United States: Weekly Washington Healthcare Update - May 27, 2014

This Week: Multiple House committees examine Medicare payment policies and reforms... Finance Committee advances Burwell HHS Secretary nomination... CMS final rule on insurance exchange and marketplace standards

1. CONGRESS

House

Ways and Means Examines Issues Related to Hospitals and Medicare

On May 20, 2014, the House Committee on Ways and Means Subcommittee on Health held a hearing on hospital issues in the Medicare program. Specifically, the hearing examined several key issues such as the Medicare two-midnights policy, short inpatient stays, outpatient observation stays, auditing and appeals. Members expressed concerns about, among other things, recovery audit contractors (RACs) and a recent decision by the Office of Medicare Hearings and Appeals (OMHA) to suspend for two years new referrals of claims appeals to Administrative Law Judges (ALJs), despite a large and growing backlog of appeals.

For more information, or to view the hearing, please visit waysandmeans.house.gov.

Oversight Subcommittee Hearing on Medicare Improper Payments

On May 20, 2014, the House Committee on Oversight and Government Reform Subcommittee on Energy Policy, Health Care and Entitlements held a hearing entitled "Medicare Mismanagement: Oversight of the Federal Government Effort to Recapture Misspent Funds." During the hearing, members of the subcommittee on both sides of the aisle expressed their displeasure with the current state of the RAC program for recouping improper payments, and a related backlog of ALJ appeals hearings. Rep. James Lankford (R-Okla.), chairman of the Committee on Oversight and Government Reform's Subcommittee on Energy Policy, Health Care & Entitlements, said that the third level of Medicare appeals, run by the Department of Health and Human Services' Office of Medicare Hearings and Appeals (OMHA), currently faces "a massive backlog of 460,000 pending appeals" for administrative law judge hearings.

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

Energy and Commerce Subcommittee Continues Work on "21st Century Cures"

On May 20, 2014, the House Energy and Commerce Subcommittee on Health held a hearing entitled "21st Century Cures: The President's Council of Advisors on Science and Technology (PCAST) Report on Drug Innovation." The 2012 PCAST report "Propelling Innovation in Drug Discovery, Development and Evaluation" identified a series of challenges and obstacles that raise costs, lengthen timelines and increase risk. These include difficulties in "translating" basic scientific discoveries into developable therapies, inefficient clinical trials, the need to streamline the regulatory process and the need to ensure that appropriate incentives are in place to encourage investment in U.S. biomedical research.

For more information, or to view the hearing, please visit energycommerce.house.gov.

Energy and Commerce Subcommittee Hearing on Medicare Payment Reform

On May 21, 2014, the House Energy and Commerce Subcommittee on Health held a hearing entitled "Keeping the Promise: Site of Service Medicare Payment Reforms." The hearing consisted of two panels of witnesses who testified on topics including site-neutral payments and the potential to increase efficiency and preserve program resources through bundling payments for post-acute services. The hearing allowed members of the subcommittee to hear testimony from the Medicare Payment Advisory Commission (MedPAC), which has examined how site-of-service payment reforms could reduce program outlays and beneficiary spending. In addition, witnesses discussed two specific pieces of legislation related to Medicare payments:

• H.R. 2869, Medicare Patient Access to Cancer Treatment Act of 2014: This bill, introduced by Mr. Rogers of Michigan, would establish payment parity under the Medicare program for ambulatory cancer care services furnished in the hospital outpatient department and the physician office setting.
• H.R. __, Bundling and Coordinating Post-Acute Care (BACPAC) Act of 2014: This bill, to be introduced by Mr. McKinley of West Virginia, would provide bundled payments for post-acute care services under Parts A and B of Medicare.

For more information, or to view the hearing, please visit energycommerce.house.gov.

Senate

Finance Committee Approves Burwell Nomination to Be HHS Secretary

On May 22, 2014, the Senate Finance Committee convened to review the nomination of Sylvia Mathews Burwell to the position of Secretary of the Department of Health and Human Services. The Committee ultimately approved Burwell's nomination by a vote of 21-3. Burwell's nomination will now go before the full Senate, which is expected to approve the nomination in June. If confirmed, Burwell, director of the Office of Management and Budget (OMB), would replace outgoing HHS Secretary Kathleen Sebelius, who announced her resignation in April. Prior to being confirmed by the U.S. Senate as the director of the OMB on April 24, 2013, with a 96-0 vote, Burwell served as president of the Walmart Foundation.

Commerce Committee Reviews Performance of Medical Loss Ratio Provision

On May 21, 2014, the Senate Commerce, Science and Transportation Committee held a hearing entitled "Delivering Better Health Care Value to Consumers: The First Three Years of the Medical Loss Ratio." The hearing examined the impact the minimum medical loss ratio (MLR) requirements in health care reform have had on making sure that health insurers are accountable to consumers and provide appropriate value for premium dollars. Under these provisions, health insurers must provide consumers rebates if the plans do not spend sufficient premium dollars on actual medical care as opposed to non-medical administrative expenses including profits.

For more information, or to view the hearing, please visit www.commerce.senate.gov.

2. ADMINISTRATION

CMS Final Rule on Medicare Advantage, Part D Version

On May 19, 2014, CMS issued final regulations (CMS-4159-F) for the Medicare Advantage and prescription drug benefit (Part D) programs. The final rule contains efforts to curb fraud and abuse and to improve benefits and the quality of care for seniors and people with disabilities enrolled in these programs. Specifically, the final rule:

• Requires Part D prescribers to enroll in Medicare: CMS is requiring that physicians and eligible professionals who prescribe covered Part D drugs be enrolled in Medicare, or have a valid record of opting out of Medicare, in order for their prescriptions to be covered under Part D. Requiring prescribers to enroll in Medicare would help CMS ensure that Part D drugs are prescribed only by qualified individuals. The final rule allows more time -- until June 1, 2015 -- for implementation.
• Revokes Medicare enrollment for abusive prescribing practices and patterns: CMS will have the authority to revoke a physician or eligible professional's Medicare enrollment if CMS determines that he or she has a pattern or practice of prescribing that is abusive, represents a threat to the health and safety of Medicare beneficiaries, or otherwise fails to meet Medicare requirements. CMS will also be able to revoke a physician's or eligible professional's Medicare enrollment if his or her Drug Enforcement Administration (DEA) Certificate of Registration is suspended or revoked, or if the applicable licensing or administrative body for any state in which he or she practices suspends or revokes his or her ability to prescribe drugs.
• Expands prevention and health improvement incentives: The final rule expands rewards and incentive programs that focus on encouraging participation in activities that promote improved health and efficient use of health care resources and prevent injuries and illness.
• Broadens the release of privacy-protected Part D data: CMS will expand the release of unencrypted, prescriber, plan and pharmacy identifiers contained in prescription drug event records to give the public broader access to health care data pursuant to CMS' policies and procedures for release of such data while still preserving the privacy of Medicare beneficiaries.

The final rule is projected to save an estimated $1.615 billion over the next 10 years, 2015-2024.

HHS Awards $110 Million in Delivery System Reform Grants

On May 22, 2014, HHS announced 12 prospective recipients' receiving as much as $110 million in combined funding, ranging from an expected $2 million to $18 million over a three-year period, under the Health Innovation Awards program to test innovative models designed to deliver better care outcomes and lower costs. Examples include projects to provide better care for dementia patients, improve coordination between specialists and primary care physicians, and improve cardiac care. Round two of the Health Care Innovation Awards program focuses on four priority areas: rapidly reducing costs for patients with Medicare and Medicaid; improving care for populations with specialized needs; testing improved financial and clinical models for specific types of providers, including specialists; and linking clinical care delivery to preventive and population health. The 12 prospective recipients will test models in all four categories and spanning 13 states. Additional prospective recipients will be announced in the coming months.

White House Deputy Chief of Staff to Focus on Information Technology, ACA

According to a statement by White House Chief of Staff Dennis McDonough, White House adviser Kristie Canegallo has been named deputy chief of staff to focus on implementing the Affordable Care Act and information technology changes, among other duties. Prior to her hiring at the White House in October 2008, Canegallo served in Iraq as an adviser to the Anbar provincial government, and she worked in Afghanistan in 2007 in the U.S. Embassy. Prior to that, she was a credit derivatives analyst with Goldman Sachs & Co., where insurance companies, hedge funds and banks were her clients.

CMS Releases Final Rule on 2015 ACA Health Insurance Exchanges

On May 16, 2014 the Centers for Medicare and Medicaid Services (CMS) released a final rule on a wide range of policy issues impacting the administration of ACA health insurance marketplaces beginning in 2015. The 400-page rule, entitled "Exchange and Insurance Market Standards for 2015 and Beyond," implements proposed policies affecting insurance coverage, including standardization of health insurer consumer notices, insurer quality rating information, the Small Business Health Options Program (SHOP), standards for Navigators and other consumer assistance personnel, and premium stabilization programs for insurers, among other guidelines. The rule was accompanied by a fact sheet and a set of Frequently Asked Questions released by CMS on the same day.

The policy changes found within the rule were previously described in the preamble of the HHS Notice of Benefit and Payment Parameters for 2015 and the Notice of Proposed Rule Making (NPRM) for this rule, both released in March 2014. The rapid turnaround on this rule (less than two months since the March 14 proposed rule release) demonstrates the urgency CMS felt to promulgate the regulations that insurers must adhere to by 2015, as many insurers are still deciding whether they should offer coverage through the exchanges and establishing their plan rates for 2015.

3. STATE ACTIVITIES

Nevada Latest State to Opt for Federally Run Exchange

Last week, the Nevada exchange board voted unanimously to end its $75 million contract with Xerox, becoming the fourth state to scrap a state-run exchange in favor of a federally facilitated exchange, HealthCare.gov. Nevada Gov. Sandoval was the only Republican governor to operate a state-based exchange. Sandoval also opted to expand the state's Medicaid program, as provided for under the ACA. Nevada initially set out to enroll 118,000 people by March 31, but severe tech problems forced state officials in January to slash the projection to 50,000. As of May 10, just 35,000 had officially enrolled.

4. REGULATIONS OPEN FOR COMMENT

CMS Proposed Rule: Medicare, Medicaid EHR Incentive Program

On May 23, 2014, CMS issued a proposed rule that would change the meaningful use stage timeline and the definition of certified electronic health record technology (CEHRT). It would also change the requirements for the reporting of clinical quality measures for 2014. Certified EHR technology is defined for the Medicare and Medicaid HER Incentive Programs at 42 CFR 495.4, which references the Office of the National Coordinator for Health Information Technology's (ONC) definition of CEHRT under 45 CFR 170.102. For Stages 1 and 2 of meaningful use, CMS and ONC worked closely to ensure that the definition of meaningful use of CEHRT and the standards and certification criteria for CEHRT were coordinated. The definition of CEHRT under 45 CFR 170.102 requires, beginning with federal fiscal year (FY) and calendar year (CY) 2014, EHR technology certified to the 2014 Edition EHR certification criteria. Therefore, all EPs, eligible hospitals and CAHs must use 2014 Edition CEHRT to meet meaningful use under the Medicare and Medicaid EHR Incentive Programs, beginning with FY 2014 and CY 2014. Beginning in 2015, all eligible hospitals and professionals would still be required to report using the 2014 Edition CEHRT. The proposed rule also includes a provision that would formalize CMS' and ONC's previously stated intention to extend Stage 2 through 2016 and begin Stage 3 in 2017.

To view the CMS press release on the proposed rule, visit cms.gov.

Medicare Program; Prior Authorization Process for Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Items

On May 23, 2014, CMS issued a proposed rule that would establish a prior authorization process for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) items that are frequently subject to unnecessary utilization and would add a contractor's decision regarding prior authorization of coverage of DMEPOS items to the list of actions that are not initial determinations and therefore not appealable.

The proposed rule is intended to replicate the Medicare Prior Authorization of Power Mobility Device Demonstration. Launched in 2012, the demonstration established a prior authorization process for certain power mobility devices. Based on September 2013 claims data, monthly expenditures for certain power mobility devices decreased from $12 million in September 2012 to $4 million in August 2013 across the seven demonstration states (California, Florida, Illinois, Michigan, New York, North Carolina and Texas) with no reduction in beneficiary access to medically necessary items. CMS seeks to leverage this success by extending the demonstration to an additional 12 states. These states include Arizona, Georgia, Indiana, Kentucky, Louisiana, Maryland, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee and Washington. This will bring the total number of states participating in the demonstration to 19.

CMS also proposes to establish a prior authorization process for certain durable medical equipment, prosthetics, orthotics and supplies items that are frequently subject to unnecessary utilization. Through a proposed rule, CMS will solicit public comments on this prior authorization process, as well as criteria for establishing a list of durable medical items that are frequently subject to unnecessary utilization that may be subject to the new prior authorization process. CMS will launch two payment model demonstrations to test prior authorization for certain non-emergent services under Medicare. These services include hyperbaric oxygen therapy and repetitive scheduled non-emergent ambulance transport. Information from these models will inform future policy decisions on the use of prior authorization.

The deadline to submit comments is July 28, 2014.

OIG Proposed Rule to Promote Civil Monetary Penalties for Health Fraud

On May 12, the Department of Health and Human Services Office of Inspector General published a rule in the Federal Register that would expand the use of civil monetary penalties (CMPs). Under the rule, CMPs could be applied to entities for failing to provide OIG with quick access to documents, ordering or prescribing medication or services while excluded from participation in federal health care programs, making false statements on enrollment applications, failing to report or return overpayments, and making a false statement that is part of a fraudulent claim. In addition, the proposed rule would also allow CMPs to be imposed on Medicare Advantage and Medicare Part D organizations. Comments on the rule are due July 11.

CMS Proposed Rule FY 2015 Hospice Payment Rate Update

On May 2, 2014, CMS issued a proposed rule [CMS-1609-P] that would update fiscal year (FY) 2015 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. As proposed, hospices would see an estimated 1.3 percent ($230 million) increase in their payments for FY 2015. The hospice payment increase would be the net result of a proposed hospice payment update to the hospice per diem rates of 2 percent (a "hospital market basket" increase of 2.7 percent minus 0.7 percent for reductions mandated by law), and a 0.7 percent decrease in payments to hospices due to updated wage data and the sixth year of CMS' seven-year phase-out of its wage index budget neutrality adjustment factor (BNAF). This rule also provides an update on hospice payment reform analyses and solicits comments on "terminal illness" and "related conditions" definitions, and on a process and appeals for Part D payment for drugs, while beneficiaries are under a hospice election. In addition, the rule proposes timeframes for filing the notice of election and the notice of termination/revocation; adding the attending physician to the hospice election form; a requirement that hospices complete their hospice inpatient and aggregate cap determinations within five months after the cap year ends, and remit any overpayments; and updates for the hospice quality reporting program.

Public comments on the proposal will be accepted until July 1, 2014.

CMS Final Rule -- Federally Qualified Health Center Prospective Payment System

On May 2, 2014, CMS issued a final rule with comment period to implement methodology and payment rates for a prospective payment system (PPS) for federally qualified health center (FQHC) services under Medicare Part B beginning on Oct. 1, 2014, in compliance with the statutory requirement of the Affordable Care Act. In addition, it establishes a policy that allows rural health clinics (RHCs) to contract with nonphysician practitioners when statutory requirements for employment of nurse practitioners and physician assistants are met, and makes other technical and conforming changes to the RHC and FQHC regulations. Finally, this final rule with comment period implements changes to the Clinical Laboratory Improvement Amendments (CLIA) regulations regarding enforcement actions for proficiency testing (PT) referrals. Comments will be accepted through July 1, 2014.

CMS Issues Proposed Hospital Inpatient Payment Regulation

CMS issued a proposed rule that would update fiscal year (FY) 2015 Medicare payment policies and rates for inpatient stays at general acute care and long-term care hospitals (LTCHs). This rule builds on the Obama administration's efforts through the Affordable Care Act to promote improvements in hospital care that will lead to better patient outcomes while slowing the long-term health care cost growth. CMS projects that the payment rate update to general acute care hospitals will be 1.3 percent in FY 2015. The rate update for long-term care hospitals will be 0.8 percent. The difference in the update is accounted for by different statutory and regulatory provisions that apply to each system.

The rule's most significant changes are payment provisions intended to improve the quality of hospital care, which reduce payment for readmissions and hospital acquired conditions (HACs). The rule also includes proposed changes to the Hospital Inpatient Quality Reporting (IQR) Program. The rule also describes how hospitals can comply with the Affordable Care Act's requirements to disclose charges for their services online or in response to a request, supporting price transparency for patients and the public.

CMS will accept comments on the proposed rule until June 30, 2014, and will respond to comments in a final rule to be issued by Aug. 1, 2014.

Fiscal Year 2015 Inpatient Psychiatric Facilities Prospective Payment System

On May 1, 2014, CMS issued a proposed rule that would update the prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs). These changes would be applicable to IPF discharges occurring during the fiscal year (FY) beginning Oct. 1, 2014, through Sept. 30, 2015. This proposed rule would also address implementation of ICD-10-CM and ICD-10-PCS codes; propose a new methodology for updating the cost of living adjustment (COLA); and propose new quality measures and reporting requirements under the IPF quality-reporting program. The proposed rule will appear in the May 6, 2014, Federal Register and will be open to public comment for 60 days.

Proposed Fiscal Year 2015 Payment and Policy Changes for Medicare Inpatient Rehabilitation Facilities

On May 1, 2014, CMS issued a proposed rule that would update the prospective payment rates for inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 2015 (for discharges occurring on or after Oct. 1, 2014, and on or before Sept. 30, 2015) as required by the statute. The rule also proposes to collect data on the amount and mode (that is, Individual, Group and Co-Treatment) of therapy provided in the IRF setting according to therapy discipline, revise the list of impairment group codes that presumptively meet the "60 percent rule" compliance criteria, provide for a new item on the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI) form to indicate whether the prior treatment and severity requirements have been met for arthritis cases to presumptively meet the "60 percent rule" compliance criteria, and revise and update quality measures and reporting requirements under the IRF quality reporting program (QRP). The proposal also addresses the implementation of the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF prospective payment system (PPS), effective when ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRF-PAI submissions. The proposed rule will appear in the May 7 Federal Register and will be open to public comments for 60 days.

FDA Proposed Rule on Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act

FDA has issued a proposed rule that would deem products meeting the statutory definition of "tobacco product," except accessories of a proposed deemed tobacco product, to be subject to the Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act). The Tobacco Control Act provides FDA authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco and any other tobacco products that the Agency by regulation deems to be subject to the law. Option 1 of the proposed rule would extend the Agency's "tobacco product" authorities in the FD&C Act to all other categories of products, except accessories of a proposed deemed tobacco product, that meet the statutory definition of "tobacco product" in the FD&C Act. Option 2 of the proposed rule would extend the Agency's "tobacco product" authorities to all other categories of products, except premium cigars and the accessories of a proposed deemed tobacco product, that meet the statutory definition of "tobacco product" in the FD&C Act. FDA also is proposing to prohibit the sale of "covered tobacco products" to individuals under the age of 18 and to require the display of health warnings on cigarette tobacco, roll-your own tobacco and covered tobacco product packages and in advertisements. FDA is taking this action to address the public health concerns associated with the use of tobacco products. Comments are due July 9, 2014.

CMS Proposed Rule on Life Safety Codes for Medicare, Medicaid Providers

On April 14, 2014, CMS announced a proposed rule on the adoption of an updated life safety code (LSC) that CMS would use in its ongoing work to ensure the health and safety of all patients, family and staff in every provider and supplier setting. The updated code contains new provisions that are vital to the health and safety of all patients and staff. CMS intends to adopt the National Fire Protection Association's (NFPA) 2012 editions of the (LSC) and the Health Care Facilities Code (HCFC), as the 2012 edition of the LSC also is aligned with the international building codes to make compliance across codes much simpler for Medicare- and Medicaid-participating facilities.

Currently, CMS applies the standards set out in the 2000 edition of the LSC to facilities in order to ensure patients' and caregivers' health and safety. CMS is now proposing to adopt the 2012 editions of the LSC and the Health Care Facilities Code. The LSC sets out fire safety requirements for new and existing buildings, and is issued by the NFPA, a private, nonprofit organization dedicated to reducing loss of life due to fire. The new edition of the LSC applies to: hospitals, long-term care facilities (LTC), critical access hospitals (CAHs), Programs for All-Inclusive Care for the Elderly (PACE®), religious nonmedical healthcare institutions (RNHCIs), hospice inpatient facilities, ambulatory surgical centers (ASCs) and intermediate care facilities for individuals with intellectual disabilities (ICF-IIDs).

Comments are due June 16, 2014.

5. REPORTS

GAO

Medicare: Further Action Could Improve Improper Payment Prevention and Recoupment Efforts

According to a report released May 20, 2014, by GAO, CMS has made progress improving improper payment prevention and recoupment efforts in the Medicare fee-for-service (FFS) program, but further actions are needed. Specifically, CMS has implemented certain provider enrollment screening procedures authorized by the ACA that address past weaknesses identified by GAO and others. The agency has also put in place other measures intended to strengthen existing procedures, but could do more to improve provider enrollment screening and ultimately reduce improper payments. For example, CMS has hired contractors to determine whether providers and suppliers have valid licenses, meet certain Medicare standards and are at legitimate locations. CMS also recently contracted for fingerprint-based criminal history checks of providers and suppliers it has identified as high risk. However, CMS has not implemented other screening actions authorized by PPACA that could further strengthen provider enrollment. CMS has also taken steps to improve the development of certain prepayment edits -- prepayment controls used to deny Medicare claims that should not be paid; however, important actions that could further prevent improper payments have not yet been implemented. Lastly, postpayment claims reviews help CMS identify and recoup improper payments. GAO has found that differing requirements for the various postpayment review contractors may reduce the efficiency and effectiveness of such reviews.

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