Washington Healthcare Update

November 10, 2014

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1. Congress

House of Representatives

  • District Work Period — No Legislative Activity
  • Boehner, McConnell Outline Priorities for 114th Congress
  • GOP Doctors Caucus Sends Letter to Leadership on Doc Fix


  • State Work Period — No Legislative Activity
  • Legislators Ask FTC to Release Information on Pay for Delay Drug Settlements

2. Administration

  • Medicare Program; Administrative Law Judge Hearing Program for Medicare Claim Appeals
  • DOL, Treasury & HHS Issue Guidance on Employers’ Using Reimbursements For Employee Individual Policy Purchase
  • HHS, IRS and Treasury Target Employer Health Plans Without Benefits for Hospitalization and Physician Services
  • OIG Will Review Early Experience of Drug Tracing System and Other Areas

3. State Activities

  • Washington Exchange Asks for Additional Federal Funds

4. Regulations Open for Comment

  • Basic Health Program; Federal Funding Methodology for Program Year 2016
  • CMS Releases Proposed Rule on Revised Conditions of Participation for Home Health Agencies
  • OIG Proposed Rule Would Expand Medicare Anti-Kickback Statute Safe Harbors
  • CMS Releases Final Rule for Medicare Program: Physician Fee Schedule OPPS, ASC Payments, End-Stage Renal Disease

5. Reports

  • HHS-OIG Work Plan for Fiscal Year (FY) 2015
  • MedPAC November Public Meeting

1. Congress


District Work Period — No Legislative Activity

This week, the House was in recess for a District Work Period. The full House calendar is available at www.majorityleader.gov. The House will return to session on Nov. 12.

Boehner, McConnell Outline Priorities for 114th Congress

In response to the Nov. 5 Congressional elections, which saw Republicans achieve the requisite number of electoral victories to secure a majority in the U.S. Senate, while retaining their majority in the House of Representatives, House Speaker Boehner and presumptive Majority Leader McConnell (R-KY) penned a joint op-ed in the Wall Street Journal outlining GOP priorities for the 114th Congress. Under a general theme of job creation and restoring trust in the legislative process, Boehner and McConnell pledged to pursue bipartisan legislative initiatives they claim had previously been stalled in the Democratic-controlled Senate in the 113th Congress. According to the op-ed, “[t]hese bills include measures authorizing the construction of the Keystone XL pipeline, which will mean lower energy costs for families and more jobs for American workers; the Hire More Heroes Act, legislation encouraging employers to hire more of our nation’s veterans; and a proposal to restore the traditional 40-hour definition of full-time employment, removing an arbitrary and destructive government barrier to more hours and better pay created by the Affordable Care Act of 2010.” Boehner has also voiced his intent to repeal the ACA’s medical device excise tax. At a briefing with reporters Nov. 6, White House Press Secretary Josh Earnest said that while Republicans were entitled to work on repeal of the ACA and its individual provisions, the president will not support such efforts. “Maybe there will be colorful debates on the floor of the Senate or on the floor of the House,” but “the president’s position on that is not just well known to everybody here at the White House; the president’s position on these issues is well known to everybody in Congress too,” Earnest told reporters. More information: online.wsj.com.

GOP Doctors Caucus Sends Letter to Leadership on Doc Fix

In a letter dated Nov. 3, the Republican Doctors Caucus of more than 110 members called on Speaker John Boehner and Majority Leader Kevin McCarthy to address “the doc fix” by the end of 2014; the doc fix refers to cuts to the Medicare Sustainable Growth Rate (SGR) currently used by the Centers for Medicare and Medicaid Services (CMS) to control Medicare spending on physician services. Enacted by the Balanced Budget Act of 1997, SGR ensures that yearly increases in the expense per Medicare beneficiary do not exceed the growth in GDP. As it stands, a 21.2 percent payment rate decrease (dropping to $28.2239 from $35.8013 per visit) goes into effect on April 1, 2015, a rate finalized in a final CY 2015 physician fee payment rule issued by CMS on Oct. 31. “We will continue to work with Congress to fix this untenable situation so doctors and beneficiaries no longer have to worry about the stability and adequacy of payments from Medicare,” the letter says. Specifically, the Caucus calls for support in passing H.R. 4015, the SGR Repeal and Medicare Provider Payment Modernization Act, which they say allows Congress to fix the flawed SGR formula while costs are still very low. The Congressional Budget Office (CBO) raised the cost of repealing the SGR from the 10-year $116.5 billion cost estimate in December 2013 to a 10-year cost of $124 billion in April 2014, shortly after a bipartisan, bicameral deal to permanently replace the SGR formula stalled because lawmakers could not agree on how to pay for the deal’s more than $150 billion price tag.


State Work Period — No Legislative Activity

This week, the Senate was in recess for a State Work Period. The complete Senate calendar is available at democrats.senate.gov. The Senate will return to session on Nov. 12.

Legislators Ask FTC to Release Information on Pay for Delay Drug Settlements

In a bipartisan letter sent Oct. 29 to Federal Trade Commission (FTC) Chairwoman Edith Ramirez, Sens. Amy Klobuchar (D-MN) and Charles Grassley (R-IA) asked the agency to release data on patent litigation settlements concerning brand-name drug companies’ paying generic drug companies to delay marketing of lower-cost generic drugs. “Pay-for-delay agreements deny consumer access to more affordable alternatives to brand medications,” the senators said. The 2013 and 2014 numbers will help Congress understand whether a 2013 FTC v. Actavis Supreme Court decision “has altered the behavior of drug manufacturers” and what legislative changes may be needed, they said. Senators Klobuchar and Grassley are also the lead sponsors of the Preserve Access to Affordable Generics Act (S.214), a bill that would make it illegal for brand-name drug manufacturers to use anticompetitive pay-off agreements to keep more affordable generic equivalents off the market; the bill was introduced in February 2013, and Sens. Klobuchar and Grassley had introduced similar legislation in 2010 following a resurgence of patent settlement agreements. The press release and full text of the letter can be found here.

2. Administration

Medicare Program; Administrative Law Judge Hearing Program for Medicare Claim Appeals

On Nov. 5, the Office of Medicare Hearings and Appeals (OMHA) issued a request for information soliciting suggestions for addressing the substantial growth in the number of requests for hearings being filed with the Office of Medicare Hearings and Appeals, and the backlog of pending cases. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 provides for an Administrative Law Judge (ALJ) to conduct and conclude a hearing and render a decision on such hearing within 90 days of the date a request for hearing has been timely filed. However, in recent years, OMHA has experienced a significant and sustained increase in appeals workload that has compromised its ability to meet the 90-day adjudication time frame.

OMHA has taken measures to mitigate the effects of the workload increase at the ALJ level, including deferment of new provider-initiated appeals to prioritize processing of the relatively small numbers of beneficiary-initiated appeals. For the remaining cases, OMHA has deferred assignments of new requests for hearing until an adjudicator becomes available, which will allow appeals to be assigned more efficiently on a first in/first out basis as an ALJ’s case docket is able to accommodate additional workload. Despite these efforts, the existing backlog is expected to reach 1 million appeals by the end of the year, with adjudication of claims taking as long as four years. The information solicited in this notice must be received no later than 5:00 p.m. EST, Dec. 5, 2014.

DOL, Treasury & HHS Issue Guidance on Employers’ Using Reimbursements For Employee Individual Policy Purchase

The Department of Labor (DOL), the Department of Health and Human Services (HHS) and the U.S. Treasury jointly issued a FAQ document on Nov. 6 warning about employers’ using premium reimbursement arrangements to assist employees in purchasing individual insurance plans under the Affordable Care Act (ACA). Violators of these arrangements could be subject to excise taxes under Section 4980D of the tax code, the document notes. Specifically the guidance addresses three scenarios, including that employers cannot provide cash for reimbursement of an employee’s purchase of an individual policy; employers cannot offer high-claims-risk employees a cash subsidy to encourage them to opt out of the employer’s group health plan; and the most complex of the illicit scenarios mentioned occurs when the health insurance vendor to an employer cancels its group health policy and then creates a reimbursement program that works with health insurance brokers to help the now-uninsured employees purchase individual insurance policies allowing these same employees access to the premium tax credits for coverage from the insurance marketplace. This guidance document is one of twenty-two released thus far by the agencies.

HHS, IRS and Treasury Target Employer Health Plans Without Benefits for Hospitalization and Physician Services

In a notice released Nov. 4, the Department of Health and Human Services (HHS), the Internal Revenue Service (IRS) and the U.S. Treasury issued a warning to group health plans that fail to cover inpatient hospitalization services or physician services; the agencies believe that because of the employer shared-responsibilities within the ACA, some low-cost plans are being used to fulfill the employer coverage requirements and avoid tax penalties. In response, the notice states that agencies are working together and will soon issue new regulations for plans that do not provide minimum value under the Affordable Care Act (ACA); marketers of these plans, on the other hand, argue that these plan designs satisfy the minimum value (MV) requirements within the language of the ACA, including those under tax code Section 36B and final HHS regulations issued in February 2013. The agencies said that after the proposed rules are issued, they will be in a position to finalize the regulations in 2015 and make them applicable upon finalization. Moreover, according to the guidance, for employers that have entered into binding contracts to adopt these non-Hospital/Non-Physician Services Plans or already started enrollment before Nov. 4 and based their reliance on the results of the MV Calculator, the agencies expect that when the final regulations are issued, they won’t be applicable for purposes of the employer shared-responsibility provisions under tax code Section 4980H with respect to the plan before the end of the plan year, if that plan year begins no later than March 1, 2015. The notice also requires employers to correct any previous disclosures to employees that stated or implied that such plan coverage provided minimum value and would preclude them from obtaining a premium tax credit in the ACA marketplace if they are otherwise eligible. The notice is scheduled to appear in Internal Revenue Bulletin on Nov. 24.

OIG Will Review Early Experience of Drug Tracing System and Other Areas

In a recently posted FY2015 Work Plan, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) announced its FY 2015 FDA oversight study priorities, saying it monitors early stakeholders’ experiences in the new drug tracing system implemented through the Drug Quality and Security Act (DQSA) passed in November 2013. DQSA mandates that an interoperable drug tracing system be created during the course of 10 years, and trading partners in the drug supply chain must exchange drug transaction information and histories in a single paper or electronic document starting Jan. 1, 2015, although dispensers have until July 1, 2015, to meet the requirement. “Together, this information forms the foundation of drug traceability and the security of the drug supply chain. We will interview trading partners about how they have successfully exchanged this information and what, if any, obstacles they have faced.” The agency also announced in the work plan that it will hone in on six other separate areas of regulation, including determining the extent to which FDA conducts inspections of generic drug manufacturers, drug sponsor compliance with clinical trial-reporting requirements, FDA oversight of postmarket studies, FDA inspections of high-risk food facilities, and drug compounding oversight. OIG expects to issue all these assessments during fiscal 2015.

3. State Activities

Washington Exchange Asks for Additional Federal Funds

In a presentation given at an Oct. 30 board meeting, the Washington state exchange, Healthplanfinder, revealed that it will be asking the Department of Health and Human Services (HHS) for approximately $40 million in additional federal funding in order to improve the exchanges’ customer experience, stabilize the exchange, manage IT changes and respond to additional federal requirements and policy enhancements. The state will be applying for a Level One grant prior to the Nov. 14 deadline; CMS maintains that states can spend the grant money only in 2015, and it can be used only to develop and implement exchange components, not for operational or maintenance costs.

4. Regulations Open for Comment

Basic Health Program; Federal Funding Methodology for Program Year 2016

On Oct. 21, CMS issued a proposed rule outlining the agency’s methodology for determining federal payment amounts to states that establish a Basic Health Program (BHP) for 2016. Under the proposed methodology, in determining the federal BHP payment amount, CMS will take into account the age and income of the enrollee, whether the enrollment is for self-only or family coverage, geographic differences in average spending for health care across rating areas, the health status of the enrollee for purposes of determining risk adjustment payments and reinsurance payments that would have been made if the enrollee had enrolled in a qualified health plan through an Exchange, and whether any reconciliation of the credit or cost-sharing reductions would have occurred if the enrollee had been so enrolled. The proposed payment methodology takes each of these factors into account. In addition, the proposed methodology that is the same as the 2015 payment methodology, with updated values but no changes in methods. States that elect to operate a BHP will make affordable health benefits coverage available for individuals under age 65 with household incomes between 133 percent and 200 percent of the FPL who are not otherwise eligible for Medicaid, the Children’s Health Insurance Program (CHIP) or affordable employer-sponsored coverage. Comments are due Nov. 24. CMS plans to issue a final notice by February.

CMS Releases Proposed Rule on Revised Conditions of Participation for Home Health Agencies

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule on Oct. 6 revising and modernizing the current conditions of participation for home health care agencies that want to take part in the Medicare and Medicaid programs. The CMS rule, published in the Federal Register on Oct. 7, “reflects the most current home health agency practices by focusing on the care provided to patients and the impact of that care on patient outcomes. This proposed regulation focuses on assuring the protection and promotion of patient rights; enhances the process for care planning, delivery, and coordination of services; streamlines regulatory requirements; and builds a foundation for ongoing, data-driven, agency-wide quality improvement.” Specific new provisions in the proposed rule include patients’ rights measures, coordination of services and quality of care measures utilizing an interdisciplinary team approach, quality assessment and performance improvement (QAPI) measures, and infection prevention and control measures, among others. Comments on the proposed rule are due to CMS by Dec. 8, 2014.

OIG Proposed Rule Would Expand Medicare Anti-Kickback Statute Safe Harbors

The Department of Health and Human Services Office of the Inspector General (OIG) released a proposed rule (RIN 0936-AA06) on Oct. 2 that would add new safe harbors to the anti-kickback statute covering some Medicare Part D activities and expand the list of conduct exempted from civil monetary penalties (CMPs). The proposed rule would cover a variety of behaviors, including: pharmacy cost-sharing waivers for impoverished Medicare Part D beneficiaries; cost-sharing waivers for emergency ambulance services offered by state or municipal-owned organizations; manufacturer discounts for drugs provided through the Medicare Coverage Gap Discount Program; and certain interactions between Medicare Advantage plans and federally qualified health centers (FQHCs). Lewis Morris, former chief counsel to the OIG, said the rule illustrates that the “inspector general is really working hard to find ways to promote quality of care in an integrated delivery system while still protecting the integrity of the program and its beneficiaries.” Comments on the proposed rule are due Dec. 2.

CMS Releases Final Rule for Medicare Program: Physician Fee Schedule OPPS, ASC Payments, End-Stage Renal Disease

On Oct. 31, the Centers for Medicare and Medicaid Services (CMS) released its final rule for CY 2015 Medicare reimbursement payments to physicians and non-physician practitioners, hospital outpatient departments (OPPS), ambulatory surgical centers (ASCs), and home health agencies and dialysis facilities that treat patients with end-stage renal disease. Specifically, the CY 2015 OPPS/ASC final rule with comment period updates Medicare payment policies and rates for hospital outpatient department and ASC services and partial hospitalization services provided by community mental health centers (CMHCs), and refines programs that encourage high-quality care in these outpatient settings. In CY 2015, CMS is implementing a policy finalized last year regarding comprehensive Ambulatory Payment Classifications (C-APCs), with some refinements and updates.


Overall OPPS payments are expected to increase by 2.3 percent for CY 2015. Also noteworthy in the rule, CMS has finalized a proposal to package prosthetic supplies as it does implantable prosthetic devices, and all other supplies in the OPPS when used in conjunction with a surgical or other procedure. Other significant OPPS payment modifications addressed in the statute include reimbursements for skin substitutes, off-campus provider-based departments, hospital outpatient outlier payments, community mental health center outlier payments, ancillary services and Part B drugs in the outpatient department.

ASC Payment Updates

For CY 2015, ASC payments will increase by 1.4 percent, accounting for the MFP-adjusted CPI-U update factor, which accounts for inflation.

Partial Hospitalization Program (PHP) Rates

CMS will update the two payment rates for CMHCs and the two payment rates for hospital-based PHPs. For community health centers the final CY 2015 APC geometric mean per diem cost will be $100.15 for Level I (three services) and $118.54 for Level II (four or more services). For hospital-based PHPs, the final CY 2015 APC geometric mean per diem cost will be $185.87 for Level I and $203.01 for Level II.

End-Stage Renal Disease

The finalized provisions in End-Stage Renal Disease (ESRD) Prospective Payment System rule introduce new quality and performance measures for outpatient dialysis facilities; moreover, the rule incorporates in 2017 a Standardized Readmission Ratio, which assesses the rate at which ESRD dialysis patients return to an acute care hospital within 30 days of discharge from an acute care hospital.

Other Policy Changes

CMS has finalized an internal process, to be used in limited circumstances, that will allow CMS to recover overpayments from erroneous payments made by Medicare Advantage (MA) organizations or Part D prescription drug plan sponsors; CMS has also finalized an appeals process for MA organizations and Part D sponsors to seek review of CMS’ determination that the payment data are erroneous. The appeals process will have three levels of review that would include reconsideration, an informal hearing and an Administrator review.

CMS also finalized a proposal that requires the physician certification only for outlier cases and long-stay cases of 20 days or more. A hospital admission order will continue to be required for all inpatient admissions when a patient has been formally admitted as an inpatient of the hospital.

The final rule is slated to be published in the Federal Register on Nov. 6. The provisions in the rule will generally take effect on Jan. 1, 2015, and the public comment period will close on Dec. 30, 2014.

More information on the rule can be found in a CMS factsheet that accompanies the rule’s release.

5. Reports

HHS-OIG Work Plan for Fiscal Year (FY) 2015

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) has released its work plan for fiscal year (FY) 2015, which summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the current fiscal year and beyond. Select items from the report include work to expand OIG’s portfolio examining inefficient payment policies or practices, including comparison among government programs to identify instances when Medicare paid significantly different amounts for the same or similar services or when less efficient payment methodologies were used. Planning is ongoing for work addressing Medicare costs incurred because of deficiencies in services or defective medical devices, as well as noncompliance or other vulnerabilities in care settings with high payment error rates. In addition, OIG is committed in FY 2015 to initiating at least five to ten additional reviews addressing ACA programs. These reviews could focus on emerging marketplace issues, including, for example, potential vulnerabilities that may arise in connection with the second open enrollment period; implementation of additional marketplace functionality, such as the redetermination process; or the premium stabilization programs. They could also focus on other ACA areas, including Medicaid expansion, new Medicare payment and delivery models or new grant programs.

MedPAC November Public Meeting

On Nov. 6 and 7, the Medicare Payment Advisory Commission (MedPAC) convened a series of meetings on Medicare payment policy. MedPAC is an independent congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. Topics covered during the session included:

  • Beneficiary access to hospital care, and how service volume affects hospital costs
  • Hospital short-stay policy issues
  • Issues in Medicare Advantage
  • Per beneficiary payment for primary care
  • The 340(B) drug pricing program
  • Site-neutral payments for select conditions treated in inpatient rehabilitation facilities and skilled nursing facilities
  • Developing payment policy to promote the use of services based on clinical evidence

If you have any questions, contact the following individuals at McGuireWoods Consulting:

Stephanie Kennan, Senior Vice President
Charlyn Iovino, Vice President
Brian Looser, Assistant Vice President
Amanda Anderson, Research Assistant

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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