Health Headlines – December 5, 2016

President-elect Trump Nominates Representative Tom Price, M.D. as HHS Secretary and Seema Verma as CMS Administrator –  President-elect Trump stated that Rep. Price, an orthopedic surgeon, six-term Member of Congress, and Chairman of the Budget Committee, “has earned a reputation for being a tireless problem solver and the go-to expert on healthcare policy, making him the ideal choice to serve in this capacity,” and that he is “exceptionally qualified to shepherd our commitment to repeal and replace Obamacare and bring affordable and accessible healthcare to every American.”

Rep. Price was one of the first Members of Congress to draft a full replacement to the Affordable Care Act (ACA) and has been a leader  the House’s efforts to repeal and replace portions of the ACA.  Speaker Paul Ryan (R-WI) praised the selection, noting that Rep. Price “has made health care his life’s work. He is the absolute perfect choice for HHS Secretary.”  A member of the House Doctors’ Caucus, Rep. Price has supported converting Medicaid into block grants to states as well as moving Medicare from a “defined benefit” to a “defined contribution.”  In addition to serving as Chairman of the Budget Committee, Rep. Price is a senior member of the House Ways and Means Committee and has served as Chairman of the Republican Study Committee and the Republican Policy Committee.  Prior to his election to Congress, Rep. Price served in the Georgia General Assembly, rising to be the first Republican Senate Majority Leader in the history of Georgia in 2003.  Rep. Price moved to Georgia from Michigan for his orthopedic surgery residency at Emory University, where he continued as an Assistant Professor, in addition to working in private practice and serving as the Medical Director of the Orthopedic Clinic at Grady Memorial Hospital in Atlanta.  If confirmed by the Senate, Rep. Price would be the first physician to lead HHS since Louis Sullivan, who served as HHS Secretary from 1989-1993.

Seema Verma, the nominee for CMS Administrator, is the president, CEO and founder of the healthcare consulting firm SVC Inc. and also worked with Vice President-elect Mike Pence, the governor of Indiana, to design Indiana’s Medicaid expansion plan, known as the Healthy Indiana Plan (HIP) 2.0.  HIP 2.0, which went into effect early last year, applied more conservative principles to Medicaid, such as requiring individuals to make a small monthly payment to have access to health insurance. Failure to make a payment could result in six-month lockout from coverage.  Verma’s firm has consulted with other Republican-led states, such as Iowa, Ohio and Kentucky, on their Medicaid expansion plans.  President-elect Trump has said of Verma, “She has decades of experience advising on Medicare and Medicaid policy and helping states navigate our complicated systems. Together, Chairman Price and Seema Verma are the dream team that will transform our healthcare system for the benefit of all Americans.”

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600, akassir@kslaw.com.

House Passes 21st Century Cures Act — On November 30, 2016, the House of Representatives passed the 21st Century Cures Act, a bill intended to modernize health care delivery and speed up and improve medical research and innovations by removing bureaucratic obstacles.  If enacted, the bill would provide (i) the National Institute of Health (NIH) with over $4.8 billion in funding over the next ten years to fund cancer research and other health innovation projects, (ii) the FDA with $500 million in funding over ten years to help move drugs and medical devices to patients more quickly while maintaining safety and effectiveness standards, and (iii) $1 billion over two years for grants to states to supplement opioid prevention and treatment activities, including improving prescription drug monitoring programs, implementing prevention activities, training health care providers, and expanding access to opioid treatment programs. The bill is expected to pass the Senate later this week.  

The bill contains sweeping legislation with provisions on FDA and NIH research prioritization, medication review, medication and medical device development, and mental health reforms, among numerous others.  As to the FDA provisions, the bill would:

• Make several changes to the FDA’s drug and device approval and regulation process, intended to bring treatments to market more quickly, particularly where they can take on unmet medical needs;
  
  
• Open up the possibility for additional market exclusivity on certain drugs, such as existing drugs that can be repurposed to safely and effectively treat rare diseases;
  
  
• Require the FDA to clarify some of its regulatory efforts, such as how its various divisions oversee drug-device combination products (such as a drug-coated stent);
  
  
• Require the FDA to identify low-risk medical devices that no longer require safety and efficacy reporting under the 510(k) process; and
  
  
• Direct the FDA to develop guidance on off-label marketing within 18 months of final passage of the bill, facilitating “responsible communication” of truthful and nonmisleading scientific developments regarding the use of drugs that are not reflected in product labels.

With respect to electronic technology and mental health, the bill includes a number of proposed provisions that:

• Are aimed at the HHS Secretary, through notice and comment rulemaking, improving the use of electronic technology, such as electronic health records, with a sizable section of the legislation dedicated to improving interoperability between various electronic health record systems, including a prohibition on configurations that enable so-called information blocking; and
  
  
• Focus on evidence-based mental health treatments and increase cooperation between federal agencies on mental health policy. 

The legislation has also become a vehicle for other healthcare priorities, including the following:

• The Burgess-DeFazio Physician ‘Sunshine Act’ Education Clarification
  
  
  • This clarification would exempt continuing medical education seminars, as well as the distribution of medical textbooks and peer-reviewed journal articles, from the Physician Sunshine Act reporting requirements.  Sponsored by Congressmen Michael C. Burgess, M.D. (R-TX), a physician, and Peter DeFazio (D-OR), this bipartisan measure supports physicians that seek to remain educated on innovative clinical care techniques by removing burdensome reporting requirements, fitting with the intended goals of the Sunshine Act to encourage transparency while ensuring that medical practices and patient care would not be harmed.
    
    
• Regulatory Relief for Long-Term Care Hospitals (LTCH)
  
  
  • Section 15004 would allow those LTCHs that qualify for a “mid-build” to be excepted from the current CMS moratorium on bed expansion.
    
    
  • Similar to the provision that allows for expansion of provider-based outpatient departments that were “mid-build” in November 2015, this new language would enable LTCHs that had previously made plans to expand its certified beds to do so before the sunset of the statutory moratorium in September 30, 2017.
    
    
  • This section is offset by a reduction to LTCHs outlier payments, requiring a higher threshold for LTCHs discharges to qualify for outlier payments.
    
    
• Establishment of a Medicare Pharmaceutical & Technology Ombudsman to Increase Pricing Transparency on the Hospital Outpatient Side
  
  
  • Section 4011 would create a new authority within CMS to review complaints regarding drug and medical technology coverage and pricing.
    
    
  • The Ombudsman, who must be appointed by the Secretary of HHS within twelve months of enactment, will work to resolve complaints from current and potential Medicare suppliers with respect to their products’ coverage status and payment parameters.
    
    
  • Similar to the Medicare Beneficiary Ombudsman, the Pharmaceutical & Technology Ombudsman will also be required to provide periodic reports to the Secretary and Congress regarding its findings.
    
    
• Requiring Information on the Provision of Telemedicine to the Medicare/Medicaid population(s) from Both CMS and MedPAC
  
  
  • Section 4013 would require CMS and MedPAC to study and evaluate the role of telemedicine techniques in improving access to Medicare and Medicaid beneficiaries.
    
    
  • Specifically, this provision would require CMS to submit a report to Congress within twelve months of enactment highlighting the specific populations of patients that would benefit from telehealth supports, high-volume treatments that are amenable to being provided in a telehealth setting, activities sponsored under the CMS Innovation Center to identify new models of service delivery using telemedicine, and barriers to encouraging more expansive use of telemedicine that currently exist.
    
    
  • The provision also requires MedPAC to produce an evaluation of the telehealth services that are currently paid for in Medicare, Medicaid, and private insurance comparatively as well as recommendations for additional services that should be considered for future coverage and payment.
    
    
• Extension of the Prohibition on the LTCH 25 Percent Rule
  
  
  • Under the LTCH 25 percent rule, no more than 25 percent of a LTCH’s admissions can come from the same inpatient acute hospital.  The Bipartisan Budget Act of 2012 prohibited the Secretary of HHS from enforcing the LTCH 25 percent rule through June 30, 2016.  If enacted, Section 15006 of the 21st Century Cures Act would amend the prohibition by extending the prohibition on the LTCH 25 percent rule for an additional 12 months from October 1, 2016 through discharges occurring before October 1, 2017.
    
    
• Adjustments to Risk Adjustment Methodology
  
  
  • Section 15002 of the legislation would require HHS to implement a transitional risk adjustment methodology to serve as a proxy for socio-economic status for the Hospital Readmissions Reduction Program and clarify that the proxy should only apply to a hospital’s Medicare population.

• Limited Exception for Mid-Build Outpatient Departments
  
  
  • Section 16001 of the legislation would provide a limited exception to the hospital outpatient department (HOPD) payment reductions in Section 603 of the Bipartisan Budget Act of 2015 for HOPDs that were defined as “mid-build” prior to November 2, 2015.
    
    
    • Under the exception, an outpatient department qualifies as “mid-build” if the hospital had “before November 2, 2015 … a binding written agreement with an outside unrelated party for the actual construction” of the department.  If a department meets that definition of “mid-build,” then it can qualify for excepted status in 2018 if the hospital sends to CMS within 60 days of the provision becoming law both (i) a letter from its chief executive officer or chief operating officer stating that the department meets the definition of mid-build and (ii) a full provider-based attestation for that department.  If CMS approves the attestation, the department will receive the full OPPS payment rate beginning January 1, 2018.  (Even mid-build departments will still receive 50 percent of the OPPS payment rate in 2017 using the “PN” claims modifier.) 
      
      
    • As a result, an outpatient department(s) will need to be operational now or very soon since the deadline to submit these documents will be just a bit more than two months from now. 
      
      
• End-Stage Renal Disease Medicare Advantage Enrollment
  
  
  • Section 17006 of the legislation would allow Medicare beneficiaries with end-stage renal disease to enroll in a Medicare Advantage plan as part of their standard benefit package for plan years beginning on or after January 1, 2021.

The full bill text is available here.

Reporters, C’Reda Weeden, Washington, D.C., +1 202 626 5572, cweeden@kslaw.com, and Kristin Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com.

Update on Recent Telehealth Legislation Activity – On November 29, 2016, the Senate passed the Expanding Capacity for Health Outcomes Act, S. 2873 (the ECHO Act) in a 97-0 vote, which would require HHS to study and report on the use of telehealth services that connect specialists with other healthcare professionals “for the purpose of facilitating case-based learning, disseminating best practices, and evaluating outcomes.”  A companion bill, H.R. 5395, was introduced in the House in June.  No action has been taken on the companion bill. 

In particular, the ECHO Act would require HHS to analyze the use of telehealth services to address mental and substance abuse disorders, chronic diseases, prenatal and maternal health, pediatric care, pain management, palliative care, healthcare workforce shortages and retention, public health programs, the delivery care of healthcare services in rural and underserved areas and the delivery of care to underserved populations.  The ECHO Act would further require HHS to issue a report within two years that would analyze the use and impact of telehealth services, list telehealth models that have been funded by HHS, analyze opportunities for increased adoption of telehealth models and provide recommendations for integrating telehealth models funded by HHS and improving the adoption of telehealth models.

The same day the Senate passed the ECHO Act, the Department of Justice, Antitrust Division  responded to an inquiry from Michigan state Senator Peter MacGregor (R) regarding the Antitrust Division’s position on the potential competitive effects of his sponsored telehealth legislation, Michigan Senate Bill 753, H-1 (SB 753) (the DOJ Letter).  A copy of the DOJ Letter is available here. 

According to the DOJ Letter, SB 753 “(1) specifies that permitted telehealth services extend beyond Michigan’s existing statutory definition of telemedicine, (2) provides for flexibility in how patients must provide consent for telehealth treatments [by permitting direct or indirect consent for telehealth treatment], and (3) allows health professionals to prescribe drugs that are non-controlled substances through telehealth services.”  However, the Antitrust Division notes that SB 753 does not address the in-state licensing requirement and encourages the legislators to consider the competitive benefits of improving access for its citizens to qualified out-of-state telehealth providers.  Nonetheless, the Antitrust Division still finds that SB 753 “has the potential to enhance consumer options and improve health care competition for services appropriately offered telehealth” and that the three changes to current Michigan law in SB 753 “have the potential to facilitate more robust use of telehealth services and expand health care competition by limiting or avoiding certain unnecessary barriers.” 

Reporter, Kate Stern, Atlanta, +1 404 572 4661, kstern@kslaw.com.

ALSO IN THE NEWS:

Paul B. Murphy to Preside Over and Moderate Health Care Fraud Institute Seminar - Atlanta partner Paul B. Murphy will be presiding over the Health Care Fraud Institute Seminar on December 8, 2016 in Atlanta.  Mr. Murphy will also moderate a panel that will address the challenges of representing and dealing with whistleblowers. Christopher C. Burris and Jay D. Mitchell from King & Spalding will also be presenting at the seminar. For more information on the seminar, click here.

King & Spalding to Host Roundtable on Graduate Medical Education Reimbursement -
Join us on Wednesday, December 14, 2016 for a webinar-only Roundtable titled “Everything You Wanted to Know About Medicare’s Reimbursement for Graduate Medical Education But Were Afraid To Ask – The Latest Updates, Issues, and Opportunities.”  The Roundtable will provide an introduction to the mechanics of graduate medical education reimbursement and will also address complex issues, such as the relationship between new programs, cap adjustments, and affiliation agreements including the practical implications of CMS’s clarified definition of what constitutes a “new” program.  To register, please click here. 

King & Spalding to Sponsor American Bar Association’s 14th Annual Washington Health Law Summit December 12-13 – The ABA Washington Health Law Summit will be held December 12-13, 2016, at the Ritz Carlton in Washington, D.C.  King & Spalding Healthcare partner Kathy Poppitt will co-chair the event, which will be one of the first conferences to discuss the future of healthcare policy following the Presidential election.  Partner Mark D. Polston will be moderating one of the key sessions titled “What’s in Store for Government Healthcare? A Discussion of the Post-Election Future of Medicare, Medicaid and Obamacare with Former CMS Leaders.”  Senior associate Juliet McBride is a member of the program committee and King & Spalding is one of the Summit’s major sponsors.  For more information and to register, please click here.