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Health Headlines – March 27, 2017


27 Mar 2017
NEWSLETTER

FEATURED ARTICLES

House Pulls Vote on ACA Repeal and Replace, Future Uncertain  Following a week of amendments and last-minute deal making, and after postponing a scheduled March 23 vote, the House leadership cancelled a vote on H.R. 1628, the American Health Care Act (AHCA), legislation to repeal and replace the Affordable Care Act.  House Speaker Paul Ryan (R-WI) noted: “We’re going to be living with Obamacare for the foreseeable future.”

At the outset of last week, the House Republican leadership outlined, and the House Rules Committee approved, a rule incorporating a  “manager’s amendment” to H.R. 1628, as forwarded by the House Budget Committee on March 16 (see committee report here).  This “manager’s amendment” was intended to address concerns of conservative Republicans aligned with the House Freedom Caucus as well as moderate Republicans.  These changes to the original AHCA included provisions to:

  • Terminate the ACA Medicaid expansion for childless, non-disabled, non-elderly, non-pregnant adults up to 133 percent of the Federal Poverty Level (FPL) and sunset the ability of States to cover adults above 133 percent FPL at the end of 2017.
  • Allow States to impose a work requirement as a condition of Medicaid coverage for non-disabled, non-elderly, non-pregnant adults.
  • Allow States to opt for a block grant rather than per-capita cap to fund traditional, non-expansion adult and children.  (Block grants would not be available for the elderly and disabled.) 
  • Modify the Medicaid matching formula for New York, prohibiting Federal reimbursements for Medicaid funds collected by counties.
  • Move implementation of the “Cadillac Tax” from 2025 to 2026, and accelerate repeal of all other ACA taxes from 2018 to 2017.
  • Attempt to add additional funding for Americans aged 50-64 and provide additional funding for the Patient and State Stability Fund.

On March 23, the Congressional Budget Office (CBO) released a score for the revised version of the AHCA, noting that the amended bill would provide $150 billion in deficit reduction over 10 years, down from $337 billion over 10 years in the original AHCA.  CBO estimated that the revised bill would result in similar impacts for health insurance coverage and premiums as would the initial AHCA bill - 14 million more individuals would be uninsured in 2018, increasing to 24 million in 2026.  The amended AHCA would result in an increase in average premiums in the nongroup market before 2020. 

After negotiations and meetings with President Trump and Vice President Pence, the House rescheduled a planned March 23 vote to March 24 and indicated further amendments would be added to the AHCA, in an effort to secure the necessary votes for passage.  These amendments would:

  • Delay the repeal of the extra 0.9 percent Medicare tax on wealthy enrollees  ($200,000 for single filers; $250,000 for joint filers) for six years, generating $63 billion in revenue.
  • Increase flexibility of the Patient and State Stability Fund, to allow it to be used for reducing the cost of coverage in the individual and small group markets, and add $15 billion to the Fund for maternity, mental health, and substance abuse purposes.
  • Require States, rather than the Secretary of HHS, to define Essential Health Benefits with respect to plans offered in a particular State.

On Friday, March 24, facing unified Democratic opposition and falling short of the 216 Republican votes needed to approve H.R. 1628, House Republican leaders pulled the bill from the schedule and adjourned.  Congressional Republicans and the Trump Administration will evaluate how to proceed on healthcare issues.  HHS and CMS may still pursue regulatory changes to the ACA, which was the second of the proposed “three bucket” approach to ACA repeal and replace. 

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600, akassir@kslaw.com.

HHS Further Delays Effective Date of Final Rule for 340B Drug Pricing Program’s Drug Ceiling Prices and Civil Monetary Penalties On March 20, 2017, HHS issued an interim final rule further delaying until May 22, 2017, the effective date of a January 5, 2017, final rule for the 340B Drug Pricing Program that addresses the calculation of drug ceiling prices and imposition of civil monetary penalties on drug manufacturers who knowingly and intentionally charge a covered entity more than the ceiling price for a covered outpatient drug.  This is the second delay HHS has announced for this final rule.  The interim final rule also invited commenters to provide their views by April 19, 2017, on whether a longer delay of the effective date to October 1, 2017, would be more appropriate.

As previously reported here, the HHS Health Resources and Services Administration (HRSA) published a final rule on January 5, 2017, updating the price structure that drug manufacturers participating in the 340B Drug Pricing Program may charge to covered entities purchasing drugs under the Program.  HRSA also established in the final rule a maximum $5,000 civil monetary penalty per instance for manufacturers that knowingly and intentionally charge a covered entity more than the ceiling price for a covered outpatient drug. 

The provisions of the final rule were to become effective on March 6, 2017; however, HHS instead issued a subsequent final rule on March 6, delaying the effective date to March 21, 2017, in accordance with a January 20, 2017, executive order that froze the imposition of new Federal regulations.  In the March 20 interim final rule, HHS noted that after further consideration, in order to provide affected parties sufficient time to make changes to facilitate compliance, HHS decided to delay the effective date of the final rule to May 22, and is inviting comments on whether to delay that date further to October 1, 2017.  In addition, HHS indicated that since the effective date of the final rule has been moved to May 22, and may be further delayed, enforcement of the final rule would be correspondingly delayed. 

The interim final rule is available here.  Comments on the delay of the effective date to May 22 as well as comments on alternatively delaying the effective date until October 1, 2017, are due by April 19, 2017.

Reporter, John Whittaker, Sacramento, +1 916 321 4808, jwhittaker@kslaw.com.

D.C. District Court Dismisses a Hospital’s Challenge of Another Hospital’s Failure to Provide Wage Documentation to CMS

On March 21, 2017, the U.S. District Court for the District of Columbia ruled that a hospital lacked standing to challenge a decision of the Provider Reimbursement Review Board (the “PRRB”), since the hospital failed to challenge one of the two grounds on which the decision was based.  The plaintiff hospital challenged the accuracy of the wage data CMS relied on in formulating the wage index, after a neighboring hospital failed to provide wage documentation to CMS.  The court held that it could not redress the plaintiff hospital’s injury, because the hospital failed to challenge the PRRB’s finding that, under CMS’s guidance, the PRRB lacked authority to afford a remedy. 

HHS has the statutory authority to adjust the proportion of payment to hospitals attributable to wages and wage-related costs for area differences in hospital wage levels.  In most cases, the geographic area for which a wage index is calculated corresponds to one of the metropolitan statistical areas (MSAs), such that a change in one hospital’s wage data affects the wage index for all hospitals in the area.  

In the case, the plaintiff hospital challenged CMS’s calculation of the Medicare wage index for the hospital’s MSA.  Another hospital in the plaintiff hospital’s MSA failed to provide documentation to CMS in support of its reported increase in wages.  As a result, CMS adjusted the neighboring hospital’s reported wages to a lower amount.  Because the wage index for an MSA is based on the reported hospital wages, CMS’s adjustment of the neighboring hospital’s reported wages figure resulted in a lower payment to the hospitals in the MSA, including to the plaintiff hospital. 

The plaintiff hospital – along with two other hospitals in the MSA – requested a hearing before the PRRB.  Upon reviewing the arguments and evidence, the PRRB ruled that CMS’s determinations must stand, citing two bases: (1) the PRRB lacked authority to afford relief, because CMS (in the pertinent 2004 rulemaking) did not provide a remedy for other hospitals in the same MSA which are harmed by the hospital that failed to furnish correct wage index data, and (2) the challenging hospitals “ha[d] not met their burden of proof,” because they did not produce any provider-specific information or documentation in support of their arguments.  

The plaintiff hospital then sought a judicial review of the PRRB’s decision.  In its complaint, the hospital asserted a single count, challenging the accuracy of the wage data CMS relied on in formulating the wage index.  The hospital did not challenge the PRRB’s holding that the PRRB lacked authority to grant a remedy.  The hospital’s failure to challenge one of the two grounds on which the PRRB ruled proved fatal for its complaint.  The court noted that where an agency’s finding is based on two alternative grounds, and the plaintiff fails to challenge one of the grounds, the court must assume, for the purposes of standing analysis, that the challenged finding was valid.  Overturning only one of the two grounds would not redress the plaintiff hospital’s harm; and redressability is required for standing. 

The court also noted another, less significant, redressability challenge: even if the court were to order CMS to permit the neighboring hospital to submit missing documentation, “it is far from clear that the [neighboring hospital] would do so.”

While the court did not reach the merits of the case, it did provide some commentary on the plaintiff hospital’s arguments.  The court found “not surprising” the PRRB’s finding that, under the 2004 Rule, CMS did not provide a remedy for other hospitals in the same MSA which are harmed by the hospital that failed to furnish correct wage index data.  The court also stated that it was “not convinced” that the plaintiff hospital was not challenging another provider’s data, as opposed to simply challenging the wage-index calculated for the MSA as the hospital asserted, or that the hospital is entitled to bring the challenge. 

The case is Dignity Health v. Burwell, Civil Action No. 2015-0804.  The Court’s opinion is available here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.

House Passes Bill Repealing Antitrust Immunity for Health Insurers – Last week, the U.S. House of Representatives passed a bill that would end the limited Federal antitrust immunity for health insurers.  The Competitive Health Insurance Reform Act of 2017 (H.R. 372) passed the House 416-7 and is currently pending before the Senate Committee on the Judiciary.  H.R. 372 amends the McCarran-Ferguson Act of 1945, which exempts health insurers from the Federal antitrust laws in certain circumstances.

Specifically, the McCarran-Ferguson Act affords insurance companies such an exemption under two conditions: (1) the challenged practice must be part of the  “business of insurance”; and (2) the practice must be regulated by State law (including State antitrust laws).  Notably, there is an exception to this exemption for acts or agreements of boycott, coercion, or intimidation.  If H.R. 372 is signed into law, health insurers would be subject to all Federal antitrust laws.  According to the Congressional Budget Office (CBO), implementing H.R. 372 would cost the Federal government less than $500,000.  The CBO also determined that H.R. 372 would not have a significant effect on the premiums private insurers would charge for health or dental insurance.  The full text of H.R. 372 is available here.  The CBO’s report is available here.

H.R. 372 was supported by both Republicans and Democrats, as well as the American Hospital Association (AHA).  In a letter submitted to H.R. 372’s sponsor, the AHA applauded the repeal of the exemption from anticompetitive conduct for health insurers.  According to the AHA, exemptions should be “carefully tailored to achieve a pro-competitive purpose.”  The AHA had previously expressed its concern with the abuse of market power by large commercial insurers.  Because H.R. 372 is expected to increase competition in the health insurance marketplace if signed into law, the AHA supported the bill.  The White House has endorsed H.R. 372 and indicated that President Trump would likely sign it into law if presented in its current form. 

The introduction of H.R. 372 comes after two controversial health insurance mergers between (1) Anthem, Inc. and Cigna Corp. and (2) Aetna Inc. and Humana Inc. were successfully blocked by the Department of Justice.  These decisions were both recently upheld in the United States District Court for the District of Columbia.  Anthem appealed to United States Court of Appeals for the District of Columbia, which heard oral argument in the case last Friday. 

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.

ALSO IN THE NEWS

HHS Final Rule on Medicare Coverage Determination Appeals Process Takes Effect –   HHS’s final rule revising procedures for ALJ and Medicare Appeals Council level appeals, announced on January 17, 2017, took effect on March 20, 2017.  As previously reported here, the final rule is meant to address the seven-year backlog of over 650,000 existing appeals, and to prevent such backlog from recurring.  The final rule is available here

Save the Date: King & Spalding Reception at the AHLA Institute on Medicare and Medicaid Payment Issues – Please join King & Spalding at a reception during the AHLA Institute on Medicare and Medicaid Payment Issues. The reception will be held at the Baltimore Marriott Waterfront Laurel Room in Baltimore, Maryland, on Thursday, March 30, 2017, from 7:00 - 9:30 p.m. ET.  Register here.

Upcoming Webinar – Please join us on Thursday, April 6, 2017 12:00 p.m. to 1:00 pm ET for Managed Care Contracting Risks: An Antitrust, Government Pricing, and Fraud and Abuse Analysis for pharmaceutical companies. This Webinar will take an inter-disciplinary approach to evaluating the legal risks associated with managed care contracting by pharmaceutical companies and provides practical advice regarding antitrust laws, government pricing laws, and fraud and abuse laws.  More information is available here.

King & Spalding to Host 2017 Cybersecurity & Privacy Summit – Join us on Monday, April 24, 2017, King & Spalding will host its 2017 Cybersecurity & Privacy Summit via webinar and in person in Atlanta, Georgia. Cybersecurity and privacy experts from King & Spalding and PwC, as well as representatives from the U.S. Department of Justice, the Federal Trade Commission, Georgia Institute of Technology, The Home Depot, and TSYS, will discuss the latest strategies for protecting against the legal and financial risks of cybersecurity breaches and other privacy incidents.  Register here

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