Washington Healthcare Update

December 14, 2015

Pardon Our Dust

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This Week:Congress unable to come to agreement on funding the government past Dec. 11 so a short-term funding bill was passed to give more time for negotiations…Tax extenders still being discussed as a vehicle for a suspension of the medical device tax… Repeal of the Cadillac tax still being discussed.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Bill on Meaningful Use Blanket Hardship Exemption Could Be Included in Upcoming Appropriations Bill

Rep. Tom Price’s (R-GA) bill that gives the Centers for Medicare and Medicaid Services (CMS) the ability to grant a blanket hardship exemption formeaningful use in 2015 and give providers a 90-day reporting period in 2016 may be included in the upcoming omnibus appropriations bill. The bill wouldmake it easier for CMS to process hardship exemptions, but its chances of making it into the appropriations package are unclear. The blanket hardshipexemption for 2015 was included because of CMS’s delay in publishing the Stage 2 meaningful use rule. CMS has reportedly been pushing for the bill underthe radar, as it could be as good for CMS as it would be for providers.

Rep. Upton Pushes for Permanent Reauthorization of 9/11 First Responders Health Bill

House Energy and Commerce Committee Chairman Fred Upton (R-MI) is proposing to help pay for permanent reauthorization of the World Trade Center HealthProgram through various changes to Medicare and Medicaid. On Dec. 2, Upton outlined six permanent entitlement reforms totaling more than $4 billion to payfor permanent extension of the program:

  1. Instituting income-based premium hikes in Medicare Parts B and D, saving $1.9 billion;
  2. Closing a Medicaid loophole for community spouse annuities, saving $900 million;
  3. Establishing a federal cap on Medicaid’s maximum allowable home equity allowance, saving $430 million;
  4. Closing a loophole that allows lottery winners to retain Medicaid, saving $400 million;
  5. Ensuring Medicaid coverage is not granted to those who are not legal immigrants, saving $865 million; and
  6. Protecting patients through the use of Medicaid Electronic Verification of in-home care, saving $300 million.

Upton says the reform to raise Medicare Part B and D premiums would require people with an annual income at or above $1 million or joint filers at or above$1.5 million to pay the total share of their premium — they would pay approximately $70 more every month.

To see a related press release, click here.

Waiting for the Omnibus Appropriations Bill

With the Dec. 11 deadline looming to pass funding for the government, Congress passed a short-term funding bill while they try to finalize an omnibusspending bill. Congress’ new deadline is Dec. 16, but many sticking points remain, so if no agreement is reached, Congress can pass another short term billwhile they continue to negotiate. There are many health policy riders that have been discussed and may be attached to the final bill. For example, a policyrider extending the requirement that risk corridors for the Affordable Care Act (ACA) health plans be “budget neutral”, a rider that would grandfatherhospitals currently developing outpatient departments from a new site neutral payment rule passed earlier this year, have been among those discussed, andpolicies related to Medicare Advantage star ratings are among the policies being watched. Another area many stakeholders are watching is the appropriationsamount for the National Institutes of Health (NIH) as well as the Agency for Healthcare Research and Quality (AHRQ).


Senate Special Committee on Aging Holds Hearing on High Drug Prices

On Dec. 9, the Senate Special Committee on Aging held a hearing entitled “Sudden PriceSpikes in Off-Patent Drugs: Perspectives from the Front Lines.” The hearing examined the causes, impacts and potential solutions to dramatic priceincreases of off-patent drugs. The committee also looked at how current regulations and public policy may contribute to this problem. There will besubsequent hearings on this issue.

Sen. Susan Collins (R-ME), chairman of the committee, said she is looking at the idea of giving FDA authority to fast track applications for generic drugswhen one product has a monopoly. She also liked ideas raised during the hearing related to transparency, including potentially creating a list of alloff-patent drugs lacking competition.

At the hearing other ideas raised included the role that pharmaceutical compounding could play, although witnesses urged caution since compounded drugsdon’t go through the same scrutiny as FDA-approved pharmaceuticals; drug importation; and regulating drugs prices like a utility to address monopoliesunder certain circumstances.

The committee will hold another hearing on drug prices to explore the FDA’s role, including the cause of a generic drug application backlog.


Erin R. Fox, Pharm.D.
Director, Drug Information Service
University of Utah Healthcare

David W. Kimberlin, M.D.
Professor and Vice Chair for Clinical and Translational Research
Co-Director, Division of Pediatric Infectious Diseases
Department of Pediatrics
University of Alabama at Birmingham

Gerard Anderson, Ph.D.
Director, Center for Hospital Finance and Management
Professor, Johns Hopkins Bloomberg School of Public Health

Mark Merritt
President and Chief Executive Officer, Pharmaceutical Care Management Association

To see the press release, clickhere.

2. Administration

PhRMA Frustrated Over TPP Deal

Pharmaceutical Research and Manufacturers of America (PhRMA) has become more vocal about concerns about the Trans-Pacific Partnership (TPP) provision ondata protection for biological drugs. However, the group stopped short of fully opposing the deal. Negotiators were not able to get 12 years of dataprotection for the new class of drugs due to opposition from TPP countries who refuse to change their current laws. The final deal will require aprotection period of only eight years.

FTC Seeks Injunction to Block Merger of Penn State Hershey and PinnacleHealth

On Dec. 8, the Federal Trade Commission (FTC) took action to block the merger of Penn State Hershey Medical Center and PinnacleHealth System, citing thatthe merger would reduce competition, and lead to reduced quality and higher health care costs in the region. The FTC will file with the Pennsylvania Officeof the Attorney General a complaint seeking a preliminary injunction to stop the merger. The merger would create a dominant provider of general acute careinpatient hospital services in the area of Pennsylvania consisting of Dauphin, Cumberland, Perry and Lebanon counties. The entity would essentially control64 percent of the market for 500,000 residents.

Hershey offers 551 beds in Dauphin County and operates the Penn State Hershey Cancer Institute and the Penn State Hershey Children’s Hospital. Its totalrevenue in FY 2014 was $1.39 billion. Pinnacle operates three acute care hospitals in Dauphin County and offers 610 beds. Its total revenue in FY 2015 was$1.07 billion. Both are nonprofit organizations.

The FTC’s administrative trial is scheduled to begin on May 17, 2016.

Johnson & Johnson Asks CMS to Include Part D Drug Spending in Merit-Based Incentive Payment System (MIPS)

Johnson & Johnson wants the Centers for Medicare and Medicaid (CMS) to include Part D drug spending in the Merit-Based Incentive Payment System (MIPS),because it worries that if providers are accountable for Part B drug spending and not for Part D spending, they could potentially prescribe Part D drugsover Part B drugs in order to earn bigger bonuses. In the proposed 2015 Physician Fee Schedule Rule, CMS said it excluded Part D data from total per-personcost measures due to the complexity of the issue. “Due to complex interactions between the Part D bidding process, timing of Part D enrollment versus ACOalignment, regulatory and statutory constraints on defining Part D service areas, and the highly fragmented nature of the Part D market, CMS has concludedthat it is not possible to explicitly combine Part D spending with Parts A and B spending in the Next Generation expenditure benchmark,” according to CMS.CMS said 2017 is the earliest it could incorporate retail drug spending in next-generation ACOs.

GAO Approves Medicare Outpatient Payment Rule

On Dec. 8, the Government Accountability Office (GAO) found that the Centers for Medicare and Medicaid Services (CMS) followed the requirements in itsfinal rule to update Medicaid outpatient and ambulatory surgical center payment systems. The final rule published on Nov. 13 updated the payment systems inaccordance with statutory requirements, according to the GAO. CMS made changes to how Medicare payments are distributed, with adjustments to account forfactors like growing Hospital Outpatient Prospective Payment System (OPPS) payout rates. This results in a 0.4 percent drop in estimated payments underOPPS. CMS expects that the hospital outpatient department fee increase in the rule will have the federal government paying $133 million more per year tooutpatient hospitals.

The final rule also updates the reporting requirements for the Medicare payment systems and finalized updates on the “2-midnight” rule, which allowsMedicare payments if the doctor expects the patient to spend at least two midnights in the hospital. The final rule also had policies to help transitionpayments for hospitals that lost their designation as small rural hospitals dependent on Medicare.

Healthcare.gov Enrollment Goes Up

There has been increased interest in health care enrollment recently, with 804,000 people choosing plans on healthcare.gov during the fifth week of openenrollment. This increase follows a slow fourth week. As of Dec. 5, over 2.8 million people had chosen plans during this open enrollment period, including1 million new customers. These figures include only the 38 states using healthcare.gov.

Outpatient Therapy Supervision Rule Delayed

Congress has cleared legislation that delays the enforcement of the outpatient therapy supervision rule: one requiring direct physician supervision ofoutpatient therapy services for small rural hospitals and critical-access hospitals. Enforcement of the rule from the Centers for Medicare and MedicaidServices (CMS) was delayed by Congress in 2014 and once before that by CMS itself. Sens. John Thune (R-SD), Jerry Moran (R-KS) and Jon Tester (D-MT) saidthat the delay will hopefully give them time to pass a more comprehensive bill on this issue.

Disagreement Over Whether CMS Final Rule on Adequate Medicaid Provider Pay Rates Should Apply to Managed Care

Medicaid stakeholders disagree over whether the Centers for Medicare and Medicaid Services’ (CMS)final ruleon adequate Medicaid provider pay rates should apply to managed care. The rule addresses the equal access provision, which requires states to pay providersat rates that are sufficient to enlist enough providers so that services are available under the plan at least to the extent that they are available to thegeneral population. The rule, however, applies only to fee-for-service Medicaid and some beneficiary advocates argue that it should also apply to managedcare. Medicaid plans and Medicaid directors think that there should be two separate rules, one for fee-for-service and one for managed care. CMS’s proposedmanaged care regulation will likely address the equal access provision for managed care.

CMS Releases FY 2016 Results for Hospital-Acquired Conditions (HAC) Reduction Program

On Dec. 10, the Centers for Medicare and Medicaid Services (CMS) released the fiscal year (FY) 2016results for the CMS Hospital-Acquired Conditions (HAC) Reduction Program. This program was established to provide an incentive for hospitals to reduce HACsand was effective at the start of FY 2015. It requires that the payments be reduced to 99 percent of what would have been paid for discharges in hospitalsthat rank in the worst-performing quartile with respect to risk-adjusted HAC quality measures.

In FY 2016, 758 out of 3,308 hospitals are in the worst-performing quartile compared to 724 in FY 2015. CMS estimates the total savings in FY 2016 will be$364 million. Also in FY 2016, the 75th percentile of Total HAC Score cutoff was 6.75, compared to 7.00 in FY 2015 — the cutoff contributed to the increasein percentage of hospitals in the worst-performing quartile. Out of the 758 in the worst-performing quartile for FY 2016, around 53.7 percent were also init in FY 2015.

For more information, click here.

CMS Expands Data on Physician Compare and Hospital Compare Websites

On Dec. 10, the Centers for Medicare & Medicaid Services (CMS) expanded data on the Physician Compare and Hospital Compare websites to try to improve the consumer online tools. CMS added newquality measures to Physician Compare for group practices, Accountable Care Organizations (ACOs) and individual health care professionals. Hospital Comparehas been updated to include new information to its database of more than 100 quality measures and more than 4,000 hospitals.

The 2014 data released on Physician Compare include:

  • Additional performance scores on preventive care, diabetes care, cardiovascular care and patient safety by some group practices.
  • New performance scores on patients’ experiences with some group practices.
  • First set of individual health care professional performance scores on preventive care, cardiovascular care and patient safety measures.
  • Updated performance scores for ACOs.

The 2014 data released on Hospital Compare include:

  • A new measure for the Inpatient Quality Reporting (IQR) program that shows whether a hospital uses safe surgery practices before administering anesthesia, before incision and closing, and prior to the patient’s leaving the operating room for inpatient surgical procedures.
  • Additional data on certain health care-associated infections (HAIs).

For more information, click here.

CMS Publishes 2016 Updates to the Child and Adult Core Health Care Quality Measurement Sets

On Dec. 11, the Centers for Medicare and Medicaid Services (CMS) released a bulletin describing the 2016 updates to the set of adult’s and children’shealth care quality measures for Medicaid and the Children’s HealthInsurance Program (CHIP). Center for Medicaid and CHIP Services (CMCS) Informational Bulletins are used to communicate with states and stakeholdersinterested in Medicaid and CHIP. They are designed to highlight recently released policy guidance and regulations and to share operational and technicalinformation.

For more information, click here.

3. State Activities

South Dakota: Gov. Daugaard May Add Work Requirement for Medicaid Eligibility

South Dakota Gov. Dennis Daugaard may add a requirement that Medicaid expansion enrollees have jobs as part of a new proposal. Daugaard would be followingmany other Republican governors in pursuing a work requirement, including former Pennsylvania Gov. Tom Corbett and Utah Gov. Gary Herbert. However, theU.S. Department of Health and Human Services still maintains that employment cannot be a requirement for Medicaid enrollment. An estimated 49,000 morepeople could be covered by the Medicaid expansion in South Dakota.

Indiana: Gov. Pence Protests CMS Review of His Medicaid Expansion Program

Indiana Gov. Mike Pencewrote a letter to HHS Secretary Sylvia Burwell protesting the way his state’s Medicaid expansion program isbeing reviewed. In the letter, Pence told Burwell to suspend a separate evaluation being conducted by the Urban Institute for federal officials, citingthat it is biased against the program based on prior work. Indiana has already contracted with the Lewin Group to evaluate the program, called the HealthyIndiana Plan 2.0 (HIP).

Arkansas: Gov. Hutchinson Halting Project to Modernize Medicaid System

On Dec. 1, Arkansas Gov. Asa Hutchinson wrote to lawmakers explaining thatthe state is halting further efforts to make changes to its Medicaid eligibility and enrollment system. This action follows a report from consulting firmGartner. The project started two years ago and originally had a budget of $108 million, but projected costs have since increased to $220 million.Hutchinson outlined a series of immediate actions he is taking to get the project back on track.

California: Kaiser Permanente Agrees to Buy Seattle-Based Group Health Cooperative

The nonprofit HMO and health system Kaiser Permanente is buying Seattle-based Group Health Cooperative, another nonprofit plan that insures almost 600,000people. Kaiser said it would contribute $1.8 billion to a new foundation in Washington as part of the transaction. The deal is still subject to regulatoryapproval. Nearly 80 percent of Kaiser’s 10.2 million members are in California.

Michigan: CMS Must Decide Whether to Approve the State’s Controversial Waiver

The Centers for Medicare and Medicaid Services (CMS) must decide whether to approve the federal waiver Michigan needs to extend its Medicaid expansion orlet the program end next year. The waiver incorporates some conservative concepts, including a requirement that enrollees above the poverty line mustchoose after four years of coverage to either enroll on healthcare.gov or stay in Medicaid and pay up to 7 percent of household income toward health carecosts. This is higher than the 5 percent ceiling that CMS gives to other states. Medicaid expansion coverage in Michigan will end in April if the waiverisn’t approved.

Massachusetts: Massachusetts Summarizes 1332 Waiver Request

Massachusetts is heading toward using a broad Obamacare waiver program to make fixes to its small group market. In the first phase, the state would requestwaiver authority to modify the definition of “merged market” to maintain unique features of a typical small group market for small group plans. Without awaiver, the state says it would need to ensure that its merged market meets federal requirements by Jan. 1, 2018. The state wants to submit an applicationfor those changes sometime in the next year. The second request could include changes to the individual and employer mandates. Under the 1332 waivers,states can begin to opt out of many of the Affordable Care Act’s (ACA) provisions to tailor their health care system to the specifics of the state systembeginning in 2017.

To read the summary, click here.

Maine: Community Health Options CO-OP Stops Individual Enrollment

Maine CO-OP Community Health Options announced it will be cutting off individual enrollment on Dec. 15 due tofinancial problems. However, the health plan will continue to sign up small group customers for 2016 coverage. Community Health Options was initially oneof the most successful CO-OPs, turning a profit after opening in 2013 and dominating enrollment in Maine during its first two years. It also expanded intoNew Hampshire last year. In the third quarter of this year, however, claims started exceeding premiums, creating a loss of $17.3 million. The CO-OP hadover 70,000 enrollees at the end of September.

Over half of the 23 CO-OP plans initiated with $2.4 billion in loans under the Affordable Care Act (ACA) have collapsed due to financial problems. To date,roughly 600,000 customers have lost coverage as a result.

4. Regulations Open for Comment

Department of Health and Human Services (HHS) Proposes Updates to “the Common Rule”

HHS and 15 other agencies released a notice of proposed rulemaking Sept. 2 for the Common Rule, theexisting regulatory framework to transparency and oversight for scientific research involving human subjects. The proposed changes are to address thesubstantial changes that have occurred within scientific research. Current regulations have been in place since 1991 and are followed by 18 federalagencies. Proposed updates to the rule include:

  • Strengthened informed consent provisions
  • Requirements for administrative or IRB review that would align better with the risks of the proposed research
  • New data security and information protection standards
  • Requirements for written consent for use of an individual’s biological samples, for example, blood or urine, for research with the option to consent to their future use for unspecified studies
  • Requirement, in most cases, to use a single institutional review board for multisite research studies
  • Application of rule to clinical trials, regardless of funding source, if they are conducted in a US institution that receives funding from a Common Rule agency for research involving human participants.

In July 2011, HHS issued an Advance Notice of Proposed Rulemaking to seek the public’s input on updating the Common Rule. The proposed rule issued reflectsinput and requests comments for HHS to consider as it drafts the final rule. HHS will take public comment on the proposed rule until Jan 6, 2016.

For a press release detailing changes to the rule visit hhs.gov.

Food and Drug Administration (FDA) Issues Final Rule to Phase Out Trans Fats

FDA issued a final rule June 16that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products frommicrowave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat inprocessed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fatcontent information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat infoods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

CMS Releases Proposed Rule with New Discharge Planning Requirements

The Centers for Medicare and Medicaid Services (CMS) released a proposed rule that would require all hospitals dev