Wachler & Associates Health Law Blog

On September 13, 2020, President Trump issued an executive order targeting prescription drug process paid by Medicare under Part B and Part D. The order, titled “Executive Order on Lowering Drug Prices by Putting Americans First,” outlines a new policy that Medicare should not pay more for Part B or Part D prescription drugs than the “most-favored-nation price.”

The order defines the “most-favored-nation price” as the lowest price, after adjusting for volume and differences in GDP, for a drug that the manufacturer sells to an Organization for Economic Co-operation and Development (“OECD”) member country with a comparable GDP per capita. For reference, Norway, Austria, and the Netherlands are all OECD member countries with a GDP per capita comparable to the United States.

The order has no immediate effect on prescription drug prices. Change will only occur once regulations have been promulgated, and this process has not yet begun. However, the order directs the Department of Health and Human Services (“HHS”) to “immediately” implement a test payment model. The test model would apply the new policy to certain high-cost prescription drugs and biological products covered by Part B to determine whether paying the “most-favored-nation price” leads to better clinical outcomes and/or cost-saving. The order also directs HHS to develop and implement a similar test payment model for Part D prescription drugs but does not impose a timeline on HHS to do so.

In March 2020, Congress passed the CARES Act to provide relief for Americans during the 2019 Novel Coronavirus (“COVID-19”) pandemic. Part of the CARES Act included an expansion of the Advanced and Accelerated Payments Programs. The Department of Health and Human Services (“HHS”) stated that this expansion would go on for no more than four months, and that the Centers for Medicare and Medicaid Services (“CMS”) would seek recoupment of these accelerated payments after 120-days from issuance of the accelerated payment has passed.

Despite the timeline given by HHS, many hospitals and other healthcare providers have reported that after the 120-day timeline given by HHS had passed, CMS had not yet begun recoupment. Speculation supports the idea that the 120-day deadline is still intact, but that hospitals still have not seen recoupment because of a 30-day turnaround time. However, CMS released guidance that indicated recoupment would be automatic and begin immediately after the 120-day period, heightening confusion among hospitals.

Hospitals and other healthcare providers have been lobbying Congress to forgive these loans, but Congress has yet to come to a resolution. It is possible that CMS is hesitant to begin recoupment while these negotiations are occurring, because if Congress ultimately decides to offer loan forgiveness after CMS has begun recoupment, then CMS would be responsible for repaying the withheld monies.

On September 2, 2020, the Centers for Medicare & Medicaid Services (CMS) finalized fiscal year (FY) 2021 policies in the Inpatient Prospective Payment System (IPPS) for acute care and long-term care hospitals. The rule safeguards access to critical diagnostic technology and medical treatments through increasing technological innovation in the medical industry, easing industry competition, and updating hospital payment policies. IPPS is the Medicare payment system for acute care hospitals. Payments are issued per inpatient or per patient discharge.  Discharge cases are categorized into diagnosis related groups (DRGs) based on similar diagnoses and services provided during the inpatient process. CMS updates the IPPS regulations each year, which allows inpatient hospitals to address quality improvement efforts and maximize cost effectiveness. The updated IPPS final rule takes effect on October 1, 2020 with two very noteworthy changes.

The first important change to the final rule is the switch to a market-based method for weight data collection for calculating Medicare Severity Diagnosis Related Groups (MS-DRGs). Currently, payments for cases under IPPS are calculated by multiplying a hospital’s standardized cost per case, adjusted by geographic location, by the relative weight for the MS-DRG assigned to the case. This cost-based methodology mainly uses hospital charges based on claims and hospital report data. However, recently CMS has acted to reduce Medicare’s use of hospital charge data, due to the thought that gross rates are an inaccurate representation of market costs. In the final rule, MS-DRG weights will instead be based on median payer specific negotiated charges for Medicare Advantage (MA) organizations, collected through Medicare cost reports. This new methodology will be fully implemented by FY 2024. CMS predicts that since hospitals are already obligated to publicly report payer-specific negotiated charges, that calculating and reporting the MA negotiated charge by MS-DRG will be less taxing on hospitals compared to the current method of weight data collection.

The second important change to the final rule is that it encourages the development of medical technology through the creation of several new alternative pathways and payment groups. Under this rule, 13 new technologies that applied for new FY 2021 add-on payments were approved. CMS will continue new technology add-on payments for a portion of the technologies that currently receive the add on payment. Thus, 24 technologies in total will be eligible to receive add-on payments for FY 2021. In addition, this payment expansion includes a new MS-DRG for Chimeric Antigen Receptor (CAR) T-cell Therapy, which will allow for more predictable compensation as well as accurate and efficient billing for hospitals paid through the IPPS when offering these immunotherapy procedures.

On September 1, 2020, the Department of Health and Human Services (“HHS”) announced that Assisted Living Facilities (“ALFs”) are now eligible to apply for payments under the Provider Relief Fund (“PRF”). ALFs have until September 13, 2020 to begin the application process.

The PRF is a multi-billion-dollar fund created by Congress through the CARES Act to provide financial relief to healthcare providers during the COVID-19 pandemic. The PRF is administered by HHS and the Health Resource Services Administration (“HRSA”). HHS has subdivided the PRF into various allocations and distributions. Expanded eligibility for ALFs falls under the Phase 2 General Distribution, which is meant to cover providers who did not receive payments under the initial Phase 1 General Distribution.

Some ALFs who bill Medicare or Medicaid were eligible for payments under prior PRF distributions. ALFs who do not bill Medicare or Medicaid are now eligible to apply for a payment if: 1) they filed a federal tax return for fiscal years 2017, 2018, or 2019 (or are exempt from filing a return), 2) provided patient care after January 31, 2020, 3) have not permanently ceased providing patient care,  4) are not otherwise excluded from federal health care programs, and 5) agrees to the terms and conditions of the payment.