Washington Healthcare Update

November 7, 2016

Pardon Our Dust

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This Week: Election Day is Tuesday! On Thursday (11/10) at 11:00 a.m., McGuireWoods Consulting will hold a conference call to discuss the meaning of the election on avariety of issues, including health care. For additional information, please contact Ann Thomas at athomas@mwcllc.com. Please register by Tuesday, Nov. 8. Call-in information will be sent to registrants onWednesday, Nov. 9.

1. Congress



2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress


House E&C Members Ask FDA for Information on CybersecurityEfforts

In aNov. 3 letter, Reps. Diana DeGette (D-CO) and Susan Brooks (R-ID), both members of the House Energy and Commerce Committee,asked the Food and Drug Administration (FDA) to detail what it is doing to address cybersecurity policies for medical devices, following recent reports ofpacemakers’ vulnerability to hackers. In August, a security company reported it could hack pacemakers made by St. Jude’s.

The letter asked the FDA to describe what it is doing to mitigate security risks, alert providers and patients of issues, and coordinate with other federalagencies that deal with cybersecurity. DeGette and Brooks note that nearly 15 million medical devices—including heart monitors, infusion pumps andventilators—connect to health networks, creating possible avenues for cyberattacks. They asked for a response by Dec. 16.

The FDA issued draft guidance inJanuary on managing cybersecurity in devices after they have received agency approval. In October 2014, FDA finalized guidance on assessingsecurity before asking for FDA approval.


Members Call for DOJ and FTC Investigation on Pricing of Diabetes Medicine

Sen. Bernie Sanders (D-VT) and Rep. Elijah Cummings (D-MD) called on the Justice Department and FTC to investigate potential collusion among drug companieson the rising prices of diabetes medicines.

In a letterreleased on Nov. 4, the two lawmakers point out that even though the original insulin patent expired more than 75 years ago, the cost of insulin has morethan tripled between 2002 and 2013. The letter mentions Sanofi, Novo Nordisk, Eli Lilly and Merck.

The rising prices have significant implications for government spending, they say. The American Diabetes Association estimates the government pays fornearly two-thirds of diabetes care in the U.S. In 2015, Medicare spent more per beneficiary on diabetes medication than any other class of drugs, primarilydue to rising prices.

2. Administration

Cigna Will No Longer Expand Participation on Obamacare Exchanges  

Cigna is no longer expanding its participation on Obamacare exchanges for 2018. The pullback comes amid concerns about the exchange’s stability andprofitability. Cigna originally anticipated expanding from seven states in 2017 to 10 states the next year. The insurer will exit three of its existingmarkets and enter three new ones. And, despite the changes, Cigna still anticipates losing money on the exchanges in 2017.

Anthem has also warned that it may pull back from the exchanges if conditions do not improve.

CMS Leaves Digital Health Programs Out of Medicare Diabetes Prevention Program

On Nov. 2, CMS released a final rule saying Medicare willexpand its Diabetes Prevention Program (DPP) nationwide starting January 2018. However, diabetes programs that deliver care virtually or through remotetechnologies will not be included for now. CMS said it does not have enough information to act now, but is gathering more information on the virtualdelivery of DPP services.

When it proposed expanding the program in July, Medicare sought feedback in a number of areas including the IT capabilities of providers. Commenters almostunanimously supported giving digital prevention programs the same recognition as in-person ones.

Research seems to show that online-based programs from companies like Omada Health and Canary Health can help Medicare beneficiaries prevent the onset ofdiabetes.

In March, the CMS actuarycertifiedthat the prevention program would reduce Medicare spending.

CMS Awards New Contracts for Recovery Audit Contractors

On Oct. 31, CMS awarded five new contracts for Medicare’s controversial recovery audit program. The agency awarded four regional contracts to PerformantRecovery, Cotiviti and HMS Federal Solutions. A fifth contract, focused on durable medical equipment and home health agencies, was awarded to PerformantRecovery. CGI Federal, which previously held contracts and protested changes to those contracts, will not return.

Performant Recovery will get an 8.38 percent contingency fee for its regional contract and an 8 percent contingency for the contract focusing on DME andhome health. Cotiviti, which was awarded contracts for regions two and three, will receive contingency fees of 6.74 percent and 7.61 percent respectively.HMS Federal Solutions will receive a 17.46 percent fee.

CGI Federal took CMS to court over changes in how CMS planned to pay the RACs—namely that CMS intended to make the RACs wait until after appeals had beencompleted at the first and second level before collecting contingency fees. CMS withdrew that effort to set up the next round of RAC contracts following afederal court’s decision siding with CGI Federal. The agency restarted the contracting process in November 2015.

A RAC statement of work from May of this year says that CMS kept the provision to keep RACs from collecting contingency fees until providers who chose toappeal have lost at the second level of appeals. The statement of work says:

“The Recovery Auditor shall not receive any payments for the identification of the improper payments. The Recovery Auditor shall be eligible forcontingency fee payment for an accepted determination which will occur when all required claim elements are input into the Data Warehouse and collectionhas occurred as a result of:

  1. The provider failing to file a valid timely appeal, at either the first (MAC) level or the second (QIC) level of the appeals process.
  2. Or, the provider received an unfavorable decision at the first (MAC) and second (QIC) level of the appeal process.”

CMS Finalizes Hospital Outpatient Prospective Payment System Rule

On Nov. 1, CMS finalized updated payment rates and policy changes in the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory SurgicalCenter (ASC) Payment System for calendar year (CY) 2017.

CMS is also adding new quality measures to the Hospital Outpatient Quality Reporting Program and the Ambulatory Surgical Center Quality Reporting Programthat are focused on improving patient outcomes and experience of care. CMS estimates that the updates in the final rule would increase OPPS payments by 1.7percent and ASC rates by 1.9 percent in 2017.

The rule also attempts to address physicians’ and other health care providers’ concerns that patient survey questions about pain management in the HospitalValue-Based Purchasing program unduly influence prescribing practices. CMS is continuing the development and field testing of alternative questions relatedto provider communications and pain, and will solicit comment on these alternatives in future rulemaking.

The rule also finalizes policies to implement Section 603 of the Bipartisan Budget Act of 2015, which makes payments site neutral beginning Jan. 1, 2017.

The final rule with comment period describes which off-campus hospital outpatient departments are subject to this requirement and which items and servicesare “excepted” from application of these payment changes and will continue to be paid under the OPPS.

Based on feedback from stakeholders, the final rule with comment period finalized proposed limitations on relocation of excepted off-campus hospitaloutpatient departments, but makes a modification to allow flexibility to accommodate instances of extraordinary circumstances that are outside a hospital’scontrol, such as natural disasters. Further, in response to stakeholder feedback, CMS is not finalizing its proposed limitation on expansion of services atthis time.

Additionally, CMS is issuing an interim final rule with comment period (IFC) in conjunction with this final rule with comment period to establish newpayment rates under the Medicare Physician Fee Schedule (MPFS) for the items and services provided by certain off-campus provider-based departments for CY2017. These payment rates are in lieu of finalizing a proposal, about which numerous commenters raised concerns, which would have precluded a hospital fromdirectly billing Medicare at all for non-excepted items and services for 2017.

These new interim final rates being adopted in the IFC will permit hospitals to be paid for the furnishing of items and services that may no longer be paidunder the OPPS, and we believe will reduce incentives for hospitals to acquire independent physician practices and convert the same service into morehighly paid OPPS services. CMS will accept comments on the policies in the interim final rule and will make adjustments as necessary to the paymentmechanisms and rates through rulemaking that could be effective in CY 2017.

The OPPS /ASC Final Rule and IFC are available on the Federal Register.

A fact sheet on this final rule and IFC is available here.

CMS Releases Hospital Value-Based Purchasing Program Results for FY 2017

CMS released data Nov. 1 that shows more than 1,600 hospitals will see bonuses from Medicare in 2017 under the Hospital Value-Based Purchasing program. Thenumber earning positive pay adjustments is around 200 fewer than last year. The program affects 3,000 hospitals, which are penalized or rewarded based onhow well they perform on certain quality measures. A hospital’s performance is assessed in comparison to its peers’ and to its own performance over time.

The payment increases add up to $1.8 billion for 2017. To create the pool for bonuses, CMS imposed a 2 percent reduction to based DRG payments forhospitals paid under the Inpatient Prospective Payment System. Hospitals earn two scores: one for achievement and one for improvement.

The number of hospitals whose payments were docked grew from 1,236 in 2016 to 1,343 in 2017. Last year, 59 percent of hospitals received bonus payments andthis year 55 percent did. About 1,250 hospitals earned bonuses both years and 875 were hit with penalties both years. By comparison, 437 hospitals thatearned bonuses last year were docked in 2017, and 315 hospitals penalized in the last round will receive bonuses next year.

CMS also announced several changes to the program for fiscal 2018. The four areas on which hospitals are scored—clinical care; patient- andcaregiver-centered experience and care coordination; safety; and efficiency and cost reduction—will be weighted equally. The program previously allotted 30percent to clinical care and 20 percent to safety. CMS also removed two measures from clinical care and added a care transition dimension.

For more information, please visit theCMS websiteand the QualityNet website.

CMS Announces 2016 Hospital Appeals Settlement Call

On Nov. 16, CMS will hold a hospital appeals settlement call to provide details on the latest round of hospital settlements and take stakeholder questions.CMS has created aHospital Appeals Settlement Process 2016webpage and indicated that details on the settlement process will be posted to the page in early November.

The American Hospital Association (AHA) noted that CMS’s announcement came days before CMS was due to appear in court to discuss the backlog at the thirdlevel of Medicare appeals. AHA asked the court earlier this month to require HHS to implement a number of solutions to reduce the backlog, including broadappeals settlements for hospitals and other providers.

Registration for the Nov. 16 call is required and can be submitted through the MLN Connects Upcoming Eventspage.

CMS Releases Final Rule Reducing 2017 Home Health Payments

In a final rule released Oct. 31, CMS cut Medicare payments tohome health agencies by 0.7 percent in 2017. This translates to a $130 million payment reduction for roughly 11,400 home health agencies next year—however,this represents a smaller reduction than CMS originally planned. In its proposed rule, CMS suggested a 1 percent—$180 million—reduction in Medicarepayments to home health agencies.

The final rule also adds four measures to home health’s quality reporting program that will help determine payments starting in 2018, as required by theImproving Medicare Post-Acute Care Transformation Act of 2014. The measures address preventable readmission rates, Medicare spending per patient, dischargeto the community and drug regimen review.

3. Courts

Appeals Court Sides With FTC and Halts Illinois Hospital Merger

A major Illinois hospital merger is on hold after a federal appeals court sided with antitrust concerns raised by the Federal Trade Commission (FTC). Thecombination of Advocate Health Care and NorthShore University Health System was temporarily halted by a preliminary injunction issued Oct. 31 by the 7thU.S. Circuit Court of Appeals, which reversed a lower court’s decision. This hold will give the FTC time to conduct administrative hearings on the merger,which the agency has warned will hurt competition and lead to higher prices.

In its ruling, the appeals court argued that the lower court did not properly evaluate the impact on competition within the twohospital systems’ geographic markets. The reversal marks the latest victory for the FTC, which has recently been aggressive in challenging hospital deals.The agency in September won an appeals case against Penn StateHershey Medical Center and PinnacleHealth System, forcing the two Pennsylvania health systems to drop their planned merger.

4. State Activities

Arkansas: State Supreme Court Disqualifies Medical Marijuana Ballot Initiative

The Arkansas Supreme Court has disqualified a second medical marijuana ballot initiative despite nearly 142,000 residents’ having already cast ballotsthrough early voting. In a 5-2 ruling, the court sided with opponents of the proposed act—Issue 7—which would have allowed patients with certain medicalconditions and a doctor’s recommendation to purchase marijuana from dispensaries. Issue 7 would also allow certain individuals to grow their own cannabisplants. Justices threw out more than 12,000 signatures that were approved by election officials for the proposal, saying supporters did not comply withlaws on registration and reporting of paid canvassers.

Another marijuana initiative—Issue 6—will still be on the ballot. That initiative would amend the Arkansas Constitution to protect the use of medical marijuana and outlines 17 qualifyingpatient conditions.

Florida: Appeals Court Rules Malpractice Damage Caps Unconstitutional

A Florida appeals court recently ruled that caps on non-economic damages in medical malpractice lawsuits are unconstitutional, creating another setback tophysician groups. The case involves personal injury claims from a woman who claimed a Florida hospital provided negligent care during her pregnancy. Thecaps were approved by the state legislature and then Gov. Jeb Bush in 2003. The Florida Supreme Court has already ruled that caps on non-economic damagesare unconstitutional when they pertain to wrongful death claims.

Minnesota: MNsure Plagued by IT Problems on First Day of Open Enrollment

On Nov. 1, Minnesota’s state-run exchange MNsure was once again experiencing IT problems. The exchange announced on Twitter that its website was down and it was working with state officials to resolve theissue. Many MNsure users successfully enrolled in coverage, but others complained of error messages, locked accounts and uncertainty about whether they hadsuccessfully enrolled in a plan. Governor Mark Dayton also told reporters that the state’s IT division found that MNsure was being targeted by robocallerstrying to tie up phone lines.

These problems could be especially frustrating in the state because of new plan enrollment caps—an attempt by state regulators to prevent Minnesota’sinsurance market from collapsing. As of 10 a.m. on Nov. 1, Minnesota exchange officials said 13,277 applications had been started and 1,965 were complete.

New Mexico: New Mexico Considering Copays From Medicaid Patients

New Mexico is considering asking CMS for authority to make Medicaid beneficiaries pay for copayments and other costs. Human Services Department SecretaryBrent Earnest told state lawmakers that charging patients Medicaid copayments would encourage them to avoid wasteful expenses, including seeking routinecare in emergency rooms. Children and pregnant women would be exempt. The agency has not determined how much the copays would be or how much money thestate would save. This announcement comes as New Mexico is struggling with a budget crisis.

Pennsylvania: Legislature Introduces Bills to Curb Opioid Abuse

The Pennsylvania legislature approved five bills aimed at combating prescription drug abuse by establishing prescribing limits and improving reporting. Thelegislation limits the amount of opioids that can be prescribed to emergency room patients to seven days and limits how many opioids can be prescribed tominors. It also requires that doctors check the state’s prescription drug monitoring program every time they prescribe opioids.

Washington, D.C.: D.C. Council Advances “Right-to-Die” Bill

On Nov. 1, the D.C. Council supported legislation that would let terminally ill patients end their lives with medication prescribed by a doctor. D.C.’sDeath with Dignity Act of 2016 is one of several bills advancing around the country, as advocates continue to push for “right-to-die” laws.

Similar to other state laws, the D.C. legislation would allow terminally ill patients who have less than six months to live to obtain life-endingmedication after getting consent from two physicians. A patient must make two verbal requests as well as one request in writing. The written request mustbe made with two witnesses present who can verify the patient is acting voluntarily. The bill also outlines reporting requirements for physicians and theD.C. health department.

The D.C. Council is required to hold two votes on the bill before it is sent to Mayor Muriel Bowser, who has not said whether she would sign it. If shedoes, Congress would have 30 days to review the legislation and could stop enactment by passing a joint resolution.

Five states currently authorize physician-assisted suicide—California, Montana, Oregon, Vermont and Washington state. Colorado voters will also consider aballot measure.

West Virginia: AG Morrisey Urges DOJ to Reject Settlement With Mylan

West Virginia Attorney General Patrick Morrisey is asking the Justice Department to reject the pending $465 million settlement between Mylan and thefederal government over the misclassification of the EpiPen. In a letter to Attorney General Loretta Lynch, Morrisey calls the settlement “woefullydeficient” and argues it does not nearly pay for the damage done by Mylan.

5. Regulations Open for Comment

IRS, Treasury Release Proposed Rule on QHP Benchmarks

The IRS and Treasury Department, in a proposed rule released July 6, proposed toalter how qualified health plan (QHP) benchmarks are determined so that theyaccount for the costs of pediatric dental benefits. If finalized, the rule wouldgo into effect for the 2019 plan year.

Although pediatric dental care is one of the 10 “essential health benefits” thatplans are required to cover under the Affordable Care Act (ACA), several plansdo not include such coverage, and consumers instead buy stand-alone dentalproducts. Meanwhile, the marketplace determines the amount of tax credits afamily can receive to cover the cost of coverage based on the second-cheapestsilver-level plan.

However, as the proposed rule said, “because qualified health plans that do notoffer pediatric dental benefits tend to be cheaper than qualified health plansthat cover all ten essential health benefits, the second lowest-cost silver plan(and therefore the premium tax credit) for taxpayers purchasing coverage througha Marketplace in which stand-alone dental plans are offered is likely to notaccount for the cost of obtaining pediatric dental coverage.”

Treasury and IRS added that the existing rules “frustrate” the goal of makingall essential health benefits affordable to those receiving premium tax credits,so the administration wants to update its interpretation to ensure all 10services are addressed.

“Consistent with this interpretation, the proposed regulations provide that fortaxable years beginning after December 31, 2018, if an Exchange offers one ormore silver-level qualified health plans that do not cover pediatric dentalbenefits, the applicable benchmark plan is determined by ranking (1) thepremiums for the silver-level qualified health plans that include pediatricdental benefits offered by the Exchange and (2) the aggregate of the premiumsfor the silver-level qualified health plans offered by the Exchange that do notinclude pediatric dental benefits plus the portion of the premium allocable topediatric dental benefits for stand-alone dental plans offered by the Exchange,”the proposal said.

The rule aims to create the ranking by adding the premium for the lowest-costsilver plan that does not include a pediatric dental benefit to the premium forthe cheapest stand-alone dental plan, and the premium for the second-cheapestsilver plan without pediatric dental benefits to that of the second-loweststand-alone dental plan. The second-cheapest amount from this combined rankingwould be the taxpayer’s applicable benchmark plan premium, the rule said.

HHS Proposes Updates to Title X Rules

On Sept. 2, HHSproposed to preclude Title X grant recipients from using criteria intheir selection of family planning providers that are unrelated to theability to deliver services effectively.

Since 2011, 13 states have attempted to restrict participation by familyplanning providers in Title X based on factors unrelated to their ability toprovide services. The Title X program provides funding for certain familyplanning services, including STD screening and treatment, but funding is notused to pay for abortions. Although Planned Parenthood is not mentioned byname in the proposed rule, it has often been the subject of defundingactions by states and Congress.

In the proposed rule, HHS said the effects already felt by the restrictionsin many states justify the department’s rulemaking. HHS said grantrecipients that do not provide services directly would also be required tofollow the updated standards when choosing subrecipients.

HHS also proposed that a tiered structure governing how funds aredistributed would not be allowed unless it can be proven that aprovider in a top tier delivers Title X services more effectively than alower-tier provider. According to the Guttmacher Institute, a researchorganization that supports reproductive rights, four states have a prioritysystem for distributing family planning funds, which often disadvantagesfamily planning centers.

CMS Releases Proposed Rule on Fire Safety Requirements for Dialysis Facilities

On Nov. 3, CMS announced a proposed rule to update Medicarefire protection guidelines for certain dialysis facilities to ensure that patients are protected from fire while receiving treatment in those facilities.

The new proposed guidelines apply to all dialysis facilities that do not provide one or more exits at grade level from the treatment area level. CMSpreviously updated the requirements to include dialysis facilities located adjacent to industrial high-hazard occupancies; however, as dialysis facilitiesare not permitted to be located in such areas, the requirement specific to such geographically located facilities will be removed.

The rule adopts, for certain dialysis facilities, updated provisions of the National Fire Protection Association’s (NFPA) 2012 edition of the Life SafetyCode (LSC), as well as provisions of the NFPA’s 2012 edition of the Health Care Facilities Code in order to bring CMS’s requirements more up to date withcurrent fire safety standards. The LSC is a compilation of fire safety requirements for new and existing buildings, and is updated every three years.

The proposed rule addresses construction, protection and operational features of dialysis facilities to provide safety for Medicare beneficiaries from fireand smoke. Some of the main requirements laid out in the rule include:

  • Doors to hazardous areas must be self-closing or must close automatically.
  • Alcohol-based hand rub dispensers now may be placed in corridors to allow for easier access.
  • A fire watch or building evacuation is required if the sprinkler system is out of service for more than 10 hours.

Currently, CMS is using the 2000 edition of the LSC to survey dialysis facilities for health and safety compliance. With this proposed rule, CMS isadopting provisions of the 2012 edition of the LSC and provisions of the 2012 edition of the Health Care Facilities Code, to bring CMS’s requirements moreup to date, and align dialysis facility fire safety requirements with the codes CMS uses to survey other healthcare facilities.

6. Reports

JAMA Study Reveals Increases in Opioid Poisonings Among Children

The number of pedia