring a qui tam case’s dismissal into a defect that DOJ could waive in its sole discretion, unguided by statutory language as to how that discretion must be exercised. The latter amendment, which narrowed what types of disclosures could trigger the bar, anticipated—and effectively disagreed with—the outcome of a case before the Supreme Court that would be decided just one week after the ACA was enacted. See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 (2010) (holding that the pre-ACA version of the FCA’s public-disclosure bar could be triggered by disclosures made in state and local administrative reports, audits, and investigations).

While most have predicted that DOJ will ultimately lose its argument in favor of striking down the entire ACA, those currently engaged in FCA litigation or involved in related investigations would be well-advised to appreciate the FCA-related ramifications should DOJ prove successful in having the ACA struck down in its entirety. And given that jurisdictional defects can typically be raised at any point in the federal judicial process (including for the first time on appeal), a decision by the Fifth Circuit and/or the Supreme Court that strikes down the entire ACA and effectively reverts the public-disclosure bar to its pre-ACA form could prove problematic for qui tam relators and DOJ alike, providing a welcome reprieve for certain defendants.

CMS Proposes FY 2020 Medicare IPPS/LTCH Update, Including Proposals to Promote Access to New Medical Device Technology

The Centers for Medicare & Medicaid Services (CMS) has released its proposed rule to update the Medicare acute inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2020.  Notably, the proposed rule includes a number of provisions that aim to “unleash medical innovation” by expediting access to novel medical technology – and the agency signals that similar reforms are contemplated for the hospital outpatient prospective payment system (OPPS).  CMS will accept comments on the proposed rule through June 24, 2019.

IPPS Payment Update

CMS projects total Medicare IPPS spending will increase by about $4.7 billion in FY 2020 under the proposed rule.  The projected market basket update is 3.2%, which is subject to a -0.5 percentage point productivity adjustment.  CMS also is making a statutory +0.5 percentage point adjustment to the standardized amount. The proposed standardized amount is $6,287 for hospitals that submit quality data and are meaningful electronic health record (EHR) users, with reduced payment to hospitals that do not report quality data and/or are not meaningful EHR users.  Specific hospital payments can be impacted by other factors, including penalties for excess readmissions under the Hospital Readmissions Reduction Program (HRRP), poor performance under the Hospital-Acquired Condition (HAC) Reduction Program, and adjustments under the Hospital Value-Based Purchasing (VBP) Program.  For instance, CMS estimates that 2,599 hospitals will have their base operating payments reduced under the HRRP by a total of approximately $550 million in FY 2020.

Promoting Access to Innovative Devices

CMS includes proposals that are intended to improve beneficiary access to innovative medical technologies, and the agency solicits comments on additional changes and clarifications that could be adopted either in FY 2020 or beyond. Specifically:

  • CMS proposes an alternative IPPS new technology add-on payment (NTAP) pathway for certain “transformative” medical devices. Specifically, if a new medical device is part of the Food and Drug Administration’s (FDA) Breakthrough Devices Program and receives FDA marketing authorization, the device would be considered new for NTAP purposes and it would not need to demonstrate substantial clinical improvement.  In other words, the device would only need to meet the NTAP cost criterion.  This policy would apply to technology add-on payments for FY 2021 and subsequent fiscal years.  CMS is not proposing an alternative inpatient NTAP pathway for drugs at this time.
  • CMS proposes to increase NTAP payments for discharges beginning on or after October 1, 2019. Currently the NTAP payment is set at the lesser of:  (1) 50% of the costs of the new medical service or technology; or (2) 50% of the amount by which the costs of the case exceed the standard diagnosis related group (DRG) payment.  Acknowledging that this payment may “no longer provide a sufficient incentive for the use of new technology,” CMS is proposing to increase the NTAP payment to the lesser of: (1) 65% of the costs of the new medical service or technology; or (2) 65% of the amount by which the costs of the case exceed the standard DRG payment.
  • CMS seeks comments on potential changes and/or clarifications to the substantial clinical improvement criteria for evaluating applications for both the IPPS NTAP and the OPPS transitional pass-through payment for devices. The agency is considering a number of revisions for FY 2020 (or calendar 2020 in the case of the OPPS changes), along with broader reforms for future years. For instance, CMS is considering specifying the types of evidence or study design that would be considered by the agency, including real-world data, and clarifying that the substantial clinical improvement requirement can be met if the technology would be “broadly adopted.”

Other Proposed IPPS Policies

CMS proposes to revise the wage index methodology to “reduce the disparity between high and low wage index hospitals.  Under this policy, CMS would increase the wage index values for certain hospitals with low wage index values (below the 25th percentile wage index value).  To maintain budget neutrality, CMS would decrease the wage index values for certain hospitals that currently have high wage index values (above the 75th percentile wage index value).  CMS proposes a one-year transition policy under which it would establish a 5% cap on any decrease in a hospital’s wage index in FY 2020 compared to its final wage index for FY 2019.

Additionally, CMS proposes to update policies for the Hospital Inpatient Quality Reporting (IQR) Program, Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition (HAC) Reduction Program; and the Medicare and Medicaid Promoting Interoperability Program.  The proposed rule also addresses, among many other things:  proposed changes to MS-DRG classifications; updates to graduate medical education, critical access hospital, and uncompensated care payments; and limits on payment increases for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis.

LTCH Rates and Policies

With regard to LTCHs, CMS expects LTCH-PPS payments to increase by about 0.9% ($37 million) in FY 2020 if the proposed rates and policies are finalized.  CMS proposes to update the standard federal rate for FY 2020 by a market basket increase of 3.2%, less a productivity adjustment of 0.5%.  The proposed standard federal rate includes an area wage budget neutrality factor of 1.0064747.  The proposed FY 2020 rule includes a temporary, one-time budget neutrality adjustment in connection with elimination of the “25 Percent Rule” in the final FY 2019 rule; CMS also anticipates making a permanent, one-time adjustment in FY 2021. The proposed FY 2020 standard federal rate is $42,951, compared with the FY 2019 standard federal rate of $41,559.  For LTCHs that fail to submit data for the LTCH Quality Reporting Program (QRP), the standard federal payment rate would be $42,114.  CMS expects about 71% of LTCH cases to meet the patient-level criteria to be paid based on the LTCH PPS standard federal payment rate, rather than the lower “site neutral” payment rate.  For FY 2020, the transition period for site-neutral cases will end and LTCH site neutral payment rate cases will be paid fully based on the site neutral payment rate.  CMS estimates that aggregate payments for LTCH site neutral payment rates would decrease by approximately 4.9%.

The proposed LTCH-PPS fixed-loss amount for high cost outlier cases would be set at $29,997, up from $27,121 in FY 2019.  The proposed fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate would be $26,994, compared with $25,743 in FY 2019.  CMS also proposes updates to LTCH QRP quality measures, data elements, and data collection and public reporting requirements.

HHS Revises Previous Penalty Structure for HIPAA Violations, Creates Annual Penalty Limits

The U.S. Department of Health and Human Services filed a Notice of Enforcement Decision on Friday, April 26, 2019, announcing a new system of annual penalty limits for HIPAA violations based on an entity’s level of culpability. The agency revised its previous interpretation of the Health Information Technology for Economic and Clinical Health Act (HITECH Act), which did not have an annual penalty cap varying on level of culpability.

This revised structure reinforces the idea that Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliance efforts can have a significant monetary impact in terms of future enforcement.

To read more on the revised penalty structure, please visit Life Sciences Legal Update.

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.