PPACA Impact and Opportunities : Health Care Lawyer & Attorney : Epstein Becker Green Law Firm : Insurance & Costs : Health Reform Musings Blog

By Greta Ravitsky

I wrote the January 2013 edition of Take 5: Views You Can Use, a newsletter published by the Labor and Employment practice of Epstein Becker Green.

In it, I summarize five actions that employers should consider taking in 2013 as the DOL steps up its audit efforts under the leadership of the reenergized Obama administration:

1. Assess the Workforce
2. Choose Whether to “Pay” or to “Play”
3. Evaluate Existing Wellness Programs and/or Implement New Wellness Programs to Enhance Employees’ Health Profiles and to Avoid or Minimize the “Cadillac Tax”
4. Understand and Be Ready to Comply with New Tax-Related Changes and Requirements
5. Conduct Self-Audits to Ensure Compliance

The following is an excerpt:

With the U.S. presidential election behind us, it is clear that the Patient Protection and Affordable Care Act (“Affordable Care Act”) is likely here to stay, having survived a U.S. Supreme Court case challenge last June. While affected employers can avoid facing penalties until 2014 for not making health care coverage available to their workforce, the U.S. Department of Labor (“DOL”) has begun auditing employers’ group health plans for compliance with other requirements of the law that are already in effect. As the DOL steps up its audit efforts under the leadership of the reenergized Obama administration, below are five actions that employers should consider taking in 2013.

Read the full version on EBGlaw.com.

On Friday, November 30, Epstein Becker Green attorneys Frank C. Morris, Jr., and Adam C. Solander offered a one-hour webinar titled “The New Wellness Program Regulations, Part of a Webinar Series on the New ACA Implementation Regulations: Employer Impact.” The webinar discussed:

• the proposed regulations and the impact these regulations could have on your overall wellness strategy
• areas where employer comment is needed
• recent wellness litigation trends
• where EEOC fits in the picture

The audio recording and presentation slides for "The New Wellness Program Regulations" webinar are now available. Contact Elizabeth Gannon at 202/861-1850 or egannon@ebglaw.com, or Lisa Blackburn at 202/861-1887 or lblackburn@ebglaw.com, to obtain a password to download the files.

Epstein Becker Green is pleased to announce a webinar series for employers on the forthcoming rules and regulations implementing the Affordable Care Act ("ACA"). We expect the Administration to release a significant number of regulations in the near future which will directly impact employers.

EBG Health Care & Life Sciences and Labor & Employment practitioners, along with outside speakers, will provide in-depth analysis on proposed rules and regulations and how they will impact decisions that must be made by employers. The first webinar will take place on November 30.

Stay tuned for upcoming webinars on:

• Wellness Programs
• Exchange Implementation
• Shared Responsibility
• And others...

In addition to this blog, EBG's HEAL blog will also post regulatory developments.

Click here to register for the November 30th Wellness Programs Webinar

For additional Information, please contact Elizabeth Gannon at 202/861-1850 or egannon@ebglaw.com, or Lisa Blackburn at 202/861-1887 or lblackburn@ebglaw.com.

This autumn, health insurance exchange ("Exchange") implementation issues can be characterized as either meeting impending deadlines or waiting on necessary federal guidance. We will shortly experience a cascade of developments on federal Exchange guidance and state implementation through the remainder of 2012. 

State Options

Exchanges are intended to operate a "one-stop marketplace" in each state for individuals and small employers to obtain health insurance. The Exchanges also have the responsibility of setting standards for participating qualified health plans (“QHPs”). States are given the option of establishing their own State-Based Exchange; coordinating with the U.S. Department of Health and Human Services (“HHS”) to establish a Partnership Exchange; or declining to establish any exchange, in which case HHS will establish and run a federally-facilitated exchange (“FFE”) in the state.

Fast Approaching Deadlines

States have until November 16, 2012 to submit a complete proposal to operate a State-Based Exchange in plan year 2014. A state proposal will be approved by HHS no later than January 1, 2013. HHS may issue a conditional approval at that time if it appears that a state has made significant progress towards implementation and its Exchange is likely to be operational in 2014.

Operating in the 2014 plan year requires being ready for open enrollment in October 2013 and plan contracting with network providers before then. This means a very busy 2013 preparing for the inaugural exchange plan year. 

The pressures may be greatest on plans, providers, and state regulators in those 25 states that have not yet decided whether to establish a State-Based Exchange.  As noted in a recent report on Exchange implementation by PricewaterhouseCoopers Health Research Institute, “the pace of state exchange planning . . . poses challenges for insurance companies that are evaluating which markets to enter or exit.”

Still Awaiting Guidance

States, in turn, face difficulty in evaluating Exchange options before the November 16 deadline because promised information from the federal government is still forthcoming. This difficulty has been articulated by

• September 12, 2012 testimony by Pennsylvania Insurance Commissioner Michael Consedine before the House of Representatives Ways and Means Committee
• A September 24, 2012 letter from Sen. Orrin Hatch, ranking member of the Senate Finance Committee, and
• A September 27, 2012 letter from Gov. Bob McDonnell, Chair of the Republican Governors Association. 

A final regulation addressing many Exchange implementation issues was released in March of this year, brief guidance on FFEs was released in May, and a template “Blueprint” was released in August to aide states in submitting proposals to HHS for state-run exchanges. Yet-to-be released information includes the following:

• Expanded guidance on FFEs, including detailing state responsibilities, costs, and any management reimbursement
• FFE guidance clarifying how many FFEs will be established and what flexibility they will have to meet unique state needs
• Proposed and final regulations defining required essential health benefits for QHPs
• Final standards for Multi-State Plans
• Quality standards for Exchanges
• Details on the conditional approval process for State-Based Exchanges

Stay Tuned

Reasons for the delay in guidance may vary, but it is unlikely that we will see significant state exchange announcements or further HHS guidance until after the November 6 election. After that point, stay tuned to this blog as the pace of Exchange implementation accelerates into 2013. 

In addition to tracking these and other PPACA regulatory developments, EBG counsels plans and providers on the arrangements necessary to participate in Exchanges. For more information, contact the author at phall@ebglaw.com. 

by Jackie Selby and Jane L. Kuesel

As enacted in the Patient Protection and Affordable Care Act, states are required to have established operational health benefit exchanges by January 1, 2014, or the federal government will implement one for them. These exchanges will allow individuals and small businesses to buy health care coverage and are expected to add approximately 30 million currently uninsured persons to the health insurance market. Most of the health plans that will be offered on such exchanges will be managed care plans with networks of participating providers. Thus, the resulting new business will be covered by hospital, physician, and other provider participation agreements with such managed care plans.

Read the full alert here

Stuart Gerson, a Member of the Firm in the Litigation and Health Care and Life Sciences practices at Epstein Becker Green, authored an article titled "The Supreme Court Has Decided, but Can America Afford the Affordable Care Act?"

Following is an excerpt:

By now, every American who pays any attention to the news is aware that on the last day of its now concluded term, the U.S. Supreme Court, with its June 28 decision in National Federation of Independent Business v. Sebelius, U.S., No. 11-393, 6/28/12, has upheld essentially all of the Obama Administration's Affordable Care Act (ACA), and did so through an unusual series of opinions, with Chief Justice John G. Roberts Jr. acting essentially as a majority of one. The two controlling holdings are neither unprecedented nor difficult to understand. How these holdings came to control, however, while sensible, was largely unpredicted and leaves interesting ramifications both for the Supreme Court and for the state of health care in the United States.

By a 5-4 majority, led by the chief justice (with Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan concurring separately), the court upheld the most controversial and essential provision of the Affordable Care Act—the ‘‘individual mandate''—not under the Commerce Clause, as its proponents primarily urged, but under the tax power—not as a requirement to buy health insurance, but as a tax if they don't.

Download the Full Article (PDF Format)

On Monday, July 2, 2012, Epstein Becker Green conducted a webinar titled "Decision 2012: What's In, What's Out, and What's Next?" examining the monumental decision (PDF) issued by the Supreme Court of the United States on the Patient Protection and Affordable Care Act.

This webinar analyzed the decision and its implications for the states, the health care and life sciences industry, and employers. It also addressed potential congressional activity and the decision's impact on the presidential election.

Click here to view the recording of this webinar (WMV file)

by Stuart M. Gerson

By now, every American who pays any attention to the news is aware that the Supreme Court of the United States has upheld essentially all of the Obama administration's Affordable Care Act. We have posted a copy of the lengthy opinion, concurrence, and dissent on our website. For now, we should be focusing on what the case of National Federation of Independent Business v. Sebelius actually will cause to occur.

Read the full alert here

by Jay Gerzog, Dale Van Demark, Tamar Rosenberg, and Dawn Welch

Is it possible that the U.S. Department of the Treasury (“Treasury”) knows something we do not about the pending U.S. Supreme Court decision on PPACA?

Probably not, but that has not stopped the Treasury and Internal Revenue Service (“IRS”) from issuing proposed regulations on June 26, 2012, with respect to three of the four new requirements for tax exemption of hospitals imposed by PPACA.

With the adoption of PPACA, Congress took its first concrete step toward toughening the standard for tax exemption in decades. For many years, members of Congress have questioned the justification for the tax exemption of hospitals, decrying the lack of a charity care mandate and pointing to commensurate levels of charity care provided by proprietary hospitals.

In PPACA, Congress vented its concerns with new requirements for tax exemption . . . which do not include a charity care mandate.

Instead, Congress created a number of operational requirements designed to protect against perceived abuses related to billing and collections, and designed to focus hospitals more intently on the health needs of the communities served. With respect to the latter, Congress mandated that hospitals conduct periodic community health needs assessments and adopt strategies to address those needs. In July 2011, the Treasury and IRS issued Notice 2011-52 (2011-30 IRB 60) (July 8, 2011), identifying approaches to the community health needs assessment requirement and seeking comments.

Now, the Treasury and IRS have addressed the remaining three new requirements with proposed regulations. The three new requirements are that hospitals must:

• establish written financial assistance policies and emergency medical care policies;
• limit the amounts charged for emergency and other medically necessary care provided to individuals eligible for assistance under financial assistance policies to no more than the amounts generally billed to individuals who have insurance coverage for such care; and
• make reasonable efforts to determine whether an individual is eligible for financial assistance before engaging in “extraordinary collection actions.”

The proposed regulations provide some useful insight into the direction that the government is headed with respect to these requirements. In particular, the proposed regulations provide definitions for “extraordinary collection actions” and suggest solutions to some interesting questions, such as the application of the requirements to multi-hospital systems.

The proposed regulations also request comments or reserve judgment in a number of areas, including the consequences of failing to comply with the requirements and whether certain actions should be considered “extraordinary collection actions.”

Let's wait to see what happens with the Supreme Court's ruling on whether these regulations will even be applicable.

Feds reject proposals by Alaska and Wisconsin

by Jesse M. Caplan and Serra J. Schlanger

The federal rate review program requires that the Centers for Medicare & Medicaid Services establish state-specific thresholds for the following year’s rate review program by June 1. This year, only two states, Alaska and Wisconsin, submitted state-specific threshold proposals to the Center for Consumer Information and Insurance Oversight. Both of these requests were denied on June 1. This health reform alert provides a summary of the state-specific threshold guidance and proposals and discusses potential trends for rate review state-specific thresholds and the implications for federal rate review.

Read the full alert here

Adam L. Zavadil, a Summer Associate (not admitted to the practice of law) in Epstein Becker Green's Washington, DC, office, contributed significantly to the preparation of this alert.

by Daniel E. Gospin and Amy F. Lerman

As part of continued efforts to expand the Medicare Recovery Audit Contractor (“RAC”) program, the Centers for Medicare & Medicaid Services announced in November 2011 the implementation of a demonstration project that will allow RACs to conduct prepayment reviews on certain types of Medicare claims that historically have resulted in high rates of improper payments.

The prepayment review demonstration project will focus these efforts in 11 states—seven of which were selected because they have significant populations of fraud- and error-prone providers, and four states were selected for having relatively high claims volumes of short inpatient (“one day”) stays. The demonstration project is expected to begin in the summer of 2012.

Providers should consider that prepayment review, through implementation of this demonstration project, may become the new model for RAC review, in line with the government’s theory that it is easier to stop money from getting out than to “pay and chase” improper payments once they have been made. As such, providers must take necessary steps to assess, analyze, and, as needed, make investments to improve internal auditing and monitoring policies, procedures, and processes.

Read the full alert here

Our colleague at Epstein Becker Green Michelle Capezza recently posted this on the Technology Company Counselor blog:

Cafeteria plans which provide a health flexible spending arrangement (FSA) allow participants to make pre-tax salary contributions to an account in order to receive reimbursements to pay for medical expenses that are not reimbursed through insurance or another arrangement (e.g., co pays, deductibles, eyeglasses). Prior to the Patient Protection and Affordable Care Act of 2010, sponsors of these plans could set an annual limit for contributions to health FSAs per plan terms. Sponsors typically established such limits by taking into consideration the uniform coverage rule which requires that if a participant elected the maximum amount permitted and incurred a reimbursable claim early in the year, the claim would need to be paid even if the full salary reductions up to that limit had not yet been made. Effective for cafeteria plan years beginning after 2012, the Affordable Care Act requires that health FSAs limit employee salary reduction contributions to $2500 per plan year (to be indexed for cost of living adjustments). Cafeteria plans must be amended to reflect this new limit (or a lower limit) before December 31, 2014 but must operate in compliance with these changes in the law for plan years beginning after December 31, 2012. The limit does not apply to certain employer flex credits, health savings accounts, health reimbursement arrangements or contributions used to pay the employee share of health premiums.

Read the full post on the Technology Company Counselor blog.

by Joseph J. Kempf, Jr., and Jackie Selby

Evolving reimbursement models for health care providers (away from “fee for service” and toward “pay for performance” and risk sharing) raise interesting questions as to how such payments will be treated under the new medical loss ratio rules under the Patient Protection and Affordable Care Act. Some of the payments will not qualify as “medical expense” or “quality improvement activities” and will be treated as “administrative expense,” so providers and insurers and health plans may want to take these rules into account when structuring alternative reimbursement methodologies.

Read the full alert here

by Joseph J. Kempf, Jr., and Jane L. Kuesel

On April 12, 2012, Governor Andrew Cuomo issued an Executive Order requiring the State of New York to establish an American Health Benefit Exchange and Small Business Health Options Program in New York (together, the “Health Benefit Exchange”). The Governor’s action was taken in response to the mandate contained in Section 1311 of the Patient Protection and Affordable Care Act, and the New York Legislature’s failure to enact legislation to begin development of the Health Benefit Exchange. Although the Health Benefit Exchange is tied to compliance with federal health care reform, it will have an impact on all health care plans offered in the individual and small group markets in New York.

Read the full alert here

by Jay P. Krupin and Adam C. Solander

Since oral arguments ended at the U.S. Supreme Court, the media has been held captive by the predictions of attorneys and pundits as to the outcome. What most of these predictions have failed to capture, however, is that from an employer perspective, the Supreme Court's decision is unlikely to have any significant impact on the applicability of the Patient Protection and Affordable Care Act ("ACA"). As a result, the court's decision should not affect an employer's preparation moving forward.

Read the full article

by Stuart M. Gerson

The three days of arguments about the constitutionality of the Patient Protection and Affordable Care Act are complete. The Justices of the Supreme Court of the United States have conducted their post-argument conference and are now turning their attention to the drafting and the discussions that will lead to a majority opinion and, likely, several dissents and concurrences. The Court's decision should be issued before the end of June. Health care companies and employers, like the rest of the population, await the ultimate decision. However, there are several matters that can be identified in the short run.

Read the full alert here

by Jesse M. Caplan and Serra J. Schlanger

Since November 2011 the Center for Consumer Information & Insurance Oversight (“CCIIO”) in the Centers for Medicare & Medicaid Services has completed 22 reviews of health insurance premium rate increase filings in the individual and small group markets. Under the new federal rate review regulations, CCIIO has determined that six of the reviewed premium rate increases represented “unreasonable” increases while 16 of the rate increases were deemed “not unreasonable.”

This Implementing Health and Insurance Reform alert provides a summary and analysis of the completed federal rate review determinations to date. It also provides a link to Epstein Becker Green’s interactive National Health Insurance Rate Review Scorecard, which offers insurance carriers, lawyers, and other stakeholders an up-to-date resource on federal and state health insurance rate review programs, standards, and initiatives.

Read the full alert here

by Pamela D. Tyner, Amy Lerman, and Lesley R. Yeung

The Recovery Audit Contractor (“RAC”) program is a national program aimed at identifying Medicare program overpayments and underpayments through a review of individual Medicare claims by contractors paid on a contingency fee basis. Over the next year, the RAC program will expand its reach beyond the current focus on fee-for-service payments under Medicare Parts A and B to include Medicare Part C (Medicare Advantage) and Part D (Prescription Drug Benefit) as well as state Medicaid programs. As Medicaid RAC programs get underway in the states, and private insurers offering coverage under Medicare Part C and D prepare for new, yet still undefined, RAC efforts, it is more important than ever for providers to make sure that their processes for documentation, billing, and coding are accurate and comprehensive.

Read the full alert here

by Shawn M. Gilman and Julia E. Loyd

On February 14, 2012, a final rule implementing Section 2715 of the Public Health Service Act, as added by the Patient Protection and Affordable Care Act, regarding the requirements for group health plans and health insurance issuers to provide a summary of benefits and coverage (“SBC”) to interested parties was published in the Federal Register. As set forth in the final rule, an SBC must be provided upon request or the occurrence of certain events and the content and format of the SBC must be in accordance with the extensive requirements contained in the final rule and associated guidance that was also issued on February 14, 2012. Although an extension from the statutory effective date of March 23, 2012 has been granted in the final rule, group health plans and health insurance issuers in the individual and group health markets will be required to take a number of steps in order to ensure compliance with the SBC requirements by September 23, 2012.

Read the full alert here

by Kathleen A. Peterson, Benjamin S. Martin, Wendy C. Goldstein, and Constance A. Wilkinson

This issue of Implementing Health & Insurance Reform summarizes and discusses some issues raised by the proposed rule ("Proposed Rule") that the Centers for Medicare & Medicaid Services ("CMS") published on February 2, 2012, to implement changes to the Medicaid Drug Rebate Program ("MDRP") and to reimbursement limits for outpatient drugs covered by Medicaid.

In Part 1, we discuss proposals relating to the MDRP that would change the manner in which pharmaceutical manufacturers calculate Average Manufacturer Price ("AMP") and Best Price for Medicaid-covered outpatient drugs and the manner in which rebates that manufacturers pay on prescriptions of those drugs dispensed to Medicaid beneficiaries are calculated. The topics covered include: the sales and price concessions manufacturers would include in their calculate AMP calculations, as well as those that would be excluded; the alternate methodology manufacturers would use to calculate AMP for so-called "5i" drugs not generally dispensed in retail community pharmacies; the calculation of Medicaid rebates for line extensions of other drugs; and new reporting obligations for manufacturers. CMS is accepting comments on the Proposed Rule until April 2, 2012.

Read the full alert here

by Gretchen Harders, Daly D.E. Temchine, and Joseph J. Kempf, Jr.

On December 7, 2011, final rules on the medical loss ratio (“MLR”) requirements for insured health plans (and an interim final rule for non-federal governmental plans) were issued by the U.S. Department of Health and Human Services and the Centers for Medicare & Medicaid Services under the Patient Protection and Affordable Care Act. The MLR requirements are effective January 1, 2012, and any issuer who does not meet the MLR requirements for the 2011 MLR reporting year must pay rebates by August 1, 2012. This alert will address who should get a rebate and what we should expect to see under the MLR rules.

Read the full alert here 

by George B. Breen and Amy F. Lerman

According to a new report released in December 2011 by the Office of Inspector General (“OIG”), more than 25 percent of all durable medical equipment (“DME”) suppliers faced enforcement actions by the Centers for Medicare & Medicaid Services during their first year of participation in the Medicare program. In its report, the OIG reviewed a sample of 229 newly enrolled suppliers and examined multiple data sources in order to assess the extent, if any, that the suppliers in the sample had program integrity issues. According to the report, during the first year of participation in the Medicare program, 26 percent of those suppliers classified as medium or high risk by the National Supplier Clearinghouse (“NSC”) for committing fraud, and 2 percent of those deemed low-risk by the NSC, had their Medicare billing privileges revoked or were subjected to prepayment claims review. This Alert addresses why DME suppliers, being among those that are subject to the highest levels of screening and scrutiny, need to be aware of these finding and offers thoughts on what suppliers need to do now to prevent and detect potential fraud, avoid prepayment review, and/or revocation of Medicare billing privileges.

Read the full alert here

by Jesse M. Caplan and Serra J. Schlanger

On November 21, 2011, the Center for Consumer Information & Insurance Oversight, in the Centers for Medicare & Medicaid Services (“CMS”), announced its determination that a health insurance premium rate increase of 11.58 percent in the small group market in Pennsylvania represented an “unreasonable” rate increase, while an 11.10 percent increase in the individual market in Montana did not. These long-awaited determinations represent the first application of CMS’s rate review regulations under federal health reform.

This Implementing Health and Insurance Reform alert discusses these first federal rate review determinations, and their implications for insurance carriers and future insurance premium rate reviews. It also provides a link to Epstein Becker Green’s interactive National Health Insurance Rate Review Scorecard, which offers insurance carriers, lawyers, and other stakeholders an up-to-date resource on federal and state health insurance rate review programs, standards, and initiatives.

Read the full alert here 

by Lesley R. Yeung, Shawn M. Gilman, and Serra J. Schlanger

On August 23, 2011, the Centers for Medicare & Medicaid Services (“CMS”) Innovation Center announced a new initiative to encourage health care providers to better coordinate patient care. The Bundled Payments for Care Improvement Initiative (“Bundled Payments Initiative”) seeks to align the financial incentives among hospitals, physicians, and non-physician practitioners through the use of a single negotiated payment for all services provided during an episode of care. The use of a bundled payment is expected to encourage hospitals, doctors, and other specialists to coordinate in treating a patient’s specific condition during a single hospital stay and recovery.

This is one of several new initiatives from the CMS Innovation Center intended to change the existing Medicare payment structure from one that pays for the quantity of care to one that pays for the quality of care. Participation in the Bundled Payments Initiative may serve as a first step for forming partnerships to improve care coordination and encourage participants to move into initiatives aimed at improving population health.

Read the full alert online 

EBG Introduces Interactive National Rate Review Scorecard

by Jesse M. Caplan and Lynn Shapiro Snyder

Shortly after the September 1st effective date for the Centers for Medicare & Medicaid Services (CMS) Rate Review Regulations, the U.S. Department of Health and Human Services published an Amendment to the Final Rule that revises the definitions of “Individual Market” and “Small Group Market” to include insurance policies sold to individuals and small groups through associations, whether or not the applicable state includes association coverage in its own definitions of the individual and small group markets. CMS also recently added two more states to the list of states with “effective rate review programs” covering both the individual and small group insurance markets.

This updated Client Alert provides further analysis of these key changes. Featured in today’s BNA Health Insurance Report, this Client Alert also refers to Epstein Becker Green's new interactive National Health Insurance Rate Review Scorecard. The Scorecard offers insurance carriers, lawyers, and other stakeholders an up-to-date resource on federal and state health insurance rate review programs, standards, and initiatives.

Read the full alert online 

Brandon C. Ge, a Summer Associate (not admitted to the practice of law) in Epstein Becker Green's Washington, DC, office, contributed significantly to the preparation of this alert. 

EBG Introduces Interactive National Rate Review Scorecard

by Jesse M. Caplan and Lynn Shapiro Snyder

On May 23, 2011, the Center for Consumer Information & Insurance Oversight (CCIIO), in the Centers for Medicare & Medicaid Services (CMS) of the United States Department of Health and Human Services (HHS) published its Final Rule implementing Section 2794 of the Public Health Service Act (PHSA).  This Section requires HHS to establish a process for the review of “unreasonable” health insurance premium rate increases in the individual and small group markets.  The Final Rule remains largely unchanged from the Proposed Rule, with important exceptions.  The Final Rule, and the key changes, are summarized in this Client Alert.

In addition, CCIIO released its list of states with effective rate review programs.  Rate increases affecting states with effective rate review programs will be reviewed by those states, while those increases in states determined not to have effective rate review programs will be reviewed by CMS. Now that this list has been published, health insurance issuers can better determine which government agencies will be responsible for reviewing their rate increases, what standards will be applied when determining whether such increases are “unreasonable,” and whether the rate increases are subject to disapproval. 

This Client Alert also introduces EBG’s new interactive National Health Insurance Rate Review Scorecard. The Scorecard offers insurance carriers, lawyers, and other stakeholders an up-to-date resource on federal and state health insurance rate review programs, standards, and initiatives.

Read the full alert online

Brandon C. Ge, a Summer Associate (not admitted to the practice of law) in Epstein Becker Green's Washington, DC, office, contributed significantly to the preparation of this alert.

by Lynn Shapiro Snyder,  Shawn M. Gilman,  Adam C. Solander, and Constance A. Wilkinson

On June 16, 2011, the Office of Personnel Management (“OPM”) released the Request for Information (“RFI”) regarding Section 1334 of the Affordable Care Act, which requires OPM to contract with health insurers to offer multi-state qualified health plans (“MSQHPs”). The purpose of the RFI is to provide OPM with information that will allow it to better understand the “interests and capabilities” of health insurance issuers that will offer MSQHPs through Health Insurance Exchanges. This alert summarizes the substantive information requested by OPM in the RFI.  Additionally, this alert provides the statutory context in which OPM is operating pursuant to Section 1334 of the Affordable Care Act.

Read the full alert online 

David C. Gibbons, a Summer Associate (not admitted to the practice of law) in EpsteinBeckerGreen's Washington, DC, office, contributed significantly to the preparation of this alert.

by Lynn Shapiro Snyder and Amy F. Lerman

On April 14, 2011, the U.S. Department of Health and Human Services announced several initiatives that will offer states more flexibility to adopt innovative new practices in order to provide better and more coordinated care for Medicare and Medicaid enrollees who are dually eligible under both of these programs. Under one of these initiatives, 15 states have been awarded $1 million contracts to support the design of state demonstration projects that will aim to improve the coordination of care for dual eligibles. The Centers for Medicare & Medicaid Services (“CMS”), through its newly formed Federal Coordinated Health Care Office, will evaluate the projects proposed by the 15 states. CMS hopes to implement the top strategies as soon as 2012. Providers and payors in selected states who currently treat a significant number of dual eligibles may want to contact their agency representatives to help influence the way in which their state intends to pursue this demonstration project initiative.

Download the full alert (PDF)   Read the full alert online

by Ross K. Friedberg, Shawn M. Gilman, and Lesley R. Yeung

On March 31, 2011, the Centers for Medicare & Medicaid Services, the Department of Health and Human Services' Office of the Inspector General, the Federal Trade Commission, the Department of Justice, and the Internal Revenue Service released four separate issuances providing the public with the opportunity to comment on the creation of accountable care organizations eligible for participation in the voluntary Medicare Shared Savings Program ("MSSP"). This alert sets forth a listing of each of the places in which the government agencies specifically request comments from the public. Even those organizations that ultimately may decide not to participate in the MSSP should still take advantage of this unique opportunity to provide these agencies with comments and help shape the modifications being proposed to the Medicare program.

Download the full alert (PDF)    Find the full alert online

by Wendy C. Goldstein, Kathleen A. Peterson, Benjamin S. Martin, and Constance A. Wilkinson 

On September 3, 2010, the Centers for Medicare & Medicaid Services ("CMS") issued a proposed rule withdrawing regulations governing the determination of "Average Manufacturer Price" ("AMP"), the definition of "Multiple Source Drug," and the application of federal upper reimbursement limits ("FULs") for Multiple Source Drugs (the "Proposed Rule"). This withdrawal would impact the applicable regulations finalized by CMS in 2007 and 2008 but would leave intact other sections of the 2007 regulations, including, for example, the "Best Price" provisions and certain "definitions" (including the definition of "bona fide service fee"). Comments may be submitted to CMS until 5:00 p.m. EDT on October 4, 2010. We recommend that organizations consider commenting on the impact of the withdrawn regulations, as well as on the open items that have not been addressed under the recent "health reform" legislation. 

Download the full alert (PDF)          Read the full alert online

Now that we have sweeping new health care legislation, the Patient Protection and Affordable Care Act ("the Act"), let's look at the rollout of the accountable care provisions--i.e., those changes to the payment and delivery system that hold the most long-term promise of improving quality and cost-efficiency. They are discussed in my most recent article: "The Timeline for Accountable Care: The Rollout of the Payment and Delivery Reform Provisions in the Patient Protection and Affordable Care Act and the Implications for Accountable Care Organizations," published last week in the BNA's Health Law Reporter.  Click here to read the full article (PDF).

With the rejection in the Senate Finance Committee of two separate proposals to create a substantial public health insurance option and, instead, the approval of the relatively weak co-op proposal (which the CBO estimates to be unlikely to establish a meaningful presence and will result in only half the budget amount of $6 billion will be spent) it seemed as though the public option had breathed its last breath.  However, new developments indicate that the public option, in various forms, is still alive. 

Senator Schumer (D-NY), having failed to pass his “level playing field” public health insurance option proposal in the Finance Committee, is pushing a new public health insurance option that would allow states to “opt out” of the public plan.  The opt-out proposal is gaining fans in the Democratic Caucus, even amongst conservative Democrats who are worried the effects a public plan could have on their state.   

Senator Carper (D-DE) meanwhile has been floating options that would allow states to “opt in” to a federal public insurance plan or for the states to create their own public options.  Under the second proposal, the federal government would provide seed funding. 

In the hope of gaining a “bipartisan” bill, Senator Snowe’s (R-ME) “trigger” public plan option is still being considered as well.   Under this option, a public plan would be introduced if the price of insurance did not decrease. 

Finally, although not discussed often, the fact remains that the Senate HELP bill being merged with the Senate Finance bill contains a nationwide public option for the uninsured and employers with less than 50 employees.  This option is somewhat weaker than the House Tri-Committee bill’s public option because its rates would not be based on Medicare and it would not require Medicare-participating physicians to participate in the new plan.

All of these options provide a menu of choices for those at the negotiating table merging the two bills in the Senate (Reid, Baucus, Dodd, Emanuel, and DeParle).  Estimates are that 52-54 Senators support some type of meaningful public option (more than the co-op proposal).  Supporters now seemingly include Sen. Evan Bayh (D-IN), who explicitly endorsed Senator Carper’s state “opt-in” proposal, a sign that even the most conservative Senate Democrats are at least open to the issue.  

As the “Three Tenors” (Chairmen Waxman, Miller and Rangel) struggle to finance the access enhancements that are central to the President’s health reform aspirations, the need for meaningful payment reform continues to challenge. This week House Speaker Nancy Pelosi urged the Chairmen to sharpen their pencils in this regard. Moreover, in a letter to the Speaker and Majority Leader Steny Hoyer, the fiscally-conservative “Blue Dog” coalition of House Democrats has now said that the current drafts fail to include sufficient structural reforms likely to succeed in lowering costs and incenting “value” (in purchasing).

These House members would like to see strenuous efforts to capture the savings promised by the literature pointing out the significant disparities in regional health care practice/resource consumption patterns. To that end, the “Blue Dogs” and many analysts are placing a great deal of hope in the ability of payment incentives to trigger the ordering of only appropriate (cost effective) diagnostic tests and pharmaceuticals and the implementation of “evidence based” care paths. 

Intuitively there is great merit to the theme. However, testing of the concepts has been limited to date. Therefore, there is yet little science from which to judge the necessary “octane” of the incentives. Moreover, the amount of change to be engendered by Medicare payment reform is unknown—hence some of the enthusiasm for a public plan that might adopt payment methodologies that echo those of a reformed Medicare fee-for-service system thus putting more strength behind the effort the “bend the curve” of growth in health care expenditures. Finally, policy makers do not how much reinforcing discernment should or could be created among beneficiaries particularly during the statistically costly “last year of life.”

While some provider systems appropriately believe they are “ready, willing and able” to operate under new payment methodologies, most are not. Moreover, even provider systems that have a high degree of clinical integration, IT infrastructure and physician leadership, face significant challenges in operating during a transition stage where some payor customers will strongly reward utilization efficiencies and others will retain payment methodologies that continue to implicitly reward providing services without regard to clinical appropriateness. (These providers are likely to capture the empathy of lawyers like me who also are increasingly operated under mixed payment methodologies.)

Health care investors face concomitant uncertainties. How will the companies they are backing fare in an era where providers are incentivized to order fewer tests, labs and scans? Will the target’s product line continue to do well among providers who are scrutinizing costs to earn incentive payments? Similarly, are the company’s products on the short list for comparative effectiveness review and, if so, what are the likely results and how will such review affect provider system choices?  Therefore, as we watch the Congress adopt payment policy reform, we open up interesting new forecasting questions with regard to the nature of such reform, its pace and its impacts on market actors.

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For the last week or so, the health reform public policy debate has been keyed to the Senate HELP Committee’s draft and thus dominated by whether or not the “Exchange” to be employed in access reform should include a “public plan” and, if so, whether such a plan should have the power to access provider payment rates tied to Medicare and whether Medicare participating providers would be required to contract with it. With this week’s release of the Senate Finance Committee’s draft, it will be interesting to see whether payment reform can similarly capture the attention of the press. Frankly, we have low expectations in this regard insofar as the consequences that the prevalence of fee for service payment methodologies have on health care output are hard to grasp relative to the easier concept of “universal coverage”. Perhaps it is ultimately less important that payment reform capture the air waves than the degree to which payment reform is incorporated in whatever pieces of health reform make it through this session of Congress.

There are, of course, a few helpful signs. The New York Times gave front page treatment to the President’s public embrace of the payment reform issue and his distribution of the Gawande article on health care incentives in the New Yorker. The New America foundation released a report on delivery system change which White House Health leader Nancy Anne DeParle also applauded. These may, however, faint notes against a cacophony of sound around the easier to enunciate (though themselves ill understood) concepts around public plan and access.

Gawande, Len Nichols, Peter Orszag and others are of course right that changing the predominant fee for service incentives that power the health care delivery system is vital to improving both the cost and quality of American health care. Using “medical home”, “accountable care organization”, and episode payments will begin to inject new incentives into the planning and care paths chosen by providers. We expect that Senator Baucus’ Committee draft will begin to increase the content of these payment methodologies into the fuel that powers our enormous health care engine. They are the crucial elements to the much lauded quest to “bend the health care cost curve”. Therefore, even if they do not capture the attention of CNN and MSNBC, the strength of these reform elements in the Senate Finance Committee’s bill, and their survival, bears watching by all who invest in as well as receive health care.

The need to change the rate at which health care costs increase (“Bending the Curve”) is axiomatic in the health reform debate. According to the President, Orszag at OMB, Hackbarth at MedPAC, and others, primary tools for this change are payment system changes. While the testimony that has been given in this regard is useful directionally,  the organizations and systems thus far identified are largely at a gestational stage and we do not know whether they are far reaching enough to “move the needle” much less “bend the curve”.

Seemingly the most fully developed of these notions is the proposal to bundle payment for the majority of facility services occurring within 30 days of a discharge into the DRG. The need for such a proposal was recently revalidated in a New Journal of Medicine article identifying the frequency and high cost of hospital readmissions. Moreover, the CBO and the President’s budget have at least put savings estimates around this program. These estimates are substantial but do not, by themselves, bend the curve materially.

Other emerging notions of delivery system innovation to bend the curve include “bonus eligible organizations” and “accountable health organizations”. These innovations return us to familiar, but largely abandoned in practice, managed care territory -- incentivization of physicians outside a group practice setting. Of course the success of such programs will depend on the strength of the incentive and that strength (as we learned in IPA model managed care) will be affected by the size of bonus or withhold, the timing of its payment, whether the data is believable and whether the opportunity to collect it is perceived by the physician to be real. Also, the real savings these organizations might achieve will be in lowering the “preference sensitive” care that is subject to wide geographic variations.

Full fledged capitation had potentially the strongest (most effective?) incentives. However, “capitation” carries a lot of media and political baggage so the term is being studiously avoided.  That political reality is understandable.  However, before we count our budgetary savings, we need to be sure that the alternative methods of payment sufficiently change physician incentives before we can realistically expect to “bend the curve” and can fairly claim the budgetary savings such a change would bring.

In yesterday’s post on The Health Care Blog, Bill Kramer remarks upon a key difference in the health reform discourse this go-round. Simply put, “the Obama Administration is changing the debate in a fundamental way.” As President Obama stated in his opening remarks to last week’s White House Forum on Health Reform, “[h]ealthcare reform is no longer just a moral imperative, it is a fiscal imperative.”

Kramer explains that past attempts at reform suffered from political sticker shock over concerns that health reform would dramatically enlarge the federal deficit. However, this time, the Obama Administration is emphasizing that reform will not pose an additional burden to the already laden deficit. Indeed, health reform is a necessary tool to “tame” the deficit over the long term.

And framing health reform as an economic necessity is already having an effect. As Nancy-Ann DeParle, director of the White House Office for Health Reform, pointed out in her Wednesday op-ed in The Boston Globe: there are no defenders of the status quo. Two happenings from yesterday, both involving key stakeholders, echo this sentiment:

Regional White House Forum on Health Reform - Dearborn Michigan
Underscoring the link between long-term economic prosperity and health reform, the White House chose Michigan, the state with the highest unemployment rate in the nation, as the site for the first of five Regional White House Forum on Health Reform. In his announcement of the Regional White House Forum series, President Obama called on participants of these forums to “put forward their best ideas about how we bring down costs and expand coverage for American families."

Among the 250 attendees were doctors, patients, insurers, policy experts and health care advocates. The forum was hosted by Governors Jennifer Granholm of Michigan and Jim Doyle of Wisconsin. Notable politicos in attendance included Congressmen John Dingell and John Conyers, Jr., as well as White House Domestic Policy Director Melody Barnes, who helped to moderate the event. Reports of the town hall-style event indicate that “guests in the room uniformly supported broad and sweeping reform focused on expanding access to the uninsured, improving medical records and emphasizing preventative care.”

The remaining four regional forums will take place in Burlington, VT (March 17th), Des Moines, IA (March 23rd), Greensboro, NC (March 31st), and Los Angeles, CA (April 6th).

Business Roundtable urges lawmakers to act quickly on health reform
Yesterday heard from another key stakeholder group, Business Roundtable. The association released a study showing that American companies were losing out to other countries with cheaper healthcare and healthier workers. As reported by Reuters, Business Roundtable “wants changes that would reduce costs through greater use of technology and other efficiencies and require everyone to obtain health coverage. The group also supports plans to provide government aid to help those who cannot afford insurance, but said they do not want to see a government insurance plan that dominates the market.”

Members of the Business Roundtable also heard from President Obama yesterday on the critical need for health reform. A transcript of the President’s speech is posted on the Wall Street Journal’s Washington Wire blog.

If yesterdays goings-on are any indication, Kramer and DeParle are right: the landscape has changed and the health form battle will be fought on different grounds. Everyone is in favor of change. The devil, of course, will be in the details.

Thursday's White House Forum on Health Reform brought together people who have a stake in our health care system with people who have the ability to change it. Prior to his inauguration, President Obama called on Americans to hold community discussions about health care. More than 9,000 Americans signed up to host discussions in all 50 states and more than 30,000 Americans attended these discussions. These community groups submitted reports to the White House that detailed their concerns about the health care system and their suggestions for reform. At the Forum, several of these community participants joined health care experts to participate in the Forum discussions.

Did these community representatives have any meaningful impact on Thursday’s discussion? Let’s hope so – engaging members of our nation’s communities adds a necessary human element to these debates as they begin to take shape and hopefully will demonstrate to those who can effect change that every ordinary person must be involved in this important national discussion. The President expressed his desire see change by the end of this year. We should harness the energy generated by yesterday's discussions to promote actions that result in health reform efforts and engage all Americans - all "stakeholders" - in these efforts. 

For health care facilities, and those who invest in them or lend to them, the President’s budget underscored the emerging “shape of things to come” in the delivery system. In short, the Administration intends to compel delivery system modifications through aggressive payment policy changes.

What industry segments are immediately concerned? -- home health agencies, skilled nursing facilities, IRFs, LTCHs, and rehab facilities. In the name of “efficiency and accountability” the President proposes to bleed (Bleeding Edge redux?) $950M over 5 years and $17.8B over ten years from payments that would otherwise have gone to these facilities. We know this because the budget is echoing Director Orszag’s work at the CBO, finding savings from putting into the hands of hospitals financial responsibility, on an MS-DRG by MS-DRG basis, for the care Medicare otherwise would have paid these facilities for within 30 days after inpatient discharge.

In the CBO formulation, bundled payments would have been applied to 1/3 of discharges by 2013 and all discharges by 2015. The budget scores this proposal somewhat higher than CBO did so one might speculate that more rapid application is now on the Director’s mind. Somewhat comforting to investors in the affected facilities is that savings begin in 2013 and that over half of the ten year savings are not realized until 2018 and 2019.

Does this “reform” propel acquisitions of post-acute facilities by acute facilities? Alternatively, will acute facilities have the market power to negotiate favorable terms in purchasing post-acute services from such facilities? Does this require additional hospital and physician integration to produce the admission patterns that will allow hospitals not to lose their shirts in paying for the new care?

Will any state insurance departments want to see hospitals establish reserves against the possibility of the cost of their post-acute care payment responsibilities exceeding their financial wherewithal? The CBO write-up of this program also included take backs so that hospitals would only realize 20% of the savings that Medicare expects that they would produce. Of course there could be a big negative for acute care hospitals if Medicare’s take backs make the margins small and expected savings do not materialize because of case mix, physician ordering patterns, or a dozen other variables. What upheaval do you predict?

Many people ask, “can we afford to pay for health care reform?” However, the more pressing question is whether we can afford not to reform our health care system. The collapse of our financial markets and the general deterioration of the economy make fundamental health reform an urgent priority. Investing in our health care system will pay off by helping to keep Americans healthy and economically stable.

On February 10, 2009, Senate Budget Committee Chairman Kent Conrad (D-N.D.) said that health care reform plans cannot add substantial costs to the system, one which already is straining the federal budget.  At the same time, the course the current health care system is currently on is unsustainable and changes based on major new spending are not the answer.

Former Congressional Budget Office Director Peter Orszag has noted that reforming the health care system is not just a human imperative, but is also the nation’s greatest economic reform opportunity. Without cost-related changes to the system, private and public health care spending will reach an estimated 37 percent of the gross domestic product in 2050.

During the February 10 hearing, current CBO Director Douglas Elmendorf also testified.  He has outlined options for expanding coverage and controlling costs in two CBO reports (Key Issues in Analyzing Major Health Insurance Proposals and Budget Options, Volume 1: Health Care) that were released in late 2008. These reports indicate that there is consensus regarding the broad direction for health reform—such as stronger incentives to control costs and provide more information about care quality and value—but the specific details are less certain, often because there is a lack of evidence on how cost-effective these proposed measures would be.

The window of opportunity for health reform is wide open, as is the opportunity to develop strategies that will allow such reform to be accomplished in a fiscally responsible way. Lawmakers must build Americans’ confidence in allowing the government to take the necessary actions to reform the health care system without reinforcing fears that government involvement will not be in the best interests of Americans. Some things to keep in mind:

• Reinforce Obvious Truths.  When it comes to health care dollars and services, more is not always better. Americans know that our current health care system does not provide value for all that it expends on the costs of providing services. Health care reform must reinforce the importance of providing quality care in as cost effective a manner as possible. We need to prove that it is possible to save money without sacrificing quality.

• Make Everyone an Ally. A sense of individual and of shared responsibility must play a role in health reform, so that all participants understand that . We must make everyone—consumers, states and businesses—feel the impact of health care reform on their wallets so that we as a nation can reach a consensus on a long-term vision for health reform. The federal government cannot solve the problem alone. Many states, for example, have launched their own efforts to control the costs of health care, as have many employers. Most consumers feel the direct effect of paying for some or all of their health care and the need to make personal choices regarding their consumption. Coordination among all the participants may create the necessary shared sense of responsibility that will inspire change.