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Health Headlines – January 3, 2017

03 Jan 2017

CMS and OIG Issue Notice of Amended Waivers for Next Generation ACO Model – On December 29, 2016, CMS and OIG issued a Notice of Amended Waivers of Certain Fraud and Abuse Laws in Connection with the Next Generation ACO Model (the 2016 Notice).  The 2016 Notice does not change or limit arrangements protected by the waivers in the Notice of Waiver of Certain Fraud and Abuse Laws in Connection with the Next Generation ACO Model dated December 9, 2015 (the 2015 Notice).  Arrangements protected under the 2015 Notice do not need any new action to remain protected under the 2016 Notice, provided that they continue to meet all of the conditions of a waiver.  Rather, the 2016 Notice includes two provisions that protect additional arrangements. 

First, the 2016 Notice adds to the Compliance with the Physician Self-referral Law Waiver protection for financial relationships between or among the Next Generation ACO and providers that are categorized as “Preferred Providers.”  This waiver previously only protected financial relationships with Next Generation ACO Participants.

Second, the 2016 Notice adds a new “All-Inclusive Population-Based Payment” (AIPBP) Arrangement Waiver that applies to AIPBP Payment Arrangements.  Under the Next Generation ACO participation agreement, providers reimbursed under AIPBP Payment Arrangements agree to accept reimbursement for services from the ACO rather than from CMS.  AIPBP Payment Arrangements must meet certain conditions, such as good-faith negotiation and fair market value compensation.

The new AIPBP Payment Arrangement Waiver waives compliance with the Stark Law and the Anti-Kickback Statute with respect to an AIPBP Payment Arrangement if all of the following conditions are met:

  • as with the other Next Generation ACO waivers, the Next Generation ACO has entered into a Participation Agreement and remains in good standing;

  • the Next Generation ACO has entered into an AIPBP Payment Arrangement with the AIPBP-participating Next Generation Participant or Preferred Provider that establishes how the Next Generation ACO will make payments for Covered Services;

  • in establishing the terms of, implementing, and performing under, the AIPBP Payment Arrangement, neither party gives or receives remuneration in return for or to induce business other than Covered Services covered by the AIPBP Payment Arrangement;

  • upon request, the parties to an AIPBP Payment Arrangement must provide the government with access to records regarding the AIPBP Payment Arrangement that are required to be maintained in accordance with the Participation Agreement; and

  • the Participation Agreement does not provide that this waiver is inapplicable.

The Next Generation ACO Participation Waiver, Shared Savings Distribution Waiver, and Waiver for Patient Engagement Incentives remain unchanged from the 2015 Notice.  The 2016 Notice is available here, and the 2015 Notice is available here.  Notably, the 2016 Notice supersedes the 2015 Notice as of December 29, 2016. 

The 2016 Notice follows CMS’s December 15, 2016 announcement of the third application round for the Next Generation ACO Model, with a January 2018 start date.  ACOs that start on January 1, 2018 will have an initial agreement term of one year with two option years that would end on December 31, 2020.  Interested applicants must submit a non-binding Letter of Intent, which CMS expects to open in February 2017.  CMS expects that the application portal will open in March 2017 and that applications will be due in May 2017.  Click here for more information regarding the 2018 application round. 

Reporter, Kate Stern, Atlanta, +1 404 572 4661,

Final Rule for Penalties Relating to 340B Drug Pricing Program Nears Release – On December 23, 2016, the White House Office of Management and Budget (OMB) completed review of a final rule for penalties under the 340B Drug Pricing Program for drug manufacturers that intentionally charge a 340B covered entity a price above the required discounted amount. OMB’s review signals that the final rule should be issued soon.

The 340B Program allows covered entities like safety-net hospitals to receive discounted outpatient drugs from manufacturers participating in Medicaid.  The final rule from HHS “provides a critical enforcement mechanism” by imposing civil penalties “when drug manufacturers intentionally charge a covered entity a price above the ceiling price established under the procedures of the 340B Program,” according to OMB’s website.  In addition, the rule will define “the standards and methodology for the calculation of ceiling prices for purposes of the 340B Program.”

The Affordable Care Act requires the final rule, and HHS published a proposed rule in June 2015.  It includes monetary sanctions of up to $5,000 per instance for drug manufacturers that intentionally overcharge a covered entity.

Reporter, R.J. Cooper, Sacramento, +1 916 321 4809,

OIG Report Examines Minimum Loss Ratio Impact on South Carolina Medicaid Managed Care – OIG recently issued a report determining that South Carolina’s Medicaid Managed Care program would not have realized any savings if the state agency implemented a minimum Medical Loss Ratio (MLR) similar to the current Federal standard for certain private health insurers and Medicare Advantage plans. 

The MLR requires health insurers to spend a significant portion of consumers’ premium dollars on medical care, rather than on administrative costs and profits. On May 6, 2016,    CMS issued a final rule requiring Medicaid Managed Care Organizations (MCOs) to achieve a minimum MLR of at least 85 percent, effective July 1, 2017.

To determine the potential impact of the MLR requirement on state Medicaid programs, OIG reviewed CY 2014 cost and premium revenue data for six South Carolina MCOs. The report found that South Carolina “would not have realized any Medicaid savings in CY 2014 if the state agency had (1) required its Medicaid managed care plans to meet minimum MLR standards . . . and (2) required remittances when Medicaid managed care plans did not meet MLR standards.”

The MLR has been a controversial portion of the Affordable Care Act.  Democrats argue the requirement ensures premium dollars are spent on patient care, while Republicans criticize the MLR, arguing that the requirement contributes to fraud and improper payments.  In fact, one GOP ACA repeal and replace plan will likely seek to eliminate or significantly reduce the requirement.  Republicans may point to reports like this to support their position that MLRs are ineffective.

Reporter, Caitlin Pardue, Atlanta, +1 404 572 4877,


King & Spalding to Host Roundtable on the 21st Century Cures Act – Join us on Thursday, January 12, 2017, 1:00 PM - 2:30 PM ET, for a webinar-only Roundtable titled “A Cancer Moonshot and So Much More: An Introduction to the 21st Century Cures Act for Healthcare Providers and Pharmaceutical and Medical Device Companies.” The Roundtable will bring you quickly up to speed on the key provisions of the 21st Century Cures Act, including insights regarding opportunities and challenges and why some of the innovations are controversial. CLE credit will be applied for in CA, GA, NY, TX, and, if needed, NC and VA. Register here.

King & Spalding to Host 26th Annual Health Law & Policy Forum – Join us on Monday, March 20, 2017, 8:00 AM – 5:30 PM ET, for the 26th Annual Health & Law Policy Forum at the St. Regis Hotel, in Atlanta, Georgia. Keynote speaker Jeffrey Toobin, a senior analyst for CNN and a staff writer for The New Yorker, will discuss the Supreme Court and how it may impact health policy in the next administration. As in previous years, Forum sessions will cover a variety of health law and policy topics. Attendance is $95 per person (lunch included). Capacity is limited. Register here.

Save the Date: 2017 Cybersecurity & Privacy Summit – On Monday, April 24, King & Spalding will host its 2017 Cybersecurity & Privacy Summit via webinar and in person in Atlanta, Georgia. The Summit will cover the latest developments and strategies for data protection. Additional details to follow.