Weekly Washington Healthcare Update

July 20, 2012

Pardon Our Dust

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In this issue:

1. Congress

House of Representatives


2. Administration

Department of Health and Human Services (HHS)

Centers for Medicare and Medicaid Services (CMS)

Centers for Medicare and Medicaid Innovation (CMMI)

Food and Drug Administration (FDA)

3. State Activities

4. Regulations Open for Comment

5. Reports

Congressional Research Service (CRS)

Commonwealth Fund

Institutes of Medicine (IOM)

Centers for Disease Control and Prevention (CDC)

6. ACA Legal Issues Update



1. Congress

House of Representatives

House Appropriations Subcommittee Drafts Labor-HHS Bill

On Wednesday, the House Appropriations Labor, Education, and Health and Human Services Subcommittee favorably reported its FY 2013 appropriations legislation. While there was bipartisan opposition to an amendment offered by Rep. Lummis (R-WY) that would have enacted a 5.5%, or $8.6 billion, across-the-board cut to the $150 billion spending measure, the final bill passed largely along party lines (8-6), with only Rep. Flake (R-AZ) defecting from his party. The full committee must act next.

Last month, also on a party-line vote, the full Senate Appropriations Committee passed its version of the Labor-HHS funding legislation (S. 3295).

Energy and Commerce Health Subcommittee — Medicare Physician Payments

Continuing a common theme among congressional committees with jurisdiction over health financing, the House Energy and Commerce Subcommittee on Health held a hearing Wednesday morning to examine Medicare physician payment policies, in advance of another looming deadline to avert a now 30% reduction in physician payments called for by the Sustainable Growth Rate (SGR) formula at year’s end.


Mr. Scott Serota
President and Chief Executive Officer
BlueCross and BlueShield Association

Dr. Bruce Nash
Senior Vice President, Medical Affairs; Chief Medical Officer
Capital District Physicians’ Health Plan

Dr. David L. Bronson
American College of Physicians

Dr. David Hoyt
Executive Director
American College of Surgeons

Dr. Kavita Patel
Managing Director for Clinical Transformation and Delivery
Engelberg Center for Health Care Reform
The Brookings Institution

For full written testimonies, or to view the hearing, click here.

House Small Business Oversight Subcommittee Hearing on Small and Solo Medical Practices

On Thursday, the House Small Business Subcommittee on Oversight, Investigations, and Regulation held a hearing titled “Health Care Realignment and Regulation: The Demise of Small and Solo Medical Practices?” to explore the challenges facing independent physician practices, and whether those challenges have been exacerbated by the Affordable Care Act (ACA).


Mark Smith, President, Merritt Hawkins, Irving, TX

Louis F. McIntyre, M.D., Westchester Orthopedic Associates, White Plains Hospital Physicians, White Plains, NY — Testifying on behalf of the American Association of Orthopaedic Surgeons

Joseph M. Yasso, Jr., D.O., Heritage Physicians Group, Independence, MO — Testifying on behalf of the American Osteopathic Association

Jerry D. Kennett, M.D., F.A.C.C., Senior Partner, Missouri Cardiovascular Specialists, Vice President and Chief Medical Officer, Boone Hospital Center, Columbia, MO — Testifying on behalf of the American College of Cardiology


While there was broad agreement among the witnesses on the difficulties imposed upon small and solo medical practices by our nation’s health care system, it remains unclear whether health reform has accelerated the trend of physicians seeking employment in larger, integrated health systems as opposed to pursuing private practice. Specific challenges to the sustainability of independent medical practices noted by the panel were low reimbursement rates from public health programs like Medicare and Medicaid, the high cost of malpractice insurance, burdensome regulatory and administrative requirements and the need to employ costly electronic medical records. In addition, ACA provisions such as the establishment of Accountable Care Organizations (ACOs), which incentivise care coordination, put independent practices at a disadvantage, pressuring physicians to join larger health systems. Dr. Kennett observed that many young physicians, in fact, often prefer the consistent work schedules offered to physicians as employees of larger health systems, which also help to absorb some of the administrative burdens an independent physician would encounter, and frequently cover the cost of the physician’s malpractice insurance. This point was countered by others on the panel who noted that private practice affords physicians more autonomy and flexibility to administer care to patients.

For full written testimonies, or to view the hearing, click here.

Lawmakers Seek Clarity on 340B Drug Discounts

In a letter sent Wednesday, House Energy and Commerce Health Subcommittee Chair Joe Pitts (R-PA) and Rep. Bill Cassidy (R-LA) asked Health Resources and Services Administration (HRSA) Administrator Mary Wakefield to proceed with recommendations from a September 2011 Government Accountability Office (GAO) report that found federal oversight of the 340B program to be lacking. Specifically, Reps. Pitts and Cassidy requested that HRSA address GAO’s concern that the guidance regarding the definition of a “patient” for purposes of 340B eligibility is necessary to help provide reasonable assurance that participants, including providers and drug manufacturers, are operating in compliance with the law. Established under the Public Health Service Act, the 340B program provides reduced-cost prescription drugs for low-income, at-risk or medically underserved patients.


Special Committee on Aging Explores Dual-Eligible Coordination

On Wednesday, July 18, the Senate Special Committee on Aging held a hearing to explore ongoing activities to better coordinate care for individuals eligible for both Medicare and Medicaid, also called “dual-eligibles.” This population often receives care that is fragmented due to misalignment between payments and incentives within the two overlapping programs.


Panel 1

Melanie Bella, Director, Medicare-Medicaid Coordination Office, Center for Medicare and Medicaid Services, U.S. Department of Health and Human Services

Panel 2

Jason Helgerson, Medicaid Director and Deputy Commissioner, Office of Health Insurance Programs, New York State Department of Health, Albany, NY

Robert Berenson, M.D., Institute Fellow, Urban Institute, Washington, D.C.

Shawn Morris, President, HealthSpring, Nashville, TN

Tom Betlach, Director, Arizona Health Care Cost Containment System, Phoenix, AZ

Dory Funk, M.D., Medical Director, Senior Community Care, Eckert, CO


As required by the Affordable Care Act (ACA), the Centers for Medicare and Medicaid Services (CMS) developed the Financial Alignment Initiative, through which states may submit plans using either a capitated or managed fee-for-service system to coordinate care for dual-eligibles, with the ultimate goal of improving the quality of care and reducing the cost of treating this vulnerable population. This demonstration project has received criticism from the Medicare Payment Advisory Commission (MedPac) and Sen. Rockefeller (D-WV), the author of the provision in the ACA, as well as from hospital and physician organizations, for being too large and for placing an emphasis on cost savings over improved care.

Sen. Corker (R-TN) echoed these concerns in his questions about the size of the demonstration projects and the potential problems that could arise from an overly cumbersome demonstration. Ms. Bella acknowledged the demonstration was larger than CMS was used to, but said that the size also allows the agency to test models across the nation, and that at an ultimate size of 2 million participants, the agency is capable of adequately operating the demonstration. “We’ve said 2 million is the target that we have,” she said. “We’re listening to stakeholder concerns. We are sticking with our 2 million target.” Ms. Bella stressed that CMS has final authority to control the size of the demonstration.

Expressing a differing view of the ability of the demonstration programs to ultimately implement an effective, full-scale version of a demonstration, Dr. Berenson noted the skepticism of experts on the matter, such as Sen. Rockefeller, who essentially created the program. While Dr. Berenson admitted the benefit of leveraging the extensive work already being done under the Financial Alignment Initiative, he concluded that “… while well intentioned, the pace, size, and scope of the duals demo needs to be reviewed and substantially altered.”

For full written testimonies, or to view the hearing, click here.

2. Administration

Department of Health and Human Services (HHS)

HHS Issues Final Rule on Essential Health Benefits (EHB) Data Collection

HHS has posted the final rule concerning data that health plans must provide to determine whether they meet essential health benefit standards. This final rule includes data-reporting standards for health plans that represent potential state-specific benchmark plans. Specifically, the final rule establishes that issuers of the largest three small group market products in each state report information on covered benefits. In addition, this rule establishes the first phase of a two-phased approach for recognizing accrediting entities to implement the standards established under the Affordable Care Act for qualified health plans (QHPs) to be accredited on the basis of local performance by an accrediting entity recognized by the Secretary on a timeline established by the Exchange. The rule also addresses some data-sharing and performance requirements of the recognized accrediting entities. In phase one, the National Committee for Quality Assurance (NCQA) and Utilization Review Accreditation Commission (URAC) are recognized as accrediting entities on an interim basis. In phase two, a criteria-based review process will be adopted through future rulemaking. The rule is due to be published in the Federal Register on July 20.

Centers for Medicare and Medicaid Services (CMS)

CMS Sends Final Rule for Stage Two Meaningful Use to Office of Management and Budget (OMB) for Final Clearance

The final rule for Stage 2 Meaningful Use is now at OMB as the last clearance before publication in the Federal Register. Like Stage 1, which was implemented last year, the proposed Stage 2 Meaningful Use rule establishes criteria for hospitals and physicians to prove they are “meaningfully using” electronic health records (EHRs) to qualify for additional incentive payments. In the proposed Stage 2 rule, the number of core functions that must be met and the number of times a function must be completed were increased. In addition, hospitals and physicians would be required to conduct a security risk analysis that includes “addressing the encryption/security of data at rest” and physicians must have a certain percentage of patients using technology to access their health information. In their comments the AMA and more than 100 state and specialty medical societies called for significant revisions. In the past, OMB has taken several weeks to several months to clear regulations.

CMS Revamps Hospital Compare and Nursing Home Compare Websites

CMS revamped its websites that allow consumers to compare hospitals and nursing homes. The Affordable Care Act required CMS to include ownership information. Other changes include updated quality information. Warnings concerning the potential health risks associated with imaging services have also been added to the Hospital Compare website.

Center for Medicare and Medicaid Innovation (CMMI)

CMMI Accepting Applications for State Innovation Model Initiative

States that want to design or test payment and care delivery models for Medicare, Medicaid and CHIP enrollees can apply for funding through CMMI’s State Innovation Model initiative. Nearly $275 million in funding is available and applications are due Sept. 17. HHS expects to announce on Nov. 6 who will be awarded funding..

The program makes two types of awards available. Up to five states already implementing a multipayer model can receive a $225 million pot of funds. The awards run for three to four years. Accountable Care Organizations and other CMMI initiatives could serve as the basis for state proposals. Up to 25 states can also apply for a combined $50 million in technical support to plan and design reforms. States may be able to apply for a second round of funding, targeted for spring 2013.

Food and Drug Administration (FDA)

FDA Approves Drugs for HIV Prevention, Obesity

This week, the FDA announced approval of a drug to reduce the risk of HIV infection (Truvada) and a drug to assist in chronic weight management (Qsymia).


On Monday, the FDA approved Truvada, a once-daily drug that has been shown to lower HIV infection risk when taken as pre-exposure prophylaxis (PrEP) in combination with safer sex practices. Truvada had previously been approved by the FDA for treatment of individuals already infected with HIV. Critics have expressed concern over the cost of the drug, and note that it is not a substitute for safe sex. For more information on Truvada, click here.


On Tuesday, the FDA approved the second drug aimed at improving weight management among the chronically obese. A combination of two FDA-approved drugs, phentermine and topiramate, Qsymia is intended for adults with a Body Mass Index (BMI) of at least 27, in conjunction with a weight-related health condition such as hypertension or high cholesterol. As a condition for approval, Qsymia maker Vivus Inc. will be required to conduct 10 postmarketing requirements, including a long-term cardiovascular outcomes trial to assess the effect of Qsymia on the risk for major adverse cardiac events, such as heart attack and stroke. For more information on Qsymia, click here.

3. State Activities

Kentucky to Establish Health Insurance Exchange

On Tuesday, Kentucky Governor Steve Beshear announced an Executive Order establishing the Kentucky Health Benefit Exchange, as provided for under the Affordable Care Act (ACA). “Since the Supreme Court upheld most of the Affordable Care Act, Kentuckians who have had difficulty finding or qualifying for affordable health coverage will be able to do so by visiting the state’s online Health Benefit Exchange,” Gov. Beshear said. “We will work closely with insurers, providers, consumers and other groups to develop a robust, responsive, and user-friendly portal that will help Kentuckians find the coverage that best suits their needs.”

Florida: “Exchange” or “Marketplace”?

In a development that illustrates the broad range of possibilities being explored by states to cover their uninsured population, Florida expects to have its own version of a health insurance “marketplace” up and running this fall. Initially established through legislation in 2008, Florida Health Choices, absent limitations on what insurance products can be offered, is hardly what President Obama would consider an “Exchange.” Nonetheless, state officials are betting the more market-oriented approach, once operational, will offer a better bang for the buck.

4. Regulations Open for Comment

FDA Proposes Unique Device Identifier (UDI) Rule

In accordance with legislation passed in 2007, and revisited in legislation enacted earlier this month, the Food and Drug Administration (FDA) has proposed a rule to implement a Unique Device Identifier system for medical devices distributed in the United States. The goal of the rule is to improve device tracking, accuracy of device review and reporting of adverse events, and to reduce medical errors to protect patient safety. Comments on the proposed rule will be accepted in either electronic or written format until Nov. 7, 2012.

CMS Proposes Policy and Payment Changes for OPPS and ASC Payment System

CMS will accept comments on the proposed rule until Sept. 4, 2012. A final rule is expected by Nov. 1, 2012. For more information on the CY 2013 proposals for the OPPS and the ASC payment system, click here

CMS Issues Medicare Physician Fee Schedule Proposed Rule

CMS will accept comments on the proposed rule until Sept. 4, 2012. A final rule is expected by Nov. 1, 2012. For more information, click here

CMS Proposes Changes to Medicare Home Health PPS for CY 2013

The proposed rule can be viewed on the Federal Register site. CMS will accept comments on the proposed rule until Sept. 4, 2012.

CMS Proposes Policy and Payment Rate Changes for End-Stage Renal Disease Facilities in 2013

CMS will accept comments on the proposed rule until Aug. 31, 2012.

5. Reports

Congressional Research Service (CRS)

Selected Issues Related to the Effect of NFIB v. Sebelius on the Medicaid Expansion Requirements in Section 2001 of the Affordable Care Act

On Monday, CRS released a report providing an updated analysis of the effect of the recent Supreme Court ruling with regard to the partially invalidated Medicaid expansion requirement. Among other things, the report breaks down the Court’s ruling, and addresses questions such as the ability of states to partially and/or temporarily fulfill the previously mandated expansion, and clarifies questions surrounding Maintenance of Effort (MOE).

Commonwealth Fund

Medicare Patients Report Fewer Cost, Access Issues

A recent study by the Commonwealth Fund, published in Health Affairs, finds that traditional Medicare beneficiaries are more satisfied with their coverage than individuals with employer-sponsored coverage. In addition, while seniors utilizing Medicare Advantage plans were less susceptible to out-of-pocket costs, those with traditional Medicare were less likely to report problems related to access than those covered under Medicare Advantage.

Institute of Medicine (IOM)

Report: Higher Payments Are No Cure For Doctor Shortage

In a report issued Tuesday, the Institute of Medicine (IOM) expanded upon a two-part report, completed in September 2011, regarding geographic adjustment in Medicare payments, which examined ways to improve the accuracy of data sources and methods used for making the geographic adjustments in payments to providers. Tuesday’s report, Geographic Adjustment in Medicare Payment, Phase II: Implications for Access, Quality, and Efficiency, found that, among other things, geographic adjustment of Medicare payments does not constitute a large enough portion of the overall Medicare payment system to be used in effectively improving the accuracy of Medicare payments, or to address problems related to the composition or distribution of health care providers. 

Centers for Disease Control and Prevention (CDC)

NCHS Data Brief #98, July 2012 — Physician Adoption of Electronic Health Record Systems: United States, 2011

In a report concerning the adoption of electronic health records the CDC found

  • In 2011, 55% of physicians had adopted an electronic health record (EHR) system.
  • About three-quarters of physicians who have adopted an EHR system reported that their system meets federal “meaningful use” criteria.
  • Eighty-five percent of physicians who have adopted an EHR system reported being somewhat (47%) or very (38%) satisfied with their system.
  • About three-quarters of adopters reported that using their EHR system resulted in enhanced patient care.
  • Nearly one-half of physicians currently without an EHR system plan to purchase or use one already purchased within the next year.

6. ACA Legal Issues Update

New Attack on the Affordable Care Act

Jonathan Adler of Case Western Reserve University and Michael Cannon of the Cato Institute published a paper on July 16 titled “Taxation Without Representation: the Illegal IRS Rule to Expand Tax Credits under the PPACA.” The premise of the paper is that the Affordable Care Act provides tax credits and subsidies for health insurance but that the legislation only authorized these under state-run exchanges. Under the health reform law, if a state does not establish its own exchange, the federal government will establish the exchange for the state. Adler and Cannon assert that the legislation does not authorize the use of tax credits for federally run exchanges and that the IRS rule implementing tax credits in federally run exchanges lacks statutory authority. They argue that Democrats in the Senate wanted to incentivize states to run their own exchanges. Others, including Democrats on the Senate Finance and Health, Education, Labor, and Pension Committees who helped draft the legislation, are dismissive of this argument, saying it is contrary to the structure and intent of the legislation. However, expect more to be made of this argument as exchanges are established.




If you have any questions, please contact Stephanie Kennan, Senior Vice President, or Brian Looser, Assistant Vice President, at McGuireWoods Consulting.

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal‘s “The Influence 50,” an annual report of the top public affairs firms in Washington, D.C.

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