Life Science Compliance Update

December 11, 2017

CMS Institutes New Medicaid Policy Regarding Opioids

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Recently, the Centers for Medicare & Medicaid Services (CMS) announced a new policy to allow states to design demonstration projects that increase access to treatment for opioid use disorder (OUD) and other substance use disorders (SUD). This new demonstration policy responds to President Trump's directive and provides states with greater flexibility to design programs that improve access to high quality, clinically appropriate treatment. In addition to the new policy, CMS announced an immediate approval of both New Jersey and Utah’s demonstration waivers under the new policy.

Through this updated policy, states will be able to pay for a fuller continuum of care to treat SUD, including critical treatment in residential treatment facilities that Medicaid is unable to pay for without a waiver.

“This new demonstration policy comes as a direct result of the President’s commitment to address the opioid crisis and ensure states have immediate relief and flexibility,” said CMS Administrator Seema Verma. “Previous policies ignored the growing urgency of the national opioid epidemic and instead put onerous requirements on states that ultimately prevented individuals from accessing these needed services. The Trump Administration’s approach reflects the pressing nature of the issues states are facing on the ground.”

Previously, states were required to build out their entire delivery system for SUD treatment while also meeting rigid CMS standards before Medicaid demonstration approvals could be granted. The new policy will allow states to provide greater treatment options while improving their continuum of care over time.

New Jersey and Utah Waivers

Under the new CMS demonstration policy, New Jersey will provide a comprehensive and coordinated SUD benefit to adults and children while also allowing for the continuum of SUD services provided to Medicaid beneficiaries who reside in residential treatment facilities. The services covered as part of the SUD benefit will include residential treatment, withdrawal management, medication-assisted treatment, peer supports and targeted case management.

“CMS’ approval of New Jersey’s Medicaid Demonstration will remove a decades-old federal barrier so that thousands more New Jerseyans with the disease of addiction will have access to treatment and recovery,” said New Jersey Gov. Chris Christie. “President Trump acknowledged the need for this policy change when he addressed the nation last week and declared a national public health emergency. This is a tremendous step forward in our efforts to aggressively combat the opioid epidemic and save lives.”

Utah’s program is part of a broader delivery system reform effort to address the needs of individuals with SUD, individuals who are chronically homeless, and individuals within the justice system. The demonstration will also expand access to SUD treatment to a more complete continuum of services, including previously excluded residential treatment sites.

"I've always maintained the role of the federal government should be to provide states with the flexibility to be innovative in how they operate their Medicaid programs. Nobody knows how to address the unique challenges we face as a state better than we do,” said Utah Gov. Gary R. Herbert. “Today's announcement from the Centers for Medicare and Medicaid Services will allow us to address a specific challenge - extending health care coverage, including substance abuse and mental health services, to the homeless population. I applaud CMS for approving our waiver request, and look forward to getting to work on providing these critical services."

This policy will also help CMS evaluate how effectively the demonstration programs are working, through the collection of information and data that can be used to inform CMS on best practices and methods to specifically combat the opioid epidemic, increasing the agency’s capacity to learn what treatment delivery methods are the most effective.

November 29, 2017

Hospitals and Health Systems Sue CMS Over 340B Provisions

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Three hospital groups, along with three health systems, have filed suit against the Department of Health and Human Services (HHS) regarding the Centers for Medicare and Medicaid Services’ (CMS) recent regulation that made substantial cuts to hospitals for 340B drugs. The American Hospital Association, Association of American Medical Colleges, America’s Essential Hospitals, Eastern Maine Healthcare Systems, Henry Ford Health System, and Fletcher Hospital Inc. brought the suit, challenging the changes made to the 340B program that were included in the calendar year 2018 hospital outpatient system (OPPS) and ambulatory surgical center payment systems final rule that CMS released earlier this month. The 340B provisions of the final rule, including a 27 percent reduction in the reimbursement rate for hospitals for 340B drugs, are scheduled to take effect on January 1, 2018.

The lawsuit contends that while CMS has the statutory authority to “calculate” and “adjust” drug payment rates, it does not have statutory authority to reduce those rates by nearly 30 percent. The complaint also states that the 340B provisions of the final rule “undermine the 340B Program by depriving eligible hospitals of critical resources Congress intended to provide those hospitals through 340B discounts.” The groups also note that the cuts will undermine critical programs that provide health services to vulnerable and underserved populations.

On July 13, 2017, CMS issued its proposed rule on OPPS and Ambulatory Surgical Center payment systems for the Calendar Year 2018. In addition to updating the OPPS with 2018 rates, CMS proposed to change how Medicare pays certain hospitals for separately payable drugs purchased under the 340B Program. CMS justified this proposed change by stating that the new rate better recognizes “the significantly lower acquisition costs of such drugs incurred by a 340B hospital,” and that it “better represents the average acquisition cost for these drugs and biologicals.” On November 1, 2017, CMS issued the final version of the 340B Provisions of the OPPS rule, adopting the proposed rate of ASP minus 22.5% for drugs purchased under the 340B Program.

The plaintiffs believe that the 340B Provisions of the OPPS Rule also exceed the Secretary’s authority because they thoroughly undermine the 340B Program by depriving eligible hospitals of critical resources Congress intended to provide those hospitals through 340B discounts.

According to the complaint, the Plaintiffs have used the 340B Program to provide critical healthcare services to their communities, including to underserved patient populations in those communities. The Plaintiffs allege that they, and the populations they serve, would suffer significant and immediate harm from the negation of the cost-reimbursement differential through the 340B Provisions of the OPPS Rule.

The harm would come from the 340B provisions of the OPPS rule because it would deprive the hospitals “of millions of dollars of savings currently generated from the differential between Medicare reimbursements and 340B discounts.”

The hospitals have asked the court to either strike the changes in payment methodology for 340B drugs from the final rule and direct CMS to use the methodology used in calendar year 2017 or issue a preliminary injunction suspending the effective date of the changes until the lawsuit is concluded.

November 16, 2017

CMS RFI Issued Regarding CMMI and Payment Models

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In September, CMS issued a "request for information" (RFI) to solicit new ideas that will revamp CMS' Center for Medicare and Medicaid Innovation (CMMI) and the payment models the center creates. Specifically, CMS “is seeking your feedback on a new direction to promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers, provide price transparency, increase choices and competition to drive quality, reduce costs, and improve outcomes.”

New Model Design

According to the RFI, CMMI will approach new model design with several guiding principles:

  1. Choice and competition in the market – Promote competition based on quality, outcomes, and costs.
  1. Provider Choice and Incentives – Focus on voluntary models, with defined and reasonable control groups or comparison populations, to the extent possible, and reduce burdensome requirements and unnecessary regulations to allow physicians and other providers to focus on providing high-quality healthcare to their patients. Give beneficiaries and healthcare providers the tools and information they need to make decisions that work best for them.
  1. Patient-centered care – Empower beneficiaries, their families, and caregivers to take ownership of their health and ensure that they have the flexibility and information to make choices as they seek care across the care continuum.
  1. Benefit design and price transparency – Use data-driven insights to ensure cost-effective care that also leads to improvements in beneficiary outcomes.
  1. Transparent model design and evaluation – Draw on partnerships and collaborations with public stakeholders and harness ideas from a broad range of organizations and individuals across the country.
  1. Small Scale Testing – Test smaller scale models that may be scaled if they meet the requirements for expansion under 1115 A(c) of the Affordable Care Act (the Act). Focus on key payment interventions rather than on specific devices or equipment.

CMMI states that it is looking to test models in eight focus areas: (1) Increased participation in Advanced Alternative Payment Models (APMs); (2) Consumer-Directed Care & Market-Based Innovation Models; (3) Physician Specialty Models; (4) Prescription Drug Models; (5) Medicare Advantage (MA) Innovation Models; (6) State-Based and Local Innovation, including Medicaid-focused Models; (7) Mental and Behavioral Health Models; and (8) Program Integrity. However, the Innovation Center may also test models in other areas.

New Direction

In August, after delaying several mandatory bundled payment models, CMS ultimately proposed to scale back the Comprehensive Care for Joint Replacement (“CJR”) Model, a bundled payment program for hip and knee replacement implemented by the Obama Administration, and eliminate the Episode Payment Models and Cardiac Rehabilitation Incentive Payment Model scheduled to begin on January 1, 2018.

In a Wall Street Journal op-ed announcing the RFI, Administrator Verma noted the following: “Clinicians, patients, entrepreneurs, state officials and others are busy designing new and better ways to provide health care. There are a lot of great ideas, and we want to hear from people on the front lines. No government agency has all of the answers, especially in an industry as large and multifaceted as health care.”

As has been previously noted, accountable care organizations, hospitals, and primary care providers were not mentioned at all in the RFI. This is a major shift in focus from an agency that once championed these care settings. This lack of inclusion gives one reason to believe that bundled payments will not only continue, but will be underscored as viable paths for physicians’ success under the MACRA alternative payment model track. In addition to a shift in focus of providers, discussion in the RFI of the Physician-Focused Payment Model Technical Advisory Committee (PTAC) initiative, centered on developing physician-driven APMs, indicate that CMMI will much more focused on specialty care and specialty physicians.

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