Weekly Washington Healthcare Update

July 29, 2013

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1. Congress

House of Representatives


2. Administration

Health and Human Services (HHS)

3. State Activities

4. Regulations Open for Comment

5. Reports

General Accountability Office (GAO)

Department of Health and Human Services — Office of the Inspector General (HHS-OIG)

1. Congress

House of Representatives

Energy and Commerce Advances Medicare Physician Payment Reforms

On July 23 the House Energy and Commerce Health Subcommitteeapproved draft legislation to repeal the current Medicare physician payment system in favor of one based on new care models and quality of care measures. The proposed legislation would repeal the current sustainable growth rate formula and create a fee-for-service system through which providers would report quality measures. During the initial phase-in period, physician groups would coordinate with medical standards-setting organizations and the Department of Health and Human Services to create quality measures for implementation in 2019. In addition, physicians would see an annual increase of 0.5 percent for the first 5 years, with Medicare payment rates after that determined by quality guideline scores. According to Subcommittee Vice Chairman Michael C. Burgess, the proposed legislation will be considered by the full committee on July 31.

Bipartisan Letter Asks CMS to Modify Stroke Quality Measures

Members of the House Congressional Heart and Stroke Coalitionsent a letter on July 23 to Marilyn Tavenner, Administrator of the Centers for Medicare and Medicaid Services, urging her to work with stakeholders to modify two strike-related quality measures included in the agency’s proposed fiscal 2014 hospital inpatient prospective payment system rule. Currently the stroke readmission measures look at the readmission rate for patients hospitalized for acute ischemic stroke. Members, including the coalition’s chairs, Reps. Chris Smith (NJ-R) and Lois Capps (CA-D), are concerned that the proposed “30-day stroke mortality” and “stroke hospital readmission measure” would mischaracterize hospital performance and could ultimately have an adverse impact on access to care by stroke patients. Advising CMS to take stroke severity into account before issuing the final rule Aug. 1, the letter points out that “inaccurate stroke measures would do little to promote improved quality of care and could instead lead to the unintended consequences of harming patients who have the most severe strokes and unfairly penalizing hospitals that care for the sickest stroke patients.” Similar measures were previously reviewed in 2012 by the National Quality Forum’s Neurology Steering Committee.

Upcoming Ways and Means Hearing on ACA Implementation

House Committee on Ways and Means Chairman Dave Camp (R-MI) has announced thatthe Committee will hold a hearing on the current status of implementation of the Affordable Care Act (ACA). The Committee will hear testimony from Daniel Werfel, Principal Deputy Commissioner and Deputy Commissioner for Services and Enforcement at the Internal Revenue Service (IRS), and Gary Cohen, Deputy Administrator and Director at the Center for Consumer Information and Insurance Oversight within the Centers for Medicare & Medicaid Services at the U.S. Department of Health and Human Services (HHS). The hearing will take place on Thursday, Aug. 1, 2013, in 1100 Longworth House Office Building, beginning at 10 a.m.


Finance Committee Hearing on Health Information Technology

The Senate Finance Committee held a hearing last week to discuss health information technology (HIT). The hearing, in which testimony was heard from representatives from a hospital and from a university medical officer, among others, built on a hearing held last week, featuring the administration’s perspective on the importance and growth of HIT. Chairman Max Baucus (D-MT) said that health care providers, technology vendors and the government must work together to create a seamless HIT system that improves the quality of care and lowers costs. He added that hospitals and clinics in rural states like Montana must have the same access to HIT others do. In 2009, Congress passed the Health Information Technology for Economic and Clinical Health Act, known as HITECH. Under the law, Medicare and Medicaid give providers financial incentives to adopt HIT and to put it into “meaningful use.” The law outlines three stages of meaningful use, with each stage increasing the sophistication and integration of the technology.


Ms. Janet Marchibroda
Director, Health Innovation Initiative
Bipartisan Policy Center

Dr. John Glaser, Ph.D.
Chief Executive Officer, Health Services
Siemens Healthcare

Mr. Marty Fattig
Administrator and Chief Executive Officer
Nemaha County Hospital

Dr. Colin Banas, M.D.
Chief Medical Information Officer and Associate Professor
Virginia Commonwealth University

For more information or to view the hearing, please visit:www.finance.senate.gov 

Upcoming Budget Committee Hearing on Health Care Costs

The Senate Budget Committee has announced it will hold a hearing entitled “Containing Health Care Costs: Recent Progress and Remaining Challenges.” The hearing will take place on Tuesday, July 30 at 10:30 a.m. in Dirksen Senate Office Building, Room SD608.


Len M. Nichols, Ph.D.
Director and Professor
Center for Health Policy Research and Ethics
College of Health and Human Services, George Mason University

Kavita K. Patel, M.D., M.S.
Fellow and Managing Director
Engelberg Center for Health Care Reform, The Brookings Institution

Joseph Antos, Ph.D.
Wilson H. Taylor Scholar in Health Care and Retirement Policy
American Enterprise Institute

For more information, or to view the hearing, please visit:www.budget.senate.gov 

2. Administration


Final 340B Rule for Drugs for Rare Diseases Issued

On July 22, HHSissued a final rule clarifying the types of discounts available on rare disease or “orphan” drugs when purchased by safety net providers under the 340B drug program. The rule, which will go into effect on Oct. 1, “will provide clarity in the marketplace, maintain the 340B savings for newly-eligible entities, and protect the financial incentives for manufacturing orphan drugs designated for a rare disease or condition as indicated in the Affordable Care Act and intended by Congress,” HHS said. Established as part of the Veterans Health Care Act of 1992, the 340B program requires drug manufacturers to offer outpatient drugs to eligible health care organizations/covered entities at reduced prices. The final rule for entities covered by the orphan drug exclusion includes free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals and applies to the approximately 390 drugs approved by the Federal Drug Administration for rare diseases and conditions.

3. State Activities

Idaho Readies for Possible Medicaid Expansion

Although the state has been reluctant to pursue expansion of its Medicaid program under the ACA, officials in the Idaho Department of Health and Welfare aresoliciting information from insurers about how they’d offer coverage should the expansion become reality, a move that would establish coverage for roughly 104,000 adults who earn less than 138 percent of the federal poverty line. Estimates have found that expanding Medicaid could save taxpayers as much as $478 million through 2024.

Maryland Releases Individual Insurance Rates

Maryland Insurance Commissioner Therese M. Goldsmithhas announced premium rates for individual health insurance plans to be sold through the state’s health benefit exchange beginning Oct. 1, 2013. Nine carriers are planning to offer plans, including two that are new to the state. The carriers are: Aetna Life Insurance; All Savers Insurance Company; CareFirst BlueChoice, Inc.; CareFirst of Maryland, Inc.; Coventry Health and Life Insurance Company; Coventry Health Care of Delaware; Evergreen Health Cooperative Inc.; Group Hospitalization and Medical Services Inc.; and Kaiser Foundation Health Plan of the Mid-Atlantic States Inc. The state did not release small-business rates for the SHOP exchange. Preliminary rates drew concerns when one carrier there planned to increase premiums by 25 percent. 

4. Regulations Open for Comment

Proposed Rule, Medicare Physician Fee Schedule (PFS) and Hospital Outpatient Prospective Payment System (OPPS)

CMS has issued the calendar year (CY) 2014 Medicare Physician Fee Schedule (PFS), Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rules. The proposed PFS regulation would continue to expand access to primary care services by proposing to provide payment for complex chronic care coordination services, beginning in CY 2015. It proposes to adjust payment rates for over 200 codes where Medicare pays more for services furnished in an office than in a hospital outpatient department or ASC, as part of the misvalued codes initiative. It also would make refinements to the Physician Quality Reporting System (PQRS) program, the Medicare Shared Savings Program and the Medicare EHR Incentive Program.

PFS: CMS projects an across-the-board reduction in payment rates based on the Sustainable Growth Rate (SGR) formula. If the SGR goes into effect, Medicare payment rates are projected to be reduced by 24.4 percent for services in 2014. The final projection, based on more recent data, will be made available in the final rule.

OPPS: CMS proposes to update the OPPS market basket by 1.8 percent for CY 2014. The proposed hospital market basket increase published in the fiscal year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital Prospective Payment System (LTCH PPS) proposed rule is 2.5 percent. The Medicare statute requires a productivity adjustment reduction of 0.4 percentage points and a 0.3 percentage point reduction to the CY 2014 OPPS market basket, so the proposed CY 2014 OPPS market basket update would be 1.8 percent.

ASC: ASC payments are annually updated for inflation by the percentage increase in the consumer price index for all urban consumers (CPI-U). The Medicare statute specifies a multifactor productivity (MFP) adjustment to the ASC annual update. For CY 2014, the CPI-U update is projected to be 1.4 percent. The MFP adjustment is projected to be 0.5 percent, resulting in an MFP-adjusted CPI-U update of 0.9 percent for CY 2014. In addition, CMS is proposing that certain ancillary or adjunctive services that would be packaged under the OPPS for CY 2014 also would be packaged under the ASC payment system for CY 2014.

In the OPPS/ASC proposed rule, total CY 2014 OPPS payments are projected to increase by $4.37 billion or 9.5 percent, and CY 2014 Medicare payments to ASCs are projected to increase by approximately $133 million or 3.51 percent as compared to CY 2013. The CY 2014 OPPS/ASC proposed rule would also expand the categories of related items and services packaged into a single payment for a primary service under the OPPS; create 29 comprehensive APCs to replace 29 existing device-dependent APCs; streamline the current five levels of outpatient visit codes; and continue paying at ASP+6 percent for non-pass-through drugs and biologicals that are covered separately under the OPPS.

The proposed rule would add five new measures for the Hospital Outpatient Quality Reporting (OQR) program, affecting payment in CY 2016, with data collection beginning in CY 2014. It seeks comment on proposed changes to the Quality Improvement Organization regulations.

CMS will accept comments on theseproposed rules until Sept. 6, 2013, and will respond to comments in final rules to be issued by Nov. 1, 2013.

IRS Proposed Rule For Tax Credits Issued on Exchanges

On June 28, the IRS issued aproposed rule on specific information regarding premium tax credits the insurance exchanges must report to IRS and to the person receiving the tax credit. Under the proposed rule, IRS explains what specific information regarding the tax credits the exchanges must report to IRS and to the person receiving the tax credit. Under ACA, tax credits can be made available to eligible recipients each month. The proposed rule would require the exchanges to report the required information to the IRS on a monthly basis and to the recipient on an annual basis. The information the exchanges must report would include, among other things, the name, address, taxpayer identification — i.e., Social Security — number (or date of birth if a taxpayer ID number is not available), the monthly premium for the applicable benchmark plan used to compute the tax credit and the monthly premium for the plan or plans in which a taxpayer, responsible adult or family member enrolls, without reduction for advance credit payments. According to the proposed rules, the exchange would report the information to the IRS on or before the 15th day following each month of coverage. The exchange must also send the tax credit recipient an annual statement including the same information on or before Jan. 31 of the year following the calendar year of coverage. Comments are due Aug. 31.

CMS Proposed Dialysis Payment Rule

CMS has issued the proposed End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rule for renal dialysis services furnished to beneficiaries on or after Jan. 1, 2014. CMS projects the updated calendar year (CY) 2014 ESRD bundled market basket increase will be 2.9 percent, which is reduced by an estimated multi-factor productivity (MFP) adjustment for CY 2014 of 0.4 percent, for a projected update of 2.5 percent to the ESRD PPS base rate in CY 2014. Section 632(a) of the American Taxpayer Relief Act of 2012 requires the Secretary to make reductions to the ESRD PPS base rate to reflect the Secretary’s estimate of the change in the utilization of ESRD-related drugs and biologicals by comparing per patient utilization data from 2007 with such data from 2012. This adjustment results in an overall 12 percent reduction in Medicare payments for CY 2014. The rule seeks comment on whether this change should be phased in over more than one year.

As a result of the application of the ESRD bundled market basket update reduced by the MFP adjustment, the wage index budget-neutrality adjustment and the drug utilization adjustment, CMS projects the proposed updates for CY 2014 would decrease total payments to all ESRD facilities by 9.4 percent compared with CY 2013.

The rule also proposes changes to the ESRD Quality Incentive Program (QIP) for payment year (PY) 2016.

The proposed rule also addresses issues related to the coverage and payment of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), including clarification of the definition of routinely purchased DME; clarification of the grandfathering provision related to the three-year minimum lifetime requirement; and implementation of budget-neutral fee schedules for splints, casts and intraocular lenses (IOLs) inserted in a physician’s office.

View the proposed rule. CMS will accept comments on the proposed rule until Aug. 30, 2013.

Proposed Rule on Home Health Payments

On June 27, CMS published a proposed rule to update Medicare’s Home Health Prospective Payment System (HH PPS) payment rates and wage index for calendar year (CY) 2014. The rule proposes rebasing adjustments, with a four-year phase-in, to the national, standardized 60-day episode payment rates, the national per-visit rates and the NRS conversion factor. Payments to home health agencies (HHAs) are estimated to decrease by approximately 1.5 percent, or $290 million in CY 2014, reflecting the combined effects of the 2.4 percent HH payment update percentage ($460 million increase); the rebasing adjustments to the national, standardized 60-day episode payment rate; the national per-visit payment rates; the NRS conversion factor ($650 million decrease); and the effects of ICD-9 coding adjustments ($100 million decrease). This proposed rule would also establish home health quality reporting requirements for CY 2014 payment and subsequent years and proposes to specify that Medicaid responsibilities for home health surveys be explicitly recognized in the State Medicaid Plan, which is similar to current regulations for surveys of Nursing Facilities (NF) and Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF-IID). Comments must be received by Aug. 26.

Final CMS Rule on Improving Coordination Between Long-Term Care Hospitals and Hospices

CMS issued a rule June 26 that aims to improve care coordination between long-term care (LTC) hospitals and hospice facilities; the new rule, which goes into effect Aug. 26, 2013, clearly defines the role of each provider in delivering and maintaining the continuity of care for each patient. Because LTC facilities and hospitals provide many of the same services, there is a high possibility that residents could receive duplicative and/or conflicting services. In general, LTC facilities are usually responsible for nursing services, dietary services, physician services, dental service, pharmacy services, specialized rehabilitative services and, when necessary, laboratory and social services. The new rule mandates that LTCs that choose to arrange for the provision of hospice care enter into written agreements with Medicare-certified hospice providers of the specific services to be provided by each entity in order to reduce overlap. “We believe that a clear division of responsibilities and increased communication required by this rule will help eliminate duplication of and/or missing services,” CMS said in the rule. As the rule stands, the written agreement of care will unanimously be applied to all residents within the LTC facility, not individual patients. Criticisms of the new rule are largely based on the extra burden to providers, as it will take staff time to develop the language for the one written agreement describing the allocated care services. It is estimated that the burden associated with first-year implementation of this rule is 80,695 hours or $5.5 million for the 16,139 LTC facilities affected.

Proposed Rule to Clarify Long-Term Care Ombudsman Program

The Administration on Aging (AoA) of the Administration for Community Living (ACL) within the Department of Health and Human Services (HHS) has issued a Notice of Proposed Rulemaking, with request for comments, to implement provisions of the Older Americans Act, the State Long-Term Care Ombudsman program. This proposed rule replaces AoA’s 1994 Notice of Proposed Rulemaking. The proposed rule contains two main parts, both related to the ombudsman program:

An amendment to existing regulations promulgated under the Older Americans Act at 45 C.F.R. Part 1321, and a new Part 1327, which would be added to the existing regulations. The proposed amendment to existing regulations addresses responsibilities of state agencies housing long-term care ombudsman offices not to disclose the identity of any person sending a complaint to the ombudsman or the identity of any resident of a long-term care facility. In addition, the proposed amendment would extend the disclosure protections to include “files, records, and other information” instead of only “files” as the existing rule provides.

The newly proposed Part 1327 would define the following terms included in the Older Americans Act, including “immediate family,” “office of the state long-term care ombudsman” and “representative of the office of the state long-term care ombudsman.” Comments are due Aug. 19.

Tanning Bed Warning Label Proposal

The FDA issued a proposal that would elevate tanning beds from a low-risk to high-risk medical device and would add a warning label to them. If the order is finalized, manufacturers would have to submit a pre-market notification (510(k)) to the FDA for these devices, which are currently exempt from any pre-market review. Manufacturers would have to show that their products have met certain performance testing requirements, address certain product design characteristics and provide comprehensive labeling that presents consumers with clear information on the risks of use. The order proposes to include a contraindication against use on people under 18 years old, and the labeling would have to include a warning that frequent users of sunlamp products should be regularly screened for skin cancer.

The FDA will take comments on the proposed order until Aug. 7.

5. Reports


Medicaid Demonstration Waivers: Approval Process Raises Cost Concerns and Lacks Transparency

According to arecent GAO report, the Department of Health and Human Services has struggled to stick to its own policy of ensuring the budget neutrality of state Medicaid demonstration projects. The report, titled “Approval Process Raises Cost Concerns and Lacks Transparency,” details the weakness of HHS’s regulation process in regard to the demonstration projects, which states use for testing and analyzing potential methods of Medicaid service delivery. According to the policy, states must demonstrate to HHS that their proposed projects are budget neutral. Part of the issue is the data being used by HHS in their evaluation process — according to the GAO, “HHS’s policy does not require documentation or describe how the data used to set spending limits are reviewed to ensure reliability and accuracy,” and that while states may perform their own quality checks, “HHS generally does not test the accuracy of the data.”


OIG Concerned About GPO Stocks-for-Contracts Plan

The Department of Health and Human Services’s Office of Inspector General (OIG) issued anadvisory opinion this week, which expressed their concern regarding a proposed plan by a publicly traded parent company of a group purchasing organization (GPO). The plan in question would involve the parent company’s offering equity positions to members of the GPO in exchange for their extension of membership contracts. The OIG is worried that this could violate certain anti-kickback laws and create “the potential for fraud and abuse.” Under current policy, GPO members pay administrative fees to the GPO, which are later either partially or fully refunded. These refunded fees act as a discount for the members. The new plan would allow GPO members to exchange a portion of these discounted fees for stock purchases in the parent company. In order to qualify for this exchange, however, members would have to sign a five- to seven-year contract extension with the GPO and would be required to maintain at least current levels of purchasing. OIG stated that they “do not believe that the Proposed Arrangement is sufficiently low risk.”

Senior Medicare Patrol Increases Medicare and Medicaid Recoveries

According to a report from the Department of Health and Human Services’s Office of Inspector General (OIG), in 2012 the Senior Medicare Patrol (SMP) recovered $72,000 in Medicare and Medicaid funds, drastically up from $19,000 in 2011. The OIG acknowledged that this number could be even higher due to the impossibility of tracking every referral from beneficiaries to Medicare contractors or law enforcement. Additionally, the SMP saved beneficiaries of Medicare and Medicaid $134,000 in 2012, credited largely to higher overall SMP activity.

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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