HHS Finalizes Healthcare Interoperability and Information Blocking Rules

The U.S. Department of Health and Human Services (HHS) issued eagerly anticipated and hotly debated companion interoperability and information blocking final rules that are expected to transform the way in which certain health care providers, health information technology (IT) developers, and health plans share patient information.  The two rules, issued by the HHS Office of the National Coordinator for Health Information Technology (ONC) and Centers for Medicare & Medicaid Services (CMS), implement interoperability and patient access provisions of the 21st Century Cures Act (Cures Act) and support the MyHealthEData initiative, designed to allow patients to access their health claims information electronically through the application of their choosing.

Major provisions of each final rule are highlighted below. Note that the final rules have not yet been formally submitted to the Federal Register, so some of the precise effective dates are still to be determined.

ONC Final Rule

For Providers, Health Information Networks or Exchanges, and Health IT Developers

  • Prohibition on Information Blocking. Effective six months following the publication of the final rule, health care providers, health IT developers of certified health IT, and health information exchanges and networks, are banned from “information blocking.”  Information blocking is defined in the rule as engaging in a practice that is likely to interfere with, prevent, or materially discourage access, exchange or use of electronic health information (EHI) and, if (a) conducted by a health IT developer or health information network or exchange, such developer, network or exchange knows, or should know or (b) if conducted by a health care provider, such provider knows – the practice is likely to interfere with, prevent, or materially discourage access, exchange, or use of EHI.
    • EHI means electronic protected health information (EPHI) as the term is defined for HIPAA, to the extent that it would be included in a designated record set, with certain exceptions, regardless of whether the group of records are used or maintained by or for a HIPAA covered entity. This EHI definition will be effective 24 months after the publication of the final rule.  In the interim, for purposes of information blocking, EHI is limited to the EHI identified by the data elements represented in the U.S. Core Data for Interoperability (USCDI) standard.
    • Health care providers include health care facilities, entities, practitioners, and clinicians listed in the Public Health Service Act. ONC did not expand the definition of health care provider in the Final Rule to cover all individuals and entities covered by HIPAA.  However, the final rule leaves this door open by giving the Secretary of HHS discretion to expand the definition of health care provider to any other category the Secretary deems appropriate by future rulemaking.
  • Examples of Information Blocking. According to ONC, information blocking practices could involve, among other things: formal restrictions in contract or licensing terms; limiting or restricting the interoperability of health IT through organizational policies or procedures or other EHI or health IT documentation; information restrictions, such as if an entity simply refuses to exchange or facilitate access to EHI as a general practice or in isolated cases; or use of certain technological measures that limit EHI exchange.
  • Information Blocking Exceptions. The final rule identifies eight activities as exceptions to information blocking.  According to ONC, the exceptions apply to certain activities that are likely to interfere with, prevent, or materially discourage the access, exchange, or use of EHI, but that would be reasonable and necessary if certain conditions are met.  Each exception falls into one of two categories: (i) exceptions that involve not fulfilling requests to access, exchange, or use EHI; and (ii) exceptions that involve procedures for fulfilling requests to access, exchange, or use EHI.
  • Penalties for Information Blocking. Consistent with the Cures Act, ONC’s information blocking prohibition seeks to deter information blocking through penalties that differ based on the actor.  Health IT developers and health information networks and exchanges are subject to civil money penalties capped at $1 million per violation, while health care providers who violate the information blocking provisions may face unspecified disincentives for violations, to be determined by the appropriate HHS department or agency in subsequent rulemaking.

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CMS Plans to Add Outpatient Hip/Knee Replacements to CJR Model, Seeks Comments on ASC Joint Procedure Bundled Payment Model

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule that would extend and modify the Comprehensive Care for Joint Replacement (CJR) Model, under which CMS makes 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).  Notably, CMS has proposed incorporating outpatient hip and knee replacements into the episode of care definition, now that these procedures are no longer on the CMS “inpatient only” list.  CMS also requests comments on a potential future bundled payment model focusing on LEJR procedures performed in ambulatory surgical centers (ASCs).  CMS will accept comments on until April 24, 2020.

Highlights of the proposed rule include the following:

  • Extension of CJR Model. The CJR Model began April 1, 2016 and currently is scheduled to run through December 31, 2020.  CMS has proposed extending the model for an additional three years, through December 31, 2023 for participant hospitals physically located in the 34 mandatory metropolitan statistical areas (MSAs), excluding rural or low-volume hospitals in those MSAs.  CMS anticipates that approximately 350 participants would participate in the CJR model during the proposed three-year extension, compared with about 470 providers as of October 2019.
  • Outpatient Joint Replacements. The proposed rule would expand the definition of a CJR “episode” to include outpatient total knee arthroplasty (TKA) and total hip arthroplasty (THA), in light of previously-adopted CMS policies that allow total knee and total hip replacements to be treated in the outpatient setting.  This change would apply to episodes initiated by an “anchor procedure” furnished on or after October 4, 2020 (because the 90-day episode would end on or after January 1, 2021, the first day of proposed new plan year 6).  CMS proposes to group all outpatient TKA procedures into MS-DRG 470 (LEJR without complications and/or comorbidities) without hip fracture historical episodes for purposes of calculating a single, site-neutral target price.  Outpatient THA cases would be grouped into either MS-DRG 470 with hip fracture or MS-DRG 470 without hip fracture depending on hip fracture status.
  • Target Price Calculation. CMS has proposed changing the basis for the target price from three years of claims data to the most recent one year of claims data.  The proposed rule also would discontinue the use of the regional and hospital anchor weighting steps in the target price calculation methodology, and it would end the annual updates to the target prices.  Furthermore, CMS proposes to incorporate additional risk adjustment to the target pricing and modify the high episode spending cap calculation methodology.

The proposed rule also would, among other things: Continue Reading

CDC Offers Guidance to Health Providers on ICD-10 Coding for Coronavirus/COVID-19 Encounters

The Centers for Disease Control and Prevention (CDC) recently released official diagnosis coding guidance for health care encounters and deaths related to the 2019 novel coronavirus (COVID-19), potentially in anticipation of more frequent cases in the United States. The guidance identifies specific ICD-10-CM codes to be used to code encounters.

CDC advises that patients presenting with certain signs and symptoms, but where a definitive diagnosis has not been made, should be coded as follows:

R05 – Cough

R06.02 – Shortness of breath

R50.9 – Fever, unspecified

For pneumonia cases confirmed as due to COVID-19, providers should use J12.89, Other viral pneumonia, and B97.29, Other coronavirus as the cause of diseases classified elsewhere.

For acute bronchitis confirmed as due to COVID-19, CDC advises providers to use J20.8, Acute bronchitis due to other specified organisms, or J40, Bronchitis not otherwise specified. In both instances, the provider should also use B97.29.

For lower respiratory infection or acute respiratory infections not otherwise specified that are documented as being associated with COVID-19, CDC recommends using code J22, Unspecified acute lower respiratory infection. If the COVID-19 is documented as being associated with a respiratory infection not otherwise specified, CDC advises that it would be appropriate to use code J98.8, Other specified respiratory disorders. Acute respiratory distress syndrome should be assigned code J80, Acute respiratory distress syndrome. These codes should also be used with B97.29.

Where a patient is evaluated following concern of possible exposure to COVID-19, but COVID-19 is ruled out, CDC advises using Z03.818, Encounter for observation for suspected exposure to other biological agents ruled out. If the patient has actual exposure to COVID-19, the provider should assign Z20.828, Contact with and (suspected) exposure to other viral and communicable diseases. B97.29 should not be used where the provider documents “suspected,” “possible” or “probable” COVID-19.

Additional information can be found here.

Potential Tensions Lie Ahead Between Federal and State Authorities Over the Application of CDC Quarantine Powers

According to the U.S. Centers for Disease Control and Prevention (CDC), although there have been imported cases of Covid-19 detected in the United States, “at this time, the virus is NOT currently spreading in the community in the United States.”[1]  However, on Tuesday, February 25, 2020, Nancy Messonier, the CDC’s Director of National Center for Immunization and Respiratory Diseases, urged American businesses and families to start preparing for the possibility of a large outbreak, noting that the virus spread quickly once it appeared in other countries.[2]  Although the World Health Organization (WHO) still has not called Covid-19 a pandemic, Mike Ryan, head of WHO’s health emergencies program, suggests that countries need to be doing everything they can to contain the virus, at least in order to buy some time.[3]

To that end, the CDC has been tapping some of its quarantine powers.  CDC has authority to oversee quarantine and isolation of persons who carry communicable diseases, derived from the Commerce Clause of the Constitution, and codified in section 361 of the Public Health Service Act (42 U.S.C. § 264).[4]  The CDC’s authority, however, is limited to persons arriving in the United States or traveling between states.  Each state has its own laws regarding quarantine powers, and the CDC also relies on state authorities to implement and enforce quarantine orders.  There is some risk that state health authorities could act in a manner that is inconsistent with the intentions of the CDC (to be more or less restrictive).  The CDC has not issued a large-scale isolation and quarantine since the Spanish influenza pandemic of 1918-1919.[5]

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Medicare/Medicaid Policy Provisions in Trump Administration’s FY 2021 Budget Proposal

The Trump Administration’s proposed fiscal year (FY) 2021 budget calls for significant cuts to federal health spending, including a 10% decrease in Department of Health and Human Services (HHS) discretionary spending in FY 2021 and a $1.6 trillion net reduction in health entitlements over the next decade.  House Budget Committee leaders have blasted the HHS provisions, and the package as a whole is unlikely to be advanced by Congress.  Nevertheless, the document reflects the Administration’s current Medicare and Medicaid priorities, some of which are administrative and could be advanced without Congress.  Furthermore, Medicare provider/supplier cost-saving recommendations could be incorporated into future budget agreements or potentially other entitlement reform efforts down the road.

Highlights of the Trump Administration’s major Medicare and Medicaid budget proposals are presented below.

Medicare Payment Policies

The Administration estimates that its proposed Medicare legislative package would result in $756 billion in Medicare Trust Fund savings over 10 years (net impact after offsets of $450 billion/10 years).  Many of the legislative recommendations have been made in previous budget proposals.  Budget provisions that would result in significant net Medicare savings include the following (net savings figures are over the 10-year period of FYs 2021-2030):  

  • Elimination of the Medicare Advantage (MA) benchmark cap and quality “double bonus” for plans in eligible counties [$1.2 billion].
  • Reform of hospital uncompensated care payments, including basing payments on a hospital’s share of charity care and non-Medicare bad debt [$87.9 billion].
  • Establishment of site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits) [$2 billion] and payment for all off-campus hospital outpatient departments under the physician fee schedule [$47.2 billion].
  • Adoption of a unified post-acute care system for skilled nursing facilities (SNFs), home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in FY 2026, with reduced annual Medicare payment updates from FYs 2021-2025 [$101.5 billion].
  • Elimination of Medicare reimbursement for disproportionate share hospital (DSH) bad debt, with an exemption for rural hospitals [$33.6 billion].
  • Reduced Medicare payment for hospice services under the SNF routine home care level of care. [$4.5 billion].
  • An increase in the intensive care unit minimum stay threshold from three days to eight days to qualify for LTCH prospective payment system payment [$9.4 billion].
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies competitive bidding program to all geographic areas and to inhalation drugs, payment of contract suppliers based on their own bids, and elimination of the surety bid bond requirement [$7.73 billion Medicare savings, $435 million in Medicaid savings]. Separate from the bidding program, the Centers for Medicare & Medicaid Services (CMS) would be authorized to update DME rates based on retail prices through rulemaking, without using the inherent reasonableness process [$1.6 billion Medicare savings, $85 million in Medicaid savings].

Other legislative proposals are intended to promote value-based care; in some cases, these proposals also would result in cost savings.  For instance, the budget proposes the following:

  • Basing Medicare beneficiary accountable care organization assignment on a broader set of non-physician primary care providers [$80 million].
  • Consolidation of the four Medicare inpatient hospital quality programs into a single hospital quality payment program [budget neutral].
  • Implementation of hospital outpatient department and ambulatory surgical center (ASC) value-based programs, with 2% of payments linked to quality/outcomes performance. Payment would be risk adjusted based on patient diagnosis severity to promote site neutrality [budget neutral].
  • Creation of a risk-adjusted monthly Medicare Priority Care payment for providers eligible to bill for evaluation and management (E/M) services who provide ongoing primary care to beneficiaries. The payment would be funded by a 5% annual cut in valuations of non-E/M services [budget neutral].

Medicare Transparency, Quality, Coverage, and Benefits

The budget includes a series of proposals intended to increase access to price and quality information and/or clarify Medicare coverage and payment processes.  For instance, the budget would: Continue Reading

CMS Releases Proposed Medicare Advantage and Part D Rules for Contract Year 2021 and 2022

CMS has put on display a proposed rule that would update Medicare Advantage (MA) and Medicare Part D prescription drug benefit policies for contract year 2021 and 2022.  CMS projects that its proposed policies would decrease federal spending by $4.4 billion over 10 years, primarily as a result of a proposal to remove outliers prior to calculating Star Rating system cut points.  Other major provisions of the proposed rule include the following:

  • CMS proposes to implement several legislative provisions intended to address the opioid epidemic, including expanded beneficiary education requirements and mandatory drug management programs for beneficiaries at-risk for misuse or abuse of frequently abused drugs.
  • The proposed rule would codify a statutory provision allowing Medicare-eligible individuals with end-stage renal disease (ESRD) to enroll in MA plans.  Effective January 1, 2021, organ acquisitions for kidney transplants for MA beneficiaries will be covered under the Medicare fee-for-service program, and such costs will be excluded from MA benchmarks.
  • CMS proposes to strengthen MA plan network adequacy rules, including new policies intended to improve access to providers in rural areas and encourage the use of telehealth providers in contracted networks.
  • Part D plan sponsors would be allowed to establish two specialty tiers, instead of the single specialty tier currently permitted.  In such cases, one tier must be a “preferred” tier that offers lower cost sharing. CMS believes the additional tier would allow Part D plan sponsors to negotiate additional rebates from manufacturers, but it is also soliciting comment on whether placement on the preferred specialty tier should be limited to generics and biosimilars whose cost exceeds the specialty threshold established by CMS.
  • Part D plan sponsors would be required to make available to beneficiaries, through a web portal or mobile app, a real-time benefit tool (RTBT) that provides accurate, timely, and clinically appropriate patient-specific real-time formulary and benefit information (including cost-sharing amount, formulary alternatives and utilization management requirements). While this would generally parallel the RTBT that Part D plan sponsors are required to make available to prescribers beginning January 1, 2021, CMS is considering numerous issues, including P&T committee determination of which formulary alternatives can be omitted and prohibition on outputs “that are intended to promote choices based upon the commercial interests of the part D sponsor rather than the beneficiary’s best interests, or the promotion of medications or refills based on the rebates that would be received.”  CMS is also considering allowing Part D plan sponsors to make available rewards and incentives for beneficiaries using the RTBT, including gift cards.  CMS proposes an effective date of January 1, 2022, but solicits comments on whether January 1, 2021 is a feasible effective date.
  • CMS proposes to make a series of changes to its Medical Loss Ratio calculations.

Comments on the proposed rule will be accepted until April 6, 2020.

CMS Proposes Updates to ACA Exchange Plan Policies for 2021

The Centers for Medicare & Medicaid Services (CMS) has proposed updates to its standards for health plan issuers offering plans through federally-facilitated and state-based Exchanges for 2021.  The proposed rule would, among other things:  revise the risk adjustment methodology; update issuer user fees and cost-sharing limits; amend medical loss ratio regulations (including with regard to treatment of prescription drug rebates received and retained by an entity that provides pharmacy benefit management services to the issuer); modify special enrollment period rules; encourage value-based insurance plan designs; and make changes to the quality rating information display requirements for Exchanges.

With regard to drug manufacturer coupons, CMS proposes to give plans and issuers “flexibility to determine whether to include or exclude coupon amounts from the annual limitation on cost sharing, regardless of whether a generic equivalent is available.”  Under the proposed rule, to the extent consistent with applicable state law, amounts paid toward reducing enrollee cost sharing using any form of direct support offered by drug manufacturers to enrollees for specific prescription drugs are permitted, but not required, to be counted toward the annual cost sharing limitation.

Comments on the proposed rule will be accepted until March 2, 2020.  CMS is accepting comments on its related Draft 2021 Letter to Issuers in the Federally-facilitated Exchanges until February 24, 2019.  Finally, CMS issued a bulletin extending for an additional year its current non-enforcement policy that permits states to allow issuers to offer certain non-grandfathered health insurance coverage in the individual and small group market that does not meet all Affordable Care Act coverage standards.

HHS Adopts New Retail Pharmacy HIPAA Transaction Requirements for Schedule II Drug Prescriptions

The Department of Health and Human Services (HHS) has modified HIPAA retail pharmacy transaction requirements to differentiate between partial fill and full refills of opioids and other Schedule II drug prescriptions.  Specifically, HHS has finalized the requirements for use of the National Council for Prescription Drug Programs (NCPDP) Telecommunication Standard Implementation Guide, Version D, Release 0, August 2007, by requiring use of the Quantity Prescribed (460-ET) field to identify partial fills for Schedule II drugs.  The Administration believes that the more robust prescribing information will help prevent impermissible refills of Schedule II drugs and enhance researchers’ understanding of prescribing trends.  The rule is effective on March 24, 2020, and compliance is required by September 21, 2020.

CMS Updates List of DMEPOS Items Subject to Medicare Prior Authorization

CMS is adding six types of lower limb prosthetics to the list of equipment subject to Medicare prior authorization (PA) requirements, and extending certain current PA requirements.  Specifically, CMS is requiring PA as a condition of Medicare payment for the following items on the basis of their being “frequently subject to unnecessary utilization”:

  • L5856 Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing and stance phase, includes electronic sensor(s), any type
  • L5857 Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, swing phase only, includes electronic sensor(s), any type
  • L5858 Addition to lower extremity prosthesis, endoskeletal knee-shin system, microprocessor control feature, stance phase only, includes electronic sensor(s), any type
  • L5973 Endoskeletal ankle foot system, microprocessor controlled feature, dorsiflexion and/or plantar flexion control, includes power source
  • L5980 All lower extremity prostheses, flex foot system
  • L5987 All lower extremity prosthesis, shank foot system with vertical loading pylon

CMS is implementing the new PA requirement in two phases.  During phase one, which begins May 11, 2020, CMS will impose the PA requirement in one state in each of the DME Medicare Administrative Contractor jurisdictions (California, Michigan, Pennsylvania, and Texas).  In phase two, which begins October 8, 2020, CMS will expand the program to the remaining states.

The notice also announces that all 45 Power Mobility Device and Pressure Reducing Support Services items currently on the Required Prior Authorization List will continue to be subject to PA requirements.  CMS has compiled information for suppliers about the PA requirements here.

CMS Proposes 2021 Funding Methodology for ACA Basic Health Program

The Centers for Medicare & Medicaid Services (CMS) has released the methodology and data sources it proposes to use to determine federal payment to states that establish a Basic Health Program (BHP) for 2021.  Through the BHP, which was authorized by the Affordable Care Act (ACA), states may offer health benefits to certain low-income individuals otherwise eligible to purchase coverage through an Affordable Insurance Exchange.  CMS will accept comments on the proposed methodology through March 11, 2020.

Analysis:  Navigating US federal and state rules during the novel coronavirus public health emergency

The novel coronavirus (2019-nCoV, also known as “SARS-CoV-2”) has been declared a public health emergency (PHE) by the U.S. Department of Health and Human Services (HHS).  This designation authorizes HHS to direct funding to: (1) enable the dissemination of information about the virus; (2) encourage research and development of diagnostic and treatment techniques; (3) improve screening and detection efforts; and (4) support state and local governments in virus control efforts.

Reed Smith has prepared a client alert that provides an overview of government PHE regulatory authorities and analyzes federal and state regulations impacting health care providers, suppliers, and facilities when a federal PHE has been declared or an infectious disease outbreak occurs under state law.  Among other things, the client alert addresses:  Emergency Medical Treatment and Active Labor Act (EMTALA), Stark Law, and other federal waivers; state law police powers, including quarantine; relevant rules for disclosure of personal health information; FDA emergency authorization for coronavirus diagnostic test; and supply chain concerns and 340B pricing implications.  Our client alert is available here.

Trump Administration Offers States New Medicaid “Healthy Adult Opportunity” Demonstration with Enhanced Benefit, Payment Flexibilities

The Centers for Medicare & Medicaid Services (CMS) has announced a controversial plan to allow states to apply to participate in a new Medicaid “Healthy Adult Opportunity” (HAO) Demonstration.  In short, the HAO Demonstration will give participating states greater flexibility in the scope and administration of Medicaid benefits for certain beneficiary populations (i.e., the Affordable Care Act (ACA) expansion population) under a capped aggregate or per-capita federal financial participation (FFP) financing model.  CMS is offering participating states a “comprehensive suite of pre-packaged waiver authorities” under section 1115(a)(2) of the Social Security Act related to, among other things, cost sharing, benefit design (including closed drug formularies), eligibility, care delivery, and changes to provider payment rates.  States may apply for the HAO Demonstration immediately, although CMS’s authority to institute the program undoubtedly will be challenged in court.

CMS has provided extremely detailed guidance to states regarding the parameters of the HAO Demonstration.  Highlights of the program include the following:

  • Beneficiary Population – HAO Demonstration is limited to adults under age 65 who qualify for Medicaid on a basis other than disability or need for long-term care services and supports, and who are not eligible under a state plan. CMS will allow states to impose certain additional conditions of eligibility, including income qualifications and “community engagement” (i.e., work) requirements for non-elderly, non-pregnant adult Medicaid beneficiaries who are eligible for Medicaid on a basis other than disability.
  • Benefits – CMS is linking Medicaid coverage under the HAO Demonstration to the ACA essential health benefit (EHB) standard rather than the traditional Medicaid benefits package.  This includes authorization to adopt a closed prescription drug formulary, with no requirement to comply with coverage requirements under the Medicaid rebate statute. Coverage would have to be in line with EHB requirements (e.g., formulary coverage of the same number of drugs in each therapeutic class as under the applicable state benchmark plan, with certain exception and appeal rights).  CMS would also require that some, but not all, of the Medicare Part D “protected class” requirements be satisfied—specifically, that all or substantially all antipsychotics, antidepressants, and HIV drugs be covered, but not all anticonvulsants, antineoplastic (cancer), and immunosuppressants for transplant rejection.  Coverage of drugs for opioid use disorder would also be required.  CMS specifies that the obligation for a drug manufacturer with drug rebate agreement to pay rebates would continue to apply under the Demonstration, and states could negotiate supplemental rebates in exchange for the inclusion of the manufacturer’s drugs on the state’s formulary.  Additionally, CMS will allow states to offer services that cannot traditionally be funded by Medicaid, such as enhanced case management services and services provided by a federally qualified health center as part of value-based payment reform efforts.
  • Cost Sharing – States will have enhanced flexibility with regard to premium and cost sharing structures, except that the aggregate limit on premiums and cost sharing may not exceed 5% of family income.
  • Managed Care and Delivery Systems – States will be able to use any combination of fee-for-service and managed care delivery systems under the demonstration as long as certain guidelines are met. States using managed care will have flexibility to propose alternative approaches to meeting statutory requirements to ensure network adequacy, access to care, and availability of services.  CMS also encourages applicants to “implement payment and delivery system reforms to improve the effectiveness of coverage, improve health outcomes and reduce the cost of health care,” including models similar to those developed by the CMS Center for Medicare & Medicaid Innovation.
  • Quality Strategy and Performance Assessment – Participating states will be required to implement a quality strategy and assess coverage, access to care, quality of care, and health outcomes of beneficiaries covered under the Demonstration. As part of this process, participating states must report on quality and access measures and continuous performance indicators addressing enrollment, retention, access to care, and financial management.
  • Financing – States participating in the HAO Demonstration will be required to operate their program under a defined total expense/aggregate cap or per-enrollee budget target. For states that assume the risk of an aggregate cap model, states with spending under their annual aggregate cap that also meet certain performance measures may qualify to receive between 25% and 50% of the federal savings, to be used for specified Medicaid reinvestment purposes (note that states selecting the total expense model will be required to spend at least 80% of their target amount on health services).
  • Demonstration Period – HAO Demonstrations generally will be approved for a five-year period, and successful demonstrations may be renewed for up to 10 years.  Additional information on the HAO Demonstration application process is available here.

As for the legality of HAO Demonstrations, it remains to be seen whether or when litigation will be filed by Medicaid stakeholders opposed to CMS’s effort.  For its part, CMS included language in its recent announcement stating that states’ requests to participate would be evaluated on a case-by-case basis with no guarantee of approval, which may complicate judicial review prior to CMS taking final agency action with respect to a particular state’s application to participate.  In the meantime, the legality of CMS’s previously announced demonstration waivers involving Medicaid work requirements is expected to be resolved shortly by the United States Court of Appeals for the District of Columbia Circuit, which heard oral argument last fall in CMS’s appeal of adverse district court rulings that found the agency exceeded its statutory authority.

2/14/2020 update:  The D.C. Circuit unanimously affirmed the district court’s judgment, finding the Secretary of Health and Human Services acted in an arbitrary and capricious manner by approving a section 1115(a) demonstration waiver imposing work requirements on Medicaid beneficiaries.

HHS Sustains Digital Health Momentum and Continues Publishing Policy Initiatives to Kick-off 2020

The U.S. Department of Health and Human Services (HHS) started the new decade by keeping up its momentum to encourage patient engagement and support the secure expansion of digital health by releasing proposed rules and policy initiatives. On January 15, 2020, the HHS Office for the National Coordinator for Health Informational Technology (ONC) released a draft of its 2020-2025 Federal Health IT Strategic Plan (Plan). The outcomes-driven Plan, which ONC collaboratively developed with 25 federal organizations, aims to promote a health IT economy that balances increased transparency, competition, and consumer choice with privacy and security of patient health information. The Plan reflects HHS’ ongoing efforts to create pathways for patients to actively engage in their health outcomes and navigate personalized care alternatives.

The Plan is intended to serve as a five-year roadmap for federal health IT initiatives and activities, and to function as a catalyst for streamlined activities in the private sector. In particular, the Plan highlights four key goals with supporting objectives, all focused on meeting the needs of patients, caregivers, health care providers, payers, researchers, developers, and innovators by increasing access to health information, emphasizing product and pricing transparency, and encouraging interoperability. Continue Reading

January Congressional Hearings Focus on Cannabis, Opioids, Other Health Priorities 

Health policy has been the focus of several House Energy and Commerce Committee hearings this month.  Notably, the Energy and Commerce Health Subcommittee held its first legislative hearing on cannabis policy, although much of the hearing focused on the status of marijuana research under the Controlled Substances Act, as discussed in a recent Reed Smith Client Alert.  The Committee has also examined state efforts to curb the opioid crisis, and reviewed bipartisan legislation intended to address gaps in health care coverage and health outcomes for babies and children.  Furthermore, the panel has scheduled a January 29 hearing on “Improving Safety and Transparency in America’s Food and Drugs.”

Separately, the House Education and Labor Committee is holding a hearing January 28 entitled “Expecting More: Addressing America’s Maternal and Infant Health Crisis.”

HHS Boosts Civil Monetary Penalties Again

The Departments of Health and Human Services (HHS) has just published its “annual” inflation update to civil monetary penalty amounts (CMP) in its regulations – even though those penalties were just increased for inflation in November 2019.  Under the latest update, CMPs are increased by a 1.01764 “multiplier” (that is, a 1.764% increase), applicable to penalties assessed on or after January 17, 2020, if the violation occurred on or after November 2, 2015.  The notice impacts CMPs assessed by the Office of Inspector General, the Centers for Medicare & Medicaid Services, the Food and Drug Administration, the Office for Civil Rights, the Health Resources and Services Administration, the Agency for Healthcare Research and Quality, and the Administration for Children and Families.

CMS Wants Input on Role of Out-of-State Medicaid Providers in Coordinating Care for Children with Medically Complex Conditions

The Centers for Medicare & Medicaid Services (CMS) has released a Request for Information (RFI) on how the Medicaid program can incorporate out-of-state providers in coordinating care for children with certain medically complex conditions under Medicaid.  The RFI is intended to help CMS implement a provision of the Medicaid Services Investment and Accountability Act of 2019 that gives states the option to cover Medicaid health home services for children with medically complex conditions who choose to enroll in a health home.  In the RFI, CMS seeks information such as how this care is coordinated in emergency and non-emergency situations, financial barriers individuals face in accessing out-of-state provider care, and ways to streamline processes for screening and enrolling out-of-state providers.  Comments will be accepted until March 21, 2020; CMS intends to use RFI responses to develop guidance to state Medicaid directors by October 1, 2020.

Federal Appeals Court Amends Stark Law Opinion to Remove Controversial “Volume or Value” Interpretation, but Uncertainty Remains

On December 20, 2019, the Federal appeals court panel that heard U.S. ex rel. Bookwalter v. UPMC, No. 18-1693 (3d Cir.), amended its September 2019 opinion by removing a controversial interpretation of the “volume or value” standard under the Stark Law.  The September opinion had adopted a “correlation theory,” holding that a physician’s compensation “varies with” the volume or value of referrals if the physician is paid based on his personally performed services, such as on a work relative value unit (wRVU) basis, and there is a “correlation” between the physician’s referrals and those personally performed services.  The court relied on this correlation theory to support its finding that the physicians had an indirect compensation arrangement with the hospitals to which they referred, thereby allowing the case to proceed and shifting the burden to the defendants to prove the availability of a Stark Law exception.  Although the amended December opinion removed the correlation theory rationale, the court maintained its September holding to allow the case to proceed based on alternative reasoning that there were adequate allegations that the physicians’ compensation “took into account” their referrals.


The Stark Law prohibits a physician’s Medicare referrals for “designated health services,” including hospital services, to an entity with which the physician has a direct or indirect financial relationship, unless the requirements of an applicable exception are satisfied.  One element of the Stark Law’s test to determine whether a physician has an indirect compensation arrangement with an entity is whether the physician’s aggregate compensation “varies with, or takes into account, the volume or value of referrals” to the entity.  For these reasons, a critical component in a Stark Law analysis is frequently whether a referring physician is compensated in a manner that “varies with” or “takes into account” the volume or value of his referrals. Continue Reading

HHS Continuing to Reduce Medicare ALJ Appeals Backlog under Court Order; Senators Reintroduce Legislation Striving to Improve Efficiency of Medicare Appeals Process

The Department of Health and Human Services (HHS) is ahead of schedule to reduce its Medicare Administrative Law Judge (ALJ) appeals backlog, as required by court order, but lawmakers are still looking for ways to improve the efficiency of the Medicare appeals process.

Following a November 1, 2018 federal district court order in American Hospital Association [AHA], et al., vs. Azar (C.V. No. 14-cv-00851) to reduce the Medicare appeals backlog, HHS reported a reduction of 31.4% through the end of the fourth quarter of 2019, according to the third status report[1] (the “Status Report”) filed by HHS to the United States District Court for the District of Columbia on December 31, 2019.  The Status Report identifies 292,517 appeals remain pending at the Office of Medicare Hearing and Appeals (OMHA).  The 2018 court order requires HHS to achieve a 49% reduction by the end of FY 2020 and to clear the backlog entirely by the end of 2022.

At the time of the court’s decision, OMHA had 426,594 appeals pending and providers were waiting up to five years for an ALJ decision, notwithstanding a 90-day deadline under 42 U.S.C. 1395ff(d)(1)(A).  With a 31% reduction so far, HHS is currently approximately 12% ahead of the court’s projected pace for reducing the backlog – at the time of the order, the court projected a 19% reduction by the end of fiscal year (FY) 2019. Continue Reading

OIG Accepting Recommendations for New Anti-kickback Safe Harbors and Fraud Alerts

The HHS Office of Inspector General (OIG) has issued its annual solicitation of recommendations for new or revised Anti-kickback Statute (AKS) safe harbors and new Special Fraud Alerts.  In reviewing proposed safe harbor changes, the OIG will consider 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
  • The ability of health care facilities to provide services in medically underserved areas or to medically underserved populations.

The OIG also will consider factors such as whether the proposal would provide potential financial benefits to health care providers that may influence decisions to order or refer health care services.

Comments will be accepted until March 2, 2020.  The OIG notes that this solicitation is separate from both:  (1) its August 27, 2018 request for information (RFI) on the AKS and the beneficiary inducement provisions of the Civil Monetary Penalty (CMP) statute; and (2) its October 17, 2019 proposed rule that would align the AKS and CMP Law regulations with value-based health care arrangements (the comment period on that rulemaking closed on December 31, 2019).  The OIG states that commenters need not duplicate comments previously submitted in response to the RFI or proposed rule.

CMS Requests Ideas for Easing Medicare Supervision/Scope of Practice Requirements

The Centers for Medicare & Medicaid Services (CMS) is inviting suggestions for how it can eliminate Medicare regulations that (1) impose more stringent supervision requirements than existing state scope of practice laws, or (2) restrict health professionals from practicing at the top of their license.  This comment solicitation, which is part of the Administration’s “Patients over Paperwork” initiative, follows related regulatory changes adopted by CMS in other recent payment rules, including the 2020 Medicare home health and outpatient prospective payment system final rules, and the 2019 and 2020 Medicare physician fee schedule (PFS) rules.  For instance, in the 2019 PFS final rule, CMS somewhat liberalized the rules for supervision of certain diagnostic tests when performed by registered radiologist assistants (RRAs), consistent with their state scope of practice.  Efforts have been ongoing to further expand Medicare rules to permit these RRAs to perform services for Medicare beneficiaries to the full extent of their state licenses.

The deadline for submitting recommendations is January 17, 2020.