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December 20, 2021

Health Headlines – December 20, 2021


Injunction Prohibiting CMS Enforcement of COVID-19 Vaccine Mandate for Healthcare Workers Partially Lifted, Potentially Opening Door for CMS to Resume Enforcement of Vaccine Mandate for Half of the U.S.
On Wednesday, December 15, 2021, the Fifth Circuit Court of Appeals denied the federal government’s petition for a stay pending appeal of the preliminary injunction issued by a federal district court in Louisiana that prohibits CMS from enforcing its COVID-19 vaccine mandate for healthcare providers. The Fifth Circuit, however, lifted the preliminary injunction as to states that were not party to the lawsuit, finding that a nationwide injunction was unwarranted. Accordingly, because of the Fifth Circuit’s order, the preliminary injunction remains in effect for the 14 states that are plaintiffs in that case. Together with injunctions issued by other federal courts, CMS is enjoined from implementing or enforcing the vaccine mandate as to 25 states. It remains unclear whether CMS will resume enforcing its COVID-19 vaccine mandate as the other remaining 25 states and the District of Columbia while the lawsuits challenging the mandate continue to be litigated.

This litigation involves a challenge filed in the U.S. District Court of the Western District of Louisiana by 14 plaintiff states – Alabama, Arizona, Georgia, Idaho, Indiana, Kentucky, Louisiana, Mississippi, Montana, Ohio, Oklahoma, South Carolina, Utah and West Virginia – of a November 5, 2021 CMS Interim Final Rule, “Medicare and Medicaid Programs; Omnibus COVID-19 Health Care Staff Vaccination,” 86 Fed. Reg. 61 (Nov. 5, 2021), which would require most staff working in certified Medicare or Medicaid provider facilities and suppliers to be fully vaccinated against COVID-19 by January 4, 2022, and to have received their first shot by December 6, 2021.  The Interim Final Rule, which does not have a sunset clause or expiration date, took effect on November 5, 2021.  CMS cited “good cause” to issue the rule without first engaging in notice-and-comment, but instead provided a 60-day comment period that runs concurrent with the rule’s implementation.

On November 30, 2021, the Louisiana District Court issued a nationwide preliminary injunction preventing CMS from enforcing its COVID-19 vaccine mandate, finding, among other things, that the mandate did not comply with the Administrative Procedure Act. The December 15, 2021, Fifth Circuit order denied the federal government’s request for a stay of the district court’s order pending appeal, concluding that the federal government failed to make a “strong showing of likely success on the merits.” However, the Fifth Circuit lifted the nationwide injunction except for the plaintiff-states on grounds that other courts, namely the Eleventh Circuit, had denied  similar injunctive relief against the mandate, and the possibility that “many states that have not brought suit may well have accepted and even enforced the vaccination rule.” The Fifth Circuit further noted that the district court issuing the injunction “gave little justification” for the need for the nation-wide scope of injunction issued.  

As noted by the Fifth Circuit, the Louisiana District Court lawsuit is one of several ongoing lawsuits being litigated in U.S. federal courts challenging CMS’s COVID-19 vaccine mandate. The Fifth Circuit order followed an injunction issued by a Missouri District Court in a similar federal court challenge that applied only to that lawsuit’s 10 plaintiff states – Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota and Wyoming. On December 13, 2021, the Eight Circuit Court of Appeals denied the federal government’s request to stay the district court’s order pending appeal. 

The State of Texas also brought its own separate lawsuit challenging the CMS mandate. Immediately following the December 15 Fifth Circuit order, the federal district court in Texas held an emergency hearing and issued an order enjoining CMS from implementing or enforcing the vaccine mandate in the State of Texas.

Although these various courts have effectively enjoined CMS from implementing or enforcing the vaccine mandate in 25 states, the federal government has prevailed before some courts. The State of Florida brought its own lawsuit challenging the mandate, and the federal district court in Florida denied the motion for preliminary injunction finding that Florida had not made an adequate showing of irreparable harm. Florida sought a stay of the order pending appeal, but the Eleventh Circuit denied that request, holding that Florida was not likely to succeed on the merits, nor had it made a showing of irreparable harm. The State of Florida has sought rehearing en banc by the full Eleventh Circuit. 

In light of these various legal challenges, CMS issued a memorandum on December 2, 2021, stating that it “will not enforce” the COVID-19 vaccine mandate “while there are court-ordered injunctions in place prohibiting enforcement” of the mandate. The CMS memo referenced the injunctions issued by District Courts in Missouri and Louisiana, and stated that “while these preliminary injunctions are in effect,” CMS “has suspended activities related to the implementation and enforcement of this rule pending future developments in the litigation.” The memo is unclear as to whether the enforcement suspension would continue to apply nationwide irrespective of the scope of these “court-ordered injunctions.” Indeed, now that the rule is longer subject to aa nationwide injunction per the Fifth Circuit order, CMS has yet to publicly clarify whether this change in n impacts the applicability of the enforcement suspension as to the 25 states not covered by any court-order currently. 

There is no official indication yet as to when CMS will resume enforcement activity as to the states and jurisdictions that are not subject to any order enjoining implementation or enforcement of the COVID-19 vaccine mandate. However, the American Hospital Association has stated in a December 18, 2021 entry in its online blog that “AHA has confirmed with CMS that this statement applies nationwide and remains accurate even after the Fifth Circuit’s order staying the nationwide effect of the Louisiana district court’s preliminary injunction. In other words, CMS is not currently enforcing its vaccine mandate in all states, including those where the mandate is not presently judicially stayed.” 

On Thursday, December 17, 2021, the Department of Justice filed a petition with the Supreme Court seeking a stay of the injunctions issued by the Louisiana and Missouri district courts pending appeals before the Circuit Courts, and thus permit CMS’s COVID-19 vaccine mandate to proceed. The federal government states in the filing that the “application seeks a stay of that injunction to allow the Secretary’s urgently needed health and safety measure to take effect before the winter spike in COVID19 cases worsens further.” The Supreme Court has set a deadline of December 30 for the states to respond to the federal government’s stay petition.  

As things stand now, preliminary injunctions enjoin the COVID-19 vaccine mandate as to the following 25 states: Alabama, Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Missouri, Mississippi, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, West Virginia, and Wyoming.

The following jurisdictions are not covered by any court-ordered injunctions: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia.

CMS’s November 5, 2021 Interim Final Rule, “Medicare and Medicaid Programs; Omnibus COVID-19 Health Care Staff Vaccination,” can be found here. A copy of the December 2, 2021 CMS memo suspending enforcement of the COVID-19 vaccine mandate can be found here. A copy of the December 15, 2021 Fifth Circuit opinion staying the nationwide injunction barring enforcement of the vaccine mandate can be found here. A copy of the DOJ’s petition with the U.S. Supreme Court can be found here.

Reporters, Nikesh Jindal, Washington, D.C., +1 202 383 8933, njindal@kslaw.com, Christopher (Chris) Kenny, Washington, D.C., +1 202 626 9253, ckenny@kslaw.com, Jonathan Shin, Atlanta, +1 213 443 4334, jshin@kslaw.com.

Don’t Be Surprised – The No Surprises Act Takes Effect January 1, 2022
The No Surprises Act (the Act), enacted December 27, 2021, will take effect on January 1, 2022. The No Surprises Act puts into place important patient protections from surprise medical  bills, while imposing significant obligations on healthcare providers and facilities. The No Surprises Act also ushers in major changes to provider reimbursement for out-of-network services, the effects of which are rippling throughout the managed care industry. The key provisions that providers and facilities need to be aware of prior to January 1, 2022 are summarized below.

Overview of the No Surprises Act
In cases where the No Surprises Act applies, providers and facilities are limited to billing patients the cost-sharing, deductibles, and out-of-pocket maximums that the patient would have paid if they sought service “in-network.” Providers and facilities may not “balance” bill patients—i.e., billing more than the patient’s in-network cost sharing amounts—unless certain exceptions apply. Payors, in turn, must issue payment directly to providers, and are prohibited from issuing payments to patients.

The Act’s surprise billing requirements apply in two circumstances: (1) when emergency services are provided by an out-of-network provider or facility; and (2) when non-emergency services are provided by out-of-network providers at in-network facilities. The Act also applies to certain post-stabilization services as discussed below. In addition to hospital-based emergency services, the Act covers services provided at an independent freestanding emergency department and urgent care centers, to the extent state law permits urgent care centers to perform emergency services.
With respect to non-emergency services, the protections apply when a health care facility has a contractual relationship directly or indirectly with a plan and the beneficiary receives non-emergency treatment at the facility from a non-participating provider. A health care facility is defined as (1) a hospital; (2) a hospital outpatient department; (3) a critical access hospital; or (4) an ambulatory surgical center. An urgent care center is not a health care facility for the purpose of non-emergency services.

The No Surprises Act applies widely to payors who offer individual, large group and small group health plans, self-insured (ERISA) health insurance markets, as well as to plans grandfathered under the Affordable Care Act and Federal Employee Health Benefit Plans. The No Surprises Act does not apply to fee-for-service Medicare, Medicare Advantage plans or Medicaid managed care plans.

Notice and Consent to Balance Bill
The No Surprises Act allows nonparticipating providers to balance bill if they furnish notice to an insured patient who acknowledges receipt of the notice and consents to waiving their balance billing protections under the Act. Notice and consent is only required if the provider or facility intends to balance bill the patient instead of limiting patient billing to in-network cost-sharing amount.   

Patients may waive their balance billing protections in the following cases only: (1) when non-emergency services are furnished by a non-participating provider at a participating facility (for non-emergency services at a participating facility, the facility must have available at least one in-network provider available to render the services the patient is seeking for consent to be available); (2) when post-stabilization services are furnished by non-participating providers; or (3) when post-stabilization services are furnished at a non-participating emergency facility. In the latter two cases, waiver is only permitted if the provider determines the patient can travel by non-emergency medical or non-medical transportation and is in a condition to receive and understand consent. A waiver cannot be obtained for pre-stabilization emergency services. A patient also cannot be asked to waive balance billing protections for the following items or services: (i) items and services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology, whether provided by a physician or non-physician practitioner; (ii) items and services provided by assistant surgeons, hospitalists, and intensivists; (iii) diagnostic services, including radiology and laboratory services; and (iv) items and services provided by a nonparticipating provider if there is no participating provider who can furnish such item or service at such facility. 

The notice must clearly identify each non-participating provider or facility and the services they will be rendering. It must also provide a good faith estimate of the amount the non-participating provider or facility expects to bill the plan for the item or services for which the provider seeks consent.

Disclosure of Patient Protections
Providers and facilities are required to make available in a public area and post on their websites a written disclosure explaining patient protections against surprise billing under the No Surprises Act. Providers and facilities are also required to furnish a one-page notice to the beneficiary on or before the date and time when the provider or facility requests payment from the individual. If no payment is requested from the individual, then notice must be provided on the date the provider or facility submits a claim to the plan or issuer. The one-page notice and public disclosures must include an explanation about balance billing prohibitions in cases of emergency and non-emergency services; information about state law requirements about balance billing; and contact information for state and federal agencies that an individual may contact if they suspect a provider is violating the requirements in the notice. The publicly available notice must be posted prominently in facilities at a central location such as the check-in counter. If no public location exists, then no sign is required. 

Importantly, a provider is only required to give a disclosure notice to the individuals to whom the provider provides items and services at a health care facility or in connection with a health care facility visit. Providers may also enter into a written agreement with a facility to provide the disclosure to the individual in order to avoid duplicate disclosures that may confuse the individual.

Good Faith Estimates to Uninsured and Self-Pay Patients
Providers and facilities must ask about an individual’s health insurance coverage status prior to furnishing non-emergency services. If the patient is uninsured or self-pay and the item or service is being scheduled at least three business days in advance, the provider or facility must provide a good faith estimate of expected charges, in clear and understandable language, for furnishing items and services. The No Surprises Act also requires good faith estimates to be provided to insured patients upon scheduling or request, but HHS has deferred this requirement pending future rulemaking in 2022.  The expected charges must include the actual charge expected to be billed, accounting for any discounts, for the scheduled or requested item or service, plus any item or service that is reasonably expected to be provided in conjunction with the scheduled or requested item or service and items, including those items and services reasonably expected to be provided by another provider or facility. The good faith estimate must include the expected billing and diagnostic codes for each such item or service. If a good faith estimate is inaccurate, it is subject to challenge by the patient.

The provider or facility with whom the patient scheduled the item or service—the “convening provider”—is responsible for collecting the good faith estimate amounts from all co-healthcare providers who are expected to provide care in conjunction with the scheduled item or service. HHS has stated it will exercise its discretion not to enforce this requirement until 2023 but convening providers should make a good faith effort to comply in the interim.
If the provider bills the patient an amount that exceeds the good faith estimate by $400 or more, the patient can challenge the billed charge in the patient-provider dispute resolution process within 120 days of receipt of the first bill from the provider. A selected dispute resolution entity (SDR entity) appointed by HHS will resolve the dispute. The good faith estimated charge is presumed to be the appropriate amount unless, through written submissions, the provider or facility can demonstrate the difference in cost reflects the cost of a medically necessary item or service and that the difference is due to unforeseen circumstances that could not have reasonably been anticipated by the provider or facility when the good faith estimate was provided. If a provider or facility fails to provide a good faith estimate, the patient may not challenge the billed amount in the Act’s patient-provider dispute resolution process, however, the provider or facility may be subject to enforcement actions. The Act allows HHS to impose penalties of up to $10,000 per violation.

Payment Standards
The No Surprises Act imposes the following payment rules. For patients, their cost sharing obligation must not be greater than the amount they would pay if they received their services from a participating provider (unless the patient has given consent). Under the Act, a patient’s cost sharing is generally calculated as if the total amount that would have been charged for the services by a participating emergency facility or participating provider were equal to the “recognized amount.” The “recognized amount” is defined as: (1) the amount determined by an applicable All Payer Model Agreement; (2) if there is no All Payer Model Agreement, then the amount determined by applicable state law; and (3) if there is no applicable state law, then the lesser of the amount billed by the provider or facility and the Qualifying Payment Amount (QPA). The QPA is the median of the contracted rates recognized by the plan or issuer on January 31, 2019, for the same or similar item or service provided in the same or similar specialty and in a geographic region in which the original item or service was furnished. The QPA is increased to account for inflation. The plan calculates the QPA and is required to disclose the QPA to the provider in the initial payment or notice of denial.

As for plans, the Act obligates a plan to pay the provider an out-of-network rate less any cost sharing from the plan participant. The out-of-network rate is defined as: (1) the amount determined by an applicable All Payer Model Agreement; (2) if there is no All Payer Model Agreement, then the amount determined by applicable state law; (3) if there is no applicable state law, the amount agreed upon by the plan and the provider; or (4) if the parties do not reach an agreement, then the amount determined by the Independent Dispute Resolution (IDR) process, discussed below.

Dispute Resolution Process

The Act is designed to encourage negotiated resolution of payment disputes between payors and providers and mandates dispute resolution procedures in the event the parties do not reach a negotiated agreement. In the absence of state law or an agreement between the parties, the Act mandates the parties use the IDR process to determine the payment amount. Before initiating the IDR process, the parties may engage in an open negotiation period for up to 30 business days. If they are unable to agree upon a payment rate through negotiation, either party may initiate the IDR process within four business days from the end of the negotiation period, after which an IDR Entity will be selected. Within 10 business days of appointment of the IDR Entity, each party must submit a final offer for payment and written documentation to support their offer (within specified limitations). The IDR Entity will review the written submissions and pick one of the two offers in a “baseball style” arbitration.
The statutory language provides that the IDR entity shall consider a number of enumerated factors in determining the out-of-network rate, including: (1) the QPA; (2) the provider’s level of experience and outcomes; (3) the parties’ respective market share; (4) patient acuity; (5) teaching status, case mix, and scope of services of the facility; and (6) demonstrations of good faith or lack thereof of the provider or facility to contract with the plan. The implementing regulations issued in September 2021 (the Second Interim Final Rule) creates a rebuttable presumption in favor of the offer that is closest to the QPA. Additional information on the Second Interim Final Rule is available here in a previous issue of Health Headlines.

Three lawsuits have been filed to challenge this presumption. The Texas Medical Association, the Association of Air Medical Services, and the American Medical Association together with the American Hospital Association, joined by other medical providers and facilities, each filed lawsuits against the federal government challenging the portions of the second interim final rule relating to the IDR process. Each of the three suits request that the courts vacate the implementing regulations and reinstate the IDR process as enacted in the No Surprises Act—without the presumption in favor of the QPA. One hundred and fifty-two members of Congress also submitted a letter to the Secretaries of the Departments of Health and Human Services, Labor, and the Treasury urging the Departments to amend the September interim final rule relating to the IDR process. The Congressmembers’ letter was previously reported in Health Headlines, available here.

Reporter, Alana Broe, Atlanta, +1 404 572 2720, abroe@kslaw.com.

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Recent District Court Opinion Allows Commission Payments Under EKRA– On October 18, 2021, a U.S. District Court in Hawaii decided that providers subject to the federal Eliminating Kickbacks in Recovery Act (EKRA) are permitted to pay employees and independent contractors sales commissions for clinical laboratory sales. The suit was brought by a laboratory account manager to enforce payment of wages under his employment agreement pursuant to which his lab employer agreed to pay him a base salary plus percentages of net profits from his own client accounts and from those of lab employees he managed. The lab argued that the commission-based compensation scheme under the employment agreement would violate EKRA and was therefore illegal and unenforceable. The court, however, disagreed.

EKRA is a criminal statute that prohibits kickbacks or any other form of remuneration for referrals for services by a recovery home, clinical treatment facility, or laboratory that are paid for under any health care benefit program, including private as well as government programs. Specifically, EKRA prohibits paying or offering remuneration "(A) to induce a referral of an individual to a …laboratory; or (B) in exchange for the individual using the services of that …laboratory." 18 U.S.C. §§ 220(a)(2)(A),(B). While EKRA is a relatively new law, for which implementing regulations have yet to be published, a number of commentators have interpreted EKRA to prohibit recovery homes, clinical treatment facilities, or laboratories from paying sales commissions to employees or independent contractors. However, this recent decision departs from this view and provides a narrower interpretation of EKRA’s prohibitions.
Crucial to this finding was the court’s interpretation of “individual” in the statute. Because that term is not defined in EKRA, the court looked to the meaning of that term in the federal Anti-Kickback Statute and interpreted the word “individual” in section (A) to refer to the patient undergoing testing, and in section (B) to refer to the account manager himself.  In finding that the employment agreement terms did not violate EKRA, the court reasoned that with respect to the prohibition in section (A), the manager’s sales efforts were directed towards physicians and other lab clients and, therefore, the account manager was not paid to induce referrals of individuals.  Further, with respect to section (B), there was no EKRA violation, according to the court, because the remuneration was not paid in exchange for the account manager’s use of the lab’s services.

The court recognized that the commission-based compensation scheme undoubtedly induced the account manager to bring more business to the lab, and that the arrangement would not meet EKRA’s exception for payments to employees or independent contractors, which does not apply to payments based on the volume or value of tests performed or billed. These findings ended up being irrelevant, however, because the court concluded that the compensation provisions of the account manager’s employment agreement did not violate EKRA in the first instance.
The case is S&G Labs Hawaii v. Graves, Civ. No. 19-00310, 2021 WL 4847430 (D. Haw. Oct. 18, 2021). The full opinion is available here.

Reporter, Jasmine Becerra, Atlanta, +1 404 572 3537, jbecerra@kslaw.com.

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CMS Finalizes Statutory Changes to GME Rules—On December 17, 2021, CMS issued a final rule implementing three changes to Medicare’s payment rules for graduate medical education that Congress enacted last year in the Consolidated Appropriations Act, 2021 (CAA). The final rule describes how CMS intends to execute Congress’s directive to distribute 1,000 new full-time equivalent (FTE) cap positions to qualifying hospitals over the next five years. The rule also explains how hospitals can qualify to establish new FTE caps and/or per-resident amounts (PRAs). Lastly, the rule implements the changes that the CAA made to the payment rules for rural training track (RTT) programs. The final rule will take effect 60 days after it is published in the Federal Register

Distribution of 1,000 FTE Cap Positions 

Section 126 of the CAA requires CMS to distribute 1,000 new full-time equivalent (FTE) cap positions to qualifying hospitals over five years starting in fiscal year (FY) 2023.  

Hospitals will have to submit applications to CMS to qualify for distributions. Separate rounds of applications will be required in each of the five years. In the final rule, CMS stated that applications will be due on March 31 of the year preceding the FY of the award, and that hospitals will be notified of their awarded distributions by January 31 of the following year. The awarded distributions will take effect July 1 of that same year. For example, applications for FY 2023 distributions will be due March 31, 2022. Hospitals will be notified of their awards by January 31, 2023, and the award will take effect July 1, 2023.

In the final rule, CMS said that hospitals will need to show a “demonstrated likelihood” that they will fill the positions they are applying to receive. To that end, qualified applicants must (1) be training residents in excess of their FTE cap (as demonstrated by their latest filed cost reports), and (2) show that they have applied for or received approval from the appropriate accrediting body to either establish a new program or expand an existing program. Commenters asked whether hospitals that are already operating in excess of their FTE caps could use that excess to fill awarded positions.  CMS answered in the negative. Awarded positions will have to be filled by either new programs or the expansion of existing ones. The one exception is that hospitals will be allowed to fill awarded positions with unused accredited positions. 

Hospitals will also have to fall into one of four eligibility classes to qualify for distributions. The first eligibility class is for hospitals located in rural areas. CMS intends to define rural in the same way it is defined for the purposes of the wage index. Hospitals that reclassify as rural will be considered rural for the purposes of this class. The second eligibility class is hospitals training in excess of their FTE caps. The third class is hospitals located in states with new medical schools or new branches of existing schools. CMS determined that this class would consist of hospitals in 35 states and 1 territory. The fourth and final class is for hospitals that participate in training residents in a program in which residents rotate for at least fifty percent of their training time to training sites physically located in health professional shortage areas (HPSAs) in primary care or mental health. 

CMS also adopted rules placing limits on the number of positions that can be awarded in a year. The maximum award that a hospital will be eligible to receive will depend on the length of the program. Hospitals can receive up to 1 FTE per program year, not to exceed 5 FTEs. Additionally, CMS is capping the aggregate annual distribution at 200 positions. 

Because there are only so many positions to go around, CMS has decided to prioritize applications based on HSPA scores. HRSA assigns a score for each HSPA ranging from 0 to 25 indicating the severity of the shortage in the area, with higher scores indicating greater severity. Each year, CMS will make the first round of distributions to hospitals serving HPSAs with a score of 25. If positions remain after that distribution, CMS will distribute positions to hospitals serving HSPAs with a score of 24. That process will continue until all 200 positions for a year are distributed. Within each HPSA score group, CMS will prioritize the applications of hospitals with less than 250 beds (as beds are defined for the purposes of IME). 

Resetting PRAs and FTE Caps

Section 131 of the CAA provides both retrospective and prospective relief for hospitals that inadvertently establish low FTE caps and/or PRAs. Retroactively, section 131 provides an opportunity for certain qualifying hospitals that already have an FTE cap or PRA to establish new ones. On a prospective basis, section 131 prohibits CMS establishing and FTE cap or PRA for a hospital that trains less than 1 FTE during that year. 

CMS has interpreted the statute as identifying two categories of hospitals that qualify for retrospective relief: Category A hospitals and Category B hospitals. Category A consists of hospitals that, as of enactment, have an FTE cap or PRA that was based on the training of less than 1.0 FTE in a cost reporting period prior to October 1, 1997. Category B refers to hospitals that, as of enactment, have an FTE cap or PRA established based on the training of 3.0 or fewer FTEs in a cost reporting period beginning on or after October 1, 1997 and before enactment of the CAA on December 27, 2020.  

In the final rule, CMS explained that a hospital will be considered to have an FTE cap or PRA as of enactment if an FTE cap or PRA was reported in a cost reporting period beginning prior to enactment. If a hospital disagrees with the FTE cap or PRA reported in the applicable base year, and the base year is within the three-year reopening window or is not yet settled, a Category B hospital can initiate a one-time request for reconsideration with its Medicare contractor to dispute the FTE cap or PRA in the base year. The request must be submitted by July 1, 2022. The Medicare contractor’s decision will be appealable to the PRRB. No similar relief is afforded for Category A hospitals. CMS is soliciting comments regarding how to handle base-year disputes when the base year is beyond the three-year reopening window. 

Commenters asked what treatment would be afforded to hospitals that trained residents in prior years but do not currently have FTE caps or PRAs because they did not report that past training in their cost reports. CMS answered that if the base reporting period is open or reopenable, then the hospital will be entitled to a reset. As for base years that are beyond the three-year reopening window, CMS is soliciting comments about how to handle those years.

In the final rule, CMS explained that the reset will be triggered for Category A hospitals when they train at least 1 FTE in a cost year beginning after December 27, 2020, and for Category B hospitals when they train more than three years in a cost year beginning after that same date. But the cost report that triggers the reset cannot begin more than five years after December 27, 2020. Regarding the FTE cap, CMS explained that only new programs will trigger the reset. And for the PRA, CMS said that the reset will be triggered even if residents are not on rotation at the hospital during the first month of the cost reporting period (a deviation from the current PRA rules). 

CMS explained in the rule that the triggering year will also serve as the base year for calculating new PRA determinations. However, hospitals will have the option of instead using the year beginning on or after the issuance of the final rule. The new FTE caps and PRAs provided under these rules will generally be calculated in the same way that FTE caps and PRAs are calculated under current rules. The new FTE cap adjustments will be added to the hospital’s existing FTE cap. 

RTT Changes

Section 127 of the CAA made several changes to the payment rules for RTT programs. The final rule implements those changes.

First, the final rule provides that when an urban and rural hospital participate in an RTT program, both the urban and the rural hospital will receive a cap adjustment for the program. The previous rule only allowed an adjustment for the urban hospital. Rural hospitals are entitled to adjustments for new programs but not existing programs. This meant that rural hospitals did not receive adjustments for existing RTT programs. The CAA, as implemented in the final rule, changes that policy.

The final rule also provides that urban and rural hospitals will be eligible to receive additional adjustments for more than one RTT program. Previously, hospitals were only eligible to receive a cap adjustment for the first RTT program they participate in.

CMS also lifted the requirement that RTT programs must be separately accredited. In addition, the final rule says that RTT programs can be in any specialty. Previously, only RTT programs specializing in family medicine were allowable.

Finally, the final rule changes how payment for RTT programs will be determined during the cap building period.  Previously, residents in RTT programs were included in the three-year rolling average during the five-year cap-building period. CMS interprets the CAA as exempting residents in RTT programs from the three-year rolling average during the five-year cap building window and has updated its regulations accordingly. 

The final rule is available here, and a CMS fact sheet is available here

Reporter, Alek Pivec, Washington D.C., +1 202 626 2914, apivec@kslaw.com.

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CMS Declines to Adopt Policy Reducing Reimbursement for “Medicare” Organs for Transplant Hospitals and Organ Procurement Organizations
On December 17, 2021, CMS issued a final rule with comment period addressing certain provisions of the fiscal year 2022 IPPS/LTCH PPS proposed rule that were designated to be addressed in “future rulemaking,” including proposed changes to organ acquisition payment policies for transplant hospitals and organ procurement organizations. In this final rule, and in further consideration of the concerns initially raised by commenters, CMS decided not to finalize a significant proposal with respect to how transplant hospitals and organ procurement organizations can count organs on their Medicare cost reports for reimbursement purposes. CMS did, however, finalize other of its organ acquisition payment policy proposals and indicated that it may address its organ counting policy again in future rulemaking.
Medicare reimburses transplant hospitals for organ acquisition costs under reasonable cost principles based on the transplant hospital’s ratio of Medicare usable organs to total usable organs. Similarly, Medicare authorizes payment to organ procurement organizations (OPOs) for kidney acquisition costs under reasonable cost principles based on the OPO’s ratio of Medicare usable kidneys to total usable kidneys. 

For over three decades, Medicare cost reporting instructions presumed that because the ultimate organ transplant recipient was unknown at the time an organ was excised, that organ would be “counted” as being transplanted into a Medicare beneficiary—and counted as a “Medicare” organ—for cost reporting purposes on a transplant hospital’s or OPO’s cost report. 86 Fed. Reg. 25070, 25665 (May 10, 2021) see also 54 Fed. Reg. 5619, 5621 (Feb 6, 1989). In fact, CMS expressly acknowledged that knowing at the time of organ procurement whether the organ will be transplanted into a Medicare or non-Medicare beneficiary is “impossible.”  54 Fed. Reg. at 5621. As a result, organs sent to and between transplant hospitals and OPOs are “assumed” to be Medicare usable organs under CMS’s current policy.  Id.

CMS announced its intention to reform organ acquisition payment for transplant hospitals and OPOs in its FY 2022 IPPS proposed rule. There, CMS introduced several proposed changes to organ acquisition payment policies. Most significantly, CMS proposed to end the decades-long presumption that all organs excised for recipients in the United States are considered “Medicare” organs in the Medicare ratio on the OPO’s and transplant hospital’s Medicare cost report. See 86 Fed. Reg. at 25664-67. CMS instead proposed that transplant hospitals and OPOs would need to identify whether the ultimate recipient of an organ was indeed a Medicare beneficiary and required these entities to provide auditable support for these determinations. Id.  

Under CMS’s proposal, transplant hospitals and OPOs would not be able to claim as many “Medicare” organs in their Medicare ratio, and thus receive lesser Medicare reimbursement. CMS estimated that the proposed changes to the calculation of Medicare’s share of organ acquisition costs would result in “annual cost savings to the Medicare trust fund of $230 million in FY 2022, $1.74 billion over five years, and $4.150 billion over ten years.” Id. at 25771.
As discussed here, on August 2, 2021, CMS did not finalize its proposals related to the organ acquisition payment policies for transplant hospitals and OPOs. Instead, CMS deferred; indicating that “[d]ue to the number and nature of the comments that we received on the organ acquisition payment policy proposals we will address public comments associated with these issues in future rulemaking.”

On December 17, 2021, CMS announced through final rule that it would not be finalizing the proposed policy for counting organs for purposes of determining Medicare’s share of organ acquisition costs for organs transplanted into Medicare beneficiaries. Specifically, CMS “heard stakeholders’ concerns” that the processing of tracking whether an organ is ultimately transplanted into a Medicare beneficiary is unduly burdensome and that the policy would result in a significant financial impact from the loss of revenue. CMS, therefore, decided not to finalize its policy at this time, giving it “more time to better understand these and other concerns that commenters have raised, including those related to organ tracking processes.”

The final rule does, however, finalize certain policies requiring donor community hospitals and transplant hospitals to bill OPOs the lesser of customary charges that are reduced to costs, or negotiated rates, in line with Medicare reasonable cost principles. The final rule also codifies and clarifies certain organ acquisition payment policies relative to definitions, standard acquisition charges, Medicare coverage of living donor complications, Medicare as a secondary payor for organ acquisitions, and kidney paired donations.
CMS’s final rule is available here.

Reporter Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.

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CARES Act Provider Relief Fund Updates – Last week, HHS announced the distribution of approximately $9 billion in CARES Act Provider Relief Fund (PRF) Phase 4 payments. The average payment for small providers is $58,000, for medium providers is $289,000, and for large providers is $1.7 million. HHS has already started making payments and will continue to do so in 2022. Furthermore, HHS released twelve new PRF Frequently Asked Questions (FAQs) covering a wide range of topics, including mergers and acquisitions, tax credits, guidance for providers that file bankruptcy petitions, and more.

The new FAQs broadly discuss the following general categories: (1) general information; (2) terms and conditions; (3) ownership structures and financial relationships; (4) auditing and reporting requirements; (5) non-financial data; and (6) miscellaneous. Notably, the Terms and Conditions for Phase 4 require that recipients that receive payments greater than $10,000 notify HHS during the applicable Reporting Time Period of any mergers with or acquisitions of any other healthcare provider that occurred within the relevant Payment Received Period. HRSA considers changes in ownership, mergers/acquisitions, and consolidations to be reportable events. If a Reporting Entity that received a Phase 4 General payment indicates when they report on the use of funds that they have undergone a merger or acquisition during the applicable Payment Received Period, this information will be a component that is factored into whether an entity is audited.

Additionally, and if applicable, PRF recipients must immediately notify HRSA about their bankruptcy petition or involvement in a bankruptcy proceeding. When notifying HRSA about a bankruptcy, recipients must submit the name that the bankruptcy is filed under, the docket number, and the district where the bankruptcy is filed to PRFbankruptcy@hrsa.gov. Federal financial obligations will be resolved in accordance with the applicable bankruptcy process, the Bankruptcy Code, and applicable non-bankruptcy federal law.

The FAQs also explain that state and federal tax credits (e.g., employee retention tax credits) should not be considered a revenue source. They, therefore, should not be reported as “other assistance received.”

The complete FAQ document is available here.
Reporter, Ahsin Azim, Washington, D.C., +1 202 626 9262, aazim@kslaw.com.  

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OIG Determines That an Online Platform to Search for Home-Based Health Care Providers is Not Subject to Sanctions—On December 16, 2021, OIG issued an advisory opinion (Advisory Opinion No. 21-20) to a requestor (Requestor) regarding a proposal to create an online search platform for users to find and contact home-based health care providers. OIG determined that it would not proceed against Requestor under the Anti-Kickback Statute or the Beneficiary Inducements CMP law based on the information provided about the proposed platform.

Requestor would provide free access to the search platform for users and allow them to search for providers of home-based health care services. The Advisory Opinion listed those services as including “skilled and non-skilled home health services, home-based physician services, nursing services, non-emergency transportation, mental health counseling, therapy services, hospice care, and infusion services.” Home-based health care service providers who want to be listed on Requestor’s platform may enroll with Requestor by paying monthly fees and providing Requestor with a list of information necessary to make the providers searchable (such as a list of services, geographic areas of service, and which health insurance is accepted). The platform and newsletter would sell advertising spots to non-health care entities for a fixed monthly fee.

To use the platform, users would enter information specifying their age, gender, location, insurance or payment source, and the service for which they are looking. The platform would generate search results and have the users determine how they want to see the results sorted—by percent matching their search criteria, distance, reviews, or just alphabetical order. The platform would then show the results of providers enrolled with Requestor, or if there are none, it would show non-enrolled providers. The platform would also allow users to opt-in to a newsletter containing educational articles about home-based health care services.

The Anti-Kickback Statute prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing or arranging for the furnishing; or the purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering; of any item or service reimbursable under a Federal health care program. The Beneficiary Inducements CMP provides for the imposition of penalties against a person offering or transferring remuneration to a Medicare or Medicaid beneficiary that the person knows, or should know, is likely to influence the beneficiary to receive any item or service reimbursed under those programs from a particular provider, practitioner, or supplier.

OIG determined that payments for advertisements on the platform and newsletter would not implicate the Anti-Kickback Statute. In reaching that determination, OIG noted that Requestor would not design any advertisements or augment them in any way—Requestor would only sell the advertisement space. Requestor would sell advertisement space to anyone, except providers of home-based health care services, and no one would have an exclusive advertisement arrangement. Requestor would label advertisements with a disclaimer that they are not recommendations. And the advertisements would be sold at a fixed monthly fee that would not change based on clicks or views. Lastly, the platform would not market itself to be operated by a health care provider or supplier. The totality of those facts led OIG to conclude that the advertising aspect of the platform would not implicate the Anti-Kickback Statute.

OIG determined that the monthly and per-contact fees paid by enrolled providers potentially would implicate the Anti-Kickback Statute but concluded that the platform would pose a low risk of fraud and abuse under all of the relevant circumstances. In reaching its conclusion, OIG noted four key points of analysis:

  • The fees charged by Requestor would not vary based on the provider. The fees would not factor in the volume or value of any business generated through the platform. The provider fees paid to Requestor would not affect how frequently providers appear on the platform’s search results or how high they appear on the results page.

  • None of the Requestor owners provide, directly or indirectly, any home-based health care services that would be offered on the platform. They are not affiliated with any potential providers who would enroll in the platform, and the platform would not steer users to any particular provider. These facts in combination avoid the danger of “white coat” marketing where a position of trust could be exploited for profit.

  • Any individual can access the platform irrespective of his or her insurance status or payment source. Requestor would only use information collected about users for generating search results on the platform. Requestor would not offer any inducements to users to use the platform beyond free use of the platform, and users would not receive anything from providers.

  • Requestor created additional safeguards to reduce the risk of fraud and abuse: the platform would not promote any specific items or services of the providers; the platform would alert users that their search results show providers who paid to be included and that other providers might be available; and if no enrolled providers show in the results, then the platform would show non-enrolled providers.

Based on these facts, OIG concluded that the platform would present a minimal risk of fraud and abuse under the Anti-Kickback Statute. OIG also concluded that although the platform could influence beneficiaries of federal health care programs to select a particular provider who enrolled with the platform, OIG would not impose sanctions under the Beneficiary Inducements CMP.

The full text of Advisory Opinion No. 21-20 is available here.
Reporter, Kasey Ashford, Washington D.C., +1 202 626 2906, kashford@kslaw.com.

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The Center for Global Health Innovation (CGHI) Launches a New Global Health District – On December 15, 2021, CGHI announced the development the Global Health Innovation District in Midtown Atlanta. The Center for Global Health Innovation (CGHI) is a 501(c)(3) organization that was launched in January 2020 to bring together diverse global health, health technology and life sciences entities to collaborate, innovate and activate solutions to enhance human health outcomes around the world. Positioning itself at the intersection of emerging issues in the areas of global health, life sciences, and technology, the Global Health Innovation District will serve as physical hub for private, non-profit, public, and academic healthcare and global health entities.

Located in Tower Square in Midtown Atlanta, the Global Health Innovation District will occupy two hundred thousand square feet in a 47-floor high-rise building. With its new physical presence plus its existing focus on high-stakes healthcare issues, CGHI’s has positioned itself to help attract industry leaders, along with economic development and job opportunities, to Atlanta. Atlanta is already home to a large population of healthcare organizations, including the CDC, the Task Force for Global Health, the American Cancer Society, MedShare, MAP International and the Carter Center, along with research universities including Emory University, including its school of medicine and Rollins School of Public Health, as well as Morehouse School of Medicine, Georgia Tech, and other University System of Georgia schools.

Multiple organizations, including the CDC, Emory University, ShareCare, and Microsoft, have partnered with CGHI to support the Global Health Innovation District’s development efforts. King and Spalding LLP has served as outside pro bono counsel to CGHI in the development of the Global Health Innovation District. Lawyers supporting this initiative include Tom Hawk, Josh Kamin, Gardner Armsby, and Rebecca Gittelson.
Reporter, Michelle Huntsman, Houston, +1 713 751 3211, mhuntsman@kslaw.com.

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