Back to Advocacy Home

Washington Outlook

November 11, 2011

As we celebrate Veterans Day, we pay tribute to the men and women of all generations who have served our country. We also honor those who currently place themselves in harm's way to protect our freedom.

Despite the increased activity relating to the Joint Select Committee on Deficit Reduction, the divide between the parties continues to expand. While trading proposals, both parties accused the other of not making “serious” offers and began openly contemplating the probability that the Super Committee would fail to deliver a package. With Democrats generally dismissive of the Republican proposal and Republicans hesitant to increase revenue, there remains no clear pathway or timeframe for the panel to come to a consensus.

While the committee debated deficit proposals, much of the focus on healthcare has taken place in the courts this week. The Supreme Court on Thursday began formal discussions on conflicting decisions from three different appeals courts on the constitutionality of the Affordable Care Act. This followed a decision by the Washington, D.C. appeals court on Tuesday upholding the validity of the individual mandate in the reform overhaul law.

Last week, the administration released final annual provider regulations that produce new payment rates for 2012 for outpatient and physician services. And, responding to the high-profile issue of drug shortages, Obama signed an executive order directing federal agencies to take action to address the problem. 

Super Committee trades partisan proposals as deadline draws near

With a November 23 deadline fast approaching, the Joint Select Committee on Deficit Reduction does not appear significantly closer to an agreement as evidenced by the fact that Democrats and Republicans have begun to construct arguments pointing at each other for failure to reach a deal. In the latest round of back and forth negotiations, Democrats have countered the Republican plan with demands of $1 trillion in revenues along with $1 trillion in spending cuts and $300 billion in savings on the debt. The Republicans’ $2.2 trillion plan, presented by Representative Patrick Toomey (R-PA) earlier this week, is heavily weighted toward spending cuts but includes some new revenue and about $300 billion in higher taxes.

The Democratic proposal includes $350 billion in revenues and $650 billion in new tax revenues through a pathway to comprehensive tax reform, with a sequester package to enforce that process. The Democrats’ package does not assume a permanent extension of the Bush tax cuts like the Toomey offer did.

On healthcare, Democrats would seek $250 billion in cuts from Medicare providers and $100 billion from Medicare beneficiaries. On Medicaid, their $50 billion number is comparable to the Republicans’ plan, and they cite the following specific policies:

The Super Committee must recommend at least $1.2 trillion in savings or trigger mandatory cuts in 2013 divided between defense and other programs, with a 2 percent cap on Medicare cuts and with Medicaid exempt from cuts. While the committee must vote on a proposal by November 23, in reality, the panel needs to reach an agreement by early next week in order for the Congressional Budget Office to score the savings.

The Super Committee must recommend at least $1.2 trillion in savings or trigger mandatory cuts in 2013 divided between defense and other programs, with a 2 percent cap on Medicare cuts and with Medicaid exempt from cuts. While the committee must vote on a proposal by November 23, in reality, the panel needs to reach an agreement by early next week in order for the Congressional Budget Office to score the savings.

Republican senators challenge Innovation Center and delivery reforms

Several forums this week left the administration and Democratic lawmakers in a position of defending delivery system changes enacted in the healthcare overhaul law, as well as the newly created Center for Medicare and Medicaid Innovation’s implementation of some of these reforms.

The Senate Health Education, Labor and Pensions (HELP) Committee examined healthcare delivery reform during a November 10 hearing, providing a platform for CMS’ Jonathan Blum to defend the law’s provisions as a force that is driving both cost savings and improved quality.

As acting chair of the hearing, Senator Sheldon Whitehouse (D-RI) said Congress cannot just keep cutting provider payments as a budget measure and said that improving the delivery system would be the more “humane” approach. While Whitehouse challenged the administration to come as quickly as it can to a target of savings with all the delivery reforms under the law, other Republican lawmakers on the HELP panel lambasted both the reforms themselves and CMS’ implementation of them. Senator Mark Kirk (R-IL) repeatedly questioned whether the Innovation Center’s Partnership for Patients initiative would truly generate the tens of billions of dollars in Medicare savings that CMS projected upon unveiling the initiative.

The same day as the hearing, three Republican senators—Michael Enzi (WY), Tom Coburn (OK) and Orrin Hatch (UT)—challenged the administration in a letter to prove that the CMS Innovation Center is delivering promised savings.

“We are concerned that at a time of significant uncertainty for the fiscal health of the U.S. government, funds are being expended by the Innovation Center with little to no actual value provided,” said the senators in a letter to HHS Secretary Kathleen Sebelius.

In a separate letter, the same lawmakers requested from the Government Accountability Office an investigation into the implementation of the center. 

Obama issues Executive Order to address drug shortages

As part of the ongoing federal activities surrounding the drug shortage problem, President Obama signed an executive order on October 31 that directs the Food and Drug Administration (FDA) and the Department of Justice (DOJ) to take additional action to prevent shortages with a focus on early notification by manufacturers. In conjunction with the executive order, two Department of Health and Human Services agencies, the Food and Drug Administration and the Office of the Assistant Secretary of Planning and Evaluation (ASPE), released separate reports intended to shed further insight around the underlying cause and economic impact of drug shortages, as well as the steps the FDA is presently undertaking to monitor and mitigate these shortages. 

The executive order specifically directs the FDA to broaden reporting of potential shortages of certain prescription drugs and requires the FDA to expand its current efforts to expedite review of new manufacturing sites, drug suppliers, and manufacturing changes to help prevent shortages.

On the congressional front, Rep. Elijah Cummings, the ranking Democrat on the House Oversight and Government Reform Committee, has stepped up his efforts in probing potential price-gouging by gray market suppliers, demanding for the second time that secondary suppliers answer questions about its handling of drugs that are experiencing shortages. Congress is likely to tackle the issue of drug shortages in early 2012 during consideration of user fee legislation.

Premier has been closely tracking these shortages and subsequent price gouging attempts by gray market vendors. In a November 7 Letter to the Editor, Premier Chief Operating Officer Mike Alkire responded to a Wall Street Journal editorial explaining how the emerging grey markets the Journal cite are not traditional supply and demand, but price gouging.

In September, Alkire testified before the House Energy and Commerce Committee during a hearing examining the recent increase in drug shortages, sharing with the panel Premier’s analyses that show the scope of the drug shortage problem and its effect on patient safety and costs. Alkire also offered several recommendations to Congress and the FDA to address the problem.

CMS releases final Medicare outpatient payment rule 

The Centers for Medicare & Medicaid Services (CMS) released a final rule on the outpatient prospective payments system (PPS) for calendar year (CY) 2012 that also finalizes provisions governing the inpatient hospital value-based purchasing (VBP) program.

The final rule with comment period will increase payment rates under the hospital outpatient PPS by 1.9 percent in CY 2012, up from the proposed outpatient PPS rule that had a net market basket update of 1.5 percent. This increase is based on the projected hospital inpatient market basket percentage increase of 3.0 percent for services paid under the hospital inpatient PPS minus the multifactor productivity adjustment of 1.0 percentage points and minus a 0.1 percentage point adjustment, both of which are required by the Affordable Care Act (ACA).

The final rule will be published in the November 30 Federal Register. CMS will accept comments on issues open for comment until January 3, 2012.

Highlights of the final rule include:

Quality Measures: CMS finalized the revision of OP-22 Left Without Being Seen from a chart abstracted measure to a web-based measure for payment in CY 2013. For CY 2014 payment CMS added only the cardiac rehabilitation measure and two structural measures relating to safe surgical practices and outpatient surgery volume. The diabetes and surgical site infection measures will be reconsidered in future ruling making. For CY 2015 payment, CMS did not add any measures to the 26 measures for CY 2014 payment. CMS will reconsider the Healthcare Personnel Influenza vaccination in a future rule making. Those hospitals that fail to report the quality measures will have their outpatient PPS annual update reduced by 2 percentage points.

Medicare EHR Incentive Program: For 2012, CMS finalized that hospitals can continue to meet the quality measure requirement by attestation. In addition, CMS also finalized its intent to develop an electronic reporting pilot in which hospitals can voluntarily participate and will not have to use the attestation process.

Drugs and pharmacy overhead: CMS finalized its proposal to pay for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status at the average sales price (ASP) plus 4 percent. This is a drop from the current payment rate of ASP plus 5 percent.

Physician Supervision: CMS is establishing a process to consider requests for changes in the required supervision levels other than direct supervision assigned for specific outpatient hospital therapeutic services. CMS will refer supervision questions to the Ambulatory Payment Classification Panel and will add representatives of Critical Access Hospitals to that panel for supervision level deliberations.

Physician-owned hospitals: The final rule with comment period makes changes to the rules governing the whole hospital and rural provider exceptions to the physician self-referral prohibition for expansion of facility capacity and makes changes to provider agreement regulations on patient notification requirements.

Inpatient value-based purchasing: In a victory for the Premier alliance, CMS reversed its decision to include measures in the Medicare hospital Value-based Purchasing (VBP) program in 2014, which Premier had argued were not ready to be used in the program because the performance data on the measures are not complete or publicly posted for hospitals to begin taking action. In response to Premier’s concerns and other public comments, CMS did not finalize any of its VBP proposals regarding the eight hospital-acquired conditions (HACs), the AHRQ Composite, and the Medicare Spending per Beneficiary measures. CMS intends to publicly report these measures on the Hospital Compare website for one year, as required by law, and adopt the measures for future years of the program. The FY 2014 VBP program domain weighting is clinical process of care = 45 percent; patient experience of care = 30 percent; outcome = 25 percent. The change from FY 2013 is clinical process of care weighting decreased by 25 percent and the addition of the outcome domain.

Without congressional action physicians face 29.5 percent cut in Medicare fees

CMS released on November 1 a separate final rule for the calendar year (CY) 2012 Medicare physician fee schedule (PFS) that, absent congressional intervention, will reduce payments to physicians by 27.4 percent in 2012 as called for under the sustainable growth rate (SGR) formula.  This is less than the 29.5 percent reduction that CMS had estimated last March because Medicare cost growth has been lower than expected. 

While the current Democratic proposal being floated to the deficit reduction panel proposes to pay for a physician payment fix addressing these steep cuts with savings from withdrawing the troops in Iraq and Afghanistan, the deal is nowhere close to certain.

Among other provisions, CMS finalized the following policies in the final physician payment rule:

Proposed Physician Incentive Program changes:  The Medicare PFS final rule contains numerous changes to physician incentive programs including electronic prescribing, electronic health records and the Physician Quality Reporting System.

Misvalued codes: The final rule expands the misvalued code initiative, focusing on the codes billed by physicians in each specialty that result in the highest Medicare expenditures under the fee schedule to determine whether these codes are misvalued.

Multiple procedure payment reduction: The final rule expands the multiple procedure payment reduction policy to the professional interpretation of advance imaging services. CMS says this is to recognize the overlapping activities that go into valuing these services.

Value-based modifier: CMS also finalized the quality and cost measures that will be used in establishing a new value-based modifier that would adjust physician payments based on whether they are providing high quality and more efficient care. The modifier will apply to certain physicians and physician groups on January 1, 2015 and to all physicians by January 1, 2017.

Geographic Practice Cost Indices (GPCIs):  CMS is finalizing its proposal to use residential rent data from the Census Bureau’s American Community Survey (ACS) in lieu of the Fair Market Rent (FMR) data from the Department of Housing and Urban Development as a proxy for variations in physician office rents.  Consistent with recommendations from the Institute of Medicine, which was tasked to examine Medicare geographic adjustment factors, CMS is also adjusting its payments for the full range of occupations employed in physicians’ offices as well as making other adjustments.

The final rule with comment period will appear in the November 28 Federal Register.  CMS will accept comments on those provisions that are subject to comment until December 31. Premier will provide a detailed summary of the final rule in the near future. 

HHS releases final standards for healthcare disparities

The Department of Health and Human Services on October 31 released final standards for data collection on race, ethnicity, sex, primary language and disability status, as required by Section 4302 of the Affordable Care Act (ACA). 

The reform provision requires HHS to ensure that any federally conducted or supported healthcare or public health program, activity or survey collect and report data on race, ethnicity, sex, primary language, and disability status, and other demographic data regarding health disparities. To consistently measure disparities, the law requires HHS to develop national standards for the management of data collected and interoperability and security systems for data management. Collected data will then be analyzed to deter and monitor trends in health disparities, and data and analyses reported. 

HHS released proposed standards on June 29, 2011 with a public comment period.  Premier worked with member hospitals and health systems to provide input to HHS on the development of the standards. As a result, HHS expanded the categories required on HHS-sponsored health surveys for “ethnicity” to recognize a wider range of populations.

Weekly legislative and regulatory round-up

The round-up for the week of November 11, 2011 is available here.

The round-up for the week of October 28, 2011 is available here.