News & Insights


December 16, 2019

Health Headlines – December 16, 2019

CMS to Repay Hospitals for 2019 Off-Campus Clinic Visit Services After King & Spalding Victory – CMS and its contractors have announced that beginning January 1, 2020, the agency will repay hospitals for underpaid evaluation and management (E/M) services provided in excepted off-campus provider-based departments during CY 2019.  This announcement is a direct result of the September 17, 2019 victory that King & Spalding won on behalf of more than 40 hospitals and health systems challenging the agency’s decision to reduce payments for such services by 30 percent.  In that decision, the United Stated District Court for the District of Columbia vacated CMS’s payment rule for excepted E/M services, holding that the payment rule was outside of the scope of CMS’s authority because the agency had tried to circumvent the requirement in the OPPS statute that payment adjustments be conducted in a budget-neutral manner.  CMS will now reprocess affected 2019 claims using a revised outpatient Pricer software that will ensure hospitals receive the difference between the full OPPS rate and the reduced rate they received.  Hospitals will not need to resubmit claims or take any other action.  Hospitals should monitor their claims payments beginning in January to confirm they have received the repayment.

While CMS will comply with the District Court’s ruling for 2019 claims, CMS also filed notice of its intent to appeal that ruling to the United States Court of Appeals for the District of Columbia Circuit on December 12.  In addition, CMS recently finalized its policy to reduce payment for these services by 60 percent in 2020, contending that the District Court’s ruling only applied to 2019 claims.  The 2020 rate cut is based on the same flawed legal justification as the 2019 decision the court invalidated.  King & Spalding plaintiffs will bring another challenge to that rate determination once those rates go into effect next year.

Reporters, Mark Polston, Washington, D.C., +1 202 626 5540,, Chris Kenny, Washington, D.C., +1 202 626 9253,, Joel McElvain, Washington, D.C., +1 202 626 2929,, and Nikesh Jindal, Washington, D.C., +1 202 383 8933,

U.S. House of Representatives Passes Drug-Pricing Bill – On December 12, 2019, the U.S. House of Representatives passed a major Democratic drug-pricing bill, H.R. 3, or the “Elijah E. Cummings Lower Drug Costs Now Act.”  If enacted, HHS would be allowed to negotiate the prices of up to 250 drugs: 125 drugs covered by Medicare Part D that account for the greatest spending under the Medicare prescription drug benefit and Medicare Advantage plans, and 125 representing greatest net spending to the U.S. public at large.

H.R. 3 would require HHS to negotiate prices for certain drugs, including maximum prices for insulin products and at least 25 single source, brand-name drugs in 2023, followed by at least 50 drugs each year, beginning in 2024.  For drugs selected for negotiation, prices would remain at negotiated levels until two or more generic or biosimilar versions of the drug are available.  Medicare and Medicare Advantage plans would be required to offer the negotiated prices, although Medicare Advantage and Part D prescription drug plans would be authorized to negotiate an even lower drug price.  The HHS-negotiated price would also be available to commercial payers as well as to employer and individual health plans. 

The negotiated maximum price may not exceed (1) 120% of the weighted average price in Australia, Canada, France, Germany, Japan, and the United Kingdom; or (2) if such information is not available, 85% of the U.S. average manufacturer price.  Drug manufacturers that fail to comply with H.R. 3’s negotiation requirements would be subject to an escalating tax penalty based on the annual gross sales of the drug selected for negotiation, as well as a civil monetary penalty.

H.R. 3 makes a series of additional changes to Medicare prescription drug coverage and pricing.  H.R. 3 would, for example, require drug manufacturers to issue rebates to HHS for covered drugs that cost $100 or more and for which the average manufacturer price increases faster than inflation.  H.R. 3 would also restructure the Medicare Part D benefit by establishing an annual out-of-pocket drug spending cap of $2,000 and eliminating the requirement that beneficiaries cover 5% of prescription costs after exceeding the “catastrophic” range.  

H.R. 3 is unlikely to move through the Senate, but certain elements of the Elijah E. Cummings Lower Drug Costs Now Act are included in a bipartisan bill, S. 2543, the Prescription Drug Pricing Reduction Act (PDPRA), approved by the Senate Finance Committee this summer and revised earlier this month.  The PDPRA includes the Lower Drug Costs Now Act’s drug manufacturer rebate requirements and the Medicare Part D annual out-of-pocket drug spending cap (set at $3,100 under the PDPRA).  House Republicans have also introduced an alternative bill, called the “Lower Costs, More Cures Act.”  The Lower Costs, More Cures Act would include a Medicare Part D spending cap of $3,100, requirements that drug manufacturers disclose pricing discounts, and a cap on insulin costs for seniors, among other drug pricing provisions that are summarized here

The full text of H.R. 3 is available here, the PDPRA is available here (with a December 2019 updated version available here), and the Lower Costs, More Cures Act is available here.

Reporter, Kristin Roshelli, Houston, +1 713 751 3263,

End of Year Flurry of Congressional Activity on Surprise Billing - Despite a year-end push, Congress will not resolve the surprise billing issue until the first quarter of 2020, at the earliest.  On Wednesday, December 11, 2019, House Ways and Means Committee Chairman Richard Neal (D-MA) and Ranking Minority Member Kevin Brady (R-TX) announced they had reached a bipartisan agreement to provide patient protection from surprise billing.  The Ways and Means proposal followed days after the announcement of a bipartisan, bicameral compromise agreement between House Energy and Commerce Committee (E&C) Chairman Frank Pallone (D-NJ) and Greg Walden (R-OR) and Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN).

The key point of conflict between the proposals concerns plan reimbursement of out-of-network providers in surprise billing scenarios.  The E&C-HELP plan would require insurers to pay an in-network market-based rate, subject to elective binding arbitration if that rate exceeds a threshold.  The Ways and Means proposal would instead implement a different process which “respects the private market dynamics between insurance plans and providers” by first calling for insurers and providers to work out differences on their own without interference.  If that fails, the parties have available an independent resolution process, though the details of the process are not set forth in Ways and Means’ preliminary proposal. 

“Surprise billing” occurs when a patient receives out-of-network emergency services or receives care from out-of-network clinician while being treated at an in-network hospital, resulting in an unexpectedly high out-of-network bill. 

The December 8, 2019 E&C-HELP plan to address surprise medical billing would be similar to the E&C’s “No Surprises Act” introduced in the House earlier this year (H.R. 3630).  The new, bipartisan compromise would limit patient cost-share for out-of-network emergency care and certain out-of-network care provided at in-network facilities to an in-network amount to be attributed to the patient’s in-network deductible.  The proposal would also set payer rates for out-of-network care in surprise billing scenarios to a median in-network rate in the geographic area.  This reimbursement rate would be subject to appeal by either provider or insurer if the median in-network rate was greater than $750, which would be resolved in “baseball-style, binding arbitration” referred to as “Independent Dispute Resolution (IDR).”  IDR would consider the “training, education and experience of the provider, the market share of the parties, and other extenuating factors such as patient acuity and the complexity of furnishing the item or service.”  It is unclear whether the median in-network rate would factor into arbitration.  The White House expressed support for this bipartisan compromise on December 9, 2019.

While the intent was that this legislation would be passed this year, the fact that the Senate HELP Ranking Minority Member Patty Murray (D-WA) did not endorse the E&C-HELP proposal, in addition to the fact that the Ways and Means proposal came with a call for delay in legislative action on the issue until next year, makes speedy passage of legislation less likely.  It is notable that neither the E&C-HELP nor the Ways and Means proposals were accompanied by legislative text outlining specific details. 

The Ways and Means proposal similarly holds patients harmless for cost-share at the in-network level in surprise billing scenarios.  The significant difference is in its proposed reconciliation process for disagreements between insurers and providers.  The agreement first calls for the parties to come to private agreement without interference.  If private negotiations fail, the proposal provides for “a robust, impartial, and structured process to settle payment.”  Only a vague outline of this process is provided, stating that the process includes, “[s]trong conflict-of-interest protections,” “[t]imely decisions,” and “[c]lear criteria.”  The only guidance as to a standard to be provided states that the “[e]vidence considered must include payments made to similar providers for similar services in similar areas.”  The proposal also calls for a disincentive for “frivolous use” in the form of a “reconciliation process fee” imposed on the losing party, and a “surcharge” imposed on parties that use the process excessively.  The proposal would not supersede surprise billing protections under State law. 

The text of H.R. 3630, introduced on July 9, 2019, can be found here. A summary of the E&C-HELP compromise plan can be found here. The Ways and Means Committee’s proposal can be found online here.

Reporter, Jonathan H. Shin, Los Angeles, +1 213 443 4334,

South Carolina Receives Approval from CMS to Implement Medicaid Work Requirements – On December 12, 2019, CMS approved South Carolina’s proposal for a demonstration project that would add work, or community engagement, requirements as part of the eligibility determinations for the state’s Medicaid plan.  South Carolina joins several other states in implementing Medicaid work requirements at a time when such requirements are being challenged in federal court.  For instance, the D.C. Circuit recently held oral argument on October 11, 2019, in the cases of Stewart v. Azar and Gresham v. Azar, which involve challenges to CMS’s approvals of demonstration projects with work requirements in Kentucky and Arkansas.

Medicaid is a cooperative federal-state program that aims to provide medical assistance to certain vulnerable populations; traditionally pregnant women, children, disabled, and the elderly.  Under the Affordable Care Act (ACA), certain states expanded Medicaid eligibility to certain low-income individuals under the age of 65.  The Medicaid statute sets out certain minimum requirements relating to promoting health assistance to vulnerable populations to which all state plans must conform.   States may also seek approval for experimental proposals, called “demonstration projects,” as long as they are consistent with the objectives of the Medicaid statute.  Under section 1115 of the Social Security Act, CMS may waive certain Medicaid requirements if CMS finds that a waiver is needed for the state to implement its demonstration project. 

Several states have obtained 1115 waivers to add new work requirements to their Medicaid programs, although no such waiver is currently in effect, either because the approval of the state’s demonstration project has been vacated in litigation or because the state has deferred implementation of the waiver.  South Carolina’s 1115 waiver, however, is different in that South Carolina is the first state that has not accepted the ACA’s Medicaid expansion to seek to impose work requirements on its existing Medicaid population.  South Carolina also seeks to extend Medicaid coverage to certain new populations, while still declining to accept the ACA expansion. 

In the Kentucky and Arkansas cases, a federal district court vacated the demonstration projects because, in the court’s view, CMS had not adequately considered whether work requirements would in fact help the state furnish medical assistance to its citizens.  A decision from the court of appeals is expected in the next several months.  That decision will likely control, or at least significantly inform, the validity of the South Carolina project.  Several stakeholders have already pledged to challenge South Carolina’s 1115 Waiver, which CMS approved in two separate letters available here and here

Reporter, Matthew W. Horton, Washington, D.C., + 1 202 626 9256,