backMedicare Finalizes Appeals Process for Reclassified Outpatient Observation Patients – On October 11, 2024, CMS issued a final rule establishing a new appeals process for Medicare beneficiaries who were initially admitted to a hospital as an inpatient but are later reclassified as an outpatient receiving observation services during their hospital stay (the Final Rule). The policy comes after a court order in Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020), aff’d sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022) required CMS to create such a process. The Final Rule contains expedited, standard, and retrospective appeals processes.
Alexander v. Azar was a nationwide class action lawsuit filed in 2011 seeking certain appeal rights for Medicare beneficiaries who were initially admitted as inpatients by a physician but whose status was later changed to outpatient observation by their hospital. This status change results in a denial of coverage for the hospital stay under Medicare Part A. The distinction between inpatient and outpatient is critical in Medicare for other reasons as well. For instance, Medicare only covers subsequent care in a skilled nursing facility for patients who were hospitalized as inpatients for three or more consecutive days.
Alexandar ordered the Secretary to create additional appeals processes for such beneficiaries, including an expedited appeals process while beneficiaries are still in the hospital and a retrospective review process for beneficiaries who met the conditions for appeal eligibility prior to the rule taking effect. Under the Final Rule, these appeals are to be filed with a Beneficiary & Family Centered Care-Quality Improvement Organization (BFCC-QIO). The BFCC-QIO will independently review the beneficiary’s patient record to determine whether the inpatient admission satisfied the relevant criteria for Part A coverage.
Under the expedited appeals process, the BFCC-QIO will render a determination within one day after receiving patient records from the hospital. Under the retrospective process, beneficiaries with hospital admissions on or after January 1, 2009, and before October 11, 2024, will have 365 calendar days from the implementation date of the Final Rule to gather any related documentation and file an appeal request. CMS will announce the implementation date on www.cms.gov and/or www.medicare.gov.
These appeals processes will be available to beneficiaries after an operational implementation period. CMS is projecting implementation beginning early in 2025.
The Final Rule that was published in the Federal Register on October 15, 2024, is available here. CMS’s fact sheet is available here.
Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.
Senate Subcommittee on Investigations Releases Report Criticizing Medicare Advantage Restrictions on Access to Post-Acute Care – On October 17, 2024, the U.S. Senate’s Permanent Subcommittee on Investigations (the Committee) chaired by Senator Richard Blumenthal released a report authored by the majority entitled, “Refusal of Recovery: How Medicare Advantage Insurers Have Denied Patients Access to Post-Acute Care,” (the Report). The fifty-four page Report details the strategies that Medicare Advantage plans use to avoid paying for sometimes lengthy and costly post-acute care for their members who require such care. As a result of the behavior detailed in the Report, hospitals are burdened with patients that they cannot discharge.
The Report focuses on the practices of three Medicare Advantage insurers – UnitedHealthcare (UHC), Humana, and CVS, which collectively cover nearly 60 percent of Medicare Advantage enrollees. In preparing the Report, the Committee gathered over 280,000 pages of documents from these three companies, which revealed the scope of the practices.
Specifically, the Report details how these three plans intentionally use prior authorization policies to target and deny post-acute care requests, which forces enrollees to choose between remaining in the hospital setting at their own expense because acute care is no longer medically necessary or being discharged home against the advice of their treating physicians and despite their need for post-acute care.
According to the Report, requests for authorization for post-acute care were denied at far higher rates than requests for other types of care. UHC and CVS denied these requests at three times the rate that they denied requests for other types of care, while Humana denied post-acute requests at sixteen times the rate at which it denied other requests. Between 2019 and 2022, UHC’s denial rate for requests for skilled nursing facilities increased ninefold.
The Committee also found that as part of its effort to reduce the time necessary to review and deny post-acute authorization requests, all three companies used strategies to automate or streamline the denial process. Specifically, an internal UHC utilization management program committee voted to approve the use of what it called “Machine Assisted Prior Authorization” in the company’s utilization management review process, which would reduce the average time necessary to review each request by six to ten minutes. During that same year (2021), UHC tested a “HCE [Healthcare Economics] Auto Authorization Model” which UHC found led to “faster handle times” and “an increase in adverse determination rate.” This model was tentatively approved after these findings were presented to the internal UHC committee. In 2022, UHC explored using AI and machine learning to predict which denials would be appealed and which of those appeals would be overturned.
The Committee found that while CVS’ denial rate remained relatively stable, the number of cases denied increased significantly due to a growth in the number of service requests subject to CVS’ prior authorization requirements. Like UHC, CVS tested a predictive model and artificial intelligence to reduce the amount of money spent on skilled nursing facility services and estimated that expanding the use of this initiative would save the company $77 million over three years. Documents reviewed by the Committee also revealed that CVS was aware of a consistent correlation between increasing prior authorization requirements and increased savings for the company, and that it deprioritized a plan to reduce prior authorizations because of the anticipated loss in savings.
According to the report, Humana’s denial rate increased by fifty-four percent for long-term acute care hospitals between 2020 and 2022. Humana modified its reviewer templates used to communicate authorization decisions in 2019, with one medical director noting that the new templates for post-acute facilities were “important for denial purposes” and would enhance the ability to “uphold a denial on appeal.” In training presentations given to the company’s reviewers, Humana included strategies for explaining denials to providers, including urging them to pose “surprise questions” to the recommending providers.
Based on its investigation and the findings set forth in the Report, the Committee recommended that CMS: (1) begin collecting prior authorization information broken down by service category; (2) conduct targeted audits of prior authorization data to reveal increases in adverse determination rates; and (3) expand regulation of insurer utilization committees to ensure that predictive technologies do not unduly influence human reviewers.
The full Report can be found here.
Reporter, David Tassa, Los Angeles, + 213 443 4335, dtassa@kslaw.com.
DEA Appears Likely to Extend Ryan Haight Waiver with New Rule – On October 10, 2024, the Drug Enforcement Administration (the DEA) submitted a new rule to the White House Office of Management and Budget titled, “Third Temporary Extension of COVID-19 Telemedicine Flexibilities for Prescription of Controlled Medications" (the New Rule). The New Rule is expected to extend the current flexibilities for telemedicine providers to prescribe controlled substances without an initial in-person consultation. The details of the New Rule and the expected extension period are not yet available but are expected to be made available for public review before the end of the year.
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008 amended the Controlled Substances Act to restrict practitioners’ prescribing of controlled substances unless the practitioner makes an in-person examination of the patient. 21 U.S.C. 829(e). The new law included several exemptions to the in-person consultation requirement, including: (i) authorizing the DEA to waive the law’s requirements during public health emergencies; and (ii) allowing prescriptions pursuant to a special registration process, to be created by the DEA.
In 2020, during the COVID-19 pandemic, the DEA promulgated a waiver of the requirement for an in-person visit prior to the prescription of controlled substances. After promulgating the waiver in 2020, the DEA extended the waiver twice, with the last extension, issued in October 2023, extending the waiver through December 31, 2024.
It was reported in August 2024 that the DEA intended to let the waiver expire and propose a special registration exception with substantial limits on telemedicine providers’ abilities to prescribe controlled substances. After these reports, the DEA received criticism from the industry and Congress over the allegedly proposed limits in its rule. U.S. House Representatives Doris Matsui and Earl L. “Buddy” Carter of Sacramento, California with eighteen other House colleagues, urged the DEA on October 11, 2024, in a letter that there were several concerns as to the DEA’s proposed rule for telemedicine prescriptions. The letter stated that even though there is a need for a special registration rule for the prescription of substances through telemedicine as previously mandated by Congress, the letter suggests that DEA’s draft proposal would categorically exclude entire classes of medications and providers which would be burdensome to patients and providers. Hence, the letter urges the DEA to extend the waiver to ensure that patients do not lose access to care until a new registration rule is implemented.
Leading up to October 11, 2024, the DEA submitted a new temporary rule that is believed to be a third extension of the COVID-19 flexibility, maintaining the waiver of in-person examination and special registration in each state where patients are located for what is expected to be at least another year.
Reporters, Beatrice Edler, New York, +1 212 790 5355, bedler@kslaw.com, and Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.
King & Spalding Client Alert Now Available: United States District Court in Florida Holds False Claims Act Qui Tam Provision Unconstitutional – On September 30, 2024, a federal district court in Florida held the qui tam enforcement provision of the False Claims Act (FCA), which permits private citizens to pursue actions in the name of and on behalf of the government, is unconstitutional under Article II’s Appointments Clause. Granting a motion for judgment on the pleadings, Judge Kathryn Kimball Mizelle of the Middle District of Florida dismissed the case, concluding that the relator was not a proper party to the lawsuit because she was not properly appointed to bring claims on behalf of the United States.
In a recent Health Headlines article discussing this District Court case, King & Spalding promised a forthcoming and more detailed Client Alert. King & Spalding’s Client Alert with additional insight is now available here.