Weekly Washington Healthcare Update

November 5, 2012

Pardon Our Dust

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This Week:

1. Congress

House of Representatives


2. Administration

Health and Human Services (HHS)

Centers for Medicare and Medicaid Services (CMS)

Department of Justice (DOJ)

3. State Activities

4. Regulations Open for Comment

5. Reports


Dartmouth Atlas

American Action Forum

Employee Benefit Research Institute

Kaiser Family Foundation


Commonwealth Fund

1. Congress

House of Representatives

Markey Introduces Legislation to Oversee Compounding Pharmacies

On the heels of arecent report released by Rep. Markey (D-MA), the congressmanoutlined legislation he will introduce to require the Food and Drug Administration (FDA) to regulate drug compounding facilities. This legislation is a response to the recent deadly meningitis outbreak.

Responding in a statement to Reuters, FDA Commissioner Margaret Hamburg said, “Over the years, there has been substantial debate within Congress about the appropriate amount of FDA oversight and regulation of compounding pharmacies. But unfortunately, there has been a lack of consensus and many challenges from industry. As pointed out in the report from Congressman Markey, FDA’s authority over compounding pharmacies is more limited by statute than with drug manufacturers.” However, at least one advocacy group has questioned whether the shortcomings that led to the outbreak are rooted in FDA’s authority or in its employment of existing authority.

Other members of Congress are expected to also introduce legislation concerning oversight of compounding pharmacies.


Track and Trace Draft Legislation Deadline for Comment Approaches

Comments are due Wednesday on the bipartisan, bicameral draft legislation to establish a federal-level track-and-trace system, and federal-level licensing, for participants in the pharmaceutical distribution chain. Since the draft’s release on Oct. 24, stakeholders have been analyzing the draft. The legislation would initially establish only a lot — or batch — level drug pedigree requirement. However, the draft would require every bottle of pills or vial of drugs in a lot to be labeled with a unique identifier of its own so that it can be traced back to the manufacturer lot. A key area of interest to national manufacturers and wholesalers has been to have uniform federal standards. On this issue the draft offers that “no State or political subdivision of a State may establish or continue in effect any requirements… which are inconsistent with, more stringent than, or in addition to, any requirements applicable under this Act.” This could negate California’s state law set to be fully implemented in 2015. There are four options laid out for wholesaler licensing, including one that is similar to the California pedigree rules.

2. Administration


Hospitals Association Sues HHS Over Payment Recovery Policy

The American Hospital Association (AHA) and four hospital systems in Missouri, Michigan and Pennsylvaniafiled suit against HHS last week over what the plaintiffs are calling a refusal on the part of the government to reimburse hospitals for “reasonable and necessary care” when recovery audit contractors (RACs) determine that the same care could have been provided at an outpatient facility, for less cost. “RACs, which are paid primarily on the basis of how much Medicare funding is taken back from hospitals and physicians, review these care decisions years later without ever seeing or talking to the patient.” AHA asserts that “when hospitals appeal these questionable decisions, they prevail at least 75 percent of the time.” AHA is asking the U.S. District Court in the District of Columbia to overturn the policy.

New Head of Patient-Centered Outcomes Research Institute (PCORI)

The Patient-Centered Outcomes Research Institute announced that Dr. Chad Boult has been named to head its program on Improving Healthcare Systems, one of PCORI’s five core research areas. Boult was previously a senior adviser for geriatrics and long-term care at CMS’s Innovation Center. Dr. Romana Hasnain-Wynia was also recently named to head up Health Disparities Research and Dr. David Hickam to run Comparative Assessment of Options.


CMS Issues Memo to States Regarding Medicaid/Meningitis Treatment

Last week,CMS issued a memo to states alerting them of the likelihood that their Medicaid programs will have to fill prescription drug requests for voriconazole, the antifungal drug CDC has recommended to treat infection caused by the New England Compounding Center’s contaminated steroid injections. “At this time, CMS expects states to be prepared for new Medicaid prescription requests for voriconazole as part of the regimen specified in the CDC interim treatment guidance …. Given the severity of this situation, we also expect states to expedite all coverage determination requests for this medication, and other appropriate antifungal medications, due to the potentially life-threatening consequences of a delay in therapy for those patients with CNS and/or parameningeal infections and septic arthritis.”

CMS Issues Final Medicare Payment Regulations for Physicians and Other Providers

Thursday, CMS issued two final regulations updating Medicare payment rates and policies in calendar year (CY) 2013 for services furnished by physicians, other practitioners, and a rule updating payment rates and policies for hospital outpatient departments and ambulatory surgical centers.

The Medicare Physician Fee Schedule was issued with a comment period. It includes the statutorily mandated 26.5 percent reimbursement cut. However, CMS anticipates that Congress will act, as it has done before, to reverse the payment reductions. Should Congress not act in time, CMS has in the past held claims as Congress hashed out a temporary physician fee “fix.” In addition, the rule includes, for the first time, a new policy to pay a patient’s physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled nursing facility stay. In addition the rule includes:

1. Implementation of the physician value-based payment modifier by phasing in application of the modifier and enabling physicians in larger groups to choose how to participate. The value modifier provides differential Medicare payments to physicians based on comparison of the quality of care furnished to beneficiaries and the cost of care.

2. Changes to the Physician Quality and Reporting System (PQRS) and the Electronic Prescribing (eRx) Incentive Program, the two quality reporting programs applicable to the Medicare Physician Fee Schedule (MPFS), and updates to the Medicare Electronic Health Records (EHR) Incentive Pilot Program. These changes will simplify reporting and align the various programs’ quality reporting approaches so they support the National Quality Strategy.

3. Next steps to enhance the Physician Compare website, including posting names of practitioners who as part of the Million Hearts campaign, successfully report measures to prevent heart disease.

4. Expanding access to services that can be provided by nonphysician practitioners. The rule allows Certified Registered Nurse Anesthetists (CRNAs) to be paid by Medicare for providing all services that they are permitted to furnish under state law. This change will allow Medicare to pay CRNAs for services to the full extent of their state scope of practice. The rule also allows Medicare to pay for portable x-rays ordered by nurse practitioners, physician assistants and other nonphysician practitioners.

5. A pathway for paying for molecular pathology services — the next innovation of clinical laboratory tests that will foster the development of personalized medicine. These tests will be paid under the Clinical Laboratory Fee Schedule, with 2013 payment set by the gap-filling method.

6. A face-to-face encounter requirement as a condition of payment for certain durable medical equipment (DME) items for orders written on or after July 1, 2013.

To read the final CY 2013 Medicare Physician Fee Schedule (MPFS) rule with comment period, please visit the Office of the Federal Register website.

CMS Issues Final Rule for Hospital Outpatient Departments and Ambulatory Surgical Centers

The Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center rule will increase payment rates for hospital outpatient departments by 1.8 percent. The increase is based on the projected hospital market basket — an inflation rate for goods and services used by hospitals — of 2.6 percent, minus 0.8 percent in statutory reductions, including a 0.7 percent adjustment for economy wide productivity and a 0.1 percentage point adjustment required by statute.

Ambulatory surgical center (ASC) payment rates will increase by 0.6 percent — the projected rate of inflation of 1.4 percent minus a 0.8 percent productivity adjustment required by law. Medicare uses changes in the consumer price index for urban consumers (CPI-U) as the measure of inflation for ASCs.

The rule made several changes to the quality-reporting program for outpatient departments. While CMS did not add any new measures to the 22 measures finalized for the CY 2014 payment determination, CMS did confirm the removal of one measure, deferred data collection for another measure, and confirmed the suspension of data collection for a third measure. In addition, CMS finalized proposed revisions to several procedural requirements that apply to the reporting of quality data and finalized the automatic retention of Hospital OQR Program measures adopted in previous payment determinations for subsequent year payment determinations, until the measures are actively removed, suspended or replaced.

CMS also finalized proposed revisions to the ASC Quality Reporting (ASCQR) program, including requirements for claims-based measures regarding the dates for submission, payment of claims and data completeness, and a methodology for reducing payment to ASCs that do not meet the program’s reporting requirements. CMS also adopted principles to be applied in future measure selection and development. CMS previously finalized the measure sets that apply to the CYs 2014 through 2016 payment determinations.

The rule also streamlines the operations of the Quality Improvement Organizations (QIOs), increases their transparency and makes them more responsive to beneficiary complaints about quality of care. QIOs are organizations composed of health professionals under contract to CMS who are charged with monitoring and improving Medicare beneficiaries’ care.

CMS also finalized Inpatient Rehabilitation Facility (IRF) quality-reporting proposals, including: (1) as proposed, an application of the National Quality Forum (NQF)-endorsed catheter-associated urinary tract infection (CAUTI) measure for the IRF quality-reporting program for the FY 2014 annual payment update determination, and (2) the actual NQF-updated CAUTI measure for the FY 2015 payment determination and all subsequent fiscal year payment determinations. CMS also adopted a nonrisk-adjusted version of a NQF-endorsed pressure ulcer measure. The final hospital Outpatient Prospective Payment System (OPPS) rule stipulates that any measure selected for use in the IRF QRP will remain in effect until actively removed, suspended or replaced.

To read the final CY 2013 OPPS and ASC rule with comment period, please visit the Office of the Federal Register website.

CMS Issues Final Rule on ESRD Payment Update

Payment rates for outpatient maintenance dialysis treatments will increase by 2.3 percent in CY 2013. This reflects the ESRD bundled market basket increase of 2.9 percent reduced by a productivity adjustment of 0.6 percent, as required by statute. CMS estimates that Medicare payments to the 5,726 ESRD facilities in CY 2013 will total $8.4 billion.

To read the final CY 2013 ESRD payment rule, please visit theOffice of the Federal Register website.

CMS Issues Final Rule for Home Health Payment Update

Payments to home health agencies are estimated to be virtually unchanged next year, decreasing by approximately $10 million in CY 2013 (about 0.01%). This reflects the net effect of a 1.3 percent home health payment update, an updated wage index, an update to the fixed-dollar loss (FDL) ratio, and a case-mix coding adjustment intended to offset coding changes unrelated to changes in patient health needs.

This final rule reflects CMS’s ongoing efforts to support Medicare beneficiary access to home health services while fostering greater efficiency, flexibility, payment accuracy and improved quality.

Medicare law applies a 1 percent reduction to the CY 2013 home health market basket update of 2.3 percent, resulting in a 1.3 percent home health payment update for home health agencies next year. As part of the 2012 HH PPS final rule, CMS finalized a reduction in rates of 1.32 percent in CY 2013 to account for growth in aggregate case-mix that is unrelated to changes in patients’ health status. This is unchanged in this final rule. CMS will continue to monitor any future changes in case-mix and make updates as appropriate.

In acute or post-acute care settings, this final rule provides additional flexibility in certifying patients as eligible for the home health benefit. The HH PPS final rule makes changes that help ensure patients maintain access to therapy services, while reducing burden on home health agencies.

To view the final CY 2013 payment rule for Home Health, please visit theOffice of the Federal Register website.


Congressional Subpoena Not Honored

The Treasury Department has not responded to a subpoena from the House Oversight and Government Reform Committee Chairman Issa (R-CA) concerning Internal Revenue Service (IRS) documents related to an IRS rule implementing subsidies under the federal health insurance exchange. The Treasury Department, citing executive branch “confidentiality interests,” declined to send the requested documents. In aletter last week the Treasury Department said it is unable to reveal details on how it decided federal-run exchanges can provide subsidies in the same fashion as state-based exchanges. The letter also noted that the rule is currently being challenged in federal court by Oklahoma’s attorney general, and the department said any questions about the rule should be settled by the courts. “We strongly disagree with these claims, and we intend to defend the lawsuit vigorously.”

3. State Activities

Idaho Eyes State-Run Exchange

Last week, Idaho’s health insurance exchange study group set up by Republican Gov. Butch Otter voted in favor of a state-run exchange, with only two of the panel’s 13 members opposing the decision. While he has been an outspoken critic of the ACA, Gov. Otter has also indicated his preference for a state-run exchange. The decision whether to establish a state-run exchange or allow the federal government to do it must be made by Nov. 16.

Vermont Encourages State Employees’ Children Toward CHIP

Last week, Vermont Gov. Peter Shumlin notified 2,100 state employees with children, who meet income eligibility requirements, that they have the option of enrolling in CHIP. The notification included a description of how they and the state would save money. “It’s an opportunity that we wanted state employees to be able to make a choice about,” said Mark Larson, the commissioner of the Department of Vermont Health Access. “It does provide an opportunity for coverage to be more affordable for a family and it does provide some opportunity for the state to provide health coverage for the family at less expense to the state.” The state estimates that if half of the eligible employees moved their children to CHIP, it could save roughly $5 million per year.

California: “Covered California” Attracts Carriers

California’s state’s exchange board last week opted to name its state-run exchange “Covered California” In addition, a number of health plans are already on board to join the California state health exchange next fall. Peter Lee, Covered California’s executive director, said 33 insurers and organizations have indicated interest in participating in the exchange, including Kaiser Permanente; Anthem Blue Cross, Blue Shield of California; and Health Net Inc. Exchange officials will decide in June what insurers will have a place on the exchange.

Illinois County Makes Early Move to Expand Medicaid

In a move officials expect will lead to an additional 115,000 individuals accessing federal funds as part of their Medicaid benefit, Illinois’s Cook County has opted to get an early start on expanding its Medicaid eligibility to individuals earning up to 133 percent of the federal poverty line.

4. Regulations Open for Comment

CMS Issues Medicare Payment Regulations for Physicians, and other Practitioners and Regulations for Hospital Outpatient Departments and ASCs

The Centers for Medicare & Medicaid Services (CMS) issued two final regulations updating Medicare payment rates and policies in calendar year (CY) 2013 for services furnished by physicians and , other practitioners, as well as the rule for hospital outpatient departments and ambulatory surgical centers. Both rules were issued as final rules with a comment period until Dec. 31, 2012. The rules will take effect Jan. 1, 2013.

To read the final CY 2013 Medicare Physician Fee Schedule (MPFS) rule with comment period, please visit theOffice of the Federal Register website.

Final Hospital Outpatient Department and Ambulatory Surgical Centers Rule Issued with Comment Period

To read the final CY 2013 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule with comment period, please visit theOffice of the Federal Register website.

FDA Unique Device Identifier (UDI) Rule

The FDA will accept comments on theproposed rule to implement a Unique Device Identifier system for medical devices distributed in the United States. Comments on the proposed rule will be accepted either electronically or written until Nov. 7, 2012.

5. Reports


Advanced Imaging Services Self-Referrals Costing Medicare Millions

Last week, Sens. Baucus (D-MT) and Grassley (R-IA) and Reps. Stark (D-CA), Levin (D-MI) and Waxman (D-CA)released a GAO report describing how physician self-referrals affect overall health spending. According to the report, in 2010, Medicare spent about $109 million that it could have avoided without self-referrals. In a statement, Baucus explained that “[s]elf-referrals offer an incentive for providers to order more tests than they would otherwise. It’s clear they are driving up costs. Providers’ bottom lines shouldn’t be getting in the way of their patients’ care and best interests.”

Dartmouth Atlas

Docs: Where You Train Impacts Your Medical Decisions

The Dartmouth Atlasreleased a report highlighting the importance of where a young doctor is trained in shaping their views on patient care. The report, called “What Kind of Physician Will You Be?; Variation in Health Care and Its Importance for Residency Training,” looked at the relationship between a doctor’s educational background and their propensity to recommend certain courses of treatment in end-of-life care situations, such as how willing doctors are to perform certain surgeries when other, less-invasive options might be just as good or better. To read more about what the study refers to as the “hidden curriculum.”

American Action Forum

ACA Insurance Subsidy Costs Will Continue to Grow

The American Action Forum provided a new estimate of the expected cost of health insurance subsidies available to individuals through the new health insurance exchanges. According to the report’s authors, Douglas Holtz-Eakin and Michael Ramlet, the Congressional Budget Office’s figures now show that the subsidies will cost $574 billion between 2012 and 2019, which is roughly $112 billion more than the original estimate. “The ACA health insurance subsidies are the most significant expansion of entitlements since the 1960s. In light of the precarious fiscal outlook for the federal government, its cost is a central concern to policymakers and taxpayers alike…. Unfortunately, there are grounds to anticipate further growth in the cost of the entitlement due to the risks of faster than expected health care inflation, slow growth in incomes, and the potential for less employer-sponsored insurance in the future,” the report says.

Employee Benefit Research Institute

Employment-Based Retiree Health Benefits: Trends in Access and Coverage

According areport issued by the Employee Benefits Research Institute last week, in 2010, fewer than 18 percent of workers had employers that offered retiree health benefits, down from 29 percent in 1997. The report’s authors believe this is a trend that will continue, with the potential to drop at an increasing rate as a result of more cost-shifting. 

Kaiser Family Foundation

Effectiveness of Dual Eligible Demos Explored

Last week, the Kaiser Family Foundationreleased a study reviewing past pilot programs that examined ways to reduce Medicare spending on dual eligibles. According to the study, it might be possible to achieve modest savings for Medicare, with an added potential benefit in the form of better outcomes for beneficiaries. However, these results rely on careful targeting and monitoring. Interestingly, the study also found that small-scale demonstrations may be more effective than larger demonstrations.


Physicians Moving Away From Independent Practice

According to arecent report produced by Accenture, “[i]ncreasingly, private practice doctors have sacrificed their independence to seek employment … as independent physicians have dropped from 57 percent in 2000 to 39 percent in 2012.” By the end of 2013, the report estimates that only 36 percent of the market will be independent physicians. Accenture projects the trend to grow 100 percent annually for three years.

Commonwealth Fund

More Uninsured Small Business Workers

Last week, the Commonwealth Fundreleased a report indicating that the number of workers with health insurance employed in small businesses is dwindling; however, provisions under the ACA may be able to help address the issue. The report found that “[l]ess than half of workers in companies with fewer than 50 employees were both offered and eligible for health insurance through their jobs in 2010, down from 58 percent in 2003. In contrast, about 90 percent of workers in companies with 100 or more employees were offered and eligible for their employer’s health plans in both 2003 and 2010.”

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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