New Federal Payment Rules, Including a Reduction in the Physician Fee Schedule During COVID-19, NY Scales Back COVID-19 Immunity, and Recent Federal Litigation

For more information about this blog post, please contact Khaled J. KleleRyan M. MageeLabinot Alexander BerlajolliBrianna J. Santolli, or Daniel J. Parziale.

CMS Finalizes Four New Payment Rules

CMS finalized new payment rules for inpatient psychiatric facilities (“IPFs”), skilled nursing facilities (“SNFs”), and hospices, for fiscal year (“FY”) 2021. The final rule includes a 2.2 percent IPF payment rate increase, which CMS expects to yield an additional $95 million in payments. As to SNFs, the final rule updates the payment rates by 2.2 percent, or an increase of $750 million, and hospice payment rates by 2.4 percent, or an increase of $540 million.  CMS also finalized the Inpatient Rehabilitation Facility Prospective Payment System, which raises the Medicare payment rate by 2.4 percent, estimating a total payment increase of $260 million. The final rule also permanently eliminates the requirement that physicians conduct a post-admission visit, instead, permitting a non-physician to perform one of three required visits in the second or later weeks of a patient’s care. CMS issued fact sheets on the rules. The rules become effective October 1, 2020.

CMS Releases Proposed Rule on the Physician Fee Schedule

CMS has released its annual proposed changes to the Physician Fee Schedule for 2021, which includes updates to the Merit-based Incentive Payment System and alternative payment model participation options, and changes to the Medicare Shared Savings Program quality performance standard and reporting requirements. In addition, the rule seeks to expand telehealth coverage during the pandemic to include, among other things, psychological and neuropsychological testing. CMS also proposes to continue direct supervision by interactive telecommunication technology through December 2021. 

Importantly, and most controversially, during these hard economic times while physicians are treating COVID-19 patients, the proposed rule values the Physician Fee Schedule conversion factor for 2021 at $32.26, down from $36.09 in 2020. Medicare reimbursement rates for general surgeons will be cut by 7 percent under the proposed rule. The following specialties will also see large impacts to their reimbursement rates:

  • Cardiovascular surgeons: 9 percent
  • Thoracic surgeons: 8 percent
  • Vascular surgeons: 7 percent
  • Neurosurgeons: 7 percent
  • Ophthalmologists: 6 percent

Comments are due October 5, 2020.

Request for Information on Electronic Prescribing of Controlled Substances

CMS issued a request for information (“RFI”) seeking to address the Electronic Prescribing of Controlled Substances ("EPCS") in Medicare Part D. The RFI requests input from stakeholders regarding the implementation of Section 2003 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act ("SUPPORT Act") which generally requires that prescriptions for controlled substances covered under a Medicare Part D prescription drug plan be transmitted by a health care practitioner electronically. The RFI specifically seeks information regarding whether CMS should include exceptions to the EPCS, under what circumstances, and whether CMS should impose penalties for noncompliance.  Comments are due by October 5, 2020.

President Trump Signs Executive Order Expanding Access to Telehealth Services in Rural Communities and CMS Creates a New Model Targeting Rural Communities

President Trump signed an executive order expanding access to telehealth services in rural areas. In addition, the order requires the Department of Health and Human Services (“HHS”) to implement a new payment model tailored to the needs of rural communities. Following the executive order, CMS launched the Community Health Access and Rural Transformation (CHART) Model. The CHART Model ties payment to value, increases choice and lowers costs for patients. CMS issued a fact sheet on the CHART Model explaining the various options that providers have regarding the new model.

New York Amends Law to Remove Hospital and Nursing Home Immunity During COVID-19

On August 3, 2020, New York Governor Andrew Cuomo signed into law a bill (S. 8835/A. 10840) revising the “Emergency or Disaster Treatment Protection Act” which provided civil and criminal immunity to hospitals and nursing homes during the pandemic. The new law clarifies that the immunity does not apply when the lapse in care was not related to COVID-19. The new law still provides hospitals or nursing homes immunity for the care they provide while treating or diagnosing patients with COVID-19, as long as the care was “impacted” by efforts to respond to the pandemic and comply with state directors.

Federal Litigation

Fifth Circuit Reverses $479M Award to the States in Affordable Care Act (“ACA”)  Refund Suit

The U.S. Court of Appeals for the Fifth Circuit recently published a decision overturning a district court ruling that would have required the federal government to return more than $479 million to six states. Texas, Kansas, Louisiana, Indiana, Wisconsin, and Nebraska challenged the lawfulness of an ACA provision requiring approval of a state’s managed-care contracts by the HHS as “actuarially sound” to receive federal reimbursement, and that they must pay an annual Provider Fee. HHS gave authority to an Actuarial Board to make binding rules in 2015. The Fifth Circuit found that HHS’s delegation did not violate the non-delegation doctrine because HHS still retained the final review of the standards. While “rubber-stamping” is impermissible, the Fifth Circuit found that “[t]he contract approval process is closely ‘superintended by HHS in every respect.’” The Fifth Circuit also determined that the Provider Fee was a valid federal tax that does not violate the U.S. Constitution’s spending clause.

The D.C. Circuit Upholds Payment Cut to 340B Hospitals The U.S. Court of Appeals for the D.C. Circuit recently overturned a lower court decision and upheld an HHS policy that will cut Medicare drug payments by nearly 30 percent at 340B hospitals. Under the 340B program, pharmaceutical manufacturers were required to deliver discounts to safety net hospitals in exchange for participation in Medicaid. A hospital will pay typically between 20% and 50% below the average sales price for the covered drugs. HHS sought to address a payment gap between 340B and Medicare Part B, which reimburses providers for drugs administered in a physician's office such as chemotherapy. There was a 25% and 55% gap between the price for a 340B drug and on Medicare Part B, so HHS administered a 28.5% cut in the 2018 hospital payment rule. The agency also included the cuts in the 2019 payment rule. Three hospital groups sued to stop the cut, arguing that HHS exceeded its federal authority to adjust the rates to the program. A lower court agreed with the hospitals and called for the agency to come up with a remedy for the cuts that already went into effect. But HHS argued that when it sets 340B payment amounts, it has the authority to adjust the amounts to ensure they do not reimburse hospitals at higher levels than the actual costs to acquire the drugs. The appellate court has reversed the decision, arguing that HHS's lower drug reimbursement rate "rests on a reasonable interpretation of the Medicare statute.”