Washington Update - January 12, 2018



  1. Congress returns facing lengthy to do list. After a brief holiday break, Congress returned to Washington with much to do, and not a lot of time in which to do it. The highest priority item on the agenda is extending funding for the federal government beyond Jan. 19 to avoid a government shutdown. While negotiations are continuing over a long-term budget deal that would lift existing budget caps and ease sequestration impacts, no agreement has been reached. Key issues still being negotiated include the overall spending totals, and whether to increase funding for both domestic and defense spending. Democrats are strongly pushing for “parity” so that if spending caps are increased to provide additional military and defense spending, that a similar increase be provided for domestic spending programs. At this point no deal seems to be imminent. There are also ongoing negotiations related to immigration policy taking place parallel to the budget discussions which include whether to provide relief for the so-called “dreamers” who received protections from immigration enforcement under the deferred action for childhood arrivals (DACA). Democrats have made providing a DACA fix a priority, while GOP leaders have indicated they do not intend to include one in the spending bill. At the same time, President Trump has been open to negotiations, but made clear that he will not sign a DACA fix without funding for a southern border wall – something Democrats have strongly opposed. At this point, it appears likely that avoiding the immigration issues and passing another short-term bill will be the most likely outcome, leaving debate about spending caps and domestic and defense spending parity for another time. 


    On the health care front, Congress returns facing many of the same issues they did in December. Specifically, Congress needs to reach a deal on a long-term funding solution for the Children’s Health Insurance Program (CHIP) and community health centers (CHCs). Congress approved a bill in late December to provide funding for CHIP and CHCs through March, but many states have reported that funding may run out as early as Jan. 19. The effort received a significant boost as the Congressional Budget Office dramatically reduced the estimated cost of extending the program as a result of the repeal of the ACA’s individual mandate late last year. CBO reduced the estimated cost to only $800 million for a 5-year extension or even as potentially saving $6 billion for a 10-year extension. It has been reported that Congress is now seriously examining moving forward with a 10-year extension given the expected cost savings that doing so would achieve.


    Congress must also address a number of expired Medicare “extenders” including the Medicare Dependent Hospital program and therapy caps exceptions process. Many of the extenders provide essential funding for many rural hospitals and hospitals that serve at-risk populations. Additionally hospitals are still urging Congress to approve legislation that would further delay or stop Medicaid Disproportionate Hospital (DSH) payment cuts from moving forward. The estimated $2 billion dollars in cuts for 2018 are underway, but Congress has considered delaying the cuts – even passing a bill to do so in the House. Lastly, there is still a small possibility that Congress may intervene to prevent the Centers for Medicare and Medicaid Services (CMS) from moving forward with 28.5% cuts in Medicare payments for 340B eligible hospitals, even as these reimbursement cuts have already gone into effect.


    Key Takeaways:

    • January is turning into a replay of December with Congress facing most of the same issues, and the very real threat of a possible government shutdown. 
    • Passing a long-term CHIP spending deal soon seems very likely after the CBO dramatically lowered the estimated cost of extending the program.
    • Given the reduced cost, it seems plausible that other health care provisions, such as the “extenders” and a delay of Medicaid DSH cuts, could be attached – though the timing for a deal remains unclear.


  2. Hospitals’ 340B lawsuit dismissed, but will be revived imminently. A hospital-backed lawsuit to prevent Medicare cuts to hospitals using the 340B drug discount program was dismissed Dec. 29 by the U.S. District Court for the District of Columbia. The hospital groups have indicated their intent to continue pursuing the lawsuit. In 2017, CMS finalized a proposal to reduce Medicare Part B reimbursement for prescription drugs purchased through the 340B drug discount program from the average sales price (ASP) plus 6% to ASP minus 22.5%. Hospital groups, including Vizient, strongly criticized the rule and urged CMS to withdraw the proposal and supported legislation to prevent the rule from going into effect. The lawsuit, which was filed by the American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, along with Eastern Maine Healthcare Systems, Henry Ford Health System, and Park Ridge Health, challenged CMS’s authority to implement the Medicare cuts to 340B hospitals. The court dismissed the challenge finding that because the cuts had not yet gone into effect, the parties did not yet have standing to challenge CMS’s rule. The court, however, did not rule on the merits of case overall. The hospital groups indicated to the court their intent to refile the suit once Medicare payment claims at the reduced rate are processed.


    Key Takeaways:

    • While the ruling was dismissed, and the Medicare 340B cuts were allowed to go into effect for the time being, the lawsuit will be refiled and heard on its merits in the future.
    • Regardless of the outcome of the legal action, Congress is expected to continue its scrutiny of 340B and may consider major changes to the drug discount program.


  3. Energy and Commerce Committee releases 340B report. On Jan. 10, the House Energy and Commerce Committee released the committee’s long-awaited report detailing its findings about the 340B drug discount program. The committee has been scrutinizing the 340B drug discount program for much of 2017 to examine concerns about the program’s scope and whether it has sufficient accountability. Many hospitals across the country utilize the drug discount program to expand access to services to underserved communities and stretch scarce federal resources to enhance services and offerings. This report reiterated many of the frequently mentioned criticisms and proposed several recommendations to address them. Many of those proposals are similar to those pursued in the past such as finalizing pending Health Resources and Services Administration (HRSA) regulations, increasing HHS’s oversight of the program, providing access to ceiling pricing information, ensuring greater transparency in the program and developing a mechanism to track and report how hospitals utilize the savings they realize from the program. Chairman Greg Walden (R-OR), indicated that while 340B has bipartisan support and serves an important purpose, he announced that the committee would look at making changes to the program in 2018. It is critical that hospitals continue to advocate on the importance of the program to their institutions and the patients that they serve.


    Key Takeaways:

    • Hospitals have been carefully monitoring the committee’s hearings, with some critics blaming expansion of the program for increasing drug prices.
    • Clearly there is an appetite from Chairman Walden and a number of other members of the committee to make significant changes to the 340B program.
    • At this point the Senate has not shown meaningful interest in considering significant changes to the drug discount program, but hospitals who utilize the program should continue to be diligent in ensuring they are complying with the program’s requirements, and tracking the savings and how they are used. 


  4. Administration launches new voluntary bundled payment program. On Jan. 9, the Center for Medicare and Medicaid Innovation (CMMI) announced a new Bundled Payments for Care Improvement Advanced (BPCI Advanced) model. Vizient prepared a brief summary of the new model. CMS announced that it expects participation in BPCI Advanced to qualify as an Advanced Alternative Payment Model for physician reimbursement under MACRA. The new model includes 32 clinical episodes (29 inpatient episodes and 3 outpatient episodes). Participants will be scored based on their performance in seven quality measures – with five clinically specific measures and both an all-cause hospital readmission measure and an advanced planning measure on all episodes. CMS indicated that it may revisit the measures annually. Under the model, an episode of care will be triggered by an inpatient admission and extend for 90 days post-discharge. The model will be based on a total-cost-of-care concept, in which the total Medicare fee-for-service spending on all items and services furnished to a beneficiary during the episode, including outlier payments, will be part of the Clinical Episode expenditures for purposes of the Target Price and reconciliation calculations. Applications for the new model will be accepted from January 11 until March 12.


    Key Takeaways:

    • The release of the new bundled payment model was anticipated with the administration’s opposition to mandatory bundles.
    • With the BPCI Advanced model qualifying as an Advanced APM and a MIPS APM under MACRA’s Quality Payment Program, it may be more likely to draw physician interest for participation.
    • A recent study highlighted the limited participation in bundled payment efforts, so the new approach may be a welcome new option for participation.


  5. Association Health Plans regulation released. On Jan. 4, the Department of Labor released a proposed rule that would expand the availability of Association Health Plans (AHPs). Under the proposed rule, DoL seeks to make changes to the Employee Retirement Income Security Act (ERISA) that would allow employers, including sole proprietors, to form AHPs based on geography or industry. Notably the rule does not allow AHPs to relax certain protections offered by ACA marketplace plans, such as denying coverage or underwriting for preexisting conditions. However, such plans would not be required to cover the 10 categories of essential health benefits required by the ACA. Because of that, some have raised concerns that AHPs may offer less regulated, skimpier benefit packages that would only attract younger, healthier consumers, leaving existing employer and individual insurance pools with a less healthy risk pool, thus driving up premiums in those markets. The proposal was released in response to President Trump’s Oct. 12 executive order that sought to promote AHPs, short-term, limited-duration health plans (STLDHPs), and health reimbursement arrangements (HRAs). The DoL rule only addresses the AHP effort, and further regulation regarding the STLDHPs is pending review. The rule was published on Jan. 5, and DoL will be accepting comments for 60 days from publication.


    Key Takeaways:

    • It is still unclear what the overall impact of the proposal will be. By expanding AHPs, the proposal’s aim is to provide more individuals access to the potentially more stable and affordable large group market. However, to the extent that AHPs prove particularly attractive to younger or lower cost individuals, they may also contribute to continued insurance market instability.
    • If developed appropriately, AHPs may provide a lower-cost option for currently uninsured individuals or small businesses to secure coverage.
    • For hospitals, the key risk is additional destabilization of ACA marketplaces, and the potential for the proliferation of health plans that offer limited coverage.


  6. CMS issues guidance for states adding Medicaid work requirements. On Jan. 11, CMS released guidance that outlined steps that states could take to implement new work or community engagement requirements for Medicaid beneficiaries. Under the guidance, states, through the 1115 waiver process, can implement employment and community engagement requirements as conditions forworking-age, non-pregnant Medicaid beneficiaries to receive or maintain eligibility for Medicaid. The elderly and those with a disability would not be subject to these requirements. In the guidance, CMS outlined several considerations that states should take into account in developing such a waiver program. According to CMS, states should consider providing a range of activities that could satisfy work and community engagement requirements, including career planning, job training, volunteering opportunities, and job support services. The letter further directs that states should make reasonable modifications for individuals with opioid addiction and other substance use disorders, such as by allowing time spent in medical treatment to count towards an individual’s community engagement requirements or exempting individuals participating in intensive inpatient or outpatient medical treatment. The guidance was expected as CMS administrator Verma has made clear over the last several months that CMS would seriously entertain state Medicaid demonstration plans that include requirements that working-age, able-bodied adults have or seek employment in order to be eligible for Medicaid. Ten states so far have pursued such a waiver, but to date none of the plans have been approved by CMS – though approval is expected to be granted in several states soon. That said, recent reports indicate that the administration could face a legal challenge on this recent guidance.


    Key Takeaways:

    • The release of the employment and community engagement guidance should clear the way for a number of states to experiment with various approaches to requiring employment or similar engagement to be eligible for Medicaid.
    • Numerous questions remain about how states would define employability or able-bodied, especially in relation to individuals struggling with substance use disorders, but the guidance offered some additional information on how states should manage such cases.
    • For hospitals, there is a concern that these new requirements could reduce eligibility for Medicaid and thus potentially reduce access to care.


  7. Finance Committee Chairman Orrin Hatch to retire. On Jan. 2, Sen Finance Committee Chairman Orrin Hatch (R-Utah) announced that he would be retiring at the end of his term in 2018. Hatch, the longest-serving Republican Senator, has been a critical voice in many of the most significant bipartisan health care policy deals struck by Congress throughout his career. He is known for passing the Hatch-Waxman Act, which established the framework for prescription drug patent system and allowed for the creation of generic drug products. He also played a major role in the creation of the Children’s Health Insurance Program and the passage of the American’s with Disabilities Act. His retirement will open the top Republican position on the Senate Finance Committee, the key committee with jurisdiction over Medicare and Medicaid next year. Sen. Charles Grassley (R-IA) seems most likely to take over the spot, but would have to surrender the prestigious position on the Judiciary Committee. If Grassley doesn’t pursue the Finance Committee position, Sen. Mike Crapo (R-ID) would be the next in line.


    Key Takeaways:

    • Throughout his career, Hatch has played an outsized role in health policy developments. Known as a dealmaker who could work well with members on both sides of the aisle, Hatch’s experience and willingness to cooperate will be missed.
    • Interestingly, one health policy icon could be replaced by another – with former GOP Presidential candidate and Massachusetts governor, Mitt Romney (who signed the Massachusetts law that the ACA was based-on), reportedly eyeing running for the Senate seat in Utah.


  8. Azar confirmation hearing focuses on drug prices but mostly avoids fireworks. On Jan. 9, Alex Azar, President Trump’s nominee to be the Secretary of Health and Human Services (HHS), faced his official confirmation hearing before the Senate Finance Committee. Because Azar previously led drug manufacturer Eli Lilly’s American operations, much of the hearing focused on how he would combat drug price increases as HHS Secretary. During the hearing, Azar said, “Drug prices are too high,” and went on to criticize the incentives in the health care system that drive higher prices. Azar also indicated that he does not support drug price negotiations due to concerns about the impact on innovation, but was open to considering drug negotiation through pharmacy benefit managers under Medicare Part B. He also indicated that he would continue implementing the ACA as the law requires. During the hearing, he also addressed whether he would support moving forward with mandatory demonstration programs – something previous HHS Secretary Tom Price opposed. Azar indicated that he would consider supporting mandatory demonstrations, saying, “If to test a hypothesis there around change in our health care system, that needs to be mandatory as opposed to voluntary to get adequate data, then so be it.”  Azar previously faced a similar line of questions by the Senate Health, Education, Labor and Pensions committee at a courtesy hearing in December. The committee is expected to advance his nomination in the coming weeks with the full Senate to consider his nomination later in January. So far, only two Democrats, Sen. Joe Manchin of West Virginia and Sen. Heidi Heitkamp of North Dakota, have indicated they will support Azar. Despite that relative lack of Democratic support to date, in all likelihood Azar will be confirmed as the next HHS Secretary.


    Key Takeaways:

    • Despite aggressive questioning, Azar avoided controversy, and absent new developments he will almost certainly be confirmed as the next HHS Secretary.
    • Azar has significant government experience already, previously serving as the Deputy HHS Secretary and general counsel during the George W. Bush administration.


  9. Roskam named to lead Ways and Means Health Subcommittee. On the other side of the capitol, another key health care leadership position is changing hands. On Jan. 10, House and Means Committee Chairman Kevin Brady (R-TX) announced that Rep. Pete Roskam (R-IL) would become the chairman of the Ways and Means Health Subcommittee. Roskam is replacing the outgoing Chairman, Pat Tiberi (R-OH), who elected to leave the House of Representatives in January. Roskam said about his appointment, “Our healthcare system has been broken for many years, and it’s important that we get this right. I’m focused on the needs of our families and what changes we can make that will protect the vulnerable, keep health insurance affordable and put American families back in control of their own healthcare.”


    Key Takeaways:

    • Chairman Roskam has long been opposed to the ACA, and supported efforts to repeal the law since its passage.
    • He is a spirited debater and has not been shy about digging in on technical health policy issues in health care so it is reasonable to expect that he will aim to be an active subcommittee chairman.


  10. CMS updates star ratings methodology and rankings. On Dec. 21, CMS announced posted an update to the data for Hospital Compare and the Overall Star Rating system. In the update, CMS utilized an updated methodology for the Overall Star Ratings system based on public input (Vizient’s comments here) and recommendations from its Technical Expert Panel. Under the new methodology, which is based on performance on 57 measures across seven domains, the distribution of stars changed for a large number of hospitals. Under the updated methodology there are more 2, 4, and 5 star rated hospitals while the number of 3 and 1 star hospitals will be reduced. CMS Administrator Seema Verma said about the updated Star Rating system, “We continue to refine the Star Ratings and look forward to an ongoing dialogue with hospitals and patients and their families on how we can provide beneficiaries useful information.”


Key Takeaways:

  • The updated Overall Star Ratings will have mixed results depending on the facility, but in general the changes produced a higher number of hospitals with four and five stars, and fewer lower rated hospitals.
  • Vizient will continue to examine the impact of the changes to the Overall Star Ratings methodology and work with our members and CMS to continue to provide feedback on the impact and accuracy of the ratings.


Quotes of Note:


“Democrats are focused on fulfilling the many long-overdue, bipartisan priorities facing the American people. In these talks, Leader Schumer and I will continue to insist on parity in the CAPS. We are fighting for funding for the opioid epidemic, veterans, pensions, disaster relief, National Institutes of Health, Children's Health Insurance Program and community health centers. We are firmly committed to swiftly passing the DREAM Act, which we know would pass with bipartisan support if brought to the Floor."


  • House Minority Leader Nancy Pelosi (D-CA) on negotiations to fund the government – Jan. 2, 2018


    “I don’t know that there is any drug price of a brand-new product that has ever gone down from any company on any drug in the United States, because every incentive in this system is towards higher prices, and that is where we can do things together, working as the government to get at this. No one company is going to fix that system.”


  • -HHS Secretary Appointee Alex Azar on increasing drug prices during his confirmation hearing before the Senate Finance Committee – Jan. 9, 2018


    “I've always been a fighter. I was an amateur boxer in my youth, and I brought that fighting spirit with me to Washington. But every good fighter knows when to hang up the gloves. And for me, that time is soon approaching. That's why, after much prayer and discussion with family and friends, I've decided to retire at the end of this term.”


  • Senate Finance Committee Chairman Orrin Hatch (R-Utah) announcing his retirement – Jan. 2, 2018