Washington Healthcare Update

August 24, 2015

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This Week: FDA Begins Device User Fee Talks with Patients andConsumers Sept. 15… CMS Extends Partial Enforcement Delay of Two-MidnightPolicy Through 2015… Alaska Legislature Sues Governor Over MedicaidExpansion

AUTHOR’S NOTE: Due to the Congressional recess, the WeeklyWashington Healthcare Update will be distributed on a biweekly basisuntil after the Labor Day holiday. The next edition will be released Sept. 8, after which we will resume our regular weekly distribution schedule.

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


District Work Period: Aug. 5–Sept. 7

2. Administration

New Plan for Targeting Heroin

The White House announced $13.4 million in grants to build a law enforcement network of local, state and federal officials targeting the heroin trade andits impact in “high-intensity drug trafficking areas. (HIDTA)” HIDTAs were created by Congress in 1988.

About $2.5 million will fund public health partnerships in five such HIDTA regions spanning 15 states—Appalachia, New England, Philadelphia/Camden, NewYork/New Jersey and Washington/Baltimore—part of the administration’s Heroin Response Strategy.

Almost $4 million will go toward prevention efforts in 18 HIDTAs; another $1.3 million will go to programs along the Southwest border; and $500,000 willtarget the trade in tribal lands.

FDA Begins Device User Fee Talks with Patients and Consumers Sept. 15

FDA will begin its device user fee talks with patients and consumers on Sept 15. The agency has scheduled six patient and consumer stakeholder meetingsrequired as part of the Medical Device User Fee Act (MDUFA) reauthorization. The meetings with public stakeholders—patient and consumer advocacy groups,healthcare professionals and scientific and academic experts—will run parallel to closed-door negotiations FDA holds with industry stakeholders. Thepurpose of these meetings is to develop a reauthorization package to send to Congress. The current MDUFA expires Sept. 30, 2017. If Congress does notreauthorize the program, the FDA will not be able to collect user fees from industry that help fund the agency’s medical device application review process.FDA has said that it hopes to have a draft of the agreement to send to Congress completed in October or November 2016.

For more information or to register for the meeting, visitfda.gov.

HHS Announces Additional $169 Million in ACA Funding for Community Health Centers

Department of Health and Human Services rel=”noopener noreferrer” Secretary Sylvia Burwell announced $169million in Affordable Care Act (ACA) funding for 266 new health center sites in 46 states, the District of Columbia and Puerto Rico for the delivery ofcomprehensive primary health care services in underserved communities. These new health center sites are projected to serve 1.2 million patients, and theinvestment builds on the $101 million awarded to 164 new health center sites in May 2015. This investment will add to the more than 700 new health centersites that have opened as a result of the ACA.

To see a list of award winners, visitbphc.hrsa.gov.

CMS Releases Figures for 2015 Special Enrollment Period

The Centers for Medicare and Medicaid Services (CMS) released enrollment figures for its 2015 special enrollment period (SEP) on Aug. 13. Nearly 950,000new consumers selected a plan through the HealthCare.gov platform during a SEP between Feb. 23 and June 30, 2015. A consumer can qualify for a SEP for suchcircumstances as loss of health coverage, losing Medicaid eligibility, changes in family status (for example, marriage or birth of a child) or otherexceptional circumstances. Eighty-four percent of plan selections occurred via three types of SEPs: 50 percent of plan selections occurred because of theloss of health coverage or “minimum essential coverage”; 19 percent occurred because the individual was determined ineligible for Medicaid; and 15 percentwere as a result of tax season issues. In May, CMS reported that it had 147,000 plan selections using the Tax SEP between March 15 and April 30. Since thattime, approximately 3,000 consumers have returned to the Marketplace to select a plan using a different SEP reason code.

A fact sheet detailing state-by-state rel=”noopener noreferrer” SEP enrollment figures can be found here.

CMS Announces Additional Participants in Bundled Payments for Care Improvement Pilot Study

The rel=”noopener noreferrer” Centers for Medicare and Medicaid Services (CMS) announced that over 2,100 acutecare hospitals, skilled nursing facilities, physician group practices, long-term care hospitals, inpatient rehabilitation facilities and home healthagencies transitioned from a preparatory period to a risk-bearing implementation period in which they assumed financial risk for episodes of care. Theparticipants include 360 organizations that have entered into agreements with CMS to participate in the Bundled Payments for Care Improvement initiativeand an additional 1,755 providers who have partnered with those organizations. The initiative includes four models of bundled payments tied to inpatienthospital admission, with the models varying by the types of providers involved and the length of the bundle after the hospitalization. Through the BundledPayments for Care Improvement initiative, CMS is testing how bundled payments for clinical episodes can result in better care, smarter spending andhealthier people.

CMS Publishes Timeline for 2017 Medicare DMEPOS Competitive rel=”noopener noreferrer” Bidding

The Centers for Medicare & Medicaid Services (CMS) today announced thetimelinefor the Round 1 2017 competition of the Medicare Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program. CMSopens the bid window for Round 1 2017 on Oct. 15, 2015, and closes it Dec. 16, 2015. CMS is required by law to recompete contracts under the CompetitiveBidding Program at least once every three years. The Medicare DMEPOS Competitive Bidding Program has saved more than $580 million in nine markets at theend of the Round 1 Rebid’s three-year contract period (Jan. 1, 2011–Dec. 31, 2013) due to lower payments and decreased utilization. The expansion of theCompetitive Bidding Program—Round 2 and the national mail-order program—saved approximately $2 billion in its first year (July 2013–July 2014). In additionto the timeline, CMS also has started a comprehensive bidder education program, designed so that DMEPOS suppliers interested in bidding receive theinformation and assistance they need to submit complete and competitive bids in a timely manner.

CMS Releases Home Health Face-To-Face Electronic Template

The Centers for Medicare and Medicaid Services released its Medicare homehealth rel=”noopener noreferrer” face-to-face electronic templateAug. 12 after more than a year of working on the prototype with stakeholders. In a Federal Register data collection request, the agency said it hasdeveloped a list of clinical elements in an electronic template “that would allow electronic health record vendors to create prompts to assist physicianswhen documenting the HH face-to-face encounter for Medicare purposes.”

The face-to-face requirement calls for physicians to document in-person encounters with patients to verify their eligibility for the program’s home healthbenefit. The agency has made changes from the previous version, including requiring physicians to compose the equivalent of narratives on homebound andskilled care need. While use of the electronic template is voluntary, documentation related to the reasons for skilled services and homebound requires anarrative explanation that is similar to the old face-to-face encounter document that agencies used. CMS has also added language to this template that wasnot on the last draft version posted in May, which some stakeholders believe may be confusing: “If the patient requiring home health services is beingdischarged to home from a hospital/acute care facility and the discharging physician will not be following the patient after discharge, then pleaseidentify the community physician who will be taking over care for the patient.” CMS has said that inadequate documentation supporting the face-to-facerequirement was responsible for nearly 90 percent of the payment errors they reviewed. HHS pointed to face-to-face requirements as one driver of Medicareimproper payment rates. Comments on the form and burden estimate are due Oct. 13, 2015.

CMS Extends Partial Enforcement Delay of Two-Midnight Policy Through 2015

On Aug. 12, the Centers for Medicare and Medicaid Services (CMS)announcedanother extension of the Medicare two-midnight policy, which will prevent Recovery Audit Contractors (RACs) from conducting patient status reviews ofshort-term hospital admissions through December 2015. Under Medicare Part A, the two-midnight rule says that physicians must anticipate Medicarebeneficiaries will stay in the hospital at least two-midnights before admitting them for inpatient services, and that shorter hospital stays must beconsidered observation status, which reimburses hospitals at a lower outpatient rate.

Congress previously delayed enforcement RAC audits for the two-midnight rule through September 2015 in its Medicare Sustainable Growth Rate (SGR)legislation. Hospital groups have been lobbying CMS to extend the enforcement delay to better align its enforcement with changes to the two-midnight policyin the proposed 2016 outpatient payment rule that begins Jan. 1. The two-midnight policy was originally implemented in FY 2014. CMS said it will continueto accept comments on the two-midnight rule through Aug. 31, 2015, and will respond to comments in its final rule on or around Nov. 1, 2015.

HHS to Delay Enforcement of Transparency Reporting Provisions for Non-QHP and Non-Grandfathered Group Plans Due to Phased-in rel=”noopener noreferrer” Transparency ReportingPlan

The Department of Health and Human Services (HHS) announced Aug. 12 in a Federal Register notice that it will again postpone enforcement of the Affordable Care Act’s(ACA) transparency reporting provisions for non-qualified health plans (QHP) and non-grandfathered group plans due to delayed data collection from insurerswho offer QHPs on the exchanges using HealthCare.gov. Last year the Centers for Medicare and Medicaid Services (CMS) decided to postpone data collectionuntil QHP issuers had a year of claims data.

In the notice, HHS asked for public comment from QHP insurers on transparency reporting. The notice also stated that CMS intends to phase in implementationfor other entities, such as non-QHP individual coverage and non-grandfathered group plans, over time. The Centers for Medicare and Medicaid Services (CMS)will put out further detailed information on a future phased-in approach for the reporting requirements.

Under the ACA, issuers must report periodic financial disclosures; data on claims payment policies and practices, enrollment, disenrollment, denied claimsand rating practices; and information on out-of-network cost-sharing and payments, enrollee and participant rights, and other criteria determined by theHHS Secretary. The ACA’s reporting provisions for off-exchange plans are aimed at providing transparency for off-exchange plans, such as self-fundedemployer-based plans that are exempt from many of the ACA’s reforms applied to QHPs.

3. State Activities

Alaska Legislature Sues Governor Over Medicaid Expansion

A joint committee of the Alaska Legislature has authorized a lawsuit against Governor Bill Walker concerning the process by which the governor chose toexpand Medicaid. The Governor chose to unilaterally expand Medicaid under the Affordable Care Act. The Governor had made expansion a focus of his 2014gubernatorial campaign, and announced in July that he would expand Medicaid without the support of the legislature.

Maryland SHOP Exchange Launched

Maryland’s SHOP exchange for small businesses began this month. Maryland chose to fix major technical problems with its individual market exchange beforelaunching the SHOP exchange. Maryland has chosen three third-party administrators to set up online portals for businesses to enroll in SHOP plans.

Arkansas Moves Ahead with a 10-day Income Verification for Medicaid

CMS has not raised objections to Arkansas’ eligibility redetermination process that is giving enrollees only 10 days to verify income information beforefacing termination of their coverage. The Arkansas process is modified because its IT system is not capable of sending beneficiaries pre-populated forms.However, there are still disagreements about what Arkansas is allowed to do. Consumer groups say enrollees should have at least 30 days to respond to thestate because federal rules require that amount of time for Medicaid renewals. There are situations where states can impose a 10-day window for enrolleesto respond to income verification requests.

Arkansas Pharmacy Law Subject to Suit

The Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers, is suing Arkansas to stop implementation of an Arkansaslaw passed this year that mandates pharmacies be reimbursed for generic drugs they dispense at or above the pharmacy acquisition cost. The currentreimbursement system for pharmacy benefit managers, which utilizes maximum allowable cost lists, does not change on a timely basis. This leads pharmaciststo lose money when dispensing certain generic drugs. Twenty-four states have passed laws to address the problem of generic drug price increases. TheNational Community Pharmacists Association supports the Arkansas law.

Kansas Governor Uses CHIP Funds for Budget Hole

Governor Sam Brownback has decided to use the increased federal funding for CHIP to help fill a $63 million hole in the state’s budget. The CHIP fundingtransfer will supply $17.6 million. A 2010 state law expanded CHIP eligibility for children from 200 percent of the federal poverty level to 250 percent,but due to an indexing provision in the law, current eligibility stands at about 244 percent of poverty level.

Massachusetts, Pennsylvania and Ohio Consider Legislation to Limit Drug Prices

The rel=”noopener noreferrer” state legislatures of Massachusetts, Pennsylvania and Ohio are currently considering legislation to limit drug prices. Residents in California are alsopushing a ballot initiative that would limitdrug prices to the rates paid rel=”noopener noreferrer” by the Department of Veterans Affairs. If the ballot initiative were successful, it would lead to the introduction of pricecap legislation in the state legislature.

The Massachusetts legislation (Senate Bill 1048) would force companies producing drugs on a“critical prescription drug list” to make public costs related to: production, research and development, marketing and advertisement. Additionally, thecompanies would have to make public prices charged outside the United States, prices charged to Massachusetts purchasers and prices paid by pharmacybenefit managing companies.

Drug price transparency bills that do not include price caps or other limits have been introduced in several states, including North Carolina, Oregon,California, New York and Minnesota.

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 Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion rel=”noopener noreferrer” 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 to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

CMS rel=”noopener noreferrer” 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 to the Ambulatory Payment Classification (APC) group to which aservice or procedure is assigned. This rel=”noopener noreferrer” 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 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 ineach of the first two payment adjustment years, 6 percent in the third payment adjustment year rel=”noopener noreferrer” 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