News & Insights


June 24, 2019

Health Headlines – June 24, 2019

Hospitals Criticize Senate Committee Revised “Benchmark Payments” Approach as Fix to End Surprise Billing – On June 19, 2019, the Senate Committee on Health, Education, Labor and Pensions (HELP), in the latest effort to curb “surprise billing,” released the “discussion draft” of its proposed “surprise billing” legislation.  The draft bill adopted one of the three proposed solutions to the issue released by HELP on May 23, adopting “benchmark payments” as the preferred policy fix.  Hospitals immediately reacted to the proposal, which could negatively impact reimbursement for some hospitals.  

The surprise billing issue picked up momentum just over a month ago as President Trump, multiple House and Senate committees, and numerous consumer groups offered up various policy solutions to eliminate so-called “surprise bills” from out-of-network providers.  In the last weeks, the  House Energy and Commerce Committee marked up legislation adopting “benchmark payments” as the prevailing approach.  Hospital groups have been critical of the benchmarking payment rate proposal, and prefer the more-fluid arbitration process to settle such payment disputes with insurers.

There is broad consensus among lawmakers and stakeholders that patients should not be liable for surprise medical bills.  But, these groups have remained divided as to the solution of who should bear the financial burden as costs shift away from patients. 

Three broad policy options emerged from the policy debate:

  • In-network guarantee:  All in-network facilities would guarantee to patients and health plans that all independent practitioners, including physicians and independent practice associations, at their facilities will be considered in-network;
  • Baseball-style arbitration: Payment disputes are to be settled through negotiations between providers and insurers for surprise medical bills, with the award being either the payor’s or the provider’s offer (and not an arbitrator’s compromise figure); and
  • Benchmark payment rate:  All surprise medical bills are reimbursed by insurers based on a fixed median in-network rate for the service in the local market.

The Senate legislation, called the Lower Health Care Costs Act, or S.1895, establishes a payment rate that insurers will pay for out-of-network services that is benchmarked to median in-network rate in the geographical area where the care was provided.  HELP Chairman  Lamar Alexander (R-TN) indicated that his preference for benchmark payment rates came from a Congressional Budget Office estimate that it would be the most effective at lowering health care costs among the competing policy proposals.  The House Energy and Commerce Committee’s discussion draft, No Surprises Act, contains a similar benchmark payment rate provision. 

Hospital groups, however, have been staunchly opposed to benchmark payment rates, favoring the baseball-style arbitration process to settle disputes with insurers over surprise bills.  American Hospital Association Executive Vice President Tom Nickels testified before the Senate HELP Committee that “[o]nce the patient is protected, hospitals and health systems should be permitted to work with health plans on appropriate reimbursement. We strongly oppose the imposition of arbitrary rates on providers. . . .”  In another statement, Nickels also mentioned that contracting mandates like benchmarked payment rates “could lead to even more narrow networks with fewer provider choices for patients, while adversely affecting access to care at rural and community hospitals serving vulnerable communities.”  Arbitration is not completely off-the table, however, as that measure is contained in the “STOP Surprise Medical Bills Act of 2019” legislation introduced by Senator Bill Cassidy, M.D. (R-LA). 

Interested stakeholders will await the Senate HELP Committee markup and vote on the bill, scheduled for June 26, 2019.

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579,

Massachusetts District Court Allows FCA Lawsuit Alleging Hospital Overbilled for Double-Booked Surgeries Performed Without Teaching Physician Supervision – On June 17, 2019, the U.S. District Court of the District of Massachusetts rejected Massachusetts General Hospital’s (MGH) request to dismiss a qui tam complaint alleging that the teaching hospital fraudulently overbilled Medicare and Medicaid for surgical procedures performed without a supervising teaching physician’s presence.  The District Court found that the whistleblower’s allegations of double-booked and unsupervised surgical procedures and lack of informed consent, which were supported by reference to specific corresponding bills submitted to Medicare or Medicaid, were sufficient to meet the heightened pleading standard applied to FCA claims.  The lawsuit will proceed.

The relator, a former anesthesiologist at MGH, initiated the qui tam action in May 2015.  She alleges that while at MGH she witnessed a practice of double or triple-booking surgeries for teaching physicians.  This allegedly resulted in residents and fellows conducting some or all of the procedure outside the presence of the teaching physician, and without the teaching physician or any designated alternate surgeon ready to immediately assist if the need arose.

The qui tam complaint asserts that MGH violated the FCA by billing Medicare and Medicaid for such services.  Under Medicare, if a resident participates in a procedure, a treating physician must be present during “all critical portions” of the procedure and be “immediately available” to take over during the entire procedure. 42 C.F.R. § 415.172(a)(1).  CMS Medicare guidelines establish that in the event of overlapping surgeries, a teaching physician can only be involved in the second procedure after all “key portions” of the initial procedure have been completed, and the physician arranges for another surgeon to immediately assist the resident in the first procedure if the need arises.  Id.

The teaching physician must also personally document that she was present during the “critical or key portion(s)” of both procedures, another requirement allegedly not met by MGH teaching physicians.  Instead, the Court acknowledged allegations in the complaint that surgeons “failed to keep accurate records to conceal their practices” of overlapping surgeries.

The complaint goes on to assert other related bases for fraudulent billings in violation of the FCA.  The relator alleges instances of teaching physicians being triple-booked, which under CMS guidance are de-facto non-reimbursable as a “supervisory services” to the hospital rather than physician services to any individual patient.  She also alleges instances where due to double-booking, a patient already placed under anesthesia was waiting for the surgeon to finish up with another patient.  Because anesthesia services are billed based on time blocks, this allegedly resulted in the billing for medically unnecessary anesthesia services. 

Lastly, hospitals are required to obtain Medicare and Medicaid beneficiaries’ informed consent for services in order to be reimbursable. According to the qui tam complaint, MGH’s written consent forms did not adequately advise patients that their treating physicians may be double booked and/or a resident might be performing particular tasks rather than the physician.  According to the complaint, MGH went so far as to ensure patients undergoing concurrent surgeries from the same physician were placed in separate rooms to conceal the practice. 

The District Court had previously dismissed a prior version of the complaint but allowed an amended complaint to proceed due to one critical difference.  While the prior complaint included detail as to the hospitals’ alleged misconduct in the manner in which care was rendered, the District Court dismissed the prior complaint because it lacked detailed allegations that specific false claims were submitted for government payment as a result of that misconduct.  However, with the opportunity to amend her complaint, the relator was able to provide additional details of 11 specific claims submitted to Medicare or Medicaid tied to those specific instances of double-booked surgical procedures previously alleged. 

The case, United States ex rel. Wollman v. Gen. Hosp. Corp., Case No. 1:15-cv-11890-ADP, proceeds before U.S. District Judge Allison D. Burroughs in the District of Massachusetts.  A copy of the June 17, 2019 Order Denying Defendants’ Motion to Dismiss can be found here

Reporter, Jonathan Shin, Los Angeles, +1 213 443 4334,

CMS Releases Proposed Rule to Update e-Prescribing Standards – On June 17, 2019, CMS released a proposed update to the transaction standard for the Medicare Prescription Drug Benefit Program’s (Part D) e-prescribing program (Proposed Rule). Specifically, the Proposed Rule would require all Part D plans to support electronic prior authorization transaction standards that were developed by the National Council for Prescription Drug Plans (NCPDP) to ensure secure electronic Prior Authorization (ePA) transactions between prescribers and Part D plan sponsors no later than January 1, 2021.

Under the Proposed Rule, Part D plan sponsors will be required to support NCPDP SCRIPT standard version 2017071 for ePA transactions and will be required to use that same standard when performing ePA transactions for Part D-covered drugs prescribed to Part D-eligible individuals.  In its press release, CMS stated that the proposed use of the NCPDP SCRIPT standard would promote “better clinical decision-making” and would “ensure that patients receive medically necessary prescription drugs…by adopting standards that ensure secure transmissions and expedite prior authorizations.”  Through the updated e-prescribing standards, clinicians would be able to complete prior authorizations online.

According to CMS, the use of an ePA transaction standard would allow prescribers using an electronic prescribing (eRx) system or an electronic health record (EHR) with eRx capability to instantly be able to determine whether the beneficiary’s plan requires a prior authorization for a given medication.  For instance, if a prescriber enters the prescription information for the Part D eligible medication into the eRx system, a message would be returned to the provider indicating whether a prior authorization is required.  Use of the ePA transactions would thus enable prescribers to know both whether additional information is required and also allow prescribers to fulfill the terms of the prior authorization at the same time.

CMS’s press release on the Proposed Rule notes that “clinicians would be able to choose to complete prior authorizations online, reducing burden for providers through a more streamlined process for performing prior authorization for Part D prescriptions.”  Moreover, clinicians who select the electronic option will typically be able to satisfy the terms of a prior authorization in real time and before a prescription is transmitted to a pharmacy.  This is so that “patients do not arrive at a pharmacy counter only to find that their prescription cannot be filled.”

Due to the proposed adoption of the new standard, CMS is seeking comment on various aspects of the Proposed Rule including:

  • The proposed adoption of the NCPDP SCRIPT standard version 2017071 eRx for ePA transactions for Part D covered drugs prescribed to Part D eligible individuals;
  • The impact of these proposed transactions and the proposed effective date on industry and other interested stakeholders, including whether the implementation of a NCPDP SCRIPT standard version 2017071 ePA transaction standard for use by prescribers and plans in the Part D program would impose an additional burden on the industry as a whole;
  • Whether the proposed date of January 2021 for implementation would be feasible;
  • Strategies to mitigate burden in order to support successful adoption of this policy; and
  • Ways CMS can support plans as they transition to the ePA standard by the 2021 deadline.

The Proposed Rule is available in its entirety here. CMS’s press release can be found here.  Comments on the Proposed Rule must be received by CMS by August 16, 2019 and may be submitted electronically here

Reporter, Kiel Yager, Sacramento, + 916 321 4811,

Also in the News

OIG Testimony Before Senate on Proposed Rule Modifying Anti-Kickback Statute’s Safe Harbor for Manufacturer’s Rebates to PBMs and Payors – Last Thursday, Vicki L. Robinson, Senior Counselor for Policy at HHS, OIG, testified before the Senate Special Committee on Aging about HHS’s proposed rule to remove the Anti-Kickback Statute’s (AKS’s) safe harbor for drug manufacturer rebates and price reductions to PBMs and payors.  The removal of the discount safe harbor for these rebates and reductions would be replaced by point-of-sale reductions occurring when a patient fills a prescription and adds a new safe harbor for drug manufacture fees paid to PBMs.  Ms. Robinson testified that the purpose of the proposed rule is “to curb list price increases, reduce financial burden on beneficiaries, improve transparency, and reduce the risks associated with rebates inappropriately influencing formulary placement or inducing business payable by Medicare Part D or Medicaid.”  The comment period closed on April 7, 2019, and Ms. Robinson testified that most comments supported reducing the out-of-pocket spending on beneficiaries, requested more guidance on how the process would work, and requested that the Medicaid MCOs be removed from the amendment.  The final rule is pending review at the Office of Management and Budget.

More details about the proposed rule can be found in a King & Spalding Client Alert, available here and King & Spalding’s Health Headlines, available here.