United States: Washington Healthcare Update - July 14, 2015

This Week: 21st Century Cures Legislation Passes House in Bipartisan Vote... CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule... CMS Releases Final CY 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Rule and Changes to the Two-Midnight Rule

1. Congress

House

21st Century Cures Legislation Passes House in Bipartisan Vote

The House passed the 21st Century Cures Act by a 344-77 tally on Friday, July 10. The vote shows a strong bipartisan support for the multifaceted proposal to speed approval of devices and drugs. The legislation would increase National Institutes of Health funding by $8.75 million in mandatory funding over the next five years. That amount is considered a major increase for the agency although less than was originally promised. The Food and Drug Administration (FDA) will receive $550 million to help implement the law that includes changes on how the agency reviews some new drugs and devices so products get to market faster.

Since the bill was reported out of the House Energy and Commerce Committee in May, much of the discussion has been about how to pay for the proposal. The insurance industry opposed taking up to $7 billion from private Medicare Part D prescription drug plans, forcing policy-makers to look for alternatives. The drug industry successfully fought two proposed pay-fors, including a new policy on how Medicare would pay for biosimilars and a change to Medicare's low-income subsidy.

Lawmakers instead kept the other offsets included in the committee-passed bill and increased the amount of oil they would sell off from the Strategic Petroleum Reserve. The bill now includes several pay-fors: trimming federal payments for generic drugs; a $300 million pay-for related to infused drugs; and several pay-fors related to durable medical equipment.

The legislation also includes an extension of the Centers for Medicare and Medicaid Services (CMS) wheelchair prior authorization demonstration, which has reduced Medicare spending on power wheelchairs. The extension is likely to save more money. CMS previously authorized a demonstration for power mobility wheelchairs in 2012, and announced an expansion in 2014. The demonstration was set to end in August 2015; however, the legislation extends it through Aug. 31, 2018, and adds more states.

Five amendments were agreed to by voice vote when the bill was considered on the floor of the House:

• A sense of Congress resolution that recording unique device identifiers at the point-of-care in electronic health record systems could significantly enhance the availability of medical device data for postmarket surveillance purposes.
• An amendment directing CDC to conduct a study to determine how additional Medicare payments for antimicrobials are affecting the development of drug resistance.
• An amendment to give NIH authority to incentivize health innovation by offering competitors the chance to win a prize for creating breakthrough research and technology.
• An amendment aimed at ensuring underrepresented individuals, such as women and minorities, are included in the Supporting Young Emerging Scientists Report.
• An amendment directing the HHS secretary to conduct outreach to Historically Black Colleges and Universities, Hispanic-serving Institutions, Native American colleges and rural colleges to ensure that health professionals from underrepresented populations are aware of research opportunities under the Cures bill.

The Administration outlined a number of concerns over the legislation, including that FDA's responsibilities would exceed the resources provided, making the agency unable to implement the law. The Administration is also concerned about how the extensions on patent exclusivity will impact drug costs and whether regulatory standards will be undermined in the rush to bring new products to market. However, the Administration did praise the inclusion of the President's Precision Medicine Initiative, including patients' voices into the FDA decision-making and reducing barriers to medical device trials.

OMB has outlined a host of Obama administration concerns over 21st Century Cures, including providing NIH with additional funding without addressing the broader budget problems posed by sequestration. In a Statement of Administration Policy, OMB also says the FDA's new responsibilities would "exceed the resources provided," which would make the agency unable to fully implement the bill while "maintaining its current performance levels." The administration is also concerned about how the extensions on patent exclusivity will impact drug costs and whether policies to bring drugs to market faster will undermine regulatory standards. But the statement also contains praise, for the bill's support of the president's Precision Medicine Initiative and its steps to incorporate patients' voices into FDA decision-making, further develop reliable biomarkers and reduce barriers to medical device trials.

The Senate has been working on its own version of the Cures bill. Its timing is unclear.

Energy and Commerce Health Subcommittee Holds Hearing on 50-Year Anniversary of Medicaid

The Energy and Commerce Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), held a hearing July 8 entitled "Medicaid at 50: Strengthening and Sustaining the Program." Witnesses from the Centers for Medicare and Medicaid Services (CMS), Government Accountability Office (GAO), and Medicaid and CHIP Payment and Access Commission (MACPAC) testified. At the hearing, claims of CMS favoritism and of inconsistent oversight of Section 1115 demonstrations were a key theme. "It's well known that some states get CMS approval for a specific proposal, while the CMS will deny another state for a very similar proposal," said Rep. Joe Pitts (R-PA). Furthermore, in the hearing several Republican committee members relayed concerns surrounding the growing financial impact of Medicaid on federal and state budgets, delivery system reforms and access to health care.

For more information or to view the hearing visit energycommerce.gov.

Upcoming: Energy and Commerce Subcommittee on Oversight and Investigations to Hold Hearing on Medicare Part D Program Integrity

The Subcommittee on Oversight and Investigations, chaired by Rep. Tim Murphy (R-PA), has scheduled a hearing entitled "Medicare Part D: Measures Needed to Strengthen Program Integrity," for Tuesday, July 14, at 2 p.m. in Room 2322 of the Rayburn House Office Building. The Medicare prescription drug program was established to provide an optional prescription drug benefit for Medicare beneficiaries. The Department of Health and Human Services Office of Inspector General recently released two reports, "Ensuring the Integrity of Medicare Part D" and "Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D ," that highlight weaknesses that make Medicare Part D fraud and abuse possible. Subcommittee members will discuss ways to ensure that the program operates more effectively and has working fiscal oversight, and that critical drug cost benefits are upheld for seniors.

For more information or to view the hearing, visit energycommerce.gov.

Congress Expands Medicare Coverage for Acute Dialysis Services

On June 29, 2015, President Obama signed into law the Trade Preferences Extension Act (H.R. of 2015 (H.R. 1295), which provides for Medicare reimbursement for renal dialysis services furnished to individuals with acute kidney injury. This measure, which takes effect on Jan. 1, 2017, has been long awaited by dialysis providers. CMS had taken the position that hospital outpatients may receive acute dialysis only in a hospital or in locations that qualify as provider-based departments of the hospital if they want those services reimbursed by Medicare. Its July 2012 statement presented considerable confusion in the dialysis community regarding whether CMS was also stating that Medicare-certified facilities could provide acute dialysis services. The legislation now ensures that dialysis facilities will be reimbursed for acute dialysis treatments rendered to Medicare beneficiaries as of Jan. 1, 2017. Further, payment for furnishing acute dialysis services "shall be the base rate for renal dialysis services determined for such year."

More information on the measure can be found here.

GOP Doctors' Caucus Sends Letter to HHS on U.S. Preventive Services Task Force Mammogram Draft Guidelines

The Republican Doctors Caucus sent a letter to Department of Health and Human Services Secretary Sylvia Burwell urging the agency to forgo finalization of the U.S. Preventive Services Task Force's (USPSTF) recent draft guidelines recommending the "C" grade assigned to screening mammograms for women between the ages of 40 and 49. Signers of the letter believe the recommendation would have a "chilling effect" on insurance coverage of mammograms and "will limit access to this valuable diagnostic tool." The issue has bipartisan support; Democrats on the House Appropriations Committee inserted language in the Department of Health and Human Services (HHS) appropriations bill that would delay the effects of the guidelines for one year.

Senate

Senate HELP Committee Holds Hearing on Small Business Health Care Challenges

In a partisan hearing, three small business owners testified to the Senate Health, Education, Labor, and Pensions' Subcommittee on Primary Health and Retirement Security on July 7 that problems within the Affordable Care Act (ACA) are leading to more expensive insurance policies for employers, thereby making it more difficult for companies to provide high-quality health care to their employees. Witness Kelly Conklin, a small business owner, said that selecting a plan "can be a daunting experience," especially for a small business owner who is uncertain of what coverage is most suitable for his employees. He told subcommittee members that coverage selection would be easier for small employers if there was more transparency, or if policies were written with less confusing language. The hearing also looked at what to do about the small group market overall.

For more information or to view the hearing, visit help.senate.gov.

Upcoming: Senate Aging Committee to Hold Hearing on Finding Diabetes Cures

On July 15, 2015, Senate Special Committee on Aging Chairwoman Susan Collins will hold a hearing entitled "Diabetes Research: Improving Lives on the Path to a Cure." The hearing will be held at 2:15 p.m. in G-50 Dirksen Senate Building. A witness list was unavailable at the time of print.

For more information or to view the hearing, visit aging.senate.gov.

2. Administration

Biosimilar Interchangeability Guidance Document to Be Released by FDA Before 2016

According to a July 1 Federal Register notice, the Food and Drug Administration (FDA) will, by year's end, release draft guidance on how companies can demonstrate how their biosimilars are interchangeable with existing reference biologics. Companies must receive an interchangeability designation from FDA for the cheaper drugs to be considered qualified for automatic substitution for the costlier brand medicines. FDA estimates that the burden estimates for seeking licensure of a proposed biosimilar product that meets the standards for interchangeability would be 860 hours. According to the notice, the agency anticipates receiving five biosimilar applications each year, significantly fewer than the hundreds of generic drug applications it receives annually.

FDA Releases New Draft Guidance on Bioequivalence Recommendations for Specific Generics

In a June 29 guidance document, the Food and Drug Administration (FDA) announced the availability of additional draft and revised draft product-specific bioequivalence (BE) recommendations for more than three dozen drug products, including several noteworthy branded pharmaceuticals that are not yet subject to generic competition. The document aims to make it easier for generic drug manufacturers to eventually make copies of several popular drugs, including Sovaldi (sofosbuvir), Northera (droxidopa), Xtandi (enzalutamide) and Olysio (simeprevir). Bioequivalence recommendations are a critical part of the submission of an Abbreviated New Drug Application (ANDA) — the application generic pharmaceutical companies use to submit for each new generic drug. Public comments on the draft product-specific BE recommendations can be sent via www.regulations.gov.

FDA Delays Enforcement of Drug Supply Chain Security Act Requirements for Pharmacies

A recent Food and Drug Administration (FDA) guidance document announced the agency's decision to give pharmacies four more months — until Nov. 1, 2015 — until enforcement will begin of the product-tracing information requirements established within the Drug Supply Chain Security Act (DSCSA). The act requires that pharmacies accept shipments of pharmaceuticals only if they receive certain tracking information from trading partners, and mandates that they store this data upon receipt. The DSCSA requires an electronic, interoperable system by Nov. 27, 2023, which will identify and trace certain prescription drugs as they are distributed within the United States. In addition, FDA plans to have a number of stakeholder calls to solicit public feedback in the coming weeks.

CMS Releases Open Payments Data for CY 2014

On June 30 the Centers for Medicare & Medicaid Services (CMS) published searchable 2014 Open Payments data-relating payments, honoraria or research grants by drug and medical device makers to health care providers. Created by the Affordable Care Act, the program relies on voluntary participation by physicians and teaching hospitals to review the information submitted by these companies. In its press release CMS said registered physicians and teaching hospitals reviewed nearly 30 percent of the total value of the reported data. The data includes information about 11.4 million financial transactions attributed to over 600,000 physicians and more than 1,100 teaching hospitals, totaling $6.49 billion. According to CMS, nearly half of the transfers was for research payments such as clinical trials; the remaining $2.56 billion — about 40 percent — was for general payments, which can include food and drink; fees for consulting; travel or speaking; royalties; and even gifts. The median value of total payments made to registered physicians is $3,644, compared to $747 made to non-registered covered recipient physicians. This was the first time a full year's worth of payment data was made available.

HHS Awards $840 Million in Public Health and Emergency Preparedness Grants to Local Health Departments

The U.S. Department of Health and Human Services (HHS) will award health departments across the country more than $840 million in cooperative agreements for the improvement and sustainability of emergency preparedness of state and local public health and health care systems. The cooperative agreement funds are distributed through two federal preparedness programs: the Hospital Preparedness Program (HPP) and the Public Health Emergency Preparedness (PHEP) program. Nationwide, HHS awarded a total of $228.5 million for HPP and $611 million for PHEP in fiscal year 2015. The programs provide resources needed to ensure that local communities can respond effectively to infectious disease outbreaks, natural disasters or chemical, biological or radiological nuclear events. The aligned HPP and PHEP cooperative agreements encourage state and local public health departments to work collaboratively with federal health and preparedness programs in their jurisdictions to maximize resources and prevent duplicative efforts. Such coordination of activities with emergency management and homeland security programs supports "whole community" planning to improve national preparedness efforts.

HPP and PHEP 2015 grant awards to individual states can be found here.

An HHS press release on the grant awards can be found here.

CMS Will Again Waive 90-Day Requirement for Grandfathered Individual Plans in 2016

In guidance released July 7, the Centers for Medicare & Medicaid Services (CMS) announced that it will again waive enforcement of the 90-day requirement for non-grandfathered, non-transitional coverage for 2016. As it stands, insurers are required to provide a notice of discontinuance for these plans only before the first day of open enrollment or prior to Nov. 1, 2015; moreover, insurers that anticipate terminating their transitional or grandfathered plans must provide the agency 60 days' notice. The 90-day discontinuance notice requirement will remain applicable to group plans, as they have continuous open enrollment status. Insurers that intend to completely withdraw from a market must continue to give 180 days' notice (and may not return to the market for five years). The CMS guidance further explains that insurers should continue to use standard notices for product discontinuances and renewals provided in previous guidance documents.

CMS Releases Data on Qualified Health Plan Selections by Advanced Premium Tax Credit, Age, Income and County

On July 8, the Centers for Medicare and Medicaid Services (CMS) released new information on Qualified Health Plan selections by county for the 37 states that use the HealthCare.gov platform (including the Federally-facilitated Marketplace, State Partnership Marketplaces and supported State-based Marketplaces) for the Marketplace open enrollment period from Nov. 15, 2014, through Feb. 15, 2015, including additional special enrollment period (SEP) activity reported through Feb. 22, 2015. CMS released the following tables:

• Advanced Premium Tax Credit (APTC): Qualified Health Plan Selections by APTC and county
• Cost-Sharing Reduction (CSR): Qualified Health Plan Selections by CSR and county
• Metal Level: Qualified Health Plan Selections by metal level and county
• Consumer Type: Qualified Health Plan Selections by type of consumer (i.e., new, auto re-enrollment or active re-enrollment) and county
• Household Income: Qualified Health Plan selections by household income as a Percent of the Federal Poverty Level and county
• Race: Qualified Health Plan selections by race/ethnicity and county
• Age Group: Qualified Health Plan selections by age group and county

FDA Announces Prescription Drug User Fee Act Patient-Focused Drug Development Disease Areas for Meetings in FY 2016-2017

On July 2 the Food and Drug Administration (FDA) announced the selection of disease areas to be addressed during fiscal years (FYs) 2016-2017 of its Patient-Focused Drug Development Initiative. FDA has identified the following diseases/ health issues to be the focus of meetings scheduled in FYs 2016-2017: alopecia areata; autism; hereditary angioedema; non-tuberculous mycobacterial infections; patients who have received an organ transplant; psoriasis; neuropathic pain associated with peripheral neuropathy; and sarcopenia. FDA selected these disease areas based on a careful consideration of the public comments received after publication of a preliminary list of disease areas in the Federal Register on Oct. 8, 2014. This initiative is being conducted to fulfill FDA's performance commitments under the Prescription Drug User Fee Act (PDUFA). This effort provides a more systematic approach for obtaining the patients' perspective on disease severity and currently available treatments for a set of disease areas.

CMS Announces Proposed Joint Replacement Model

The Centers for Medicare & Medicaid Services' Innovation Center (CMS Innovation Center) has announced a proposal for a new coordinated care model concerning the most common inpatient surgery for Medicare beneficiaries: hip and knee replacements. This model, called the Comprehensive Care for Joint Replacement (CCJR) Model, would test bundled payment and quality measurement for hip and knee replacements to encourage hospitals, physicians and post-acute-care providers to work together to improve quality and coordination of care throughout an entire episode of care, from the initial hospitalization through recovery. Through the proposed five-year payment model, health care providers in 75 geographic areas would continue to be paid under existing Medicare payment systems. However, the hospital where the hip or knee replacement takes place would be held accountable for the quality and costs of care for the entire episode of care — from the time of the surgery through 90 days after discharge. In 2013, there were more than 400,000 inpatient, first-time procedures, which cost Medicare more than $7 billion for the hospitalizations alone. The average Medicare expenditure for surgery, hospitalization and recovery ranges from $16,500 to $33,000 across geographic areas.

The proposal will be published in the Federal Register starting July 14, 2015. The deadline to submit comments is Sept. 8, 2015.

For more information, please visit the CCJR Model web page .

Obama Nominates Andy Slavitt to Be Permanent CMS Administrator

The White House has nominated Andy Slavitt, the acting administrator of the CMS, to be the permanent Administrator. The announcement July 9 was expected. Andy Slavitt has been in the acting administrator role since Administrator Marilyn Tavenner resigned in February. When he was still an executive at Optum, a subsidiary of UnitedHealth Group, Andy Slavitt played a crucial part in repairing HealthCare.gov after its rollout in October 2013. Prior to joining CMS in July as principal deputy administrator, Slavitt worked in the private sector for 20 years. Both Senate Majority Leader Mitch McConnell (R-KY) and Senate Finance Committee Chairman Orrin Hatch (R-UT) promptly issued press releases that foreshadow an uphill battle as Slavitt's nomination moves through the Judiciary Committee and into the larger chamber. The nomination process is likely to be as much about the Affordable Care Act (ACA) as it is about Slavitt's suitability for the position.

FDA Rule Amends Reporting Requirements of Drug Shortage Rule to Include FDASIA Provisions, Including Blood or Blood Components for Transfusion

The Food and Drug Administration (FDA) provided amendments to a final rule July 8 to implement certain drug shortage provisions included in the Food and Drug Administration Safety and Innovation Act (FDASIA). The rule requires all applicants of covered approved drugs or biological products — including certain applicants of blood or blood components for transfusion and all manufacturers of covered drugs marketed without an approved application — to notify FDA electronically of a permanent discontinuance or an interruption in manufacturing of the product that is likely to lead to a meaningful disruption in supply (or a significant disruption in supply for blood or blood components) of the product six months in advance of the permanent discontinuance or interruption in manufacturing, or, if that is not possible, as soon as practicable, but no later than five business days after the permanent discontinuance or interruption occurs. Moreover, the rule also requires that FDA issue a noncompliance letter to an applicant for failure to notify FDA under the rule; specifies minimum information that must be included in the notification; codifies FDA's current practice of publicly disseminating information on shortages and maintaining public lists of drugs and biological products in shortage. The rule would increase the modest reporting costs associated with notifying FDA of discontinuances or interruptions in the production of certain drug products, and would potentially impose annual costs of up to $40.54 million on those applicants or entities affected by the rule, and up to $6.38 million on FDA in preventive costs. The rule will become effective Sept. 8, 2015.

The final rule can be found here.

3. State Activities

California Judge Rules Nursing Homes Cannot Make Decisions for Mentally Incompetent Patients

On June 24, a California state court ruled that nursing homes cannot make medical decisions for mentally incompetent residents who lack a designated representative. The court deemed the law unconstitutional on the premise of a violation of due process — it does not require nursing homes to notify patients that they are considered incapacitated, nor does it give them the opportunity to contest that decision. Though Alameda County Superior Court Judge Evelio M. Grillo recognized that this will "create problems" for nursing homes, he argued that "the stakes are too high to hold otherwise." Moreover, the judge wrote that an error could deprive patients of their rights to make medical decisions that "may result in significant consequences, including death."

End-of-life treatment has been highly debated in California. A bill permitting aid in dying was pulled from the Assembly Health Committee Schedule on July 7 and is done for the year. Senate Bill 128, which would allow doctors to prescribe lethal drugs to terminally ill patients, passed the Senate last month; however it is unclear if it will meet a July 17 committee deadline. Proponents have pledged to pursue a ballot initiative next year if it does not pass.

California Considers Cap on Out-of-Pocket Drug Costs

The California Assembly passed a bill to cap copays for prescription drugs to limit patients' monthly costs to $250 for a 30-day prescription. Further, it would bar insurers from placing all drugs for any condition in the highest tier of cost sharing. Lawmakers in California are following Maryland, Delaware and Louisiana, which have already limited consumers' copays to $150 per month for specialty drugs. The proposal will have a hearing in the Senate on July 15. It is similar to the cost-cap policy put in place for 2016 by the state's insurance exchange, Covered California. The Pharmaceutical Research and Manufacturers of America (PhRMA) group has expressed their support, but the insurance industry has warned that the caps would drive up premiums. Instead, insurance companies are backing legislation to require drug companies to disclose research, development and production costs for high-priced medicines.

Ohio Governor Signs Budget Imposing Medicaid Cost-Sharing Regime

Republican Gov. John Kasich signed Ohio's $71.2 billion FY 2016-2017 operating budget July 2, which contains a new blueprint for Medicaid expansion within the state. Under the plan, the state is required to apply for a Medicaid expansion waiver with the federal government and would impose mandatory cost-sharing on enrolled beneficiaries via personal contributions to health savings accounts. The controversial personal responsibility requirements, which have yet to be approved by the U.S. Department of Health and Human Services in other states, would disenroll non-disabled beneficiaries, except pregnant women, should they fail to contribute 2 percent of their family income or $99, whichever is less, annually to their personal accounts. Medicaid serves more than 2.9 million Ohio residents, about a quarter of the state's population. The Kasich administration will draft the waiver request in the coming months and solicit feedback via a public comment period.

New York to Divide $7.3 Billion From Federal Delivery System Reform Incentive Payment Program to Reduce Avoidable Hospital Usage

In a recent announcement from the Office of Governor Andrew Cuomo (D), 25 networks of hospitals, physician groups and other providers aligned in geographic collaborative networks in New York were awarded a total of $7.3 billion via the federal Delivery System Reform Incentive Payment program (DSRIP) — a Medicaid waiver that allows the state to reinvest a portion of federal savings generated by Medicaid Redesign Team (MRT). DSRIP requires providers to collaborate by forming a Performing Provider System (PPS) to implement innovative projects focusing on system transformation, clinical improvement and population health improvement. Through community-level collaborations and a focus on system reform, the ultimate goal of these projects is to achieve a 25 percent reduction in avoidable hospital use over five years. Each group proposed measures meant to provide more effective upfront care and reduce more expensive emergency room visits, inpatient stays and hospital beds; such cost-reduction initiatives suggested include utilizing more outpatient clinics, using electronic patient records and enabling low-income patients to see doctors and psychologists in the same visit.

Oregon Insurance Division Posts 2016 Insurance Market Rates

In a July 1 press release, the Oregon Insurance Division announced final decisions for 2016 individual and small employer health insurance rates. The rates, which apply to about 10 percent of Oregonians, are for health plans covering businesses with fewer than 50 employees and individuals who buy their own coverage rather than getting it through an employer. In the individual market, the division's final rate decisions range from an average rate increase of 8.3 percent to an average rate increase of 37.8 percent, depending on the insurance company. In the small group market, the division's final rate decisions range from an average rate decrease of 7.6 percent to an average rate increase of 15 percent. The Insurance Division actuaries reviewed claims and cost information from 2014, and determined that the cost of providing coverage for individual plans in Oregon was $830 million, while premiums were only $703 million. This means costs exceeded rates by $127 million, or an average of $624 per person, thereby driving the rate increase decision. In plan year 2015, 78 percent of Oregonians enrolled through healthcare.gov received an average premium tax credit of $199 per member per month.

Final rates, a summary of the state of the individual and small group markets, and the final decision information for each carrier can be found at www.oregonhealthrates.org.

4. Regulations Open for Comment

CMS Releases CY 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Rule and Changes to the Two-Midnight Rule

On July 1, the Centers for Medicare & Medicaid Services (CMS) announced the release of the Calendar Year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions and payment rates proposed rule . The CY 2016 OPPS/ASC proposed rule recommends updates to Medicare payment policies and rates for hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs), and refinements to programs that encourage high-quality care in these outpatient settings. CMS suggested a decrease of 0.1% for outpatient payment rates. Moreover, it suggested an additional 2 percentage point adjustment to be included to account for inflation in OPPS payments to an increase in payments for laboratory tests. Approximately 3,800 hospitals and 60 CMHCs are paid under the OPPS, while approximately 5,300 ASCs are paid under the ASC payment system. The OPPS provides payment for most HOPD services, including partial hospitalization services furnished by HOPDs and CMHCs. OPPS payment amounts vary according to the Ambulatory Payment Classification (APC) group to which a service or procedure is assigned. This proposed rule also includes suggested changes to the Two Midnight Rule for CY 2016. The proposal was published in the July 8, 2015, Federal Register online. Comments on the proposed rule are due on Sept. 4, 2015.

A fact sheet on the proposed changes to the Two Midnight Rule for CY 2016 can be found here.

CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule

On July 6, the Centers for Medicare & Medicaid Services (CMS) announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2016, including updating requirements for home health agencies under the Medicare program and moving forward to implement the third year of the four-year phase-in of the rebasing adjustments to the HH PPS. Finalized in the CY 14 final rule, the CY 16 downward adjustment is $80.95. Home health agencies (HHA) are paid a national standardized 60-day episode payment for all covered home health services, adjusted for case-mix and area wage differences. CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72 percent in each of CY 2016 and CY 2017. CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY 16. The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode and other relevant factors.

Also in the proposed rule, CMS included further implementation of provisions within the IMPACT Act, including one standardized cross-setting measure for CY 2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, although CMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

• All-condition risk-adjusted potentially preventable hospital readmission rates;
• Resource use, including total estimated Medicare spending per beneficiary;
• Discharge to the community; and
• Medication reconciliation

CMS also announced the launch of a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across the nation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation, the HHVBP model draws upon the lessons learned from other value-based purchasing programs and demonstrations — including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance and Nursing Home Value-Based Purchasing Demonstrations — to shift to a model that promotes the delivery of higher-quality care to Medicare beneficiaries. CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation. HHAs in the nine states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) would have their payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third payment adjustment year and 8 percent in the final two payment adjustment years based on their performance across a series of quality metrics. CMS estimates approximately 3.5 million beneficiaries receive home health services from approximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

Published in the Federal Register July 8, the proposed rule can be found here. CMS will solicit public comments on the proposed rule until Sept. 4, 2015.

CMS Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the Sustainable Growth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused on person-centered care, and continues the Administration's intention to transition the Medicare program to a system based on quality and healthy outcomes. In the proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA, including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5 percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System, which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties a portion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systems survey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistants and other non-physicians. In the proposed rule, CMS is additionally seeking comment on the potential expansion of the Comprehensive Primary Care Initiative, a CMS Innovation Center initiative designed to improve the coordination of care for Medicare beneficiaries. Other items included in the proposed rule include an initiative that supports patient- and family-centered care for seniors and other Medicare beneficiaries by enabling them to discuss advance care planning with their providers.

For a fact sheet on the proposed rule, please see here. For further information, please see the rule on display here. CMS is accepting public comments on the CY 2016 PFS proposed rule until Sept. 8, 2015. The proposed rule will be published in the Federal Register on July 15, 2015, and CMS will issue the final rule by Nov. 1.

CMS Releases Proposed 2016 Medicare Dialysis Pay Rule

The Centers for Medicare and Medicaid Services (CMS) released a proposed 2016 Medicare Dialysis pay rule June 26 which includes several technical changes including a new drug designation process, a new rural pay adjuster, and updates to the end-stage renal disease Quality Incentive Program- the base pay rate for services and the adjusters to that base rate. Specifically, CMS proposes reducing the base pay rate by $9.23, from $239.43 in 2015 to $230.20 in 2016. Other pay changes include updates to the low-volume payment adjustment and a new payment adjustment for rural ESRD facilities. Further, the proposed rule would revise the geographic proximity eligibility criterion for the low-volume payment adjustment from (25 road miles to 5 road miles) and would eliminate grandfathering from the criteria for the adjustment. CMS also suggests reducing the fixed-dollar loss amount for pediatric beneficiaries from $54.35 to $49.99 and the Medicare Allowable Payments for pediatric patients from $43.57 to $37.82. For adults, the fixed-dollar loss amount would decrease from $86.19 to $85.66 and the Medicare Allowable Payments amount would decrease from $51.29 to $48.15.

Other specific changes include:

• A process for understanding when an oral-only drug is no longer considered an oral-only drug
• A process for including new injectable and intravenous products into the ESRD bundled payment
• Changes to quality measures and implementation of payment reductions for low preforming facilities

CMS expects that combined these updates would increase the total payments to all dialysis facilities by 0.3 percent with Hospital-based facilities receiving an increase in total payments of 0.5 percent, and freestanding facilities receiving a 0.2 percent increase. The proposed rule will be published the Federal Register on July 1. Comments on the proposed rule are due August 25, 2015.

FDA Issues Final Rule to Phase Out Trans Fats

The Food and Drug Administration (FDA) issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not "generally recognized as safe" or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA's decision can be found in the agency's press release.

CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

On May 26, CMS posted a proposed rule to modernize the Medicaid and Children's Health Insurance Program (CHIP) managed care regulations. The proposed rule is the first major update to Medicaid and CHIP managed care regulations in more than a decade. The proposal is sweeping in that it touches many areas, including network adequacy, quality measures, enrollment and best practices, and aligns many policies to be similar to those for Medicare Advantage and the private market. The rule will be published in the Federal Register on June 1, and the deadline to submit comments is July 27, 2015, at 5 p.m. EST.

More information on the rule can be found at federal registar.gov.

FDA Releases Draft Guidance on Use Adaptive Trial Designs for Medical Devices

On May 18, the Food and Drug Administration (FDA) released draft guidance in hopes of clarifying ways in which adaptive clinical trial designs can be used for medical devices. Specifically, the draft guidance lays out 11 types of adaptive trial designs the agency feels can be successfully used for devices: group sequential design; sample size adaptation; Bayesian sample size adaptation; group sequential designs with sample size reassessment; dropping a treatment arm; changing the randomization ratio; changing the hypothesis (claim); adaptive enrichment; planning to adapt based on the total information; adaptation of the device or endpoint; and seamless studies. The draft document also makes clear that the adaptive trial designs discussed apply to premarket approval applications, 510(k) submissions, de novo submissions, humanitarian device exemptions and investigational device exception, and do not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. Worth noting, FDA says there are possible limitations to using adaptive trial designs, including requiring more effort at the design stage—leading to study designs that are overly complicated and cost more and to the introduction of bias into the study; implementing changes to the study due to an adaptation can "confound interpretation of the study results." FDA says in the guidance that to ensure that adaptive trial designs are scientifically valid, studies should be prospectively planned for in consultation with FDA prior to the initiation of any study, and the agency lays out two approaches that can help evaluate the operating characteristics of adaptive study designs—analytical methods and simulation studies.

FDA: Guidance Released on Investigational New Drug Applications

The Food and Drug Administration (FDA) released draft guidance to assist sponsor-investigators in preparing and submitting complete investigational new drug applications (INDs)—an application used by FDA to approve the start of a new trial—to the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER). The guidance is intended to act as a basic overview of the IND process, with an eye on individual researchers who are investigating new uses for either an approved or investigational drug. FDA's guidance goes on to explain the basics of 21 CFR 312—the federal regulation governing IND submissions—providing an overview of the essential elements of an IND submission, including information about the sponsor, a summary of the investigational drug product and its risks, the clinical trial protocol and a summary of previous clinical trial results involving the drug. Worth noting, the guidance, FDA notes, is not intended for use by sponsors or investigators "seeking to evaluate a drug for commercial purposes (i.e. seeking market approval or licensure) and thus does not focus on certain regulatory requirements that involve exchange of information or materials between a sponsor and investigator." The proposed guidance was published in the Federal Register May 15, and comments on the proposed draft guidance are due July 14, 2015.

5. Reports

CMS Report: Agency to Pay Insurers $7.9 Billion in Risk Adjustment Payments

According to a report released June 30, the Centers for Medicare and Medicaid Services (CMS) announced that for the 2014 benefit year, over $7.9 billion in reinsurance payments will be made to 437 issuers nationwide. The report also found that total 2014 benefit year reinsurance contributions collected to date are approximately $8.7 billion and noted that the agency anticipates collection of an additional $1 billion in 2014 benefit year reinsurance contributions by or before Nov. 15, 2015, for use in subsequent years. The report provided specific data on the amount of reinsurance payments given to each state and to each individual insurance company. Originally planning to cover only 80 percent of cost, CMS recently announced boosted rates (of 100 percent) because "for the 2014 benefit year, reinsurance contributions exceeded the requests for reinsurance payments."

However, several insurers released estimates in Security and Exchange Commission (SEC) filings of how much in reinsurance funds they expected to receive from Centers for Medicare and Medicaid Services (CMS) for 2014. Of the major insurers, Anthem will get the largest payout, of more than $667 million — its estimate, however, was $753 million; Humana anticipated $586 million and will receive $549 million. Aetna is expected to receive $356 million from the premium stabilization program, including payments to Coventry and other subsidiaries, which exceeds its original guess of $338 million. Claims are eligible for reinsurance funds if an enrollee buys an ACA-compliant plan and the person's costs exceed $45,000 but are less than $250,000. The Affordable Care Act (ACA) established the transitional reinsurance program to help keep premiums stable and low for consumers by providing payments to health insurance issuers that cover higher-cost populations in the individual market.

GAO Report Recommends Congress Should Consider Ending 340B Drug Incentive Payments for Hospitals

In a report released July 6, the Government Accountability Office (GAO) found there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries. Approximately 40 percent of all U.S. hospitals participate in the 340B Drug Pricing Program, and the majority of 340B discounted drugs are sold to hospitals. Stakeholders have questioned the increase in hospital participation in the 340B program, and the implications for Medicare and its beneficiaries, especially regarding cancer care, and whether certain of the program's hospital eligibility criteria target hospitals appropriately. The GAO recommended that Congress consider eliminating 340B hospitals' incentive to prescribe Medicare beneficiaries more drugs or more expensive drugs than necessary, and warned that without any modifications to the 340B program potentially unacceptable drug overspending may continue. In commenting on a draft of this report the Department of Health and Human Services (HHS) noted some concerns with GAO's conclusions and suggested that further analysis may be needed to examine patient outcomes and differences in health status.

GAO Releases Comprehensive Report on Key Issues Facing Medicaid

In light of the 50th anniversary of the Medicaid program, the Government Accountability Office (GAO) released an overarching report on July 8 that identified four key issues facing the Medicaid program:

• Access to Care: GAO has recommended actions such as improving data on enrollees' access to care. CMS has issued guidance to states about reporting referrals for services, but has no plans to require states to report whether certain enrollees receive services for which they are referred, as GAO recommended.
• Transparency and Oversight: GAO estimated that spending limits were tens of billions of dollars higher than what spending would have been if states' existing Medicaid programs had continued. GAO has suggested that Congress consider requiring HHS to make improvements in these areas, including ensuring that valid methods are used to demonstrate budget neutrality.
• Program Integrity: GAO has recommended steps to improve program integrity, such as improving Medicaid managed care oversight, and requiring states to conduct audits of payments to and by managed care organizations.
• Federal Financing: GAO has suggested that Congress could consider enacting a funding formula that provides automatic, targeted and timely assistance in response to national economic downturns. GAO has also described revisions to the current funding formula that could better align federal funding with each state's resources, demand for services and costs.

In the report, GAO made over 80 recommendations regarding Medicaid. HHS has taken action in response to some of GAO's prior recommendations from past reports, but did not agree with others.

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