Health Law Update - December 1, 2016

Alerts / December 1, 2016

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

  • Capitol Hill Healthcare Update
  • Resistance Is Futile: CMS Gets Serious About Antibiotic-Resistant Bacteria
  • OCR Issues Alerts Regarding Phishing Email Disguised as Official OCR Audit Communication
  • Texas Judge Halts December 1 Implementation of Department of Labor’s “Overtime Final Rule”
  • Events Calendar
Capitol Hill Healthcare Update

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

House Passes Cures Legislation

After months of debate and partisan wrangling, the House on Wednesday voted 392-26 to pass the “21st Century Cures” bill designed to accelerate the development of new drugs and medical devices as well as increase federal funding for biomedical research. The Senate is expected to give the bill final congressional approval next week before lawmakers recess for the year. The legislation would authorize $4.8 billion over 10 years to the National Institutes of Health (NIH), including $1.8 billion for Vice President Biden’s “Cancer Moonshot” project, $1.5 billion for NIH’s BRAIN initiative to study diseases like Alzheimer’s, and $1.5 billion for NIH’s Precision Medicine Initiative. The Food and Drug Administration (FDA) would be eligible for an additional $500 million over 10 years, and states could apply for $1 billion in federal grants over two years to address opioid abuse. None of that money is guaranteed, a key concession by Democrats after November's Republican election sweep. Funding will be subject to annual congressional approval.

Earlier versions of the bill required stakeholders to provide offsets for the new spending, including one that would have forced companies with drugs subject to the FDA’s Risk Evaluation and Mitigation Strategies to make the products available to generic manufacturers. But all industry payfors were ultimately dropped, and the bill’s new spending instead will be paid for by sales from drawing down the U.S. strategic petroleum reserve and cutting $3.5 billion from the Affordable Care Act’s prevention fund.

The Cures effort began in 2015 with sweeping goals of accelerating the discovery and approval of revolutionary new treatments, backed up by new exclusivities for drug manufacturers and guaranteed reimbursements for device makers. But most of those provisions were dropped as the partisan debate over drug prices hampered efforts in Congress to win approval for regulatory and reimbursement policies favorable to industry.

The final Cures bill would establish a review pathway at the FDA for biomarkers, increase patient participation in the drug-approval process, and require the FDA to evaluate real-world evidence to support new uses for previously-approved drugs. It also would streamline the review process for combination products that include both a drug and device, and allow the FDA to accelerate approval of regenerative therapies to heal damaged human cells, a measure pushed by Senate Majority Leader Mitch McConnell (R-KY).

For medical technology manufacturers, the bill would establish a breakthrough device pathway by building on the current priority review pathway. It also would expand the FDA’s ability to apply the humanitarian device exemption to devices that treat diseases and conditions that impact up to 8,000 individuals, double the current 4,000 patient limit.

The legislation also would require the FDA’s ombudsman to audit and assess the measurements used to track implementation of the so-called “least burdensome” requirements for device makers.

Trump's Picks for HHS, CMS

President-elect Trump announced he is nominating Congressman Tom Price (R-GA) to be secretary of the U.S. Department of Health and Human Services (HHS) and Seema Verma to be Centers for Medicare and Medicaid Services (CMS) administrator.

Rep. Price, an orthopedic surgeon, is chairman of the House Budget Committee and a member of the Ways and Means Committee, which has jurisdiction over CMS. He’s been a vocal opponent of the Affordable Care Act and authored “repeal and replace” legislation for the House GOP. Price also was a leading voice in Congress on replacing the Sustainable Growth Rate with the new physician-reimbursement system that will come online next year, and he has been an opponent of competitive bidding for durable medical equipment.

Verma served in Vice President-elect Mike Pence’s administration in Indiana in a variety of healthcare roles, and for Pence’s predecessor, Gov. Mitch Daniels. She led Pence’s effort to expand Medicaid coverage with federal funding as well as assisting with Medicaid redesigns in other states.

Both Price and Verma will require Senate confirmation.

Top Dems Call on CMS to Kill Part B Demo

The top Democrats in Congress are asking CMS not to finalize the agency’s sweeping and controversial proposal to test changes to Medicare reimbursements for drugs administered in physician offices. The move by House Democratic Leader Nancy Pelosi (D-CA) and incoming Senate Democratic Leader Chuck Schumer (D-NY) could effectively kill the Part B demo, which was the Obama administration’s election-year effort to control drug prices. CMS’s innovation center announced the demonstration program in March, but it immediately faced bipartisan criticism on Capitol Hill as well as from the drug industry and some physician and patient groups. Still, CMS hasn’t publicly responded to the Democrats’ call to scrap the pilot program or told Republican committee staff on Capitol Hill what the agency’s next steps may be. Even if the pilot program were finalized before Obama leaves office, the incoming Trump administration could roll it back. Congress could take action early next year to block it, too.

Mylan Won’t Testify at Senate Hearing

After Mylan, the U.S. Department of Justice (DOJ) and CMS declined to participate in a Senate Judiciary Committee hearing scheduled for this week. Panel Chairman Chuck Grassley (R-IA) accused the Obama administration of “dodging accountability” and Mylan of “gaming the system.” Sen. Grassley is probing Mylan’s $465 million settlement with the DOJ for allegedly overcharging Medicaid for its life-saving EpiPen allergy treatment. Mylan declined to send a company witness to the hearing because it is “a pending matter.” Grassley said he is considering issuing subpoenas to compel Mylan’s testimony. Separately, Grassley also is calling on the U.S. Securities and Exchange Commission to investigate whether Mylan misled investors about the settlement.

Hospitals Call for Changes to Chronic Care Framework

The American Hospital Association last week called for expanding the Senate Finance Committee’s draft plan to create Medicare programs to improve coordination and reduce cost for treating chronic conditions. The trade association, which represents nearly 5,000 hospitals nationwide, urged senators to expand access to telehealth by removing restrictions on covered services and technologies. The committee proposed expanding the Medicare telehealth benefit, including coverage of consults for patients experiencing acute stroke symptoms and monthly clinical visits for patients undergoing home dialysis treatment. Hospitals also called for increased regulatory flexibility for doctors’ groups that participate in accountable care organizations and for an adjustment to the CMS “hierarchical conditions” risk model to include socio-economic and socio-demographic factors on the cost of care. Led by committee Chairman Orrin Hatch (R-UT), the chronic care proposal is expected to be considered next year in the Senate.

Diabetes Group Wants Probe of Insulin Prices

The American Diabetes Association is calling on Congress to hold hearings on recent insulin price increases. Insulin was discovered in 1921, and its first patent expired 75 years ago. Since then, multiple companies have produced variants with faster-acting or longer-lasting formulations. Insulin prices tripled between 2002 and 2013, the group said, forcing some of the six million Americans with diabetes to ration their medicine. Separately, Sen. Bernie Sanders (I-VT) and Rep. Elijah Cummings (D-MD) have asked the DOJ and the Federal Trade Commission to investigate what they said was collusion among drug companies over insulin prices.

Pelosi, Schumer Vow to Block GOP Medicare Changes

The top Democrats in Congress are warning that Republicans could “privatize” Medicare, signaling they will fight GOP changes to the healthcare system for the elderly and disabled. Republicans have made no secret of their goal next year to advance Medicare changes as part of repealing the ACA. House Speaker Paul Ryan (R-WI) has called for expanding Medicare Advantage plans, allowing beneficiaries to shop for plans other than the traditional fee-for-service Medicare, and for consolidating Medicare Part A and Part B. House Democratic Leader Nancy Pelosi (D-CA) and incoming Senate Democratic Leader Chuck Schumer (D-NY) warned Republicans against over-reaching on Medicare, saying changes could backfire on Republicans and cost them politically in the 2018 mid-term elections.

House Hearing on Preventive Services

The House Energy and Commerce Health Subcommittee on Wednesday held a hearing on bipartisan legislation reauthorizing the U.S. Preventive Services Task Force. The legislation, introduced by Reps. Marsha Blackburn (R-TN) and Bobby Rush (D-IL), would require the task force to ensure balanced and relevant representation of medical personnel on its committees and require members to disclose conflicts of interest. The bill would require specialists to review the preventive services that the task force examines. It also would require the Government Accountability Office to submit a report comparing the task force’s recommendations with other federal government health guidelines. It’s not likely Blackburn’s legislation would be considered by the House before it adjourns this month, requiring the bill to be reintroduced in the 115th Congress in 2017.

Resistance Is Futile: CMS Gets Serious About Antibiotic-Resistant Bacteria

By: Kyle R. Gregory, Gregory E. Fosheim and Emily C. Crosby

Antibiotics and similar drugs, known more broadly as antimicrobial agents, are an instrumental weapon in the healthcare armory, rendering once-lethal infections treatable, and dramatically reducing instances of sepsis and secondary infections associated with cancer chemotherapy and organ transplants. However, sub-therapeutic use of antimicrobial agents in livestock, over-prescription, bacterial evolution and myriad other factors have contributed to the emergence of resistance in the infections that these agents are intended to combat. Antibiotic-resistant bacteria pose a critical threat to the global healthcare system. According to the Centers for Disease Control and Prevention, at least 2 million people become infected with bacteria that are resistant to antibiotics each year in the United States, and at least 23,000 people die annually as a result of these infections. As part of a government-wide response, CMS has proposed a series of measures to combat antibiotic resistance in healthcare facilities.

Long-Term Care Facilities

On October 4, 2016, CMS published a Final Rule to revise Medicare and Medicaid participation requirements for skilled nursing facilities and nursing homes (collectively, long-term care facilities). The Final Rule requires that long-term care facilities establish and maintain an Infection Prevention and Control Program (IPCP) by November 28, 2016 that includes “[a] system for preventing, identifying, reporting, investigating, and controlling infections and communicable diseases for all residents, staff, volunteers, visitors, and other individuals providing services under a contractual arrangement based upon the facility assessment . . . and following accepted national standards.”

By November 28, 2017, facilities must establish an “antibiotic stewardship program” as part of the IPCP, and the program must include antibiotic use protocols and a system for monitoring their use. These requirements are significant, with CMS estimating that implementing such a program and ensuring proper oversight would cost long-term care facilities $19,000 per year, which CMS hopes will be greatly offset by the savings achieved through lowered rates of infection, a cost estimated to range between $4,000 and $11,000 per patient.

To help achieve compliance by the deadline, the Agency for Healthcare Research and Quality (AHRQ) has created a Nursing Home Antimicrobial Stewardship Guide to help long-term care facilities improve antibiotic use and decrease harms caused by inappropriate prescribing.

The guide’s four toolkits are designed to help facilities:

  • Implement, monitor and sustain an antimicrobial stewardship program.
  • Determine whether it is necessary to treat a potential infection with antibiotics.
  • Create antibiograms (a table of antibiotics to which a bacterial strain is resistant or susceptible) to help prescribing clinicians choose the right antibiotic to treat a particular infection.
  • Educate and engage residents and family members on proper use and risks associated with antibiotics.

Long-term care facilities are not alone. Starting next year, CMS plans to include hospitals as another front in the government-wide attempt to rein in the problem of antibiotic-resistant bacterial infection.

Hospital and Critical Access Hospitals

Beginning in FY 2017, as part of the Hospital Acquired Conditions Reduction Program, hospitals and critical access hospitals (CAH) will be required to report MRSA bacteremia and Clostridium difficile infections in addition to central line-associated blood stream infections, catheter-associated urinary tract infections and surgical site infections. These data, along with a hospital or CAH’s Patient Safety Indicator-90 composite measure, will be used to rank facilities on Hospital Compare. Low-ranking facilities will have their Medicare payments reduced.

Additionally, on June 16, 2016, CMS released a proposed rule to improve antibiotic-prescribing practices and mitigate patient risk for infections, which would require hospitals and CAHs to:

  • Have hospital-wide infection prevention and control, and antibiotic stewardship programs for the surveillance, prevention and control of healthcare-associated infections and other infectious diseases, and for the appropriate use of antibiotics.
  • Designate leaders of the IPCP and the antibiotic stewardship program who are qualified through education, training, experience, or certification. This requirement allows for flexibility in staffing in order to suit the needs of each hospital or CAH.

CMS estimates that these revisions, which would apply to approximately 6,200 hospitals and CAHs, would produce savings of up to $284 million. These proposed regulations are very similar to provisions recently finalized for long-term care facilities. We would not be surprised if these conditions of participation were finalized and implemented in largely the same form as their proposed version.

Physicians (MACRA)

Beginning in 2017, physicians will have a part to play as well. As part of the switch to the Medicare Access and Chip Reauthorization Act of 2015 (MACRA), data regarding the treatment of infections will be incorporated into the MACRA quality measures, potentially having a major impact on how physicians will be paid. Under MACRA, physicians may earn a payment adjustment based on evidence-based and practice-specific quality data. The program includes measures aimed at combating the spread of infection generally (e.g., surgical site infections) as well as measures specifically tied to combating overuse of antibiotics, such as:

  • Adult Sinusitis: Antibiotic Prescribed for Acute Sinusitis (Overuse).
  • Adult Sinusitis: Appropriate Choice of Antibiotic: Amoxicillin With or Without Clavulanate Prescribed for Patients With Acute Bacterial Sinusitis (Appropriate Use).\
  • Appropriate Treatment of Methicillin-Sensitive Staphylococcus Aureus Bacteremia.
  • Tuberculosis Prevention for Psoriasis, Psoriatic Arthritis and Rheumatoid Arthritis Patients on a Biological Immune Response.

In addition to Quality Measures, development of an antibiotic stewardship program is included as one of the potential MACRA Improvement Activities, where clinicians are rewarded for care focused on care coordination, beneficiary engagement, and patient safety.

While many of the required elements of the IPCP policies and procedures are likely reflected in facilities’ existing infection control plans, some requirements will almost certainly be new for many facilities. It may be difficult to determine whether existing practices will meet CMS’s requirements and Medicare’s Conditions of Participation, given that much of the guidance and training has yet to be developed. However, one thing is certain: Going forward, CMS expects providers to get serious about antibiotic resistance.

OCR Issues Alerts Regarding Phishing Email Disguised as Official OCR Audit Communication

By Patrick H. Haggerty

The HHS Office for Civil Rights (OCR) published an alert on November 28 describing a phishing email being circulated on mock HHS departmental letterhead under the signature of OCR Director Jocelyn Samuels. The email prompts recipients to click a link regarding possible inclusion in the HIPAA Privacy, Security, and Breach Rules Audit Program. The link takes the recipient to a nongovernmental website marketing a firm’s cybersecurity services. The HHS OCR stated that it is in no way associated with the firm. The email is targeting employees of covered entities and their business associates. Covered entities and business associates should, therefore, make their workforce members aware of this phishing campaign and remind workforce members to be vigilant and not click on links or attachments that seem suspicious. The HHS OCR has stated that you can reach out to them at if you have a question as to whether a communication you receive from them regarding a HIPAA audit is legitimate.

OCR shared in another alert on November 30 that the phishing email originates from the email address and directs individuals to a URL at This is a subtle difference from the official email address for OCR’s HIPAA audit program, Covered entities and business associates should alert their workforce members of this issue and take note that official communications regarding the HIPAA audit program are sent to selected auditees from the email address

Texas Judge Halts December 1 Implementation of Department of Labor’s “Overtime Final Rule”

By Ashlee Grant

Events Calendar

February 15, 2017

Houston Partner Lynn Sessions will be speaking at the “Healthcare Cyber 101 Event” for the Greater Houston Society for Healthcare Risk Management in Houston, TX.

February 23-24, 2017

Houston Partner Lynn Sessions will present “Preparing for your Coming Privacy Breach” for the American Health Lawyers Association’s Long Term Care and the Law Program in San Diego, CA.

March 11, 2017

Houston Partner Lynn Sessions will present “Domino Effect of Flawed Breach Response” at the 2017 SXSW Conference in Austin, TX.

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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