Washington Healthcare Update

August 10, 2015

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This Week: Bipartisan Senate Letter Questions HHS and CMS onDetails of State ACA Waivers…OMB Is Reviewing Final Medicaid-CoveredOutpatient Drug Rule…Delaware Forgoes Transition to State-Based Exchange

AUTHOR’S NOTE: Due to the Congressional recess, the WeeklyWashington Healthcare Update will be distributed on a biweekly basis untilafter the Labor Day holiday. New editions will be released on Aug.24 and Sept. 4, after which we will resume our regular weekly distributionschedule.

1. Congress

House of Representatives

District Work Period: Aug. 3–Sept. 7


District Work Period: Aug. 5–Sept. 7

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


District Work Period: Aug. 3–Sept. 7

House Energy and Commerce Leaders Send Letters to FDA and NIH on Policies Regarding NIH Investigational Drug Center Closure

The House Energy and Commerce Committee leadership sent letters to National Institutes of Health (NIH) Director Francis Collins and Food and DrugAdministration (FDA) Commissioner Stephen Ostroff concerning federal oversight of manufacturing practices and contamination issues that have led to theJune 4 closure of NIH’s Pharmaceutical Development Section (PDS), a facility that oversees investigational drugs. The letters’ authors — Committee ChairFred Upton (R-MI) and Ranking Member Frank Pallone (D-NJ), and Oversight Subcommittee Chair Tim Murphy (R-PA) and Ranking Member Diana DeGette (D-CO) —also questioned the FDA on its procedures of not regularly performing good manufacturing practices inspections at sites that use these research drugs onpatients in human trials. “The severity of the deficiencies, the disruption of ongoing studies, and the resulting suspensions of PDS operations raiseserious questions about the management of the NIH PDS for the last several years,” the letter said. In comments, FDA officials have said a current GoodManufacturing Practices inspection was not required for the division because the agency does not routinely inspect facilities that utilize drugs solely forresearch purposes.

The letter to NIH Director Collins can be foundhere.

The letter to FDA Commissioner rel=”noopener noreferrer” Ostroff can be found here.

Illinois Democrats Introduce Bicameral Legislation to Create Government Part D Plan(s) Allowing CMS to Negotiate Drug Prices

Rep. Jan Schakowsky (D-IL) and Sen. Dick Durbin (D-IL) recently introduced identical legislation, The rel=”noopener noreferrer” Medicare Prescription Drug Savings and Choice Act (H.R.3261, S.1884), into their respective chambers that would create oneor more Medicare-administered prescription drug plans to compete with privately administered prescription drug plans currently offered under Medicare PartD. The bill would also require the Secretary of Health and Human Services to negotiate lower drug prices, and would use incentives (such as lowercopayments) to encourage Medicare beneficiaries to choose the drug with the lowest negotiated price. Administered by Medicare with a uniform monthlypremium, the prescription plan(s) would not eliminate the private plans that are currently offered, but, by providing competition, would aim to putdownward pressure on the drug costs in private plans as well. The Agency for Healthcare Research and Quality would assess the clinical effectiveness andsafety of drugs, and recommend drugs that should be included on the formulary. An Advisory Committee would also review petitions and make recommendationson whether to add drugs to the formulary. The bill is co-sponsored in the House of Representatives by Reps. Jim McDermott (D-WA), Sam Farr (D-CA), RaulGrijalva (D-AZ), Yvette Clarke (D-NY), Diana DeGette (D-CO), Rosa DeLauro (D-CT) and Chellie Pingree (D-ME). In the Senate, the legislation is co-sponsoredby Sens. Sheldon Whitehouse (D-RI), Jack Reed (D-RI), Sherrod Brown (D-OH), Angus King (I-ME), Tammy Baldwin (D-WI) and Mazie Hirono (D-HI).

A press release on the legislation can be foundhere.

Bipartisan House Members Send Letter to CMS Requesting the Agency to Forgo the Creation of Single Billing Codes in Biosimilar Reimbursement rel=”noopener noreferrer” Proposal

On Aug. 4, thirty-three bipartisan House members sent a letter to theCenters for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt asking the agency to abandon its proposed plan to group all biosimilarsof the same reference biologic into one payment code, claiming that each product deserves its own unique billing code. The proposed 2016 Physician FeeSchedule, released July 8, calculates reimbursement for billing codes via the average sales price of all biosimilars that reference a common biologicslicense application, which in essence decreases reimbursement rates for biosimilars. In their letter, the authors stress that biosimilars are inherentlycomplex and difficult to develop, so biosimilars should not be treated as generics. Reps. Anna Eshoo (D-CA) and Joe Barton (R-TX), key co-authors of thelegislation that created the regulatory pathway for biosimilars, are leaders on the letter.


District Work Period: Aug. 5–Sept. 7

GOP Senators Send Letter to Acting CMS Administrator Slavitt on Recouping Lost State-Based Exchange Funding

On rel=”noopener noreferrer” Aug. 3, Republican senators Orrin Hatch (UT), Chuck Grassley (IA) and John Barrasso (WY) sent a letter to Centers for Medicare and MedicaidServices (CMS) Acting Administrator Andy Slavitt outlining their concern about the lack of oversight for more than $1 billion in federal grants given tostate exchanges. They also inquired whether CMS would seek repayment from contractors for these mishandled federal funds. The senators said that while theyagreed with the Secretary confirmation hearing statement that the federal government was responsible for recapturing mishandled funds, they note that theAdministration has not followed thorough. Members cited the example of unrecouped funds from several states, including Maryland, Massachusetts, Nevada andOregon. These states received grant funding from the federal government to create state exchanges, but eventually abandoned their original exchanges forfederal exchange or using technology from other states.

Senate Hearing for DeSalvo, Nominee for HHS Assistant Secretary forHealth, Postponed

An early start to August Congressional recess prevented the Senate Health, Education, Labor, and Pensions (HELP) Committee from rel=”noopener noreferrer” obtaining a necessaryquorum to vote on President Obama’s nominee for Department of Health and Human rel=”noopener noreferrer” Services (HHS) Assistant Secretary for Health,Karen DeSalvo, at the Aug. 6 committeehearing. The committee will postpone the hearing onthe nomination, the consideration of drug abuse legislation (S. 481) and a mental health bill (S.1893) until after Sept. 8.

Bipartisan rel=”noopener noreferrer” Bill Introduced to Make FDA’s Pediatric Priority Review Voucher Program Permanent

Sens. Bob Casey (D-PA) and Johnny Isakson (R-GA) introduced legislation, the Advancing Hope Act (S. 1878), that would make permanent a Food and DrugAdministration (FDA) pilot program, established by the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), that incentivizes drugcompanies to research treatments for rare, life-altering diseases that impact pediatric patients. The incentive in this program is a special voucher thatallows its owner to have any experimental drug the company owns (i.e., one that would not otherwise qualify for priority review) reviewed by the FDA underits Priority Review pathway, resulting in a review time of six months instead of the usual 10 months. This program expanded the existing Tropical DiseasePriority Review Voucher Program. The senators’ bill would also alter the definition of “rare pediatric rel=”noopener noreferrer” disease” and extend program eligibility to allpediatric cancers and any form of sickle cell disease. Currently, the priority review voucher program is slated to sunset in March 2016. Rep. G.K.Butterfield (D-NC) introduced a similar bill in March, but his versiondiffers by excluding for two years foreign-approved drugs for tropical disease indications. The 21st Century Cures Act, passed by the House in July,contains its own reauthorizing language but would sunset the program at the end of 2018.

A press release on the legislation can be foundhere.

Bipartisan Senate Letter Questions HHS and CMS on Details of State ACA Waivers

Sens. Tom Cotton (R-AR), Al Franken (D-MN) and John Boozman (R-AR)sent a letter to Secretary of the Department of Health and Human Services (HHS) SylviaBurwell and Acting Centers for Medicare and Medicaid Services (CMS) Administrator Andy Slavitt seeking specific details on how states can qualify forAffordable Care Act (ACA) Section 1332 waivers, which begin in 2017. Section 1332 waivers allow states to modify ACA mandates concerning covered benefits,subsidies, insurance marketplaces and individual and employer mandates so long as beneficiary coverage will remain accessible, comprehensive and affordable(as before the waiver), and that the changes will not add to the federal deficit. With Section 1332 waivers, states may propose broad alternatives ortargeted fixes so long as the number of insurers and eligible residents remains comparable. “We ask you provide clear guidelines and thresholds so that ourstates can credibly meet the requirements to receive a Sec. 1332 waiver,” they wrote, referencing four specific clarification points. Several states areexploring 1332 waivers, including Arkansas and Minnesota. The members ask for response by Sept. 1, 2015, so governors and state legislatures have adequatetime to incorporate the clarifications into their waiver applications. Waiver applications are due by Dec. 2015 for a Jan. 2017 implementation date.

2. Administration

HHS Proposes Plan for Fast-Moving Investigational Drug Studies During Public Health Emergencies

The Department of Health and Human Services (HHS) officials released a proposed plan that would allow medical researchers to rapidly study investigationaltherapies during disease outbreak emergencies; the goal of the new process would be to get new remedies to patients as quickly as they are developed. Thedepartment’s new paradigm is based on previously established clinical trial designs developed during tests to find potential treatments for Ebola. HHS’proposal allows scientists to evaluate multiple treatments concurrently against a shared control patient group, despite differences in the treatments’stages of development. The control group would receive the best known form of care for the respective disease, until any of the experimental therapiesdemonstrate improved outcomes. “Once a drug is proven effective, it is incorporated into the supportive care that all trial patients receive, and the studymay continue in order to evaluate the added benefit of other investigational drugs…. The first drug being evaluated under this protocol, ZMapp, advancedmore rapidly than usual to a clinical trial designed to assess rel=”noopener noreferrer” both safety and efficacy (typically, efficacy trials occur much later in development),” theresearchers wrote. HHS’ new model was published in the New England Journal of Medicine on Aug. 5.

The published article describing the new model can be found here.

OMB is Reviewing Final Medicaid-Covered Outpatient Drug Rule

The White House’s Office of Management and Budget (OMB) is in the process of reviewing the Centers for Medicare and Medicaid Services’ (CMS) finalMedicaid-covered outpatient drug rule for federal reimbursement levels for multiple-source drugs. The unexpected schedule modification follows a June 2014CMS announcement that the agency anticipated releasing final Medicaid Average Manufacturer Price-based Federal Upper Limits (FULs) and guidance on howstates can implement FULs as mandated by the Affordable Care Act (ACA). CMS is required by the ACA to recalculate the FUL amounts, as they occasionally topout the market prices for multiple-source drugs. Released in 2012, the proposed FULs rule includes a plan to pay pharmacists according to the actualacquisition cost of a drug rather than estimated acquisition cost for brand drugs and some generics. CMS’ proposal also includes definitions of a retailcommunity pharmacy and wholesaler, as well as the determination of the average manufacturer price (AMP). CMS originally intended to finalize the Medicaidand ACA FULs in July 2014; however the rule was shelved after a November 2013 announcement that the final FULs and ACA-mandated FULs guidance would comeout jointly. A 2013 Department of Health and Human Services Office of Inspector General report found FUL amounts prior to the enactment of the ACA werenearly double, on average, of the State Maximum Allowable Cost (MAC) programs, while the post-ACA FUL amounts reviewed by the OIG were lower, on average,than the MAC prices.

3. State Activities

Delaware Forgoes Transition to State-Based Exchange

Delaware’s Health and Social Services Secretary Rita Landgraf announced on Aug. 6 that the state will no longer be pursuing development of its ownstate-based health insurance exchange, instead opting to keep its current state-federal partnership model that relies on the HealthCare.gov platform forenrollment. In June, Delaware was granted nonbinding approval by the Centers for Medicare and Medicaid Services (CMS) to develop a supported state-basedhealth insurance marketplace for enrollment in 2016. The state decided to submit a conditional approval waiver amid uncertainty over whether the SupremeCourt would rel=”noopener noreferrer” uphold government insurance subsidies in King v. Burwell. Following the court’s decision, Delaware said it would make a final decisionon its exchange format by the end of July.

Washington State Exchange CEO Resigning

In an Aug. 6 announcement,Richard Onizuka, Washington Health Benefit Exchange CEO, revealed that he will leave his position at the end of August. He has led the state’s insurancemarketplace since May 2012 and was the manager during the original launch. “My goal from day one was to ensure that we establish a health insurancemarketplace that best served the people of Washington. With the foundation now laid I feel it is the right time to step aside,” Onizuka said in astatement. “It is a difficult decision, especially given my affinity for this work and the people associated with it.” The announcement follows the statelegislature’s vote on a two-year, $110 million budget for the exchange, a budget that is significantly less than what CEO Onizuka requested for theexchange’s continued operations. While Medicaid enrollment in the state has been on the rise since 2014, enrollment goals for its private plan offerings onthe exchange were not met in 2015. CEO Onizuka’s Chief of Staff since August 2012, Pam MacEwan, will rel=”noopener noreferrer” lead as interim CEO following his departure.

4. Regulations Open for Comment

CMS Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

The Centers for Medicare and Medicaid Services (CMS) issued a final rule on July 31, 2015, to update fiscal year (FY) 2016Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System(PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use ofcertified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percentadjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable CareAct and further adjusted by – 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourthreduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic healthrecords will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, acontinued – 1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonusesand penalties for hospital valued-based purchasing.

Medicare rel=”noopener noreferrer” Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments inFY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be publishedin theFederal Registeron Aug. 17, 2015. Comments may be made on the final rule and are due rel=”noopener noreferrer” to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

CMS Releases CY 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Rule and Changes to theTwo-Midnight Rule

On July 1, the Centers for Medicare & Medicaid Services (CMS)announced the release of theCalendar Year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, qualityprovisions and payment rates proposed rule. The CY 2016 OPPS/ASC proposed rule recommends updates to Medicare payment policies and rates for hospital outpatient departments (HOPDs), ASCs andpartial hospitalization services provided by community mental health centers (CMHCs), and refinements to programs that encourage high-quality care in theseoutpatient settings. CMS suggested a decrease of 0.1% for outpatient payment rates. Moreover, it suggested an additional 2 percentage point adjustment tobe included to account for inflation in OPPS payments to an increase in payments for laboratory tests. Approximately 3,800 hospitals and 60 CMHCs are paidunder the OPPS, while approximately 5,300 ASCs are paid under the ASC payment system. The OPPS provides payment for most HOPD services, including partialhospitalization services furnished by HOPDs and CMHCs. OPPS payment amounts vary according rel=”noopener noreferrer” to the Ambulatory Payment Classification (APC) group to which aservice or procedure is assigned. This proposed rule also includes suggested changes to the Two Midnight Rule for CY 2016. The proposal was published inthe July 8, 2015, Federal Register online. Comments on the proposed rule are due on Sept. 4, 2015.

A fact sheet on the proposed rel=”noopener noreferrer” changes to the Two Midnight Rule for CY 2016 can be foundhere.

CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule

On July 6, the Centers for Medicare & Medicaid Services (CMS)announced proposed changes to the Medicarehome health prospective payment system (HH PPS) for calendar year (CY) 2016, including updating requirements for home health agencies under the Medicareprogram and moving forward to implement the third year of the four-year phase-in of the rebasing adjustments to the HH PPS. Finalized in the CY 14 finalrule, the CY 16 downward adjustment is $80.95. Home health agencies (HHA) are paid a national standardized 60-day episode payment for all covered homehealth services, adjusted for case-mix and area wage differences. CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72percent in each of CY 2016 and CY 2017. CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY16. The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable amounts thatreflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode,the average cost of providing care per episode and other relevant factors.

Also in the proposed rule, CMS included further implementation of provisions within the IMPACT Act, including one standardized cross-setting measure for CY2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, althoughCMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

  • All-condition risk-adjusted potentially preventable hospital readmission rates;
  • Resource use, including total estimated Medicare spending per beneficiary;
  • Discharge to the community; and
  • Medication reconciliation

CMS also announced the launch of a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across thenation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation, the HHVBP model draws upon the lessons learned fromother value-based purchasing programs and demonstrations — including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performanceand Nursing Home Value-Based Purchasing Demonstrations — to shift to a model that promotes the delivery of higher-quality care to Medicare beneficiaries.CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation. HHAs in the nine states(Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) would have their payments adjusted by 5 percent rel=”noopener noreferrer” ineach of the first two payment adjustment years, 6 percent in the third payment adjustment year and 8 percent in the final two payment adjustment yearsbased on their performance across a series of quality metrics. CMS estimates approximately 3.5 million beneficiaries receive home health services fromapproximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

Published in the Federal Register July 8, the proposed rule can be foundhere. CMS will solicit public comments on the proposed ruleuntil Sept. 4, 2015.

CMS Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the SustainableGrowth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused onperson-centered care, and continues the Administration’s intention to transition the Medicare program to a system based on quality and healthy outcomes. Inthe proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA,including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System,which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties aportion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systemssurvey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistantsand other non-physicians. In the proposed rule, CMS is additionally rel=”noopener noreferrer” seeking comment on the potential expansion of