News & Insights


June 27, 2016

Health Headlines – June 27, 2016

California Insurance Commissioner Asks DOJ to Block Proposed Mergers – On June 23, 2016, California Insurance Commissioner Dave Jones submitted a letter urging the Department of Justice, Antitrust Division (DOJ) to block the proposed merger between Aetna, Inc. (Aetna) and Humana, Inc. (Humana).  This letter comes a week after Jones’ June 16, 2016 submission urging the DOJ to block the proposed merger between Anthem, Inc. (Anthem) and Cigna Corporation (Cigna).

Aetna’s plan to purchase Humana for $37 billion has been under substantial antitrust scrutiny by federal and state authorities since it was announced last July.  Aetna and Humana have disclosed that the merger would create the second-largest managed care company in the United States, with more than 33 million medical members and would give Aetna more than a quarter of the Medicare Advantage market nationwide, which is more than any other insurer.    Jones claims the acquisition will increase costs for customers and decrease the quality of and access to available care.  The American Hospital Association (AHA), seven U.S. senators, and the Missouri Department of Insurance have also opposed the merger on antitrust grounds, though  fifteen states and California’s Department of Managed Health Care have approved the merger.  These approvals have been tempered with stipulations that Aetna make investments in particular communities and divest certain assets. 

Anthem’s plan to purchase Cigna for $54 billion was also announced last July and has faced similar scrutiny.  If approved, Anthem would become the largest health insurer in the nation.  Jones held a public meeting in March to interview Anthem and Cigna representatives on their plans for sharing the anticipated $2 billion in savings from the transaction with consumers.  Jones concluded that the companies had not made plans to reduce insurance costs for consumers, nor was he convinced quality of care would improve.  The AHA, American Medical Association, and the same senators have also opposed this merger.

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

Hospice Requests Supreme Court Review of Medicare Hospice Annual Cap – On June 8, 2016, Southeast Arkansas Hospice, Inc. (SEARK) filed a petition for a writ of certiorari to the Supreme Court to review an Eighth Circuit decision that upheld the annual Medicare payment cap for hospice services.  Under the Medicare Act (42 U.S.C. § 1395f(i)(2)(A)), each hospice’s annual payment is capped at an amount calculated based on the number of beneficiaries receiving care at the hospice and a multiplier.  Any payment above the cap must be refunded by the hospice to CMS.  SEARK argues that the cap in combination with the prohibition on the discharge of hospice patients due to inability to pay operate as a regulatory taking under the Takings Clause, for which hospices must be compensated.  The Supreme Court’s response as to whether to grant the petition is due on July 11, 2016.

The District Court and the Eighth Circuit rejected SEARK’s Takings Clause argument.  In evaluating a claim of regulatory taking, courts consider three factors: the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.  The Eighth Circuit concluded that none of the three factors supports a finding that Medicare’s annual payment cap policy for hospice care providers constitutes a regulatory taking.  The Circuit Court concluded that (1) the reimbursement cap allocates the government’s capacity to subsidize healthcare, (2) SEARK presented no evidence to suggest that the cap makes it impossible to profitably engage in its business, and (3) the voluntariness of participation in Medicare by hospice providers “forecloses the possibility that the statute could result in and imposed taking.”

SEARK previously filed suit against CMS seeking to invalidate a former version of the hospice cap regulation, which employed a calculation methodology that was ultimately struck down by several courts and amended by CMS.  See Se. Arkansas Hospice, Inc. v. Sebelius, 784 F. Supp. 2d 1102 (E.D. Ark. 2011). In that case, the court reversed the application of the regulation to SEARK’s 2009 claims. 

The Eighth Circuit opinion is Se. Arkansas Hospice, Inc. v. Burwell, 815 F.3d 448 (8th Cir. 2016).  The Supreme Court case number is 15-1495, and the Supreme Court docket for the case is available by clicking here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326,

CMS Issues Proposed Rule to Update Policies and Payment Rates for Renal Dialysis Services and Medical Equipment Bidding – On June 24, 2016, CMS issued a proposed rule that would update payment policies and rates under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for renal dialysis services furnished to beneficiaries on or after January 1, 2017.  The proposed rule also proposes changes related to the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) Competitive Bidding Program.  The proposed rule is scheduled to be published in the Federal Register on June 20, 2016 and comments on the proposed rule are due August 23, 2016.  A summary of the proposed updates can be found in the fact sheet published by CMS, available by clicking here

In the proposed rule, CMS proposes an increase to the 2017 ESRD PPS base rate, which CMS projects will increase the total payments to all ESRD facilities by 0.5 percent compared with 2016.  For hospital-based ESRD facilities, CMS projects an increase in total payments of 0.7 percent, while for freestanding facilities the projected increase in total payments will be 0.5 percent. 

CMS also proposes changes to the ESRD Quality Incentive Program (QIP), including for payment years 2018, 2019, and 2020, under which payment incentives are made to dialysis facilities to improve the quality of care that they provide.  Under the ESRD QIP, facilities that do not achieve a minimum Total Performance Score with respect to quality measures receive a reduction in their payment rates under the ESRD PPS.

CMS also addresses in the proposed rule issues related to the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) Competitive Bidding Program (CBP).  CMS proposes requiring bidding entities to obtain and provide proof of a bid surety bond for each competitive bidding area in which the entity submits its bid(s), in accordance with Section 1847(a)(1)(G) of the Social Security Act.  CMS also proposes revisions to the existing state licensure requirement and proposes to expand suppliers’ appeal rights in the event of a breach of contract action by CMS.

Finally, CMS would change the methodologies for adjusting DMEPOS fee schedule amounts using information from the DMEPOS Competitive Bidding Programs for certain groups of items with similar items.  CMS also proposes changes to the methodology for establishing bid limits for items under the DMEPOS Competitive Bidding Program.

Reporter, John Whittaker, Sacramento, +1 916 321 4808,


House Republicans Reveal Plan for Alternative to ACA – On June 22, 2016, House Republicans released a health plan in the form of a 37-page white paper outlining a series of proposals that would replace a repealed Affordable Care Act.  Among other things, House Republicans would gradually increase the eligibility age for Medicare, which is currently 65, along with the eligibility age for full Social Security benefits, eventually reaching 67.  In addition, the requirement that most Americans carry health insurance would be eliminated, and flat tax credits would be offered to each person or family in the individual insurance market regardless of income or the premium for a particular insurance policy.  House Republicans would also roll back ACA’s expansion of Medicaid and provide to each state a fixed sum for each beneficiary or a lump sum for all of a state’s Medicaid program.  No details were included on how House Republicans would propose to pay for the changes included in the plan.    

You're Invited! King & Spalding to Host Reception at AHLA Annual Meeting – Please join King & Spalding on Tuesday, June 28, 2016 from 5:30-7:30 p.m. in the Club Room of the Brown Palace Hotel during the AHLA Annual Meeting.  We hope to see you in Denver!

Watch Sessions of the King & Spalding Health Law and Policy Forum Online! – King & Spalding is pleased to share sessions from its Health Law and Policy Forum by video.  Currently, we are offering the keynote address by the distinguished associate editor of the Washington Post, Bob Woodward, as well as sessions on hospital consolidation, hot topics and trends in healthcare antitrust enforcement and opportunities and obstacles in healthcare delivery innovations.  Find out more and register here.