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Bipartisan Efforts to Address Healthcare Issues

On Tuesday, August 1, 2017, the Senate Health Committee (the “Committee”) announced hearings, to take place in September, on the issue of stabilizing the individual health insurance market. The announcement of these hearings is in response to continued legislative efforts to repeal Obamacare and President Trump’s threats to stop paying insurance companies cost-sharing subsidies, currently availed under Obamacare, that reduce out-of-pocket expenses for low-income policyholders.

Republican Senator Lamar Alexander, Chair of the Committee, is working with Democratic Senator Patty Murray to make the hearings bipartisan. Congress must develop a solution before September
27th, when insurers enter into contracts with the federal government over what insurance plans to sell on the exchange for 2018. If these subsidies are eliminated, then insurance companies will likely stop offering individual products through the exchange,
which is likely to affect a large number of the 18 million Americans who obtain their insurance in this manner.

In addition, a group of around 40 Republicans and Democrats, known as the “Problem Solvers Caucus” (“PSC”), have endorsed a white paper outline of ideas directed toward making some major Obamacare
improvements. While there is no formal legislative text at this time, PSC members are moving rapidly to garner broader support for their proposals in light of the most recent defeat of the Senate bill to repeal Obamacare and to force Republicans, once and
for all, to stop trying to get rid of Obamacare.

The PSC proposal includes mandatory funding for the cost-sharing subsidies for low income policyholders; repeal of the medical device tax; and raising the threshold of the “employer mandate”,
so that companies with 500 employees or more, rather than 50, are required to provide employee health insurance. PSC leadership has acknowledged that this initial proposal is an attempt to fix only certain pieces of Obamacare and should not be viewed as a
“cure all” to its shortfalls

The Committee and the PSC face a number of challenges. First, conservative legislators have made it clear that they are still favor of repeal. In addition, House Speaker Paul Ryan’s office
has stated that a bipartisan healthcare proposal would not be approved by the House anytime soon. At the same time, however, other GOP members are insisting that it is time to leave “repeal and replace” behind and devote their efforts to reaching accord with
the Democrats on smaller fixes before September 27th.

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Centers for Medicare & Medicaid Services (“CMS”) overpaid an estimated $729 million under the Medicare and Medicaid Electronic Health Record (“EHR”) Incentive Program

According to a report issued last month by the Department of Health and Human Services’ Office of Inspector General (“OIG”), the Centers for Medicare & Medicaid Services (“CMS”) overpaid an estimated $729 million under the Medicare and Medicaid Electronic Health Record (“EHR”) Incentive Program (the “EHR Incentive Program”) to physicians and other eligible professionals who did not actually comply with federal meaningful use requirements.    In addition, the Report estimates that CMS mistakenly paid $2.3 million in EHR incentive payments to eligible professionals who switched incentive programs.  These overpayments represent approximately twelve percent (12.0%) of total Medicare/Medicaid spending.

Since the Report’s issuance, several professional associations have voiced concern over the prospect of CMS seeking to recover these overpayments. The primary issues raised by these groups (including Medical Group Management Association, American College of Physicians, American Medical Association, American Osteopathic Association) relate to whether the results of the Report stem from these professionals receiving improper payments or their failing to provide sufficient proof during the audit process.

As an example, one of the requirements tested in the Report was having clinical decision alerts.  To meet the requirements, the randomly sampled providers were required to have five (5) such alerts.  An example alert is for the EHR system to flag high medical dosage(s).  During an audit, a provider may be able to demonstrate that the alerts were working at a point in time, but it would be impossible to prove that these alerts were in effect during the entire meaningful use reporting period unless the provider had taken a screenshot of the alert every day of the reporting period.

At this point, it is not entirely clear that provider need to be concerned about CMS trying to recoup these overpayments.  In a written statement following the Report’s release, CMS stated that “….this administration is committed to turning the page and ushering in a new era of accountability.  We stand committed to safeguarding federal funding by leveraging proven and new program integrity tools to prevent and identify waste, fraud and abuse.”

So, for the time being, at least, it appears that CMS will not take action to recover these overpayments.  Nonetheless, it will continue to be important for healthcare professionals to make good faith efforts to satisfy these meaningful use requirements and have the evidence to support such attestations when audits are performed.

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Key Takeaways in Recent HIPAA Settlements

Over the past several months, a steady stream of security breaches, coupled with a number of settlements recently announced by the U.S. Department of Health and Human Services – Office for Civil Rights (“OCR”), have put healthcare providers on high alert.  Several OCR decisions, including a $5.5 million settlement with Memorial Healthcare System last month—have highlighted the legal implications of security breaches in the wake of a record-setting year of hackers targeting the healthcare industry. The costs associated with a breach will likely far exceed any settlement with OCR because the significant majority of corrective action plans require providers to hire independent, third-party investigators to assess HIPAA compliance.

In reviewing some of the more significant settlements during the past several months, four (4) distinct themes seem to be evolving regarding the nature and scope of these breaches, which ca be summarized as follows:

  • business associate agreements between providers (as covered entities) and vendors (as business associates) are an important target for OCR enforcement actions;
  • failure to conduct or implement the findings from a risk assessment required by HIPAA can lead to significant fines and penalties over and above standard amounts of $1.5 million;
  • “cloud service” providers are liable for failing to protect PHI; and
  • OCR will take an organization’s failure to report a breach very seriously.

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The healthcare industry has received substantial criticism over the past year for cybersecurity failures.  Therefore, it is critical for security concerns to be handled on a timely basis at the executive level and with the full involvement of the organization’s board.

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Pennsylvania Department of Health to Issue Medical Marijuana Permits in June 2017

On March 31, 2017, Dr. Karen Murphy, Secretary of the Pennsylvania Department of Health (the “Department”) announced an important new development in the implementation of the Pennsylvania Medical Marijuana Act (the “MMA”).  Secretary Murphy stated that the Department will, in the very near term, begin the application review process for growers/processors and dispensaries, the key business entities in the production and sale of medical marijuana under the MMA.  She also stated that the Department anticipates being able to release information about who applied, and for which region or county, after the permits are issued in late June 2017.

The Department will issue permits to no more than 25 grower/processors, which are entities that are permitted under the MMA to grow and possess medical marijuana. The Department will also issue no more than fifty (50) permits for dispensaries, which are entities that are permitted to dispense medical marijuana to qualified patients and caregivers, and no more than five (5) dispensary permits to any one person or entity.  All permits are valid for one (1) year.  All applicants will be subject to criminal background checks.

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Health-Related Highlights of Trump Budget Proposal

President Trump recently submitted his first formal budget proposal to Congress.  It is viewed by many to be one of the most ambitious ever proposed, and seeks to “redefine the proper role” of the federal government by dramatically reducing its involvement in many domestic areas, including health spending.  while boosting investments in security and defense.  This post focuses on the health-related highlights of this budget proposal (the “Proposal”):

  • Under the Proposal, the annual budget of the Department of Health and Human Services (“HHS”) would be reduced by more than $15 billion (or 17.9 percent) in 2018.  The Proposal seeks to increase funding for fraud and abuse detection by $70 million, and the Substance Abuse and Mental Health Services Administration would get $500 million to expand opioid addiction treatment efforts.
  • The most significant decrease in spending is directed toward the National Institutes of Health (“NIH”), which would see a $5.8 billion (or 18.3 percent) reduction in funding, bringing NIH’s annual budget to $25.9 billion. The proposal includes a major reorganization of NIH’s institutes and centers, including the closure of the Fogarty International Center, which focuses on global health research and the consolidation of the Agency for Healthcare Quality and Research.
  • The Proposal also looks to cut $4.2 billion by eliminating two programs under the Office of Community Services that help low-income families heat their homes in the winter. The Proposal indicated that the Low Income Home Energy Assistance Program is “unable to demonstrate strong performance outcomes” and the Community Services Block Grant “funds services that are duplicative of other Federal programs.”
  • The Proposal would also double medical product user fees for companies applying for FDA approval and eliminate more than $400 million in funding for dedicated professional training programs for healthcare workers.

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In summary, it is certain that the Proposal will face some degree of resistance from federal lawmakers.  When reviewing the Proposal, it is important to keep in mind that any such budget proposal is a starting point and, as with any new president, is a direct reflection of the administration’s priorities and something of a wish list.

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Key Features Of Clinically Integrated Networks Versus Accountable Care Organizations

As health systems develop and implement strategies around clinical care redesign and health care reform, industry participants often ask how clinically integrated networks (“CINs”) relate and compare to accountable care organizations (“ACOs”). While unquestionably linked, each of these concepts has its own unique definition and purpose. The following table presents a summary comparison of key operating features and characteristics of CINs and ACOs.

DEFINITION

CIN – A network of independent medical practices and physicians who collectively commit to quality and cost improvement. Physicians in the CIN may collectively negotiate third party payer contracts under a “safe harbor” from federal antitrust law relating to joint contracting being “reasonably necessary” to support investment (of both time and resources) in performance improvement and ensure cross-referrals among participating providers.

ACO – A group of different provider types across the care delivery spectrum – potentially including medical practices, physicians, hospitals/health systems and other non-acute care facilities – that are compensated based on their collective responsibility for the total cost and quality of care provided to a given patient population over a defined time period.

 

CARE MANAGEMENT FOCUS

CIN – Focus of care management and care improvement for medical practices/physicians across specialties; often a foundational element toward the formation of an ACO..

ACO – Focus on care management and improvement for an entire patient population, across the continuum of care delivery for that population. Physician integration is an integral part of any ACO.

 

COST TO PHYSICIANS

CIN – Free, non-risk bearing contracts that provide networks with the option to negotiate an ACO contract with a local payer with risk for the local population if it so chooses.

ACO – Variable and dependent on the ACO contract terms. An ACO is taking on a contract and can be set up in different ways. Some ACOs have no downside risk to providers whereas other providers could be asked to participate in risk.

 

PERFORMANCE INFRASTRUCTURE INVESTMENT

CIN – Significant capital requirements from an individual physician perspective ((e.g., $10,000 per physician in start-up costs, $2,500 in annual operating costs).

ACO – ACOs typically require significant investments in reporting and care management infrastructure. Estimates for viable ACO start-ups range from $11.6 million to $26.1 million, depending on the size of the sponsoring health system.

 

EXCLUSIVITY

CIN – At this early stage, have little or no opportunity to require participating physicians to contract exclusively through the CIN.

ACO – Typically structured with varying degrees of exclusivity from a contracting standpoint, depending on the market power of the sponsoring health system and the overall competitive environment.

 

POTENTIAL RISK

CIN – In CIN arrangements, there is usually only an “upside” based on achievement of performance incentives. More evolved CINs often participate in contracts through an ACO, which gives rise to greater levels of financial risk.

ACO – ACOs are capable of assuming financial risk for defined populations under contract. As such, there is greater “upside” potential, but there is also downside risk for poor performance in managing population health.

 

INCENTIVE ALIGNMENT

CIN – In CIN arrangements, most incentives are based on quality and outcome-based factors, to be agreed upon in the payer contracts.

ACO – ACO members (i.e., medical practices, physicians, hospitals/health systems and other non-acute care facilities) are given quality, outcome and cost-based incentives.

 

PHYSICIAN COMMITMENT

CIN – Performance expectations are well-documented in CIN arrangements, and clear action steps for addressing underperformance are an integral part thereof.

ACO – Performance expectations are well-documented in ACO arrangements, and clear action steps for addressing underperformance are an integral part thereof.

 

HUMAN RESOURCE COMMITMENT

CIN – Requires significant personnel commitments to deal with various operational requirements (e.g., training, case management, technology maintenance and payer contracting).

ACO – ACOs generally require far more significant personnel commitments for these same areas, as compared to CINs.

 

DATA COLLECTION AND MONITORING

CIN – Processes to collect patient data from various sources (including claim submissions) are an integral part of CIN infrastructure requirements..

ACO – An IT infrastructure that facilitates exchange of patient information across all ACO members is essential. Therefore, technology investment in these initiatives is very significant.

 

 

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Implications of Trump’s ACA Executive Order

On January 27, 2017, President Trump signed his first executive order relating to the Affordable Care Act (the “Act”).  The executive order directs the Secretary of the Department of Health and Human Services and all government agencies to “…exercise all authority and discretion available to them to waive, defer, grant exceptions from or delay the implementation of any provision or requirement of the act that would impose a fiscal burden on any state or a cost, fee, tax, penalty or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare insurance, purchasers of health insurance, or makers of medical devices, products or medications.” The executive order’s stated purpose is “…to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to allow the states more flexibility and control to create a more free and open healthcare market.”

Trump’s executive order is a clear message that he plans to repeal and replace the Act.  Dismantling unpopular provisions of the Act will be easy compared with the difficult task of symbolically unwinding the federal law, while preserving the key aspects that have enormous economic and political consequences, certain of which are discussed below.

Preexisting Conditions

In the recent past, Trump has stated that he would seek to maintain the “pre-existing condition” requirement that prohibits payers from excluding individuals with existing illnesses or conditions.  Republican plans for repealing the Act also maintain this protection of insureds with pre-existing conditions.

Desire of Insurance Companies to Underwrite Coverage in Exchanges

While the health insurance industry is predicted to remain fairly stable through early 2018, the potential loss of subsidies to both beneficiaries and payors could cause them to abandon the individual marketplaces altogether. The prospect of a lesser number of participants in the individual marketplaces would likely defeat the often-cited GOP policy proposal of enhancing competition among health insurers by permitting the sale of insurance across state lines.

Individual and Employer Mandate(s)

A key element of the Act requires most individuals and employers with more than 50 full-time employees to obtain “minimum essential healthcare coverage” or become subject to a penalty tax. The controversy surrounding these mandates have caused some individuals and small businesses to accept the penalty because it is less costly than the cost of coverage. This executive order permits individuals and small employers to be exempted from this provision. It is feared, however, that the relaxation of the individual and employer mandates will cause a significant increase in the number of uninsureds, which will force healthcare providers to continue shifting costs to insured populations. Payors expect that the relaxation of these mandates will likely cause healthier (i.e., younger) individuals to opt not to purchase insurance, thus making it more expensive to insure those who require insurance (i.e., the aged and those who have pre-existing conditions).  This result is expected to increase the cost of health insurance across the board.

Medicaid Expansion by States

Conservative states face the difficult choice between their general opposition to federal control versus the availability of significant federal subsidies for Medicaid program expansion . Many Medicaid programs are poorly administered, demonstrate cost overruns and result in significant state deficits.  Though certain states have developed successful Medicaid programs, it is expected that a number of states will simply abandon Medicaid expansion.

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It will be important for the new administration to build on the valuable lessons learned under Obamacare, rather than just dismantling the Act in its entirety.

 

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Telemedicine in Primary Care

Primary care physician groups, especially those employed through health systems, are increasingly using mid-level practitioners (i.e., nurse practitioners, physician assistants) to visit patients “virtually” through the use of telemedicine technologies. This combination of clinical and technological resources is being directed toward patients who have difficulty getting to the doctor’s office, such as those in nursing homes and assisted living facilities, and is expanding access to care by eliminating the need for a patient to come into the doctor’s office.

Some primary care practices are using NPs and PAs to monitor patients with chronic conditions, such as diabetes, hypertension and asthma. Telemedicine visits also help reach patients who would not otherwise visit their primary care providers, allowing doctors to keep tabs on their sickest patients by having NPs or PAs do weekly check-ins, and can keep patients out of the hospital if problems are caught early.

Physicians thinking of employing NPs or PAs to conduct telemedicine visits should know the rules, regulations and restrictions for telemedicine in their state. Of course, physicians also need to understand how such services will be reimbursed by third party payors. At this time, twenty-nine (29) states and the District of Columbia have laws that provide third party reimbursement for telemedicine services. Rules and regulations regarding the use of mid-level practitioners vary on a state by state basis. Certain states have relaxed their “scope of practice” laws to allow NP’s and PA’s to care for patients independently from physicians.

Although telemedicine offers numerous potential benefits, the delivery of health care via telecommunication technology presents health care providers and organizations with unique risks and challenges. Some of the main areas of concern include the following: fears of a breakdown in the relationship between health professional and patient (for example, inability to perform the whole consultation); problems with the quality of health information (for example, lack of access to a patient’s full medical record); and organizational complications (for example, problems with infrastructure planning and development). In addition, malpractice liability concerns have also been exacerbated by the move toward more telemedicine-based services, due to issues regarding location of service and determining jurisdiction. State legislators are actively seeking solutions to these challenges, because the provision of healthcare services using telemedicine is widely viewed as having a pivotal role in the health care delivery system in the future.

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Small and Rural Medical Practices Not Prepared for MACRA, According to GAO

A recent Government Accountability Office (GAO) report highlights that small and rural physician practices face significant problems with the implementation of Medicare’s value-based payment models under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Value-based payment models require physicians to take steps toward using electronic health record (EHR) systems to better track and monitor quality of patient care. The GAO review found that small physician practices (defined as having fifteen (15) or fewer physicians) and rural physician practices (defined as those located outside of an urban area) are less prepared for this transition than their large, urban counterparts.

The GAO report focused on five (5) areas that will likely prove challenging to these small and rural practices:

Financial Resources and Risk Management. GAO posits that many small and rural practices lack the finances to make investments in EHR systems, particularly when such investments are not likely to yield significant returns for several years.

Health IT and Data. To be successful under value-based payment models, physician practices will need to hire and train professional staff and develop experience EHR systems and analyzing data.

Population Health Management Care Delivery. Population health management in rural areas can be more complex, particularly when patients are required to travel long distances to receive care.

Quality and Efficiency Performance Measurement and Reporting. Practices with relatively few patients may find that proper measurement of quality and efficiency can be easily distorted by patients with multiple morbidities, requiring greater levels of care.

Effects of Model Participation and Managing Compliance with Requirements. Small physician practices typically operate with leaner staffing levels, which could create difficulty in balancing and finding time for direct patient care, care management activities and additional administrative duties associated with value-based payment models.

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Despite these challenges, and the fact that the political climate is uncertain, industry observers believe that MACRA is not going away, as it has significant bipartisan support. As such, medical practices are well-advised to continue to prepare for the new MACRA payment system, which the Centers for Medicare and Medicaid Services will implement in 2017.

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House Files Motion to Delay Affordable Care Act Lawsuit in Light of New Trump Presidency

On November 21, 2016, the U.S. House of Representatives filed a motion with the D.C. Court of Appeals requesting a temporary hold on briefing in U.S. House of Representatives v. Burwell as a result of Donald Trump’s election earlier that month.  The case is currently on appeal by President Obama’s administration after the District Court found that the appropriation of funds to pay cost-sharing subsidies to health insurers under Section 1402 of the Affordable Care Act did not receive Congressional approval and that it was unlawful for the Government to pay subsidies under such circumstances.

The House asked the D.C. Court of Appeals to grant a temporary stay of the briefing schedule until February 21, 2017, at which point the House proposed that the parties would file a joint status update on the matter, which would specify either (i) that the parties were considering settlement or dismissal of the case, or (ii) a new briefing schedule.  The House argued that a temporary stay of the briefing schedule would provide President-Elect Trump and his administration time to decide on continuing the prosecution of the case or to otherwise resolve the appeal.  The House motion also requested, as an alternative, a 45-day extension of the briefing schedule if the Court of Appeals did not grant the temporary hold on briefing until February 21.

In response, the Obama administration filed a motion to continue the briefing schedule uninterrupted, stating that the House identified “no harm to completing the briefing schedule to which the parties agreed” and positing that the issues under appeal are not changed by the election outcome.  The House’s brief is currently due on December 23, 2016, with the reply due on January 19, 2017.

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Attorney George W. Bodenger

Memberships

  • Member, American Bar Association, Health Law Section
  • Member, American Health Lawyers Association
  • Member, American Health Lawyers Association Accountable Care Organization Task Force.

Education

  • J.D., Temple University James E. Beasley School of Law
  • M.B.A., Drexel University, summa cum laude
  • B.S., Pennsylvania State University

Bar Admission(s)

  • Pennsylvania
  • New Jersey

Calendar

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