Washington Healthcare Update

November 2, 2015

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This Week:Paul Ryan becomes Speaker of the House…Two-year budget agreement passes, avoiding debt ceiling fight and government shutdown…Open enrollment for health plans starts Nov. 1…CMS posts final payment rules and includes many policy changes.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Bipartisan Budget Act of 2015: A New Budget Deal Covering Fiscal Years 2016 and 2017

In order to stave off a government shutdown on Dec. 11, as well as having no more borrowing authority to pay the country’s bills on Nov. 3, the Congressand the White House negotiated a two-year budget deal that simply provides a blueprint for appropriators to divvy up the funds for various governmentfunctions. It also temporarily suspends the debt limit until Mar. 15, 2017.

Criticized by conservatives, the two-year budget deal would lift current sequestration caps by $80 billion — $50 billion in the first year and $30 billionin the second. The increase would be divided evenly between defense and non-defense spending. The legislation contained four health care provisions.

First, the deal takes action to prevent a monthly Medicare Part B premium spike for beneficiaries not held harmless, by transferring general revenue fundsto the Supplemental Medical Insurance Trust Fund. Beneficiaries will repay the “loan” by paying an additional amount of at least $3 per month until theloan is repaid. This policy applies to new enrollees and high-income beneficiaries.

Second, the legislation applies an inflation adjustment to Medicaid generic drug rebates. This policy is similar to what is already applied to brand-namedrugs.

Third, a new policy of site-neutral payment will be applied to off-campus hospital outpatient departments that are more than 250 yards from the mainhospital campus. Services provided will be reimbursed under the Ambulatory Surgical Center PPS or the Medicare Physician Fee Schedule.

Last, the budget deal repeals an Affordable Care Act provision requiring automatic enrollment of new employees in employer-based health care plans foremployers with more than 200 employees.

The budget deal can be found here.

Energy and Commerce Democrats Write Letter Opposing Rep. Murphy’s Mental Health Bill

On Oct. 23, almost all of the House Energy and Commerce Democrats came out against Rep. Tim Murphy’s (R-PA) mental health bill, citing concerns with provisions they believe wouldrestrict patients’ civil rights. Their main issues with H.R. 2646 were with provisions that would 1) restrict patients’ privacy rights, 2) providefinancial incentives to states to enact laws providing for involuntary assisted outpatient treatment (AOT) and 3) restructure the Substance Abuse andMental Health Services Administration (SAMHSA). The group, led by Rep. Doris Matsui (D-CA), outlined their concerns in a letter to Chairman Fred Upton and Ranking Member Frank Pallone.

The group opposes the provision that would create an exception to HIPAA that allows health care providers to disclose information to the caregivers ofindividuals with serious mental illness, contesting that it discriminates against them by giving them fewer rights and protections.

The group also has issues with the bill’s restructuring of SAMHSA, particularly its “wholesale elimination.” Thirdly, the group is against the provisionthat incentivizes states to enact laws providing for court-ordered involuntary assisted outpatient treatment (AOT). The bill has been delayed many timessince its introduction two years ago, and this letter was sent as the bill was making apparent progress in the committee.

House Information Technology Oversight Subcommittee Holds Hearing on EHR Interoperability

The House Committee on Oversight and Government Subcommittee on Information Technology held a hearing on Oct. 27 entitled “VA and DoD IT: Electronic HealthRecords Interoperability.” The goal of the hearing was to look at each of the departments’ work to develop and implement an interoperable electronic healthrecord (EHR). The subcommittee met with both Veterans Affairs (VA) and Defense Department (DoD) officials to discuss issues between the agencies’ systems.It is possible that the VA will follow the DoD and replace its systems with a commercial EHR system. The VA reportedly spends 80 percent of its IT budgeton maintenance and interoperability problems have made it hard for veterans to see private documents.


The Honorable LaVerne Council
Assistant Secretary for Information Technology and Chief Information Officer
U.S. Department of Veterans Affairs

Mr. Terry Halvorsen
Chief Information Officer
U.S. Department of Defense

Mr. Christopher Miller
Program Executive Officer for Defense Health Management Systems
Director of the Interagency Program Office
U.S. Department of Defense

Ms. Valerie Melvin
Director of Information Management
Government Accountability Office

For more information or to watch the hearing, please visit oversight.house.gov.

Two Committees to Examine Co-op Failures

The House Energy and Commerce Subcommittee on Oversight and Investigations will hold a hearing on Thursday, Nov. 5, at 10:15 a.m. to examine why the co-opscreated with federal loans from the Affordable Care Act have failed. The hearing is entitled “Examining the Costly Failures of Obamacare’s CO-OP InsuranceLoans.” The hearing will be in Rayburn House Office Building Room 2322.

A press release for the hearing can be found here.

The Ways and Means Subcommittee on Health announced a hearing on the “State of Obamacare’s CO-OP Program,” to be held Tuesday, Nov. 3, in Room 1100 of theLongworth House Office Building at 2 p.m.

A press release for the hearing can be found here.

Witnesses for both hearings will be announced later.


Senate HELP Committee Expected to Release Draft of Innovations for Healthier Americans Act

The U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) is expected to release a draft of its Innovations for Healthier Americans Act inthe next few weeks, after missing earlier targets. This bill will face a different political arena than its House counterpart, the 21st Century Cures bill, which came through the House last summer. The Cures billincludes a mandatory funding stream for NIH and FDA. Senate HELP committee ranking member Patty Murray (D-WA) has insisted that there be mandatory agencyfunding in the Senate version of the bill. However, HELP cannot create that same big pay-for like the House bill did, due to committee jurisdiction.Committee aides are trying to find money, but lobbyists said mandatory funding is a long shot. In a surprise move however, negotiators for the BipartisanBudget Agreement of 2015 included the major funding used in the House Cures legislation to fund the budget agreement. Therefore, the House bill will need anew funding source. This Senate draft will be more condensed than House Cures legislation, and some benefits for the drug industry and FDA reformlegislation will not be included.

Senators Write Letter Asking FTC to Investigate Saline Shortage

A bipartisan group of senators wrote a letterin which they ask the Federal Trade Commission (FTC) to investigate possible illegal collusion by three saline solution manufacturers — Baxter, Hospira andB. Braun — connected to a saline shortage. Sens. Richard Blumenthal (D-CT), Mike Lee (R-UT), Amy Klobuchar (D-MN) and Orrin Hatch (R-UT) wrote that thecompanies have increased their saline prices by 200-300 percent since the beginning of the shortage in 2013. They noted that price increases usually helpclear shortages, but that this one is still ongoing after two years — this raises questions about the incentives of the companies and about possiblecoordination between them.

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