Political Maneuvering and the President's Health Care Plan

President Barack Obama has mounted a push to pass a health reform plan following a "template" his administration recently unveiled. The president's plan includes provisions from the House and Senate bills (and possibly a few Republican ideas). Democrats intend to use the congressional "reconciliation" procedure, which requires "only" a majority vote in the Senate and would avoid Republican filibusters, to pass at least a large part of the health reform plan, though Republicans intend to try to block that bill by arguing numerous points of order and submitting an overwhelming number of amendments. The Democrats would meanwhile have the House of Representative separately pass the Senate bill which has already been approved by the Senate. Many House Democrats, however, are reluctant to do so unless the Senate provides ironclad assurances that it will later pass a reconciliation bill which includes items important to the House so that the original Senate bill will not be signed by the president. The reconciliation measure would serve as a "corrections" bill that would make changes to the original Senate bill so that the final plan would satisfy at least all Democrats. Groups of House Democrats, for example, seek elimination of the special treatment for Nebraska's and Louisiana's Medicaid programs and for Florida's seniors in Medicare Advantage plans, in the Senate bill as passed earlier. Others would like to revise the abortion language, improve subsidies for low- and middle-income families to purchase insurance and remove the excise tax on high-cost insurance plans.

Key elements of the White House plan include:

  • Closing the Medicare prescription drug "donut hole" coverage gap;
  • Eliminating the Nebraska Medicaid exception and providing uniform support for state Medicaid programs for newly eligible individuals;
  • Increasing tax credits for health insurance premiums;
  • Federal review of insurance rates;
  • Delaying the excise tax on high-cost insurance plans and increasing the amount of exempt premiums;
  • Broadening the Medicare Hospital Insurance tax base to include unearned income of high-income households;
  • Tax credits for small businesses to support health insurance for their employees; and
  • Additional measures to combat fraud, waste and abuse in Medicare and Medicaid.

HIT Policy Committee Workgroup Seeks Modification of Proposed Rules on Meaningful Use and Standards For Electronic Health Records

The meaningful use workgroup of the Health and Human Services (HHS) HIT Policy Committee recently issued twelve recommendations to modify the January 13, 2010, proposed rule on meaningful use. In particular, the workgroup recommended that more flexibility be provided in meeting meaningful use criteria and that the "all-or-nothing" approach contained in the proposed rule be relaxed to some degree. Under the proposed rule, eligible professionals and hospitals must meet every single meaningful use criterion in order to receive any incentive payments. The recommendation establishes some mandatory criteria and would allow some of the non-mandatory criteria to be deferred to Stage 2. The workgroup's recommendations included:

  • Include progress note documentation for eligible professionals in Stage 1;
  • Remove "core measures" from Stage 1;
  • Stratify quality reports by disparity variables, such as race, ethnicity, gender, primary language and insurance type;
  • Require that providers maintain up-to-date lists, rather than one-time entries;
  • Include recording of advanced directives in Stage 1;
  • Include patient-specific education resources in Stage 1;
  • Include clinical efficiency measures in Stage 1;
  • Include a roadmap for Stage 2 and 3 to make future expectations more feasible;
  • Require that Computerized Physician Order Entry (CPOE) be done by authorizing provider (which, based on the discussion, is defined as the licensed professional responsible for care decisions);
  • Amend prevention/follow-up reminders criterion to apply to a broader range of the population and allow for provider discretion in targeting reminders;
  • Clarify the definition of "transitions of care" to occur when a patient changes setting of care, and delete the term "relevant encounter"; and
  • Allow some flexibility in meeting meaningful use criteria by allowing some of the criteria to be deferred to Stage 2.

The chart below outlines the mandatory criteria and provides the number of non-mandatory criteria that could be deferred under each priority area if the recommendations were adopted:  

Priority area

# of non-mandatory objectives that may be deferred by EP or hospital

Mandatory objectives for EPs and hospitals

Improving quality, safety, efficiency, and reducing health disparities


  • Have demographics recorded as structured data
  • Report ambulatory/hospital quality measures to CMS or the States
  • Use CPOE/Use of CPOE for orders (any type) directly entered by authorizing provider (for example, MD, DO, RN, PA, NP)
  • Generate and transmit permissible prescriptions electronically (eRx)

Engage patients and families in their health care


  • Patients discharged are provided electronic copy of their instructions and procedures

Improve care coordination



Improve population and public health



Ensure adequate privacy and security protections for personal health information


  • Protect electronic health information created or maintained by the certified EHR technology through the implementation of  appropriate technical capabilities

The Centers for Medicare and Medicaid Services (CMS) issued the proposed rule on meaningful use and other provisions governing the electronic health record (EHR) incentive programs on January 13, 2010. The Office of National Coordinator (ONC) issued an interim final rule setting out standards and specifications for health information technology on the same day.

DOJ Charges Guidant With Criminal Violations Based on Failures to Explain Problems With Defibrillators to FDA

On February 25, 2010, the Justice Department charged Guidant (acquired in 2006 by Boston Scientific) with criminal violations of the federal Food, Drug, and Cosmetic Act related to safety problems with its implanted defibrillators. The DOJ alleges that Guidant became aware of electrical problems with these life-saving devices that could render them inoperative and, in response, redesigned the devices and provided physicians with updated operating instructions. According to prosecutors, however, Guidant did not fully explain the problems and corrections to the FDA as required by law. Guidant is expected to enter a formal guilty plea agreement. Boston Scientific has already paid $296 million on behalf of Guidant to resolve the charges, and has said that its employees acted in good faith, intending to comply with law, and it is pleased to be able to resolve the matter.

In December 2009, Boston Scientific announced that it agreed to pay the federal government $22 million to resolve allegations that Guidant paid physicians kickbacks through post-marketing research designed to induce them to use Guidant products. In 2003 and 2004, Guidant conducted post-marketing studies of its implantable cardiac devices and the federal government contended that such studies were designed to increase device sales by paying physicians to select Guidant devices, rather than devices manufactured by Guidant's competitors, to implant into their patients. Participating physicians were paid a fee of $1,000 to $1,500 for each implanted device. The government alleged that the participating physicians were selected because Guidant believed the fees associated with participation would cause the physicians to switch some of their business to Guidant.

Under the terms of the settlement agreement, in addition to paying to the federal government $22 million, Boston Scientific agreed to enter a corporate integrity agreement under which it must enhance its compliance procedures relating to payments to health care providers. The settlement agreement did not involve admission of any fault or liability by Boston Scientific. The federal government released Boston Scientific from certain civil and administrative monetary claims, as well as common law claims of unjust enrichment and fraud, and agreed not to seek the company's exclusion from participation in federal health care programs.

Will Congress Fix the Stark Law Disclosure Dilemma?

One of the most difficult compliance issues facing health care providers is what to do when their organizations discover insignificant or ''technical'' violations of the Physician Self-Referral Law, i.e., the Stark law, 42 U.S.C. § 1395nn. Hospitals and other entities that discover Stark law violations face the risk of enormous potential exposure that is completely out of proportion to any harm caused to the government or to society, yet the government currently has no established process to enable entities to disclose and resolve Stark law violations on a reasonable basis. The risk of ruinous liability arises because the Stark Law and its regulations are widely understood as requiring health care providers to refund any amounts received from Medicare in violation of the statute.

Handling Potential Whistleblowers: How Providers Can Deter Qui Tam Lawsuits

The biggest fraud enforcement risk facing health care providers may be lawsuits by "whistleblowers" under the qui tam provisions of the False Claims Act (FCA). Qui tam lawsuits are frequently unrelated to actual workplace issues and are filed by disgruntled former employees to "get even" for wrongs they feel they have suffered. Using methods to effectively manage disenchanted employees, such as channeling regulatory complaints through the provider's compliance program or including certain provisions in severance agreements, providers can effectively mitigate their risk. Drinker Biddle partners Jesse Witten (Washington, D.C.) and Mark Nelson (Chicago) authored a recent article for BNA's Health Law Reporter, "Handling Potential Whistleblowers: How Providers Can Deter Qui Tam Lawsuits," on this issue.

CMS Launches Fifth Annual Medicare Health Care Provider Satisfaction Survey

CMS launched the fifth annual health care provider satisfaction survey of the Medicare fee-for-service (FFS) contractors that process and pay more than $370 billion in Medicare claims each year. The Medicare Contractor Provider Satisfaction Survey (MCPSS) offers Medicare FFS providers an opportunity to give CMS feedback on their satisfaction and opinions about the services provided by their respective contractors.

CMS is sending the 2010 survey to approximately 30,000 randomly selected providers, including physicians and other health care practitioners, suppliers, and institutional facilities that serve Medicare beneficiaries across the country. Those health care providers selected to participate in this year's survey will be notified beginning in January 2010.

The MCPSS is a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which required CMS to develop performance measures. The MCPSS is a way for CMS to hear provider concerns and monitor trends.

The Future of Physician-Owned Hospitals

Physicians with an ownership interest in a hospital or physicians interested in investing in or opening a hospital should take heed of the proposed health reform bill. While no final bill exists yet, the versions passed by the House and Senate each contain language that will effectively make new physician-owned hospitals ineligible for Medicare reimbursement. The language would eliminate a Stark law exception -- allowing a physician to refer patients to a hospital he or she has an ownership interest in if the physician is authorized to perform services at the hospital -- for any hospital in which the physician invests after August 1, 2010. This prohibition would apply to all physician-owned hospitals that do not obtain Medicare reimbursement certification by the deadline.

The bills originally applied the prohibitions to hospitals in which physicians had not invested prior to February 1, 2010, but the Senate Manager's Amendment to the bill delayed the prohibition date to August 1, 2010. Even with this extension, the Physician Hospitals of America (PHA) has projected that at least 75 planned physician-owned hospital projects would be killed by the possible legislation.

Some hospitals and hospital systems are already anticipating repercussions if this provision is included in a final enactment. The Dallas Morning News has reported that as many as 32 projects to build physician-owned hospitals in Texas alone would not meet the August 1, 2010, deadline. According to the newspaper, north Texas has a higher concentration of physician-owned hospitals than any place else in the country, and yet at least one executive of a physician-owned rehabilitative hospital company believes that there is still demand. Another newspaper reported that a physician-owned heart hospital in Oklahoma is hopeful that it will receive its certification in time, but that obtaining a Medicare certificate could take "two weeks, nine months or two years."

The bills present other challenges for physician-owned hospitals. Immediately upon enactment of the pertinent section, these hospitals will be prohibited from increasing their aggregate percentage of physician ownership or expanding their facilities with new operating rooms, procedure rooms or beds. The only way for physician-owned hospitals to update or expand their facilities while preserving their Medicare participation would be to meet five or more criteria (depending on which version of the bill) is passed and whether the Department of Health and Human Services promulgates further criteria. These criteria are largely out of the hands of the hospital, such as the population growth of the county where the hospital is located and average bed capacity of the hospital's resident State compared to the national average.

PHA has posted a study estimating that none of existing physician-owned hospitals, and only 2 percent of existing non-physician-owned hospitals, would meet four of the required criteria. The narrow exceptions in effect will freeze physician investment in physician-owned hospitals at their current levels and prohibit growth of existing physician-owned hospitals.

Hospitals in the construction phase that will not make the August 1 deadline may be forced to decide between re-funding projects without physician investment or continuing to build physician-owned hospitals to cover only non-Medicare populations. Existing physician-owned hospitals may face the most difficult decisions, however, when they cannot expand their businesses to meet demand. .

CMS Issues Annual Report on National Health Spending

According to a new national report, health spending grew 4.4 percent in 2008, to $2.3 trillion ($7,681 per person). This represents the slowest rate of growth since CMS officially started tracking expenditures. The findings are part of a report issued by CMS' Office of the Actuary.

The 4.4 percent growth in 2008 was down from 6.0 percent in 2007, as spending slowed for almost all health care goods and services. Health spending as a share of the nation's GDP continued to climb, however, reaching 16.2 percent in 2008, up 0.3 percentage points from 2007.

Some other significant findings in the report:

  • Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared to 5.9 percent in 2007, the slowest rate of increase since 1998;
  • Physician and clinical services spending increased 5.0 percent in 2008, a deceleration from 5.8 percent in 2007;
  • Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5 percent in 2008, the same rate as in 2007;
  • Health care spending by private sources of funds grew only 2.6 percent in 2008 compared to 5.6 percent in 2007; and
  • Private health insurance premiums grew 3.1 percent in 2008, a deceleration from 4.4 percent in 2007.

Read more about the report.

Departing New Jersey Governor Signs Three Mental Health Bills Into Law

As one of his final acts before leaving office, New Jersey Gov. Jon S. Corzine signed three mental health bills into law. The three bills are intended to improve critical emergency mental health care by standardizing and streamlining care.

Assembly Bill 3582 requires the Department of Human Services (DHS) to develop procedures to enable hospitals promptly to transfer emergency department patients with mental illness to appropriate treatment settings if they have remained in an emergency room for 24 hours or longer. DHS must designate staff within the department who will be notified by a hospital when such a situation arises.

Assembly Bill 3583 requires DHS and the Department of Children and Families (DCF) to establish standardized admission protocols and medical clearance criteria for admission to behavioral health facilities. The protocols will cover routine laboratory and diagnostic tests; a medical clearance checklist for transfers or admissions to a psychiatric hospital; guidelines for emergency medical services personnel, procedures for requesting a patient transfer; procedures for contacting the physician at a designated state or county psychiatric hospital or short-term care facility who is responsible for coordinating medical clearance of a patient; and a mechanism for training all of the appropriate medical personnel and screening staff on these new standardized admissions protocols.

The third bill, Assembly Bill 3584, requires DHS and DCF to identify available mental health services and perform needs assessments.