On December 14, 2018 the Department of Health and Human Services, Office for Civil Rights (“OCR”) formally issued a Request For Information (“RFI”) seeking public input on “ways to modify the HIPAA Rules to remove regulatory obstacles and decrease regulatory burdens in order to facilitate efficient care coordination and/or case management and to promote the transformation to value-based healthcare, while preserving the privacy and security of PHI.”  OCR is seeking comments for a series of 54 different specific questions (many with additional subparts) corresponding to the following five major topic areas:  (1) the promotion of information sharing for treatment and care coordination; (2) the promotion of parental and caregiver involvement in addressing the opioid crisis and serious mental illness; (3) additional ways to remove regulatory obstacles and burdens to facilitate care coordination and promote value-based health care; (4) an effective means to implement the accounting of disclosures requirement of the HITECH Act; and (5) Notice of Privacy Practices operational practices.

While some of the questions ask for factual information (such as the typical time it takes a covered entity to transfer PHI to another covered entity), many of the questions raise larger policy issues.  For example, the RFI includes a series of questions on whether it would make sense to have health care clearinghouses play a much more direct role in providing information to individuals, whether health care clearinghouses should be treated only as covered entities, and if so, could other covered entities impose contractual obligations on the health care clearinghouses to protect PHI without the use of a business associate agreement.  Similarly, the RFI includes multiple questions on whether the OCR could amend the Privacy Rule to allow for better coordination for patients suffering from a substance abuse disorder or serious mental illness, and how such changes might interact with current state privacy laws and 42 CFR Part 2 that would otherwise prohibit the sharing of such information.

From an operational perspective, the RFI requests comments on how to effectively implement the HITECH Act requirement to provide an accounting of all disclosures made through an electronic health record and whether requiring providers to make a good faith effort to obtain written acknowledgement from a patient that they have received a Notice of Privacy Practices places an unnecessary burden on providers, and perhaps inadvertently confuses patients.

OCR is requesting comments to the elucidated questions on or before February 12, 2019.

On November 26, 2018, the U.S. Food and Drug Administration (“FDA”) announced the process for clearing most medical devices for marketing is being updated to incorporate changes the FDA laid out in an April draft guidance. For over forty years, most medical devices have entered the United States market through the 510(k) clearance process. The 510(k) process offers an expedited approval process available only for products that are substantially equivalent to products already on the market (known as predicate devices). The FDA is considering no longer allowing sponsors to rely on predicates older than ten years and making public information about cleared devices that relied on predicates more than ten years old. In addition, the FDA intends to finalize guidance establishing an alternative 510(k) pathway with different criteria that reflect current technological principles.

In a statement, FDA Commissioner Scott Gottlieb reasoned that newer products relying upon older predicates might not reflect new performance standards or latest scientific and medical understanding. Commissioner Gottlieb believes this change will promote the continual improvement of medical devices. However, the announced change received quick pushback. Many manufacturers argue that reliance upon older predicates can be necessary when no newer predicates are available, and older predicates can provide data that helps sponsors make new devices safer. In addition, many industry-observers believe the FDA’s plans may contradict and exceed its statutory authority, and therefore require additional support from Congress.

If the current proposal becomes law, the implications will include increased costs for manufacturers forced to innovate because of the inability to rely on older predicates. The agency’s statement indicates that new medical devices that utilize the 510(k) pathway should be better than predicates, rather than the applicable legal standard of substantial equivalence. Thus, manufacturers can anticipate increased agency scrutiny when submitting information in the 510(k) summaries. In addition, manufacturers may need to make alternative plans if developing a new device based on an older predicate.

On November 19, 2018, the FDA submitted a proposal to the White House Office of Management and Budget (OMB) to approve a review that will assess current communication practices between FDA review staff and Investigational New Drug (IND) sponsors.  The FDA has contracted with Eastern Research Group (ERG) to determine whether the current mode of communication between these parties needs to be adapted moving forward.  Depending on the results of this review, communication practices and requirements could be altered, which might have an effect on the IND application process. Possible modifications might occur that could assist in removing communication bottlenecks hindering approval timelines.

By filing an IND, a drug developer seeks approval to conduct human trials of investigational new drugs.  After an organization submits an IND application to the FDA for approval, the FDA review team must review the submission within a 30 day period and determine whether to approve or deny the application.  During this period, the FDA review staff and IND sponsors communicate regarding IND status, concerns, and questions, and the clock stops on the 30-day period any time the FDA requests additional information from the sponsor. Overall, this process is designed to minimize the risk of harm to clinical trial volunteers and confirm that the clinical trial protocols are appropriate. Further, the FDA reviews the proposed study protocol to confirm sponsors’ plans support compliance with good clinical practice requirements.  The FDA released guidance last December on best practices for communication between IND sponsors and FDA review staff in order to assist in improving the effectiveness, timeliness, and transparency in communications between the parties.  Additionally, the FDA believes that improved communication may assist in facilitating the availability of effective and safe drugs to consumers.

The FDA expects that the upcoming review, pending OMB approval, will shed more light on how commercial IND sponsors perceive their communications with FDA staff.  During this review, ERG will collect data from sponsors of “a sample of up to 150 active commercial INDs that have activity during a one-year period.”  The surveys (which can be found here) and interviews with IND sponsors are intended to assess sponsors’ experiences when communicating with the FDA review staff, and will examine “what is working well, ongoing challenges and pain points, lessons learned, and opportunities for improvement.” After this data is analyzed and reported by ERG, the FDA will “publish the report on the Agency’s public website and hold a public meeting about the assessment.”

The study findings may be useful in assisting the FDA in meeting its PDUFA commitment to promote transparency between sponsors and review personnel.  The PDUFA plan emphasizes its goal to promote effectiveness and efficiency of the first cycle review process while minimizing the number of review cycles necessary for approval. Sponsor recommendations through the surveys may very well shed light on current communication issues as well as other factors that might hinder the approval process.  An understanding of such hindrances may assist FDA in improving communication and transparency between parties and, thus, the IND approval process itself.

EBG will continue to monitor all developments in FDA’s regulation of the IND approval process as well as the forthcoming results from ERG’s review of IND sponsor communication with FDA review staff.

During a November 29, 2018 speech, Deputy Attorney General Rod Rosenstein announced changes to Department of Justice (“DOJ”) policy concerning individual accountability in corporate cases.  The announcement followed the DOJ’s year-long review of its individual accountability policies and the September 2015 memorandum issued by then-Deputy Attorney General Sally Yates, commonly known as the “Yates Memo.”

While making clear that pursuing individuals responsible for corporate wrongdoing remains a top priority in every investigation conducted by DOJ, Mr. Rosenstein drew a substantial distinction between the treatment of individuals in criminal investigations and civil investigations.

Criminal Matters

In criminal cases, the revised policy provides that to receive cooperation credit, a company “must identify every individual who was substantially involved in or responsible for the criminal conduct.”  Responding to concerns that it was inefficient to require companies to identify every employee involved irrespective of culpability, Mr. Rosenstein stated that DOJ’s focus will be on those who play “significant roles in setting a company on a course of criminal conduct.” He also noted that “investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.”   Importantly, Mr. Rosenstein made clear that if a company fails to work in good faith to identify substantially involved or responsible individuals, it would not receive any cooperation credit.

Civil Matters

According to Mr. Rosenstein, “[c]ivil cases are different.” Recognizing that the primary purpose of civil enforcement is the recovery of money, Mr. Rosenstein noted that the “all or nothing” approach to civil cases espoused in the Yates Memo was simply not practical and, in some circumstances could be counterproductive.  In those matters where criminal culpability is not in question, the revised policy recognizes a need for flexibility.

The most significant aspect of this revision is the focus on senior officials in the company, including members of “senior management or the board of directors.”  In civil matters, entities are expected to  identify all wrongdoing by these individuals.  Indeed, Mr. Rosenstein noted that if companies make any effort to hide misconduct by senior leaders, they “will not be eligible for any [cooperation] credit.”  Companies that want to receive “maximum credit” must “identify every individual person who was substantially involved in or responsible for the misconduct.”

The revised policy also provides DOJ lawyers with the flexibility to provide “partial credit” for companies that seek to cooperate with the government.  For instance, in situations where a company “honestly” and “meaningfully” provides “valuable assistance” to the government, the revised policy envisions the ability to award at least partial credit, even if the company does not agree with the government about every employee’s individual liability.  According to Mr. Rosenstein, when credit is all or nothing, resolution of cases can be delayed without any resultant benefit.

Additionally, in settling civil cases post-Yates, the DOJ has routinely refused to include releases for individuals regardless of culpability.  The revised policy returns to the pre-Yates practice of allowing DOJ’s civil attorneys the discretion to negotiate individual releases in cases where additional investigation of those individuals is not warranted “with appropriate supervisory approval.”

Finally, the Yates Memo stated that DOJ would not consider an individual’s ability to pay a civil settlement or judgment as part of its decision whether or not to pursue that individual.  Going forward, the revised policy permits DOJ attorneys to consider “ability to pay” issues in deciding whether or not to pursue a civil judgment against an individual.  According to Mr. Rosenstein, this commonsense change has been made so that DOJ civil attorneys are not wasting valuable resources pursuing individuals from whom there is no realistic source of recovery.

Key Takeaways

While noting that it is “revising” current policy, DOJ has made clear that the pursuit of individuals, whether in criminal or civil investigations, remains a top priority.  The specific identification in civil cases of the actions of senior management, including members of a company’s board of directors, is significant and should be top of mind for entities operating in the health care arena, where enforcement efforts are so routinely focused—whether by the government directly or through the efforts of qui tam relators.  This development suggests the continued need to focus compliance efforts throughout an organization and to ensure that its most senior leaders appreciate the spotlight that will be put on their activities.

The changes referenced above can be found in the documents identified below:

https://www.justice.gov/jm/jm-1-12000-coordination-parallel-criminal-civil-regulatory-and-administrative-proceedings#1-12.000

https://www.justice.gov/jm/jm-4-3000-compromising-and-closing#4-3.100

https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.210

https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.300

https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.700

 

On November 30, 2018, the Department for Health and Human Services (“HHS”) Health Resources and Services Administration (“HRSA”) will publish its final rule to change the effective date for its 340B Drug Pricing Program ceiling price and manufacturer civil monetary penalty final rule to January 1, 2019.

After two years of proposed rulemaking, HHS published a final rule on January 5, 2017 outlining requirements of manufacturers to calculate the 340B ceiling price for a covered outpatient drug and the process by which HRSA can levy civil monetary penalties on drug manufacturers for knowingly and intentionally charging beyond the statutory ceiling price. This final rule was initially announced to be effective March 6, 2017 but was delayed on several instances. HHS’s most recent delay was announced on June 5, 2018, when HHS published a second final rule delaying the regulation’s effective date until July 1, 2019 so it could develop “comprehensive policies to address the rising costs of prescription drugs.” HHS then issued a proposed rule on November 2, 2018 soliciting comments on potentially changing the effective date from July 1, 2019 to January 1, 2019 to eliminate further delay. HHS’s latest announcement solidifies the effective date as January 1, 2019.

HHS maintains that finalizing the 340B ceiling price and civil monetary penalty rule will not interfere with its plan to develop separate drug pricing policies. Commenters expressed concern that HHS has not established adequate guidance to implement the rule appropriately, responded to public questions, or provided adequate rationale for its change of view on the need for additional rulemaking. HHS addressed these concerns by explaining that issuing additional guidance is unnecessary to implement the rule and that it would be more efficient for the rule to go into effect sooner and to “assess the need for further rulemaking and guidance after the rule is in effect.” Other commenters feared that they would be unable to achieve compliance in time for a January 1, 2019 effective date. HHS responded that, since HHS published the initial final rule in January 2017, these stakeholders have had “sufficient time” to adjust their systems and update their policies and procedures.

After January 1, 2019, drug manufacturers must calculate the 340B ceiling price for covered drugs on a quarterly basis consistent with the January 5, 2017 final rule. Most significantly, drug manufacturers will newly be subject to financial sanctions for knowingly and intentionally overcharging a covered entity, although HRSA anticipates using such penalties in “rare situations.”   For additional information about the issues discussed above, please contact one of the authors or the Epstein Becker Green attorney who regularly handles your legal matters.

Clinical laboratories need to review how they compensate sales personnel following the passage of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) (Section 8122 of the SUPPORT Act) which is effective as of October 24, 2018.  The SUPPORT Act is a combination of more than 70 bills aimed at fighting the opioid epidemic, with EKRA intended to address patient brokering in exchange for kickbacks of individuals with substance abuse disorders.  However, as written, EKRA is far more expansive.

EKRA adds an all payor (public and private) anti-kickback rule to the health care fraud laws concerning improper remuneration for patient referrals to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or clinical laboratory.  This broad language enables the federal government to monitor provider arrangements intended to generate business for any laboratory services, not only those related to individuals in treatment for substance abuse disorders, payable by a federal health care program (“FHCP”) or commercial health insurer.

The prior version of the bill entitled “Opioid Crisis Response Act” (passed in the Senate on 9/17/18) did not include EKRA provisions, and it appears that laboratories were thrown into EKRA at the last minute, as multiple House bills proposing the addition of EKRA to the SUPPORT Act did not include laboratories.  Congressman Pallone expressed his concerns with EKRA in that “[i]t did not go through regular order and was not properly vetted . . . it was added at the very last minute . . .”  He further states that: “multiple stakeholders have raised concerns that the language does not do what we think it does. It may have unintended consequences.”  This is evident in our review and analysis of the EKRA provisions.

With regard to payment arrangements with sales personnel, one statutory exemption provides that compensation paid to both W-2 employees and 1099 contractors would not violate EKRA if the payment is not determined by or does not vary by:

  • the number of individuals referred;
  • the number of tests or procedures performed; or
  • the amount billed or received

By inclusion of the statutory exemption in EKRA, Congress indicates that payments to any employee or contractor related to the business they generate is prohibited unless the laboratory can meet the specific criteria under the three-prong exception.

As a comparison, the federal Anti-Kickback Statute (“AKS”)[1] prohibits improper remuneration “in return for referring an individual” or “purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item” directly or indirectly reimbursable by a federal health care program.  We know that the Office of the Inspector General (“OIG”) for the Department of Health and Human Services imposes a broad interpretation of the AKS (especially the phrase “arranging for or recommending”) and has taken the position that a pure marketing relationship to generate FHCP business could be a violation of the AKS.  However, compliance with the regulatory criteria under the Bona Fide Employee safe harbor[2] has been heavily relied upon in the health care industry to permit commission-based payments to sales personnel based on FHCP business they generate.[3]

On its face, EKRA would seem to make such commission-based payments to W-2 sales personnel, otherwise permissible under the AKS safe harbors, a criminal act that can carry up to $200,000 in fines and imprisonment up to (10) years for each occurrence.  However, Congress includes an exemption provision that states: “[t]his section shall not apply to conduct that is prohibited under section 1128B of the Social Security Act (42 U.S.C. 1320a–7b) [Anti-Kickback Statute].”  We are uncertain why Congress used the term “prohibited” instead of “not prohibited” or “permitted” in this provision.  This may have been a mere drafting error, but CMS will need to clarify whether it believes payments to sales personnel permitted under a AKS safe harbor are now prohibited by EKRA.  If that is the case, then the exemption should apply to the business generated by W-2 sales personnel for all payors (public and private) under EKRA.

Prior enforcement actions illustrate that the federal government takes the position that sales personnel can be deemed to induce patient referrals in violation of the federal AKS; however, to our knowledge this position has not been fully litigated and we do not believe this is a strong position.  Generally, sales personnel are in a position to solicit referrals and promote laboratory services but are not in a position to make a patient referral; exert undue influence on medical decision-making; or control an individual’s election of a laboratory service.  This distinction should be relevant to a criminal or civil prosecution; especially in the context of laboratory services where coverage requires an order by a physician or other authorized person.

Notwithstanding the above, EKRA would appear to permit a payment arrangement with sales personnel similar to the type that meets the criteria of the Personal Services and Management Contract safe harbor under the AKS.[4]  That safe harbor permits payments to sales personnel if the compensation is fixed in advance and not determined by the volume or value of the FHCP business they generate, which means commission-based payments do not qualify since there would be a nexus between the compensation and volume or value of business they generate.[5]

Finally, Congress does not address whether intent requires actual knowledge of the statute or specific intent to commit a violation, which is the standard in most criminal laws.  Multiple House bills proposing the addition of EKRA to the SUPPORT Act included intent language that did not ultimately make it into EKRA (“Neither actual knowledge of this section nor specific intent to commit a violation of this section shall be an element of an offense under this section.”)[6].  CMS will need to provide clarity.

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[1]  42 U.S.C. § 1320a-7b(b)(1)

[2] 42 C.F.R. §§ 1001952(i)

[3] 54 Fed.Reg. 3088, 3093 (1989)

[4] 42 C.F.R. §§ 1001952(d)

[5] See 64 Fed.Reg. 36360; OIG Advisory Opinion No. 98-10.

[6] See H.R. 6878 (Sept. 25, 2018).

The Medicare Payment Advisory Commission (“MedPAC”) held its monthly public meetings in Washington, D.C., on November 1-2, 2018. The purpose of this and other MedPAC public meetings is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in healthcare law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the November meeting:

  1. MedPAC Reviewed Mandate Related to Long-Term Care Hospitals and Presented Initial Findings Using Data Through 2016

In response to a congressional mandate due in June 2019, the Commission reviewed operational changes made by Long-term Care Hospitals (LTCHs) in response to policy changes and performance trends, patterns of post-hospital discharge to other post-acute care and hospice providers, and LTCH quality data since the implementation of the new dual-payment rate structure.  For operational changes, the degree of change that occurred varied from facility to facility.  It was reported that some LTCHs either changed their admission patterns to admit only patients who met criteria, continued to take beneficiaries who do not meet the criteria, or halted admitting cases that did not meet criteria.  It was also reported that some LTCHs made efforts to contract with private payors, including Medicare Advantage plans, in order to expand the mix of patients and payors.  Additionally, facilities examined increased their capabilities adding bariatric and ICU beds as well as telemetry services.  However, these changes often led to a decline in occupancy and closures.  Over 40 facilities closed (roughly 10% of the industry) – most located in an area with other LTCHs.

In terms of discharges, the share of cases that met the criteria for the new dual-payment rate structure increased from 50% to 64% over the last few years.  This was attributed to some facilities having the capacity to change their admission patterns and take a higher share of cases that meet the criteria.  Finally, LTCH quality data showed that measures of unadjusted direct acute-care hospital re-admissions, in-LTCH mortality, and 30-day mortality remained stable since 2015.  Whereas 30-day mortality and re-admissions have remained at similar rates, the rate for in-LTCH mortality has increased.  However, the Commission could not conclude whether these changes in quality were the result of implementing the dual-payment rate structure.

  1. MedPAC Discusses Ways CMS Could Improve the Use of Functional Assessment in the Medicare Program

MedPAC staff examined the pros and cons of the use of functional assessment in the Medicare program to improve functional assessment usage in the Medicare Program.  MedPAC highlighted that patient assessment data does not always reflect the actual care needs of patients.  Concerns relative to function data reported by Inpatient Rehabilitation Facilities (IRFs), Home Health Agencies, Skilled Nursing Facilities (SNFs), and Long-term Care Hospitals (LTCH) were expressed in regards to payment incentives received by these entities.  When reporting rules changed relative to financial incentives, the mentioned entities changed the amount of therapy they offered and how they coded therapy modalities.  MedPAC believed that if providers were making these changes based on financial incentives, the recording of disability would likely increase since payments are tied to functional status.  Thus, the Commission suggested that CMS could help improve the accuracy of these provider-reported data or collect information about patient function by (1) improving monitoring of provider-reported assessment and penalize providers found misreporting; (2) requiring hospitals to complete discharge assessments to patients referred to post-acute care; and (3) gathering patient-reported outcomes (PROs).

  1. Promoting greater Medicare-Medicaid integration in dual-eligible special-needs plans

MedPAC presented potential policies that would promote greater Medicare-Medicaid integration in dual-eligible special needs plans (“D-SNPs”) to improve care coordination and health outcomes.  Under the existing structure, D-SNPs only enroll dual eligible beneficiaries compared to regular plans which open up to all beneficiaries in their service area.  D-SNPs are required to follow an evidence-based model of care and must take steps to integrate Medicaid coverage by forming contracts with states that meet certain minimum standards.  However, there are D-SNPs that require higher standards for integration that are known as fully integrated D-SNPs, or FIDE SNPs, which enables such plans to receive higher Medicare payments.  Under the FIDE SNP framework, the plan must have a capitated Medicaid contract, which includes acute and primary care services along with services like nursing home care.  Currently, the challenge has been the low levels of integration as most plans either do not provide Medicaid services or provide a limited subset, such as Medicare cost sharing.  Factors that have limited Medicaid integration in D-SNPs include the large number of D-SNP enrollees that are partial-benefit dual eligible as well as misaligned enrollment.

MedPAC proposed a couple of changes that could assist in achieving greater integration.  First, it was proposed that there should be a limit on the ability of partial dual beneficiaries to enroll in D-SNPs.  Secondly, the Commission proposed requiring D-SNPs to follow an aligned enrollment practice where beneficiaries cannot enroll in a D-SNP unless they were enrolled in a Managed Long Term Services and Supports (“MLTSS”) plan offered by the same parent company.  The goal is that this policy would ensure that all D-SNP enrollees are receiving both Medicare and Medicaid benefits from the same parent company while laying the foundation for integration into other areas, such as developing a single care coordination process overseeing all Medicare and Medicaid service needs.

  1. MedPAC Reviews Its Recommendations for Improving the Medicare Advantage Quality Bonus Program and Provides Potential Next Steps

MedPAC led off its presentation by summarizing the Medicare Advantage (“MA”) quality bonus program, which has been implemented since 2012. This program pays bonuses to MA plans based on their overall “star rating,” which tracks and weighs forty-six quality measures. MA plan contracts greater than or equal to a 4-star rating receive the bonus, which ultimately increases a plan’s ability to receive rebate dollars (and therefore attract beneficiaries by reducing enrollee premiums and/or offering coverage to a greater variety of services). Overall star ratings and the breakdown of MA plans’ individual quality measures are publicly reported and can be accessed via Medicare’s Health Plan Finder. MedPAC then expressed its concern for the effectiveness of these star ratings and resulting bonus payments. Notably, these star ratings are awarded at the MA contract level, meaning that the star rating often applies to a vast geographical region. Indeed, according to MedPAC, “about 40 percent of enrollees of MA [Health Maintenance Organizations] and local [Preferred Provider Organizations] are in contracts that include enrollees from non-contiguous states.” Moreover, MedPAC stated that boosted star ratings are the result of health care “consolidations,” where the acquired MA contract inherits the star rating of the “surviving” MA contract. These factors have led to “unwarranted bonus payments” and decreased reliance on star rating as an indicator for plan quality in the enrollee’s region.

In its March 2018 report to Congress, MedPAC recommended two courses of action to address these flaws: (1) freeze quality reporting units at pre-consolidation so these plans do not inherit the ratings of their acquirer and (2) require quality reporting at local market level instead of the large MA contract level. In the meeting, MedPAC stated that the Bipartisan Budget Act of 2018 partly addressed the first recommendation—the act requires an average of quality results for consolidated contracts effective in year 2020.[1]

MedPAC then provided its current recommendations for improving the MA quality bonus program. MedPAC advocated for (1) restructuring the MA bonus evaluation system to remove the current seventeen “process measures”[2] and (2) implementing a “claims-based” outcome measures based on MA claims and encounters, which would, according to MedPAC, improve accuracy and uniformity, align more closely with fee-for-service quality results, and lessen reporting burdens. MedPAC also presented “cliff” and “plateau” issues with the bonus cutoff[3] and offered the potential solution of “a continuous scale for bonus payments” similar to its hospital value incentive program (“HVIP”).[4] MedPAC also presented this solution to address the “tournament model” of the current star system.[5] Finally, MedPAC proposed solutions to various issues with the quality measures (e.g., uneven measure adjustments, narrow differences in measure results, etc.). MedPAC plans to further discuss how to move the MA quality bonus program towards budget neutrality.

  1. MedPAC Reviews Medicare Advantage Encounter Data and Introduces Proposed Policy Options for the Program

In 2012, CMS started to collect “encounter data”[6] from MA plans, mainly for purposes of risk adjustment. MedPAC stated that it has access to this encounter data for 2012–2014 (and “preliminary files” for 2015) for six provider types/settings.[7] For each of these settings, MedPAC validated encounter data by comparing it with other data sources of MA utilization. MedPAC uncovered three broad categories of MA encounter data issues in its review: (1) MA plans “are not successfully submitting encounters for all settings,”[8] (2) “about 1 % of encounter data records attribute enrollees to the wrong plan,”[9] and (3) there were substantial differences in encounter data from other data sources used for comparison. MedPAC focused its discussion on addressing this third issue.

MedPAC compared encounter data with four other MA utilization sources that originate from provider reports (including hospitals, home health agencies, skilled nursing facilities, and dialysis facilities). Encounter data was not consistent with these reports. In 2015, the percentage of MA enrollees reported in encounter data were consistent with the following reports:

  • 90% encounter data consistency with data reported by hospitals (for inpatient stays)
  • 89% consistency with data reported by dialysis facilities (for having dialysis services)
  • 49% consistency with data reported by skilled nursing facilities (for skilled nursing stays)
  • 47% consistency with data reported by home health agencies (for home health services)

These results, combined with MA plans’ lack of encounter data submissions, demonstrate a need for CMS to better assess encounter data completeness and ensure consistency and ability to utilize this data for risk adjustment. MedPAC then gave three policy options to incentivize MA plans to submit complete encounter data: (1) to expand the performance metric framework (e.g., to include specific information about missing encounter data); (2) to apply payment withholds proportional to degree of incomplete encounter data submissions; and (3) to collect encounter data through Medicare Administrative Contractors (which already process fee-for-service claims for all Part A and B services). By enforcing complete encounter data through these methods, MedPAC hopes to learn more about how care is provided to MA enrollees and ensure Medicare benefits are properly administered.

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[1] MedPAC expressed concern that various “consolidation strategies” may still result in unwarranted higher star ratings and accompanying bonus payments.

[2] MedPAC asserted that these administrative measures could effectively be monitored by compliance activities.

[3] Currently, the 4-star requirement for bonus acquisition causes two distinct issues. Contracts with a overall rating of less than 3.75 stars (which is rounded to 4 stars) do not receive any bonus payments (i.e., the “cliff”), and contracts with an overall rating above 4 stars receive “the same benchmark increase” as those with 4-star ratings (i.e., the “plateau”) and there are minimal incentives to reaching star rating above a 4.

[4] A recent blog post discussed MedPAC’s review of its new HVIP in the September meetings.

[5] Under this tournament model, 5-star plans exist despite decreases in overall quality. MedPAC also suggested the establishment of pre-set objectives to promote improvement.

[6] Health care providers generate this “encounter data,” which includes detailed documentation of diagnosed clinical conditions and items and services furnished to treat these conditions.

[7] The six provider types/settings MedPAC referred to are “physician/supplier Part B,” inpatient hospital, outpatient hospital skilled nursing facility, home health, and durable medical equipment.

[8] According to MedPAC, only 80% of MA contracts have “at least one encounter record for each of the six settings.”

[9] MedPAC asserts that this issue may be corrected by changing data processing.

Following up on its July 2017 guidance on the same topic (discussed in a previous blog post), FDA issued a proposed rule on November 15, 2018 to amend Agency regulations to allow Institutional Review Boards (“IRBs”) to waive or alter certain informed consent elements (or in some cases, waive the informed consent requirement altogether) for FDA-regulated, minimal risk clinical investigations (“Proposed Rule”).

What Clinical Investigations are Affected?

Importantly, the only clinical investigations affected by the Proposed Rule are those that are FDA-regulated and “minimal risk” – a term defined by FDA to mean that “the probability and magnitude of harm or discomfort anticipated in the research are not greater in and of themselves than those ordinarily encountered in daily life or during the performance of routine physical or psychological examinations or tests.”

Such minimal risk investigations may be approved by IRBs through an expedited review procedure.  Although FDA has designated specific categories of research that may be reviewed through this procedure, the designated activities are not automatically considered minimal risk just because they are on FDA’s list.  Rather, inclusion on the list simply means that the research activity is eligible for expedited review where the specific circumstances of the research involve no more than minimal risk.  Still, the designated research categories shed light on the types of studies that may be deemed minimal risk, including: research on a drug or device where an investigational new drug application (“IND”) or investigational device exemption (“IDE”), respectively, is not required; prospective collection of biological specimens for research purposes by noninvasive means (e.g., hair and nail clippings); collection of data from voice, video, digital, or image recordings made for research purposes; and research on individual or group characteristics or behavior, or research employing survey, interview, oral history, focus group, program evaluation, human factors evaluation, or quality assurance methodologies.

What is the Intent of the Proposed Rule?

Sometimes it’s not practicable for sponsors to obtain informed consent when conducting clinical investigations.  As current FDA regulations offer only very narrow exceptions to the informed consent requirements – for life threatening situations or emergency research –  the inability of an investigator to obtain subject informed consent would have previously brought potentially valuable investigations to a halt.  However, the Proposed Rule seeks to provide increased flexibility with respect to FDA’s informed consent requirements for certain minimal risk studies.

In particular, the Proposed Rule implements changes made to the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) by the 2016 21st Century Cures Act (“Cures Act”).  These changes authorize FDA to allow for exceptions to its standard informed consent requirements where the proposed clinical trial poses no more than minimal risk to the human subject and includes appropriate safeguards to protect the rights, safety, and welfare of the subject.  Specifically, under the Proposed Rule, FDA would allow IRBs to waive or alter informed consent requirements if the IRB finds and documents that:

  1. the clinical investigation involves no more than minimal risk to the subjects (see “minimal risk” definition above);
  2. the waiver or alteration will not adversely affect the rights and welfare of the subjects (in making this determination, the IRB may consider, for example, whether the waiver or alteration has the potential to negatively affect the subjects’ well-being or whether the subject population in general would likely object to a waiver or alteration being granted for the research in question);
  3. the clinical investigation could not practicably be carried out without the waiver or alteration (FDA defines “practicable” to mean (i) recruitment of consenting subjects does not bias the science and the science is no less rigorous as a result of restricting it to consenting subjects, or (ii) the research is not unduly delayed by restricting it to consenting subjects); and
  4. whenever appropriate, the subjects will be provided with additional pertinent information after participation.

As noted above, FDA already issued guidance for immediate implementation in July 2017 that states that FDA does not intend to object to IRBs waiving or altering informed consent requirements, as described in the guidance, for certain minimal risk clinical investigations (see our previous blog post).  However, FDA intends to withdraw this guidance after the Proposed Rule takes effect.

What are the Envisioned Benefits?

If finalized, the Proposed Rule would largely harmonize FDA regulations with the Common Rule, which governs human subject research conducted or supported by HHS and other federal agencies.  The Common Rule has included provisions allowing waiver of informed consent for minimal risk research since it was first issued in 1991.  We note, however, that January 2017 revisions to the Common Rule added a fifth criterion to the four listed above related to IRB waiver or alteration of informed consent (this fifth criterion requires that “if the research involves using identifiable private information or identifiable biospecimens, the research could not practicably be carried out without using such information or biospecimens in an identifiable format”).  FDA is not proposing to adopt this fifth criterion at this time.

Beyond harmonization, the Proposed Rule should pave the way for certain minimal risk clinical investigations to proceed that otherwise would have never gotten off the ground, offering greater opportunities for sponsors and investigators to further their product development efforts and make positive contributions to the public health.

Comments on the Proposed Rule must be submitted to the docket by January 14, 2019.

The Centers for Medicare & Medicaid Services (CMS) issued a final rule on November 1, 2018 that updates physician fee schedule (PFS) payments for calendar year (CY) 2019 and finalizes several policies. The final rule includes amendments to the regulations promulgated under Section 216 of the Protecting Access to Medicare Act of 2014 (“PAMA”) intended to increase the number of clinical laboratories that qualify as an “applicable laboratory” for reporting purposes; specifically (1) removal of payments received from Medicare Advantage (MA) Plans for determining applicable laboratory status and (2) the use of the Form CMS-1450 14x Type of Bill (TOB) to define an applicable laboratory.

Before the start of the next data collection period (starting January 1, 2019) clinical laboratories will need to determine how these amendment may have impacted their applicable laboratory status.  Epstein Becker Green is working with our clients to provide counsel how to comply with these amendments and determine how to record and report its billing data to CMS.

Medicare Advantage (MA) Plan Payments. The first amendment is simple and straight forward.  CMS has removed MA Plan payments to laboratories from the calculation of total Medicare revenues.  The change would remove such Medicare revenue from the denominator of the fraction that is used to determine whether a laboratory received more than 50 percent of its revenues from PFS and Clinical Laboratory Fee Schedule (CLFS) services.  CMS explained that it was not logical to consider MA Plan payments in calculating Medicare revenues received by a laboratory, while also requiring the applicable laboratory to report such payments as an MA Plan is defined as a private payor under PAMA (42 C.F.R. § 414.502).  As such, laboratories that furnish Medicare services to a significant number of beneficiaries enrolled in MA plans may now meet the majority of Medicare revenues threshold criterion, and therefore, qualify as an applicable laboratory.

CMS 1450 14X Type of Bill (TOB).   This amendment is more complicated. The definition of an “applicable laboratory” now includes clinical laboratories that receive at least $12,500 of Medicare revenues from the CLFS for claims submitted using the CMS 1450 14X bill type, which is used by some hospital outreach laboratories to bill for laboratory services provided to non-patients.  CMS has essentially created a de facto entity (“hospital outreach laboratory”) that meets the definition of an applicable laboratory based on how the hospital laboratory bills Medicare Part B for a sub-set of test services.

The problem is that the 14X bill type is a billing mechanism for claim submission to Medicare Party B and is not used by all private payors. This poses the question of how a hospital laboratory will correctly identify and collect applicable information associated solely with this de facto entity (hospital outreach laboratory). CMS does not adequately address in the final rule how the term “non-patient” is defined for purposes of determining private payor rates that the hospital laboratory must report.  CMS needs to provide clarity in sub-regulatory guidance and provider education materials on this issue.

Interestingly, in its response to the proposed rule, the American Hospital Association included data that showed hospital outpatient claims reported using 14X bill type was only 12.20%, whereas the percentage of hospital outpatient claims billed using the 13X bill type represents was 87.37% of all hospital outpatient claims.

In 2014, CMS created narrow exceptions for circumstances when hospitals function as independent laboratories and instructed hospitals to use the 14X TOB to obtain separate payment only in the following circumstances: (1) non-patient (referred specimen), (2) hospital collects a specimen and furnishes only the outpatient labs on a given date of service; or (3) hospital conducts outpatient lab tests that are clinically unrelated to other hospital outpatient services furnished for the same day. “Unrelated” means the laboratory test is ordered by a different practitioner than the one who ordered the outpatient services and for a different diagnosis.  However, CMS permits hospitals to bill under 13X TOB in circumstances (2) and (3) above when non-referred laboratory tests are eligible for separate payment.  Most hospitals likely opt to bill under 13X TOB when eligible as those revenues are not taxed as income, as compared to revenues under a 14X TOB which are taxable income as an unrelated business expense.

Ironically, CMS has argued in a federal lawsuit and proposed rules that Congress did not intend hospital outreach laboratories to qualify as applicable laboratories.  Moreover, CMS has repeatedly argued in a federal lawsuit and the final rule that there is no reason to believe that increasing the level of participation would result in a measurable cost difference under the Medicare Part B CLFS payment rate.  In the final rule, however, CMS states “[w]e believe that we will only know the impact of the data on CLFS rates by collecting data from hospital outreach laboratories. . . . [h]owever, if it becomes apparent that data from hospital outreach laboratories do not result in a significant change in the weighted median of private payor rates, we will revisit the use of the CMS-1450 14x TOB through future rulemaking.”   Ultimately, CMS suggests that these amendments were actually made to placate stakeholder concerns regarding the number of applicable laboratories reporting applicable information from the initial data reporting period.

A dental practice and related dental management company have become the first two entities to make their way on to the newly created “High Risk – Heightened Scrutiny” list from the Office of Inspector General for the United States Department of Health and Human Services (the “OIG”).[1]

ImmediaDent of Indiana, LLC, a professional dental practice (“ImmediaDent”), and Samson Dental Partners, LLC, a dental management company which provides management and administrative services to ImmediaDent and other dental practices in Indiana, Kentucky and Ohio (“Samson”), jointly agreed on October 31, 2018 to an approximately $5.14 Million settlement with the Department of Justice and the OIG.[2]  The settlement stems from a qui tam suit brought by Dr. Jihaad Abdul-Majid, DDS, a dentist formerly employed by ImmediaDent.  Dr. Abdul-Majid claimed that ImmediaDent and Samson perpetrated fraud against Indiana’s Medicaid program by way of upcoding certain tooth extraction procedures, in addition to improperly billing for tooth cleanings which were either not medically necessary or never performed.  Interestingly, the settlement also involves claims that Medicaid fraud occurred in part due to Samson’s violation of Indiana’s prohibition on the corporate practice of dentistry.  The theory proffered was that a pre-requisite to compliance with Indiana’s Medicaid program requirements was compliance with the law and regulations governing the practice of dentistry, including those requiring dentistry to only be practiced by licensed professionals.  The government contended that Samson violated Indiana’s prohibition on the corporate practice of dentistry, and thus illegally engaged in the unlicensed practice of dentistry, by exerting undue influence over ImmediaDent’s dentists and other dental staff, including by way of rewarding production, disciplining those who did not meet production goals and directly interfering with clinical judgment.

The High Risk – Heightened Scrutiny list is a part of a new, five tier Fraud Risk Indicator system promulgated by the OIG to assess future risk posed by individuals and entities that have been alleged to have engaged in healthcare fraud.[3] The tiers range from “Low Risk – Self Disclosure” to “Highest Risk – Exclusion”.   The second “riskiest” tier is “High Risk – Heightened Scrutiny”.  As part of this tier, the Federal government has begun listing entities that it believes “pose a significant risk to Federal healthcare programs and beneficiaries” and further need additional oversight, but have refused the government’s request to enter into a Corporate Integrity Agreement (“CIA”).

Though not required by statute or regulation, CIAs are typically utilized by the government as part of settlement negotiations with providers and other entities alleged to have perpetrated healthcare fraud.  CIAs are structured to monitor an entity’s compliance with Federal healthcare program requirements in order to show the OIG that it should waive its authority to exclude the entity from participation in Federal healthcare programs.  CIAs involve significant expense, requiring the ongoing engagement of specialized external auditors, or independent review organizations, and substantial investments in compliance systems and processes.  Thus, certain entities have fought the Federal government’s attempts to impose a CIA.  As a result, some have viewed the Heightened Scrutiny list as the government’s attempt to publicly shame entities who have refused to enter into a CIA.

The Heightened Scrutiny list has only formally been in place since October 1, 2018, and thus it remains to be seen if the government will actively add other entities to this list, and further whether the list will serve as a deterrent to entities considering pushing back on the government’s attempts to impose a CIA.

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[1] See https://oig.hhs.gov/compliance/corporate-integrity-agreements/high-risk.asp.

[2] See United States ex rel. Jihaad Abdul-Majid, et al. v. ImmediaDent Specialty, P.C., et al., Civil Action No. 3:13-cv-222-CRS.

[3] See https://oig.hhs.gov/compliance/corporate-integrity-agreements/risk.asp.