CMS Issues The 2018 MACRA Quality Payment Program Final Rule

The Centers for Medicare and Medicaid Services (“CMS”) recently published the 2018 Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) Quality Payment Program (“QPP”) final rule.  CMS maintained that it is listening to feedback and concerns from providers and that what it has heard is reflected in many of the provisions of the rule.

Among the many changes in the final rule are the following:

  • For 2018, CMS will exempt providers and groups with less than $90,000 in Medicare Part B allowed charges or that care for less than 200 Medicare Part B patients. These providers would be exempt from participating in the QPP altogether.
  • Small practices (those with fifteen or fewer practitioners) can earn five additional points to their Merit-Based Incentive Payment System final score if they submit data on at least one performance category. Further, CMS will award providers up to five bonus points if their patient population is deemed particularly complex, as measured by a combination of Hierarchical Conditions Category risk scores and the number of dually eligible patients treated.
  • Providers are allowed to continue using 2014 Edition Certified Electronic Health Record Technology (“CEHRT”), rather than upgrading to 2015 Edition technology, to report the Advancing Care Information (“ACI”) transition measures.  Providers that exclusively use 2015 CEHRT to report the ACI objectives and measures (the Stage 3 equivalent measure set) could be eligible for a ten percent bonus score.
  • The reporting period for quality performance, which was ninety days during 2017, which was the transition year, is now the full calendar year.
  • Solo practitioners and small practices can form a virtual group without specialty or location limitations to participate in MIPS.  While it was previously known that virtual groups would be an option, more detail on how those groups can be formed and can apply for treatment as virtual groups is now available.
  • CMS will implement a MIPS measurement option that allows hospital-based clinicians to use their hospital’s value-based purchasing results for the MIPS cost and quality categories.  However, this option will not be available until calendar year 2019.
  • Providers will be assessed on cost measures for 2018.  This was originally a 2019 requirement under the proposed rule.  The cost category will be weighted at ten percent of the MIPS final score in 2018 and will increase to thirty percent in 2019.

The 2018 final rule is emblematic of CMS’ continued approach to tinker with MACRA’s obligations and burdens on providers of all sizes.  From the beginning, it has been clear that MACRA would be a work in progress that would evolve, especially in the early years.  Thus, it is important that providers continue to pay attention to additional MACRA-related rules to ensure that they are current on the latest requirements, especially those that may be beneficial.

New Jersey Proposes Enhanced Limitations on Payments From Pharmaceutical Companies to Health Care Providers

The New Jersey Division of Consumer Affairs recently proposed enhanced limitations on payments from pharmaceutical companies to health care providers.  Those licensees affected by the proposed rules are the following:  physicians, podiatrists, physician assistants, advanced practice nurses, dentists and optometrists.

With limited exceptions, providers would not be able to accept any of the following from pharmaceutical manufacturers or their agents:

  • gifts
  • payments
  • stock
  • stock options
  • grants
  • scholarships
  • subsidies
  • charitable contributions
  • entertainment or recreational items, such as tickets to theater or sporting events, or leisure or vacation trips
  • meals
  • any item of value that does not advance disease or treatment education, including:
  • pens, note pads, clipboards, mugs or other items with a company or product logo
  • items intended for the personal benefit of the prescriber or staff, such as floral arrangements, sporting equipment, artwork, or items that may have utility in both the professional and non-professional setting, such as electronic devices
  • any payment in cash or cash equivalent, such as a gift certificate
  • any payment or direct subsidy to a non-faculty prescriber to support attendance at, or as remuneration for time spent attending, or for the costs of travel, lodging, or other personal expenses associated with attending any continuing education event or a promotional activity

There are some exceptions to the proposed limitations:

  • items designed for educational purposes for patients
  • a manufacturer subsidized registration fee at a continuing education event if that fee is available to all event participants
  • modest meals provided through the event organizer at a continuing education event, provided the meals facilitate the educational program to maximize prescriber learning and are capped at the fair market value of $15.00 per prescriber
  • modest meals provided to non-faculty prescribers through promotional activities no more than four times in a calendar year from the same manufacturer, each of which is capped at the fair market value of $15.00 per prescriber
  • fair market value compensation for providing bona fide services as a speaker or faculty organizer or academic program consultant for a continuing education event (subject to disclosure to attendees), plus reasonable payment and remuneration for travel, lodging, and other personal expenses associated with such services and continuing education credit if permitted by the licensee’s licensing board
  • fair market value compensation (capped at $10,000 per year from all pharmaceutical manufacturers) for providing bona fide services as a speaker or faculty organizer or academic program consultant for a promotional activity (subject to disclosure to attendees), plus reasonable payment or remuneration for travel, lodging, and other personal expenses associated with such services, but no continuing education credit
  • fair market value compensation for participation on advisory bodies or under consulting arrangements, but subject to the aforementioned $10,000 per year cap (together with payments for services for a promotional activity)

A provider can still receive samples from manufacturers, provided that the licensee does not charge patients for the samples and dispenses samples in accordance with the licensee’s licensing board.

The New Jersey Board of Medical Examiners, Board of Dentistry and Board of Optometry already have regulations that govern the relationships between their respective licensees and pharmaceutical companies, but the proposed regulations will both clarify and strengthen the existing rules.

While restrictions on payments to providers exist in other states, New Jersey’s proposed rules appear to be particularly stringent.  Pharmaceutical companies will need to carefully review their policies on all interactions with providers and, if the rules are passed, revise them accordingly as well as educate and monitor their employees and contractors for compliance.  Providers will also need to carefully track their relationships with pharmaceutical companies.  The regulations, if passed, will burden both parties.

Changes to MACRA to Hopefully Lessen the Burdens

The Centers for Medicare & Medicaid Services (“CMS”) recently published a proposed rule, which included modifications to the final rule that implemented the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) in 2017.  Some of the changes are detailed in this blog post.

The proposed rule increases the required participation threshold for providers from Medicare Part B annual charges of $30,000 to $90,000 and 100 or less Medicare patients annually to 200 or less Medicare patients annually.

CMS also finally provided proposed guidance on how to participate in virtual groups.  A virtual group is a combination of two or more federal tax identification numbers (“TIN”), with each TIN consisting of ten or fewer eligible clinicians.  The virtual group must form itself and provide written notice of this election to CMS by December 1 of the calendar year preceding the performance period.  Clinicians can only participate in one virtual group.  All eligible clinicians in a TIN must participate in the virtual group except for those who participate in the Alternative Payment Model (“APM”) scoring.  Virtual groups can opt to receive a determination as to whether the participants qualify to form a virtual group and will then be required to establish a formal agreement amongst the members.  Virtual groups will be subject to the same reporting and performance standards as non-virtual Merit-Based Incentive Payment System (“MIPS”) track groups.

Another part of the proposed rule is the creation of a new partial group reporting option.  Under this option, some clinicians under a TIN could use the APM reporting standard while the remaining participants would collectively report under MIPS.

CMS also proposed a Facility Based Measurement for the 2018 MIPS performance year.  Facility-based clinicians who have at least seventy-five percent of their professional services furnished in the emergency department or other hospital inpatient setting would qualify for this option.  The hospital Total Performance Score from the facility where the clinician treats the highest number of Medicare beneficiaries during the measurement period would be converted into the MIPS quality performance category and cost performance category score.

By proposing these changes and others, CMS has indicated a willingness to continually examine the impact of MACRA on providers and make adjustments to help with compliance while preserving the goals of the program. While 2017 is the transition year, 2018 is fast approaching, and providers need to be prepared for a full year of MACRA implementation.  Providers of all sizes, including institutional providers that employ clinicians, should continue to ramp up their readiness for full MACRA performance.

NJ Gainsharing Legislation Signed Into Law

New Jersey Governor Chris Christie recently signed into law S-913/A-3404, which took effect on May 1, 2017.  This new legislation permits New Jersey hospitals to establish commercial gainsharing programs that meet certain requirements and amends the Codey Law accordingly.

A New Jersey acute care hospital may now establish a hospital and physician incentive plan, with a physician or physician group.  The hospital must contract with an independent party to administer the plan and establish a hospital steering committee, with physicians making up at least half of the committee membership.

The committee will be charged with establishing institutional and specialty-specific goals related to patient safety, quality of care and operational performance.  The committee must ensure that:

  1. no payments are made for reducing or limiting medically necessary care;
  2. the appropriate course of treatment for each patient is determined, in consultation with the patient or the patient’s representative, by the attending physician or surgeon of record;
  3. safeguards are in place to ensure that there are no incentives to avoid difficult or complex medical cases, or to withhold, reduce or limit quality care;
  4. no payment is made for exceeding best practice standards established under the plan;
  5. overall payments to individual physicians under a plan shall not exceed 50 percent of the total professional payments for services related to the cases for which that physician receives incentive payments under the plan;
  6. individual physician performance is objectively measured, taking into account the severity of the medical issues presented by an individual patient;
  7. payments objectively correlate with physician performance and are applied in a consistent manner to all physicians participating in the plan;
  8. participating physicians are treated uniformly relative to their respective individual contributions to institutional efficiency and quality of patient care;
  9. performance and best practice standards established under the plan are based primarily on local and regional data;
  10. the methodology recognizes both individual physician performance, including a physician’s utilization of inpatient resources compared to the physician’s peers, and improvements in individual physician performance, including a physician’s utilization of inpatient resources compared with the physician’s own performance over time; and
  11. the elements of the methodology are properly balanced to meet the needs of physicians, hospitals and patients.

The plan can include multiple hospital participants, provided that the plan utilizes a facilitator-convener who will coordinate with the plan administrator and the hospital steering committee to facilitate plan administration, disseminate information concerning best practices and serve as the point of contact for the New Jersey Department of Health (“NJDOH”).

Except for plans limited to specific clinical specialties or diagnosis related groups, the plan must apply to all admissions and all inpatient costs related to those admissions in a given program.  Plans are to be open to all surgeons and attending physicians of record and may, at the discretion of the hospital, include other physicians involved in the provision of inpatient care.  A physician must have been on the medical staff of the hospital for at least one year to participate in the plan, except for hospitalists and physicians who are new to the hospital’s geographic area.  The plan must include a mechanism to limit incentives attributable to year-to-year increases in patient volume for physicians on staff with multiple admitting privileges. Patients are to be notified of the plan in advance of admission to the hospital.

The plan must be filed with NJDOH by the hospital or facilitator-convener prior to the anticipated start date of the plan.  The filing must include the incentive methodology, institutional and specialty-specific goals, quality and cost performance standards, and any standards, programs or protocols designed to ensure that the plan meets the requirements of the legislation.  Annual reports must be submitted to NJDOH setting forth the distributions made to physicians, quality and cost performance standards, proposed revisions to the plan, if any, and such other information as NJDOH may require.  NJDOH will review the plan and shall notify the hospital if its plan does not meet the requirements of the legislation.  NJDOH will provide the hospital with a reasonable opportunity to remedy any deficiencies in the plan, and may terminate a plan that continues to fail to meet the requirements of the legislation.

With respect to the amendment to the Codey Law, the definition of “significant beneficial interest” now excludes “payments made by a hospital to a physician pursuant to a hospital and physician incentive plan.”  It is important to note that the definition under the Codey Law of a “hospital and physician incentive plan” is limited to a plan that meets the requirements of this legislation.

While gainsharing programs are not new to New Jersey, it is clear that the state government has recognized the trend of the expansion of such programs in health care and is supportive.  Providers may wish to seize this opportunity to explore affiliations that align their visions for health care, but preserve some independence between hospitals and physicians, which appears to have become a mutual goal after the most recent spate of acquisitions of physician practices.  Hospitals should also review their physician employment agreements and professional service agreements to ensure that such agreements allow the hospitals to develop these incentive plans with their physicians or prepare amendments for the next round of renewals.  Beware, though, of simply following the requirements of this new legislation, while ignoring federal law restrictions, which will still be applicable.

Potential Pitfalls For the Health Care Private Equity and Family Office Investor

Despite the uncertain reimbursement environment and the strict regulatory scheme, health care remains an attractive industry for private equity and family office investors.  On the other side, health care providers facing a murky future and looking for capital to expand their platforms are looking for the opportunities presented by private equity and family office investors.  The resulting marriage can prove fruitful for both parties.

Investors are typically aware of the tough regulatory environment in health care, but are not necessarily up to speed on what they should be looking for when conducting due diligence on potential provider partners.  Here are a few topics to keep in mind:

  1. Coding:  Providers have been scrutinized in recent years for improper coding, upcoding and insufficient documentation in the medical record to support the code provided for the service rendered.  The code directly corresponds with the reimbursement provided to the provider for the service.  Improper coding, whatever the reason for it, can result in recoupment of payments, civil penalties and criminal penalties.  An investor should engage a qualified and experienced coding consultant to audit the potential partner’s coding practices.
  2. Compliance:  Some providers are required by law now to have robust compliance programs in place while others are not required, but it is strongly recommended and may become required for all sometime in the near future.  Compliance programs consist of more than just a binder of policies and procedures collecting dust on the shelf; they include regular audits and risk management programs.  Experienced counsel should be engaged to review and audit a potential partner’s compliance program.
  3. Self-Referral and Anti-Kickback Laws:  These laws place strict limitations on relationships between providers and other potential referral sources.  What may be the valuable keys to the success of a provider (and, ultimately, an investor’s returns) exists in a dangerous minefield and tangled regulatory maze.  This goes beyond the well-known federal Stark Law and Anti-Kickback Statute and extends to various state versions of those laws, some of which mimic their federal counterparts and others which are completely different.  Experienced counsel should be engage to evaluate all relationships which may implicate these laws.
  4. Corporate Practice of Medicine Doctrine:  See Cecylia Hahn’s March 13, 2014 post on this blog for a complete explanation of this concept, but also be aware that many states have some form of this doctrine.  Of course, the doctrine is not identical across the states that employ it.
  5. Licensing:  Many states require that certain types of health care facilities be licensed and, in some instances, obtain a certificate of need before getting licensed.  It is vital to ensure that the facility has all of the licenses and permits that it needs as penalties for non-compliance can range from daily monetary penalties to complete shutdown of a facility.  Requirements vary from state to state.  Additionally, an investment, depending on the structure, may trigger a change of ownership or control that requires notice or consent of a licensing authority in connection with the investment.
  6. HIPAA:  For many years, HIPAA existed with little enforcement.  The regulatory scheme was out there, but a violation did not appear to lead to any consequences.  No more.  Heavy penalties for violations have been publicized in recent years, from hundreds of thousands of dollars to tens of millions of dollars, from small practices to large institutions.  When a breach happens, the government has seized upon that opportunity to examine whether the provider is strictly following HIPAA, including have the required policies and procedures in place and conducting risk assessments.  Experienced counsel should be engaged to review and audit a potential partner’s HIPAA compliance program.

The above are just a few of the areas that a potential investor should evaluate when exploring a transaction with a potential provider partner.  The rewards may be achievable in the partnership, but it is important to conduct the appropriate due diligence to avoid the possible penalties.

MACRA: Alignment Beyond The New Advanced Alternative Payment Models

The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) provides for two reporting tracks for eligible practitioners:  the Merit-based Incentive Payment System (“MIPS”) and Advanced Alternative Payments Models (“AAPMs”). There are only a few models that have been approved by the Centers for Medicare and Medicaid Services as AAPMs for 2017, and the list of expected 2018 AAPM models is quite short.  Further, the AAPM requirements include, among other criteria, a strict risk-bearing standard.

Missing from the list of AAPMs: clinically integrated networks (“CINs”), physician-hospital organizations (“PHOs”) and many of their brethren.  However, that does not mean that CINs and PHOs and other non-advanced alternative payment models (“APMs”) are about to fade into the night.  On the contrary, it is likely that these types of models will continue to proliferate.  The reporting requirements for eligible practitioners on the MIPS track are quite daunting.  Additionally, independent practitioners will need to expend significant sums and time reporting for MIPS.

This is where the non-advanced APMs come in. By this time, most of the remaining independent practitioners fall into one of three categories: (1) those who do not want to be employed by a health system; (2) those who a health system does not want to employ and (3) those that were employed by a health system, but are not any longer.  Yet, most of those practitioners will be subject to MACRA and will have a difficult time going it alone.  Moreover, in an era of continued consolidation and competition, health systems continue to evaluate alignment models with community practitioners.

It is possible that independent practitioners will now see more than ever the value of joining a non-advanced APM. The non-advanced APM likely has the personnel and the resources to help practitioners choose the appropriate measures for MIPS reporting, compile the necessary data, analyze the data and complete the actual reporting.  Further, the cost of joining and maintaining participation in a non-advanced APM for an independent practitioner is likely much less than what it would cost that same practitioner to comply with MACRA on his or her own.  Additionally, these benefits would be in addition to those already offered by non-advanced APMs such as data sharing, best practice protocols and joint contracting.  Non-advanced APMs allow the practitioners to remain independent, but also bring alignment, on a non-exclusive basis, with a health system.

MACRA represents a significant change for health care providers, but it also represents a great opportunity.