ML Strategies has posted its weekly Health Care Update. This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.
Open Enrollment through the health insurance exchanges ended on February 15th. On February 11th, the Department of Health and Human Services (“HHS”) reported that 7.75 million consumers selected a plan or were automatically re-enrolled through HealthCare.gov since the beginning of this year’s Open Enrollment. HHS also extended the deadline for enrollment by one week for users affected by technical glitches on the website.
In other news, the Centers for Medicare and Medicaid Services released final rules for Medicare Advantage and Part D prescription drug plans. We posted a blog this week explaining the new requirements for plans in 2016.
Click here to read this week’s full Health Care Update.
Last week, HHS, along with the Department of Labor and the Treasury, provided long overdue guidance regarding the third category of supplemental “excepted benefits” as defined by Section 2791 of the Public Health Services Act, Section 733 of ERISA and Section 9832 of the Internal Revenue Service Code. Coverage that meets the definition of supplemental excepted benefits is not required to comply with a variety of requirements, including certain requirements established under the Affordable Care Act.
The first two categories of supplemental excepted benefits were relatively well-defined as coverage meeting the definition of Medicare supplemental health insurance and Tricare supplemental programs, but the third category of “similar” supplemental coverage had left policy issuers scratching their heads.
The agencies last provided substantive guidance on what qualifies as supplemental excepted benefits in 2008. In their announcement last week, the agencies repeated their previous guidance and addressed whether supplemental coverage that provided additional categories of benefits, rather than just reducing coinsurance and deductibles under the insured’s primary coverage, could qualify as “excepted.” The agencies responded with the age old legal answer of “it depends.”
The Department of Justice (DOJ) recently announced that ev3 Inc. (which acquired Fox Hollow Technologies, Inc. (“Fox Hollow”), a medical device manufacturer, in late 2007) agreed to pay $1.25 million to resolve allegations that Fox Hollow violated the False Claims Act (FCA) by causing certain hospital clients to submit false claims to the Medicare program.
Fox Hollow manufactures the Silver Hawk Plaque Excision System, which is a device used in atherectomy procedures. Atherectomy is a minimally invasive surgical procedure that utilizes a small cutting device to remove atherosclerosis (or hardening of the arteries) from large blood vessels. The goal of atherectomy procedures is to open up narrowed coronary arteries and increase blood flow and circulation.
A former Fox Hollow sales representative, Amanda Cashi, filed an FCA qui tam action in December 2009 alleging that in 2006 and 2007, Fox Hollow caused 12 hospitals located in nine states to submit claims to Medicare for medically unnecessary inpatient stays for beneficiaries receiving elective atherectomy procedures. More specifically, DOJ alleged that Fox Hollow, in an effort to increase hospital purchases of the Silver Hawk device, advised hospitals to bill atherectomy procedures as more expensive inpatient procedures even though many of those patients should have received less costly outpatient procedures. As a result, those hospitals allegedly received higher reimbursement than they were entitled to for treating certain beneficiaries receiving Silver Hawk atherectomy procedures. Ms. Cashi will receive $250,000 as her share of the government’s settlement with ev3. Continue Reading
Earlier this month, the Centers for Medicare & Medicaid Services (CMS) released its final rules on policy and technical changes to the Medicare Advantage (MA) and Prescription Drug Benefit programs (Part D) for contract year 2016. More than a year has passed since we alerted our clients to the publication of the controversial proposed rules. While CMS released the 2015 final rule in May, it left open many of the most controversial proposals. But as of this week, we know what is in and what is out.
The most interesting part of the new rules are the provisions that CMS abandoned. As expected and as we previously posted, CMS is not finalizing provisions that would have lifted the protected class designation for three of its drug classes, required Part D plans (PDPs) to allow any willing pharmacy to participate in its preferred network, and clarified its interpretation of the non-interference provision to allow CMS to intervene in the negotiations between a Part D plan and a pharmacy. Other notable provisions not being finalized in this rule include:
- CMS’ ability to terminate MA plans offering Part D plans (MA-PD) for achieving less than 3 stars on both Parts C and D summary Star ratings in the same contract year for 3 consecutive years.
- A two-year limitation on submitting a new bid in an area where MA plans were terminated due to low enrollment.
- Requirements that MA plans and PDPs demonstrate they provide “good quality health care” by scoring 3 or higher on several CMS performance standards.
- Flexibility that would have allowed MA plans to separate their Evidence of Coverage document from the Annual Notice of Change (ANOC).
- Medication Therapy Management Program requirement to develop an outreach strategy to “effectively engage all at-risk beneficiaries enrolled in the plan.”
- Authority for CMS to passively enroll members in a non-renewing D-SNP to another D-SNP that is affiliated with the member’s Medicaid plan.
- Requirements that PDP sponsors of Employer Group Waiver Plans (EGWPs) disclose to each employer group the discount payments under the Discount Program.
CMS indicated that it would not finalize many of these provisions without undergoing new rulemaking processes.
The New York State Department of Financial Services (the “Department”) recently released a “Report on Cyber Security in the Insurance Sector” (the “Report”). The Report was released on February 8, 2015, just four days after Anthem first reported the breach of its database estimated to contain as many as 80 million customer records. While the Report does not directly address the Anthem breach (the Department addressed Anthem’s breach in a separate alert), its findings provide a detailed look at the current cyber security landscape in which the Anthem breach occurred.
The Report analyzes survey data collected from 43 insurance entities that collectively hold a staggering $3.2 trillion of combined assets. Of these 43 entities, 21 are health insurance providers, 12 are property and casualty insurance providers, and 10 are life insurance providers. The Report’s questions address six main topics: (1) the insurer’s information security framework; (2) the use and frequency of penetration testing and results; (3) the budget and costs associated with cyber security; (4) corporate governance around cyber security; (5) the frequency, nature, cost of, and response to cyber security breaches; and (6) the company’s future plans on cyber security. In an effort to obtain a broader understanding of the context of these cyber security programs within the insurers’ overall risk management strategy, the Report also analyzes the statutorily required enterprise risk management (“ERM”) reports that certain insurers filed with the Department.
The Report has a number of interesting findings, many of which trigger their own questions:
On February 10, 2015, in United States v. Patel (Case No. 14-2607), the Seventh Circuit Court of Appeals ruled that a physician makes a “referral” within the meaning of the federal health care programs Anti-Kickback Statute (AKS) when the physician makes a certification and recertification for Medicare-reimbursed home health services even without playing any role in the patient’s selection of the provider. This expansive definition could give broad leeway to prosecutors and will make it more difficult for counsel to advise clients on the scope of the AKS.
Patel was convicted in February 2014 by the Northern District Court of Illinois (J. Dow) for receiving kickbacks from Grand Home Health Care (Grand) in the form of $400 cash for each original home health care certification (CMS Form 485) and $300 for each recertification. It was undisputed in the case that all of the patients needed home health services. Importantly, Grand was one of many home health agencies that Patel’s patients used. As explained by the court, the process used in Patel’s office was the following:
Patel made the initial determination that the patient required home health care services. . . . After this initial determination was made, . . . Patel did not personally discuss the selection of providers with patients or their family members, either as an initial matter or as part of recertification. Rather, his patients discussed home health care options with Patel’s medical assistant, . . [who] gave patients an array of 10-20 brochures from various providers. . . Each patient independently chose a provider from those in the array.
The court affirmed Patel’s conviction and rejected his argument that he never referred a patient to Grand. “[I]t does not matter who first identifies the care provider; what matters is whether the doctor facilitates or authorizes that choice. . . [T]he doctor acted as a gatekeeper—without his approval, the patient could not receive treatment from the provider the patient had selected.” The court found it irrelevant that Patel “played no role” in his patients’ selection of Grand because in signing the Form 485s he “chose whether his patients could go to Grand.” (Emphasis in original)
In a much anticipated appellate health care antitrust decision, the United States Court of Appeals for the Ninth Circuit recently upheld a district court’s finding that a consummated hospital-physician group merger violated Section 7 of the Clayton Act, despite the provider-defendants’ assertion of an efficiencies defense. St. Alphonsus Med. Ctr. – Nampa Inc. v. St. Luke’s Health System, Ltd., No. 14-35173 (9th Cir. Feb. 10, 2015). As discussed further in “Ninth Circuit Affirms FTC’s Challenge to Hospital-Physician Group Merger“, this decision is a big win for health care antitrust enforcers as it limits the viability of an efficiencies defense for proposed health care mergers. It is also significant in the health care context because the court did not acknowledge that quality was a cognizable element of competition that should be evaluated in the merger calculus. The case involved the $16 million acquisition by St. Luke’s Health System, Ltd. of Saltzer Medical Group PA, a physician multispecialty group in Nampa, Idaho. The Ninth Circuit affirmed divestiture of the physician group as the appropriate remedy. In defending the transaction, defendants had claimed that efficiencies would result based on integrated care and risk-based reimbursement. The Ninth Circuit’s decision here will likely impact the strategy and plans of many hospitals and physician groups pursuing transactions designed to achieve improved quality and reduced costs to meet the goals of the Affordable Care Act.
2015 promises to be a big year for biosimilars. Our colleague, Thomas Wintner, recently published an article in Law360 highlighting the biosimilar developments to expect in 2015 and potential areas for future litigation. As the article points out, though the Affordable Care Act created an abbreviated pathway for FDA approval of biosimilars in 2010, no applications for approval were submitted to FDA until 2014.
In addition to issues related to how the FDA will review and approve biosimilars and how intellectual property questions will be litigated and resolved, the approvals of the first biosimilars raise questions about how states will treat biosimilars under their pharmacy laws and how payers will address biosimilar substitution. States already regulate the substitution of generic small molecule drugs for their brand-name counterparts and many states have considered, or have already enacted, legislation addressing the substitution of biosimilars for their reference product counterparts. According to the National Conference of State Legislatures, at least 23 states have considered legislation regarding standards for biosimilar substitution. Some common features of these legislative efforts include permitting prescribers to prohibit substitution, requiring pharmacists to notify prescribers of a substitution, requiring patient consent for substitution, requiring states to create a list of interchangeable products, and requiring pharmacists and prescribers to maintain records of substitution. To date, eight states have passed laws regarding biosimilar substitution (Delaware, Florida, Indiana, Massachusetts, North Dakota, Oregon, Utah, and Virginia). Colorado and New Jersey currently have biosimilar substitution bills pending in their legislatures.
Last week, the Centers for Medicare & Medicaid Services (CMS) approved Indiana’s waiver under Section 1115 of the Social Security Act to implement Medicaid expansion, making it the 29th state (including the District of Columbia) to expand Medicaid. Indiana’s program, referred to as the Healthy Indiana Plan (HIP) 2.0 will cover up to 350,000 individuals, including individuals ages 19 to 64 with annual incomes under 138 percent of the federal poverty level (FPL) beginning February 1, 2015. Under HIP 2.0, beneficiaries will receive services through one of two benefit packages, HIP Basic or HIP Plus, based on the individuals’ incomes and contributions to POWER accounts, which the State describes as types of health savings accounts.
In approving Indiana’s waiver, CMS approved several provisions that have not been approved in other Medicaid expansion programs or waivers, which may entice other states to consider, or reconsider, expansion. Continue Reading
Last week, the Texas Medical Board issued a proposed rule (the “Rule”) clarifying that physicians must perform a face-to-face or in-person physical examination of a patient prior to issuing a prescription or risk sanctions for unprofessional conduct. The Rule states that a physician cannot prescribe any drug “without first establishing a defined physician-patient relationship,” which includes, among other things, documenting and performing a physical examination via a face-to-face visit or in-person evaluation. The face-to-face visit or in-person evaluation can occur through the use of telecommunications equipment that allows the provider to see and hear the patient such as through a two-way, real time video conference consultation, but the patient must be located at an “established medical site” – which does not include the patient’s home. Mental health services are explicitly carved out of the face-to-face or in-person evaluation requirement.
The Rule also provides that the use of online questionnaires, or questions and answers exchanged through email, electronic text or chat, or telephone evaluation of a patient are not adequate to establish a valid physician-patient relationship. Contrary to most states that prohibit prescribing based upon only an online questionnaire, the Medical Board appears to be taking the hard line stance that even online prescribing enhanced with such capabilities as telephone consultations, an online chat function, emails, or text will not be enough to meet the standard of care in Texas when prescribing for new patients. Continue Reading