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.

On October 24, 2018, President Trump signed sweeping bipartisan legislation to combat the opioid epidemic. The Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or the SUPPORT for Patients and Communities Act (“H.R. 6” or “the Law”), aims to “reduce access to the supply of opioids by expanding access to prevention, treatment, and recovery services.”[1] Congress has already appropriated $8.5 billion to implement this “landmark legislation” in 2018 and 2019.

In a series of Client Alerts, Epstein Becker Green will provide an overview of key components of H.R. 6, focusing on substantive requirements impacting an array of providers, manufacturers, health care professionals, community services organizations, and other health care entities. Forthcoming topics include the impact on treatment measures for opioid use disorders, addiction prevention measures, clarifications to U.S. Food and Drug Administration and U.S. Drug Enforcement Administration regulation and enforcement authority over opioid products, Medicare and Medicaid funding provisions, enhanced health care fraud protection, new data & reporting provisions, and telehealth requirements.

H.R. 6’s breadth requires impacted entities to take careful note of the Law’s requirements and varying effective dates.

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[1] Press Release, The White House, President Donald J. Trump Signed H.R. 6 into Law (Oct. 24, 2018), available at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-signed-h-r-6-law/.

[2] Press Release, U.S. Senate Committee on Health, Education, Labor & Pensions, President Trump Signs Alexander Bill to Fight Opioid Crisis (Oct. 24), available at https://www.help.senate.gov/chair/newsroom/press/president-trump-signs-alexander-bill-to-fight-opioid-crisis.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, D.C., on September 6-7, 2018. The purpose of this and other public meetings of MedPAC 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 September meeting:

  1. MedPAC Discusses Trends in the Growth of Medicare and Total Healthcare Spending

MedPAC examined recent growth trends in Medicare and total healthcare spending in order to determine the budgetary impact of its recommendations. As part of their analysis, MedPAC reviewed the effects of healthcare spending on Medicare beneficiaries, households, and federal and state budgets as well as discussed evidence on ineffective spending and the opportunities it presents to lower health care spending without adversely impacting health outcomes.

MedPAC projects that the Medicare program will nearly double in size over the next decade, rising from “about $700 billion in total spending to 2017 to $1.3 trillion 2026.” At the same time, MedPAC expects that Medicare’s financing will become increasingly strained. Indeed, MedPAC projects that Medicare spending could rise from roughly 3 percent of our economy today to about 6 percent by 2048. The Commission estimates that Medicare, Medicaid, Social Security, and other major health program spending as well as net interest will reach nearly 20 percent of the economy and exceed total federal revenues by themselves.

Finally, the Commission found that Medicare may face a number of challenges in achieving savings down the road. The Commission points to Medicare’s fragmented payment systems across multiple health care settings, which the Commission believes contributes to a reduction in incentives to provide patient-centered coordinated care. Furthermore, Medicare’s benefit design is comprised of several parts, each of which cover different services and require different levels of cost sharing.

  1. MedPAC Provides Recommendations to Revise Statutory and Regulatory Requirements for PAC Providers

MedPAC presented recommendations for adopting a more unified payment system as well as ideas for creating common requirements for all Post-Acute Care (“PAC”) providers that would align the proposed system goals. The current system is comprised of four prospective payment systems (“PPS”). MedPAC’s concerns with the existing system is relative to differences in statutory and regulatory requirements for each. MedPAC found the requirements to be quite different across the four PPS settings while relatively similar in other cases. MedPAC also referenced other differences among PPSs relative to setting-specific and nursing requirements as well as Inpatient Rehabilitation Facilities (“IRF”) and Long-term Care Hospitals (“LTCH”). MedPAC’s theory rested on the idea that a unified PAC PPS would determine payments based “solely on patient characteristics and minimize the role of site of care in setting payments.”

MedPAC proposed establishing new requirements that could establish “separate categories to acknowledge that delivering care in the institution has some responsibilities that care in the home does not have . . . .” The proposed requirements were split into two tiers: (1) the first tier forming general requirements for services necessary to serve the majority of Medicare PAC patients and (2) the second tier for patients requiring more specialized care. Altogether, MedPAC believed that such a system could enhance the possibility of creating a more cohesive, unified payment system that could best determine patient payments.

  1. MedPAC Expresses Concerns Regarding Spending and Utilization of Long-term Care Hospitals

Congress mandated MedPAC to examine the effect of the LTCH dual-payment policy on the following issues:

  • The quality of care provided in long-term hospitals
  • The use of hospice care and post-acute-care settings
  • The effect on different types of LTCH, and
  • The growth in Medicare spending for services in LTCHs

MedPAC expressed concerns relative to LTCH spending and use over the past two decades as more than one LTCH would be located in one region of the country whereas some areas had none. Further concerns focused on research findings that failed to show a clear advantage in terms of outcomes or episode spending for LTCH users compared to those who used other PAC provider types. LTCHs are quite expensive—total Medicare spending totaled “just over $5.1 billion for about 126,000 cases in 2016.” Thus, due to the high expenses and unclear health outcome advantage of LTCHs, MedPAC suggested Medicare payers should better define the appropriate patients for LTCH care.

The Commission also expressed concerns relative to the growth of LTCHs. Though spending began to decrease after 2012, CMS never fully implemented policies to set limits on the share of cases being admitted to LTCHs from single referring acute-care hospitals. Thus, MedPAC is concerned as to whether the most appropriate patients are receiving care in LTCHs given that policymakers have failed to define this class of patients.

MedPAC plans to analyze new measures to determine quality of care in LTCHs, the use of hospice and other post-acute-care settings, use and spending data across different types of LTCHs, and the impact of the elimination of threshold policies in order to address these issues.

  1. MedPAC begins review of Medicare clinician payment updates under MACRA mandate

In 2015, the Medicare Access and CHIP Reauthorization Act (“MACRA”) repealed the sustainable growth rate formula for Medicare clinician fees and created permanent statutory updates for such fees. MACRA required MedPAC to conduct a report on clinician payment that reviews these updates and considers their impact on four indicators: (1) the efficiency and economy of care, (2) supply, (3) access, and (4) quality.

MedPAC first examined the efficiency and economy of care by analyzing Medicare spending trends. It identified the payment updates as affecting Medicare spending—the payment updates apply to Medicare’s conversion factor for the clinician services fee schedule used by Medicare. However, MedPAC also acknowledged that other factors might impact spending in addition to the payment updates, including policy adjustments (e.g., converting payment incentive programs to penalty programs), site-of-service shifts (i.e., moving services from “the physician office setting to the hospital outpatient department” decreases Medicare physician fee schedule spending but still increases total Medicare spending), and clinician increases in volume and intensity of services provided.

MedPAC then reviewed the effect of the payment updates on supply, which it measured as the “number of clinicians billing Medicare.” It found that despite “relatively modest” payment updates (averaging about a half percent annually), supply has been steadily growing since 2009, from a 1.5% increase in specialty physicians billing Medicare per year to a robust 10.1% increase in advanced practice registered nurses and physician assistants billing per year.

In order to track access to care, MedPAC analyzed the results of its yearly telephone survey of Medicare beneficiaries and individuals with private insurance, closely tracking the ease of finding new primary care physicians as a key indicator of access to care. It found that “diverging payment rates” between Medicare and private insurance “have not appeared to have resulted in a difference in patient-reported access to care” based on MedPAC’s survey results.

Finally, MedPAC reviewed statutory updates and their impact on quality. MedPAC reported “little evidence” that higher payments translate to higher quality for clinician services. MedPAC also emphasized its recommendation to repeal Medicare’s current quality program for clinicians, the Merit-based Incentive Payment System (“MIPS”) since MIPS does not allow for comparison of quality performance across clinicians. Overall, MedPAC concluded that impact on quality is indeterminate.

MedPAC plans to revisit this review in the spring of 2019 with a presentation analyzing updated data and a “site-of-service adjusted volume analysis.”

  1. MedPAC reviews its new Hospital Value Incentive Program and requests feedback regarding quality measures and monitoring hospital-acquired conditions

MedPAC was tasked with the potential redesign of the hospital quality and value program, which currently involves four complex and overlapping quality payment and reporting programs. Based on quality incentive principles laid out by the Commission, MedPAC created the Hospital Value Incentive Program (“HVIP”). MedPAC reviewed the design of its new clear and focused HVIP:

Combined

  • Hospital Readmissions Reduction Program (“HRRP”) and
  • Hospital Value-based Purchasing Program (“VBP”)

Eliminated

  • Inpatient Quality Reporting Program (“IQRP”) and
  • Hospital-Acquired Condition Reduction Program (“HACRP”)

MedPAC described four outcome, patient experience, and cost measures of quality in the HVIP: (1) readmissions, (2) mortality, (3) spending, and (4) patient experience. MedPAC also asserted the following characteristics of its HVIP:

  • Translation of quality measure performance into payment by adhering to clear performance standards.
  • “Peer grouping” to account for provider population differences (“Peers” are those providers that “treat a similar share of fully dual-eligible beneficiaries”)
  • Redistribution of a budgeted amount based on the hospitals’ performance
  • Public reporting of quality results

MedPAC explained that its model of the HVIP projected a 50:50 reward-penalty ratio. The model weighted each of the four measures of quality equally when determining a HVIP “score” for the hospital, but MedPAC reasoned that policymakers could prioritize certain measures to appropriately balance the interests of Medicare and its beneficiaries. MedPAC then offered suggestions for changing the withhold amount to align to the budget neutral goal of the HVIP, instead of the current maximum 3% reward and 6% penalty assessed to hospitals. MedPAC discussed the “patient experience” measure, which it stated would be based on the Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) national survey, which consists of ten core measures. MedPAC explained two alternatives for incorporating this survey data: (1) using the overall HCAHPS score or (2) scoring multiple select individual HCAHPS measures. MedPAC did caution that several hospital quality leaders favored the single overall HCAHPS rating due to better avoidance of bias. MedPAC subsequently requested the Commission’s thoughts on patient experience data to be used in the HVIP.

Finally, MedPAC expressed hospital quality leaders’ concern over Medicare’s hospital-acquired conditions (“HAC”) reduction program and its connection to payment. MedPAC suggested removing these financial incentives associated with limiting HACs and instead continue public reporting of results and allow financial incentives indirectly through HVIP’s readmissions measure. MedPAC requested feedback from the Commission on this issue.

The Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services issued Advisory Opinion No. 18-03 in support of an arrangement where a federally qualified health center look-alike (the “Provider”) would donate free information technology-related equipment and services to a county health clinic (the “County Clinic”) to facilitate telemedicine encounters with the County Clinic’s patients (the “Proposed Arrangement”).  The OIG concluded that although the Proposed Arrangement could potentially generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) and Civil Monetary Penalties Law (“CMPL”) with the requisite intent to induce or reward referrals of federal health care programs, the OIG would exercise its discretion and not sanction the Provider or the County Clinic (collectively the “Requestors”).

The OIG’s analysis and conclusion of the Proposed Arrangement provides new insight into the government’s position on these type of donations that facilitate telemedicine encounters.  Specifically, how the government views these type of donations with the continued expansion of coverage and reimbursement of telemedicine services under federal health care programs.  The Advisory Opinion indicates support for the development of collaborative telemedicine affiliations and that the potential remuneration from the future referrals can be outweighed by the access to health care services and benefits actually received by rural or remote communities.

Proposed Arrangement

The County Clinic is a division of the County Department of Health that furnishes certain confidential sexually transmitted infection testing, treatment and counseling. The Provider has an existing referral relationship with the County Clinic but the facilities are separated by about 80 miles making it difficult for patients to access the Provider.  Under the Proposed Arrangement, the Provider would donate information technology-related equipment and services to the County Clinic to facilitate telemedicine encounters between the Provider and the County Clinic’s patients for certain HIV prevention and treatment services.  The Provider would cover the costs of the equipment, its set up, and maintenance through grant-funding from the State Department of Health.  The Provider would bill the Medicare program for the professional services delivered in the telemedicine encounters.  The County Clinic would house the equipment and bill the state Medicaid program an originating site fee related to the telemedicine encounters. The originating site is not required to provide any personnel or equipment in order to bill for the facility fee (Q3014) (which is only a coverage requirement to provide the telehealth consult).

OIG Analysis

AKS makes it a criminal offense to knowingly and willfully offer or receive remuneration in an effort to induce or reward referrals of items or services reimbursable by federal health care programs. CMP provides for penalties against any person who offers or transfers remuneration to a Medicaid or Medicare beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a specific provider, service, or item that will be paid, in whole or part, by Medicaid or Medicare.

Under the Proposed Arrangement, the County Clinic would receive remuneration of the free equipment and services and the Provider would have the opportunity to bill for the telehealth consultation referred by the County Clinic.  As such, the OIG acknowledged that the Proposed Arrangement could potentially generate prohibited remuneration under the federal AKS with the requisite intent to induce or reward referrals of services payable by a federal health care program.  However, the OIG identified the following factors as minimizing the potential risk of fraud and abuse:

  • There are safeguards in place to prevent patient steering to the Provider for treatment; namely use of technology with any other provider is not restricted and patients are given the option to have either a virtual or in-person consultation
  • Not likely to result in patient steering for prescriptions to any pharmacy operated by the Provider or County Clinic
  • There would be no increased cost to any federal health care program
  • Patients would benefit by having increased access to treatment; making it more likely that patients will seek out and receive such services

It is important to keep in mind that under the Proposed Arrangement the County Clinic would not obtain ownership of the equipment, as the Provider would use grant funds awarded by the State Department of Health to cover the costs of the equipment and services and the state agency would retain title and have the authority to recover the equipment at any time.  This could prove to be an important distinction concerning whether and how donating providers can provide information technology-related equipment and services to referring facilities in the other arrangements.

Notes and Comments

In prior Advisory Opinions (99-14, 04-07 and 11-12) concerning donations of information technology-related equipment and supplies, the OIG similarly concluded that it would not pursue sanctions; however, those proposed arrangements would not have directly resulted in a service payable by a federal health care program, but rather would only potentially result in other items or services to the patient by the donating provider. Under the Proposed Arrangement, both the County Clinic and the Provider would be in a positon to submit claims to a federal health care program as a result of the telemedicine encounter and follow-up services.  Nevertheless, the OIG concluded that there would be no increased cost to any federal health care program because the County Clinic would have performed the preliminary tests and referred clinically appropriate patients for in-person consultations and, potentially, follow-up items and services regardless of the Proposed Arrangement.

While the analysis acknowledges the additional reimbursement the County Clinic would receive for serving as the originating site (i.e., the location of the Medicaid beneficiary when the service furnished via a telecommunications system occurs), there is no actual analysis of this facility fee and why it is not considered an increased cost.  To be clear, the County Clinic does not provide the HIV preventative services to be delivered by the Provider via the telemedicine consultation, and therefore, would not have previously received any payments if and when the patient was referred to the Provider for an in-person consultation.

Again, it appears that the OIG is willing to prioritize the health benefits to patients over any secondary or tertiary benefits to the referring provider; especially when such subsequent benefits are unlikely to result in overutilization and have the potential to decrease costs to federal health care programs.

Since the inauguration of President Trump, the Affordable Care Act (ACA) has taken quite a few significant jabs and blows. When Congress failed to repeal the ACA, Congress instead eliminated the individual mandate penalty through the GOP tax bill. The individual mandate penalty was one of the main pillars of the ACA because it effectively widened the pool of participants who buy health insurance in order to keep costs down. While removal of this penalty hit the ACA where it hurt, the true threat to the stability of the ACA arose when the Trump Administration announced that it would no longer defend the ACA against a challenge filed by twenty states that believe the individual mandate itself is unconstitutional and that key parts of the act are invalid. What is the outlook for the ACA?

Congressional Efforts to Repeal

The House has voted to repeal or amend the ACA at least 50 times, but their efforts have never made it past the Senate. Despite this history of failure, there are still Republicans pushing for the repeal of the ACA.  On June 19, 2018, a coalition of conservatives released the outline of a new plan for repealing and replacing the ACA. The plan emphasizes the use of block grants, implementing risk pools, removing essential health benefits, and minimum loss ratio requirements.  As it stands, the plan will likely succumb to the fate of its predecessors.  Even if the bill passed the House, there are fewer Republicans in the Senate than the last time the repeal went to a vote. However, if after the upcoming mid-term elections the Republicans win Senate seats in Montana and Missouri and keep the majority in the House, the ACA could truly be in jeopardy.

Lawsuits

Meanwhile, twenty states have filed a lawsuit against the ACA’s individual mandate arguing that the elimination of the tax penalty without the elimination of the mandate is unconstitutional because it leaves the mandate without the exercise of Congress’s taxing power. The Supreme Court’s 2012 ruling may come back to haunt ACA proponents. The Supreme Court held that the individual mandate is constitutional because it constitutes a tax and that the ACA could not function without the mandate in place. Those filing suit argue that because the tax penalty is eliminated it is a tax-less mandate and thus unconstitutional because Congress cannot exercise its taxing power. As such, the mandate is such a key provision that the whole ACA should be thrown out if the provision cannot be severed.  In other words, the whole cannot exist without the entirety of its parts.

States Embrace Medicaid Expansion

Amid the slew of blows taken by the ACA, there is one provision left unscathed—Medicaid expansion.  The number of states expanding Medicaid continues to grow. For example, Virginia recently passed an expansion of Medicaid, and the Governor of Utah signed a Medicaid expansion bill.  Interestingly, some Republican-leaning states have embraced the expansion due in part to the current Administration’s support of work requirements. In fact, Maine is currently in a dispute with its Governor about the implementation of the expansion of Medicaid that was approved by Maine voters.

The Outlook

With the ACA constantly under attack from multiple vantage points, it is safe to say that the Act will have to fight to survive. Although heavily dependent on the November elections, it is possible that the ACA will survive additional congressional efforts to repeal the bill.  Further, the popularity of Medicaid expansion would make it difficult to repeal the bill in its entirety. More states are embracing Medicaid Expansion, and there is evidence available of the positive effects expansion has on access to care. The survival of the ACA really hinges on how U.S. District Judge Reed O’Connor interprets the law as he presides over the twenty-state suit, especially considering that the Trump Administration has already stated that it does not intend to defend the ACA. Stakeholders will have wait patiently to see how the outcome of the upcoming elections and the pending lawsuit will affect the ACA’s future.

This is the 7th and final installment in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

We can put many of the points discussed in the previous blogs into a practical context by examining two recent cases that highlight some of the struggles faced by payers in administering and processing MSP payments. These cases show that even sophisticated payers from different industries can still overlook this long-existent law, which can result in major costs to those payers. It also goes to show that a well-designed  compliance program can lead to decreased risks and potential regulatory costs.

Kane ex rel. United States v. Healthfirst, Inc. et al.[1]

In this case, the United States and the State of New York filed complaints-in-intervention  alleging that the defendant, Healthfirst, a private, non-profit insurance program with contracts with New York hospitals, issued electronic remittances to certain providers relating to Medicaid patients.  Though the remittances should have stated that Medicaid could not be billed as a secondary payer for certain covered services, due to an alleged computer software glitch, they failed to include that information; this resulted in improper payment by Medicaid for claims that  triggered MSP and FCA liability.[2]

The relator alleged that Healthfirst violated the 60 day window mandate by reimbursing Medicaid more than 60 days from the time the relator compiled the list of possible overpayments.  Healthfirst moved to dismiss the complaint, but the district court denied the motion.  It concluded that the 60 day window for reimbursement commenced when the provider was put on notice of a potential overpayment, noting that allowing an individual or entity to commence repayment only after definitively identifying an overpayment would be incompatible with the legislative history and intent of the FCA.  Subsequently, this case settled for $2.95 million.[3]

Negron ex rel. United States v. Progressive Cas. Ins. Co. et al.[4]

This FCA case based on an alleged violation of the MSP law has a twist: it involves the intersection of MSP law with New Jersey state automobile insurance law.  In Negron, the relator purchased an auto insurance policy from Progressive, which gave her the choice of selecting a “health first” policy or a “Personal Injury Protection (PIP)” policy as her primary insurer.  Under a health first policy, the enrollee’s private health insurer is the primary payer for medical bills resulting from an automobile accident.  The relator’s primary insurance was Medicare; however, Medicare and Medicaid recipients are not eligible for this type of insurance coverage because Medicare and Medicaid are treated as secondary payers in such situations.[5]

A few months later, after the relator was involved in a car accident. Medicare conditionally paid for a claim that should have been reimbursed by the auto insurance policy.  The relator brought a FCA action against Progressive and its New Jersey subsidiary, stating that the insurer had failed “to make reasonable and prudent inquiries to ensure compliance with the MSP Act” and that Medicare had improperly paid her bills as the primary payer.[6]  In response, the insurer moved to dismiss the complaint.  In denying the motion to dismiss, the court found that the practice of allowing Medicare and Medicaid beneficiaries to select the “health first” policy was a violation of the MSP, as it allows Progressive to remain willfully ignorant of a beneficiary’s primary plan coverage, and chided the auto insurance company for its lack of controls.  Specifically, the court looked at the underwriting process, which should have involved some investigation into the beneficiary’s eligibility for Medicare and Medicaid.  It also noted that the claims adjustment process should have involved an identical investigation to determine the appropriateness of a “health first” or “PIP” policy for each beneficiary.[7]

The court stated that Medicare should not pay conditionally for the services rendered to the relator just because the auto insurance company eventually paid Medicare back, and found that this manipulation of the “conditional payment” provision of the MSP ignores the requirement that a conditional payment is only to be made if prompt payment is not made by a primary payer.  Ignoring this requirement allows the defendants to “receiv[e] an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.”[8]  As a result, the court found that there was a “sufficient allegation [in the complaint] demonstrating economic loss to plead that the claims were false or fraudulent.”  After the U.S. Department of Justice and the State of New Jersey intervened, the defendants settled the case for $2 million.[9]

Although Negron involves New Jersey state auto insurance laws, the key part of the court’s ruling for health care providers is that the MSP law places the burden of investigating a patient’s health insurance coverage squarely on the shoulders of the provider, and simply  allowing a patient to elect certain coverage without more inquiry may not be a sufficient defense against FCA liability based upon MSP violationspayer.

It is likely that we will see more of the MSP-based FCA cases in the coming months and years. Due to the nature of FCA cases, investigations can remain under seal for years at a time before their filing becomes public. As such, the newest trend of enforcement that has been seen may be only the tip of the iceberg of FCA actions brought against payers and providers of all types in the current health care marketplace.

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

[1] Kane ex rel. United States v. Healthfirst, Inc. et al., 120 F. Supp. 3d 370 (S.D.N.Y. 2015).

[2] Id. at 375-77.

[3] Manhattan U.S. Attorney Announces $2.95 Million Settlement With Hospital Group For Improperly Delaying Repayment Of Medicaid Funds, The United States Department of Justice (Aug. 24, 2016), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-295-million-settlement-hospital-group-improperly.

[4] Negron ex rel. United States v. Progressive Cas. Ins. Co. et al, No. 14-577(NLH/KMW), 2016 U.S. Dist. LEXIS 24994 (D.N.J. Mar. 1, 2016).

[5] Id. at *5-*9.

[6] Id. at *27.

[7] Id. at *7.

[8] Id. at *8.

[9]  Two Insurance Companies Agree To Pay More Than $2 Million To Resolve False Claims Act Allegations, The United States Department of Justice (Nov. 14, 2017), https://www.justice.gov/usao-nj/pr/two-insurance-companies-agree-pay-more-2-million-resolve-false-claims-act-allegations.

This is part 6 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

The federal government’s most powerful and popular enforcement tool for Medicare and Medicaid reimbursement matters is the False Claims Act, 31 U.S.C. §§ 3729 et seq.. The FCA is a federal law that imposes fines and penalties on individuals and entities that submit false or fraudulent claims to the federal government, cause a false or fraudulent claim to be submitted, or submit a false certification of compliance with a law in order to have a claim paid by the government. A violation of the FCA can lead to the payment of triple damages, attorney’s fees, and fines for each false or fraudulent claim. False certifications may be expressly stated, such as when a contractor affirmatively states that it has complied with specific legal requirements, or may be implied, based on the theory that each claim or invoice would not be paid by the government unless all of the legal prerequisites have been met even if they are not expressly stated in the claim itself.  The “implied false certification” theory of wrongdoing under the FCA was endorsed recently by the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, which expands the potential for Medicare Secondary Payer (MSP) enforcement.[1]  The Supreme Court ruled that an implied false certification action can survive if the defendant made a misrepresentation “about compliance with a statutory, regulatory, or contractual requirement [that is] material to the Government’s payment decision.”  Through the implied false certification theory of liability both relators and the government have a potentially powerful tool to regulate noncompliance with several regulations and statutes, including the MSP.  One recent decision helps explain how the Escobar analysis is applied by trial courts. United States ex rel. Jersey Strong Pediatrics, LLC v. Wanaque Convalescent Center et al.[2]

In this case, a qui tam whistleblower (or relator) alleges that Wanaque Convalescent Center billed only Medicare/Medicaid for services rendered to patients admitted to its skilled nursing facility and failed to bill any third party, which resulted in overpayments triggering MSP and FCA liability.  In its amended complaint, the whistleblower detailed eight instances of allegedly incorrect billing where the patient’s medical record listed Medicare or Medicaid as payers even though the patient had multiple forms of insurance.[3]

The defendants filed a motion to dismiss the amended complaint, arguing that false claims were not submitted as private insurance plans did not cover the services rendered, and that this resulted in Medicare or Medicaid becoming the primary payer for the specific services.  The defendants further contended that the relator’s allegations lacked the heightened materiality standard set forth in Escobar, claiming that the relator merely cited to federal regulations that the relator deemed “material” to the government’s decision to reimburse, rather than providing specific facts that any claim for payment has been rejected as being noncompliant with the MSP or any other regulation.[4]  The relator responded that noncompliance with the MSP satisfies the “materiality” standard set by Escobar.

The court denied the motion to dismiss, noting that the government has a great interest in ensuring strict compliance with the MSP, and therefore compliance with the MSP is “material” to the government’s decision to render payment.  The court found that the amended complaint alleged sufficient detail to put the defendants on notice, sufficiently pled knowledge, and found that the relator sufficiently pled that “MSP laws are material to the government’s decision to pay Medicare/Medicaid claims in this context.”[5]

As this moves forward from the initial pleadings, the key issue is whether the defendant may be liable under the FCA for violations of the MSP for submitting allegedly improper claims to Medicare or Medicaid as the primary payer and impliedly certifying those claims as compliant with all federal laws and regulations.[6]

Small and mid-sized providers in particular should be alert to the application of this law, particularly if their payment and billing system is not as sophisticated as may be seen in a larger hospital system or medical group. Although there were Medicare and Medicaid beneficiaries who were disabled, the MSP law applies equally for those that are injured and may receive recovery, such as someone in a car accident. As part of a compliant screening process for patients, providers may want to inquire before or during the treatment of a patient whether the injuries of the patient were the result of an accident involving a third party. If so, providers should  be aware of potential billing issues that may arise if a third party is responsible  for the primary payment of a patient’s medical costs.

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

[1] 136 S. Ct. 1989, 1996 (2016).

[2] United States ex rel. Jersey Strong Pediatrics v. Wanaque Convalescent Ctr., No. 14-6651-SDW-SCM, 2017 U.S. Dist. LEXIS 150566 (D.N.J. Sept. 18, 2017).

[3] Am. Compl. ¶¶ 76-127.

[4] Defs. Mot. to Dismiss the First Am. Compl., 5-7 (Aug. 29, 2017).

[5] Wanaque Convalescent Ctr., 2017 U.S. Dist. LEXIS 150566 at *7-9.

[6] Id. at *7-8.

Over the past week, the White House administration (the “Administration”) has issued two documents addressing drug pricing. First, on February 9, 2018, the White House’s Council of Economic Advisers released a white paper titled “Reforming Biopharmaceutical Pricing at Home and Abroad” (the “White Paper”).  Second, on February 12, 2018, the Administration issued its 2019 Budget Proposal (“2019 Budget”).

Whereas the recommendations set forth in the White Paper are more conceptual or exploratory, the 2019 Budget purportedly reflects the Administration’s more specific priorities for 2019. The developments are significant because, after outspoken pledges to reduce drug prices over a year ago, the White Paper and the 2019 Budget, taken together, are the Administration’s first attempt to set forth its drug pricing policy framework.

FY 2019 Budget Proposal Outline

The Administration’s 2019 Budget proposes strategies to address drug pricing reform in several areas.

  • Medicaid: The 2019 Budget proposes for new Medicaid demonstration authority to allow five states to test drug coverage and financing reform. Under this demonstration, instead of participating in the Medicaid Drug Rebate Program, these states would determine their own drug formularies and negotiate drug prices directly with manufacturers, with the resulting negotiated prices being exempt from Best Price.
  • Medicare Part B: With respect to the Medicare program, the 2019 Budget provides several proposals. First, the 2019 Budget would require all manufacturers of Part B drugs to report average sales price (“ASP”) data, and to penalize those who do not report ASP data. Additionally, the 2019 Budget proposes to limit the increase in ASP-based drug payment to the annual rate of inflation. For drugs reimbursed based on wholesale acquisition cost (“WAC”) rather than ASP, the 2019 Budget proposes to reduce this payment rate from 106% of WAC down to 103% of WAC. The 2019 Budget also proposes to modify reimbursement to hospitals for drugs acquired at 340B discounts by rewarding hospitals that provide charity care, and reducing payments to hospitals that provide little to no charity care. The 2019 Budget proposes to consolidate certain drugs covered under Part B into Part D coverage.
  • Medicare Part D: For beneficiaries enrolled in Part D plans, the 2019 Budget proposes to establish an out-of-pocket maximum in the catastrophic coverage phase, eliminate cost-sharing for generic drugs for low-income seniors, and permanently authorize a Part D demonstration that provides retroactive and point-of-sale coverage to certain low-income patients.
  • FDA: The 2019 Budget proposes to give the FDA greater ability to bring generics to market more quickly. If a first-to-file generic application is not yet approved due to deficiencies, the 2019 Budget proposes to allow the FDA to tentatively approve a subsequent generic application rather than waiting for the first-to-file application to amend its application deficiencies.

Council of Economic Advisers White Paper

The White Paper discusses options for drug pricing reforms that would impact Medicaid, Medicare, the 340B drug discount program, and FDA. The following provides a summary of the major ideas proposed in the White Paper:

  • Medicaid: The White Paper contends that the determination of Best Price on a single unit of drug under the Medicaid Drug Rebate Program operates as an inducement to manufacturers to inflate commercial prices. The White Paper posits that CMS could revise the applicable rules for Best Price without conflicting with the statutory language, such that Best Price could be determined post-sale based on “the patient’s recovery”, i.e., the health outcome or effectiveness of the drug. The White Paper suggests that more clarity from CMS on value-based contracting would encourage drug purchasers to negotiate for lower prices.
  • Medicare Part B: With respect to drugs reimbursable under Medicare Part B, the White Paper focuses on expensive specialty drugs and biologics administered by physicians. The White Paper contends that due to the cost-plus reimbursement methodology under Medicare Part B (ASP plus 6 per cent), physicians do not have incentives to prescribe cheaper medications to control costs. The White Paper cites solutions proposed by MedPAC and other government agencies to realign incentives including: (i) introducing physician reimbursement that is not tied to drug prices, (ii) moving Medicare Part B drug coverage into Medicare Part D, where price-competition over drug prices is better structured, and (iii) changing how pricing data is reported to increase transparency.
  • Medicare Part D: The White Paper scrutinizes the Part D program as being structured in a manner that prevents pricing competition and causes “perverse incentives.” Specifically, the White Paper suggests that Part D’s requirement to cover at least two non-therapeutically equivalent products within each class and category prevents Part D sponsors from competitively negotiating lower prices and that the prohibition of formulary tier-based cost-sharing for low income beneficiaries creates a disincentive to use “high value” rather than high cost drugs. In addition, the White Paper states that since the 50% discount drug manufacturers are required to provide during the coverage gap is applied to the patient’s true out-of-pocket costs, enrollees have an incentive to use high cost drugs while in the coverage gap.In addition to making the specific observations above, the White Paper cites more general options proposed by MedPAC, OIG and other government agencies to address “misaligned incentives”: (i) requiring plans to share drug manufacturer discounts with patients, (ii) allowing plans to manage formularies to negotiate better prices for patients, (iii) lowering co-pays for generic drugs for patients; and (iv) discouraging plan formulary design that speeds patients to the catastrophic coverage phase of benefit and increases overall spending.
  • 340B Drug Discount Program: The White Paper posits that there are two significant issues with the 340B Program. The first is “imprecise eligibility criteria has allowed for significant program growth beyond the intended purpose of the program.” The second is the use of program revenue for purposes other than providing care for low-income patients, which is what the Administration believes was originally intended. While not providing specifics, the White Paper suggests establishing “more precise” eligibility criteria as an alternative to the DSH percentage currently used to establish hospital eligibility, and requiring that the 340B discount more directly benefit poor patient populations.
  • FDA: The White Paper suggests modifying the existing FDA criteria for expedited review to include new molecular entities that are second or third in a class, or second or third for a given indication for which there are no generic competitors. The White Paper states that this would reduce the time period a particular drug would be able to benefit from a higher price before facing generic competition. The White Paper also suggests policies aimed at reducing the cost of innovation, including having the FDA continue to facilitate the validation and qualification of new drug development tools that allow manufacturers to demonstrate safety and efficacy more efficiently and earlier, and speeding up the issuance of FDA final guidelines to add certainty and attract additional biosimilar applicants to the marketplace.
  • Pharmacy Benefit Managers: The White Paper scrutinizes the PBM industry as having “outsized profits” due to the high concentration of the PBM market (3 PBMs account for 85% of the market) and criticizes the lack of transparency with respect to the rebates that PBMs receive. The White Paper states that the “undue market power” causes manufacturers to set artificially high list prices, which are reduced via rebates to PBMs without reducing the costs to consumers. The White Paper suggests that policies to decrease concentration in the PBM market could reduce the price of drugs paid by consumers.
  • Drug Pricing in Foreign Countries: The White Paper discusses in detail how the United States bears a disproportionate share of the burden of the cost of innovation, since foreign governments, in exercising price control, are able to set drug prices lower than that in the United States. The White Paper suggests drug pricing reform abroad with the United States changing the incentives of foreign governments to price drugs at levels that reward innovation. The White Paper broadly suggests achieving this goal through enhanced trade policy or policies tying reimbursement levels in the United States to prices paid by foreign governments that set lower prices or other methods.

EBG Considerations

The combined result of the 2019 Budget and the White Paper is a hodgepodge of policy ideas that could impact a wide range of government programs and industry stakeholders throughout the drug distribution and reimbursement channel. While the proposals set forth in the 2019 Budget are more specific, the ideas in the White Paper are more conceptual and less developed.  For example, policies to address the high concentration of the PBM market and foreign government drug price control appear more aspirational and lack detail on what such policies would entail or how they would be accomplished.  This suggests that, while the 2019 Budget and White Paper are indicative of the Administration’s direction with respect to drug pricing policy, the policy is likely still a “work in progress” and subject to further development.

We will continue to report on how these ideas take shape in this Administration.

On January 16, 2018, the Department of Health and Human Services Office of Inspector General (OIG) published its most recent update to the agency’s “Work Plan.”  Of note to Durable Medical Equipment (DME) manufacturers, suppliers and prescribers, OIG signaled increased interest in the investigation of three specific off-the-shelf orthotic devices identified by the HCPCS codes:

  • L0648—back bracing
  • L0650—back bracing
  • L1833—knee bracing

According to OIG, the government paid out $349 million for these braces in 2016, representing a 97% increase from just 2014.  OIG expressed concern that many of the braces were being prescribed without adequate documentation of medical necessity in patient records and also fulfillment in cases where actual physical examination of the patient had occurred over a year prior to the device being provided.

DME manufacturers, suppliers and prescribers of back and knee bracing should be advised that OIG has, and will, start taking a much closer look at any Medicare/Medicaid reimbursements for these devices and one can expect increased scrutiny in this area.

For additional information about this issue, contact the author of this post, Clay Lee, or the Epstein Becker Green attorney who regularly assists you.

Perspectives on Health Care and Life Sciences advisory by Bob Atlas, President of EBG Advisors, Inc. 

Following is an excerpt:

The U.S. Senate and House of Representatives have both passed their tax reform bills and will now confer toward creating a unified bill that both chambers can support, and that President Trump will sign. The two bills differ in some key respects, but their implications for health care are already rather clear. Some aspects of the legislation explicitly touch health care, while other effects would be indirect. Overall, it appears that most of the changes would adversely affect many health care industry participants, especially those in the nonprofit sector that would not gain from the reduction in the corporate tax rate that is the central feature of the legislation. …

Read the full post here or download a PDF of this piece.