CMS Gives States Options for Complying with Cures Act Mandate to Cap Medicaid DME Rates

As previously reported, the 21st Century Cures Act prohibits federal financial participation (FFP) payments to the states for certain Medicaid durable medical equipment (DME) expenditures that exceed what Medicare would have paid for such items, either on a fee schedule basis or under competitive bidding.  The provision is effective January 1, 2018.

CMS recently provided guidance to the states on the scope of the FFP limitation, noting that it only applies to DME covered by a state’s Medicaid program on a fee-for-service (FFS) basis that is also covered by Medicare. The FFP limitation does not apply to prosthetics, orthotics, or medical supplies, nor does it apply to items for which Medicaid is not the primary payer.  Medical equipment and appliances provided in an institutional setting and paid as a component of the institutional payment are not subject to the FFP limitation, but DME items paid on a FFS basis separate from the institutional payment will be subject to the limit.

CMS presents two basic options available to the states to demonstrate compliance with this provision. First, states may base their Medicaid DME payment rates on Medicare fee schedule or competitive bid rates, or on a lesser percentage of those rates (if this requires a state plan amendment, the amendment must be submitted by March 31, 2018).  Second, the state could conduct a “robust” comparison of Medicare and Medicaid rates, using both rate and unit utilization data; CMS expects the first comparative analysis to be submitted to CMS by March 31, 2019 (pending certain regulatory approvals).  CMS also would consider alternative approaches designed to meet a state’s specific needs.

Under any of these methods, if a state discovers that its payments for relevant DME items exceed the FFP limit, CMS directs that the overpayment must be returned to CMS.

CMS Mulling Changes to CLIA Personnel, Proficiency Testing Referral Rules

CMS is requesting information from the public on potential changes to longstanding Clinical Laboratory Improvement Amendments of 1988 (CLIA) personnel, histocompatibility, and related policies, which have not been comprehensively updated since 1992. With regard to personnel requirements, CMS seeks information that will enable it to revise the regulations to “better reflect current knowledge, changes in the academic context and advancements in laboratory testing,” particularly with regard to nursing and physical science degrees, competency assessment, laboratory training and experience requirements, and documentation. Regarding CLIA histocompatibility requirements, CMS asks for comments regarding potential updates to crossmatching requirements (including whether virtual crossmatching should be an acceptable alternative to physical crossmatching) and other rules that may not reflect current laboratory practice.

In addition, CMS requests feedback regarding CMS’s flexibility to impose alternative sanctions for laboratories issued a Certificate of Waiver (CoW) that are determined to have participated in prohibited proficiency testing (PT) referral. CMS also seeks comments on appropriate sanctions when a laboratory has referred its PT samples to another laboratory and has reported the other laboratory’s result as their own. Furthermore, CMS invites input on existing and potential new CLIA-related fees.

CMS will accept comments until March 12, 2018. CMS will consider submitted comments in a future related rulemaking.

OIG Invites Anti-kickback Safe Harbor, Fraud Alert Recommendations

The HHS Office of Inspector General (OIG) has published its annual solicitation of recommendations for new or revised anti-kickback statute safe harbors and new Special Fraud Alerts. The OIG states that in considering any recommendations, it will seek to determine potential financial benefits to health care providers in ordering or referring health care services. The OIG also will weigh the extent to which the proposals would increase or decrease:

  • Access to health care services,
  • Quality of health care services,
  • Patient freedom of choice among health care providers,
  • Competition among health care providers,
  • Costs to federal health care programs,
  • Potential overutilization of health care services, and
  • The ability of health care facilities to provide services in medically underserved areas or to medically underserved populations.

Comments will be accepted until February 26, 2018. In its most recent semiannual report, the OIG provided a status report on the response to last year’s safe harbor solicitation. The OIG received 11 recommendations for new or modified safe harbors — none of which are being adopted at this time.

DOJ Recouped $2.4 billion in Health Care Industry False Claims Act Settlements in FY 2017

The Department of Justice (DOJ) obtained $3.7 billion in False Claims Act (FCA) settlements and judgments in fiscal year (FY) 2017, with $2.4 billion coming from health care industry cases. The $2.4 billion amount includes only federal recoveries; additional funds were recovered for state Medicaid programs.  The largest health care industry recoveries in FY 2017– more than $900 million – involved the drug and medical device industry.  Most of the government’s FCA settlements and judgments ($3.4 billion) related to qui tam lawsuits in FY 2017, with individual whistleblowers receiving $392 million.  The DOJ notes that 669 qui tam suits were filed this past year.

CMS Establishes New Rules for Medicare Shared Savings Program ACOs Impacted by Extreme/Uncontrollable Circumstances

CMS has just put on display an interim final rule with comment period to establish special policies to assess the performance year 2017 financial and quality performance of Medicare Shared Savings Program accountable care organizations (ACOs) affected by extreme and uncontrollable circumstances, such as Hurricanes Harvey, Irma, and Maria and the California wildfires.  CMS is aligning the Shared Savings Program policy with the extreme and uncontrollable circumstances rules it recently promulgated for the Quality Payment Program.  CMS will use the determination of an extreme and uncontrollable circumstance under the Quality Payment Program, including the identification of affected geographic areas and applicable time periods, to trigger the extreme and uncontrollable circumstances policies under the Shared Savings Program.  The rule establishes special criteria for determining ACO quality performance scores and modifies the payment methodology under Tracks 2 and 3 to mitigate shared losses owed by ACOs affected by extreme and uncontrollable circumstances during performance year 2017.  CMS expects the total increase in shared savings payments and total reduction in shared loss payments  for ACOs impacted by this rule in 2017 to be approximately $3.5 million.  The regulation is effective January 20, 2018.  CMS will accept comments on the rule until February 20, 2018.

Trump Administration Outlines Planned Regulatory — and Deregulatory — Actions for 2018

The Trump Administration has updated its “Unified Agenda of Regulatory and Deregulatory Actions,” which lists the scope and anticipated timing of pending and future regulations. In releasing the agenda, the Administration highlights its “ongoing progress toward the goals of more effective and less burdensome regulation,” including its plans to finalize three deregulatory actions for every new regulatory action in fiscal year 2018.  For instance, the Administration intends to issue a proposed regulation to “remove unnecessary and outdated requirements from the conditions of participation for the Medicare and Medicaid programs for Long-Term Care facilities.” Other planned HHS regulatory and deregulatory actions include, among many others:

  • Annual proposed updates to Medicare provider payment rates and policies;
  • A proposed CMS rule to establish requirements for third parties that provide financial assistance to patients for premiums to enroll in coverage provided by a qualified health plan;
  • A proposed CMS rule to provide Medicare coverage of certain devices under investigation through a clinical research study and certain associated routine care items and services in that research, under the proposed Expedited Coverage of Innovative Technology (ExCITe) coverage pathway;
  • A proposed CMS rule to provide an exception to Medicaid fee-for-service access to care documentation requirements for states with high managed care penetration rates;
  • A proposed CMS rule to repeal Health Plan Identifier regulations; and
  • A proposed HRSA 340B drug pricing program ceiling price and manufacturer civil monetary penalties rule.

More generally, HHS intends to take regulatory actions “aimed at improving service delivery through meaningful information sharing, supporting consumer autonomy and decision-making, and better aligning programs with the most current science.” At the same time, “HHS is committed to streamlining and clarifying its regulations to reduce unnecessary burden” while protecting public health. The Department also intends to continue its focus on addressing fraud, waste and abuse.

OIG Report Assesses Accuracy of Manufacturer-Reported Medicaid Rebate Program Data

The OIG recently issued a report evaluating the accuracy of pharmaceutical manufacturer-reported Medicaid drug rebate program data, including pricing information and FDA classification (e.g., innovator/brand or noninnovator/generic). The OIG determined that the “vast majority” of the drugs in the Medicaid rebate program were classified appropriately in 2016, but about 3% of these drugs (885 drugs) may have been misclassified.  The OIG estimates that from 2012 to 2016, Medicaid may have lost $1.3 billion in rebates for 10 potentially-misclassified drugs with the highest total reimbursement in 2016.

In light of these findings, the OIG recommended that CMS: (1) follow up with identified manufacturers to determine whether current classifications are correct; (2) improve the CMS Drug Data Reporting for Medicaid System; and (3) pursue a means to compel manufacturers to correct inaccurate classification data reported to the Medicaid rebate program (either through new legislative authority or a determination that CMS has the authority to suspend potentially-misclassified drugs from Medicaid rebate program participation until the manufacturer corrects all inaccurate information).  CMS concurred with the OIG’s recommendations.  With regard to the third recommendation, CMS pointed out that it shares oversight responsibility with the OIG, and CMS “encourages OIG to use its enforcement authority to compel manufacturers to correct inaccurate drug classification data reported to the Medicaid drug rebate program.”  The OIG responded that while it will continue to pursue penalties against manufacturers where appropriate, it “believes it lacks legal authority to affirmatively pursue penalties for the submission of inaccurate drug classification data.”

CMS Plans Educational Call on Low Volume Appeals Settlement Initiative (Jan. 9)

On January 9, 2018, CMS is hosting a call to discuss its new low volume appeals settlement option. As previously reported, this option is available for certain Medicare fee-for-service providers, physicians, and other suppliers with fewer than 500 appeals pending at the Office of Medicare Hearings and Appeals and the Medicare Appeals Council at the Departmental Appeals Board. The call will cover provider/supplier eligibility and which pending appeals may be settled.  The call will not include a question and answer session, but questions may be submitted in advance. Registration information is available here.

GOP Tax Bill Eliminates ACA Individual Insurance Mandate Penalty

While previous broad Republican efforts to dismantle the Affordable Care Act (ACA) have failed, the GOP tax bill cleared by Congress today has succeeded in effectively repealing the ACA’s individual health insurance mandate.  By way of background, the ACA established a penalty for failure to maintain health insurance coverage that provides at least minimum essential coverage, as defined by various ACA regulations.  The penalty generally is equal to the greater of (1) 2.5% of income in excess of tax filing thresholds, or (2) a flat dollar threshold (for 2017, the threshold is $695 per adult and $347.50 per child, up to a family maximum of $2,085), subject to certain limitations and exemptions.  The “Tax Cuts and Jobs Act” (HR 1) cuts this penalty to zero, effective with respect to health coverage status for months beginning after December 31, 2018.  The tax bill does not impact the ACA’s employer insurance coverage responsibilities.  President Trump is expected to sign the bill into law in the near future. 

The individual insurance mandate was intended to encourage healthier individuals to obtain health insurance, thereby resulting in a more favorable risk pool and lower insurance premiums overall.  The Congressional Budget Office (CBO) recently estimated that if the individual mandate were repealed, the number of people with health insurance would decrease by 4 million in 2019 and 13 million in 2027, and average premiums in the individual market would increase by about 10% in most years of the coming decade.  Furthermore, federal budget deficits would be reduced by about $338 billion between 2018 and 2027, according to the CBO, mainly due to reduced federal spending on insurance exchange subsidies and Medicaid.

Senate Majority Leader Mitch McConnell has committed to considering legislation to mitigate potential health insurance premium increases caused by the repeal of the individual insurance penalty, including bills to fund cost-sharing-reduction payments and to create high risk pools for individuals with pre-existing conditions.  House consideration of such legislation is not assured, however, likely exacerbating uncertainties in the individual insurance market.  

Year-End Congressional Hearings Examine Health Policies

This month, Congressional committees held a number of hearings that focused on health policy issues, including the following:

FDA Proposes Framework for Regulating Software as a Medical Device

The Food and Drug Administration (FDA) recently released new draft guidance documents to clarify its approach to regulating software as a medical device. The first draft guidance, Clinical and Patient Decision Support Software, addresses provision of the 21st Century Cures Act that exempts certain clinical decision support software from the definition of a medical device. The second guidance, Changes to Existing Medical Software Policies Resulting from Section 3060 of the 21st Century Cures Act, sets forth types of software that the FDA no longer considers medical devices. These guidance documents are analyzed on our sister blog, Life Sciences Legal Update.

OIG Highlights Recent Audit, Investigation, and Enforcement Accomplishments

The Office of Inspector General (OIG) of the Department of Health and Human Services has released its semiannual report for the period of April 1, 2017, through September 30, 2017. The report also includes aggregated data for all of fiscal year (FY) 2017.  For instance, during FY 2017, the OIG achieved:

  • $4.13 billion in expected investigative recoveries;
  • 881 criminal and 826 civil actions against individuals or entities related to HHS programs; and
  • Exclusion of 3,244 individuals and entities from federal health care programs.

In the report, Inspector General Daniel R. Levinson notes the OIG’s growing use of advanced data analytics to detect potential vulnerabilities and fraud trends, which he asserts allows the agency “to target our resources at those areas and individuals most in need of oversight, leaving others free to provide care and services without unnecessary disruption.” Additionally, the OIG takes credit for generating almost $24.4 billion in savings in FY 2017 as a result of its recommendations being included in legislative, regulatory, and other policy decisions.

CMS Extends Medicare Prior Authorization Program for Repetitive Scheduled Non-Emergent Ambulance Transport

CMS is extending for another year the Medicare prior authorization program for repetitive, scheduled non-emergent ambulance transport services rendered by ambulance providers in selected states. As previously reported, CMS began testing the three-year Medicare prior authorization model in New Jersey, Pennsylvania, and South Carolina on December 1, 2014. The agency extended the model to the following six locations as of January 1, 2016: Delaware, the District of Columbia, Maryland, North Carolina, Virginia, and West Virginia.  While the model was scheduled to end in all states on December 1, 2017, CMS has now extended the program in each of the current model locations; the model will now end in all states on December 1, 2018. According to the CMS notice, prior authorization will not be available for repetitive scheduled non-emergent ambulance transportation services furnished after that date.

CMS Scraps Cardiac/Hip Fracture Episode Payment Model, Downsizes CJR Program

The Centers for Medicare & Medicaid Services (CMS) has officially cancelled a planned program to require certain hospitals to participate in Medicare episode payment models (EPMs) for acute myocardial infarction, coronary artery bypass graft, and surgical hip/femur fracture treatment procedures furnished in designated areas of the country, along with a Cardiac Rehabilitation (CR) Incentive Payment Model. These programs, which were slated to launch on January 1, 2018, were summarized in previous posts. In a press release, CMS states that not pursuing these models gives it “greater flexibility to design and test innovations that will improve quality and care coordination across the in-patient and post-acute care spectrum.”

In the same rulemaking, CMS also dramatically scaled back the ongoing Comprehensive Care for Joint Replacement (CJR) model. By way of background, this program provides a “bundled” payment to participant hospitals for an “episode of care” for lower extremity joint replacement (LEJR) surgery, covering all services provided during the inpatient admission through 90 days post-discharge (with certain exceptions).  The bundled payment is paid retrospectively through a reconciliation process; providers receive regular fee-for-service payments in the interim. The CJR model began April 1, 2016 and runs through 2020.

Most notably, the new rule gives certain hospitals participating in the CJR model a one-time option to choose whether to continue their participation in the model, effective February 1, 2018. This voluntary election option applies to hospitals in 33 of the 67 Metropolitan Statistical Areas (MSAs) selected in the original CJR final rule, along with low volume hospitals and rural hospitals in the remaining 34 mandatory participation MSAs.  CMS is designating a one-time participation opt-in period from January 1 – 31, 2018 during which eligible hospitals may opt to continue to participate in CJR.  Note, however, that CMS will automatically terminate CJR participation for hospitals in the designated 33 MSAs, along with low volume and rural hospitals, as of February 1, 2018, unless the hospital elects to continue participation in the CJR model.  CMS expects the number of hospitals required to participate in CJR to fall from approximately 700 to about 370, and an additional 60 to 80 hospitals to make a voluntary election to continue participation.  A list of all current CJR participant hospitals and their status (mandatory or voluntary) is available on the CJR webpage, as is the Voluntary Participation Election Letter Template.

CMS also adopted a number of refinements to CJR model policies, including the following: Continue Reading

Congressional Hearings Focus on Health Policy Issues

A number of Congressional panels have scheduled or held recent hearings on health policy issues, including the following:

  • On November 30, 2017, the House Energy & Commerce Committee is holding a hearing on implementation of the 21st Century Cures Act (Cures Act), featuring testimony by National Institutes of Health Director Francis Collins, M.D. and Food and Drug Administration Commissioner Scott Gottlieb, M.D. The panel previously held a hearing on “MACRA and Alternative Payment Models: Developing Options for Value-based Care.”
  • The Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings on gene editing technology, the Surgeon General’s perspective on encouraging healthy communities, and health information technology. On November 29, the HELP Committee is considering President Trump’s nomination of Alex Azar to be Secretary of Health and Human Services. The panel has also scheduled a November 30 hearing on “The Front Lines of the Opioid Crisis: Perspectives from States, Communities, and Providers,” along with a December 7 hearing on implementation of the Cures Act.
  • The House Oversight and Government Reform Committee held a hearing on combatting the opioid crisis.

House Approves IPAB Repeal Legislation

The House of Representatives has voted 307 – 111 to approve HR 849, Protecting Seniors’ Access to Medicare Act, to repeal the Independent Payment Advisory Board (IPAB).  Under the ACA, the IPAB must submit Medicare spending plans to Congress if projected spending growth exceeds specified targets.  IPAB proposals go into effect automatically unless Congress enacts alternative legislation achieving required savings.  While IPAB members have not been appointed and the spending trigger has not been met to date, the Congressional Budget Office currently projects that the IPAB authority will be invoked in 2023, 2025, and 2027.  The bill now moves to the Senate Finance Committee.


President Signs Metabolic Syndrome Support Legislation, Emergency Medication Act

President Trump has signed into law S 920, the National Clinical Care Commission Act, which establishes a national clinical care commission to improve coordination of federal programs that support care for people with complex metabolic syndromes and related autoimmune disorders.

In addition, President Trump signed HR 304, Protecting Patient Access to Emergency Medications Act of 2017.  The measure clarifies that emergency medical services professionals may administer controlled substances pursuant to standing or verbal orders in certain circumstances.

HHS Announces New Appeals Settlement Initiatives

The HHS Departmental Appeals Board (DAB) is inviting the public to submit recommendations for precedential Medicare Appeals Council (Council) decisions that will be binding on all CMS, HHS, and Social Security Administration components that adjudicate matters under CMS jurisdiction. The designation of precedential decisions was authorized by regulations adopted earlier this year; the DAB will publish notice of any precedential designations in the Federal Register.

CMS also announced that it will provide a low-volume appeals (LVA) settlement option for certain providers and suppliers with appeals pending at the Office of Medicare Hearings and Appeals (OMHA) and the Council. This option will be available for appellants with fewer than 500 total Medicare Part A or Part B claim appeals pending at OMHA and the Council as of November 3, 2017 with a total billed amount of $9,000 or less per appeal, subject to certain other conditions.  Eligible appeals will be settled at 62% of the net allowed amount.  In addition, OMHA intends to expand its Settlement Conference Facilitation (SCF) alternative dispute resolution process for certain appellants that are not eligible for the LVA option.

OIG: Medicare Program Integrity at the Top of HHS Management Challenges

The OIG’s latest compilation of top HHS management and performance challenges flags vulnerabilities in key HHS health and social services programs, including includes the following:

  1. Ensuring Program Integrity in Medicare (addressing improper payments, fraud, payment policies, health care reforms, and health information technology).
  2. Ensuring Program Integrity in Medicaid (including compliance with fiscal controls, fraud prevention, and quality of Medicaid data).
  3. Curbing the Opioid Epidemic (addressing inappropriate prescribing of opioids, fraud and diversion, access to treatment, and misuse of grant funds).
  4. Improving Care for Vulnerable Populations (addressing substandard nursing home care, hospice care and community-based services problems, and safe services for children).
  5. Ensuring Integrity in Managed Care and Other Programs Delivered through Private Insurers (including combating fraud, waste, and abuse by health care providers; ensuring compliance by managed care and Part D sponsors; and overseeing the health insurance marketplace).
  6. Improving Financial and Administrative Management and Reducing Improper Payments (addressing weaknesses in financial management systems, Medicare trust fund issues, improper payments, contracts management, and Digital Accountability and Transparency Act implementation).
  7. Protecting the Integrity of Public Health and Human Services Grants (ensuring effective Department grants management and grantee program integrity).
  8. Ensuring the Safety of Food, Drugs, and Medical Devices (including overseeing the drug and medical device supply chain).
  9. Ensuring Program Integrity and Quality in Programs Serving American Indian and Alaska Native Populations (improving Indian Health Service quality of care, management, and infrastructure; combating fraud; and ensuring adequate internal controls for grant programs).
  10. Protecting HHS Data, Systems, and Beneficiaries from Cybersecurity Threats (guarding HHS’s data and systems and fostering a culture of cybersecurity beyond HHS).

OIG urges HHS to “be mindful of these challenges and opportunities to address them as it undertakes its efforts to reimagine HHS as part of the Federal Government’s comprehensive plan to reform Government.”