Taking Pills for Pay: FDA Releases Information Sheet on Paying Research Subjects

In clinical research, compensating research subjects as an incentive for their participation is a common practice. However, paying research subjects can also pose ethical issues and create the potential for abuse such as undue inducement.

The Food and Drug Administration (FDA) does not provide firm guidance to institutional review boards (IRBs) and clinical investigators as to how they should calculate payments or the specific factors that should be considered in setting that compensation. Recently, however, the FDA updated their guidance for IRBs and clinical investigators on appropriate practices for paying or reimbursing research subjects. It is important to note that the information sheet is non-binding and meant to serve as a guide on how to approach payment and reimbursement to clinical research subjects.

Authored by:
 Ashley L.


The New Option in Town: Applying for the Low Volume Appeals Settlement

In November 2017, the Department of Health and Human Services (HHS) announced new settlement options for providers and suppliers stuck in the backlog of the Medicare appeals process. One of the new options available is the Low Volume Appeals Settlement Options (LVA), which is geared towards providers and suppliers with fewer than 500 Medicare Part A or Part B claim appeals pending at the Office of Medicare Hearing and Appeals (OMHA).

HHS provided little information on LVA at the time of the announcement, as we noted in our previous alert, “HHS Reveals New Settlement Options to Address Medicare Appeals Backlog.” Since that time, HHS held a webinar on January 9, 2018 covering the logistics of the LVA process and clarifying any outstanding issues.

Authored by:
Donna K.
Tracy E.
Ashley L.
Matthew W.


Key Health Care Provisions of Bipartisan Budget Act of 2018

The wide-reaching Bipartisan Budget Act of 2018 (BBA), passed by Congress and signed by the President on February 9, 2018, extends and modifies dozens of health care programs, including extending funding for two years for community health centers and extending the Children’s Health Insurance Program (CHIP) for an additional four years through Fiscal Year (FY) 2027. The bill also provides funding for a number of Medicare extenders and incorporates policy reforms from the CHRONIC Care Act and the Medicare Part B Improvement Act – affecting Stark Law compliance, physician payment plans, telehealth, home health services, and other programs. The bipartisan legislation also includes funding for the National Institutes of Health (NIH) and for efforts to combat the opioid crisis. Finally, the legislation repeals the Affordable Care Act’s (ACA) Independent Payment Advisory Board (IPAB) and eliminates the Medicaid Disproportionate Share Hospital (DSH) reductions scheduled for FY18 and FY19. Of note, the legislation does not include ACA market stabilization measures to address ongoing uncertainty and turmoil in the individual insurance market. Congress will now turn to enacting a full-year omnibus appropriations measure for FY18 under the newly passed BBA.

Authored by:
Sheila P.
Sam E.


Leslie Demaree Goldsmith

Donna Thiel
Washington, D.C.

Bipartisan Budget Act of 2018: Major Impacts on Health Care

By Sheila P. Burke, Amit Rao and Sam E. Sadle

After a brief federal government shutdown overnight, Congress passed and the President signed into law the Bipartisan Budget Act of 2018 on February 9, 2018. The Senate voted 71-28 and the House voted 240-186 to approve the legislation. This major legislation provides for a two-year budget agreement that increases the budget caps, resulting in approximately $300 billion in additional federal spending. The legislation increases both defense and domestic spending, suspends the federal debt ceiling until March 2019, and funds hurricane and wildfire disaster relief, among other programs. The measure extends stopgap funding through March 23, 2018 to keep the federal government fully operating and to give Congress time to enact a full-year omnibus appropriations measure for Fiscal Year 2018 (FY18).

The measure also extends and modifies dozens of health care programs, including extending funding for two years for community health centers and extending the Children’s Health Insurance Program (CHIP) for an additional four years through FY27. Similar to the House-passed Continuing Resolution (CR) from earlier this week, the bill provides funding for a number of Medicare extenders and incorporates policy reforms from the CHRONIC Care Act and the Medicare Part B Improvement Act – affecting Stark Law compliance, physician payment plans, telehealth, home health services, and other programs. The bipartisan legislation also includes funding for the National Institutes of Health (NIH) and for efforts to combat the opioid crisis. Finally, the legislation repeals the Affordable Care Act’s (ACA) Independent Payment Advisory Board (IPAB) and eliminates the Medicaid Disproportionate Share Hospital (DSH) reductions scheduled for FY18 and FY19. Of note, the legislation does not include ACA market stabilization measures to address ongoing uncertainty and turmoil in the individual insurance market.


Sheila P. Burke
Washington, D.C.

Amit Rao
Washington, D.C.

Sam E. Sadle
Washington, D.C.

HBMA Washington Report – Jaunary Issue

Washington Report – January, 2018
(Covers activity between 1/1/18 and 1/31/17)
Bill Finerfrock, Matt Reiter, Nathan Baugh, Ryan Mash and Carolyn Bounds


Three-day Government Shutdown Leads to Six Year CHIP Reauthorization, Delay of ACA Taxes

Due to the failure of Congress to pass any of the 12 bills necessary to fund all agencies of the federal government, there was a government-wide “shutdown” on January 20th. The government “reopened” after funding was temporarily restored three days later. The bill that allowed the government to reopen also included language reauthorizing the Children’s Health Insurance Program (CHIP) and delayed several ACA related taxes that were scheduled to take effect in 2019.

Every year, Congress is supposed to pass 12 separate appropriations bills that fund the agencies that make up the Federal Government. These appropriations bills normally cover the entire federal Fiscal Year (October 1 to September 30). If, for some reason, Congress is unable to pass those bills before the new fiscal year begins, they will pass what is known as a Continuing Resolution (CR) which extends the federal fiscal year to whatever “new” date is included in the CR. This allows agencies to keep spending at the previously approved spending level.

The 2018 Fiscal Year began on October 1, 2017. Because Congress was unable to complete the appropriations process ahead of that date, all federal agencies have been relying on a series of short-term CRs to keep the government up-and-running since October 1.

On December 22, 2017, President Trump signed into law a CR that funded the Federal Government through January 19, 2018. However, the Senate and House failed to reach agreement on another extension before January 20th causing the Federal Government to “shut down” for three days until funding was restored by Congress on January 22nd. Two of the three days were the weekend which mitigated the effect of the shutdown.

In these situations, it is not unusual for Congress to attach unrelated provisions, known as “policy riders,” to the Continuing Resolution. These “riders” are often necessary to secure the votes needed to pass the underlying legislation. A bill such as a CR is an attractive vehicle for policy riders because of its “must pass” nature.

Initially, brinksmanship from both parties is the order of the day. Each side establishes “ironclad” demands that must be met “or else”. Eventually, cooler heads prevail – as was the case with this CR – and Congress votes to reopen government with each side trying to declare some victory – Pyrrhic or otherwise.

On Monday, January 22nd, a new CR was passed and the government shutdown ended. This CR expires on February 8th. Included in the CR was a six-year reauthorization for CHIP funding. The CR also further delays several taxes that were created under Affordable Care Act (ACA). The medical device tax is delayed until 2020, the excise tax on expensive employer-provided health insurance (sometimes referred to as the “Cadillac Tax”) is delayed until 2021 and a tax on health insurers is delayed until 2020.

At the time this article was being written, it is unclear if another shutdown will occur at 12:01 AM, February 9th. A new CR was introduced in the House to extend funding into March. This CR also would fund the Department of Defense for the entire year; reauthorize funding for Community Health Centers (CHC) for two years, extend several temporary Medicare policies that expired at the end of the year and adopt changes in other Medicare programs that enjoyed bi-partisan support.

It is important to note that during a government shutdown, the Centers for Medicare and Medicaid Services (CMS) will largely operate without significant disruption. Claims will be paid and other important services such as provider enrollment activities would also continue.

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CMS Creates New, Centralized MIPS Reporting Tool

The Merit-based Incentive Payment System (MIPS) offers participating clinicians several options for reporting data for all four reporting components of the program. These submission methods include claims reporting, EHR reporting and reporting through registries.

The Centers for Medicare and Medicaid Services (CMS) is now offering a single, streamlined reporting method through the Quality Payment Program (QPP) website ( to submit data, and satisfy all MIPS reporting requirements for the 2017 reporting year.

Eligible Clinicians (ECs) have until March 31, 2018, to submit 2017 MIPS data. It should be noted that CMS Web Interface users (groups with 25 or more clinicians, including APM entities) have until March 16, 2018, to report data.

ECs can upload data manually to this system or through their EHR if it supports that functionality.

ECs who use this new CMS submission tool can also view their performance data in real time.

ECs only need to achieve a MIPS Composite Performance Score (CPS) of three points to avoid negative payment adjustments in 2019 based on 2017 data reporting. Submitting data on one quality measure for one patient for any period of time would achieve the minimum CPS of three points. This benchmark CPS increases from three points to 15 points for the 2018 reporting year.

Questions about this new reporting system can be directed to the CMS QPP Help Desk,

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CMS Will Begin Processing Claims Affected by Expiration of Medicare “Extenders”

Every year or two, Congress has taken action to temporarily extend certain short-term Medicare coverage policies which are aptly referred to as “Medicare extenders.” These policies include exceptions to the outpatient therapy caps, the Medicare physician work geographic adjustment floor, add-on payments for rural ambulance services and rural home health services, payments for low volume hospitals, and payments for Medicare dependent hospitals.

For a variety of reasons, Congress failed to pass a bill that extended these policies before they expired at the end of 2017. The Centers for Medicare and Medicaid Services (CMS) is therefore bound by law to begin processing claims without the extenders payment policies in place.

CMS has taken steps to mitigate the effects of the expired extenders, specifically with regard to the expired exceptions to the outpatient therapy caps.

Beginning on January 1st, when the expiration of the extenders took effect, CMS held claims affected by the therapy caps exceptions process expiration. Medicare caps how much it pays for occupational therapy services at $2,010. It also caps what it pays for combined physical therapy and speech-language pathology at that same amount. The expired extenders provision provided an exceptions process to allow for payments that exceed the caps.

Only therapy claims containing the KX modifier were held. Claims submitted with the KX modifier indicate that the cap has been met but the service meets the exception criteria for payment consideration. During this short period of time, claims that were submitted without the KX modifier were paid if the beneficiary had not exceeded the cap but were denied if the beneficiary exceeded the cap.

According to CMS:

Starting January 25, 2018, CMS will immediately release for processing held therapy claims with the KX modifier with dates of receipt beginning from January 1-10, 2018.  Then, starting January 31, 2018, CMS will release for processing the held claims one day at a time based on the date the claim was received, i.e., on a first-in, first-out basis. At the same time, CMS will hold all newly received therapy claims with the KX modifier and implement a “rolling hold” of 20 days of claims to help minimize the number of claims requiring reprocessing and minimize the impact on beneficiaries if legislation regarding therapy caps is enacted.

As of the time this article was written, Congress was considering a Continuing Resolution (CR) that extends funding for the Federal Government beyond February 9th. The CR includes Medicare extenders language. This package would temporarily extend many of these policies but would permanently eliminate the therapy caps described above. A more detailed summary of these provisions will be provided to HBMA members once a bill with extenders language is officially passed into law.

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HHS Secretary Confirmed, CDC Director Resigns

On January 24th, the Senate voted 55-43 to confirm Alex Azar as the Secretary of Health and Human Services (HHS). Azar replaces Rep. Tom Price (R-GA) who stepped down as HHS Secretary in 2017 after it was uncovered that he frequently used expensive private charter flights. Cabinet secretaries generally fly commercial under most circumstances. Azar was sworn in as Secretary on January 29th.

Azar served as the Deputy Secretary of HHS under President George W. Bush. Azar also served as the President of pharmaceutical giant Eli Lilly & Co.’s U.S. operations for five years but left that position in 2017.

Similar to Secretary Price, Azar has been a vocal critic of the Affordable Care Act (ACA) and will likely use his executive authority to make changes to the way the law is implemented.

Azar is supportive of the transition to value-based payments in Medicare and, like his predecessor, he is also committed to reducing the burdens these models place on providers.

As a former pharmaceutical executive, Azar will bring a different perspective to HHS than Secretary Price. Secretary Price’s background as a physician (orthopedic surgeon) led him to focus on the concerns of the physician community. He sought to ease the burdens of many HHS policies on physicians such as quality reporting and mandatory alternative payment models.

While Azar also subscribes to this “burden reduction” philosophy, his background leading Eli Lilly & Co. could lead to a shift in HHS’ focus towards prescription drug issues. Prescription drug prices has been a nationally prominent issue for several years. President Trump re-emphasized the importance of addressing rising prescription drug prices in his State of the Union Address.

Two days after Azar was sworn in as Secretary, the Director of the Centers for Disease Control and Prevention (CDC), Brenda Fitzgerald, announced she would resign her position over lingering financial conflicts of interest.

These conflicts of interest were disclosed before her confirmation. She attempted to divest from these conflicts but ultimately she was unable to divest from some of her holdings in healthcare companies. This has required her to recuse herself from several notable areas of the CDC’s work such as cancer prevention and testifying at congressional hearings on public health threats.

Fitzgerald then came under greater scrutiny after it was reported that she purchased stock in a tobacco company while she was CDC Director.

Fitzgerald, who is also a physician, has been the CDC Director since July. She was previously the Commissioner of the Georgia Department of Public Health. The CDC’s Principal Deputy Director, Anne Schuchat, will serve as Acting Director until a replacement is nominated by the President and confirmed by the Senate.

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CMS Will Begin Mailing New Medicare Cards In April

Beginning in April, Medicare beneficiaries residing in certain states and territories will begin receiving new Medicare cards in the mail. These cards will include the new Medicare Beneficiary Identifier (MBI) that replaces the Social Security Number (SSN)-based Health Insurance Claim Number (HICN).

CMS is phasing in the distribution of the new Medicare cards in seven “waves.” States in the first two waves will receive their new Medicare cards between April and June of 2018 with states in the remaining five waves receiving their new cards “after June 2018.”

Wave one includes Delaware, the District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia.

Wave two includes Alaska, American Samoa, California, Guam, Hawaii, Northern Mariana Islands and Oregon.

According to CMS, starting in April 2018 Medicare beneficiaries will be able to check the status of card mailings in their area on

Beginning in October 2018, when providers submit a claim using a patient’s valid and active HICN, CMS will return both the HICN and the MBI on every remittance advice. CMS has begun providing examples of what this will look like via its website.

CMS will accept claims with either the HICN or MBI from April 1, 2018, through December 31, 2019. Beginning on January 1, 2020, CMS will only accept claims with the MBI.

In addition to claims submission, CMS will allow providers to use the HICN or MBI for other transactions such as:

  • Appeals – Providers can use either the HICN or the MBI for claims appeals and related forms.
  • Claim status query – Providers can use either the HICN or MBI to check the status of a claim (276 transactions) if the earliest date of service on the claim is before January 1, 2020.  If a provider is checking the status of a claim with a date of service on or after January 1, 2020, they will have to use the MBI.
  • Span-date claims – Providers can use the HICN for 11X-Inpatient Hospital, 32X-Home Health (home health claims & Request for Anticipated Payments (RAPs)), and 41X-Religious Non-Medical Health Care Institution claims if the “From Date” is before the end of the transition period (12/31/2019).  Providers can submit claims received between April 1, 2018, and December 31, 2019, using the HICN or the MBI.  If a patient starts getting services in an inpatient hospital, home health, or religious non-medical health care institution before December 31, 2019, but stops getting those services after December 31, 2019, they may submit a claim using either the HICN or the MBI, even if they submit it after December 31, 2019.
  • Incoming premium payments – People with Medicare who don’t get SSA or RRB benefits and submit premium payments should use the MBI on incoming premium remittances.  But, CMS will accept the HICN on incoming premium remittances after the transition period.  (Part A premiums, Part B premiums, Part D income related monthly adjustment amounts, etc.)

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States Begin to Adopt Medicaid Work Requirements

The Centers for Medicare and Medicaid Services (CMS) has begun issuing waivers to states allowing them to impose limited work requirements for able bodied adults who are enrolled in Medicaid. Kentucky and Indiana are the first two states to receive this authority from CMS.

On January 11th, CMS released a letter to State Medicaid Directors which provided guidance on how CMS will use its section 1115 waiver authority to review proposals that would add work requirements as an eligibility condition for Medicaid.

Beneficiaries will be required to verify their status in approved activities, such as employee job search, job training programs, or other means of demonstrating they are working or actively looking for work. The waiver requires that the able-bodied adult recipients participate in at least 80 hours/month of “employment activities.”

The work requirements would apply to able-bodied, non-elderly adults who are currently not working for a non-exemptible reason. Exemptions for this program include not working due to illness or disability, school attendance, and being the primary caregiver (limited to one per household).

In its guidelines, CMS is clear in saying that states must provide assistance to beneficiaries in meeting the work requirements, while also stating that they are not permitted to use federal Medicaid funding to do so.

Several other states (AR, AZ, KS, ME, NH, UT, and WI) have applied for the waiver and are awaiting a decision from CMS.

This policy has already been challenged in court by Kentucky Medicaid beneficiaries.

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Trump Administration Issues Proposed Rule for Expanding Access to Association Health Plans

The Department of Labor (DOL) has issued a proposed rule that changes the definition of “Employer” under the Employee Retirement Income Security Act (ERISA) to expand the definition in a way that allows associations to offer health insurance plans for their members similar to how employers offer health insurance to their employees.

In October 2017, President Trump issued an Executive Order (EO) titled “Promoting Healthcare Choice and Competition Across the United States.” This EO was intended to offer consumers alternative options to the Affordable Care Act (ACA) for obtaining health insurance. The EO also directed certain federal agencies (HHS and Treasury) to issue proposed regulations that would expand the availability of Short-Term, Limited Duration Insurance (STLDI) products and expand the availability and permitted uses of health reimbursement arrangements (HRA).

Under the EO the DOL was directed to expand the conditions that would satisfy the “commonality-of-interest” requirements the Department of Labor uses to define an “employer” under the Employee Retirement Income Security Act (ERISA), the law that regulates insurance provided by large employers that operate in multiple states. The DOL has proposed changing this definition so that associations would be able to provide health insurance the same way that employers provide health insurance.

The goal of expanding access to AHPs is to increase access to the “large group” market for individuals and small businesses who are largely relegated to the individual/small group insurance market. ACA plans sold in the “individual” and “small group” markets are separated from the large group market into their own risk pool. The ACA markets are smaller and more volatile than the larger and insurance products sold on these markets tend to be more expensive.

Plans sold on the large group market are exempt from the ACA benefit mandates.

In theory, expanding access to AHPs, and therefore expanding access to the lower-cost and more stable large group market, may provide cost relief to individuals and businesses that are currently in the individual or small group markets. Advocates for expansion of the AHP market also believe that Association members can get price relief through expanded purchasing power. Plans sold on the large group market are exempt from many of the ACA benefit regulations which could reduce their price.

AHP critics argue that this option will undermine the actuarial stability of the already unstable individual and small group markets which will result in increased prices for anyone who remains in the ACA markets.

The proposed rule would also allow employers to form their own association for purposes of offering an AHP. Associations must be formed on the basis of geography or industry. A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide.

Under the AHP proposal, hypothetically, an individual who works as a freelance website designer and currently receives health insurance through the individual ACA Exchange, would be able to purchase health insurance through a trade association for website designers the individual belongs to, should that Association seek authority to establish an AHP. The individual would join together with hundreds of other freelance website designers as a group rather than each going into the insurance market as individuals.

Similar to ACA plans, AHPs would not be able to charge members higher premiums based on their health status or refuse to admit members to a plan because of health factors.

However, AHPs would not be subject to other ACA plan requirements such as the requirement to cover a list of essential health benefits. AHPs would also be exempt from the ACA’s medical loss ratio that requires plans to spend at least 80 percent of premiums on benefits.

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2018 Value Modifier Results Now Available

The Centers for Medicare and Medicaid Services (CMS) has published data on the payment adjustments for the 2018 Value Modifier (VM) payment year from data reported in 2016. The 2018 Value Modifier results and the payment adjustment factor are available on the 2016 QRUR and 2018 Value Modifier webpage.

According to CMS, in 2018, 1.8 percent of eligible providers (about 20,000 clinicians) will receive an increase of 6.6% to 19.9% on their Medicare physician fee schedule payments as a result of their high performance on quality and cost measures in 2016. The overwhelming majority of eligible clinicians received neutral payment adjustments. About 25 percent of eligible clinicians will receive a negative payment adjustment for failing to meet the reporting requirements of the VM program.

On September 18, 2017, CMS made available the 2016 Annual Quality and Resource Use Reports (QRURs) to every eligible provider in the VM program. The 2016 Annual QRURs show how eligible providers performed in 2016 on the quality and cost measures used to calculate the 2018 VM and payment adjustment.

2018 is the final year that providers will receive payment adjustments under the VM program. Beginning in 2019, providers will have their payments adjusted based on their participation in the Merit-based Incentive Payment System (MIPS) for which 2017 was the first reporting year.

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CMS Provides MIPS Reporting Leeway for ECs Affected by Natural Disasters in 2017

The Centers for Medicare and Medicaid Services (CMS) is updating its Extreme and Uncontrollable Circumstances Policy for the Merit-based Incentive Payment System (MIPS) to ease the reporting burdens on eligible clinicians (EC) in geographic areas that were affected by natural disasters in 2017. CMS issued an Interim Final Rule in 2017 that that addresses extreme and uncontrollable circumstances MIPS ECs could face as a result of natural disasters that occurred in 2017.

In its announcement, CMS stated that it understands living in an area where these disasters occurred may impact an EC’s resources to collect or submit data on time.

ECs in Federal Emergency Management Agency (FEMA) designated areas affected by Northern California wildfires and Hurricanes Harvey, Irma, Maria and Nate will be automatically identified. No action is required by the EC.

Under this policy, CMS is lessening the reporting requirements for ECs in these designated areas and automatically providing affected ECs with a neutral MIPS payment adjustment. However, affected ECs can voluntarily submit data for two or more MIPS performance categories by the submission deadline for 2017. Voluntarily participating affected ECs will be scored on each performance category, according to normal existing MIPS scoring policies.

CMS announced an expansion to the list of geographic areas that will be covered under this policy. MIPS eligible clinicians in these newly identified designated areas for Hurricane Nate and the California Wildfires are now covered by the Extreme and Uncontrollable Circumstances policy:

  • Alabama: Autauga, Baldwin, Choctaw, Clarke, Dallas, Macon, Mobile, and Washington
  • Mississippi: George, Greene, Hancock, Harrison, Jackson, and Stone
  • California: Butte, Lake, Mendocino, Napa, Nevada, Orange, Santa Barbara, Solano, Sonoma, Ventura, and Yuba

ECs have until March 31, 2018, to submit MIPS data for the 2017 reporting year. Questions on this policy can be directed to the QPP help desk:

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President Trump Focuses on Opioids and Veteran Health in State of the Union Address

In the hour and twenty minute State of the Union Address given by President Donald Trump on January 30th, only a few minutes were dedicate to healthcare issues. The State of the Union Address generally addresses issues in broad terms, however the speech is one of the strongest indications of what the President’s priorities will be for the year ahead.

As expected, the President used the speech to highlight that Congress eliminated the Affordable Care Act’s (ACA) individual mandate penalty beginning in 2019. However, he did not use the speech to urge Congress to make a renewed attempt at repealing and replacing the ACA after Congress was unable to do so in 2017.

Addressing opioid abuse and addiction has been a main priority for Congress and the Administration. The President’s address shows that it will continue to be a priority in 2018.

President Trump used his speech to call attention to the fact that every day, 174 people die from opioid overdose. He advocated for a tougher law enforcement approach to crack down on drug dealers as a key strategy for addressing this problem.

He also highlighted the issue of rising prescription drug prices as an area his administration intends to focus in the coming year.

President Trump used the speech to call attention to the need to improve healthcare for our nation’s veterans. He voiced support for veteran access to increased choices in their healthcare options. This is likely a reference to the Veterans Choice program which allows veterans to see private health care providers outside of the VA system under certain circumstances.

President Trump also expressed support for patients “right to try” experimental drugs and treatments. Right to try is of particular interest of Vice President Pence.

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CBO Analysis Compares Healthcare Prices for Commercial and Government Payers

The Congressional Budget Office (CBO) is out with a white paper analyzing the price of healthcare across different payers. The CBO is a non-partisan agency of Congress that provides estimates of the impact major legislation will have on the federal budget and also analysis of the economy at large.

The CBO conducted its analysis, using claims data from 2014, to gather information and compare the prices of the 20 most common and expensive physicians’ services paid for by Aetna, Humana, and UnitedHealthcare to those of Medicare’s fee-for-service (FFS) program and Medicare Advantage (MA).

The analysis done by the CBO suggests that private insurers tend to pay much more for medical services than Medicare FFS and MA plans pay for the same services. It also shows a similarity between Medicare FFS and MA payment rates.

Of the 20 services analyzed, the CBO found that commercial prices were between 11 and 139 percent higher than Medicare FFS prices. CBO also found that the ratios of commercial prices to Medicare FFS prices varied substantially across and within metropolitan statistical areas. MA price ratios did not vary in this sense.

For half of the 20 services CBO studied, there was at least a twofold difference in the average ratios of commercial to Medicare FFS prices across geographic areas.

Compared to in- and out-of-network services, commercial prices were up to 300 percent higher out-of-network than in, while MA services were at most 20 percent higher out-of-network.

Geographic location plays a large role in determining prices the CBO found. According to the CBO, “the average ratios of commercial prices to Medicare FFS prices in the costliest metropolitan areas were at least 70 percent higher than the average price ratios in the least costly areas for all services.” CBO goes on to describe how, “For 10 of the 20 services, the most costly areas were twice as expensive as the least costly. Similar variation was observed among providers within areas. For all 20 services, the most expensive providers were paid 50 percent more than the least expensive in at least half of all metropolitan areas.” About one third of price disparities among providers could be explained due to geographic differences.

The CBO found that commercial prices lack a benchmark that is typically found in Medicare’s FFS program. In the 20 services studied, price ratios at the 90th percentile of a service were double those in the 10th percentile. Compared to MA which at the maximum, was 54 percent more expensive at those same percentiles.

According to the CBO, depending on the service, between 42 percent and 63 percent of the MA claims studied were priced within one percentage point of the Medicare FFS price. In contrast, fewer than three percent of commercial claim observations were within a percentage point of the Medicare FFS price.

It is generally common knowledge among the healthcare RCM community that commercial payers reimburse at higher rates than government payers such as Medicare and Medicaid. However, this analysis by CBO offers quantifiable insight into how large of a price disparity exists.

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Amazon, JP Morgan Chase, and Berkshire Hathaway Announce Plans to Disrupt the Healthcare Industry

On January 30, 2018, three of America’s largest corporations, Amazon, JP Morgan Chase, and Berkshire Hathaway announced in a joint statement that they will be developing a new healthcare entity that will cover their employees for cheaper prices and promote more efficient practices. Specifically, the companies are “partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.”

The statement did not offer many details on what exactly this partnership will entail.

“The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

Tackling the enormous challenges of healthcare and harnessing its full benefits are among the greatest issues facing society today. By bringing together three of the world’s leading organizations into this new and innovative construct, the group hopes to draw on its combined capabilities and resources to take a fresh approach to these critical matters.”

Speculation on what this program will look like varies based on who you ask, but predictions have ranged from a self-insured plan for their employees to the companies creating their own closed network of providers to serve the employees of those three companies.

Their combination of technological capability, online infrastructure, and investment experience leads many to believe that they have a chance to succeed in this policy arena.

Other possibilities could be that they would use their combined size to create a negotiating network for their employees to apply downward pressure on costs. The companies said that their system would be “free of profit making incentives and constraints” which led to speculation on just how involved they will be in the distribution of the healthcare services themselves.

The sheer size of these three companies, as well as their notoriety as some of the most well-known companies in the world, have led to many observers viewing this announcement as something more significant than the normal corporate partnership. As always, the devil lies in the details. However, it is clear that this partnership certainly has the potential to disrupt the healthcare system in some way.

The announcement concludes by assuring us that more details will be released in the future.

In similar news, four large health systems announced they are making their own attempt at an industry shakeup. Intermountain Healthcare, SSM Health, Ascension and Trinity Health announced that they will seek to create their own generic drug manufacturing company. Rising prescription drug prices have been affecting the bottom line for hospitals across the country. These companies believe that creating their own, not-for-profit drug company will give them access to cheaper drugs. This venture will be a partnership with the Veterans Administration (VA).

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Veterans Affairs and HHS Partner to Reduce Waste and Fraud

The Department of Veterans Affairs (VA), the Department of Health and Human Services (HHS) and Center for Medicare and Medicaid Services (CMS) announced an inter-department partnership to share data, analytic tools, and other means to help identify waste, fraud, and abuse.

Since Congress allowed veterans to go outside of the VA for care under certain circumstances, the VA has faced a greater program integrity challenges. CMS has more experience in this area and can help the VA. Under this arrangement, CMS will share some of the fraud prevention resources it has developed with the VA.

Information sharing will also be a key component of this partnership. Sharing program integrity information between the two agencies will help both Agencies identify providers who are trying to defraud the system.

An example of a resource the VA could receive includes CMS’ predictive analytics software, the Fraud Prevention System (FPS). The FPS is used to “flag” providers who are engaging in suspicious billing activities which helps CMS target its efforts. CMS has also been implementing other strategies such as its Targeted Probe and Educate (TPE) program which is intended to educate providers on how to correct billing errors before applying fraud prevention strategies.

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CMS Proposes Opioid Prescribing Limits for certain Medicare Enrollees

In its annual Call Letter that outlines the requirements for Medicare Part C and Part D plans for the upcoming plan year, the Centers for Medicare and Medicaid Services (CMS) proposed opioid prescribing limits for Medicare Part D plans to help address the growing issue of opioid addiction and abuse.

Under the proposal, Medicare Part D plans will have a safety limit of both length of prescriptions and strength. CMS is proposing to implement a supply limit for initial fills of prescription opioids of seven days for the treatment of acute pain with or without a daily dose maximum. CMS would also limit each seven-day supply to 90 morphine milligram equivalent (MME) unless overridden by the plan for special circumstances.

CMS is also considering measures on the simultaneous use of opioids and benzodiazepines.

This proposal comes on the heels of the President promising to address opioid addiction and abuse during his State of the Union Address. This is also part of a larger effort in general to ensure that the Part D program is responsible about not overprescribing opioids.

Attorney General, Jeff Sessions, indicated in a speech that the Department of Justice (DOJ) and the Drug Enforcement Administration (DEA) will increase its scrutiny of healthcare providers and pharmacies with unusual prescribing and distribution practices for opioids, respectively.

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CMS Transmittals

The following Transmittals were released by CMS during the month of January.

Transmittal Number Subject Effective Date
R1998OTN HIGLAS Enhancement Required for Implementation of Overpayment based Denials 2018-04-02
R1996OTN Analyze Common Working File (CWF) System and Identify Layouts with Minimum FILLER Areas Available 2018-04-02
R1997OTN Enhancement to the Recovery Audit Contractor (RAC) Mass Adjustment Input File 2018-07-02
R3945CP New Waived Tests 2018-04-02
R3946CP File Conversions Related to the Spanish Translation of the Healthcare Common Procedure Coding System (HCPCS) Descriptions 2018-04-02
R3947CP April 2018 Quarterly Average Sales Price (ASP) Medicare Part B Drug Pricing Files and Revisions to Prior Quarterly Pricing Files 2018-04-02
R3948CP Ensuring Correct Processing of Home Health Disaster Related Claims and Claims for Denial 2018-07-02
R765PI Medicare Diabetes Prevention Program (MDPP) Enrollment Process 2018-01-19
R1999OTN Implementation of the Transitional Drug Add-On Payment Adjustment 2018-01-02
R477PR1 Medicare Provider Reimbursement Manual Part 1, Chapter 14, Reasonable Cost of Therapy and Other Services Furnished by Outside Suppliers 2018-01-12
R2000OTN MCS Proof of Concept to Convert Existing MCSDT Window to Utilize API Technology 2018-07-02
R3949CP Healthcare Common Procedure Coding System (HCPCS) Codes Subject to and Excluded from Clinical Laboratory Improvement Amendments (CLIA) Edits 2018-04-02
R3950CP 2018 Durable Medical Equipment Prosthetics, Orthotics, and Supplies Healthcare Common Procedure Coding System (HCPCS) Code Jurisdiction List 2018-02-13
R297FM Notice of New Interest Rate for Medicare Overpayments and Underpayments -2nd Qtr Notification for FY 2018 2018-01-19
R476PR1 Medicare Provider Reimbursement Manual Part 1, Chapter 9, Compensation of Owners 2018-01-12
R2005OTN ICD-10 and Other Coding Revisions to National Coverage Determinations (NCDs) N/A
R240BP Internet Only Manual (IOM) Update to Pub. 100-02, Chapter 11 – End Stage Renal Disease (ESRD), Section 100 2018-02-20
R2006OTN Monthly Status Report (MSR) Excel Data Template Updates and Implementation of MAC/CMS Data Exchange (MDX) Portal System 2018-02-20
R3953CP Revisions to the Claims Processing for Grandfathered Oxygen Claims that Span Competitive Bidding Rounds 2018-07-02
R2008OTN Shared System Enhancement 2015: Identify Inactive Medicare Demonstration Projects Within the Common Working File (CWF) 2018-07-02
R2022OTN Modifications to the National Coordination of Benefits Agreement (COBA) Crossover Process 2018-02-18
R239BP Rural Health Clinic (RHC) and Federally Qualified Health Center (FQHC) Medicare Benefit Policy Manual Chapter 13 Update 2018-01-22
R2021OTN Shared System Enhancement 2014: Implementation of Fiscal Intermediary Shared System (FISS) Obsolete Financial Reports – Phase 2 2018-07-02
R2019OTN Redesign of Flu Vaccines in Fiscal Intermediary Shared System (FISS) N/A
R2018OTN Shared System Enhancement 2014: Implementation of Fiscal Intermediary Shared System (FISS) Obsolete Core Reports – Phase 2 2018-07-02
R2017OTN Updates to Common Working File (CWF) Edits for Acute Kidney Injury (AKI) Claims 2018-07-02
R2016OTN Part B Detail Line Expansion – VMS 2018-01-26
R2010OTN Analysis Only: Procedures to Handle Foreign (non US) Addresses 2018-07-02
R2011OTN Shared System Enhancement 2015: Identify Inactive Medicare Demonstration Codes 46, 48, and 49 within the Fiscal Intermediary Shared System (FISS) 2018-07-02
R2012OTN Analysis of Reject Responses for Prior Authorization/Pre-Claim Review Requests (PA/PCR) via the Electronic Submission of Medical Documentation (esMD) System and Usage of Standardized Review Reason Codes and Statements 2018-07-02
R2013OTN Global Surgical Days for Critical Access Hospital (CAH) Method II 2018-01-26
R2014OTN Identifying Prior Hospice Days When Calculating Hospice Routine Home Care Payments After a Transfer 2018-07-02
R2015OTN Updates to the Common Working File (CWF) to Allow Entry Code 9 Durable Medical Equipment (DME) Claims to Process Correctly 2018-01-26
R177SOMA Revisions to State Operations Manual (SOM) Appendix G, Guidance for Surveyors: Rural Health Clinics 2018-01-26
R13P240 By reissuing transmittal 12 as transmittal 13, in order to revise the effective date from cost reporting periods ending on or after August 31, 2017 to cost reporting periods ending on or after September 30, 2017. No other revisions are made in this transmittal. N/A

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Health Law Alert – February 2018

BPCI Advanced – CMS Offers a Familiar Program with a New Twist

The Centers for Medicare & Medicaid Services (CMS) is launching BPCI Advanced – the successor program to the Bundled Payments for Care Improvement Initiative. Providers that like the current BPCI program, or simply missed the opportunity to join BPCI when it launched in 2013, should consider applying for BPCI Advanced before the March 12, 2018 application deadline.

CMS created the concept of bundled payments as a way to link payments across all health care providers during a single episode of care, with the aim of improving care and removing waste from the health care delivery system. BPCI Advanced builds on the work of CMS’s Center for Medicare and Medicaid Innovation (CMMI) and the foundation of the first BPCI initiative, which started in April 2013 and will end on September 30, 2018. The BPCI Advanced performance period will begin on October 1, 2018 and run through December 31, 2023.

Authored by:
Kristin M. Bohl, 410.862.1145,
Christopher P. Dean, 410.862.1176,
Catherine A. Martin, 410.862.1120,
Ashley L. Thomas, 202.508.3429,


Post-Acute Care Providers Ponder Role in BPCI Advanced

As CMS’s approach to Alternative Payment Models continues to evolve, most recently with the release of BPCI Advanced, post-acute care providers may be left scratching their heads as they try to determine where they fit. An evaluation of Year 3 of the BPCI program, released in October 2017, identified shortened skilled nursing facility (SNF) stays as a primary driver of savings under both BPCI Model 2 and Model 3. Shorter SNF stays, and more efficient use of other types of post-acute care, will likely continue to drive savings for BPCI Advanced participants. Despite the role post-acute care (PAC) providers play in reducing costs, the updated iteration of the BPCI program reduces opportunities for them to benefit from the reductions in costs that they help to generate. Nonetheless, under BPCI Advanced, cooperating with participating physicians and hospitals to coordinate care for beneficiaries during BPCI episodes will remain important for SNFs and other PAC providers.

Authored by: Meredith N. Larson, 410.862.1123,


Nursing Facility Discounts Approved in OIG Advisory Opinion 17-08

The OIG created an opening for nursing facility discounts to private payors when it approved a startup company’s proposal to create a network of nursing facilities willing to offer discounts on the daily rates charged to private long term care insurers and their policy holders in OIG Advisory Opinion 17-08. Because the nursing facilities involved also provide items and services that are reimbursed under federal health care programs, the OIG analyzed the arrangement under the beneficiary inducement prohibitions of the civil monetary penalty statute (beneficiary inducement CMP) and the Anti-Kickback Statute (AKS). The OIG ultimately concluded that neither AKS sanctions nor a CMP would be imposed due to the sufficiently low risk of fraud, abuse or beneficiary inducement under the facts at hand.

Authored by: Kathleen R. Salsbury, 202.508.3411,
Reviewed by: William T. Mathias, 410.862.1067,


OIG Offers Additional Guidance on Gainsharing Arrangement in Advisory Opinion 17-09

A non-profit acute care hospital may share cost savings for certain spinal surgeries with neurosurgeons in a multi-specialty physician group following approval by the U.S. Department of Health & Human Services, Office of Inspector General (OIG). In Advisory Opinion 17-09, the OIG determined that the parties had incorporated sufficient safeguards in the gainsharing arrangement to avoid sanctions under both the civil monetary penalty prohibiting a hospital’s payment to a physician to induce the reduction or limitation of medically necessary services to Medicare or Medicaid beneficiaries (the Gainsharing CMP) and the Anti-Kickback Statute (AKS).

The advisory opinion is notable for two firsts. It is the first advisory opinion to address gainsharing since the passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which modified the Gainsharing CMP to prohibit only inducements made to reduce or limit medically necessary services under Medicare or Medicaid. Furthermore, it is the first gainsharing advisory opinion involving a large multi-specialty physician group.

Authored by:
Ashley L. Thomas, 202.508.3429,
William T. Mathias, 410.862.1067,


OIG January 2018 Work Plan Update

The OIG added six new items to its Work Plan with the January 2018 update. Consistent with prior Work Plan missives, the OIG continues to focus its efforts on reducing prescription opioid misuse. Additionally, similar to the December 2017 Work Plan update, the Medicare Advantage industry may be interested to know the OIG is examining elements impacting risk-adjusted payments to Medicare Advantage organizations. Those involved in the orthotic device industry should be aware that the OIG is scrutinizing reimbursement for certain off-the-shelf orthotic devices. Furthermore, the OIG is analyzing claims data to determine the prevalence of potential abuse to Medicare beneficiaries. Lastly, the OIG will examine states that receive block grants related to the Child Care Development Fund to ensure program integrity. Read on for brief descriptions of the six new items.

Authored by: Daniel A. Stephenson, 615.726.5678,
Reviewed by: William T. Mathias, 410.862.1067,


Quotable: Non-profits and the New Tax Law

Jackie Henson and Bill Robinson explain what non-profits need to know about the new tax law in this interview with HealthLeaders.

“This provision, this 21% excise tax, once you start getting into it, is not going to be an easy provision to comply with,” says Jacqueline Henson, an attorney and specialist in tax-exempt organizations with the Washington, D.C. office of the Baker Donelson law firm. “It will make life difficult not necessarily for the largest of the largest organizations, but for the mid-sized. I don’t think non-profits know what’s going to hit them yet.”


Co-Chairs, Health Care Regulatory Group

Jonell B. Beeler

Catherine A. Martin