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.

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.

_____

[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.

On November 1, 2018, the Office of the Inspector General (“OIG”) for the U.S. Department of Health and Human Services (“HHS”) published an audit report finding that the U.S. Food and Drug Administration’s (“FDA”) policies and procedures were “deficient for addressing medical device cybersecurity compromises.” (A copy of OIG’s complete report is available here and Report in Brief is available here.) Specifically, the OIG found that FDA’s policies and procedures were “insufficient for handling postmarket medical device cybersecurity events” and that FDA had not adequately tested its ability to respond to emergencies resulting from cybersecurity events in medical devices. Although the OIG report “did not identify evidence that FDA mismanaged or responded untimely to a reported medical device cybersecurity event,” it noted that “existing policies and procedures did not include effective practices for responding to these events.”

Citing cybersecurity of medical devices as a top management challenge for HHS, OIG conducted an audit to evaluate FDA’s plans and processes for timely communicating and addressing cybersecurity compromises in the medical device postmarket phase. Based on OIG’s audit of certain FDA internal policies, procedures, and website, as well as interviews with FDA staff, OIG recommended that FDA take the following actions: (i) continually assess the cybersecurity risks to medical devices and update its plans and strategies; (ii) establish written procedures and practices for securely sharing sensitive information about cybersecurity events with key stakeholders; (iii) enter into a formal agreement with federal agency partners; and (iv) establish and maintain procedures for handling recalls of medical devices vulnerable to cybersecurity threats. Although the OIG acknowledged that FDA has recently implemented some of its initial recommendations, it emphasized that its findings and recommendations with regard to FDA’s cybersecurity policies and procedures remain valid.

On the same date OIG published its report, FDA’s Suzanne B. Schwartz, M.D., M.B.A., published a post on FDA Voices asserting that the OIG report is an incomplete and inaccurate picture of FDA’s oversight of medical device cybersecurity. The post addresses FDA’s ongoing efforts to improve medical device cybersecurity over the past five years, including entering into a memorandum of agreement between FDA and the Department of Homeland Security (“DHS”) and publishing a new premarket cybersecurity guidance update in October 2018, which we wrote about in a previous blog here. FDA’s post also highlights FDA’s other partnerships with industry that aim to increase awareness of cybersecurity vulnerabilities and related concerns.

FDA reiterated that its regulatory approach to cybersecurity threats “is not static,” and reconfirmed its commitment to “work with the medical device industry and other stakeholders to proactively address emerging cybersecurity threats to medical devices in a way that puts patient safety first.” FDA has announced that it will hold a public Workshop on January 29-30, 2019 to discuss the newly released draft guidance on cybersecurity in premarket submissions. Instructions for registration are available on FDA’s website here.

In response to the OIG’s report, FDA will likely continue to develop new cybersecurity policies, initiatives, and guidance. Stakeholders in the medical device industry should monitor these developments and be prepared to address any such changes in policy or regulation. Meanwhile, regulated industry should consider reviewing FDA’s current cybersecurity guidance documents and assess whether its internal controls, quality systems, policies, or procedures adequately address potential cybersecurity risks or threats or could be improved.

EBG will continue to monitor all developments in FDA’s regulation of and policies related to medical device cybersecurity.

The American Clinical Laboratory Association (“ACLA”) challenged the final rules promulgated by the Department for Health and Human Services (“HHS”) pertaining to how the Medicare Clinical Laboratory Fee Schedule (“CLFS”) payment rates are established for laboratory services (Am. Clinical Lab. Ass’n v. Azar, No. 17-2645 ABJ, 2018 U.S. Dist. LEXIS 161639, 2018 WL 4539681 (D.D.C. Sept. 21, 2018)). The U.S. District Court of the District of Columbia granted HHS’ motion for summary judgment to dismiss the complaint after concluding that the court lacked subject matter jurisdiction to hear the case. This is a significant set-back for the laboratory industry that has been fighting against the reductions in Medicare reimbursement under the new payment methodology, but it is not the end of the road.

In accordance with Section 216 of Protecting Access to Medicare Act of 2014 (“PAMA”), beginning January 1, 2018 the Medicare CLFS payment rate was established using a volume-weighted median of private payor rates for laboratory services as reported by applicable laboratories. What laboratories met the definition of an “applicable laboratory” and whether HHS had the authority to redefine the term was at the center of the challenge by the ACLA.

In December 2017, ACLA filed a lawsuit arguing that in the final rule HHS redefined the term “applicable laboratory” from the plain text of the statute and in doing so excluded almost 90% of hospital laboratories which reduced private-payment data reported and in turn resulted in lower CLFS payment rates. HHS argued that the terms “laboratory” and “revenue” relevant to determining an “applicable laboratory” were ambiguous and regardless PAMA includes a statutory bar to judicial review.

While ACLA presented multiple claims and arguments, the court focused on the threshold question: whether PAMA bars judicial review of HHS’ authority in “establishment of payment amounts under this section [of PAMA].” The court concluded that the statute did not permit judicial review; relying heavily on Florida Health, a D.C. Circuit case (Fla. Health Scis., Ctr., Inc. v. Sec’y of HHS, 830 F.3d 515 (D.C. Cir. 2016)). In Florida Health, the D.C. Circuit found that the statute gave HHS the power to make the choice as to what data should be used to calculate payment for hospitals’ uncompensated patient care. The reasoning in Florida Health is sound as it relates to the statutory authority granted under at issue in that case. Florida Health, however, seems to be easily distinguishable from the case brought by ACLA because, as the court itself recognized, “Florida Health did not involve a rule about how the Secretary would obtain the data needed … like this case does.” That is, Congress already defined under PAMA what data to be reported and who should report that data. In doing so, we believe the court conflated the breadth of the judicial review bar under PAMA and failed to differentiate between challenging the validity of HSS’ decisions made in the rulemaking process and contesting how and what data must be received and processed as per statutory procedure.

Here, ACLA argued that HHS overstepped its authority by redefining a clear statutory term; however, this was essentially ignored by the court by using the statutory judicial bar as a red-herring and conveniently limiting its analysis. Even though the court acknowledged that ACLA’s arguments “raise important questions,” the court refused to answer those very questions upon its determination that it could not hear the case. The court’s failure to address these issues likely gives ACLA grounds for appeal.

ACLA’s statement, released in response to the decision, reports that the association is exploring further legal options. The statement expresses concern that the decision “sets a harmful precedent that allows agencies to circumvent Congress’ express directions at the expense of patient care.” The association also urged Congress to take immediate action to resolve the issues raised in the lawsuit; specifically, the impact the reduction in Medicare CLFS payment rates will have on the laboratory industry. In the meantime, ACLA must seriously and carefully consider filing an appeal to request their central arguments be addressed and prepare to show the D.C. Circuit how this case can easily be distinguished from Florida Health and the underlying notion of judicial deference for an agency’s implementation of a complex statute.

Of course, even if successful, the ACLA must still address the other jurisdictional issues raised by HHS, such as whether ACLA had standing to bring suit on behalf of its members and if injury to labs or impact on Medicare rates had been proven.

 

Sydney Reed, a Law Clerk (not admitted to the practice of law) in the firm’s Houston office, contributed significantly to the preparation of this post.

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 Health Care Compliance Association (HCCA) kicked off its 22nd Annual Compliance Institute on Monday, April 16, 2018. During the opening remarks, Inspector General Daniel Levinson, of the Department of Health and Human Services (HHS) Office of Inspector General Office (OIG), announced the rollout of a new public resource to assist companies in ensuring compliance with Federal health care laws. The Compliance Resource Portal on the OIG’s website features:

  • Toolkits
  • Advisory opinions
  • Provider Compliance Resource and Training
  • Voluntary Compliance and Exclusions Resources
  • Resources for Health Care Boards and Physicians
  • Accountable Care Organizations
  • Special Fraud Alerts, Other Guidance, and Safe Harbors

The main benefit of the portal is that it streamlines public access to helpful compliance guidance resources, and allows for OIG to highlight new materials and updates.  For example, the portal already indicates that a Toolkit to Identify Patients at Risk of Opioid Misuse is “coming soon.”

In addition to announcing the portal, the Inspector General also touched on the dynamic shift in compliance considerations due to changes in the health care industry. Shifts such as the move towards value based care and the increase in role of technology create new risks and issues for providers, which makes user-friendly public access to compliance resources increasingly more important.

The Inspector General also emphasized the OIG’s focus on the “power of data” when it comes to compliance.  Mr. Levinson’s remarks indicated that data-driven decision making is crucial to navigating risk-mitigation waters, and that consequently the OIG places high value on the diligent collection and review of data in the compliance context.

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

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

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

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

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

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

Last week, the U.S. Department of Health and Human Services (“HHS”) announced that FDA intends to update its regulations governing clinical studies of new drugs.  More specifically, FDA intends to update Parts 312 and 16 of Title 21 of the Code of Federal Regulations (the “Code” or “CFR”).  In its announcement, HHS stated that the revisions will be focused on defining and clarifying “the roles and responsibilities of the various persons engaged in the initiation, conduct, and oversight of clinical investigations subject to [investigational new drug] requirements.”  The announcement also notes that the changes will “better protect the rights, safety and welfare of subjects and help ensure the integrity of clinical trial data.”

I don’t think anyone disagrees that these are important goals and that FDA should be commended for recognizing their importance and taking steps to achieve them.  However, these are not the only goals FDA should be striving to achieve as it revamps these regulations.  As noted in the January 29, 2015 Innovation for Healthier Americans report issued by Senators Alexander and Burr, clinical trials are becoming longer and the number of procedures subjects are required to undergo continues to increase.  This not only makes trials more expensive, but also makes it harder to enroll and retain subjects.  Addressing the rising costs and enrollment difficulties is one of the drivers behind the 21st Century Cures Act which is working its way through the House and the companion legislation working its way through the Senate.  Although addressing these goals has bipartisan support and FDA legislation traditionally has been less susceptible to the partisan gridlock in Congress, there is no guarantee that Congress will be able to address these issues legislatively.  Therefore, it would be advisable for FDA also to focus on streamlining the regulatory process and establishing a framework for the use of surrogate endpoints and adaptive clinical trial designs.  This can serve two purposes.  First, it hedges against the possibility that a legislative fix will not materialize.  Second, it reduces the potential that FDA will need to revisit these regulations again if a legislative fix does materialize.

In addition to expanding the goals FDA is pursuing with these changes, FDA should also expand the scope of the regulations that it will update to achieve these goals.  According to the announcement, FDA only intends to update Parts 312 and 16.[1]  However, it is unclear how FDA can achieve these goals if it limits the scope of changes to these parts of the Code.  Part 312 primarily focuses on the division of responsibilities as between the sponsor and the investigator.  However, there are other parties and entities responsible for the oversight of clinical investigations, including institutional review boards (IRBs) and the institutions where the studies are conducted.  Specifically, IRBs are responsible for ensuring the protection of rights, safety, and welfare of clinical trial subjects.  Although Part 312 requires the Sponsor and the Investigator to ensure IRB approval and continuing oversight, Part 312 does not specifically address the roles and responsibilities of an IRB or the research institutions.  Instead, these are addressed in Part 56.  Therefore, it is unclear how FDA will be able to effectively clarify the “roles and responsibilities of the various persons engaged in the initiation, conduct, and oversight of clinical investigations” and “better protect the rights, safety and welfare of subjects” without also updating Part 56.

I look forward to seeing the changes FDA proposes to make to Part 312. I just hope that these changes enhance the protection of study subjects and ensure the integrity of the data generated by clinical trials in a manner that also makes conducting and participating in clinical trials less burdensome than it is currently.

 

 

[1] 21 CFR Part 16 governs regulatory hearings to which investigators are entitled to in the event they are disqualified pursuant to 21 CFR § 312.70 or to which sponsors are entitled in the event FDA terminates an IND.

Robert E. Wanerman
Robert E. Wanerman

Even after the Secretary of HHS admitted that the current backlog of Medicare Part B appeals would take ten years to adjudicate at current staffing and funding levels, that was not enough for a hospital to obtain any relief from a court. Cumberland County Hospital System, Inc. v. Burwell, No. 15-1393 (4th Cir., Mar. 7, 2016).  In that case, a North Carolina hospital had initially been paid for over 900 claims, but those claims were subsequently determined to be ineligible after a post-payment review by a Recovery Audit Contractor (“RAC”), which sought to recover over $12 million from the hospital.  Although the hospital complied with the deadlines for filing administrative appeals, the Medicare Office of Hearings and Appeals had not held hearings or made determinations within the 90-day deadline in the Medicare statute. In order to expedite the process, the hospital sought a writ of mandamus from a federal court to order the Secretary to conduct the hearings.  The district court denied the motion, and the U.S. Court of Appeals for the Fourth Circuit agreed with the Secretary that no relief was warranted.

The court noted the Secretary’s admission that there are over 800,000 pending Medicare appeals, and that absent any legislative remedy it would take over ten years to hear and decide the current caseload.  Despite these appalling statistics and the court’s own statement that, “HHS’s procedural arteries are seriously clogged,” the court agreed with the Secretary that because the Medicare statute gives claimants the option of escalating their claim to the next level of review if hearing deadlines are not met, the hospital was not entitled to the court order it sought.

The Cumberland County decision highlights a critical step for anyone seeking to appeal a Medicare coverage or reimbursement decision: making sure that the record is complete as early as possible in the appeal process.  Under the Medicare hearing regulations, it becomes more difficult to introduce additional evidence at each level of review, and new evidence will not be considered by a reviewing court. As a result, anyone appealing an unfavorable Medicare decision should either be prepared to be patient, or should make a complete record as early as possible in the process if an option is escalating an appeal to a higher level to get a timely hearing.  Although Congress is considering legislation that may help, the degree of that help or when that help may arrive is still too uncertain to predict.

2016 is poised to be a major year in network adequacy developments across public and private insurance markets.  Changes are ahead in the Medicare and Medicaid managed care programs, the Exchange markets and the state-regulated group and individual markets, including state-run Exchanges.  The developing standards and enforcement will vary significantly across these markets.

Through 2014 and 2015, major news stories discussed concerns over the growing use of narrow provider networks by issuers on the Affordable Care Act’s insurance exchanges (“Exchanges”).  Others reported on enrollees’ frustration with receipt of unexpected charges from out-of-network practitioners when receiving treatment at in-network facilities (often referred to as “surprise bills”).  As a result, calls for improved network adequacy and transparency mounted.  A September 2014 HHS Office of Inspector General (OIG) report was critical of variation in state oversight of the Medicaid managed care market.  An August 2015 Government Accountability Office (GAO) report called for greater CMS network oversight in the Medicare Advantage market.  In response, a series of proposed rules and other changes have accumulated –

Medicare Advantage (MA) – In April 2015, CMS announced in a Call Letter that it will impose more stringent network adequacy requirements in the application process for MA plans.  To address surprise provider terminations, CMS will require 90 days notice of any significant mid-year changes.  Additionally, plans must establish and maintain a process to keep provider directories current in real-time.  CMS intends to monitor compliance and is considering a CY2017 requirement for standardized electronic submission for inclusion in a nationwide provider database.  CMS has also expressed its intent to review network adequacy as part of its regular program audits, as a pilot in 2016 and as a standard feature in 2017.

Medicaid Managed Care – In May 2015, CMS released the first proposed rule to make comprehensive changes to its Medicaid managed care rules in 12 years, including new quantitative network adequacy standards.  Once finalized, states would be required to establish time and distance standards for specific provider types, including primary care (adult and pediatric), OB/GYN, behavioral health, specialists (adult and pediatric), hospital, pharmacy, pediatric dental, and any “additional provider types when it promotes the objectives of the Medicaid program for the provider type to be subject to such time and distance standards.”[1]  Interestingly, CMS suggested in its proposed rule that states look to MA and state commercial standards as models.

Federal Exchanges – In December 2015, CMS, through its Center for Consumer Information and Insurance Oversight (CCIIO), released a proposed rule that featured more prescriptive network adequacy standards for Qualified Health Plans (QHPs) offered on the federal Exchange.  Where CCIIO is satisfied that a state uses “an acceptable quantifiable metric,” it will defer to their review of QHPs.  In other states, a default federal standard would apply.  Starting in 2017, CMS expects to take a similar approach as to MA and apply time and distance standards, with an emphasis on high-utilization specialties.  While CMS says it will not “prohibit certification of plans with narrow networks or otherwise impede innovation in plan design,”[2] it intends to set a floor with the federal Exchange default standards and it seeks greater network transparency.  Toward that end, ratings on QHP network coverage may be a future feature of HealthCare.gov.

State Regulated Group and Individual Markets – In November 2015, the National Association of Insurance Commissioners (NAIC) released a long-awaited network adequacy model act with more detailed requirements than federal and many state standards.  While the act would not impose quantitative standards such as provider number and type requirements, it does include reimbursement parity provisions for emergency and out-of-network facility-based providers.

Looking Ahead

With legislative sessions underway in all but four states this year, there are several important developments to watch for in 2016.  Some states will adopt the NAIC model act, in whole or in part, or use the act as a baseline from which to tailor its own standards.  Other states will decline to adopt it, leaving existing standards intact that range from minimal to highly detailed and prescriptive.  With increasing pressure from CMS across markets, some states may seek to aggressively increase the specificity of their network adequacy standards, adding number and type requirements or legislating that their insurance commissioners do so through an administrative process.  Some states may consider aligning standards across markets to ensure regulatory uniformity.  While there is nothing in the model act that suggests states increase oversight and enforcement activities, CMS is clearly increasing its own oversight and is pushing states to set a floor for state level access standards.  Changes to the landscape will come better into focus as CMS releases its final rules for all of the above proposed changes.

 

[1] 80 Fed. Reg. at 31145.

[2] 80 Fed. Reg. at 75550.