Health Law Update - May 4, 2017

Alerts / May 4, 2017

Welcome to this week's edition of the Health Law Update. In this Issue:

Capitol Hill Healthcare Update

By Mike A. Ferguson, Christian B. Jones, Adam J. Higgins and Tyler M. Thompson

House Passes ACA Repeal and Replace

Eight weeks after its introduction, legislation to “repeal and replace” the Affordable Care Act (ACA) won House approval today by a 217-213 vote. Vice President Mike Pence on Sunday said a vote in Congress to repeal the ACA was “just around the corner,” even as key House moderates continued to balk at changes they fear could undermine coverage for people with pre-existing conditions. In the end, the GOP leadership successfully kept up the pressure for a vote on the American Health Care Act (AHCA) before the House went on recess this week.

Now that the AHCA has passed the House, the Senate faces a similar ideological divide between conservatives and moderates – but with a narrower governing majority than the House. With only two votes to spare, Senate leaders could try to change the bill to cobble together at least 50 votes, sending the legislation back to the House. But House Majority Leader Kevin McCarthy, who spoke at BakerHostetler’s 28th Annual Legislative Seminar last week, said he believes Senate Republicans could approve the House-passed bill without any changes.

Spending Bill Includes Increased NIH Funding

Congress has agreed on a $1.8 trillion budget bill for the rest of fiscal 2017 that includes a $2 billion increase for National Institutes of Health (NIH). The boost comes after President Trump proposed cutting NIH funding by $1.2 billion and reflects the strong support on Capitol Hill for the research agency. The NIH funding is part of a government-wide budget bill that will cover spending through September 30. The White House is expected to release its fiscal 2018 budget proposal later this month.

Senate Panel to Hold CHIP Hearing

The Senate Finance Committee announced that it will hold a hearing May 9 on the Children’s Health Insurance Program (CHIP), which last year covered nearly nine million children nationally. Congress is likely to reauthorize CHIP – which enjoys wide bipartisan support – before it expires September 30. Governors had hoped Washington would renew CHIP before the summer, when most state budgets are being finalized.

Bipartisan Bill Targets Drug Prices

Republican and Democratic leaders of the House and Senate judiciary committees have introduced legislation designed to speed the development of generic drugs. Targeting what Sen. Patrick Leahy (D-Vt.) called “abusive delay tactics,” the legislation would create a private right of action allowing generic manufacturers to sue innovators to gain access to brand-name drugs protected by FDA safety programs. Including the private party lawsuit in the legislation allows the bill to be referred to the judiciary committees, which can hold hearings and vote to approve the bill. A Senate judiciary subcommittee last year held a hearing on similar legislation.

The legislation was introduced by Leahy and Sen. Chuck Grassley (R-Iowa), and Reps. Tom Marino (R-Pa.) and David Cicilline (D-R.I.). Grassley is chairman of the Senate Judiciary Committee, and Marino is chairman of the House Judiciary Subcommittee on Antitrust Law. It has also been reported that Marino will be tapped by President Trump to head the Office of National Drug Control Policy.

Brand-name manufacturers oppose the new legislation, saying it would ignore FDA-imposed safety requirements on high-risk drugs and cause unnecessary litigation. The bill follows similar legislation introduced in the House last month that would compel brand-name companies to make their products available to generic drug makers for bioequivalence testing, but that bill doesn’t include a private right of action against the brand-name drug companies.

Both bills have been introduced in previous sessions of Congress and failed to gain significant traction. But both have picked up new bipartisan support as the issue of drug prices continues to swirl on Capitol Hill.

House Bill Would Update Rules for Device Accessories

Bipartisan legislation introduced in the House last week would streamline the FDA review process for medical device accessories. Medical accessories – everything from plastic trays to ultrasound probes – are classified and reviewed by the FDA along with their parent devices. Manufacturers say the process is burdensome and costly, and can delay approval of otherwise safe medical technology. Introduced by Reps. Mimi Walters (R-Calif.) and Ann Kuster (D-N.H.), the bill would classify accessories independently from their parent devices. The lawmakers said some accessories already approved shouldn’t require additional reviews when they are combined with other devices. Last year’s medical innovation law, the 21st Century Cures Act, directed the FDA to classify accessories independent of parent devices. The Walters-Kuster legislation would give the agency additional clarity and authority to decouple accessories from devices. The device industry trade association AdvaMed endorsed the bill.

Gottlieb Wins Committee Vote

President Trump’s nominee to lead the FDA, Dr. Scott Gottlieb, won approval last week in the Senate Health, Education, Labor and Pensions Committee on a largely party-line vote. The committee vote was 14-9. Only Sens. Michael Bennet (D-Colo.) and Sheldon Whitehouse (D-R.I.) broke ranks with panel Democrats and backed Gottlieb’s confirmation. The next step is a vote by the full Senate next week.

Meanwhile, Senate Democrats called on Gottlieb to overturn President Trump’s government-wide hiring freeze, which they say is particularly harming the FDA, and work to implement filling the new positions authorized in last year’s 21st Century Cures medical innovation legislation.

House Panel Examines Device Bills

The House Energy and Commerce Health Subcommittee held a hearing this week on several medical device bills that could be included in the FDA user fee reauthorization. Congress is considering the five-year renewal of user fees negotiated by the FDA and the medical technology and pharmaceutical industries. The subcommittee may add other provisions, but likely only those that enjoy bipartisan support and wouldn’t jeopardize congressional passage of the underlying user fee bill.

BakerHostetler’s “Capitol Hill Healthcare Update” is distributed weekly when Congress is in session. To access previous postings, please see the Health Law Update blog.

IPPS Proposed Rule Increases Hospital Payment; Solicits Ideas for Achieving Transparency, Relieving Administrative Burden

By Amy E. Fouts, Ernessa B. McKie and Katy Appleby

The Centers for Medicare & Medicaid Services (CMS) recently issued its proposed rule updating fiscal year (FY) 2018 payment policies and rates under the Medicare inpatient prospective payment system (IPPS). As highlighted below, the proposed rule aims to reduce regulatory burdens for providers and to promote transparency and flexibility in the delivery of care. Comments on the proposed rule are due June 13, 2017. Once finalized, the updated IPPS will apply to all discharges on or after October 1, 2017.

Update to Prospective Payment Rate and Uncompensated Care Payments

Overall, CMS estimates the proposed rule will increase IPPS operating payments by approximately 1.7 percent in FY 2018. CMS also proposed changes to uncompensated care payments resulting in an additional 1.2 percent increase. The agency plans to distribute close to $7 billion in uncompensated care payments, a $1 billion increase from the previous year. This increase results from CMS’s proposal to change its data source for calculating the uninsured rate, by utilizing its National Health Expenditures Account (NHEA) data as opposed to the Congressional Budget Office data. Agency officials believe the NHEA is a more complete data source and estimate that this change will reflect a decrease in the uninsured rate.

Quality Reporting and Incentive Programs

Even as CMS ramps up the Quality Payment Program and initiatives under the Medicare Access and CHIP Reauthorization Act (MACRA), the agency continues using the IPPS rule to introduce new proposals for its legacy quality programs. Most notably, as part of ensuring overall quality of care and patient health, CMS is requesting comment on how to account for social risk factors such as income, education, race and ethnicity, employment, disability, community resources, and social support. CMS wants public input on which social factors are most appropriate to consider, how to statistically account for them and how to operationalize a strategy to include these measures in various programs.

Hospital Value-Based Purchasing (VBP) Program

CMS continues making adjustments to the domain methodology for hospitals receiving a score in fewer than four domains, and has proposed that hospitals in FY 2019 have at least two measure scores in the Safety domain and at least one measure score in the Efficiency and Cost Reduction domains. According to the agency, these changes will “include the greatest number of hospitals in the Hospital VBP Program possible while ensuring the need for TPSs to be sufficiently reliable.” In addition to proposing measures for future program years, CMS will remove one of its long-standing safety measures, the current PSI-90 measure. Given the complexities associated with the ICD-9 and ICD-10 transition, the agency seeks to remove the current PSI-90 measure from the Hospital VBP Program beginning with the FY 2019 program year. A modified version of the measure is planned for FY 2023.

Hospital-Acquired Condition (HAC) Reduction Program

For the FY 2020 HAC Reduction Program, CMS proposes to utilize claims data from July 1, 2016, through June 30, 2017, to calculate the performance results for Domain 1 (Patient Safety and Adverse Events Composite), and from January 1, 2017, through December 31, 2018, to calculate performance results for Domain 2 (National Health and Safety Network measures). The agency is also seeking public feedback on outcomes and patient-safety performance measures. In order to further align with other quality reporting Extraordinary Circumstance Exception policies, CMS proposes to modify the HAC policy effective for requests received in FY 2018 (on or after October 1, 2017).

Hospital Inpatient Quality Reporting (IQR) Program

The proposed rule reduces the number of required electronic quality measures for reporting from eight to six to alleviate some of the burdens associated with successful submission. For the FY 2019 payment determination, hospitals may self-select the quarters they use for reporting this data. For the FY 2020 payment determination, hospitals will use the data from the first three quarters of calendar year 2018. Proposed refinements by CMS to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey pain management questions will “focus on the hospital’s communications with patients about the patients’ pain during the hospital stay” beginning in FY 2020.

Hospital Readmissions Reduction Program

In order to meet the statutory mandates of the 21st Century Cures Act, changes to the excess readmissions adjustment factor will occur for patients eligible for both Medicare and Medicaid. CMS plans to implement a methodology that groups hospitals into five peer groups. Essentially, by grouping the hospitals in a manner relative to their federal payment similarities, CMS officials believe that performance will in turn account for the patient population and socioeconomic adjustment. Consistent with its definition of “applicable period,” the agency proposes to calculate the excess readmissions ratio and payment adjustment using data from July 1, 2013, through June 30, 2016.

Other Proposals

CMS seeks public comment on two areas vexing to the healthcare industry. The first deals with how the current scope and restrictions on physician-owned hospitals affect healthcare delivery. The second focuses on reducing burdens for providers and patients, improving quality while decreasing costs, and “mak[ing] the health care system more effective, simple and accessible.” Targeting regulatory simplification, the proposed rule is soliciting ideas for payment system redesign, streamlined reporting, improved monitoring and documentation, and enhanced mechanisms for feedback.

In response to stakeholder input and to lower the administrative burden on providers, the proposed rule makes the 96-hour certification requirement for Critical Access Hospitals (CAHs) a low priority for medical record reviews conducted on or after October 1, 2017, unless CMS or its contractors find evidence of fraud, abuse or waste.

Lastly, in keeping with the agency’s goal to increase transparency in healthcare, CMS proposes that accrediting organizations make a facility’s survey reports and any associated plans of correction for the most recent three years publicly available on the accrediting organization’s website within 90 days after this information is made available to the facility.

EMTALA Laboring Along 30 Years Later

By Robert M. Wolin

The Emergency Medical Treatment and Active Labor Act (EMTALA), despite being enacted more than 30 years ago, has produced a case examining the applicability of malpractice damages limitations that bears watching.

In Scott v. Ruston Louisiana Hospital Company, the court examined whether state medical malpractice caps are applicable to an EMTALA case. A young patient came to Northern Louisiana Medical Center’s emergency room for treatment. The physician ordered an MRI around 9 a.m. However, the MRI was not performed until after 3 p.m. The delay was alleged to be the result of a hospital policy “that requires that emergency room requests for MRIs be summarily denied and delayed until reimbursement from the insurance company has been certified.” The parents of the patient alleged that if the MRI had been timely performed, the patient’s hematoma would have been identified and treated in enough time to prevent the permanent paralysis that later developed, or that the severity of the patient’s symptoms would have been reduced.

EMTALA regulates the procedural aspects of the provision of emergency medical services and establishes a private cause of action for a violation of its terms. However, EMTALA does not address the substantive quality of care provided to a patient. Any person who suffers harm as a direct result of a participating hospital’s violation of EMTALA may, in a civil action, obtain those damages available for personal injury under the laws of the state in which the hospital is located, and obtain such equitable relief as is appropriate.

In this case, the plaintiffs’ complaint specifically alleged that their EMTALA claims were not subject to the state’s medical malpractice damages limitations. The court found that there was no conflict between the malpractice statute’s damages caps and EMTALA, as EMTALA expressly defers to state law on the question of damages. The court held, similarly to most federal courts confronting the question of damages limitations, “that EMTALA’s incorporation of state law extends to caps on damages for medical malpractice claims so long as the challenged conduct falls within the particular state’s definition of malpractice.” Under this line of reasoning, whether the malpractice damages limitations are applicable depends on whether the allegations in the complaint state a malpractice claim under the state’s malpractice law. Thus, medical malpractice damages limitations will be applicable if the allegations come within the scope of applicable state malpractice laws, which will be determined on a case-by-case basis.

The court, however, has granted a motion for an interlocutory appeal to the Fifth Circuit on the issue of the medical malpractice damages limitations, to resolve the issue inasmuch as there was a prior Eastern District of Louisiana case that held that the state medical malpractice claims caps were not applicable to an EMTALA case. In Jeff v. Universal Health Services, the court found that (1) EMTALA creates a distinct federal cause of action based on a strict liability standard rather than a negligence standard; (2) EMTALA claims are not analogous to a medical malpractice claim; and (3) EMTALA’s failure to incorporate a state’s procedural limitations for malpractice actions “supports the conclusion that EMTALA does not incorporate a state’s medical malpractice damages caps.”

The case bears watching, as it may significantly increase the risks associated with EMTALA violations should the Fifth Circuit decide that the limitations are inapplicable.

Events Calendar

May 10, 2017

Washington, D.C. Partner Lee H. Rosebush will participate in a webinar on the Orphan Drug Act for the Food & Drug Law Institute.

June 16, 2017

Houston Partner Gregory S. Saikin will participate in an “Anti-Kickback Master Class” webinar for the American Bar Association.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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