Medicare Hospital Inpatient and Long-Term Care Hospital Payment Policies Finalized for FY 2019

By Gail L. Daubert, Paul W. Pitts and Debra A. McCurdy on 14 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) has released its final rule updating the Medicare inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2019. The following are highlights of the lengthy rule, which is scheduled to be published August 17, 2018.

IPPS Payments to Rise by $4.8 Billion. CMS expects total IPPS payments by $4.8 billion in FY 2019 compared to FY 2018. The annual hospital update for FY 2019 is 1.35%, based on a 2.9% hospital market basket update that is reduced by a 0.8 percentage point productivity adjustment and an additional 0.75 percentage point statutory reduction. CMS also is applying a 0.5 percentage point documentation and coding increase mandated by the Medicare Access and CHIP Reauthorization Act of 2015, for a 1.85% increase to operating payment rates.

Quality Measures and Related Payment Adjustments. Updates to acute hospitals are subject to several quality-related adjustments. For example, the maximum update of 1.35% applies to a hospital that submits quality data and is a meaningful electronic health record (EHR) user. On the other hand, a hospital that does not submit quality data and is not a meaningful EHR user is subject to an update of -1.55%. Other factors impacting payments include excess readmissions under the Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program performance, and Hospital Value-Based Purchasing (VBP) Program adjustments.

CMS adopted numerous changes to hospital quality and value programs to reduce the burden on hospitals and to align with the Administration’s “Meaningful Measures” initiative. For instance, CMS is remove 18 measures from CMS quality programs and “de-duplicating” 25 additional measures that are reported in multiple quality programs. In response to public comments, however, CMS is retaining six patient safety measures it had proposed to remove from the VBP Program. CMS also is revising requirements under the Medicare and Medicaid Electronic EHR Incentive Programs, which CMS now calls “Promoting Interoperability Programs.”

Other IPPS Policies. The final rule also addresses, among many other things: changes to MS-DRG classifications; new technology add-on payment applications; updates to Medicare uncompensated care payments; wage index updates; payments for certain hospitals paid on a reasonable cost basis; and revisions to documentation requirements for Medicare cost report submissions and physician certification and recertification of claims.

LTCH Policies. Under the final rule, CMS expects LTCH PPS payments will increase by approximately 0.9% ($39 million) in FY 2019. The standard federal rate for FY 2019 is $41,579.65 (compared to $41,415.11 in FY 2018). This rate reflects a 1.35% annual update, an area wage level budget neutrality factor of 0.999713, and a one-time budget neutrality adjustment of 0.990884 in connection with elimination of the “25 Percent Rule” (discussed below). The update for an LTCH that does not submit required LTCH Quality Reporting Program data is reduced by 2 percentage points, resulting in a standard federal rate of $40,759.12. The final fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $27,124, and the fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $25,769.

Elimination of the 25 Percent Rule. As previously proposed, CMS is eliminating the current 25% threshold policy. By way of background, under the 25% rule, an LTCH is allowed to admit up to 25% of its patients from a single general acute care hospital, beyond which there is a significant reimbursement reduction (with certain exceptions). Full implementation has been subject to statutory and regulatory delays. Under the final rule, CMS is eliminating the 25% threshold policy effective beginning in FY 2019 by removing the provisions of 42 C.F.R. § 412.538. In light of the full implementation of the site neutral payment rate beginning in FY 2016, CMS determined that the concerns that led to the introduction of the 25-percent threshold policy (i.e. LTCHs acting like IPPS step-down units) have been ameliorated. CMS is applying a one-time adjustment to the LTCH PPS standard federal payment rate in FY 2019 to make this change budget neutral.

FY 2019 Medicare Inpatient Rehabilitation Facility Payments to Rise by $105 Million under Final Rule

By Debra A. McCurdy on 10 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) expects Medicare payments to inpatient rehabilitation facilities (IRFs) to increase by 1.3% ($105 million) in fiscal year (FY) 2019 under the final IRF prospective payment system (PPS) rule. For FY 2019, the IRF PPS update factor is 1.35%, based on an IRF market basket update of 2.9%, reduced by a 0.8 percentage point multifactor productivity adjustment and a statutory 0.75 percentage point reduction (the update for an IRF that does not submit required quality data is reduced by 2.0 percentage points). The final FY 2019 standard payment conversion factor is $16,021, compared to $15,838 in FY 2018. CMS estimates that aggregate payments will decrease by an additional 0.1% due an update to the outlier threshold, from $8,679 in FY 2018 to $9,402 for FY 2019.

CMS finalized several policies intended to reduce the administrative and regulatory burdens for IRFs. Specifically, applicable to IRF discharges beginning on or after October 1, 2018, CMS is: 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, for IRF discharges beginning on or after October 1, 2019, CMS is removing the Functional Independence Measure instrument and associated Function Modifiers from the IRF-Patient Assessment Instrument. The final rule also updates IRF Quality Reporting Program policies and measures.

PDPM Activated: CMS Finalizes FY 2019 SNF Rule Largely as Proposed

By Jeremy Alexander on 9 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) has finalized its annual update to Medicare skilled nursing facility (SNF) PPS rates and policies for fiscal year (FY) 2019, without significant changes to the rule as proposed. Most notably, CMS adopted the Patient-Driven Payment Model (PDPM) case mix classification system. The PDPM, which will replace the existing Resource Utilization Groups, Version IV (RUG–IV) model beginning in FY 2020 (effective October 1, 2019), focuses on a resident’s clinical condition and care needs, rather than the volume of care provided. CMS characterizes PDPM as a value-based, unified post-acute care payment system that prioritizes the unique care needs of patients and reduces the administrative burden associated with the system.

With regard to the annual payment update, CMS (as proposed) increased rates by 2.4%, as mandated by the Bipartisan Budget Act of 2018; the annual market basket percentage is reduced by 2 percentage points for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program (QRP). Based on this update, CMS estimates an increase of $820 million in Medicare payments to SNFs in FY 2019. CMS also finalized various updates to the SNF Value-Based Purchasing Program (VBP), which adjusts a SNF’s payments up or down based on its performance on a 30-day hospital readmissions measure.

As we noted in our post on the proposed rule, CMS expressed concerns that its proposed change in how therapy services would be used to classify residents under the PDPM could incentivize the use of group and concurrent therapy rather than individual therapy. CMS finalized its proposal to establish a combined 25% limit on concurrent therapy and group therapy for each discipline of therapy provided. CMS reiterated its position that individual therapy permits the greatest degree of interaction between the resident and therapist, and should therefore represent, at a minimum, the majority of therapy provided to an SNF resident. While CMS finalized the proposed cap, it left room for future changes and stated that it will monitor whether group and concurrent therapy are being over- or underutilized and will consider revising the policy and undertaking enforcement efforts as necessary. Continue Reading

Trump Administration Finalizes Rule Expanding Availability of Short-Term, Limited Duration Health Insurance

By Debra A. McCurdy on 8 August 2018 Posted in Department of Health & Human Services Regulations

The Departments of Treasury, Labor, and Health and Human Services have issued a final rule that expands the availability of short-term, limited duration insurance policies that are exempt from Affordable Care Act (ACA) qualified health plan standards (e.g., the requirement to provide essential health benefits, prohibition on preexisting condition exclusions, lifetime and annual dollar limits, guaranteed availability and guaranteed renewability). The final rule extends the maximum duration of such “short-term” coverage from less than three months to a maximum initial contract term of less than 12 months, and – in a change from the proposed rule — a maximum duration (including the initial contract term and renewals and extensions) of up to 36 months. States may adopt a definition with a shorter maximum initial contract term and/or a shorter maximum duration of a policy. The final rule also revises the requirements for consumer notices that must appear in the contract and any application materials provided in connection with enrollment in these short-term, limited-duration insurance policies.

Based on an updated analysis, the Administration estimates that 2019 enrollment in short-term, limited-duration insurance will increase by 600,000 (including 100,000 previously-uninsured consumers), while Exchange enrollment is expected to decrease by 200,000 and off-exchange plan enrollment is expected to decrease by 300,000. By 2028, the Administration projects that enrollment in individual market plans will decrease by 1.3 million, while enrollment in short-term, limited-duration insurance will increase by 1.4 million, representing a 0.1 million increase in the total number of people with some type of coverage. The Administration also discusses benefits and costs of the rule, including comments it received regarding the potential effects on premiums, the individual market risk pool, out-of-pocket spending, and access to care, among other impacts.

The final rule is effective October 2, 2018 and applies to insurance policies sold on or after October 2, 2018.

Medicare Hospice Payments to Increase by $340 Million under Final FY 2019 Rule

By Debra A. McCurdy on 8 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) has finalized its FY 2019 update to Medicare hospice rates and policies. As forecast in the May 8, 2018 proposed rule, CMS is increasing FY 2019 hospice rates by 1.8% ($340 million), based on a 2.9% inpatient hospital market basket update that is reduced by both a 0.8 percentage point multifactor productivity adjustment and a 0.3 percentage point statutory adjustment. The annual update is reduced by 2 percentage points for hospices that fail to report required quality data. The final FY 2019 hospice cap is $29,205.44, an increase of 1.8% over the 2018 level.

The final rule codifies a Bipartisan Budget Act of 2018 provision that expands the definition of attending physician to include physician assistants. CMS also updates Hospice Quality Reporting Program (HQRP) procedural policies, changes how hospice quality results are displayed on Hospice Compare, and adds a new HQRP measure “removal factor” that considers whether the costs associated with a measure outweigh the benefit of its continued use, among other HQRP provisions.

CMS Educational Call on Proposed CY 2019 Physician Fee Schedule Rule (Aug. 22)

By Debra A. McCurdy on 8 August 2018 Posted in Health Care Industry Events

CMS is inviting stakeholders to participate an August 22, 2019 listening session on the CY 2019 proposed Medicare physician fee schedule rule. The call will focus on three aspects of the proposed rule:

Streamlining Evaluation and Management (E/M) payment policies
Advancing virtual care
Changes to the Quality Payment Program intended to reduce clinician burden, focus on outcomes, and promote interoperability

During the call, CMS experts will answer “clarifying questions” regarding these provisions to help stakeholders develop their formal comments.

Medicare Inpatient Psychiatric Facility Rates for FY 2019 Finalized

By Debra A. McCurdy on 8 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

CMS has published its final rule to update fiscal year (FY) 2019 rates and policies for Medicare inpatient psychiatric facility (IPF) services. CMS estimates that the final rule will increase payments by a total of $50 million (1.1%) compared to FY 2018 levels. The final rule provides for a 1.35% payment update for FY 2019, based on a 2.9% market basket update that is reduced by both a 0.8 percentage point productivity adjustment and a statutorily-mandated 0.75 percentage point reduction. CMS estimates that payments will be further reduced by 0.24 percentage points as a result of an outlier fixed-dollar loss threshold adjustment. Under the final rule, the IPF prospective payment system federal per diem base rate is increased from $771.35 to $782.78; the per diem base rate is $767.33 for providers who failed to report quality data. The final rule also updates the IPF labor-related share, the IPF wage index, and quality measures and reporting requirements under the IPF Quality Reporting Program (IFPQR). Note that while CMS proposed to remove eight IPFQR measures, as a result of public comments CMS is retaining three of the measures (pertaining to Physical Restraint Use, Seclusion Use, and Tobacco Use Treatment at Discharge).

CMS Hosts Forum for Opioid Prescribers to Address the Opioid Epidemic (Aug. 15)

By Debra A. McCurdy on 8 August 2018 Posted in Health Care Industry Events

On August 15, 2018, CMS is convening a Special Open Door Forum on “Sharing Federal Strategies to Address the Opioid Epidemic.” The conference call, which will feature representatives from several Department of Health and Human Services agencies, is intended to educate opioid prescribers on federal resources and strategies for safe prescribing as well as other opioid-related topics.

Citing “Significant Potential for Fraud, Waste, and Abuse,” CMS Extends HHA/Ambulance Enrollment Moratoria in Selected States

By Debra A. McCurdy on 8 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) has determined that it should extend for an additional six months its current moratoria on the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) enrollment of new home health agencies (HHAs) and Part B nonemergency ground ambulance suppliers in selected states. Under the latest notice, the moratoria on new HHAs and branch locations applies to Florida, Illinois, Michigan, and Texas, and the non-emergency ambulance enrollment moratorium applies to New Jersey and Pennsylvania (the previous ambulance supplier enrollment moratorium in Texas was lifted last year as a result of Hurricane Harvey), applicable beginning July 20, 2018. In extending the moratoria, CMS states that the Office of Inspector General concurs that “a significant potential for fraud, waste, and abuse continues to exist regarding those provider and supplier types in these geographic areas.” Furthermore, CMS believes that the moratoria are needed to enable the agency to “continue with administrative actions to combat fraud and abuse, such as payment suspensions and revocations of provider/supplier numbers.” Since the initial moratoria were imposed in 2013, denied applications from more than 1204 HHAs and 26 ambulance companies in the affected geographic areas.

House Approves Permanent Medical Device Tax Repeal Bill

By Debra A. McCurdy on 8 August 2018 Posted in Legislative Developments

The House of Representatives has voted 283 – 132 to approve legislation (HR 184) that would permanently repeal the Affordable Care Act’s 2.3% excise tax on the sale of certain medical devices. While a government funding bill approved by Congress in February 2018 blocked imposition of the tax in 2018 and 2019, permanent repeal has been a top priority of the medical technology industry. It is uncertain, however, whether the Senate will take up the bill this year.

CMS Proposes CY 2019 Medicare OPPS, ASC Update, with Emphasis on Promoting Site-Neutrality

By Debra A. McCurdy on 3 August 2018 Posted in Centers for Medicare & Medicaid Services Regulations

CMS has issued its proposed rule to update Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rates and policies for calendar year (CY) 2019. In addition to providing routine annual updates, the proposed rule includes several provisions intended to encourage “site-neutral payments” for different types of providers. CMS also proposes a change to the basis for updating ASC rates that has long been sought by stakeholders. CMS will accept comments on the proposed rule until September 24, 2018.

Hospital Outpatient Provisions

CMS proposes a 1.25% update to Medicare OPPS rates for 2019, reflecting an expected 2.8% market basket increase that is partly offset by both a statutory 0.75 percentage point reduction and a 0.8% multi-factor productivity (MFP) reduction. The update for hospitals that fail to meet quality reporting requirements is reduced by 2.0% points. Payment changes for individual procedures vary.

In the proposed rule, CMS emphasizes its interest in addressing payment differentials that the agency believes drives site-of-service decisions, especially between the physician’s office and hospital outpatient department settings, and increases costs to the Medicare program and beneficiaries. In particular, CMS targets certain off-campus hospital provider-based departments (PBD) that are “excepted” under section 603 of the Bipartisan Budget Act of 2015. Section 603 provides that effective for services provided on or after January 1, 2017, certain off-campus PBDs are generally paid under the physician fee schedule (PFS), rather than the typically higher-paying OPPS, unless an exception applies. For 2019, CMS proposes:

Paying a PFS equivalent rate for clinic visit services (G0463, Hospital outpatient clinic visit for assessment and management of a patient) when provided at an “excepted” PBD. CMS observes that clinic visits are the most common service billed under the OPPS, and this policy is expected to save approximately $760 million in FY 2019, including $150 million in reduced beneficiary copayments.
CMS proposes to apply to exempted PBDs a current policy that reduces OPPS payment for separately payable, nonpass-through drugs and biologicals (other than vaccines) purchased through the 340B drug discount program from average sales price (ASP) plus 6% to ASP minus 22.5% (with certain exceptions).
Revising payment when an excepted PBD expands into new lines of service. Under the proposed rule, if an excepted off-campus PBD furnishes a service from one of 19 proposed clinical families of services that it did not furnish during a baseline period (November 1, 2014 through November 1, 2015), the service from the “new” family would be paid under the PFS rather than the OPPS.
CMS notes that it is “developing a method to systematically control for unnecessary increases in the volume of other hospital outpatient department services.” In the meantime, CMS requests comments on alternative approaches to controlling unnecessary volume increases, while “not impeding development or beneficiary access to new innovations.”

Other proposed provisions include the following: Continue Reading

Congress Continues Focus on Health Policy; More Hearings on the Congressional Agenda

By Debra A. McCurdy on 23 July 2018 Posted in Legislative Developments

The House Energy and Commerce Committee has scheduled three hearings this week on health topics:

A July 24 hearing on advertising and marketing practices within the substance use treatment industry;
A July 25 hearing on FDA and NIH implementation of the 21^st Century Cures Act; and
A July 26 hearing on the Medicare Merit-based Incentive Payment System for physicians.

These hearings follow several other recent health policy committee hearings and markups, including the following:

Energy & Commerce subcommittee hearings examined state efforts to improve transparency of health costs, mental health provisions of the 21^stCentury Cures Act, and the 340B drug pricing program.
The Energy & Commerce Committee approved the following public health bills: HR 6378, the Pandemic and All-Hazards Preparedness and Advancing Innovation Act; HR 959, the Title VIII Nursing Workforce Reauthorization Act; HR 1676, the Palliative Care and Hospice Education and Training Act; HR 3728, the Educating Medical Professionals and Optimizing Workforce Efficiency Readiness Act; and HR 5385, the Children’s Hospital GME Support Reauthorization Act.
The House Ways and Means Committee held hearings on combating Medicare fraud and modernizing the Stark Law to address value-based care. The Committee also approved several bills to promote health savings accounts and make other health-related tax code changes.
The Senate Health, Education, Labor and Pensions Committee held a hearing on “Reducing Health Care Costs: Eliminating Excess Health Care Spending and Improving Quality and Value for Patients.”

CMS Proposes CY 2019 Update to Medicare Physician Fee Schedule Rates, Policies

By Gail L. Daubert, Thomas W. Greeson and Debra A. McCurdy on 23 July 2018 Posted in Centers for Medicare & Medicaid Services Regulations

The Centers for Medicare & Medicaid Services (CMS) has issued its proposed Medicare physician fee schedule (PFS) rule for calendar year (CY) 2019. In addition to updating rates for physician services, the sweeping rule proposes changes to numerous other Medicare Part B policies. Highlights of the proposed rule include the following:

CMS proposes a 2019 conversion factor (CF) of $36.0463, up slightly from the 2018 CF of $35.9996. This proposed rate is based on a statutory update of 0.25%, offset by a -0.12% relative value unit (RVU) budget neutrality adjustment. CMS also proposes numerous RVU changes for individual procedures, including potentially misvalued codes. CMS also discusses its efforts to accurately value postoperative visits performed during the global period.
CMS proposes to reduce from 6% to 3% the “add-on” payment for new, separately-payable Part B drugs and biologicals that are paid based on wholesale acquisition cost when average sales price during first quarter of sales is unavailable.
CMS proposes to maintain its current “site-neutral payment policy” whereby the agency reduces payments to certain provider-based, off-campus hospital outpatient departments that came into operation after the Bipartisan Budget Act of 2015 (which CMS calls “off-campus provider-based departments” or “off-campus PBDs”). Under this policy, CMS reimburses nonexcepted items and services furnished by these off-campus PBDs at a rate that is 40% of the outpatient hospital prospective payment system (OPPS) rate.
CMS is maintaining its implementation schedule for Appropriate Use Criteria (AUC), which requires that physicians who order advance diagnostic imaging (ADI) services (diagnostic magnetic resonance imaging, computed tomography, and positron emission tomography/nuclear medicine) for a Medicare beneficiary consult with AUC via a clinical decision support mechanism (CDSM). In the final 2018 rule, CMS announced it will begin the AUC program on January 1, 2020 (three years after the statutory deadline) as an “educational and operations testing year. As of January 1, 2020, ordering professionals will be required to consult specified applicable AUC using a qualified CDSM when ordering applicable ADI services, and furnishing professionals will be required to report consultation information on the Medicare claim. However, CMS will pay claims for ADI services in 2020 regardless of whether the claims report the AUC consultation. From July 2018 through December 2019, “early adopters” can voluntarily report limited consultation information on Medicare claims. In the 2019 proposed rule, CMS proposes to:
- Extend the AUC program requirements to independent diagnostic testing facilities (joining physician offices, hospital outpatient departments, and ambulatory surgical centers).
- Allow the AUC consultation to be performed by auxiliary personnel under the direction of the ordering professional and incident to the ordering professional’s services. The proposed rule is currently silent on what, if any, steps are required if the auxiliary personnel learn that the ordered ADI test does not adhere to the specified AUC criteria.
- Clarify that AUC consultation information must be reported on all applicable claims (i.e., not just reported on claims by furnishing professionals/practitioners).
- Use established coding methods (e.g., G-codes and modifiers), not a unique consultation identifier, to report the required AUC information.
- Revise the significant hardship exception criteria.
CMS proposes to allow diagnostic imaging tests to be furnished under a physician’s direct supervision (instead of personal/in-the-room supervision) when performed by a radiologist assistant in accordance with state law and state scope of practice rules. Radiologist assistants would be required to personally perform the test and not supervise a technologist.
CMS proposes significant changes to evaluation and management (E/M) payment and documentation policies that are intended to reduce administrative burdens and improve payment accuracy. Notably, CMS proposes to eliminate the payment distinction and documentation requirements between E/M visit levels 2 through 5. CMS also proposes to impose a 50% multiple procedure payment adjustment when E/M visits and procedures with global periods are furnished together.
CMS proposes numerous changes to the Quality Payment Program (QPP) designed to reduce burdens on clinicians, focus on outcomes, and promote interoperability of electronic health records. These proposals are discussed in a detailed CMS fact sheet. In conjunction with the proposed rule, CMS announced additional details related to its Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) Demonstration, which will waive Merit-based Incentive Payment System (MIPS) requirements for clinicians sufficiently participating in Medicare Advantage arrangements that are similar to Advanced Alternative Payment Models.
The proposed rule includes numerous other policy provisions, including: implementation of a Bipartisan Budget Act of 2018 (BBA of 2018) provision pertaining to writing and signature requirements in certain compensation arrangement exceptions to the Stark Act; implementation of a BBA of 2018 provision adding mobile stroke units, renal dialysis facilities, and the homes of ESRD beneficiaries as Medicare telehealth originating sites; payment for new communication technology-based service codes; discontinuation of certain functional reporting requirements for outpatient therapy services and creation of payment modifiers for services furnished by therapy assistants (which will be paid at 85% of the applicable Part B payment); and changes to the definition of “applicable laboratory” for clinical laboratory fee schedule purposes. CMS also solicits comments on creation of a bundled episode of care for management and counseling treatment for substance use disorders.

CMS also includes a Request for Information (RFI) on the possibility of revising conditions of participation to advance electronic exchange of information that supports safe, effective transitions of care among providers. A second RFI requests input on ways to improve the accessibility and usability charge information to help patients understand their potential financial liability and compare charges for similar services across providers and suppliers.

CMS will accept comments on the proposed rule and RFIs through September 10, 2018.

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

By Robert Hill and Joseph W. Metro on 20 July 2018 Posted in Office of Inspector General Regulations

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

By Debra A. McCurdy on 16 July 2018 Posted in Centers for Medicare & Medicaid Services Regulations

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

By Debra A. McCurdy on 13 July 2018 Posted in Centers for Medicare & Medicaid Services Regulations

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

By Debra A. McCurdy on 12 July 2018 Posted in Legislative Developments

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

By Debra A. McCurdy on 12 July 2018 Posted in Centers for Medicare & Medicaid Services Regulations

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

By Debra A. McCurdy on 10 July 2018 Posted in Centers for Medicare & Medicaid Services Regulations

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

By Debra A. McCurdy on 5 July 2018 Posted in Other CMS Developments

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:

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
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.