Washington Watch

Authors: Sara Imhoff, Amita Sanghvi, Peggy Tighe and Rebecca Burke of Powers, Pyle, Sutter, & Verville, PC

CMS Extends Enforcement Delay of Two-Midnight Rule

Through an update posted on the CMS website on August 12, 2015, CMS indicated that it would further delay review of patient status under the Inpatient Prospective Payment System (IPPS) and two-midnight rule through December 31, 2015. CMS’ decision is an extension of a moratorium that Congress had placed on the two-midnight rule as part of the Medicare Access and CHIP Reauthorization Act of 2015, last April, which would have otherwise expired October 1, 2015.  The two-midnight rule states that inpatient admissions are payable under Medicare Part A if the patient is expected to stay in the hospital for at least two midnights and the medical record supports that expectation. To implement this delay, CMS stated that it “will not approve recovery auditors to conduct patient status reviews for dates of admission of October 1, 2015 through December 31, 2015.” CMS had proposed changes to the two-midnight rule in the Hospital Outpatient Prospective Payment System proposed rule for CY 2016 on July 1, 2015 that would allow short-stay inpatient admissions for less than two midnights on a case-by-case basis as opposed to under “rare and unusual” circumstances under the existing rule.

Federal Court Eases Rule for Promotion of Off-Label Uses

On August 7, 2015, a federal district court in New York granted the Amarin Corporation a preliminary injunction to prohibit the Food and Drug Administration (FDA) from enforcing its long-held position that drug manufacturers who market their products for off-label uses can be subject to criminal liability by having engaged in a form of misbranding under the Food, Drug, and Cosmetic Act (FDCA). The matter stems from Amarin’s off-label promotion of the drug Vascepa. The preliminary injunction, follows the decision of the United States Circuit Court of Appeals for the Second Circuit in United States v. Caronia, 703F.3d 149 (2d Circ. 2012) which found a ban on off-label marketing to be a violation of freedom of speech.

The Amarin Corporation filed a lawsuit in the Southern District of New York last June, based on Caronia, claiming that the FDA’s position on misbranding is an unconstitutional limitation of free speech under the First Amendment. In the Court’s opinion and order granting the preliminary injunction, it concluded that off-label promotion of a drug is protected by the First Amendment so long as it is truthful and non-misleading and that Amarin’s off-label promotion of Vascepa met this standard. Though this conclusion may be modified as part of the court’s final ruling in the case, it indicates that the court believes the Amarin Corporation is likely to succeed on the merits.

The Court’s holding further weakens the FDA’s efforts to prevent commercial speech related to off-label drug marketing. Like Caronia, it does not preclude the agency from precluding other non-speech and company actions to promote off-label uses such as improper payments to physicians that use a company’s drug or device off-label; however, it does significantly inhibit the FDA’s ability to stop companies from disseminating information on the safety and efficacy of off-label uses of drugs and devices. The decision also provides protection for physicians who consult with drug or device companies about their products and promote off-label uses of those products through articles and presentations.

Congress to Hold Hearings on Health Insurance Mergers

The United States House Judiciary Committee plans to hold hearings in September exploring competition within the health insurance marketplace and the potential impact that recently announced third-party payor mergers may have on the accessibility and affordability of health care. The first hearing will focus on the role the Patient Protection and Affordable Care Act (PPACA) may have played in the consolidation of the health care industry. The second hearing will examine the proposed mergers of Humana with Aetna and Anthem with Cigna. In a press release announcing the hearings, House Judiciary Committee Chairman Bob Goodlatte (R-VA) expressed concern that the PPACA has prompted increased consolidation in the health care industry. Regulatory Reform, Commercial and Antitrust Law Subcommittee Chairman Tom Marino (R-PA) and Ranking Member Henry C. “Hank” Johnson (D-GA) noted that health care consolidation is the result of a faulty antitrust exception under the McCarran-Ferguson Act and lax antitrust enforcement.

The hearings come on the wake of several physician groups expressing concern about the recent merger announcements. The American Academy of Family Physicians submitted letters to the Department of Justice’s Antitrust Division and to Senate and House leaders last week stating that the proposed mergers could lead to “decreased choice for consumers, higher costs for purchasers, and potentially establish mass disruptions in continuity of care due to changing and narrowing networks of physicians and hospitals.” The American Medical Association issued a press release following the announcement of Anthem and Cigna merger, noting that “the lack of a competitive health insurance market allows the few remaining companies to exploit their market power, dictate premium increases and pursue corporate policies that are contrary to patient interests.”

Surgeons Urge the FDA to Modify Approach for Robotically-Assisted Surgical Devices

The Food and Drug Administration (FDA) held a public workshop on July 27 to obtain public feedback on the scientific, clinical, and regulatory considerations associated with robotically-assisted surgical devices (RASD). According to news reports, surgeons and medical professionals at the workshop urged the FDA to review a database of clinical data from actual surgeries in assessing robotically-assisted surgical devices.   

The FDA recognized that improved regulatory pathways could make it less challenging to move RASD from the laboratory to the clinical environment. RASDs are currently regulated as Class II 510(k) devices and must be shown to be “substantially equivalent” to another legally-marketed (predicate) device; but stakeholders at the workshop suggested allowing a limited marketing release so that data can be collected from surgeons using the devices prior to full approval.    

Over 2000 Providers Participating in Bundled Pay Pilot Program

On August 13, 2015, Centers for Medicare & Medicaid Services (CMS) released a fact sheet on the Bundled Payments for Care Improvement Initiative (BPCI), which is composed of four care models that bundle payments for multiple services Medicare beneficiaries receive during an episode of care. The four care models vary based on the types of providers and Medicare services involved in the bundle and whether CMS pays providers prospectively, or after care is provided. The goal of BPCI is to create financial and performance accountability for an entire episode of care to improve the quality and coordination of care for Medicare beneficiaries.

Three of the four models consist of a Phase 1, where CMS shares data and engages in education and learning activities with participants in preparation for assuming financial risk, and a Phase 2, where the participants assume financial risk. As of July 1, 2015, BCPI had 2,115 participants assuming financial risk in Phase 2 under the payment models. These participants consist of acute care hospitals, physician group practices, home health agencies, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities. Of these participants, 360 organizations had already entered into agreements with CMS to participate in the project and an additional 1,755 providers partner with those organizations.  

House Republications Looking Into GME Reform

The House Ways and Means Health Subcommittee is currently working on a hospital reform package, which Chair Kevin Brady (R-TX) is expecting to introduce to the House of Representatives in fall 2015. In preparation for this package, Representative Brady introduced the Medicare Crosswalk IME Pool Act of 2015, which proposes to change Medicare indirect medical education (IME) payments by decoupling IME from hospital discharges and instead providing bi-monthly, lump-sum payments to teaching hospitals.

In addition, on August 4, 2015, Representative Brady wrote a letter to the Government Accountability Office (GAO) requesting an analysis of the current structure of graduate medical education (GME) programs and recommendations for improvement. Specifically, the letter asks the GAO to provide suggestions to refine, validate, and standardize direct cost data, recommendations on how to track federal funds being used for GME payments, an analysis to determine if there is a need for increased oversight or consolidation through commissions and accreditation bodies, and evaluation of geographic discrepancies within GME programs to determine if a reallocation of physician residency spots is necessary to serve rural and physician shortage areas. The House Republicans seek the GAO’s analysis to study whether there is duplication, overlap, or waste in federal funding for GME.  

President Signs Observation Stay Bill

On July 27, 2015, the Senate passed the Notice of Observation Treatment and Implication for Care Eligibility Act, otherwise known as the NOTICE Act, a bipartisan bill that alerts Medicare beneficiaries when they are put under outpatient observation instead of being admitted as an inpatient to the hospital. The bill, approved by the Senate Finance Committee and passed in the House earlier this year, will be referred to President Obama for further consideration. The NOTICE Act, which has no cost to the federal government, requires hospitals to notify Medicare beneficiaries within 36 hours of being placed under outpatient observation that they are not admitted to the hospital as an inpatient, explain the implications of outpatient status, disclose the cost of treatment, and detail the effects on eligibility for nursing home coverage. The notice must be signed by the beneficiary, their representative, or hospital staff if the beneficiary refuses to sign. The goal of the legislation is to give Medicare patients notice of the costs they could incur for their outpatient treatment and allows them to be advocates for their own care. As Medicare requires beneficiaries to be admitted to the hospital for at least three days before Medicare will pay for a nursing home stay, the NOTICE Act is also key for ensuring patients understand the limitations of outpatient observation status and the effect this status has on nursing home coverage.  

Senate Health Panel to Suggest Fixes for Meaningful Use Program

On July 23, 2015, Senate Health Committee Chair Lamar Alexander (R-TN)  stated that he plans to recommend four or five ways to fix Meaningful Use Stage 3 and delay implementation of the next phase of the electronic health record (EHR) incentive program. Over recent months, many provider associations have expressed concern that physicians and hospitals are not ready to comply with the stringent Stage 3 requirements. Currently, there is a critical gap in the technical infrastructure providers need to meet in some of the proposed requirements.

If Stage 3 is implemented as scheduled, it could work against encouraging providers to share information with one another by being too restrictive. Some argue that because of fear and intimidation, providers do not notify the right entities when there is an issue with their EHR, adding to data blocking issues. EHRs are often not shared between provider groups, highlighting that not all stakeholders are similarly motivated to share information. Therefore, Senator Lamar seeks to propose legislation to fix the data sharing and information blocking issues to allow for successful implementation of Meaningful Use Stage 3 at a later date.