News & Insights


August 10, 2020

Health Headlines – August 10, 2020

CMS Releases Proposed 2021 Physician Fee Schedule

On August 3, 2020, CMS issued a proposed rule which updates payment policies, payment rates, and other provisions for services furnished under the Medicare Physician Fee Schedule (PFS) on or after January 1, 2021 (the Proposed Rule). The Proposed Rule introduces a number of updates to the PFS, including, but not limited to payment provisions; telehealth service expansion; care management services and remote physiologic monitoring services; professional scopes of practice; and direct supervision by interactive telecommunications technology. CMS will be accepting comments on the Proposed Rule until 5:00 pm EST on October 5, 2020.

Payment Provisions

In the Proposed Rule, CMS proposes a series of technical proposals “involving practice expense, including the implementation of the third year of the market-based supply and equipment pricing update, and standard rate-setting refinements to update premium data involving malpractice expense and geographic practice cost indices.”

The Proposed Rule also includes a budget neutrality adjustment that accounts for changes in relative value units (RVUs) that are converted into PFS payments rates. With the budget neutrality adjustment to account for changes in RVUs, the proposed CY 2021 PFS conversion factor is $32.26, a decrease of $3.83 from the CY 2020 PFS conversion factor of $36.09.

Telehealth Service Expansion

The Proposed Rule introduces a number of telehealth policy proposals, including the expanded use of telehealth services covered by Medicare. In the Proposed Rule, CMS looks to add 22 services to the list of telehealth services that Medicare covers. Examples of such services to be added to the Healthcare Common Procedure Coding System (HCPCS) include:

  • Group psychotherapy (other than of a multiple-family group)
  • End-Stage Renal Disease (ESRD) Services
  • Psychological and Neuropsychological Testing
  • Domiciliary, Rest Home, or Custodial Care services

In the Proposed Rule, CMS clarifies that Medicare telehealth rules are not meant to apply when providers provide services via telehealth technology when the provider is in the same location as the patient. For example, if a provider uses telehealth services to provide care to a patient in the same room due to concerns regarding exposure to COVID-19, the telehealth rules will not apply.

Additionally, CMS proposes revising frequency limitations for nursing facility visits provided via Medicare telehealth. Currently, CMS limits the provision of subsequent inpatient visits via Medicare telehealth to once every three days and subsequent nursing facility visits to once every 30 days.  CMS is also considering removing frequency limitations for the visits altogether.

Care Management Services and Remote Physiologic Monitoring Services

The Proposed Rule clarifies Medicare payment policies for certain remote physiologic monitoring (RPM) services. Such clarifications include:

  • Clarifying payment policies related to the RPM services described by CPT codes 99453, 99454, 99091, 99457, and 99458;
  • Requiring that an established patient-physician relationship exist for RPM services to be furnished;
  • Explaining that RPM services are considered to be evaluation and management (E/M) services; and
  • Explaining that practitioners may furnish RPM services to patients with acute conditions as well as patients with chronic conditions.

Professional Scope of Practice

Under the Proposed Rule, CMS looks to make final certain allowances available under the federal public health emergency declaration, including allowing certain nonphysician practitioners to supervise diagnostic testing within state limits, so long as such nonphysician practitioners maintain required relationships with collaborating or supervising physicians.

CMS also clarifies that pharmacists fall within the regulatory definition of “auxiliary personnel” under the “incident to” regulations, meaning that pharmacists may provide services incident to the services, and under the appropriate level of supervision, of the billing physician or nonphysician practitioner, if payment for the services is not made under the Medicare Part D benefit.

Additionally, CMS no longer believes that all maintenance therapy services require that a physical therapist or occupational therapist personally perform such services. In turn, CMS proposes allowing physical and occupation therapists the same discretion to delegate the performance of maintenance therapy services, as clinically appropriate, to a therapy assistant.

Direct Supervision by Interactive Telecommunications Technology

In the Proposed Rule, CMS proposes allowing providers to provide “direct supervision” by using “real-time, interactive audio and video technology” through December 31, 2021. In connection with this proposal, CMS has asked stakeholders whether there should be any guardrails included for this policy and to highlight what risks this policy may introduce to beneficiaries as they receive care from practitioners that would supervise care virtually in this way.

Comments may be submitted online at

Reporter, Michelle Huntsman, Houston, +1 713 751 3211,

CMS Proposes Quality Program Changes, Increased OPPS and ASC Medicare Payments for 2021

On August 4, 2020, CMS proposed its annual rule adjusting the Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System, as well as changes to quality reporting programs and other important policies described in detail below (the Proposed Rule). Overall, CMS proposes to increase OPPS and ASC payments by 2.6%, reflecting an increase of nearly $7.5 billion and $160 million, respectively, over CY 2020 figures. Comments are due to CMS by 5:00 p.m. EST on October 5, 2020.

The thrust of the policies in the Proposed Rule further highlights CMS’s trend of increasing the amount of services available in varying sites of service, part of CMS’s “site neutrality” focus. The Proposed Rule proposes several significant site-of-service-focused changes, including the elimination of the Inpatient Only list over a three-year period. The Proposed Rule’s policies take effect January 1, 2021 following the comment period ending on October 5, 2020. 

Adjustments to OPPS and ASC Payments

For OPPS generally, the Proposed Rule seeks, among other things, to “recalibrate” the ambulatory payment classification (APC)-relative payment weights for services furnished on or after January 1, 2021 and before January 1, 2022, using the same methodology described in the CY 2020 OPPS/ASC final rule using the updated CY 2019 claims data.  CMS would therefore recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department services with the most recent available data for APC group weight calculations. CMS also proposes to continue using hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. (The Proposed Rule offers other detailed proposals affecting OPPS payments, and readers should consult the full text of the Proposed Rule for specific inquiries.)

As to OPPS payment rates, CMS proposes for CY 2021 to increase its payment rates by an outpatient department fee schedule increase factor of 2.6%. CMS expects the result of this 2.6% increase will be total payments to OPPS providers of approximately $83.9 billion, which is an increase of almost $7.5 billion from CY 2020. 

CMS arrived at the 2.6% figure by subtracting a multifactor productivity adjustment (required by the ACA) of 0.4% from a 3.0% hospital inpatient market basket percentage increase for inpatient services (paid under the hospital Inpatient Prospective Payment System, or IPPS). The Proposed Rule also proposes to continue implementation of the 2.0% reduction in hospital payments when hospitals fail to meet outpatient quality reporting requirements.

As to the ASC Payment System updates, CMS also proposes to increase payment rates by 2.6% and continues its policy of updating ASC rates using the hospital market basket update. The increase is proposed to apply only to ASCs that meet the quality reporting requirements of the ASC Quality Reporting (ASCQR) program. CMS calculated the proposed increase based on a market basket percentage increase of 3.0% minus a 0.4% proposed multifactor productivity adjustment.

The ASC payment increase will result in estimated total payments in CY 2021 of approximately $5.45 billion, representing an increase over CY 2020 of nearly $160 million.

Proposed Elimination of the Inpatient Only (IPO) List

The Proposed Rule seeks to eliminate the IPO list in a three-year transitional period, phasing it out by CY 2024, to allow certain services to take place in the outpatient setting. The procedures removed from the list would ultimately become subject to the 2-midnight rule, following the two-year exemption from medical review activities put in place by the CY 2020 OPPS/ASC final rule and proposed for continued implementation by this Proposed Rule.

Approximately 300 musculoskeletal-related services will be eliminated from the IPO list in the initial tranche if the proposals are finalized. The Proposed Rule seeks comments on which additional services should be removed from the IPO list in CY 2021. The Proposed Rule also seeks comment on whether a three-year transition period away from the IPO list is appropriate and how the public would prefer CMS to remove clinical families or specific services from the IPO list.

ASC Covered Procedures List

The Proposed Rule also seeks to add 11 surgical procedures to the ASC covered procedures list, including, most notably, total hip arthroplasties (CPT 27130). Other proposed inclusions on the list include vaginal colpopexy, transcervical uterine fibroid ablation, intravascular lithotripsy, and certain mastectomies, among others. Beyond these proposed additions, CMS has since 2018 added 28 procedures to the covered procedures list.

CMS also proposes two alternative methods for adding further procedures to the ASC covered procedures list. First, CMS proposes to establish a public nomination process beginning in CY 2021 so that various stakeholders (such as professional specialty societies) can suggest (under certain parameters) procedures that can be safely performed in the ASC setting. CMS would review the suggestions and propose them for addition through annual rulemaking. Under the second alternative, CMS proposes to revise the criteria for covered surgical procedures found at 42 C.F.R. § 416.166 by eliminating five of the general exclusions and keeping the general standards.  This modification would result in approximately 270 surgery or “surgery-like” codes being added to the covered procedures list. As part of its proposal, CMS is also seeking comment on whether the conditions for coverage for ASCs should be revised if the second alternative is adopted.

Updates to Quality Reporting and Rating Programs

The Proposed Rule updates requirements for the Hospital Outpatient Quality Reporting (HOQR) Program, ASCQR Program, and the Overall Star Rating system. CMS noted in the Proposed Rule it intends to “revise and codify previously finalized administrative procedures and to propose and codify an expanded review and corrections process,” although it is “not proposing any measure additions or removals for” either the HOQR or ASCQR programs. Namely, the Proposed Rule would redesignate certain paragraphs related to HOQR program regulations and codify the program’s statutory authority under 42 C.F.R. § 419.46. The Proposed Rule also seeks to update HOQR annual submission deadlines, among other changes.

The Proposed Rule further proposes updates to the Overall Hospital Quality Star Rating system. CMS notes it proposes to “update and simplify” how the ratings are calculated, reduce the total number of measure groups, and stratify the Readmission measure group based on proportion of dual-eligible patients.

Specifically, CMS proposes to retain much of its current methodology, such as the annual refresh, included measures, measure score standardization, and use of k-means clustering for ratings assignments.  However, CMS proposes updating other elements of the methodology, such as:

  • Creating a new “Timely and Effective Care” group from three existing process measure groups (meaning the Overall Star Rating would now have five groups);
  • Using a simple average methodology to calculate measure group scores, instead of the current statistical Latent Variable Model;
  • Stratifying the Readmission measure group;
  • Changing the reporting threshold to receive an Overall Star Rating by requiring hospitals to report at least three measures for three measure groups; and
  • Applying a peer grouping methodology based on the number of measure groups.

Among other rating program updates in the Proposed Rule, CMS further proposes to include critical access hospitals (CAHs) and Veterans Health Administration (VHA) hospitals in the Overall Star Rating program.

Updated Policies for Physician-owned Hospitals

The Proposed Rule further seeks to permit expansion of physician-owned hospitals qualifying as “high Medicaid facilities” such as by altering the method for counting beds in a hospital’s baseline number of operating rooms, procedure rooms, and beds.

CMS proposes to remove what it views as “unnecessary regulatory restrictions” on high Medicaid facilities and include beds in a physician-owned hospital’s baseline, as allowed by state licensure laws. Specifically, the Proposed Rule seeks to remove the cap on the number of additional operating rooms, procedure rooms, and beds that can be approved in an expansion exception, as well as remove the restriction that the expansion must occur only in facilities on the hospital’s main campus. 

The Proposed Rule also would permit a high Medicaid facility to apply for an exception more than once every two years.

Adjustments for Cancer Hospital Payments

The Proposed Rule also seeks to continue additional payments to cancer hospitals to equalize the cancer hospital’s payment-to-cost ratio (PCR) when measured against the weighted average PCR for other OPPS hospitals based on recent cost report data. Because the implementation of the 21st Century Cures Act requires the weighted average PCR to be reduced by 1.0%, CMS proposes a target PCR of 0.89 for use in CY 2021 for cancer hospitals’ payment adjustments at cost report settlement. The payment adjustments will be the cancer hospitals’ additional payments needed to result in a PCR of 0.89.

Updates to 340B Program

Following on the results of a hospital acquisition cost survey, the Proposed Rule also proposes to pay for drugs acquired under the 340B program at ASP minus 34.7%, plus an add-on of 6% of the product’s ASP, leading to a net payment rate of ASP minus 28.7%.  CMS also proposes the alternative of continuing its current policy of paying ASP minus 22.5% for 340B-acquired drugs.

The Proposed Rule also proposes a policy much like that implemented in 2018 for the exemption of rural sole community hospitals (SCHs), PPS-exempt cancer hospitals, and children’s hospitals from the 340B payment policy to be effective starting in CY 2021.

As noted above, the Proposed Rule contains numerous other proposed policy changes not summarized in this article; readers should contact King & Spalding with specific questions.

The Proposed Rule is scheduled to be published in the Federal Register on August 12, 2020, and will be available online here.  The full text of the Proposed Rule is available here. The CMS Fact Sheet summarizing the Proposed Rule is available here.

Reporters, Lee T. Nutini, Chicago, +1 312 764 6910, and Christopher P. Kenny, Washington, D.C., +1 202 626 9253,

CMS Issues Proposed Regulation Regarding Treatment of Part C Days Prior to October 1, 2013

On August 6, 2020, CMS published a proposed regulation that would require patient days attributable to Medicare Part C beneficiaries (Part C days) to be counted in the Medicare fraction of the disproportionate share hospital (DSH) payment formula for cost reporting periods beginning before October 1, 2013.  This regulation would treat Part C days in the same way they were treated under the policy that the Supreme Court invalidated on procedural grounds in last year’s decision in Azar v. Allina.  CMS is seeking to reinstate its invalidated policy by invoking its statutory authority to adopt retroactive rules.  As explained below, this proposed rule is the culmination of nearly a decade of proceedings concerning the treatment of Part C days prior to October 1, 2013.

In the inpatient prospective payment system (IPPS) proposed rule for FY 2004, CMS proposed to “clarify” its practice of excluding Part C days from the Medicare fraction of the DSH calculation.  68 Fed. Reg. 27154, 27208 (May 19, 2003). In the 2005 IPPS final rule, however, CMS reversed course and adopted a policy to treat Part C days as being days entitled to benefits under Part A and include them in the Medicare fraction.  69 Fed. Reg. 48916, 49099, 49246 (Aug. 11, 2004).   The D.C. Circuit, however, stated that CMS’s “surprise switcheroo” violated notice-and-comment rulemaking and was not a logical outgrowth of its proposed rule.  See Allina Health Services v. Sebelius, 746 F.3d 1102, 1106 (D.C. Cir. 2014) (Allina I).  The D.C. Circuit left open, however, the question of whether CMS was required to undertake notice and comment rulemaking to adopt its policy of treating Part C days as being “entitled to benefits under Part A.”  Allina I, 746 F.3d at 1106.

In 2017, the D.C. Circuit answered that question by stating that the Medicare statute required CMS to undertake notice and comment rulemaking before changing its prior standard of excluding Part C days from the Medicare fraction.  See Allina Health Services v. Price, 863 F.3d 937 (D.C. Cir. 2017) (“Allina II”).   The Supreme Court upheld the D.C. Circuit.  Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019). 

Typically, invalidation of a final rule would reinstate the status quo ante. CMS contends, however, that it cannot simply return to its prior practice of excluding Part C days because that, too, would violate the Supreme Court’s ruling that any policy regarding the treatment of Part C days requires notice-and-comment rulemaking.

While the Medicare statute generally prohibits retroactive rulemaking, it contains two limited exceptions if: “(i) such retroactive application is necessary to comply with statutory requirements; or (ii) failure to apply the change retroactively would be contrary to the public interest.” 42 U.S.C. § 1395hh(e)(1)(A).  To justify its retroactive rulemaking here, CMS has invoked both exceptions.

CMS contends that retroactive rulemaking is compelled by the statute because the Supreme Court has interpreted the statute as requiring the agency to engage in rulemaking before it can establish a policy concerning the treatment of Part C days prior to October 1, 2013.  CMS further contends that failure to engage in retroactive rulemaking would be contrary to the public interest because CMS would not be able to make DSH payments to hospitals.  Both of these contentions are highly dubious and, if the rule is finalized as proposed, there will almost certainly be further litigation regarding its procedural and substantive validity.

A copy of the proposed rule is available here.  Comments to the proposed rule are due October 5, 2020.

Reporter, Daniel J. Hettich, Washington D.C., + 1 202 626 9128,

Executive Order Looks to Extend Access to Telemedicine Beyond the Pandemic and Increase Access to Care in Rural Communities

On August 3, 2020, President Trump signed an Executive Order that could potentially extend the easing of restrictions on telemedicine that were put in place during the COVID-19 public health emergency (PHE) beyond the pandemic and increase access to care in rural areas.

Telemedicine use has rapidly accelerated during the pandemic.  A recent HHS study found that Medicare beneficiaries’ frequency of telehealth primary care visits increased from less than one percent in February to over forty percent in April.  CMS also performed an internal analysis showing a dramatic increase in Medicare beneficiaries’ use of telemedicine services.  In all, over 10.1 million Medicare beneficiaries received a telemedicine service between March and July 2020.

To decrease the need for patients to seek in-person care, CMS implemented several measures during the PHE that have made telemedicine a viable alternative to in-person care for Medicare beneficiaries.  Using its 1135 waiver authority, CMS lifted geographic and site of service restrictions permitting Medicare beneficiaries to receive services at home, and also expanded the types of providers that are permitted to use telemedicine to deliver care.  CMS also used its emergency rulemaking authority to expand the types of services that could be delivered using telemedicine.  The Executive Order has tasked the Secretary of HHS with reviewing the measures put in place during the PHE and proposing a regulation in the next 60 days that would extend these telemedicine flexibilities beyond the PHE.

In addition to expanding telemedicine capabilities, the Executive Order also addresses access to care in rural communities.  The Executive Order directs the Secretary of HHS to submit a report outlining policy initiatives, past and future, that address maternal mortality, mental health, and barriers to care in rural communities, including regulations that limit provider availability in rural areas.  The Secretary of HHS and Secretary of Agriculture are also directed to work with the FCC and other agencies to improve the communications infrastructure in rural communities.  In addition, the Secretary of HHS will announce a new payment model pursuant to Section 1115A of the Social Security Act that permits rural providers to have more flexibility from the Medicare rules, with the goal of ensuring that providers receive adequate and consistent reimbursement.

Reporter, Taylor Whitten, Sacramento, +1 916 321 4815,

HHS Releases Additional Details for $5 Billion in Nursing Home Relief

On Friday, August 7, 2020, HHS issued a press release detailing the next CARES Act-authorized Provider Relief Fund (PRF) distribution for nursing homes.  The PRF distribution will total approximately $5 billion.  Unlike previous distributions, a portion of the distribution will be linked to nursing home performance metrics.  The non-performance-based distributions are expected to occur in mid-August while the performance-based distributions are scheduled to occur throughout the fall.

First announced in late July, the $5 billion disbursements will be administered to nursing homes through the Health Resources and Services Administration (HRSA) under the $2 trillion stimulus package authorized under the CARES Act.  The press release indicates that approximately $2.5 billion of the funding is available to support increased testing, staffing, and PPE needs.  There will also be funding available for establishing COVID-19 isolation facilities.

The remaining of the $5 billion will be linked to nursing home performance.  According to the press release, CMS will consider the prevalence of the virus in the nursing home’s local geography and will base its evaluation of performance on the nursing home’s ability within this context to minimize COVID-19 spread and related fatalities among its residents.  In a statement by HHS Secretary Alex Azar, “linking these funds to performance in controlling COVID-19 . . . provid[es] powerful tools and incentives for nursing homes to better protect their residents from the virus.”  According to the press release, the performance-based distribution for nursing homes comes in light of almost 40% of all U.S. COVID-19 deaths categorized as nursing-home related.

The press release is available here

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579,

HHS OIG Permits Labs to Offer Free COVID-19 Antibody Tests and Oncology Practices to Offer Free Lodging in Certain Circumstances

OIG has updated its FAQs regarding the application of its administrative enforcement authorities to arrangements directly connected with COVID-19 with the addition of two new FAQs. On August 4, 2020, the OIG issued an FAQ permitting labs to offer free COVID-19 antibody tests; and on July 29, 2020, it published an FAQ allowing oncology practices to offer free lodging where lodging facilities have closed and patients otherwise would have qualified for free or reduced lodging.

Free COVID Antibody Tests

OIG states that a clinical laboratory may provide free COVID-19 antibody testing to patients, including federal healthcare program beneficiaries, who are contemporaneously undergoing other medically necessary blood tests at the lab.  Although providing free lab testing to federal healthcare program beneficiaries implicates the federal anti-kickback statute (AKS) and the Beneficiary Inducements CMP, OIG believes the proposed arrangement offers substantial public health benefits by identifying additional potential convalescent plasma donors and providing valuable public health data through reporting antibody testing results to public health agencies. 

OIG identified several safeguards labs should implement to minimize risk of fraud and abuse: (1) the physicians ordering the laboratory tests cannot receive payments or anything else of value from the laboratory in connection with the free antibody testing program; (2) the patients receiving the laboratory tests cannot receive payments or anything of value, other than the free COVID-19 antibody test, from the laboratory in connection with the free antibody testing program; (3) the tests should be offered only to patients receiving other medically necessary blood tests; (4) no payor, including the patient, a commercial insurance company, or a federal healthcare program, should be billed for or pay any costs in connection with the COVID-19 antibody tests; and (5) the antibody tests are approved by the FDA or are subject to an FDA Emergency Use Authorization.

Free Oncology Lodging

In certain circumstances, federal healthcare program beneficiaries with cancer who are receiving chemotherapy or radiation treatment qualify for free or discounting housing at nonprofit lodging facilities near treatment sites while their treatment is ongoing.  In its FAQ, OIG recognizes that some of these facilities have closed as a result of COVID-19, causing some cancer patients to travel longer distances from their homes to receive medically necessary cancer treatment.  If an oncology practice wishes to offer free or discounted lodging to financially needy patients who have qualified for free or discounted lodging at a nonprofit facility that is now closed as a result of COVID-19, OIG believes that an oncology practice’s provision of free or discounted lodging to these patients presents a low risk of fraud and abuse if certain conditions are met.

OIG identified the following safeguards to minimize the risk of fraud and abuse in providing such lodging: (1) the patient resides at least 50 miles from the treatment site; (2) the patient is an established patient of the oncology practice who has already scheduled chemotherapy or radiation treatment prior to the offer of free or discounted lodging; (3) the patient’s physician determines that free or discounted lodging would facilitate access to care while the patient is receiving chemotherapy or radiation treatment; (4) the oncology practice reasonably believes that the patient would have qualified for free or discounted housing during treatment at a nonprofit lodging facility that is closed as a result of the COVID-19 public health emergency; (5) the remuneration is in-kind, such as a direct payment to a hotel or motel for the appropriate number of nights; (6) the hotel or motel is located in close proximity to the treatment site; (7) the practice does not advertise the availability of free or discounted housing or otherwise use the availability of this remuneration for patient recruitment; and (8) the lodging is provided during the COVID-19 public health emergency.

The new FAQs are published as part of OIG’s ongoing effort to ensure healthcare providers have the regulatory flexibility necessary to respond to COVID-19 concerns.  Providers should note that, unlike OIG’s advisory opinion process, OIG’s published FAQs are “informal feedback” that do not bind or obligate the HHS, the DOJ, or any other agency.  OIG’s FAQs also do not have any effect on any other federal, state, or local statute, rule, regulation, or other law that may be applicable to a certain question answered.

All of the OIG FAQs regarding COVID-19, including these two most recent FAQs, can be found here.

Reporter, Ariana Fuller, Los Angeles, +1 213 443 4342,  

California Bill Giving Attorney General Authority to Regulate and Approve or Deny Healthcare Transactions Gets Legislative Push

On August 4, 2020, the California State Assembly referred SB-977 to the Committee on Appropriations, ahead of an August 31 deadline to send bills to Governor Gavin Newsom.  SB-977, titled “Health care system consolidation: Attorney General approval and enforcement,” would grant the California Attorney General (AG) expansive authority to review, and approve or deny, changes of control and acquisitions of health care facilities and providers. 

The bill would require health care systems, private equity groups, and hedge funds to provide notice to, and obtain written consent of, the AG prior to any change of control or acquisition of or with a healthcare facility or provider. The term “acquisition” is broadly defined as the “direct or indirect purchase in any manner . . . of all, or any part of, the assets of a health care facility or provider,” and includes, but is not limited to, a “lease, transfer, exchange, option, receipt of a conveyance, creation of a joint venture, or any other manner of purchase.” 

For acquisitions or changes in control that are subject to review, the bill would permit the AG to deny consent unless the change of control or acquisition will result in a “substantial likelihood of clinical integration, a substantial likelihood of increasing or maintaining the availability and access of services to an underserved population, or both.” The AG may also deny consent to a change of control or an acquisition “if there is a substantial likelihood of anticompetitive effects that outweigh the benefits of a substantial likelihood of clinical integration, a substantial likelihood of an increase in, or maintenance of, services to an underserved population, or both.” Notably, the bill defines “clinical integration” as “a showing . . . that there will likely be a reduction in costs to the benefit of consumer care and outcomes or an increase in the quality of care as a result of the acquisition or change of control.” The bill also specifies that a “substantial likelihood of anticompetitive effects in providing hospital or health care services” includes, but is not limited to, “a substantial likelihood of raising market prices, diminishing quality, reducing choice, or diminishing availability of, or diminishing access to, hospital or health care services.”

The bill includes an abbreviated process for changes of control and acquisitions by a health care system of any of the following providers, groups of providers, or health facilities: (i) a provider, group of providers, or health facility for a transactional value of $1,000,000 or less; (ii) a county health facility; or (iii) an academic medical center that is acquiring or making a change of control with a provider, group of providers, or health care facility for any transactional value.

If passed, SB-977 would apply to transactions entered on or after January 1, 2021. The bill and its legislative history can be found here.

Reporters, Jonathan Shin, Los Angeles, +1 213 443 4334,, and Kyle Gotchy, Sacramento, +1 916 321 4809,


CMS Finalizes Inpatient Rehabilitation Facility PPS Rule for FY 2021 – On August 4, 2020, CMS issued Final Rule CMS-1729-F, which updates Medicare payment policies and rates for IRFs under the Prospective Payment System for FY 2021, beginning October 1, 2020 (the Final Rule).  The Final Rule updates IRF PPS rates by 2.4 percent, based on a 2.4 percent market basket increase with no multifactor productivity adjustment.  Additionally, CMS is increasing aggregate payments by 0.4 percent to maintain outlier payments at 3 percent of total payments, resulting in an overall update of 2.8 percent, which equates to roughly $260 million for FY 2021.  The Final Rule also makes permanent some flexibilities offered during the COVID-19 public health emergency, including waiver of the requirement for physicians to conduct a post-admission visit within 24 hours of a patient’s admission to an IRF.  The Final Rule was published in the Federal Register today, August 10, 2020, and is available here.

OIG Publishes Toolkit to Assist Health Care Facilities on Emergency Preparedness and Response – On August 3, 2020, the OIG published a toolkit entitled “Insights for Health Care Facilities from OIG’s Historical Work on Emergency Response,” which contains insights from OIG reports published from 2002 to 2020 about health care emergency preparedness and response based on facility actions during prior infectious disease outbreaks and natural disasters.  The toolkit breaks down prior relevant OIG reports into four categories: Facility Operations, Facility Staffing, Facility Coordination with Community, and Facility Emergency Planning.  The document contains descriptions, citations and links to those prior OIG reports.  The toolkit can be downloaded from the OIG website here.