Advocacy Newsletter Q1 2021

Issue 11, Winter 2021

General OrthoForum Policy Issues

Appropriations/Covid-19 Final Package Passed by Congress in December

This legislation is the Consolidated Appropriations Act, 2021, which passed Congress on December 21, 2020, and was signed by the President on December 27 (Public Law 116-260). This new law, which has close to 6,000 pages, provides appropriations for all programs and activities of the federal government for the remainder of the fiscal year 2021 (October 1, 2020, through September 30, 2021). It also contains another round of stimulus funding concerning Covid-19, including an extension of the Paycheck Protection Program (summary below). The law in addition contains a number of miscellaneous provisions, including those concerning cuts in payments under the Medicare Physician Fee Schedule (summary below), and those concerning the balance-billing issue with respect to private-sector health plans (summary in the portion of the newsletter concerning the Balance Billing Subcommittee). Changing Medicare’s statutory telehealth authorities is an important objective of the OrthoForum, but there was nothing relevant in the final package. Finally, on a technical point, note that, although all provisions of the new law are under the overall short title of the law (the Consolidated Appropriations Act, 2021), some parts of the law in addition have their own separate short title (e.g., the No Surprises Act, which concerns balance billing).

Response by Congress to Medicare PFS Cuts

In the Consolidated Appropriations Act, 2021, Congress took several steps to mitigate the cuts to the Physician Fee Schedule under the final rule published in December:

Title I of division N increases by 3.75 percent the payment levels that apply under the 2021 PFS final rule. The increase applies to all Part B health professionals, including orthopaedic physicians, physical therapists, and occupational therapists. Budget-neutrality requirements are waived for this 3.75 percent increase. The increase applies only for 2021. It is paid for by transfers from the Medicare Trust Fund.
This title I also extends through March 1, 2021, the moratorium on budget sequestration that would have resulted in an additional 2% cut to physician Medicare payment.
Section 113 of division CC provides for a 3-year suspension (until January 1, 2024) of the Medicare add-on code G2211 for complexity inherent to evaluation and management (E/M) visits. The G2211 code reportedly would have accounted for approximately $3 billion of spending in the PFS; therefore, the delay in implementing the code reduces the effect of the budget-neutrality requirements.
Section 101 of division CC reinstated the 1.0 floor on the work Geographic Practice Cost Index through CY 2023.

Per these changes, CMS has recalculated the CY 2021 PFS conversion factor to be 34.8931. This is an increase of about 2.5, which is very helpful, although it is still a decrease of about 1.2 from the CY 2020 conversion factor of 36.0896. Compared to the CY 2020 conversion factor, this recalculated 2021 conversion factor is a reduction of about 3.3 percent, but that’s far better than the 10.2 percent cut that would have applied without action by Congress.

The Advocacy Committee plans to advocate with AAOS and other specialty physician organizations toward the goal that the 2022 PFS does not make draconian reductions in Medicare payments to physicians.

Second Draw Under Paycheck Protection Program (PPP)

In the Consolidated Appropriations Act, 2021, title III of division N is the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which amends the statutory provisions for the Paycheck Protection Program (PPP). Under the amendments made by that title III:

A current PPP borrower is eligible for a second round of loans — referred to as a “second draw” — if it has 300 or fewer employees, and has at least a 25 percent reduction in gross receipts in a 2020 quarter as compared to the same 2019 quarter. The applicant must also have used, or will use, all of the original PPP loan.
In general, a borrower may receive a PPP second draw in an amount of up to 2.5 times the average monthly payroll costs in the one-year prior to the loan. The maximum loan is $2 million.
Borrowers are eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period. (Title III creates additional authorized uses of the loan.) The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness continues to apply.
There is an extension of the existing safe harbors on restoring FTE and salaries and wages. Specifically, there is a continuation of the policy that loan forgiveness is reduced if the borrower reduces the number of employees or reduces employees’ salaries by more than 25 percent.
Title III also clarifies that other employer-provided group insurance benefits are included in payroll costs. This includes group life, disability, vision, or dental insurance.

PPP Tax Issue

In title II of division N, section 276 provides that the amount of PPP loan forgiveness is not included in gross income and that this exclusion will not have any other tax consequences. This exclusion applies to all original PPP loans and to second draws.

This legislation (H.R. 1418) was enacted January 13, 2021 (Public Law 116-327). It amends the McCarran-Ferguson Act to exclude the business of health insurance from the scope of that Act. Before the enactment of this new law, the federal antitrust laws did not apply to health insurance. When the legislation was considered on the House floor and passed in September 2020, the lead sponsor of the legislation, Representative Peter DeFazio (D-OR), made statements that included the following:

[R]ight now, insurance companies can and do get together and collude. Before COVID, they would go to some fancy resorts, get together, and say: How about you stay out of North Dakota; we will stay out of South Dakota? You stay out of Oregon; we will stay out of Washington. Let’s divide up the pie here. You decide where you are selling, and we will decide where we are selling. Oh, and by the way, here are the things we don’t want to cover. Here are the people we want to redline and exclude.

That is all legal. That is all legal.

What does it do? It drives up the cost and the availability is diminished for Americans. And now here we are in the midst of COVID and the estimates are that 5 million people have lost their health insurance during COVID — 5 million people — yet, last year, the health insurance industry made an eye-popping $33 billion in profits. This year, the reports are they are doing even better, with more and more people uninsured.

As to the effect of the new law, consider a court case concerning Blue Cross & Blue Shield of Florida (Florida Blue), which was filed in November 2018. The company has a business policy that no broker may sell Florida Blue’s individual plans unless that broker agrees to sell only Florida Blue’s individual plans. Oscar Insurance sued Florida Blue over this policy on the basis that the policy violates the antitrust laws. The trial court dismissed Oscar’s case because of the McCarran-Ferguson Act, and Oscar appealed (no decision yet). On January 15, 2021 (two days after the new law was enacted), the U.S. Department of Justice filed a notice with the appeals court (the 11th Circuit) stating that the Department is requesting the court to reverse the trial court’s decision on the basis of the new law.

Brief Reminder on Medicare-Related Final Rules Published in Recent Months

The previous newsletter discussed these rules in some detail, but it may be helpful to provide brief summaries that serve as reminders of the main points of interest. Below are summaries of the rules concerning the Physician Fee Schedule (PFS) and the ASCs payment system. See the portion of the newsletter concerning the CMMI Subcommittee for summaries concerning the BPCI-A and CJR models, and see the portion concerning the Stark Law Subcommittee for a summary of the Stark Law final rule.

PFS final rule: Despite intense opposition to the proposed cuts by many medical organizations and a significant number of Members of Congress, the final rule kept the cuts for most providers and the increases for primary care and certain other specialties, including the add-on code (GPC1X) for those same providers who received increases. Fortunately, as described above, Congress reduced the PFS cuts from a 10.2 percent cut under the final rule to a 3.3 percent cut for 2021. (The PFS final rule also made Stark Law changes for “high Medicaid” physician-owned hospitals. These changes are summarized in the portion of the newsletter concerning the POH Subcommittee.)

OPPS/ASCs final rule:

CMS finalized its proposal to require prior authorization for cervical fusion with disc removal, and for implanted spinal neurostimulators, in the outpatient setting. The agency also declined to make any changes in its fee-for-service prior-authorization requirements, although it has since decided to make some prior-authorization changes for the Medicaid and CHIP programs and also the ACA federal exchanges. (As to legislation, it appears that no prior authorization bills have been introduced in the new Congress.)
With respect to the IPO list, CMS finalized its decision to eliminate it over a three-year period, and to remove all 266 musculoskeletal procedures as of January 1, 2021. The agency also finalized its position that the 2-midnight rule will apply to all these procedures. CMS noted that it will continue the policy adopted in CY 2020 to provide an exemption from certain medical review activities related to the 2-midnight rule for procedures that have recently been removed from the IPO list.
The final rule made changes concerning ambulatory surgical centers, which are summarized in the portion of this newsletter concerning the ASC Subcommittee.

Additional Information

For more information on any of the topics discussed in this section, please contact the chair of the OrthoForum Advocacy Committee, Dr. Richard Bruch, at rich.bruch@gmail.com.

Therapy Services Update

Telehealth Issues

Changing Medicare’s statutory telehealth authorities is an important objective of the OrthoForum. Several significant telehealth bills were pending in Congress in 2020. There was a possibility that the appropriations/Covid-19 final package enacted on December 27 — the Consolidated Appropriations Act, 2021 (Public Law 116-260) — would incorporate one or more of these bills, but in the end the almost 6,000 page bill did not include telehealth changes relevant to physical therapists or occupational therapists.

For these therapists, the telehealth objective of the OrthoForum (as stated in our comment letter to CMS on the PFS proposed rule) is the enactment of legislation that would amend the relevant Medicare statutory provisions (section 1834(m) of the Social Security Act) to establish permanent authority for physical therapists and occupational therapists and their assistants to provide telehealth services. This authority would be truly permanent in that it would not be conditioned on the existence of a national emergency or on CMS granting a waiver. The legislation would specify particular Medicare billing codes that apply to physical therapy and occupational therapy and provide that, for those codes, telehealth geographic limitations do not apply.

Telehealth Bills in Congress

More than 30 telehealth-related Medicare bills were pending in Congress as of the end of 2020. For the OrthoForum, the most significant were the Senate CONNECT Act (S. 2741), with 46 cosponsors, and the House Outpatient Therapy Modernization and Stabilization Act (H.R. 7154), with 14 cosponsors. These bills “died” at the end of the 116th Congress and have not been reintroduced in the 117th Congress, which began January 3, 2021.

In the 116th Congress, S. 2741 was helpful but was narrower than the House bill in significant ways. It would have given CMS the authority to make permanent telehealth changes (as opposed to temporary authority in emergency situations); however, the bill would have required CMS to grant a waiver of the current restrictions, and certain conditions had to be met to receive a waiver. Moreover, the bill did not specifically mention physical therapists or occupational therapists, although it was broad enough to allow CMS to include them.

In contrast, H.R. 7154 was specific to such therapists, would have directly authorized them to provide telehealth services through the Medicare program (with no CMS waiver process), and would have provided that specific HCPCS therapy codes are not subject to the normal geographic limitations. In other words, this bill met the OrthoForum’s telehealth objective regarding physical therapists and occupational therapists.

Once the new Congress settles in and begins normal operations, the Advocacy Committee plans to contact the sponsors of this House bill and Senate bill from last Congress to learn their telehealth-related plans for 2021, and to pursue the OrthoForum’s telehealth objective.

Development of Survey of OrthoForum Physical Therapists and Occupational Therapists

The Advocacy Committee is developing a survey to be distributed. The survey questions, which are currently being refined, are intended to gather information that will be useful with our advocacy efforts with Congress. Questions under consideration include the number of visits with patients; payment amounts for visits; and outcomes and level of satisfaction as reported by patients. The Advocacy Committee welcomes comments on the development of these survey questions.

Physical Therapy Services Subcommittee

For more information on PT issues, or to join the OrthoForum Advocacy Committee Physical Therapy Services Subcommittee, please contact Renee Duncan at renee.duncan@orthotennessee.com.

CMS/CMMI Update

Change in Leadership; Name of Subcommittee

The CMS/CMMI Subcommittee would first and foremost like to thank outgoing chair Joel James for his leadership on CMMI issues. Dr. Doug Lundy is taking over as the chair. Also note that the name of the Subcommittee has been formally changed to the CMS/CMMI Subcommittee to encompass a broader range of issues.

Biden Administration

While President Biden has not yet formally named his nominee to head CMS, we are hearing that the top candidates include Chaquita Brooks-LaSure, who worked at HHS under Obama and on the Ways and Means Committee during the development of the ACA, and Mandy Cohen, North Carolina’s Secretary of Health and Human Services. We anticipate that a nominee to head CMMI will be named shortly after the CMS head is confirmed.

In terms of the direction of the Biden Administration, we think it is more likely to use the force of the federal government to drive cost and quality changes than Republicans typically are. We anticipate that Biden’s health team will pursue more mandatory models in the value-based care space. As a reminder, the Trump Administration initially slashed the extent of mandatory participation in the Comprehensive Care for Joint Replacement (CJR) model.

There are other policy issues on the table in the Medicare space, including President Biden’s campaign pledge to lower the Medicare eligibility age to 60. This would, however, require congressional action and would require the support of nearly all Democrats, mainly the moderate wing of the party, such as Senators Manchin (D-WV) and Sinema (D-AZ).

2021 Changes to BPCI-A Model

As noted in the previous newsletter, CMMI made changes in the pricing methodology to the existing Bundled Payments for Care Improvement Advanced (BPCI-A) model for Model Year 4 (MY4), which began on January 1, 2021. The changes include (1) utilization of a realized trend adjustment to the peer group trend (PGT); (2) removal of the physician group practice (PGP) offset; (3) modified clinical episode overlap methodology; (4) major joint replacement of the lower extremity (MJRLE) risk adjustment; and (5) clinical episode service line groups (CESLGs).

Regarding the service line groups, participants in MY4 are required to select such groups, instead of one or more clinical episode categories. For the orthopaedics line group, there are six procedures: (1) double joint replacement of the lower extremity; (2) fractures of the femur and hip or pelvis; (3) hip and femur procedures except major joint; (4) lower extremity/humerus procedure except hip, foot, femur; (5) major joint replacement of the lower extremity (inpatient and outpatient); and (6) major joint replacement of the upper extremity.

Extension of CJR Model

As noted in the previous newsletter, CMS has through an interim final rule extended Performance Year (PY) 5 of the model from March 31, 2021, through September 30, 2021, an additional six months. To accommodate the extension to PY5, CMS will perform two reconciliations to divide PY5 — one for the first 12 months of PY 5 and one for the remaining nine months of PY 5. This rule also ends the current COVID-19 extreme and uncontrollable circumstances policy on March 31, 2021 or the end of the coronavirus public health emergency, whichever occurs first. After that, to address ongoing effects of the pandemic, actual episode payments will be capped at the quality adjusted target price for any episode with actual episode payments that include a claim with a COVID-19 diagnosis code. Lastly, to ensure that the model continues to include the same inpatient lower extremity joint replacement (LEJR) procedures, despite the adoption of new MS-DRGs 521 and 522 to describe those procedures, CMS made a technical change (as of October 1, 2020) to include these new DRGs in the model.

CMS/CMMI Subcommittee

For more information on CMS, CMMI, and BPCI-A issues, or to join the OrthoForum Advocacy Committee CMS/CMMI Subcommittee, please contact the chair of the Subcommittee, Dr. Doug Lundy, at LundyDW@resurgens.com.

Stark Law Update

Overview of Stark Law Final Rule

The Stark final rule published in December 2020 has two basic categories of changes — those that apply within the context of a “value-based arrangement” (VBA) and those that apply regardless of whether there is a VBA (i.e., changes to long-standing Stark regulations that do not concern VBAs). For example, there are changes to the definition of “fair market value”; a definition of “commercially reasonable” is created for the first time; and there are changes to the provisions concerning directed referrals. The final rule also attempts to create a bright line for determining whether compensation directly relates to the volume or value of referrals.

Note that all of the final rule’s provisions concern compensation arrangements. These provisions do not concern exceptions for ownership or investment interests (and therefore do not concern the Stark restrictions on physician-owned hospitals).

The changes made by the Stark final rule generally took effect on January 19, 2021; however, the group-practice changes concerning the distribution of “overall profits” and concerning the payment of “productivity bonuses”, as well as the addition of the new VBA provisions — are delayed until January 1, 2022. This delay is important because the changes on the distribution of overall profits from designated health services (DHS) — which apply in the non-VBA context — will no longer allow distribution of profits on a service-by-service basis. Distributions of overall profits must be based on either (1) aggregating profits of the entire practice; or (2) aggregating profits of components of the practice consisting of at least five physicians.

The Advocacy Committee recognizes that OrthoForum members need more information on these changes to the Stark Law regulations, including whether group-practice compensation policies must be changed in order to comply with the revised regulations that will take effect on January 1, 2022. The Committee is preparing to provide additional information on these matters.

With respect to VBAs, CMS acknowledged in the final rule the need to coordinate the Stark regulations with the VBA regulations for the Anti-Kickback Statute (AKS). The agency indicated that it made efforts in this regard, but that complete alignment between the two regulatory programs is not possible.

As noted, the regulations on the new VBA provisions for group practices will not take effect until January 1, 2022. Regarding group practices and profit shares, the final rule states that, per the new VBA exception that will take effect on that date, “a group practice may distribute directly to a physician in the group the profits from designated health services furnished by the group that are derived from the physician’s participation in a value-based enterprise, including profits from designated health services referred by the physician, and such remuneration will be deemed not to be based on (or take into account) the volume or value of the physician’s referrals.”

For example, Physician #1 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model), and Physician #2 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model). Neither distribution would jeopardize the group’s ability to qualify as a “group practice . . .”
Again, the Advocacy Committee is preparing to provide additional information on the changes to the Stark Law regulations made by the December final rule.

Stark Law Subcommittee

For more information on Stark Law issues, or to join the OrthoForum Advocacy Committee Stark Law Subcommittee, please contact Dr. Chip Hummer at: chummer3@premierortho.com.

Ambulatory Surgery Center Update

Summary of OPPS/ASC final rule for 2021

CMS continues to apply a budget-neutrality requirement to the ASC payment system, notwithstanding that many new procedures will be allowed in the ASC setting due to the phase-out of the IPO list. The removal of a procedure from the IPO list automatically makes the procedure allowable in hospital outpatient departments (HOPDs), which in turn allows the procedure to be considered by CMS for possible addition to the ASC payable list (see the next bullet below). The addition over time of procedures to the ASC payable list will lower reimbursement rates for procedures that were on the ASC payable list prior to 2021, as the budget-neutrality requirement means that a finite amount of funds for the ASC payment system (increased only by the annual update to the ASC conversion factor) will be allocated among more and more procedures.
The final rule provides increased discretion to physicians as to which procedures will be included on the ASC payable list, but CMS still has four requirements. The procedure must be: (1) separately paid under the OPPS; (2) not included on the IPO list; (3) not only able to be reported using a CPT unlisted surgical procedure code; or (4) not otherwise excluded under § 411.15 (e.g., routine physical checkups, eye examinations, and hearing aids). CMS will itself add procedures to the list, but also created a process for physicians to suggest the addition of procedures and have those suggestions reviewed by the agency.
CMS, as with CY 2020, used the hospital market basket to update the conversion factor for CY 2021 and will continue to do so through CY 2023. For CY 2021, the update for ASCs meeting the quality reporting requirements is 2.4 percent, which results in a conversion factor of 48.952. For ASCs not meeting those requirements, the update is 0.4 percent, which results in a conversion factor of 47.996. Both of these conversion factors are about 59% of the parallel amounts for HOPDs. The agency also stated that it “will continue to assess the feasibility of collaborating with stakeholders to collect ASC cost data in a minimally burdensome manner”.

Recent MedPAC Meetings

The Medicare Payment Advisory Commission had meetings on January 14, 2021. With respect to ASCs, the MedPAC members voted unanimously in favor of submitting to Congress a recommendation to eliminate the CY 2022 update to the ASC conversion factor and a recommendation to require ASCs to report cost data. MedPAC has made these same recommendations in the past. The question is whether Congress will at some point decide to follow the recommendations. In addition, CMS has some authority to take action on these matters.

Adjusting to Removal of IPO List

The Advocacy Committee is considering the effects of the expected increase in the number of procedures on the ASC payable list (as CMS considers procedures performed in HOPDs for possible addition to the ASC payable list, pursuant to the phase-out of the IPO list). One of the issues is whether and to what extent ASCs will, for certain procedures, be expected to be prepared for the possibility that a patient will need to stay overnight, and if so, whether CMS will reimburse for the stay.

ASC Subcommittee
For more information on ASC issues, or to join the OrthoForum Advocacy Committee ASC Subcommittee, please contact Teresa Copeland at teresa.copeland@orthotennessee.com.

Balance Billing Update

Balance-Billing Provisions of Appropriations/Covid-19 Final Package Passed by Congress in December

The final package is the Consolidated Appropriations Act, 2021, which passed the Congress on December 21, 2020, and was signed by the President on December 27 (Public Law 116-260). The balance-billing provisions, which concern private-sector health plans, are in title I of division BB, which has a separate short title, the No Surprises Act. A summary is provided below.

The balance-billing provisions are effective for items and services furnished by out-of-network providers on or after January 1, 2022.

The amount paid on a claim by an out-of-network provider is determined under State law, if the State has a law governing such claims.

The patient’s cost sharing is based on the State-law payment amount to such provider, if there is one. If not, the patient’s cost sharing is based on the median in-network rate. There will be a process for the government to audit health plans to ensure they are correctly determining and applying the median in-network rate. Regulations for this audit process must be finalized by October 1, 2021.

In a State that does not have a law governing claims by out-of-network providers, the following applies:

Upon an out-of-network provider receiving from a health plan a payment for a claim, or a notice of denial of the claim, a 30-day period begins in which either the provider or the plan may initiate “open negotiations” toward reaching agreement on the claim. (It appears that the amount of the initial payment from the plan is not governed in any way by the legislation, although it seems likely that plans will pay the median in-network amount.)
If negotiations are initiated within that 30-day period, a separate 30-day negotiation period begins as of the initiation date.
If agreement is not reached within the 30-day negotiation period, then at the end of that period a 4-day period begins in which either the provider or the plan can initiate an “independent dispute resolution” (IDR) process. The provider and the plan must each pay an administrative fee in order to utilize the process. Regulations for the IDR process must be finalized by December 27, 2021. See below for a discussion of provisions regarding bundled claims and payments through the process.
An “IDR entity” will be selected jointly by the provider and the plan, or by HHS if they cannot agree on a selection. (There is a process for entities to be certified as IDR entities.)
The IDR entity will make a decision on the payment amount within 30 days of being selected. The provider will make a payment offer, as will the plan, and they each may give the IDR entity information supporting its offer. The provider and plan will also provide any additional information required by the IDR entity.

The IDR entity will choose one of those two offers to be the payment amount. In making the decision, the IDR entity will consider the following:

– The information referred to above that is submitted by the provider and the plan.
– The median in-network amount for the item or service in the geographic region. (For 2022, this is the rate as of January 31, 2019, adjusted for inflation since that date, per the percentage increase in the consumer price index for all urban consumers.)
– The level of training, experience, and quality and outcomes measurements of the provider.
– The market share held by the provider, and held by the plan, in the geographic region.
– The acuity of the patient and the complexity of the item or service.
– Demonstrations of good faith efforts (or lack of good faith efforts) made by the provider and by the plan to enter into network agreements and, if applicable, contracted rates between the provider and the plan during the previous 4 plan years.

The IDR entity will not consider any of the following:

– Usual and customary charges.
– The amount the provider would have charged in the absence of the balance billing provisions.
– The amount the provider would have received for the same item or service from Medicare, Medicaid, CHIP, TRICARE, or the VA.

The decision of the IDR entity is binding, in the absence of a fraudulent claim or evidence of misrepresentation of facts presented to the entity. The decision is not subject to judicial review, unless —

– the decision was procured by corruption, fraud, or undue means;
– there was evidence of partiality or corruption in the IDR entity;
– the IDR entity was guilty of misconduct in refusing to postpone the proceeding, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the decision; or of any other misbehavior by which the rights of the provider or plan have been prejudiced; or
– the IDR entity exceeded its authorities, or so imperfectly executed them that a mutual, final, and definite decision upon the subject matter submitted was not made.

With respect to bundling claims together, the IDR process will have criteria under which multiple IDR dispute claims are permitted to be considered jointly as part of a single determination by an IDR entity (in order to encourage the efficiency of the IDR process, including minimizing costs). Claims are eligible for bundling if —

– the items and services involved are furnished by the same provider;
– payment for the items and services is required to be made by the same health plan;
– the items and services are related to the treatment of a similar condition; and
– the items and services were furnished during the same 30 day period, except that, in order to encourage procedural efficiency and minimize provider and plan administrative costs, the IDR criteria may allow an alternative period for use in limited situations, such as by the consent of the parties or in the case of low-volume items and services.

Balance Billing Subcommittee

For more information on balance billing issues, please contact Dr. Doug Lundy at LundyDW@resurgens.com. Please note that the Advocacy Committee is ending the Balance Billing Subcommittee, per the decision made on the conference call of January 13, 2021.

Physician-Owned Hospital (POH) Update

Summary Regarding 2020; Outlook for 2021

The primary player on POH issues in 2020 was the executive branch, not Congress. As noted in the previous newsletter, CMS took a step in the right direction by publishing a final rule in December 2020 that loosened the Stark restriction on POHs that are “high Medicaid facilities”, meaning POHs that serve more Medicaid inpatients than other hospitals in the counties in which they are located. With respect to the Stark POH cap on the number of additional operating rooms, procedure rooms, and beds above the POH’s baseline number, this final rule lifts restrictions for POHs qualifying as high Medicaid facilities.

It should be noted that this Medicaid-related final rule only concerns the interpretation of specific statutory exceptions relating to high Medicaid facilities. The POH-related efforts of the OrthoForum Advocacy Committee have instead concerned POHs generally. Our efforts with officials of the Department of Health and Human Services during the Trump Administration focused on the broad, general authority of the Department under the Stark Law to create exceptions by regulation (section 1877(b)(4) of the Social Security Act). We have argued that, under this authority, the Department could issue a regulation authorizing the expansion of POHs, notwithstanding the Stark statutory restrictions. This argument is based on the way the statute is drafted. The statute appears to state that exceptions created by regulation would control over the POH statutory restrictions.

A separate final rule published in December 2020 made significant changes to the Stark Law. Although that final rule did not concern POHs (the rule only concerned compensation arrangements), it did use the same statutory authority referred to above to create exceptions by regulations (section 1877(b)(4)). Of course, our POH advocacy efforts involved asking CMS to use that exceptions authority in a novel way, which is to nullify or modify statutory restrictions on POHs. As noted, we believe the exceptions authority is broad enough to do this.

Turning to the Biden Administration, the first issue will be to explore the background of the person who becomes the head of CMS. That appointment likely will not be made until after the confirmation of Xavier Becerra (the attorney general of California), who has been nominated to be the Secretary of Health and Human Services. The second issue will be to monitor the new HHS/CMS heads to see whether they take action to undo or modify any of the provisions of the new Stark regulations that were finalized in December. And we will monitor Congress to determine whether any bills are introduced regarding those Stark regulations.

It appears unlikely at the moment that the Biden Administration or the new Congress (117th Congress) will loosen the Stark restrictions on POHs. Nevertheless, the Advocacy Committee will work to develop arguments on why the restrictions should be loosened. We believe that doing so would increase competition in the healthcare industry, and would increase the access of patients. There should also be a place for POHs in a U.S. healthcare system focused on value-based care.

Physician-Owned Hospital Subcommittee
For more information on POH issues, or to join the OrthoForum Advocacy Committee POH Subcommittee, please contact the chair of the Subcommittee, Dr. Blake Curd, at bcurd@oi.md.

Political Update

Since our last update, we’ve seen significant changes in the composition of Congress, and we’ve seen substantial progress in the staffing of the Biden administration.

The Senate is divided evenly between Democrats and Republicans, a 50-50 split. Because a Democratic Vice President has the tie-breaking vote, Democrats are the majority party, but only just barely. Negotiations over power-sharing were so fraught that it took until the first week of February for the parties to reach an agreement and announce new committee assignments (as of February 4th, Republicans were still chairing Senate committee hearings). All Senate committees will have equal numbers of Democrats and Republicans. Instead of requiring a majority of votes in committee for legislation to be eligible for floor consideration, a tie will be considered sufficient.

As of the first week of February, the House has three vacant seats (one of which is the subject of an extremely slow vote count). We project that when the House is at full strength, the breakdown will be 222 Democrats – 213 Republicans. This represents a strong 2020 election showing by GOP candidates, which reduced the Democratic majority from 38 seats to 9 seats.

The Biden administration has been rolling out appointments to the Department of Health and Human Services and the COVID Task Force. What is most evident to D.C. insiders is that Biden has brought back a large corps of Obama HHS appointees, which means that while the incoming Secretary, Xavier Becerra, does not come from a health care field, he will be supported by a highly experienced team. To take the most visible example, HHS’s sole Deputy Secretary position will be filled by Andrea Palm, who served for eight years in Obama’s HHS, first as chief of staff to Secretary Sebelius, then as a senior counselor to Secretary Burwell.

Andrea will be joined by former HHS counselor Anne Reid, who has been named Deputy Chief of Staff to Becerra; former Surgeon General Vivek Murthy, who has been named to that position again; and a number of Obama-era HHS officials who have been appointed to the COVID Task Force, including former senior counselor Dawn McConnell and former CMS director Andy Slavitt.

As of this writing, there are a number of senior positions yet to be filled, including most of the assistant secretary slots (i.e., heads of agencies) and CMS leadership.
The Biden administration’s top health care priorities are addressing the pandemic and expanding the Affordable Care Act. To the extent that the president can address these priorities through unilateral executive action, he is likely to do so. However, most substantive initiatives require legislation, meaning that the closely divided House and Senate have to approve.

With the Senate filibuster still extant, most legislation will require the votes of 60 senators to pass. One exception is budget reconciliation legislation, which deals with taxes and mandatory spending, and can pass the Senate with a bare majority. That doesn’t mean that Biden’s entire wish list will sail through; Democrats still need to keep their moderates aboard, which puts Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) in the spotlight.

Manchin and Sinema have both said they oppose eliminating the filibuster, and the Democrats need their votes to get to 51 on reconciliation. Democrats are also likely to be solicitous of newly elected purple-state senators Raphael Warnock (D-GA) and Mark Kelly (D-AZ), both of whom are filling unexpired terms and therefore will have to stand for re-election in 2022.

Among the health care items in Biden’s $1.9 trillion COVID relief proposal are $110 billion for vaccinations and testing, funding for 100,000 new public health jobs, and broadened eligibility for ACA subsidies. Negotiations between Democrats and Republicans, and between the White House and Senator Manchin, are only just getting underway. The final relief package/reconciliation bill will come in somewhere between Biden’s requested $1.9 trillion and the $600 billion proposal put forward by a group of ten centrist Republican senators, but it’s too early to say exactly where. The Senate passed its version of the package early on February 5, and House Speaker Nancy Pelosi (D-CA) then announced that her goal is for the House to pass its version within approximately two weeks (by February 19).