Category: Health Care Law

Over a Decade in the Making: CMS Releases Long-Awaited Medicaid Managed Care Rule

On May 27, 2015, the Centers for Medicare and Medicaid Services (“CMS”) published a 653-page proposed rule affecting the thirty-nine states (plus the District of Columbia) that use managed care organizations (“MCOs”) to administer their Medicaid benefits. This represents the first major overhaul of the Medicaid managed care system since the rules were established in 2002, now covering approximately seventy percent of all Medicaid enrollees.

Centers for Medicare & Medicaid Services, CMSPublic comments are due July 27, 2015, which gives health plans, providers, consumer groups, and even state Medicaid directors a narrow window to identify potential areas of concern and to propose solutions for formal CMS consideration. While some issues will align important stakeholder groups, others are likely to remain contested during the comment period and up to publication of the final rule.

As a backdrop leading to the publication of the proposed rules, the managed care landscape has become much more complex and variable among the states that have adopted this approach in their Medicaid programs. Because of this, CMS has been contemplating ways to ensure more consistent rules that promote adequate access to health services while also creating more synergy between Medicaid, Medicare, and even the commercial sector via delivery system reforms that improve quality and lower costs.

The proposed rule also addresses some areas of perceived inequity in the Medicaid program that range from behavioral and substance-abuse treatment to long-term care and insurance reforms akin to those in the Affordable Care Act (“ACA”), which was mostly targeted at commercial health plans.

But CMS’s ambitions in proposing the rules need to be tempered by the reality that state Medicaid programs are administered by the individual states: through federal regulations CMS can establish minimal standards for the state Medicaid managed care systems but states may enact state regulations or impose managed care contract terms that go farther than the federal requirements. The managed care community must view federal regulations as a starting, not an end, point.

CMS categorizes the massive Medicaid managed care proposed rule into several issue areas in its Fact Sheet:

Beneficiary Experience

  • Requires states to improve access to care through regular assessment and certification of a health plan’s provider network and time/distance standards to providers including behavioral health, pediatric dental, and pharmacy.

  • Updates communication rules directed towards Medicaid/CHIP beneficiaries to include electronic methods, non-English language options, and additional information in provider/drug formulary directories,

  • Sets standards for care coordination, assessments and treatment plans that include care transition services, initial health risk assessments within 90 days of enrollment, and regularly updated assessments and treatment plans for beneficiaries with special health care needs or long-term services and supports.

  • Creates a new enrollment selection period of 14 days to allow beneficiaries to research and select managed care plan options.

State Delivery System Reform

  • Encourages participation in Medicare-led alternative payment models and initiatives.

  • Establishes minimum reimbursement standards or fee schedules for providers that deliver a particular covered service.

  • Clarifies “short-term stay” rule that managed care plans are able to receive capitated payments for beneficiaries who are admitted to an institution for mental disease (“IMD”) for no more than 15 days so long as the facility is an inpatient hospital or sub-acute short-term crises residential service.

Quality Improvement

  • Creates a public notice and comment period to determine a core set of performance measures and improvement projects for states related to managed care plans.

  • Establishes a Medicaid managed care quality rating system in each state that would report performance information on all health plans, akin to the Medicare Advantage (“MA”) and marketplace ratings.

Program and Fiscal Integrity

  • Requires certain types of data to be used for rate setting purposes and the level of documentation and detail about the development of the capitation rates such as trend factors, adjustments and the development of non-benefit costs.

  • Establishes a medical loss ratio (“MLR”) for both Medicaid and CHIP plans using standards similar to Medicare Advantage and the commercial market.

  • Adds several components to fraud prevention efforts by implementing procedures for internal monitoring, auditing, and prompt referral of potential compliance issues, etc.

Managed Long-Term Services and Supports (“MLTSS”) Programs

  • Affirms recent updates such as Olmstead, stakeholder engagement requirements, and provider credentialing in the development and implementation of MLTSS programs.

  • Requires MLTSS-specific elements to be included in a state’s quality improvement strategy and reporting systems to protect MLTSS enrollees.

Children’s Health Insurance Program (“CHIP”)

  • CMS proposes to align the CHIP managed care regulations, where appropriate.

Alignment with Medicare Advantage and Private Coverage Plans

  • Importantly, CMS proposed where appropriate and possible, to align the Medicaid managed care regulations with those governing MA and private health insurance plans including the MLR, appeals and grievances, and marketing rules.

Finally, other highlights from the proposed rule include a requirement that Medicaid managed care entities offering outpatient drug coverage must now collect the necessary information for the states to include those managed care drugs in rebate invoices to drug manufacturers pursuant to the Medicaid Drug Rebate Program (“MDRP”) as well as modifications to the rules governing plan appeals and grievance procedures to increase uniformity with the procedures that apply to MA and commercial plans.

Discussion

Alignment with Medicare Advantage and Private Coverage Plans

CMS proposes numerous changes aimed at aligning Medicaid managed care with other health care programs… click here to continue reading…

ARTICLE BY Susan W. Berson, Andrew J. Shin, Ellyn L. Sternfield, Pamela Kramer, Lauren M. Moldawer & Bridgette A. Wiley of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Time to Exclude the IMD Exclusion – Institutions for Mental Disease

Some rules are borne out of the best of intentions, and the Institutions for Mental Disease Exclusion (“IMD exclusion”) bears the hallmarks of such a beginning. The IMD exclusion bars federal funding for care of patients between the ages of 21 and 65 who receive inpatient treatment in an IMD, a hospital, nursing facility or other institution with more than 16 beds that primarily treats those with mental illness. This provision came into being in 1965, primarily as a way to prevent dubious institutions from stocking up on mentally ill patients for the purposes of collecting federal funds en masse, but also to put the onus on states, rather than the federal government, to care for the mentally ill.

IMD Exclusion, Institutions for Mental Disease

In modern times, however, the IMD exclusion is arguably one of the larger impediments to expansion of mental and behavioral health treatment, particularly in the area of substance abuse disorders, where a brewing epidemic of opioid addiction demands a proportional institutional response. Not only does this exclusion apply to standard mental health institutions, a Center for Medicare & Medicaid Services (“CMS”) interpretation applies the exclusion to other facilities such as substance abuse treatment center. The irony is that states which have accepted the Medicaid expansion to cover a wide range of newly-eligible patients for mental and behavioral health disorders such as substance abuse find themselves stymied by a lack of appropriate facilities in which to treat them. The Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) provides that covered individuals receive the same coverage for mental and behavioral health as for other medical and surgical benefits, yet medical and surgical facilities are not limited to a maximum of 16 beds, rendering much of the benefit of this law illusory.

The Medicaid expansion provides mental and behavioral health providers with a steady new flow of patients in dire need of assistance – so long as that inpatient treatment is provided in increments of 16. Substance abuse victims now have the coverage to receive the services they desperately need, and behavioral health providers now have more tools than ever to combat the problem. The obstacle in care comes in the limitation of the facilities.

Even an exception for behavioral health provider facilities for substance abuse treatment would provide significant relief, and CMS went so far as to allow eight states to include IMD benefits under Medicaid managed care programs for a period of ten years. Although this exception hasn’t been allowed recently, it at least provides a ray of hope that CMS can adapt regulatory policies to reflect a growing problem, understanding that it may be standing in the way of progress with draconian measures.

True parity can only be attained when mental and behavioral health facilities are free from the limitations imposed by the IMD exclusion. Until then, rather than protecting patients from unscrupulous institutions, this policy will only continue to hurt those who need real care.

ARTICLE BY Molly Nicol Lewis of McBrayer, McGinnis, Leslie and Kirkland, PLLC

© 2015 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.

Shaking Down the Thunder From the Sky: Notre Dame’s Challenge to the Contraception Mandate

For the second time in as many years, the Seventh Circuit has declined to grant Notre Dame’s request for an injunction exempting the university from the contraception requirements of the Affordable Care Act. 

As was true back in 2014, the court remained skeptical of the link between Notre Dame’s actions (filling out a form noting its religious objections to contraceptives and sending the form to its insurance administrator) and the resulting actions (the administrator then providing the contraceptives directly to the insured). Consequently, the court ruled that Notre Dame did not meet its burden of showing that its religious beliefs were substantially burdened by the contraceptive mandate. Judge Posner wrote the majority opinion, which Judge Hamilton joined while writing a separate concurrence.

The case was back before the Seventh Circuit following the Supreme Court’s vacating of the Seventh Circuit’s 2014 opinion with directions to review the case in light of the Court’s Hobby Lobby opinion. (Odd, then, that the Seventh Circuit’s decision does not begin discussing Hobby Lobby until page 18 and discusses the case for little more than a page in a 25-page opinion.) The court concluded in short order that Hobby Lobby had virtually no application in Notre Dame’s case: In Hobby Lobby, a private sector employer wanted to receive the accommodation afforded to religious organizations, whereas Notre Dame argued that the accommodation itself was insufficient to protect its religious beliefs.

As in the original opinion, Judge Flaum strongly dissented. He once again argued that the majority was inappropriately judging the sincerity of Notre Dame’s beliefs, something he believes was foreclosed by the Hobby Lobby decision.

Perhaps most noteworthy about this opinion is that—nearly 18 months after Notre Dame filed suit—the decision simply affirmed the denial of a preliminary injunction. As both Judge Posner’s majority opinion and Judge Hamilton’s concurrence note, the record is still barren of the kinds of facts that a trial will bring out—and that could allow Notre Dame to introduce more evidence of the religious burden the contraceptive provisions of the Affordable Care Act place on the school. Yet it seems likely that before that trial occurs, Notre Dame will again petition the Supreme Court to review the Seventh Circuit’s opinion. And given the Court’s willingness to weigh in on these issues, the thunderstorm shows no signs of letting up.

ARTICLE BY Ryan N. Parsons of Foley & Lardner LLP
© 2015 Foley & Lardner LLP

Shaking Down the Thunder From the Sky: Notre Dame's Challenge to the Contraception Mandate

For the second time in as many years, the Seventh Circuit has declined to grant Notre Dame’s request for an injunction exempting the university from the contraception requirements of the Affordable Care Act. 

As was true back in 2014, the court remained skeptical of the link between Notre Dame’s actions (filling out a form noting its religious objections to contraceptives and sending the form to its insurance administrator) and the resulting actions (the administrator then providing the contraceptives directly to the insured). Consequently, the court ruled that Notre Dame did not meet its burden of showing that its religious beliefs were substantially burdened by the contraceptive mandate. Judge Posner wrote the majority opinion, which Judge Hamilton joined while writing a separate concurrence.

The case was back before the Seventh Circuit following the Supreme Court’s vacating of the Seventh Circuit’s 2014 opinion with directions to review the case in light of the Court’s Hobby Lobby opinion. (Odd, then, that the Seventh Circuit’s decision does not begin discussing Hobby Lobby until page 18 and discusses the case for little more than a page in a 25-page opinion.) The court concluded in short order that Hobby Lobby had virtually no application in Notre Dame’s case: In Hobby Lobby, a private sector employer wanted to receive the accommodation afforded to religious organizations, whereas Notre Dame argued that the accommodation itself was insufficient to protect its religious beliefs.

As in the original opinion, Judge Flaum strongly dissented. He once again argued that the majority was inappropriately judging the sincerity of Notre Dame’s beliefs, something he believes was foreclosed by the Hobby Lobby decision.

Perhaps most noteworthy about this opinion is that—nearly 18 months after Notre Dame filed suit—the decision simply affirmed the denial of a preliminary injunction. As both Judge Posner’s majority opinion and Judge Hamilton’s concurrence note, the record is still barren of the kinds of facts that a trial will bring out—and that could allow Notre Dame to introduce more evidence of the religious burden the contraceptive provisions of the Affordable Care Act place on the school. Yet it seems likely that before that trial occurs, Notre Dame will again petition the Supreme Court to review the Seventh Circuit’s opinion. And given the Court’s willingness to weigh in on these issues, the thunderstorm shows no signs of letting up.

ARTICLE BY Ryan N. Parsons of Foley & Lardner LLP
© 2015 Foley & Lardner LLP

DaVita Agree to $495 Million Settlement in Alleged Medicare Fraud Lawsuit Filed by Qui Tam Whistleblowers

On Monday, May 4, 2015, DaVita Kidney Care, a division of DaVita Healthcare Partners, Inc. (DaVita), and one of the leading dialysis services providers in the United States, agreed to pay the U.S. Government $450 million for allegedly violating the False Claims Act (FCA) when it continuously discarded good medicine and then billed Medicare and Medicaid for it. DaVita also agreed to pay $45 million for legal fees.

According to the lawsuit filed in 2011 by two former employees of DaVita, between 2003 and 2010, when DaVita administered iron and vitamin supplements such as Zemplar, Vitamin D, and Venofer, vials containing more than what the patients needed were used and the rest was thrown away. For example, if a patient only needed 25 milligrams of medicine, DaVita allegedly used a 100 milligram vial, administered only 25 mg, and tossed the rest in the trash. Although before 2001, this practice was condoned by the National Centers for Disease Control and Prevention (CDC) in order to prevent infectious outbreaks caused by the re-entry of the same vial of medicine, the CDC subsequently changed it policies to outlaw this practice.

This FCA lawsuit alleging that DaVita misused and mishandled of medicine, and overbilled Medicare and Medicaid is not the first such allegation against DaVita, which is not a stranger to FCA lawsuits. In fact, DaVita previously settled two other lawsuits in which it allegedly violated the FCA. In October 2014, DaVita agreed to pay the U.S. Government $350 million for allegedly persuading physicians or physician groups to refer their dialysis patients to DaVita by offering kickbacks for each patient referred. And in 2012, DaVita agreed to pay $55 million to the federal government for overbilling the government for Epogen, an anemia drug. These lawsuits were filed by former employees who decided to come forward as whistleblowers and to help to uncover what they considered to be illegal practices by DaVita. Under the FCA, such whistleblowers can bring what is known as a “qui tam” lawsuit, which is brought by a private citizen to recover money obtained by fraud on the government. As an incentive to bring qui tam lawsuits, the FCA provides that qui whistleblowers receive between 15 and 30 percent of the amount of funds recovered for the government.

Provisions of the FCA make it unlawful for a person or company to defraud governmental programs, such as Medicare or Medicaid.

Posted by the Whistleblower Practice Group at Tycko & Zavareei LLP

© 2015 by Tycko & Zavareei LLP

New York Implements Medical Marijuana Rules

The New York State Department of Health has issued regulations implementing the State’s medical marijuana law, enacted last July.

Published April 15 in the State Register, the regulations allow the use of marijuana for patients with cancer, AIDS, Lou Gehrig’s disease, Parkinson’s disease, multiple sclerosis, certain spinal cord injuries, epilepsy, inflammatory bowel disease, neuropathies, and Huntington’s Disease, and symptoms including severe or chronic pain, surgeries, severe nausea, persistent muscle spasms and wasting syndrome, who comply with the rules. The Commissioner of Health may add other conditions, symptoms or complications, under the regulations.

In accordance with the law, those patients will be able to use only non-smokable forms or marijuana, to be ingested or vaporized. “Smoking is not an approved route of administration.” However, even vaporization is banned in public places, and in no case may approved medical marijuana be consumed through vaporization in locations where smoking would be prohibited by the State’s Public Health Law, including places of employment. Products authorized by the regulations are restricted to liquids, oils or capsules. Unless the Commissioner approves, approved marijuana products may not be incorporated into edible food products by a registered organization.

Only five businesses or non-profits in the State may be licensed to grow, process of distribute approved marijuana. Each such enterprise may have four dispensing facilities. The Commissioner can consider permitting more dispensing facilities.

While implementation will not be immediate, employers should prepare for responding to employees taking marijuana under the law and regulations.

Authored by:  Roger S. Kaplan of Jackson Lewis P.C.

FDA Regulation of mHealth Updates

Covington & Burling LLP

At the Food Drug and Law Institute’s annual conference on April 21, 2015, Bakul Patel, Associate Director for Digital Health, Office of Center Director, Center for Devices and Radiological Health (CDRH), held a discussion of “FDA Regulation of Mobile Health/Medical Applications.”  There have already been several important developments in FDA regulation of mHealth products this year.  Patel stated that FDA recognizes the importance of digital health, and its potential to drive be

ARTICLE BY

Cassie Scherer
Covington & Burling LLP
Covington E-Health

tter health outcomes and promote patient engagement.  Patel discussed two recently released draft guidances that impact FDA regulation of mHealth, the draft General Wellness Guidance and the draft Accessories Guidance, and highlighted that FDA continues to work promote innovation while at the same time protecting patient safety.  The public comment period for these guidances ended on April 20th, and Patel noted that CDRH did not receive many comments.  Finally, Patel emphasized that industry can continue to reach out to FDA with questions about mobile health at mobilemedicalapps@fda.hhs.gov or digital health at digitalhealth@fda.hhs.gov.

The discussion draft of the 21st Century Cures Act includes sections that would exclude “health software” from regulation as a medical device, and would require FDA to promulgate regulations to establish standards and procedures for regulating “medical software.”  New 21st Century Cures language may be released by the end of this month.  We will be watching closely to see if there are any changes to the software language.

Massachusetts Announces Significant Changes to the Medical Marijuana Dispensary Program

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

At today’s Massachusetts Public Health Council meeting, Department of Public Health Commissioner Monica Bharel, MD, MPH, announced sweeping changes to the Medical Marijuana Dispensary Program in Massachusetts. The changes follow what Dr. Bharel described as a “top to bottom” review of the application process that has been plagued with difficulties.  The revisions shift the focus of the application process from its current form, which has followed a competitive procurement model, to a licensure focus similar to other health care facilities.   The revised application process will launch on May 15, 2015, and will feature a rolling basis application process. The application review will include a sharp focus on security issues and the background of those involved in the proposed dispensary.  Dr. Bharel noted that this shift will result in a more efficient, straightforward application process and that DPH will strive to make the process more straightforward and more transparent. No regulatory changes are needed, as the changes affect DPH’s process only.

Starting today, DPH will post and update the status of dispensaries in the approval and development “pipeline,” and the number of registered and certified patients on its website.  Those applicants with pending applications will not need to reapply.  DPH will clarify the process to resubmit applications that were previously rejected.

Public Health Council member Harold Cox (Associate Dean of Public Health Practice, Boston University School of Public Health) addressed ongoing legalization efforts – marijuana is legal in four states and the District of Columbia – and suggested that DPH should be proactive in understanding what is happening in those states and how potential legalization would affect Massachusetts’ program.  Public Health Council member Dr. Michele David expressed concern regarding the packaging of marijuana edibles, particularly candy, that may look like ordinary candy to children.

The DPH press release is available here.

ARTICLE BY

M. Daria Niewenhous
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Pay for Delay – Big Pharma’s Dirty Secret

Mahany Law Firm

For most Americans, generic drugs are a godsend. Prescription drug prices have become so high that many folks simply can’t afford to purchase needed medications.  It’s not uncommon for some cancer and hepatitis medications to cost $1000 or more per dose. Generics, however, can cut prescription bills by 90% or more.

As much as consumers love generic drugs, big pharma hates them. Once a branded drug goes “off patent,” sales usually plummet. Most health plans, insurance companies and Medicare require physicians to dispense less costly generics.

The loss of profits can be so great when a drug goes generic that many pharmaceutical companies are now engaging in “pay for delay” tactics.

What is “pay for delay”? It is the payment by a pharmaceutical company to would be competitors to not copy a certain medication.  The results are more profits for big pharma and therefore an extension of their monopoly on pricing. The Federal Trade Commission says pay for delay costs taxpayers, insurance companies and consumers almost $4 billion per year.

Is this legal? Probably not.

Congress wanted to encourage generic manufacturers to quickly enter the marketplace and lower drug costs. In 1984, Congress passed the Hatch Waxman Act. That law encourages generic manufacturers to challenge pharmaceutical companies.  The first company that seeks to make a generic of a branded drug is given an expedited review by the FDA.

Unfortunately, what started out as a law with good intentions soon turned horribly bad. Big pharma began suing the generic manufacturers for patent infringement. The pharmaceutical companies would then settle the suits and pay the generic company not to compete for a period of time, often 5 years.

A few court victories later, the pay for delay industry was in full swing.

Thankfully the Federal Trade Commission has stepped in and appears to be gaining traction. The government says that many of these pay for delay schemes violate federal anti-trust laws. In 2013, the United States Supreme Court ruled that pay for delay does automatically violate antitrust laws but still must be carefully scrutinized. (FTC v. Actavis). Georgetown University Professor Lawrence Gostin, writing for the Journal of the American Medical Association, hailed the decision and says it will save consumers and taxpayers billions of dollars.

Some may be wondering why the generic manufacturers go along with these payments.  Obviously big pharma likes these settlements because they can extend their monopolies for years. Generic manufacturers find these settlements economically worthwhile too. Because the profits made on branded drugs are so large, big pharma can pay millions to the generic manufacturers and still make a profit.  The smaller generic companies make just as much profit from the settlements and don’t have to produce a single pill.

The Motley Fool investigated one branded drug, Provigil, manufactured by Cephalon. The drug was due to come off patent in 2005 but Cephalon paid four generic companies $200 million to delay manufacturer of generic equivalents until 2012. The cost of a three-month supply of Provigil? $3600. The cost after generics were finally introduced? About $5 per month according to fool.com.

With the courts and regulators finally looking hard at these arrangements, we hope more whistleblowers come forward. Under the federal False Claims Act, whistleblowers with inside information about fraud involving a government program can receive up to 30% of whatever is recovered from drug companies. To qualify for an award, whistleblowers need inside, “original source” information about the fraud.

The FTC’s Bureau of Competition concluded that of the 145 final patent dispute settlements in 2013, 29 represent potential pay for delay schemes.  Recently the agency launched a hotline to help people report illegal pay for delay schemes.

Whistleblowers using the hotline should know, however, that calling the hotline does not make them eligible for a whistleblower award. To claim an award, one must first file a lawsuit in federal court.

As a law firm that has helped clients receive over $100,000,000.00 in whistleblower award payments, we want to see whistleblowers properly awarded for coming forward and reporting illegal behavior.

ARTICLE BY

Brian Mahany
Mahany Law

Moving to the Cloud: Some Key Considerations for Healthcare Entities

Covington & Burling LLP

Healthcare providers, health plans, and other entities are increasingly utilizing cloud services to collect, aggregate, store and process data.  A recent report by IDC Health Insights suggests that 80 percent of healthcare data is expected to pass through the cloud by 2020.  As a substantial amount of healthcare data comprises “personal information” or “protected health information” (PHI), federal and state privacy and security laws, including the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act, raise significant questions for healthcare providers and health plans utilizing the cloud in connection with such data.  Such questions include whether HIPAA requirements extend to cloud providers, how and if entities storing health data on the cloud will be notified in case of a breach, and whether storage of data overseas by cloud providers triggers any additional obligations or concerns.

Given the complex legal issues at play, any contract between a healthcare provider or health plan and a cloud service provider that involves using the cloud in connection with PHI should therefore address the regulatory restrictions and requirements applicable to PHI.  By way of example, recent guidance from the HHS Office for Civil Rights suggests that health care providers must likely have a business associate agreement in place with their cloud service provider.  Moreover, although cloud providers might not regularly access the data they store and may never “use” or “disclose” that data as those terms are defined under HIPAA, cloud providers probably need to adhere to HIPAA breach notification requirements.  There have also been indications of late that HHS may consider it advisable, if not required, that entities subject to the HIPAA Security Rule encrypt PHI data even when that data is at rest and not being transmitted electronically.  The recent data breaches involving health plans Anthem and Premera highlight the vulnerability of health care data and may lead to additional pressure for providers to implement additional encryption measures.

Even if HIPAA rules do not apply to cloud service provider contracts, healthcare providers and health plans storing data on the cloud should be aware that many states now have privacy and breach notification laws which could come into play.

Finally, in addition to addressing the regulatory requirements and data privacy and security, a healthcare provider or health plan should negotiate appropriate service level terms with the cloud provider that address such issues as the performance requirements for the cloud network and the process and procedures for addressing problems with the cloud network.  The healthcare provider or health plan should also include appropriate back-up and disaster recovery provisions in the contract with the cloud provider, as well as appropriate remedies in the event it suffers losses as a result of the contract.

ARTICLE BY

Paige M. Jennings
Anna Kraus
Ramy Ramadan
Lee J. Tiedrich
Covington & Burling LLP
Covington E-Health