Health Care Law Reform : Health Care Lawyer & Attorney : McDermott Will & Emery Law Firm : Managed Care, Product Regulations

The Facts

The Senate health care bill, the Patient Protection and Affordable Care Act, includes provisions (detailed in Sections 6301 and 6302) establishing a nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI). The PCORI will conduct research and disseminate findings with respect to “the relative health outcomes, clinical effectiveness, and appropriateness” of medical treatments, services and items. The PCORI will not be permitted “to mandate coverage, reimbursement, or other policies for any public or private payer.” However, the government may use comparative clinical effectiveness research in coverage decisions “if such use [of the research] is through an iterative and transparent process which includes public comment and considers the effect on subpopulations” and under other constraints.

What’s at Stake

Regardless of whether this particular bill is passed, comparative effectiveness research is likely to become an ever greater part of how government determines whether and what it will choose to reimburse. Companies with a stake in governmental reimbursement will need to be aware of the direction of comparative effectiveness research and be prepared to justify services and products on that basis.

Steps to Consider

• Evaluate whether the products and services you offer have a comparative advantage over other products or services promising the same outcome. 
• Evaluate what the clinical basis is for your comparative advantage, including any effect on subpopulations.
• Keep informed about the direction of the PCORI’s research agenda and initiatives to decide whether your area is under review.
• Be prepared to establish comparative clinical effectiveness if the PCORI’s research does not agree with the results of your own research on your products or services.
• Be prepared to participate in the public comment and review process if the government chooses to use comparative effectiveness in its coverage decisions, as allowed.

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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:

• “Physician Payment Sunshine” provisions require drug and device manufacturers to report certain payments to physicians and other health providers. 
• Physicians are required to document referrals to programs at high risk of waste and abuse, such as durable medical equipment or home health services, as well as face-to-face encounters with patients prior to certifying eligibility for home health services or ordering durable medical equipment. The Secretary may apply this requirement to any other service upon a finding that it would reduce the risk of fraud waste and abuse. 
• Medicare and Medicaid overpayments must be returned within 60 days of identification of overpayments. Failure to return overpayments constitutes a false claim for purposes of the False Claims Act.

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.

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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

• Work with your commercial account teams to assess the potential additional customer opportunities presented by an expansion of 340B eligibility.
• Prepare to engage in strategic planning around the launch of enhanced versions of existing products subject to higher Medicaid Drug Rebate obligations.
• Work with your finance and government price reporting teams to determine steps needed to keep your price reporting systems in compliance.

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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:

• “Physician Payment Sunshine” provisions would require drug and device manufacturers to report payments to physicians, physician groups and hospitals with residency training programs. The proposal pre-empts state law covering the same types of payments, but does not pre-empt state laws that cover other types of payments, payors or payees. Also, manufacturers and “related group purchasing organizations” would be required to report annually information regarding physician ownership in the manufacturer or GPO.
• Manufacturers that currently are required to maintain records of samples distributed to practitioners under the Prescription Drug Marketing Act would be required to report such information to the U.S. Department of Health and Human Services.
• Physicians making referrals for high-tech imaging services furnished within their office would be required to provide information about other sources of the service, unrelated to the physician’s group practice.
• Providers and suppliers would be required to implement a compliance program as a condition of Medicare or Medicaid participation.
• The anti-kickback statute would be amended to provide that a person need not have actual knowledge of the law or specific intent to violate that law to establish that a violation occurred.
• The process for providers to voluntarily disclose violations of the physician self-referral law (Stark Law) would be re-established. 

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).

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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”:

• New enrollment process for providers and suppliers, including an application fee
• Data matching and data sharing across federal health care programs
• Increased civil monetary penalties
• Increased authority to suspend payment during credible investigations of fraud
• New procedures to disclose and repay overpayments
• Limitations on physician-owned hospitals
• Requirements for drug, device and biologic manufacturers to report any payments or transfers of value, with limited exceptions, made to a physician or teaching hospital
• Requirements for drug manufacturers and authorized drug distributors to report the type and amount of drug samples requested and distributed to practitioners 

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.

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The Facts

Health reform legislation approved by the House Energy and Commerce Committee on July 31, 2009, includes an amendment to strike the so-called Part D “non-interference” clause, which prohibits the Secretary of the U.S. Department of Health and Human Services (the Secretary) from interfering with negotiations between pharmaceutical manufacturers, pharmacies and Part D Plan Sponsors.  Click here for an overview of the underlying legislation.

The amendment would authorize the Secretary to directly negotiate with pharmaceutical manufacturers the prices—including discounts, rebates and other price concessions— that may be charged to Part D Plan Sponsors for covered Part D drugs. The negotiated prices would apply beginning in CY 2011, and would not prevent Part D Plan Sponsors from obtaining further reductions or discounts.

What’s at Stake

Inclusion of this amendment renews debate on the role of competition within the Medicare prescription drug benefit, and whether the federal government or private health plans are better suited to achieve greater reductions on prescription drug costs for Medicare beneficiaries (and taxpayers).  That this concept is part of health reform legislation also is noteworthy for potentially signaling a first step towards federal price setting for pharmaceuticals.

Steps to Consider

Part D Plan Sponsors, pharmacies and pharmaceutical manufacturers alike should closely watch reconciliation of the Energy and Commerce Committee’s bill with the bills adopted by the two other House committees of jurisdiction to see the fate of this clause. Whether the Senate Finance Committee includes such a provision in its draft legislation also will be significant. 

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The Facts

On July 14, 2009, the chairmen of three House Committees with jurisdiction over health policy introduced the America’s Affordable Health Choices Act of 2009. The fraud and abuse provisions from the first House bill remain with some changes to strengthen penalties or make technical corrections. The bill also includes several new provisions and provides for $100 million additional annual funding of the Health Care Fraud and Abuse Control Fund.

Changes or technical corrections to existing provisions include the following:

• Authorization for the Secretary to disenroll certain providers of services or suppliers for failing to establish a compliance program with required core elements
• Clarification that a provider's repayment of an overpayment does not limit the provider's potential exposure to other governmental actions such as interest, fines, civil or criminal sanctions it if is later determined that the overpayment was related to fraud by the provider or supplier or by provider or suppliers employees or agents
• Expansion of the requirement for physician face-to-face encounters with patients prior to certifying eligibility for home health services to also mandate this requirement prior to ordering durable medical equipment or any other service if the Secretary determines it would reduce the risk of fraud waste and abuse 

New provisions include the following:

• Language addressing the period and effect of the Office of Inspector General exclusion authority
• A requirement for billing agents and clearinghouses to register with the Secretary
• Amendments to conform the Civil Monetary Penalties law to the recent False Claims Act amendments

What’s at Stake?

The health care reform fraud and abuse provisions have a wide reach and touch on nearly every aspect of providing health care—from enrolling as a provider to payment for services. Strict enforcement and penalty provisions will raise the compliance bar to new heights.

Steps to Consider

Consider how current compliance programs, policies and procedures, including those for repaying overpayments, will need to be modified to manage proactively the government’s increased focus on fraud and abuse.

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On a parallel track with health reform initiatives, the Centers for Medicare and Medicaid Services (CMS) continues its annual process of proposing changes to the existing Medicare payment systems.  The proposed 2010 Medicare Physician Fee Schedule Update, published in the July 13, 2009, Federal Register (74 Fed. Reg. 33520), includes a number of important changes to physician reimbursement, including a significant reduction in physician fees (unlikely to survive the final rule intact) as well as the "usual" array of technical revisions to the Medicare Physician Fee Schedule.  Click here for a brief summary of key proposals.

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The Facts
The first draft of the House Democrats’ health care reform legislation published June 19, 2009, portends the government’s continued focus on Medicare program integrity, fraud and abuse reform, and transparency in industry-physician relationships. The bill includes several provisions that propose to enhance existing program penalties for fraud and abuse. Further, the bill explicitly provides that existing authority relating to program integrity and the authority to prevent and prosecute fraud, waste and abuse will apply equally to the public health insurance option. Other provisions of the bill propose to strengthen significantly compliance requirements for Medicare program participation.

Proposals for increasing existing penalties include enhanced penalties for:

• False statements on provider or supplier enrollment applications
• Submission of false Medicare, Medicaid or CHIP claims
• Delay of Inspector General investigations
• Exclusion of individuals from program participation
• Obstruction of program audits

Proposals aimed at enhancing program and provider protections include:

• Requiring providers and suppliers to adopt compliance programs that contain certain “core elements” established by the Secretary
• Requiring physicians to provide documentation on referrals to programs at high risk of waste and abuse, such as durable medical equipment or home health services
• Requiring repayments of known Medicare and Medicaid overpayments within a specified time period and making the failure to repay a false claim
• Increasing access to databases and information necessary to identify fraud, waste and abuse
• Proposing a more robust version of the Physician Payments Sunshine Act (S.301)

What’s at Stake
The provisions in the proposed bill underscore the federal government’s objective to fund some of the cost of health care reform through increased program penalties, reducing fraud, waste and abuse and enhancing payment protections. Physicians, providers and suppliers may see increased enforcement activities bolstered by greater scrutiny of program activities.

Steps to Consider

• Review and assess current compliance programs and procedures to ensure accuracy of claims data
• Consider whether existing policies and procedures for responding to government investigations should be modified or updated in light of the potential for increased government enforcement activity
• Evaluate the additional investment of time and resources to meet the proposed physician payment transparency requirements

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The Facts
On June 19, 2009, House Democrats unveiled their first draft of health care reform legislation. Despite exceeding 850 pages, the draft bill is still a work-in-progress. Many of the anticipated Medicare program payment reductions and revisions are absent from this draft, but providers should not draw too much comfort from that. President Obama has called for more than $600 billion in savings from Medicare, and those savings will be required to pay for the massive overhaul. Providers should still expect significant savings provisions to be added later.

In the meantime, the bill still includes considerable change, including:

• Annual Medicare payment updates for virtually every facility type, including all hospitals and post-acute care providers, would be reduced by a productivity adjustment factor. Given that hospital market baskets are expected to be between 2.0 and 2.5 percent in FY 2010, the actual update for providers, if this change were to be enacted, could be only slightly above zero.
• Medicare payment for post-acute services would be revamped and coordinated across settings.
• Medicare payments for imaging services would be reduced.
• Hospitals would be penalized for excess readmissions.
• Ambulatory Surgery Centers would for the first time submit cost reports and quality data.

What’s at Stake
The proposed bill foreshadows a new reimbursement paradigm that focuses on accountability for quality, cost savings, coordinated care, and increased scrutiny to preclude conflicts of interest and other skewed incentives. Health care service providers will face new systems, obligations and incentives that will dramatically alter how providers furnish services and interact with Medicare and its beneficiaries.

Steps to Consider

• Examine current approaches to patient care and consider internal and external steps necessary to manage the impending shift from traditional fee-for-service payments to payments based on quality measurements and care coordination.
• Explore relationships with management companies or other partners who can improve overall quality and reduce cost.
• Consider new relationships with physicians to invest doctors in quality outcomes.

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The Facts
The proposals under consideration in the Senate Finance Committee’s first of three anticipated health reform option papers, released on April 29, 2009, would impose new transparency obligations on physicians, hospitals, nursing homes and pharmaceutical manufacturers. Transparency proposals include amending the Stark Law in-office ancillary services exception to require physicians to disclose financial interests in certain imaging services; eliminating the Stark Law “whole hospital” and rural provider exceptions with limited grandfather provisions; requiring manufacturers to disclose financial relationships with physicians; and requiring nursing homes to disclose ownership information, implement employee compliance programs and report staffing data. The Committee also proposes to strengthen compliance requirements and enforcement activity by increasing funding to federal enforcement programs, strengthening the screening process for Medicare program provider applications, requiring providers to implement compliance programs as a condition of participation in Medicare and Medicaid, and amending the Civil Monetary Penalties (CMPs) Law to increase penalties and extend the use of CMPs for certain violations.

What’s at Stake
The federal government may increase enforcement activities bolstered by easier access to publicly available information on existing arrangements and relationships. Providers could face increased penalties or suspension of payment for compliance failures. 

Steps to Consider

• Assess and audit current approaches to management of financial relationships, and closely evaluate the implications of publicly disclosing the details of these relationships.
• Evaluate the additional investment of time and resources to meet the proposed transparency requirements.
• Review and update compliance plans.

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Senator Kennedy’s Senior Health Policy Advisor John McDonough, one of the key architects of the health reform effort, spoke at McDermott’s Washington, D.C., office in mid-April 2009 on the outlook for health reform. Other speakers included principals from Speaker Pelosi’s health care advisory team, Families USA and America’s Health Insurance Plans. McDonough affirmed that systemic health reform will happen in this Congress. Unlike in the Clinton years, all stakeholders are aligned and coordinating towards this end. Both the House and Senate intend to pass bills by the August 2009 recess. If Republicans block reform in 2009, the Democrats will change tactics to accomplish reform through budget reconciliation, which is not subject to filibuster. Click here to read John McDonough’s core predictions and our insights on how those policies, if adopted, would affect the health care industry.

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