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Newsletter

July 15, 2019

Health Headlines – July 15, 2019


CMS Issues Proposed Rule to Rescind Reporting Requirements for State Medicaid Programs – On July 11, 2019, CMS released a proposed rule that would rescind certain state reporting requirements relating to Medicaid (the Proposed Rule) that potentially could make it easier for states to reduce Medicaid benefits and expenditures.  Under Section 1902(a)(30)(A) of the Social Security Act, a state Medicaid agency is required to ensure that its state plan makes payment that is “sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”  CMS issued a final rule in 2015 in which it adopted requirements for compliance with this provision.  The Proposed Rule would rescind certain requirements and provide states with more “flexibility.”  The Proposed Rule was published today in the Federal Register.  Comments are due by September 13, 2019. 

The CMS 2015 final rule instructed states to document their compliance with Section 1902(a)(30)(A) by submitting to the agency an access monitoring review plan (AMRP), that is updated at least every three years, for the following services: (1) primary care (including those provided by a physician, federally qualified health center, clinic or dental care); (2) physician specialist services (for example, cardiology, urology, radiology); (3) behavioral health services (including mental health and substance use disorder); (4) pre- and post- natal obstetric services, (including labor and delivery); (5) home health services; (6) any additional types of services for which a review is required under §447.203(b)(6) because of a proposed payment rate reduction or restructuring; (7) additional types of services for which the state or CMS has received a significantly higher than usual volume of beneficiary, provider or other stakeholder access complaints for a geographic area; and (8) additional types of services selected by the state.  The 2015 rule also required states to go through a process of notice and comment before adopting a state plan amendment (SPA) that would restructure payment rates in any of these categories, and to submit documentation to CMS that would show that any changes to payment rates would not harm beneficiary access to care.

The Proposed Rule would rescind these requirements and would provide states “flexibility” to provide CMS with other forms of data would document a SPA’s compliance with Section 1902(a)(30)(A).  The Proposed Rule does not purport to change the substantive network adequacy requirement under Section 1902(a)(30)(A), although CMS is separately considering a proposal to revisit these requirements for Medicaid managed care plans.  However, because there is no private right of action under Section 1902(a)(30)(A), and CMS is the only enforcement authority, this proposal may give rise to a concern that a rescission of the reporting requirements would, as a practical matter, permit state Medicaid agencies to depart from the statutory requirement for adequate payments for Medicaid providers.  Hospitals are advised to track the Proposed Rule and to be aware of the possibility that, if the Proposed Rule takes effect, it may impact the health care services offered under Medicaid in some states.

Reporter, Elizabeth Han, Houston, +1 713 276 7319, ehan@kslaw.com

President Trump Issues Executive Order Aimed at Kidney Health in America – On July 10, 2019, President Trump issued an Executive Order on Advancing American Kidney Health aimed at reducing the number of patients developing kidney failure, having fewer Americans receiving dialysis in dialysis centers, and making more kidneys available for transplant (the Order).  The Order calls on the Secretary of HHS to, among other things, develop a payment model designed to identify at-risk patients earlier in disease development and increase home dialysis and kidney transplants.  The Order also tasks the Secretary to reform regulations regarding the evaluation metrics for Organ Procurement Organizations (OPOs).  These steps, and others, are set to roll out as early as 30 days from the Order.   

The Order’s policy initiatives are three-fold.  The first goal is to “prevent kidney failure whenever possible through better diagnosis, treatment, and incentives for preventive care.”  The second is to “increase patient choice through affordable alternative treatments for end stage renal disease (ESRD) by encouraging higher value care, educating patients on treatment alternatives, and encouraging the development of artificial kidneys.”  The third initiative is to “increase access to kidney transplants by modernizing the organ recovery and transplantation systems and updating outmoded and counterproductive regulations.”  A press release by HHS added specifics to the President’s goals: 

  • Reducing the number of Americans developing end-stage renal disease by 25 percent by 2030;
  • Having 80 percent of new ESRD patients in 2025 either receiving dialysis at home or receiving a transplant; and
  • Doubling the number of kidneys available for transplant by 2030.

HHS is tasked with developing new payment models and initiatives to implement the Order.  Specifically, the Secretary is called upon to launch several initiatives to promote kidney disease awareness and support research regarding prevention and treatment.  The Secretary shall also develop a payment model to test innovations in compensation for providers of kidney care services based on kidney patient cost and quality outcomes, with a focus on delaying or preventing the onset of kidney failure, preventing unnecessary hospitalizations, increasing the rate of transplants and creating incentives to provide care for Medicare beneficiaries who have advanced stages of kidney disease but who are not yet on dialysis.  The Secretary shall also select a payment model incentivizing greater use of home dialysis and kidney transplants for Medicare beneficiaries on dialysis.

According to HHS’s press release, the Center for Medicare & Medicaid Innovation (CMMI) has responded to the Order by releasing a set of four optional payment models, expected to enroll more than 200,000 Medicare patients in arrangements that give providers new incentives for preventing kidney disease and managing kidney patients’ health in a more comprehensive and person-centered way.  To provide more options for people with kidney failure, CMMI also announced a required payment model, known as ESRD Treatment Choices, which will enroll all dialysis providers in approximately half of the country and provide new incentives to encourage dialysis in the home.

The Order also forecasts regulatory changes for OPOs—the organizations responsible for working with hospitals to help place donor organs for transplant.  The Order requires the Secretary to issue regulations and evaluation metrics to establish more transparent, reliable, and enforceable objective metrics for evaluating an OPO’s performance.  Additionally, the Secretary is charged to streamline and expedite the process of kidney matching and delivery to reduce the discard rate by removing process inefficiencies in matching and delivery that result in delayed acceptance by transplant centers. 

Additionally, the Order calls for the Secretary to consider requests for premarket approval of wearable or implantable artificial kidneys.  This step is designed to encourage development and cooperation between developers and FDA, as well as produce a strategy to encourage innovation in new therapies through the Kidney Innovation Accelerator (KidneyX), a public-private partnership between HHS and the American Society of Nephrology.

Finally, the Secretary shall propose a regulation to remove financial barriers to living organ donation by expanding the definition of allowable costs that can be reimbursed under the current program.  Proposals would include raising the limit on the income of donors eligible for reimbursement under the program, allowing reimbursement for lost-wage expenses, and providing for reimbursement of child-care and elder-care expenses.

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.

District Court Order Paves Way for HHS to Appeal Decision Finding 340B Rate Cut Unlawful Without First Providing a Proposed Remedy on Remand  – On July 10, 2019, Judge Rudolph Contreras of the U.S. District Court for the District of Columbia granted HHS’ request for a final judgment, clearing the way for the government to immediately appeal his earlier decision that found unlawful Medicare’s nearly 30 percent rate cut for separately payable outpatient drugs purchased under the 340B program. 

This lawsuit was originally initiated in November 2017, shortly before CMS implemented its policy, adopted in the Calendar Year 2018 Outpatient Prospective Payment System (OPPS) final rule, to cut the rates for separately payable drugs purchased under the 340B program to ASP minus 22.5 percent.  That lawsuit, brought by the American Hospital Association (AHA), other hospital associations and a handful of representative hospitals, was dismissed by Judge Contreras because the plaintiffs had failed to present their claims to the Secretary in the context of a claim for payment as required by the Medicare statute.  The United States Court of Appeals for the District of Columbia affirmed that decision, requiring the AHA and other plaintiffs to initiate a second lawsuit after they complied with the “presentment” requirement.  A copy of the Court of Appeals’ final decision can be found here.

In December 2018 and after the plaintiffs filed their second lawsuit, Judge Contreras found that CMS’s rate cut violated the formula prescribed in the Medicare statute for setting rates for certain outpatient drugs.  That provision requires CMS to set rates either using drug acquisition cost data it collects from hospitals as part of a survey or default to the drug’s average sales price as reported by manufacturers.  See 42 U.S.C § 1395l(t)(14).  The agency is not free, according to Judge Contreras, to use its adjustment authority to develop a third payment methodology altogether, which the ASP minus 22.5 formula effectively was.  Despite finding that the agency had acted ultra vires—beyond its power granted by Congress—Judge Contreras decided not to vacate CMS’s OPPS payment rule out of concern that vacatur would be too disruptive, given that the OPPS system is budget neutral and the “savings” achieved by the rate cut had been used to raise OPPS rates for all other outpatient department services.  See Judge Contreras’ May 6, 2019 Memorandum Opinion here.   Instead, Judge Contreras remanded the matter back to HHS to determine its own remedy for resolving its error.  Judge Contreras also ruled at that time that he would retain jurisdiction over the case in order to address the adequacy of the government’s actions on remand.  Id

In a motion filed in June 3, 2019, HHS requested that Judge Contreras reconsider his earlier decision on the merits and, in the alternative, revise his decision to retain jurisdiction of the case on remand and instead enter an order of final judgment.  According to the government, Judge Contreras’ order raised doubts as to whether the district court matter was final and immediately appealable to the D.C. Circuit.  On July 10th, Judge Contreras reaffirmed in his order that CMS’s 340B rate cut was unlawful, denying the government’s request to reconsider the merits of the matter.  But Judge Contreras did grant the government’s request to revise his order and not retain jurisdiction of the case on remand.  Although the plaintiffs had requested that he set a firm date by which HHS had to present its remedy on remand—presumably so that it could be challenged if insufficient—Judge Contreras denied that request as moot. 

What this means as a practical matter is that the government is now free to appeal immediately the merits of Judge Contreras’ decision that the 340B rate cut was ultra vires.   It will not be required to present a plan on remand as to how it will reverse the rate cut and make hospitals whole before asking the D.C. Circuit to reverse Judge Contreras’ decision on the merits.  At this time, affected hospitals have lost billions of dollars in reimbursements since CMS implemented the 340B rate cut in both CY 2018 and CY 2019.  It now appears they will have to wait until after the D.C. Circuit reviews and rules on Judge Contreras decision—which could take an additional year to 18 months—before seeing how CMS would propose to make them whole.   A copy of the July 10, 2019 Order can be found here and the Court’s accompanying memorandum can be found here

Reporters, Mark D. Polston, Washington D.C., +1 202 626 5540, mpolston@kslaw.com, Kathryn T. Han, Los Angeles, +1 213 443 4336, khan@kslaw.com.

CMS Proposes New Radiation Oncology Model – On July 10, 2019, CMS announced a new proposal for episode-based payment for radiation oncology services.  The aim of this new proposal is to determine whether episode-based payment to hospitals, physician groups, and freestanding radiation therapy centers would reduce expenditures for radiation oncology services while preserving or enhancing quality of care.

In 2017, the Secretary of HHS issued a report to Congress identifying three reasons that episode-based payment would be appropriate for radiation therapy: the lack of site neutrality for payments; incentives encouraging practitioners to deliver services in volume rather than value; and coding and payment challenges.

CMS’ proposal would require participation in episode-based payment from radiation oncology providers furnishing services for 17 different cancer types within randomly selected Core Based Statistical Areas.  Participants would receive prospective, episode-based payment amounts for radiation therapy furnished during a 90-day episode of care instead of regular Medicare fee-for-service payments.  These episode-based payments would be split into a professional component payment for reimbursement of physician services, and a technical component payment for reimbursement of all other services provided as part of the radiation therapy treatment, including facility and equipment fees.  The pricing for radiation oncology services would be site-neutral under CMS’ proposal in order to encourage more cost-efficient care delivery.

CMS currently projects that the new radiation oncology payment mode will begin on either January 1, 2020 or April 1, 2020 and end December 31, 2024. 

A copy of the announcement can be found here.

Reporter, David Tassa, Los Angeles, +1 213 443 4335, dtassa@kslaw.com.

New York Anesthesiologist Indicted in Alleged Telemedicine Fraud Scheme – On July 9, 2019, the Department of Justice (DOJ) announced it has indicted and arraigned a New York-based anesthesiologist for her alleged role in a $7 million telemedicine conspiracy to fraudulently bill Medicare, Medicare Part D plans, and private insurance plans.  According to DOJ’s press release, this indictment results from work by the Criminal Division’s Medicare Fraud Strike Force, a joint initiative of DOJ and HHS. It appears to be consistent with recent focus by DOJ and HHS on alleged misuse of telemedicine to prescribe DME to Medicare beneficiaries.

Federal prosecutors in the Eastern District of New York charged anesthesiologist Anna Steiner, also known as “Hanna Wasielewska,” with one count of conspiring to commit healthcare fraud by misusing telemedicine channels under agreements with unidentified companies to prescribe durable medical equipment (DME) and drugs to more than 3,000 beneficiaries. The full indictment is available here.

The June 27 indictment alleges that, from January 2015 to May 2018, Steiner and other providers allegedly received kickback payments from unidentified companies for improper telemedicine encounters. The indictment alleges Steiner “prescribed and ordered DME and prescription drugs for beneficiaries who were not examined or evaluated by a licensed physician.” The prescriptions flowing from the alleged telemedicine encounters were for DME and drugs that prosecutors claim were neither medically necessary nor the result of genuine physician-patient relationships.

The indictment alleges that Steiner and her co-conspirators submitted and caused to be submitted over $7 million in claims to Medicare for DME on behalf of more than 3,000 beneficiaries, resulting in over $3 million in payments on those claims. The indictment includes a criminal forfeiture allegation.

Reporter, Lee Nutini, Atlanta, +1 404 572 3533, lnutini@kslaw.com.

ALSO IN THE NEWS

FTC Complaint to Block Merger of North Dakota Providers Dropped After Deal Abandoned – On July 8, 2019, the FTC dropped its case seeking to block Sanford Health’s proposed acquisition of Mid Dakota Clinic PC, alleging that the merger would create a group with a dominant market share of physician services in the area raising significant anti-competitive concerns.   Sanford and North Dakota Clinic dropped the deal after the 8th Circuit upheld a preliminary injunction halting the merger on June 13, 2019, finding that the FTC met its burden of showing anti-competitive effects of the proposed transaction.  The FTC Order dismissing the complaint can be found here, and a public version of the FTC complaint is available here on ftc.gov.

Proposed Rule Would Increase Medicare Reimbursements to Home Health Agencies – On July 11, 2019, CMS issued a proposed rule that would increase Medicare reimbursements to home health agencies by 1.3% (or $250 million) in calendar year 2020. In addition, the rule addresses implementation of a new payment model, the Patient-Driven Groupings Model, which allows Medicare to establish reimbursement rates based on patients’ clinical presentation, rather than the amount of care provided.  The proposed rule is available here, and will be published in the Federal Register on July 18, 2019. Comments are due to CMS by September 9, 2019.

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.

Atlanta Life Sciences & Healthcare Group Event – The Atlanta Life Sciences & Healthcare Group is an educational, networking and social resource for professionals working in or serving the life sciences and healthcare industry. We invite you to join us for our summer event on July 31 from 5:30 – 7:30 PM to network with others working in this growing area of our economy. The event will be hosted by Parker Hudson at 303 Peachtree Street NE, Suite 3600. Please register here.