Health Headlines– February 28, 2022

Federal Court Vacates Portion of No Surprises Act Dispute Resolution Rule

On February 23, 2022, the Texas Medical Association was granted summary judgment in its challenge to portions of the second set of implementing regulations that implement the No Surprises Act’s Independent Dispute Resolution (IDR) process. Judge Kernodle of the Eastern District of Texas ruled that HHS and the Departments of Labor and the Treasury (the Departments) violated the Administrative Procedure Act (APA) by substantively rewriting the No Surprises Act in creating a presumptive out-of-network rate for plans in the No Surprises Act’s dispute resolution process. The court also held that the Departments were not justified in skipping regular notice and comment rulemaking.

Background

The No Surprises Act, enacted in December 2020, prohibits balance billing patients for out-of-network emergency services and non-emergency services rendered by out-of-network providers at in-network facilities. When the No Surprises Act applies, the out-of-network rate payable by the plan is determined by state law or an all-payer model, if applicable. In the absence of state law, reimbursement is determined by the IDR process when the payor and provider cannot agree on a negotiated out-of-network rate. In the IDR process, both parties must submit final offers for payment along with supportive written material to an IDR entity who is required to select between the two offers. The No Surprises Act directs the IDR entity to consider seven factors in making the payment determination, including: (i) the qualifying payment amount (QPA), which is defined as the plan’s median in-network rate for same or similar items or services in the geographic area; (ii) the provider’s level of training experience, and quality outcomes; (iii) the market share of the provider and plan; (iv) teaching status, case, mix, and scope of services of the provider; (v) patient acuity; (vi) demonstrations of good faith efforts to enter into a network agreement with the other party; and (vii) if applicable, prior contracted rates between the parties in the previous four years. The IDR entity cannot consider the provider’s usual and customary rate or the rates paid by government reimbursement programs.

On September 30, 2021, the Departments issued the second set of implementing regulations (the IDR Rule) which, in part, provided significant additional detail regarding the IDR process and made the QPA the presumptive out-of-network rate. The IDR Rule was promulgated as an interim final rule, skipping the regular notice-and-comment rulemaking required by the APA. Specifically, the IDR Rule established that the IDR entity should presume that the QPA is the appropriate payment amount and should select the offer closest to the QPA unless either party submits credible evidence to establish that the appropriate payment amount is materially different than the QPA. If the IDR entity does not choose the offer closest to the QPA, then the written decision must explain the additional consideration relied upon, whether the information was credible, and the basis by which it determined that the credible information demonstrated that the QPA was materially different from the appropriate out-of-network rate. Additional information on the IDR Rule is available here in a previous issue of Health Headlines.

On October 28, 2021, the Texas Medical Association filed suit in federal district court alleging that the Departments ignored the text of the No Surprises Act and congressional intent, effectively rewriting portions of the No Surprises Act by requiring the IDR entity to presume the QPA is the appropriate payment amount. The Texas Medical Association asked the court to strike the portions of the IDR rule that establish the presumption in favor of the QPA and reinstate the process set out in the No Surprises Act. Five other lawsuits were filed shortly thereafter challenging the IDR Rule on similar grounds.

Eastern District of Texas Grants Summary Judgment

The Eastern District of Texas granted summary judgment in favor of the Texas Medical Association, vacating the challenged portions of the IDR Rule. The court explained, “It is a core administrative law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate. But here, the Departments impermissibly altered the Act’s requirements.” The court held the portions of the IDR Rule that establish the offer closest to the QPA as the presumptive out-of-network rate in the IDR process conflict with the unambiguous statutory text by placing a thumb on the scale for the QPA. The court held that the IDR Rule unlawfully “rewrite[s] clear statutory terms by ascribing additional, material terms” in instructing arbitrators to consider one factor more heavily than the others, and the IDR Rule must be set aside.

The court additionally held that the Departments’ failure to provide notice and comment as required by the APA is a second and independent basis to set the portions of the IDR Rule aside. The APA requires that agencies publish a notice of proposed rulemaking and give interested parties an opportunity to participate through the submission of comments. A rule promulgated without notice-and-comment is contrary to law and must be set aside unless the agency can show an exception to the requirement. Here, the court held that the Departments were not excused from regular notice and comment rulemaking and, with respect to the disputed aspects of the IDR Rule, the error was not harmless.

Impact of Judgment

The government asked the court for limited relief, but the court rejected those arguments and vacated the challenged portions of the IDR Rule. Specifically, the court vacated:

• 45 C.F.R. § 149.510(a)(2)(viii); the second sentence of 45 C.F.R. § 149.510(c)(4)(ii)(A); the final sentence of 45 C.F.R. § 149.510(c)(4)(iii)(C); 45 C.F.R. § 149.510(c)(4)(iv); and 45 C.F.R. § 149.510(c)(4)(vi)(B);

• 26 C.F.R. § 54.9816-8T(a)(2)(viii); the second sentence of 26 C.F.R. § 54.9816-8T(c)(4)(ii)(A); the final sentence of 26 C.F.R. § 54.9816-8T(c)(4)(iii)(C); 26 C.F.R. § 54.9816-8T(c)(4)(iv); and 26 C.F.R. § 54.9816-8T(c)(4)(vi)(B); and

• 29 C.F.R. § 2590.716-8(a)(2)(viii); the second sentence of 29 C.F.R. § 2590.716-8(c)(4)(ii)(A); the final sentence of 29 C.F.R. § 2590.716-8(c)(4)(iii)(C); 29 C.F.R. § 2590.716-8(c)(4)(iv); and 29 C.F.R. § 2590.716-8(c)(4)(vi)(B).

These portions of the IDR Rule serve to establish the QPA as the presumptive out-of-network rate in the IDR process. The court’s vacatur removes any reference to this presumption or the need for the parties to demonstrate a “material difference” between the QPA and what they argue is the appropriate out-of-network rate. Despite the procedural shortcomings of skipping notice and comment, the remainder of the second interim final rule remains in effect. Thus, the IDR process will remain in effect as implemented, with all factors enumerated in the No Surprises Act considered equally.

The vacatur issued by the court is not limited to the plaintiffs, but the impacted portions of the IDR Rule entirely and will have national effect. The government may appeal this ruling to the U.S. Court of Appeals for the Fifth Circuit, but the vacatur will stand while the appeal is pending. The summary judgment order is available here.

Reporter, Alana Broe, Atlanta, +1 404 572 2720, abroe@kslaw.com.

CMS Changes Trump-Era Innovation Models Affecting ACOs 

On February 24, 2022, CMS announced major changes to several of its innovation models, including the permanent cancellation of the Geographic Direct Contracting Model—a Trump-era model that tested whether a geographic-based approach to care delivery and value-based care can improve health and reduce costs for Medicare beneficiaries across an entire geographic region. On the same day, CMS also announced the launch of the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model, a rebranded and redesigned version of the Global and Professional Direct Contracting Model (GPDC) Model.

Cancellation of the Geographic Direct Contracting Model

On December 3, 2020, CMS announced a new payment and care delivery model testing whether a geographic-based approach to care delivery and value-based care can improve health and reduce costs for Medicare beneficiaries across an entire geographic region. The Geographic Direct Contracting Model was designed to allow ACOs to assume financial risk in return for enhanced flexibilities, purportedly making it possible for these entities to offer Medicare beneficiaries an increased focus on care coordination through care-delivery innovation. 

The model was initially scheduled to begin on January 1, 2022 but came under review by the Biden administration and was put on hold until further notice. CMS’s announcement last week permanently cancelling the Geographic Direct Contracting Model stated that the model “does not align with CMS’s vision of accountable care and concerns raised by stakeholders.”

Global and Professional Direct Contracting Model Becomes ACO REACH

The GPDC Model was implemented on October 1, 2020 as a voluntary, ACO model to incentivize participation in value-based care arrangements under original Medicare. The model offers two risk-sharing arrangement options. Under the “Professional” option, participants face a 50% savings/losses arrangement with one payment option for participants, which is a risk-adjusted monthly payment for primary care services provided by the ACO’s participating providers (Primary Care Capitation Payment). Under the “Global” option, participants face a 100% savings/losses arrangement—with either the Primary Care Capitation Payment or a risk-adjusted monthly payment for all covered services, including specialty care, provided by the ACO’s participating providers (Total Care Capitation Payment). In each option, participating providers accept Medicare claims reductions and agree to receive at least some compensation from their ACO. 

Beginning in 2023, the GPDC Model will be redesigned and renamed the ACO REACH Model. Despite a new moniker and redesign, the risk sharing options have not changed. According to a press release from CMS, the ACO REACH Model “better reflect[s] the priorities of the Biden-Harris Administration.” Among other changes, the ACO REACH Model requires all participants to have a robust health equity plan describing how they will reach underserved populations. The new model also provides an adjustment to increase the benchmark for ACOs serving higher proportions of underserved beneficiaries, which will be identified using a composite measure that incorporates a combination of the Area Deprivation Index and Dual Medicaid Status to ensure the benefits of ACOs are available to all Medicare beneficiaries.

The ACO REACH application period for Performance Year 2023 and the optional Implementation Period (running August 1, 2022 through December 31, 2023) is March 7, 2022 to April 22, 2022. According to CMS, organizations currently participating in the GPDC Model will be permitted to continue participating in the ACO REACH Model, provided they maintain a strong compliance record and agree to meet the requirements of the ACO REACH Model by January 1, 2023.

CMS’s summary of the ACO REACH Model is available here. 

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.

HHS Distributes $560 Million in Provider Relief Fund Payments

Last week, HHS announced the distribution of more than $560 million in Provider Relief Fund (PRF) Phase 4 General Distribution payments. These payments bring the Phase 4 distribution total to approximately $11.5 billion of the total $17 billion allocated.  With this announcement, nearly 78,000 providers received Phase 4 payments based on changes in revenue and expenses, with an increased focus on equity. 

Phase 4 payments are based on providers’ lost revenues and expenditures between July 1, 2020 and March 31, 2021. Notably, Phase 4 applications added new elements specifically focused on equity.  Of note, the elements focus on reimbursing a higher percentage of losses for smaller providers, and include “bonus” payments for providers who serve Medicaid, CHIP, and Medicare beneficiaries. HHS has processed approximately 86 percent of all Phase 4 applications, and remaining applications will continue to be processed through 2022.

HHS’s announcement also reminds providers that they may use PRF payments to support recruitment and retention efforts. Recruitment efforts include salaries for new or temporary staff, employee referrals, hiring bonuses, and other recruitment tools. Retention examples include incentive pay, retention bonuses, childcare assistance, and other fringe benefits. Importantly, eligible expenses must not be reimbursed by other sources or obligated to be reimbursed by other sources, and salaries must not be paid at a rate in excess of Executive Level II, which is currently set at $197,300.

The HHS press release regarding the Phase 4 PRF payments is available here. HHS’s guidance on recruitment and retention efforts is available here.

Reporter, Ahsin Azim, Washington, D.C., +1 202 626 9262, aazim@kslaw.com.

CMS Removes ACO Transformation Track from CHART Model

On February 22, 2022, CMS announced that it has removed the Accountable Care Organization (ACO) Transformation Track from the Community Health Access and Rural Transformation (CHART) Model. According to CMS, the CHART Model is intended to help individuals in rural communities, including Medicare and Medicaid beneficiaries, by transforming their health care delivery systems through “leveraging innovative financial arrangements as well as operational and regulatory flexibilities.” The decision to remove the ACO transformation track comes nearly a year after CMS delayed a request for applications for the ACO transformation track in March 2021. 

Specifically, one of the CHART Model’s stated objectives is to increase “financial stability for rural health care providers through multiple new funding approaches, including the use of up-front investments and predictable, capitated payments that pay for quality and patient outcomes over volume[.]” To that end, the CHART Model provided for two separate tracks: the Community Transformation Track and the ACO Transformation Track.
The Community Transformation Track offers upfront funding to state Medicaid agencies, local public health departments, independent practice associations, academic medical centers, and other organizations to provide coordinated care in rural areas.

Under the ACO Transformation Track, participating rural ACOs were to receive a one-time upfront payment equal to a minimum of $200,000 plus $36 per beneficiary to participate in the CHART Model.
CMS asserts that its decision to eliminate the ACO Transformation Track from the CHART Model is part of its “broader efforts” to “to advance health equity and to increase the number of beneficiaries in accountable care relationships.”

Reporter, Kelley T. Tran, Los Angeles, +1 213 443 4328, ktran@kslaw.com.

COMPLIANCE CORNER

Massachusetts General Hospital Reaches Settlement to Resolve Overlapping Surgery Allegations

On February 18, 2022, Massachusetts General Hospital (MGH), the Massachusetts General Hospital’s Physician’s Organization, and Mass General Brigham Incorporated (collectively, Defendants) agreed to pay $14.6 million to resolve a False Claims Act lawsuit. The case included allegations Defendants billed government healthcare programs for certain overlapping surgeries that violated federal and state requirements.

The practice of overlapping surgeries, or when an attending surgeon participates in two procedures that overlap in time, is a common practice at teaching hospitals. Efficiencies gained by overlapping surgeries can allow more patients to receive care from top surgeons. CMS allows billing for overlapping surgeries only when they meet certain requirements concerning physician presence during procedures and documentation.

Allegations regarding MGH’s overlapping surgery practices first garnered significant attention in the fall of 2015 when the Boston Globe published a detailed investigative story. Since that time, the practice of overlapping surgeries across the country has received increased public and enforcement scrutiny.

The MGH False Claims Act lawsuit was initially filed in 2015 by relator Lisa Wollman, M.D., a former MGH anesthesiologist. In addition to allegations that certain overlapping procedures were not in compliance with applicable CMS and state requirements, Dr. Wollman also alleged that Defendants billed for excessive, medically unnecessary anesthesia services performed during certain overlapping surgeries. Further, the case included allegations that Defendants failed to obtain informed consent for certain overlapping surgical procedures. Defendants agreed to pay $14.6 million, and Mass General Brigham Incorporated agreed to add language regarding overlapping surgeries to its standardized procedural consent form. Defendants did not admit to any liability or wrongdoing in the settlement.

The MGH settlement is available here.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com. 

Focus on Data Governance in Healthcare: Part One of a Three-Part Series on Data Governance, Data Analytics and Artificial Intelligence

Hospital systems, provider groups, and other healthcare organizations are uniquely situated to drive technological innovation in the provision of healthcare services in large part because of the patient and other data to which they have access. Moreover, given the proliferation of data touchpoints generated through the business of caring for patients, there is a trove of data that enables better patient outcomes, facilitates business intelligence, aids the identification and management of risk, reduces data management costs, and optimizes performance management. The key to realizing these patient care and operational efficiencies is a robust data governance program that protects data while allowing real-time access to trusted data. This column explores the key elements of a data governance program, data governance benefits, as well as risks associated with data governance gaps.

Key Elements of a Data Governance Program.Four of the key elements that comprise a data governance program include: data owners, data mapping, data classification, and policies and procedures. Data owners are responsible for the data assets within a specific domain and ensure the information within their domain is accessed and managed appropriately across systems and business functions. 

Data mapping is a technical process that connects or matches data fields in one system or database with the same data elements in another system or database. The principal purposes of data mapping are to integrate data sources to create a single source of truth. This process eliminates duplication of data and identifies those who use the data and for what purpose. 

Data classification involves analyzing the data in a system or database and organizing it into categories. Data is classified by the characteristics of the data such as the sensitivity of the data and the regulations associated with its access, use, and storage requirements. One example of a data category is data that contains protected health information. Classifying data by category is particularly important given the limitations on use and disclosure of individually identifiable data under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations.   

Finally, a data governance program includes written policies, procedures, and standards that govern how an organization will store, move, edit, access, secure, and transmit data. It is important to involve data owners in the creation of an organization’s data governance policies and procedures, a task that is made easier if the organization has already conducted data mapping and data classification to determine the nature and scope of the data created across the healthcare organization. 

In addition, an organization should implement internal controls and audit plans to ensure that data owners and others with access to data comply with the data governance policies, procedures, and standards. Utilizing data governance software will help enforce data governance policies, including compliance with access rules, monitoring and reporting requirements, and data quality solutions.

The Benefits of Good Data Governance.Data governance affords organizations visibility into the creation, use, and retention of its data assets. A data governance program will also:

• Decrease the cost of maintaining data by eliminating information data silos or shadow IT

• Improve data quality

• Increase regulatory compliance with privacy and security laws

• Optimize staff effectiveness by reducing redundancies and duplicative work

• Improve process efficiencies

• Single source of truth

• Enable timely destruction of data upon expiration of retention period

Data Governance Mitigates the Risk of Breaches and Unauthorized Disclosures.  An organization that does not have a data governance program risks creating and maintaining disparate data systems, or shadow IT, making it difficult to have visibility into the location and use of the organization’s data. The organization is likely to have data integrity issues that negatively impacts the organization’s data analytics efforts and the accuracy of its business intelligence. Perhaps most importantly, an organization that has not implemented a data governance program increases the likelihood that the organization may experience cybersecurity breaches and attempts to access the organization’s data systems without authorization, potentially in violation of federal privacy and other laws. 

As new data privacy regulations increase and as healthcare organizations work to implement data analytics programs, a data governance program becomes an integral part of doing business. However, being focused solely on protecting patient information may slow or even prohibit access to needed data. Therefore, it is important to focus on data governance as a whole rather than on the data itself.

Please reach out to Andi Bosshart if you would like more information about King & Spalding’s Data Governance practice.

Reporters, Andi Bosshart, Atlanta, +1 404 572 2657, abosshart@kslaw.com, and Tamra Moore, Washington, D.C., + 1 202 626 5458, tmoore@kslaw.com.

ALSO IN THE NEWS

King & Spalding Event: Health Law & Policy Forum—King & Spalding will host its 31st Annual Health Law & Policy Forum on March 21, 2022. Please join us for a one-day conference focusing on the foremost legal and political developments impacting the healthcare industry. Our keynote speaker this year is columnist George F. Will from The Washington Post, who will speak about current political trends and the role of the healthcare industry in shaping them. We will also hear from leading practitioners about current policy and regulatory enforcement updates and the special considerations healthcare providers face in pandemics. The forum will be held that the St. Regis Atlanta.  Register here.

Editors: Christopher P. Kenny and Catherine (Kate) S. Stern
Issue Editors: ArianaFuller and Gardner Armsby