The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC on November 2-3, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the November meeting are as follows:

  1. MedPAC refines an alternative to MIPS.

MedPAC discussed the potential implementation of a new value-based program, described as a voluntary value program (“VVP”), for clinicians in Medicare fee-for service (“FFS”) if the Merit-based Incentive Payment System (“MIPS”) is eliminated, as was proposed by MedPAC in its October meeting. The VVP would encourage clinicians to form voluntary groups that would receive payment depending on the group’s overall performance. MedPAC did not anticipate recommending restrictions on the size or markup of the voluntary group beyond a minimum threshold, which would depend on specific quality measures, clinician specialties, and attribution rules. MedPAC also discussed the potential of a CMS-established voluntary fallback group for isolated or low-volume clinicians who want to join a group. With respect to different quality measures on which the VVP would reward payments, MedPAC proposed that Congress focus on measuring population-based outcomes, patient experience, and cost. Lastly, to incentivize clinicians to switch from the Medicare FFS, MedPAC proposed that any policy should cap the total value payment as to make it less attractive than an alternative payment model.

  1. MedPAC recommends rebalancing Medicare’s physician fee schedule towards primary care services.

MedPAC expressed concern that the current physician fee schedule disfavors primary care practice, often underpricing primary care relative to other Medicare health care services, and thus potentially contributing to the decrease of primary care clinicians. In response, MedPAC proposed two approaches towards rebalancing the fee schedule in favor of primary care services. The first approach would increase fee schedule payments for primary care clinicians and psychiatric services provided by all specialties and clinicians. The payment increase would be distributed on a per service basis, to achieve the goal of spreading the increased dollars among clinicians. Eligible primary care services would include: evaluation and management codes for office visits, home visits, and visits to patients in long-term care settings; chronic care management and transitional care management codes; and “Welcome to Medicare” visits and annual wellness visits.

The second approach would increase fee schedule payments for primary care and psychiatric services provided only by certain specialties and certain clinicians within those specialties. Payment increases could be distributed either on a service-by-service basis or on a per beneficiary basis. While the former may incentivize more discrete primary care visits, the latter would encourage non-face-to-face care coordination and would be consistent with MedPACs 2015 recommendation to Congress. However, as the size of a per beneficiary payment increases, questions would arise about how to attribute patients and whether to risk-adjust the payments.

  1. MedPAC makes payment policy recommendations for non-competitively bid DMEPOS.

MedPAC discussed the proposed recommendations it intends to make to the Centers for Medicare and Medicaid Services (“CMS”) to address the durable medical equipment, prosthetics, and orthotics (“DMEPOS”) fee schedule rates, which MedPAC finds to be excessive. As proposed, the recommendations would shift more DMEPOS products currently paid on a fee schedule basis to a competitive bidding program (“CBP”). MedPAC’s recommendations also call for immediate reduced payment rates for certain non-CBP products while CMS works on incorporating them into the CBP. Alternatively, MedPAC recommends a policy option that aligns balance billing and participation rules for DMEPOS suppliers with the rest of Medicare and that further protects beneficiaries. This policy option would have CMS consider capping balance billing at a percentage of the fee schedule rate and reducing the allowed amount by five percent for non-participating suppliers.

  1. MedPAC makes coverage-gap discount policy recommendations for biosimilars in Medicare Part D.

Consistent with its 2016 recommendations and the Chairman’s draft recommendation, MedPAC’s proposed policy for Part D would have the manufacturing coverage gap discount apply to both originator biologics and biosimilars, which currently applies only to originator biologics. However, the discount would no longer apply to the beneficiary’s out-of-pocket spending for either originator biologics or biosimilars. MedPAC believes that the standardized use of the coverage gap discount will better align the incentives. Because the discount would no longer distort price signals between the two products, there would be slightly lower plan liability for biosimilars than originator biologics, therefore incentivizing sponsors to put the lower-priced biosimilars on their formulary. This change would also result in Medicare paying lower reinsurance. Although some enrollees would have higher cost sharing, cost sharing above the out-of-pocket threshold would be eliminated, creating a hard cap. Because prices for biologics have been outpacing Part D as a whole, MedPAC anticipates the hard cap would become more valuable over time.

  1. MedPAC provides principles for evaluating the expansion of Medicare’s coverage of telehealth services.

This month is MedPAC’s third and last address to Congress’ mandate concerning telehealth expansion under Medicare. MedPAC discussed three principles that policy makers should consider when evaluating telehealth services or policies for potential incorporation into the FFS Medicare program: 1. increased access; 2. improved quality; and 3. reduced costs. Through examples, MedPAC appears to recommend (1) expanding telehealth services into urban areas; and (2) covering direct-to-consumer (“DTC”) services across all areas and for all beneficiaries. According to MedPAC, Medicare’s coverage of urban telehealth and DTC services would increase beneficiary access and convenience, especially in areas with certain service coverage shortages (i.e., stroke specialists, mental practitioners). For programs like telestroke, MedPAC notes that expanding access would likely improve quality by reducing mortality or more serious disability. MedPAC acknowledges that expanding telehealth services may increase costs, and noted that policy makers would need to decide whether the benefits in access and quality that result from telehealth services justify the extra costs of those services.

MedPAC also briefly reported its take on FFS Medicare’s telehealth service expansion for Medicare Advantage (“MA”). Rather than changing the MA program or its payment policy, MedPAC focuses on addressing the question of whether the Medicare benefit should be the same regardless of whether a beneficiary enrolls for FFS Medicare or MA. One option would keep the benefit between FFS Medicare and MA the same. Another option would allow MA plans to include telehealth services in their bids, thereby making the Medicare payment for telehealth services included in the program’s base payment and not financed by rebate dollars. This would mean all plan members would have access to the telehealth benefits, but not be able to opt out in exchange for lower premiums.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 5-6, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

  1. MedPAC reports the results from its recently conducted survey regarding telehealth utilization across the healthcare system.

This past summer, MedPAC identified several large health programs, Medicare beneficiaries, primary care physicians, and home health agencies to survey with the goal of better understanding their use and attitudes toward telehealth.  Results of this survey show that despite the success of certain telehealth programs for health plans (e.g., telestroke, telemental health) and the increased use of telehealth services among home health agencies, many of those surveyed believe that telehealth provides convenience and improves care only in limited circumstances.  There appears to be a consensus among plans, providers, and beneficiaries that there is little incentive to employ direct-to-consumer (“DTC”) telehealth services.  Even health systems that use telehealth services for pre-operation and follow-up visits, and observed reductions in hospital inpatient readmissions, reported that telehealth services are only financially justified if they help avoid Medicare’s inpatient readmission penalties.  Among surveyed beneficiaries, a majority reported that they are unlikely to use DTC telehealth services because they already have access to their normal physicians via email and telephone.  The beneficiaries’ reported that their primary concern is DTC services only provide them access to random physicians who would not be familiar with their medical histories.  Primary care physicians (“PCPs”) appeared to be concerned that DTC services would only add to their already burdened caseloads.  This sentiment seems founded in PCPs’ reports that electronic medical record systems add time and technical complications to their days instead of simplifying or making their jobs more effective or efficient.

The health plans surveyed by MedPAC cited various factors they believe hinder adoption of telehealth services, such as: federal and state regulations that limit Federal health care program coverage of telehealth services according to geographic locations or originating sites; the elimination of broadband subsidizing programs; and a perceived increased in administrative burden (i.e., complicated Medicare billing practices, required licensing for telehealth clinicians in each state, and credentialing telehealth providers for each facility.)  The health plans’ responses also suggest that state laws that mandate payment parity between in-person and telehealth services are more likely to encourage expansion of telehealth use than laws that merely mandate coverage parity between the two.

  1. MedPAC discusses commercial health plans’ telehealth coverage.

In MedPAC’s September meeting, MedPAC commenced discussion concerning Medicare payments for telehealth services, as mandated under Congress’ 21st Century Cures Act of 2016.  This month, MedPAC continued that discussion by addressing coverage of telehealth services by commercial health plans.  MedPAC’s discussion included the analysis of 48 individual plans available across all 50 states.  The plans included managed care products and various types of commercial health plans such as employer, individual, small and large group, and exchange plans.[1]

Interestingly, MedPAC’s findings do not indicate a significant difference between Medicare and commercial health plans in telehealth utilization and coverage.  The majority of health plans reported less than 1% of their plan enrollees using some form of telehealth service during the year.  The highest reported use was still less than 5% of enrollees.

Unlike Medicare, commercial health plans are more likely to cover urban-originating sites. However, only approximately half of the surveyed plans cover a patient’s residence as an originating site.  MedPAC found the most commonly covered telehealth services are basic Evaluation and Management (E&M) physician visits, mental health visits, and pharmacy management visits, but few cover a broad range of telehealth services.

The MedPAC report demonstrates that commercial health plans do not implement telehealth services to reduce costs, but rather to keep up with competitors who offer these services.  However, while the plans also did not report actual reductions in costs resulting from telehealth services, they did report improvements in convenience and access and increased telehealth use would eventually translate into cost reductions.

  1. MedPAC proposes eliminating the Merit-Based Incentive Payment System.

MedPAC proposed a drastic policy change to the Medicare Access and CHIP Reauthorization Act (“MACRA”); specifically to its Merit-Based Incentive Program (“MIPS”). MedPAC is concerned that the MIPS will not achieve the goal of identifying and rewarding high-value clinicians because it is overly complex and places an excessive burden on clinicians who wish to comply with reporting standards. Moreover, MedPAC states that the measures used are not proven as associated with high-value patient care or improved patient outcomes. Finally, because clinicians choose on which measures they are evaluated, each clinician’s composite score is comprised of performance on different measures. This leads to inconsistencies in how clinicians are compared to each other, and therefore inequities in their payment adjustments.

Given the above, MedPAC proposed a policy option to eliminate individual-level reporting requirements of the MIPS and to establish a voluntary value program in its place. The new voluntary value program would encourage fee-for-service clinicians to join other clinicians and assume responsibility for the health outcomes of their collective patient panels. Clinicians would have the option of being measured as part of a larger group, comprised of other clinicians in their area or affiliated hospitals. Moreover, population-based measures would easily be extracted from the claims submitted by the clinicians – significantly reducing their reporting burden.

MedPAC is considering formalizing this policy proposal as a draft recommendation in December.

  1. MedPAC proposes limiting the use of Physician-Owned Distributors through the Stark law.

MedPAC proposed two policy approaches to limit the use of Physician-Owned Distributors (“PODs”) through the Stark law. PODs currently operate under the indirect compensation exception and “per unit of service” rule of the Stark law, which allows their business model to avoid self-referral liability. However, MedPAC is concerned that this “loophole” contradicts the spirit of the law because it has the potential to influence care based on financial incentives.

The first proposed policy approach would eliminate the application of the “per unit of service” rule to PODs, which would result in PODs no longer meeting the indirect compensation exception. CMS took this type of direct action before when, after reports of abuse, they explicitly eliminated the application of the per unit of service rule to space and equipment leases. The second proposed policy approach redefines PODs as Designated Health Service entities under the Stark law, thereby prohibiting physician ownership of PODs. Under this new definition, physicians with stakes in PODs would be prohibited from referring patients for services using devices supplied by their POD unless another exception applied.

To address the concerns regarding the effect of these policy changes on medical device innovation, MedPAC proposed an exception for large, publicly traded PODs and for PODs that meet specified, limited criteria – for example, if less than 40% of a POD’s business is generated by physician-owners.

If Congress, or more likely, CMS, implements these changes to the Stark Law, hospitals will have a strong incentive to monitor their supply chain to avoid denial of payment and False Claims Act liability. Further, although such changes would limit PODs, some PODs would likely survive on the ability to sell to non-DHS entities, such as ambulatory surgical centers.

  1. MedPAC recommends paying for sequential stays and aligning regulatory requirements in a unified payment system for post-acute care.

MedPAC discussed the continuation of its efforts for a Post-Acute Care (“PAC”) unified payment system. Specifically, MedPAC addressed two important implementation efforts: 1. the effect of sequential stays in PAC on payment; and 2. how to align the relevant regulatory requirements with the new payment system.

The unified payment system would make payments based on patient characteristics rather than patient settings. As a result, sequential PAC stays in different settings would present challenges to accurate payment. MedPAC wants to ensure that the new payment system would not inadvertently shortchange or influence the care that beneficiaries receive. As such, MedPAC plans to examine the cost of stays over the next year, comparing the length of initial stays and the length of later stays, and to consider policies that adjust payments to more accurately reflect the cost of care.

Similarly, regulatory requirements would need to be reformed to align with a new unified PAC payment system. MedPAC proposed various possibilities, such as eliminating the 25-day average length of stay requirement for long-term care hospitals or eliminating the 60% rule for inpatient rehabilitation facilities, as payment would no longer be based on the setting of the care provided.

MedPAC will conduct research on the implementation of a PAC unified payment system in the coming months for inclusion in the June 2018 report.

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[1] MedPAC did not include fee-for-service plans in its report.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 7-8, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC opens the new season with daunting challenges facing the Medicare program.

MedPAC began the 2017-2018 MedPAC year by providing context to the issues MedPAC will address this coming year. Starting from 2014, healthcare spending has modestly accelerated, driven in part by health insurance expansions under the ACA and increases in prescription drug spending.  Additionally, because of increased enrollment,  the size of the Medicare program will nearly double within the next decade; rising from approximately $700 billion in total spending in 2017 to more than $1.3 trillion in 2026.  The increasing cost to the Medicare program, in conjunction with the decreasing workforce contribution per beneficiary, is projected to deplete several Medicare funds such as the HI Trust Fund, which covers Part A services, by 2029.  Unless federal revenues, which are historically approximately 17 percent of GDP, increase above 19 percent, Medicare, Medicaid, other major federal health programs, Social Security, and net interest are projected to outpace total federal revenues by 2039.  Also, MedPAC showed that out-of-pocket spending for healthcare services by Medicare beneficiaries and by individuals and families in private insurance plans, are continuing to increase.

  1. MedPAC discusses two comparative clinical effectiveness research programs that may address low-value spending.

MedPAC presented two sponsor comparative clinical effectiveness research initiatives: (1) the Patient-Centered Outcomes Research Institute (“PCORI”); and (2) the Institute for Clinical and Economic Review (“ICER”). PCORI was established and funded by the Patient Protection and Affordable Care Act to identify, fund, and disseminate comparative clinical effectiveness research.  As of July 2017, it has awarded $1.69 billion to approximately 580 comparative clinical effectiveness research, data infrastructure, and methods projects.  Additionally, PCORI launched pragmatic clinical trials, which compare two or more alternatives for preventing, diagnosing, treating, or managing a particular clinical condition.  To date, $289 million has funded 24 pragmatic clinical trials.  PCORI’s funding will expire September 30, 2019 if it is not reauthorized by Congress.

ICER is an independent nonprofit organization mostly funded 70% by various other nonprofit organizations, but also funded 30% by health care industry entities, i.e., life science companies, health plans, and pharmacy benefit management companies.  ICER compares clinical and cost-effectiveness of a treatment versus its alternative.

Because most of the studies are still ongoing, it is unknown how Medicare’s utilization of data from these programs implicates or will implicate low-value spending.

  1. MedPAC begins Medicare payments for telehealth services discussions under Congress’ 21st Century Cures Act of 2016 mandate.

Congress mandated MedPAC to answer the following questions by March 15, 2018:

  • What telehealth services are covered under the Medicare Fee-for-Service program Parts A and B?
  • What telehealth services do commercial health plans cover?
  • In what ways can commercial health plan coverage of telehealth services be incorporated into the Medicare Fee-for-Service program?

MedPAC briefly addressed the first question at the meeting. Medicare covers telehealth in four areas of the program with varying degrees: (1) physician fee schedule (“PFS”); (2) other fee-for-service payment systems (“FFS”); (3) Medicare Advantage (“MA”); and (4) the Center for Medicare and Medicaid Innovation (“CMMI”) initiatives.  Medicare coverage for PFS is constrained.  Medicare will cover PFS only if the telehealth services: (i) originate in rural areas and take place at one of several types of facilities; (ii) are conducted via two-way video or store-and-forward technology; and (iii) are for particular fee schedule service codes (i.e., office visits, mental health, substance abuse, and pharmacy management).  The reason for coverage parameters is because there is no incentive to curb the use of telehealth services, and therefore there is concern of a volume incentive.  In contrast, there is flexible coverage for FFS, MA, and CMMI initiatives because the incentive to use telehealth services exists only if it reduces costs.  The latter two questions will be addressed in the following two months.

  1. MedPAC addresses the Specialty Pharmacy Industry, and recommends reform in management and data disclosure.

MedPAC began with a general overview of the specialty drug market before shifting to specific specialty drug policy issues within the context of Medicare. In sum, pharmacy benefit managers (“PBMs”) and specialty drug management will have to be reformed in order to contain increased drug spending.

First, MedPAC discussed the use of exclusive specialty pharmacy networks in Part D. Although the “any-willing provider” rule in Part D precludes the use of exclusive networks, MedPAC found that PBMs could get around the rule by “setting fees that discourage certain specialty pharmacies from participating in their network.” Thus, MedPAC recommends Congress to consider the effect of such exclusive networks on the availability of specialty drugs for Medicare beneficiaries. If more of the rebates and fees for specialty drugs shift from PBMs to specialty pharmacies, it may mean increased Medicare program costs.Second, MedPAC recommends CMS provides Plan D sponsors increased access to data related to the amounts of rebates or fees received by PBMs. Plan D sponsors currently do not have access to such information when requested and such disclosures would be “essential for accurate payment, program integrity, and…in evaluating PBM performance.”Third, MedPAC proposed allowing Medicare Advantage Prescription Drug plans (“MA-PDs”) to manage specialty drugs as medical benefits, as is done within the commercial sector. Increased integration in how medical and pharmacy benefits are managed would cap drug spending and facilitate better care. However, MedPAC recognizes that in order for such integration to be feasible, “programmatic changes” within Medicare would have to occur.

  1. Use of High Quality Post-Acute Care Providers by Medicare Beneficiaries

Post-acute care (“PAC”) in the United States is delivered primarily through skilled nursing facilities (“SNFs”), home health agencies (“HHAs”), patient rehab facilities, and long-term acute care hospitals. About 40% of hospital discharges use one or more of these services, and approximately $60 billion was spent on PAC in 2015. MedPAC’s concern lies not in the availability of PAC facilities, but in the quality of care provided by the majority of PAC facilities. The rate of rehospitalization doubles between a SNF in the bottom quartile of performance and a SNF in the top percentile. As such, ensuring adequate placement of beneficiaries in high quality PAC facilities is imperative in ensuring long-term health and decreasing repeated hospitalizations. However, the challenge lies in just how to incentivize beneficiaries to choose higher-quality PAC facilities upon discharge.

Medicare has publicly released data rating various SNFs and HHAs; however, the data reflects broad categories of patients and does not report results for specific conditions. Indeed, MedPAC found that such data generally fails to influence which PAC facility a beneficiary will choose. MedPAC considered a wide array of policies and incentives that could positively impact which PAC facilities beneficiaries will attend after discharge.

First, MedPAC supports granting hospitals greater flexibility to recommend PAC providers as part of the discharge process. Hospitals are currently prohibited from recommending specific PAC providers. Granting such flexibility would align discharge planning with the accountability for post-hospital care that hospitals have under programs such as the Hospital Reduction Program or within ACOs. MedPAC also recommends strengthening and implementing current requirements, such as those set forth by the IMPACT Act, which require hospitals to use quality measures as a factor in discharge planning and require providing such quality data to beneficiaries. Furthermore, MedPAC recommends expanding the financial incentives for hospitals and PAC providers to provide higher-quality care. For example, the Hospital Reduction program currently penalizes hospitals with high rates of readmission for six conditions. MedPAC suggested expanding the number of conditions subject to the penalty could encourage hospitalize to scrutinize the quality of the PAC provider to which patients are referred. Finally, MedPAC suggested expanding value-based purchasing programs for PAC facilities.

On April 14, 2017, CMS issued the FY 2018 Medicare Hospital IPPS Proposed Rule that includes numerous proposed changes.   However, there is a very small provision in this proposed rule that organizations may not be aware of …. especially those that are not hospitals and who normally would not look at the Hospital IPPS rule.

Within the rule, there is a section proposing to revise the application and re-application process for Accrediting Organizations so as to require them to post provider/supplier survey reports and plans of corrections on their website.   Although the survey results are currently available through a number of other methods, CMS states that they are proposing AOs be required to post this information on their websites “in order to advance the Department’s and Agency’s commitment to transparency in terms of patient access to quality and safety information. Access to survey reports and PoCs will enable health care consumers, in addition to Medicare beneficiaries, to make a more informed decision regarding where to receive health care thus encouraging health care providers to improve the quality of care and services they provide.”

In my communications and discussions with several AOs and health care providers, many are concerned that a requirement that AOs post this information on their websites will not achieve the desired result of providing consumers with more transparency, but instead will merely provide what otherwise might be considered confusing information.   Specifically, it has been advanced that requiring AOs to post these reports on their websites will not support the intent to help the public but instead will:

  • Jeopardize the necessary confidentiality of quality improvement work that takes place between organizations and accrediting bodies through the private accreditation survey to ensure quality outcomes that are already public through accreditation decisions;  and
  • Not produce meaningful information for patients or the public beyond extensive data already available through CMS, departments of health, and many other entities that report information to the public appropriate to their scopes and roles, but instead create confusion for the public and patients seeking valid quality data on a healthcare organization.

Comments are due to CMS no later than 5:00 pm EST on June 13, 2017.

On March 15, 2017, the United States District Court for the Western District of Pennsylvania issued an opinion that sheds insight on how courts view the “writing” requirement of various exceptions under the federal physician self-referral law (or “Stark Law”). The ruling involved the FCA qui tam case, United States ex rel. Emanuele v. Medicor Assocs., No. 1:10-cv-245, 2017 U.S. Dist. LEXIS 36593 (W.D. Pa. Mar. 15, 2017), involving a cardiology practice (Medicor Associates, Inc.) and the Hamot Medical Center. The Court’s detailed discussion of the Stark Law in its summary judgment opinion provides guidance as to what may or may not constitute a “collection of documents” for purposes of satisfying a Stark Law exception.

This opinion is of particular note because it marks the first time that a physician arrangement has been analyzed since the Stark Law was most recently amended in November 2015, at which time the Centers for Medicare and Medicaid Services (“CMS”) clarified and codified its longstanding interpretation of when the writing requirement is satisfied under various exceptions.

Arrangements Established by a “Collection of Documents”

Both the “professional services arrangement” and “fair market value” exceptions were potentially applicable, and require that the arrangement be “in writing” and signed. However, two of the medical directorships were not reduced to a formal written agreement. The Defendants identified the following collection of documents as evidence that the writing requirement was satisfied:

  • Emails regarding a general initiative between Hamot and Medicor for cardiac services, but without any specific information regarding directorship positions, duties or compensation.
  • Letter correspondence between Hamot and Medicor discussing the potential establishment of a director position for the women’s cardiac program.
  • Internal summary that identified a Medicor physician as the director of the women’s cardiac program.
  • Unsigned draft Agreement for Medical Supervision and Direction of the Women’s Cardiac Services Program.
  • A one page letter appointing a Medicor physician as the CV Chair and identifying a three-year term that expired June 30, 2008.

The Court said that although “these kinds of documents may generally be considered in determining whether the writing requirement is satisfied, it is essential that the documents outline, at an absolute minimum, identifiable services, a timeframe, and a rate of compensation.” (emphasis added). In addition, the Court noted that CMS requires that at least one of the documents in the collection be signed by each party. After confirming that these “critical” terms were missing from the documents described above, the Court concluded that no reasonable jury could find that either arrangement was set forth in writing in order to satisfy Stark’s fair market value exception or personal service arrangement exception.

Expired Arrangements

Other directorships were initially memorialized in signed, formal written contracts, but they all terminated pursuant to their terms on December 31, 2006 and were not formally extended or renewed in writing on or prior to their termination. Thereafter, Medicor continued to provide services and Hamot continued to make payments under the agreements. The parties eventually executed a series of “addendums” to extend the term of each arrangement, although these addenda had a prior effective date. During the timeframe between when the agreements expired and when the addenda were executed, invoices were continuously submitted and paid.

Plaintiff argued that the failure to execute timely written extensions in advance of renewals resulted in a failure of all six arrangements to meet the “writing” requirement under a relevant Stark Law exception. The Court disagreed, explaining that there is no requirement that the “writing” be a single formal agreement and CMS has provided guidance as to the type of collection of documents that could be considered when determining if the writing requirement is met at the time of the physician referral. In this case, the Defendants specifically relied upon the invoices from Medicor to Hamot and the checks that were sent in payment thereof.

In deciding that a reasonable jury could find that there was a sufficient collection of documents, the Court denied Plaintiff/Relator’s motion for summary judgment with respect to these six ‘expiring” directorships, and the case will proceed to trial on these claims.

Hospitals should carefully consider this opinion when auditing Stark Law compliance of their physician arrangements. A more detailed article analyzing this case will be published in the July edition of Compliance Today.

As the transition in Washington moves into high gear this month, it’s not just the new Administration and Congress that are putting in place plans for policy and legislation; stakeholders are busy creating agendas, too.

Many stakeholder agendas will seek to affect how government addresses such prominent health care issues as the Affordable Care Act, Medicare entitlements, fraud-and-abuse policies, FDA user fees, and drug pricing. There will be a myriad of stakeholder ideas, cutting a variety of directions, all framed with an eye to the new political terrain.

But whatever policies a stakeholder advocates, ideas must be translated into a form that that the political system can digest. For this to occur, an important technical conversion must take place; words must be conjured and organized so that desired policy can become legal reality.  This is no easy task, and stakeholders should proceed thoughtfully.

Here are five takeaways for making proposals concrete and workable:

1. Butterfly Effect

A “simple” contract (to buy a house, say) can end up getting pretty complicated, even when the stated rights and obligations apply to no more than two parties. In contrast, a policy proposal typically seeks to set arrangements for a broad array of parties (perhaps a whole economic sector) and thus will usually involve substantial complexity.

The large number of parties potentially affected means that even the most minor-seeming policy adjustment can have large, unintended, and unpredictable results – not dissimilar from how the proverbial flap of a butterfly’s wings can start the chain reaction that leads to a distant hurricane.

2. Pre-Drafting Steps

Taming the butterfly effect should begin before putting pen to paper. It starts with a clear view of the problem to be solved and the ways to solve it.  Notably, the legislative drafters available to Congress place some considerable emphasis on the steps that precede actual drafting.

For example, the House Legislative Counsel’s Office recommends use of a pre-drafting checklist that includes questions like these:  What is the planned policy’s scope (expressed as populations or subjects)?   Who will administer the policy?  Who will enforce it?  When should the policy take effect (and are transition rules needed)?  Each of these questions contains multiple sub-questions.

Similarly, the Senate Legislative Counsel’s Office points out that most legislated policies build on prior statutes. As such, it is important to know how new provisions will harmonize with — or will override — previously adopted language.  Making these judgments requires a solid grasp of existing legal authorities and ways these authorities have been interpreted.

3. Words on the Page

Translating concepts into words is a specialized task, for ultimately the words must be “right” – they must be technically sufficient to effectuate the policy intended.

It is not news that Congresses, Presidents, and courts sometimes have different views on the meaning of statutes, regulations, and other types of policy issuances. In theory, the drafting curative is to make the words so clear that only a single meaning is possible.  But realistically, legal contention often comes with the territory of a controversial policy, and so stakeholders should at a minimum avoid such unforced errors as these:

  • Obvious mistakes – e.g., purporting to amend a U.S. code title that has not been enacted into positive law;
  • Wrong law – e.g., confusing the statute that enacts new language with the statute that the new language amends;
  • Wrong time – e.g., getting the words right but putting them into effect for an unintended time period;
  • Imprecise labels – e.g., referring to concepts or parties via shorthand phrases similar to, but not identical to, defined terms; and
  • Vague references — e.g., omitting enough key details to confer unintended discretion on an agency or administrative official.

4. Document Silos

Today’s integrated world doesn’t look kindly on silos, but, in the specialized context of Washington policy development, they can be a helpful check on the temptation to combine technical drafting with political messaging.

The desire to combine these two forms of communication is understandable, for it is an appealing notion that policy proposals be “user friendly” so they can be quickly scanned for substantive gist. In fact, however, the practice is dilutive and dangerous; it can put the wrong words on the page and undermine policy intent.

A better course is for stakeholders to manage separately siloed sets of documents that, while consistent, operate at different levels of specificity. One silo should be reserved for the technically rigorous proposals that effect legal authority and a separate silo for “plain English” issue briefs, fact sheets, and other materials that summarize the authority.

5. Plug & Play

Washington policy debates are less often set battles, more often fast-moving skirmishes. Such places a premium on ability to adapt as new ideas emerge, political signals morph, and coalitions shift.  For the task of converting ideas into policies, there are at least two implications.

First, stakeholders should be prepared to think and draft in modules – in discrete chunks of policy that can be embedded in one or more larger proposals. In Congress, stakeholder-originated ideas are more likely to emerge as legislative amendments than as free-standing bills.

Second, stakeholders should be ready to iterate quickly as debate advances. Feedback from reviewers will often focus on proposal summaries because they are easier to read and understand.  But changes in response to comments must also be reflected in the technical proposals themselves.  Tight deadlines are the norm, so separately siloing the two types of documents (see above) will help speed an effective response when political opportunity strikes.

On December 31, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction that prohibits the U.S. Department of Health and Human Services (HHS) from enforcing certain provisions of its regulations implementing Section 1557 of the Affordable Care Act that prohibit discrimination on the basis of gender identity or termination of pregnancy. This ruling, in Franciscan Alliance v. Burwell (Case No. 7:16-cv-00108-O), a case filed by the Franciscan Alliance (a Catholic hospital system), a Catholic medical group, a Christian medical association, and eight states in which the plaintiffs allege, among other allegations, that the Section 1557 regulations force them to provide gender transition services and abortion services against their religious beliefs and medical judgment in violation of the Religious Freedom Restoration Act (“RFRA”).

By way of background, the Section 1557 regulations prohibit discrimination on the basis of gender identify, which regulations define to mean “an internal sense of gender, which may be male, female, neither, or a combination of male and female, and which may be different from an individual’s sex assigned at birth.”[i] The regulations prohibit a categorical insurance coverage exclusion or limitation for all health services related to gender transition and requires providers to provide transition-related procedures if the provider performs an analogous service in a different context. The plaintiffs also alleged that because they perform certain procedures for miscarriages, the Section 1557 regulations will require them to perform such procedures for abortions to avoid discriminating on the basis of termination of pregnancy.

The court held that the Section 1557 regulations failed to incorporate the exceptions for religious institutions and abortions services that Congress provided in Title IX. The court also found that Title IX, which is incorporated by Section 1557 statute, only prohibits discrimination on the basis of biological sex. The court further noted that “the government’s own health insurance programs, Medicare and Medicaid, do not mandate coverage for transition surgeries; the military’s health insurance program, TRICARE, specifically excludes coverage for transition surgeries. . .”[ii]

Specifically, the court concluded that “the regulation violates the Administrative Procedure Act (“APA”) by contradicting existing law and exceeding statutory authority, and the regulation likely violates the [RFRA] as applied to Private Plaintiffs.” The court also agreed that the plaintiffs would likely suffer irreparable harm without the injunction as “one of the State Plaintiffs is already undergoing investigation by the HHS’s OCR, and entities similarly situated to Private Plaintiffs have already been sued under the Rule since it took partial effect on May 18, 2016″ (emphasis added). Conversely, the court found that HHS will not suffer any harm by delaying implementation of this portion of the Section 1557 regulations. It should be noted that this is a ruling granting a preliminary injunction and a final ruling on the merits of a permanent injunction is still to come.

While an HHS appeal of this order would normally be expected, the impending change of Administration—including new leadership at HHS and an expected early Congressional push to repeal and replace the Affordable Care Act—makes it very uncertain whether an appeal will be filed, or ruled upon, prior to any possible changes in the regulatory scheme or underlying statute.

Health care entities should take note, however, that the remaining provisions of the Section 1557 regulations, including those that prohibit discrimination on the basis of disability, race, color, age, national origin, or sex (other than gender identity), are not impacted by the nationwide injunction and HHS can still enforce such provisions. Indeed, HHS has issued a broadcast email specifically stating that:

“[OCR] will continue to enforce the law—including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions—to the full extent consistent with the Court’s order.”

Health care entities should closely monitor this area of law for further developments and ensure that their operations are compliant with the remaining provisions of the Section 1557 regulations.

Further information regarding Section 1557 and its accompanying regulations can be found in EBG Client Alerts and Webinars.

[i] 45 C.F.R. § 92.4

[ii] The court cited Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2780 (2014). The Supreme Court will consider whether Title IX covers gender identity in Gloucester Cty. School Bd. V. G.G., Sup. Ct. No. 16-273, during the current term.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on December 8-9, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress. At the annual December meeting MedPAC reviews draft recommendations to Congress regarding Medicare payment policy. MedPAC reviews and formalizes these recommendations during its January meeting.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. MedPAC discusses recommending that Congress update Medicare inpatient and outpatient payments by the amounts specified in current law.

MedPAC reviewed the inpatient and outpatient hospital payment adequacy. In doing so MedPAC reviewed beneficiary access to care, provider access to capital, quality of care, and the impact of cost growth on hospital margin. MedPAC found that beneficiary access to care is good, provider access to capital is strong, quality is improving, and that margin for inpatient and outpatient hospital services in Medicare was at 9%. This led the MedPAC make a draft recommendation that Congress update the inpatient and outpatient payments as currently specified in existing law.

2. MedPAC finds annual volume growth in the clinician services highest in five year period, but that beneficiary access to clinician services remained comparable to private health insurance.

In reviewing payment adequacy to physicians and other health professionals MedPAC staff found that the annual volume growth in clinician services was higher in 2015 than it was in the period from 2010-2014. The staff also found that the growth in services reflected a shift from freestanding offices to hospital based settings. However, despite the growth in volume MedPAC also found that Medicare beneficiaries have comparable access to clinician services as those with private insurance. Based on this MedPAC’s draft recommendation to Congress is that they should increase payment rates for physician and other health professional services as specified in current law.

3. MedPAC considers recommending changes to how Medicare pays for skilled nursing facility (SNF) services.

MedPAC’s review of the current SNF payment model found that Medicare fee-for-service payments remain higher then Medicare Advantage payments for services and that differences in beneficiary population across payment models does not explain the payment differences. They also found that the current payment model has resulted in a wide disparity in SNF margins partially due to the current payment model favoring intensive therapy over medically complex care. MedPac’s draft recommendation is for Congress to eliminate the market basket for 2018 and 2019 and direct the Secretary of Health and Human Services to revise the prospective payment system for SNFs.

4. MedPAC considers recommending Congress eliminate the update to Medicare hospice payments for 2018.

MedPAC review of the Medicare hospice benefit found that the number of hospice providers has continued to increase and that the number of Medicare beneficiaries utilizing hospice has also increased. Medicare hospice providers saw a marginal profit of 11% in 2014. Given the strength of marginal profit and the increase of in the number of hospice providers MedPAC’s draft recommendation is that Congress should eliminate the update to the hospice payment rates for fiscal year 2018.

5. MedPAC considers recommending changes to Medicare’s home health payment model, including reducing the total payment level.

MedPAC found that Medicare home health benefits have resulted in a provider margin of better than 16% in the 2001 to 2014 period. MedPAC also found that the current payment model may be creating inefficiencies in treatment by incentivize multiple therapy visits per episode. To address these areas MedPAC’s draft recommendation is that Congress should reduce payments by 5% in 2018, and implement a two year rebasing of the payment system, beginning in 2019. Further, MedPAC draft recommendation is that Congress should direct the Secretary of Health and Human Services to revise the PPS to eliminate the use of therapy visits as a factor in payment determinations, concurrent with rebasing.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 6-7, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

1. While Accountable Care Organizations received high marks for quality they failed to produce Medicare savings in 2015.

MedPAC staff provided a status report on Medicare Accountable Care Organizations (“ACOs”). The report found that while ACOs received high marks for quality they failed to produce significant Medicare savings in 2015. Pioneer model ACOs produced net savings of only $5 million while Medicare Shared Savings ACOs cost the Medicare program $216 million. The MedPAC staff conducted a review of the ACO data and found that ACOs in the south, those that are physician led, and are smaller in size were more likely to produce savings. However, the most important variable was the historic level of service use in the area where the ACO was located. Regions with a high historic use of services had more success producing savings.

2. MedPAC finds the rate of potentially avoidable hospital admissions varied significantly among long-stay nursing facilities.

As part of an ongoing project to develop measures to properly evaluate initiatives aimed at reducing the number of hospital admissions and use of skilled nursing facilities among long-stay nursing facility residents, MedPAC staff found a wide discrepancy among nursing facility providers. Overall the staff found that in 2014 long-stay nursing residents accounted for 200,000 “potentially avoidable” hospital admissions and 20 million days of skilled nursing facility care. They found that nursing facilities with fewer than 100 beds and rural nursing facilities made up a disproportionate share of facilities with high potentially avoidable hospital admission rates. The data showed that some facility-level characteristics affected the rate of potentially avoidable hospital admissions; facilities with higher portions of hospice days and access to x-ray services on site had lower potential avoidable admissions, and facilities with a higher use of licensed practical nurses and lower frequency of physician visits had higher rates of hospital use.

3. MedPAC considering suggesting changes to Part B drug payment policies.

MedPAC discussed a number of policy options with respect to the Part B drug payments. The options the Commission discussed sought to either increase price competition and address the growth in Part B prices or improve the current payment formula and available data.  The polices designed to increase price completion and address price growth  included: consolidating billing codes for drugs and biologics with similar health effects, limit the growth in drug prices based on inflation, and introduced a restructured competitive acquisition program. The policies designed to improve the payment formula and improve available data included: modifying the average sale price add-on formula, modifying the wholesale accusation cost formula, and strengthen the manufacture reporting requirements. MedPAC is expected to continue to actively work towards developing policy recommendations regarding Part B drug payment reforms.

4. MedPAC continues to develop a premium support model to reward high quality plans and ACOs and incentivize beneficiaries to seek out high quality care.

As part of its efforts to develop a payment model that rewards high quality care and incentivizes beneficiaries to seek high quality care MedPAC continued its discussion of alternative quality measures that could be used across the Medicare delivery system. Under this alternative model Medicare would use a smaller number of population based health outcomes and patient experience to measures to measure quality across the delivery spectrum (including fee-for service). The Commission suggests that these quality measures be collected at a local market level; each market will then be given a quality benchmark based on the measures. Medicare Advantage (“MA”) plans and ACOs which have quality scores that are higher than the benchmark would see an increased federal contribution to lower beneficiary premiums, with the hope of pushing more beneficiaries into higher quality delivery systems based on the lower beneficiary premiums.

5. MedPAC is considering how to improve Medicare’s behavioral health benefits.

MedPAC staff gave an overview of behavioral health issues among Medicare beneficiaries and of highlighted potential areas for programmatic improvement. The staff suggested Medicare improve payment of inpatient psychiatric care and work towards integrating primary care delivery and behavioral health services. MedPAC appears to be committed to dedicating more resources towards developing policy options for achieving these suggestions in the future.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 8-9, 2016. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gage the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC expects Medicare spending growth to outpace GDP, with total Medicare spending to reach approximately $1 trillion by 2025
    MedPAC began its September meeting with a discussion of the projected growth in the Medicare program. Although the growth in both Medicare and overall health care spending slowed from 2009 to 2013, the Congressional Budget Office (“CBO”) and the Medicare Trustees (“Trustees”) project that total Medicare spending will return to growing at a rate that outpaces gross domestic product (“GDP”) growth. Driven by an increase in both enrollment and per beneficiary spending, the CBO and Trustees project that total Medicare spending will grow at an average rate of 7 percent annually through 2025; if these projections are accurate, the Medicare program will almost double in size—from $600 billion in 2015 to approximately $1 trillion 2025.
  2. MedPAC predicts the trends in Medicare to trigger action from the Independent Payment and Advisory Board in 2017
    MedPAC staff expects the growth in Medicare spending to trigger action from the Independent Payment and Advisory Board (“IPAB”) at some point in 2017. Created by the Affordable Care Act, IPAB is an independent board tasked with proposing Medicare policies designed to reduce spending growth. As of now, no one has been appointed to IPAB. If there are no members when Medicare growth triggers IPAB action, IPAB’s authority will transfer to the Secretary of Health and Human Services. The Secretary will then be required to fulfill IPAB’s role, and the Secretary’s savings proposals will automatically become law unless Congress affirmatively acts to block the proposals.
  3. Physician practice sizes continue to grow, and a greater number are affiliating with health systems and hospitals
    MedPAC staff, using the SK&A Office-based physician database (a commercial database file with information on almost 600,000 physicians), determined that the number of physicians who reported as affiliated with a health system or hospital rose from 34 percent in 2012 to 39 percent in 2014. Over that same time period, the percentage of physicians working in practices with more than 50 physicians grew from 16 percent to 22 percent. MedPAC plans to look deeper into the size and affiliation of physician practice groups, including the geographic distribution of practice groups, to more accurately understand the infrastructure needed to move towards alternative payment models.
  4. MedPAC will focus on recommending steps for adjusting the clinician fee schedule to address “misvalued” services
    MedPAC expressed concern that certain clinician services, mainly primary care, are undervalued and undercompensated as a part of the clinician fee schedule. Accordingly, MedPAC will continue to look at recommendations to improve the Relative Value Scale Update Committee (or “RUC”) process and make suggestions to increase payment for primary care services, including a potential partial capitation payment for primary care services.
  5. MedPAC is considering how to evaluate initiatives for reducing avoidable hospitalizations of long-stay nursing facility residents
    MedPAC staff gave an overview of provider initiatives to reduce avoidable hospitalizations of nursing facility residents. These initiatives included efforts made in conjunction with the Center for Medicare and Medicaid Innovation that feature a new three-part payment model. The new model will make payments to facilities for providing treatment for qualified conditions, increase payments to clinicians for providing treatment in nursing facilities, and establish a new payment to providers who conduct care coordination in nursing facilities. MedPAC is planning on developing measures to evaluate the success of these initiatives at reducing cost and improving beneficiary care.