The Medicare Payment Advisory Commission (MedPAC), recently issued its June Report to Congress. Echoing the comments of the healthcare community, MedPAC recommended that CMS rescind its Two-Midnight Rule.
As a reminder, CMS implemented the Two-Midnight Rule in the FY 2014 IPPS Rulemaking. There are three main elements to the Rule:
- Amended the definition of “inpatient” to mean an admitted patient who is expected to require a minimum stay spanning two midnights.
- Implemented a new policy on when a hospital can request – and receive – payment if a patient is improperly classified under the Rule as an inpatient, versus an outpatient.
- Implemented a requirement that there be a written physician order for every inpatient admission.
Not surprisingly, the Two-Midnight Rule has been controversial, and its enforcement has been delayed by both CMS and Congress. Multiple pending cases are also challenging aspects of the Two-Midnight Rule. As a result, MedPAC’s recommendation may be the final straw to pressure CMS to rescind the Rule.
Even if CMS rescinds the Two- Midnight Rule, providers should, at a minimum, remember to protest the 0.2% reduction to the standardized amount that CMS instituted in FY 2014 to finance the implementation of the Rule. (In addition to the 0.2% reduction, providers can also protest the reimbursement amount lost as a result of complying with the Rule.) A refresher on the cost report appeals process for both self-disallowance and late NPRs is available here.
It’s not too late to challenge the 0.2% reduction for FY 2014!
On the heels of its announcement that it is “hiring additional lawyers to look into taking more administrative actions against” physicians, the Office of Inspector General (OIG) recently filed 75 indictments and 14 complaints against various parties. See the Fact Sheet. The OIG’s “national sweep” yielded prosecution of $712 million in false billings and led to charges against 46 doctors and 197 others. Most prosecutions were for egregious violations —billing for medically unnecessary and often never provided items or services.
This operation was unique in that it focused on Medicare Part D prescription drugs. This is no surprise since spending for Part D has more than doubled since 2006, from $51.3 billion to $121.1 billion. See HHS OIG Data Brief, June 2015. Part of this increase is attributed to prescription drug abuse. Accordingly, prescription drug fraud schemes were one-third of the investigations.
House to Continue Consideration of IPAB Repeal
Majority Leader Kevin McCarthy (R-CA) has announced that the House of Representatives will complete consideration of H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015, this week. This bill repeals the sections of the ACA that establish the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. The Congressional Budget Office (CBO) has estimated that the repeal would cost $7.1 billion from FY 2016 to FY 2025. The House Committee on Rules adopted an amendment, offered by Rep. Joe Pitts (R-PA), which offsets the repeal costs with funds from the ACA’s prevention and public health fund. The House began considering the bill last week but a vote was postponed. It currently has 235 bipartisan cosponsors.
Appropriations Committees Mark Up Health Legislation
Following Subcommittee action last week, the House Committee on Appropriations has announced it will hold a markup of the FY 2016 Labor, Health and Human Services, and Education bill on Wednesday, June 24. The draft legislation includes $153 billion in discretionary funding ($14.6 billion below the President’s budget request), with $71.3 billion for the Department of Health and Human Services (HHS) ($3.9 billion below the President’s budget request). The bill includes over $6 billion in funds for the Health Resources and Services Administration (HRSA) ($413 million below the President’s budget request), including $265 million for the Children’s Hospital Graduate Medical Education Program. Additionally, the bill provides the Centers for Disease Control and Prevention (CDC) $7 billion (equal to the President’s budget request), including $1.56 billion for Public Health Preparedness and Response; $31.2 billion for the National Institutes of Health (NIH) to increase several research initiatives ($100 million above the President’s budget request); and $3.3 billion for the Centers for Medicare and Medicaid Services (CMS) ($919 million below the President’s budget request). The bill does not include additional funding to implement the ACA. It prohibits funds from going to the “Center for Consumer Information and Insurance Oversight” and “Navigators” programs.
The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on its appropriations language on Tuesday, June 23. The legislation has yet to be released.
Chairman Upton Expected To Release Manager’s Amendment for 21st Century Cures Act
After announcing that the House floor will not consider the 21st Century Cures Act this month, Committee on Energy and Commerce Chairman Fred Upton (R-MI) stated that he plans to file a manager’s amendment for the bill this coming week. Lawmakers have been in discussions over the bill’s offsets, which have remained controversial since the Committee advanced the legislation last month. Offsets currently include delaying certain Medicare Part D plan prepayments, drawing down the Strategic Petroleum Reserve, limiting federal Medicaid reimbursement to states for durable medical equipment to Medicare payment rates, and limiting federal payment for X-ray imaging services that use film. America’s Health Insurance Plans (AHIP) has come out against the Medicare Part D offset, which is expected to lower Medicare spending by about $5 billion to $7 billion. The Advanced Medical Technology Association (AdvaMed) has expressed concerns on the durable medical equipment offset, which is expected to save $2.8 billion.
Chairman Upton expects the Committee on Ways and Means to waive jurisdiction and agree to his manager’s amendment. He predicted a floor vote would occur in early July.
Stakeholder Comments Due for Senate Finance Committee’s Chronic Care Working Group
In May, the Senate Committee on Finance Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) announced the formation of a chronic care working group, to be co-chaired by Sens. Johnny Isakson (R-GA) and Mark Warner (D-VA). The committee’s working group has requested stakeholder input on strategies to improve outcomes for Medicare patients with chronic conditions, including the use of telehealth and remote monitoring technology. The deadline to respond to the committee’s working group is this Monday, June 22.
This Week’s Hearings:
- Tuesday, June 23: The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act, 2016.
- Wednesday, June 24: The House Committee on Ways and Means Subcommittee on Oversight will hold a hearing titled “Rising Health Insurance Premiums Under Obamacare.”
- Wednesday, June 24: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining the Administration’s Approval of Medicaid Demonstration Projects.”
- Wednesday, June 24: The House Committee on Appropriations will hold a markup on the FY 2016 Labor, Health and Human Services, and Education bill.
- Wednesday, June 24: The Senate Committee on Veterans’ Affairs will hold a hearing titled “Pending Health Care and Benefits Legislation.”
- Thursday, June 25: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining Public Health Legislation: H.R. 2820, H.R. 1344, and H.R. 1462.” H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act, provides federal support for cord blood donation and research so as to increase patient access to transplant. H.R. 1344, the Early Hearing Detection and Intervention Act of 2015, reauthorizes a program for early detection, diagnosis, and treatment regarding deaf and hard-of-hearing newborns, infants, and young children. H.R. 1462, the Protecting Our Infants Act of 2015, develops recommendations and improves prevention, treatment, and data on prenatal opioid abuse and neonatal abstinence syndrome.
Only two days after releasing its latest fraud alert, a deputy director from HHS’s Office of Inspector General announced that the OIG will be hiring additional attorneys to look into taking more administrative actions against physicians in their individual capacity. This announcement emphasizes that the OIG means serious business – not only is the OIG shifting its focus to the physicians themselves, but it is hiring a team of attorneys as further enforcement. In a related development, the Department of Justice recently reached a record settlement with a skilled nursing facility for paying physicians as medical directors under false contracts. This confirms that while the OIG is broadening its enforcement to individual physicians, the entities are not off the hook.
According to the Deputy Administrator and Director with CMS’s Center for Program Integrity, waste accounts for 30% of overall healthcare costs. It is increasingly clear that HHS intends to significantly reduce that percentage by now focusing on individual physicians rather than only going after the organizations that pay them.
Last week, we wrote about the OIG advising physicians to ensure their compensation arrangements reflect fair market value for bona fide services the physicians actually provide. In particular, the OIG mentioned medical directorships, which put physicians in a key position to generate business for the entity.
For those who missed our previous blog post, we noted that physicians should be careful to ensure their medical director agreements – in fact, any financial arrangement, such as office staff arrangements, contain fair market value compensation for services they actually provide. Moreover, it important for all physicians to begin building evidentiary support (e.g., documenting time spent performing tasks under the agreement) in case the agreement is challenged. Documentation will be important in order to show that compensation was in fact based on the services provided rather than for a physician’s past or future referrals.
House to Vote on Medical Device Excise Tax and IPAB Repeals
In the House of Representatives, Majority Leader Kevin McCarthy (R-CA) has announced that several health care bills will be considered on the floor this week.
Two of these bills dismantle portions of the Affordable Care Act (ACA). H.R. 160, the Protect Medical Innovation Act of 2015, repeals the excise tax on medical device manufacturers and importers. It has 282 bipartisan cosponsors. H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015, repeals the sections of the ACA that establish the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. It has 235 bipartisan cosponsors. Prior to any floor action, the House Committee on Rules will meet on Monday, June 15, to consider these pieces of legislation.
Several Medicare Advantage bills will be considered under suspension of the rules: H.R. 2505, the Medicare Advantage Coverage Transparency Act of 2015, as amended; H.R. 2507, the Increasing Regulatory Fairness Act of 2015, as amended; H.R. 2582, the Seniors’ Health Care Plan Protection Act of 2015, as amended; and H.R. 2570, the Strengthening Medicare Advantage through Innovation and Transparency for Seniors Act of 2015, as amended.
This Week’s Hearings:
- Monday, June 15: The House Committee on Rules will meet to consider H.R. 160, the Protect Medical Innovation Act of 2015, and H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015.
- Tuesday, June 16: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining H.R. 2646, the Helping Families in Mental Health Crisis Act.”
- Tuesday, June 16: The House Committee on Science, Space, and Technology Subcommittee on Research and Technology will hold a hearing titled “The Science and Ethics of Genetically Engineered Human DNA.”
- Tuesday, June 16: The Senate Committee on Health, Education, Labor, and Pensions (HELP) will hold a hearing titled “Achieving the Promise of Health Information Technology: What Can Providers and the U.S. Department of Health and Human Services Do to Improve the Electronic Health Record User Experience?”
- Wednesday, June 17: The House Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a markup of the FY 2016 Labor, Health and Human Services, and Education Appropriations bill.
- Thursday, June 18: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “A National Framework for the Review and Labeling of Biotechnology in Food.”
The World Economic Forum has identified that today’s global infrastructure demand is estimated at approximately US$ 4 trillion in annual expenditures, with a gap – or missed opportunity – of at least US$ 1 trillion every year. Despite existing supply of private capital, much more is needed to fill this gap. This demand for infrastructure includes soft infrastructure such as healthcare facilities. Thus, in recent years, more and more US healthcare providers are looking for international partnerships or investment opportunities to take advantage of the unique demands abroad. One such area is building senior care facilities in China.
On May 25, a tragic fire broke out at a well-known privately owned nursing home in the central province of Henan, China. Thirty-eight people were killed and six other were injured. It is believed that poor construction and a lack of safety measures were to blame for the fire. This tragedy highlights the urgent need for safe senior care facilities in China. According to population data from the United Nations, adults age 60 and older are projected to represent 19.8% of China’s population by 2025. While this figure is lower than the projected 24.8% for the U.S., China’s one-child policy and the fact that working adults gravitate towards coastal urban centers mean that many seniors in China are living alone, without help for the need care.
At the same time, there is a great lack of quality senior care facilities. Thus, there is significant demand for American senior living companies with expertise in providing both housing and healthcare related services to serve the aging boom in China.
The Chinese government recognizes such a demand and has recently issued circulars and regulations with the goal of encouraging foreign investors in the area of for-profit senior care. The first of which, dated November 24, 2014, the Ministry of Commerce (MOFCOM) and the Ministry of Civil Affairs (MCA), jointly issued a Circular on Various Issues on Foreign Investment in For-profit Senior Care Facilities:
- It clarifies the approval and registration process for foreign investment in for-profit senior care business, specifying that such facilities are subject to approval by MOFCOM, licensing by MCA, and registration with the State Administration of Industry and Commerce. There are also additional permitting requirements at the municipal level thereafter.
- It lists documentation requirements for application and set the time limit for MOFCOM approval (20 days upon acceptance of application).
- It encourages franchising and expansion by foreign for-profit senior care facilities.
- It provides the same preferential treatment currently granted to domestic private senior care facilities. However, it did not specify whether any tax benefit may be available to foreign owned facilities.
Then in February of 2015, the MCA offered additional opinions and regulations to further set the framework for private investment in senior care facilities. Of note are two points below:
- It expressly permits public private partnerships (PPP) to further encourage private investment to take part in conversion of public institutions and enterprises. PPP can be a valuable vehicle for sharing risk with the host government in a foreign country.
- For-profit private senior facilities will be able to set their own prices, though it’s not clear if a PPP facility will be subject to government intervention.
These regulations and circulars are only available in Chinese, but Squire Patton Boggs is happy to provide translations, as well as assistance to anyone interested in exploring the Chinese senior care market.
One example of a recent American entrant into the China market is the recently announced development and management partnership between Greystone Communities, a Texas based senior living company, with CITIC Guoan Investment Co., Ltc. (“CITIC GAI”), a real estate development finance investment firm based in Beijing. In this partnership, announced on May 31, 2015, Greystone would provide management, planning and operations management consulting for CITIC GAI’s portfolio of senior care projects in China.
Tuesday, the OIG released a fraud alert advising physicians to ensure their compensation arrangements, such as medical director agreements, reflect fair market value for bona fide services the physicians actually provide, or they could potentially face liability under the Anti-Kickback Statute. As part of the fraud alert, the OIG encouraged physicians “to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.”
To underscore the seriousness of the issue, the OIG highlighted the fact that it has recently reached settlements with 12 individual physicians regarding questionable medical directorship and office staff arrangements. Compliance issues under these agreements included compensation the reflected the volume or value of referrals, compensation that was not fair market value for services performed, and payment for services that were not actually performed. In one case, the OIG noted that the arrangement called for the affiliated health care entity to pay the salaries of the physicians’ front office staff, providing physicians an improper benefit by relieving them of that burden.
This latest fraud alert comes on the heels of similar alerts released in 2013 and 2014, putting physicians on notice that they too can be the focus of enforcement activity. This appears to represent a shift by the OIG, which previously concentrated its enforcement efforts on larger entities, like hospitals and health care systems, rather than individual physicians.
In light of the OIG’s warning, physicians should be careful to ensure their medical director agreements and similar arrangements contain fair market value compensation for services they actually provide, and the services provided under the agreement should not overlap with obligations under other agreements. Documenting time spent performing tasks under the agreement (such as through timesheets) is also a good way to build evidentiary support in case the agreement is challenged. Agreements that seem “too good to be true” should be viewed with suspicion.
On May 26, 2015, CMS released a proposed rule for Medicaid managed care plans with the objective of creating more standardized practices across states, and to align Medicaid managed care with other major sources of coverage, including those offered by the private market. The proposed rule would be the first update to Medicaid managed care rules in more than a decade.
The proposed rule calls for managed care plans to adhere to a medical-loss ratio (MLR) of 85%, which would take effect in 2017. Unlike the MLR for insurance plans established under the Affordable Care Act (ACA), here, Medicaid managed care plans would not be required to repay states if they do not meet the threshold.
The proposed rule also seeks to create standards that would ensure beneficiaries can access adequate provider networks. For example, CMS proposed states adopt distance and time standards that plan applicants must meet. This would largely parallel the Medicare Advantage program that requires MA plans to limit how far patients have to travel and how long they have to wait for a primary care visit. Further, CMS noted the high number of pediatric Medicaid enrollees and called for states and plans to specifically include pediatric primary, specialty, and dental providers in their network – the intention is to prevent critical provider shortages and decrease the need for out-of-network authorizations and coordination.
The proposed rule provides for greater transparency in how states determine plan payment rates. States would be required to give CMS sufficient information for the agency to understand the data and the rationale for the rate. In addition, the proposed rule includes new guidance on long-term care.
In sum, the proposed rule is broad in scope as it relates to networks, price transparency, and long-term care, among other concerns. CMS is currently accepting comments on the proposed rule’s provisions. Comments must be received by no later than 5 p.m. on July 27, 2015.
For more information on this issue, please see our client alert.
Lawmakers Anticipate King v. Burwell Decision
With the Supreme Court expected to issue its opinion in the statutory interpretation case of King v. Burwell this month, lawmakers are considering legislative options to address any potential changes to the Affordable Care Act (ACA). The issue in the case of King v. Burwell is whether the ACA provides tax subsidies to individuals who purchase insurance through the federal exchange, in addition to the subsidies for those who buy insurance through state-based exchanges, which is explicitly stated in the law.
On Tuesday, June 2, the Republican Study Committee, a group of conservative House Republicans, is expected to unveil its plan to repeal and replace the ACA. The group would like their proposal to influence the Republican response to the King v. Burwell decision. Chairman of the House Committee on Education and the Workforce John Kline (R-MN), Chairman of the House Committee on Ways and Means Paul Ryan (R-WI), and Chairman of the House Committee on Energy and Commerce Fred Upton (R-MI) are currently leading the effort to compose a House Republican response to the upcoming ruling.
On Thursday, June 4, the Senate Committee on the Judiciary Subcommittee on Oversight, Agency Action, Federal Rights, and Federal Courts will examine the subsidy issue. The Subcommittee is scheduled to hold a hearing titled “Rewriting the Law: Examining the Process that Led to the Obamacare Subsidy Rule.”
House Committee on Ways and Means Marks Up Health Care Legislation
On Tuesday, June 2, the House Committee on Ways and Means will hold a markup to consider several health care bills. On the Committee’s agenda is H.R. 160, the Protect Medical Innovation Act of 2015, which would repeal the excise tax on medical device manufacturers and importers that was put into law by the ACA. The bill, sponsored by Rep. Erik Paulsen (R-MN), has 281 bipartisan cosponsors. The committee will also mark up H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015. This bill would repeal the portion of the ACA that establishes the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. Several bipartisan Medicare Advantage-related bills are also slated for consideration.
This Week’s Hearings:
- Monday, June 1: The House Committee on Veterans’ Affairs Subcommittee on Oversight and Investigations will hold a hearing titled “Circumvention of Contracts in the Provision of Non-VA Healthcare.”
- Tuesday, June 2: The House Committee on Energy and Commerce Subcommittee on Oversight and Investigations will hold a hearing titled “Medicaid Program Integrity: Screening Out Errors, Fraud, and Abuse.”
- Tuesday, June 2: The House Committee on Ways and Means will hold a markup of: H.R. 160, Protect Medical Innovation Act of 2015; H.R. 1190, Protecting Seniors’ Access to Medicare Act of 2015; S. 984, Steve Gleason Act of 2015; S. 971, Medicare Independence at Home Medical Practice Demonstration Improvement Act of 2015; H.R. 2580, LTCH Technical Correction Act of 2015; H.R. 2505, Medicare Advantage Coverage Transparency Act of 2015; H.R. 2506, Seniors’ Health Care Plan Protection Act of 2015; H.R. 2507, Increasing Regulatory Fairness Act of 2015; H.R. 2579, Securing Care for Seniors Act of 2015; and H.R. 2581, Preservation of Access for Seniors in Medicare Advantage Act of 2015.
- Wednesday, June 3: The House Committee on Veterans’ Affairs Subcommittee on Health will hold a hearing titled “Assessing VA’s Ability to Promptly Pay Non-VA Providers.”
- Wednesday, June 3: The Senate Committee on Veterans’ Affairs will hold a hearing to examine pending health care legislation, including: S. 207, to require the Secretary of Veterans Affairs to use existing authorities to furnish health care at non-Department of Veterans Affairs facilities to veterans who live more than 40 miles driving distance from the closest medical facility of the Department that furnishes the care sought by the veteran; S. 297, to revive and expand the Intermediate Care Technician Pilot Program of the Department of Veterans Affairs; S. 425, to amend title 38, United States Code, to provide for a five-year extension to the homeless veterans reintegration programs and to provide clarification regarding eligibility for services under such programs; S. 471, to improve the provision of health care for women veterans by the Department of Veterans Affairs; S. 684, to amend title 38, United States Code, to improve the provision of services for homeless veterans; and other calendar business.
- Wednesday, June 3: The Joint Economic Committee will hold a hearing titled “Examining the Employment Effects of the Affordable Care Act.”
- Thursday, June 4: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining H.R. 2017, the Common Sense Nutrition Disclosure Act of 2015.”
- Thursday, June 4: The Senate Committee on the Judiciary Subcommittee on Oversight, Agency Action, Federal Rights, and Federal Courts will hold a hearing titled “Rewriting the Law: Examining the Process that Led to the Obamacare Subsidy Rule.”