Health Law Update – June 16, 2016

Alerts / June 16, 2016

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

  • The Future of Provider-Based Status Post-BBA 2015
  • Vermont to Require Drug Transparency
  • OCR Clarifies “Reasonable, Cost-Based” Fee Calculations for Access to Medical Records
  • Publication Notice
  • Events Calendar
The Future of Provider-Based Status Post-BBA 2015

Examining Possible Congressional Relief and CMS Guidance

By Kristen McDermott Woodrum, Susan Feigin Harris, and Ernessa B. McKie

This month, hospitals impacted by Section 603 of the Bipartisan Budget Act of 2015 (BBA) may finally get a glimpse of what the future holds for the off-campus departments they operated or were developing when the BBA was enacted on November 2, 2015. Section 603 introduced site neutrality for new off-campus outpatient departments, eliminating the payment differential between provider-based and freestanding locations. The BBA left open many important questions that hospitals need answered to make financial and operational decisions.

On June 7, the U.S. House of Representatives passed H.R. 5273, the Helping Hospitals Improve Patient Care Act, which, among its many provisions, included potential relief for cancer hospitals and hospitals that can certify a new off-campus outpatient department was in “mid-build” when the BBA was enacted. Guidance addressing implementation of the site-neutral reimbursement policy is promised by the Centers for Medicare & Medicaid Services (CMS) in the annual Outpatient Prospective Payment System (OPPS) rulemaking, expected later this month. 

Impact of the BBA

Section 603 of the BBA eliminated provider-based reimbursement for new off-campus hospital departments. Starting January 1, 2017, non-grandfathered off-campus hospital departments will be paid under other applicable payment systems. Dedicated emergency departments are excluded from the payment reduction. Section 603 was brief, but clear, on one point: Effective November 2, 2015, hospitals cannot open new off-campus provider-based departments and bill under the higher OPPS rates.

Section 603 of the BBA eliminated provider-based reimbursement for new off-campus hospital departments. Starting January 1, 2017, non-grandfathered off-campus hospital departments will be paid under other applicable payment systems. Dedicated emergency departments are excluded from the payment reduction. Section 603 was brief, but clear, on one point: Effective November 2, 2015, hospitals cannot open new off-campus provider-based departments and bill under the higher OPPS rates.

It has been no secret that Congress, MedPAC, and CMS have been examining options to eliminate the reimbursement differential based on site of service, but the BBA caught the hospital industry off guard with its sudden enactment and dramatic impact. The BBA became the law of the land just a week after its legislative text became available, without any congressional committee consideration or hearings. The law immediately quelled opportunities to create off-campus, provider-based hospital departments out in the community, pursuing the hub-and-spoke delivery initiatives popular today, including oncology infusion, echocardiography, and nuclear medicine centers. As a result, hospitals are looking closely at planned transactions and projects, including expansions and relocations, and making tough decisions about off-campus departments in development as of November 2, 2015.

Relief for Mid-Build Hospitals

H.R. 5273, passed by the House last week, addresses the mid-build issue. For a hospital department to qualify as “mid-build,” the provider must have had a binding written agreement with an outside unrelated party before November 2, 2015 for the actual construction of such department and must satisfy the following requirements:

1. Submit a provider-based attestation (pursuant to 42 C.F.R. Sec. 413.65) before December 31, 2016 (or, if later, 60 days after the law’s enactment);
2. Include the department as part of the provider on its CMS 855A enrollment form; and
3. Submit a written certification (for receipt by the U.S. Department of Health and Human Services [HHS] not later than 60 days after the law’s enactment) from the chief executive officer or chief operating officer of the provider that the department met the “mid-build” requirement on November 2, 2015.

Under H.R. 5273, the mid-build provision is effective January 1, 2018. The bill requires HHS to audit each hospital department’s compliance with the mid-build requirements no later than December 31, 2018. Questions remain relating to the significant delay in time between submitting the required attestation (December 31, 2016) and the effective date of the mid-build exception (January 1, 2018), which is one entire year. There has been no discussion of this issue, which poses billing questions for hospitals and CMS.

While H.R. 5273 had broad bipartisan support in the House, it is not clear whether the Senate will take up or consider the bill or propose alternative relief. The Congressional Budget Office projects the “mid-build” exception will cost the government $750 million from 2017 to 2026, based on an estimate of 100 qualifying hospitals. This significant budget item will be a factor in the Senate’s decision to move the bill forward. If the Senate takes up this bill, it will likely be in a lame-duck session of Congress following the presidential election.

If enacted, H.R. 5273 will provide welcome relief to hospitals that can meet the mid-build criteria and are willing to certify and attest to the status of the department. Notably, the mid-build exception is narrower than previous grandfathering provisions and has more onerous requirements. Providers should determine whether any of their projected activities would qualify as “mid-build” under the bill’s current definition, and make plans to meet the required deadlines, even if the outcome of the bill is uncertain. Practically, since the outcome of the bill will not be known until the end of the year close to the attestation and certification deadlines, it will be important to start the process early to ensure it is complete.

The American Hospital Association (AHA) has lobbied Congress to extend relief from the site-neutral payment application for those facilities under development when the BBA was enacted. In a February 12, 2016, letter to ranking members of the House, the AHA contrasted the law’s failure to include a grandfathering provision with previous legislation affecting physician-owned hospitals and long-term care hospitals.

Relief for Cancer Hospitals

H.R. 5273 provides that cancer hospitals exempt from OPPS reimbursement are excluded from the BBA’s Section 603 payment limitations. The bill will require qualifying cancer hospitals to submit provider-based attestations for their off-campus outpatient departments and provides for an audit of the attestations.

CMS Implementation Guidance in the CY 2017 OPPS Rule

CMS has announced that it will address Section 603 implementation in its calendar year (CY) 2017 OPPS rulemaking. While the agency has declined to provide guidance prior to the publication of the proposed rule, the public is invited to submit specific scenarios of concern to CMS by e-mail.

In May, both the House and Senate sent letters, signed by 235 representatives and 51 senators, to the acting CMS administrator, Andrew M. Slavitt, urging CMS to include flexibilities in implementing the BBA to protect patients’ access to care and provide predictability for hospitals. The letters identify several of the key open questions facing hospital administrators:

  • Relocation or Rebuilding. Will hospital outpatient departments that relocate or rebuild lose their grandfathered status? The House and Senate letters recognize that hospitals may need to relocate, expand or rebuild departments for a variety of reasons, including lease expiration, population shift or change in patient load, and location on an earthquake fault line or flood plain. Until CMS issues guidance, many hospitals are putting relocation and expansion plans on hold and seeking to lock down binding lease renewal options.  Additionally, one unintended consequence of the BBA may result from a realization by landlords that they have leverage in lease negotiations with existing hospital tenants.  Increased rent demands may be at odds with the fraud and abuse laws or applicable requirements for tax-exempt hospitals.
  • Change in Ownership. Change in ownership is not addressed in the BBA. While the CMS enrollment process could cause some transactions to technically result in the addition of a new department, members of Congress have voiced that a change in ownership should not cause a department to lose its grandfathered status, and urged CMS to protect OPPS reimbursement to existing sites even after a change in ownership.
  • Change or Expansion in Services Offered by Department. The House letter states that nothing in the BBA was intended to preclude existing off-campus departments from changing or expanding the types of outpatient services they provide to patients and urges CMS to protect the ability of these departments to bill under the OPPS upon such changes.
  • Definition of Campus. Congress also urges CMS to exercise its discretion in determining whether buildings fit the definition of “on-campus” and would thereby not be subject to the BBA’s site-neutral payment limitations. Current regulations define “on-campus” as buildings within 250 yards of the main buildings of the hospital or other buildings that the CMS regional office determines, on a case-by-case basis, to be part of the hospital campus. Congress urges CMS to instruct its regional offices to use the rule of “reasonable proximity” when making on-campus determinations and recognizes the potential expansion issues faced by hospitals adjacent to barriers (such as rivers, wetlands, or highways) or located in densely populated urban areas.

The CMS rulemaking may address some of these concerns, though Congress did not deliver an easy job to the agency. The proposed CY 2017 OPPS Rule is expected to be issued by July 1, 2016. Comments will be accepted for 60 days and a final rule is due by November 1, 2016.  Notably, Marc Hartstein, the director of the Hospital and Ambulatory Policy Group at CMS who is charged with oversight of the proposed BBA rule, has announced plans to retire from CMS on July 1.

What Is Next?  Voice Your Concerns or Wait and See

If providers have significant issues, now is the time to make their voices heard, either through the existing trade association or independently, not only with Congress, but also with CMS. Opportunities to impact the manner in which these provisions are finally enacted exist now, in the Senate and with CMS once the regulations are proposed.

Vermont to Require Drug Transparency

By Lee H. Rosebush and Nita Garg

Vermont recently became the first state to require drug manufacturers to provide justification for price increases. Under the new law, data on the cost of the drug will come from the state Medicaid program. The Department of Vermont Health Access (DVHA) and the Green Mountain Care Board (GMCB) will work together to create a yearly list of 15 drugs whose prices have increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months for the state’s Medicaid program. The DVHA is responsible for the management of Vermont’s publicly-funded health insurance programs, while the GMCB is an independent group created by the Vermont Legislature tasked with ensuring that changes in the health system improve quality while stabilizing costs.

For each prescription drug on the GMCB and DVHA list, the manufacturer will be required to submit all relevant information and supporting documentation necessary to justify the manufacturer’s wholesale acquisition cost increase in a format the state’s attorney general determines to be understandable and appropriate. Such relevant information may include:

  • All factors that have contributed to the wholesale acquisition cost increase;
  • The percentage of the total wholesale acquisition cost increase attributable to each factor; and
  • An explanation of the role of each factor in contributing to the wholesale acquisition cost increase.

The state attorney general may bring an action against non-compliant manufacturers, and may impose a civil penalty of no more than $10,000 per violation.

In addition to the reporting obligations mentioned above, the new law also requires that the DVHA use the same dispensing fee in its reimbursement formula for 340B prescription drugs as it uses to pay for non-340B prescription drugs under the Medicaid program. Additionally, the DVHA is authorized to modify the dispensing fee or reimbursement formula provided to federally qualified health centers and Title X family planning clinics for dispensing 340B prescription drugs to Medicaid beneficiaries.

OCR Clarifies “Reasonable, Cost-Based” Fee Calculations for Access to Medical Records

By Lynn Sessions and Suchismita Pahi

The HHS Office for Civil Rights (OCR) recently issued guidance that clarifies open questions for covered entities on how to charge for copies of personal health information requested by patients and members, regardless of state laws.


Publication Notice

The Health Law Update newsletter is going on hiatus for the summer. Our normal publication schedule will resume in August.

Subscribe to the Health Law Update blog for postings on the latest healthcare industry news and developments over the summer break (and every day!). Follow us on Twitter @HealthLawUpdate.

Happy summer!

Events Calendar

June 28, 2016

Houston Partner Robert M. Wolin is a co-speaker for a webinar titled “Network Wars:  Health Plan Strategies to Protect and Defend In-Network Contracts,” sponsored by AIS Health.

June 28-29, 2016

Washington, D.C., Partner Lee H. Rosebush will present on “Drug-Pricing as It Relates to Pharmaceutical, Pharmacy, and PBM Contracting – What Does It All Really Mean?” at the American Health Lawyers Association Annual Meeting in Denver, CO.

September 26, 2016

Washington, D.C., Partner Lee H. Rosebush will present on “Compounding-503(b)” at the National Association of Specialty Pharmacy (NASP) Specialty Pharmacy Law Conference in Washington, DC. 

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