Washington Healthcare Update

June 2, 2014

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1. Congress

House of Representatives


  • State Work Period — No Legislative Activity

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Energy and Commerce Advances Trio of Public Health Bills

On May 26, 2014, the House Energy and Commerce Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), approved three bipartisan bills aimed at improving public health services. Each of the bills was approved by voice vote.

  • H.R. 4299, the Improving Regulatory Transparency for New Medical Therapies Act, was introduced by Pitts and Subcommittee Ranking Member Frank Pallone (D-NJ). The bill would amend the Controlled Substances Act to improve efficiency, transparency and consistency of the Drug Enforcement Agency’s process for scheduling new drugs approved by the Food and Drug Administration.
  • H.R. 4709, the Ensuring Patient Access and Effective Drug Enforcement Act, was introduced by full committee Vice Chairman Marsha Blackburn (R-TN) and Reps. Tom Marino (R-PA), Peter Welch (D-VT) and Judy Chu (D-CA). This bill would improve enforcement efforts regarding prescription drug diversion and abuse.
  • H.R. 4631, the Combating Autism Reauthorization Act, was introduced by Reps. Chris Smith (R-NJ) and Michael Doyle (D-PA). The bill would extend the Combating Autism Reauthorization Act of 2011 to continue federal research, early identification and intervention, and education related to autism as well as the activities of the Interagency Autism Coordinating Community. The measure continues the 2006 Combating Autism Act and has the support of Autism Speaks, although some other advocates say previous funding has been badly coordinated.

For more information, or to view the markup, please visit energycommerce.house.gov.

Veterans Affairs Committee Hearing on Vets Health Waiting Lists

On May 28, 2014, the House Veterans’ Affairs Committee held a hearing to explore recent developments regarding the alleged destruction of an alternate wait list associated with the Phoenix Veterans Affairs Health Care System. The hearing provided members of the committee with an opportunity to discuss an interim report from the VA Inspector General, which is part of an ongoing review at the Phoenix Health Care System . Allegations at the Phoenix HCS include gross mismanagement of VA resources and criminal misconduct by VA senior hospital leadership, creating systemic patient safety issues and possible wrongful deaths.


Thomas Lynch, M.D.
Assistant Deputy Undersecretary for Health for Clinical Operations
U.S. Department of Veterans Affairs

Ms. Joan Mooney
Assistant Secretary for Congressional and Legislative Affairs
U.S. Department of Veterans Affairs

Mr. Michael Huff
Congressional Relations Officer
U.S. Department of Veterans Affairs

For more information, or to view the hearing, please visit veterans.house.gov.

Appropriations Committee Approves FDA Funding Measure

On May 29, 2014, the House Appropriations Committee held a markup of the FY 2015 appropriations bill for Agriculture, Rural Development and the Food and Drug Administration in which the bill was ultimately approved by a vote of 31-18. The proposed legislation funds important agricultural and food programs and services, including food and medical product safety, animal and plant health programs, rural development and farm services, marketplace oversight and nutrition programs. The measure urges FDA guidance on painkiller labeling and includes funding for FDA oversight of compounding pharmacies at half the level requested by the White House.


State Work Period — No Legislative Activity

2. Administration

HHS-OIG: $3 Billion in Recovered Funds Expected for First Half of 2014

According to the HHS-OIG Semiannual Report to Congress, in the first half of FY 2014, OIG reported expected recoveries of more than $3.1 billion, consisting of nearly $295 million in audit receivables and about $2.83 billion in investigative receivables, which include about $813.7 million in non-HHS investigative receivables resulting from OIG’s work in areas such as the States’ shares of Medicaid restitution. The Department of Health and Human Services (HHS) Office of Inspector General (OIG) Semiannual Report to Congress (Semiannual Report) describes significant problems, abuses, deficiencies and investigative outcomes relating to the administration of HHS programs and operations that were disclosed during the reporting period. This edition addresses work completed during the first half of fiscal year (FY) 2014 (October — March) and summarizes key accomplishments during the period. OIG reported 465 criminal actions against individuals or entities that engaged in crimes against HHS programs, and 266 civil actions, which include false claims and unjust-enrichment lawsuits filed in Federal district court, civil monetary penalties (CMP) settlements and administrative recoveries related to provider self-disclosure matters.

OMB Reviewing Proposed Home Health Conditions of Participation

On May 22, 2014, the Office of Management and Budget (OMB) began reviewing a proposed rule that would revise the conditions of participation (CoPs) home health agencies (HHAs) must meet to participate in the Medicare program. According to an OMB description of a previous CMS proposal, the CoP requirements would focus on the actual care delivered to patients by HHAs; reflect an interdisciplinary view of patient care; allow HHAs greater flexibility in meeting quality standards; and eliminate unnecessary procedural requirements. OMB review is a required element of the regulatory review process that occurs prior to a proposed regulation’s being made public. 1989 was the last year in which CMS updated the home health CoPs, and home health industry stakeholders say the proposal has been in the works for more than a decade.

CDC Awards Funds to Combat Chronic Illness

The Centers for Disease Control and Prevention has awarded $19.5 million to 26 academic institutions in 25 states to study how people and their communities can avoid or counter the risks for chronic illnesses, such as heart disease, obesity and cancer. The funds will support the development and evaluation of practical public health prevention interventions. The awards are for the first year of a five-year funding period.

3. State Activities

UnitedHealth Exploring Potential Illinois Exchange Offerings

According to local news reports, UnitedHealth Group intends to offer plans on the Illinois health insurance exchange next year, after refraining from making such offerings in 2014. Nationwide, UnitedHealth offered exchange-based products in the individual or small-business markets in 10 states and Washington, D.C., this year. However, it did not offer individual policies on the exchanges in any of the 34 states where the federal government operated the marketplaces, including Illinois. Five insurers offered plans on the Illinois health insurance marketplace in the first year, including Blue Cross, Humana, Aetna, Health Alliance and the startup Land of Lincoln Health. Each is expected to submit applications to offer plans again next year. Insurers have until June 10, 2014, to submit health plans for inclusion in the 2015 Illinois marketplace.

4. Regulations Open for Comment

CMS Proposed Rule: Medicare, Medicaid EHR Incentive Program

On May 23, 2014, CMS issued a proposed rule that would change the meaningful use stage timeline and the definition of certified electronic health record technology (CEHRT). It would also change the requirements for the reporting of clinical quality measures for 2014. Certified EHR technology is defined for the Medicare and Medicaid HER Incentive Programs at 42 CFR 495.4, which references the Office of the National Coordinator for Health Information Technology’s (ONC) definition of CEHRT under 45 CFR 170.102. For Stages 1 and 2 of meaningful use, CMS and ONC worked closely to ensure that the definition of meaningful use of CEHRT and the standards and certification criteria for CEHRT were coordinated. The definition of CEHRT under 45 CFR 170.102 requires, beginning with federal fiscal year (FY) and calendar year (CY) 2014, EHR technology certified to the 2014 Edition EHR certification criteria. Therefore, all EPs, eligible hospitals and CAHs must use 2014 Edition CEHRT to meet meaningful use under the Medicare and Medicaid EHR Incentive Programs, beginning with FY 2014 and CY 2014. Beginning in 2015, all eligible hospitals and professionals would still be required to report using the 2014 Edition CEHRT. The proposed rule also includes a provision that would formalize CMS’ and ONC’s previously stated intention to extend Stage 2 through 2016 and begin Stage 3 in 2017.

To view the CMS press release on the proposed rule, visit cms.gov.

Medicare Program; Prior Authorization Process for Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Items

On May 23, 2014, CMS issued a proposed rule that would establish a prior authorization process for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) items that are frequently subject to unnecessary utilization and would add a contractor’s decision regarding prior authorization of coverage of DMEPOS items to the list of actions that are not initial determinations and therefore not appealable.

The proposed rule is intended to replicate the Medicare Prior Authorization of Power Mobility Device Demonstration. Launched in 2012, the demonstration established a prior authorization process for certain power mobility devices. Based on September 2013 claims data, monthly expenditures for certain power mobility devices decreased from $12 million in September 2012 to $4 million in August 2013 across the seven demonstration states (California, Florida, Illinois, Michigan, New York, North Carolina and Texas) with no reduction in beneficiary access to medically necessary items. CMS seeks to leverage this success by extending the demonstration to an additional 12 states. These states include Arizona, Georgia, Indiana, Kentucky, Louisiana, Maryland, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee and Washington. This will bring the total number of states participating in the demonstration to 19.

CMS also proposes to establish a prior authorization process for certain durable medical equipment, prosthetics, orthotics and supplies items that are frequently subject to unnecessary utilization. Through a proposed rule, CMS will solicit public comments on this prior authorization process, as well as criteria for establishing a list of durable medical items that are frequently subject to unnecessary utilization that may be subject to the new prior authorization process. CMS will launch two payment model demonstrations to test prior authorization for certain non-emergent services under Medicare. These services include hyperbaric oxygen therapy and repetitive scheduled non-emergent ambulance transport. Information from these models will inform future policy decisions on the use of prior authorization.

The deadline to submit comments is July 28, 2014.

OIG Proposed Rule to Promote Civil Monetary Penalties for Health Fraud

On May 12, the Department of Health and Human Services Office of Inspector General published a rule in the Federal Register that would expand the use of civil monetary penalties (CMPs). Under the rule, CMPs could be applied to entities for failing to provide OIG with quick access to documents, ordering or prescribing medication or services while excluded from participation in federal health care programs, making false statements on enrollment applications, failing to report or return overpayments, and making a false statement that is part of a fraudulent claim. In addition, the proposed rule would also allow CMPs to be imposed on Medicare Advantage and Medicare Part D organizations. Comments on the rule are due July 11.

CMS Proposed Rule FY 2015 Hospice Payment Rate Update

On May 2, 2014, CMS issued a proposed rule [CMS-1609-P] that would update fiscal year (FY) 2015 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. As proposed, hospices would see an estimated 1.3 percent ($230 million) increase in their payments for FY 2015. The hospice payment increase would be the net result of a proposed hospice payment update to the hospice per diem rates of 2 percent (a “hospital market basket” increase of 2.7 percent minus 0.7 percent for reductions mandated by law), and a 0.7 percent decrease in payments to hospices due to updated wage data and the sixth year of CMS’ seven-year phase-out of its wage index budget neutrality adjustment factor (BNAF). This rule also provides an update on hospice payment reform analyses and solicits comments on “terminal illness” and “related conditions” definitions, and on a process and appeals for Part D payment for drugs, while beneficiaries are under a hospice election. In addition, the rule proposes timeframes for filing the notice of election and the notice of termination/revocation; adding the attending physician to the hospice election form; a requirement that hospices complete their hospice inpatient and aggregate cap determinations within five months after the cap year ends, and remit any overpayments; and updates for the hospice quality reporting program.

Public comments on the proposal will be accepted until July 1, 2014.

CMS Final Rule — Federally Qualified Health Center Prospective Payment System

On May 2, 2014, CMS issued a final rule with comment period to implement methodology and payment rates for a prospective payment system (PPS) for federally qualified health center (FQHC) services under Medicare Part B beginning on Oct. 1, 2014, in compliance with the statutory requirement of the Affordable Care Act. In addition, it establishes a policy that allows rural health clinics (RHCs) to contract with nonphysician practitioners when statutory requirements for employment of nurse practitioners and physician assistants are met, and makes other technical and conforming changes to the RHC and FQHC regulations. Finally, this final rule with comment period implements changes to the Clinical Laboratory Improvement Amendments (CLIA) regulations regarding enforcement actions for proficiency testing (PT) referrals. Comments will be accepted through July 1, 2014.

CMS Issues Proposed Hospital Inpatient Payment Regulation

CMS issued a proposed rule that would update fiscal year (FY) 2015 Medicare payment policies and rates for inpatient stays at general acute care and long-term care hospitals (LTCHs). This rule builds on the Obama administration’s efforts through the Affordable Care Act to promote improvements in hospital care that will lead to better patient outcomes while slowing the long-term health care cost growth. CMS projects that the payment rate update to general acute care hospitals will be 1.3 percent in FY 2015. The rate update for long-term care hospitals will be 0.8 percent. The difference in the update is accounted for by different statutory and regulatory provisions that apply to each system.

The rule’s most significant changes are payment provisions intended to improve the quality of hospital care, which reduce payment for readmissions and hospital acquired conditions (HACs). The rule also includes proposed changes to the Hospital Inpatient Quality Reporting (IQR) Program. The rule also describes how hospitals can comply with the Affordable Care Act’s requirements to disclose charges for their services online or in response to a request, supporting price transparency for patients and the public.

CMS will accept comments on the proposed rule until June 30, 2014, and will respond to comments in a final rule to be issued by Aug. 1, 2014.

Fiscal Year 2015 Inpatient Psychiatric Facilities Prospective Payment System

On May 1, 2014, CMS issued a proposed rule that would update the prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs). These changes would be applicable to IPF discharges occurring during the fiscal year (FY) beginning Oct. 1, 2014, through Sept. 30, 2015. This proposed rule would also address implementation of ICD-10-CM and ICD-10-PCS codes; propose a new methodology for updating the cost of living adjustment (COLA); and propose new quality measures and reporting requirements under the IPF quality-reporting program. The proposed rule will appear in the May 6, 2014, Federal Register and will be open to public comment for 60 days.

Proposed Fiscal Year 2015 Payment and Policy Changes for Medicare Inpatient Rehabilitation Facilities

On May 1, 2014, CMS issued a proposed rule that would update the prospective payment rates for inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 2015 (for discharges occurring on or after Oct. 1, 2014, and on or before Sept. 30, 2015) as required by the statute. The rule also proposes to collect data on the amount and mode (that is, Individual, Group and Co-Treatment) of therapy provided in the IRF setting according to therapy discipline, revise the list of impairment group codes that presumptively meet the “60 percent rule” compliance criteria, provide for a new item on the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI) form to indicate whether the prior treatment and severity requirements have been met for arthritis cases to presumptively meet the “60 percent rule” compliance criteria, and revise and update quality measures and reporting requirements under the IRF quality reporting program (QRP). The proposal also addresses the implementation of the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF prospective payment system (PPS), effective when ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRF-PAI submissions. The proposed rule will appear in the May 7 Federal Register and will be open to public comments for 60 days.

FDA Proposed Rule on Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act

FDA has issued a proposed rule that would deem products meeting the statutory definition of “tobacco product,” except accessories of a proposed deemed tobacco product, to be subject to the Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act). The Tobacco Control Act provides FDA authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco and any other tobacco products that the Agency by regulation deems to be subject to the law. Option 1 of the proposed rule would extend the Agency’s “tobacco product” authorities in the FD&C Act to all other categories of products, except accessories of a proposed deemed tobacco product, that meet the statutory definition of “tobacco product” in the FD&C Act. Option 2 of the proposed rule would extend the Agency’s “tobacco product” authorities to all other categories of products, except premium cigars and the accessories of a proposed deemed tobacco product, that meet the statutory definition of “tobacco product” in the FD&C Act. FDA also is proposing to prohibit the sale of “covered tobacco products” to individuals under the age of 18 and to require the display of health warnings on cigarette tobacco, roll-your own tobacco and covered tobacco product packages and in advertisements. FDA is taking this action to address the public health concerns associated with the use of tobacco products. Comments are due July 9, 2014.

CMS Proposed Rule on Life Safety Codes for Medicare, Medicaid Providers

On April 14, 2014, CMS announced a proposed rule on the adoption of an updated life safety code (LSC) that CMS would use in its ongoing work to ensure the health and safety of all patients, family and staff in every provider and supplier setting. The updated code contains new provisions that are vital to the health and safety of all patients and staff. CMS intends to adopt the National Fire Protection Association’s (NFPA) 2012 editions of the (LSC) and the Health Care Facilities Code (HCFC), as the 2012 edition of the LSC also is aligned with the international building codes to make compliance across codes much simpler for Medicare- and Medicaid-participating facilities.

Currently, CMS applies the standards set out in the 2000 edition of the LSC to facilities in order to ensure patients’ and caregivers’ health and safety. CMS is now proposing to adopt the 2012 editions of the LSC and the Health Care Facilities Code. The LSC sets out fire safety requirements for new and existing buildings, and is issued by the NFPA, a private, nonprofit organization dedicated to reducing loss of life due to fire. The new edition of the LSC applies to: hospitals, long-term care facilities (LTC), critical access hospitals (CAHs), Programs for All-Inclusive Care for the Elderly (PACE®), religious nonmedical healthcare institutions (RNHCIs), hospice inpatient facilities, ambulatory surgical centers (ASCs) and intermediate care facilities for individuals with intellectual disabilities (ICF-IIDs).

Comments are due June 16, 2014.

5. Reports

OIG: Improper Payments for Evaluation and Management Services Cost Medicare Billions in 2010

According to a recent report by the HHS-OIG, in total, Medicare inappropriately paid $6.7 billion for claims for E/M services in 2010 that were incorrectly coded and/or lacking documentation, representing 21 percent of Medicare payments for E/M services that year. We found that 42 percent of claims for E/M services in 2010 were incorrectly coded, which included both upcoding and downcoding (i.e., billing at levels higher and lower than warranted, respectively), and 19 percent were lacking documentation. Additionally, we found that claims from high-coding physicians were more likely to be incorrectly coded or insufficiently documented than claims from other physicians. OIG recommends that CMS educate physicians on coding and documentation requirements for E/M services, continue to encourage contractors to review E/M services billed for by high-coding physicians and follow up on claims for E/M services that were paid for in error. CMS concurred with the first recommendation, did not concur with the second recommendation and partially concurred with the third recommendation.

OIG: Medicare Inappropriately Paid Hospitals’ Inpatient Claims Subject to the Post-acute Care Transfer Policy

According to a report released by the HHS-OIG on May 28, 2014, Medicare inappropriately paid 6,635 Medicare claims subject to the post-acute care transfer policy during the period January 2009 through September 2012. The hospitals used incorrect patient discharge status codes on their claims, indicating that the patients were discharged to home or certain types of health care institutions rather than transferred to post-acute care. Of these claims, 91 percent were followed by claims for home health services, and 9 percent were followed by claims for services in other post-acute care settings. Medicare overpaid the hospitals by $19.5 million. Medicare overpaid the hospitals because the Common Working File (CWF) edits related to post-acute care transfers were not working properly. Medicare could have saved approximately $31.7 million over four years if it had had controls to ensure that the CWF edits were working properly. OIG recommends that CMS direct Medicare contractors to recover the $19.5 million in identified overpayments in accordance with CMS’s policies and procedures, direct the Medicare contractors to identify any transfer claims on which the patient discharge status was coded incorrectly and recover any overpayments after the audit period, correct the CWF edits and ensure that they are working properly, and educate hospitals on the importance of reporting the correct patient discharge status codes on transfer claims, especially when home health services have been ordered. CMS partially concurred with the first and second recommendations and concurred with the third and fourth recommendations.

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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