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July 16, 2018

Health Headlines – July 16, 2018


CMS Announces Proposed Calendar Year 2019 Physician Fee Schedule with Significant Focus on Streamlining Documentation Processes and Supporting Virtual Care – On July 12, 2018, CMS released the unpublished version of the Calendar Year (CY) 2019 Proposed Physician Fee Schedule (PFS), which can be found here while the Fact Sheet is available here. The CY 2019 Proposed PFS reflects a response by CMS to stakeholder feedback regarding the need to streamline documentation requirements for Evaluation and Management (E&M) visits. There are currently four levels of E&M billing with different documentation requirements needed to support each level. CMS currently requires the requisite code documentation for E&M visits in order for the physician to be paid for the visit. CMS is proposing to eliminate the different levels in exchange for a single E&M coding level. CMS expects this change to reduce payments to specialists who bill at the highest E&M level, although revenue loss could be offset by the time savings to the clinicians, who will be able to see more patients. CMS estimates that this proposal “would save individual clinicians an estimated 51 hours per year if 40 percent of their patients are in Medicare.” 

Another major area of change in the CY 2019 PFS proposed rule is the proposed expansion of telemedicine reimbursement. The proposed rule would allow billing for a non-face-to-face consult between an established physician and patient to determine whether an E&M visit is necessary. The CY 2019 PFS proposed rule also proposes establishing a code to permit Medicare payment when a physician uses a recorded video or image captured by a patient in order to evaluate a patient’s condition and potential need for an E&M visit. For the non-face-to-face consult, as well as the recorded video or image consult, the service would not be separately billable by the physician if the remote service originates from a related E&M visit within the previous seven days, or if the consult results in an E&M visit within the next 24 hours. In these instances, the consult would be bundled into the E&M visit. Where separately recoverable, these remote consults would be reimbursed at a lesser rate than traditional E&M visits in light of the reduced overhead cost of these visits and the efficiencies associated with the use of communication technology.

CMS has not set a frequency limitation on the number of times a physician can recover for remote visits associated with the same patient, but seeks input from stakeholders on whether a frequency limitation should be imposed. CMS also seeks input from stakeholders on whether a physician/patient relationship should be required before the physician can submit for reimbursement for a consult based on review of a recorded video or image sent by the patient to determine if an in-person E&M visit is necessary. These are just a few areas in which CMS requests feedback during the comment period. Other areas where CMS is requesting feedback can be found throughout the proposed rule.

Comments on the CY 2019 PFS proposed rule are due by 5 p.m. ET on September 10, 2018.

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

Latest House Energy and Commerce Committee Hearing on 340B Drug Pricing Program Focuses on HRSA Oversight Concerns and Proposed Legislation – On July 11, 2018, the House Energy & Commerce Committee’s Health Subcommittee (the Subcommittee)  held a hearing titled, “Opportunities to Improve the 340B Drug Pricing Program.”  In addition to hearing from two witness panels, including the Government Accountability Office (GAO), the Subcommittee discussed a number of 340B-related bills pending before the Committee.

While Subcommittee members on both sides of the aisle expressed support for the 340B Program, the hearing highlighted members’ continued concerns regarding federal oversight of the Program, particularly in light of the GAO’s recent report on the Health Resources and Services Administration’s (HRSA) oversight of 340B contract pharmacies. In his opening remarks, Subcommittee Chairman Michael Burgess (R-TX) noted, “I think we all should be concerned by the fact that many of the covered entities that the GAO reviewed do not have in place a policy that ensures uninsured, low-income patients are not hit with a big hospital bill for their outpatient drugs.”

In response to concerns raised regarding HRSA’s oversight of the program, full Committee Ranking Member Frank Pallone (D-NJ) advocated for legislation that “would enhance 340B operations and give HRSA more resources and authority to operate the program, and collect covered entity and manufacturer information.”  Pallone and other Democratic members emphasized their opposition to proposed legislation which they believe would “curtail or restrict” the 340B Program, citing the 340B Protecting Access for the Underserved and Safety-net Entities Act (H.R. 4710) and the Protecting Safety-Net 340B Hospitals Act as examples.

Committee members and witnesses also raised concerns about a lack of clarity with respect to the 340B Program’s intent, and Rep. Doris Matsui (D-CA) highlighted her bill (H.R. 6071) to codify the definition of “patient” under the 340B Program. In expressing his support for Matsui’s legislation, Pallone pointed out the bill’s provisions requiring audit parity between covered entities and pharmaceutical manufacturers, a concern raised by multiple members during the hearing.

A link to the hearing and accompanying documents may be found here.

Reporters, William Clarkson, Washington, D.C., +1 202 626 8997, wclarkson@kslaw.com, and Jessica Rennert, Washington, D.C., +1 202 737 0500, jrennert@kslaw.com.

District Court Dismisses Teaching Hospital from FCA Suit Involving Billing for Surgeries Performed Without Residents – On July 3, 2018, the U.S. District Court for the Northern District of Illinois issued a ruling dismissing Advocate Christ Medical Center (ACMC) from a False Claims Act suit brought by a former resident against ACMC and a separate surgeon group.  The case involves allegations that teaching hospital ACMC and the surgeon group improperly billed Medicare and Medicaid for surgeries performed without the assistance of residents.  The relator contended, among other things, that ACMC and the surgeon group improperly billed and were paid for the use of physician assistants at surgery when residents were available to assist with the surgeries, and that ACMC submitted false Medicare cost reports (MCRs) to CMS when it sought graduate medical education (GME) funding associated with such surgeries.  The case is an example of the limits of imputing liability to a hospital for services and billing of its medical staff.

The district court initially denied ACMC’s motion to dismiss the second amended complaint.  However, upon ACMC’s request for reconsideration of that ruling, the court found that ACMC’s MCR certifications did not extend to services provided by the surgeon group.  Therefore, the MCRs (through which ACMC received GME funding) did not make any false representations about the surgeon group’s services.  The court further found that ACMC could not be liable under the FCA for another party’s fraudulent billing practices.  The court went on to say that “to state a claim, Relator would have to be able to allege that ACMC took an ‘active role’ in submitting false claims or material fraudulent documents to the government.” 

The case is United States v. Advocate Christ Medical Center, Case No. 13-cv-1826 (N.D. Ill.). The district court opinion, in which the court dismissed ACMC with prejudice, is available here

Reporter, Jennifer S. Lewin, Atlanta, + 1 404 572 3569, jlewin@kslaw.com.

CMS Announces that Current DMEPOS CBP Contracts Will Not Be Renewed or Extended for January 2019, and Proposes Changes to the DMEPOS CBP – On July 11, 2018, CMS announced that the process for recompeting contracts with suppliers currently in effect under the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) Competitive Bidding Program (CBP) continues to be delayed with no specific launch date planned. CMS indicated, however, that the agency continues to back the CBP and intends to initiate a new bid process sometime in the future. In the meantime, the current contracts for the DMEPOS CBP will expire on December 31, 2018. Beginning on January 1, 2019, and until new contracts are awarded under the DMEPOS CBP, Medicare beneficiaries may receive covered DMEPOS items from any Medicare enrolled DMEPOS supplier. In a new proposed rulemaking governing payment for end stage renal disease services, renal dialysis services and DMEPOS, CMS-1691-P (Proposed Rule), CMS is proposing to keep the current competitively bid rates in place, subject to a CPI-U update; however, all enrolled suppliers would be eligible to receive payment at the rates. CMS also proposed several changes to the DMEPOS CBP in the Proposed Rule.

Specifically, in the Proposed Rule, CMS is proposing changes to the DMEPOS CBP and DMEPOS Fee Schedule amounts, including the following:

  • Implement lead item pricing (i.e., pricing based on the maximum winning bid) within each DMEPOS CBP product category;
  • Revise the definition of “composite bid” to mean the bid submitted by the supplier for the lead item in the product category; 
  • Establish a new method for establishing single payment amounts (SPAs) under the DMEPOS CBP using maximum winning bids (as opposed to the current methodology that relies on the median price offered by the winning suppliers); and
  • Establish three temporary fee schedule adjustment methodologies, each applicable to a different area in which the items or services are furnished:
    • For items and services furnished in former competitive bidding areas (CBAs), the fee schedule would be based on the SPAs in effect in the CBA on the last day before the DMEPOS CBP contract periods of performance ended, increased by the projected percentage change in the Consumer Price Index for Urban Consumers (CPI-U) for the 12-month period on the date after the contract periods ended (for example, January 1, 2019). This would effectively keep the current rates in place with a CPI-U update.
    • For items and services subject to the DMEPOS CBP that are furnished in rural and non-contiguous non-CBAs, the fee schedule amounts would be based on a blend of 50 percent of the adjusted fee schedule amounts and 50 percent of the unadjusted fee schedule amount, through December 31, 2020.
    • For items and services furnished in non-CBAs that are not rural or non-contiguous areas with dates of service between January 1, 2019 and December 31, 2020, the fee schedule amount would equal 100 percent of the adjusted payment amount.

A number of facets of the Proposed Rule may be subject to challenges. Comments on the Proposed Rule are due by September 10, 2018. The Proposed Rule is available here, and CMS’s announcement is available here.

Reporters, Seth Lundy, Washington, D.C.,  +1 202 626 2924, slundy@kslaw.com, and Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.

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Torrey McClary Discusses Healthcare M&A Trends – An article published last week by Mergermarket includes quotes from King & Spalding partner, Torrey McClary, discussing the trend of affiliations, joint ventures and other unique deal structures that are becoming increasingly prevalent among U.S. hospital systems as an alternative to traditional mergers and acquisitions.

Upcoming Webinar on Risk Assessments in Today’s Enforcement and Compliance Environment – King & Spalding partner, Sara Kay Wheeler, and associate, Lauren S. Gennett, will be featured speakers on a Wolters Kluwer webinar on July 19, 2018, at 1:00 p.m. ET. Sara Kay and Lauren will speak on “Risk Assessments: The Critical Role of Assessing & Managing Risk in Today's Enforcement and Compliance Environment.”  More information can be found here.

King & Spalding Webinar on Reference-Based Pricing – On July 26, 2018, at 1:00 p.m. ET, King & Spalding will host a webinar titled “Legal and Practical Implications of Reference-Based Pricing.”  King & Spalding partner, John Barnes, and associate, Kiel Yager, will discuss the legal implications of reference-based pricing by self-insured payors, including what is reference-based pricing, strategies for providers to identify reference-based pricing, options for providers to respond to reference-based pricing and best practices to limit the damages caused by use of reference-based pricing. The webinar is free and open to clients and non-clients. Registration is available here.

11th Annual King & Spalding Medical Device Summit – King & Spalding, in conjunction with FDANews, will host the 11th Annual Medical Device Summit on September 6, 2018, in Chicago. Registration is now open. Subjects will include regulatory, reimbursement, enforcement, compliance, commercial, litigation, cybersecurity and other important topics for medical device manufacturers in the coming year. For more information please click here.