Washington Healthcare Update

December 22, 2016

Pardon Our Dust

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Happy Holidays and Happy New Year to our readers. This is the last newsletterof 2016. The next newsletter will be Monday, Jan. 9, 2017.

Looking forward to next year? See our special section at the end of thisnewsletter — “2017 and Health Care” for what might happen and how fast, and aprimer on the all-important budget reconciliation process.

In the meantime, the current administration continues to release regulationsand payment models…but will they stay the same in the next administration?

1. Congress


The House has adjourned for the holidays.


The Senate has adjourned for the holidays.

2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. 2017 and Health Care

1. Congress


The House has adjourned for the holidays.


The Senate has adjourned for the holidays.

2. Administration

President ObamaSigns ECHO Act Into Law

Last week, President Obama signed into law the Expanding Capacity for Health Outcomes (ECHO) Act. The legislation aims toexpand the Project ECHO telemedicine program, which would educate and support rural health care providers on disease management and rural behavioral healthtreatment as well as bolster health interventions.

CMS to Phase in Prior Authorization for Two Types of Power Wheelchairs

On Dec. 20, CMS announced plans to implement prior authorization starting in March for two kinds of power wheelchairs not previously included in a similardemonstration. CMS will phase in the new prior authorization program before going nationwide.

Late last year, CMS finalized a prior authorization process to cover durable medical equipment that CMS said was frequently subject to unnecessary use. CMSreleased a list of equipment that could fall under the process. CMS said at the time it would give 60 days’ notice before putting the process in place forspecific types of DME.

Stakeholders at the time raised concerns that 60 days might not be enough time for Medicare contractors to implement the new prior authorizationprocedures. As a result, CMS has chosen to provide 90 days’ notice.

CMS plans to start prior authorization on two types of power wheelchairs not included in the Prior Authorization of Power Mobility Devices Demonstration.Despite initial industry concerns, both CMS and some DME suppliers have characterized that demonstration as a success.

The prior authorization requirements will be phased in starting March 20 in one state in each of the DME Medicare Administrative Contractors’jurisdictions—Illinois, Missouri, New York and West Virginia. The program is set to go nationwide July 17, but CMS says it can suspend the program at anytime if prior authorization creates barriers to care.

CMS plans to issue specific prior authorization guidance and include final timelines for prior authorization requests. Those timelines will be customizedfor each DME item, the agency notes.

CMS Announces New Payment Models to Improve Cardiac and Joint Care

On Dec. 20, CMS finalized new Medicare alternative payment models for cardiac andorthopedic care that were opposed by Donald Trump’s choice for HHS secretary. The new bundled payment models would go into effect in July in 98metropolitan areas, providing Medicare bonuses to clinicians who coordinate care and rehabilitation for patients receiving treatment for hip surgery, heartattacks, coronary bypass surgery and cardiac rehabilitation.

Rep. Tom Price, who has been nominated to be Secretary of HHS, opposed the mandatory cardiac model, calling it a government overreach. Should Rep. Pricebecome Secretary, he might seek to quash the alternative payment model or substantially change it.

Another part of the proposal would expand accountable care organizations to smaller physician practices and hospitals with lower financial risks thanprevious ACO models. Some 70,000 clinicians could qualify for the program in 2018, joining 70,000-125,000 expected in alternative payment models next year,Conway said.

The cardiac model is aimed at improving care for the estimated 200,000 Medicare beneficiaries hospitalized for heart attack or bypass surgery annually,whose treatment cost Medicare over $6 billion. The costs and outcomes of the patients vary widely, and only 15 percent of heart attack patients receivecardiac rehabilitation.

For more information, click here.

New CMS FAQs Provide More Information About Changes to the EHR Incentive Programs

CMS recently added two new FAQs providing more information on changes to the EHR Incentive Programs as a result of the CY 2017 Hospital OutpatientProspective Payment System (OPPS) and Ambulatory Surgical Center (ASC) final rule. The new questions are:

  1. Are new participants who attest only to the Medicaid EHR Incentive Program in 2017 required to attest to Modified Stage 2?
  2. What is the policy for measure calculation for actions outside the EHR reporting period for the Medicare and Medicaid EHR Incentive Programs beginning in 2017?

To view CMS’s FAQ page, click here.

FDA Orders Drug Companies to Pull Misleading TV Ads

FDA told two drug makers, Celgene and Sanofi, to pull their TV ads because they are in violation of the Food, Drug & Cosmetic Act. Both companies gotin trouble for juxtaposing fun, fast-paced scenes with the serious risk information associated with the medicines.

Celgene Corporation’s television adfor its plaque psoriasis treatment, Otezla, discusses the risks of the drug while also showing scenes of people relaxed and having fun at parties andshopping with friends. FDA noted that an instrumental version of the song “Walking on Sunshine” plays in the background throughout the entire ad, with themusic’s volume loud enough to drown out the audio disclosure of risk information.

Sanofi was reprimandedfor juxtaposing risk information in a similar way in its ad for Toujeo, an insulin product. The on-screen text, along with the ad’s narrator, conveys thedrug’s serious risks while viewers watch fast-paced visuals that feature a man dancing.

FDA Announces Delay on Off-Label Promotion

FDA recently announced it will extend until April 10 the public comment period for feedback on how it should regulate drug and medical device companycommunications about unapproved uses of their products. That means people who have been waiting about four years for the FDA to issue new guidance on thematter may have to wait even longer. FDA policies prohibit companies from talking about off-label uses in most circumstances, but courts have held theposition that this can be a First Amendment violation.

FDA DATA Shows Decrease in Drugs Approved But Also Shows Other Progress

On Dec. 9 at an FDA/CMS Summit, the FDA said they approved 19 out of 36 novel drug applications in 2016. That is a decrease from 2015 approvals and thelowest number of novel approvals since 2007. Part of the reason for the decrease was because in 2015 the FDA got ahead of itself and approved a handful ofdrugs with 2016 review deadlines. Also, there were fewer applications overall to review. However, the FDA handed out more rejection letters this year, manydue to manufacturing problems rather than to the drugs’ safety or efficacy. It approved more than 90 percent of novel new drug or biological applicationsin 2015, but just over 60 percent in 2016.

While the overall number of novel treatments approved dropped, the FDA sped up its process in deciding on them. In 2016, the median time to approval was7.8 months compared to 10.9 months last year. That is record-breaking speed for the agency. Most of the drugs were part of its expedited review programs.

All but one of the 19 new drugs approved this year made it through the agency on its first review cycle, and 16 were approved in the U.S. before anywhereelse in the world. Seven drugs are used to treat rare diseases. The FDA also met its user fee deadline for all but one drug—the now infamous SareptaDuchenne drug Exondys 51.

For more information, click here.

The House Freedom Caucus Releases Health Agenda

The House Freedom Caucus issued a 23-page list identifying 200 rules they want to see gutted under the Trump administration, including an HHS rule that expanded the number of patients providers could treat withmedications that help combat opioid addiction from 100 to 275. That move could impede the nation’s effort to deal with the prescription drug abuseepidemic.

The Caucus also wants to get rid of a rule released this fall that will require drug companies and research institutions to publicly report more clinicaltrial data, including results that show their products or experiments failed. The list also includes a proposed rule that wouldmodernize the “Common Rule,” the massive regulation designed to protect the safety of patients who participate in clinical trials and other studies.

Other items on the list: Medicare’srecent updateto how it pays for clinical diagnostic laboratory tests and anFDA rulethat was designed to ensure that drug companies do not abuse the Citizen Petition process to keep cheaper generic versions of their products off themarket. In addition, the Caucus wants to nix the FDA’s authority to regulate tobacco products under the Food, Drug and Cosmetic Act.

For the full list, clickhere.

3. Courts

ACA CSR Recipients File Motion to Intervene in House v. Burwell Case

Two recipients of the ACA’s cost-sharing reduction (CSR) payments have filed a motion to intervene in House GOP’s case against HHS out of concern theincoming president might not defend the Obama administration’s position in support of the payments. This could leave around 6 million Americans unable toafford coverage.

The motion, filed on behalf of Gustavo Parker and La Trina Patton, argues that Parker and Patton—and the other 5.9 million Americans receiving CSRs—wouldbe harmed should the incoming administration and the House allow the lower court’s ruling to stand.

Earlier this year, a federal judge ruled that the administration violated its authority by sending the CSR payments to issuers without a formalcongressional appropriation, but the judge allowed the money to continue to flow until the case was fully settled. The administration appealed the ruling,and it had been expected to go to court in the spring. However, at the House’s request, the case briefings have been delayed until Feb. 21 to provide thenew administration time to consider its strategy.

The motion argues that until recently, Parker and Patton’s interests had been represented by the administration, which advocated for the continuedpayments.

4. State Activities

Maine: Over 65,000 Mainers Sign on for Health Care Referendum

Supporters of expanding Medicaid in Maine under the ACA say they have enough signatures to put a referendum on the ballot as early as next year, despitethe uncertainty surrounding the future of the health care law. Maine Equal Justice Partners said it collected more than65,000 signatures to get the issue on the ballot—more than the required 61,123—although the state still needs to certify them. In order to get thereferendum on the November 2017 ballot, the signatures must be filed by Jan. 26. Medicaid expansion has repeatedly received legislative approval in Maine,only to be vetoed by Republican Gov. Paul LePage.

Maryland: Maryland Had the Highest Rate of Opioid-Related Hospitalizations in 2014

Maryland had the highest rate of opioid-related hospitalizations in 2014, according to new Agency for Healthcare Research and Quality statistics. Maryland’s hospitalization ratewas 362.1 stays for every 100,000 people, while the District of Columbia and New York closely followed at 339 and 335.3 stays, respectively. States withthe lowest hospitalization rates were Iowa (44.2), Nebraska (46.1) and Texas (70.9).

The state-by-state breakdown, the first that AHRQ has released, also documented which states saw the largest increases in opioid-related inpatient staysand the highest rates of opioid-related emergency room visits. Nationwide, the rate of hospitalizations related to opioid misuse and addiction nearlydoubled between 2000 and 2012, AHRQ said.

Michigan: Report Recommends Changes to Mental Health Services

A new draft report commissioned by Michigan Gov. Rick Snyder recommends that thestate create pilot projects to test the coordination of physical and behavioral health services, while also maintaining current funding levels for Medicaidthrough HMOs. The report comes after the governor caused a stir among mental health providers and advocates when his budget recommended handing the state’smental health services over to Medicaid HMOs. The governor retracted that plan and ordered a working group to offer alternative recommendations. The77-page draft report contained 69 policy recommendations ranging from care coordination to access to services and quality measures, among other things.

Tennessee: CMS Extends TennCare 1115 Waiver

Tennessee secured a five-year extension of its TennCare 1115 waiver,which includes changes to Medicaid uncompensated care funding for hospitals, among other revisions. As it has in other states, CMS is reducing the amountof funding available to providers to offset uncompensated care costs. Starting in July, Tennessee will receive up to $709 million in uncompensated carefunding (down from $880 million). That amount reduces further to $627 million in July 2018. The waiver is in effect through June 2021.

Washington, D.C.: D.C. Mayor Signs “Right to Die” Bill

District of Columbia Mayor Muriel Bowser has signed legislation that will let terminally ill patients end their lives with medication prescribed by adoctor. Bowser’s decision to approve the so-called “right to die” bill makes D.C. the seventh jurisdiction to authorize the practice—unless Congress movesto block it. The D.C. Council overwhelmingly approved the legislation last month and Bowser signed it Dec. 19.

Similar to existing laws in several states, the D.C. legislation would require terminally ill patients with less than six months to live who wish to obtainlife-ending medication to get consent from two physicians. A patient must make two verbal requests as well as one request in writing. The written requestmust be made with two witnesses present who can verify the patient is acting voluntarily. The legislation also outlines reporting requirements forphysicians and the D.C. health department.

But Congress can still prevent the bill from becoming law. Once the bill is transmitted, lawmakers have 30 days to review it and could try to halt it bypassing a joint resolution of disapproval. If that resolution is not approved by the president within that 30-day period, the bill would become law.

5. Regulations Open for Comment

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.

CMS Releases Proposed Notice With Changes to Medicaid National Drug Rebate Agreement

On Nov. 7, CMS issued a proposed notice announcing changes that would be made to the Medicaid National Drug Rebate Agreement (NDRA) for use by theSecretary of the Department of Health and Human Services and manufacturers under the Medicaid Drug Rebate Program. The NDRA is being updated to incorporatelegislative and regulatory changes that have occurred since the agreement was published in February 1991, as well as to make editorial and structuralrevisions, such as references to the updated Office of Management and Budget (OMB)-approved data collection forms and electronic data reporting. There is a90-day comment period for this proposed notice that will end on Feb. 7, 2017.

For more information, click here.

Comments Due on IMPACT Act Cross-Setting Quality Measure

On Nov. 4, CMS announced that public comments are due Nov. 17 on a cross-setting post-acute care measure under the Improving Medicare Post-Acute CareTransformation Act of 2014 (IMPACT Act) to further develop and refinethe percentage of residents or patients with pressure ulcers that are new or worsened and language modifications being explored with the term “PressureInjury.” CMS seeks feedback on potential updates to measure specifications and items used to calculate the quality measure. Visit the Public Comment webpagefor more information.

CMS Issues Interim Final Rule to Delay Inclusion of U.S. Territories in Definitions of States and United States

CMS published the Covered Outpatient Drug Final Rule with Comment Period in the Federal Register on Feb. 1, 2016. As partof that final rule with comment, CMS amended the regulatory definitions of “States” and “United States” to include the U.S. territories (American Samoa,the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands) beginning April 1, 2017. However, the agency said thoseterritories could not be ready to implement the program by this date.

Therefore, CMS issued an Interim Final Rule with comment period that delays the inclusion of the territories in the definitions of “States” and “UnitedStates” from April 1, 2017, until April 1, 2020, which is effective on Nov. 15, 2016. There is a 60-day comment period that will end on Jan. 17, 2017.

For more information visit theCovered Outpatient Drugs Policy page on Medicaid.gov.

CMS Issues Proposed Rule for Medicaid Managed Care Plans

CMS has issued a new proposed rule detailing regulations for pass-through payments to providers from Medicaid managed care plans. The guidance builds onthe Medicaid managed care rule finalized by the Obama administration in May.

Read the proposed rulehere.

6. 2017 and Health Care

Looking Ahead: Repealing the Affordable Care Act

It is widely understood that Congress will repeal part of the Affordable Care Act (ACA) next year. While Congress will repeal the insurance requirementportion of the ACA, it is likely that the health care delivery changes required by the Medicare portion of the ACA will be kept in place. In the budgetcontext this means repealing benefits and some of the financing and keeping in place the cuts made in Medicare. In addition, Medicaid reform is likely tobe part of this effort. The overall thrust of the incoming administration and Republican-controlled Congress appears to be to return health care to thestates to provide them with the flexibility to create what they believe best provides coverage for their residents.

While there is a general understanding of how Congress will proceed, there are still many substantive issues that need to be answered.

Congress is expected to pass a “budget reconciliation” bill that repeals many ACA provisions. All indications are that the likely starting point for thismeasure will be the budget reconciliation bill Congress passed in December 2015, which was vetoed by President Obama. (Please see special budgetreconciliation process section for more detail.) The 2015 legislation did keep the Medicare cuts and health care delivery changes in place.

The 2015 vetoed bill, had it become law, would have struck from the Internal Revenue Code many ACA tax provisions (e.g., the Cadillac tax, medical devicetax, insurer premium tax, the “pharma brand name fee,” etc.). Although it has been widely reported that the bill also “repealed the employer mandate,” itdid not eliminate the ACA’s employer responsibility provision, Internal Revenue Code (IRC) Section 4980H. Instead, the bill changed the penalties to “zerodollars,” but otherwise left the provision unchanged. Likewise, the individual mandate also amended the tax code to make the penalty for failure to obtainrequired health coverage “zero dollars.” Most likely this awkward construct was because of rules particular to budget reconciliation.

The information reporting provisions to enforce the mandates (through the filing of IRS Form 1095-B or Form 1095-C) was not amended at all by thereconciliation measure, but remained in place.

The 2015 legislation is likely to be the starting point, but there may have to be some changes. For example, discussions on the Hill have begun to focus ona transition period. A range of time periods have been given for a transition period—from 6 months to 4 years. Presumably, that transition period wouldrequire some financing. Therefore, it cannot be assumed that all the taxes in the ACA would be immediately struck.

Medicaid is another area that raises questions about what Congress will decide to do. While most Republicans support block granting Medicaid, what happensto the expansion population is an important question. Would it be left up to the states to determine how to cover that population; would they be phased outor would Congress decide to take a portion of the federal savings from block granting and provide a tax credit for the expansion population so they maypurchase private coverage in a Medicaid managed care plan? Block granting would have significant ramifications for state budgets and how they manage theirMedicaid populations, should it occur.

Since last year’s bill is expected to be the template for the forthcoming ACA repeal measure, there will be implications if Congress “zeroes” thepenalties, but retains the existing employer information reporting requirements. Presumably, financial penalties for non-reporting would stillapply, even where the employer mandate penalties, themselves, are amended to make them zero dollars.

This would be highly frustrating for employer plan sponsors given the cost and ongoing challenge of Form 1095-B/Form1095-C and related reporting. Since theeffective date of repealing the exchange subsidies and Medicaid expansion will likely be delayed for some period, reporting obligations would also likelycontinue during the transition period in order to determine eligibility for individuals’ premium tax credits.

There is an additional reason Congress might retain a version of the employer information