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September 28, 2020

Health Headlines – September 28, 2020


CMS Expands Prior Authorization Model for Non-Emergent Ambulance Transport – On September 22, 2020, CMS announced it will expand the Medicare Prior Authorization Model for Repetitive, Scheduled Non-Emergent Ambulance Transport (RSNAT) nationwide. The RSNAT Prior Authorization Model assesses whether prior authorization saves Medicare money while maintaining or improving the quality of care for repetitive, scheduled non-emergency ambulance transportation.

The RSNAT Prior Authorization Model was initiated in New Jersey, Pennsylvania, and South Carolina in 2014 and expanded to North Carolina, Virginia, West Virginia, Maryland, Delaware, and the District of Columbia in 2016. The Model’s first report in 2018 indicated that nationwide expansion of the RSNAT Prior Authorization Model would reduce net Medicare spending. The Model’s second report, issued on September 22, 2020, found that the Model reduced RSNAT service use by 63% and RSNAT expenditures by 72% among beneficiaries with end stage renal disease and/or severe pressure ulcers during the first four years of the model, resulting in a decrease of approximately $650 million in costs for Medicare.  The RSNAT Prior Authorization Model’s second report did not find evidence of any adverse impact on quality of care.

The RSNAT Prior Authorization Model’s program integrity, patient safety and cost-savings elements will continue without interruption in the current states.  CMS states that it will release more information on the national expansion and implementation dates for additional states as it becomes available.

CMS’s press release regarding the expansion is available here. The RSNAT Prior Authorization Model second Report is available here.

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

Orthopedic Clinic Agrees to $1.5 Million Settlement with OCR and Two-Year Comprehensive Corrective Action Plan – On September 21, 2020, the HHS Office of Civil Rights (OCR) announced a $1.5 million settlement with Athens Orthopedic Clinic, a Georgia orthopedic clinic, to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules.  The orthopedic clinic also agreed to a comprehensive two-year corrective action plan that provides for detailed monitoring by HHS.

The settlement stems from a data hacking incident that occurred in 2016.  In June 2016, a journalist notified the orthopedic clinic that a database of its patient records may have been posted online for sale.   Two days later, a hacker group known as “The Dark Overlord” contacted the clinic demanding money in return for a complete copy of the stolen database.  The clinic subsequently determined that the hacker had used a vendor’s credentials to access the electronic medical record system and exfiltrate the patient health data.  In July 2016, the orthopedic clinic filed a breach report with OCR indicating that 208,557 individuals were affected by the breach, and that the protected health information (PHI) disclosed included patients’ names, dates of birth, social security numbers, medical procedures, test results, and health insurance information.  

OCR performed an investigation and concluded there was longstanding, systematic noncompliance with the HIPAA Privacy and Security Rules, including failures to conduct a risk analysis, implement risk management and audit controls, maintain HIPAA policies and procedures, secure certain business associate agreements, and to provide HIPAA Privacy Rule training to workforce members. 

The orthopedic clinic’s corrective action plan includes two years of robust monitoring by HHS.  A number of the provisions resemble common elements of OIG Corporate Integrity Agreements (CIAs), such as requirements for annual reports and reportable event submissions.  The requirements of the corrective action plan also include:

  • Within 60 days and then annually thereafter, the orthopedic clinic must review all relationships with vendors and third-party service providers to identify business associates.  The orthopedic clinic must also provide HHS with an accounting of its business associates and provide copies of all business associate agreements. 
  • The orthopedic clinic must conduct a risk analysis overseen and approved by HHS.  HHS will also oversee and approve the development of an enterprise-wide risk management plan developed based on the risk analysis.  This risk analysis and risk management process must be repeated annually during the term of corrective action plan. 
  • The orthopedic clinic must review and revise various written policies and procedures and provide such policies and procedures to HHS for its review and approval.
  • The orthopedic clinic must provide HHS with proposed training materials for HHS’s review and approval.

OCR’s press release is available here.  The resolution agreement and corrective action plan is available here.

Reporter, Isabella E. Wood, Atlanta, +1 404 572 3527, iwood@kslaw.com.

OIG Issues Advisory Opinion for Pharmaceutical Manufacturer’s Cost-Sharing Assistance Proposal – On September 18, 2020, OIG issued Advisory Opinion No. 20-05 analyzing a pharmaceutical manufacturer’s proposal to offer direct cost-sharing assistance to Medicare beneficiaries prescribed certain of the manufacturer’s new drugs. As discussed in further detail below, the drugs are the only pharmaceutical treatments currently available for a rare disease and carry a high list price that would impose significant cost-sharing obligations on most Medicare beneficiaries. The manufacturer’s proposed arrangement would subsidize most of these cost-sharing obligations for beneficiaries meeting certain eligibility criteria. OIG concludes in the Advisory Opinion that the proposed arrangement would not generate prohibited remuneration under the beneficiary inducement prohibitions of the civil monetary penalties law, but could generate prohibited remuneration under the Federal anti-kickback statute (the AKS), which could result in the imposition of sanctions by OIG if the requisite intent to reward referrals is present. 

Factual Background

The manufacturer’s drugs are intended to treat a rare disease that affects approximately 100,000 to 150,000 Americans. The manufacturer certified to OIG that alternative non-pharmaceutical treatments generally have limited application and the FDA is not expected to approve any competitors’ drugs until 2021 or later. The manufacturer also certified that the price of the drugs is cost prohibitive for most Medicare beneficiates, with a list price of $225,000 for a one-year course of treatment. Beneficiaries enrolled in the standard Medicare benefit would face a $5,100 true out-of-pocket cost when filling their first order and $13,000 in annual out-of-pocket expenses.

Under the manufacturer’s proposed arrangement, the manufacturer would provide cost-sharing assistance to patients who meet certain eligibility criteria requiring that they (i) are Medicare beneficiaries enrolled in a Part D plan or Medicare Advantage Part D plan that covers the medications, (ii) are U.S. residents, (iii) have household income between 500% and 800% of the Federal poverty level, and (iv) have been prescribed either of the medications on-label for treatment of the disease.

The manufacturer also certified that it has an existing free-drug program for certain Medicare beneficiaries who are below 500% of the Federal poverty level. The assistance program would not be offered as part of any advertisement or solicitation. A third-party vendor would handle administration and issue qualifying beneficiaries a card to be used at the point of sale to receive the cost-sharing assistance. Each beneficiary would be responsible for a monthly copayment of up to $35 at each refill and the manufacturer would cover the remaining balance of the cost-sharing obligations. The vendor would require both the prescriber and patient to provide certain information and certifications for purposes of determining eligibility and would conduct an investigation to determine whether alternative funding is available.

Beneficiary Inducement Analysis

OIG determined that the proposed arrangement would not generate prohibited remuneration under the beneficiary inducement prohibition of the civil monetary penalties law, 42 U.S.C. § 1320a-7a(a)(5). In reaching this conclusion, OIG noted that the beneficiary inducement prohibition only applies to remuneration that might influence a patient’s selection of a “provider, practitioner, or supplier.” An entity that solely operates as a pharmaceutical manufacturer¾and does not also own or operate a pharmacy or pharmacy benefits manager¾is not considered a “provider, practitioner, or supplier.” OIG also analyzed the manufacturer’s relationships with dispensing pharmacies and found that the subsidy program would be unlikely to influence a patient’s selection of a dispensing pharmacy.

Anti-Kickback Statute Analysis

OIG found that the proposed arrangement could generate prohibited remuneration under the AKS, 42 U.S.C. § 1320-7b, and stated that OIG could potentially impose sanctions on the manufacturer if the requisite intent to induce or reward referrals were present. In reaching this conclusion, OIG noted at the outset that the subsidy “plainly would involve remuneration to an individual to induce that individual to purchase an item for which payment may be made under a Federal health care program.” Analyzing further, OIG opined that there is a “significant risk” the subsidy would “effectively abrogate” the cost-sharing protections under the Part D program. Based on the profile of Medicare beneficiaries who would likely be prescribed the drugs, all but 9% would be able to purchase the drug without incurring any significant out-of-pocket costs. OIG also expressed concern with the manufacturer’s high list prices, citing a study that found treating all eligible patients would increase U.S. spending by approximately $32.3 billion. Finally, OIG expressed concerns that the arrangement could result in patient steering and anti-competitive effects due to the current absence of any competitive drugs on the market.

The Advisory Opinion is limited in scope to the proposed arrangement and can only be relied upon by the requestor. However, the opinion provides a helpful indication of how OIG might respond to similar requests from other pharmaceutical manufacturers.

The Advisory Opinion is available here.

Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760, garmsby@kslaw.com.

Also in the News

Health Law & Policy Forum Rescheduled to September 2021

We have been closely monitoring all guidance updates from the CDC for large gatherings. Given that there is no vaccine for Coronavirus, and we value the health and safety of our clients and their families, we have decided to reschedule the 29th Annual King & Spalding Health Law & Policy Forum to take place on Monday, September 20, 2021 at the St. Regis Atlanta. We will continue to monitor developments, but are hopeful that September 2021 will allow us to all gather in person. In the meantime, please reach out to Jay Harris (jrharris@kslaw.com) and Tom Hawk (thawk@kslaw.com) with your feedback and questions.