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Top Five Takeaways from MedPAC’s Meeting on Medicare Issues and Policy Developments — October 2016

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The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 6-7, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. While Accountable Care Organizations received high marks for quality they failed to produce Medicare savings in 2015.

MedPAC staff provided a status report on Medicare Accountable Care Organizations (“ACOs”). The report found that while ACOs received high marks for quality they failed to produce significant Medicare savings in 2015. Pioneer model ACOs produced net savings of only $5 million while Medicare Shared Savings ACOs cost the Medicare program $216 million. The MedPAC staff conducted a review of the ACO data and found that ACOs in the south, those that are physician led, and are smaller in size were more likely to produce savings. However, the most important variable was the historic level of service use in the area where the ACO was located. Regions with a high historic use of services had more success producing savings.

2. MedPAC finds the rate of potentially avoidable hospital admissions varied significantly among long-stay nursing facilities.

As part of an ongoing project to develop measures to properly evaluate initiatives aimed at reducing the number of hospital admissions and use of skilled nursing facilities among long-stay nursing facility residents, MedPAC staff found a wide discrepancy among nursing facility providers. Overall the staff found that in 2014 long-stay nursing residents accounted for 200,000 “potentially avoidable” hospital admissions and 20 million days of skilled nursing facility care. They found that nursing facilities with fewer than 100 beds and rural nursing facilities made up a disproportionate share of facilities with high potentially avoidable hospital admission rates. The data showed that some facility-level characteristics affected the rate of potentially avoidable hospital admissions; facilities with higher portions of hospice days and access to x-ray services on site had lower potential avoidable admissions, and facilities with a higher use of licensed practical nurses and lower frequency of physician visits had higher rates of hospital use.

3. MedPAC considering suggesting changes to Part B drug payment policies.

MedPAC discussed a number of policy options with respect to the Part B drug payments. The options the Commission discussed sought to either increase price competition and address the growth in Part B prices or improve the current payment formula and available data.  The polices designed to increase price completion and address price growth  included: consolidating billing codes for drugs and biologics with similar health effects, limit the growth in drug prices based on inflation, and introduced a restructured competitive acquisition program. The policies designed to improve the payment formula and improve available data included: modifying the average sale price add-on formula, modifying the wholesale accusation cost formula, and strengthen the manufacture reporting requirements. MedPAC is expected to continue to actively work towards developing policy recommendations regarding Part B drug payment reforms.

4. MedPAC continues to develop a premium support model to reward high quality plans and ACOs and incentivize beneficiaries to seek out high quality care.

As part of its efforts to develop a payment model that rewards high quality care and incentivizes beneficiaries to seek high quality care MedPAC continued its discussion of alternative quality measures that could be used across the Medicare delivery system. Under this alternative model Medicare would use a smaller number of population based health outcomes and patient experience to measures to measure quality across the delivery spectrum (including fee-for service). The Commission suggests that these quality measures be collected at a local market level; each market will then be given a quality benchmark based on the measures. Medicare Advantage (“MA”) plans and ACOs which have quality scores that are higher than the benchmark would see an increased federal contribution to lower beneficiary premiums, with the hope of pushing more beneficiaries into higher quality delivery systems based on the lower beneficiary premiums.

5. MedPAC is considering how to improve Medicare’s behavioral health benefits.

MedPAC staff gave an overview of behavioral health issues among Medicare beneficiaries and of highlighted potential areas for programmatic improvement. The staff suggested Medicare improve payment of inpatient psychiatric care and work towards integrating primary care delivery and behavioral health services. MedPAC appears to be committed to dedicating more resources towards developing policy options for achieving these suggestions in the future.

If At First It Doesn’t Succeed—FTC Will Try, Try Again to Oppose Hospital Mergers

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Recently, the Federal Trade Commission (“FTC”) faced major losses in challenging hospital mergers.  However, it is clear that the FTC is not backing down, especially given its tendency to conclude that proposed efficiencies do not outweigh the chance of lessening competition.

In July of this year, the FTC abandoned a challenge to the proposed merger of St. Mary’s Medical Center and Cabell Huntington Hospital in West Virginia after state authorities had changed West Virginia law and approved the merger despite the FTC’s objections. This year as well, the FTC failed to enjoin the Penn State Hershey Medical Center and PinnacleHealth System (“Pennsylvania Hospital Merger”) and the Advocate Health Care and NorthShore University Health System (“Illinois Hospital Merger”) under a relevant geographic market theory in the federal district courts.  However, the FTC promptly appealed to the United States Courts of Appeals for the Third and Seventh Circuits, respectively.

Against many predictions to the contrary, the FTC prevailed when, on September 27, 2016, the Third Circuit reversed the District Court’s decision in the Pennsylvania Hospital Merger, concluding that the lower court erred when it disagreed with the FTC on the choice and use of the proper test to define the relevant geographic market. The Third Circuit concluded that the hypothetical monopolist test should determine the relevant geographic market, and that using patient flow data to show a relevant market is “particularly unhelpful in hospital merger cases.”[1]  This means that using data showing why one patient travels to a farther hospital for services does not have a constraining effect on the price charged by the nearby hospital that the patient does not choose.  Additionally, the Third Circuit expressed extreme skepticism about using an efficiencies defense.  While it recognized that other courts and the government’s Merger Guidelines themselves consider efficiencies in their antitrust analyses, it made clear that “efficiencies are not the same as equities”[2] needed to successfully overcome a Clayton Act Section 7 claim in considering whether an injunction is warranted.

The Third Circuit’s logic may have emboldened the FTC, which on September 30, 2016, formally urged Virginia state authorities to reject the proposed merger of Mountain States Health Alliance and Wellmont Health System, two large regional health systems, claiming that the merger would lessen competition and reduce the quality, availability, and price of health care services in the area.  The FTC is alleging, that if the merger were consummated, the new entity would control 71% of the geographic market for inpatient hospital services in the area that both systems serve, and proposed efficiencies (e.g., greater clinical service offerings, reductions in labor expenses, and reductions in purchasing) are not extraordinary enough to outweigh the anticompetitive harms created.  While Virginia does not require FTC consent to approve the merger, the FTC’s evaluation under the Merger Guidelines carries weight because its process is similar to Virginia’s antitrust review.

Going forward, potential merger partners in the health care space should recognize that the FTC has been energized in its opposition to consolidation and should be attentive to the careful definition of geographic markets with an eye towards the hypothetical monopolist test. As stakeholders begin crafting acquisition strategies to take advantage of the Affordable Care Act’s consolidation opportunities, they should recognize that the enforcement components of the government such as the FTC are in apparent contradiction with the policy arm of the administration and that the FTC won’t back down from its challenges to mergers.

[1] FTC v. Penn State Hershey Medical Center, et al., at 19, No. 16-2365 (3d Cir. 2016).

[2] 36.

HHS Increases Civil Monetary Penalties and 299 Other Fines

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Health care providers, life sciences companies and other entities subject to regulation by the Food and Drug Administration (“FDA”) or the Centers for Medicare & Medicaid Services (“CMS”) should be aware that the U.S. Department of Health and Human Services (“HHS”) is increasing the maximum civil monetary penalty amounts that may be assessed by the agency.

The new maximum adjusted penalty amounts may have a significant impact on entities that violate or fail to meet mandatory reporting requirements set by FDA or CMS. Of the 299 enumerated increased fines, 137 fines (45.8%) have increased by over 75%, 100 fines (33.4%) increased by over 97%, and 64 fines (21.4%) have doubled or more.  These increased fines affect a wide variety of activities and providers illustrated by the following examples:

Fine Previous Penalty New, Increased Penalty
Fines for failure to report drug samples required by 21 U.S.C. § 353(d)(3)(E) $100,000 per instance $197,869 per instance
Fines for participating in prohibited conduct under 21 U.S.C. § 331 (misbranding, unapproved alteration, use of counterfeits, and other conduct related to the use of drugs or devices) $1,000,000 $1,781,560
Fines for any related series of violations of requirements relating to electronic products under 21 U.S.C. § 360pp(b)(1) $375,000 $937,500
Improper billing fines for Hospitals, critical access hospitals, or skilled nursing facilities under 42 U.S.C. § 1395cc(g) $2,000 $5,000
Fines for certain biological product recall violations under 42 U.S.C. § 262(d) $100,000 $215,628
Fines to Medicaid MCOs that improperly expel or refuse to reenroll a beneficiary under 42 U.S.C. § 1396b(m)(5)(B)(i) $100,000 $197,869
Fines for failure to report medical malpractice claims, or breaching confidentiality of information within such a claim, to the National Practitioner Data Bank under 42 U.S.C. § 11131(b)(2)-(c) $10,000 $21,563
Skilled Nursing Facility fines for noncompliance under 42 U.S.C. § 1395i-3(h)(2)(B)(ii)(l) $10,000 $20,628
Fines for failure to promptly provide appropriate diagnosis codes to CMS under 42 U.S.C. § 1395u(p)(3)(A) $2,000 $3,957
Daily fines for failure by a home health agency to be in compliance with statutory requirements per 42 U.S.C. § 1395bbb(f)(2)(A)(i) $10,000 $19,787

The adjusted civil monetary penalty amounts became effective on September 6, 2016, and are applicable only to HHS civil penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015.  Pursuant to the Bipartisan Budget Act of 2015 (“2015 Act”) and the Administrative Procedures Act (5 U.S.C. 553(b)(3)(B)), HHS finalized the interim rule without prior notice or comment period.  As the 2015 Act provided a straight forward formula to calculate future civil monetary penalty adjustments, HHS determined that there was good cause for immediate implementation without a notice and comment period.

While penalties that more than double their previous amounts may be alarming, a penalty increase is not surprising considering some penalties have remained unchanged since 1968.[1]  These increases represent only the initial “catch up” adjustments required by the 2015 Act.  Similar to the U.S. Department of Justice and U.S. Railroad Retirement Board penalty increase adjustments for the False Claims Act discussed previously, HHS must also make subsequent annual civil monetary penalty adjustments for inflation by January 15 each  year. These increased penalties, along with the anticipated yearly inflation adjustments, provide companies with additional incentives to increase their compliance efforts in the hope of limiting their exposure to additional penalties.

[1] For example, 21 U.S.C. 360pp(b)(1) increased the penalty for any person who violated requirements for electronic products 150% from its pre-inflation penalty, from $1,100 per unlawful act or omission pre-adjustment to $2,750 per act or omission post-adjustment.

Top Five Takeaways from MedPAC’s Meeting on Medicare Issues and Policy Developments — September 2016

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The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 8-9, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC expects Medicare spending growth to outpace GDP, with total Medicare spending to reach approximately $1 trillion by 2025
    MedPAC began its September meeting with a discussion of the projected growth in the Medicare program. Although the growth in both Medicare and overall health care spending slowed from 2009 to 2013, the Congressional Budget Office (“CBO”) and the Medicare Trustees (“Trustees”) project that total Medicare spending will return to growing at a rate that outpaces gross domestic product (“GDP”) growth. Driven by an increase in both enrollment and per beneficiary spending, the CBO and Trustees project that total Medicare spending will grow at an average rate of 7 percent annually through 2025; if these projections are accurate, the Medicare program will almost double in size—from $600 billion in 2015 to approximately $1 trillion 2025.
  2. MedPAC predicts the trends in Medicare to trigger action from the Independent Payment and Advisory Board in 2017
    MedPAC staff expects the growth in Medicare spending to trigger action from the Independent Payment and Advisory Board (“IPAB”) at some point in 2017. Created by the Affordable Care Act, IPAB is an independent board tasked with proposing Medicare policies designed to reduce spending growth. As of now, no one has been appointed to IPAB. If there are no members when Medicare growth triggers IPAB action, IPAB’s authority will transfer to the Secretary of Health and Human Services. The Secretary will then be required to fulfill IPAB’s role, and the Secretary’s savings proposals will automatically become law unless Congress affirmatively acts to block the proposals.
  3. Physician practice sizes continue to grow, and a greater number are affiliating with health systems and hospitals
    MedPAC staff, using the SK&A Office-based physician database (a commercial database file with information on almost 600,000 physicians), determined that the number of physicians who reported as affiliated with a health system or hospital rose from 34 percent in 2012 to 39 percent in 2014. Over that same time period, the percentage of physicians working in practices with more than 50 physicians grew from 16 percent to 22 percent. MedPAC plans to look deeper into the size and affiliation of physician practice groups, including the geographic distribution of practice groups, to more accurately understand the infrastructure needed to move towards alternative payment models.
  4. MedPAC will focus on recommending steps for adjusting the clinician fee schedule to address “misvalued” services
    MedPAC expressed concern that certain clinician services, mainly primary care, are undervalued and undercompensated as a part of the clinician fee schedule. Accordingly, MedPAC will continue to look at recommendations to improve the Relative Value Scale Update Committee (or “RUC”) process and make suggestions to increase payment for primary care services, including a potential partial capitation payment for primary care services.
  5. MedPAC is considering how to evaluate initiatives for reducing avoidable hospitalizations of long-stay nursing facility residents
    MedPAC staff gave an overview of provider initiatives to reduce avoidable hospitalizations of nursing facility residents. These initiatives included efforts made in conjunction with the Center for Medicare and Medicaid Innovation that feature a new three-part payment model. The new model will make payments to facilities for providing treatment for qualified conditions, increase payments to clinicians for providing treatment in nursing facilities, and establish a new payment to providers who conduct care coordination in nursing facilities. MedPAC is planning on developing measures to evaluate the success of these initiatives at reducing cost and improving beneficiary care.

FDA Announces November Public Hearing on Off-Label Communications: An Important Step Forward or a Signal that FDA is Headed Back to the Drawing Board?

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On August 31, 2016, FDA issued a notification of public hearing and request for comments on manufacturer communications regarding unapproved uses of approved or cleared medical products. The hearing will be held on November 9-10, 2016, and individuals wishing to present information at the hearing must register by October 19, 2016. The deadline for written comments is January 9, 2017.

In the notice, FDA posed a series of questions on which it is seeking input from a broad group of stakeholders, including manufacturers, health care providers, patient advocates, payors, academics and public interest groups. The topics on which FDA is seeking feedback are broad, but generally include:

  • The impact of off-label communications on public health,
  • The impact of changes in the health care system on the development of high-quality data on new uses of cleared or approved products,
  • Preserving incentives for manufacturers to seek approval for new uses, standards for truthful and non-misleading information,
  • Factors FDA should consider in monitoring and bringing enforcement actions based on off-label communications by manufacturers,
  • The extent to which data on which off-label communications are based should be publicly available, and
  • The changes FDA should consider to existing regulations governing manufacturers’ communications regarding their products.

This announcement comes in the wake of increased pressure from lawmakers, public interest groups, and regulated industry for FDA to issue guidance or propose regulatory changes to address recent litigation clarifying commercial speech protections for pharmaceutical and medical devices manufacturers under the First Amendment. On May 26, 2016, the House Committee on Energy and Commerce sent a letter to HHS Secretary Sylvia Burwell expressing concern that FDA had failed to clarify its current thinking on permissible manufacturer communications about uses of cleared and approved drugs and devices beyond the scope of their approved labeling. In the letter, the committee noted that FDA had neither issued guidance, including guidance on the permissible scope of “scientific exchange” that has been on FDA’s Guidance Agenda since 2014, nor conducted the public hearing it announced in May 2015 in connection with negotiations on the proposed 21st Century Cures bill.  The committee expressed concern that HHS was preventing FDA from issuing guidance or proposing new regulations to address a string of recent court victories for companies and individuals prosecuted for off-label communications about drug and medical devices.

In light of the current state of First Amendment commercial speech protections, which makes it clear that manufacturers’ truthful and non-misleading speech regarding their products is not unlawful even if that speech includes uses of their products that have not been approved or cleared by FDA, other stakeholders have actively encouraged FDA to issue guidance or modify its regulations to conform its regulatory oversight and enforcement activities to this reality. While stakeholder groups have been actively engaged on these issues for several years, recent examples include the February 2016 white paper issued by the Duke-Margolis Center for Health Policy outlining policy options for off-label communications, and the joint release by BIO and PhRMA of the Principles on Responsible Sharing of Truthful and Non-Misleading Information about Medicines with Health Care Professionals and Payers on July 27, 2016.

Despite pressure from interested stakeholders, FDA has yet to propose changes to its regulations or issue long-awaited guidance on a number of topics related to manufacturers’ communications regarding off-label uses of their cleared or approved products. While FDA’s 2016 Guidance Agenda, updated most recently on August 6, 2016, continues to promise guidance on manufacturer communications regarding unapproved, unlicensed, or uncleared uses of approved, licensed, or cleared human drugs, biologics, animal drugs and medical devices and the inclusion of health care economic information in promotional labeling and advertising for prescription drugs, among others, the post-election timeline for the public hearing and FDA’s ongoing collection of feedback announced in the August 31st notice may suggest that FDA is going back to the drawing board. In particular, the focus in the notice’s background discussion and in FDA’s questions on the public health impact of off-label communications may suggest that FDA is re-evaluating its position in response to the HHS concerns about broader dissemination of off-label by manufacturers that were highlighted in the Energy and Commerce committee letter.  While FDA’s notice and request for comments is a step in the right direction, it likely signals a further delay in the issuance of guidance that is needed to bring greater clarity to the currently unsettled regulatory framework for FDA’s oversight of manufacturers’ off-label communications, and a punting of these important decisions to the next administration.

New FDA Draft Guidance Shows Limited Compromise with Brand and Generic Drug Manufacturers

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The Food and Drug Administration (FDA) issued a draft guidance (Draft Guidance) on July 11, 2016 that allows some generic drug manufacturers holding an Abbreviated New Drug Application (ANDA) to update the label of the drug they manufacture with new safety information.  The Draft Guidance provides new clarifications and recommendations to generic drug manufacturers seeking to update a generic label after withdrawal by the name brand manufacturer of the reference listed drug (RLD) (a “Withdrawn RLD”).  The Draft Guidance explains how a generic manufacturer may submit an updated label of a generic drug to the FDA for approval after withdrawal of the RLD.  The FDA must approve the proposed new label before the new generic label may be issued.  The Draft Guidance also reminds applicants that the FDA continues to retain the authority to request the ANDA-holder with a Withdrawn RLD to update the label of the drug under its ANDA for safety reasons.

The issue of generic labeling was put in the spotlight in 2011 with the US Supreme Court’s decision in  PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011), which held that generic drug manufacturers could not be held liable for failure to warn under state tort law because such laws were preempted by FDA regulations.  The specific regulations at issue prohibit generic manufacturers from changing a drug label unless and until the label of the RLD is amended.    Per Justice Thomas:

[t]he FDA denies that [generic drug manufacturers] could have… unilaterally strengthen[ed] their warning labels. The agency interprets… [its regulations] to allow changes to generic drug labels only when a generic drug manufacturer changes its label to match an updated brand-name label or to follow the FDA’s instructions. 

In response to public outcry over the decision in PLIVA, the FDA published a proposed rule entitled, “Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products” (Proposed Rule). This Proposed Rule gives generic manufacturers much broader powers and responsibilities over the labels of the generic drugs they manufacture.  The Proposed Rule was issued in 2013 and has been subject to controversy within the pharmaceutical industry.  This controversy has led to multiple delays in the finalization of the Proposed Rule and the unusual step by appropriations committees in the House of Representatives and the Senate to approve budgets that prohibit spending on the Proposed Rule.  As we reported in a June blog post, publication of the Proposed Rule has now been pushed out to at least the Summer of 2017.

In the interim, FDA’s Draft Guidance focuses on changes to generic drug labeling under a much narrower set of circumstances where the New Drug Application (NDA) of the RLD has been withdrawn by the brand name manufacturer for reasons other than safety or efficacy.

Currently, holders of a NDA or ANDA are each required to collect post-marketing safety data and provide the FDA with reports and safety data they receive for a drug under an NDA or ANDA. Based upon the data and reports submitted to the FDA, the FDA may request or require a change to the label of the corresponding drug (either a NDA or an ANDA with a Withdrawn RLD) in accordance with 21 USC §355(o)(4).  Additionally, NDA holders have available a mechanism by which the NDA holder can update the label of the drug under the NDA on its own or by providing a suggested label to the FDA for review.  This mechanism has typically been unavailable to ANDA holders. (See “Guidance for Industry: Safety Labeling Changes – Implementation of Section 505(o)(4) of the FD&C Act,” footnote 10).  The Draft Guidance clarifies that this second avenue for updating a drug’s label is available for an ANDA holder with a Withdrawn RLD if changes become necessary based upon new safety information it obtains.

Additionally, the Draft Guidance describes the other sources of data available to the holder of an ANDA with a Withdrawn RLD to aid in determining whether a label should be updated. Specifically, the FDA suggests that such an ANDA holder should review the labels of other drugs, both NDAs and ANDAs, containing the same active ingredient as they may have been updated more recently than the label of the RLD at the time it was withdrawn.

The ability to update a label under these circumstances is important for an ANDA holder with a Withdrawn RLD to avoid misbranding allegations. As the Draft Guidance states:

as a Drug is used over time, the scientific community’s understanding of the drug may evolve based on data from various sources…. Therefore, the labeling of ANDAs that rely on the withdrawn RLD might eventually become inaccurate and outdated, resulting in labeling that is false and/or misleading…

While review of new data and undergoing the process of supplementing a drug’s label with new safety information may be burdensome for ANDA holders, it is likely preferable to the risk of facing misbranding allegations.

The avenue for updated labeling in the Draft Guidance also resembles the concept of Expedited Agency Review (EAR) included in the alternative to the Proposed Rule issued jointly by the Generic Pharmaceutical Association (GPhA) and the Pharmaceutical Research and Manufacturers of America (PhRMA). While the Draft Guidance only applies to a very small and specific set of generic labels, the similarities between EAR and the FDA’s process for updating the label of an ANDA with a Withdrawn RLD demonstrates cooperation between the FDA and industry to at least find common ground on the issue of generic labeling. While the recommendations set forth in the Draft Guidance may be a sign the FDA is willing to listen to industry suggestions, the Draft Guidance’s impact is too limited to predict whether the FDA will  continue to search for middle-ground with the remaining generic labeling issues raised in the Proposed Rule.

Per the listing in the Federal Register, any comment on the Draft Guidance must be submitted by September 9th, 2016 in order to be considered in rendering the final guidance.

OCR Hones in on Smaller HIPAA Breaches

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The U.S. Department of Health and Human Services, Office of Civil Rights (“OCR”), the agency tasked with enforcing the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), recently announced that it will redouble its efforts to investigate smaller breaches of Protected Health Information (“PHI”) that affect fewer than five-hundred (500) individuals.

It has been widely known that OCR opens an investigation for every breach affecting more than 500 individuals; this announcement describes OCR’s new initiative to investigate smaller breaches as well.  OCR stated that in determining when it will open an investigation, it will evaluate a number of factors, such as: (1) the size of the breach, (2) whether the PHI was stolen or improperly disposed of, (3) whether an entity reports multiple breaches, (4) whether numerous entities are reporting breaches of a particular type, and (5) whether the breach involved unauthorized access to an IT system.  The announcement also notes that OCR may consider lack of breach reports for a region, suggesting that OCR is interested in investigating the potential of under reporting.

The announcement emphasized that OCR can determine both large scale trends among HIPAA regulated entities, and entity-specific compliance issues that must be addressed by investigating breaches.  The announcement also serves as a warning to persons and/or entities subject to HIPAA to ensure that their breach reporting and other HIPAA compliance efforts are up-to-date and ready to withstand any potential scrutiny from OCR.

CMS Issues Proposed Rule Advancing Care Coordination through Three New Mandatory Episode Payment Models and Introducing a Cardiac Rehabilitation Incentive Payment Model

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If your organization has missed an opportunity to participate in the voluntary Medicare Bundled Payments for Care Initiatives and/or the mandatory CJR program, CMS’ Centers for Medicare and Medicaid Innovation has issued a proposed rule introducing three new mandatory Episode Payment Models (EPMs) and a Cardiac Rehabilitation incentive payment model intended to be tested with a broad scope of hospitals which may not have otherwise participated in innovative payment model testing.

In the proposed rule issued August 2, 2016, CMS introduced EPMs for Acute Myocardial infarction (AMI), Coronary Surgery Bypass Graft (CABG) and Surgical Hip/Femur Fracture Treatment- Excluding Lower Joint Replacement (SHFFT) and a Cardiac Rehabilitation incentive model to be tested for five performance years, beginning July 1, 2017 and continuing through December 31, 2021. CMS estimates Medicare savings of $170 million over the five-year test period.

These new EPMs were selected to compliment care episodes addressed in other voluntary BPCI models and the mandatory Comprehensive Joint Replacement program with different patient populations due to the clinical conditions and non-elective treatment nature of the episodes chosen. As the clinical characteristics of these EPMs include both planned and unplanned treatment needs and underlying chronic conditions, the EPMs will be tested over a broader and complementary array of hospitals and MSA regions, to further promote care redesign models that focus on coordination and alignment of care in a largely fragmented acute to post acute care spectrum. It is hoped that with testing these new EPMs and the Cardiac Rehabilitation incentive model with a broader scope of hospitals with aligned post-acute providers will promote the rapid development of evidence-based knowledge CMS is striving to obtain.

These AMI, CABG and SHFFT EPMs were selected due to the high volume of these procedures among beneficiaries with common chronic conditions, such as cardiovascular disease, which contribute to the episode and impact high readmission rates. With these EPMs, CMMI is furthering its goals of testing innovative payment models to reduce cost and improve care transition efficiencies and long term outcomes throughout the care continuum. The same quality measures applied to Comprehensive Joint Replacement will be applied to SHFFT. The Cardiac Rehabilitation incentive model is designed to encourage treatment, reduce barriers to high –value care and increase utilization of cardiac rehabilitation and intensive cardiac services which have been shown to improve long term outcomes, but appear to be underutilized. (For example, CMS estimates that 35% of AMI patients older than 50 receive cardiac rehabilitation services). The Cardiac Rehabilitation incentive payment will be made to the selected hospitals with AMI and CABG EPMs for cardiac rehabilitation services provided during the EPM as they are already engaging in managing such episodes.

The EPM episodes will begin with acute admission at an anchor hospital for the applicable MS-DRG for the EPM upon discharge, and continue for 90- day period post discharge. Similar to CJR , acute care hospitals bear the financial risk for AMI, CABG and SHFFT EPMS, which include the inpatient admission(s), all related Medicare Part A and B services, including hospital, post-acute and physician services within the 90-day period. Eligible beneficiaries admitted to the anchor hospital for the applicable EPM will automatically be included within the applicable EPM. Hospitals and providers will be paid under Medicare FFS and after the first performance year, calculation of the actual episode payments will be reconciled against an established historical EPM quality adjusted target. Hospitals will bear upside and downside risk for the episodes after performance year two. The Cardiac Rehabilitation incentive will be paid to AMI and CABG EPM hospitals at a per cardiac rehabilitation/ intensive cardiac rehabilitation service level based on threshold treatments provided per AMI/ CABG episode post discharge.

While complementing current BPCI and CRJ programs, CMS is addressing potential advantages and disadvantages to certain overlapping of programs, geographic regions (MSAs) and hospitals. For example, acute care hospitals participating in BPCI Models 2 and 4 for hip and femur procedures and for all three BPCI cardiac episodes (AMI, PCI and CABG) will not be included for selection for the new EPMs. SHFFT EPMs will be implemented in the same 67 geographic MSAs where the CJR model is currently implemented. AMI and CABG EPMs will be implemented together in 98 MSAs selected based on specific criteria to avoid overlap with other payment initiatives such as BPCI models and AMI/ CABG procedure volumes.

Hospitals and certain ACOs may share gains with other providers under the AMI, CABG and SHFFT models as EPM collaborators. Similar to other model programs, the adoption of certain waivers are also proposed, such as adopting waivers of the telehealth originating and geographic site requirements and allowing for in-home telehealth visits for the three EPMs; EPM-specific limits for post-discharge home nursing visits and the SNF 3-day stay waiver, and expanding the practitioners allowed to perform certain cardiac rehabilitation services. Hospitals’ aligning with post acute providers and programs to effectively manage their EPM patients’ post acute transition and treatment adherence and monitoring will be critical to the EPM program success.

The selected MSAs and hospitals will be announced with the publication of the final rule. CMS is requesting public comment on the proposed rule and on any alternatives considered, by October 3, 2016.

“Good Faith” Off-Label Promotions Saved Ex-Acclarent Execs from Felony Misbranding Indictments

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Where does the line fall between good faith and criminal intent? That was the question that a Massachusetts federal jury faced in July as it deliberated criminal charges against William Facteau and Patrick Fabian, ex-Acclarent executives, who were indicted on multiple charges of fraud and misbranding a medical device. Acclarent’s device, the Relieva Stratus Microflow Spacer (“Stratus”), was cleared by the FDA for use as a spacer to maintain an opening in the sinus. Although the FDA expressly rejected Acclarant’s request to expand the indicated use of the device to include delivery of drugs, the government alleged that Acclarent promoted Stratus as a delivery method for the steroid drug Kenalog.

The arguments at trial focused on whether, in the defense’s view, Acclarent had done no more than claim that it had a good faith belief that it could promote the proven success of Stratus for delivering Kenalog, or the government’s position that the company’s leadership deliberately evaded the FDA’s requirements in order to put a product on the market without adequate data. The defense highlighted how, after receiving clearance for Stratus as a spacer, Acclarent asked the FDA to expand the indications for use to include the delivery of Kenalog, a corticosteroid. The FDA would not approve the expanded indication without multiple clinical trial data. The government, on the other hand, emphasized that Acclarent withheld this information when promoting Stratus to Ethicon, a subsidiary of Johnson & Johnson that bought Acclarent in 2010. After the deal closed and Ethicon realized Stratus lacked FDA clearance to deliver steroids, Ethicon ordered Acclarent to stop all off-label promotions to doctors and to notify the FDA. While Acclarent did contact the FDA, evidence shows that Facteau and Fabian continued encouraging sales representatives to promote Stratus for the delivery of Kenalog. An Acclarent sales representative testified that sales training focused on how to promote the use of Stratus with Kenalog without directly promoting the off-label use, and the videos used to train physicians showed Stratus being used to deliver a white substance resembling the steroid.

Ultimately, after six weeks of trial and almost three days of deliberations, the jury decided that good faith won over the alleged criminal intent. Fabian and Facteau were acquitted of all felony charges but convicted of ten misdemeanor counts of misbranding and adulteration of Stratus. The jury concluded that while the off-label promotion rules were broken, there was not enough evidence to conclude that the defendants had the intent to mislead or defraud doctors or the FDA. The misdemeanor convictions were based on statutes that impose strict liability, for which no finding of a criminal intent is required. A misdemeanor violation of the Food, Drug and Cosmetics Act (“FDCA”) has a maximum sentence of a year in prison per count, a year of supervised release, and a fine of either $100,000 or double the gross gain or loss.

When the dust settled from the jury’s verdict, Facteau and Fabian submitted a formal request for acquittal of the misdemeanor convictions. If the federal judge denies their request for judgment, the ex-Acclarent executives will seek a new trial. The outcome of this case may affect how medical device manufacturers deal with FDA oversight, particularly where a manufacturer seeks to market a device for a specific use but only has data addressing a more basic purpose. At the same time, the outcome may serve as an indication to the FDA that bringing similar criminal charges for off-label promotion in the future may prove more difficult than anticipated.

This post was written with assistance from Megan E. Robertson, a 2016 Summer Associate at Epstein Becker Green.

8th Circuit: Assigned Non-Competes Are Enforceable — Under Certain Facts

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Our colleagues James P. Flynn, Paul A. Gomez, Purvi B. Maniar and Yael Spiewak of Epstein Becker Green have published a blog post on the Trade Secrets & Noncompete Blog that will be of interest to our readers: “Assignment Lessons: 8th Circuit Finds Assigned Non-Competes Enforceable — Under Certain Facts.”

Following is an excerpt:

The 8th Circuit’s recent decision in Symphony Diagnostic Servs. No. 1 v. Greenbaum, No. 15-2294, __ F.3d __ (8th Cir. July 6, 2016), upheld the enforceability of non-compete and confidentiality agreements assigned by Ozark Mobile Imaging to Mobilex as part of Mobilex’s purchase of Ozark’s assets.  Although the 8th Circuit is careful to ground its analysis in that case’s specific factual and legal framework, this decision is helpful in providing some guidance to those dealing with the assignability of rights under non-compete and confidentiality agreements.

The non-compete and confidentiality agreements at issue were (1) “free standing” and (2) assignment did not “materially change the obligations of the employee” nor (3) were the agreements dependent upon “qualities specific to the employer.” Symphony Diagnostic Servs. It is also notable that the agreements contained no language regarding assignability, i.e. they did not expressly restrict or permit assignment. Symphony Diagnostic Servs. No. 1 v. Greenbaum, 97 F. Supp. 3d 1126 (W.D. Mo. March 16, 2015).  Under those factual circumstances, the 8th Circuit, applying Missouri law, concluded that a Missouri court would find the agreements assignable and enforceable.

There are lessons for both those seeking to enforce or to avoid enforcement of non-compete and confidentiality agreements following the acquisition of a business via an asset purchase.

Read the full alert here.