Washington Healthcare Update

2. Administration

National Governors Association Asks HHS for Information Sharing and Information on Section 1332 Waivers

The National Governors Association’s Health and Human Services Committee wrote two separate letters to the U.S. Department of Health and Human Services(HHS) on Oct. 27. Massachusetts Gov. Charlie Baker and New Hampshire Gov. Maggie Hassan asked the Centers for Medicare and Medicaid Services (CMS) toprovide states with increased flexibility to oversee marketplaces, and for more information sharing between the states and the federal government. In asecond letter, they asked HHS and Treasury to provide states with the guidance and flexibility to pursue Section 1332, which provides for state innovationwaivers, in order to opt out of major parts of Obamacare.

The letter on Health Insurance Marketplaces can be foundhere.

The letter on 1332 waivers can be foundhere.

E-Cigarette Trade Group Publishes FDA Draft Guidance

The Tobacco Vapor Electronic Cigarette Association leaked what appears to be draft guidance on e-cigarette approval from the U.S. Food and DrugAdministration (FDA). The Office of Management and Budget (OMB) is reviewing FDA’s final “deeming” rule, which would assert its authority to regulatee-cigs and other tobacco products under the 2009 Tobacco Control Act. The guidance details the process by which companies will file applications forpremarket review of tobacco products (including e-cigarettes). The Tobacco Vapor Electronic Cigarette Association has expressed discontent with the draftguidance.

FDA Takes Action Against Tobacco Retailers Who Violated Restrictions

The U.S. Food and Drug Administration (FDA)announcedthat it filed complaints to start No-Tobacco-Sale Order actions against stores that repeatedly violated restrictions on the sale and distribution oftobacco. This is the first time FDA has used this authority that was granted in the 2009 Family Smoking Prevention and Tobacco Control Act (Tobacco ControlAct). FDA seeks to prohibit the sale of tobacco products for a period of 30 days at eight retail stores in five states. The enforcement actions will serveto send a message that there will be real consequences for breaking the law. For the locations please see the FDA’s press release.

Hospitals in VBP Program to Experience Payment Increase

According to the Centers for Medicare and Medicaid Services (CMS), a bigger percentage of the hospitals participating in their Hospital Value-BasedPurchasing program (VBP) will see payments rise. More than 1,800 of the 3,500 participating hospitals will experience an increase in their base operatingpayments, and 1,200 will see a decrease. Half of the hospitals will experience between a -0.4 percent and 0.4 percent change. The best-performing hospitalswill see a 3 percent increase in payments and the worst a 1.75 percent decrease — which is the amount all the hospitals paid to initially fund the program.CMS will add new measures to the program in 2017, and remove six clinical process measures that are “topped out.”

To see the CMS fact sheet, click here.

CMS Announces Final Rule for Payment Changes for Medicare Home Health Agencies for 2016

On Oct. 29, CMS announced that it projects Medicare payments to home health agencies (HHAs) in CY 2016 will be reduced by 1.4 percent. This decreasereflects the effects of the 1.9 percent home health payment update percentage; a 0.9 percent decrease in payments due to the 0.97 percent payment reductionto the national, standardized 60-day episode payment rate to account for nominal case-mix growth from 2012 through 2014; and a 2.4 percent decrease inpayments due to the third year of the four-year phase-in of the rebasing adjustments to the national, standardized 60-day episode payment rate, thenational per-visit payment rates and the non-routine medical supplies (NRS) conversion factor. Compared to the proposed rule, the maximum payment reductionin the first year of the value-based purchasing program would have been 5 percent but the final rule reduces that to 3 percent.

The final rule will be published in the Federal Register on Nov. 5. The final rule can be viewed here.

Highlights of the payment rule include:

Rebasing the HH PPS Payment Rates

The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode payment rate and other applicable amounts toreflect 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. CMS is required to phase in any adjustment over a four-year period, in equalincrements, not to exceed 3.5 percent of the amount (or amounts) as of the date of the enactment of the ACA (CY 2010), and be fully implemented by CY 2017.

In this CY 2016 final rule, CMS is moving forward with the third year of the four-year phase-in of the rebasing adjustments to the HH PPS payment rates. Asfinalized in the CY 2014 final rule, the adjustments include increases to the national per-visit payment rates, a 2.82 percent reduction to the NRSconversion factor and a reduction to the national, standardized 60-day episode payment rate of $80.95 for CY 2016.

Recalibration of the HH PPS Case-Mix Weights

CY 2016 will be the second year that CMS is annually recalibrating the HH PPS case-mix weights. The methodology used to recalibrate the case-mix weightsfor CY 2016 is identical to methodology used in CY 2015.

Reduction to the 60-day Episode Rate to Account for Nominal Case-Mix Growth

CMS is decreasing the national, standardized 60-day episode payment amount by 0.97 percent each year in CY 2016, CY 2017 and CY 2018 to account for nominalcase-mix growth (i.e., case-mix growth unrelated to changes in patient acuity) from 2012 to 2014. CMS has adjusted home health payment in prior years toaccount for nominal case mix growth.

Other Updates

The Affordable Care Act requires that the market basket update for HHAs be adjusted by changes in economy-wide productivity. The CY 2016 home health marketbasket (2.3 percent) combined with the multifactor productivity adjustment (0.4 percentage points) results in a 1.9 percent home health payment updatepercentage.

CMS’s Physician Payment Rule Contains Biosimilar Reimbursement Policy

The Centers for Medicare and Medicaid Services (CMS) included policy concerning paying for biosimilars in the finalized 2016 Physician Payment rulepublished Oct. 30. Biosimilars will be reimbursed under Medicare Part B in the same manner Medicare pays for generic drugs. Biosimilar manufacturers hadargued the complexity of developing biologic drugs and biosimilars meant those products should be treated differently than traditional generics. In thefinal rule, CMS noted that any biosimilar that is approved under the Food and Drug Administration pathway would share a “high degree of similarity in theactive component; have no clinically meaningful difference in safety, purity and potency.” However, CMS also stated, “We would like to make clear thatalthough our payment policy approach for biosimilars in analogous to our payment policy for multiple source drugs as described in this response, we take noposition on whether a biosimilar is completely or partial analogous to its biologic reference product as a clinical matter.

CMS Finalizes Two-Midnight Rule Policy

In its final 2016 hospital outpatient payment rule released Oct. 30, the Centers for Medicare and Medicaid Services (CMS) finalized its proposal concerningthe 2-midnight hospital admissions policy and recognized some hospital stays shorter than 2-midnights as legitimate inpatient stays. The 2-midnight policydictates that doctors should expect beneficiaries to stay in the hospital for at least two-midnights for Medicare to reimburse hospitalizations asinpatient stays. Shorter stays would be considered outpatient stays and are paid at a lower rate. However, CMS acknowledged that some stakeholders’concerns were worth considering and proposed to relax the policy. “After consideration of the public comments we received, we are finalizing, withoutmodification, our proposal to revise our previous ‘rare and unusual’ exceptions policy to allow for Medicare Part A payment on a case-by-case basis forinpatient admissions that do not satisfy the 2-midnight benchmark, if the documentation in the medical record supports the admitting physician’sdetermination that the patient requires inpatient hospital care despite an expected length of stay that is less than 2 midnights,” CMS says in the finalrule. CMS is accepting comments on the rule. The American Hospital Association said it was pleased that CMS finalized its changes to the 2-midnight policy.

CMS Releases Rule to Ensure Medicaid Beneficiaries Have Access to Needed Services

The Centers for Medicare & Medicaid Services (CMS) on Oct. 29 released a final rule that improves CMS’s ability to measure and ensure meaningful accessto covered services for Medicaid beneficiaries. The rule also provides a higher level of safeguards for beneficiaries who may otherwise experiencedifficulty in receiving needed health care services. The intent of this final rule is to provide a framework for CMS to use to make better-informed,data-driven decisions that support more-effective service delivery systems, service rate structures and provider payment methodologies that reflect ourunique and evolving Medicaid population. The proposed rule was released for comment in 2011.

The goals of the final rule are: (1) measuring and linking beneficiaries’ needs and utilization of services with availability of care and providers, (2)increasing beneficiaries’ involvement through multiple feedback mechanisms and (3) increasing stakeholder, provider and beneficiary engagement whenconsidering proposed changes to Medicaid fee-for-service payment rates that could potentially impact beneficiaries’ ability to obtain care.

To support these three goals, the final rule requires states to develop an access review plan that set out the data elements and other information to beused to ensure beneficiary access to mandatory and optional services; to establish new procedures to review the effects on beneficiary access of proposedrate reductions and payment restructuring; and to implement ongoing access monitoring reviews of key services, and additional services as warranted.

The final rule also strengthens CMS’s ability to review and ensure Medicaid payment rates are consistent with efficiency, economy and quality and care.This aligns with the recent Supreme Court Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015) decision, which concluded that federaladministrative agencies are better suited than federal courts to make these determinations. The court ruling placed greater importance on review andenforcement capability at the federal level, thus improving CMS’s ability to monitor, measure, and ensure access to care within fee-for-service paymentmethodologies.

The final rule becomes effective on Jan. 4, 2016, at which time states must meet the requirements established through the provisions of the rule. Duringthe 60-day period, CMS will accept comments from the public on the access review requirements. This will enable states to begin preparing their initialreview plan analysis and to assess whether adjustments to this provision are warranted.

In conjunction with the final rule, CMS released a request for information to solicit comments on additional approaches the agency and states shouldconsider ensuring better compliance with Medicaid access requirements. This includes comments on the potential development of standardized core setmeasures of access, access measures for long-term care and home- and community-based services, national access to care thresholds, and resolution processesthat beneficiaries could use in facing challenges in accessing essential health care services. CMS will accept response to the request for informationthrough Jan. 4, 2016.

The final rule with comment and the request for information are available on the Federal Register starting Oct. 29, 2015, and can be viewed at federalregister.gov starting Nov. 2, 2015.

3. State Activities

Utah: Tenth Co-op Closes

Arches Health Plan will become the tenth co-op started with federal funds from the Affordable Care Act (ACA) to close. Like other co-ops, the reason forits collapse has been cited as the failure to receive full funding for risk corridors. Nearly 50,000 individuals were enrolled in plans sold by Arches.Customers will need to find new coverage during the open enrollment period that starts Nov. 1. In 20 of the 29 counties in the state, customers will nowonly have one choice when they shop for coverage. However, Utah Insurance Commissioner Todd Kiser said state regulators are discussing the possibility ofadding other insurers with the Obama Administration and other health plans.

Connecticut Law Bans EHR-linked Information Blocking

In June, Connecticut became the first state to make it illegal to use electronic health records (EHRs) to block the flow of medical information. Theissue of data blocking has become an issue in Congress recently. The Senate Health, Education, Labor and Pensions (HELP) Committee began drafting abill to prohibit data blocking. The Connecticut law took effect Oct. 1 and was designed to slow the fast consolidation of health care networks. It cameabout as a result of independent medical groups’ accusing big hospital networks of using their EHRs to coerce practices to join them — and punishingthose who stay out of the network. The state attorney general is investigating Epic Systems and hospital networks throughout the state, and the U.S.Department of Health and Human Services’ inspector general issued a warning about unfair EHR practices.Connecticut’s law makes information blocking an unfair trade practice and puts severe penalties on it. Epic controls over half of the hospital EHR market in the state. The June law allows for the creation of a new statewide HealthInformation Exchange (HIE) to provide an alternative to the Epic exchange.

4. Regulations Open for Comment

Centers for Medicare and Medicaid Services (CMS) Issues Proposed Rule to Begin Data Collection for New Fee Schedule for Medicare Clinical DiagnosticLaboratory Tests

CMS released a proposed rule Sept. 25 that initiates the agency’s next step inimplementing the Protecting Access to Medicare Act of 2014 (PAMA), a bill that requires clinical laboratories to report on private insurance paymentamounts and volumes for lab tests. Under the proposed rule, certain laboratories would be required to report private payor rate and volume data if theyreceive at least $50,000 in Medicare revenues from laboratory services and more than 50 percent of their Medicare revenues from laboratory and physicianservices. Laboratories would collect private payor data from July 1, 2015, through Dec. 31, 2015, and report it to CMS by March 31, 2016. CMS will post thenew Medicare rates by Nov. 1, 2016; these rates will be effective on Jan. 1, 2017. Tests that meet the criteria for being considered new advanceddiagnostic laboratory tests (ADLTs) will be paid at actual list charge for a minimum of three quarters. ADLTs are tests offered under Medicare Part B andare furnished by only one laboratory and that either include a unique algorithm and are at a minimum an analysis of RNA or DNA, or are cleared or approvedby the U.S. Food and Drug Administration (FDA). Under PAMA, the Medicare payment amount for any test cannot be reduced by more than 10 percent compared to