Tag: healthcare law

Pennsylvania AG takes hard stance on nonprofit healthcare providers in the name of consumer protection

Clay Brewer, Class of 2019; Neil B. Krugman, Partner at Waller

The rise in healthcare costs and public concern about accessing adequate care has caught the eye of many government officials across the country, some of whom have increased their enforcement of consumer protection laws in response.

The Attorney General of Pennsylvania, Josh Shapiro, provides a recent example.

In 2012, the University of Pittsburgh Medical Center (UPMC), an integrated nonprofit hospital, announced that it would no longer contract with Highmark, a health insurer, due to Highmark’s recent affiliation with a large UPMC rival, Allegheny Health Network. In 2014, despite continuing disagreements, UPMC and Highmark entered into a consent decree with the Attorney General, the Pennsylvania Insurance Department and the Pennsylvania Department of Health. With the aim of protecting consumers, the decree permitted in-network access for certain groups of Highmark members (such as senior citizens) to certain unique or exception UPMC hospitals and providers.

The decree expires on June 30, 2019. With that date nearing and no resolution in sight to UPMC’s dispute with Highmark, in February 2019, General Shapiro filed a petition in Pennsylvania state court against UPMC, contending that UPMC has failed to meet its charitable purpose and seeking to require “that all charitable, nonprofit health systems contract with all health insurers who want to do business with them.”

In a recent counterclaim filed in federal district court, UPMC has labeled General Shapiro’s actions as unprecedented and illegal because they usurp the rights of nonprofit healthcare providers. Not only does the petition essentially force nonprofit providers to contract with insurers, UPMC claims, but it also allows the state to infringe upon federal government programs such as Medicare Advantage, the Patient Protection and Affordable Care Act (ACA), the Sherman Act and the Employee Retirement Income Security Act of 1974 (ERISA).

On April 3, Shapiro witnessed a setback with a Pennsylvania state court ruling that the court lacks authority to extend a consent decree without an allegation of fraud, accident or mistake or mutual consent by the parties, despite the impact the Attorney General claims it may have on the greater population. Interestingly, the court declined to rule on most of the primary issues such as whether the Attorney General has the power to regulate nonprofits and whether UPMC, in fact, violated its charitable mission.

Although an initial victory for nonprofits, this case will continue to be closely monitored for the impact it may have not only in Pennsylvania but also in the national discussion on the intersection between healthcare costs and consumer protection laws.

Shapiro says he will continue to fight for consumer protection, and submitted an appeal of the trial court’s decision to the Pennsylvania Supreme Court in early April.

Several Southeastern states seek to eliminate or relax Certificate of Need laws

Philip FitzGerald, Class of 2019; Kim Harvey Looney, Partner at Waller; Zachary D. Trotter, Associate at Waller

State certificate of need (“CON”) programs regulate the building and expansion of health care facilities and the acquisition of health care equipment. In our region, the states of Tennessee, Georgia, South Carolina, and North Carolina have bills working their way through the legislative process that would amend, limit or repeal CON laws.

Tennessee’s Legislature is currently considering a bill (SB 1291/HB 1085) to repeal the CON requirement for healthcare facilities and to terminate the Tennessee Health Services and Development Agency, the agency responsible for administering the CON program. The bill has passed on second consideration and both the House and Senate bills have been referred to their respective Government Operations Committees. A second bill (SB 0547/HB 0672) would eliminate the CON requirement for home care organizations or satellite emergency departments. That bill also passed on second consideration in the Senate and has been referred to the Senate Commerce and Labor Committee. In the House, this second bill has been assigned to the Facilities, Licensure & Regulations Subcommittee.

Georgia’s Legislature has introduced a bill (HB 198) which proposes to revise the CON program by the following:

  • Increase the amount existing healthcare facilities can spend on expansion and equipment acquisition without requiring a CON.
  • Eliminate the health strategies council, which advises Georgia’s Department of Community Health on the CON program.
  • Allow destination cancer hospitals granted CONs prior to July 1, 2019, to convert to a hospital without obtaining any additional CON.
  • Ease restrictions on CON exemptions for continuing care retirement communities.
  • Add CON exemptions for private psychiatric hospitals, mental health or substance abuse facilities or programs, or mental health or substance abuse services.
  • Add CON exemptions for freestanding ambulatory surgical centers.
  • Add requirements for modifying or acquiring a CON that includes providing indigent care, and participating as a provider for Medicaid and PeachCare for Kids beneficiaries.
  • Limit which providers may oppose a CON application to existing health care facilities of the same type proposed, or which offer substantially similar services located within a 35-mile radius of the proposed project.

This bill was favorably reported by the House Special Committee on Access to Quality Health Care on March 1.

In South Carolina, a bill (H 3823) proposes eliminating the CON program completely, which would leave licensure approval as the only requirement for building or modifying medical facilities or acquiring medical equipment. The bill was referred for review to the Committee on Ways and Means on January 31.

Although in previous years North Carolina has considered bills proposed to completely repeal its CON program, the only CON bill presented so far this year proposes to exempt ocular surgery from CON laws (H173).

It is too soon to tell whether any or all of these bills will be passed, however, their passage could have a substantial impact on the healthcare landscape throughout the Southeast. We will provide updates as these bills progress through the legislative process in each state.

The Amazon-Berkshire Hathaway-JPMorgan Chase healthcare venture remains a mystery

Seth Carver, Class of 2020; Neil B. Krugman, Partner at Waller

In early 2018, Amazon announced a joint healthcare venture with Berkshire Hathaway and JPMorgan Chase to build an independent, nonprofit healthcare company targeted at improving care and reducing costs for its employees.

Since then, the joint venture has continued to form and develop, hiring surgeon and author Dr. Atul Gawande as its chief executive.  Outside of the joint venture, Amazon has also recently acquired PillPack, an online pharmacy, and now offers its own line of over-the-counter medical products, under the Basic Care brand.

These moves by Amazon, and a general lack of information about the joint venture’s ultimate goals, and, in particular, whether those plans include bringing healthcare services and products to the general public, make some segments of the health care industry nervous.

Recently the joint venture has encountered some headwinds in the form of a lawsuit filed against it by UnitedHealth. The latter company is seeking a temporary restraining order to block the joint venture from employing a former executive of UnitedHealth Optum, which is in the pharmacy benefit management business.

In her recent article in the New York Times, Reed Abelson described the suit as “a stark example of aggressive tactics that health companies have taken to protect their turf from technology powerhouses like Amazon and Apple,” and to pry open secrets about the joint venture’s ultimate plans.

The joint venture and Amazon’s moves in the health care space are especially pertinent to the Nashville healthcare industry with the recent announcement of Amazon’s “Operation Center of Excellence,” which will be located in Nashville Yards, just blocks away from Waller’s offices and the offices of such healthcare giants as HCA.  Regardless of the joint venture’s or Amazon’s ultimate plans, Nashville’s local healthcare community is bound to be impacted by the influx of approximately 5,000 new Amazon employees, with an average salary of $150,000.

OIG advisory opinion approving smartphone initiative

By Clay Brewer, Class of 2020; Caitlyn W. Page, Partner at Waller

An advisory opinion issued recently by the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) provides some insight into the growing relationship between access to technology and access to patient care.

The OIG issued Advisory Opinion No. 19-02 permitting a pharmaceutical manufacturer’s proposal to loan limited capability smartphones to certain financially needy patients in order to assist these patients and their care providers track medication adherence data. In issuing this advisory the OIG provided valuable insight into how it interprets the “promotes access to care” exception to the Beneficiary Inducement Civil Monetary Penalty Statute (the “Beneficiary Inducement CMP”).

According to the requestor, the patient population for an undisclosed drug experiences a high amount of medication nonadherence or partial adherence, which results in higher utilization of healthcare services and increased costs to the healthcare system. In response to this issue, the drug’s manufacturer created a device that detects a signal sent by the drug upon ingestion, which in turn transmits the ingestion time to an app developed by the manufacturer through Bluetooth. However, because some patients do not have a smartphone, they are unable to use the app. As a result, the manufacturer proposed issuing a limited capability smartphone along with the drug to patients who do not have a smartphone and who have a household income below a specified percentage of the federal poverty level. Aside from the preloaded app, all other features of the smartphone would be disabled except the patient would still be able to make domestic telephone calls. The smartphones would be issued by a specialty pharmacy under contract with the manufacturer and each patient would only be permitted to such use the phone for a maximum of two 12-week administrations while receiving the medication.

The OIG concluded that the Beneficiary Inducements CMP would be implicated by this proposal because patients would be receiving the ability to make domestic phone calls, which constitutes remuneration. Additionally, because the patient’s prescribing practitioner would complete the paperwork for the patient to obtain the smartphone, the patient would likely have the impression that he or she must continue receiving care from a particular provider in order to maintain use of the smartphone. The patient may also feel obligated to obtain the drug from the specialty pharmacy issuing the smartphones even if the drug is available at other pharmacies.  The OIG, however, found that the proposal would fall under the “promotes access to care” exception to the Beneficiary Inducements CMP for a number of reasons, most notably because the OIG concluded that there is unlikely to be any possibility of disrupting clinical decision making since the patient only receives a smartphone if he or she falls below a certain income and does not currently have a smartphone device to download the app.

The OIG also concluded the proposal poses a low risk of imposing additional costs upon federal healthcare programs because:

  • there would be no incentive to issue a smartphone to an individual who already has one;
  • there is no advertising of the proposal which would cause individuals to seek treatment for the purposes of receiving a smartphone; and,
  • the smartphone’s limited capabilities and a maximum of two 12-week time periods would limit a patient’s effort to retain the smartphone.

Lastly, the OIG determined that the federal Anti-Kickback Statute could be implicated by this proposal if the requisite intent were present; however, it would not pursue administrative sanctions against the manufacturer because the proposed program contained a number of safeguards, including the fact that the loaner smartphone would be available only on a temporary basis, would only be used by individuals who otherwise would not be able to use the medication, and there would be no advertising of the smartphone so individual patients would not go to a certain provider seeking the medication for the purposes of receiving a smartphone.

While the OIG expressly stated that this opinion is narrowed to the specific facts that the Requestor presented and should not be relied upon for other possible initiatives, this advisory opinion provides useful guidance regarding the OIG’s view on the intersection of technology and the Anti-Kickback Statute and Beneficiary Inducements CMP.

Fifth Circuit resumes consideration of district court decision invalidating the Affordable Care Act

By Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

In late 2018, federal District Court Judge Reed O’Connor held that the Patient Protection and Affordable Care Act (the “ACA”) was invalid. The lawsuit was filed by a coalition of Republican attorneys general and governors, and was based upon the Tax Cuts and Jobs Act of 2017, which reduced the tax penalty for failing to obtain an ACA-compliant plan (i.e. the “individual mandate”) to $0.

The individual mandate had previously been held constitutional by the Supreme Court based upon Congress’ taxing power. The plaintiffs’ argument in this case was that the individual mandate was no longer constitutional since the tax no longer existed. Furthermore, they argued that the mandate was an essential, inseverable piece of the ACA, and therefore, the entirety of the ACA was invalid.

Judge O’Connor agreed with the plaintiffs’ arguments, holding that the individual mandate was unconstitutional, and, since the mandate was an inseverable part of the ACA, also held the entire act to be invalid. In other words, not only was the individual mandate unconstitutional, but the hundreds of other provisions in the ACA, such as the 10 essential health benefits, Medicaid expansion and the prohibition on discrimination for pre-existing conditions, were also no longer enforceable.

The healthcare industry had a mixed response to this ruling. The American Medical Association warned that the decision could destabilize health insurance coverage. However, Seema Verma, the CMS Administrator, stated that 2019 ACA plans would not be affected by the ruling. She also stated that CMS has a plan to protect patients with pre-existing conditions if the ACA is struck down, but was not forthcoming with the details of the plan.

In early January 2019, Judge O’Connor’s ruling was appealed to the U.S. Court of Appeals for the Fifth Circuit by a coalition of Democratic state attorneys general. It should be noted that Judge O’Connor allowed the ACA to stand while his decision is under appeal “because many everyday Americans would otherwise face great uncertainty.” Therefore, for now, the ACA remains in full force and effect.

The federal appeals process can take anywhere from a few months to more than a year in order to obtain a decision. If the case is appealed all the way to the Supreme Court, the process could take even longer.

To make matters worse, the Fifth Circuit stayed its review of this case during the federal government shutdown, and only resumed consideration of this appeal on January 29. Many legal experts are confident that Judge O’Connor’s ruling will be reversed by the Fifth Circuit. However, the Fifth Circuit could uphold the decision, could overturn only part of the decision, or could rule to sever the individual mandate from the ACA, leaving all other portions of the ACA intact. We will continue to monitor this case as we await the decision of the Fifth Circuit and, regardless of the Fifth Circuit’s decision, we expect that the case will ultimately be appealed to the Supreme Court.

CMS Proposed Rule Change for ACO Payments

By Curtis Campbell, Class of 2019; Andrew F. Solinger, Attorney at Waller

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule that would overhaul the Medicare Shared Savings Program, which was established by the Affordable Care Act (ACA). Currently, the vast majority of Medicare’s Accountable Care Organizations (ACOs) operate under the Medicare Shared Savings Program. The redesigned program is called “Pathways to Success” and was developed based on a comprehensive analysis of the performance of ACOs to date.

What is an “ACO”?

ACOs are groups of health care providers that agree to take responsibility for the total cost and quality of care for their patients. Under the Medicare Shared Savings Program, the ACOs get to keep a portion of the savings they achieve. CMS provides ACOs with Shared Savings Waivers to allow the savings to be applied in virtually any manner to further innovation.  Presently, there are 561 Shared Savings Program ACOs that serve over 10.5 million Medicare fee-for-service beneficiaries.

Results of the Medicare Shared Savings Program

Since the Medicare Shared Savings Program was established by the ACA, and launched in 2012, it has been faced with a mix bag of success:

  • Shared Savings Programs have shown increases in net spending for CMS and taxpayers because 82 percent of all ACOs in the program are not taking on risk for increases in cost.
  • ACOs that are not at risk for cost increases end up increasing Medicare spending in the aggregate.
  • ACOs participating in the two-sided, risk-sharing model in which eligible ACOs share in a larger portion of any savings, but are also required to take on losses if spending exceeds certain benchmarks, have proven successful in accounting for significant savings to the Medicare Program.

Pathways to Success

The proposed rule, Pathways to Success, would redesign the participation options available under the program to transition more to two-sided models. The projected proposal is estimated to lead to savings to Medicare of $2.2 billion over ten years.

Pathways to Success is designed to advance five goals:

  • (1) Accountability and (2) Competition: Currently, ACOs have up to six years without taking on risk for increases in cost. These ACOs receive a shared savings payment from CMS when they keep their costs down, but do not have to pay back taxpayers when costs are high. Under the proposed rule, ACOs can only remain in the program without taking risk for two years, instead of six.
  • (3) Beneficiary Engagement: CMS proposes to require that beneficiaries receive a notification at their first primary care visit of a performance year informing them that they are in an ACO and what it means for their care. To bolster beneficiary engagement, CMS proposes to allow certain ACOs to provide incentive payments to patients for taking steps to achieve good health.
  •  (4) Quality: CMS proposes allowing physicians in risk-sharing ACOs to receive payment for telehealth services provided to patients regardless of the patient’s location. This would expand the use of telehealth even in situations in which the beneficiary’s home is the originating site. In addition, the proposed rule promotes interoperability and patient control of their medical data by proposing a new requirement around ACOs adopting the 2015 edition of the Certified Electronic Health Records (EHR) technology.
  • (5) Integrity: CMS’s proposed rule would change the benchmark calculations to better account for regional adjustments by accurately reflecting the spending levels and growth rates in each ACO’s local market. The proposed ruled will also strengthen the monitoring of financial performance and permitting termination of ACOs with multiple years of poor financial performance.

In sum, Pathways to Success is aimed at mitigating losses, increasing program integrity, and promoting regulatory flexibility for ACOs. As CMS Administrator Seema Verma stated, “ACOs can be an important component of a system that increases the quality of care while decreasing costs.” With the proposed rule change, the program will hopefully achieve its original intent of decreasing net spending for CMS and taxpayers.

Requesting EMTALA waivers during a natural disaster

By Seth Carver, Class of 2020; Andrew F. Solinger, Associate at Waller

With the start of hurricane season, and the recent destruction caused by Hurricane Florence on the Carolinas and beyond, hospitals must review and update their policies and procedures to ensure that proper care can be provided to patients following surges caused by natural disasters and emergencies.

Following large natural disasters such as Hurricane Florence, and other mass casualty events such as terrorist attacks or public health emergencies, hospitals are likely to experience significant surges of patients that will test and push the limits of hospitals’ capacities.  In the face of these mass casualty events, hospitals must quickly and effectively choose which patients will be treated and which will not.

This decision is likely to cause friction with a hospital’s obligations under The Emergency Medical Treatment and Active Labor Act (“EMTALA”), which requires hospitals to properly screen and stabilize all patients that present to an emergency department for care.  Because of this tension between a hospital’s ethical and legal obligations to treat patients and the realities of responding to natural disasters and other mass casualty events, hospitals must understand the requisite responsibilities under EMTALA during such disasters as well as ways in which they can protect themselves from liability for potential, but unavoidable, violations of EMTALA.

EMTALA prohibits all Medicare-participating hospitals from denying emergency medical service to individuals, regardless of ability to pay.  It also requires hospitals to provide an appropriate medical screening to determine if a medical condition exists.  If such a condition exists, the hospital is required to provide stabilizing treatment before transferring or discharging the patient.

Natural disasters do not by themselves absolve hospitals of this requirement under EMTALA.  However, it is foreseeable that hospitals in the path of a natural disaster will need to transfer patients to other facilities without conducting medical screening exams or stabilizing treatment.  An option which has been used in the past to transfer these patients without violating the requirements under EMTALA is a Section 1135 waiver. These waivers are short-term releases from the normal EMTALA requirements in the wake of declared natural disasters.  HHS has issued these waivers in previous natural disasters, including Hurricanes Katrina, Rita, Gustav, Ike and Dean, the Iowa floods of 2008, and the Minnesota floods of 2009.

When utilizing Section 1135 waivers, in order to lawfully transfer patients without conducting such medical screening exams, or if needed stabilizing treatments, all of the following conditions must apply:

  • The President declares an emergency or disaster under the Stafford Act or the National Emergencies Act;
  • The Secretary of HHS declares that a public health emergency (PHE) exists;
  • The Secretary of HHS authorizes EMTALA waivers under Section 1135 of the Social Security Act;
  • Unless EMTALA waivers are granted for an entire geographic area, the hospital in question applies for a waiver from HHS;
  • The hospital has actually activated its emergency operations plan; and
  • The state has activated its emergency operations plan or pandemic plan for the area that covers the hospital.

Once the Secretary of HHS authorizes § 1135 waivers a hospital may submit a request to operate under that authority by sending an email to the CMS regional office in their service area.

The request should contain the following:[i]

  • Provider Name/Type;
  • Full Address (including county/city/town/state) CCN (Medicare provider number);
  • Contact person and his or her contact information for follow-up questions;
  • A brief summary of why the waiver is needed.  For example: “Critical Access Hospital (CAH) is the sole community provider without reasonable transfer options at this point during the specified emergent event (e.g. flooding, tornado, fires, or flu outbreak)” or “CAH needs a waiver to exceed its bed limit by X number of beds for Y days/weeks” (be specific);
  • Consideration – Type of relief you are seeking or regulatory requirements or regulatory reference that the requestor is seeking to be waived;
  • There is no specific form or format that is required to submit the information but it is helpful to clearly state the scope of the issue and the impact;
  • If a waiver is requested, the information should come directly from the impacted provider to the appropriate Regional Office mailbox with a copy to the appropriate State Agency for Health Care Administration to make sure the waiver request does not conflict with any State requirements and all concerns are addressed timely.

The waiver request is then reviewed by a cross-regional waiver validation team.  In reviewing waiver requests CMS makes the following inquiries: [ii]

  • Is the hospital within the defined emergency area?
  • Is there an actual need?
  • What is the expected duration?
  • Can this be resolved within current regulations?
  • Will regulatory relief requested actually address stated need?
  • Should we consider an individual or blanket waiver?

If granted, Section 1135 waivers generally last for up to 72 hours after both the emergency is declared and the hospital’s emergency plan is activated.  In some instances, the waiver will terminate prior to 72 hours if the HHS Secretary determines that the waiver is no longer necessary. It is important to note that this waiver does not allow for hospitals to selectively only treat patients with insurance and to transfer away all uninsured or underinsured patients.  If utilizing the waiver to transfer such patients, hospitals must not discriminate on

In order for hospitals to remain compliant with all EMTLA regulations during natural disasters and emergencies, it is important to review and revise EMTLA policies so that they reflect the proper steps in utilizing Section 1135 waivers.  Natural disasters and other mass casualty events impose large challenges for hospitals regarding treatment requirements. However, with active preparation and well-written emergency policies hospitals can limit violations of government regulations and ease the decision making of hospital personnel.

10 ways you can protect your company from a cyberattack

By Emmie Futrell, Class of 2018; Robb S. Harvey, Partner at Waller; Elizabeth N. Pitman, Counsel at Waller

The government, through the United States Department of Justice, has increased its efforts to respond to cyberattacks, a hot-button issue that extended across disciplines in 2017. The newly created Cyber-Digital Task Force has been charged with developing policies to combat global cyber terror and involve federal law enforcement on the front lines of this virtual battlefield.

The OCR’s January and February 2018 OCR Cybersecurity Newsletters provided targeted tips to HIPAA-covered entities and business partners to prevent cyber extortion as a means to obtain ransom money and to avoid the consequences of phishing attacks. The OCR recommended training, vigilance and bolstering defenses by encrypting and backing up sensitive data and training workforce. Specifically, OCR provided the following list of suggestions:

  1. Train employees to identify unusual emails and other messages that hackers could use to break into your system.
  2. Document suspicious activity and review those logs regularly.
  3. Perform a risk analysis that looks at the entire organization and addresses known risks.
  4. Use anti-malware programs to prevent access by malicious software proactively.
  5. Implement and test cyberattack recovery plans.
  6. Encrypt and back up sensitive data.
  7. Stay on top of new and emerging cyber threats, perhaps by signing up for governmental alerts known as US-CERT alerts, which are generated by the government’s National Cyber Awareness System and received via email or an RSS feed and provide timely information about security issues
  8. Be wary of unusual emails and text messages
  9. Use multi-factor authentication
  10. Stay updated with anti-malware software and system patches

These measures can both protect and prove cost-effective.

The 2017 Ponemon Data Breach report found that the healthcare industry in the United States stands to lose the most from a data breach, with the average cost per lost or stolen record at $380. Estimated savings for companies that only chose to extensively encrypt information are $16 per record and, companies that have a prepared Incident Response Team and Plan could save $19 per record. Saving these costs per record could significantly lessen the inevitable economic impact of a large-scale breach. The report made clear that time is of the essence in a breach, a sentiment that has been echoed by the OCR’s guidance and HIPAA’s response requirements.

Implementing the OCR’s guidance can help healthcare companies save costs when faced with cyber extortion. Many of the suggestions from the OCR will also ensure that HIPAA standards are satisfied. For example, documenting suspicious activity will be key in creating the necessary paper trail in the event of an OCR investigation. This type of documentation is already required by HIPAA. Implementing cyberattack recovery plans like training an Incident Response Team and developing contingency plans, including the possible necessity of paying the ransom, will guarantee that the breach can be identified and contained as quickly as possible and data availability and integrity are maintained. These measures will ensure that electronic health records and other healthcare information continue to be a pathway towards innovation, rather than a backdoor for an insidious attack.

Why telehealth was a big winner in new budget deal

By Andy Cole, Class of 2018; Amber Greene Arnold, Associate at Waller

Hidden in the details of the Bipartisan Budget Act of 2018 are some key telehealth provisions that are receiving praise from many industry groups and could mark a significant development for Medicare telehealth policy.

The new legislation promotes telehealth in several ways.

Tele-stroke. Medicare currently only covers tele-stroke services for patients located in rural health professional shortage areas and counties not classified as a metropolitan statistical area.  Effective January 1, 2019, however, Medicare will cover a telehealth consultation for any Medicare beneficiary presenting at a hospital with acute stroke symptoms, without regard to current geographic restrictions.

End-Stage Renal Disease (ESRD) Services.  Beginning January 1, 2019, the legislation allows nephrologists to use telehealth to provide monthly clinical assessments for ESRD patients on home dialysis.  This provision is not subject to any geographical restrictions and the “originating site” may be a freestanding dialysis facility or the patient’s home. However, ESRD patients benefiting from this provision will still be required to have an in-person assessment each of the first three months of home dialysis and once every three months thereafter.  This provision is notable for ESRD patients who may have difficulty traveling.

Medicare Advantage Plans.  Currently, Medicare Advantage plans may cover telehealth services in addition to those covered by the traditional Medicare program, but these additional telehealth services are not paid for separately by Medicare.  The new legislation, however, authorizes Medicare Advantage plans, beginning with the 2020 plan year, to offer to include additional telehealth benefits beyond those available under traditional Medicare in their annual bid to the government.  These additional telehealth services would also have to be available to patients through in-person visits as well.  Due to the rapidly growing number of beneficiaries enrolling in Medicare Advantage plans, this provision may have a significant effect on the growth of telehealth services under Medicare.

Accountable Care Organizations.  The legislation also allows for increased coverage of telehealth services provided to Medicare patients assigned to certain ACOs.  More specifically, after January 1, 2020, for two-sided ACOs (meaning the ACO shares in both savings and losses) or an ACO tested or expanded through the Center for Medicare and Medicaid Innovation, existing telehealth geographic limitations will not apply.  This will allow for a patient’s home to qualify as an “originating site” even if the patient’s home is not located in a rural health professional shortage area.

These changes reflect a continued interest by lawmakers in supporting and expanding telehealth services and have the potential to increase access to care for Medicare beneficiaries while potentially lowering costs.  Healthcare providers should monitor the implementation of these provisions and evaluate opportunities for participating in Medicare’s expansion of coverage for telehealth.

Between a rock and a hard place: medical-device stakeholders disappointed by cancelled CMS rulemaking

By Emmie Futrell, Class of 2018; Denise D. Burke, Partner at Waller

Another attempt at bridging the gaping lag between FDA approval for medical devices and CMS’s Medicare coverage determinations has been struck down, after a nine-month standstill.

CMS’s proposed rulemaking included a promising new program called EXCITE, or expedited coverage of innovative technology. The proposed rulemaking had not been made public in substance, and the reasons for its cancellation are still unclear.

CMS officials confirmed that EXCITE was intended to improve access to innovative medical-device technologies for Medicare patients.

Members of the medical-device industry, however, believe that EXCITE was patterned after a 2016 industry proposal that had been presented to CMS to correct the backlog.

The 2016 proposal, known as PACER, or the provisional accelerated coverage to encourage research initiative, suggested that CMS grant provisional coverage under Medicare for FDA-approved devices. This would ensure that patients could access innovative technology, while CMS could gather the information necessary for its own approval process.

The provisional coverage would also alleviate pressure on device sponsors, who would not suffer from having to bankroll expensive and highly specific clinical tests before devices are even on the market.

EXCITE is not CMS’s first attempt to reduce the backlog between FDA and Medicare approval for medical devices.

This backlog, which can sometimes last years, results from the independent statutory mandates that tie the hands of the respective agencies. FDA must ensure that the drugs and devices it approves are “safe and effective,” while CMS can only approve products for Medicare coverage if the products are “reasonable and necessary.” This coverage determination requires CMS to evaluate the necessity of devices for typical Medicare patients, which are generally more medically complex than those of patients in FDA clinical trials.

In 2011, the Department of Health and Human Services attempted to address the lag between FDA and Medicare approval by initiating a parallel review program. This program focused on increasing communication between CMS, the FDA and device manufacturers, including providing medical-device stakeholders and manufacturers with detailed information about the study data that each agency would require in the approval process.

It was believed that this would speed the review process by allowing manufacturers to tailor their studies to encapsulate necessary data for each agency.   Lack of resources, however, largely doomed this program before it was effectively launched. Critics have condemned the program, which only resulted in two approvals by CMS.

CMS’s cancellation of the EXCITE program is a strong indication that, for at least the immediate future, medical-device manufacturers will continue to suffer from the bottleneck between the FDA and CMS and experience lengthy delays between FDA approval and CMS reimbursement.