News / Resources

Topics covered in this issue of the Health Law Update include:

• Health Reform Update 
  • Florida Federal Judge Stays His Decision, Government Files Appeal and Review is Fast-Tracked by 11th Circuit 
  • HHS Releases Proposed Rule on Waivers for State Innovation
• Program Integrity--Medicare RACs Moving Forward Full Steam Ahead; Medicaid RAC Implementation Delayed 
• Teaching Hospitals--CMS Issues Rules Revising FTE Resident CAP Reductions; Technical Corrections to GME Payments 
• Publication Notice 
• Events Calendar

Health Reform Update

Florida Federal Judge Stays His Decision, Government Files Appeal and Review Is Fast-Tracked by 11th Circuit

The January 31 U.S. District Court decision in Florida overturning the Affordable Care Act (ACA) in its entirety has set in motion the appellate machinery that many believe will lead to an ultimate review of the constitutionality of the Obama administration’s landmark healthcare reform legislation by the U.S. Supreme Court. On March 11, the U.S. Court of Appeals, 11th Circuit in Atlanta, ordered an expedited schedule of the federal government’s appeal (filed on March 8) of Judge Roger Vinson’s decision in the Northern District of Florida originally issued on January 31. Judge Vinson’s decision upheld the expansion of the Medicaid program under the ACA and declared that Congress did not exceed a state’s sovereign powers in such expansion. Additionally, and most notably, Judge Vinson’s decision struck down the law’s individual mandate and further declared that the mandate was so inextricably linked to the remaining law such that the entire law should be overturned.

Following the decision, the government filed a Motion to Clarify Judge Vinson’s decision. On March 3, Judge Vinson granted a stay of his January decision and gave the Obama administration seven days in which to file its appeal. The judge reprimanded the Obama administration for failing to seek clarification promptly but, nevertheless, interpreted the Motion to Clarify as a Motion to Stay and ruled as such, giving the administration seven days to file its formal appeal with the 11th Circuit, stating that “the citizens of this country have an interest in having this case resolved as soon as practically possible.” Both sides in the case must begin filing appellate papers supporting their position in the appeal during April, with briefing to be concluded by late May. As yet, there has been no ruling by the Atlanta appellate court on whether the case will be heard before the 11th Circuit’s full panel of ten judges.

Judge Vinson’s March 3 order included a reassertion of several key points of his prior ruling, namely that Congress exceeded its authority in mandating individuals to purchase health insurance coverage, based on Judge Vinson’s review of the entire history of federal Commerce Clause cases, and that Congress, having considered and been fully advised of the likely legal and constitutional challenges to the sweeping legislation, chose not to include a severability clause that would have enabled other parts of the ACA to be implemented, notwithstanding the unconstitutionality of the individual mandate.

For more information, please contact John S. Mulhollan, or 216.861.7484.

HHS Releases Proposed Rule on Waivers for State Innovation

The U.S. Department of Health and Human Services (HHS) issued a proposed rule published in the Federal Register March 14, 2011, that outlines the steps states must take to obtain a Waiver for State Innovation under the health reform law. Section 1332 of the ACA authorizes the Secretary of HHS and the Secretary of the Treasury to waive certain requirements falling under their respective jurisdictions for health insurance coverage within a state for plan years beginning on or after January 1, 2017. However, the Obama administration has endorsed bipartisan legislation, “Empowering States to Innovate Act,” introduced by Senators Ron Wyden (D-Ore.) and Scott Brown (R-Mass.) that would make waivers available to states beginning in 2014. For more information, see the December 9, 2010, issue of the Health Law Update.

The proposed rule requires that states applying for a Waiver for State Innovation must enact state legislation authorizing such waiver request and must demonstrate that the state’s proposed waiver will (1) provide coverage that is as comprehensive as the coverage offered through Health Insurance Exchanges; (2) make coverage as affordable as it would have been through the Exchanges; (3) provide coverage to as many residents as otherwise would have been covered under the ACA; and (4) not increase the federal deficit. In a February 28, 2011, White House Blog posting, Secretary Kathleen Sebelius praised governors of both political parties that have “shown true leadership in applying the expertise of their states in devising approaches that best fit their own market conditions.” Thus far, the Obama administration has granted more than 1000 waivers from certain ACA provisions. A few of the state reform models the Secretary highlights in the February 28 posting include, among others, linking tax credits for small businesses with tax credits for low-income families, automatically enrolling people in health plans and alternative health plan options to increase competition and provide consumers with additional choices.

Consistent with what is required by the law, the proposed rule says that an application for a Waiver for State Innovation must include (1) the provisions of law that the state seeks to waive; (2) an explanation of how the proposed waiver will meet the goals related to coverage expansion, affordability, comprehensiveness of coverage and costs; (3) a budget plan that does not increase the federal deficit, with supporting information; (4) actuarial certifications and economic analysis to support the state’s estimates that the proposed waiver will comply with the comprehensive coverage requirement, the affordability requirement and the scope of coverage requirement; and (5) analyses of the waiver’s potential impact on provisions that are not waived, access to healthcare services when residents leave the state and deterring waste, fraud and abuse. The proposed regulations include provisions that will allow for public input in the review and approval of the Waivers for State Innovation. Additionally, states that are granted waivers will be expected to comply with certain reporting and evaluation measures, including submission of quarterly and annual reports used to track measures for affordability, comprehensiveness of coverage, the number of people covered and impact on the federal deficit. Comments to the proposed rule are due on or before May 13, 2011.

For more information, please contact Summer D. Swallow, or 713.646.1306.

Program Integrity-Medicare RACs Moving Forward Full Steam Ahead; Medicaid RAC Implementation Delayed

In a move expanding the reach of Recovery Audit Contractors (RACs), the Centers for Medicare & Medicaid Services (CMS) recently provided notice that RACs can request up to 500 records per period for hospitals with more than $100 million in Medicare payments. Previously, CMS limited the number of records a RAC could request to a 300-record cap. The American Hospital Association (AHA) has expressed concern over this increase and believes this change will affect approximately 87 hospitals.

A recently published AHA survey provides data to help understand the scope of RAC progress to date. The AHA survey revealed that 79 percent of the 1850 hospitals surveyed have had RAC activity through the fourth quarter of 2010. Of this 79 percent, nearly four out of five reported complex RAC reviews which involve the review of medical records and other documentation to identify improper payments. Therefore, it’s not surprising that the majority (90 percent) of denials that hospitals are receiving from RACs are for complex reviews, totaling over $78 million dollars. Nationwide, hospitals are appealing only 23 percent of the denied claims; however, of the claims that have completed the appeals process, 85 percent were overturned in favor of the provider.

While the Medicare RAC program appears to be proceeding full speed ahead, CMS issued an informational bulletin on February 17, 2011, delaying the requirement that states fully implement Medicaid RAC programs by April 1, 2011. The CMS bulletin states:

Out of consideration for State operational issues and to ensure States comply
with the provisions of the Final Rule, we have determined that States will not be
required to implement their RAC programs by the proposed implementation date
of April 1, 2011.

A new implementation deadline will be announced in the publication of a final rule on Medicaid RAC programs expected later in 2011.

For more information, please contact B. Scott McBride, or 713.646.1390 or Ameena N. Ashfaq, or 713.646.1329.

Teaching Hospitals-CMS Issues Rules Revising FTE Resident Cap Reductions; Technical Corrections to GME Payments

CMS may consider hospitals that are members of the same Medicare graduate medical education (GME) affiliated group in the aggregate (rather than only on an individual basis) for purposes of determining possible full-time equivalent (FTE) resident cap reductions under an interim final rule published in the Federal Register on March 14, 2010. The rule implements Section 203 of the Medicare and Medicaid Extenders Act of 2010, a provision that amended the ACA, which, when enacted, did not provide language specific to Medicare GME affiliated groups for making such determinations. The comment period for the interim final rule, which became effective March 14, 2011, will close on April 13, 2011.

CMS also recently published a technical correction notice relating to the 2011 hospital outpatient prospective payment system final rule published in the November 24, 2010, Federal Register that includes several technical corrections to GME payments.

For more information, please contact Susan Feigin Harris, or 713.646.1307, or Kathleen P. Rubinstein, MPA, Policy Analyst, or 713.276.1650.

Publication Notice

Please be advised that the Health Law Update will not publish Thursday, March 31, 2011. We will resume our regular publication schedule on April 14.

Events Calendar

March 25

Cleveland of counsel Tom Campanella will speak on “The New World of Health Care Reform” at the Medical Professional Liability Symposium of the Professional Liability Underwriting Society (PLUS) in Chicago, Illinois.

March 29

Houston partner Susan Feigin Harris will speak on “The Nuts and Bolts of Accountable Care: ACOs and Beyond” sponsored by the American Health Lawyers Association in Baltimore, Maryland.

April 14

Houston partner Susan Feigin Harris will speak on “Healthcare Reform: Shifting Political Winds and the Impact, One Year Later” at the 23rd Annual Health Law Conference sponsored by the University of Texas School of Law in Houston, Texas.

April 15

Houston partner Donna Clark will speak on “Stark Law Self-Disclosure Protocol and Recent Developments” at the 23rd Annual Health Law Conference sponsored by the University of Texas School of Law in Houston, Texas.

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