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July 1, 2019

Health Headlines – July 1, 2019


Trump Signs Executive Order Calling for Increased Transparency and Upfront Disclosure of Hospital Charges and Out-of-Pocket Costs - On Monday, June 24, 2019, President Trump issued an executive order requiring HHS and other agencies to propose regulations designed to promote transparency and upfront disclosure by hospitals to patients of the charge prices of procedures and tests.  Trump’s order also requires that patients be informed ahead of time of patient responsibility amounts such as deductibles and copays.  The order does not set out the legal basis HHS or any other agency has to implement these directives and they likely will be subject to legal challenge if ultimately implemented.

The order gives HHS and other agencies 60 days to develop requirements and propose regulation on hospital publication of “standard charge information, including charges and information based on negotiated rates and for common or shoppable items.”  The stated intent of the order is to allow patients to make “fully informed decisions about their healthcare,” and the order anticipates that the price transparency it calls for will lower costs by spurring competition among providers.  It is unclear at this point whether the disclosure requirement will be more general in nature or extend to specific rates negotiated with individual payors.  The latter has raised significant anti-competitive concerns among the provider community as payors will have access to confidential rate information negotiated by hospitals with their competitors.

The order further gives HHS 90 days to issue an advanced notice of proposed rulemaking requiring providers and insurers “to facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” 

A copy of the executive order can be found on whitehouse.gov

Reporters, Jonathan Shin, Los Angeles, +1 213 443 4334, jshin@kslaw.com and David Tassa, Los Angeles, +1 213 443 4335, dtassa@kslaw.com.

MedPAC Recommends Elimination of Medicare “Incident To” Billing Provisions – In its June 2019 quarterly report to Congress, the Medicare Payment Advisory Commission (MedPAC) voted unanimously to recommend that Congress eliminate “incident-to” billing under Medicare and refine specialty designations for advanced practice registered nurses (APRNs) and physician assistants (PAs).  The recommendation seeks to reduce Medicare spending and improve accounting and tracking of services rendered by APRNs and PAs.

“Incident-to” billing occurs when these practitioners or other auxiliary personnel perform a service but bill Medicare under a supervising physician’s national provider identifier (NPI).  Such billing of services “incident to” physician services is currently permitted under Medicare if certain conditions are met, and results in payment at the physician’s fee schedule rate rather than 85 percent of the Medicare rate when billed under the APRN or PA’s NPI. 

The report discusses a trend of the growing use of PAs and nurse practitioners (NP), the most common type of APRN.  MedPAC further notes recent patterns suggesting that NPs and PAs are increasingly practicing in specialty fields, diversifying the variety of services they perform.  According to MedPAC, the historical development and current status of “incident-to” billing rules do not reflect these growth trends in APRN and PA use. 

MedPAC’s recommendation would require APRNs and PAs to bill Medicare directly, eliminating “incident to” billing.  In addition, MedPAC also recommends that Medicare’s specialty designation for APRNs and PAs be refined.  According to MedPAC, requiring these advanced practitioners to bill directly would better reflect the provision of care in practice, allow for better accuracy in valuation of quality and cost of services, and bring more clarity and accuracy to Medicare data.  In the report, MedPAC also estimates that this recommendation would reduce Medicare spending “by $50 million to $250 million in the first year and by $1 billion to $5 billion over the first five years.”

If Congress were to act on these recommendations, it would have a significant impact on revenue and operations of the large number of physician practices that employ APRNs or PAs.   The full MedPAC report can be found on the MedPAC website here

Reporter, Jonathan Shin, Los Angeles, +1 213 443 4334, jshin@kslaw.com.

Fifth Circuit Orders CMS to Count Mississippi Hospitals’ UCCP Days in the Medicaid Fraction of the Medicare DSH Payment Formula -- In a ruling dated June 10, 2019, the United States Court of Appeals for the Fifth Circuit sided with Mississippi hospitals in a dispute over the calculation of the Medicare DSH payment. Forrest General Hospital v. Azar, No. 18-60227, 2019 WL 2417409 (5th Cir. 2019).  The question before the Court was whether inpatient days attributable to individuals who received benefits by means of payments made to hospitals from Mississippi’s uncompensated care pool (UCCP) established under a Section 1115 waiver should be included in the Medicaid fraction in the Medicare DSH payment formula.  In a unanimous decision, the Fifth Circuit answered in the affirmative, holding that the outcome was dictated by the unambiguous text of the statute and regulation.

The Medicare program makes DSH payments to hospitals that treat a disproportionate number of low-income patients.  Whether and to what extent a hospital qualifies for Medicare DSH depends on its “disproportionate patient percentage.” One component of the disproportionate patient percentage is the Medicaid fraction, which is calculated by taking the sum of a hospital’s days attributable to inpatients who are not entitled to Medicare benefits but are either eligible for Medicaid benefits or are “regarded as such” by the Secretary because they receive benefits under a Section 1115 demonstration project, and dividing that figure by the hospital’s total number of Medicaid inpatient days. A higher Medicaid fraction means a higher disproportionate patient percentage, which improves a hospital’s eligibility for DSH, increases the amount of DSH funding it will receive, and may qualify the hospital for 340B eligibility.

The plaintiffs in Forrest General, two Mississippi hospitals, argued that their Medicare DSH payments were understated because CMS calculated their Medicaid fractions without including days attributable to patients for whom the hospitals received payment from an uncompensated care pool that was established under a Section 1115 demonstration project. 

Section 1115 of the Social Security Act authorizes CMS to waive certain Medicaid requirements for experimental demonstration projects to provide benefits to people who would not otherwise be eligible for Medicaid.  In the aftermath of Hurricane Katrina, CMS approved a demonstration project permitting the Mississippi Medicaid program to expand Medicaid eligibility to individuals displaced or otherwise affected by the hurricane.  That same demonstration project also established the UCCP, which allowed Mississippi to reimburse hospitals that incurred uncompensated care costs for individuals affected by Hurricane Katrina who did not have any public or private insurance coverage. 

The Forrest General plaintiffs contended that the UCCP was a demonstration project authorized under Section 1115 of the Social Security Act, and therefore the days attributable to patients for whom the plaintiffs received UCCP payments should have been counted in their Medicaid fractions.  Since 2000, CMS has permitted hospitals to include in the Medicaid fraction the inpatient days of individuals who receive inpatient hospital benefits under a demonstration project. 42 C.F.R. § 412.106.  CMS countered that the UCCP was not a Section 1115 demonstration project because, although it helped hospitals defray expenses incurred treating patients for whom they did not receive compensation, it did not expressly expand Medicaid eligibility to those patients.  On that basis, CMS likened UCCP days to “general assistance” days, which courts have roundly said cannot be included in the Medicaid fraction. 

The Fifth Circuit was unmoved by CMS’s reasoning.  The court found irrelevant the fact that the terms of the UCCP did not expressly expand Medicaid eligibility to the patients for whom the hospitals received payment.  Under the court’s reading of the statute and regulation, the controlling question is whether the patients received benefits under a demonstration project.  If so, the statute regards them as Medicaid-eligible and the days associated with their treatment must be included in the Medicaid fraction.  The court ruled that the UCCP payments, although paid to the hospitals, were benefits to the patients because they received “medical assistance” in the form of payment for their inpatient care.  Therefore, CMS was required to include those days in the plaintiff hospitals’ Medicaid fractions.

Forrest General is not the first case of its kind.  In HealthAlliance Hospitals, Inc. v Azar, decided on October 26, 2018, Judge Ketanji Brown Jackson of the United States District Court for the District of Columbia held on nearly identical facts that patients under the Massachusetts Commonwealth Care program should be counted in the Medicaid fraction.  HealthAlliance Hospitals, Inc. v Azar, 346 F. Supp. 3d 43, 60-61 (D.D.C. 2018), appeal docketed, No. 18-5372 (DC. Cir. Dec. 28, 2018).  In addition, there is currently ongoing litigation in D.C. District Court regarding whether patient days attributable to individuals who received inpatient services as members of Florida’s Low Income Pool Medicaid Eligibility Group should be counted in the Medicaid fraction.  Bethesda Health, Inc. v. Azar, No. 18-00875 (D.D.C. filed Apr. 13, 2018).  The Fifth Circuit’s decision in Forrest General could open the door for hospitals in other states with uncompensated care payment pools established under a Section 1115 waiver to claim additional inpatient days in their Medicaid fractions. 

A copy of the Forrest General Fifth Circuit opinion is available here and a copy of the HealthAlliance Hospitals District Court decision is available here.

Reporters, Mark Polston, Washington D.C., +1 202 626 5540, mpolston@kslaw.com, and Alek Pivec, Washington, D.C., +1 202 626 2914, apivec@kslaw.com.

CMS Announces Settlement Program for Inpatient Rehabilitation Facility Appeals -- On June 17, 2019, CMS announced a voluntary settlement program for Inpatient Rehabilitation Facility (IRF) appeals pending at the Medicare Administrative Contractor (MAC), the Qualified Independent Contractor, the Office of Medicare Hearings and Appeals and/or Medicare Appeals Council levels of review.

CMS will pay 69 percent of the net payable amount for all claims associated with pending IRF appeals, and will pay 100 percent of the net payable amount for all IRF appeals in two cases:  (1) claims denied based solely on a threshold of therapy time not being met where the claim did not undergo more comprehensive review for medical necessity of the intensive rehabilitation therapy program based on the individual facts of the case; and (2) claims denied solely because justification for group therapy was not documented in the medical record.

To be eligible, the IRF appellant must have filed an appeal at the MAC for redetermination no later than August 31, 2018. Notably, claims that were part of an extrapolation and claims that were dismissed are not eligible for the settlement. In addition, providers involved in False Claims Act litigation or investigations, or that otherwise have program integrity concerns, may not be eligible.

If an IRF provider is approved for participation in the settlement process, the resulting settlement will apply to all eligible appeals from that appellant. As such, a provider cannot choose to settle some eligible IRF appeals and continue to appeal others.

Providers that would like to participate should submit an Expression of Interest to CMS by September 17, 2019.  Additional details and complete eligibility criteria are available here.  

Reporter, Lauren Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com.

District Court Dismisses Hospice False Claims Act Case Where Relator Failed to Identify False Records or Claims – On June 26, 2019, the United States District Court for the Northern District of Ohio granted a motion to dismiss a qui tam lawsuit against HCR ManorCare Inc. and its subsidiaries, including Heartland Hospice Services, LLC (collectively, Heartland), involving allegations that Heartland violated the False Claims Act (FCA) by billing for patients that did not quality for hospice.

The lawsuit, U.S. ex rel. Holloway v. Heartland Hospice Inc. et al., No. 3:10-cv-01875 (N.D. Ohio), was filed in 2010 by a relator who worked for Heartland as a consultant.  In dismissing the case with prejudice, the Court found that, among other things, the relator failed to meet the Rule 9(b) requirement in FCA cases to plead with particularity. Although the relator provided a list of patients she determined were not terminally ill and not qualified for hospice, the court found that information was insufficient to demonstrate that Heartland submitted fraudulent claims.  The court explained that the patient list “neither describes claims Heartland submitted for the listed patients’ care nor explains why the patients were ineligible for hospice.”

The relator also alleged that Heartland violated the FCA by failing to return overpayments. The court again found that the relator failed to meet the pleading standard as she identified no specific claims or facts showing that patients did not qualify for hospice and therefore that payments for services to those patients were overpayments.

The DOJ previously declined to intervene in the case. The order dismissing the lawsuit is available here.

Reporter, Lauren Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com.

Medicare Changes Coverage Restrictions to Allow Lower Volume Facilities to Perform Aortic Valve Procedure – On June 21, 2019, CMS finalized a decision memo updating the national coverage policy for Transcatheter Aortic Valve Replacement (TAVR), a procedure used to address aortic stenosis.  The decision changes the volume requirements for hospitals and physicians to begin and maintain TAVR programs, making it easier for hospitals and providers to meet the requirements for performing TAVR.  The changes are generally consistent with the 2018 Consensus Statement from various medical professional associations including the American Association for Thoracic Surgery, and recommendations from a July 25, 2018 meeting of the Medicare Evidence Development & Coverage Advisory Committee.  The national coverage analysis tracking sheet for TAVR is available here.

Reporter, Kristin Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com.

ALSO IN THE NEWS

King & Spalding Roundtable: #Metoo Risks Facing Healthcare Providers -- King & Spalding will host a webinar on Tuesday, July 23, 2019 from 1:00 P.M. – 2:30 P.M. ET discussing “#metoo” risks that healthcare providers are facing and how they can minimize those risks. This webinar will address:

  • The legal and business impact of the #metoo movement;
  • Recent sexual misconduct scandals involving healthcare providers;
  • Understanding the risks of sexual misconduct allegations and common themes found in such allegations relating to healthcare providers;
  • Reducing the risks of sexual misconduct scandals through effective policies and practices; and
  • Conducting a #metoo wellness assessment.

Registration for this event is available here.