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Newsletter

September 30, 2019

Health Headlines – September 30, 2019


King & Spalding Partners Discuss Healthcare Fraud and Abuse – Healthcare fraud and abuse is a top priority for the Department of Justice. Of the $2.8 billion recovered from FCA cases, $2.5 billion involved companies in the life sciences and healthcare industry. Watch King & Spalding partners Sally Yates and Mike Paulhus discuss DOJ’s enforcement priorities.

CMS Issues Final Rule Aimed to Reduce Burden on Providers and Suppliers Through Regulatory Reforms – On September 26, 2019, CMS issued a Final Rule that CMS intends will reform certain Medicare regulations related to standards and certifications that CMS identified as “unnecessary, obsolete, or excessively burdensome.”  CMS estimates that these reforms will eliminate 4.4 million hours of time previously spent on paperwork, with an overall total projected savings to providers of $800 million annually.  These changes are effective November 29, 2019.

The Final Rule (84 Fed. Reg. 51732 (Sept. 30, 2019)) implements President Trump’s January 30, 2017 Executive Order titled “Reducing Regulation and Controlling Regulatory Costs” (Exec. Order No. 13771) and CMS’s “Patients over Paperwork” initiative.  The Final Rule encompasses policies that the agency had set forth in three separate proposed rules:  Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction (“Omnibus Burden Reduction”), published September 20, 2018; Hospital and Critical Access Hospital (CAH) Changes to Promote Innovation, Flexibility, and Improvement in Patient Care, published June 16, 2016; and Fire Safety Requirements for Certain Dialysis Facilities, published November 4, 2016.  Some of the changes as adopted in the Final Rule are highlighted below.

Emergency Preparedness Procedures for Providers and Suppliers

CMS made significant changes to 42 C.F.R. § 403.748 regarding emergency preparedness procedures.  For example, CMS eliminated the requirement that facilities conduct an annual review of their emergency program.  Facilities can now perform this review every other year.  CMS also eliminated the requirement that a facility’s emergency plan include documentation of efforts to contact local, tribal, regional, State, and federal emergency preparedness officials and of a facility’s participation in collaborative and cooperative planning efforts.  Certain related testing and training requirements are also reduced under the Final Rule. 

Hospitals, Critical Access Hospitals, and Swing Bed Providers

Under the Final Rule, CMS revised 42 C.F.R. § 482.21(f) to allow multi-hospital systems the option to have unified and integrated Quality Assessment and Performance Improvement (QAPI) programs and unified and integrated infection control and antibiotic stewardship programs for all of their member hospitals.  Previously, each hospital in the system was required to have individual programs.  CMS also removed the requirement at § 482.22(d) that a hospital’s medical staff must attempt to secure autopsies in all cases of unusual deaths and of medical-legal and educational interest.  The Final Rule also revises §§ 482.22, 482.24, and 482.51 to give hospitals flexibility to establish a medical staff policy that utilizes a limited outpatient assessment instead of requiring a comprehensive medical history and physical examination prior to routine procedures and surgeries. 

For hospitals that provide long-term care “swing bed” services, CMS removed the requirement at § 483.10(f)(9) for a facility to request or allow swing-bed patients to perform services for the facility.  Additionally, CAH providers of long-term care swing bed services will no longer be required under § 485.645(d)(4) to provide an ongoing activities program that is directed by a qualified professional because the patient’s activity needs are addressed in the nursing care plan.  The Final Rule also removes the requirements at § 482.58(b)(5) for hospital swing-bed providers and § 485.645(d)(5) for CAH swing-bed providers that require these facilities with more than 120 beds to employ a social worker on a full-time basis.  Finally, facilities are no longer required to assist in obtaining routine and 24-hour emergency dental care under § 482.58(b)(8) for hospital swing-bed providers and § 485.645(d)(8) for CAH swing-bed providers.

Ambulatory Surgical Centers (ASCs)

CMS removed the requirement at 42 C.F.R. § 416.41(b)(3) that ASCs must have a written transfer agreement with a hospital that meets certain Medicare requirements or that all physicians performing surgery in the ASC have admitting privileges in a hospital that meets certain Medicare requirements.  Instead, ASCs will now be required to periodically provide the local hospital with written notice that outlines the ASC operation and patient population served by the ASC facility.  However, ASCs must continue to have a procedure to immediately transfers to a hospital when patient care requirements are beyond the capabilities of the ASC.  The Final Rule also revised the requirement at § 416.52(a) that a physician or other practitioner conduct a complete comprehensive medical history and physical assessment on each patient not more than 30 days before the date of the scheduled surgery.  Now, CMS will defer to the ASC’s policy and the operating physician’s clinical judgment to ensure that patients receive the appropriate pre-surgical assessments tailored to the patient and the type of surgery being performed.

Transplant Centers

The Final Rule removes the requirements at 42 C.F.R. § 482.82 for transplant centers to submit clinical experience, outcomes, and other data in order to obtain Medicare re-approval.  CMS has indicated that this policy attempts to avoid transplant programs potentially avoiding performing transplant procedures on certain patients and many organs going unused.  See 84 Fed. Reg. at 51789.  Transplant centers seeking initial Medicare approval will still be required to comply with the data submission, clinical experience, and outcome requirements.

Home Health and Hospice

Under the Final Rule, Home Health Agencies are no longer required under 42 C.F.R. § 484.80 to conduct a full competency evaluation of a home health aide when deficiencies are identified in the aide’s services.  Instead, CMS now requires retraining of the aide in the identified deficient skills and requires the aide to complete a competency evaluation related only to those skills.  Hospices will be allowed, under the Final Rule revising § 418.76(a)(1)(iv), to defer to State licensure requirements for qualification of their hospice aides, regardless of the State licensure content or format, thus allowing states to set forth training and competency requirements that meet the needs of their populations.  Hospices also will no longer be required under § 418.106(a)(1) to consult with an individual with expertise in drug management in addition to the hospice’s own expert clinicians.

Comprehensive Outpatient Rehabilitation Facilities and Community Mental Health Centers

The Final Rule revises 42 C.F.R. § 485.66 to reduce the frequency of the implementation of a utilization review plan from four times per year to annually, which will allow an entire year to collect and analyze data to inform changes to the facility and the services provided.  For Community Mental Health Centers, the Final Rule removes the requirement at 42 C.F.R. § 485.914 that requires updates to the client comprehensive assessment every 30 days and instead retains the minimum 30-day assessment update only for those clients who receive partial hospitalization program services.

The Final Rule is available here.  The CMS fact sheet is available here

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

Eleventh Circuit Denies Preliminary Injunction for New National Liver Transplant Allocation Policy On September 25, 2019, the United States Court of Appeals for the Eleventh Circuit affirmed a lower court’s decision to deny a motion for a preliminary injunction to stay the implementation of the new policy for allocating donated livers to transplant candidates in the United States.  Callahan v. United States Department of Health & Human Services,No. 19-11876, 2019 WL 4668052 (11th Cir. 2019).  The plaintiffs behind the motion, which include liver-transplant candidates and several prominent hospital systems, contend that the new policy is substantively flawed and that HHS failed to follow legally required procedures in adopting it.  The Eleventh Circuit found that the plaintiffs’ procedural challenge did not merit a preliminary injunction but sent the case back to the district court to consider whether the substantive challenges warrant injunctive relief.  The new policy remains stayed pending that determination.

The current policy for allocating donated livers, which stands to be replaced if the plaintiffs are unsuccessful, was adopted in 2013 by the Organ Procurement and Transplant Network (OPTN)—a private nonprofit entity, appointed by HHS, that is responsible for coordinating the nation’s organ transplant system.

Under the current policy, donated livers are first offered to patients who reside in the same “Region”—11 groups of states—or “Donation Service Area” (DSA)—geographic areas within Regions—where the liver was acquired.  Proponents of this system claim that prioritizing candidates within the same Region or DSA enables better communication between the entities that collect the organs and those that perform the transplants.  But critics of this system argue that because it relies on territories, donated livers often end up traveling greater distances to less-acute patients. 

In December of last year, the OPTN adopted a new methodology for allocating donated livers called the Acuity Circles model.  Under this system, organs will be distributed to patients within a 150 to 500-mile radius of the donor hospital, without regard for Regions or DSAs.  The OPTN found that the Acuity Circles model would result in “lower waitlist mortality rate[s]” and “more equity in access.”  But critics say this new policy will require many more organs to be transported by air to reach their intended recipients, which will purportedly increase the likelihood that the organs will be discarded as unusable. 

The Acuity Circles model was originally slated to take effect on May 1, 2019.  Before that could happen, the plaintiffs sued HHS and OPTN to challenge the new policy.  The complaint alleged that before the Acuity Circles model can take effect, HHS is required by its regulations to refer the model to the Advisory Committee on Organ Transplantation and to publish the model in the Federal Register for public comment.  See 42 C.F.R. § 121.4(b).  On the substance, the plaintiffs contend that the Acuity Circles model will not promote an efficient management of organs. 

Before the district court, the plaintiffs filed a motion for a preliminary injunction to stay the implementation of the Acuity Circles model pending the outcome of their suit.  The district court denied the motion because it found that the plaintiffs do not have a substantial likelihood of success on the merits—a perquisite to preliminary injunctive relief.  Specifically, the court deferred to HHS’ position that its regulation at § 121.4(b) did not require the agency to refer the Acuity Circles model to the Advisory Committee on Organ Transplantation or publish the model in the Federal Register.  However, in deciding the motion, the district court did not consider the merits of the plaintiffs’ challenge that the Acuity Circles model is substantively flawed.  The plaintiffs appealed the district court’s decision and requested a temporary restraining order pending the outcome of their appeal, which was granted. 

On review, the Eleventh Circuit agreed that the plaintiffs’ procedural challenge does not have a substantial likelihood of success on the merits.  The court found that § 121.4(b), by its terms, does not apply to policies like the Acuity Circles model.  However, the Eleventh Circuit remanded the case back to the district court to decide whether the plaintiffs’ substantive challenge could support preliminary injunctive relief.   

A copy of the Eleventh Circuit’s decision is available here.

Reporter, Alek Pivec, Washington, D.C., +1 202 626 2914, apivec@kslaw.com.

CMS Paid Over $277 Million in Unallowable Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) Bonus Payments Based on Incorrect Enrollment Data – On September 19, 2019, the OIG released a report relating to recent audits of the CHIPRA program. The audits, performed from April 2012 through September 2017, identified over $277 million in unallowable payments made to 12 states: Virginia, Alaska, Idaho, Kansas, Colorado, New Mexico, North Carolina, Wisconsin, Ohio, Washington, Louisiana, and Alabama. 

Under CHIPRA, certain qualifying states received bonus payments for 2009 through 2013 to offset the costs of increased enrollment of children in Medicaid. Under the program, a state was eligible for a bonus payment if it increased its current enrollment of qualifying children in its Medicaid program above the baseline enrollment of qualifying children for a given year. To qualify for a bonus payment, a state must also have implemented at least five of the Medicaid enrollment and retention provisions specified in CHIPRA.

In total, CMS paid $645,009,558 in CHIPRA bonus payments for the given years, 40% of which were identified as “unallowed” under the terms of the bonus program. According to CMS, states were instructed to calculate their current CHIPRA enrollment figures by using the same “institutional data sources” as used for reporting under the Medicaid Statistical Information System.  However, states incorrectly calculated the CHIPRA enrollment figures, resulting in allegedly “inflated” figures, which were then used as the basis for the CHIPRA bonus payments.

Given that the bonuses were allegedly calculated based upon the incorrect enrollment figures, CMS took action to recover the alleged overpayments. To date, three states voluntarily returned overpayments totaling approximately $37 million, and CMS has recovered $88 million in “unallowable” payments. CMS is also working with the states to recover the remaining $189 million.  CMS has also withheld approximately $51 million from three states with unspent bonus payment funds. In the report, the OIG recommended that CMS (1) continue to work with the states to collect the outstanding remainder of $189 million in “unallowable” CHIPRA bonus payments, and (2) use the findings of the report to tighten controls and review processes in similar programs.

The full report is available here.

Reporter, Michelle Huntsman, Houston, +1 713 751 3211, mhuntsman@kslaw.com.

Also in the News

Atlanta Life Sciences & Healthcare Group Fall 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.  King & Spalding invites you to attend our fall event, hosted by Houlihan Lokey, to network with others working in this growing area of our economy.  The event will be held on Thursday, October 10, 2019, from 6:00 p.m. to 8:00 p.m. ET. Click here to RSVP. Please contact Lauren Gennett at lgennett@kslaw.com if you have additional questions.