The Federal Trade Commission’s (“FTC”) recently submitted Congressional Budget Justification and Annual Performance Plan and Report contains helpful insight into the FTC’s focus and expectations for the coming fiscal year.  Of particular note, is a slight shift of funds from activities designed to “protect consumers” to activities intended to “promote competition.”  High on the FTC’s list of actions designed to promote competition is continued scrutiny of the health care industry.  And to that end, the FTC reiterated its intention to, among other things:

Take action against anticompetitive agreements among health care providers and to challenge anticompetitive mergers of hospitals, medical device manufacturers, pharmaceutical companies, and other health care providers that contribute to the rising cost of health care. The FTC will also continue to advance its health care enforcement program by challenging anticompetitive conduct in the pharmaceutical industry that delays the introduction of generic drugs and costs consumers and governments enormous sums of money each year. The agency also will continue its vigorous advocacy for health care competition by advising local, state, and federal entities, upon request, on the competitive implications of pending government actions.

In order to accomplish its goals, the FTC has proposed a budget for its Fiscal Year 2018 of $306,317,000, which is on par with its current annual budget.  The amount requested would be offset by filing fees submitted pursuant to the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) by parties to transactions (mergers, joint ventures, etc.) meeting the HSR filing thresholds.  Filing fees are split with the Department of Justice, and the budget justification notably projects a reduction in anticipated filings resulting in a drop of approximately $15 million in expected fees.

The FTC’s budget justification also forecasts a slight drop in staff from 1,161 to 1,140 FTEs.  However, this reduction is not a consequence of diminished enforcement expectations but rather the effect of balancing out staff raises from the prior year with an effort to meet the President’s current budget request.  The reduction in staffing levels is expected to be accomplished through attrition and an adjusted hiring strategy rather than personnel layoffs.  Significantly, staffing levels for activities designed to promote competition are only nominally affected, and the FTC has actually asked for an increase in funding (approximately $1 million) associated with competition promoting activities.

Metrics from the prior year are also worth noting.  In particular, the FTC brought 29 enforcement actions in fiscal year 2016 of which 22 were merger related.  The FTC identifies mergers that raise potential antitrust concerns through the HSR filing process, as well as through “consumer and competitor complaints, referrals from other government agencies, and trade press.”  The FTC estimates that it saved consumers over $2.1 billion dollars in fiscal year 2016 as a result of its merger enforcement activities.

Overall, the FTC returned approximately $50.3 million dollars to consumers, and $7.3 million to the U.S. Treasury as a result of its enforcement actions in fiscal year 2016.  In addition, the FTC made a number of criminal referrals to the Department of Justice, resulting in 56 separate actions brought from FTC related matters.

Congress is currently considering two bills that would dramatically alter the ways in which all federal agencies develop and publish rules. If enacted, both would create significant new obligations for agencies such as CMS and the FDA, expand the scope of judicial review of rules, and would increase the potential for political influence over the rulemaking process. Both bills passed the House on party-line votes, and are under consideration by the Senate.

The first bill, H.R. 5, would overhaul multiple phases of the federal rulemaking process. These proposed changes would make the rulemaking process significantly longer and more complex for agencies, and includes provisions that could prevent some rules from ever taking effect. The key provisions of the bill are summarized below:

  • Prior to publishing any rule (1) with an expected annual impact of $100 million or more, (2) that may reduce employment, or (3) that involves a novel legal or policy issue, an agency would have to publish an advance notice that it intends to publish a proposed notice of rulemaking, and must solicit comments on the notice. A proposed rule could only be published after this new additional process is complete.
  • Whenever an agency publishes a proposed rule for public comment in any of the categories described above, it would have to explain the basis for the rule, the data it relied on, and would have to explain the alternatives to the rule and justify why they were not adopted. In addition to the current public comment period, once a proposed rule was published an interested party could then request a hearing to contest the quality of the information relied on by the agency. Any resolution of this new step would slow down the rulemaking process further.
  • In all cases where a rule is expected to have an annual impact of at least $1 billion annually, the agency would now be required to conduct a public hearing limited to fact issues. This would add to the time and cost of publishing a new or revised rule.
  • When a final rule is published, the agency would be required to explain in the preamble to that rule why the rule will have the lowest possible cost unless it involves public health, safety, or welfare.
  • All agencies would be required to publish all documents considered by an agency prior to publishing the rule.  This would eliminate the deliberative process privilege that has been in place for decades, which is intended to promote the exchange of views within an agency, and may have a chilling effect on agency deliberation. In many cases, a final rule could not take effect until all of the information relied on by the agency had been made available electronically for at least six months unless the agency or the President claims an exception.
  • Recipients of federal funds would be prohibited from advocating for or against the rule, or appealing to the public to either support or oppose the rule.
  • Guidance documents issued by agencies, including manuals, circulars, and other subregulatory publications would no longer have any legal effect and could not be relied on by the agency for any actions. The bill does not explain how many important parts of federal programs, such as the administration of grants or cost accounting for hospitals in the Medicare program would be handled. These and other programs rely heavily on the detailed information found only in agency manuals and guidance. Without these guidelines, health care providers, suppliers, manufacturers, and researchers among others would find it increasingly difficult to comply with federal laws.

The bill would also make drastic changes in the scope of any judicial review of published agency rules. The bill would overturn the Supreme Court’s landmark Chevron decision, which established the principle that when an agency is charged with administering a statute and interprets ambiguous statutory language in a regulation, courts will defer to the agency’s permissible interpretation of the law. In its place, the bill would authorize courts to review all questions of law involving a regulation without giving weight to the agency’s experience or expertise. Courts would be empowered to impose their own constructions of the law on an agency, upending decades of precedents. This has the potential to increase federal courts’ dockets and place those courts in the position of reviewing technical information without all of the resources available to conduct a review. In addition, by allowing courts to decide cases without relying on the agency’s rationale, this increases the potential for inconsistent decisions and confusion among regulated entities such as health care providers, suppliers, and manufacturers seeking to comply with federal laws.

The second bill, H.R. 26, focuses more on expanding Congress’s control over the rulemaking process once an agency has completed the public notice and comment procedure under current law. It also expands the legislative veto over rules, which currently is authorized only when Congress disapproves of a rule and requires the President’s concurrence.

Under the bill, agencies would be required to report all new rules to Congress, and must identify all “major rules” as determined by the Office of Management and Budget that (1) will have an annual impact of $100M or more, (2) increases costs or prices, or (3) will have a significant impact on competition, employment, investment, or foreign trade. The report to Congress must also contain an analysis of the projected number or jobs that would be gained or lost as result of the rule. All major rules with the exception of those necessary for an emergency, enforcement of criminal laws, or to implement a trade agreement would not go into effect unless both houses of Congress approve the rule by a joint resolution within 70 legislative days after the agency submits its report. There is only one chance to obtain approval of a major rule during a session of Congress; if the joint resolution is not approved, or if no action is taken, the bill would bar Congress from considering a second resolution on the same rule during the same two-year session of Congress. This would allow Congress to override an agency and force the agency to begin the rulemaking anew, if at all. Congress would retain the authority to disapprove all other rules by a joint resolution. The bill also allows for judicial review of Congress’s actions only to review whether or not it followed the procedure in the statute; the merits of any action would be unreviewable.

In addition to expanding control over prospective rules, the bill would also add a sunset provision for existing rules. All agencies would be required to review current rules at least once every ten years and report to Congress; if Congress then failed to enact a joint resolution to retain the rules, they would be nullified.

Although the bills passed the House, it will be much harder for the Senate to pass them as well. Under Senate rules, 60 votes are required to end debate and bring the bills to a vote. Since the Republicans only hold 52 seats, they would need additional votes from Democrats in order for the bills to pass.

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.

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.

Act-Now-Advisory-BadgeOur colleagues, Michael S. Kun, Member of the Firm, and Jeffrey H. Ruzal, Senior Counsel, at Epstein Becker Green, have written an Act Now Advisory that will be of interest to many of our readers: DOL’s New “White Collar” Exemption Rule Goes Into Effect on December 1, 2016.

On May 18, 2016, the U.S. Department of Labor (“DOL”) announced the publication of a final rule that amends the “white collar” overtime exemptions to significantly increase the number of employees eligible for overtime pay. The final rule will go into effect on December 1, 2016.

What Is New

The final rule provides for the following changes to the executive, administrative, and professional exemptions:

  • The salary threshold for the executive, administrative, and professional exemptions will increase from $23,660 ($455 per week) to $47,476 ($913 per week), which represents the 40th percentile of full-time salaried workers in the lowest-wage census region (currently the South). This threshold is approximately $3,000 less per year than that proposed last summer in the NPRM.
  • The total annual compensation requirement for “highly compensated employees” subject to a minimal duties test will increase from the current level of $100,000 to $134,004, which represents the 90th percentile of full-time salaried workers nationally. This threshold is approximately $12,000more per year than that proposed last summer in the NPRM.
  • The salary threshold for the executive, administrative, professional, and highly compensated employee exemptions will be automatically updated every three years to maintain the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage census region to “ensure that they continue to provide useful and effective tests for exemption.”
  • The salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold.

 

What Allowance Is Being Afforded to the Health Care Industry

With its publication of the final rule, the DOL announced a Time Limited Non-Enforcement Policy (“Policy”) for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. Under the Policy, from December 1, 2016 (the effective date of the final rule) until March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for employers providing these services.

The DOL issued the Policy in response to inter-agency discussion between the DOL and the U.S. Department of Health and Human Services (“HHS”) about the concern that the final rule would frustrate the HHS’s goal of providing services to individuals with intellectual or developmental disabilities in integrated settings that support full access to the community and the provision of services through small, community-based settings that maximize individuals’ autonomy, quality of life and community participation.

What This Means

While it is certainly good news for employers that the duties tests for the various exemptions will not be augmented in the final rule, the significant increase to the salary threshold is expected to extend the right to overtime pay to an estimated 4.2 million workers who are currently exempt. This change will not only affect labor costs but also require employers to rethink the current structures and efficiencies of their workforces, including assessing how the reclassification of workers from exempt to non-exempt will affect their fundamental business models. In addition, to the extent exempt employees are reclassified as non-exempt, employers will have to consider implementing policies and procedures to both comply with overtime laws and control overtime worked, such as proscription against off-the-clock work and proper maintenance of accurate record-keeping.

The apparent trade-off for scaling back the salary threshold from the proposed $50,440 to $47,476 for the executive, administrative, and professional exemptions is the increase in the highly compensated employee salary threshold from the proposed $122,148 to $134,004 announced in the final rule. That, of course, is a substantial increase to the current $100,000 threshold and will likely result in employers relying less than they had previously on this exemption.

The permitted use of non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold may help soften the impact of the increase to the salary threshold. Employers should proceed carefully, however, if they wish to take advantage of that provision. For example, employers should make sure that the 10 percent maximum allowance is not exceeded, which could otherwise lead to misclassification claims. Also, employers should be mindful of maintaining a proper distinction between discretionary and non-discretionary bonuses and only attribute the latter to satisfy the salary threshold.

With respect to the DOL’s Policy delaying enforcement against providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds, employers should take heed that that the Policy applies only to DOL investigations and enforcement actions. Because the FLSA provides employees with the right to bring a private cause of action, the Policy provides no apparent protection against private lawsuits that may be brought by employees who are treated as exempt but paid less than the updated salary threshold of $913 per week effective December 1, 2016. Although difficult to predict, plaintiffs’s attorneys may not pursue private litigation until the March 17, 2019 end date of the Policy to evaluate whether the DOL issues a NPRM addressing the application of the final rule for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities, and also to maximize the potential value of a lawsuit since the statute of limitations under the FLSA is two years (or three years if willful).

Resistance to the final rule can be expected. There is little doubt that the DOL modified its proposed salary threshold increase of $50,440 to $47,476 in response to nearly 300,000 comments, many of which were from employers and advocacy groups providing thoughtful commentary on the practical issues and repercussions of implementing such a significant increase to the salary threshold. Because of the severity of the final rule, a Congressional challenge may be in the offing. Subject to the Congressional Review Act, the final rule will be scrutinized by the next Congress to be seated in 2017.

For the full Act Now Advisory, click here.

M. Brian Hall, IV

Daniel C. Fundakowski

On October 26, 2015, the Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ”) (collectively the “Agencies”) issued a joint statement to the Virginia Certificate of Public Need (“COPN”) Work Group encouraging the Work Group and the Virginia General Assembly to repeal or restrict the state’s certificate of need process.  The Virginia COPN Work Group was tasked by the Virginia General Assembly to review the current COPN process and recommend any changes that should be made to it.

Thirty-six states currently maintain some form of certificate of need (“CON”) program.  Although there are variations in the programs, in general, new entrants and incumbent providers are required to obtain state-issued approval before constructing new facilities, or in some cases prior to offering certain health care services, or making major capital expenditures—such as expanding the number of beds in a hospital or investing in robotic surgery equipment.

In their statement, the Agencies outlined their concerns that state certificate of need (“CON”) laws fail to achieve their original conceived goals of improving access to care and reducing health care costs.  Instead, the Agencies remarked that programs like the Virginia COPN process “prevent the efficient functioning of health care markets” in numerous ways:

  • By creating barriers to entry and expansion, limiting consumer choice, and stifling innovation;
  • By allowing incumbent firms to use CON laws to thwart or delay market entry by new competitors;
  • By denying consumers of an effective remedy following the consummation of an anticompetitive merger (specifically referencing the FTC v. Phoebe Putney case, which we previously reported on here); and
  • By failing to assist states in controlling health care costs or improving care quality (based on studies referenced by the Agencies).

For these reasons, the Agencies have historically taken the position that state CON laws should be repealed or limited.

In a concurring statement, FTC Commissioner Julie Brill agreed that the FTC was capable to advise the Virginia COPN Work Group about the impact of CON laws on competition. But Commissioner Brill took exception to the FTC’s comments concerning non-competition-related public policy goals, noting that the FTC lacks evidence of the impact of repealing CON laws.

The Virginia COPN Work Group issued its final report to the General Assembly in December 2015, recommending several changes to the COPN requirement but stopping short of recommending that Virginia repeal it.  The Work Group noted that the program currently lacks a statement of purpose and urged the General Assembly to draft one.  In addition, the Work Group suggested several steps to make the current application submission and review process more efficient and streamlined, including adopting a 45-day expedited review process for projects that are non-contested and raise few health planning concerns. The Work Group also suggested making the COPN program more transparent, including improved online access to COPN filings and other related documents.

On January 11, 2016, the Agencies submitted a similar joint statement, upon the request of South Carolina Governor Nikki Haley, regarding the competitive implications of CON laws and South Carolina House Bill 3250—a bipartisan bill that ultimately would repeal South Carolina’s CON program effective January 1, 2018.  While the Agencies observed certain flaws in the legislation, they expressed broad support for the proposed repeal of South Carolina’s CON program.  FTC Commissioner Brill also issued a dissenting statement, noting in large part the commendable non-competition policy goals advanced by CON programs.

Virginia’s COPN law also survived a recent constitutional challenge in the U.S. Court of Appeals for the Fourth Circuit.  In the case, Colon Health Centers v. Hazel, No. 14-2283 (4th Cir. Jan. 21, 2015), two providers of medical imaging services alleged that Virginia’s COPN law violated the dormant aspect of the Commerce Clause.  The Fourth Circuit affirmed the district court’s holding that the COPN requirement neither discriminated against nor placed an undue burden on out-of-state health care providers (and granting summary judgment to the Commonwealth).  This recent Fourth Circuit precedent may decrease the likelihood of the Agencies formally challenging Virginia’s COPN program following their joint statement encouraging that it be repealed.

Epstein-Becker-Green-ClientAlertHCLS_gif_pagespeed_ce_KdBznDCAW4In February 2012, two years after the passage of the Affordable Care Act (“ACA”), the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule, which was subject to significant public comment, concerning reporting and returning certain Medicare overpayments (“Proposed Rule”). On February 12, 2016, four years from the issuance of the Proposed Rule (and six years after passage of the ACA), CMS issued the final rule, which becomes effective on March 14, 2016 (“A and B Final Rule”).

The A and B Final Rule applies only to providers and suppliers under Medicare Parts A and B. The return of overpayments under Medicare Parts C and D are addressed in a final rule that was published by CMS in May 2014 (“C and D Final Rule”). To date, no final regulations have been adopted that address Medicaid requirements.

Among other things, the A and B Final Rule and its preamble provide:

  • a six-year lookback period;
  • that providers and suppliers must exercise “reasonable diligence” in connection with identifying potential overpayments;
  • that the time period to conduct “reasonable diligence” should be no more than six months, except in extraordinary circumstances; and
  • that “identification” includes quantifying the amount of the overpayment.

Kirsten M. Backstrom, George B. Breen, Anjali N.C. Downs, David E. Matyas, and Meghan F. Weinberg coauthored a Health Care and Life Sciences Client Alert that addresses a number of the significant provisions of the A and B Final Rule, describes an important difference between the two final rules, and sets forth a list of nine key “takeaways” that we believe all Medicare providers and suppliers should be aware of.

Click here to read the full Health Care and Life Sciences Client Alert.

On September 28, 2015, the Centers for Medicare & Medicaid Services (“CMS”) issued a request for information (“RFI”) seeking comments on two key components of the physician payment reform provisions included in the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), the law enacted on April 16, 2015, repealing the sustainable growth rate formula used to update payment rates under the Medicare Physician Fee Schedule.  The RFI was originally open for a 30-comment period.  However, CMS has announced that it is extending the comment period for an additional 15 days.  Comments to the RFI are now due to CMS on November 17, 2015.

The RFI included an extensive list of questions related to the implementation of the Merit-Based Incentive Program System (“MIPS”), as well as adoption and physician participation in Alternative Payment Models (“APMs”) and Physician-Focused Payment Models (“PFPMs”).  More details on the questions that CMS has raised and the areas where CMS is seeking input in the RFI are discussed in the Epstein Becker Green Client Alert, “New Opportunity to Comment on Key Components of Medicare Physician Payment Reform: CMS Issues 30-Day Request for Information on MIPS and APMs.”

Importantly, in the CMS announcement extending the public comment period released on October 15, 2015, CMS identified sections and questions in the RFI that are of higher priority to the agency.  For example, CMS has ranked questions about how physicians should be identified to determine eligibility, participation, and performance under the MIPS performance categories, and what measures and reporting mechanisms should be used for each of the four MIPS performance categories (quality, resource use, clinical practice improvement activities, and meaningful use of certified electronic health record technology), above questions about public reporting requirements, use of measures from other payment systems, and the weighting of performance categories and the determination of performance scores and thresholds.  Similarly, for questions related to the adoption of APMs, CMS has prioritized questions about how to define the amount of services furnished through an eligible APM entity, how to determine the Medicare and other payer payment thresholds used to identify qualifying and partial qualifying APM participants, and how to compare state Medicaid medical home models to medical home models expanded under Section 1115A(c) of the Social Security Act.  Given the short period of time to provide comments to CMS, stakeholders should consider the priority rankings that CMS has assigned to the various topics that it is seeking input on.

All stakeholders, not just physicians, should consider how the fundamental shift in Medicare physician payments, from traditional fee-for-service to value-based models, will impact them.  It is important to engage with CMS now by submitting comments to the RFI, in order to shape how these new payment mechanisms are implemented in the years to come.  For additional information about the physician payment reforms implemented in MACRA, or if you are interested in submitting comments to CMS, please contact Lesley Yeung or the Epstein Becker Green attorney who regularly handles your legal matters.

In January 2015, CMS announced that it was considering developing voluntary clinical templates to help physicians adequately document their encounters with Medicare patients who receive home health services.[1] CMS initially proposed a sample paper template progress note and suggested clinical template elements for an electronic progress note. CMS hosted three Special Open Door Forums to solicit feedback on the proposed templates from physicians, home health agencies, and other interested stakeholders to provide feedback on the proposed templates.

On August 12, 2015, CMS announced that a suggested clinical template had been submitted to the Office of Management and Budget (OMB) for review.[2] Although CMS had initially proposed the creation of separate paper and electronic templates, the proposed progress note template that was submitted to OMB combines the information into one template.

The proposed template is designed as a paper progress note that includes a list of clinical elements that will allow electronic health record vendors to create prompts to assist physicians when documenting eligibility and the face-to-face encounter. The template is intended to help physicians and allowed non-physician practitioners capture necessary information, to increase compliance with Medicare requirements, and to reduce the possibility that home health claims will be denied for failure to meet Medicare requirements. CMS estimates that it will take approximately 10 minutes to complete the electronic template and approximately 15 minutes to complete the paper template.

Use of the proposed template will be completely voluntary. Physicians and home health agencies must still ensure that the patient’s medical record supports certification of the home health benefit, as the Progress Note Guidance specifies that “completion of this Progress Note alone will not substantiate eligibility for the Medicare Home Health Benefit.” However, the elements included in the proposed template do provide an indication of what CMS may consider adequate documentation of the face-to-face encounter and of a patient’s eligibility for home health services.

Public comments on the proposed template are due by October 13, 2015 and may be submitted electronically via http://www.regulations.gov, or by mail.

[1] Home Health Medical Review and Home Health Electronic Clinical Template.

[2] 80 Fed. Reg. 48,321 (Aug. 12, 2015).

By Arthur J. Fried, Patricia M. Wagner, Adam C. Solander, Evan Nagler, and Jonathan Hoerner

On September 2, 2015, the U. S. Department of Health and Human Services (“HHS”) announced a $750,000 settlement with Cancer Care Group, P.C. (“CCG”), a radiation oncology practice in Indiana, for Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules violations. The alleged violations occurred in 2012, but a subsequent HHS Office for Civil Rights (OCR) investigation led to allegations from OCR that there was a lack of compliance with HIPAA Privacy and Security Rules requirements dating back to 2005.

CCG notified OCR on August 29, 2012 of a data breach of electronic protected health information (ePHI) resulting from the theft of a laptop bag that was left unattended in an employee’s car.  The bag contained a laptop computer and unencrypted backup storage media.  OCR estimated that the stolen data included the names, addresses, dates of birth, Social Security numbers, insurance information, and clinical information of approximately 55,000 current and former patients.

After receiving notification of the breach, OCR conducted an investigation that OCR alleged revealed CCG was in “widespread non-compliance with the HIPAA security rule.”  Specifically, OCR determined that CCG failed to conduct an enterprise-wide risk analysis at any time between April 21, 2005 (the compliance date of the Security Rule) and November 5, 2012, almost 5 months after the data breach.  OCR also determined that CCG also failed to have in place a written policy covering the removal of hardware and electronic media containing ePHI from CCG facilities.  OCR noted that an enterprise-wide risk analysis would have determined that removal of unencrypted media was a high risk to the group’s ePHI security.

In addition to the $750,000 payment, the settlement requires CCG to adopt a robust corrective action plan to correct HIPAA compliance program deficiencies. The entire Resolution Agreement can be viewed here.

This case highlights the need for all covered entities and business associates to conduct regular risk assessments and vulnerability testing.  A proper risk assessment will help organizations to identify vulnerabilities to the ePHI they store. While the Security Rule does not mandate encryption, as it is an addressable implementation specification, this settlement again reinforces OCR’s position that unencrypted computer hard drives, mobile devices, and electronic media will be under intense scrutiny should a breach occur. Thus, in most instances it is advisable for those types of devices to be encrypted.