News & Insights


April 17, 2017

Health Headlines – April 17, 2017


CMS Releases FY 2018 Hospital Inpatient Prospective Payment System Proposed Rule and Request for Information – On April 14, 2017, CMS issued the annual Hospital Inpatient Prospective Payment System (IPPS) Rule for FY 2018 (the “Proposed Rule”) which will affect discharges on or after October 1, 2017.  CMS estimates that IPPS operating payments will increase by 2.9 percent and spending will increase by $3.1 billion in FY 2018.  The Proposed Rule also adjusts disproportionate share hospital (DSH) payment adjustments, changes quality of care payment provisions and extends the Rural Community Hospital Demonstration, among numerous others policy developments.  Additionally, in an effort to start a national conversation about improving the healthcare delivery system, CMS is requesting ideas to reduce clinician burdens in a manner that allows for increased quality of care and decreased costs.  Comments on the Proposed Rule will be accepted until June 13, 2017. 

Under the Proposed Rule, available here, for inpatient acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users, CMS proposes an increase in operating payment rates of 1.6 percent.  The 1.6 percent increase reflects a market basket update of 2.9 percent, minus a 0.4 percent productivity reduction, minus a 0.6 percent reduction to remove the one-time 0.6 percent increase to offset costs of the two midnight policy, minus 0.75 percent in accordance with the Affordable Care Act (ACA), plus a 0.4588 percent increase as required by the 21st Century Cures Act.  CMS projects that the 1.6 percent rate increase combined with the 1.2 percent increase for uncompensated care payments, will increase overall IPPS operating payment rates by 2.9 percent.  Other payment adjustments will continue, including the 1 percent penalty for hospitals performing in the lowest quartile of the Hospital Acquired Condition Reduction Program and upward and downward adjustments under the Hospital Value-Based Purchasing Program.

Uncompensated Care and DSH Payments

In FY 2018, CMS proposes to distribute approximately $7 billion in uncompensated care payments, an increase of $1 billion from FY 2017.  The increase results from the CMS proposal to incorporate data from the its National Health Expenditure Accounts to estimate the change in the rate of uninsurance.  Additionally, in FY 2018, in disbursing uncompensated care funds, CMS will begin to incorporate uncompensated care data from Worksheet S-10 of the Medicare cost report.  CMS proposes to use Worksheet S-10 data from FY 2014 cost reports in combination with insured low income days data from the two preceding cost reporting periods. 

Hospital-Acquired Conditions (HAC) Reduction Program

The HAC Reduction Program, which was established under the ACA, penalizes hospitals performing in the lowest quartile with a 1 percent payment adjustment.  In the Proposed Rule, CMS specifies the time period used to calculate performance for the FY 2020 HAC Reduction Program and updates the Extraordinary Circumstance Exception policy. CMS also requests comments on additional measures for future adoption, that account for social risk factors, and that account for disability and medical complexity in the CDC NHSN measures in Domain 2.

Hospital Readmissions Reduction Program (HRRP)

In FY 2018, CMS proposes a change to the payment adjustment factor in accordance with the 21st Century Cures Act.  In the Proposed Rule, CMS will assess penalties based on a hospital’s performance compared to other hospitals with a comparable proportion of dually eligible Medicare and Medicaid patients.  CMS proposes a methodology for calculating the proportion of dual-eligible patients and assigning hospitals to peer groups, and a payment adjustment formula.  The Proposed Rule specifies the applicable time period for calculating aggregate payment for excess readmission and also updates the Extraordinary Circumstance Exception Policy.

EHR Incentive Programs

For the EHR Incentive Program, CMS has proposed that the reporting period in CY 2017 will be two self-selected quarters. For CY 2018 the reporting period will be the first three quarters of 2018.  For both CYs 2017 and 2018, hospitals must report on at least six Clinical Quality Measures (CQMs).  In CY 2018, for those hospitals only participating in the Medicare EHR Incentive Program, electronic CQM submission will be available for the two months following the close of the year ending on February 28, 2019.  For eligible professionals reporting electronically, CMS proposes to modify the EHR Incentive Program reporting period from a full year to a minimum of a continuous 90-day period during the year.  The Proposed Rule also aligns CQMs with the measures available under the Merit-based Incentive Payment System.

As required by the 21st Century Cures Act, CMS has proposed an exception for providers who do not meet meaningful use requirements because their certified EHR technology has been decertified under ONC’s Health IT Certification Program.  Additionally, CMS proposes that no payment adjustment will be made for professionals who render “substantially all” of their services in an ambulatory surgical center (ASC).  CMS seeks public comment on the following two alternative definitions to determine the final definition regarding ASC services:

  • An EP who furnishes 75 percent or more of his or her covered professional services in sites of service identified by the codes used in the HIPAA standard transaction as an ASC setting in the calendar year that is two years before the payment adjustment year; and
  • An EP who furnishes 90 percent or more of his or her covered professional services in sites of service identified by the codes used in the HIPAA standard transaction as an ASC setting in the calendar year that is two years before the payment adjustment year.

In the Proposed Rule, CMS also proposes using Place of Service (POS) code 24 to identify services performed in an ASC.  CMS requests comment on whether POS 24 or alternative mechanisms should be used to identify the site of service.

Hospital Inpatient Quality Reporting (IQR) Program

With respect to the IQR Program, which requires hospitals to report data on select measures to receive the full annual percentage increase, CMS is refining two previously adopted measures. First, CMS proposes to re-word the current pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems survey to focus on hospital communication with patients regarding the patients’ pain during the hospital stay.  Second, CMS proposes to change the risk adjustment methodology used in the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate following Acute Ischemic Stroke Hospitalization measure to include stroke severity codes.  This change will begin in the 2023 payment determination.

Beginning with the FY 2020 payment determination, CMS proposes to reduce the number of cases required for submission and to include additional exclusion criteria.  CMS also proposes to continue the medical record validation requirement for FY 2021 and subsequent years.  CMS has also asked for public comment on new quality measures to be included in the Hospital IQR Program that account for social risk factors. 

Hospital Value-Based Purchasing (VBP) Program

CMS proposes to update the performance measures in the Hospital VBP program across several performance domains, beginning in 2019.  The agency proposed to remove the Patient Safety for Selected Indicators (PSI 90) safety measure in FY 2019, and will retain all other previously adopted measures for FYs 2019 and 2020. In addition, CMS has proposed new measures for adoption in FY 2022 and beyond, including a new Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Pneumonia (PN Payment) measure in FY 2022 and a modified version of the previously Patient Safety and Adverse Events Composite measure (NQF #0531) in FY 2023.  CMS will also revise the Efficiency and Cost Reduction domain weighting starting in FY 2021 to account for new condition-specific payment measures such as the AMI Payment and HF Payment measures to be implemented in FY 2021, and the proposed PN Payment discussed above for 2022.

CMS also requests comments on potential social risk factors to be included in the Hospital VBP program and other performance measurement programs, as well as recommendations for the appropriate methods to account for those risk factors and data sources that should be used for measurement. CMS will continue working with the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) and the National Academies of Science to explore and evaluate feasible methods to consider social risk factors, such as dual eligibility/low-income subsidy, race and ethnicity, and geographic area of residence, in evaluating providers across a spectrum of safety, quality, and performance areas.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
The Measure Application Partnership (MAP) component of the National Quality Forum has recommended that integrating end-of-life care considerations is an area of cancer care that could be improved for both patients and caregivers. The MAP reviewed and recommended the proposed measures listed below, which were also supported by the MAP Hospital Workshop for inclusion in PCHQR.  These measures would assess “comprehensive care that addresses medical, emotional, spiritual, and social needs during the last stages of a person’s terminal illness,” including access to palliative care and access to patient and caregiver support services. The proposed end-of-life care measures are:

  • Proportion of Patients Who Died from Cancer Receiving Chemotherapy in the Last 14 Days of Life (NQF #0210);
  • Proportion of Patients Who Died from Cancer Admitted to the ICU in the Last 30 Days of Life (NQF #0213);
  • Proportion of Patients Who Died from Cancer Not Admitted to Hospice (NQF #0215); and
  • Proportion of Patients Who Died from Cancer Admitted to Hospice for Less than Three Days (NQF #0216).

CMS also proposes to remove three of the current measures for cancer hospitals, based on the agency’s determination that performance on these measures have “topped out,” i.e., they are so high and unvarying across the provider population that distinctions related to performance cannot be made.  For the measures below, CMS has determined that PCHs have integrated the related clinical standards consistently.

  • Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 Days) of Diagnosis to Patients Under the Age of 80 with AJCC III (Lymph Node Positive) Colon Cancer (PCH-01/NQF #0223);
  • Combination Chemotherapy is Considered or Administered Within 4 Months (120 Days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer (PCH-02/NQF #0559); and
  • Adjuvant Hormonal Therapy (PCH-03/NQF #0220).

Inpatient Psychiatric Facility Quality Reporting Quality Reporting (IPFQR) Program

CMS proposes to update the IPFQR program with new measures for Medication Continuation following Inpatient Psychiatric Discharge, which is calculated from claims data, in FY 2020.

Beginning with the FY 2019 payment determination, CMS has proposed to update the extraordinary circumstances exception (ECE) for inpatient psychiatric facilities to align with policies for other provider settings.  Specifically, CMS proposes to update this policy by: (1) allowing designated personnel to provide their contact information and sign the ECE request in lieu of the Chief Executive Officer; (2) allowing up to 90 days after the extraordinary circumstance to submit the request; and (3) implementing a 90-day response standard for CMS to respond to ECE requests.  CMS is proposing similar updates across other quality reporting programs in Medicare, including the Hospital IQR, PCHQR, Hospital Acquired Condition Reduction, and Hospital Readmission Reduction programs. 

Other proposed changes to the IPFQR program include changing the data submission period to a 45-day period beginning at least 30 days following the end of the collection period and aligning the Notice of Participation and Notice of Program Withdrawal deadlines with the revised data submission period; and proposing factors to be used for evaluating measure removal, similar to factors used in other quality reporting programs.

Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Changes

Accompanied with other proposed changes in this rule, CMS projects that LTCH PPS payments would decrease by approximately 3.75 percent, or $173 million in FY 2018, due in large part to the continued phase in of the dual payment rate system.  CMS also signaled that it is evaluating the need for continuing the 25-percent threshold payment policy in light of implementation of new payment methodologies required by MACRA and the 21st Century Cures Act.  In the interim, the agency has proposed a moratorium on the threshold policy for FY 2018.  CMS has also proposed revisions to the short-stay outlier payment adjustment, classification as an LTHC hospital, and previous expansion moratorium, among other applicable policy changes in the 21st Century Cures Act.

Long Term Care Hospital Quality Reporting Program (LTCH QRP)

Under the LTCH QRP, CMS proposes an annual payment reduction of two percentage points if an LTCH does not submit data on specified quality measures.  The agency also proposes to require reporting on standardized patient assessment data for beginning in the FY 2020 program year in five areas: functional status, such as mobility and self-care at admission to a PAC provider and before discharge from a PAC provider; cognitive function, such as ability to express ideas and to understand and mental status, such as depression and dementia; special services, treatments and interventions such as the need for ventilator use, dialysis, chemotherapy, central line placement and total parenteral nutrition; medical conditions and comorbidities such as diabetes, congestive heart failure and pressure ulcers; and impairments, such as incontinence and an impaired ability to hear, see or swallow.  CMS announced its intention to continue evaluating the need for additional standardized patient assessment data in future years.  Related to the standardized patient assessment data, CMS proposed to replace the current pressure ulcer measure with an updated version as well as adopt companion measures related to ventilator weaning, beginning in FY 2020.  The agency has also proposed two measures for removal: Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) and All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from LTCHs.

Finally, CMS proposes to begin publicly reporting quality measures on the LTCH Compare website by fall 2018 for existing measures, and by fall 2020 for new measures; and making procedural updates to the reporting schedule.

Additional Provisions in the FY 2018 IPPS/LTCH Proposed Rule

  • CMS has proposed a number of changes to reduce regulatory burden on certain provider settings, including discretionary enforcement of Critical Access Hospital 96-Hour certification reviews, flexibility in requirements for IHS facilities and tribal hospitals within hospitals, and eliminating required newspaper publication of termination notices for Ambulatory Surgical Centers (ASCs), Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs) and Organ Procurement Organizations (OPOs).
  • CMS has proposed new policy requirements for national accrediting organizations to post provider/supplier survey reports online, consistent with federal and state government practices of reporting survey findings publicly.
  • Finally, CMS has extended the Rural Community Hospital Demonstration for an additional 5-year period, including allowing current participants to request a second extension period and allowing additional facilities to apply for the program, up to the statutory limit of 30 hospitals.  CMS announced its intention to release the application for this extended program to be released in April.

Reporters:  Catherine Silas, Washington, DC, +1 202 626 8976, and C’Reda Weeden, Washington, DC, +1 202 626 5572, 

CMS Issues New Rules Aimed at Improving Health Benefit Exchange Participation – Even as President Trump and Congress work toward repealing some or all of the Affordable Care Act (ACA), CMS announced a final rule aimed at market stabilization of the Health Benefit Exchanges that are the cornerstone of the ACA.  CMS explained that the stability and competitiveness of the Exchanges have recently been threatened by insurers exiting some markets and increasing rates in others.  The final rule, available here, seeks to address the problem of individuals only seeking coverage after they discover they need medical services, and adding incentives for healthy individuals to maintain coverage.

The final rule includes several changes that attempt to improve the risk pool and address insurers’ concerns.  First, the open enrollment period is being shortened for 2018.  Instead of an open enrollment period of November 1, 2017 through January 31, 2018, the currently set period, enrollment under the final rule is limited to November 1, 2017 through December 15, 2017.  This will make the enrollment period consistent with future years, and improve the risk pools of the individual markets by reducing opportunities for adverse selection. 

The final rule also addresses concerns about potential misuse of the special enrollment periods.  Insurers complained that these periods are abused to enable individuals who are not entitled to special enrollment periods to enroll after they realize they need medical services.  The rule increases pre-enrollment verification from 50 percent to 100 percent of new consumers who attempt to enroll during these special enrollment periods. 

CMS is also revising its interpretation of the Federal guaranteed availability requirement in a way that would permit insurers to apply a premium payment to an individual’s past debt for healthcare coverage.  This change is intended to remove economic incentives for individuals to pay premiums only when they are in need of healthcare services.  This is also important in the effort to ensure individuals maintain continuous coverage throughout the year.  CMS is also making changes in the actuarial values used to determine levels of coverage.  This change is intended to allow insurers greater flexibility in offering new plans, and to help keep cost sharing and premiums stable for consumers.

CMS also announced that it is finalizing policies aimed at affirming the roles of States in regulating their health insurance markets and reducing the regulatory burdens insurers face by participating in the Exchanges.  The final rule signifies recognition that insurer participation is critical to ensuring consumers have access to affordable, quality healthcare coverage.  Insurer participation has been limited in some areas primarily due to market uncertainty and concerns regarding the risk pools insurers face.  CMS is working to address these concerns, even while the administration works to repeal or replace the system through legislation.

Reporter, Scott Cameron, Sacramento, CA, +1 916 321 4807,  

U.S. District Court Holds that a State University Is Immune from False Claims Act Liability Despite Intervention by United States

On April 11, 2017, the U.S. District Court for the District of Oregon granted Oregon Health and Sciences University’s (OHSU) motion to dismiss a qui tam False Claim Act (FCA) suit, holding that (1) OHSU is an “arm of the state” of Oregon, and therefore (2) OHSU is not subject to FCA liability, regardless of whether the United States intervenes in the case.  The Court concluded that the Supreme Court’s holding in Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000) that a state or a state agency is immune from FCA liability extends to cases in which the United States elects to intervene. 

The FCA provides in pertinent part that “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . is liable to the United States Government.”  31 U.S.C. § 3729(a).  A private person (a relator) may bring a qui tam civil action “for a violation of section 3729 for the person and for the United States Government . . . in the name of the Government.” 

In Doughty, the relator filed a qui tam action against OHSU, a public corporation created by the State of Oregon and defined in state statute as “a governmental entity performing governmental functions and exercising governmental powers.”  OHSU is a state university offering programs in medicine, nursing, and dentistry.  The relator alleged that OHSU violated the FCA when OHSU applied improper reimbursement rates to certain federally-sponsored projects.  OHSU filed a motion to dismiss, arguing that it is an arm of the state and therefore cannot be liable under the FCA.  The Court agreed with OHSU that, under the Ninth Circuit test, OHSU is an arm of the state.  The more difficult question was whether, under Stevens, an arm of the state may be liable in a qui tam FCA suit in which the United States Government intervenes. 

In Stevens, the relator brought a qui tam action against a state agency, alleging that it had submitted false claims to the Environmental Protection Agency.  The United States declined to intervene in the case.  The state agency moved to dismiss, arguing that it was not a “person” under the FCA.  The Supreme Court agreed with the state agency, and held that the FCA does not subject a state or a state agency to liability in a federal-court suit by a private individual on behalf of the United States.  The Court reasoned—based on a review of the legislative history of the FCA—that a state agency is not a “person” subject to qui tam liability for the purposes of the FCA.

In Doughty, the plaintiff argued that Stevens’ holding is limited to cases where the relator proceeds without the United States’ intervention in the case.  The plaintiff pointed to Justice Ginsburg’s concurring opinion in Stevens, which stated that “the Court’s decision . . . leave[s] open the question whether the word ‘person’ encompasses States when the United States itself sues under the False Claims Act.”  The Doughty Court, however, focused on the Stevens majority opinion instead, and concluded that “[t]here is not any indication that the [Supreme] Court’s analysis or conclusion would have differed if the United States had intervened in the matter.”  Accordingly, the Court concluded that the United States may not bring an FCA action against an arm of the state, such as OHSU. 

The case is United States ex rel. Doughty v. Or. Health & Scis. Univ., 2017 BL 118712, D. Or., No. 3:13-cv-1306, 4/11/17, available here.  The Supreme Court opinion Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000), is available here.

Reporters, Igor Gorlach, Houston, +1 713 276 7326, and Adam Robison,, Houston, +1 713 276 7306.  

Oklahoma Hospital to Settle FCA Allegations for $1.6M – On April 11, 2017, the DOJ announced that Norman Regional Health System entered into a settlement agreement with the government. The settlement resolves allegations that the hospital billed Medicare for radiological services performed without the required level of physician supervision.

Included in the settlement were seven individual defendants: a former Norman Regional Hospital administrator and six physicians employed by Norman Regional as radiologists. The government alleged that Norman Regional submitted claims to Medicare for services provided by radiological practitioner assistants (RPAs) that were performed without the appropriate level of physician supervision.

In order to bill Medicare for radiological diagnostic services performed by an RPA, a physician must be in the room directly supervising the RPA. If the RPA is not appropriately supervised by a physician, the service cannot be billed to Medicare.

The settlement stems from an FCA government-intervened qui tam action. The relator was a radiologist formerly employed by Norman Regional.

The DOJ press release is available here.

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

Nurse Anesthetists Sue Novitas Solutions and CMS Over Medicare Reimbursement Policy on Chronic Pain Management – On April 11, 2017, the American Association of Nurse Anesthetists (AANA), an organization representing more than 50,000 Certified Registered Nurse Anesthetists (CRNAs), filed a complaint for declaratory and injunctive relief in federal court in the Northern District of Illinois against Medicare Administrative Contractor (MAC) Novitas Solutions, Inc. (Novitas) and Administrator of CMS Seema Verma in her official capacity.  The lawsuit alleges that a Novitas local coverage determination (LCD) to become effective on May 4, 2017 prevents CRNAs from being reimbursed for their treatment of Medicare beneficiaries suffering from chronic pain.  Novitas’ jurisdiction spans Washington D.C., Pennsylvania, New Jersey, Maryland, Delaware, Colorado, Oklahoma, New Mexico, Arkansas, Texas, Louisiana, and Mississippi.

AANA alleges in its suit that CMS engaged in proper rulemaking in 2012 that clarified 42 C.F.R. § 410.69, which provided that CRNAs will be reimbursed for anesthesia and related care, including chronic pain management care if the performance of such care is permitted by the scope of practice of the state in which the services are performed.  AANA further alleges that Novitas LCD L36920 (Epidural Injections for Pain Management), which is set to take effect on May 4, seeks to block proper reimbursement for CRNA pain management services by creating several new training requirements that must be satisfied before epidural injections can qualify for reimbursement.  However, CRNAs cannot fulfill these requirements because there are allegedly no training programs that exist for non-physician practitioners to meet those requirements.  The suit alleges that the LCD “provides a path for CRNAs that leads nowhere.” 

AANA alleges that Novitas exceeded its proper authority and engaged in improper rulemaking.  AANA also alleges that the Defendants’ use of the LCD deprives CRNAs of their constitutionally-protected property interest (i.e., their right to Medicare reimbursement) and violates their rights under the Due Process Clause of the Fifth Amendment.  AANA seeks a declaratory judgment that (1) the CRNAs are entitled to due process, including a hearing before an impartial decision maker and a meaningful appeal process before the LCD deprives them of their property interest, and (2) the LCD is an improper attempt at rulemaking and that Defendants have exceeded their authority to make Medicare coverage determinations.  AANA also seeks an injunction prohibiting enforcement of the LCD as it relates to CRNAs.

The lawsuit is American Association of Nurse Anesthetists and Lisa Pearson, CRNA v. Novitas Solutions, Inc., and Seema Verma, in her official capacity as Administrator of CMS, No. 1:17-cv-02753 (N.D. Ill. April 11, 2017).  The complaint is attached here, and the LCD is attached here.   

Reporter, Jennifer S. Lewin, Atlanta, +1 404 572 3569, 


King & Spalding Roundtable on Compliance Enforcement and Post-Acute Care Providers – Please join us for on Wednesday April 19, 2017 from 1:00 p.m. to 2:30 p.m. ET for a Roundtable webinar that will explore recent enforcement trends and current industry scrutiny on post-acute providers, including hospice, home health, inpatient rehabilitation facility, and skilled nursing providers. In addition, this webinar will also highlight strategies for providers to consider in order to manage risk proactively and promote compliance with federal healthcare program requirements. There is no charge to participate. Please register here.

King & Spalding’s 2017 Cybersecurity & Privacy Summit – On Monday, April 24, 2017, make plans to join the 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, to learn about the latest strategies for protecting your company against the legal and financial risks of cybersecurity breaches and other privacy incidents. Click here for more information regarding session topics and featured speakers.