United States: Washington Healthcare Update - June 08, 2015

This Week: House Ways & Means Committee Holds Markup; Makes Significant Legislative Changes to Health Care Bills... Senate Finance Committee Holds Markup on Medicare Appeals Process Bill... CMS Issues Final Rule on Accountable Care Organizations... CMS Posts Proposed Health Insurance Rate Increases for 2016

1. Congress

House

House Ways & Means Committee Holds Markup; Makes Significant Legislative Changes to Health Care Bills

On June 2, 2015, the House Ways and Means Committee held a markup on ten health care bills, during which two sections of the Affordable Care Act (ACA) were repealed: the medical device excise tax and the Independent Payment Advisory Board (IPAB). During the markup, committee members cited how the implementation of the medical device tax has caused companies to shift operations overseas and lay off employees due to the tariff's tax on revenues rather than profits. Likewise, IPAB was repealed due to lawmakers' concerns that rulemaking and Congressional authority would be transferred into the hands of unelected bureaucrats who have the ability to control and alter Medicare spending. The committee also unanimously passed a Long-Term Care Hospital bill that approved a specific number of long-term care hospitals to expand their operations or to open. Five bills were passed concerning the Medicare Advantage programs, including ones that delayed CMS ability to terminate contracts because of low star ratings, stronger CMS data reporting guidelines and expanded the timetable for seniors to switch plans. The two other small bills that moved out of committee include the Steve Gleason Act, named after the former NFL football player who was diagnosed with ALS, which requires Medicare to cover specific eye-tracking and gaze-interaction devices for qualified individuals, and a bill that expands the Medicare Independence at Home Medical Practice Demonstration program for two years.

More information on the markup can be found here.

House E&C Committee Held Hearing to Reduce Medicaid Fraud

On June 2, House Energy and Commerce Oversight and Investigations Chairman Tim Murphy held a hearing titled "Medicaid Program Integrity: Screening Out Errors, Fraud, and Abuse." The hearing focused on reducing wasteful spending in the Medicaid program, through reducing improper or fraudulent payments to beneficiaries and providers. Evidence from the Government Accountability Office and the Office of Management and Budget indicates the numerous errors in state programs, such as the ability for providers to continue to bill Medicaid state programs despite exclusion from the program. Gaps remain in the Centers for Medicare & Medicaid's attempts to screen the eligibility of providers and beneficiaries, according to a GAO study. The witnesses gave the committee insight on current federal oversight of the program and the fraud issues that exist at the state level.

Senate

Senate Judiciary Approves Patent Reform Legislation

On June 4, 2015, the Senate Judiciary Committee favorably reported S. 1137, the PATENT Act, out of committee by a 16-4 vote after a brief markup. The bill, which was introduced by Chairman of the committee Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT), aims to curb lawsuits brought by "patent trolls" by setting a national standard for what is considered a deceptive patent demand letter. The legislation also gives the Federal Communications Commission expanded enforcement authority. The measures in the bill do not go as far as Pharma would like, but the industry agrees that the changes make it easier for patent holders facing an IPR challenge. "Abusive patent litigation is a threat to our economy and costs consumers and businesses billions of dollars each year. Too often, small business owners are being targeted for doing nothing more than using off-the-shelf products. These types of frivolous lawsuits cost them millions of dollars and force them to settle despite having a strong defense," Chairman Grassley said in a press release. Worth noting, the legislation is still a work-in-progress, as in the Manager's Amendment there is placeholder language for amending claims in the Patent and Trademark Office's proceedings. Negotiations are ongoing regarding this provision. Another issue concerns a proposal by the life sciences community about the applicability of the Patent and Trademark Office's post-grant proceedings to patents that are subject to the Hatch-Waxman Act and Biologics Price Competition and Innovation Act processes. The co-sponsors have agreed to work on these issues as the bill proceeds to the Senate floor.

Senators Reintroduce Bipartisan Bill Aimed at Increasing and Improving Opioid Addiction Treatment

Sens. Rand Paul (R-KY) and Edward Markey (D-MA.) reintroduced the Recovery Enhancement for Addiction Treatment Act (TREAT Act) on May 28, to expand specialized treatment for prescription drug and heroin addiction. Specifically, the legislation would expand the ability of addiction medical specialists and other trained medical professionals to provide lifesaving medication-assisted therapies such as buprenorphine (also called Suboxone ®) for patients battling heroin and prescription drug addiction. Unfortunately, due in part to federal restrictions, of the approximately 2.4 million people dealing with prescription drug and heroin dependency in 2013, only half received specialty treatment for their condition. "Heroin addiction is on the rise in Kentucky and throughout the country, and government's solution of locking up people with addiction is not solving the problem. The TREAT Act will remove a roadblock to getting people the help they need to break the cycle of addiction and get on a path to recovery," said Sen. Paul in a press release. The TREAT Act also calls for the creation of "Qualified Practice Settings," which are clinical settings that meet certain standards and qualification and mandates that the Government Accountability Office (GAO) look into potential alterations for a myriad of different aspects of current addiction treatment practices and policies. In 2013, 44,000 people died in the United States because of drug overdoses. As that number has risen in the past decade, States and Health care providers have attempted to adapt and keep up with the increased demand for overdose and addiction treatment.

Bipartisan Bill to Improve Rural Health Care Introduced

Sens. Maria Cantwell and Patty Murray, both Washington Democrats, and Sen. John Thune (R-SD) introduced a new bipartisan bill, the Rural ACO Improvement Act, aimed at improving care in rural areas through Medicare Accountable Care Organizations (ACOs). S.1456 instructs Medicare to provide care in an ACO to beneficiaries who receive primary care services from nurse practitioners, physician assistants, rural health clinics or federally qualified health centers, specifically because these patients live in rural communities where primary care doctors are in short supply. Rural Health Clinics are included as well. Under current law, patients who see only nurse practitioners, physicians' assistants and clinical nurses are not eligible to be counted toward shared savings. These changes will also ensure that health care providers attain enough ACO participants to maintain the model. "This bipartisan legislation takes several common-sense steps that would not only help rural ACOs get off the ground, but would also result in more coordinated access to value-based rural health care for Medicare beneficiaries across the country," said Sen. Thune in a press release. In ACOs, health care providers are responsible for effectively managing the health and wellness of patients: when an ACO delivers high-quality care at a lower cost than traditional fee-for-service spending, the ACO recoups part of the savings. Created by Congress in 2010, the Medicare Shared Savings Program is a voluntary program enabling health care providers to share savings with Medicare if they beat cost targets and achieve specified quality measures.

Senate Finance Committee Holds Markup on Medicare Appeals Process Bill

The Senate Finance Committee held a markup June 3 to finalize the Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act, following several committee hearings to investigate ways to streamline the appeals and audit process and clear the 870,000 pending appeals in backlog. The far-ranging appeals reform legislation, which includes many measures originally proposed in the President's FY 2016 Budget, would instruct auditors to send claims back to the first level of appeals when new evidence is submitted later in the appeals process and create an exemption for beneficiaries, the Centers for Medicare and Medicaid Services (CMS) and contractors if they submit new information after the first level of appeals. Others appealing are exempted from the process if introducing new information is justified because those handling the lower levels of appeals inadvertently left information out of the record, a lower level of appeals made a decision on different grounds than the initial decision or other circumstances determined by Department of Health and Human Services (HHS) come into play. The AFIRM Act also would create a Medicare Magistrates division to handle smaller appeals amounting to less than $1,460, or the amount required to take a claim to a federal court. "Increased Medicare payment appeals from a range of Medicare providers and suppliers has resulted in a substantial backlog, causing financial and administrative problems that sometimes last years," Sens. Hatch and Wyden said in a statement. "This legislation is designed to improve the appeals process at HHS while upholding the integrity of the audit process so that providers and beneficiaries are not indefinitely left in limbo." Other provisions included in legislation include the creations of an independent Ombudsman for Medicare Reviews and Appeals to help people considering appeals and additional funding for CMS to hire more contractors to help slog through the existing appeals backlog. The committee voted the legislation out of committee by voice vote.

For more information, or to watch the markup, please visit finance.senate.gov.

2. Administration

CMS Releases New Medicare Data on Hospital and Physician Utilization

On June 1, 2015, the Centers for Medicare and Medicaid Services (CMS) released Medicare Part A hospital utilization and payment data as well as Medicare Part B physician and other supplier utilization data for FY 2013 as a means to increase the transparency over hospital and physician utilization respectively. The Medicare Part A data provides insight into the average costs of the 100 most common Medicare procedures, both inpatient and outpatient services, as well as information on services and procedures provided to Medicare beneficiaries by physicians or other health care professionals. According to the hospital data, the most frequently occurring hospital discharges are for major joint replacements, followed by sepsis, digestive disorders, heart failure and pneumonia. Moreover, hematology, oncology, rheumatology and dermatology have the highest average Part B costs per provider. The released data shows what different hospitals and physicians in all 50 states and Washington, D.C., charge for similar services.

CMS Posts Proposed Health Insurance Rate Increases for 2016

In a June 1 press release, the Centers for Medicare and Medicaid Services (CMS) posted proposed health insurance rate increases of 10 percent or more for the 2016 coverage year on ratereview.health.gov. In an attempt to increase transparency and oversight, CMS rate review process allows for officials, experts and the public to examine and question why a particular health insurance plan's yearly increase in its premium is high (10 percent or great) before it is finalized. The rates will be finalized by October. The rate review process is designed to improve the accountability and transparency of the process by which insurance companies set premiums. Final rates for all states will be published no later than Nov. 1, 2015.

CMS Announces New Policy to Allow Entrepreneurs and Innovators to Have Access to Medicare Data

Centers for Medicare and Medicaid Services (CMS) Administrator Andy Slavitt announced a new policy June 2 that allows innovators and entrepreneurs to access CMS data, such as Medicare claims data. Under the new guidelines, innovators and entrepreneurs can conduct approved research that will improve care and provide better tools that should benefit health care consumers. "Data is the essential ingredient to building a better, smarter, healthier system. Today's announcement is aimed directly at shaking up health care innovation and setting a new standard for data transparency," said Administrator Slavitt. "We expect a stream of new tools for beneficiaries and care providers that improve care and personalize decision-making." Innovators and entrepreneurs will be able to peruse data via the CMS Virtual Research Data Center (VRDC), which provides access to granular CMS program information, including Medicare fee-for-service claims statistics, in an efficient and cost-effective manner. Researchers working in the CMS VRDC have direct access to approved privacy-protected data files and are able to conduct their analysis within a secure CMS environment. Researchers will be able to access data on a quarterly basis. CMS will begin accepting innovator research requests in September 2015.

CMS Releases First Quarter Effectuated Enrollment Numbers

On June 2, 2015, CMS released updated enrollment figures that show that about 11.7 million Americans selected plans through Affordable Care Act (ACA) health insurance marketplaces as of Feb. 22, the end of the "in-line" special enrollment period for individual market coverage. On March 31, 2015, about 10.2 million consumers had "effectuated" coverage, which means those individuals paid for Marketplace coverage and still have an active policy in the applicable month. These numbers are consistent with the Department of Health and Human Services (HHS) effectuated target for the end of 2015. Of the 10.2 million effectuated consumers, 85 percent have received an advanced premium tax credit, averaging about $272 per month, to make their premiums more affordable. Effectuated enrollment for the 34 states that are part of the federally facilitated Marketplaces was 7.3 million, and for state-based Marketplaces effectuated enrollment was 2.9 million. CMS plans to release Marketplaces' state-by-state effectuated enrollment overviews on a quarterly basis.

CMS Issues Final Rule on Accountable Care Organizations

The Centers for Medicare & Medicaid Services (CMS) has issued a final rule, on June 4, relating to its Medicare Shared Savings Program, a voluntary program to improve the quality and coordination of care for beneficiaries through accountable care organizations (ACOs) while simultaneously trying to reduce health care costs. The rule is an effort to increase the efficiency of and the participation in the program by provider groups and hospitals and will both enhance the focus on primary care services and provide additional flexibility in the program. "Accountable Care Organizations have shown early but exciting progress in improving quality of care, while providing more patient-centered care at a lower cost," said CMS Acting Administrator Andy Slavitt. "The ACO rule strengthens our ability to reward better care and lay the groundwork for more providers to become successful ACOs." The rule modifies the program in numerous areas including:

• ACOs will be able to choose from three tracks with the addition of a new Track 3. This model includes higher rates of shared savings, the prospective assignment of beneficiaries and the opportunity to use new care coordination tools.
• Data sharing between CMS and participating ACOs will be streamlined, in order to give ACOs access to patient data in a more secure manner. This will greatly improve the quality of care and care coordination for beneficiaries.
• A waiver of the three-day stay Skilled Nursing Facility (SNF) rule will be available to beneficiaries who are assigned to Track 3 ACOs.
• The rule refines policies for resetting benchmarks to incentivize ACOs to continually improve patient care and generate cost savings. CMS also intends to propose further improvements to benchmarks later this year.

These reforms are a result of growth in the ACO program; over 400 ACOs are currently participating in the Medicare Shared Savings Program, serving over 7 million beneficiaries. Earlier this year, the Obama Administration announced its goal of tying 30 percent of Medicare payments through ACOs and other alternative payment models by 2016. The final rule will be published in the Federal Register and will be available online on Tuesday, June 9. For more information, please visit cms.gov.

FDA Guidance Clarifies Interchangeability Determinations in 351(k) Application

The Food and Drug Administration (FDA) clarified in a recent draft guidance document that interchangeability determinations can be made in an original 351(k) biosimilar application, but warns that it would be very difficult for biosimilar drug researchers to do so. The draft guidance also covers additional questions and answers regarding implementation of the biosimilar pathway, including how to meet the mandated provisions under the Pediatric Research Equity Act (PREA) by taking information from the reference product. A biosimilar product is a biological product that is approved based on a showing that it is highly similar to an FDA-approved biological product, known as a reference product, and has no clinically meaningful differences in terms of safety and effectiveness from the reference product. Among the questions addressed in the recent draft guidance is whether FDA can determine interchangeability in an original biosimilar application. The agency says it can determine statutory interchangeability in a biosimilar application or any supplement application, but notes that "at this time, it would be difficult as a scientific matter for a prospective biosimilar applicant to establish interchangeability in an original 351(k) application given the statutory standard for interchangeability and the sequential nature of that assessment. FDA is continuing to consider the type of information sufficient to enable FDA to determine that a biological product is interchangeable with the reference product." The Affordable Care Act amends the Public Health Service Act (PHS Act) to create an abbreviated licensure pathway for biological products that are demonstrated to be "biosimilar" to or "interchangeable" with an FDA-licensed biological product. This pathway is provided in the part of the law known as the Biologics Price Competition and Innovation Act (BPCI Act).

FDA Deadline Extended for Electronic Submission of Drug and Biologic Safety Reports

The Food and Drug Administration (FDA) announced May 26 that it is delaying the compliance date for the final rule for the electronic submission of postmarketing safety reports from June 10 to Sept. 8 for human drugs and biological products. Previously mandated in June 2014, the original Safety Reporting rule modifies FDA's postmarketing safety reporting regulations for human drugs and biological products in order to demand that persons subject to mandatory reporting requirements submit safety reports in an electronic format that FDA can process, review and archive. FDA's announcement simultaneously broadcasts the availability of the Safety Reporting Portal (SRP), an online electronic submission system, for the electronic submission of postmarketing individual case safety reports (ICSRs) of adverse events for human drug and nonvaccine biological products. The decision was made in order for those required to submit the reports to register and test the agency's new Safety Reporting Portal (SRP). The agency says those mandated to submit the postmarket safety reports—which include manufacturers, packers, distributors and applicants with approved new drug applications, abbreviated new drug applications and biologics license applications—can continue to send FDA paper submissions until the new deadline.

3. State Activities

Pennsylvania Announces First ACA Contingency Plan for Subsidies

In a statement June 2, Democratic Gov. Tom Wolf (PA) announced his administration's backup plan to save Pennsylvanians Affordable Care Act (ACA) subsidies, should the Supreme Court rule against the federal government in King v. Burwell. In a press release, Gov. Wolf announced that the Pennsylvania Department of Insurance submitted an application to the federal government June 1 to set up a state-based Marketplace for nearly 350,000 people in the state on the federal exchange, which he called "the responsible thing to do." "I am committed to protecting hardworking Pennsylvanians from losing the assistance they rely on to purchase health care coverage," Gov. Wolf said. Gov. Wolf is just one of a few governors who have been public about their plans for the ruling. Worth noting, more than a dozen states quietly met last month to discuss contingency plans for the looming Supreme Court case involving billions of dollars in ACA subsidies.

Connecticut Exchange Approves FY 2016 Self-Sustaining Budget

In meeting materials released last month, the Board of Directors of the Connecticut Exchange, Access Health CT (AHCT), approved a self-sustaining budget for FY 2016. The new budget contains $25.7 million of the $82 million budget to be paid for through carrier assessments, while outstanding federal grants will contribute $7 million, and Connecticut's Department of Social Services, which manages the state's Medicaid program, will underwrite $43 million. The 2016 AHCT budget is $5.3 million, or 15.1 percent less than the 2015 forecast of $35.0 million, while on a gross expense basis, 2016 is $81.7 million , which is $26.9 million or 24.8 percent less than the 2015 forecast of $108.6 million. Also worth noting, the board voted to increase exchange user fees from 1.35 percent to 1.65 percent. Exchange CEO Jim Wadleigh said in a statement, "For the typical consumer, this increase amounts to about six cents per day, but ultimately our goal is to become completely self-sustaining, without any carrier assessments." Access Health CT was created by the Connecticut Legislature in 2011 and established to satisfy the requirements of the Affordable Care Act (ACA).

4. Regulations Open for Comment

CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

On May 26, CMS posted a proposed rule to modernize the Medicaid and Children's Health Insurance Program (CHIP) managed care regulations. The proposed rule is the first major update to Medicaid and CHIP managed care regulations in more than a decade. The proposal is sweeping in that it touches many areas, including network adequacy, quality measures, enrollment and best practices, and aligns many policies to be similar to those for Medicare Advantage and the private market. The rule will be published in the Federal Register on June 1, and the deadline to submit comments is July 27, 2015, at 5 p.m. EST.

More information on the rule can be found at federal registar.gov.

FDA Releases Draft Guidance on Use Adaptive Trial Designs for Medical Devices

On May 18, the Food and Drug Administration (FDA) released draft guidance in hopes of clarifying ways in which adaptive clinical trial designs can be used for medical devices. Specifically, the draft guidance lays out 11 types of adaptive trial designs the agency feels can be successfully used for devices: group sequential design; sample size adaptation; Bayesian sample size adaptation; group sequential designs with sample size reassessment; dropping a treatment arm; changing the randomization ratio; changing the hypothesis (claim); adaptive enrichment; planning to adapt based on the total information; adaptation of the device or endpoint; and seamless studies. The draft document also makes clear that the adaptive trial designs discussed apply to premarket approval applications, 510(k) submissions, de novo submissions, humanitarian device exemptions and investigational device exception, and do not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. Worth noting, FDA says there are possible limitations to using adaptive trial designs, including requiring more effort at the design stage—leading to study designs that are overly complicated and cost more and to the introduction of bias into the study; implementing changes to the study due to an adaptation can "confound interpretation of the study results." FDA says in the guidance that to ensure that adaptive trial designs are scientifically valid, studies should be prospectively planned for in consultation with FDA prior to the initiation of any study, and the agency lays out two approaches that can help evaluate the operating characteristics of adaptive study designs—analytical methods and simulation studies.

FDA Releases Guidance on Standardizing Study Data for Drug Makers

In the Federal Register May 18, the Food and Drug Administration (FDA) announced the availability of draft recommendations for preparing a Study Data Standardization Plan. FDA's guidance recommends that, for both clinical and nonclinical studies, sponsors include a plan that describes the submission of standardized study data to FDA. The draft recommendations describe the information that should be included in the Standardization Plan, which includes but is not limited to, general sponsor information, product information, a list of completed studies and standards, and a list of planned studies and standards. The draft recommendations for creating a Standardization Plan are posted here. The agency is soliciting feedback on the plan, with comments due by July 2.

FDA: Guidance Released on Investigational New Drug Applications

The Food and Drug Administration (FDA) released draft guidance to assist sponsor-investigators in preparing and submitting complete investigational new drug applications (INDs)—an application used by FDA to approve the start of a new trial—to the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER). The guidance is intended to act as a basic overview of the IND process, with an eye on individual researchers who are investigating new uses for either an approved or investigational drug. FDA's guidance goes on to explain the basics of 21 CFR 312—the federal regulation governing IND submissions—providing an overview of the essential elements of an IND submission, including information about the sponsor, a summary of the investigational drug product and its risks, the clinical trial protocol and a summary of previous clinical trial results involving the drug. Worth noting, the guidance, FDA notes, is not intended for use by sponsors or investigators "seeking to evaluate a drug for commercial purposes (i.e. seeking market approval or licensure) and thus does not focus on certain regulatory requirements that involve exchange of information or materials between a sponsor and investigator." The proposed guidance was published in the Federal Register May 15, and comments on the proposed draft guidance are due July 14, 2015.

CMS Updates Wage Index and Payment Rates for the Medicare Hospice Benefit

On April 30, 2015, CMS issued a proposed rule ( CMS-1629-P) that would update fiscal year (FY) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. The proposed hospice payment rule reflects the ongoing efforts of CMS to support beneficiary access to hospice care. As proposed, hospices would see an estimated 1.3 percent ($200 million) increase in their payments for FY 2016. The $200 million increase in estimated payments for FY 2016 reflects the distributional effects of the 1.8 percent proposed FY 2016 hospice payment update percentage ($290 million increase); the use of updated wage index data and the phaseout of the wage index budget neutrality adjustment factor (-0.7 percent/$120 million decrease); and the proposed implementation of the new Office of Management and Budget (OMB) Core Based Statistical Areas (CBSA) delineations for the FY 2016 hospice wage index with a one-year transition (0.2 percent/$30 million increase). The elimination of the wage index budget neutrality adjustment factor (BNAF) was part of a seven-year phaseout that was finalized in the "Medicare Program; Hospice Wage Index for Fiscal Year 2010" final rule (74 FR 39384, Aug. 6, 2009) and is not a policy change.

Proposed FY 2016 Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

On April 24, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS). The proposed rule also updates the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program, which requires participating facilities to report on quality measures or incur a reduction in their annual payment update. This proposed rule would expand the measure sets in future fiscal years and change certain data reporting requirements for these measures. CMS is proposing to update the estimated payments to IPFs in FY 2016 relative to estimated payments in FY 2015 by 1.6 percent (or $80 million). This amount reflects 2.7 percent IPF-specific market basket estimate less the productivity adjustment of 0.6 percentage point and less the 0.2 percentage point reduction required by law, for a net update of 1.9 percent. Estimated payments to IPFs are reduced by 0.3 percent due to updating the outlier fixed-dollar loss threshold amount. CMS will accept comments on the proposed rule until June 23, 2015.

CMS Releases Proposed Rule on FY 2016 Medicare Payments for Inpatient Rehab Facilities

On April 23, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed FY 2016 Medicare payment policies and rates for the Inpatient Rehabilitation Facility (IRF) Prospective Payment System and the IRF Quality Reporting Program. Specifically, CMS is proposing to increase payments to inpatient rehabilitation hospitals in 2016 by approximately $130 million, or 1.7 percent when compared to 2015. This agency also proposes new quality reporting requirements to adopt measures that satisfy three of the quality domains required by the IMPACT Act in FY 2016: skin integrity and changes in skin integrity; functional status, cognitive function and changes in function and cognitive function; and incidence of major falls; IRFs that fail to submit the required quality data to CMS will be subject to a 2 percentage point reduction to their applicable FY annual increase factor, and the expected cost of the implementation of these new quality reporting requirements is approximately $24 million to hospitals. Worth noting, the payment increase is significantly smaller than the 2.4 percent raise they received in fiscal 2015. The agency proposes to begin collecting IRF quality reporting data by fall 2016. The proposed rule will be published in the Federal Register on April 27, and the agency will accept comments from stakeholders until June 22, 2015.

Fiscal Year 2016 Proposed Inpatient and Long-term Care Hospital Policy and Payment Changes

On April 17, 2015, CMS issued a proposed rule to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The proposed rule, which would apply to approximately 3,400 acute care hospitals and approximately 435 LTCHs, would affect discharges occurring on or after Oct. 1, 2015. The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals' costs, including the patient's condition and market conditions in the hospital's geographic area.

The rule proposes policies that continue a commitment to increasingly shift Medicare payments from volume to value. CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS and long-term care hospitals under the LTCH PPS. Under these two payment systems, CMS generally sets payment rates prospectively for inpatient stays based on the patient's diagnosis and severity of illness. A hospital receives a single payment for the case based on the payment classification — MS-DRGs under the IPPS and MS-LTC-DRGs under the LTCH PPS — assigned at discharge.

By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital "market basket." LTCHs are paid according to a separate market basket based on LTCH-specific goods and services. CMS will accept comments on the proposed rule until June 16, 2015.

Proposed FY 2016 Payment and Policy Changes for Medicare Skilled Nursing Facilities (SNF)

On April 15, 2015, CMS issued a proposed rule [CMS-1622-P] outlining proposed Fiscal Year (FY) 2016 Medicare payment rates for skilled nursing facilities (SNFs). This proposed rule would update the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for fiscal year (FY) 2016. In addition, it includes a proposal to specify a SNF all-cause all-condition hospital readmission measure, as well as a proposal to adopt that measure for a new SNF Value-Based Purchasing (VBP) Program and a discussion of SNF VBP Program policies being considered for future rulemaking to promote higher quality and more efficient health care for Medicare beneficiaries. Additionally, this proposed rule would implement a new quality reporting program for SNFs as specified in the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act). It also would amend the requirements that a long-term care (LTC) facility must meet to qualify to participate as a skilled nursing facility (SNF) in the Medicare program, or a nursing facility (NF) in the Medicaid program. These requirements implement the provision in the Affordable Care Act regarding the submission of staffing information based on payroll data. To be assured consideration, comments must be received no later than 5 p.m. on June 19, 2015.

CMS Proposes Mental Health Parity for Medicaid and CHIP in New Rule

The Centers for Medicare & Medicaid Services (CMS) announced April 6 a new proposed rule to align mental health and substance use disorder benefits for low-income Americans with benefits required of private health plans and insurance. Specifically, the proposal applies certain provisions of the Mental Health Parity and Addiction Equity Act of 2008 to Medicaid and the Children's Health Insurance Program (CHIP) by mandating that mental health and substance use disorder benefits are no more restrictive than medical and surgical services. As it is currently written, the proposed rule ensures that all beneficiaries who receive services through managed care organizations or under alternative benefit plans have access to mental health and substance use disorder benefits regardless of whether services are provided through the managed care organization or another service delivery system, and the full scope of the proposed rule applies to CHIP, regardless of whether care is provided through fee-for-service or managed care. Currently, states have flexibility to provide services through a managed care delivery mechanism using entities other than Medicaid managed care organizations, such as prepaid inpatient health plans or prepaid ambulatory health plans; in the new rule, states will be required to include contract provisions requiring compliance with parity requirements in all applicable contracts for these Medicaid managed care arrangements. The proposed rule was published in the Federal Register on April 10 with comments due to the agency by June 9, 2015.

HHS Releases Proposed Rules on EHR Incentive Programs and Health IT Certification Criteria

The U.S. Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC) announced March 20 the release of the Stage 3 notice of proposed rulemaking for the Medicare and Medicaid Electronic Health Records (EHRs) Incentive Programs and 2015 Edition Health IT Certification Criteria to improve the way electronic health information is shared and ultimately improve the way care is delivered and experienced. The proposed rules aim to give providers additional flexibility, make the program simpler, drive interoperability among electronic health records and increase the focus on patient outcomes to improve care.

Specifically, the Meaningful Use Stage 3 proposed rule issued by CMS specifies new criteria that eligible professionals, eligible hospitals and critical access hospitals must meet to qualify for Medicaid EHR incentive payments; the rule also proposes criteria that providers must meet to avoid Medicare payment adjustments (Medicaid has no payment adjustments) based on program performance beginning in payment year 2018. Moreover, the 2015 Edition Health IT Certification Criteria proposed rule aligns with the path toward interoperability — the secure, efficient and effective sharing and use of health information — identified in ONC's draft shared Nationwide Interoperability Roadmap. The proposed rule also builds on past editions of adopted health IT certification criteria, and includes new and updated IT functionality and provisions that support the EHR Incentive Programs' care improvement, cost reduction and patient safety across the health system.

Under the Health Information Technology for Economic and Clinical Health Act, doctors, health care professionals and hospitals, including critical access hospitals, can qualify for Medicare and Medicaid incentive payments when they adopt and meaningfully use health IT technology certified by ONC. The Stage 3 proposed rule may be viewed here, and the comment period ends on May 29, 2015. The 2015 Edition proposed rule may be viewed here and the comment period ends on May 29, 2015. The Draft 2015 Edition Certification Test Procedures may be viewed at HealthIT.gov, and the comment period ends on June 30, 2015.

5. Reports

GAO Releases Report on Non-VA Medical Care Program

After last year's Veteran Affairs Administration (VA) scandals and subsequent Congressional hearings, Congress commissioned a GAO report on how the VA monitors and oversees the non-VA medical care programs. This report, released on June 1, highlights how limitations in the VA's ability to oversee non-VA medical care and medical care data, both financial and logistical, led to the agency's inability to guarantee comparable quality of non-VA care. The report specifically found that the medical claims processing of non-VA facilities were not adequately managed and evaluated. This led to "inappropriate denials" and allowed "notification issues to persist." Another key area where error and limitations were found was in that of the contracting officer's representatives (COR). These COR are supposed to oversee non-VA contractor performance, i.e., the care of a contracting hospital that treats many VA patients. These COR were overburdened with their workloads and responsibilities, which led them to be unable to perform their abilities sufficiently. These abilities included monitoring contract costs, and satisfaction with contractors. Summarily, the report identifies many areas where the COR group can be improved, with more resources and training, but also strongly identifies that weak and limited oversight of non-VA providers was causing substantial problems. The GAO report ultimately made 22 recommendations to the VA, which primarily focus around improving the monitoring and oversight process.

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