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Washington Outlook

December 3, 2010

The House and Senate returned this week from the Thanksgiving break and advanced two measures that provide breathing room for lawmakers to seek a more permanent resolution.  The House approved on Monday a Senate-passed bill to delay the Medicare physician payment cuts until the end of the year, which was signed by the President.  On Thursday, the Senate cleared a short-term appropriations bill that will keep federal programs running until December 18.  Republicans have signaled that they would not support additional legislation during the lame duck session other than another stop-gap spending bill and an extension of expiring tax cuts, which will make it difficult to move forward with more long-term legislation addressing both of these issues.

Meanwhile, the President’s fiscal commission voted down a set of proposals today to address the national debt that contains significant healthcare cost controls and reductions.  Regardless of the failure to approve the recommendations, this debate could set the tone as Congress considers reform adjustments and the role of health spending in creating fiscal challenges.

As the 112th Congress approaches, the Republican Steering Committee has been meeting this week and will announce next Tuesday the House committee chairs, including those who will lead the Energy and Commerce and Ways and Means Committees.  The top four contenders in line for the Energy and Commerce Committee spot are Reps. Fred Upton (R-MI), Joe Barton (R-TX), John Shimkus (R-IL) and Cliff Stearns (R-FL).  The Ways and Means Committee gavel is expected to go to the current Ranking Republican member, Dave Camp (R-MI).  Specific members, ratios and the sizes of the committees will be the subject of inter-party negotiations over the next several weeks.  There is a strong likelihood that both panels lose seats and that at least one or two Freshmen will be added.

National fiscal commission fails to approve final recommendations

President Obama’s fiscal commission today failed to garner the 14 out of 18 votes needed to approve a set of final recommendations released earlier this week that would reduce the deficit, in part, by imposing healthcare cost containment measures. Only 11 members of the National Commission on Fiscal Responsibility and Reform supported the plan, which falls short of the supermajority that would require the House and Senate to consider the recommendations. While consensus was not reached, it is expected that Congress could consider specific recommendations in the plan as it looks to reign in the budget. 

Overall, the plan would reduce the deficit to 2.3 percent of Gross Domestic Product (GDP) by 2015 and achieve more than $4 trillion in deficit reduction through 2020.  The plan would also cap revenue and spending at 21 percent of GDP.

Those opposing the plan include three Republicans—Rep. Paul Ryan (R-WI), Rep. Dave Camp (R-MI), and Rep. Jeb Hensarling (R-TX)—and four Democrats—Rep. Xavier Becerra (D-CA), Rep. Jan Schakowsky (D-IL), Sen. Max Baucus (D-MT) and presidential appointee Andy Stern.

In the area of healthcare, the plan would establish a long-term global budget for total federal healthcare costs and limit the growth to GDP plus 1 percent.  Exceeding the targets would trigger action by the President and Congress. Among other recommended changes, those that will most directly impact hospitals include:

The full report can be found on the National Commission on Fiscal Responsibility and Reform website.

MedPAC considers recommending 1 percent hospital payment update for 2012

The Medicare Payment Advisory Commission (MedPAC) yesterday debated a draft recommendation to increase hospital inpatient and outpatient payments by 1 percent in 2012. 

Commission Chairman Glenn Hackbarth said he based the recommendation on an assessment of hospital margins, particularly for efficient providers, and the likelihood of a payment offset related to Medicare’s move to a severity-adjusted payment system. In January, MedPAC will vote on a payment recommendation for inclusion in its March report to Congress.

MedPAC staff presenting the recommendation  said overall hospital Medicare margins improved to  negative 5.2 percent in 2009 from  negative 7.1 percent in 2008, the first improvement in recent years, as cost increases abated and patient case mix increased. MedPAC staff estimates the margin will deteriorate to negative 7.0 percent in 2011 due to payment reductions and higher costs for health information technology. Staff did not offer data on 2010 margins, but last year forecast a margin of negative 5.9 percent.

Margins were best for teaching hospitals and slightly better for rural providers, and would have been even better if critical access hospitals were included in the calculation. Staff also concluded that hospitals under pressure to cut costs fared better than providers who were under low pressure to do so, and also performed better on some quality measures.

Last year, the Commission recommended a full market-basket update coupled with a pay-for-performance program and also recommended a gradual recovery of overpayments attributed to coding adjustments when Medicare instituted a severity-adjusted payment system in 2008. Congress reduced hospital payments over the next 10 years in the healthcare reform law enacted earlier this year.

Hackbarth said his 1 percent recommendation, which is a departure from MedPAC’s past update recommendations that are connected to the market basket, is based on his judgment that hospitals deserve a payment update, given that margins are weak even for some efficient providers. “I think a small update is appropriate, given that picture,” Hackbarth said. It assumes a full market basket increase of 2.6 percent and a coding adjustment of 1.6 percent but does not consider productivity improvements. Conversely, the staff’s model does not include a coding adjustment from CMS at this point but a 1.4 percent reduction for productivity gains for a net maximum update of 1.2 percent.

Hackbarth prefaced the Medicare payment updated discussion by underscoring the difficultly the panel faces in thinking in payment silos.  While MedPAC strives to look across these silos, Hackbarth said, the panel will need to support coordination of care in the context of broader healthcare reform recommendations, rather than through update recommendations.

MedPAC also discussed a draft recommendation that would result in a 1 percent update for the Medicare physician fee schedule for 2012.  Although they did not vote, the commissioners seemed unanimous in their support of this recommendation.  For ambulatory surgical centers, MedPAC considered a draft recommendation providing a 0.6 percent update for 2012.  The commissioners seemed less sure about this update because it was not based on a rigorous methodology, but they were pleased to move away from a Consumer Price Index methodology for the ASC update.

CMS holds forum on healthcare delivery system reform

The Centers for Medicare & Medicaid Services (CMS) held a special open door forum yesterday on healthcare delivery system reforms, specifically addressing the current status of implementation of accountable care organizations (ACOs) under the Affordable Care Act (ACA), the Center for Medicare and Medicaid Innovation (CMMI) and the Federal Coordinated Health Care Office (FCHCO.

Deputy Administrator and Director for the Center for Medicare, Jonathan Blum indicated that CMS anticipates releasing a rule on ACOs in late December or early next year.  Blum said CMS is trying to approach its work by soliciting as much input as possible, including through the November 17 ACO Request for Information.  CMS wants the ACO model to be attractive to hospital systems, large physician practices, and solo practitioners working in consort with each other, said Blum. 

Premier vice president of Advocacy Margaret Reagan underscored that CMS should be flexible in recognizing various ACO structures since they are at the early stages of development and should measure ACOs on quality, not just efficiency.  Reagan added that CMS should focus on the outcomes achieved by ACOs in the near term, rather than their structure or process.

CMMI acting director Rick Gilfillan said that the center needs to identify new models of delivering care and find ways to support these models and the professionals providing care through them. This must occur at three levels: the patient care level, the care system level, and the population/community level. Gilfillan said that at this point CMMI is being established, hiring staff and building core functions and is seeking ideas for initiatives to fund.  He discussed the first four models that CMMI will test:  the expansion of the multi-payer advanced primary care practice demonstration, the Federally Qualified Health Center Advanced Primary Care Practice Demonstration, the Medicaid health home state plan option and 15 state contracts of $1 million for programs that fully integrate care for dual eligibles. Gilfillan added that in the "not too distant future" CMMI will solicit proposals for other projects that the center should undertake.

Finally, Melanie Bella, Director of the Federal Coordinated Health Care Office (FCHCO), said that the goal of her office is to create a seamless coordinated care system for dual eligibles, 95 percent of whom received care through the "fragmented fee-for-service system."  Through the program alignment function, the office is developing a comprehensive list of all the places where Medicare and Medicaid "bump up" against each other in order to determine what changes are needed. 

During the comment period, the American Hospital Association (AHA) recommended that CMS establish a transparent process for how entities can participate in CMMI initiatives and stated that the statutory requirements for ACOs are a barrier for participation by rural providers.  The AHA representative suggested that similar ACO programs could be tested by CMMI.  In addition, she said that the front end investment required to set up ACOs should be covered at least in part by the shared savings.

Premier joins hospital organizations in providing recommendations to CMS on hospital value-based purchasing program

In comments submitted on to the Centers for Medicare & Medicaid Services (CMS), Premier joined other hospital organizations in offering recommendations on the Medicare hospital value-based purchasing (VBP) program that will be implemented as part of the Affordable Care Act (ACA).  The organizations’ comments centered on the quality measures to be selected, calculation of the performance scores, minimum numbers of cases and measures for participation, distribution of the incentive payments and other implementation issues.

The groups sending the letter include the American Hospital Association, the Catholic Health Association, the Association of American Medical Colleges, the Federation of American Hospitals, and the National Association of Public Hospitals and Health Systems.

ACA left many of the details of how the VBP program will be structured up to the administration and CMS is currently in the process of rulemaking. During an October 26 CMS Hospital Value-based Purchasing Program Special Forum, the agency solicited input from attendees on all aspects of the VBP program. In connection with this forum, Premier submitted separate comments on November 5.  In its comment related to provisions of ACA that require that hospital performance standards be announced 60 days before the start of each performance measurement period, Premier underscored the importance of hospitals knowing all standards on which their performance will be assessed before the performance period begins.  Premier also urged CMS to base a hospital’s score on whichever yields the highest value—performance or attainment.

In determining the VBP payments, Premier recommended that all hospitals be given financial incentives based on their level of performance or improvement and that higher performing hospitals receive higher incentive payments. Premier further advised CMS to set performance thresholds at a level hospitals can reasonably achieve and to set the “full incentive” standard so that every hospital has a realistic chance to earn back its entire VBP set-aside.

House Judiciary Committee examine antitrust issues related to ACOs

Lawmakers probed officials from the Federal Trade Commission (FTC) and Department of Justice (DOJ) on the dangers of anticompetitive market practices in the healthcare industry, touching on accountable care organizations and the potential for them to run afoul of antitrust laws or hinder competition. 

During a December 1 House Judiciary Committee hearing, Sharis Pozen, chief of staff at the DOJ antitrust division, assured panel members that the agency would develop guidelines that will allow ACOs to form without violating antitrust laws.  She also indicated that the DOJ would provide expedited review for any ACOs that did not fall under the safe habors established by the agency. Richard Feinstein, director of the Bureau of Competition at the FTC, also pledged that his agency was working with the DOJ and the Centers for Medicare & Medicaid Services to develop rules that would allow the formation of ACOs without stifling competition.

The American Hospital Association testified, urging the FTC and DOJ to issue clear guidelines for providers on clinical integration and also warned against anticompetitive conduct on the part of health insurers. 

Obama signs one-month physician payment fix

President Obama this week signed into law The Physician Payment and Therapy Relief Act, that will avert for one month the 23 percent cut to Medicare physician payments that would otherwise have gone into effect on December 1.  The House passed the bill after the Senate approved it prior to the Thanksgiving break by unanimous consent. The law is fully offset by cost-saving changes to the physical therapy second site of service Medicare payment policy.

At a cost of about $1 billion, the one-month fix is paid for by a reduction in the physical therapy second site of service from 25 percent to 20 percent and removal of the budget neutrality requirement for that change. 

In a White House statement, President Obama appealed to members of Congress to pass a one-year extension.  Senate Finance Committee Chairman Max Baucus (D-MT) said that he is working on a longer-term package.

Meanwhile, the Democratic chairs of the House Ways and Means and Energy and Commerce Committees (and Health Subcommittees) introduced a bill that would provide a 13-month unpaid for physician payment fix that includes a 1 percent increase for 2011.  Passing this legislation will be a heavy lift, and it is more likely that the House will look to the 12-month fix that is currently under development.

Berwick announces new leadership appointments

Centers for Medicare & Medicaid Services Administrator Donald Berwick announced several new leadership appointments this week, including Julie Boughn as acting deputy director for the Medicare and Medicaid Innovation Center.  Boughn will be working with Richard Gilfillan, the center’s acting director.

According to a memo from Berwick, Boughn will be “working to develop and implement innovative programs that will help improve and update the nation’s health care delivery systems under the provisions of the Affordable Care Act.”  Boughn comes to CMMI after serving as Chief Information Officer and Director of the Office of Information Services (OIS) at CMS where she led the agency’s major information technology (IT) development projects.  

Tony Trenkle, acting director of OIS: Trenkle has served as the Director of OESS where he has been leading the HITECH electronic health record incentive program, the implementation of the administrative simplification provisions of the Affordable Care Act, and was responsible for the regulations, enforcement and outreach for the HIPAA Administrative Simplification standards. 

Karen Trudel, acting director of the Office of E-Health Standards and Services (OESS): Trudel has been the OESS Deputy Director since its creation in 2005. 

Berwick also announced the addition of two new members of his team in the Office of the Administrator (OA), Joe McCannon and Vish Sankaran, who will be servicing as senior adivors.  McCannon will be working on projects for OA including the launch of the Innovation Center, cross-cutting initiatives on safety and quality, and development of the CMS-wide strategy.  Sankaran will be working in the areas of enterprise business planning, knowledge management, data and technology strategies, partnering with the senior leadership and program owners to promote enterprise-wide business solutions and cost effective, scalable technology investments for CMS. 

“I am grateful for the dedication and expertise that they all bring to their new roles and look forward to working with each of them, and all of you, as we continue to improve healthcare for all Americans,” said Berwick.

Weekly legislative and regulatory round-up

The round-up for the week of November 27 - December 3, 2010 is available here.

The round-up for the week of November 12, 2010 is available here.