The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week's article.
The healthcare industry in the U.S. is highly regulated at the state and federal levels, and the balance between the two depends on what part of the industry you’re in. To illustrate—
- Health insurers are overseen by state insurance regulators, but the Affordable Care Act added a new layer of federal oversight. The current tussle between HHS and the National Association of Insurance Commissioners over what constitutes an accessible network of providers is a case in point.
- The 56,000 retail pharmacies are overseen by states, but drug manufacturers and distributors are overseen by the FDA and FTC, and the 3000 compounding pharmacies find themselves regulated by both.
- Physicians are primarily self-regulated by their state licensing and disciplinary boards, but federal rules that require transparency (Physician Sunshine Act) about their performance and prescribe limitations in their business dealings (Stark rules) take precedent.
- The regulatory framework for post-acute providers is equally complex: each sub-sector has its own combination of state and federal (i.e. assisted living, hospice, et. al.) and all follow Medicare guidance for quality and safety, in addition to provisions added by state authorities in their Medicaid programs.
- Hospitals largely operate under state oversight through Certificate of Need laws (“Health Planning Resources Development Act” of 1974 is in place in 36 states) and others but Medicare (CMS) is the single biggest force in day to day regulatory compliance and the Affordable Care Act added a significant set of new federal mandates.
- And in emerging sectors like digital and retail health, distance medicine, self-diagnostics and smart devices, over-the-counter therapeutics and probiotics, et. al., the regulatory framework is equally complex and dynamic. For example, recently the FDA added regulations for smart devices that capture and transmit vitals to caregivers and consumers themselves and advertising claims by “healthy foods” are getting increased attention from the FTC.
Not surprisingly, healthcare issues show up routinely on state ballots: assisted suicide, restrictions on abortion and contraceptive services, and others are prominent. In Colorado, for instance, they’ll vote on becoming a single payer system in 2016. So healthcare oversight at the state level is significant.
But the federal role in policing healthcare is increasing and is arguably center stage in health reform. It’s understandable: the federal government spends more than $1.1 trillion on healthcare annually, or 28% of the total federal spending.1Opponents of the Affordable Care Act used “government run healthcare” to characterize the role of the federal government in its reforms while its proponents called attention to its provisions giving state’s wide latitude in its implementation. Nonetheless, it’s clear the federal government plays a huge role, and it’s growing.
2015 was a case in point: King v. Burwell, the permanent fix to the Sustainable Growth Rate (SGR) pay formula for physicians, clarification of CMS value-based payment program, the first mandatory bundled payment program (CJR), Medicaid waivers and the budget deal reached two weeks ago that delayed the Cadillac, Medicare Device, and Insurance Premium taxes are just a few of the year’s headliners.
So what’s ahead for 2016? An even busier agenda for federal regulation of healthcare – here’s a preview:
1-Mega-Merger Decisions: The Department of Justice and FTC should announce the outcome of the proposed insurance mergers (Anthem-Cigna, Aetna-Humana) along with the Walgreens-Rite Aid and Pfizer-Allergan deals in the middle or second half of 2016.2,3 And the FTC will continue its scrutiny of hospital mergers, having challenged three high profile deals in recent months: Penn State Hershey Medical Center and Pinnacle Health System, Cabell Huntington (W.Va.) Hospital and St. Mary’s Medical Center, and Advocate Health Care and Northshore University Health System.4
2-Medicaid Expansion and Waivers: 31 states and DC have expanded Medicaid to date. CMS has shown flexibility in approving alternative expansion waivers, including most recently Michigan’s that included a 7% beneficiary income contribution feature. Arizona is awaiting CMS’ response on its waiver petition and in five states (Alabama, Louisiana, South Dakota, Virginia, and Wyoming), legislative support is building.5 Beyond Medicaid, other waivers are on the federal review docket:
- Section 1115 and 1915 Waivers – California and CMS are finalizing terms on an extension of the state’s Bridge to Reform waiver that expires in 2016, and Texas awaits approval on its pending 1115 waiver – both include Delivery System Reform Incentive Payment (DSRIP) programs, $15.3 billion in Texas and $6.7 billion in California. And Iowa’s request to transition to Medicaid Managed Care has been pushed back by CMS with a potential March 1 start.6
- Section 1332 State Innovation Waivers – Seven states (Arkansas, California, Hawaii, Massachusetts, Minnesota, New Mexico and Rhode Island) have expressed an interest in 1332 Waivers, but the December guidance HHS released is viewed as restrictive. So few states are likely to apply and only those like Hawaii that would like to make small changes around the edges are likely to apply.7
3-Drug Pricing: 1% of drug prescriptions consume 31% of total drug expenditures in the U.S. and overall spending on drugs is expected to increase more than 10% annually again this year.8 Escalating drug costs will be a hotspot for federal attention. Consider:
- CMS: CMS hosted a public forum in November to find solutions on improving patient access to affordable prescription drugs and one month later published Medicare Part B and D data (total spend, spend per beneficiary, average beneficiary cost share) on 80 prescription drugs representing 33% of Part D and 71% of Part D spend.9
- Congress: The Senate Finance Committee released its 18-month investigation into the pricing strategies of Gilead’s Sovaldi and Harvoni and the Senate Special Committee on Aging held a hearing on drug pricing by four pharmaceutical companies: Valeant Pharmaceuticals, Turing Pharmaceuticals, Retrophin Inc, and Rodelis Therapeutics. 10
- Candidates: Secretary Clinton is proposing a $250/month cap on out-of-pocket drug spending, importation, prohibition of industry pay for delay tactics to keep generics off the market. Senator Sanders1 supports importation and prohibition of pay for delay. And GOP candidate platforms favor reforms of the FDA2 to bring drugs to market faster. 11
4-Court Challenges: The courts will continue to be a focus for challenges to the Affordable Care Act and issue opinions in other pertinent healthcare matters:
The Supreme Court is slated to hear six cases with healthcare implications, notably the religious non-profits objection to contraceptive coverage opt-out accommodation in Zubik v Burwell and the constitutionality of Texas restrictions on abortion providers in Whole Woman’s Health v Cole. 12
In Federal Courts, there are several False Claims Act cases and Teladoc’s suit against the Texas Medical Board for requiring an in-person first visit to a clinician prior to a virtual visit authorization.13
Attention to the False Claims Act is certain to be a key focus in 2016 Court proceedings. And House Republicans are suing the Administration for expending funds for cost-sharing for eligible Exchange Plans, alleging the funds were not appropriated by Congress. The case is moving forward in Federal Court.14
5-Pending Guidance and Final Rules: HHS has 153 new regulations in development, including several noteworthy rules (proposed and final) to be released in 2016:
- Medicaid Managed Care – In April, CMS will release a final a rule modernizing regulation of Medicaid managed care plans, the first update to the regs since 2002. 15
- 340B Drug Discount Program: HHS is expected to issue guidance on three changes: 1- tightened eligibility; 2- a civil fine on drug manufacturers that charge above a ceiling price for 340B drugs; and 3- establishment of a dispute resolution process for entities that are overcharged for 340B drugs.16
- Tobacco & E-Cigarettes – Four rules addressing tobacco related issues are pending including if electronic cigarettes should be regulated as a drugs or device, if sales to minors should be banned, and testing requirements. 17
- Generic Drug Labeling3 – In July, FDA will release a final rule on whether generic drug manufacturers may unilaterally update safety labels to accommodate new safety risks.18
- Discharge Planning – In November CMS will release a final rule requiring all hospitals (including long-term care hospitals and inpatient rehabilitation facilities, critical access hospitals, and home health agencies) develop a written discharge plan for all inpatient and many outpatients. 19
- Common Rule (Scientific Research) – In March, HHS and 15 other agencies will release a final rule updating the “Common Rule,” governing the oversight of scientific research involving human subjects. 20
- *Not HHS* – Employer Wellness Programs– The Equal Employment Opportunity Commission will finalize regulations clarifying what incentives may be offered for spousal participation in employer sponsored wellness plans and harmonization of the Americans with Disabilities Act with wellness participation incentives. 21
- Merit-Based Incentive Payment System – In March, CMS will release notice of proposed rulemaking defining the elements and methodology for MIPS, which replaces several Medicare value-based payment programs in 2019, and for incentive payments for alternative payment model participation. 22
- Meaningful Use – The final rule for Meaningful Use in 2015 and Beyond elicited feedback on how to integrate Stage 3 with the Merit-based Incentive Payment System (MIPS), suggesting the Stage 3 changes could be adjusted. 23
- Pain Med Overuse: The CDC is reevaluating its draft opioid guidance (due to industry and internal HHS concerns) and it intends to release a final version in 2016. 24
- Drug Manufacturer User Fees: The FDA will begin negotiations for reauthorizing the Prescription Drug User Fee Act (PDUFA), the Generic Drug User Fee Amendments (GDUFA) and the Biosimilar User Fee Act (BsUFA)25
- Biosimilar naming: The FDA is expected to release its biosimilar naming guidance and continue its review of 7 pending applications. 26
6-Medicare Alternative Payment Program Updates: In 2016, CMS will continue its acceleration of the volume to value transition in its payment programs. It will provide additional updated clinical and financial results for its alternative payment model programs and other guidance on…
- Medicare Shared Savings Program (MSSP) – Hospitals, physicians and other providers are awaiting a final rule on 2017 cost and quality benchmarking methodologies. 27
- Home Health VBP – January 2016 is the start of the Home health value based purchasing program, a mandatory program for providers in 9 states.28
- Next Generation ACO – The first performance year begins January 1 (pending participant announcement) and applications for the second cycle are due in June.29
- Comprehensive Care for Joint Replacement Model – In early 2016 CMS will finalize the list of ICD-10 diagnosis codes to identify applicable cases and on April 1st the mandatory program will begin for providers in 67 regions. 30
7-New overarching laws that impact Healthcare Markets directly: In addition to final guidance on current laws and pending regulations, several new laws will get Congressional attention with significant impact across the healthcare industry. A few…
- Trans-Pacific Partnership – The Administration is pushing passage but it faces challenges in Congress. Senator Hatch and others are concerned with its reduced exclusivity of biologics from 12 years to as few as 5 citing its potential to reduce drug manufacturer investments in new biologics. 31
- 21st Century Cures – This law, passed by the House last July, provides funding for the NIH through 2018 and authorizes the FDA to focus efforts around “precision medicine.” The Senate released its version of the bill and passage is expected this year. 32
- Corporate Inversions – The Senate Finance Committee and House Ways and Means are expected to address corporate inversions that have allowed US drug manufacturers to avoid US taxes. 33
What’s all this mean?
- It means the federal government is playing a larger role in oversight in every sector of U.S. healthcare.
- It means healthcare will get significant media attention in 2016 as court rulings and guidance are released.
- It means navigating regulatory compliance and managing an organization’s risk will be tougher.
- It means candidates in Campaign 2016 will be addressing health reforms in their platforms.
- It means management teams across the spectrum of healthcare must be attentive to regulatory compliance risk to avoid financial penalties and protect reputations.
2016 will be busy in regulatory compliance activities for every organization in healthcare. Boards of directors must be educated about the issues and penalties for non-compliance for the organizations they serve. Management teams must be prepared to demonstrate compliance to regulators. Legislators and policymakers must be diligent and circumspect in understanding the intended and unintended consequences of their actions. And the public will be watching.
Healthcare is not government run, but it is, indeed, government regulated. 2016 promises to bring more guidance, more laws and more risk to every sector in U.S. healthcare!
P.S. Special Thank You to Center Associate Directors John Colleran and Marina Karp for helping with this Special Edition. Happy Holidays all!!
1-Federal Budget: https://www.whitehouse.gov/omb/budget/
2-DOJ/FTC Deals: http://healthaffairs.org/blog/2015/12/01/how-might-proposed-payer-mergers-impact-state-insurance-markets/
5-Medicaid Expansion: http://kff.org/health-reform/slide/current-status-of-the-medicaid-expansion-decision/
6-1115/1915 Waivers: ibid
7-1332 Waivers: ibid
10-Senate Finance: http://www.aging.senate.gov/press-releases/collins-mccaskill-open-senate-investigation-into-rx-drug-pricing-announce-intention-to-hold-hearings
11-Campaigns: https://berniesanders.com/issues/fighting-to-lower-prescription-drug-prices/; http://www.politico.com/story/2015/11/drug-costs-gop-candidates-prescriptions-216292; https://www.hillaryclinton.com/briefing/factsheets/2015/09/21/hillary-clinton-plan-for-lowering-prescription-drug-costs/
12-SCOTUS: http://www.scotusblog.com/case-files/cases/montanile-v-board-of-trustees-of-the-national-elevator-industry-health-benefit-plan/;http://www.scotusblog.com/case-files/cases/zubik-v-burwell/ and http://kff.org/womens-health-policy/issue-brief/round-2-on-the-legal-challenges-to-contraceptive-coverage-are-nonprofits-substantially-burdened-by-the-accommodation/
13-Teledoc Legal Challenge: http://www.modernhealthcare.com/article/20151214/NEWS/151219924
14-House Republicans Challenge to ACA: http://www.modernhealthcare.com/article/20151020/NEWS/151029995
15-Medicaid Managed Care: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201510&RIN=0938-AS25
16-340B Drug Discounts: http://drugdiscountmonitor.com/
18-Generic Labelling: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201510&RIN=0910-AG94
19-Hospital Discharge Planning: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201510&RIN=0938-AS59
20-Common Rule: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201510&RIN=2528-AA10
21-Employer Wellness: http://www.eeoc.gov/laws/regulations
22-Merit Incentive Program: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201510&RIN=0938-AS69
23-Meaningful Use: https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/index.html?redirect=/ehrincentiveprograms
25-Drug User Fee: http://www.bna.com/rx-user-fee-n57982065143/
26-Biosimilar Naming: http://www.raps.org/Regulatory-Focus/News/2015/10/29/23487/Industry-Patient-Groups-Weigh-in-on-FDAs-Biosimilar-Naming-Guidance/
28-Home Health VBP: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-10-29-3.html
29-Next Gen ACO: https://innovation.cms.gov/Files/slides/nextgenaco-odf1slides.pdf
31-Trans Pacific Pact: http://www.nytimes.com/2015/10/06/business/trans-pacific-partnership-trade-deal-is-reached.html?_r=0
32-21st Century Cures Act: https://www.congress.gov/bill/114th-congress/house-bill/6
33-Corporate Inversions: http://www.wsj.com/articles/u-s-unveils-rules-to-make-corporate-inversions-more-difficult-1447970935
The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.
©2015 Navigant Consulting, Inc.