News & Insights


December 22, 2014

Health Headlines – December 22, 2014


D.C. District Court Dismisses Lawsuit Challenging Backlog of Medicare Appeals – On December 18, 2014, the U.S. District Court for the District of Columbia dismissed a lawsuit filed by the American Hospital Association (AHA) and others to compel the Secretary of HHS to process Medicare reimbursement administrative appeals in accordance with statutory timelines. 

Based on these statutory timelines, a Medicare provider’s appeal should pass through all four levels within a year or so.  However, due to a massive backlog at the Administrative Law Judge (ALJ) level caused in part by Recovery Audit Contractor (RAC) activity, providers have been forced to wait an average of sixteen months before even getting a hearing before an ALJ, and, in December 2013, were informed in a memorandum that the Office of Medicare Hearings and Appeals (OMHA) had suspended assigning new hearing requests to ALJs—a suspension expected to be in place for at least two years.

While acknowledging that HHS’s delay in processing administrative appeals was “far from ideal,” the Court found that the delay was “not so egregious as to warrant intervention.”  In reaching its decision, the Court applied a six-factor test, chief among them being the effect of expediting delayed action on agency activities of a higher or competing priority.  The Court ultimately concluded that Congress and HHS should fix the problem rather than the courts: “OMHA has been saddled with a workload it cannot, at present, possibly manage.  Congress is well aware of the problem, and Congress and the Secretary are the proper agents to solve it.  In such situations—where an agency is underfunded and where it is processing Plaintiffs’ appeals on a first-come, first-served basis—the Court will not intervene.”

In a statement on its website, the AHA expressed disagreement with the Court’s decision on the basis of “competing priorities” and stated that it “expect[s] to appeal the decision and will call upon the government to identify those priorities that trump providing hospitals with the necessary resources to provide essential care to the nation’s elderly and most vulnerable patients.”

Reporter, Kerrie S. Howze, Atlanta, + 1 404 572 3594,

Congress Passes Tax Extender Bill With Certain Medicare Cuts – On December 16, 2014, Congress approved a tax extender bill (H.R. 5771) that includes the Achieving a Better Life Experience (ABLE) Act.  The ABLE Act provides for tax-free savings accounts for people with disabilities to pay for qualified expenses, including medical, education, housing, and transportation expenses.  To pay for the bill, which President Obama is expected to sign, Congress included three Medicare “offsets.” 

These Medicare cuts include: 

  1. imposing a target 1% reduction for 2016 in Medicare Physician Fee Schedule expenditures to be achieved through adjustments to the relative values for misvalued codes, by accelerating the application of “relative value targets” that were previously scheduled to apply beginning in 2017, but retaining the target reduction of 0.5% in each of 2017 and 2018;

  2. prohibiting Medicare Part B coverage for vacuum pumps used to treat erectile dysfunction; and

  3. delaying by one year the implementation of oral-only end stage renal disease (ESRD)-related drugs in the ESRD Prospective Payment System until 2025.

H.R. 5771 is available here

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

CMS Publishes Guidance Regarding Reporting CME Payments Under Open Payments –On Monday, December 15, 2014, CMS published guidance regarding pharmaceutical and medical device manufacturers’ obligations under the Open Payments requirements to report payments they provide indirectly to U.S. physicians in association with continuing medical education (CME) events.  The guidance addresses manufacturers’ reporting obligations in the wake of CMS’s recent removal of an exemption to the Open Payments reporting requirements that applied to payments provided indirectly to physicians for speaking at certain accredited CME programs. 

The agency’s removal of the exemption was one of several revisions to the Open Payments regulatory requirements that the agency published on November 13, 2014.  Manufacturers are required to begin tracking payments in accordance with the regulatory revisions (including the removal of the CME exemption) by January 1, 2016, for reports due by March 31, 2017.  The agency’s December 15 guidance provides several examples of CME funding arrangements and addresses what will be the reporting implications of each beginning in 2016.  Most notably, CMS indicates that, beginning in January 2016, if “an applicable manufacturer provides a payment to an accredited continuing education organization for a continuing education event for physicians . . . [and] does not pay the physician speaker directly, nor . . . select the speaker or provide the continuing education organization with a distinct, identifiable set of individuals to be considered as speakers for the continuing education[, but] . . . is able to determine who the physician speaker was . . .[, then the payment] will be reportable for 2016 data collection.”  This guidance, along with other examples, is available here

Reporter, Brian Bohnenkamp, Washington D.C., +1 202 626 5413,

House Committee Issues Open Letter Requesting Input on GME Funding By January 16, 2015 – The U.S. House of Representatives’ Committee on Energy and Commerce (the Committee) issued an open letter to the public on December 6, 2014, soliciting input on ways to improve graduate medical education (GME) “financing [and] federal program governance and structure.”  The request comes as Congress is considering the Institute of Medicine’s (IOM) recent report recommending “sweeping changes” to the GME system.  Among the specific proposal the Committee requests comment upon is whether there should be separate payments for indirect medical education (IME) costs and direct graduate medical education (DGME) costs, whether the per-resident amount should “follow[] the resident and not the institution,” and “whether the current system of residency slots appropriately” meets the nation’s healthcare needs.  The deadline to submit comments is January 16, 2015. 

In particular, the Committee requests input on the following seven questions:

1. What changes to the current GME financing system might be leveraged to improve its efficiency, effectiveness, and stability?

2. Of the “numerous proposals put forward to reform the funding of the GME System,” are there “any proposals or provisions” you support and why?

3. Should federal funding for GME programs ensure training opportunities are available in both rural and urban areas?  If so, what sorts of reforms are needed?

4. Is the current financing structure for GME appropriate to meet current and future healthcare workforce needs?

i. Should it account for direct and indirect costs as separate payments?

a. If not, how should it be restructured?  Should a per-resident amount be used that follows the resident and not the institution?

b. If so, are there improvements to the current formulas or structure that would increase the availability of additional training slots and be responsive to current and future workforce needs?

ii. Does the financing structure impact the availability of specialty and primary care designations currently?  Should it moving forward?

5. Does the current system incentivize high-quality training programs?  lf not, what reforms should Congress consider to improve program training, accountability, and quality?

6. Is the current system of residency slots appropriately meeting the nation’s healthcare needs?  If not, please describe any problems and potential solutions necessary to address these problems?

7. Is there a role for states to play in defining our nation’s healthcare workforce?

The open letter is available here

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


CMS Awards $665 Million in Second Round of State Innovation Models Initiative – CMS announced the recipients of the second round of the State Innovation Models (SIM) awards on December 16, 2014.  The recipients—28 states, three territories and the District of Columbia—will receive over $665 million in funding to design and test state-led health care payment and service delivery models that seek to improve health, improve care, and lower costs.  Over $622 million in model “test” awards will support states that are ready to implement their proposed State Health Care Innovation Plans, and nearly $43 million in model “design” awards will support recipients in developing or further refining their plans and strategies.  The CMS Fact Sheet is available by clicking here.  The HHS Press Release is available by clicking here.   

CMS Releases FY 2015 Results for the HAC Reduction Program and Hospital VBP Program – CMS has released the results for the FY 2015 Hospital-Acquired Condition (HAC) Reduction Program and Hospital Value-Based Purchasing (VBP) Program.  According to the announcement, approximately 724 hospitals will have their payments reduced by one percent in FY 2015 under the HAC Reduction Program.  Under the VBP program, the number of hospitals that will experience a positive change in their base operating diagnosis-related group (DRG) payments in FY 2015 is slightly higher than the number of hospitals that will experience a negative change, and about half of all affected hospitals will see only a small change in their base operating DRG payments (between -0.3 and 0.3 percent).  The CMS Fact Sheet is available by clicking here.  The CMS data tables for these two programs (Tables 16A, 16B, and 17) are available by clicking here.

New Quality Data Posted on Physician Compare and Hospital Compare Websites – Per an announcement on December 18, 2014, CMS has added new quality data to the Physician Compare website and has updated quality measures on the Hospital Compare website and released data on new measures.  The CMS Fact Sheet is available by clicking here.

HHS Issues Notice of Proposed Rulemaking for Clinical Trials Registration and Results Submission to – King & Spalding’s FDA & Life Sciences Practice Group has recently issued a Client Alert, addressing a Notice of Proposed Rulemaking for Clinical Trials Registration and Results Submission that was published by HHS on November 19, 2014.  Comments on the proposed rule are due by February 19, 2015.

Editorial Note We will not be publishing Health Headlines on December 29, 2014.  Please look for our next edition on January 5, 2015.  Happy Holidays!

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice.

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