United States: Washington Healthcare Update - June 15, 2015

This Week: GOP Post-King Contingency Bills Released in Both the House and the Senate... House E&C Committee Draft LDT Bill – Creates FDA In Vitro Center, Sets Agency Review Timeline and Defines Risk Categories... CMS Clarifies Use of Leftover Establishment Funds, States Given More Flexibility

1. CONGRESS

House

House E&C Health Subcommittee to Hold Hearing on Mental Health Legislation

The House Energy and Commerce (E&C) Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), has scheduled a hearing entitled "Examining H.R. 2646, the Helping Families in Mental Health Crisis Act" for Tuesday, June 16, 2015, at 10 a.m. in Room 2322 of the Rayburn House Office Building. Subcommittee members will review H.R. 2646, legislation authored by Oversight and Investigations Subcommittee Chairman Tim Murphy (R-PA) and Rep. Eddie Bernice Johnson (D-TX), as well as additional legislation authored by Rep. Doris Matsui (D-CA). The bipartisan legislation aims to fix the nation's broken mental health system by refocusing programs, reforming grants and removing barriers to care. "This legislation is not just a new bill, but marks a new dawn for mental health care in America. We are moving mental health care from crisis response to recovery, and from tragedy to triumph. The work of this committee and its members have been critical in putting forth a foundation for all of the new and revamped provisions in H.R. 2646," said Chairman Murphy in a statement. "The Helping Families in Mental Health Crisis Act not only reflects the need for reform, but also provides the tools to provide comprehensive solutions to challenges—such as federal barriers and antiquated programs—we discovered when this committee began its top-to-bottom review of our nation's broken mental health system."

The legislative text, a witness list and witness testimony will be available here as they are posted.

Bipartisan Bill Introduced in House to Alter ACA Reporting System Rules

On June 10, Reps. Diane Black (R-TN-06) and Mike Thompson (D-CA-05) introduced H.R. 2712, the Commonsense Reporting and Verification Act of 2015, bipartisan legislation which aims to provide workable options for employers to administer and offer health coverage to their employees by creating a voluntary prospective reporting system and streamlining the reporting process for businesses under the Affordable Care Act (ACA). Under the current reporting requirements established by the ACA, businesses are required to collect and annually report information about the coverage they offer to the Internal Revenue Service (IRS) and their employees. The information reporting is intended to verify compliance with the individual and employer mandates established by the ACA, and administer subsidies through the insurance exchanges. "I've heard from employers of all sizes, who want to offer health care to their employees, about the challenges they face complying with the ACA's administrative requirements. This bill would allow employers to maintain employer-sponsored health coverage, while reducing reporting burdens on businesses so they can focus on what they do best—creating jobs and growing our local economies. Our bill would also increase consumer protections by requiring that eligibility for subsidies be based on the most recent tax data. This will increase accuracy and ensure that individuals and families aren't hit with a large and unexpected tax bill at the end of the year," said Rep. Thompson in a press release. Companion legislation in the Senate is expected to be released this week.

House Judiciary Committee Approves Patent Bill Sans Increased Protections for Branded Pharmaceuticals

On June 11, the House Judiciary Committee approved the Innovation Act (H.R. 9), which was introduced by Committee Chairman Bob Goodlatte (R-VA), by an overwhelming vote of 24-8. This bipartisan bill aims to combat the ever-increasing problem of abusive patent litigation while protecting legitimate property rights. With regard to health care, the legislation voted out of committee fails to include a branded pharmaceutical industry-favored provision that exempts generic drugs and biologics from a streamlined process for challenging patents. As written, the industry carve-out, pushed by the Biotechnology Industry Organization (BIO), would exempt drug and biologics patents, covered under the Biologics Price Competition and Innovation Act (Hatch-Waxman), from inter partes review (IPR) challenges at the U.S. Patent and Trademark Office. The branded pharmaceutical community feels these protections are critical to protecting innovation and believes that the IPR process allows generics manufacturers to circumvent pay-for-delay settlements by invalidating the patent claims that are being used by the brand-name drug owner to prevent generic competition. Worth noting, on June 4, the Senate Judiciary Committee voted out of committee its companion bill, S. 1137, the PATENT Act, sponsored by Chairman Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT); the branded pharmaceutical industry circulated a proposal to members after the vote to would undo provisions in the patent law that make it easier for generics, and potentially biosimilars, to come to the market. Sen. Orrin Hatch (R-UT) said BIO's proposal should be addressed before the PATENT Act reaches the Senate floor. The IPR should remain a faster, cheaper alternative to patent litigation, "but at the same time we must also prevent bad actors from using the administrative process to interfere with a litigation system that encourages the development of cheaper life-saving medicines," Sen. Hatch said, referring to the legislation that he and former Rep. Henry Waxman (D-CA) co-authored in 1984. A previous amendment that failed to make it onto the Senate bill, authored by Sen. Thom Tillis (R-NC), would have exempted drug and biologics patents from the IPR process.

For more information on the bill, please review an official committee press release.

House E&C Committee Draft LDT Bill — Creates FDA In Vitro Center, Sets Agency Review Timeline and Defines Risk Categories

In recently released House Energy & Commerce Committee draft language addressing laboratory-developed tests (LDTs), the committee reveals possible intentions to create a new three-way classification system for LDTs based on the different value of risk (low, moderate, high) and whether an adverse result would have a significant effect on patient health. With the new proposed language, developers would be able to submit their tests for approval under one of the three specified categories, and the Food and Drug Administration (FDA) would have 60 days, following a meeting with the developer, to make a final decision either accepting or rejecting the proposed classification and providing its decision rationale. Another significant measure in the proposed language is the development of a priority review voucher program for high and moderate-risk tests which meet an unmet medical need and a requirement that regulations be drafted creating a unique identification system, mandating all finished products "bear a unique identifier." The discussion document additionally addresses FDA fees, but lists them as "to be supplied." Also significant, the draft bill would create an in vitro center within FDA that reports directly to the agency commissioner as do other agency centers. The "Center for In Vitro Clinical Tests" would be responsible for the implementation of the new regulatory structure concerning LDTs. Worth noting, the committee included an LDT spot in its initial 21st Century Cures draft bill, but the placeholder was later scrapped due to concerns that differences would derail the bipartisan bill.

Lawmakers Introduce a Bill to Expand Coverage for Cancer Drugs

On June 11, Reps. Leonard Lance (R-NJ) and Brian Higgins (D-NY) introduced the Cancer Drug Coverage Parity Act, which aims to encourage uniform health coverage for different types of cancer treatment. In detail, the bill requires any health plan that provides coverage for traditional chemotherapy treatment to also provide coverage for orally administered anti-cancer medications. Worth noting, the Cancer Drug Coverage Parity Act is not a mandate, as it applies only to private health insurance plans that already offer IV chemotherapy benefits. "Many patients are now using promising oral treatments but are forced to pay astronomical out-of-pocket costs or forgo treatment altogether. We have to fix this disparity in coverage so cancer patients are making health care decisions based on the best information, not which treatment fits into outdated guidelines," said Rep. Lance in a press release. Intravenous (IV) and injected treatment have traditionally been the primary methods of treatment; however, oral chemotherapy has increasingly become more prevalent, accounting for 35 percent of present oncology research.

House W&M Committee Holds HHS FY 2016 Budget Request Hearing; SCOTUS Ruling Dominates Discussion

On June 10, the House Ways and Means Committee held a hearing focused on the Affordable Care Act (ACA) implementation and the Department of Health and Human Services' (HHS) FY 2016 Budget request. In light of the upcoming Supreme Court (SCOTUS) decision, members focused their questioning to strategically obtain information from Secretary Burwell on HHS's contingency plan should the Court rule against the government in the impending case King v. Burwell later this month. Specifically, Republican members pressed hard on whether the Administration will work with Congress to address subsidy patches for residents in states with federally run exchanges or whether they would only advocate for a quick, one-line fix as mentioned by the president to the press earlier this week. GOP members are currently drafting legislation to respond should SCOTUS block subsidies in more than 30 states where people buy insurance through the federal marketplace, HealthCare.gov. In her testimony, Secretary Burwell stressed that the White House would not entertain legislation that undermines the integrity of the ACA, and asserted that the Administration has yet to see a Republican-sponsored backstop bill that it could support. With regard to the budget, Secretary Burwell mentioned several key components President Obama sees as critical to achieving his Administration's health care goals in the upcoming fiscal year: continuing and improving the Affordable Care Act; investing in health care research, such as increased funding for the National Institutes of Health (NIH) and the Precision Medicine Initiative; spearheading social initiatives including combating drug abuse and promoting affordable childcare; and reforming Medicare and Medicaid to reduce fraud, waste and abuse.

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

House Veterans Affairs Subcommittee Holds Hearing on Prescription Mismanagement and the Risk of Veteran Suicide

The House Veterans Affairs oversight and investigations subcommittee held a hearing on June 10 in order to investigate prescription mismanagement and the risk of veteran suicide, following the release of a Government Accountability Office (GAO) report finding the need for improvements in mental health services for veterans, particularly in the area of monitoring antidepressant use among veterans. The study concluded the Veterans Affairs Administration "lacks methods to track whether recommended care is provided." According to the report, 1.5 million veterans required care for mental health in 2013. Two topics that dominated member questioning in the hearing included veterans cut from prescription drugs abruptly and the lack of a suicide hotline available for veterans with mental illness.

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

Senate

Senate HELP Committee Holds Hearing to Address Barriers to Health Information Exchange

The Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing June 10 to investigate the ways Congress can help solve the immediate problems of the implementation of meaningful use Stage 3, enhancing electronic health record interoperability and increasing patient access to data as a means of enhancing quality of care for patients. "Our goal is to identify the 5 or 6 steps we can take to improve electronic health records—a technology that has great promise, but has, through bad policy and bad incentives, run off track," Chairman Lamar Alexander (R-TN) said in his written opening statement. The hearing was the first hearing in a planned series on health information technology, and Chair Alexander has also put together a bipartisan group to work on the issue. Worth noting, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule earlier this year setting up the third stage of the meaningful use program, which providers will have to adhere to in 2018.

For more information or to watch the hearing, visit help.senate.gov.

The next hearing in the series, entitled "Achieving the Promise of Health Information Technology: What Can Providers and the U.S. Department of Health and Human Services Do To Improve the Electronic Health Record User Experience?," is scheduled for Tues., June 16 at 10 a.m. in 430 Dirksen Senate Office Building.

GOP Post-King Contingency Bills Released in Both the House and the Senate

On June 9 and June 4, respectively, Sens. Bill Cassidy (R-LA) and House Budget Chairman Tom Price (R-GA) each dropped their own draft bill language that aims to provide consumers relief should a Supreme Court decision in King v. Burwell disallow federal subsidies in the 30+ states currently operating through the federal exchange platform, healthcare.gov. Sen. Cassidy's plan, the Patient Freedom Act, which has the co-sponsorship support of Senate Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX) and other GOP senators, David Vitter (LA), Dan Coats (IN), Susan Collins (ME), Jim Inhofe (OK) and Mike Rounds (R-SD), would give states the option of keeping an Affordable Care Act (ACA) marketplace by establishing a state-based exchange or using existing funding to provide tax credits to create Health Savings Accounts (HSAs) for the uninsured, averaging $1,500 per person. Moreover, should states choose the funding option, they could do away with various mandates under ACA, including the individual and employer mandates and requirements for minimum essential coverage; the legislation would also equalize tax treatment, and require health providers to publish cash prices for services reimbursed from an HSA. An identical companion bill will be introduced in the U.S. House of Representatives by Rep. Ralph Abraham (R-LA).

Alternatively, Rep. Price introduced H.R. 2650, the RESCUE America's Health Care Act, which would offer refundable tax credits for health insurance coverage, with the tax value contingent on a consumer's age (with beneficiaries over 50 years old getting the highest subsidy). Like Sen. Cassidy's plan, the bill would repeal several key components of the ACA, including the insurance reforms in Title I, as well as all of the provisions related to HSAs; moreover, the bill would require insurers to cover consumers irrespective of their preexisting conditions, so long as an individual maintains continuous health coverage for 18 months prior to his or her enrollment. Of note, an insurer could still penalize consumers with preexisting conditions so long as his or her condition is diagnosed by a physician within the first six months of insurance enrollment.

More information on Sen. Cassidy's bill can be found here.

More information on Rep. Price's bill can be found here.

2. ADMINISTRATION

OIG Fraud Alert Warns Physicians of Potential Exposure for Unlawful Compensation Arrangements

The Department of the Health and Human Services Office of the Inspector General's (OIG ) June 9 fraud alert cautions that the agency has initiated a renewed focus on physician compensation arrangements, including medical directorships, as potentially improper payments to physicians for referrals. OIG states that such arrangements may violate the Anti-Kickback Statute if even one purpose of the arrangement is to compensate the physician for past or future referrals and urges physicians to carefully consider such arrangements lest they be held liable civilly or even criminally. The fraud alert discusses the fact that OIG recently reached settlement agreements with 12 physicians who had entered into problematic medical directorships. According to OIG, the compensation paid to the physicians was above fair market value and took into account the referral volume of the physicians. In addition to the directorships that compensated physicians directly, OIG also took issue with office staff arrangements under which an affiliated entity paid the salaries of physician staff. Because the physicians avoided the responsibility of paying for this staff, OIG alleged that the office staff arrangements were improper remuneration to the physicians. OIG sought to recover civil money penalties from all 12 doctors for the improper agreements. OIG directs physicians to its guidance on the topic, including its Roadmap for New Physicians.

More detailed information on the OIG alert can be found here.

HHS Announces Results of Comprehensive Prevention Program that Helps Reduce Falls Among the Elderly Population

In a June 8 press release, the Department of Health and Human Services (HHS) announced the results of an HHS-funded study which tests the effectiveness of a comprehensive prevention program that aims to reduce both falls and the resulting use of long-term care such as nursing homes. The prevention program, which includes clinical in-home assessments of health, physical functioning, falls history, home environment and medications to create customized recommendations, was developed by HHS based on the research evidence on risk factors and interventions. Using a randomized control trial, the program was tested among long-term care insurance policyholders age 75 and older to determine whether the intervention was effective and, if so, the impact on long-term care utilization. The study found that the program led to significantly lower rates of falls over a one-year study period; those who received the intervention had a 13 percent lower rate of falls, and an 11 percent reduction in risk of falling compared to the control group. Participants also had a significantly lower rate of injurious falls. Long-term care insurance claims were 33 percent lower over a three-year period. The intervention, which cost $500 per person to administer, saved $838 per person. Given the impact of falls, findings from the HHS-funded study give hope for reducing the rate of falls among the growing population of older adults. "While falls are preventable, we need to intervene at the right time in a way that is comprehensive and yet individually tailored," said Richard Frank, Ph.D., the assistant secretary for planning and evaluation at HHS, whose office funded the study. "Preventing falls helps everyone: the older person, their family, and the health and long-term care systems. And this study shows that by investing in falls prevention, we can reduce long-term care use and spending."

More background information on the design of the study can be found here. The HHS-funded study appears online and in print in the June issue of Health Affairs.

CMS Clarifies Use of Leftover Establishment Funds; States Given More Flexibility

The Centers for Medicare and Medicaid Services (CMS) released new guidance June 8 in order to clarify the legal use of grants obtained under Section 1311 of the Affordable Care Act (ACA) further reiterating previous statements from CMS that state-run marketplaces need an additional funding stream other than establishment grants to ensure their financial self-solvency in the future. The much anticipated frequently asked questions (FAQ) document follows a Department of Health and Human Services (HHS) Office of Inspector General (OIG) report that warned that state exchanges may be utilizing 1,311 grants for noncompliant, non-establishment purposes. In the document, CMS specified that states can use the establishment grants in specific ways including: designing, developing and testing information technology functions; setting up federally compliant financial and program audit policies, procedures and related data systems; outreach, education and call center efforts to boost enrollment; and long-term capital planning. Furthermore, while the operations paid for under these Section 1211 grants must consist of establishment-related activities, they can also cover costs that indirectly support establishment work, such as employee salaries. Specifically, the document identifies that grant funding excludes the payment of ongoing expenses, including rent, utilities and telecommunications. The CMS document also mentions the non-qualifying status of call center operations that "do not constitute establishment activities" while stopping short of clarifying what those activities may include. The funding flexibility relayed in the FAQ document suggests that the CMS is agreeable to partner with states to allow them to utilize funds that they have already budgeted for future use. Worth noting, this document provides little guidance on ensuring financial sustainability for states that may try to transition to a state-operated exchange should the Supreme Court block subsidies from federal exchanges.

HHS Releases Spring 2015 Regulatory Agenda

The Department of Health and Human Services (HHS) released its updated Spring 2015 regulatory agenda, which lists major pending or planned regulatory actions and the anticipated timelines for the department's rulemaking activity. Specifically, the agenda lists numerous pending HHS proposed and final rules in a range of policy areas, including Medicare payment updates, 340B drug pricing policies and changes to fraud and abuse authorities. Specific upcoming regulatory agenda items within the Food and Drug Administration's (FDA) purview include electronic submission of label and package inserts for home-use medical devices, pediatric study plan requirements for new drug and biologic license applications, clarification as to when products made from tobacco will be regulated as drugs and devices, and national standards for licensing of prescription drug wholesale distributors. Of note on the agenda, FDA includes a long-awaited plan that would align regulations on fixed-dose combination prescription and over-the-counter (OTC) drugs expected to be released in the late summer or early fall. Other areas to be further defined by FDA include OTC antihistamine labeling, user fees for third-party food auditors, gluten-free labels, food safety rules and latex gloves.

OMB Considers Proposed Rule to Increase Oversight of the 340B Program

The Health Resources and Services Administration will soon be publically releasing a proposed rule to enforce the 340B program's requirement that drug manufacturers not charge more than the ceiling price for drugs purchased under the program. The proposed rule, which made its way over to review by the Office of Management and Budget on June 5, is the product of a mandate imposed by the Affordable Care Act (ACA) and of findings by the U.S. Government Accountability Office (GAO) and the U.S. Department of Health and Human Services Office of the Inspector General (HHS OIG) that indicate a need for more transparency concerning 340B ceiling prices. Furthermore, the ACA also requires the HRSA to give participating hospitals access to the 340B ceiling prices, which it plans to do later this year, and to "define the standards and methodology for the calculation of ceiling prices for purposes of the 340B Program." The 340B program requires drug manufacturers to provide outpatient drugs to eligible health care organizations or entities at significantly reduced prices as a condition of their drugs' being covered by Medicaid. Despite its original purpose to increase access to prescription medicines, the program has expanded dramatically since its creation in 1992, and has since strayed from its core mission. The implementation of civil monetary penalties addresses one of many problems with the 340B program by ensuring that drug manufacturers are not overcharging covered entities.

3. STATE ACTIVITIES

California Senate Approves "Right to Die" Legislation

On June 4, the California state Senate approved a "right to die" bill 23-14 which would allow mentally competent adults with a terminal illness of six or less months to live the ability to seek a medication from a physician to terminate their lives. The Senate vote was split along party lines, with all Republicans opposed and all Democrats who were present—with the exception of Tony Mendoza, D-Artesia—voting in support. "We count today's vote as a historic step forward," said Sen. Bill Monning, D-Monterey, co-sponsor of SB 128. "We hear a lot of different tough issues being debated, but I can't remember an issue that commanded greater attention." The measure is expected to be taken up and approved by the Democrat-majority state assembly; however, Gov. Jerry Brown (D), a former Jesuit seminarian, has not indicated whether he will support it. Four other states have previously legalized physician-assisted suicide for dying patients, including Montana, Washington, Oregon and Vermont.

Florida House Rejects State Senate's Medicaid Expansion Plan; GOP Offers Alternatives

In a June 5 vote, the Florida House rejected by 72 to 41 the state Senate's alternative to Medicaid expansion plan for the third time since the passage of the Affordable Care Act (ACA). Despite the Senate's attempt to refurbish its legislation prior to the vote to address several concerns raised by the House, including adding measures that would end the expansion program after three years and strengthening a work-requirement component, only four House Republicans voted for the measure. The Florida Health Insurance Affordability Exchange would have used more than $18 billion over 10 years in federal funds to expand the pool of low-income Floridians eligible for health insurance and help them buy coverage from private providers. Further, the rejection ensures that expansion will not be acted on this year, with GOP Gov. Rick Scott still strongly opposed to it. House Republicans took an alternative approach to health care reform June 10, when a GOP-led committee passed six bills largely centered on stripping away regulations, offering new ways for patients to receive care and urging state employees to select from a larger list of health-insurance plans. House leaders contend that they are seeking more choices for Floridian health care consumers, as they believe competition will lower costs and increase access to care. Meanwhile, the Department of Health and Human Services (HHS) has argued in a Florida court that Gov. Scott's lawsuit over the Low Income Pool (LIP) and Medicaid expansion is "baseless." CMS has previously told the state that it will receive $1 billion in FY 2016 and $600 million in FY 2017; however, on June 8 Gov. Scott filed a motion to force mediation between the state and HHS.

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 Report Details Lack of Oversight for Federal Mental Health Grants

The Government Accountability Office (GAO) released a report June 11 relaying findings of significant lack of oversight and proper documentation with regard to federal mental health grant funding under the purview of Substance Abuse and Mental Health Services Administration (SAMHSA) Center for Mental Health Services (CMHS). In its study, GAO reviewed information related to CMHS grants management; reviewed grant documentation from fiscal years 2012 and 2013 for 16 grantees within five grant programs; and interviewed SAMHSA officials. In its findings, GAO said CMHS did not document its application of criteria for about a third of the 16 grantees GAO reviewed, nor did CMHS document its application of the criteria it used to award grants to six of the 16 grantees reviewed. Moreover, the independent oversight body indicates that the CMHS lacks the proper information and documentation to effectively oversee its programs. Further, GAO directs the Administrator of SAMHSA to "direct CMHS to take steps, such as developing additional program-specific guidance, to ensure that it consistently and completely documents both the application of criteria when awarding grants to grantees, and its ongoing oversight of grantees once grants are awarded." In 2013, SAMHSA estimated 43.8 million—or 18.5 percent—of adults in the United States suffered from a mental illness. SAMHSA, an agency within HHS, has various programs that aim to reduce the impact of mental illness through CMHS grants awarded to grantees that include states, territories and nonprofit organizations. This report comes at the heels of a broader report released in February that detailed significant failures of the federal mental health system as a whole.

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