Senate Majority Leader Reid Unveils Senate Health Care Reform Legislation
On November 18, 2009, Senate Majority Leader Harry Reid (D-Nev) unveiled health care reform legislation to be considered by the full Senate beginning today. The bill is entitled the "Patient Protection and Affordable Care Act" and is derived from health care reform bills passed by two Senate Committees, the Finance Committee and the Health, Education, Labor, and Pension Committee. The Congressional Budget Office (“CBO”) estimates the Senate bill’s cost at roughly $848 billion, with a net reduction in federal deficits of $130 billion over the 2010-2019 period. It is estimated that the legislation would provide coverage for an additional 31 million people, in part through mandates requiring the purchase of health insurance; fines would be levied on those who fail to purchase coverage. The Senate bill would create state insurance exchanges offering federally subsidized coverage; employers with more than fifty employees and not offering coverage would be assessed penalties for each employee in the event that any receives government premium subsidization. The CBO indicates that the Senate legislation would “significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law) [and] impose an excise tax on insurance plans with relatively high premiums.” The bill would implement a 40 percent tax on insurance policies exceeding $8,500 for individuals and $23,000 for families. The legislaton includes a public option under which a public plan would negotiate payment rates with providers; states could opt out of the public option.

Title II of the legislation addresses reforms to the Medicaid program and includes such provisions as Section 2001, which would provide Medicaid eligibility at 133% of the federal poverty level beginning in 2014, and which, starting in 2017, would make adjustments to the federal medical assistance percentage (“FMAP”) between 30.3 and 34.3%, depending on the level of benefits provided by each state as of the date of enactment. Section 2006 would create an FMAP adjustment in certain areas recovering from natural disasters; beginning in 2011, a state’s FMAP percentage would be increased by 50% in the initial year, and by 25% in subsequent years, for qualifying states. Qualification would, in part, require a Presidential major disaster declaration in the preceding seven fiscal years and would also require a determination to have been made that, as a result of such disaster, every county or parish in the State warrants individual and public assistance. Section 2551 would, beginning in 2012, reduce Medicaid disproportionate share hospital (“DSH”) payments by 25 to 50%, to reflect anticipated reductions in state uninsured populations by 45% over 2009 levels. Section 2702 would prohibit Medicaid payments associated with certain healthcare-acquired conditions.

Title III contains certain provisions affecting Medicare program reimbursement, including Section 3001, which would fund certain value-based incentive payments to hospitals starting in FY 2013 with commensurate reductions in base operating diagnostic related group (“DRG”) payment amounts. Section 3001 would also establish value-based purchasing demonstration programs for critical access hospitals (“CAHs”) and certain other low volume hospitals excluded under the main incentive program.

Section 3101 would adjust the update to the single conversion factor under the physician fee schedule by 0.5% in 2010, but does not address adjustments for 2011 and beyond. Section 3002 would make downward adjustments to payments under the physician quality reporting incentive (“PQRI”) program for failure to comply with requirements thereunder starting in 2015. Section 3002 would also integrate PQRI requirements with electronic health record (“EHR”) reporting requirements.

Section 3011 would require the U.S. Department of Health and Human Services (“HHS”) to “establish a national strategy to improve the delivery of health care services, patient health outcomes, and population health,” tasked with improvement of “outcomes, efficiency, and patient-centeredness of health care for all populations, including children and vulnerable populations,” to identify areas of improvement, to address gaps in quality and to reduce health disparities.

Section 3022 would create a shared savings program, intended to encourage “investment in infrastructure and redesigned care processes for high quality and efficient service delivery” and enabling certain groups of providers having established shared governance mechanisms to receive payments for shared savings. Section 3023 would establish a national pilot program to study the bundling of payment for integrated care related to inpatient admissions for selected conditions. Section 3025 would impose penalties related to excessive readmission rates for hospitals after October 1, 2012.

Section 3401 would revise certain market basket updates for providers to include a productivity adjustment modeled on the 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity.

Section 5301 would provide expanded support for primary care training programs, and would make available certain grants or awards up to five years in duration. Likewise, Section 5503 would redistribute certain residency slots to those hospitals meeting certain primary care residency thresholds.

Title VI contains program integrity provisions, including Section 6001, which contains a limitation on the rural and whole-hospital exceptions under the Stark Law prohibition on self-referrals. Hospitals not having a provider agreement in place by February 1, 2010 would be excluded; qualifying hospitals would face certain limitations on the ability to expand operating rooms, procedure rooms or bed count as of the date of enactment. Section 6407 would impose requirements that home health or durable medical equipment orders be made only pursuant to physician documentation indicating that a face-to-face encounter with a physician, a physician assistant, a nurse practitioner, or a clinical nurse specialist has occurred within the six months prior to the order.

It is anticipated that the full Senate will consider the Patient Protection and Affordable Care Act beginning this evening and a vote on passage is tenatively scheduled for Saturday evening, November 21. The full text of the Senate health care reform legislation may be found here; CBO’s analysis of the Senate bill may be found here. Mark Faccenda

House Votes, CBO Issues Analysis on H.R. 3961
On November 19, 2009, the U.S. House of Representatives passed the Medicare Physician Payment Reform Act of 2009 (“H.R. 3961”) by a 243-183 vote. H.R. 3961 would prevent a 21% cut in physician payments scheduled for January 2010 and would replace traditional temporary fixes under the Physician Fee Schedule with a revision to the sustainable growth rate (“SGR”) formula used in the calculation of payments. H.R. 3961 provides for a 1.2% increase in reimbursement in 2010 and a restructured model starting in 2011 that grows at a 2% rate for evaluation and management and preventive care services and a 1% rate for all other services. Spending related to H.R. 3961 would be restricted by budget neutrality provisions going forward. The CBO estimates that enacting H.R. 3961, by itself, would cost $210 billion over the 2010-1019 period.” H.R. 3961, as passed by the House, may be found here; CBO’s analysis related to H.R. 3961 may be found here. Mark Faccenda

HHS To Impose Stricter Standards in the Calculation of Improper Medicare Payment Rates
The Department of Health and Human Services (“HHS”) and the Centers for Medicare & Medicaid Services (“CMS”) announced that they have revised the calculations used to determine Medicare fee-for-service (“FFS”) error rates in 2009. The agencies state that these improvements will reflect a more complete accounting of Medicare's improper payments that will allow CMS to better target such improper payments. These changes have been made as part of the Obama Administration's commitment to improving the Medicare and Medicaid programs by reducing the amount of fraud, waste and abuse that occurs in these programs. Although improper payment rates are not a direct indicator of Medicare fraud, these error rates allow CMS and HHS to develop new ways to prevent such payment errors in the future. HHS Secretary Kathleen Sebelius states that CMS and HHS are striving to take more aggressive steps to reduce error rates and to identify abusive or potentially fraudulent actions before they become larger problems. To read the CMS press release, click here. India Brim

Ninth Circuit Permits Qui Tam Defendant to Bring Indemnity Claims Against Third Party
On November 18, 2009, the Ninth Circuit issued its opinion in Cell Therapeutics, Inc. v. Lash Group, Inc., holding that the False Claims Act (“FCA”) does not preclude Cell Therapeutics, Inc. (“CTI”), a qui tam defendant, from bringing claims against Lash Group, Inc., its Medicare reimbursement consultant. The qui tam lawsuit against CTI alleged that the company promoted the off-label use of its cancer drug, Trisonex. CTI argued that it relied on the faulty advice of its Medicare reimbursement consultant. CTI ultimately settled with the relator and the government in the qui tam suit and brought a series of claims against the reimbursement consultant. The district court dismissed CTI’s claims, concluding that qui tam defendants may not seek indemnification from co-participants in a scheme to defraud the government and CTI’s damages were “incidental to and dependent upon its payments…to settle the FCA claims in the underlying qui tam action.”

On appeal, the Ninth Circuit reversed the district court’s decision. The Ninth Circuit held that some of CTI’s claims were independent of CTI’s liability under the FCA. The Ninth Circuit noted that the prohibitions on bringing indemnification claims for FCA liability “do not extend to damages for claims other than those for fraud under the FCA.” As a result, the Court held that CTI’s claims against the reimbursement consultant for unjust enrichment and negligent misrepresentation were not barred by the FCA. In addition, the Court held that CTI’s claims for indemnification, which were not independent of its FCA liability, could proceed notwithstanding CTI’s settlement with the relator and the government in the underlying qui tam suit. The Court explained that such indemnification claims are only precluded if the qui tam defendant is found liable under the FCA. In this case, CTI’s settlement agreement explicitly stated that CTI did not admit liability under the FCA. The Court noted that “a settlement agreement under the FCA should not, absent specific and clearly identified intent to the contrary, be viewed as an admission of liability that precludes non-FCA claims against third parties.” To read the opinion, click here. Peter Leininger