News & Insights


January 9, 2017

Health Headlines – January 9, 2017

Congress to Vote on Budget Resolution to Start Process of Repealing the Affordable Care Act; Vice President-Elect Pence Promises Quick Executive Actions to Smooth Transition  – This week, the Senate and the House are expected to approve an FY 2017 budget resolution instructing congressional committees to write legislation, known as budget reconciliation bills, to rescind many key components of the Affordable Care Act (ACA).  On January 4, 2017, the Senate voted to begin debate on S. Con. Res. 3, the FY 17 budget resolution that begins the repeal process, introduced by Senate Budget Committee Chairman Mike Enzi (R-WY). 

Republicans are using the budget reconciliation process to expedite ACA repeal efforts.  The budget reconciliation process, which is not subject to filibuster in the Senate, consists of two components: (1) approval of the budget resolution by both chambers of Congress, and (2) consideration of reconciliation legislation to carry out instructions contained in the budget resolution.  Senate procedures provide for 50 hours of debate time, equally divided between Republicans and Democrats, on the budget resolution.  After this debate time has expired, senators are allowed to offer amendments to the budget resolution under a marathon voting session known as a “vote-a-rama.”  The House process for considering the legislation will be shorter in duration, with a final vote expected by the end of this week.  The budget resolution does not need to be signed into law by the president; passage of the resolution in each chamber triggers the procedural mechanisms known as reconciliation.

S. Con. Res. 3 directs four committees with jurisdiction over health care policy (House Ways & Means; House Energy & Commerce; Senate Finance; and Senate Health, Education, Labor & Pensions) to submit legislation to the House and Senate Budget Committees by January 27, 2017.  The Budget Committees will then combine the content of these reconciliation bills into a single bill to be considered under expedited procedures and not subject to filibuster in the Senate.  Under the rules of the budget reconciliation process, only certain components of the ACA can be repealed.  It is likely that the reconciliation bills will focus on eliminating the individual mandate penalty, reducing money available for states that opted to expand Medicaid, and repealing subsidies for the purchase of health insurance in the marketplace.

While the timing and content of an ACA replacement is still under debate, on January 4, 2017, Vice President-elect Mike Pence assured House Republicans that President-elect Trump plans to announce executive actions to ensure an “orderly transition for the American people.”  Vice President-elect Pence also promised to work together with Congress on legislation to replace the ACA. 

The budget resolution is available here.

Reporters,  Allison Kassir, Washington, D.C., +1 202 626 5600,, and Lauren S. Gennett, Atlanta, + 1 404 572 3592,

CMS Clarifies the Application Processes for the Mid-Build Exception under the 21st Century Cures Act and for Relocation Exception Requests under the CY 2017 OPPS Final Rule – CMS has issued guidance documents addressing how hospitals can (1) qualify an off-campus provider-based department (PBD) for the “mid-build” exception set forth in the 21st Century Cures Act and (2) request from their CMS Regional Office a relocation exception for an excepted PBD due to an extraordinary circumstance.  PBDs that remain “excepted” from the payment changes set forth in Section 603 of the Bipartisan Budget Act of 2015 will receive full OPPS payment in the future.  These guidance documents for receiving or maintaining excepted status are described below. 

Mid-Build Exception 

As previously reported here, on December 13, 2016, President Obama signed the 21st Century Cures Act into law.  The Act provided additional criteria by which off-campus PBDs that were “mid-build” before November 2, 2015 can qualify as excepted from payment changes under Section 603 and continue to receive full OPPS payment beginning in 2018 if they submit certain documents to CMS by February 13, 2017.  The guidance document from CMS addresses the process by which hospitals should provide the required documentation to their Medicare Administrative Contractor to qualify for this exception.  Per the guidance document, hospitals must submit the following materials to their MAC no later than February 13, 2017:

  • An attestation (pursuant to 42 C.F.R. § 413.65(b)(3)) that such department meets the requirements of the provider-based regulation at 42 C.F.R. § 413.65;

  • Documentation that the provider included such department as a hospital practice location on its CMS-855A enrollment form; and

  • A written certification signed by the chief executive officer or chief operating officer of the main provider (as defined by 42 CFR 413.65(b)(2)) (or equivalent if such titles are not used by the main provider) that the department met the definition of a “mid-build” department.  The Cures Act defines a “mid-build” PBD as one for which the hospital had a binding written agreement with an unrelated third party for actual construction of the PBD before November 2, 2015.

CMS’s notice states that additional guidance will be forthcoming at a later date.  

Relocation Exception

As previously reported here, the CY 2017 OPPS Final Rule implemented Section 603, which states that CMS may not pay for certain non-excepted items and services provided in off-campus hospital outpatient departments under the OPPS beginning January 1, 2017.  CMS adopted a policy to allow an excepted off-campus PBD to relocate to a new location (either temporarily or permanently) without losing its excepted status, only upon a demonstration of extraordinary circumstances outside of the hospital’s control (such as a natural disaster).  The guidance document provides information on the timelines for relocation exception requests, describes the minimum information applicants should provide to the CMS Regional Office, and provides staff contact information for the various CMS Regional Offices.

Applications for relocations that occurred between November 2, 2015 and December 31, 2016 must be received by the hospital’s CMS Regional Office no later than January 31, 2017.  These requests will receive priority review by CMS.  While such application is pending, CMS states that it expects hospitals to bill using the claims modifier “PN” for non-excepted items and services furnished at these departments.  However, an approved application will be given a January 1, 2017 effective date – presumably indicating that providers can resubmit any 2017 claims for services furnished before approval and receive the full OPPS payment amount.

Applications for relocations that took place on or after January 1, 2017 must be submitted to the provider’s CMS Regional Office no later than 30 days after the extraordinary circumstance occurs – not after the relocation itself.  This may present a time crunch as a hospital that experiences one of these events must settle on a new location and report it to CMS within 30 days of the triggering event.

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

Judge Denies HHS’s Request to Rescind Timeline to Eliminate the Medicare Appeals Backlog – On January 4, 2017, the court in the American Hospital Association (AHA) v. Burwell litigation denied HHS’s motion to reconsider, which means that HHS must comply with the court’s timeline to eliminate the Medicare appeals backlog by December 31, 2020.  The AHA filed suit against HHS in 2014, wherein AHA sought mandamus relief to compel HHS to meet its statutory deadline for administrative review of denial of claims for Medicare reimbursement.  As previously reported, on December 5, 2016, the U.S. District Court for the District of Columbia granted AHA’s motion for summary judgment.  

Adopting AHA’s proposed deadlines to reduce the appeals backlog, the court ordered HHS to:

  • Reduce the appeals backlog by 30 percent by the end of 2017;

  • Reduce the appeals backlog by 60 percent by the end of 2018;

  • Reduce the appeals backlog by 90 percent by the end of 2019; and

  • Completely eliminate the appeals backlog by December 31, 2020.

The order further provided that: (i) HHS must file status reports with the court every 90 days; and (ii) AHA may move for a default judgment or enforce the writ of mandamus against HHS should HHS be in default of the court’s order on January 1, 2021.  

In response to the court’s December 5, 2016 ruling, HHS filed a motion to reconsider on December 15, 2016.  HHS argued that reconsideration was “[w]arranted to correct a clear error in the Court’s ruling and to prevent manifest injustice.” 

Specifically, HHS contended that it would have to “[p]ay pending claims without regard to their merit” to achieve the court’s deadlines for percentage reductions in the Medicare appeals backlog.  HHS further argued that such a result would violate HHS’s obligation to protect the Medicare Trust Funds, which are “[r]eserved by statute for the payment of meritorious claims for Medicare-covered services to the elderly and disabled and associated administrative costs.”  HHS concluded its motion to reconsider by arguing that “[b]ecause [HHS] is caught between two statutory mandates that are incompatible given HHS’s present resources and authorities, the Court should have left resolution of the conflict to the Secretary’s discretion and allowed the Secretary to continue to address the backlog through the administrative measures [it] deems appropriate.”

As noted, on January 4, 2017, the court denied HHS’s motion to reconsider, which means that HHS must comply with the court’s timeline to eliminate the Medicare appeals backlog by December 31, 2020.  Although the court was “[n]ot unsympathetic to Defendant’s plight,” it found that “[HHS’s] argument that [it] cannot comply with both the reduction targets and [its] statutory obligation to protect the Medicare Trust Funds is not new; it was twice urged in prior briefing.”  The court ultimately concluded that HHS had failed to meet the “stringent standard” to alter or amend the court’s judgment.  

HHS implied in its motion to reconsider that it will appeal the court’s decision. 

Reporter, Stephanie F. Johnson, Atlanta, +1 404 572 4629,

HHS Publishes Final Rule for 340B Drug Program Ceiling Prices and Civil Monetary Penalties – On January 5, 2017, the HHS Health Resources and Services Administration (HRSA) published a final rule updating the price structure that drug manufacturers participating in the 340B Drug Pricing Program may charge to covered entities purchasing drugs under the Program.  This rule becomes effective on March 6, 2017; however, HRSA has announced that it will begin enforcement of this rule on April 1, 2017 to coincide with the beginning of the next quarter for the 340B Program. 

The final rule does not make significant substantive changes from the proposed ceiling price rule, which was published in June 2015, as reported here.   HRSA finalized the requirements for manufacturers to calculate the ceiling price for covered outpatient drugs on a quarterly basis as the AMP (average manufacturer price) reported from the preceding calendar quarter minus the URA (unit rebate amount), and defined the methodology that manufacturers must use when estimating the ceiling price for a new covered outpatient drug based on the wholesale acquisition cost minus rebate percentage.  HRSA limited the use of the estimated ceiling price for new drugs only until an AMP becomes available.  HRSA also codified its current policy on “penny pricing” in this rule, which requires manufacturers to charge $0.01 when the calculation of the 340B ceiling price for a covered outpatient drug is zero. 

In this rule, HRSA established a maximum $5,000 civil monetary penalty per instance for manufacturers that have “knowingly and intentionally” charged a covered entity more than the ceiling price for a covered outpatient drug.  HRSA suggested that it expects CMPs to be applied infrequently, as it encourages manufacturers and covered entities to work together to resolve discrepancies within the 340B Program.  While the final rule offers a number of examples of overcharging that HRSA would not consider to be “knowing and intentional,” HRSA has delegated the enforcement of this civil monetary penalties provision – including the definitions of intent – to the HHS Office of the Inspector General. 

The final rule is available here, and a news alert from HRSA’s Office of Pharmacy Affairs is available here.

Reporter, C’Reda Weeden, Washington, D.C., +1 202 626 5572,


King & Spalding University e-Learn Series on the Budget Reconciliation Process – On Wednesday, January 11, 2017 from 12:30 PM - 1:30 PM ET, King & Spalding’s Government Advocacy and Public Policy Group will host an interactive web seminar entitled, “Budget Reconciliation – What Is It And Why Is Everyone Talking About It?”  The seminar will explain how reconciliation works and how it might be used this year to consider major elements of the Trump Administration and the Republican-controlled Congress, including repeal of the Affordable Care Act.  Former governor Bob Ehrlich will provide the political context and explain areas in which the Republican majorities in the House and Senate may attempt to use reconciliation to achieve their legislative priorities.  Tom Spulak and George Crawford, joined by guest speaker Peter Robinson, a former House and Senate Senior Assistant Parliamentarian and a foremost authority on congressional procedures, will explain how the reconciliation process works and what you might expect to see in the coming year in Congress.  There is no expense to participants.  Register here.

King & Spalding to Host Roundtable on the 21st Century Cures Act – Join us on Thursday, January 12, 2017, 1:00 PM - 2:30 PM ET, for a webinar-only roundtable titled “A Cancer Moonshot and So Much More: An Introduction to the 21st Century Cures Act for Healthcare Providers and Pharmaceutical and Medical Device Companies.” The Roundtable will bring you quickly up to speed on the key provisions of the 21st Century Cures Act, including insights regarding opportunities and challenges and why some of the innovations are controversial. CLE credit will be applied for in CA, GA, NY, TX, and, if needed, NC and VA. Register here.

King & Spalding to Host 26th Annual Health Law & Policy Forum – Join us on Monday, March 20, 2017, 8:00 AM – 5:30 PM ET, for the 26th Annual Health & Law Policy Forum at the St. Regis Hotel, in Atlanta, Georgia. Keynote speaker Jeffrey Toobin, a senior analyst for CNN and a staff writer for The New Yorker, will discuss the Supreme Court and how it may impact health policy in the next administration. As in previous years, Forum sessions will cover a variety of health law and policy topics. Attendance is $95 per person (lunch included). Capacity is limited. Register here.

Save the Date: 2017 Cybersecurity & Privacy Summit – On Monday, April 24, 2017, King & Spalding will host its 2017 Cybersecurity & Privacy Summit via webinar and in person in Atlanta, Georgia. The Summit will cover the latest developments and strategies for data protection. Additional details to follow.