Life Science Compliance Update

May 30, 2017

Medicare Backlog Must Be Fixed


Since 2014, the American Hospital Association (AHA) has been in court with HHS regarding HHS’ failure to meet statutorily-imposed deadlines for Medicare administrative appeals. And, as has been reported, the Medicare appeals backlog has reached its all-time worst. If you’re a healthcare provider or supplier waiting for a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA) – the third level of the Medicare appeals process – you’ve likely been waiting years to have your case heard or, at least, you’re expecting such a wait.

The suit centered on the Recovery Audit Contractor program. The RAC program's mission is to correct improper Medicare payments by identifying and collecting over- and underpayments. Healthcare providers have the option of appealing recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals administers hearings concerning denied Medicare claims. Claim denials that reach the third level (of five possible levels) of the appeals process are brought before administrative law judges, who issue decisions regarding coverage determinations.

Court order

Recently, a court determined that there were equitable grounds to issue a writ of mandamus. The Court reasoned that even with certain good faith efforts made by HHS to reduce the backlog (such as a Proposed Rule issued this past summer), the appeals backlog was “still unacceptably high.” In its decision, the Court found that HHS did not “point to any categorically new administrative actions” and continues “to promise the elimination of the backlog only ‘with legislative action’ — a significant caveat.”

The Court ordered HHS to achieve the following reduction thresholds, as proposed by AHA, from the current backlog of cases pending at the ALJ level:

  • 30% by December 31, 2017;
  • 60% by December 31, 2018;
  • 90% by December 31, 2019; and
  • 100% by December 31, 2020

In the ruling, U.S. District Court Judge James Boasberg ordered HHS to eliminate the backlog in accordance with the timeline AHA outlined in its motion for summary judgment. Boasberg also ordered HHS to file progress reports every 90 days on its efforts to reduce the backlog.

AHA Statement

On December 6, 2016, the AHA released a statement from its general counsel: AHA General Counsel Melinda Hatton said the decision “is a victory for hospitals that continue to have billions of dollars in Medicare reimbursement tied up in a heavily backlogged appeals system. To meet the court-ordered backlog reductions, we trust that HHS will implement real reforms critical to resolving the backlog, including fundamental reforms of the Recovery Audit Contractor program.”

Good news for providers

As cited by the Advisory Board, William Dombi, VP for law at the National Association for Home Care and Hospice, said the "ruling may finally spur concrete action by [CMS] to reduce what are wholly unreasonable delays in providing appeal rights to Medicare beneficiaries and providers of health services." However, HHS has said even with additional resources, it likely will not be able to eliminate the backlog before 2021, so we will continue to monitor this story.

May 29, 2017

GOP Senators Send Letter to CMS, Requesting MA Changes


In a recent letter to the CMS Administrator, Republican Senators highlighted specific policy recommendations they would like to see incorporated into Medicare Advantage (MA) plans. This includes measures relating to the fee-for-service normalization factor, plan performance rating methods and employer group waiver plans.  The Senators also noted the importance of CMS’s willingness to work with stakeholders and Congress on these issues. 

The letter was signed by: Senate Finance Committee Chairman Orrin Hatch (Utah), Majority Leader Mitch McConnell (R-Ky.) and Finance Committee Senators Chuck Grassley (Iowa), Mike Crapo (Idaho), Pat Roberts (Kans.), John Cornyn (Tex.), John Thune (S.D.), Richard Burr (N.C.), Johnny Isakson (Ga.), Rob Portman (Ohio), Pat Toomey (Pa.), Dean Heller (Nev.), Tim Scott (S.C.) and Bill Cassidy (R-La.).

Some specifics of letter

“Specifically, we appreciate that the 2018 Advance Notice proposes to pause the phase-in of the use of encounter data to determine patient risk scores. It is important that CMS continue to work with stakeholders and the Congress to ensure that use of encounter data is viable prior to further implementation.”

Fee-for-Service Normalization Factor: We urge CMS to make additional information available regarding the methodology for calculating the normalization factor and to work with stakeholders to fully understand the data sources and implications.  We recognize the challenges that the agency faces in establishing the normalization factor but believe that increased transparency will help establish the most appropriate adjustment.  We are also concerned with the proposed 2018 normalization factor specific to the ESRD Dialysis Model.  This proposed factor, which is calculated based on a risk score that includes at least one outlier year, would result in an 8 percent decrease in payments to plans for serving this vulnerable, high-need population.”

Star Ratings: We urge CMS to ensure that any reflection of data integrity issues into the MA Star Ratings methodology is fair to plans and helpful to beneficiaries in distinguishing plan performance.  We appreciate the CMS willingness to reconsider its approach in recent years and ask that the agency continue to work with stakeholders and the Congress.”    

Employer Group Waiver Plans (EGWPs): We urge CMS to reconsider the 2017 Final Notice policy that waives the bidding requirements for MA EGWPs.  The decision to set payments to EGWPs administratively, which was made by the previous Administration, is likely to adversely impact the roughly 3.2 million beneficiaries with retiree coverage.  Further, CMS took this action despite a lack of Congressional interest in the policy when it was included in then-President Obama’s budget request.  At a minimum, CMS should use the same blend between the old and new methodology for 2018 to provide more time to broadly consider the issue and its impact.” 

Final Rate Notice

On April 3, after the release of the GOP letter, CMS announced the Medicare Advantage Final Rate Notice, laying out the policies governing plan payment for 2018. CMS estimated that MA funding will increase by 0.45 percent on average in 2018. However, plan costs are expected to increase on average by 4 percent to 5 percent due to projected health care cost increases and the expiration of the one-year moratorium on collecting the health insurance tax.

According to analysis from AHIP, CMS responded to the GOP requests on three particular topics with the following policies:

Fee-for-Service Normalization Factor

CMS finalized the normalization factor as proposed for 2018. CMS made a technical correction to the ESRD normalization factor. As a result, the ESRD normalization factor was 1.015, resulting in a lower impact on payments than proposed.

Star Ratings

CMS retained the current Beneficiary Access and Performance Problems (BAPP) Star Rating measure for 2018. In addition, CMS will incorporate results of Appeals Timeliness Monitoring activity audits, if accurate and valid, into data integrity reviews for the four Star Ratings appeals measures. For 2019, the agency intends to retire the current BAPP measure and introduce a revised BAPP measure on the display page that will no longer include enforcement actions or reductions for plans under sanction due to an audit, and may consider scaling reductions of Star Ratings due to data integrity reviews (rather than continue the policy of automatic downgrades to one star).

Employer Group Waiver Plans (EGWPs)

CMS will use the same methodology for payment of EGWPs in 2018 as in 2017. That is, EGWPs will not submit bids for 2018 and CMS will base payments on a 50/50 blend of individual MA plan and EGWP bids submitted in 2016.

May 19, 2017

Medicare Cuts in the Future of HACRP Hospitals


As has been noted, CMS named 769 hospitals that will face Medicare payment cuts in fiscal year (FY) 2017 under the Hospital-Acquired Condition Reduction Program (HACRP), which for the first time considered rates of infection from antibiotic-resistant bacteria in its calculations. The HAC Reduction Program requires the Secretary of the Department of Health and Human Services to adjust payments to applicable hospitals that rank in the worst-performing quartile of all subsection (d) hospitals with respect to risk-adjusted HAC quality measures. These hospitals will have their payments reduced to 99 percent of what would otherwise have been paid for such discharges. In the FY 2017, HAC Reduction Program, hospitals with a Total HAC Score greater than 6.5700 are subject to a payment reduction.


From Modern Healthcare: “Our goal is for all hospitals to improve,” and roughly half did improve enough to escape the bottom quartile, said Dr. Patrick Conway, the CMS' deputy administrator and chief medical officer. Federal data on quality measures released earlier this month by the Agency for Healthcare Research and Quality also showed that between 2010 and 2013, progress was made in reducing patient harm and preventing avoidable deaths, he said.


The Advisory Board collected reaction from stakeholders. Some noted that hospitals cannot fully control antibiotic-resistant infections that occur in their facilities. Louise Dembry, a professor at the Yale School of Medicine and president of the Society for Healthcare Epidemiology of America, said, "The reality is we don't know how to prevent all these infections."

Moreover, some critics take issue with the way HACRP assesses penalties. Because the program penalizes the 25 percent of hospitals that perform worst overall, in some cases a hospital is penalized even though it has reduced its rate of avoidable complications. Nancy Foster, vice president for quality and patient safety at the American Hospital Association, said, "The HAC penalty payment program is regarded as rather arbitrary, so other than people getting upset when they incur a penalty, it is not in and of itself changing behavior"

Example from Emory

Three Emory-affiliated hospitals were fined for high rates of hospital-acquired conditions for fiscal year 2017. Emory University Hospital Midtown (EUHM) is being fined for the third consecutive fiscal year, and Emory Johns Creek Hospital (EJCH) for the second consecutive fiscal year. Emory University Hospital (EUH) is being fined for a second fiscal year, the first instance occurring in 2015.

But Emory’s response is worth considering. Director of Media Relations of Emory Healthcare Janet Christenbury wrote in a statement that the ratings inaccurately compared hospitals because they are “based on methodologies that often do not sufficiently take into account the differences in patient populations and the complexity of conditions that certain hospitals treat.”

Teaching hospitals, such as Emory’s Midtown facility, are unique because they conduct various common and complex procedures and provide clinical education and training to current and future medical providers, Christenbury said. Consequently, there is more data to report to CMS in comparison to other facilities that treat patients with limited specializations or more common conditions, Christenbury added.


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