Aug 3, 2015

Washington Healthcare Update

This Week: CMS Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes...  CMS Releases Final FY 2016 Medicare Payment Rule for Skilled Nursing Facilities... House Ways and Means Committee Members Introduce Three Medicare Hospital Bills; Committee Eyes Bills for Major Upcoming Health Care Legislation

AUTHOR'S NOTE: Due to the Congressional recess, the Weekly Washington Healthcare Update will be distributed on a biweekly basis until after the Labor Day holiday. New editions will be released on Aug. 10, Aug. 24 and Sept. 4, after which we will resume our regular weekly distribution schedule.

1. Congress

House of Representatives

District Work Period: August 4–September 7


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


House Energy and Commerce Committee Holds Markup on Health Care and Manufacturing Bills

The House Energy and Commerce Committee held a markup July 29 to vote on six bills, including four public health bills, previously discussed in the health subcommittee, July 23.

The following health care bills were all approved by voice vote without amendment:

  • H.R. 1344, the Early Hearing Detection and Intervention Act : Authored by Health Subcommittee Vice Chairman Brett Guthrie (R-KY) and Rep. Lois Capps (D-CA), the bill reauthorizes a program for early detection, diagnosis and treatment regarding deaf and hard-of-hearing newborns, infants and young children.
  • H.R. 1462, the Protecting Our Infants Act : Authored by Reps. Katherine Clark (D-MA) and Steve Stivers (R-OH), the bill requires the Agency for Healthcare Research and Quality to study and release a report on prenatal opioid abuse and neonatal abstinence syndrome; mandates that the Department of Health and Human Services develop a strategy to address gaps in research and programs; and instructs the Centers for Disease Control and Prevention to provide technical assistance to states to improve neonatal abstinence syndrome surveillance.
  • H.R. 1725, the National All Schedules Prescription Electronic Reporting Reauthorization Act (NASPER) : Authored by Rep. Ed Whitfield (R-KY) and Rep. Joseph Kennedy (D-MA), the bill reauthorizes the NASPER program to support state prescription drug monitoring programs.
  • H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act : Authored by Reps. Chris Smith (R-NJ) and Doris Matsui (D-CA), the bill reauthorizes the Stem Cell Therapeutic and Research Act, which provides federal support for cord blood donation, a national bone marrow registry and research to increase patient access to transplants.

A background memo and electronic copy of the legislation can be found on the Energy and Commerce Committee’s website here.

House and Senate Health Care Committee Members Renew Focus on Fixes for Stage 3 of Meaningful Use

Rep. Renee Ellmers (R-NC) introduced H.R. 3309, July 29, to delay rulemaking for Stage 3 of meaningful use until at least 2017, or either CMS releases its Merit-Based Incentive Payment System final rule or at least 75 percent of doctors and hospitals are successful in meeting Stage 2 program requirements. “The Further Flexibility in HIT Reporting and Advancing Interoperability Act” (Flex-IT 2 Act) also would: 1) expand the provider hardship exemption; 2) eliminate CMS’s pass-fail approach to meaningful use by replacing it with a sliding scale to measure adoption performance; 3) harmonize reporting requirements (MU, PQRS, IQR) to remove duplicative measurement and streamline requirements; and 4) institute a 90-day reporting period for each year, regardless of stage or program experience.

The legislation that comes after comments made by Senate Health, Education, Labor, and Pensions Committee Chair Lamar Alexander (R-TN) in a July 23 hearing that his committee plans to introduce four or five suggestions to address issues within electronic health records meaningful use program by this fall and possibly ask the Department of Health and Human Services (HHS) for an administrative delay for the mandate.

CMS earlier this year released a proposed rule setting up the third stage of the meaningful use program, and providers have urged the agency not to finalize the rules at this time. Current implementation of Meaningful Use Stage 2 and Stage 3 were extended through 2016 and 2017, respectively, by CMS in December 2014. Only 19 percent of providers and 48 percent of hospitals have met Meaningful Use Stage 2.

House Ways and Means Health Subcommittee Members Introduce Bill to Create a Single Post-Acute Care Value-Based Purchasing System

House Ways and Means Health Subcommittee Chair Kevin Brady (R-TX) and Rep. Ron Kind (D-WI) introduced a bill on July 29, H.R. 3298, the Medicare Post-Acute Care Value-Based Purchasing Act of 2015 (PAC VBP Act). The bill would create a single value-based purchasing system for post-acute care, including home health agencies, skilled-nursing facilities, inpatient-rehabilitation facilities and long-term-care hospitals. The model proposed by the legislation would create competition for bonus payments based on provider performance, and CMS would incentivize top individual provider performance. The sponsors believe this model would encourage providers to partner with other providers within the same region and decrease geographic variations.

In addition, Chairman Brady and Rep. Kind also sent a letter to Secretary Burwell on the Centers for Medicare and Medicaid Services’s recent home health proposal. The Centers for Medicare and Medicaid Services (CMS) released its final FY 2016 Medicare Skilled Nursing Facilities payment rule July 30.

A one-page description of the PAC VBP bill can be found here.

A section-by-section for the PAC VBP bill can be found here.

House Education and Workforce Committee Holds Hearing on HHS’s 2016 Policies and Priorities

The House Committee on Education and the Workforce held a partisan hearing July 28 entitled “Reviewing the Policies and Priorities of the U.S. Department of Health and Human Services.” Sylvia Burwell, Secretary of Health and Human Services (HHS), testified before the committee on 2016 health care priorities, including the Affordable Care Act (ACA) implementation, as well as federal children and family programs within HHS and, in particular, those programs’ effect on working families. In the hearing, Committee Democrats highlighted the ACA’s role in increasing access, reducing health spending growth and improving care, and applauded the President’s Budget for executing ACA implementation and advancing early learning and childcare programs. Republicans at the hearing focused on the ACA’s negative effects on the economy, employment and quality of care delivered to patients. At the hearing, in a response to a question about a recent GAO report, Secretary Burwell reaffirmed that the department is not aware of any consumers intentionally falsifying information to get subsidies for insurance exchange coverage.

Witness List

The Honorable Sylvia Mathews Burwell
Department of Health and Human Services

For more information or to view the hearing, visit

House Ways and Means Committee Members Introduce Three Medicare Hospital Bills; Committee Eyes Bills for Major Upcoming Health Care Legislation

On July 29, House Ways and Means Chairman Paul Ryan (R-WI), Health Subcommittee Chairman Kevin Brady (R-TX), Health Subcommittee member Kenny Marchant (R-TX) and Human Resources Subcommittee Chairman Charles Boustany (R-LA) introduced three bills to change Medicare reimbursement for hospital care. This legislation builds on the comments the committee received on Subcommittee Chairman Brady’s Hospital Improvements for Payment discussion draft, the recent regulatory notices from the Centers for Medicare and Medicaid Services (CMS), and work done by the Medicare Payment Advisory Committee (MedPAC).

  • The Medicare Crosswalk Hospital Code Development Act of 2015 (H.R. 3291 ) : Introduced by Chairman Ryan, this bill follows up on a finding by the Medicare Payment Advisory Commission that Medicare is paying more for similar services depending on which payment system it uses — either outpatient or inpatient. MedPAC used a crosswalk to convert the principal diagnosis and procedure codes of outpatient claims into Medicare inpatient Diagnosis Related Groups. Because surgery is a clearly defined service, the legislation would create a crosswalk to serve as a guide to connect the inpatient and outpatient coding and payment systems for hospitals. The crosswalk could then be used for further payment reform. A one-page description of the Medicare Crosswalk Hospital Code Development Act of 2015 can be found here.

A section-by-section for the Medicare Crosswalk Hospital Code Development Act of 2015 can be found here.

  • The Medicare IME Pool Act of 2015 (H.R. 3292) : Introduced by Health Subcommittee Chairman Kevin Brady, the bill would direct the Department Health and Human Services (HHS) to give each teaching hospital a bimonthly lump-sum payment to reimburse IME costs, instead of paying the hospital an additional percentage based on each inpatient case. The stated goal of the legislation is to give more stability in Medicare’s ability to support medical education, while still maximizing incentives to deliver care at a lower cost and with improved quality. A one-page description of the Medicare IME Pool Act of 2015 can be found here.

A section-by-section for the Medicare IME Pool Act of 2015 can be found here.

  • The Strengthening DSH and Medicare through Subsidy Recapture and Payment Reform Act of 2015 (H.R. 3288) : Introduced by Health Subcommittee Member Kenny Marchant, the bill would change the Disproportionate Share Hospital (DSH) payment system by instructing the HHS Secretary to reimburse DSH through lump-sum payments, rather than as a per discharge add-on payment. Rather than redirecting DSH payments from expansion states to non-expansion states, the new spending called for under this bill is intended to be offset by recouping all overpayments made under the Affordable Care Act (ACA) subsidy recapture program.

A one-page description of the Strengthening DSH and Medicare Through Subsidy Recapture and Payment Reform Act of 2015 can be found here.

A section-by-section for the Strengthening DSH and Medicare Through Subsidy Recapture and Payment Reform Act of 2015 can be found here.

In addition, Health Subcommittee Chair Brady said he plans to introduce legislation this fall that restructures graduate medical education, addresses rural care disparities and applies similar pay-for-performance approaches implemented in the SGR-replacement law to other health care providers.

House Energy and Commerce Committee Members Question HHS’s 2016 Influenza Response Preparedness

On July 29, leadership from the House Energy & Commerce Committee and the Subcommittee on Oversight and Investigations sent a letter to Department of Health and Human Services (HHS) Secretary Sylvia Burwell regarding the Department’s preparedness for the upcoming flu season. This is part of a larger effort by the bipartisan group to examine the U.S. public health response to seasonal influenza; the letter specifically highlighted the need for improvements from the 2014-2015 influenza season, which saw high death rates among the elderly and ineffective vaccinations. The letter, written by Energy and Commerce Chairman Fred Upton and Ranking Member Frank Pallone, and Oversight and Investigations Subcommittee Chairman Tim Murphy and Ranking Member Diana DeGette, asks for documentation of the lessons that HHS learned from last year.


Bipartisan Senate Bill Directs FDA to Streamline Approval for Combination Drug, Device and Companion Diagnostic Products

Sens. Johnny Isakson (R-GA), Bob Casey (D-PA) and Pat Roberts (R-KS) introduced a bipartisan bill July 15, the Combination Product Regulatory Fairness Act of 2015 (S.1767), to streamline the regulatory process for combination drug, device and companion diagnostic products that currently do not fall under a single categorization for approval by the Food and Drug Administration (FDA). The bill requires FDA to assign a leader center within the agency to address whether a product is to be examined as a drug, device or biologic, based upon the intended purpose of the product. The bill will allow application sponsors to submit and negotiate agreements with the agency on an individualized Combination Product Review Plan (CPRP) that details a clear regulatory process for the combination product, addressing necessary clinical studies, timelines and an evaluation of incremental risks posed by the combination product. The CPRP would establish requirements for the safety and efficacy review, post-market modifications and good manufacturing practices for the product. The bill would also create a risk-based framework to allow for prior findings of safety and efficacy for an approved constituent product to be used as scientific evidence in the premarket review process for combination products. The legislation may be incorporated into a larger Senate Health, Education, Labor and Pension Committee’s Innovation for Healthier Americans initiative.

Senate HELP Committee Leaders Introduce Mental Health Bill

On July 29, Senate Health, Education, Labor, and Pensions committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) introduced the Mental Health Awareness and Improvement Act, a bill to continue and improve programs that help states and local communities in suicide prevention, help children recover from traumatic events, provide mental health awareness for teachers and other individuals, and assess barriers to integrating behavioral health and primary care. The bill requires:

  • A study of federal mandates that may get in the way of integrating mental health and substance use disorder treatment with primary care, as well as other barriers to care.
  • The Substance Abuse and Mental Health Services Administration (SAMHSA) to improve education and awareness among providers and patients of treatments for addiction to opioid painkillers.
  • A Government Accountability Office (GAO) study on mental health services for children, looking at both access and availability.
  • The National Violent Death Reporting System to improve reporting data.
  • A study on the status of recommendations to the Department of Health and Human Services in a 2007 report following the Virginia Tech tragedy.

A copy of the Senate bill text can be found here. A detailed summary of each section of the bill can be found here.

The bill has 16 cosponsors. Sen. Bill Cassidy (R-LA) will also be releasing a mental health bill in the coming weeks that would create a new Assistant Secretary for Mental Health and Substance Use Disorders within the Department of Health and Human Services (HHS). The purpose of this Assistant Secretary would be to coordinate HHS’s efforts, including encouraging medical professionals to specialize in mental health care and new research.

In the House, the Energy and Commerce Committee recently announced its intentions to study mental health issues after the August recess.

2. Administration

CMS Releases Final FY 2016 Medicare Payment Rule for Skilled Nursing Facilities

On July 30, 2015, the Centers for Medicare and Medicaid Services (CMS) issued a final rule outlining Fiscal Year (FY) 2016 Medicare payment rates for skilled nursing facilities (SNFs). CMS will increase payment for SNF services 1.2 percent from FY 2015. This estimated increase is attributable to a 2.3 percent market basket increase, reduced by a 0.6 percentage point forecast error adjustment and further reduced by a 0.5 percentage point, in accordance with the multifactor productivity adjustment required by law. In addition, beginning with FY 2018, SNFs that do not satisfactorily report required quality data to CMS under the SNF Quality Reporting Program will have their market basket percentage updates reduced by 2 percentage points.

This rule is complicated because it implements major changes from multiple laws. The Protecting Access to Medicare Act requires a nursing home value-based purchasing program to take effect FY 2019. Value-based incentive payments will be made to SNFs based on performance and the rule adopts a measure that estimates the risk standard rate for “all-cause, unplanned, hospital readmissions” for beneficiaries within 30 days of their previous short inpatient stay.

The final rule will be published in the Federal Register Aug. 4. A CMS press release outlining the rule can be found here.

CMS Releases Final FY 2016 Inpatient Psychiatric Facilities Prospective Payment System Rule

On July 31, 2015, the Centers for Medicare and Medicaid Services (CMS) issued a final rule for fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS). The final rule will be published in the Federal Register on Aug. 5, 2015, with an implementation date of Oct. 1, 2015.

Inpatient psychiatric facilities will receive an estimated 1.5 percent ($75 million) increase in Medicare payments. The update is calculated from a 2.4 percent IPF market basket update minus the productivity adjustment of 0.5 and -0.2 percent for updating the outlier fixed-dollar loss threshold amount.

CMS is adopting an IPF-specific market basket to replace the Rehabilitation, Psychiatric and Long-Term Care market basket. The final IPF market basket is based on 2012 Medicare cost report data for both freestanding and hospital-based IPFs. The final 2012 IPF market basket was modified slightly based on comments CMS received on the proposed rule.

The rule also reflects changes in the wage index because of CMS’s updating the Core Based Statistical Areas with the Office of Management and Budget. As a result of the change, 37 IPF providers will have their status changed from rural to urban.

The final rule also updates quality measures including substance abuse intervention and measures related to tobacco cessation after the patient is discharged. CMS removed two measures and added three transition record measures.

CMS also made changes to data-reporting requirements for the Inpatient Facility Quality reporting program.

A fact sheet on the final rule is available online.

CMS Issues Final FY 2016 Payment and Policy Changes Rule for Medicare Inpatient Rehabilitation Facilities

On July 31, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a final rule outlining fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) and the IRF Quality Reporting Program (IRF QRP). The IRF payment rates reflect an estimated 1.7 percent increase factor based on a new IRF-specific market basket. The market basket increase is 2.4 percent then reduced by a 0.5 percent productivity adjustment and a 0.2 percent reduction required by law. An additional 0.1 percent increase to aggregate payments due to updates for the outlier threshold results in an overall update of 1.8 percent from FY 2015.

The rule contains a number of other policy changes including changes to the wage index and changes to the IRF Quality Reporting Program.

A fact sheet on the final rule can be found here. The final IRF PPS rule will be published in the Federal Register on Aug. 6, 2015, and will be effective on Oct. 1, 2015.

CMS Releases Final FY 2016 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Requirements

The Centers for Medicare and Medicaid Services (CMS) released its final FY 2016 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Requirements on July 31, 2015. The Medicare payment rate is estimated to increase 1.1 percent ($160 million) for FY 2016. CMS is finalizing two routine home care rates, in a budget-neutral manner, to provide separate payment rates for the first 60 days of care and care beyond 60 days. In the final rule, CMS also provided clarification that hospices are required to report all diagnoses identified in the initial and comprehensive assessments on hospice claims, whether related or unrelated to the terminal prognosis of the individual. In addition to the two routine home care rates, CMS is finalizing a service intensity add-on payment that would help to promote and compensate for the provision of skilled visits at end of life. These two new policies will be effective beginning on Jan. 1, 2016. Between Oct. 1, 2015, and Dec. 31, 2015, hospices will continue to be paid a single RHC rate updated for FY 2016.

A fact sheet on the final rule can be found here. The rule will be published in the Federal Register on Aug. 6, 2015, and will become effective Oct. 1, 2015.

FDA Releases Guidance on Submitting Analytical Procedures/Methods Data Process for Drugs and Biologics

The Food and Drug Administration (FDA) released new guidance for industry entitled “Analytical Procedures and Methods Validation for Drugs and Biologics.” This guidance discusses how to submit analytical procedures and methods validation data to support the documentation of the identity, strength, quality, purity and potency of drug substances and drug products, and how to assemble information and present data to support analytical methodologies. The recommendations in this guidance apply to new drug applications, abbreviated new drug applications, biologics license applications and supplements to these applications. This guidance supersedes the draft of the same name that was published on Feb. 19, 2014, and replaces the 2000 draft guidance for industry on “Analytical Procedures and Methods Validation” and the 1987 FDA guidance for industry on “Submitting Samples and Analytical Data for Methods Validation.”

FDA Appoints New Associate Director for Rare Diseases Program

On July 23, the Food and Drug Administration’s (FDA) Center for Drug Evaluation and Research announced the permanent appointment of Jonathan Goldsmith as Associate Director of the Rare Diseases Program. The program was established back in February 2010 to facilitate, support and accelerate the development of drug and biologic products for the benefit of patients with rare disorders. Goldsmith, who joined the office last year, was its acting associate director.

HHS Announces New Opioid Initiative: $100 Million in Additional Funding to Combat Opioid Abuse

On July 25, the Department of Health and Human Services (HHS) announced a new opioid initiative that includes $100 million in additional funding available to states and community health centers to expand the use of medication-assisted treatment for opioid use disorder and new written guidance to help states implement innovative approaches to substance use disorder treatment. The Secretary’s evidence-based opioid initiative focuses on three targeted areas: informing opioid prescribing practices, increasing the use of naloxone (a drug that reverses drug overdose) and expanding the use of medication-assisted treatment to treat opioid use disorder.

The Substance Abuse and Mental Health Services Administration (SAMHSA) is awarding up to $11 million annually (for three years totaling up to $33 million) to 11 states to increase access to comprehensive medication-assisted treatment for opioid use disorders. The grants are to promote effective, evidence-based, medication-assisted treatment and recovery support services. The Health Resources and Services Administration (HRSA) will also make $100 million available in additional funding to improve and expand the delivery of substance use disorder services, with a focus on medication-assisted treatment for opioid use disorder. In addition, the Centers for Medicare and Medicaid Services (CMS) is offering state Medicaid programs a new opportunity to receive federal funding through a demonstration project that reimburses for substance use disorder treatment. This will support state efforts to implement innovative treatment approaches. According to a study conducted by researchers at the Food and Drug Administration, the Substance Abuse and Mental Health Services Administration (SAMHSA) and the Centers for Disease Control and Prevention, the rate of past-year opioid abuse or dependence significantly exceeded treatment capacity each year, increasing from 634.1 per 100,000 in 2003 to 891.8 per 100,000 in 2012.

For more information on the SAMHSA grant awards, visit

For more information on the Secretary’s Opioid Initiative, visit

CMS Opens Special Enrollment for Enrollees Affected by IRS System Glitch

CMS will offer a special enrollment period to thousands of enrollees who were incorrectly told that they qualified for fewer subsidies than they were eligible for or for none at all. This inaccurate information was due to a Social Security-related glitch in the eligibility system that inflated household income. As a result of this error, some people were denied Medicaid despite income eligibility, and others are receiving less financial assistance. CMS said it would inform those who were affected about the special enrollment period and ask them to update their application for a new eligibility determination.

CMS Projects Medicare Prescription Drug Premiums Will Remain Stable in 2016

The Centers for Medicare and Medicaid Services (CMS) announced July 30 that the average premium for a Medicare Part D prescription Drug Plan is predicted to remain stable at approximately $32.50 in 2016. Part D costs per capita rose by approximately 11 percent in 2014, largely due to expensive highly specialized drugs, such as the Hepatitis C drug Solvadi, and their effects. For the past five years — for plan years 2011-2015 — the average Medicare Part D monthly premium for a basic plan has been between $30 and $32. CMS’s projection for the average premium for 2016 is based on bids submitted by drug and health plans for basic drug coverage for the 2016 benefit year and calculated by the independent CMS Office of the Actuary.

To view the Part D Base Beneficiary Premium, the Part D National Average Monthly Bid Amount, the Part D Regional Low-Income Premium Subsidy Amounts, the De Minimis Amount, the Part D income-related monthly adjustment amounts and the Medicare Advantage Regional Benchmarks, visit and select “2016.”

CMS Announces Extension of Ambulance Moratoria for New Ambulance Suppliers & Home Health Agencies

The Centers for Medicare and Medicaid Services (CMS) announced in the Federal Register July 28 that for the fourth time the agency will extend its current Medicare, Medicaid and Children’s Health Insurance Program enrollment moratoria for new ground ambulances in the Houston and Philadelphia metropolitan areas and new home health agencies in the metropolitan areas of Chicago, Fort Lauderdale, Detroit, Dallas, Houston and Miami. This action is taken when CMS finds that the potential for fraud is significant. Existing providers and suppliers can continue to deliver and bill for services, but no new provider and supplier applications will be approved in these areas. This latest six-month extension of the existing moratoria is effective July 29, and CMS may lift the moratoria earlier or extend it another six months by issuing another notice in the Federal Register. The original moratoria was first implemented on July 31, 2013, and extended to include additional metropolitan areas in subsequent extension announcements.

HHS Announces $38 Million in Grants to Improve Coordinated Health Information Sharing

The Department of Health and Human Services’s (HHS) Office of the National Coordinator for Health Information Technology (ONC) announced July 28 that it will award 20 applicants a total of $38 million for three health information technology (health IT) grant programs. The grants build on programs funded from the Health Information Technology and Clinical Health Act (HITECH), part of the American Recovery and Revitalization Act (ARRA) of 2009. These grants are to improve the way providers are paid, improve and innovate in care delivery, and share information more broadly with providers, consumers and others to support better health care decisions while maintaining privacy.

The three cooperative agreement programs are:

  • Advance Interoperable Health Information Technology Services to Support Health Information Exchange This two-year cooperative agreement program has awarded $29.6 million to support the efforts of 12 states or state-designated entities to expand the adoption of health information exchange technology, tools and services; facilitate and enable the send, receive, find and use capabilities of health information across organizational, vendor and geographic boundaries; and increase the integration of health information in interoperable health IT to support care processes and decision making.
  • The Community Health Peer Learning Program This two-year cooperative agreement grant award was made to AcademyHealth to work with 15 communities around population health strategies including identifying data solutions, accelerating local progress, disseminating best practices and learning guides, and helping inform national strategy around population health challenges. The grant for this program totals $2.2 million.
  • The Workforce Training Program This two-year cooperative agreement program has awarded seven grantees $6.7 million to update training materials from the original Workforce Curriculum Development program funded under HITECH. In addition to updating training materials, the goal of this program is to train incumbent health care workers to use new health information technologies in a variety of settings, including: team-based care environments, long-term care facilities, patient-centered medical homes, accountable care organizations, hospitals and clinics.

More information on the program and a list of the grant awardees can be found in the department’s press release.

3. State Activities

California Exchange Announces Average 4 Percent Rate Increase in 2016

Covered California, the state’s health insurance exchange, announced a proposed 4 percent statewide weighted average rate increase for plans offered in 2016, which is lower than last year’s increase of 4.2 percent. This is the second year in a row that Covered California has achieved single-digit rate increases. Statewide, the largest health insurers are Anthem Inc., Blue Shield of California and Kaiser. In 2016, Anthem Inc. premiums will increase by an average of 5.9 percent, Kaiser rates will go up by 5.2 percent and Blue Shield premiums will rise by 2.3 percent. Covered California credited an enrollment mix that includes many young and healthy enrollees, as well as premium stabilization programs created by the Affordable Care Act, for helping to hold the line on rate increases. Final rates for all states will be published in the Federal Register no later than Nov. 1, 2015.

Rhode Island and CMS to Coordinate on New Medicare-Medicaid Integrated Care Initiative

The Centers for Medicare and Medicaid Services (CMS) announced July 30 a new partnership with Rhode Island to allow the state and CMS to contract with a Medicare-Medicaid Plan to provide an integrated set of Medicare and Medicaid benefits for enrolled beneficiaries including those who are dually eligible. The demonstration is designed to provide Medicare-Medicaid enrollees with a more person-centered care experience that improves access to and coordinates delivery of Medicare and Medicaid services, and enrollees will have a dedicated service coordination team to address their medical, behavioral health and long-term services and supports needs. Approximately 30,000 individuals in Rhode Island will be eligible for the demonstration.

A fact sheet on the new demonstration can be found here.

More information about the Integrated Care Initiative can be found here.

4. Regulations Open for Comment

CMS Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

The Centers for Medicare and Medicaid Services (CMS) issued a final rule on July 31, 2015, 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).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percent adjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable Care Act and further adjusted by - 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic health records will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued - 1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonuses and penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be published in the Federal Register on Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

CMS Releases CY 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Rule and Changes to the Two-Midnight Rule

On July 1, the Centers for Medicare & Medicaid Services (CMS) announced the release of the Calendar Year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions and payment rates proposed rule. The CY 2016 OPPS/ASC proposed rule recommends updates to Medicare payment policies and rates for hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs), and refinements to programs that encourage high-quality care in these outpatient settings. CMS suggested a decrease of 0.1% for outpatient payment rates. Moreover, it suggested an additional 2 percentage point adjustment to be included to account for inflation in OPPS payments to an increase in payments for laboratory tests. Approximately 3,800 hospitals and 60 CMHCs are paid under the OPPS, while approximately 5,300 ASCs are paid under the ASC payment system. The OPPS provides payment for most HOPD services, including partial hospitalization services furnished by HOPDs and CMHCs. OPPS payment amounts vary according to the Ambulatory Payment Classification (APC) group to which a service or procedure is assigned. This proposed rule also includes suggested changes to the Two Midnight Rule for CY 2016. The proposal was published in the July 8, 2015, Federal Register online. Comments on the proposed rule are due on Sept. 4, 2015.

A fact sheet on the proposed changes to the Two Midnight Rule for CY 2016 can be found here.

CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule

On July 6, the Centers for Medicare & Medicaid Services (CMS) announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2016, including updating requirements for home health agencies under the Medicare program and moving forward to implement the third year of the four-year phase-in of the rebasing adjustments to the HH PPS. Finalized in the CY 14 final rule, the CY 16 downward adjustment is $80.95. Home health agencies (HHA) are paid a national standardized 60-day episode payment for all covered home health services, adjusted for case-mix and area wage differences. CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72 percent in each of CY 2016 and CY 2017. CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY 16. The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode and other relevant factors.

Also in the proposed rule, CMS included further implementation of provisions within the IMPACT Act, including one standardized cross-setting measure for CY 2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, although CMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

  • All-condition risk-adjusted potentially preventable hospital readmission rates;
  • Resource use, including total estimated Medicare spending per beneficiary;
  • Discharge to the community; and
  • Medication reconciliation

CMS also announced the launch of a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across the nation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation, the HHVBP model draws upon the lessons learned from other value-based purchasing programs and demonstrations — including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance and Nursing Home Value-Based Purchasing Demonstrations — to shift to a model that promotes the delivery of higher-quality care to Medicare beneficiaries. CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation. HHAs in the nine states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) would have their payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third payment adjustment year and 8 percent in the final two payment adjustment years based on their performance across a series of quality metrics. CMS estimates approximately 3.5 million beneficiaries receive home health services from approximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

Published in the Federal Register July 8, the proposed rule can be found here. CMS will solicit public comments on the proposed rule until Sept. 4, 2015.

CMS Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the Sustainable Growth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused on person-centered care, and continues the Administration’s intention to transition the Medicare program to a system based on quality and healthy outcomes. In the proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA, including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5 percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System, which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties a portion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systems survey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistants and other non-physicians. In the proposed rule, CMS is additionally seeking comment on the potential expansion of the Comprehensive Primary Care Initiative, a CMS Innovation Center initiative designed to improve the coordination of care for Medicare beneficiaries. Other items included in the proposed rule include an initiative that supports patient- and family-centered care for seniors and other Medicare beneficiaries by enabling them to discuss advance care planning with their providers.

For a fact sheet on the proposed rule, please see here. For further information, please see the rule on display here. CMS is accepting public comments on the CY 2016 PFS proposed rule until Sept. 8, 2015. The proposed rule will be published in the Federal Register on July 15, 2015, and CMS will issue the final rule by Nov. 1.

CMS Releases Proposed 2016 Medicare Dialysis Pay Rule

The Centers for Medicare and Medicaid Services (CMS) released a proposed 2016 Medicare Dialysis pay rule June 26 which includes several technical changes including a new drug designation process, a new rural pay adjuster, and updates to the end-stage renal disease Quality Incentive Program- the base pay rate for services and the adjusters to that base rate. Specifically, CMS proposes reducing the base pay rate by $9.23, from $239.43 in 2015 to $230.20 in 2016. Other pay changes include updates to the low-volume payment adjustment and a new payment adjustment for rural ESRD facilities. Further, the proposed rule would revise the geographic proximity eligibility criterion for the low-volume payment adjustment from (25 road miles to 5 road miles) and would eliminate grandfathering from the criteria for the adjustment. CMS also suggests reducing the fixed-dollar loss amount for pediatric beneficiaries from $54.35 to $49.99 and the Medicare Allowable Payments for pediatric patients from $43.57 to $37.82. For adults, the fixed-dollar loss amount would decrease from $86.19 to $85.66 and the Medicare Allowable Payments amount would decrease from $51.29 to $48.15.

Other specific changes include:

  • A process for understanding when an oral-only drug is no longer considered an oral-only drug
  • A process for including new injectable and intravenous products into the ESRD bundled payment
  • Changes to quality measures and implementation of payment reductions for low preforming facilities

CMS expects that combined these updates would increase the total payments to all dialysis facilities by 0.3 percent with Hospital-based facilities receiving an increase in total payments of 0.5 percent, and freestanding facilities receiving a 0.2 percent increase. The proposed rule will be published the Federal Register on July 1. Comments on the proposed rule are due August 25, 2015.

FDA Issues Final Rule to Phase Out Trans Fats

The Food and Drug Administration (FDA) issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

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.

5. Reports

GAO Releases Report Urging IRS to Strengthen Oversight of ACA Individual Tax Credits

On July 29, the Government Accountability Office (GAO) released a report that found incomplete and delayed marketplace data limited the Internal Revenue Service’s (IRS) ability to match taxpayer premium tax credit claims to marketplace data at the time of return filing. GAO’s report examined IRS’s implementation of these ACA requirements and IRS efforts to collaborate with key external stakeholders. For its study, the agency reviewed documents from IRS and CMS; analyzed preliminary 2014 tax year data; and interviewed officials from IRS, CMS, marketplaces and other key external stakeholders, such as tax preparers and tax software companies.

In its findings, GAO found that complete marketplace data for the 2014 coverage year was due to IRS in January, but due to marketplace delays in transmitting the data and IRS technical difficulties with processing the data for matching, as of March 21, 2015, IRS had complete data available for verification of taxpayer PTC claims for only four of the 51 marketplace states (i.e., the 50 states and the District of Columbia).

HHS OIG Report: Medicare Part B Overpaid Millions for Selected Outpatient Drugs

On July 29, the Department of Health and Human Services Office of the Inspector General (OIG) released a report that found that Medicare contractors in 13 jurisdictions overpaid providers $35.8 million for selected outpatient drugs during an audit period of July 1, 2009, through June 30, 2012. For the majority of the overpayments (88 percent), providers billed either incorrect units of service or a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes. Moreover, OIG found that during the agency’s audit period, the Medicare claims processing systems did not have sufficient prepayment edits in place to prevent all overpayments. OIG identified potential overpayments for outpatient drugs that were billed after the audit period. In its recommendations, OIG advised CMS to (1) ensure that Medicare contractors collect the remaining overpayments identified in the individual reviews; (2) continue to educate providers on correct billing of outpatient drugs; (3) instruct Medicare contractors to review payments to providers for outpatient drugs billed from July 2012 through June 2014, which could represent overpayments of $11.5 million; and (4) continue to implement line item and date-of-service MUEs for additional outpatient drugs. As of May 2015, CMS reported that Medicare contractors had recovered 63 percent of the $35.8 million in overpayments, and 10 of the 13 Medicare contractors had used the results of this audit in ongoing provider education activities.

HHS OIG Report Finds Few State CO-OPs Are Meeting Financial and Enrollment Expectations

A July 29 Department of Health and Human Services (HHS) Office of the Inspector General (OIG) report found that actual enrollment and profitability of state-implemented nonprofit Consumer Operated and Oriented Plan (CO-OP) programs were lower than projected, which may affect their ability to repay loans provided under the Affordable Care Act (ACA). Twenty-one of the 23 CO-OPs did not meet profitability goals and 13 state CO-OPs enrolled fewer people than expected. The report cites a number of reasons for the failures including website issues, licensing issues and market-price competitiveness. Although CMS recently placed four CO-OPs on enhanced oversight or corrective action plans and two CO-OPs on low-enrollment-warning notifications, CMS had not established guidance or criteria to assess whether a CO-OP was viable or sustainable. OIG recommended CMS (1) continue to place underperforming CO-OPs on enhanced oversight or corrective action plans; (2) work with state insurance regulators to identify and correct underperforming CO-OPs; (3) provide guidance or establish criteria to determine when a CO-OP is no longer viable or sustainable; and (4) pursue available remedies for recovery of funds from terminated CO-OPs. In written comments on our draft report, CMS concurred with OIG’s recommendations and noted that it has taken a number of steps to further oversee CO-OP compliance by requiring external audits, site visits and additional financial reporting.

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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