Health Care Reform Blog : Health Care Law Reform : McDermott Will & Emery Law Firm

by Teddy Eynon, Karen S. Sealander and Eric Zimmerman

The Temporary Payroll Tax Cut Continuation Act of 2011 extends numerous expiring Medicare and Medicaid programs, thus sparing physicians, hospitals and other health care providers significant Medicare and Medicaid payment cuts.  This On the Subject provides an overview of the most significant Medicare- and Medicaid-related provisions in the Temporary Continuation Act.

To read the full article, please click here. 

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by Bernadette M. Broccolo, Emily J. Cook, Lesley N. DeRenzo, Susan S. Lee and Joan Polacheck

The U.S. Centers for Medicare & Medicaid Services (CMS) released a proposed rule implementing the "Sunshine" provisions of the Affordable Care Act (ACA) that requires annual public reporting by certain drug and device manufacturers of payments made by them to physicians and teaching hospitals and of physician ownership interests in such manufacturers.  The "Sunshine" provisions of the ACA also require group purchasing organizations to make annual public reports of physician ownership interests in such organizations.  CMS is accepting comments on its proposed rule through February 17, 2012.

To read the full article, please click here. 

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McDermott Will & Emery is pleased to provide this supplemental matrix to its original White Paper summarizing and evaluating the Centers for Medicare & Medicaid Services (CMS) proposed Medicare Shared Savings Program (MSSP) regulations.  As did the original White Paper, the matrix provides both a summary of, and commentary on, CMS’s recently published final regulations.  The matrix, which is intended to be read together with the original White Paper, “The Controversial Draft Medicare ACO Regulations: Analysis, Comments and Recommended Action,” includes page-by-page cross-references identifying changes between the Proposed Rule and the Final Rule, as well as McDermott commentary and recommended action items.  Readers should consult both the White Paper and the updated matrix when navigating through the Final Rule’s requirements.  We hope that you find this update and the original White Paper to be a useful and valuable resource and strategic planning tool as you evaluate your organization’s participation in the MSSP.  The authors and editors of these documents, as well as other McDermott lawyers with substantial experience and knowledge in the many issues raised by the MSSP, are available to respond to your questions and to facilitate your consideration and pursuit of shared savings programs.

For more information, please contact your regular McDermott Will & Emery lawyer or an editor: 

Editor:
Gary Davis:  +1 305 347 6520 gsdavis@mwe.com

Contributing Editor:
Eric Zimmerman:  +1 202 756 8148 ezimmerman@mwe.com

Click here to view the Supplemental Matrix in Adobe PDF format.

Please click here to view the original White Paper in Adobe PDF format.

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by Karen S. Sealander and Erika Stocker

As the clock ticks down on Congress’ 2011 session and lawmakers look to wrap up outstanding FY 2012 appropriations bills, leaders in both the House of Representatives and the Senate continue to look for a path forward on priority legislation to extend unemployment benefits, renew the expiring Social Security payroll tax cut and prevent a steep cut in Medicare physician reimbursements as part of a large year-end “extenders” package. 

House Republicans released their extenders package, HR 3630, late last week and are working to build support for the measure, with a vote expected early this week. This 369-page legislation would reduce Medicare payments to hospitals by more than $17 billion in order to finance other of the bill’s provisions. Highlights of the health-related provisions are set forth below and a more detailed summary of the health-related provisions can be found here. 

Should HR 3630 pass the House, it is expected to be soundly rejected in the Senate. Further, President Obama has already indicated his displeasure with certain of the bill’s provisions. As such, we believe that there are two options for an extenders package to make its way to the President’s desk for a signature: (1) House and Senate leaders will need to have an earnest negotiation to agree on a compromise that can pass muster in a Republican-led House, can garner 60 votes in the Democratically-controlled Senate and can avoid the veto pen of President Obama, or (2) the Senate will approve its own extenders package in the nature of a substitute to the House bill, which the House would have little choice but to accept.

Highlights of some of the health-related provisions are as follows:

Extenders and Other Changes

• The bill heads off a 27.4 percent cut in Medicare physician payments, and provides that for CYs 2012 and 2013, physician payments would increase 1 percent in each year. The Congressional Budget Office (CBO) scores this provision as costing $38.9 billion over 10 years.
• The bill would extend several expiring Medicare ambulance add-on payments, including a 2 percent adjustment for urban ground ambulance services, a 3 percent adjustment for rural ground ambulance services and the 22.6 percent increase for ambulance payments for trips originating in “super rural areas,” through December 31, 2012,. CBO scored this provision at $0.1 billion over 10 years.
• The bill would extend with modifications a program that provides an exceptions process to outpatient therapy caps through December 31, 2013. CBO scored this provision at $1.7 billion over 10 years.
• The bill would extend the physician fee schedule's work relative value units (RVU) geographic floor through December 31, 2012.  CBO scored this provision at $0.5 billion over 10 years.
• The bill would re-open physician-hospital ownership restrictions imposed under the Affordable Care Act (ACA) to allow physician-owned hospitals that were under construction, but did not have Medicare provider numbers as of December 31, 2010, to open and operate and qualify for grandfather protection.  The bill also would make it significantly easier for hospitals that were grandfathered under the ACA provisions to expand capacity (presently, grandfathered hospitals are allowed to expand bed and OR capacity only if they meet very limited criteria). CBO scored this provision at $0.3 billion over 10 years.

Offsets

 The bill utilizes a number of offsets, including several that come directly from hospital payments:

• Reducing hospital outpatient prospective payment system (HOPPS) facility fee payments to hospitals for evaluation and management (E/M) services to be equal to the Medicare payment for the same service when furnished in a physician office. CBO estimates that this provision saves $6.8 billion over 10 years.
• Reducing the reimbursement hospitals and other providers can receive for bad debts from 70 percent to 55 percent, phased in over 3 years.  CBO estimates that this provision saves $10.6 billion over 10 years. Of note, the President had proposed that the percentage be reduced to 25 percent.
• Rebasing Medicaid disproportionate share hospital (DSH) payments.  CBO estimates that this provision saves $4.1 billion over 10 years.
• Increase Medicare Part B and D premiums for high-income individuals by 15 percent, and increase the number of individuals considered to be high-income by lowering brackets from $85,000 for individuals to $80,000, and from $170,000 for couples to $160,000.  CBO estimates that this provision saves $31 billion over 10 years.
• Reducing by $8 billion the Prevention and Public Health Fund created in the ACA.

Omitted Provisions

The bill is also noteworthy for what it does not include, including:

• Sole community hospital and small rural hospital hold harmless or “TOPS” protections under the outpatient PPS, which will expire December 31, 2011.
• Section 508 wage index reclassifications, which expired September 30, 2011.
• Physician pathology technical component payments that allow independent laboratories to receive payments from Medicare for the technical component of pathology services performed for a hospital patient.
• Reasonable cost payments for clinical laboratories in low density population areas, which expires July 2012.
• The Medicare-dependent hospital designation program, which expires September 30, 2012.
• Low-volume hospital payment adjustments, which expires September 30, 2012.

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by J. Peter Rich and Lesley DeRenzo

Medicare MSSP ACOs

Pursuant to the Medicare Shared Savings Program (MSSP) final rule released on October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) has released its 2012 Accountable Care Organization (ACO) application.  Organizations interested in participating as an ACO in the MSSP created under the Patient Protection & Affordable Care Act may now move forward with the application process. 

Organizations must submit a brief Notice of Intent (NOI) to CMS by 5:00 p.m. EST on January 6, 2012.  A link to the NOI is accessible here.

Once CMS receives and processes an applicant’s NOI, the applicant will receive an acknowledgement letter from CMS that contains the applicant’s ACO ID.  Additionally, CMS will provide the applicant with detailed information on how to obtain a CMS user ID (which is necessary to apply for the MSSP). 

After an applicant has obtained an ACO ID and CMS user ID, the applicant should submit the MSSP application to CMS by no later than 5:00 pm EST on January 20, 2011, for the April 1, 2012 contract start date.  Applicants wishing to participate starting July 1, 2012, should submit the MSSP application to CMS by no later than 5:00 pm EST on March 30, 2012.  

For more information about the MSSP application process click here. 

Separate ACO Development - Pioneer ACOs Advance

In a separate ACO development, CMS has recently pursued partnerships with ACOs through its Pioneer ACO model, led by the Center for Medicare & Medicaid Innovation (CMI) within CMS.  The Pioneer ACO program has been designed for health care providers that have relatively more experience with an integrated delivery system model, and thus, greater readiness to contract with CMI as an ACO.  Approximately 40-50 of the Pioneer ACO applicants were offered contracts, and approximately 25-30 Pioneer ACOs are expected to enter into contracts with CMI.  CMI’s collaborations with Pioneer ACOs are aimed at achieving better care for individuals, better health for populations, and reduced expenditures for Medicare, Medicaid, and CHIP beneficiaries.

For more information about CMI click here.
 

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by Emily J. Cook and Lesley DeRenzo

On November 14, 2011, the Center for Medicare and Medicaid Innovation (Innovation Center) acting under the United States Department of Health and Human Services announced a funding opportunity entitled the: “Health Care Innovation Challenge.” The Patient Protection & Affordable Care Act established the Innovation Center and provides the funding for meritorious grantees who have successfully demonstrated an ability to implement innovative approaches to deliver high-quality health care services at lower costs for those beneficiaries enrolled in Medicare, Medicaid, and CHIP. 

The purpose behind the Health Care Innovation Challenge is to award pioneering ideas from individuals and entities that will ultimately reduce health care costs, improve quality of health care, and change the way health care services are delivered. To accomplish this objective, the Innovation Center will fund successful grant applicants through cooperative agreements ranging from approximately $1 million to $30 million dollars over a three-year period.

The Innovation Center is looking for grant applications that at a minimum address: (1) how the proposed model will develop and/or deploy health care workers in new and innovative ways, (2) how soon the proposed model will become operational (e.g., it must be capable of coming to realization in 6 months), and (3) how the proposal will be sustainable over time.  

All potential grantees must submit any applications electronically at www.grants.gov. Letters of Intent are due on December 19, 2011. Final applications are due on January 27, 2012. Awards are expected to be announced by the Innovation Center in March 2012.

For more information on the Health Care Innovation Challenge initiative funding opportunity announcement (in addition to upcoming events sponsored by the Innovation Center) please click here. 

Prospective applicants may submit specific questions about the Health Care Innovation Challenge by sending an e-mail to: InnovationChallenge@cms.hhs.gov

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by J. Peter Rich and Webb Millsaps

The Obama Administration has asked the U.S. Supreme Court to consider the constitutionality of the individual mandate, a provision in the Affordable Care Act (ACA) that the Administration once referred to as the “linchpin” of the sweeping 2010 health reform law.   As we wrote previously, there are numerous challenges to the ACA that are in various stages of litigation, but the most significant case, Florida et al. v. United States Department of Health and Human Services et al. (Florida v. HHS), is the one that the Administration has petitioned the Supreme Court to review.

The challengers in Florida v. HHS, including 26 states, the National Federation of Independent Business and two individual citizens, originally were victorious in the U.S. District Court for the Northern District Court of Florida.  That decision by Judge Roger Vinson found that the individual mandate was unconstitutional and also found that the whole of the ACA must fail as a result because the individual mandate was not deemed severable from the rest of the law.  Judge Vinson’s decision was then upheld in part and reversed in part when the Eleventh Circuit Court of Appeals ruled August 12, 2011.  A three-judge panel of the Eleventh Circuit Court found, in a 2-1 decision, that the individual mandate is unconstitutional, but that it is severable from the remainder of the ACA and therefore that the rest of the health reform law should survive.

The Administration, which could have requested that the Eleventh Circuit re-hear the case en banc, filed their Petition for a Writ of Certiorari (the Petition) on September 27, 2011. By not pursuing the potential interim step of an en banc re-hearing the Administration has made it more likely that the Supreme Court will hear the case and make its ultimate ruling on the matter prior to the November 2012 election. Politically, this could be risky as some observers felt the Administration would not want to have a final decision by the Supreme Court come prior to the election. However, an en banc re-hearing would have carried some risk to the Administration since the Eleventh Circuit would have been free to fully affirm Judge Vinson’s original decision that if the individual mandate is unconstitutional then all of the ACA must be struck down.

The Petition argues that the Supreme Court should resolve the case because the decision by the Eleventh Circuit Court of Appeals “conflicts with a decision of the Sixth Circuit and involves a question of fundamental importance.” The Administration argues in the Petition that the decision by the Eleventh Circuit on the issue of the individual mandate is “fundamentally flawed and denies Congress the broad deference it is due in enacting laws to address the Nation’s most pressing economic problems and set tax policy.”

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by J. Peter Rich and Webb Millsaps

On September 13, 2011, a federal district court judge in Pennsylvania ruled that the individual mandate under the Affordable Care Act (ACA) is unconstitutional and that certain provisions closely linked to the individual mandate must also be struck down.

Judge Christopher C. Connor’s decision differed from all of the prior judicial rulings on the question of severability, finding that certain provisions of the ACA which are closely tied to the individual mandate should fail as well, including provisions on guaranteed issuance of health insurance coverage irrespective of pre-existing conditions.  However, Judge Connor ruled that the bulk of the ACA should remain intact, notwithstanding the unconstitutionality of the individual mandate. In this regard, Judge Connor’s decision took a middle path between the previous two district court decisions that had found the individual mandate unconstitutional.  Judge Hudson in Virginia had struck down the individual mandate, but had ruled that all other provisions of the ACA could stand intact.  Judge Vinson in Florida had struck down the individual mandate and had ruled that the entirety of the ACA must fail.

Six federal district courts have now ruled on the constitutionality of the individual mandate: three finding it constitutional and three finding it unconstitutional (two of those decisions, one on each side of the scorecard, were vacated last week by the Fourth Circuit Court of Appeals).  Aside from those six courts, other federal district courts have also ruled in cases involving challenges to the ACA, but those rulings have been on legal grounds not related to the constitutional questions, such as whether the challengers have standing.

Three federal circuit courts of appeals have now considered lower court decisions on the individual mandate.  The Eleventh Circuit Court of Appeals in Atlanta, reviewing Judge Vinson’s opinion, found the individual mandate to be unconstitutional, but overturned Judge Vinson on the severability issue, ruling that the remainder of the ACA should not be struck down.  The Sixth Circuit Court of Appeals in Cincinnati upheld a lower court decision that found the individual mandate to be constitutional.  Last week, on September 8, 2011, the Fourth Circuit Court of Appeals in Richmond vacated two federal district court decisions, finding that the judges did not have standing to reach their decisions (for legal reasons related to standing of the challengers and ripeness of the injuries).  Separately, briefs have been filed in another case which is before the Circuit Court of Appeals for the District of Columbia.

There are approximately 30 cases involving challenges to the ACA that are in various stages of litigation.  Due to the circuit split between the Eleventh Circuit and Sixth Circuit, the U.S. Supreme Court will ultimately resolve the issues of the individual mandate and its severability from other provisions of the ACA.

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by Webb Millsaps and J. Peter Rich

In a 2-1 decision on August 12, 2011, the Eleventh Circuit Court of Appeals in Atlanta ruled that the individual mandate in the Affordable Care Act (the ACA) is unconstitutional. (See opinion.) In a reversal from the original federal district court decision on appeal, however, the circuit court found that the individual mandate was severable from the remainder of the ACA, and therefore concluded that the remaining parts of the ACA should stand.

By contrast, in the original district court opinion, Judge Roger Vinson, after noting that the individual mandate had been referred to as the “linchpin” of the ACA by the President and others, found that the whole of the ACA was not severable from the individual mandate, and that since the individual mandate was unconstitutional the entire ACA must be struck down.

While the Eleventh Circuit found that the “district court placed undue emphasis on the [ACA’s] lack of a severability clause,” it did acknowledge the closeness of the severability question, particularly with regard to two reforms under the ACA: guaranteed issue health insurance, 42 U.S.C. § 300gg-1 (effective January 1, 2014) and the prohibition on preexisting condition exclusions, id. § 300gg-3.

The Eleventh Circuit Court’s opinion is of significant interest to stakeholders for a variety of reasons. Importantly, this decision sets up a circuit split (the 6th Circuit in Atlanta previously upheld the constitutionality of the individual mandate in a 2-1 decision), which means that Supreme Court review is virtually inevitable. Further, this decision marks the first time that a judge appointed by a democrat ruled against the Obama Administration on the constitutionality of any aspect of the ACA. In addition, the Eleventh Circuit case has been regarded as perhaps the most significant legal challenge to the ACA, in part because the challengers include 26 states, as well as the National Federation of Independent Business. In related ACA legal action, the Fourth Circuit has yet to rule in two other pending challenges.

The Obama Administration has 90 days from August 12, 2011, to decide if it wishes to request an en banc re-hearing before the full Eleventh Circuit Court of Appeals or instead appeal the decision directly to the Supreme Court. The Administration’s decision will likely involve legal and political considerations. In an en banc re-hearing, there is a potential legal risk that the full Eleventh Circuit could affirm the unconstitutionality of the individual mandate, but reverse the panel on the severability issue. Alternatively, if the case moves more swiftly to the Supreme Court and the Court agrees to take up the ACA challenge in the term that begins in October 2011, then a decision would be expected no later than June 2012, a scant five months before the presidential election. From a political perspective, an en banc re-hearing could delay a final Supreme Court decision on health care reform until after the November 2012 election. However, even if requested by the Administration, an en banc re-hearing is not guaranteed because en banc re-hearings are disfavored under federal court rules and the Eleventh Circuit could only order an en banc re-hearing if a majority of all the eligible Eleventh Circuit Judges agree to hear it. 

Meanwhile, President Obama has expressed confidence that the ACA will be upheld and the Administration is continuing to press ahead with implementation of its provisions.

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The deficit reduction deal will dominate the congressional and presidential agendas for the balance of 2011 and have a profound impact on the U.S. economy.  Join our panel of political and policy insiders at a webcast where they will evaluate whether the “super committee” can reach an agreement, and predict which sectors and programs will be most vulnerable to further spending cuts. 

 Some of the questions our panel will discuss include:

• How will tax policy likely change?
• How will the appropriation process change this year, and how will the budget-cutting process affect industries such as health care, agriculture, energy, defense and others?
• How will the White House deal with this budget-cutting panel?

This webcast will provide the analysis and insight necessary to understand the events that will unfold behind closed doors and affect your business. Our panel will take questions and answer with specifics.

Wednesday, September 7, 2011
12:00 – 1:30 pm EDT

To register, please click here.

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