On Thursday April 16th, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). Pub.L. 114-10. In two previous posts, we discussed MACRA’s repeal of the Sustainable Growth Rate formula (the “SGR”) and physician payment reform, and the payment provisions and offsets established by MACRA. This third post will detail the Program integrity and fraud and abuse provisions of MACRA.

Section 101(e)(7): Promoting Alternative Payment Models – Study and Report on Fraud Related to Alternative Payment Models under the Medicare Program

Buried within Section 101, which is the provision repealing the SGR and authorizing various reforms to physician reimbursement, Subsection (e)(7) includes a required study and report on fraud related to alternative payment models under the Medicare Program. This study will be conducted by the Secretary of the Department of Health and Human Services (the “Secretary”) and examine the applicability of Federal fraud prevention laws to the items and services furnished to Medicare beneficiaries for which payment is made under an alternative payment model defined by MACRA. In addition, this study will identify aspects of those same alternative payment models that are vulnerable to fraudulent activity and consider the implications of waivers of federal fraud prevention laws in support of such alternative payment models.

Within two years of the enactment of MACRA, the Secretary is required to submit to Congress a report providing the results of this study, which will include recommended actions to reduce the identified vulnerabilities of the alternative payment models and, as appropriate, recommendations from the Inspector General of the Department of Health and Human Services (“HHS”) regarding possible changes in Federal fraud prevention laws to reduce those vulnerabilities.

Section 104: Empowering Beneficiary Choices Through Continued Access to Information on Physicians’ Services

Section 104 requires that beginning in 2015, the Secretary make publicly available on an annual basis, through a searchable database, information regarding physicians and, as appropriate, other eligible professionals (which are defined to include physicians, physical or occupational therapists, qualified speech-language pathologists, qualified audiologists, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals) on items and services furnished to Medicare beneficiaries.

Section 104 of MACRA requires the Secretary to provide at least the following types of information:

1. The number of services furnished to beneficiaries of Medicare Part B by physicians or other eligible professionals (which may include information on the most frequent services furnished or groupings of services);

2. Submitted charges and payments for services; and

3. A unique identifier for the physician or eligible professional that is available to the public (e.g., NPI number).

Additional requirements of Section 104 include that the information made available under this Section must be searchable by at least:

1. The specialty or type of physician or other eligible professional;

2. Characteristics of the services furnished (e.g., volume or groupings of services); and

3. The location of the physician or other eligible professional.

Beginning in 2016, the Secretary is required to integrate the information made available under this section on the Physician Compare website hosted by the Centers for Medicare & Medicaid Services (“CMS”).

This required publication of data will be similar to the 2012 Medicare Provider Utilization and Payment Data information made public by the Secretary in April 2014. As we discussed in a previous post dated April 10, 2014, HHS’s original and historic release of Medicare payment data last year was the result of multi-year litigation, which resulted in a federal judge overturning an injunction that had been in place since the late 1970s prohibiting HHS from disclosing information about Medicare payments to individual physicians.

Even recognizing the general merits of annual publication of this type of data, the information has the potential to cause confusion. For example, certain physicians, notably oncologists and retinal surgeons, dispense drugs through their practices. Because Medicare pays these physicians directly for these drugs, without a detailed look at the CPT codes in the published data, it appears at first glance that these physicians receive disproportionately large incomes from treating Medicare patients.

Another example of problems caused by this data is the publication of charges. Only those who follow reimbursement closely understand that charge data is almost meaningless. This is because very few patients pay providers based on charges, but rather payment is typically based on a fee schedule set by third party payors. As a result, providers set their charges based on a variety of measures. In some cases charges are very close to the payment rates, and in some cases they are set well above payment rates in order to recoup from a small number of charge-paying patients losses the provider incurs from private payor reimbursement. All this appears to have been irrelevant to Congress as it has now mandated annual publication of providers’ charge data.

Section 505: Reducing Improper Medicare Payments

Section 505 of MACRA requires each Medicare Administrative Contractor (“MAC”) to establish an improper payment outreach and education program under which the MAC “through outreach, education, training, and technical assistance or other activities” will give providers located in its jurisdiction certain information suggested by MACRA (with priority placed on activities that will reduce improper payments in certain areas).

To help MACs in carrying out these education and outreach activities, the Secretary will give each MAC a list of the types of improper payments identified by recovery audit contractors (“RACs”) with respect to providers and suppliers located in the MAC’s jurisdiction. Examples of information to be provided by RACs include: providers and suppliers that have the highest rates of improper payments, items and services furnished in the region that have the highest rates of improper payments, and items and services furnished in the region that are responsible for the greatest total dollar amount of improper payments, among others.

Section 505 also allows the Secretary to retain certain monies recovered by RACs and make them available to CMS’s program management account for purposes of implementing strategies to help reduce the error rate of Medicare payments, among others.

Section 507: Requiring Valid Prescriber National Provider Identifiers on Pharmacy Claims

Another initiative aimed at Program integrity under MACRA is the requirement that, beginning in plan year 2016, a claim for a drug covered under Medicare Part D for a Part D eligible individual enrolled in a prescription drug plan under Medicare Part D or a Medicare Advantage Prescription Drug Plan (“MA-PD”) must include a valid NPI number for the prescriber. Section 507 also requires the Secretary to establish procedures for determining the validity of prescriber NPIs and for properly informing at the point of service individuals whose claims for covered Part D drugs are denied because the claim does not meet this NPI requirement of the reason for the denial.

Section 512: Eliminating Certain Civil Monetary Penalties; Gainsharing Study and Report

MACRA Section 512 contains two important changes related to gainsharing. First, Section 512(a) narrows the so-called Gainsharing Civil Monetary Penalty (“CMP”) Law (Section 1128A(b)(1) of the Social Security Act) so that it only applies to reductions or limitations of medically necessary services: “[H]ospitals or a critical access hospital [may not] knowingly [make] a payment, directly or indirectly, to a physician as an inducement to reduce or limit medically necessary services…[emphasis added].” Previously, the Gainsharing CMP applied to payments that induced physicians to reduce or limit anyservice – not just those which were medically necessary.

Second, Section 512(b) requires that within 12 months after the date of enactment of MACRA, the Secretary (in consultation with the Inspector General of HHS) submit to Congress a report with options for amending existing fraud and abuse laws and regulations “through exceptions, safe harbors or other narrowly tailored provisions, to permit gainsharing arrangements that would otherwise be subject to existing [CMP laws] or similar arrangements between physicians and hospitals.” In addition to gainsharing arrangements, this report must also consider those arrangements that “improve care while reducing waste and increasing efficiency.”

Section 512(b) also requires that the Secretary’s report:

1. Consider whether such provisions should apply to ownership interests, compensation arrangements or other relationships;

2. Describe how the recommendations address accountability, transparency, and quality, including how best to limit inducements to stint on care, discharge patients prematurely, or otherwise reduce or limit medically necessary care; and

3. Consider whether a portion of any savings generated by such arrangements (as compared to an historical benchmark or other metric specified by the Secretary to determine the impact of delivery and payment system changes under [title XVIII of the Social Security Act] on expenditures made under such title) should accrue to the Medicare program….”

Notably, MACRA is the second effort by the federal government in the last six months to propose changes to the CMP authorities. In its October 2014 Proposed Rule, the HHS Office of Inspector General (the “OIG”) proposed, in part, codifying the Gainsharing CMP in regulations by interpreting terms used in that statute.  The OIG also pointed out that it had proposed regulations in 1994 to interpret the Gainsharing CMP — but that proposal was never finalized.

In addition to its proposal to codify the Gainsharing CMP, OIG suggested in its October 2014 Proposed Rule interpreting certain provisions “in a manner that reflects today’s health care landscape.” The OIG noted that the Gainsharing CMP’s prohibitions were not limited to reductions or limitations of medically necessary items or services and thus could mean that “any change in current medical practice that a hospital might initiate [was] potentially a reduction in care that could trigger CMP liability,” even if that change were actually beneficial by improving care or reducing cost. The OIG determined that without a change in the Gainsharing CMP statute, the OIG could not read a “medically necessary” element into the Gainsharing CMP’s prohibition, but that given changes in the practice of medicine over the years, it was “considering a narrower interpretation of the term ‘reduce or limit services’ than [it had] previously held.” Through MACRA, Congress provided the long sought-after amendment.

This change to the Gainsharing CMP will likely bring new life to gainsharing proposals. The OIG already has indicated that it intends to proceed, as it has done in the past, through the Advisory Opinion process. Although there are advantages to this approach, the OIG should consider reopening its rulemaking from the October Proposed Rule to obtain input on the meaning of the term “medically necessary.” The problem is that if the OIG adopts a broad interpretation of this term, many beneficial gainsharing arrangements potentially will be stifled. Our health system is undergoing fundamental change, and we are seeing substantially slower growth in health care spending as a result. The changes we have seen since the enactment of the Affordable Care Act in 2010, and the changes that will likely continue more vigorously in the coming years have not merely reduced treatment deemed “medically unnecessary.” Inevitably, reduced spending also involves some amount of treatment deemed “medically necessary” care. The challenge is to identify care that, while perhaps technically “medically necessary,” is nevertheless care that provides marginal benefits. Carefully crafted gainsharing proposals should be permitted here to incentivize physicians to reduce wasteful, marginal care, while focusing instead on high quality services with demonstrated outcomes.