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.

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.

On November 2, 2018 CMS announced the finalization of the 2019 OPPS and ASC payment rules which were initially proposed in July of 2018.[1] [2] While the final document will not be officially published until November 21st, an Inspection Copy is available for the public to review on the Federal Register website. These new payment rules in many ways expand the range of services that CMS will reimburse when performed at Ambulatory Surgical Centers (ASCs), most notably, by including certain cardiac catheterization procedures on the approved list, and by lowering the threshold that determines allowable device intensive procedures.

Increase in Covered Cardiac Catheterization Procedures:

The Final Rule will add 17 procedures relating to cardiac catheterization to the list of ASC Covered Surgical Procedures.  The final list includes five procedures that were not included in the July 2018 proposed rule, due in part to commenters requesting that additional procedures be added to the list, and CMS adopting their request, at least in part.[3] [4] [5] The expanded list reflects the growing trend of cardiac procedures being transitioned from an inpatient to an outpatient setting. This shift will have a continuing business impact on inpatient providers and may also lead to state-level regulatory changes. States that currently prohibit cardiac catheterization procedures at outpatient facilities may decide to adopt changes to allow certain procedures that have been deemed acceptable by CMS to be performed at facilities without on-site inpatient services, including ASCs.[6] Furthermore, these additions could be a springboard for CMS to later add more complicated procedures to the list of ASC covered services.

Decrease in Device Offset Percentage:

CMS has also taken steps to make device-intensive procedures more accessible in the ASC setting. Procedures categorized as “device-intensive” are paid at the higher OPPS rate, even if performed in an ASC.  However, a procedure only qualifies as “device-intensive” if the portion of the procedure’s cost related to the device falls within a predetermine percentage. The Final Rule decreases the device offset percentage threshold from 40 percent to 30 percent, meaning that procedures utilizing lower-cost devices will now be eligible for reimbursement as “device-intensive.”  As a result, ASCs will have the financial capacity to perform more procedures that involve lower cost medical devices.[7] CMS directly states its purpose behind this move saying “We believe allowing these additional procedures to qualify for device-intensive status will help ensure these procedures receive more appropriate payment in the ASC setting, which will help encourage the provision of these services in the ASC setting.”[8] The implementation of the new payment rules will undoubtedly lead to an increase in the amount of device-intensive procedures performed in the ASC setting as ASCs expand their scope of services to include more device-intensive procedures and patients choose to have these procedures performed in an outpatient setting. This change may also indicate future moves by CMS to encourage complex, device intensive procedures, such as joint replacements, in the ASC setting.

Government Shift to Outpatient Providers

These rule changes reflect Medicare’s continued shift towards encouraging services to be provided in the less costly outpatient setting. Anticipating a continued incline in the amount of individuals eligible for federal programs based on the expectation that 10,000 baby boomers will retire per day for over the next decade, CMS is likely to continue making changes to its payment rules to encourage the provision of care in lower cost settings.[9] These changes provide opportunities for ASCs and physicians to expand their business, but also threaten more “bread and butter” revenue streams on which hospitals have historically relied. Thus, hospitals, ASCs and physicians should consider addressing these changes in their long-term strategic plans, including possible joint ventures for outpatient services, in general, or specific service lines, such as cardiac catheterizations.

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[1] CMS Inspection Copy

[2] 83 Fed. Reg. 37046.

[3] CMS Inspection Copy (at page 746)

[4] 83 Fed. Reg. 37046, 37160.

[5] CMS Inspection Copy (at page 743-44)

[6] N.J.A.C. 8:33E-1.3.

[7] 83 Fed. Reg. 37046, 37108.

[8] Id.

[9] http://www.pewresearch.org/fact-tank/2010/12/29/baby-boomers-retire/

On October 25, 2018, the Centers for Medicare and Medicaid Services (CMS) released an advance notice of proposed rulemaking (ANPRM) to solicit feedback on its newly proposed International Pricing Index (IPI) model for Medicare Part B drug reimbursement.  The IPI model will be tested by the CMS Innovation Center as a potential means to dismantle and replace the current buy-and-bill model and advance the Trump Administration’s agenda for drug pricing reform, as described in its May 2018 Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.  The framework of the IPI model is characterized by three components designed to achieve the following objectives:

  • Utilize private sector vendors to purchase and take title (but not necessarily possession) over single source drugs and biologicals (including biosimilars) and bill Medicare.  The vendors would then have flexibility to offer a variety of delivery options to ordering physicians.  This concept, which was inspired by Medicare Part D’s use of competing private-sector companies to facilitate the provision of Medicare-covered items and supplies, would leverage and improve upon the Competitive Acquisition Program (CAP) previously implemented in the mid-2000s.
  • Phase in, over a five-year period, a reduced Medicare payment for selected drugs based on a composite of international prices.  CMS would reimburse vendors for drugs purchased from manufacturers based on international pricing (except where the ASP is lower), as benchmarked against more than a dozen other nations with economies comparable to the United States that have significantly lower acquisition costs for physician-administered drugs.
  • Replace the percentage-based Part B add-on payment (i.e., ASP+6% (ASP+4.3% post-sequestration)) with a set payment amount, which would be based on 6% of a Part B drug’s historical drug costs.  Under the new model, physicians would continue to receive payment for drug administration.  Because physicians would be obtaining drugs from vendors, and no longer assuming financial risk, the add-on payment would be decreased to remove physicians’ incentive to prescribe higher cost drugs but be calibrated to hold providers harmless to the extent possible.

CMS plans to issue a proposed rule fully describing the IPI model in Spring 2019, with the goal of testing the model over a five-year period, from Spring 2020 to Spring 2025.  The IPI model would involve selected Part B-covered single source drugs and biologicals (including biosimilars) and would apply to all physician practices and hospital outpatient departments (HOPDs) in certain designated geographic areas.  Providers, beneficiaries, and drugs not included in the model will remain under the current Medicare Part B reimbursement system.

The ANPRM signals the Administration’s determination to dramatically overhaul the Medicare Part B drug reimbursement system through a new competitive acquisition program based on international pricing that would seek to reduce government and beneficiary costs while keeping providers revenue neutral.  While CMS appears committed to the general outlines of the IPI model, it has invited industry feedback on a wide range of matters pertaining to the configuration and details of each of the model’s components as well as certain quality measures that CMS will consider in assessing the impact of the model on beneficiary access and quality of care.  Stakeholders have until December 31, 2018 to submit comments on the ANPRM.

Epstein Becker Green (EBG) will be closely analyzing the proposed IPI model and related developments while working with its clients to assess its impact and formulate and advance new ideas to shape the model and its future implementation.

On October 15, 2018, the Centers for Medicare and Medicaid Services (CMS) unveiled its proposed rule requiring direct-to-consumer television advertisements for prescription drug and biological products to contain the list price (defined as the Wholesale Acquisition Cost) if the product is reimbursable by Medicare or Medicaid. Medical devices are not included in the proposed rule, although CMS seeks comment on how advertised drugs should be treated if used in combination with a non-advertised device. If finalized, the requirement will be sweeping and only purports to exclude products costing under $35 per month for a 30-day supply or a typical course of treatment.

CMS prescribes specific language for manufacturers to use at the end of an advertisement:

The list price for a [30-day supply of ] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.

The list price is determined “on the first day of the quarter during which the advertisement is being aired or otherwise broadcast.” This pricing statement must be legible, “placed appropriately against a contrasting background for sufficient duration,” and must be in an easily read font and size. Manufacturers are permitted under the proposed rule, “[t]o the extent permissible under current laws,” to include a competitor’s current product list price, so long as the disclosure is done in a “truthful, non-misleading way.”

CMS proposes that drug and biological products in violation of the proposed rule would be publically listed on its website. Although CMS acknowledged that it was proposing no other HHS-specific enforcement mechanisms, CMS anticipates an influx in private actions under the Lanham Act as the primary enforcement mechanism if the proposed rule is finalized.

Health and Human Services Secretary Alex Azar emphasized the proposed rule’s intent to mitigate consumer out-of-pocket costs and reduce unnecessary Medicare and Medicaid expenditures. Interested stakeholders can submit comments online to the regulations.gov docket or by mail until December 17, 2018.

The Department of Justice (DOJ) announced this week that it has entered into a settlement agreement with Davita Medical Holdings (Davita) for $270 million dollars to resolve certain False Claims Act liability related to Medicare Advantage risk adjustment payments.

As the settlement agreement describes, Davita acquired HealthCare Partners (HCP), a large California based independent physician association in 2012. HCP, subsequently Davita Medical Group (or Davita), operated as a medical service organization (MSO) who contracted with Medicare Advantage Organizations (MAOs) to provide services and manage the care of its beneficiaries. Davita would provide beneficiary diagnostic information to its MAOs which would be used by the Centers for Medicare and Medicaid (CMS) to calculate the MAO’s risk adjusted capitated payments under the program’s risk adjustment payment methodology. Payments would then be made by MAOs to DaVita under the terms of its risk sharing arrangements.

The settlement resolved allegations raised in the qui tam action filed in District Court for the Central District of California, United States ex rel. Swoben v. Secure Horizons, et al., by James Swoben, a former employee of a MAO that contracted with HCP. Swoben alleged that HCP hired coding companies to perform “one-way” retrospective reviews of member records, whereby the MAO would submit additional diagnosis codes to CMS but not validate previously submitted codes.

The settlement further resolves allegations related to incorrect coding guidance, unsupported but un-retraced codes identified during audits, in-home assessments, incorrect diagnosis mapping to appropriate ICD-9 codes in its electronic medical record, and acute condition codes in the primary care setting.  In its press release, the DOJ emphasized that the failure by Davita to delete unsupported or undocumented diagnosis codes caused the MAOs to retain payments from CMS that they were otherwise not entitled.

Importantly, Davita as downstream provider to MAOs, did not directly submit claims to the Centers for Medicare and Medicaid. Accordingly, this settlement is extremely significant to downstream entities such as MSOs, IPAs, physician practices and risk adjustment vendors who can themselves potentially be subject to “causes to be submitted” and other theories under the FCA.

Epstein Becker Green’s Jason Christ, Teresa Mason and Tom Hutchinson served as counsel and advisor to the Member Representative of the former owners of HCP. Epstein Becker Green was actively involved in co-defending this matter.

A variety of traditional and non-traditional investors are starting to capitalize on the stability of the Medicare Advantage Program and expansion of the Medicare Advantage Health Plan Market.  These companies are leveraging sophisticated technological interfaces, data, and telemedicine to help improve the patient experience and to maximize the Triple Aim.

Why Medicare Advantage?

Medicare Advantage plans are offered by private insurance companies subject to certain standards established by the Centers for Medicare & Medicaid Services (“CMS”).  While the Medicare Advantage health plans are responsible for meeting specified levels of benefits and service standards and receive premium funding from the government, they have a high degree of autonomy on how they administer the plans to cover enrolled Medicare beneficiaries.  Medicare Advantage funding is risk adjusted for the health status of the enrollee and as a result, effective Medicare Advantage plans (“MA Plans”) are highly dependent upon real time data sharing.

Disfavored no more

Recent developments show that Medicare Advantage has more bipartisan support than the ACA Marketplace and is less susceptible to political intrigues.  However, this was not always the case. Not too long ago, Medicare Advantage was considered a “privatization of Medicare” and insurance companies were accused of making a profit off of the Medicare Program.  In February 2013, federal officials announced a 2.2% cut to Medicare Advantage reimbursement.  The political attacks on Medicare Advantage were not well received by the Medicare Advantage enrolled seniors who vocally began to defend their beleaguered program.  The patients began a campaign of communication to members of Congress, touting the benefits of engaged Medicare Advantage healthcare providers and health related initiatives such as fitness and nutrition counseling.  This caught the skeptics between a rock and a hard place.  Some Congressional Democrats have noted that they support killing the program but cannot because senior constituents love it.  After significant grassroots lobbying, coalition building, and industry efforts, the proposed 2.2% reduction was transformed into a minor increase by April 2013.  This turnaround was primarily due to patient and provider advocacy with thousands of seniors participating in letter writing campaigns to protect their Medicare Advantage Program.  Medicare Advantage went from a political pariah to a bipartisan tolerated program within a few years.

Medicare Advantage is here to stay

Fast forward to 2018, Medicare Advantage is marketed as an innovative health care option that will provide more choices and lower premiums.  The Trump Administration is providing greater flexibility to companies offering benefits in Medicare Advantage plans.  Medicare Advantage is expanding beyond the retiree states of Florida, Arizona, and California with significant inroads in all fifty states.  The growth has caught the eye of innovative healthcare investors and market consolidation has produced larger plans with stronger infrastructure including captive staff-model delivery systems.  Medicare Advantage continues to grow with 33% of Medicare eligible beneficiaries currently enrolled in MA Plans.  Significant opportunities exist for companies which already possess sophisticated data analytics and coordinated care systems.  Notably, one such player, Clover Health, announced on August 27, 2018 that it is also launching Medicare Advantage plans in six new markets in 2019.  Clover Health is a San Francisco based startup that uses data analytics and artificial intelligence to deliver health care.  Currently, Clover Health provides services for 30,000 seniors and others eligible for Medicare in parts of Georgia, New Jersey, Pennsylvania and Texas.  Only time will tell how successful starts ups such as Clover Health will be in the Medicare Advantage marketplace.  However, this investment is one indicator that despite the rhetoric around health care in America, Medicare Advantage is here to stay.

In the tech world, blockchain technology appears to be the panacea to all problems.  As blockchain technology becomes increasingly popular, many industries are trying to determine the best way to use the new phenomenon. Healthcare is no different in this quest. Health care is an optimal candidate to benefit from development of innovative ways to solve its impending issues using transformational technology. Blockchain could be the technology that helps to alleviate some of health care’s problems, such as the incredibly fragmented delivery of care and the painstakingly slow reaction to technological advances.

What is Blockchain Technology?

An over-simplified explanation of blockchain is an online database that stores information on a network of computers. Information also known as “a record” is stored in a block. For example, a record of you paying Mr. Smith 10 dollars is stored in a block. Traditionally, that information is saved in a database at a data center. However, blockchain technology stores that record on an individual computer with a time stamp (the “block”).  Any change to that information is then stored on another individual computer with a time stamp.  Each individual computer holds a block of information that is chronologically time stamped, which creates the blockchain. Thus, information cannot be edited or changed without the verification from all parties who have access to a block in the blockchain.  Blockchain technology distributes and decentralizes information.  There is no central company or one person that holds the information. This makes it extremely difficult for any one person to take down or corrupt the network. Traditionally, blockchain technology is used as a public transaction ledger for bitcoin. Bitcoin users utilized the technology to mitigate the issue of double spending, spending the same single digital coin more than once, without the need of one trusted authorizer or central server. 

Blockchain and Health Care

Blockchain technology could play a role in the industry’s goal to improve the quality of care through care coordination. Care coordination often involves the sharing of information between multiples providers. Blockchain technology could be used to facilitate this process in a more efficient manner by storing a variety of information, including provider and patient details, within electronic health records (EHR) on a network of computers. Blockchain would store the information on various computers, such that information entered into an EHR could be stored across a network of computers that includes providers and the patient. Providers and the patient would hold blocks of information, allowing each provider and each patient to validate the updates to that patient’s record with the consensus of all the providers and the patient. Using blockchain in this fashion would give patients control over their care while also encouraging care coordination because providers would have to interact with one another to update a patient’s file. In this sense, Blockchain could take the first step in facilitatating the improvement of patient care as a whole.

Blockchain could also reduce the health care industry’s susceptibility to privacy attacks or breaches because of its decentralized and distributed structure. Privacy attacks often involve a hacker entering a system or a database, but, with blocks held in multiple locations instead of one database, blockchain technology would help to minimize hacker infiltration.

However, as with any heavily regulated industry, implementing blockchain will not be easy. There are state and legal roadblocks that hinder blockchain’s viability. Health Insurance Portability and Accountability Act (“HIPAA”), for example, could hinder the ability of sharing health information technology between a network of computers due to restrictions on sharing of Personal Health Information (PHI). Furthermore, state and federal laws would have to be updated to facilitate this technological advance. Despite these hurdles, there may be a glimmer of hope. The Centers for Medicare & Medicaid Services is dedicated to improving interoperability and patients’ access to health information through its Promoting Interoperability program. The agency’s push for moving health towards EHR has the potential to be pivotal if the industry uses blockchain or a similar technology to improve patient access to health information.

Blockchain may not be a today solution—it will take time to change state and federal laws regarding health information to facilitate such technology. However the promotion of initiatives encouraging use of EHR, may be priming the industry’s palate to provide a place for blockchain in the future.

On June 20, 2018, the Centers for Medicare and Medicaid Services (“CMS”) published an advance copy of a request for information seeking public input on reforms to the Physician Self-Referral Law (or “Stark Law”).

The request for information stems from on-going efforts by the Department of Health and Human Services (“HHS”) to accelerate the government’s transformation from a fee-for-service to a value-based system focused on care coordination.  Dubbed the “Regulatory Sprint to Coordinated Care” (#RS2CC), HHS expressed an intent to first identify regulatory requirements that act as obstacles to coordinated care, and then issue guidance or revise regulations to address these obstacles and/or incentivize coordinated care.

In connection with this HHS initiative, CMS acknowledged and identified that certain aspects of the Stark Law may pose potential obstacles to coordinated care.  Through their request for information, CMS seeks additional information and input from the public to help achieve their goal of “reducing regulatory burden and dismantling barriers to value-based care transformation.”  In particular, CMS has asked the public to share their thoughts and experiences related to:

  • the structure of arrangements between DHS entities that are used to effectuate alternative payment models and novel financial arrangements;
  • potential revisions to current Stark Law exceptions and key defined terms that would serve to permit or encourage the implementation of alternative payment models; and
  • the creation of new Stark Law exceptions to permit or encourage the implementation of alternative payment models.

The request for information follows a number of other administrative actions and announcements focused on reforming the current regulatory environment, particularly with respect to physician arrangements and, more specifically, the Stark Law. In January, CMS Administrator Seema Verna announced a plan to form an interagency group focused on reviewing the regulatory barriers to alternative payment models created by the Stark Law.  In addition, the Fiscal Year 2019 budget proposal, issued by the Office of Management and Budget in February, includes a proposal to reform the Stark Law to “better support and align with alternative payment models and to address overutilization.”  These more recent actions continue to build on concerns and suggestions identified in a white paper released by the Senate Finance Committee in 2016 titled “Why Stark? Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models.”

This request is only the first formal step in the combined efforts of HHS and CMS to adopt what may be significant changes to the Stark Law.  However, the government appears to be poised to move quickly on regulatory reforms now that the ball is rolling, as evidenced by their branding of these efforts as a “sprint.”

Epstein Becker Green is in the process of coordinating with clients that are interested in submitting responses to the request for information.  If your organization is interested in developing comments to this request and would like assistance in these efforts, please contact Victoria Sheridan by e-mail at vsheridan@ebglaw.com or by phone at (973) 639-8296.

The final copy of the request for information is scheduled to be published in the Federal Register on June 25, 2018.

The long-running saga of the Medicare appeals backlog added a new chapter that may give frustrated stakeholders a new remedy.[1]  On March 27, 2018, the United States Court of Appeals for the Fifth Circuit ruled that a home health agency may pursue a claim against the Secretary of HHS for failing to provide a hearing before an Administrative Law Judge within a reasonable time.  Family Rehabilitation, Incorporated v. Azar, No. 17-11337 (5th Cir., Mar. 27, 2018).

In this case, Family Rehabilitation (“Family”) received a notice from a Medicare Zone Integrity Program Contractor (“ZPIC”) in 2016 alleging that it had been overpaid $7.88 million based on an extrapolation from a sample of 43 claims.  It pursued its administrative appeal rights, and after the second level of review the overpayment was reduced to $7.62 million. At that point, its Medicare Administrative Contractor began recouping the alleged overpayment; at the same time, Family requested a hearing before an Administrative Law Judge. However, due to the backlog of Medicare Part B appeals, the Secretary conceded that it would take between three and five years to schedule a hearing even though the Social Security Act requires that an ALJ issue a decision within 90 days of a timely hearing request.[2]

Family was caught in a bind: if it waited for a hearing, it would likely have gone out of business without any Medicare reimbursement while over seven million dollars was being recouped. It took the drastic step of seeking an injunction to prevent CMS from recouping the alleged overpayments until its appeal had been decided. It alleged that because the recoupment would force it to go out of business before it had any chance to have its appeal heard, this amounted to irreparable harm and authorized the injunctive relief to prevent the Secretary from acting beyond the scope of his authorityAlthough the District Court dismissed the case on jurisdictional grounds, the Court of Appeals reversed the judgment and concluded that Family could state a cause of action based on the Secretary’s alleged failure to comply with the statute.

The Court of Appeals explained that although there is a presumption that all Medicare appeals will follow the established four levels of administrative appeals before a federal court will review the Secretary’s actions, there are exceptions. One well-established caselaw exception allows for direct judicial review of matters that are “entirely collateral” to a claim for benefits, and where the full relief requested cannot be obtained in an after-the-fact hearing.  The Court agreed that both elements were met, and that Family could argue that this provided a separate cause of action for relief. It agreed that the relief sought for alleged due process and equal protection violations could not be obtained through the administrative hearing process, and did not require a court to “wade into the Medicare Act and regulations” governing home health coverage and reimbursement; as a result, since the claims made by Family were unrelated to the merits of the alleged overpayment and recoupment because Family was not challenging the authority of CMS to recoup overpayments, they were entirely collateral.  The Fifth Circuit then sent the case back to the district court for a ruling on Family’s request for an injunction.

Although the Fifth Circuit did not rule on Family’s requests for an injunction, the decision is significant for stakeholders because it may give them an avenue for interim relief when CMS acts first, offers after-the-fact appeals, but then forces them to wait for years before deciding an appeal or even scheduling a hearing. The decision is narrow, but would be useful in circumstances where CMS is moving forward with recoupment of disputed Medicare funds that may ruin a provider or supplier because it would be out of business before it could even get a hearing. It may offer providers and suppliers a targeted remedy to forestall a recovery of disputed Medicare funds before a provider or supplier can have a hearing. This is different from an action that seeks to block CMS from taking any action before the administrative appeals process has been exhausted, because it does not challenge the merits of an alleged overpayment or the Secretary’s authority to recover overpayments.   In its decision, the court expressly rejected the Secretary’s arguments that Family was really seeking to prevent the recoupment of an overpayment, and was not persuaded that Family’s motivation was to short-circuit the appeals process. It noted that the relief sought was limited to suspending the recoupment before a hearing, which is different from a request to prohibit the recoupment altogether.

The slow pace of any executive or legislative remedy for the Medicare auditing and administrative appeals process may mean that in these circumstances federal courts may be less inclined to be deferential to agencies, and are open to finding that agency non-compliance may rise to the level of a constitutional violation.

[1] The ongoing history of the Medicare appeals backlog and attempts to remedy the situation are discussed in American Hospital Association v. Burwell, 209 F. Supp. 2d 221 (D.D.C. 2016).

[2] 42 U.S.C. § 1395ff(d)(1)(A).