Health Care Reform Blog

Congress, President Agree to Extend Expiring Medicare and Medicaid Payments

McDermott Will & Emery — Thu, 23 Feb 2012 13:06:05 -0600

by Andrea M. Bergman, Teddy Eynon, Karen S. Sealander and Eric Zimmerman

On February 17, 2012, Congress approved the Middle Class Tax Relief and Job Creation Act of 2012, ending debate over the extension of payroll tax reductions, unemployment insurance benefits, and numerous Medicare and Medicaid payment provisions, most of which were set to expire at the end of February. This White Paper provides an overview of the most significant Medicare- and Medicaid-related provisions in the act.

To read the full article, click here.

Congress, President Extend Endangered Medicare and Medicaid Programs

McDermott Will & Emery — Wed, 04 Jan 2012 14:53:43 -0600

by Teddy Eynon, Karen S. Sealander and Eric Zimmerman

The Temporary Payroll Tax Cut Continuation Act of 2011 extends numerous expiring Medicare and Medicaid programs, thus sparing physicians, hospitals and other health care providers significant Medicare and Medicaid payment cuts. This On the Subject provides an overview of the most significant Medicare- and Medicaid-related provisions in the Temporary Continuation Act.

To read the full article, please click here.

CMS Issues Proposed Rule Implementing the "Federal Sunshine Law" Reporting Requirements

McDermott Will & Emery — Wed, 04 Jan 2012 09:10:52 -0600

by Bernadette M. Broccolo, Emily J. Cook, Lesley N. DeRenzo, Susan S. Lee and Joan Polacheck

The U.S. Centers for Medicare & Medicaid Services (CMS) released a proposed rule implementing the "Sunshine" provisions of the Affordable Care Act (ACA) that requires annual public reporting by certain drug and device manufacturers of payments made by them to physicians and teaching hospitals and of physician ownership interests in such manufacturers. The "Sunshine" provisions of the ACA also require group purchasing organizations to make annual public reports of physician ownership interests in such organizations. CMS is accepting comments on its proposed rule through February 17, 2012.

To read the full article, please click here.

Medicare Shared Savings Program Final Rule: Where Do We Go from Here?

McDermott Will & Emery — Fri, 23 Dec 2011 08:58:15 -0600

McDermott Will & Emery is pleased to provide this supplemental matrix to its original White Paper summarizing and evaluating the Centers for Medicare & Medicaid Services (CMS) proposed Medicare Shared Savings Program (MSSP) regulations. As did the original White Paper, the matrix provides both a summary of, and commentary on, CMS’s recently published final regulations. The matrix, which is intended to be read together with the original White Paper, “The Controversial Draft Medicare ACO Regulations: Analysis, Comments and Recommended Action,” includes page-by-page cross-references identifying changes between the Proposed Rule and the Final Rule, as well as McDermott commentary and recommended action items. Readers should consult both the White Paper and the updated matrix when navigating through the Final Rule’s requirements. We hope that you find this update and the original White Paper to be a useful and valuable resource and strategic planning tool as you evaluate your organization’s participation in the MSSP. The authors and editors of these documents, as well as other McDermott lawyers with substantial experience and knowledge in the many issues raised by the MSSP, are available to respond to your questions and to facilitate your consideration and pursuit of shared savings programs.

For more information, please contact your regular McDermott Will & Emery lawyer or an editor:

Editor:
Gary Davis: +1 305 347 6520 gsdavis@mwe.com

Contributing Editor:
Eric Zimmerman: +1 202 756 8148 ezimmerman@mwe.com

Click here to view the Supplemental Matrix in Adobe PDF format.

Please click here to view the original White Paper in Adobe PDF format.

House End of Year Package Would Cut Hospital Funding More than $17 billion

McDermott Will & Emery — Mon, 12 Dec 2011 14:01:13 -0600

by Karen S. Sealander and Erika Stocker

As the clock ticks down on Congress’ 2011 session and lawmakers look to wrap up outstanding FY 2012 appropriations bills, leaders in both the House of Representatives and the Senate continue to look for a path forward on priority legislation to extend unemployment benefits, renew the expiring Social Security payroll tax cut and prevent a steep cut in Medicare physician reimbursements as part of a large year-end “extenders” package.

House Republicans released their extenders package, HR 3630, late last week and are working to build support for the measure, with a vote expected early this week. This 369-page legislation would reduce Medicare payments to hospitals by more than $17 billion in order to finance other of the bill’s provisions. Highlights of the health-related provisions are set forth below and a more detailed summary of the health-related provisions can be found here.

Should HR 3630 pass the House, it is expected to be soundly rejected in the Senate. Further, President Obama has already indicated his displeasure with certain of the bill’s provisions. As such, we believe that there are two options for an extenders package to make its way to the President’s desk for a signature: (1) House and Senate leaders will need to have an earnest negotiation to agree on a compromise that can pass muster in a Republican-led House, can garner 60 votes in the Democratically-controlled Senate and can avoid the veto pen of President Obama, or (2) the Senate will approve its own extenders package in the nature of a substitute to the House bill, which the House would have little choice but to accept.

Highlights of some of the health-related provisions are as follows:

Extenders and Other Changes

The bill heads off a 27.4 percent cut in Medicare physician payments, and provides that for CYs 2012 and 2013, physician payments would increase 1 percent in each year. The Congressional Budget Office (CBO) scores this provision as costing $38.9 billion over 10 years.
The bill would extend several expiring Medicare ambulance add-on payments, including a 2 percent adjustment for urban ground ambulance services, a 3 percent adjustment for rural ground ambulance services and the 22.6 percent increase for ambulance payments for trips originating in “super rural areas,” through December 31, 2012,. CBO scored this provision at $0.1 billion over 10 years.
The bill would extend with modifications a program that provides an exceptions process to outpatient therapy caps through December 31, 2013. CBO scored this provision at $1.7 billion over 10 years.
The bill would extend the physician fee schedule's work relative value units (RVU) geographic floor through December 31, 2012. CBO scored this provision at $0.5 billion over 10 years.
The bill would re-open physician-hospital ownership restrictions imposed under the Affordable Care Act (ACA) to allow physician-owned hospitals that were under construction, but did not have Medicare provider numbers as of December 31, 2010, to open and operate and qualify for grandfather protection. The bill also would make it significantly easier for hospitals that were grandfathered under the ACA provisions to expand capacity (presently, grandfathered hospitals are allowed to expand bed and OR capacity only if they meet very limited criteria). CBO scored this provision at $0.3 billion over 10 years.

Offsets

The bill utilizes a number of offsets, including several that come directly from hospital payments:

Reducing hospital outpatient prospective payment system (HOPPS) facility fee payments to hospitals for evaluation and management (E/M) services to be equal to the Medicare payment for the same service when furnished in a physician office. CBO estimates that this provision saves $6.8 billion over 10 years.
Reducing the reimbursement hospitals and other providers can receive for bad debts from 70 percent to 55 percent, phased in over 3 years. CBO estimates that this provision saves $10.6 billion over 10 years. Of note, the President had proposed that the percentage be reduced to 25 percent.
Rebasing Medicaid disproportionate share hospital (DSH) payments. CBO estimates that this provision saves $4.1 billion over 10 years.
Increase Medicare Part B and D premiums for high-income individuals by 15 percent, and increase the number of individuals considered to be high-income by lowering brackets from $85,000 for individuals to $80,000, and from $170,000 for couples to $160,000. CBO estimates that this provision saves $31 billion over 10 years.
Reducing by $8 billion the Prevention and Public Health Fund created in the ACA.

Omitted Provisions

The bill is also noteworthy for what it does not include, including:

Sole community hospital and small rural hospital hold harmless or “TOPS” protections under the outpatient PPS, which will expire December 31, 2011.
Section 508 wage index reclassifications, which expired September 30, 2011.
Physician pathology technical component payments that allow independent laboratories to receive payments from Medicare for the technical component of pathology services performed for a hospital patient.
Reasonable cost payments for clinical laboratories in low density population areas, which expires July 2012.
The Medicare-dependent hospital designation program, which expires September 30, 2012.
Low-volume hospital payment adjustments, which expires September 30, 2012.

CMS Releases its 2012 ACO Application; Pioneer ACOs Advance

McDermott Will & Emery — Mon, 21 Nov 2011 16:13:36 -0600

by J. Peter Rich and Lesley DeRenzo

Medicare MSSP ACOs

Pursuant to the Medicare Shared Savings Program (MSSP) final rule released on October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) has released its 2012 Accountable Care Organization (ACO) application. Organizations interested in participating as an ACO in the MSSP created under the Patient Protection & Affordable Care Act may now move forward with the application process.

Organizations must submit a brief Notice of Intent (NOI) to CMS by 5:00 p.m. EST on January 6, 2012. A link to the NOI is accessible here.

Once CMS receives and processes an applicant’s NOI, the applicant will receive an acknowledgement letter from CMS that contains the applicant’s ACO ID. Additionally, CMS will provide the applicant with detailed information on how to obtain a CMS user ID (which is necessary to apply for the MSSP).

After an applicant has obtained an ACO ID and CMS user ID, the applicant should submit the MSSP application to CMS by no later than 5:00 pm EST on January 20, 2011, for the April 1, 2012 contract start date. Applicants wishing to participate starting July 1, 2012, should submit the MSSP application to CMS by no later than 5:00 pm EST on March 30, 2012.

For more information about the MSSP application process click here.

Separate ACO Development - Pioneer ACOs Advance

In a separate ACO development, CMS has recently pursued partnerships with ACOs through its Pioneer ACO model, led by the Center for Medicare & Medicaid Innovation (CMI) within CMS. The Pioneer ACO program has been designed for health care providers that have relatively more experience with an integrated delivery system model, and thus, greater readiness to contract with CMI as an ACO. Approximately 40-50 of the Pioneer ACO applicants were offered contracts, and approximately 25-30 Pioneer ACOs are expected to enter into contracts with CMI. CMI’s collaborations with Pioneer ACOs are aimed at achieving better care for individuals, better health for populations, and reduced expenditures for Medicare, Medicaid, and CHIP beneficiaries.

For more information about CMI click here.

HHS Announces $1 Billion Grant Project: Health Care Innovation Challenge

McDermott Will & Emery — Tue, 15 Nov 2011 16:04:20 -0600

by Emily J. Cook and Lesley DeRenzo

On November 14, 2011, the Center for Medicare and Medicaid Innovation (Innovation Center) acting under the United States Department of Health and Human Services announced a funding opportunity entitled the: “Health Care Innovation Challenge.” The Patient Protection & Affordable Care Act established the Innovation Center and provides the funding for meritorious grantees who have successfully demonstrated an ability to implement innovative approaches to deliver high-quality health care services at lower costs for those beneficiaries enrolled in Medicare, Medicaid, and CHIP.

The purpose behind the Health Care Innovation Challenge is to award pioneering ideas from individuals and entities that will ultimately reduce health care costs, improve quality of health care, and change the way health care services are delivered. To accomplish this objective, the Innovation Center will fund successful grant applicants through cooperative agreements ranging from approximately $1 million to $30 million dollars over a three-year period.

The Innovation Center is looking for grant applications that at a minimum address: (1) how the proposed model will develop and/or deploy health care workers in new and innovative ways, (2) how soon the proposed model will become operational (e.g., it must be capable of coming to realization in 6 months), and (3) how the proposal will be sustainable over time.

All potential grantees must submit any applications electronically at www.grants.gov. Letters of Intent are due on December 19, 2011. Final applications are due on January 27, 2012. Awards are expected to be announced by the Innovation Center in March 2012.

For more information on the Health Care Innovation Challenge initiative funding opportunity announcement (in addition to upcoming events sponsored by the Innovation Center) please click here.

Prospective applicants may submit specific questions about the Health Care Innovation Challenge by sending an e-mail to: InnovationChallenge@cms.hhs.gov

Obama Administration Asks Supreme Court to Take Up Health Reform Case

McDermott Will & Emery — Tue, 11 Oct 2011 11:27:17 -0600

by J. Peter Rich and Webb Millsaps

The Obama Administration has asked the U.S. Supreme Court to consider the constitutionality of the individual mandate, a provision in the Affordable Care Act (ACA) that the Administration once referred to as the “linchpin” of the sweeping 2010 health reform law. As we wrote previously, there are numerous challenges to the ACA that are in various stages of litigation, but the most significant case, Florida et al. v. United States Department of Health and Human Services et al. (Florida v. HHS), is the one that the Administration has petitioned the Supreme Court to review.

The challengers in Florida v. HHS, including 26 states, the National Federation of Independent Business and two individual citizens, originally were victorious in the U.S. District Court for the Northern District Court of Florida. That decision by Judge Roger Vinson found that the individual mandate was unconstitutional and also found that the whole of the ACA must fail as a result because the individual mandate was not deemed severable from the rest of the law. Judge Vinson’s decision was then upheld in part and reversed in part when the Eleventh Circuit Court of Appeals ruled August 12, 2011. A three-judge panel of the Eleventh Circuit Court found, in a 2-1 decision, that the individual mandate is unconstitutional, but that it is severable from the remainder of the ACA and therefore that the rest of the health reform law should survive.

The Administration, which could have requested that the Eleventh Circuit re-hear the case en banc, filed their Petition for a Writ of Certiorari (the Petition) on September 27, 2011. By not pursuing the potential interim step of an en banc re-hearing the Administration has made it more likely that the Supreme Court will hear the case and make its ultimate ruling on the matter prior to the November 2012 election. Politically, this could be risky as some observers felt the Administration would not want to have a final decision by the Supreme Court come prior to the election. However, an en banc re-hearing would have carried some risk to the Administration since the Eleventh Circuit would have been free to fully affirm Judge Vinson’s original decision that if the individual mandate is unconstitutional then all of the ACA must be struck down.

The Petition argues that the Supreme Court should resolve the case because the decision by the Eleventh Circuit Court of Appeals “conflicts with a decision of the Sixth Circuit and involves a question of fundamental importance.” The Administration argues in the Petition that the decision by the Eleventh Circuit on the issue of the individual mandate is “fundamentally flawed and denies Congress the broad deference it is due in enacting laws to address the Nation’s most pressing economic problems and set tax policy.”

Pennsylvania Federal Judge Finds the Individual Mandate Unconstitutional and Strikes Down Closely Related Provisions

McDermott Will & Emery — Wed, 14 Sep 2011 15:38:42 -0600

by J. Peter Rich and Webb Millsaps

On September 13, 2011, a federal district court judge in Pennsylvania ruled that the individual mandate under the Affordable Care Act (ACA) is unconstitutional and that certain provisions closely linked to the individual mandate must also be struck down.

Judge Christopher C. Connor’s decision differed from all of the prior judicial rulings on the question of severability, finding that certain provisions of the ACA which are closely tied to the individual mandate should fail as well, including provisions on guaranteed issuance of health insurance coverage irrespective of pre-existing conditions. However, Judge Connor ruled that the bulk of the ACA should remain intact, notwithstanding the unconstitutionality of the individual mandate. In this regard, Judge Connor’s decision took a middle path between the previous two district court decisions that had found the individual mandate unconstitutional. Judge Hudson in Virginia had struck down the individual mandate, but had ruled that all other provisions of the ACA could stand intact. Judge Vinson in Florida had struck down the individual mandate and had ruled that the entirety of the ACA must fail.

Six federal district courts have now ruled on the constitutionality of the individual mandate: three finding it constitutional and three finding it unconstitutional (two of those decisions, one on each side of the scorecard, were vacated last week by the Fourth Circuit Court of Appeals). Aside from those six courts, other federal district courts have also ruled in cases involving challenges to the ACA, but those rulings have been on legal grounds not related to the constitutional questions, such as whether the challengers have standing.

Three federal circuit courts of appeals have now considered lower court decisions on the individual mandate. The Eleventh Circuit Court of Appeals in Atlanta, reviewing Judge Vinson’s opinion, found the individual mandate to be unconstitutional, but overturned Judge Vinson on the severability issue, ruling that the remainder of the ACA should not be struck down. The Sixth Circuit Court of Appeals in Cincinnati upheld a lower court decision that found the individual mandate to be constitutional. Last week, on September 8, 2011, the Fourth Circuit Court of Appeals in Richmond vacated two federal district court decisions, finding that the judges did not have standing to reach their decisions (for legal reasons related to standing of the challengers and ripeness of the injuries). Separately, briefs have been filed in another case which is before the Circuit Court of Appeals for the District of Columbia.

There are approximately 30 cases involving challenges to the ACA that are in various stages of litigation. Due to the circuit split between the Eleventh Circuit and Sixth Circuit, the U.S. Supreme Court will ultimately resolve the issues of the individual mandate and its severability from other provisions of the ACA.

Eleventh Circuit Strikes the ACA's Individual Mandate as Unconstitutional, Setting Up a Circuit Split and Making Supreme Court Review More Likely

McDermott Will & Emery — Mon, 22 Aug 2011 15:13:46 -0600

by Webb Millsaps and J. Peter Rich

In a 2-1 decision on August 12, 2011, the Eleventh Circuit Court of Appeals in Atlanta ruled that the individual mandate in the Affordable Care Act (the ACA) is unconstitutional. (See opinion.) In a reversal from the original federal district court decision on appeal, however, the circuit court found that the individual mandate was severable from the remainder of the ACA, and therefore concluded that the remaining parts of the ACA should stand.

By contrast, in the original district court opinion, Judge Roger Vinson, after noting that the individual mandate had been referred to as the “linchpin” of the ACA by the President and others, found that the whole of the ACA was not severable from the individual mandate, and that since the individual mandate was unconstitutional the entire ACA must be struck down.

While the Eleventh Circuit found that the “district court placed undue emphasis on the [ACA’s] lack of a severability clause,” it did acknowledge the closeness of the severability question, particularly with regard to two reforms under the ACA: guaranteed issue health insurance, 42 U.S.C. § 300gg-1 (effective January 1, 2014) and the prohibition on preexisting condition exclusions, id. § 300gg-3.

The Eleventh Circuit Court’s opinion is of significant interest to stakeholders for a variety of reasons. Importantly, this decision sets up a circuit split (the 6th Circuit in Atlanta previously upheld the constitutionality of the individual mandate in a 2-1 decision), which means that Supreme Court review is virtually inevitable. Further, this decision marks the first time that a judge appointed by a democrat ruled against the Obama Administration on the constitutionality of any aspect of the ACA. In addition, the Eleventh Circuit case has been regarded as perhaps the most significant legal challenge to the ACA, in part because the challengers include 26 states, as well as the National Federation of Independent Business. In related ACA legal action, the Fourth Circuit has yet to rule in two other pending challenges.

The Obama Administration has 90 days from August 12, 2011, to decide if it wishes to request an en banc re-hearing before the full Eleventh Circuit Court of Appeals or instead appeal the decision directly to the Supreme Court. The Administration’s decision will likely involve legal and political considerations. In an en banc re-hearing, there is a potential legal risk that the full Eleventh Circuit could affirm the unconstitutionality of the individual mandate, but reverse the panel on the severability issue. Alternatively, if the case moves more swiftly to the Supreme Court and the Court agrees to take up the ACA challenge in the term that begins in October 2011, then a decision would be expected no later than June 2012, a scant five months before the presidential election. From a political perspective, an en banc re-hearing could delay a final Supreme Court decision on health care reform until after the November 2012 election. However, even if requested by the Administration, an en banc re-hearing is not guaranteed because en banc re-hearings are disfavored under federal court rules and the Eleventh Circuit could only order an en banc re-hearing if a majority of all the eligible Eleventh Circuit Judges agree to hear it.

Meanwhile, President Obama has expressed confidence that the ACA will be upheld and the Administration is continuing to press ahead with implementation of its provisions.

The Debt Deal: What's Next and How Will It Impact Your Business?

McDermott Will & Emery — Mon, 22 Aug 2011 08:00:00 -0600

The deficit reduction deal will dominate the congressional and presidential agendas for the balance of 2011 and have a profound impact on the U.S. economy. Join our panel of political and policy insiders at a webcast where they will evaluate whether the “super committee” can reach an agreement, and predict which sectors and programs will be most vulnerable to further spending cuts.

Some of the questions our panel will discuss include:

How will tax policy likely change?
How will the appropriation process change this year, and how will the budget-cutting process affect industries such as health care, agriculture, energy, defense and others?
How will the White House deal with this budget-cutting panel?

This webcast will provide the analysis and insight necessary to understand the events that will unfold behind closed doors and affect your business. Our panel will take questions and answer with specifics.

Wednesday, September 7, 2011
12:00 – 1:30 pm EDT

To register, please click here.

Webcast: Strategies to Deal with the Patient Protection & Affordable Care Act

McDermott Will & Emery — Mon, 15 Aug 2011 14:48:56 -0600

Live Knowledge Congress Webcast
Strategies to Deal with the Patient Protection & Affordable Care Act
September 13, 2011, Noon to 2 pm (EST)

Panel includes Susan Nash, Co-Chair of McDermott Will & Emery’s Health and Welfare Benefits Group.

The Patient Protection & Affordable Care Act (PPACA or “Health Reform Bill”) has been the subject of significant legal and policy debate since it was enacted in April 2010. The legislation has been both hailed as an important victory in the battle to improve the quality and accessibility of healthcare in the United States, and challenged as unconstitutional and ineffective in reducing medical costs and otherwise incenting choice and value in medical care and services.

Amidst this debate, legal and business strategies for dealing with the aspects of Health Reform that have been, or soon will be, implemented are often left in the background. These strategies are critical for ensuring compliance and optimizing business performance as PPACA rolls out. No matter how the broader policy or legal debate resolves, entities affected by PPACA must consider the Act’s impact on reimbursement, cost protection, and other day-to-day operational issues.

Strategies to Deal with the Patient Protection & Afford Care Act LIVE Webcast is a must-attend for healthcare professionals, health policy directors, health executives, pharmaceutical and medical device manufacturers and others who are interested in developing practical strategies to deal with healthcare reform. The Knowledge Group has assembled a panel of key thought leaders and regulators to discuss the fundamentals and updates regarding this topic.

Click here to register for the event.

To receive a discount courtesy of McDermott Will & Emery, please enter this code: will8992.

Supreme Court Receives New Request to Consider Constitutionality of Health Reform Law

McDermott Will & Emery — Fri, 29 Jul 2011 08:38:40 -0600

by Webb Millsaps and J. Peter Rich

The Supreme Court of the United States received a new request today that it consider the question of whether the “individual mandate” under the Affordable Care Act (the ACA) is constitutional or not. The petition of certiorari was filed by the Thomas More Law Center, one of several plaintiffs challenging the ACA on constitutional grounds in various litigation now working through the federal courts. The filing today requesting Supreme Court review took less than a month after the Sixth Circuit Court of Appeals handed down a 2-1 decision that rejected the Thomas More Law Center’s challenge to the ACA and declared that the individual mandate was constitutional. After losing the Sixth Circuit decision before the three-judge panel, the Thomas More Law Center could have made a request that the Sixth Circuit rehear the case en banc, meaning that all of the Sixth Circuit judges (as many as 26 judges, depending on factors such as current vacancies) would rehear the case and issue a decision. En banc hearings are somewhat rare and are usually reserved for especially complex cases or ones of considerable public importance.

The July 27, 2011 filing is not the first time one of the litigants challenging the ACA has requested that the Supreme Court take up the matter. In April of this year, the Supreme Court refused a request from the State of Virginia that its challenge to the individual mandate and the ACA be heard by the high court on an accelerated basis. Virginia’s request was different in an important respect from the July 27 petition by the Thomas More Law Center because Virginia sought to leap frog the intermediate step of going before a U.S. Circuit Court of Appeals, preferring instead to ask for the extraordinary step of immediately proceeding to the Supreme Court. Accordingly, Virginia’s request represented a departure from the normal course of review and at the time no one was surprised that the Supreme Court preferred that the Virginia matter first be heard by the Fourth Circuit Court of Appeals. It is also worth noting that Virginia’s request was different from the July 27 request by the Thomas More Legal Center in the sense that Virginia won in its original petition (at least in large part) because the original federal district court had sided with Virginia in its position that the individual mandate was unconstitutional, whereas the Thomas More Law Center has now lost before a federal district court and the Sixth Circuit.

Throughout the legal battle, the Obama Administration has taken the position that the legal process should play out methodically and go through the appropriate stages of appeal. This may be a political preference and a legal strategy that the Administration views as beneficial to it. Regardless, the Supreme Court itself has a strong, historical preference that, absent extraordinary urgency, it only consider matters after a complete review has taken place in applicable lower courts.

It is highly unlikely that the Supreme Court will consider taking up the challenges to the ACA until both the Fourth Circuit Court of Appeals and the Eleventh Circuit Court of Appeals have rendered decisions on the ACA cases currently before them. As we have stated previously, if either of those circuit courts strike down the individual mandate or, possibly even the ACA entirely, that would establish a circuit split given that the Sixth Circuit ruled in support of the individual mandate. And if there is a circuit split after decisions are rendered in the other pending cases, it is likely that the Supreme Court will take up the matter more quickly. In that event, if the high court takes the case this fall, it will likely decide the constitutionality of health care reform just months before the 2012 election.

Split Decision: U.S. Appellate Court Finds Health Reform Law is Constitutional

McDermott Will & Emery — Fri, 01 Jul 2011 08:35:37 -0600

by J. Peter Rich and Webb Millsaps

The Obama Administration enthusiastically embraced a legal victory yesterday when, in a 2-1 split decision, a federal appeals court panel upheld a lower federal court decision finding that the federal Health Reform Law is constitutional. Some observers quickly seized on the fact that one of the two votes upholding the Health Reform Law was a conservative Republican judge, Jeffrey Sutton, who once clerked for Supreme Court Justice Antonin Scalia. The third judge, a Reagan appointee, dissented on the substantive issue, arguing that the Health Reform Law is unconstitutional.

The core question remains an extremely close one. The three judges on the panel were not unanimous and the opinion itself gives some further indications that the matter could go either way when it is finally decided by the Supreme Court. For example, Judge Sutton, who concurred in part and wrote the majority opinion in part, indicated that his opinion is just one step in the process – at one point he essentially refers to the appeals court as a “middle management judge” and then later goes on to observe that he is “[m]indful that we at the court of appeals are not just fallible but utterly non-final in this case…”

Whether today's decision has any ultimate impact will turn on its persuasive power and, in particular, whether the logic of the opinion is deemed compelling by the Supreme Court of the United States. Even before this case approaches the high court, several additional steps will occur. First, the challengers could request the Sixth Circuit Court of Appeals to re-hear the case en banc, although information posted on the lead challenger’s website indicates that this option will not be pursued and that the challengers prefer that the case proceed directly to the Supreme Court. In any event, the Sixth Circuit decision is just the first of the three appellate court reviews; two other federal appeals courts are currently considering similar challenges to the Health Reform Law. In contrast to the Sixth Circuit’s decision in which the lower court had already found the Health Reform Law to be constitutional, the other two circuits, the Fourth and the Eleventh, would have to reverse lower courts that have previously rejected the Health Reform Law as being unconstitutional. If either of those circuit courts decides the opposite way of today’s decision, the odds will increase that the Supreme Court will take up the matter more quickly. If the high court takes the case this fall, it could decide the constitutionality of health care reform just months before the 2012 election.

Schedule H's PPACA Questions Optional for Tax-Exempt Hospital

McDermott Will & Emery — Fri, 10 Jun 2011 14:35:19 -0600

by Michael N. Fine

Yesterday, the Internal Revenue Service (IRS) announced that tax-exempt hospitals need not answer certain questions related to the Patient Protection and Affordable Care Act's (PPACA) requirements for their continued tax exemption.

As you may recall, the PPACA added exemption requirements for tax-exempt hospitals through new Section 501(r) to the Internal Revenue Code. Earlier this year, the IRS released a redesigned Schedule H, Hospitals,to the Form 990 that included Section 501(r)-related questions focusing on each facility's (i) community health needs assessment practices, (ii) financial assistance policies, (iii) billing and collection practices, and (iv) charges for medical care.

Today's announcement makes answering these questions optional for the 2010 reporting year. This gives tax-exempt hospitals more time to analyze the schedule's new questions and better prepare for future disclosures. No penalties will be assessed against tax-exempt hospitals that choose to leave blank this Schedule H subpart.

Key Takeaways

Tax-exempt hospitals must still wait until at least July 1, 2011, to file their 2010 returns. In February, the IRS directed tax-exempt hospitals to delay filing their Forms 990. The stated purpose for this unusual delay was to give the IRS additional time to implement changes to the IRS forms and systems to accommodate the additional requirements for charitable hospitals. Today's announcement does not effect the July 1st delay.
While the new Schedule H questions are optional, tax-exempt hospitals must still demonstrate that they comply with Section 501(r)'s requirements or else risk losing their exempt status. The announcement does not alter Section 501(r)'s effectiveness, just the reporting disclosure timeframe.
A tax-exempt hospital must still attach a copy of its most recent audited financial statements to its 2010 Form 990 if its reporting period began after March 23, 2010. This requirement reflects another Affordable Care Act requirement.
The announcement encourages the tax-exempt hospital community to provide comments on how to improve the clarity and reduce the reporting burden of the Form 990 and Schedule H.

A copy of IRS Announcement 2011-37 is attached and available at: http://www.irs.gov/pub/irs-drop/a-11-37.pdf

Wage Index Report Issued by Institute of Medicine Affects Medicare Payments to Hospitals

Eric Zimmerman — Fri, 10 Jun 2011 08:07:42 -0600

The Facts
The Institute of Medicine (IOM) on June 1, 2011, released a long anticipated report analyzing geographic adjustment factors under the Medicare program, including the hospital wage index and physician geographic practice cost index. This report is the first of two that have been commissioned by the Centers for Medicare & Medicaid Services (CMS) to examine the hospital wage index under the Inpatient Prospective Payment System and the geographic practice cost indices (GPCIs) under the Physician Fee Schedule. The focus of this first report is evaluating alternative methodologies and data sources for improving the accuracy of the hospital wage index and the GPCIs.

The IOM embraced recommendations remarkably similar to those made by the Medicare Payment Advisory Commission in its 2007 study of the wage index, including using Bureau of Labor Statistics data instead of hospital cost report wage data to form the backbone of the wage index. However, IOM departs from MedPAC in a few key respects. First, IOM recommends retaining metropolitan statistical areas (MSAs) as the building block for reflecting labor markets, instead using counties as MedPAC recommended. Similar to MedPAC, IOM also embraces a smoothing technique to eliminate sharp differences in wage index values between areas, but IOM recommends using commuting patterns rather than mathematical formulas, which MedPAC recommended. Notably consistent among these various reports is the proposal to eliminate reclassification processes, which IOM and others reason would no longer be necessary with smoothing.

The IOM report is the latest in a series of wage index reports to be released of late, all of which were generated by health reform legislation. CMS in April 2011 released a report on wage index reform developed by its consultant, Acumen, which recommended using wage and commuting data to define hospital labor markets rather than relying on MSAs.

What's at Stake
Future changes to the wage index, such as those recommended by the IOM, could dramatically increase or decrease Medicare payments to hospitals. While the release of this report is important for informing the discussion of geographic adjustment factors in Medicare payment, it likely will not have any immediate impact. The IOM report and others before it highlight that legislation is necessary to advance many of the recommendations. The Affordable Care Act (ACA) requires CMS to issue a plan to reform the wage index by December 31, 2011. CMS is expected to rely heavily on work previously done by Acumen for this report. Timing for the final report is not yet certain, but is critical. Congress is not likely to act until it gets CMS's report, and even then action will be difficult. Budget neutral action will redistribute billions of dollars, which makes any change politically difficult. Insulating would-be losers from heavy losses resulting from reform could be very expensive, which also makes any change politically challenging.

Steps to Consider

Hospitals may re-examine the 2007 MedPAC report to evaluate how the MedPAC proposals and comparable IOM proposals may impact payment.
Hospitals also may examine recommendations from CMS's contractor, Acumen, to evaluate potential impact.
Finally, hospitals that anticipate significant reimbursement impacts -- positive or negative -- arising from wage index changes, may wish to begin discussing these issues with congressional representatives.

CMS Issues Final Rule to Streamline Hospital and CAH Credentialing of Telemedicine Providers

McDermott Will & Emery — Wed, 04 May 2011 13:43:10 -0600

by Amanda Jester

The Facts
On May 2, 2011, CMS released a final rule (the Final Rule) revising the conditions of participation (CoPs) for both hospitals and critical access hospitals (CAHs), scheduled to be published in the Federal Register on May 5, 2011. The Final Rule is an attempt to streamline the credentialing and privileging process for practitioners who provide telemedicine services to hospital or CAH patients. Currently, the CoPs require all practitioners providing services to patients to go through the same credentialing and privileging process, even if those practitioners are only providing services remotely through telemedicine capabilities. The Final Rule allows hospitals and CAHs to rely on the credentialing and privileging process of the facility where the practitioner is located (the distant cite), provided that the hospital or CAH and the distant cite have an agreement in place and the distant cite meets CMS standards (even if it is not a Medicare-participating provider). The Final Rule will take effect 60 days from publication, July 4, 2011, assuming a May 5, 2011, publication date.

What’s at Stake
CMS anticipates that the removal of unnecessary barriers to the use of telemedicine may improve access to and quality of care by enabling patients to receive medically necessary interventions in a more timely manner and enhancing patient follow-up in the management of chronic disease conditions. These revisions may also provide some relief to small hospitals and CAHs in rural areas with a shortage of primary care and specialized providers, by providing easier access to these practitioners through telemedicine.

Steps to Consider

If a hospital or CAH does not already access practitioners via telemedicine, consider whether there are “gaps” in services available to patients that could be alleviated through telemedicine.
Identify a distant cite that may be a source of practitioners.
Keep in mind that the distant cite must meet CMS standards with regard to its credentialing and privileging process.
Develop thoughtful arrangements with distant cites to facilitate telemedicine services.

Providing Accountable Care: Strategy & Structure Webcast Materials

McDermott Will & Emery — Wed, 04 May 2011 13:34:05 -0600

McDermott hosted a series of five complimentary webcasts focused on providing practical, can-do commentary and stimulating dialogue regarding the provision of “accountable care” and the formation of accountable care organizations (ACOs), including electronic health information, governance, management and provider alignment.

View archived webcasts and presentations

April 14, 2011: So You Want to Partner with CMS … Practical Considerations for Medicare ACOs Webcast | Materials

March 29, 2011: Payment, At-risk Arrangements and Funds Flow Models Webcast | Materials

March 15, 2011: Payor Perspectives on Provider Realignment and ACOs Webcast | Materials

March 1, 2011: Regulatory Hurdles, Best Practices, Evidenced Based-Medicine and the Evolution of Clinical Care Webcast | Materials

February 15, 2011: Use of Information, Governance, Management and Provider Alignment Issues Webcast | Materials

2011 Budget Deal Includes Changes to PPACA

McDermott Will & Emery — Mon, 18 Apr 2011 13:44:28 -0600

by Amy Gordon, Susan Nash and Maureen O'Brien

The 2011 budget agreement just passed by U.S. Congress on April 14, 2011, contains provisions that repeal and de-fund certain provisions of the Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act of 2010) (PPACA).

Specifically, the “free choice voucher” program mandated under Section 10108 of PPACA has been repealed. The free choice voucher provision of PPACA required employers to provide vouchers for workers whose employer-provided health insurance premiums cost between 8 percent and 9.8 percent of the worker’s family income. The vouchers could then have been used by the worker to purchase insurance in the private market or in the exchanges.

In addition, the 2011 budget agreement rescinds $2.2 billion of the $6 billion in start-up funding provided for the Consumer Operated and Oriented Plan program created under Section 1322 of PPACA and also rescinds $3.5 billion in performance bonus payments authorized in the 2009 State Children’s Health Insurance Program reauthorization.

Letter From Twenty-One GOP Governors Emphasizes Uncertainty of ACA's Future While Also Seeking Targeted Modifications That Would Improve ACA

Webb Millsaps — Tue, 08 Feb 2011 08:56:44 -0600

On February 7, 2011, Republican Governors sent a letter to Secretary of Health and Human Services (HHS), Kathleen Sebelius, emphasizing that the future of the Affordable Care Act (ACA) is uncertain and suggesting a short of list of “improvements” to ACA. On January 31, 2011, a Florida court ruling in favor of twenty-six states found that ACA’s “individual mandate” (IM) and in turn the whole of ACA is unconstitutional. The case will almost certainly reach and ultimately be decided by the U.S. Supreme Court.

The Governors’ letter says that the States now “face the decision of whether to participate in [ACA] by operating state [insurance] exchanges, or to let the federal government take on that task,” even though the States cannot know at present whether ACA will be in force in 2014. Although the IM does not take effect until 2014, the ACA requires states to establish insurance exchanges ready to operate January 1, 2014. If a state does not set up its own insurance exchange, the Federal government must step in and set up an exchange in that state, which could occur in 2012 or earlier. As a result, states cannot wait to see what happens with the litigation concerning the constitutional questions. ACA provides that HHS can set up and operate an exchange in any state that “the Secretary determines on or before January 1, 2013” will not be able to meet the 2014 deadline for setting up its own exchange.

Although the Governors' express “grave concerns” about ACA and note their belief that it contains “constitutional infringements,” the letter nonetheless urges the following targeted ACA modifications:

Provide states with complete flexibility on operating the exchange, most importantly the freedom to decide which licensed insurers are permitted to offer their products
Waive the bill’s costly mandates and grant states the authority to choose benefit rules that meet the specific needs of their citizens.
Waive the provisions that discriminate against consumer-driven health plans, such as health savings accounts.
Provide blanket discretion to individual states if they chose to move non-disabled Medicaid beneficiaries into the exchanges for their insurance coverage without the need of further HHS approval.
Deliver a comprehensive plan for verifying incomes and subsidy amounts for exchange participants that is not an unfunded mandate but rather fully funded by the federal government and is certified as workable by an independent auditor.
Commission a new and objective assessment of how many people will end up in the exchanges and on Medicaid in every state as a result of the legislation (including those “offloaded” by employers), and at what potential cost to state governments. The study should be conducted by a neutral third-party research organization approved by the signatory states.