Jan 13, 2020

Washington Healthcare Update

This week in Washington: House to hold hearings on the opioid crisis and cannabis policies. 

Upcoming Hearings/Markups



Proposed Regulations/Guidance


Courts and Healthcare Policy in 2020


Tuesday, January 14, 2020

House Committee on Energy and Commerce: “A Public Health Emergency: State Efforts to Curb the Opioid Crisis”

The Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce will hold a hearing on actions taken by states to address the current opioid crisis. Find hearing updates and details as they become available here.

Wednesday, January 15, 2020

House Committee on Energy and Commerce: “Cannabis Policies for the New Decade”

The Subcommittee on Health of the Committee on Energy and Commerce will hold a legislative hearing to discuss federal cannabis policies, the implications of changing marijuana’s schedule listing and the potential for cannabis research. Find hearing updates and details as they become available here.


House Committee on Energy and Commerce: “Legislation to Improve Americans’ Health Care Coverage and Outcomes”

Wednesday, January 8, 2020

The Subcommittee on Health of the Committee on Energy and Commerce held a legislative hearing on the following bills:

  • H.R. 1379, the “Ensuring Lasting Smiles Act”
  • H.R. 2271, the “Scarlett’s Sunshine on Sudden Unexpected Death Act”
  • H.R. 2468, the “School-Based Allergies and Asthma Management Program Act”
  • H.R. 2477, the “Beneficiary Enrollment Notification and Eligibility Simplification Act of 2019” or the “BENES Act of 2019”
  • H.R. 3935, the “Protecting Patients Transportation to Care Act”
  • H.R. 4801, the “Healthy Start Reauthorization Act of 2019”
  • H.R. 5534, the “Comprehensive Immunosuppressive Drug Coverage for Kidney Transplant Patients Act”

Find a memo outlining the hearing legislation here.


CMS Asking for Provider Bank Information in Order to Pay APM Bonuses

As of Jan. 9, the Centers for Medicare and Medicaid Services (CMS) has been unable to pay more than 2,800 providers in alternative payment models (APM) their 5 percent bonus for 2017 performance because it does not have their banking information. CMS has given those clinicians until Feb. 28 of this year to report back, so that the bonuses can be paid.

FDA May Pull 249 ANDAs Because of Failure to Submit Annual Reports

On Jan. 8, the Food and Drug Administration (FDA) proposed the withdrawal of 249 generic drug applications because the application holders repeatedly failed to file annual reports. The FDA added that application holders have 30 days from the date of publication to submit a request for a hearing. Under the Code of Federal Regulations, abbreviated new drug application holders are supposed to file a report each year within 60 days of the anniversary date of FDA approval.

Find the notice in the Federal Register here.

Proposed Regulations/Guidance

CMS: 2021 Medicare Advantage Advance Notice Part I – Risk Adjustment

On Jan. 6, the Centers for Medicare and Medicaid Services (CMS) released Part I of the 2021 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the Advance Notice), which contains key information about proposed updates to the Part C CMS-Hierarchical Condition Categories (HCC) risk adjustment model and the use of encounter data.

Part 1 of the 2021 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies proposes changes to the Part C risk adjustment model and the use of encounter data. Under the proposal, CMS proposes to calculate risk scores for 2021 by using the sum of 75 percent of the risk score calculated with the 2020 CMS-Hierarchical Condition Categories model and 25 percent of the risk score calculated with the 2017 version of the model. For 2020, CMS calculated risk scores using the sum of 50 percent of each model.

CMS also proposed changes to how it uses encounter data, or diagnostic information, in the risk adjustment calculation process. For 2021, CMS wants to calculate risk scores for Medicare Advantage plans by summing 75 percent of the encounter data-based risk score with 25 percent of the Risk Adjustment Processing System-based risk score. For 2020, CMS calculated risk scores using the sum of 50 percent of each type of data.

Find the proposed rule here. Public comments are due by March 6, 2020.

CMS and HRSA: Two Proposed Rules for Organ Procurement Organizations (OPOs)

On Dec. 17, two rules were proposed related to organ procurement organizations (OPOs), specifically on performance standards and the promotion of donations from living donors.

The first rule, by the Centers for Medicare and Medicaid Services (CMS), holds OPOs accountable for meeting specific performance metrics. The rule uses federal death records, which show the entire pool of potential organ donors, to calculate an OPO’s donation and transplantation rates. In addition, the proposed rule would require all OPOs to meet the donation and transplantation rates of the current top 25 percent of OPOs. CMS will be able to rank the OPOs based on their performance and make that data public, assessing them annually through a re-certification cycle.

Find the CMS rule here.

Public comments are due by Feb. 21, 2020.

The second rule, by the Health Resources and Services Administration (HRSA), attempts to eliminate financial burden on living donors. The proposed rule would allow insurers to reimburse living donors for lost wages, as well as any child care or elder care expenses they incurred during their hospitalizations for or recoveries from the donation.

Find the HRSA rule here.

Public comments are due by Feb. 18, 2020.

CMS: Transparency in Coverage Proposed Rule

On Nov. 15, the Centers for Medicare and Medicaid Services (CMS) proposed a rule with the Department of Labor and the Department of the Treasury to implement President Trump’s executive order on Improving Price and Quality Transparency in health care.

The rule proposes to make each non-grandfathered group health plan or health insurance issuer offering non-grandfathered health insurance coverage in the individual and group markets be required to make available to participants, beneficiaries and enrollees (or their authorized representative) personalized out-of-pocket cost information for all covered health care items and services through an internet-based self-service tool and in paper form upon request. The same plans would be required to make available to the public the in-network negotiated rates with their network providers and historical payments of allowed amounts to out-of-network providers through standardized, regularly updated machine-readable files. This would provide opportunities for innovation to drive price comparison and consumerism in the health care market.

This proposed rule also solicits comments on:

  • Whether group health plans and health insurance issuers should also be required to make available through a standards-based application programming interface (API) the cost-sharing information referenced above that is proposed to be disclosed through the internet-based self-service tool and the machine-readable files.
  • How health care quality information can be incorporated into the price transparency proposals included in these proposed rules.

Find the proposed rule here.

CMS Releases Kidney Care Choices Model Request for Application

On Oct. 24, the Center for Medicare and Medicaid Innovation (Innovation Center) announced that the request for applications (RFA) for the Kidney Care Choices (KCC) Model has been posted here.

The deadline to submit an application is Jan. 22, 2020.

The KCC Model is a voluntary model to reduce Medicare expenditures while preserving or enhancing quality of care for beneficiaries with end-stage renal disease (ESRD) and chronic kidney disease (CKD). The KCC Model contains the following four options:

  1. The CMS Kidney Care First (KCF) option
  2. The Comprehensive Kidney Care Contracting (CKCC) Graduated option
  3. The CKCC Professional option
  4. The CKCC Global option

Stay up to date on the latest Kidney Care Choices Model news and updates by subscribing to the KCC Model listserv

FDA and HHS: Proposed Rule on Canadian Drug Importation Plan

On Dec. 18, the Food and Drug Administration (FDA) and the Department of Health and Human Services (HHS) released a draft guidance on the importation of certain prescription drug imports from Canada, leaving out many specialty medications and other therapies for chronic disease that cost patients the most. The FDA seeks request for comment on two importation pathways. One would allow states to submit proposals to the FDA to allow the importation of small molecule brand-name medicines sold at retail pharmacies, typically ones that have rebates attached to them. The draft guidance for industry lets manufacturers import the same versions of FDA-approved drugs they now sell in foreign countries. Under this second pathway, drug manufacturers would use a new National Drug Code (NDC) and sell these drugs in the U.S. at a cheaper price.

Find the proposed rule here.

Find the guidance for industry here—comments are due by March 5, 2020.


MACPAC Reports That IMDs Lack Federal Oversight

A report released on Jan. 6 by the Medicaid and CHIP Payment and Access Commission (MACPAC) found that institutions for mental diseases (IMDs) lack clear federal oversight and state oversight is fragmented. IMDs are defined as facilities with more than 16 beds that are primarily engaged in providing diagnosis, treatment or care of persons with mental diseases. 

  • The report found that federal standards that apply to facilities considered to be IMDs are largely determined by whether or not facilities are Medicare providers. Because providers accepting Medicare payment must meet that program’s standards, hospitals typically seek Medicare certification. However, because Medicare does not cover SUD treatment services in freestanding facilities, there is no Medicare certification process for these facilities.
  • Unlike psychiatric hospitals and psychiatric residential treatment facilities, there is no federally mandated standard for most SUD treatment facilities.
  • Federal guidance notes that state Medicaid agencies must, at a minimum, use Medicare certification standards for providers recognized by Medicare. However, states have flexibility in how they regulate all other providers, including freestanding SUD treatment facilities and residential mental health treatment programs.
  • States do not have licensure criteria specific to IMDs. Rather, they have separate licensure processes for facilities providing inpatient or residential treatment. Standards vary depending on whether a facility provides SUD treatment or mental health care.

Find the MACPAC report here.

Courts and Healthcare Policy in 2020

2019 saw court hearings of a number of cases related to the Affordable Care Act (ACA). Several other Trump administration policies were also challenged, including Medicare payment policies, price transparency, how the Medicaid program can change and whether Medicaid beneficiaries can sue over curtailed benefits, and immigration changes affecting access to programs like Medicaid.

In 2020, the courts will continue to play an important role as some cases continue in the process, and potential new lawsuits challenge the administration’s continued effort to change health policy.

Cases Related to the Affordable Care Act

Texas v. United States. The most consequential case related to the ACA is the constitutional challenge to the law. A group of Republican-controlled states and two Texas residents argue that the entire ACA became unconstitutional when Congress eliminated the penalty for individuals who fail to obtain health insurance. Last month, a divided three-judge panel of the 5th U.S. Circuit Court of Appeals issued a ruling stating the individual mandate was unconstitutional because it can no longer be justified as a tax since Congress set the penalty at 0. However, the panel also remanded the case to the lower court to determine what portions of the ACA are or are not severable from the individual mandate.

Now, a coalition of Democratic attorneys general has asked the U.S. Supreme Court to take up the case and not wait for the Texas court to rule on whether some or all of the ACA provisions are so intertwined with the individual mandate that they, too, must be deemed unconstitutional.

Risk corridors. The Supreme Court is already reviewing a third ACA case. It is a challenge brought by health insurance companies seeking $12 billion in “risk corridor payments” that were envisioned by the ACA. The risk corridor program was designed to compensate insurers who lost money in the early years of the exchanges, but congressional Republicans blocked CMS from making most of the promised payments.

The court is expected to issue a ruling by June.

Association health plans. One lawsuit challenges the administration’s expansion of association health plans through a Department of Labor rule that seeks to make it easier for small employers to band together and offer plans that do not have to comply with ACA consumer protections. A panel of the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in November. A ruling is expected in the coming months.

Short-term plans. Similar to the association health plan case, this case involves the administration’s expansion of short-term, limited-duration plans, which also need not comply with ACA protections. Briefing in the case is ongoing, and the court has not yet scheduled a date for oral arguments.

Cost-sharing reductions (CSR). Litigation continues over the ACA’s cost-sharing reduction program, which was intended to compensate insurers for setting low deductibles and copayments on the exchanges. In 2017, the administration decided to stop making the CSR payments, prompting numerous lawsuits from insurers. The insurers have won various lower-court rulings, and a consolidated group of the lawsuits is on appeal at the U.S. Court of Appeals for the Federal Circuit. Oral arguments were held Jan. 9.

The CSR litigation raises legal issues similar to those posed by the risk corridor case at the Supreme Court because both involve government payments to insurance companies that were intended by the drafters of the ACA but subsequently revoked. The Supreme Court’s decision in the risk corridor case may therefore presage the eventual outcome on CSRs.

Contraceptive mandate. The Supreme Court is considering whether to take up another controversial ACA-related issue: the ACA’s requirement that employers provide coverage for birth control in employee health plans. Last year, two federal appeals courts blocked Trump administration rules that created exemptions for employers with religious or moral objections to the contraceptive mandate.

The justices will discuss whether to take the case at their private conference Jan. 10, with an announcement likely following within weeks.

Nondiscrimination provisions. A new lawsuit is likely this year over the administration’s efforts to weaken some of the ACA’s nondiscrimination provisions, codified in Section 1557 of the law. HHS is currently finalizing regulatory changes expected to roll back Obama-era protections for groups such as transgender people, gay and lesbian people, and people who have terminated a pregnancy. Once the administration issues its final rule, a legal challenge is expected.

“Take care” clause. This broad-based lawsuit brought by a group of cities argues that the administration violated the Constitution by sabotaging the ACA. The lawsuit says President Trump’s various administration actions weakening the ACA conflict with the Constitution’s requirement that the president “take care that the laws be faithfully executed.” The case was filed in 2018 but remains in the early stages at a federal district court in Maryland.

Medicaid in the Courts

As the administration injects conservative policies into the Medicaid program, objectors are filing lawsuits.

Work requirements. The most prominent legal issue in Medicaid is the ongoing fight over work requirements, and a key ruling from the D.C. Circuit could come any day.

CMS has aggressively advocated for work requirements to be included in Section 1115 waivers. As waivers including work requirements are approved, opponents are responding with lawsuits challenging those waivers. Democrat-appointed District Judge James Boasberg repeatedly sided with the opponents last year, ordering Arkansas to suspend its work requirement program and blocking the policy from taking effect in Kentucky and New Hampshire. Other lawsuits challenging the policy in Indiana and Michigan are in the early stages before Boasberg, and more lawsuits could be coming.

Boasberg’s rulings against work requirements are now on appeal at the D.C. Circuit, which heard oral arguments in October. The D.C. Circuit has considered the case on an expedited schedule.

Beneficiaries’ right to sue. Another policy being tested in the courts is the extent to which beneficiaries have a right to sue state officials to challenge state actions that curtail Medicaid benefits. The ability to bring such lawsuits in federal court has long been viewed as an important safeguard for beneficiaries, but in recent years, some courts have expressed doubt about the legal theories underlying such lawsuits.

The Supreme Court declined to weigh in on the issue in 2018. However, currently pending at the 5th Circuit is a lawsuit brought by beneficiaries challenging Texas’ attempt to remove abortion providers from its Medicaid program. The ruling could extend far beyond the abortion context and help clarify the authority of beneficiaries to sue over a wide range of allegedly unlawful coverage policies by states.

Block grants. While no lawsuit has yet been filed, CMS’ push to permit states to convert their federal Medicaid funding into a form of a block grant has opponents on the ready. Tennessee was the first state to submit a waiver request to convert its program to a block grant. Once a waiver is approved, lawsuits are sure to follow.

Payment Policy Challenges

In Medicare, CMS remains engaged in litigation over two controversial payment policies that the agency says will bring down costs but hospitals describe as illegal. Continuing to fight both policies is a priority for the hospital industry in 2020.

340B cuts. One lawsuit challenges the agency’s 2018 and 2019 reimbursement cuts for drugs in the 340B drug discount program. Hospitals argue that the agency does not have the authority to make those cuts, and a federal district judge agreed. The case is now at the D.C. Circuit. Oral arguments were heard in November and a decision is expected by summer of this year. Meanwhile, CMS retained the 340B cuts in its 2020 hospital outpatient pay rule.

Site neutrality. Another case challenges CMS’ site-neutral policy, which cut payments for outpatient clinic visits at certain off-campus hospital facilities in 2019. Under the policy, the agency reimbursed hospitals for those visits at a rate equivalent to the cost of such services provided in doctors’ offices under the physician fee schedule. In September, a district judge said CMS lacked authority to make the cuts and vacated them. CMS’ appeal of that ruling could be heard by the D.C. Circuit sometime in 2020.

As with the 340B reimbursement cuts, the litigation did not stop CMS from going ahead with phasing in the cuts in its 2020 outpatient rule.

Transparency Policy

CMS faces drug and hospital industry-led legal challenges to two final rules issued last year that require drug companies and hospitals to disclose more information about pricing. Both challenges are based on the First Amendment.

Drug prices. A drug-pricing rule, issued in May by the U.S. Food and Drug Administration (FDA), seeks to require pharmaceutical companies to include the list prices of their drugs in television advertising. A district judge struck the rule on the grounds that the FDA overstepped its statutory authority. However, the judge did not rule on the drug manufacturers’ argument that the rule’s requirement of disclosure of list prices infringes on the manufacturers’ right to free speech. The case is on appeal at the D.C. Circuit, and oral arguments are scheduled for Jan. 13.

Hospital prices. The hospital transparency rule, issued in November by CMS, seeks to require hospitals to publish the confidential rates they negotiate with private insurers. The hospital industry sued, arguing the rule is highly burdensome and violates hospitals’ free speech. The district judge presiding over the case has set an expedited schedule to review it — but this case, like many of the other lawsuits challenging regulatory actions, likely will end up at the D.C. Circuit.

Other Health Law Issues

Immigrants and health insurance. Two immigration policies finalized last year have health law consequences. The “public charge” rule, issued in August by the Department of Homeland Security, and an executive proclamation on immigration, issued in October, have led to two lawsuits.

The public charge rule makes it harder for legal immigrants who receive certain forms of public assistance, including Medicaid, to remain in the country and become permanent U.S. residents. The proclamation requires new immigrants seeking entry into the country to demonstrate that they will be able to obtain health insurance, not including subsidized ACA plans or Medicaid.

Conscience rule. The rule, issued in May by the HHS Office of Civil Rights, expands the ability of medical professionals to refuse to provide care based on religious or moral objections.

Lawsuits challenging the immigration policies and the conscience rule are pending in federal courthouses around the country, and most of them are moving quickly. Substantive rulings from federal appeals courts are expected on all three issues in 2020.


GAO: 340B Drug Discount Program - Increased Oversight Needed to Ensure Nongovernmental Hospitals Meet Eligibility Requirements

On Jan. 10, the Government Accountability Office (GAO) published a report on weaknesses in the Health Resources and Services Administration (HRSA) oversight that may result in some hospitals’ receiving discounted prescription drugs under the 340B program, for which they are not eligible. For example, nonprofit hospitals may qualify if they contract with state or local governments to provide services to low-income individuals who cannot get Medicaid or Medicare coverage.

Find the GAO’s recommendations here on how HRSA can increase oversight and ensure that hospitals in the 340B program meet eligibility requirements.

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

Stephanie Kennan, Senior Vice President
Mariam Eatedali, Research Associate

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering infrastructure and economic development, strategic communications & grassroots, and government relations services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and has been named in The National Law Journal's special annual report, "The Influence 50," for the past several years. In the most recent report, McGuireWoods Consulting was ranked 15th of the 1,900 government relations firms in Washington, D.C.

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