Employers that currently receive a federal subsidy for providing retiree prescription drug coverage will no longer be able to take a deduction for those retiree drug expenses with respect to that subsidy as of 2013 under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
Click here to view the full article.
The Facts
Health care reform requires non-grandfathered group health plans and health insurance coverage to provide first-dollar coverage of certain preventive services furnished by in-network providers. This requirement is effective with the first day of the first plan / policy year beginning on or after September 23, 2010.
Coverage is mandatory for four general categories of preventive services, referred to as recommended preventive services. The U.S. Department of Health and Human Services (HHS) will maintain a complete and up-to-date list of recommended preventive services on its website.
Coverage is not required for recommended preventive services furnished by out-of-network providers, and cost-sharing obligations also may imposed. HHS also has adopted regulations addressing cost-sharing requirements for office visits (and other health care services) furnished at the same time as a recommended preventive service.
What’s at Stake
Group health plans and health insurance issuers offering non-grandfathered plans and policies need to evaluate their plans / policies to assess whether changes are needed, both to comply with this new coverage mandate and to promote in-network provider utilization.
Steps to Consider
Medical management techniques to administer benefits for recommended preventive services are permitted, and group health plans and health insurance issuers will want to consider what techniques may be appropriate. An additional consideration is whether the claims submission and payment provisions need to be modified to implement the cost-sharing regulations for office visits and other health care services provided at the same time as recommended preventive services.
On July 7, 2010, in a recess appointment, President Obama appointed Don Berwick, M.D., M.P.P., to lead the Centers for Medicare and Medicaid Services (CMS). Dr. Berwick is a pediatrician, Harvard professor, and president and chief executive officer of the Institute for Healthcare Improvement. As administrator of CMS, Dr. Berwick will play a pivotal role in the implementation of health reform legislation.
The president's use of his recess appointment power obviates the traditional U.S. Senate confirmation process, which would have included a confirmation hearing at the U.S. Senate Committee on Finance (Finance Committee), at which legislators could ask questions of the nominee, and, if the Finance Committee reported the nomination, a subsequent Senate floor vote which would have provided all Senators an opportunity to discuss the nominees' record and vote for or against his confirmation. The recess appointment avoids what would likely have been an extremely partisan and drawn out confirmation battle. Indeed, congressional Republicans—with an eye toward the rapidly approaching November 2010 congressional elections—seemed bent on using the Berwick confirmation process as a referendum on health reform legislation. While the recess appointment effectively installs Dr. Berwick at CMS without Senate confirmation, a recess appointment lasts only as long as the current Congress, which extends through 2011. This means that, in order to serve beyond 2011, Dr. Berwick would need Senate confirmation in 2012, or another recess appointment.
To learn more about Dr. Berwick's background and extensive experience, see McDermott's previous blog post.
Concern about the recess appointment was not confined to the Republican side of the aisle. Both Senator Max Baucus (D-MT), chairman of the Finance Committee, and Senator Charles Grassley (R-IA), the ranking Republican on the Finance Committee, expressed dismay. Senator Baucus said he was “troubled that, rather than going through the standard nomination process, Dr. Berwick was recess appointed. Senate confirmation of presidential appointees is an essential process prescribed by the Constitution that serves as a check on executive power….by ensuring that crucial questions are asked of the nominee – and answered.” Senator Grassley protested the recess appointment as well, saying, “The administration has taken advantage of the fact that there's no check on its power, with one-party control of Congress and the White House.” He continued, “This recess appointment follows a pattern. Health care legislation was written behind closed doors. Broad new regulations have been written within the bureaucracy and issued without any public comment period. It really flies in the face of the President's pledge to have the most transparent administration ever.”
Despite the controversy regarding the appointment, Dr. Berwick does enjoy support from past CMS administrators, including those appointed by both Democratic and Republican administrations. He also receives support from numerous providers and other organizations, and he has a long history of working to improve both the quality and efficiency of health care—one of the principal aims of health reform legislation.
The Facts
President Obama is reportedly poised to nominate Don Berwick, M.D., M.P.P., to head the Centers for Medicare & Medicaid Services (CMS). Since 2006, when Dr. Mark McClellan left, CMS has been without a permanent administrator.
Berwick is the current president and CEO of the Institute for Healthcare Improvement, a Cambridge, Massachusetts, organization that seeks to improve health care by "building the will for change, cultivating promising concepts for improving patient care, and helping health care systems put those ideas into action." In its work, the institute seeks to "accelerate the measurable and continual progress of health care systems." For more information about the institute, visit http://www.ihi.org/ihi/about/. Berwick is also a clinical professor of pediatrics at Harvard Medical School and a professor of health care policy at the Harvard School of Public Health. Berwick served as vice-chair of the U.S. Preventive Services Task Force, and chair of the National Advisory Council of the Agency for Healthcare Research and Quality. He also served two terms on the Institute of Medicine’s governing council.
Berwick would have the difficult job of managing and improving Medicare, Medicaid and the Children's Health Insurance Program, while simultaneously implementing much of the recently enacted health reform legislation. While Medicare currently covers 46 million Americans, Medicaid currently covers 43.5 million Americans and is slated to expand to cover an additional 16 million individuals through expanded eligibility in health reform legislation. However, in light of Berwick’s vast experience in the area of health quality improvement, he seems well-positioned to lead CMS as the agency positions itself to increasingly focus on paying for value as opposed to volume.
What’s at Stake
As the new head of the largest medical payer in the nation, Berwick’s leadership and decisions would significantly affect almost everyone in the health care sector. With the enactment of health reform legislation, implementation is the primary focus of the Obama administration. Berwick would have a vital role in determining how this reform is rolled out and ensuring that this reform meets U.S. Department of Health and Human Services Secretary Kathleen Sebelius’s goal of HHS becoming “the face of competent government — the face of a help desk that can really respond to personal issues and questions.”
Steps to Consider
The post of CMS administrator requires U.S. Senate confirmation, a process that may reignite the deep political and philosophical divisions about the newly passed health reform legislation. Thus, all in the health care sector should monitor the nomination and Senate confirmation process.
The Facts
Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate health reform bill, H.R. 3590 (Patient Protection and Affordable Care Act), include provisions establishing one or more health insurance marketplaces (exchanges). The exchanges would serve as an organized and transparent marketplace designed to facilitate access to, evaluation of and purchase of qualified health insurance plans by individuals and small businesses. Premium subsidies would be available through the exchange, and benefit packages would be structured in standardized tiers. An exchange would seek to create a large enough risk pool so that competition among insurers would increase not only with respect to pricing but on quality and service aspects as well. Insurance market reforms in both bills would disallow preexisting condition exclusions and impose medical loss ratio requirements.
There are key differences between the House and Senate proposals. The House bill would create one national exchange overseen by a new federal agency, the Health Choices Administration (HCA), with an opt-out provision for states under certain circumstances. The HCA would oversee the health plans and premiums charged for policies available through the exchange. Under the House bill, the exchange would be the exclusive marketplace for all individual (non-group) policies, other than grandfathered policies. Insurers would be required to bid to participate in the exchange, with the HCA able to negotiate terms before allowing a plan to participate in the exchange. By contrast, the Senate bill provides for each state to establish and administer its own exchange, subject to compliance with minimum federal standards, with federal intervention if a state does not provide an exchange.
What’s at Stake
The exchanges will be at the crux of revamping the individual and small business markets. Whether there is a single national exchange or separate state exchanges will have significant implications for providers, payors and consumers. The House proposal could offer greater economies of scale and potential efficiencies for products offered across state lines, but would represent a significant shift from how insurance is currently regulated at the state level. The Senate proposal would retain the benefit of the local market knowledge of the states and would preclude an additional layer of federal regulation.
Steps to Consider
Understand the impact of the exchanges on structure and oversight of the insurance market, evaluate current plans and prepare for refinements needed to transition to new exchanges.
The Facts
On January 13, 2010, the U.S. Department of Health and Human Services (HHS) proposed requirements for hospitals, physicians and other eligible providers to earn incentives for the adoption and “meaningful use” of “certified electronic health record (EHR) technology.” Incentives in the form of enhanced Medicare and Medicaid reimbursement are received by demonstrating meaningful use of certified EHR technology. The incentives start in 2011, but become penalties by 2015 through reduced reimbursements for those who do not achieve meaningful use. This initial set of standards is intended to begin to define “a common language to ensure accurate and secure health information exchange across different EHR systems.” Certified EHR technology can be either a “complete EHR or a combination of EHR modules" to enable providers to adapt to innovations in a rapidly evolving industry while ensuring access to a wide array of technology options, from vendor-based products, to homegrown technology, to hosted services on a subscription basis, to open source products. For more information, see McDermott Will & Emery’s White Paper “HHS Establishes the Initial Pathway for Qualifying for HITECH Act Incentives Dollars for Meaningful Use of Certified Electronic Health Record Technology.”
What’s at Stake
Eligible hospitals and professionals may receive incentive payments for achieving and may avoid penalties for failing to achieve meaningful use of certified EHR technology. Some hospitals and doctors have already expressed concern about the all or nothing structure of the proposed rule, which requires providers to meet 23 criteria at once, or fail to qualify at all. Vendors of EHR systems or EHR modules must ensure their products have the features and functionality to be certified and to enable meaningful use although the certifying bodies have yet to be certified.
Steps to Consider
Providers, vendors of health information technology and other interested parties should consider submitting comments to HHS prior to the March 15, 2010, deadline.
In selecting an EHR, ensure that the EHR product by itself or combined with other EHR modules will achieve, or be modified by the vendor to achieve, certification. Assess interoperability of modules. Consider contractual commitments covering interoperability, certification and meaningful use.
Vendors should develop a road map or work-around to ensure that products will be certified and that they will enable meaningful use. Vendors should be ready to address customer demand for assurances.
The Facts
Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate version (Patient Protection and Affordable Care Act), include provisions (House Section 1301 and Senate Section 3022) establishing Accountable Care Organizations (ACOs). ACOs are provider-centric organizations focused on the costs and quality of care received by a designated population of patients over time. ACOs can consist of vertically and horizontally positioned providers, including physician groups and hospitals. In its most basic concept, although paid on a fee-for-service basis, ACOs that meet quality-of-care targets and reduce the aggregate costs of care rendered to their patient population relative to a spending benchmark are rewarded with a share of the savings they achieve for the Medicare program.
What’s at Stake
Regardless of whether health reform legislation is passed, providers will be increasingly challenged to adopt operating models through which they are responsible and accountable for the quality, cost and overall care of a defined population of patients. Emphasis will be placed on clinical processes and outcomes, the patient care experience and utilization.
Steps to Consider
The Facts
The health care fraud provisions in the Affordable Health Care for America Act (H.R. 3162), the House health reform bill released last week, are largely the same as those in earlier proposals (click here and here for more information), and similar to those included in the Senate Finance Committee Bill, signaling clear potential for these provisions to become part of any final health reform package. The latest House bill now includes a provision requiring the Secretary of HHS to establish a self-disclosure protocol to enable health care providers and suppliers to disclose actual or potential violations of the physician self-referral law (Stark Law). Additional provisions from the Senate Finance Committee bill that overlap with the latest House bill include the following:
What’s at Stake
The fraud and abuse provisions in both the House and Senate health reform bills are quietly moving through the health reform process. It is likely that any health reform package passed by Congress will include significant fraud and abuse provisions. In addition to increased scrutiny, these provisions will require additional commitment and resources for compliance efforts.
Steps to Consider
Providers should closely monitor these proposals and consider how current compliance programs, policies and procedures will need to be updated to address requirements common to the health reform proposals.
The Facts
The Baucus Bill contains a specific section dedicated to tax exempt hospitals. The section "Additional Requirements for Section 501(c) (3) Hospitals" would establish a series of four new requirements for hospital tax exempt status, which are in addition to the core requirements for tax exempt status currently established under the controversial "Community Benefit Standard,” and include:
The Bill also provides for increased reporting and disclosure requirements with respect to Form 990, and for continuing governmental oversight of community benefit related indicators.
What's At Stake
This portion of the Baucus Bill serves as a supplement to, rather than a replacement of, the Community Benefit Standard for hospital tax exempt status under the Internal Revenue Code. It excludes the controversial excise tax and minimum patient charity care standards originally proposed by the Senate Finance Committee last May. In many respects, this may be perceived as a moderate alternative to other, more significant proposals to revise or replace the entire Standard. However, what presently remains unclear are the long-term implications of the proposals relating to mandated IRS review of the Schedule H information, financial statement disclosure and the ongoing Health and Human Services study and review of community benefit expenditures.
Steps to Consider
The Facts
The health care reform process is speeding along with various proposals that could have substantial impact on the market for pharmaceuticals, particularly those favored by hospitals. A subset of these proposals would expand the 340B Drug Program and increase manufacturer Medicaid Drug Rebate Program (MDRP) payment obligations.
Both the House Tri-Committee Bill (H.R. 3200) and the Senate HELP Committee Bill include provisions that would expand the categories of facilities that qualify as “covered entities” under the 340B Program. Children’s hospitals, certain DSH hospitals and critical access hospitals are among the six categories included in the proposed changes. Both bills would extend 340B pricing to drugs administered n connection with inpatient services.
H.R. 3200 would significantly affect the MDRP by expanding the scope of included classes of trade to Medicaid managed care organizations (Section 1743 of H.R. 3200) and Medicaid/Medicare dual eligibles (Section 1181 of H.R. 3200). Section 1181 would expand the scope of the program. Section 1742 would raise the minimum rebate percentage amount from 15.1 percent to 22.1 percent. Section 1742 also would impose a higher rebate percentage on new formulations of older single source or innovator multiple source drugs. Note that the Senate Finance Committee Chairman's Markup proposes an even larger increase in the minimum rebate percentage to 23.1 percent
What’s At Stake
While the 340B-related proposals in the House and Senate Bills would increase the market for discounted drugs, the MDRP proposals from both the House and Senate would also increase the cost to a manufacturer participating in the MDRP.
Steps to Consider
The Facts
The health reform proposal pending before the Senate Finance Committee includes many significant fraud and abuse changes that would affect hospitals, physicians, group purchasing organizations (GPOs) and device manufacturers, among others. Following are some of the more significant changes:
What’s at Stake
The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress. While most of the proposals reflect increased scrutiny for providers, the proposal for a Stark Law self-disclosure protocol could be a significant positive development for providers that are looking for a pathway to deal with so-called “technical” Stark Law violations, where there is no fraudulent or abusive conduct, yet the statutory damages are significant.
Steps to Consider
Providers that are subject to the Stark Law should closely monitor the proposals for a self-disclosure protocol in the health reform package and in a stand-alone bill introduced by Rep. McDermott (H.R. 3556).
The Facts
Among the many changes that would be wrought by the health system reform bill introduced today by Senator Baucus is a proposal having little to do with health system reform, but nonetheless drawing significant attention from hospitals and physicians alike. Under the Senate bill, a physician would be prohibited from referring Medicare beneficiaries to a hospital in which he or she has an ownership interest. Hospitals that have physician ownership and a Medicare provider agreement by November 1, 2009, would be grandfathered, subject to significant restrictions that would prohibit most qualifying hospitals from expanding operating room and bed capacity.
The Senate restriction differs from its House counterpart in at least two key respects. First, to qualify for grandfather protection, a hospital must have physician ownership and a Medicare provider agreement in place by November 1, 2009, rather than January 1, 2009, as is the case in the House bill. Second, there may be some additional latitude on the growth restrictions. While the proposal would severely limit a hospital’s ability to expand its bed inventory, the limit on bed capacity for the first time references “licensed” beds, rather than simply beds. In the absence of this clarification, prior iterations of this restriction have generally been understood to mean beds as defined by Medicare under 42 C.F.R. § 412.105(b), which is often different from and less than a hospital’s licensed bed count.
What’s at Stake
Hundreds of physician-owned hospitals and planned physician-hospital ventures would be affected by these provisions. Existing physician-owned hospitals that have complained about restrictions on growth may see some opportunity in this revised language.
Steps to Consider
Physician-owned hospitals should examine the language carefully to gauge the impact of the proposed changes, and those that would struggle under growth restrictions should examine whether a threshold based on licensed beds provides any relief. Physician-owned hospitals might explore increasing licensed bed capacity before the legislation is enacted.
The Facts
Senate Finance Committee Chairman Max Baucus (D-MT) put forth his much-anticipated Framework for Comprehensive Health Reform on September 8, 2009. The Framework outlines a plan for consideration by the Finance Committee’s “Gang of Six” bipartisan negotiators and includes policies that reflect the work of the committee throughout the summer. In addition to other areas of health reform, the Framework includes policies specific to both “transparency and program integrity” and “fraud, waste and abuse”:
Additional details about these provisions will be contained in the Chairman’s Mark of the bill, which will be made available prior to committee markup, which is expected later this month. Importantly, similar provisions are contained in the House health reform bill, America’s Affordable Health Choices Act of 2009. The Senate Health, Education, Labor and Pensions Committee (HELP) bill also includes provisions related to fraud and abuse enforcement.
What’s at Stake
Each health reform proposal to date includes provisions designed to prevent or deter fraud and abuse. Furthermore, reducing the rising cost of health care is a goal shared by lawmakers on both sides of the aisle, and reduction in fraud, waste and abuse is generally viewed as an area of significant savings. The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress.
Steps to Consider
Evaluate the impact of fraud and abuse proposals in pending legislation. Assess how current compliance programs, policies and procedures will need to be updated to address requirements common to health reform proposals.
The Facts
The Health Information Technology for Economic and Clinical Health Act (HITECH Act) includes significant investment in health information technology to facilitate the adoption of a U.S.-wide health information network and requires HIPAA covered entities, business associates, vendors of personal health records and related entities to notify individuals when their personal health information is subject to a breach of security. The U.S. Department of Health and Human Services (HHS) and the Federal Trade Commission (FTC) recently issued rules relating to these security breach notification requirements. Compliance with these regulations will require the expenditure of significant time and expense, and, therefore, health care and related industries should begin immediately familiarizing themselves with the rulemakings and updating their processes and procedures to comply accordingly.
What’s at Stake
HIPAA covered entities, business associates, vendors of personal health records and related entities could be subject to penalties for not properly notifying patients or customers, as applicable, of security breaches involving the patients’ or customers’ individually identifiable health information. Note that while the HHS rule is effective September 23, 2009, HHS will delay enforcement for six months. This means that HHS will not impose sanctions for failure to provide the required notification for breaches discovered before February 22, 2010. Similarly, while the FTC rule is effective September 24, 2009, the FTC will delay enforcement for six months. This means that the FTC will not impose sanctions for failure to provide the required notification for breaches discovered before February 22, 2010.
Steps to Consider
The Facts
The Office of the National Coordinator for Health Information Technology’s HIT Policy Committee has taken another important step towards defining “meaningful use” under the American Recovery and Reinvestment Act of 2009 (ARRA). Hospitals and eligible providers must meet the requirements for “meaningful use” of certified electronic health records (EHRs) in order to qualify for Medicare incentive payments under ARRA. Recently, the HIT Policy Committee approved revised recommendations for an initial definition of “meaningful use.” These recommendations are outlined in a lengthy matrix, which sets forth measures for meeting specified objectives for each of the years 2011, 2013 and 2015:
The HIT Policy Committee also recommended that the incentives be paid according to an “adoption year” timeframe rather than a calendar year timeframe. Accordingly, the objectives and measures for the year 2011 would apply to an organization’s first adoption year, if an organization is not ready for incentive payments until after 2011. The U.S. Department of Health and Human Services (HHS) will use the recommendations to develop regulations to implement the incentive payments under ARRA.
What’s at Stake
Hospitals and eligible providers that meet the requirements of “meaningful use” of certified EHRs will be eligible for Medicare incentive payments beginning in 2011. Medicare payments may be reduced to hospitals and providers that do not meet the requirements for “meaningful use” of certified EHRs by 2015.
Steps to Consider
Evaluate how the 2011 Objectives and Measures in the Meaningful Use Matrix may require changes in the operations of your organization, anticipating that some form of the objectives and measures may ultimately be included in the regulations promulgated by HHS. Monitor regulatory actions by HHS regarding the definition of “meaningful use” and Medicare incentive payments under ARRA.
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