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January 4, 2021

Health Headlines – January 4, 2021


Court of Appeals Upholds CMS Rule Requiring Public Disclosure of Prices Negotiated Between Hospitals and Insurance Companies On December 29, 2020, the U.S. Court of Appeals for the District of Columbia Circuit upheld a CMS final rule promulgated in November 2019 that requires hospitals to disclose various forms of pricing information related to the items and services they provide.  In particular, the rule requires hospitals to disclose charge rates including gross charges from chargemasters; payer-specific negotiated charges; standardized discounted cash prices offered to self-pay patients before any individualized discounts; and the maximum and minimum third-party negotiated charges for a given item or service.  The American Hospital Association (AHA), joined by other associations and individual hospitals, challenged the rule but the district court awarded summary judgment to the government.  AHA appealed, and the D.C. Court of Appeals has now upheld the rule that went into effect January 1, 2021.  The case is American Hospital Assoc. v. Azar, D.C. Cir., No. 20-05193 and is available here .

In 2010, Congress passed the Affordable Care Act (ACA), which added section 2718, entitled “Bringing down the cost of health care coverage,” to the Public Health Service Act.  Subsection 2718(e) requires “[e]ach hospital operating within the United States” to “each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under [the Medicare reimbursement statute].”  42 U.S.C. § 300gg-18(e).  The statute does not define “standard charges.”  Until recently, hospitals could comply with this requirement by making their chargemasters available to the public in a machine-readable format.

In June 2019, President Trump issued Executive Order 13877, which directed the Secretary of HHS to “propose a regulation, consistent with applicable law, to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services.”  After taking comments on its proposed rule, the Secretary issued a final rule in November 2019 that defines “standard charge” as “the regular rate established by the hospital for an item or service provided to a specific group of paying patients.”  Price Transparency Requirements, 84 Fed. Reg. 65,524, 65,540 (Nov. 27, 2019).  The rule lists five categories of standard charges that hospitals must disclose: gross charges from chargemasters; payer-specific negotiated charges; standardized discounted cash prices offered to self-pay patients before any individualized discounts; and maximum and minimum third-party negotiated charges for a given item or service.  Id. at 65,540.  The Secretary delayed the rule’s effective date until January 1, 2021.

AHA challenged the rule, arguing that the interpretation of “standard charges” violates section 2718(e), the APA, and the First Amendment.  The Court disagreed, finding that the Secretary’s interpretation of “standard charges” was reasonable under the language of the statute and held that “section 2718(e) permits the Secretary to require disclosure of negotiated rates, and requiring hospitals to display certain datapoints separately falls squarely within the Secretary’s authority to develop guidelines for making the list public.”  The Court was also unpersuaded by AHA’s arguments regarding the feasibility and administrative burdens of complying with the rule.  The Court lastly held that “the Association’s argument that the rule violates the First Amendment” was  “squarely barred” by relevant Supreme Court and D.C. Circuit caselaw.

In a December 29, 2020 press release, AHA has said it is reviewing the ruling to determine next steps and urged the next administration “to evaluate whether the rule should be revised, and to exercise enforcement discretion for the duration of the public health emergency.”

Reporter, Amy L. O’Neill, Sacramento, +1 916 321 4812, aoneill@kslaw.com.

OIG Issues Four Advisory Opinions — From December 23, 2020 through December 31, 2020, the OIG issued several advisory opinions.  The advisory opinions analyzed (1) a program for a pharmaceutical manufacturer to provide financial assistance to certain patients, (2) a proposal from a qualified health center to offer gift cards to incentivize certain patients to attend preventative appointments, (3) a proposed web-based platform where health care facilities and clinicians could remit to patients and payors a portion of claims for which payment may be made by the Medicare program as a secondary payor, and (4) a management company’s provision of below fair market value Medicaid enrollment application assistance services and affiliated skilled nursing facilities’ payments for those services.

Advisory Opinion 20-09

The requestor is a pharmaceutical manufacturer which manufactures an FDA-approved and potentially curative therapy that is individually produced for each patient (Drug). The manufacturing process involves multiple steps, including: (1) leukapheresis, whereby certain cells are removed from the patient’s body; (2) the cells are shipped to the requestor’s manufacturing facility where the cells are engineered to include the DNA for a particular protein which is inserted into the patient’s T-cells; and (3) the cells are then shipped to the treating facility where they are infused back into the patient’s bloodstream to treat the disease. Treatment with this therapy requires that the patient make one visit to a leukapheresis facility or an inpatient/outpatient facility (Center), in addition to a second visit to a Center where the patient undergoes chemotherapy, Drug infusion, and post-infusion monitoring.  In accordance with the Risk Evaluation and Mitigation Strategy (REMS), the physicians and other health care staff at the Centers must instruct the patient to stay within two hours of the administering Center for at least four weeks after the Drug infusion.

The requestor assists eligible patients and one caregiver with travel, hotel lodging, and certain out-of-pocket expenses that are incurred during leukapheresis, chemotherapy, infusion and monitoring.  Based on the facts certified by the requestor, the OIG concluded that although the arrangement could potentially generate prohibited remuneration under the Federal anti-kickback statute, the OIG will not impose administrative sanctions under sections 1128(b)(7) or 1128A(a)(7) of the Act, or under section 1128A(a)(5) of the Act.  The OIG’s determination was based upon the following reasons:

  • The remuneration is intended to assist indigent and rural patients stay in proximity to a Center for Drug treatment. Indigent patients may be disproportionately impacted by health risks or death if they are unable to travel and stay in proximity to a center to receive the Drug and necessary post-treatment monitoring.
  • The modest lodging provided by the requestor enables physicians to meet the FDA requirements in the Drug’s prescribing information and mitigate patient harm from potentially lethal Drug side effects.
  • The Drug’s safety risks, and the requestor’s assurance that any facility that meets all REMS requirements and the requestor’s uniform criteria may participate in the arrangement, limit the likelihood that the requestor uses the arrangement to reward a limited number of prescribers who prescribe and administer its Drug.
  • The Drug is a treatment of last resort and is a one-time, potentially curative treatment, so the arrangement does not pose a risk of inducing patients to continue purchasing the drug when it would be payable by a Federal health program.  In addition, the requestor does not advertise the arrangement, reducing the likelihood that the arrangement serves as a marketing tool to drive patients to the requestor’s Drug.
  • The assistance under the arrangement does not duplicate other charitable assistance, as patients cannot receive lodging under the arrangement if they are eligible for other free lodging from a Center.
  • There is no existing authority permitting the Secretary to pay for the travel and lodging for patients receiving the Drug.  The requestor’s arrangement would enable an eligible patient and caregiver to follow the requirements of the Drug’s prescribing information.
  • While the arrangement implicates the Beneficiary Inducements CMP, the renumeration for travel, lodging and certain out-of-pocket expenses satisfies the Promotes Access to Care Exception.

A copy of Advisory Opinion 20-09 is available here.

Advisory Opinion 20-08

The requestor, a 501(c)(3) nonprofit community health center that serves predominantly low-income individuals, sought to incentivize pediatric patients (Eligible Patients) who have previously missed two or more preventative and early intervention care appointments (Care Appointments) with requestor.  Under the proposed arrangement , the requestor would: (1) contact the Eligible Patients or their parents or guardians who have missed two or more previously scheduled Care Appointments with Requestor in the past six months (Eligible Patients); (2) notify such Eligible Patients of the opportunity to receive a $20 gift card from the requestor upon rescheduling and attending a Care Appointment; and (3) furnish the gift card at checkout after the Eligible Patient attends the Care Appointment.

Based on the facts certified by the requestor, the OIG concluded that although the arrangement could potentially generate prohibited remuneration under the Federal anti-kickback statute, the OIG would not impose administrative sanctions under sections 1128(b)(7) or 1128A(a)(7) of the Act in connection with the arrangement.  The OIG additionally concluded that the arrangement would not constitute grounds for the imposition of civil monetary penalties under section 1128A(a)(5) of the Act.  The OIG’s determination was based upon the following reasons:

  • The risk of inappropriate patient steering is minimized due to a narrowly defined pool of Eligible Patients.
  • The risk that the gift card would induce Eligible Patients to select the requestor for future Care Appointments is low, because the arrangement would: (1) be available only to a patient who has previously scheduled a Care Appointment at least twice with the requestor and then missed the appointments; and (2) the arrangement offers a one-time $20 gift card, even if an Eligible patient misses Care Appointments in the future.
  • The arrangement would be unlikely to lead to increased costs to Federal health care programs through overutilization or inappropriate utilization.
  • The arrangement is unlikely to harm competition, as the remuneration is of modest value and could only be furnished once. In addition, the requestor would only notify those Eligible Patients who had previously scheduled and missed two Care Appointments with the Requestor, and the requestor has certified that it would not advertise the arrangement, otherwise.
  • The arrangement is reasonably tailored to accomplish the requestor’s goal of improving attendance rates at Care Appointments.

A copy of Advisory Opinion 20-08 is available here.

Advisory Opinion 20-07 

The requestor operates a web-based platform which lists all known health care facilities and clinicians with a National Provider Identifier and offers potential remittances to patients and their non-government third-party payors for diagnostic, procedural, and surgical care that is both elective and episodic.  The requestor proposed establishing a separate user pathway exclusively for patients who have Medicare as a secondary payor through which: (i) providers could offer potential remittances to such patients and their third-party payors for certain services and potentially payable by the Medicare program as a secondary payor; and (ii) patients could enter into agreements with providers, whereby the patients and their third-party payors could receive a portion of the remittances from providers, after requestor deducts the portion of the remittances it would keep as a fee.  Requestor also ensured that it would not charge any fees for members joining and the platform will continue to be free to members who do not ultimately receive a remittance from a provider.

Based on the facts certified by the requestor, OIG opined that although the arrangement could potentially generate prohibited remuneration under the Federal antikickback statute and constitute grounds for the imposition of sanctions under the Beneficiary Inducements CMP, the OIG would not impose administrative sanction under sections 1128A(a)(5), 1128A(a)(7), or 1128(b)(7) of the Act, based on the following:

  • The risk that the arrangement would result in increased costs to Federal health care programs through overutilization or inappropriate utilization would be low.
  • The structure of the payments would reduce the potential for overutilization or inappropriate utilization and would reduce the potential for interference with clinical decision making.
  • The arrangement would mitigate provider incentives to increase prices to induce patients to receive services.
  • The risk that the arrangement would have anti-competitive effects is low.
  • The arrangement would not steer patients to certain providers.

A copy of Advisory Opinion 20-07 is available here.

Advisory Opinion 20-06

The requestor management company provides financial, marketing, and other administrative services to skilled nursing facilities (SNFs) and home health agencies (HHAs), including two SNFs and an HHA affiliated with the management company. The management company proposed an arrangement whereby the affiliated SNFs and HHA would refer current patients, and in rare circumstances, individuals who are not yet patients but who have already selected an affiliated SNF or HHA, to the management company for the provision of Medicaid enrollment application assistance services.  Such services would not involve the provision of any health care items or services.  Under the arrangement, the patient would generally not pay any fees for the management company’s services if referred by an affiliated SNF.  However, the patient would pay for the management company’s services if referred by an affiliated HHA.  The management company also ensures that it would not target prospective patients of the affiliated SNFs, HHA or the referral sources for those entities when advertising its services, and neither the affiliated SNFs nor the HHA would advertise such services.

Based on the facts certified by the requestor, OIG opined that (i) the arrangement would not constitute grounds for the imposition of civil monetary penalties under section 1128A(a)(5) of the Act; and (ii) although the arrangement could potentially generate prohibited remuneration under the Federal anti-kickback statute, the OIG would not impose administrative sanctions on under sections 1128(b)(7) or 1128A(a)(7) of the Act, based on the following:

  • The arrangement would facilitate the Medicaid application process for individuals who otherwise may struggle to navigate the process independently or afford assistance with the process and thereby, satisfy the Promotes Access to Care Exception.
  • The arrangement’s remuneration would pose a low risk of harm by: (i) being unlikely to interfere with clinical decision making; (ii) being unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (iii) not raising patient safety or quality-of-care concerns.
  • The arrangement includes a number of safeguards that would sufficiently mitigate the risks of fraud and abuse and would present no more than a minimal risk of fraud and abuse under the Federal anti-kickback statute

A copy of Advisory Opinion 20-06 is available here.

Reporters, Jennifer Siegel, Washington D.C., +1 202 626 5595, jsiegel@kslaw.com, and  Kathryn T. Han, Los Angeles, +1 213 443 4336, khan@kslaw.com.

HHS Advisory Opinion Rejects Drug Manufacturers’ Attempts to Limit Contract Pharmacy Use by 340B Covered Entities On December 30, 2020, the HHS Office of General Counsel (OGC) issued Advisory Opinion No. 20-06 finding the 340B Federal Drug Pricing Program requires drug manufacturers to extend 340B pricing to covered outpatient drugs dispensed through contract pharmacies.

Recently, certain drug manufacturers have declined to distribute covered outpatient drugs through contract pharmacies at 340B pricing.  The OGC concluded that this practice is impermissible and that drug manufacturers must offer covered drugs at no more than the 340B ceiling price, even if covered entities use contract pharmacies for distribution.

Many covered entities enter into written agreements with pharmacies (Contract Pharmacies) to distribute their covered outpatient drugs to the entities’ patients.  Under those agreements, the covered entity orders and pays for the 340B drugs, which are then shipped from the manufacturer to the Contract Pharmacy.  As previously reported in Health Headlines, beginning in summer 2020, manufacturers participating in the 340B Drug Pricing Program started to push back on the use of Contract Pharmacies by providers.  At least one major manufacturer refused to sell drugs for shipment to Contract Pharmacies, and others sent letters to providers requesting pharmacy claims data for 340B eligible prescriptions.  Following these actions, numerous covered entities and manufacturers requested guidance from the OGC about the extent to which such actions are permissible under 340B.

OGC concluded that to the extent Contract Pharmacies are acting as agents of a covered entity, a drug manufacturer in the 340B Program is obligated to deliver its covered outpatient drugs to Contract Pharmacies and charge no more than the 340B ceiling price.  The OGC cited three rationales in support of this conclusion.

First, OGC reasoned the plain meaning of Section 340B of the Public Health Service Act requires manufacturers to sell covered drugs to covered entities at or below the ceiling price, independent of whether the entity opts to use Contract Pharmacies.  The plain language of the statute requires manufacturers to “offer” covered outpatient drugs at or below the ceiling price for “purchase by” covered entities.  This requirement is not qualified, restricted, or dependent on how the covered entity chooses to distribute the covered outpatient drugs, and the site of delivery is irrelevant.  All that is required is that the discounted drug be “purchased by” a covered entity.

Additionally, OGC cited the purpose and history of the 340B Program for support of this interpretation.  At the outset of the 340B program, less than 5 percent of providers used in-house pharmacies; to disallow the use of Contract Pharmacies would exclude 95 percent of covered entities.  In 1996, HRSA issued guidance stating, “[i]t has been the Department’s position that if a covered entity using Contract Pharmacy services requests to purchase a covered drug from a participating manufacturer, the statute directs the manufacturer to sell the drug at the discounted price.” 61 Fed. Reg. at 43,549.  HRSA reaffirmed this interpretation of the statute in guidance issued in 2010.

Finally, OGC rejected manufacturers rationales to support disallowing the use of Contract Pharmacies.  Manufacturers primarily cited concerns that the use of Contract Pharmacies would lead to a heightened risk of diversion and duplicate accounts.  OGC explained the legitimate transfer of drugs to Contract Pharmacies so that they can be dispensed to patients is a function of the principal-agent relationship, not diversion or illicit transfer.  Any concerns by the manufacturers about double-discounting or diversion should be resolved by the 340B Administrative Dispute Resolution procedures detailed at 85 Fed. Reg. 80,632. The Administrative Dispute Resolution procedures for the 340B program, published in December 2020, are discussed in detail in the December 14, 2020 issue of Health Headlines.

The Advisory Opinion is available here.

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

ALSO IN THE NEWS

King & Spalding Webinar - Recalculating: Major Stark, Anti-Kickback and CMP Final Rule Changes Are Taking Us in a New Direction — King & Spalding will host a three-part webinar series in January about the recently finalized changes to the Stark Law rules, the Anti-Kickback Statute (AKS) safe harbors and the Beneficiary Inducements CMP regulations.  Information about the content of each part of this series is available here.  Part One of this series will be presented on Thursday, January 7, 2021 from 1:00 – 2:30 p.m. ET, Part Two will be presented on Thursday, January 14, 2021 from 1:00 – 2:30 p.m. ET, and Part Three will be presented on Thursday, January 21, 2021 from 1:00 – 2:00 p.m. ET.  Registration for the event is available here.

King & Spalding Webinar - The New Frontier in Managed Care: An Overview of the Newly Passed Federal Surprise Billing Legislation — King & Spalding will host a webinar on Tuesday, January 12, 2021 from 12:30 – 2:00 p.m. ET about the recently enacted “No Surprises Act.”  The presentation will discuss the anticipated effect of the legislation on existing and future managed care arrangements, revenue cycle practices, and disputes concerning out-of-network reimbursement, and potential unintended consequences.  Click here to register.