Medicare Hospice Payments to Rise by $520 Million in FY 2020 under Final CMS Rule

The Centers for Medicare & Medicaid Services (CMS) has published its final fiscal year (FY) 2020 Medicare hospice payment rule.  CMS forecasts that the final rule will result in an estimated $520 million increase in FY 2020 payments to hospices due to the final hospice payment update percentage of 2.6%. The final FY 2020 hospice cap is $29,964.78, compared with the FY 2019 cap amount of $29,205.44.

The rule makes a number of modifications to the requirements for hospice election statement content, to provide additional transparency for patients regarding the scope of hospice benefits and their potential financial liability, effective for hospice elections beginning October 1, 2020.  Specifically, the hospice must provide notification of the individual’s (or representative’s) right to receive an election statement “addendum” if there are conditions, items, services, and drugs the hospice has determined to be unrelated to the individual’s terminal illness and related conditions and would not be covered by the hospice.  CMS sets forth detailed requirement for: content of the addendum, including a list and understandable rationale for such unrelated items; timelines for delivery of the addendum; and notification of the right for advocacy through a Medicare Beneficiary and Family Centered Care-Quality Improvement Organization (BFCC–QIO) if the individual disagrees with the hospice’s determination.

Among other things, the final rule also:

  • Rebases the continuous home care, general inpatient care, and inpatient respite care per diem payment rates, with a reduction in routine home care rates to maintain budget neutrality.
  • Uses the current year’s hospital wage data (rather than data from the prior year) to establish the hospice wage index.
  • Revises various Hospice Quality Reporting Program requirements.

CMS Proposes Medicare Physician Fee Schedule Rates and Policies for CY 2020

The Centers for Medicare & Medicaid Services (CMS) has published its proposed Medicare physician fee schedule (PFS) rule for calendar year (CY) 2020.  In addition to updating rates for physician services, CMS proposes changes to numerous other Medicare Part B policies.  Highlights of the proposed rule include the following:

  • The proposed 2020 conversion factor (CF) is $36.0896, up slightly from the 2019 CF of $36.0391. CMS also proposes updates to work and practice expense relative value units (RVUs) for numerous new, revised, and potentially misvalued codes.
  • CMS solicits feedback on contractor reports regarding the number and level of postoperative visits for surgical procedures. The data is intended to inform potential revisions to the global surgical package.
  • CMS requests comments on new opportunities for unspecified bundled payment rates for PFS services that are furnished together. Such bundles might include per-beneficiary payments for multiple services or condition-specific episodes of care.
  • CMS proposes additional updates to evaluation and management (E/M) visit coding and payment policies for 2021 to align with CPT Editorial Panel changes. CMS notes that the E/M changes would provide the greatest RVU increase to specialties that bill higher level established patient visits, while specialties that do not generally bill office/outpatient E/M visits, because of budget neutrality, could see large payment decreases.  For instance, CMS estimates that endocrinology charges could increase 16% and rheumatology charges could rise by 15%, while radiology charges would fall by 8% and ophthalmology charges would drop 10% as a result of the proposed E/M policies if implemented for CY 2021.  CMS adds that the 2021 implementation date allows “a year of preparatory time and time for potential refinement over the next year as we take into account any feedback from stakeholders on these proposed changes.”
  • CMS proposes to replace the current Medicare requirement for general physician supervision of physician assistants (PAs), including the immediate availability of the supervising physician to the PA for consultation, with medical direction and appropriate supervision as provided by State law.  In the absence of State law governing physician supervision of PA services, the physician supervision required by Medicare for PA services would be evidenced by documentation in the medical record of the PA’s approach to working with physicians in furnishing their professional services.
  • CMS proposes to streamline documentation requirements by allowing the physician, PA, or advanced practice registered nurse who furnishes and bills for his or her professional services to review and verify — rather than fully re-document — information included in the medical record by physicians, residents, nurses, students or other members of the medical team. This principle would apply to all Medicare-covered services paid under the PFS.
  • CMS continues to implement a statutory requirement that modifiers be reported to identify certain therapy services that are furnished in whole or in part by physical therapy (PT) and occupational therapy assistants (OTA), beginning January 1, 2020. CMS has adopted a de minimis standard under which a service is considered to be furnished in whole or in part by a PTA or OTA when more than 10% of the service is furnished by the PTA or OTA.  CMS proposes to make the 10% calculation based on the respective therapeutic minutes of time spent by the therapist and the PTA/ OTA, rounded to the nearest whole minute.  Beginning January 1, 2022, claims that contain a therapy assistant modifier will be paid at 85% of the otherwise applicable payment amount.
  • CMS proposes to establish bundled payments for opioid use disorder treatment services furnished by opioid treatment programs.
  • CMS proposes changes to Open Payments reporting requirements, including: codifying a statutory expansion of the definition of a covered recipient to include PAs, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives; adding Debt Forgiveness, Long-Term Medical Supply or Device Loan, and Acquisitions to the “nature of payment” categories; consolidating medical education program categories; and standardizing data reporting requirements for drugs, devices, biologicals, and medical supplies.
  • CMS requests comments on a series of potential changes to the physician self-referral (Stark Law) advisory opinion process.
  • CMS proposes a number of changes to the Quality Payment Program (QPP). Notably, CMS proposes establishing new Merit-based Incentive Payment System (MIPS) Value Pathways (MVPs) beginning in the 2021 performance period to allow clinicians to report on a smaller set of outcomes-based, specialty-specific measures.  The QPP proposals are detailed in a CMS fact sheet.
  • Other topics addressed by the rule include, among many others:documentation of beneficiary consent for cost sharing associated with communication technology-based services; collection of ground ambulance cost data; Medicare Shared Savings Program quality reporting requirements; and payment for chronic care management, transitional care management, and principal care management services.

CMS will accept comments on the proposed rule through September 27, 2019.

CMS Finalizes Medicare SNF PPS Rates and Policies for FY 2020

The Centers for Medicare & Medicaid Services (CMS) has published its final rule updating the Medicare skilled nursing facility (SNF) prospective payment system (PPS) for fiscal year (FY) 2020, which begins October 1, 2019.  CMS expects SNF PPS payments to increase by 2.4%, or $851 million, in FY 2020, down from the $887 million increase forecasted in the proposed rule.  The final update is based on a 2.8% market basket increase offset by a 0.4 percentage point multifactor productivity adjustment.

In the final rule, CMS discusses the October 1, 2019 implementation of the new SNF Patient-Driven Payment Model (PDPM), which focuses on a resident’s clinical condition and care needs rather than the volume of care provided.  CMS previously established a limit on group and concurrent therapy, which provides 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.  While CMS initially defined group therapy for PDPM purposes as exactly four patients, CMS has adopted its proposal to modify the definition to align with the definition used under the Medicare Inpatient Rehabilitation Facility (IRF) PPS.  Specifically, under the final rule, group therapy under the SNF PDPM means treating two to six patients at the same time who are performing the same or similar activities.  CMS plans to monitor the usage of group and concurrent therapy and review clinical outcomes, noting that “[i]f the results of our monitoring efforts indicate substantial non-compliance with the 25 percent limit, we may consider taking additional action in future rulemaking.”  However, CMS expects “providers will pay close attention to the warning provided on their validation reports and be aware that we are monitoring their use of group and concurrent therapy as well.”

The final rule also, among other things, implements a subregulatory process for updating ICD-10 code lists used under the PDPM and updates various SNF Quality Reporting Program (QRP) and SNF Value-Based Purchasing Program requirements.  CMS discusses a previous request for comments on expanding data collection for SNF QRP quality measures to all SNF residents regardless of payer beginning with the FY 2022 program year; however, CMS is not finalizing such a proposal at this time.

CMS Proposes 2020 Medicare OPPS and ASC Update, Floats Plan for Hospital Disclosure of Payer-Specific Prices

The Centers for Medicare & Medicaid Services (CMS) has published its proposed Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rates and policies for calendar year 2020.  In addition to making annual updates to the OPPS and ASC payment systems, CMS includes a controversial proposal to require all hospitals to disclose payer-specific pricing, including “consumer-friendly” information for hundreds of “shoppable” services.  CMS is accepting comments on the proposed rule through September 27, 2019.  The following are highlights of the proposed rule.

Hospital Outpatient Provisions

CMS proposes a 2.7% update to OPPS rates for 2020, with the update reduced by 2.0% for hospitals that fail to meet quality reporting requirements.  Payment changes for individual procedures vary.  CMS estimates total OPPS payments would increase by $6 billion in CY 2020 compared with 2019 under the rule.

Other OPPS policy proposals include the following, among many others: Continue Reading

HHS OIG Pulls CMP, Safe Harbor Proposed Regs Pending for More Than a Decade

Seeking to “eliminate any confusion,” the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) has formally withdrawn proposed civil money penalty (CMP) and anti-kickback (AKS) safe harbor regulations that it no longer intends to finalize.  Specifically, the OIG is withdrawing:

  • A 1994 proposed rule that would have codified the OIG’s authority to levy CMPs when a hospital knowingly makes incentive payments to a physician as an inducement for reducing services to Medicare or Medicaid beneficiaries.
  • A 2002 proposed rule that would have expanded an AKS safe harbor regulation at 42 CFR 1001.952(k) to include waivers of cost sharing amounts for Part A and B services for holders of Medicare SELECT policies.

According to the notices, the OIG has neither applied nor enforced the positions stated in the rules, and it does not intend to do so.  Moreover, to the OIG’s knowledge, the public is not currently relying on, and may be unaware of” the proposed rules.  If OIG were to finalize either proposal, updated public comments would be required, “as reimbursement methods and other aspects of the healthcare industry have changed in the interim.”

OIG states that the regulatory housecleaning is intended to comply with the Trump Administration’s goal of identifying regulations that can be repealed, replaced, or modified.  Nevertheless, the OIG also may be taking advantage of this opportunity to clear the decks of outdated policy proposals while the Office of Management and Budget (OMB) reviews a highly-anticipated OIG proposed rule to amend the AKS safe harbors and exceptions to the beneficiary inducement CMP provisions intended to support coordinated care.

CMS Issues Final Rule Repealing the Prohibition on the Use of Pre-Dispute Binding Arbitration Agreements

On July 18, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a final rule repealing the agency’s ban on the use of pre-dispute arbitration agreements in the long-term care (LTC) setting.1 This final rule follows CMS’s proposed rule, issued on June 8, 2017, reversing course on CMS’s initial ban on pre-dispute, binding arbitration agreements in October 2016.2 (See CMS Reverses Course in Pre-Dispute Arbitration Agreement Ban for additional background and analysis on the June 8, 2017, proposed rule.)

As you may recall, CMS’s proposed rule offered to eliminate entirely the prohibition on pre-dispute binding arbitration agreements and provided no limitations on the use of arbitration agreements as a condition of admission (or continuing admission) to a LTC facility, provided certain “transparency” requirements were met. CMS received over 1,000 comments in response to the proposed rule and, in turn, delivered a final rule that makes concessions for both the proponents of a ban on pre-dispute arbitration agreements and the opponents seeking to preserve the legal right of the LTC facilities to freely contract with their residents. CMS explained in the final rule: “Although we are not finalizing a prohibition on pre-dispute, binding arbitration agreements, we believe that the requirements we are finalizing in this rule will provide the protections residents and their representatives will need to avoid being compelled to arbitrate disputes with LTC facilities without voluntarily and knowingly choosing to do so.”3

Continue Reading

CMS Proposes Rolling Back LTC Facility Requirements to Reduce Regulatory Burden

The Centers for Medicare & Medicaid Services (CMS) has proposed simplifying and streamlining long-term care (LTC) facility rules and survey processes to “increase provider flexibility and reduce excessively burdensome regulations, while also allowing facilities to focus on providing high-quality healthcare to their residents.”  In addition to numerous other provisions, CMS proposes the following changes that the agency anticipates would significantly reduce costs to LTC facilities:

  • Revising grievance policy requirements, including clarifying the difference between resident feedback and a grievance; removing the specific duties required of the grievance official who is responsible for overseeing the grievance process; paring the specific requirements for the content of written grievance decisions; and shortening the required document retention period related to results of grievances.
  • Limiting the conditions under which a facility must send a copy of a transfer or discharge notice to the State LTC Ombudsman to facility-initiated involuntary transfers or discharges.
  • Providing more flexibility in the required qualifications for a director of food and nutrition services.
  • Streamlining facility assessment requirements, including clarifying that data collected under the facility assessment requirement can be used to inform policies and procedures for other LTC requirements, removing duplicative requirements, and revising the requirement for the review of the facility assessment from annually to biennially.
  • Providing facilities with more flexibility in tailoring their Quality Assurance and Performance Improvement program to the specific needs of the facility.
  • Streamlining the regulatory requirements for compliance and ethics programs, including removing requirements for a compliance officer and compliance liaisons and reducing the frequency of mandatory program reviews.
  • Allowing LTC facilities that were Medicare or Medicaid certified before July 5, 2016, and that previously used the 2001 Fire Safety Equivalency System (FSES) to determine fire protection levels to continue to use the 2001 FSES scoring values when determining compliance with certain fire safety standards.
  • Limiting to newly-constructed facilities and newly-certified facilities that have never previously been a nursing home the current physical environment requirements that LTC facilities accommodate no more than two residents in a bedroom and equip each resident room with its own bathroom containing a commode and sink.
  • Revising the hearing process, including replacing the requirement for a facility to file a written waiver with a constructive waiver process that would operate by default when CMS has not received a timely request for a hearing.

CMS also proposes to delay implementation of certain “Phase 3” LTC requirements for participation that are scheduled to go into effect November 28, 2019; instead, they would be implemented one year following the effective date of the final rule.

CMS will accept comments on the proposed rule until September 18, 2019.

Trump Administration Launches Multi-Pronged Effort to “Transform Care Delivery for Patients with Chronic Kidney Disease”

The Trump Administration has announced a number of policy goals and innovation models that seek to “improve the lives of Americans suffering from kidney disease, expand options for American patients, and reduce healthcare costs,” according to the Department of Health and Human Services (HHS).  The broad policy framework was outlined in an executive order on “Advancing American Kidney Health” signed by President Trump on July 10, 2019.  The executive order includes as federal priorities:  preventing kidney failure whenever possible through better diagnosis, treatment, and incentives for preventive care; expanding affordable treatment alternatives for end stage renal disease (ESRD); encouraging the development of artificial kidneys, and updating the organ transplant system.

HHS is launching five new Medicare ESRD innovation models to jump-start the Advancing American Kidney Health initiative.  One model, a proposed ESRD Treatment Choices Model, would be mandatory for dialysis providers in randomly-selected geographic areas that account for about 50% of adult ESRD beneficiaries.  This model promotes home dialysis and kidney transplants by adjusting ESRD prospective payment system (PPS) payments upward or downward based on home dialysis and transplant rates, and increasing certain payments for home dialysis services.  This model is subject to a public comment period through September 16, 2019.  CMS also announced four optional models:  the Kidney Care First (KCF) Model, and three Comprehensive Kidney Care Contracting (CKCC) Models.  These models include incentives for coordinating care for beneficiaries with chronic kidney disease or ESRD and reducing total care costs, and for successful transplants.  Details about these models are available here.

CMS Proposes Easing State Requirements for Demonstrating Medicaid Beneficiary Access to Care

The Centers for Medicare & Medicaid Services (CMS) has proposed rescinding current procedural standards that must be met for states to demonstrate that Medicaid fee-for-service (FFS) payments are sufficient to assure beneficiary access to covered services.

As we previously reported, regulations adopted in 2015 require states to establish and periodically update access monitoring review plans (AMRPs) for certain categories of Medicaid services provided through a FFS delivery system to demonstrate the sufficiency of provider payment rates.  The regulations also include administrative requirements for states proposing to reduce or restructure Medicaid provider payments.  These regulations apply to the following categories of services:  primary care; physician specialist services; behavioral health; pre- and post-natal obstetric services including labor and delivery; home health; any services for which the state has submitted a state plan amendment to reduce or restructure provider payments that could result in diminished access; and additional services as determined necessary by the state or CMS.

Citing state concerns about the administrative burden associated with the current regulations, in March 2018 CMS proposed exempting states with high rates of Medicaid managed care enrollment from the AMRP requirements.  CMS did not finalize this plan.  Instead, in a proposed rule published July 15, 2019, CMS now proposes to rescind the regulatory process requirements for states to develop and update an AMRP and to submit certain access analysis when proposing to reduce or restructure provider payment rates.  However, states would not be exempt from the statutory requirements “to ensure access is consistent with the Act generally, and especially when seeking to reduce or restructure Medicaid payment rates.”  CMS will accept comments on the proposed rule until September 13, 2019.

Concurrent with release of the proposed rule, CMS issued an informational bulletin to states announcing CMS plans “to develop a new data-driven strategy to understand access to care in the Medicaid program across fee-for-service and managed care delivery systems, as well as in home and community-based services (HCBS) waiver programs.”  In the coming months, CMS expects to convene workgroups comprised of state and federal stakeholders to identify measures, benchmarks, and data that could be used as access indicators across Medicaid programs.

CMS Proposes CY 2020 Medicare Home Health PPS Update, Infusion Therapy Benefit Policies

The Centers for Medicare & Medicaid Services (CMS) has issued the proposed calendar year (CY) 2020 update to Medicare home health prospective payment system (HH PPS) rates and policies.  The proposed rule also would update transitional home infusion therapy rates for CY 2020 and institute permanent infusion therapy payment reforms beginning in CY 2021.

With regard to home health policy, CMS projects that aggregate CY 2020 HH PPS payments would increase by 1.3%, or $250 million, compared to 2019 levels under the proposed rule.  As established in the CY 2019 final rule, CMS will implement its new case mix methodology, the “Patient-Driven Groupings Model” (PDGM), effective January 1, 2020.  The proposed CY 2020 HH PPS update reflects the transition to the PDGM methodology and a new 30-day payment unit, with CMS proposing downward adjustments for certain anticipated “behavior changes” such as modifications to documentation and coding practices.  The proposed update also makes other adjustments, including to incorporate a new rural add-on policy, updated wage index data, and an updated fixed-dollar loss ratio for outlier payments.  The proposed 2020 national, standardized 30-day payment for an HHA that submits required quality data is $1,791.73 (compared to the CY 2019 national, standardized 60-day episode payment of $3,154.27). The proposed rate for an HHA that does not submit required quality data is $1,756.42.

In addition to the HH PPS rate update, CMS proposes to make a number of HHA policy changes, including:  streamlining home health plan of care content requirements; allowing physical therapy assistants to furnish maintenance therapy; modifying the split percentage payment policy (with elimination of split-percentage payments beginning in CY 2021); and updating Home Health Quality Reporting Program and Home Health Value-Based Purchasing Model requirements.

The proposed rule also continues to implement refinements to Medicare payment policy for home infusion therapy services, as mandated by the 21st Century Cures Act.  In the final 2019 rule, CMS established a new temporary transitional payment for home infusion therapy services in 2019 and 2020, in advance of implementation of a new home infusion therapy benefit in 2021.  The proposed 2020 rule would update the temporary transitional payment rates for 2020 based on corresponding CY 2020 Physician Fee Schedule (PFS) amounts (which are expected to be released in the near future).  For 2021, CMS proposes fully implementing the new home infusion therapy benefit, with home infusion drugs classified into three payment categories, each of which would have a single unit of payment based on PFS amounts (such amounts would be adjusted by the geographic adjustment factor).  CMS proposes establishing higher payment amounts for the first home infusion therapy visit; for subsequent visits, CMS would apply a small decrease to the payment amounts to maintain budget neutrality.

CMS will accept comments on the proposed rule until September 9, 2019.

CMS Proposes New Mandatory Medicare Radiation Oncology Payment Innovation Model

The Centers for Medicare & Medicaid Services (CMS) has proposed a new Radiation Oncology (RO) innovation model (RO Model) to test whether prospective site neutral, episode-based payments for radiotherapy (RT) episodes of care would reduce Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries.  Importantly, the RO Model would be mandatory for providers and suppliers that furnish RT services within randomly selected Core Based Statistical Areas (CBSAs), with very limited exceptions.  CMS estimates that the RO Model would cover about 40% of Medicare RO episodes and reduce Medicare spending by $250 million – $260 million during the five-year program.

Key features of the proposed RO Model are summarized below.  CMS will accept comments on the model until September 16, 2019.

RO Provider/Supplier Participation

Medicare-participating physician group practices (PGPs), hospital outpatient departments (HOPD), and freestanding radiation therapy centers that furnish RT services in designated CBSAs generally would be required to participate in the RO Model.  CMS proposes exempting a provider or supplier that:

(1)    furnishes RT services only in Maryland, Vermont, or the U.S. territories;

(2)    is classified as an ambulatory surgery center (ASC), critical access hospital (CAH), or prospective payment system-exempt cancer hospital; or

(3)    is eligible to participate the Pennsylvania Rural Health Model.

In a proposed rule to be published on July 18, 2019; CMS expresses its view that mandatory participation “is necessary to obtain a diverse, representative sample of RT providers and RT suppliers and to help support a statistically robust test of the prospective episode payments made under the RO Model.”  CMS notes that because hospital outpatient prospective payment system (OPPS) rates are projected to increase substantially more than physician fee schedule (PFS) rates during the period of 2019 through 2023, it “would result in few to no HOPDs electing to voluntarily participate in the Model.”  CMS also expects that a voluntary program would attract only those freestanding radiation therapy centers with historically lower RT costs compared to the national average.

Providers and suppliers would participate in the RO Model as either a Professional participant, Technical participant, or Dual participant. Continue Reading

HHS Scraps Pending Rule to Remove Anti-Kickback Safe Harbor Protection for Drug Rebates to Health Plans, PBMs

The Trump Administration has decided against finalizing a controversial proposed Office of Inspector General (OIG) regulation that would have modified Federal Anti-Kickback Statute safe harbor protection for certain prescription drug rebates to health plans and pharmacy benefit managers (PBMs).  As we previously reported, the proposed rule would have (i) removed safe harbor protection for drug manufacturer rebates to Part D plans, Medicaid managed care organizations, and PBMs acting under contract with either type of entity, (ii) establish a new safe harbor protecting manufacturer “point of sale” price reductions on Part D and Medicaid managed care drug utilization, and (iii) establish a new safe harbor protecting certain service fees paid by drug manufacturers to PBMs.  

According to the White House Office of Management and Budget (OMB), the OIG officially withdrew the pending final rule on July 10, 2019.  Action to end consideration came after release of a Congressional Budget Office estimate that the rule as proposed would increase federal spending by about $177 billion over the 2020–2029 period while increasing beneficiary Part D drug plan premiums.

HHS “Quality Summit” to Focus on Overhauling Federal Quality Programs

The Department of Health and Human Services (HHS) has announced plans to hold a “Quality Summit” to foster dialogue between government leaders and health care industry stakeholders on how HHS quality programs “can be further evaluated, adapted, and ultimately streamlined to deliver a value-based care model focused on improving outcomes for American patients.”  Ultimately, the initiative is intended to help HHS formulate a “Health Quality Roadmap,” as directed by President Trump’s recent executive order on health care price and quality transparency.  In announcing the Quality Summit, HHS Deputy Secretary Eric Hargan observed that current HHS quality programs are “uncoordinated among the various agencies and inconsistent in their demands on healthcare providers.”  Through an external, systemic review, HHS believes the Quality Summit will both strengthen the protections offered to patients and improve value by reducing costs and onerous requirements for providers.

Summit participants will include government representatives and approximately 15 non-government health care industry leaders.  Nominations for participation in the summit will be accepted through July 31, 2019.

Congressional Committees Advance Multiple Bills Addressing Surprise Medical Billing, Prescription Drug Policy, and Other Health Policy Issues

Prior to the 4th of July break, Senate and House Committees approved more than a dozen health policy bills, covering topics including:  surprise medical bills, health pricing transparency, drug prices and competition, various Medicare policies, and public health program reauthorization, among others.  The following are highlights of recent action.  Note that none of the bills has yet been considered by the full House or Senate, and all are subject to change during the legislative process.

Senate HELP Committee

The Senate Health, Education, Labor and Pensions (HELP) Committee approved S 1895, the Lower Health Care Costs Act of 2019.  This high-profile, bipartisan legislation would hold patients harmless from “surprise” medical bills for out-of-network services provided at an in-network facility, with payment to out-of-network providers set at the median contracted rate for in-network providers in the geographic area (a controversial “benchmark rate” proposal).  The bill contains separate protections regarding costs for emergency room and air ambulance services.  Additionally, S 1895 seeks to improve health care transparency by, among other things, banning what are described as “anticompetitive” terms in contracts between insurers and providers; providing patients with additional information on out-of-pocket costs; and regulating certain pharmacy benefit manager (PBM) pricing practices.  The legislation also includes numerous provisions intended to promote generic drug and biosimilar biological product innovation; improve health information exchange and strengthen health entity cybersecurity practices; and authorize various public health programs.  The Committee approved the bill on June 26, 2019 on a vote of 20-3.  Committee Chairman Lamar Alexander expressed hope for full Senate consideration of the bill in July.

During the same markup, the HELP Committee also approved S 1173, the Emergency Medical Services for Children Program Reauthorization Act, and S 1199, the Poison Center Network Enhancement Act of 2019.

Senate Judiciary Committee

The Senate Judiciary Committee approved the following four bills that are intended to help reduce prescription drug prices:

  • S 1227, the Prescription Pricing for the People Act of 2019, which would require the Federal Trade Commission (FTC) to study the role of PBMs in the pharmaceutical supply chain and provide Congress with related policy recommendations.
  • S 440, the Preserving Access to Cost Effective Drugs Act, which would bar patent owners from asserting sovereign immunity, including the sovereign immunity accorded to an Indian tribe, in certain drug patent disputes.
  • S 1224, the “Stop STALLING Act,” to authorize the FTC to take action against entities that file “sham” citizen petitions to attempt to interfere with approval of a competing generic drug or biosimilar.
  • S 1416, Affordable Prescriptions for Patients Act of 2019, which would authorize the FTC to challenge certain brand manufacturer practices (e.g., “product hopping” and “patent thickets”) that could discourage generic drug and biological use.

House Ways and Means Committee

The House Ways and Means Committee recently passed the following health policy bills: Continue Reading

States Banding Together on HIPAA Enforcement

In the first settlement of its kind, a medical software provider has agreed to pay $900,000 to 16 state attorneys general for alleged violations of state and federal privacy laws. The settlement, stemming from a federal lawsuit in the U.S. District Court for the Northern District of Indiana, demonstrates the resolution of the first-ever multistate data breach suit based on alleged violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as well as state deceptive trade practices acts, state personal information protection acts, and state breach notifications acts. The settlement is a result of a 2015 data breach resulting in compromised user ID and password data of the electronic protected health information of approximately 3.5 million individuals. The settlement was finalized shortly after the medical software provider agreed to pay $100,000 to the Office of Civil Rights (OCR), the agency tasked with enforcing HIPAA, for alleged HIPAA violations associated with the same breach.

To read more, please visit our Life Sciences Legal Update blog.

Supreme Court Decides Important Agency-Deference Question

As we reported back in March 2019, the Supreme Court of the United States was reexamining what level of deference, if any, courts must show to a federal agency in cases challenging an agency’s interpretation of its own regulations. Today, in Kisor v. Wilkie, No. 18-15, a narrow majority of the Supreme Court relied on principles of stare decisis in refusing to overrule the Court’s past rulings addressing the deference question. After doing so, however, the majority purported to “reinforce [the] limits” of the test courts must apply when evaluating an agency’s interpretation of its own regulations.

Much ink will be spilled over Kisor given the issues involved and the intensity of the disagreeing views expressed by four Justices. For now, let us focus on what constitutes the opinion of the Court that lower federal courts must follow on a going-forward basis. (The opinion of the Court was authored by Justice Kagan and joined by Chief Justice Roberts and Justices Ginsburg, Breyer, and Sotomayor.)

The refined test is as follows:

First, a court should not afford deference to an agency’s interpretation of its own regulation unless the regulation is “genuinely ambiguous.” In deciding whether such ambiguity exists, a court must carefully consider the text, structure, history, and purpose of the regulation. The Kisor majority specifically cautioned that a court “cannot wave the ambiguity flag just because it found the regulation impenetrable on first read. Agency regulations can sometimes make the eyes glaze over. But hard interpretive conundrums, even relating to complex rules, can often be solved.”

Second, even if the regulation is genuinely ambiguous, the agency’s interpretation must still be “reasonable.” “In other words,” the Kisor majority explained, “it must come within the zone of ambiguity the court has identified [in step one] after employing all its interpretive tools.”

Third, even if the agency’s interpretation of the ambiguous regulation is reasonable, a court “must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight.” This, in turn, involves three elements. First, the “regulatory interpretation must be one actually made by the agency. In other words, it must be the agency’s ‘authoritative’ or ‘official position,’ rather than [an] ad hoc statement not reflecting the agency’s views.” Second, the agency’s interpretation “must in some way implicate [the agency’s] substantive expertise.” Finally, an agency’s interpretation of a regulation “must reflect fair and considered judgment” to receive deference. For example, Kisor instructs that a court “should decline to defer to a merely convenient litigating position or post hoc rationalization advanced to defend past agency action against attack. . . . And a court may not defer to a new interpretation, whether or not introduced in litigation, that creates unfair surprise to regulated parties.”

Only time will tell if the test as refined by Kisor actually results in more court decisions rejecting agency regulatory interpretations and/or a change in agency behavior when drafting regulations.

President Trump’s Issues Executive Order on Health Care Price Transparency, but Key Details are TBD

On June 24, 2019, President Trump signed an executive order (EO) intended to improve health care price and quality transparency, boost tax-preferred health savings accounts, and protect patients from surprise medical bills.  This is not the first time the Trump Administration has tacked health price disclosure.  For instance, new hospital price transparency rules went into effect October 1, 2019, and the Administration has issued rules (challenged in court) to require drug manufacturers to include certain pricing information in direct-to-consumer television advertising.  This attempt is more ambitious, however.  In signing the measure, the President remarked that if the Administration’s action “is half as big as some people are saying it will be, it will be one of the biggest things ever done in this world, in this industry, in this profession.”  That said, assessing the potential impact of this EO is a challenge given that (1) the EO is short on actual policy changes, deferring action to future regulations and reports, and (2) the realities of the health marketplace prevent “transparency” from being a panacea.

The EO sets in motion three parallel initiatives to provide patients with more health care pricing information, each of which will require additional policy development:

  • The EO directs the Secretary of Health and Human Services (HHS) to propose regulations to require hospitals to publicly post standard charge information, including charges based on negotiated rates and for common or “shoppable” items and services (defined as “common services offered by multiple providers … which patients can research and compare before making informed choices based on price and quality”).  The charge information, which will cover services, supplies, or other fees billed by the hospital or provided by hospital employees, must be provided “in an easy-to-understand, consumer-friendly, and machine-readable format … that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals,” and must be regularly updated.  The regulation must be issued within 60 days of the order; there is no deadline for the Secretary to issue a final rule or for the regulation to go into effect.
  • The EO requires the Secretaries of HHS, Treasury, and Labor to issue an advance notice of proposed rulemaking (ANPR) “on a proposal to require healthcare providers, health insurance issuers, and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” The ANPR must be proposed within 90 days; no other deadlines are established.
  • The EO instructs the HHS Secretary, in consultation with the Attorney General and the Federal Trade Commission (FTC), to “issue a report describing the manners in which the Federal Government or the private sector are impeding healthcare price and quality transparency for patients, and providing recommendations for eliminating these impediments in a way that promotes competition.” Furthermore, this report – which must be issued within 180 days – “should describe why, under current conditions, lower-cost providers generally avoid healthcare advertising.”

In other provisions, the EO seeks to:  align quality measures across federal health programs and eliminate low-value or counterproductive measures; expand researcher and other stakeholder access to de-identified claims data; and expand access to tax-preferred health savings accounts and make other tax-related policy changes (potentially including direct primary care arrangements and healthcare sharing ministries).  Finally, the EO requires the HHS Secretary to submit a report on ways to address surprise medical billing; the report is due within 180 days.

The full impact of the EO will not be felt unless associated regulatory policies are promulgated and enacted.  Industry players are already warning, however, that price transparency does not necessarily equate with lower out-of-pocket costs.  For instance, the American Hospital Association contends that “publicly posting privately negotiated rates could, in fact, undermine the competitive forces of private market dynamics, and result in increased prices.”  Even the FTC has observed that if disclosures allow competitors to figure out what their rivals are charging, it “dampens each competitor’s incentive to offer a low price, or increases the likelihood that they can coordinate on higher prices.”  Furthermore, while the EO targets “shoppable” health care (which the Administration states makes up a significant share of the market), many health care decisions would not necessarily be different in light of additional pricing data, given patients’ established provider relationships, insurance network rules, and numerous other factors.

We will be reporting on the progress of the Administration’s transparency initiative as future policy milestones are achieved.

Legislation to Modify Medicaid Drug Rebate Policies, Extend Medicaid Health Provisions Advances in Congress

The House of Representatives has overwhelmingly approved H.R. 3253, the Empowering Beneficiaries, Ensuring Access, and Strengthening Accountability Act, which would finance extension of various Medicaid-related health programs by increasing manufacturer Medicaid drug rebate obligations.  In terms of health programs, the legislation also would, among other things:

  • Extend the “Money Follows The Person Rebalancing Demonstration” and the Medicaid demonstration program for certified community behavioral health clinics.
  • Authorize state Medicaid fraud control units to review complaints of abuse or neglect involving patients in noninstitutional or other settings.
  • Extend through March 31, 2024 the applicability of current Medicaid spousal impoverishment protections for recipients of home- and community-based services.
  • Increase funding for the Medicaid Improvement Fund.

To offset the costs of these provisions, H.R. 3253 would make two changes to Medicaid drug rebate rules.  First, the legislation would prohibit manufacturers from blending the average manufacturer price of a brand drug and any authorized generic of the drug for Medicaid drug rebate purposes.  Second, the bill would exclude manufacturers from the definition of “wholesalers” for purposes of rebate calculations.  The Congressional Budget Office (CBO) estimates that the Medicaid drug rebate provisions would save the federal government $1.17 billion over 5 years (FYs 2020-2024) and $3.08 billion over 10 years (FYs 2020-2029).

The legislation was passed on a bipartisan vote of 371 to 46.  It now moves to the Senate.

OMB Reviewing OIG Proposed Rule Amending Federal Anti-kickback and Beneficiary Inducement Policies to Promote Value-Based Care

The White House Office of Management and Budget (OMB) is reviewing a long-awaited Trump Administration proposed rule to amend the safe harbors to the Anti-Kickback Statute (AKS) and exceptions to the beneficiary inducement provisions of the Civil Monetary Penalty (CMP) statute to better support coordinated care.  The proposed rule presumably builds on the related request for information (RFI) on this topic issued by the Office of Inspector General (OIG) of the Department of Health Human Services (HHS) in August 2018.  As discussed in a Reed Smith client alert, the RFI sought information on, among other things, changes needed in current safe harbors and beneficiary inducement CMPs to promote beneficial care coordination, patient engagement, and value-based arrangements.

The OIG sent the safe harbor proposed rule to OMB for review on June 5, 2019.  The text of the rule is not yet available, and regulatory review can take anywhere from hours to months.  The latest Trump Administration regulatory agenda projects that the proposed rule will be released in July 2019.  While such projections are not always accurate, the notation on the agenda indicates that the wait for this highly-anticipated proposed rule may be coming to a close, and the beginning of the comment period may be on the horizon.   We will be closely monitoring developments.

CMS Looking for More Ways to Cut Medicare & Medicaid Red Tape

As part of its continuing “Patients over Paperwork” initiative, the Centers for Medicare & Medicaid Services (CMS) has released another request for information (RFI) on regulatory or subregulatory changes the agency could make to “reduce unnecessary administrative burdens for clinicians, providers, patients and their families.”  In particular, CMS seeks new ideas for:

  • Streamlining reporting requirements, documentation requirements, or processes to monitor compliance with CMS rules and regulations;
  • Aligning Medicare, Medicaid and other payer coding, payment, and documentation requirements and processes;
  • Enabling operational flexibility, feedback mechanisms, and data sharing that would enhance patient care, support the clinician-patient relationship, and facilitate individual preferences; and
  • Determining how and when CMS issues regulations and policies, and how CMS can simplify rules and policies for beneficiaries, clinicians, and providers.

Additionally, CMS solicits recommendations regarding ways the agency could: Continue Reading

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