Washington Healthcare Update

January 16, 2018

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This Week: Finance Held HHS Nominee Hearing, CHIP Doesn’t Cost So Much After All…CMS Launches New Bundled Payment Program…CMS Issues Guidance on Medicaid Work Requirements.

1. Congress



2. Administration

3. Courts

4. Reports

1. Congress


Steering Committee Recommends Rep. Steve Womack to be New House Budget Committee Chair

On Jan. 10, the House Republican Steering Committee recommended Rep. Steve Womack (R-AR) to chair the House Budget Committee, replacing Rep. Diane Black (R-TN) who is stepping down from the chairmanship to focus on running for governor. The appointment has to be voted on by the Republican House conference and voted on the floor.      

Womack enjoys close relationships with GOP leaders, has been a proficient fundraiser for the party and is for reducing mandatory spending—a belief that will win him support with the committee’s fiscal hawks.

If ratified, Womack could leave the Budget Committee Chairmanship next year for a coveted subcommittee chairmanship on the more powerful House Appropriations Committee.

CBO Says CHIP Doesn’t Cost So Much After All

The Congressional Budget Office determined the cost of funding CHIP for five years is now only $800 million. That is $7.5 billion less than previous estimates. Advocates are now looking to extend CHIP for six years. Advocates say extension for six years would actually save money because the cost of CHIP gets cheaper once the federal match declines to pre-Affordable Care Act levels.

The House is weighing a longer-term funding renewal of the program. Energy and Commerce Chair Greg Walden (R-OR) said they are now discussing a six-year reauthorization of CHIP that may have no cost to the federal government. It was not clear whether the package would be included in a Jan. 19 spending bill or could move separately. How to pay for the previously considered package had been a point of contention between the parties.

House Energy and Commerce Committee Releases Recommendations on 340B

On Jan. 10 the House Energy and Commerce Committee released a report recommending changes to the 340B drug discount program, including giving the Health Resources and Services Administration more authority and resources, requiring more audits of manufacturers and providers and clarifying the intent of the 340B program.

The committee held multiple hearings on the program last year and raised concerns about the program’s rapid rate of growth. To read the report:   https://energycommerce.house.gov/news/press-release/new-ec-report-examines-340b-drug-pricing-program/


Senate Finance Holds Nomination Hearing for HHS Secretary Nominee

On Tuesday, Alex Azar, the administration’s nominee for secretary of Health and Human Services, went before Senate Finance to face intense questioning from Democrats about his plans for the Affordable Care Act and drug pricing.  

Azar was sympathetic to concerns about escalating drug prices, assuring the committee he had a holistic view of how to untangle a complex system that encourages drug makers to continuously raise prices.

He stated he wanted to explore ways to bring down “list prices” that drug manufacturers set before offering discounts—an area that the industry has been reluctant to address. He also expressed interest in creating a private-sector negotiation process that could bring down the costs of physician-administered drugs. Otherwise, he declined to endorse specific measures as he expressed support for creating more transparency and competition among manufacturers.

Azar is widely expected to be confirmed as HHS secretary with broad Republican support and some votes from some centrist Democrats. Sens. Joe Manchin (D-WV) and Heidi Heitkamp (D-ND) have already voiced support for Azar.

Market Stabilization Anyone?

Sen. Susan Collins (R-ME) said that leadership did not meet her deadline of passing legislation to stabilize the exchanges before the end of the year; she is now working to pass the legislation before premiums rise in 2019. 

Sens. Alexander (R-TN) and Murray (D-WA) have also restarted talks concerning market stabilization.

2. Administration

CMS Announces New Bundled Payment Model

The Centers for Medicare & Medicaid Services (CMS) Center for Medicare and Medicaid Innovation (Innovation Center) announced the launch of a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced (BPCI Advanced). Under traditional fee-for-service payment, Medicare pays providers for each individual service they perform. Under this bundled payment model, participants can earn additional payment if all expenditures for a beneficiary’s episode of care are under a spending target that factors in quality.

BPCI Advanced Participants may receive payments for performance on 32 different clinical episodes, such as major joint replacement of the lower extremity (inpatient) and percutaneous coronary intervention (inpatient or outpatient). An episode model such as BPCI Advanced supports health care providers who invest in practice innovation and care redesign to improve quality and reduce expenditures.

Of note, BPCI Advanced will qualify as an Advanced Alternative Payment Model (Advanced APM) under the Quality Payment Program. In 2015, Congress passed the Medicare Access and CHIP Reauthorization Act or MACRA. MACRA requires CMS to implement a program called the Quality Payment Program or QPP, which changes the way physicians are paid in Medicare. QPP creates two tracks for physician payment—the Merit-based Incentive Payment System or MIPS track and the Advanced APM track. Under MIPS, providers have to report a range of performance metrics and then have their payment amount adjusted based on their performance. Under Advanced APMs, providers take on financial risk to earn the Advanced APM incentive payment.

In BPCI Advanced, participants will be expected to redesign care delivery to keep Medicare expenditures within a defined budget while maintaining or improving performance on specific quality measures. Participants bear financial risk, have payments under the model tied to quality performance and are required to use Certified Electronic Health Record Technology. By meeting these requirements, the model qualifies as an Advanced APM. The 32 types of clinical episodes in BPCI Advanced add outpatient episodes to the inpatient episodes that were offered in the Innovation Center’s previous bundled payment model (the Bundled Payments for Care Improvement initiative), including percutaneous coronary intervention, cardiac defibrillator.

CMS designed this model taking into account rigorous evaluation results from previous CMMI models, industry experience with bundled payment and stakeholder input from health care providers at acute care hospitals, physician group practices and other providers and suppliers. BPCI Advanced seeks to support and encourage participants who are interested in:

  • continuously redesigning and improving care;
  • decreasing costs by eliminating care that is unnecessary or provides little benefit to patients;
  • encouraging care coordination, and fostering quality improvement;
  • participating in a payment model that tests extended financial accountability for the outcomes of improved quality and reduced spending;
  • creating environments that stimulate rapid development of new evidence-based knowledge; and
  • increasing the likelihood of better health at lower cost through patient engagement, education and ongoing communication between doctors and patients.

The Model Performance Period for BPCI Advanced starts on Oct. 1, 2018, and runs through Dec. 31, 2023. Like all models tested by CMS, there will be a formal, independent evaluation to assess the quality of care and changes in spending under the model.

For more information about the model and its requirements, or to download a Request for Applications document (RFA), the application template and the necessary attachments, please visit: https://innovation.cms.gov/initiatives/bpci-advanced. Applications must be submitted via the Application Portal, which will close on 11:59 p.m. EST on March 12, 2018. Applications submitted via email will not be accepted.

The CMS Innovation Center will hold a Q&A Open Forum on Tues., Jan. 30, 2018, from 12 p.m.–1 p.m. ET. This event is open to those who are interested in learning more about the model and how to apply. Please register in advance here: https://preaward.adobeconnect.com/e3cdwg6hgx9f/event/registration.html.

CMS Issues Guidance Concerning Work Requirements in Medicaid

On Jan. 11, CMS told state Medicaid directors and governors that they will begin approving state waivers that include work requirements. CMS urges states to model Medicaid work requirements after those in SNAP and TANF.  On January 12, Kentucky’s waiver with work requirements was approved.  Beneficiary advocates are expected to test the inclusion of work requirements in court.

The policy guidance is the most concrete development of a policy shift toward achieving the goal of tying Medicaid benefits to employment.

CMS in its letter to state Medicaid directors outlined the criteria it would use to approve state employment proposals that would require able-bodied, working-age Medicaid enrollees to get a job or participate in a related activity like job training for at least 20 hours a week in order to keep their health coverage. CMS Administrator Seema Verma has made it clear from the moment she took office last year that the Trump administration will approve such proposals, but requests from nearly a dozen conservative states have stalled with federal officials for months.

Other states that have submitted waiver requests to CMS include: Kentucky, Arkansas, Wisconsin, Utah, Mississippi, Kansas, Arizona, Maine, New Hampshire and Indiana. To learn more about the guidance:  


FDA and Pentagon Agree on Plan for Drug Approvals

The Food and Drug Administration and the Department of Defense have reached an agreement for the FDA to expedite military requests for product approvals. This agreement comes two months after DOD attempted to go around the FDA and get authority to approve drugs on their own. 

Under the plan, FDA will take seven steps to improve its dealings with the Pentagon, notably treating priority military requests as though they had FDA breakthrough designation. That classification requires the agency to expedite reviews and approvals.

Much of the responsibility to oversee the agreement at FDA will fall to the Center for Biologics Evaluation and Research.

3. Courts

Hospitals to Appeal 340B Decision

Hospital associations have told a federal court that they intend to appeal a Dec. 29, 2017, decision rejecting their attempts to block $1.6 billion in cuts to the government’s 340B drug discount program.

The American Hospital Association, Association of American Medical Colleges, America’s Essential Hospitals and other interests previously said they were exploring legal options.

The administration’s 28.5 percent cut to payments for certain drugs to many hospitals serving low-income populations took effect Jan. 1.

U.S. District Court Judge Rudolph Contreras last month rejected a hospital industry request for an injunction to block the cuts. Hospitals argued in court that Congress intended office-delivered drugs to be discounted for hospitals that serve poorer patients. HHS countered that the law gives it broad authority to set payment rates for hospital services.

Court Holds Oral Arguments on Disputed ACA Payments for Insurers

On Jan. 9, a federal appeals court considered whether the Trump administration must pay health insurers payments promised in the Affordable Care Act.  

Federal courts have so far split on whether the federal government owes money to the health insurers. In November 2016, Land of Lincoln Health, a now-defunct nonprofit startup in Illinois, lost its case in the Court of Federal Claims, seeking more than $70 million. But last February, a judge from the same court awarded Oregon-based Moda Health more than $200 million. Both insurers said the government’s tab has grown by tens of millions of dollars since then.

Those cases have now been combined before a three-judge appellate panel that will hold oral arguments in Washington. The ruling is likely to establish a precedent for similar lawsuits winding through the court system.

A ruling on the risk corridor cases is expected within six months, but that might not be the end of the issue. Either side could appeal to the Supreme Court—raising the possibility the country’s top court would once again be faced with taking up an Obamacare case with huge implications.

Congress could also try to block the funds from being paid out if the insurers prevail in court. Any claims would need to be covered by the federal government’s “judgment fund.”

4. Reports

Government Accountability Office: Medicaid: Further Action Needed to Expedite Use of National Data for Program Oversight

GAO-18-70:  Released Jan. 8, 2018

State-reported data helps the federal government oversee the Medicaid program, which made an estimated $36.7 billion in payment errors in 2017. However, there have been concerns that this data is not sufficient for effective oversight.

To help, federal administrators established a new data repository. Nearly all states now submit data that could be used to improve oversight and program management. However, the program is still missing its overall goals, in part due to incompatibility of state data.

The GAO recommended federal administrators take steps to expedite collection of complete and comparable data, and draft a plan for how they will use the data.

To read the report: https://www.gao.gov/products/GAO-18-70

If you have any questions, contact the following individuals atMcGuireWoods Consulting:

StephanieKennan, Senior Vice President
Anne Starke, Research Associate

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