Life Science Compliance Update

April 16, 2018

Data Analytics & Detecting Medicare Fraud – A Promising Idea Still Awaiting Proof of Concept


For analyzing so-called “Big Data” sets, data analytics is an invaluable set of tools and techniques. Now the HHS OIG plans to expand its efforts to use data analytics to detect Medicare fraud. While promising, it remains to be proven that the tool and techniques will be cost-effective in this context.

The fiscal year 2017 was a big year for the Office of Inspector General of the Department of Health and Human Services (“OIG”). Among many important accomplishments, the OIG undertook “the largest healthcare fraud takedown in history,” involving more than 400 defendants and more than $1.3 billion in false billings to Medicare and Medicaid.

This action was notable not just for the number of defendants involved and the amount of money recovered, but for the fact that as characterized by the OIG, it was a “data-driven effort.” Therefore, the case represents a signature moment in the evolution of healthcare fraud enforcement, as we transition from a “pay and catch” approach to using data analytics to support targeted enforcement.

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March 13, 2018

White House White Paper on Pharma Pricing Released


In February 2018, the White House Council of Economic Advisers released a white paper, “Reforming Biopharmaceutical Pricing at Home and Abroad,” a report that discusses the affordability of healthcare and biopharmaceutical drugs.

According to the report, federal policies that affect drug pricing should satisfy two goals. First, domestic drug prices paid by Americans should be reduced. Second, the price of better health in the future should also be reduced by spurring medical innovation. The report considers policy options to simultaneously advance these two seemingly conflicting goals.

Reducing drug prices that Americans pay means recognizing that many artificially high prices result from government policies that prevent, rather than foster, healthy price competition. Drug prices, for example, can be artificially high due to government regulations that raise prices. The report discusses changes to the Medicare and Medicaid programs that could help lower domestic prices, as well as reforms to the Food and Drug Administration (FDA) that could encourage more robust price competition.

The report notes that concerns about affordability have been magnified by the high price of newly-approved drugs. The report also notes that it is misleading to consider only the prices of these new drugs without evaluating the well-being of patients before the drug became available. It is important to separate the price of healthcare, such as drugs, from the effective price of better health, such as how costly it is to live longer. Innovations such as new drugs often reduce the price of health even when the new drug is very expensive relative to other goods. The example of HIV drugs from the mid-1990s was given to make the point that even though the price of the drug was considerable and drug spending rose, the effective price of better health declined.

The objective of government in biopharmaceutical policy is to ensure that the private sector competes and invests in meaningful innovations that lower the price of health, rather than incentivizing market exclusivity and high prices on products. The two goals of reducing American prices and stimulating innovation are consistent but can be achieved through a combined strategy that corrects government policies that hinder price-competition at home, while at the same time limiting free-riding abroad.

One topic discussed in more detail in the report is how to reduce prices that are induced by Medicare and Medicaid reimbursement policies. Other topics include: how to cut the duration of high prices induced by price manipulation and how to enhance price competition in the Pharmacy Benefit Manager (PBM) market.

Another discussion, how to raise the innovation incentives to reduce the price of better health in the future, mentioned how to limit the under-pricing of drugs in foreign countries, limit under-pricing domestically, reduce the cost of innovation through change at the FDA, and create reforms that reduce the costs of innovation and raise price competition of new innovations.

The report concludes by noting that the two “seemingly inconsistent goals” of reducing American prices and stimulating innovation can be achieved by using a combined strategy, and that preserving this industry and encouraging it to innovate while making drugs more available and affordable for all Americans is an attainable goal.

March 09, 2018

CMS Posts CY 2019 Notice and Call Letter


The Centers for Medicare and Medicaid Services (CMS) has posted the calendar year (CY) 2019 Advance Notice and Call Letter explaining proposed methodological and payment changes for Medicare Advantage (MA) plans, as well as key policies under Part D. The proposal includes opioid prescribing limits in Medicare Part D and changes to MA utilization of encounter data. It also expands MA supplemental benefits and reducing payments to Employer Group Waiver Plans.

Net Payment Impact

For MA plans, CMS estimates a +1.84 percent net increase on average relative to CY 2018 because of Advance Notice policies. Specifically, the proposed changes leading to the increase are as follows: the effective growth rate is listed at 4.35 percent; rebasing and repricing is yet to be determined (CMS notes this is “dependent on finalization of average geographic adjustment index and will be available with the publication of the 2019 Rate Announcement”); changes to the Star ratings is -.2 percent; MA coding intensity adjustment is -.01 percent; risk model revision is positive .28 percent; and normalization is -2.26 percent.

Proposal Highlights


In the Advance Notice and Call Letter, CMS is proposing that Part D plans place new restrictions on opioid prescribing in 2019. Plan sponsors will be asked to prevent prescribing more than a seven-day supply of opioids for acute pain. Plans will have the option of setting a maximum daily dose for this seven-day supply. For non-acute pain, plans will need to have a formulary limit of 90 morphine milligram equivalents of opioids per day with a seven-day supply limit; plan sponsors will be allowed to override this request.

Insurance companies will also need to create safeguards to prevent patients from receiving multiple prescriptions of long-acting opioids; pharmacists will have the ability to override this restriction. CMS is also enhancing its overutilization monitoring system (OMS) so that it identifies high-risk beneficiaries who use drugs that can be dangerous in combination with opioids such as gabapentin and pregabalin — the monitoring system already flags concurrent benzodiazepine use with opioids.

Finally, CMS is seeking feedback on whether it should add a new pharmacy quality alliance measure — measures used to evaluate Part D plans’ progress in combating the opioid crisis — to track the percentage of individuals 18 and older with concurrent use of opioids and benzodiazepine.

Encounter Data

Historically, CMS has used diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS) by Medicare Advantage organizations. In recent years, CMS began collecting encounter data from Medicare Advantage organizations, which also includes diagnostic information. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending 10 percent of the encounter data-based risk scores with 90 percent of the RAPS-based risk scores.

For 2017 and 2018, CMS continued to use a blend to calculate risk scores, by calculating risk scores with 25 percent encounter data and 75 percent RAPS in 2017, and 15 percent encounter data and 85 percent RAPS in 2018. For 2019, CMS proposes to calculate risk scores by adding 25 percent of the risk score calculated using diagnoses from encounter data and FFS diagnoses with 75 percent of the risk score calculated with diagnoses from RAPS and FFS diagnoses.

Risk Adjustment 

CMS is proposing changes to the CMS-HCC Risk Adjustment model that is used to pay for beneficiaries enrolled in MA plans. These proposals reflect changes to improve risk adjustment required by the 21st Century Cures Act, including an evaluation of adding mental health, substance use disorder, and chronic kidney disease conditions to the risk adjustment model and making adjustments to take into account the number of conditions an individual beneficiary may have, as well as a variety of additional technical updates.

Further, the 21st Century Cures Act requires that CMS fully phase in the required changes to the risk adjustment model by 2022. CMS is proposing to begin the phase in of this new model in 2019, starting with a blend of 75 percent of the risk adjustment model used for payment in 2017 and 2018 and 25 percent of the new risk adjustment model proposed.

Employer Group Waiver Plans (EGWPs) 

CMS proposes to complete the transition to administratively setting EGWP rates in CY 2019, using only individual market plan bids to calculate the bid-to-benchmark ratios to set EGWP payments. The completion of this transition was initially contemplated for implementation in 2018, but was ultimately delayed.

Star Ratings

CMS proposes to continue to apply its analytical adjustment, the categorical adjustment index (CAI), to CY 2018 Star ratings to account for the impact of dual-eligible and low-income subsidy (LIS) status and disability status. CMS says the overall methodology would “remain unchanged.” CMS is also proposing adding new quality measures relating to statin use among patients with diabetes or cardiovascular disease, and removing the Beneficiary Access and Performance Problems Measure.

MA Supplemental Benefits

Historically, services that include daily maintenance have not been eligible as supplemental benefits. However, CMS discusses expanding the scope of the primarily health-related supplemental benefit standard. CMS would allow supplemental benefits if they compensate for physical impairments, diminish the impact of injuries or health conditions, and/or reduce avoidable emergency room utilization. This could include such services as non-skilled respite home care, portable wheelchair ramps, and other devices to assist disabled beneficiaries.


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