May 27, 2015

Washington Healthcare Update

This Week: House E&C 21st Century Cures Bill Passes Unanimously Out of Committee... House Votes to Codify Permanent R&D Tax Credit... CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

1. Congress

House of Representatives

District Work Period – No Legislative Activity


State Work Period – No Legislative Activity

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


District Work Period – No Legislative Activity

House E&C 21st Century Cures Bill Passes Unanimously Out of Committee

On May 21, the House Energy and Commerce Committee held a markup to finalize the draft of its comprehensive health care legislation, 21st Century Cures Act, H.R. 6. The legislation was authored by full committee Chairman Fred Upton (R-MI), Oversight and Investigations Subcommittee Ranking Member DeGette, full committee Ranking Member Frank Pallone, Jr. (D-NJ), Health Subcommittee Chairman Joe Pitts (R-PA) and Health Subcommittee Ranking Member Gene Green (D-TX). The latest version of the bill, which passed unanimously out of committee 51-0, includes $13.2 billion in new offsets to cover the cost of the bill’s increased funding for the National Institutes of Health (NIH) and the Food and Drug Administration (FDA). The new offsets include selling off some the country’s strategic petroleum reserves, altering the timetable for pre-payments on Medicare Part D, lowering federal reimbursement rate for durable medical equipment in Medicaid to coincide with Medicare rates, and advancing the modernization of X-ray imaging from cassette-based imaging to digital imaging. Moreover, the approved bill includes $550 million toward a Cures Innovation Fund ($110 million a year for fiscal years 2016 through 2020 for various FDA and NIH expenditures), and protects FDA user fees funding from sequestration cuts. Seemingly controversial proposals scrapped in the final version of the bill include a proposal to save $1.8 billion by calculating the Federal Upper Limit reimbursement using generic drug prices and eliminating a previous proposal to increase premium costs of Medicare for multi-millionaire beneficiaries. “I’m proud of the final bill that was voted out of Committee, which will improve the innovation ecosystem for the development of life-saving medical breakthroughs, foster the development and the interoperability of health information technology, and better leverage critical resources to facilitate the discovery of new cures. After one year of deliberation, research, and stakeholder input we’re one step closer to delivering new cures and therapies, and hope to patients,” said Rep. Green. Chair Upton said at an event after the markup that he anticipates having the legislation up for a full House vote by the third week of June and hopes the legislation will come up for a vote on the Senate floor by August. Worth noting, Senate Health, Education, Labor, and Pensions Committee Chair Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) are working on a parallel effort to a comprehensive health care bill, but Chair Alexander has said he doesn’t anticipate having the measure finished until early next year.

The agreed-to manager’s amendment to the bill can be found here.

A section-by-section outline of the bill can be found here.

House Votes to Codify Permanent R&D Tax Credit

The House voted 274-145 on May 20 to simplify the research and development tax credit and make it permanent, giving businesses more incentive to invest in innovation. Specifically, H.R. 880, the American Research and Competitiveness Act of 2015, introduced earlier this year by Rep. Kevin Brady (R-TX), makes permanent the 2014 Research and Development (R&D) tax credit, thereby ending the series of year-to-year extensions seen in recent history. “America’s future depends on innovation occurring here in the U.S. Without the right permanent research and development incentive, we will continue to fall behind our global competitors and watch good paying research jobs go overseas. A permanently strong economy requires a permanent research and development tax credit,” said Rep. Brady in a press release. The measure allows companies to claim 20 percent of their basic or otherwise qualified research expenses once those costs go above 50 percent of their average research costs for the previous three years; moreover, the credit covers a flat 10 percent of research expenditures if a company does not have any qualified research expenses for any or all of the previous three years and 20 percent for any energy research expenses paid to an “energy research consortium,” with no minimum threshold. The White House, however, has threatened to veto the bill, as the House has not offered any funding measure to offset the $180 billion in lost tax revenue over the next 10 years. Although not opposed to the measure itself, the White House noted that “H.R. 880 violates the very standard that House and Senate Republicans approved less than a month ago in their concurrent budget resolution, which requires offsetting the cost of any tax extenders that are made permanent with other revenue measures.” Also worth noting, on the same day lawmakers passed H.R. 1806, the America Competes Reauthorization Act, in a 217-205 vote. The America Competes Reauthorization Act would provide about $33 billion in funding for federal scientific research and research grants between fiscal years 2016 and 2020, to be divided among the National Science Foundation, the Office of Science and Technology Policy, the National Institute of Standards and Technology and certain offices at the U.S. Department of Energy.

House E&C Commerce Oversight Subcommittee Holds Hearing on Assisting State Governments Fight Opioid Abuse

On Thursday, May 21, 2015, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing entitled “What are the State Governments Doing to Combat the Opioid Abuse Epidemic?” Members on the committee heard from several state health officials (from Missouri, Indiana, Massachusetts and Colorado) regarding their ongoing efforts to combat the opioid abuse epidemic and explore how State and Federal policies can most effectively incentivize the development and broadened use of evidence-based practices and treatments in their communities. “The size of this problem and the need for a new paradigm of treatment can’t be understated. And the process of developing legislative solutions has already started.… We received honest input and ideas about where there are problems and successes with any federal policies,” said Subcommittee Chair Tim Murphy (R-PA) in his opening statement. “We know that more than 70% of those who abuse prescription drugs obtain them from the unused supplies of friends or family, highlighting the importance of supporting robust medication collection and disposal resources throughout the state,” explained Colorado Department of Public Health and Environment Executive Director and Chief Medical Officer Larry Wolk, M.D., MSPH. In his testimony, Dr. Wolk, like the other witnesses, stressed how important education and collaborative work are to fighting this crisis.

Witness List

Jerome Adams, M.D., M.P.H.
Health Commissioner
Indiana State Department of Health

Monica Bharel, M.D., M.P.H.
Massachusetts Department of Public Health

Mark Stringer, M.A., L.P.C., N.C.C.
Director, Division of Behavioral Health
Missouri Department of Mental Health

Larry Wolk, M.D., MSPH
Executive Director and Chief Medical Officer
Colorado Department of Public Health and Environment

For more information or to view the hearing, visit

W&M Oversight Subcommittee Holds Hearing on Administration’s Use of Agency Action in ACA Implementation

On May 20, Chair of the Ways and Means Subcommittee on Oversight Peter Roskam (R-IL) held a hearing to investigate the role of Administrative actions in the years-long implementation and roll out of the Affordable Care Act. In a largely political hearing, members used their questioning to specifically target premium tax credits, the ACA transition policy that let insurers continue to offer some plans past 2014, and the delay in the employer mandate, among other issues. “Today we’re going to look at ‘administrative actions’—that is—unilateral actions by the President and the Executive Branch as they implement and administer the President’s healthcare law.… The question before us is not whether the Administration is implementing the healthcare law. It’s whether the Administration is undermining the rule of law. And the answer is yes,” said Chair Roskam in his opening statement. Democrats, on the other hand, argued that the Administration acted as both party predecessors before them to implement a law in a manner that considers and reflects the importance of the affordable health care mission.

Witness List

Elizabeth Papez
Winston & Strawn LLP

Jonathan Adler
Professor of Law
Case-Western Reserve University School of Law

Grace-Marie Turner
The Galen Institute

Robert Weiner
Arnold and Porter LLC

For more information or to view the hearing visit

House Bill Introduced to Establish ACA Inspector General

On May 19, Ways and Means Oversight Subcommittee Chair Peter Roskam (R-IL) and 16 other Republican cosponsors reintroduced H.R. 2400, the Special Inspector General for Monitoring the Affordable Care (SIGMA) Act , which would establish an oversight body to investigate the overall effectiveness and spending mechanisms within programs established under the Affordable Care Act (ACA). “We need assurance that—until Obamacare is repealed and replaced—there is rigorous oversight in place to prevent more taxpayer dollars from being squandered on this law,” Rep. Roskam said in a statement, adding that this inspector general “alone would have needed authority to oversee all federal agencies involved in implementing and administering Obamacare and protect the American people from its harmful effects.” As written, H.R. 2400 would require the Special Inspector General for Monitoring the Affordable Care Act to provide a report to Congress within 120 days after appointment, followed by quarterly reports and audits that would span every aspect of the health care law, from the impact on out-of-pocket costs, to shrinking provider networks, contracting, the role of the Independent Payment Advisory Board in cutting Medicare benefits and much more. SIGMA would also be equipped with the same investigative and law enforcement authority as standing Inspectors General, including subpoena and audit powers to compel responses from the Administration. The legislation was originally introduced last Congress in March 2014, and the bill already has support from Sens. Pat Roberts (R-PA) and Rob Portman (R-OH), who will introduce a Senate companion bill.

W&M Health Subcommittee Holds Hearing on Way to Improve Competition in Medicare

On May 19, House Ways and Means Health Subcommittee Chair Kevin Brady (R-TX) held a hearing entitled “Improving Competition in Medicare: Removing Moratoria and Expanding Access” in order to explore how to improve the complicated Medicare payment system for hospitals and other health care providers. At the hearing, witnesses spoke to a measure by Rep. Sam Johnson (R-TX) that repeals the ban expanding physician-owned hospitals. “What are the impacts—pro and con—of this discrimination against one model of acute care, and is the current ban based on quality of service or a desire to restrain competition?” Rep. Kevin Brady asked during a hearing Tuesday. Another topic discussed included a bill by Rep. Tom Price (R-GA) that repeals and reforms the Medicare bidding process for supplying durable medical equipment.

Witness List

Joe Antos
Wilson H. Taylor Scholar in Health Care and Retirement Policy
American Enterprise Institute

Joe Minissale
Methodist McKinney Hospital

Robert Steedley
Barnes Healthcare Services
On behalf of the American Association for Homecare

Rich Umbdenstock
President and CEO
American Hospital Association

For more information or to view the hearing, please visit

Members of House W&M and E&C Committees Introduce Legislation Targeted at Medicare Advantage Reform

Members on both sides of the aisle of the House Ways and Means Committee and the House Energy and Commerce Committee on May 21 introduced four bills that attempt to modify the Medicare Advantage (MA) program for seniors. The four bipartisan bills are:

  • H.R. 2506, the Seniors’ Health Care Plan Protection Act of 2015, introduced by Ways and Means members Rep. Vern Buchanan (R-FL) and Rep. Charles Rangel (D-NY) and Energy and Commerce member Rep. Marsha Blackburn (R-TN). The legislation would delay the authority to terminate MA contracts for plans failing to achieve minimum quality ratings under the Medicare Advantage STARS rating system.
  • H.R. 2505, the Medicare Advantage Coverage Transparency Act of 2015, introduced by Ways and Means members Rep. Mike Kelly (R-PA) and Rep. Ron Kind (D-WI) and Energy and Commerce member Rep. Gus Bilirakis (R-FL). The bill would require annual reporting of enrollment data in MA plans.
  • H.R. 2507, the Increasing Regulatory Fairness Act of 2015, introduced by Ways and Means members Rep. Kevin Brady (R-TX)—chairman of the Health Subcommittee—and Rep. Mike Thompson (D-CA) and Energy and Commerce member Rep. Joe Pitts (R-PA). The legislation looks to expand an annual regulatory schedule for MA payment rates.
  • H.R. 2488, the Medicare Beneficiary Preservation of Choice Act of 2015, introduced by Ways and Means member Rep. Brady, Rep. Keith Rothfus (R-PA) and Energy and Commerce members Rep. Susan Brooks (R-IN) and Rep. Kurt Schrader (D-OR). The bill aims to restore the second Medicare open enrollment period and disenrollment opportunities.


State Work Period – No Legislative Activity

Senate NIH Caucus Launched

On May 19, alongside National Institutes of Health (NIH) Director Francis Collins, Senators Lindsey Graham (R-SC) and Dick Durbin (D-IL) launched a new bipartisan caucus dedicated to strengthening the National Institutes of Health (NIH). The NIH Caucus, according to the senators, will offer “more than symbolic support” for the agency and will work to boost stagnant research funds. “The purpose of this caucus is to shine a light on what you [the NIH] do, inform the American tax payer that this is a great return on investment—about 30 billion dollars a year,” said Sen. Graham. “I would tell the American tax payer for the money that we spend, percentage wise of the budget—and it’s a very small percent of the budget, return on investment is enormous here.” Other members who have joined the caucus include: Sens. Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Bob Casey (D-PA), Ben Cardin (D-MD), Joe Donnelly (D-IN), Ed Markey (D-MA), Gary Peters (D-MI), Al Franken (D-MN), Tim Kaine (D-VA), Amy Klobuchar (D-MN), Roger Wicker (R-MS) and Jerry Moran (R-KS). Funding for the NIH is already a driving force behind a bipartisan House bill known as 21st Century Cures. That bill, which comes from the House Energy and Commerce Committee, includes $10 billion for the agency. Due to looming sequestration cuts, NIH’s budget will be an enormous challenge for Congress to develop; while both Democrats and conservative Republicans have called for increased funding for the NIH, none have proposed how to pay for it. A dear colleague letter announcing the new caucus was previously circulated May 5.

Senate Passes Trade Promotion Authority Legislation Paving Way for TTPP Negotiations

On May 22, the Senate passed 62-38 its bipartisan version of the Trade Promotion Authority (TPA) legislation, or Fast Track, which allows the president to expedite and negotiate the completion of international trade dealings. With fast track legislation in place, as it was from 1975-1994, the House and Senate are not given authority to vote on individual elements of international trade deals, and instead members must simply vote yes or no on whether it should pass. In the end, Democrats Maria Cantwell (WA) and Patty Murray (WA), Heidi Heitkamp (ND), Chris Coons (DE) and Claire McCaskill (MO), plus Republican Lindsey Graham (SC), all voted “aye” to bring the package past the 60 vote threshold; an extension to a program called Trade Adjustment Assistance that provides income support and training to workers displaced by international trade and a deal on the Export-Import Bank brought the legislation its final votes. Pending passage in the House of Representatives, the legislation tees up President Obama’s 12-country Trans Pacific Partnership (TPP) negotiations, which, at present, contains language that advocates for making permanent the 12-year patent exclusivity for biologics drugs. In the health care space, opponents of the trade agreement worry it will limit competition and encourage higher prices for pharmaceuticals and other high-value products by spreading American standards for patent protections to other countries. Worth noting, this existing biologic proposal is contrary to the Administration’s FY 2016 budget, which calls for only seven years of exclusivity. A vote on the House version of the bill is expected in the coming weeks, although potential hurdles to its passage remain.

Bipartisan NOTICE Act Introduced in Senate

On May 14, Sens. Ben Cardin (D-MD) and Michael Enzi (R-WY) introduced S. 1349, the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, which mandates that hospitals notify beneficiaries put into observation rather than admitted to a hospital that Medicare may not pay for their nursing home care. The legislation is designed to save seniors under Medicare Part A the sticker shock that comes after they are discharged from the hospital; Medicare does not cover the cost of post-acute care in a skilled nursing facility because their overnight stays in a hospital is classified as outpatient observation instead of inpatient admissions. “This bill is about helping seniors understand when their treatment after a hospital stay will be covered by Medicare and when it isn’t,” said Senator Enzi in a press release. “With this little bit of information we can help people feel a little bit more secure in their medical care.” The House companion bill NOTICE Act passed the House of Representatives in March, 395-0, with 37 lawmakers not voting. An Office of Inspector General (OIG) report found that the average out-of-pocket cost for skilled nursing facilities services not covered by Medicare was more than $10,000 per beneficiary.

2. Administration

HHS Awards $112 Million to Help 5,000 Primary Care Professionals Advance Heart Health

Department of Health and Human Services (HHS) Secretary Sylvia Burwell announced May 26 the awarding of $112 million to regional cooperatives to work with about 5,000 primary care professionals in 12 states to improve the heart health of their nearly 8 million patients. The EvidenceNOW initiative establishes seven regional cooperatives composed of multidisciplinary teams of experts who will each provide quality improvement services to up to 300 small primary care practices. These services include on-site coaching, consultation from experts in health care delivery improvement, sharing best practices, and electronic health record support. This initiative will help small primary care practices incorporate the most recent evidence on how best to deliver the ABCS of cardiovascular prevention into their patients’ care: Aspirin use by high-risk individuals, Blood pressure control, Cholesterol management and Smoking cessation. “The goal of the EvidenceNOW initiative is to give primary care practices the support they need to help patients live healthier and longer,” said Secretary Burwell. “By targeting smaller practices, we have a unique opportunity to reduce cardiovascular risk factors for hundreds of thousands of patients, and learn what kind of support results in better patient outcomes.” Heart disease is the leading cause of death for men and women in the United States.

For more information about AHRQ’s EvidenceNOW initiative, including details on each of the grantees and cooperatives, visit

3. State Activities

Tennessee “Right to Try” Law Takes Effect

Patients diagnosed with terminal illnesses in Tennessee will now have the right to access experimental medications that haven’t passed the Food and Drug Administration’s final approval processes after Gov. Bill Haslam (R) signed the Phil Timp-Amanda Wilcox Right to Try Act into effect May 8. The legislation, sponsored by Rep. Jon Lundberg and Sen. Joey Hensley, both Republicans, unanimously passed both chambers of the General Assembly in April. The legislation, House Bill 143, will grant Volunteer State doctors the ability to prescribe to terminally ill patients drugs that haven’t yet been fully vetted by the FDA, as long as they’ve passed phase 1 testing for safety. Tennessee became the 18th state to enact a law to give patients with advanced illness the ability to access an investigational drug or medical device.

New Jersey Biologic Substitution Bill Passes the General Assembly

On May 12, the New Jersey Assembly passed a bill, A.2477, which would permit the automatic substitution of interchangeable biosimilars. The bill, which was first proposed in 2014, would mandate that, after dispensing an interchangeable biosimilar, pharmacists notify prescribers within five business days, providing them with information including the specific product name and the name of manufacturer, and preferably in an electronic manner. New Jersey Assembly Deputy Republican Leader Nancy Muñoz said in a statement that the bill is needed to ensure that once the Food and Drug Administration (FDA) has approved a biosimilar as “interchangeable” with a biologic, a law is in place to handle the issue of substitution. Currently, eight states—Delaware, Florida, Indiana, Massachusetts, North Dakota, Oregon, Utah and Virginia—have enacted laws that limit biosimilar substitution to those drugs that the FDA has deemed interchangeable. Thus far, the FDA has only approved one biosimilar, Sandoz’s Zarxio, which it deemed as not interchangeable. The legislation now heads to the state senate for approval.

4. Regulations Open for Comment

CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

On May 26, CMS posted a proposed rule to modernize the Medicaid and Children’s Health Insurance Program (CHIP) managed care regulations. The proposed rule is the first major update to Medicaid and CHIP managed care regulations in more than a decade. The proposal is sweeping in that it touches many areas, including network adequacy, quality measures, enrollment and best practices, and aligns many policies to be similar to those for Medicare Advantage and the private market. The rule will be published in the Federal Register on June 1, and the deadline to submit comments is July 27, 2015, at 5 p.m. EST.

More information on the rule can be found at federal

FDA Releases Draft Guidance on Use Adaptive Trial Designs for Medical Devices

On May 18, the Food and Drug Administration (FDA) released draft guidance in hopes of clarifying ways in which adaptive clinical trial designs can be used for medical devices. Specifically, the draft guidance lays out 11 types of adaptive trial designs the agency feels can be successfully used for devices: group sequential design; sample size adaptation; Bayesian sample size adaptation; group sequential designs with sample size reassessment; dropping a treatment arm; changing the randomization ratio; changing the hypothesis (claim); adaptive enrichment; planning to adapt based on the total information; adaptation of the device or endpoint; and seamless studies. The draft document also makes clear that the adaptive trial designs discussed apply to premarket approval applications, 510(k) submissions, de novo submissions, humanitarian device exemptions and investigational device exception, and do not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. Worth noting, FDA says there are possible limitations to using adaptive trial designs, including requiring more effort at the design stage—leading to study designs that are overly complicated and cost more and to the introduction of bias into the study; implementing changes to the study due to an adaptation can “confound interpretation of the study results.” FDA says in the guidance that to ensure that adaptive trial designs are scientifically valid, studies should be prospectively planned for in consultation with FDA prior to the initiation of any study, and the agency lays out two approaches that can help evaluate the operating characteristics of adaptive study designs—analytical methods and simulation studies.

FDA Releases Guidance on Standardizing Study Data for Drug Makers

In the Federal Register May 18, the Food and Drug Administration (FDA) announced the availability of draft recommendations for preparing a Study Data Standardization Plan. FDA’s guidance recommends that, for both clinical and nonclinical studies, sponsors include a plan that describes the submission of standardized study data to FDA. The draft recommendations describe the information that should be included in the Standardization Plan, which includes but is not limited to, general sponsor information, product information, a list of completed studies and standards, and a list of planned studies and standards. The draft recommendations for creating a Standardization Plan are posted here. The agency is soliciting feedback on the plan, with comments due by July 2.

FDA: Guidance Released on Investigational New Drug Applications

The Food and Drug Administration (FDA) released draft guidance to assist sponsor-investigators in preparing and submitting complete investigational new drug applications (INDs)—an application used by FDA to approve the start of a new trial—to the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER). The guidance is intended to act as a basic overview of the IND process, with an eye on individual researchers who are investigating new uses for either an approved or investigational drug. FDA’s guidance goes on to explain the basics of 21 CFR 312—the federal regulation governing IND submissions—providing an overview of the essential elements of an IND submission, including information about the sponsor, a summary of the investigational drug product and its risks, the clinical trial protocol and a summary of previous clinical trial results involving the drug. Worth noting, the guidance, FDA notes, is not intended for use by sponsors or investigators “seeking to evaluate a drug for commercial purposes (i.e. seeking market approval or licensure) and thus does not focus on certain regulatory requirements that involve exchange of information or materials between a sponsor and investigator.” The proposed guidance was published in the Federal Register May 15, and comments on the proposed draft guidance are due July 14, 2015.

CMS Updates Wage Index and Payment Rates for the Medicare Hospice Benefit

On April 30, 2015, CMS issued a proposed rule (CMS-1629-P) that would update fiscal year (FY) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. The proposed hospice payment rule reflects the ongoing efforts of CMS to support beneficiary access to hospice care. As proposed, hospices would see an estimated 1.3 percent ($200 million) increase in their payments for FY 2016. The $200 million increase in estimated payments for FY 2016 reflects the distributional effects of the 1.8 percent proposed FY 2016 hospice payment update percentage ($290 million increase); the use of updated wage index data and the phaseout of the wage index budget neutrality adjustment factor (-0.7 percent/$120 million decrease); and the proposed implementation of the new Office of Management and Budget (OMB) Core Based Statistical Areas (CBSA) delineations for the FY 2016 hospice wage index with a one-year transition (0.2 percent/$30 million increase). The elimination of the wage index budget neutrality adjustment factor (BNAF) was part of a seven-year phaseout that was finalized in the “Medicare Program; Hospice Wage Index for Fiscal Year 2010” final rule (74 FR 39384, Aug. 6, 2009) and is not a policy change.

Proposed FY 2016 Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

On April 24, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS). The proposed rule also updates the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program, which requires participating facilities to report on quality measures or incur a reduction in their annual payment update. This proposed rule would expand the measure sets in future fiscal years and change certain data reporting requirements for these measures. CMS is proposing to update the estimated payments to IPFs in FY 2016 relative to estimated payments in FY 2015 by 1.6 percent (or $80 million). This amount reflects 2.7 percent IPF-specific market basket estimate less the productivity adjustment of 0.6 percentage point and less the 0.2 percentage point reduction required by law, for a net update of 1.9 percent. Estimated payments to IPFs are reduced by 0.3 percent due to updating the outlier fixed-dollar loss threshold amount. CMS will accept comments on the proposed rule until June 23, 2015.

CMS Releases Proposed Rule on FY 2016 Medicare Payments for Inpatient Rehab Facilities

On April 23, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed FY 2016 Medicare payment policies and rates for the Inpatient Rehabilitation Facility (IRF) Prospective Payment System and the IRF Quality Reporting Program. Specifically, CMS is proposing to increase payments to inpatient rehabilitation hospitals in 2016 by approximately $130 million, or 1.7 percent when compared to 2015. This agency also proposes new quality reporting requirements to adopt measures that satisfy three of the quality domains required by the IMPACT Act in FY 2016: skin integrity and changes in skin integrity; functional status, cognitive function and changes in function and cognitive function; and incidence of major falls; IRFs that fail to submit the required quality data to CMS will be subject to a 2 percentage point reduction to their applicable FY annual increase factor, and the expected cost of the implementation of these new quality reporting requirements is approximately $24 million to hospitals. Worth noting, the payment increase is significantly smaller than the 2.4 percent raise they received in fiscal 2015. The agency proposes to begin collecting IRF quality reporting data by fall 2016. The proposed rule will be published in the Federal Register on April 27, and the agency will accept comments from stakeholders until June 22, 2015.

Fiscal Year 2016 Proposed Inpatient and Long-term Care Hospital Policy and Payment Changes

On April 17, 2015, CMS issued a proposed rule to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The proposed rule, which would apply to approximately 3,400 acute care hospitals and approximately 435 LTCHs, would affect discharges occurring on or after Oct. 1, 2015. The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and market conditions in the hospital’s geographic area.

The rule proposes policies that continue a commitment to increasingly shift Medicare payments from volume to value. CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS and long-term care hospitals under the LTCH PPS. Under these two payment systems, CMS generally sets payment rates prospectively for inpatient stays based on the patient’s diagnosis and severity of illness. A hospital receives a single payment for the case based on the payment classification — MS-DRGs under the IPPS and MS-LTC-DRGs under the LTCH PPS — assigned at discharge.

By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.” LTCHs are paid according to a separate market basket based on LTCH-specific goods and services. CMS will accept comments on the proposed rule until June 16, 2015.

Proposed FY 2016 Payment and Policy Changes for Medicare Skilled Nursing Facilities (SNF)

On April 15, 2015, CMS issued a proposed rule [CMS-1622-P] outlining proposed Fiscal Year (FY) 2016 Medicare payment rates for skilled nursing facilities (SNFs). This proposed rule would update the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for fiscal year (FY) 2016. In addition, it includes a proposal to specify a SNF all-cause all-condition hospital readmission measure, as well as a proposal to adopt that measure for a new SNF Value-Based Purchasing (VBP) Program and a discussion of SNF VBP Program policies being considered for future rulemaking to promote higher quality and more efficient health care for Medicare beneficiaries. Additionally, this proposed rule would implement a new quality reporting program for SNFs as specified in the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act). It also would amend the requirements that a long-term care (LTC) facility must meet to qualify to participate as a skilled nursing facility (SNF) in the Medicare program, or a nursing facility (NF) in the Medicaid program. These requirements implement the provision in the Affordable Care Act regarding the submission of staffing information based on payroll data. To be assured consideration, comments must be received no later than 5 p.m. on June 19, 2015.

CMS Proposes Mental Health Parity for Medicaid and CHIP in New Rule

The Centers for Medicare & Medicaid Services (CMS) announced April 6 a new proposed rule to align mental health and substance use disorder benefits for low-income Americans with benefits required of private health plans and insurance. Specifically, the proposal applies certain provisions of the Mental Health Parity and Addiction Equity Act of 2008 to Medicaid and the Children’s Health Insurance Program (CHIP) by mandating that mental health and substance use disorder benefits are no more restrictive than medical and surgical services. As it is currently written, the proposed rule ensures that all beneficiaries who receive services through managed care organizations or under alternative benefit plans have access to mental health and substance use disorder benefits regardless of whether services are provided through the managed care organization or another service delivery system, and the full scope of the proposed rule applies to CHIP, regardless of whether care is provided through fee-for-service or managed care. Currently, states have flexibility to provide services through a managed care delivery mechanism using entities other than Medicaid managed care organizations, such as prepaid inpatient health plans or prepaid ambulatory health plans; in the new rule, states will be required to include contract provisions requiring compliance with parity requirements in all applicable contracts for these Medicaid managed care arrangements. The proposed rule was published in the Federal Register on April 10 with comments due to the agency by June 9, 2015.

HHS Releases Proposed Rules on EHR Incentive Programs and Health IT Certification Criteria

The U.S. Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC) announced March 20 the release of the Stage 3 notice of proposed rulemaking for the Medicare and Medicaid Electronic Health Records (EHRs) Incentive Programs and 2015 Edition Health IT Certification Criteria to improve the way electronic health information is shared and ultimately improve the way care is delivered and experienced. The proposed rules aim to give providers additional flexibility, make the program simpler, drive interoperability among electronic health records and increase the focus on patient outcomes to improve care.

Specifically, the Meaningful Use Stage 3 proposed rule issued by CMS specifies new criteria that eligible professionals, eligible hospitals and critical access hospitals must meet to qualify for Medicaid EHR incentive payments; the rule also proposes criteria that providers must meet to avoid Medicare payment adjustments (Medicaid has no payment adjustments) based on program performance beginning in payment year 2018. Moreover, the 2015 Edition Health IT Certification Criteria proposed rule aligns with the path toward interoperability — the secure, efficient and effective sharing and use of health information — identified in ONC’s draft shared Nationwide Interoperability Roadmap. The proposed rule also builds on past editions of adopted health IT certification criteria, and includes new and updated IT functionality and provisions that support the EHR Incentive Programs’ care improvement, cost reduction and patient safety across the health system.

Under the Health Information Technology for Economic and Clinical Health Act, doctors, health care professionals and hospitals, including critical access hospitals, can qualify for Medicare and Medicaid incentive payments when they adopt and meaningfully use health IT technology certified by ONC. The Stage 3 proposed rule may be viewed here, and the comment period ends on May 29, 2015. The 2015 Edition proposed rule may be viewed here and the comment period ends on May 29, 2015. The Draft 2015 Edition Certification Test Procedures may be viewed at, and the comment period ends on June 30, 2015.

5. Reports

GAO Report Finds Better Data and Greater Transparency Could Improve Accuracy for RUC’s Process for Developing Relative Value Recommendations for CMS

The Protecting Access to Medicare Act of 2014 included a provision for the Government Accountability Office (GAO) to study the Relative Value Scale Update Committee’s (RUC) process for developing relative value recommendations for the Centers for Medicare & Medicaid Services (CMS). The RUC’s process for developing relative value recommendations relies on the input of physicians who may have potential conflicts of interest with respect to the outcomes of CMS’s process. While the RUC has taken steps to mitigate the impact of physicians’ potential conflicts of interest, GAO found that specialty societies’ work relative value recommendations may still be inflated. In a study released May 21, GAO evaluated the RUC’s process for recommending relative values for CMS to consider when setting Medicare payment rates, and CMS’s process for establishing relative values, including how it uses RUC recommendations. The oversight agency found that while CMS’s process for establishing relative values complies with the statutory requirement to review all Medicare services every five years, the agency does not maintain a database to track when a service was last valued or have a documented standardized process for prioritizing its reviews. Moreover, GAO found that CMS’s process is not fully transparent because the agency does not publish the potentially misvalued services identified by the RUC in its rulemaking or otherwise, nor does it document the methods used to review specific RUC recommendations. While CMS has begun to research ways to develop an approach for validating RUC recommendations, it does not yet have a specific plan for doing so. In its recommendations, GAO told CMS it should better document its process for establishing relative values, develop a process to inform the public of potentially misvalued services identified by the RUC, and develop a plan for using funds appropriated for the collection and use of information on physicians’ services in the determination of relative values.

GAO Study Finds Fewer than Half of Pioneer ACOs Earned Shared Savings in 2012-2013

On May 22, the Government Accountability Office (GAO) released a study examining the financial and quality results for each accountable care organization (ACO) within the Pioneer Accountable Care Model for 2012 and 2013 (the first two years of the model). A program created under the Affordable Care Act (ACA), the Pioneer ACO Model is composed of health care providers and suppliers who voluntarily form individual ACOs to provide coordinated care to patients, with the goal of reducing spending and improving quality of care. Under this model, ACOs can earn additional Medicare payments if they generate savings, but must pay the Centers for Medicare & Medicaid Services (CMS) a penalty if their spending is higher than expected. In its study, GAO analyzed ACOs’ expenditures, spending benchmarks, the amount of shared savings and losses, and payment amounts for shared savings or losses. In its report, the agency found that fewer than half of the ACOs in the Pioneer ACO program earned shared savings in 2012 and in 2013, and specifically:

  • In 2012, 41 percent of the ACOs produced $139 million in total shared savings, and 48 percent produced $121 million in total shared savings in 2013.
  • In 2012 and 2013 CMS paid ACOs $77 million and $68 million, respectively, for their shared savings.
  • The Pioneer ACO Model produced net shared savings of $134 million in 2012 and $99 million in 2013.

Worth noting, GAO found that ACOs that participated in both years had significantly higher quality scores in 2013 than in 2012 for 67 percent of the quality measures. In commenting on a draft of this report, the Department of Health and Human Services (HHS) emphasized the overall goal of the Pioneer ACO Model and provided technical comments that GAO incorporated as appropriate.

If you have any questions, contact the following individuals at McGuireWoods Consulting:

Stephanie Kennan, Senior Vice President
Charlyn Iovino, Vice President
Amanda Anderson, Research Assistant

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal's "The Influence 50," an annual report of the top public affairs firms in Washington, D.C.

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