Life Science Compliance Update

March 22, 2017

CMS Delays New Bundled Payments Model

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In late-February, we reported that CMS had recently finalized new Innovation Center models. However, now, in an interim rule, CMS is delaying the implementation of the mandatory cardiac bundle program and cardiac rehabilitation program from July 1 to Oct. 1.

The rule also postpones the expansion of the mandatory joint replacement bundle program to include other treatments for hip and femur fractures in addition to hip replacement from July 1 to Oct 1. Further delays the effective date of a final rule to implement the joint replacement bundle initiative, the cardiac rehabilitation incentive payment model and the initiative to advance care coordination through episode payment models from March 21 to May 20. CMS is seeking comment on a potential further delay of the programs to January 1, 2018.

Original announcement

As we wrote, in the original announcement from CMS on the proposed program, the agency finalized three significant new policies related to: (1) cardiac care; three new payment models will support clinicians in providing care to patients who receive treatment for heart attacks, heart surgery to bypass blocked coronary arteries, or cardiac rehabilitation following a heart attack or heart surgery; (2) orthopedic care; one payment model to support clinicians in providing care to patients who receive surgery after a hip fracture, other than hip replacement; and (3) CMS finalized updates to the Comprehensive Care for Joint Replacement Model, which began in April 2016.

CMS comments regarding new delay

CMS writes that the delays allow it more time to review the programs. They also state it gives providers time to prepare for the changes in payment under the models. The agency is accepting comments on the delays for 30 days starting on March 21. CMS stressed that it would prefer to line the payment period with the calendar year as well.

Stakeholder response

As reported by the Advisory Board, stakeholders said the decision raises important questions about how President Trump and his HHS will approach value-based care and mandatory (as opposed to voluntary) payment bundles. They cite Ashish Jha, a professor of health policy at the Harvard School of Public Health, who said the delays might suggest CMS will make the programs voluntary, which he said would affect the pool of participants and ultimately drive up costs.

In contrast, Carolyn Magill—CEO of Remedy Partners, a firm that helps hospitals and health systems with bundled payment programs—said, "We have found that voluntary models provide a forum for more engaged participation."

This comes after groups like the American Hospital Association had criticized the payment models for being “too much, too soon.” The Federal of American Hospitals praised the decision to delay the bundles.

March 20, 2017

2016-2025 Projections of National Health Expenditures Data Released

Spending

National health expenditure is expected to grow an average of 5.6% annually from 2016 through 2025, according to a report published by Health Affairs (authored by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary (OACT)).

National health spending growth is projected to outpace projected Gross Domestic Product (GDP) growth by 1.2%. The report also projects that the health share of GDP will rise from 17.8% in 2015 to 19.9% by 2025. Growth in national health expenditures over this period is likely to be largely influenced by faster growth in medical prices, as compared to recent historically low growth.

For 2016, the report notes that total health spending is projected to have reached nearly $3.4 trillion, a 4.8% increase from 2015. The report also found that by 2025, federal, state and local governments are projected to finance roughly 47% of national health spending, a slight increase from 46% in 2015.

“After an anticipated slowdown in health spending growth for 2016, we expect health spending growth to gradually increase as a result of faster projected growth in medical prices that is only partially offset by slower projected growth in the use and intensity of medical goods and services,” says Sean Keehan, the study’s first author. “Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers, and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services.”  

Additional findings from the report include:

  • Total national health spending growth: Growth is projected to have been 4.8% in 2016, a bit slower than the 5.8% growth in 2015, likely because of slower Medicaid and prescription drug spending growth. In 2017, total health spending is projected to grow by 5.4%, expected to be led by increases in private health insurance spending.
  • Medicare: Medicare spending growth is projected to have been 5.0% in 2016 and is expected to average 7.1% over the full projection period of 2016 through 2025. Faster-than-expected growth after 2016 primarily reflects utilization of Medicare-covered services increasing to approach rates closer to Medicare’s longer historical experience.
  • Private health insurance: Spending growth is projected to have slowed from 7.2% in 2015 to 5.9% in 2016, a trend that is related to slower growth in private health insurance enrollment. Spending growth is projected to increase to 6.5% in 2017, due in part to faster premium growth in Marketplace plans related to previous underpricing of premiums and the end of the temporary risk corridors.
  • Medicaid: Projected spending growth slowed significantly in 2016, down to 3.7%, down from 9.7% in 2015, largely reflecting slower growth in Medicaid enrollment. Spending growth is expected to accelerate and average 5.7% for 2017 through 2025 as projected per-enrollee spending growth rises over that timeframe. The increasingly larger share of the Medicaid population who are aged and disabled and who tend to use more intensive services is likely to drive that impetus.
  • Medical price inflation: Medical prices are expected to increase more rapidly after historically low growth in 2015 of 0.8% to nearly 3% by 2025. This faster projected growth in prices is influenced by an acceleration in both economy-wide prices and medical specific prices and is projected to be partially offset by slowing growth in the use and intensity of medical goods and services.
  • Prescription drug spending:  Drug spending growth is projected to have been 5% in 2016, following growth of 9% in 2015, mainly due to slowing use of expensive drugs that treat Hepatitis C. Growth is projected to average 6.4% each year for 2017 through 2025, likely influenced by higher spending on expensive specialty drugs.
  • Insured Share of the Population: The proportion of the population with health insurance is projected to increase from 90.9% in 2015 to 91.5% in 2025.

March 16, 2017

OIG Raises Concerns Regarding Accuracy of New Clinical Laboratory Payment System

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In early October, the Office of Inspector General (OIG) released a report monitoring the progress made by the Centers for Medicare and Medicaid Services (CMS) on preparing for the implementation of the new payment system for clinical laboratory tests, which was mandated by the Protecting Access to Medicare Act of 2014 (PAMA).

The new payment plan requires, with certain designated exceptions, for payment of clinical diagnostic laboratory tests furnished on or after January 1, 2018, to be equal to the weighted median of private payor rates determined for the test, based on certain data reported by laboratories during a specified data collection period. Different reporting and payment requirements will apply to a subset of clinical diagnostic laboratory tests that are determined to be advanced diagnostic laboratory tests.

Though CMS has made significant progress towards the January 2018 implementation date, OIG has several concerns regarding how accurate CMS’ method of obtaining payment data for the new payment rates is. One such concern is that CMS has stated it will not verify whether required laboratories have submitted the payment data CMS will use to establish the new payment rates, another is that CMS does not plan to independently verify the reported payment data’s completeness or accuracy.

While the new payment system is slated to save Medicare $3.9 billion during the first ten years of implementation, OIG has cautioned that potential issues with the accuracy of the payment data for the new system may impact its effectiveness and expected savings.

For example, in 2015, Medicare Part B paid $7 billion for clinical laboratory tests. Those payments were largely based on laboratory charges from 1984 and 1985, which have been adjusted annually for inflation. PAMA charged CMS with the responsibility of replacing the historical payment system with a new payment system based on current charges in the private health insurance market. These new rates will be updated every three years, based on payment data reported by clinical laboratories.

CMS Final Rule

CMS released a final rule on June 23, 2016, detailing its plans to prepare for the implementation of the new payment system. According to OIG, CMS has built the reporting system that clinical laboratories will use to submit payment data, but that the next step is actually collecting payment data from the clinical laboratories.

As alluded to previously, while CMS does have some safeguards in place to mitigate inaccurate reporting by clinical laboratories, it does not plan to independently verify clinical laboratories’ data or whether the required clinical laboratories have even reported their data. This may result in CMS setting inaccurate payment rates for laboratory tests.

Additionally, according to the OIG, CMS defines an “applicable laboratory” in a manner that excludes most if not all hospital laboratories, potentially leading to an understatement of true clinical laboratory cost and payment data.

Reporting Dates

Clinical laboratories will start reporting their payment data in early 2017. CMS has set a target date of November 2017 to publish the rates that will be used in the new payment system.

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