Yesterday, the U.S. Department of Health and Human Services (HHS) named the Certification Commission for Health Information Technology (CCHIT) and the Drummond Group as the initial organizations qualified to test and certify electronic health record (EHR) systems as capable of meeting the meaningful-use criteria of the federal health IT subsidy program established by the American Recovery and Reinvestment Act (ARRA) of 2009.  At this time, these ONC-Authorized Testing and Certification Bodies (ONC-ATCBs) will be the only two entities that can certify EHRs in the “temporary” certification program outlined by the Office of the National Coordinator (ONC) for Health Information Technology in a recently released rule.  This may be an indication of a relatively small number of entities that will eventually be certifying EHRs and EHR modules as meeting the criteria for meaningful use, but in a statement HHS confirmed additional ONC-ATCBs were under review.

Last week, as the Senate remained in session to finish up some last-minute business before the August recess, Majority Leader Harry Reid and Washington Senator Patty Murray led an effort to pass a $26.1 billion state-aid package. The measure, in the form of a substitute amendment to the Federal Aviation Administration reauthorization bill, provides $16.1 billion to state governments to put towards their Medicaid expenses. It accomplishes this by extending the increases in the Federal Medical Assistance Percentages (FMAP) for a total of six months, a provision that originated in the stimulus bill.

Republican Senators Susan Collins and Olympia Snowe provided crucial votes for the majority, enabling them to suspend debate and ultimately win passage on the amended bill. The Congressional Budget Office scored the bill as being deficit-neutral over the ten year window in part to a number of revenue-raising provisions including cuts in the food stamp program and international tax credits, as well as recessions to a wide variety of other programs. Although many of these cuts drew criticism, the bill is being praised by many states that are desperately in need of the Medicaid funds.

In wake of the Senate’s passage of the bill, House Democratic leadership announced that it would be calling members back into session this week in order to consider the legislation. House Majority Leader Steny Hoyer announced that the House will meet in pro forma session today and again at 10 a.m. on Tuesday to “vote on the bill and send it to the president for his signature.” Although many members may be reluctant to vote for another spending measure in such proximity to the upcoming elections, the fact that both of the major provisions in the bill have already been passed through the House on two separate occasions bodes well for its chances this time around.

After the final vote on the Medicaid bill, the Senate was also able to achieve passage of Senator Blanche Lincoln’s bill to reauthorize federal children’s nutrition programs, as well as a prescription drug disposal bill. Senators are scheduled to return to Washington on September 13, and will begin consideration of competing amendments to a small business bill soon thereafter. The amendments, offered by Senators Mike Johanns and Bill Nelson, would adjust IRS vendor-purchase tax reporting requirements included in the health care overhaul law. In addition, the Johanns amendment would eliminate a preventive care trust fund and decrease the requirements for mandatory health coverage beginning in 2014.

Last week also saw the release of the annual Medicare and Social Security Trustees Report, which depicted an overly optimistic view of the future of Medicare, although the validity of that report has been questioned given that the authors were all members of the current administration.

State challenges to the health care reform law also received a boost last week as a federal court rejected the administration’s request to dismiss the Virginia lawsuit questioning the law’s constitutionality. Additionally, voters in Missouri overwhelmingly supported a measure to repeal the individual mandate created in the reform law, becoming the first state to overturn a central element of the law. This could be the first in a string of such actions taken by individual states in the coming months, as there continues to be growing anxiety over the implementation of state-based insurance exchanges.

On Tuesday, July 27, 2010, the House Energy and Commerce Subcommittee on Health held a hearing, entitled, “Implementation of the Health Information Technology for Economic and Clinical Health (HITECH) Act.”  The hearing focused on the progress and plans for implementation of the provisions of the HITECH Act aimed at nationwide electronic use and exchange of health information since its passage on February 17, 2009, as a part of the American Recovery and Reinvestment Act (ARRA) of 2009.

Several members of the Committee voiced their concern that multi-campus hospitals are not eligible for seperate electronic health record (EHR) incentive payments for each qualifying hospital. 

Mr. Tony Trenkle, Director of the Office of E-Health Standards and Services at the Centers for Medicare & Medicaid Services (CMS), addressed the interest from stakeholders that CMS accommodate multi-campus hospitals with a single CMS Certification Number (CCN) to allow each campus within the hospital to receive a separate EHR incentive payment. He stated that CMS carefully reviewed the comments and met with interested stakeholders, including the two largest hospital associations, the American Hospital Association and the Federation of American Hospitals, to hear their concerns with the policy described in the proposed rule. Taking this input as well as the legislative language of the Recovery Act into account, Mr. Trenkle explained that CMS came to the conclusion in its Final Rule that historically, a subsection (d) hospital has been treated as an entire institution and not each campus that is under the CCN.  Therefore, he stated that allowing each campus of one hospital to be considered its own hospital for purposes of EHR incentive payments, but not for other purposes, would inappropriately distinguish EHR incentives from other payment and program participation policies without clear statutory direction to do so.  To avoid this inconsistent treatment, Mr. Trenkle confirmed that CMS must have a consistent definition of a hospital for all policies, including EHR incentive payments, unless otherwise specified by law.  Finally, he noted that more specificity for future stages of meaningful use would be given in subsequent rulemakings.

The multi-campus hospital issue was discussed by several members, both Republicans and Democrats, of the House Energy and Commerce Committee.  Rep. Zach Space (D-OH) stated that numerous hospitals are going to be impacted by the multi-campus hospital regulation, and he specifically noted that the largest hospital in his district stands to lose about $2 million.  He inquired whether it will make it more difficult to adopt the very technology that the law is designed to promote.  Mr. Trenkle stated that the decision is based on existing policy and the provider number is based on how a hospital chooses to organize itself, consistent with the payment policy in other Medicare programs.  He explained that absent clear statutory intent, CMS does not intend to change, but the agency is committed to working with Congress. 

In response, Rep. Space introduced a bill (H.R. 6072), co-sponsored with a group of thirty bipartisan Members, including Committee Chairman Henry Waxman (D-CA), Rep. Michael Burgess (R-GA), Rep. Marsha Blackburn (R-TN), and Health Subcommittee Chairman Frank Pallone (D-NJ) that clarifies the eligibility for all qualified hospitals that are part of a larger multi-campus hospital system with one CMS provider number.   The legislation was referred to the House Ways and Means Committee and the Energy and Commerce Committee.  The American Hospital Association voiced strong support for the bill.

On Tuesday, July 13, 2010, the U.S. Department of Health and Human Services (HHS) released the greatly anticipated final regulations for the Medicare and Medicaid Electronic Health Record (EHR) Incentive Program and the Initial Set of Standards, Implementation Specifications, and Certification Criteria for EHR Technology. 

HHS Secretary Kathleen Sebelius stated the regulations move Americans toward a 21^stcentury health care system with patients and doctors regaining control.  Dr. Donald Berwick, new Administrator of the Centers for Medicare and Medicaid Services (CMS), stated that EHRs are the future of health care and it will bring tremendous benefits to ensure patient safety, reduce costs and improve access.  Dr. Richard Blumenthal, Director of the Office of the National Coordinator for Health Information Technology (ONC), explained that in his practice as a primary care physician he saw how the use of EHRs prevented tragic errors in providing prescription drugs and duplicating x-rays.  He noted while they may be small victories, but if spread across the health care system, it would greatly bend the cost curve down.

In an HHS press release, the following key changes in the final rules were noted:

• Greater flexibility for eligible professionals (EPs) and hospitals in meeting and reporting certain objectives for demonstrating meaningful use;
• An objective of providing condition-specific patient education resources for both EPs and eligible hospitals and the objective of recording advance directives for eligible hospitals;
• A definition of a hospital-based EP is one who performs substantially all of his or her services in an inpatient hospital setting or emergency room only; and
• Critical Access Hospitals (CAHs) are within the definition of acute care hospital for the purpose of incentive program eligibility under Medicaid.

Dr. Blumenthal also noted that overall achievement levels were reduced, for example, EPs will only have to electronically prescribe 40 percent of medications, down from 75 percent in the proposed rule.

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On June 24, the House passed the “Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010,” which will increase Medicare reimbursement to physicians by 2.2 percent through November 30, 2010.  President Obama signed the legislation into law on June 25.  Amy Hall, Director of the Office of Legislation at the Centers for Medicare and Medicaid Services (CMS) issued a notice to Hill staff explaining that Medicare physician “claims containing June 2010 dates of services which have been paid at the negative update rates will be reprocessed as soon as possible.”  The notification indicated that contractors have been instructed to stop processing claims with the 21 percent cut and to hold claims for services provided in June until the 2.2 percent update is loaded into the claims processing systems.      

After eight weeks of consideration of various versions of the “American Jobs and Closing Tax Loopholes Act of 2010” (H.R. 4213) that would extend the Medicaid FMAP funding increase, COBRA insurance, and unemployment benefits, the Senate continues to be in a holding pattern.  Senate Majority Leader Harry Reid most recently failed to get 60 Senators to support cloture on June 24.  Senator Ben Nelson voted with Republicans to block the measure.   The majority has not signaled whether it will try to pass another version this week, but it is the last week Congress is in session before the week-long July 4^th recess.

HHS has two major deadlines mandated by the health reform law, the Affordable Care Act, this week – the Department must establish high-risk pools and launch a health insurance web portal by July 1.  Thirty-one states have agreed to run their own high-risk pools, while 20 states will have pools administered by the federal government.

This week the House Education and Labor Committee will hold a hearing on H.R.5504, the “Improving Nutrition for America’s Children Act.”  The bipartisan bill aims to improve the meals children eat both in and out of schools, as well as support community efforts to reduce childhood hunger.  Additionally, the legislation establishes nutrition standards for all foods sold in schools.  The Senate Agriculture Committee has already marked-up its version of a child nutrition reauthorization bill, which awaits floor time.

On Wednesday, June 23, 2010, the House Energy and Commerce Subcommittee on Health held a hearingentitled “MedPAC’s June 2010 Report to Congress:  Aligning Incentives in Medicare.”  The hearing examined the findings and recommendations proposed in the report submitted by the Medicare Payment Advisory Commission (MedPAC) to Congress on June 15, 2010.

MedPAC Chairman Glenn Hackbarth testified that the Commission has offered 26 recommendations in two reports to Congress this year.  He highlighted areas where MedPAC commissioners have reached strong consensus, such as the unsustainability of Medicare and the need to look for ways to slow the growth rate of expenditures, while improving access and quality.  He stated that there needs to be consistent pressure applied to all health care services to look for ways to change relative values of payments and opportunities need to be examined that signal the type of care beneficiaries need and to reward that type of care.  As an example, he highlighted the medial home concept.  Additionally, Chairman Hackbarth stated that there still needs to be a robust and value-focused Medicare Advantage (MA) program because private plans have the ability to provide care in ways that traditional Medicare does not. 

He explained that it is important to reform how Medicare pays for Graduate Medical Education (GME).  Chairman Hackbarth stated that the Commission believes the GME system is the envy of the world, but the current system is not consistently producing physicians that the system needs to move towards a value-based health system.  He noted two types of deficits in the system: 1) the mix of physicians being produced (i.e. lack of racial and ethnic diversity; and 2) content of training, evidence-based medicine, team coordination, or shared decision making is not focused on.  Chairman Hackbarth stated his support for The Accreditation Council for Graduate Medical Education (ASCGME) for working on an outcomes project to refocus training on new skills and a focus on higher value health care, but urged rapid movement on implementing value-based standards.

Republican Members of the Committee largely used the hearing as a platform to air its grievances about the health reform law.  Chairman Waxman described the Republican comments as “propaganda.” 

 The majority of members were concerned that MedPAC’s recommendation to restructure GME funds would actually take money away from teaching hospitals.  Chairman Hackbarth reiterated that MedPAC was not recommending that money be taken away from hospitals, but that greater accountability be established for the funds.  Specifically, MedPAC recommended that the GME funds move away from being contingent upon fee-for-service and move towards value-based care.  He stated that the proposed standards for value-based GME payments would take effect in three years, which would give institutions time to conform.  Chairman Hackbarth declared that  Medicare could be the lever for this change. 

Rep. Donna Christensen (D-VI) stated that when CMS institutes a least costly alternative (LCA) policy, providers often face a financial loss when they prescribe a product that is more expensive.  She asked to the extent that Congress grants CMS explicit authority to institute LCA policies for drugs and biologics, what safeguards does MedPAC recommend so that access to medically needed therapies are appropriately observed.  Chairman Hackbarth stated that least costly alternative policies and reference pricing need to be informed by the best clinical evidence and the process needs to be transparent where all interested parties have the opportunity to present information to CMS.  He noted that MedPAC reported that it would be advantageous to give CMS and the Secretary of HHS more flexibility to execute these policies, but it does not mean abdication by Congress.  Chairman Hackbarth noted that Congress could reserve the right override policies.

Rep. Gene Green (D-TX) inquired whether there will be a problem within the Agency for the newly created Center for Medicare and Medicaid Innovation (CMI).  Chairman Hackbarth explained that the health reform law took a major step in giving the Secretary broader authority for testing new ideas in Medicare, but that in order to meet the challenges that Medicare faces, CMS will need to change the process for testing new ideas.  He noted that currently innovation is painfully slow, but that the health reform law could accelerate the process.  Chairman Hackbarth stated that his greatest concern is that resources will be needed to implement successful demonstrations. He also asked about self-referral and imaging services.  Chairman Hackbarth stated that there is variability among the different types of imaging services, but that the combination of physician ownership, fee-for-service, and mispricing of services leads to over-utilization.

Yesterday, the Medicare Payment Advisory Commission (MedPAC) released its June 2010 Report to the Congress entitled Aligning Incentives in Medicare.  It addresses Medicare payment accuracy, aligning provider incentives in a reformed health care system, improvements to the Graduate Medical Education (GME) system, and the conflicting incentives in Medicare and Medicaid that affect individuals eligible for both programs. The report made specific recommendations on GME.  Most notably, the Commission urged Congress to consider performance-based GME funding by October 2013.  Additionally, MedPAC suggested that the Secretary of HHS establish standards that should, “specify ambitious goals for practice-based learning and improvement, interpersonal and communication skills, professionalism, and systems-based practice, including integration of community-based care with hospital care.”

 A chapter also touched on the dual eligible population.  MedPAC suggested that the design of care coordination approaches should be customized to match the needs of different groups of dual-eligible beneficiaries because of the variation in the level and mix of spending.  For example, MedPAC states that care coordination for nursing home residents would be best if based at the facilities where they are residing.  Additionally, MedPAC notes that care coordination is hindered by the conflicting Medicare and Medicaid incentives. 

The report does not make specific recommendations about in-office ancillary services (IOAS), such as laboratory tests, but explored several policy options under the IOAS exception.  MedPAC noted that the rapid growth of services covered by the IOAS exception are sometimes furnished inappropriately because of the incentive for physicians to increase the volume of ancillary services under the fee-for-service payment system, and thus self-refer.  MedPAC explored limiting the ability of physician practices to self-refer.  MedPAC stated that a key purpose of the IOAS exception is for patients to receive ancillary services on the same day as their visit.  MedPAC’s three options to address concerns about the growth of ancillary services:

• Limiting the types of services or physician groups covered by the IOAS exception,
• Developing payment tools to mitigate incentives to increase volume, such as
  • Reducing payments rates for diagnostic tests preformed by self-referring physicians, and
  • Improving payment accuracy for IOAS in the physician free schedule and eventually creating larger payment bundles that include IOAS often furnished during the same visit of same episode of care.
• Adopting a targeted prior authorization program for advanced diagnostic imaging services.

The Commission is expected to further examine these options with the goal of developing policy recommendations in the future.

This week the Senate will resume consideration of the “American Jobs and Closing Tax Loopholes Act” (H.R. 4213), a substitute amendment released by Senate Finance Committee Chairman Max Baucus. The legislation would provide a 2.2 percent update to physicians for the remainder of 2010 and a 1 percent increase in 2011 bill at a cost of $144 billion. The key difference in the health provisions of the House and Senate extenders legislation is that the Senate version includes a six-month extension through June 30, 2011 of the enhanced Federal Medicaid Assistance Percentages (FMAP) rate. Senate Republicans introduced an alternative package that reduces the deficit by $55 billion. The amendment extends the “doc fix” an additional year and provides a 2 percent increase in reimbursement levels for 2010, and additional 2 percent increases in both 2011 and 2012.  Other potential amendments filed include an extension of COBRA benefits for unemployed worker health insurance, and adjustments to the 340B inpatient discount program.

The Administration continues to promote the effects of the new health care reform law across the country. President Obama hosted a town hall meeting to announce the mailing of $250 checks to assist seniors whose drug coverage found them in the “dount hole” causing high out-of-pocket costs for prescription drugs.

Chairman of the House Education and Labor Committee George Miller introduced the House’s version of a child nutrition reauthorization bill, the “Improving Nutrition for America’s Children Act.” The legislation would authorize the Department of Agriculture to set nutrition standards for all foods sold or served at schools, as well as raise reimbursement rates for schools that meet higher nutritional standards, and improved food safety requirements for schools meals programs. Additionally, it aims to improve program administration, support services and program access and modernize the WIC program by extending period of certification for children, increasing support for breastfeeding, and transitioning from paper food vouchers to an electronic benefit program. Chairman Miller stated that the legislation mirrors key investments proposed by President Obama and First Lady Michelle Obama in her “Let’s Move” initiative, including reducing childhood obesity and improving school wellness. The Senate version has already been considered by the Senate Agriculture Committee and awaits floor time.

This week, the Health Subcommittee and the Oversight Subcommittee of the House Ways and Means Committee will hold a joint hearing on reducing fraud, waste and abuse in Medicare on Tuesday, and the Health Subcommittee of the House Energy and Commerce Committee will hold a hearing titled “NIH in the 21st Century: The Director’s Perspective” also on Tuesday.

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Congress to Consider Extenders Legislation This Week

This week, the House and Senate are expected to consider and vote on the “American Jobs and Closing Tax Loopholes Act” (H.R. 4213). House Ways and Means Committee Chairman Sandy Levin and Senate Finance Committee Chairman Max Baucus released the tax extenders legislation last week, which includes several health care provisions, including a six-month extension of the temporary increase in Federal Medicaid Matching Rate and extension of COBRA premium subsidy for individuals terminated on or before December 31, 2010. The bill would also provide an update to physicians for the remainder of 2010 and 2011. Payment rates would increase in 2012 and 2013 if spending growth is within reasonable limits. The bill provides an extra allowance for primary and preventive care in 2012 and 2013.

IRS Issues Guidance on Therapeutic Discovery Project Program

The Administration continues to rollout health reform regulations. Last week, the Internal Revenue Service released guidance on the Therapeutic Discovery Project Program that was established in the Patient Protection and Affordable Care Act. The health reform law authorized a two-year tax credit designed to encourage investments in new therapies to prevent, diagnose, and treat chronic diseases. Firms with 250 employees or less could receive up to 50 percent of the cost of biomedical research up to a maximum credit of $5 million. Applications for the credit are due on July 21, 2010. The IRS will make determinations of eligibility for credits no later than October 29, 2010.

National Commission on Fiscal Responsibility Reconvenes

The National Commission on Fiscal Responsibility will convene for its second meeting, this time on the Hill, on Wednesday. The meeting will be webcast at www.whitehouse.gov/live. The Commission has issued a request for comments and ideas to address the country’s fiscal challenges. Comments can be emailed to commission@fc.eop.gov and will be part of the public record.

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Health Care Reform Regulations

This week, the Health Resources and Services Administration will publish notice to establish a rulemaking committee. The Patient Protection and Affordable Care Act requires the Administration to establish a methodology and criteria for designation of medically underserved populations and primary care health professions shortage areas.  The rulemaking committee will work to reach consensus among technical experts and stakeholders on an interim final rule on the methodology and criteria.   

The interim final rules for group health plans and health insurance issuers related to dependent coverage of children to age 26 is currently under review at the Office of Management and Budget. The interim final rule is expected to be one of several forthcoming rules required under the Patient Protection and Affordable Care Act.   

House Appropriations Chairman Announces Retirement

Last week, House Appropriations Committee Chairman Dave Obey announced his retirement.  He served as the Chairman of the full Committee and the Labor-Health and Human Services Subcommittee. Rep. Norm Dicks of Washington is expected to serve as Chairman of the full committee. Rep. Nita Lowey of New York, the second ranking Democrat on the Labor-HHS Subcommittee, or Rep. Rosa DeLauro of Connecticut, Chairwoman of the Agriculture Subcommittee, will likely serve as the Labor-HHS Subcommittee Chairwoman upon Chairman Obey’s retirement.  

Medicare Physician Fee Fix 

Congress has three work weeks prior to adjourning for Memorial Day recess. With the physician fee fix set to expire on May 31, the House is posed to move an extenders bill that would include an extension of the Medicare physician fee fix. Majority Leader Steny Hoyer stated that the House would act within the next two weeks. If the cost of the extenders package is not offset, we expect that the Senate will not be able to move the legislation. In the midst of the financial reform debate, several Senators have been working on an extenders package, which would also prevent the drastic Medicare physician payment cuts from going into effect.