Category Archives: Government Accountability Office

House hearing ups ante on Medicare Advantage reform

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Political will seems to be growing to reshape the increasingly popular Medicare Advantage program.

At a House Energy and Commerce committee hearing on Tuesday, lawmakers on both sides of the aisle called for more oversight of MA following watchdog reports that found impediments to receiving covered care, including improper denials of prior authorization requests, and plans gaming the system in exchange for more funding from Medicare.

“Medicare Advantage is an important tool for helping seniors and we want it to succeed. We’re going to continue to conduct the oversight necessary,” said Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colo.

Witnesses at the hearing — officials from the Government Accountability Office, HHS Office of Inspector General and congressional advisory board MedPAC — also pointed to higher rates of beneficiary disenrollment in their last year of life and opaque plan data, which can complicate oversight efforts.

Surveys have shown MA remains extremely popular with beneficiaries, attracted by lower co-pays and supplemental benefits like vision coverage and telehealth. In the program, Medicare pays private plans a capitated monthly rate to provide care for their beneficiaries based on the severity of their beneficiaries’ needs.

The hearing comes amid inflamed industry debate over the future of MA.

For-profit hospital lobby Federation of American Hospitals submitted a letter for the record sharing concerns over some MA plans denying patient care and having inadequate care networks.

Meanwhile, MA trade group Better Medicare Alliance sent a letter to the CMS on Monday urging the agency to safeguard the program as Congress mulls changes to Medicare.

But as Medicare’s hospital benefit — part of which funds MA — limps towards insolvency, lawmakers appear poised to target the growing MA program in a bid to crack down on improper payments and care denials.

“This is something that I think is very much bipartisan,” said Rep. Gary Palmer, R-Ala.

Coverage delays and denials

It’s not the first time lawmakers have zeroed in on MA oversight as a strategy to save Medicare money: In a Senate hearing on Medicare insolvency in February, Sen. Elizabeth Warren, D-Mass., said “the Medicare system is hemorrhaging money on scams and frauds” due to insurers taking advantage of the program’s rules to increase profits.

Even amid rising congressional criticism of MA, lawmakers on Tuesday reiterated their support for the program overall, which covered roughly 27 million Americans in 2021.

That’s more than a third of all Medicare beneficiaries, though MA is expected to swell to cover half of all Medicare members by 2030.

But lawmakers said they are increasingly concerned about disparities in the quality of coverage offered by Medicare Advantage plans compared to traditional Medicare plans, along with unscrupulous practices in the program resulting in higher reimbursement for MA organizations.

A GAO report found MA beneficiaries in their last year of life disenroll from MA in favor of traditional Medicare at a rate two times higher than other MA members, suggesting the plans may not support high-cost and specialized care, testified Leslie Gordon, GAO’s acting director for healthcare.

Gordon called it a “red flag” for the program that requires more scrutiny from CMS.

In addition, an HHS OIG report published April found MA organizations wrongly denied members care, with plans turning down 18% of payment requests that should have been approved.

Erin Bliss, OIG assistant inspector general in the Office of Evaluation and Inspection, testified plans sometimes use internal critical criteria that are not required by Medicare. In one example, an MA plan denied a medically necessary CT scan to diagnose a serious disease, citing that the patient hadn’t yet received an x-ray, Bliss said.

When appealed, plan denials were reversed 75% of time, a rate DeGette called “alarmingly high.”

“We are concerned that patients are receiving the timely care they need in those situations,” Bliss said.

OIG also found plans denied 13% of prior authorization requests that would have been approved under traditional Medicare.

Rep. Michael Burgess, R-Texas, suggested policymakers consider requiring insurers to forego prior authorization for doctors with a consistent track record of submitting accurate data. That strategy, called “gold carding,” is already used in some states, including Texas and West Virginia, to pare back on prior authorization delays.

MA payment reform

Along with coverage restrictions, lawmakers at Tuesday’s hearing asked witnesses about the scope and severity of improper MA payments in a bid to zero in on specific solutions Congress and the CMS can enact.

Though MA has potential to save the Medicare program money, “the current incentives for MA plans are not adequately aligned with the Medicare program,” said James Mathews, MedPAC executive director.

“Substantial reforms are urgently needed,” especially in light of Medicare’s “profound” financial problems, Mathews said.

In 2022, the average MA plan bid was 85% of fee-for-service spending, Mathews said. However, Medicare pays plans 104% of fee-for-service costs.

That imbalance is partially due to plans making patients appear sicker than they are to get extra payments from the government, witnesses said. The practice, called “coding intensity,” resulted in an estimated $12 billion in excess Medicare spending in 2020, according to MedPAC data.

Methods include chart reviews, where plans identify and add patient diagnoses that aren’t included in the service record, and health risk assessments, where plans contract with vendors to visit beneficiaries homes and conduct assessments, finding new diagnoses that often aren’t backed up by other records, according to Bliss.

GAO estimates that roughly a tenth of Medicare payments to MA plans in 2021 were improper, Gordon said.

To try to tamp down on coding intensity, the CMS should conduct targeted oversight of MA plans that routinely use these tools, and reassess whether chart reviews and in-home assessments are allowed to be sole sources of diagnoses for payment purposes, witnesses said. In addition, MA should improve care coordination for enrollees who receive health risk assessments. 

The CMS should also consider replacing the quality bonus program and change its approach to calculating MA benchmarks, Mathews said.

In addition, the agency should require and validate data for completeness and accuracy before risk-adjusting payments through methods like medical record reviews, Gordon said.

Gordon also suggested the agency conduct more timely audits, as the CMS is currently missing out on recouping hundreds of millions of dollars in improper payments.

Policymakers appeared open witnesses’ suggestions to ensure MA is running as smoothly as possible, with Rep. Frank Pallone, D-N.J., calling for an additional hearing on the matter.

“This is bipartisan … You can be assured that we’re going to be following up,” DeGette said.

Administration Wants To Cut Back A Billion-Dollar Healthcare Program. Hospitals Say Now Is A Really Bad Time.

Posted on by • Posted in 2020 Election Issues, American Hospital Association (AHA), Center for Medicare and Medicaid Services (CMS), Dept of Health and Human Services (HHS), District Court of Appeals, Financially Distressed, Government Accountability Office, Health Policy, Health System, Hospital, Hospital Industry, Lawsuit, Medicare 340B Drug Discount Program, Pandemic, Pharmaceutical Industry, Safety Net Hospitals, Safety-Net Providers, Vulnerable Populations • Leave a comment

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340B Drug Pricing Program: What Is it, How Does It Work?

The Trump administration has been fighting in court with public and nonprofit hospitals since 2017 over a plan to slash the reimbursement rates for drugs prescribed to Medicare patients.

In 2018, Park Ridge Health, a not-for-profit healthcare network in western North Carolina that serves a large population of lower-income patients, delayed plans to buy a new CT scanner for stroke patients.

The Trump administration had drastically scaled back a federal drug reimbursement program that benefitted public and not-for-profit hospitals. Park Ridge, now called AdventHealth Hendersonville, stood to lose $3.3 million per year, the hospital’s chief financial officer wrote in a court affidavit, and it wasn’t just the CT scanner on the line — that money went toward a variety of services for elderly and poor patients, including new cancer treatment facilities, women’s healthcare, and partnerships with nonprofits on issues like prescription drug abuse.

Park Ridge and other hospitals have been battling with the administration in court for three years over a plan to slash by nearly 30% the reimbursement rate that hospitals get for certain drugs prescribed to Medicare patients. The hospitals won the first round. The US Court of Appeals for the DC Circuit heard arguments in November and has yet to rule, and for now the cut is still in effect. In the meantime, the Centers for Medicare & Medicaid Services (CMS) is exploring another way to make the cut if they lose the case, over the objection of hospitals.

The litigation predates the coronavirus pandemic, but the stakes are higher as hospitals nationwide lose tens of billions of dollars weekly while nonessential services and elective surgeries are on hold because of the ongoing crisis.

“If [hospitals] lost that money now, it would make an already dire financial situation worse,” Lindsay Wiley, director of the Health Law and Policy Program at American University Washington College of Law, wrote in an email to BuzzFeed News.

Hospitals that serve a high proportion of lower-income patients can buy outpatient drugs at a discounted price through what’s known as the 340B program. Until 2017, these hospitals were reimbursed by the federal government for drugs prescribed to Medicare patients at a higher rate than the discounted price the hospitals paid.

The CMS announced in 2017 that it was slashing the reimbursement rate from 6% above the average price of the drugs to 22.5% below the average cost. The agency said the program gave hospitals an incentive to overprescribe drugs and cost patients more money, and shouldn’t provide a windfall to subsidize other services.

Hospitals that opposed the change argued that they had put money earned through the program — which can run in the millions of dollars for a hospital each year — into services for poor and underserved communities, as Congress intended.

The CMS estimated that cutting the reimbursement rate for the drugs would reduce the amount of money paid to hospitals by $1.6 billion in 2018 alone. Scaling back that funding would actually increase the rates paid by the government for other services for Medicare patients — the payment system has to be “budget neutral” — but Park Ridge and other hospitals that took the administration to court said they still expected net losses of millions of dollars.

Many hospitals that participate in the 340B program “are in the red to begin with,” said Maureen Testoni, president and CEO of 340B Health, a membership group for hospitals and health systems that participate.

“So on top of that, you add this pandemic and all the financial turmoil that this has caused,” Testoni said. The pandemic has highlighted “how critical [hospitals] are … and what an important role they play. And, financially, they’re not in a situation where they can play that role when they have this big financial reduction.”

While waiting for the DC Circuit to rule, the CMS is exploring ways to move forward with the rate cut even if it loses. Last month, the agency launched a survey to collect data from 340B hospitals that the CMS says would address the issues that led the lower court judge to rule against the government. Hospitals opposed the survey and asked the agency to at least delay it, saying they’d have to divert resources that are already stretched thin during the pandemic to respond.

“Now is not the time to distract hospitals’ attention from the vital job at hand to complete a CMS survey on drug acquisition costs. By launching the survey with no notice on April 24 and providing less than three weeks to respond, CMS is creating an unnecessary burden on hospitals at the worst possible moment,” Testoni wrote in a May 4 letter to the agency. The agency didn’t respond.

Representatives of hospitals involved in the lawsuits declined interview requests, citing the pending litigation. The American Hospital Association, a lead plaintiff, declined an interview request but sent a statement:

“The COVID-19 pandemic has created the greatest financial crisis in history for America’s hospitals and health systems, with our field losing over $50 billion each month. While it is too soon to have precise data on the full impact of this pandemic, the unlawful Medicare cuts that we are contesting in federal court have added significantly to the financial pressure all hospitals face,” the group said.

A spokesperson for the Department of Health and Human Services did not return a request for comment. In court, the Justice Department has argued that the district court judge lacked authority to review the rate cut at all, and that even if he could, the government had the power to bring the rate in line with what the available data showed hospitals were paying for the drugs.

“[O]vercompensation for some drugs or treatments means reduced payments for other drugs and treatments, and correcting overcompensation permits more equitable distribution of limited funds,” Justice Department lawyers argued in the government’s brief to the DC Circuit. “The result of bringing the Medicare payment amount for 340B drugs into alignment with average acquisition cost was therefore the redistribution of the anticipated $1.6 billion in savings, resulting in a 3.2% increase in the Medicare payment rates for non-drug items and services.”

Congress created the 340B program in 1992. Healthcare providers eligible for the program can buy outpatient drugs at discounted rates from pharmaceutical companies. When hospitals prescribe those drugs to patients covered by Medicare — the federal insurance program for people who are over the age of 65 or have disabilities — they submit claims to the government for reimbursement.

Starting in 2006, Congress gave the CMS two options to set the drug reimbursement rate. It could rely on what hospitals were actually paying to buy drugs if it had “statistically sound survey data” or, if that wasn’t available, the average sales price of the drugs. If the agency used the second, alternative option, Congress set a default rate: the average sales price plus 6%.

In the summer of 2017, the Trump administration announced a plan to change the rate. Under the new rule, the Medicare agency said it would pay the average sales price of drugs minus 22.5%. That rate would come closer to matching the discounted rate hospitals were paying through the 340B program, the agency said.

Hospitals don’t have to track or disclose how they use money saved through the program. Kelly Cleary, who spent three years as the chief legal officer for the CMS, said hospitals had provided examples of how they were using the funds to expand services into underserved areas and provide free or low-cost care.

“The money was going toward a purpose that was consistent with their mission,” said Cleary, who was involved in the CMS’s effort to change the rate and defend it in court. She returned to private practice last month as a partner at the law firm Akin Gump Strauss Hauer & Feld.

The chief financial officer for the Henry Ford Health System, which serves patients in Detroit and Jackson, Michigan, wrote in a court affidavit that even if the cut meant that reimbursement rates increased for other Medicare services, the hospital network still expected to lose around $8.5 million by the end of 2018 — money that had gone toward services for patients with low incomes, such as free and low-cost medications, a free community clinic, and mobile health units.

The margin between what the Henry Ford Health System paid for drugs through the 340B program and what it received back from Medicare helped hospitals in that network provide care for “underserved and indigent populations … that would otherwise be financially unsustainable,” the officer wrote.

In support of the rate cut, the CMS pointed to a 2015 report by the Government Accountability Office that showed hospitals participating in the program had an incentive to prescribe more drugs than hospitals that weren’t in the program, and that meant higher copayments for Medicare patients who were prescribed more drugs or higher-priced drugs. The agency concluded hospitals were receiving too much of a net financial benefit.

“While we recognize the intent of the 340B Program,” the agency wrote in a November 2017 notice in the Federal Register, “we believe it is inappropriate for Medicare to subsidize other activities.”

It’s a position that aligned the government with the pharmaceutical industry, which argued that some hospitals had abused the program. Drugmakers pointed out that even with a cut to the reimbursement rate, the healthcare providers would still get the benefit of discounted drugs. A representative of PhRMA, a membership group for the pharmaceutical industry, declined an interview request, but sent BuzzFeed News a copy of comments the group submitted in support of the cut.

“PhRMA is concerned that the 340B program continues to grow rapidly and without patient benefits, thus increasingly departing from its purpose and statutory boundaries,” the group wrote. “This growth in the 340B program creates market-distorting incentives that affect consumer prices for medicines, shift care to more expensive hospital settings, and accelerate provider market consolidation.”

Hospitals that supported the program, meanwhile, said the proposal punished providers who work with vulnerable patients, and they urged the CMS to focus its efforts instead on bringing down drug costs.

The agency disputed that the plan was punitive and said that “lowering the price of pharmaceuticals is a top priority” but was outside the scope of what it was considering at the time.

Hospitals and hospital associations began suing the administration shortly after the rule became final in November 2017. They argued that the CMS had come up with the new rate using a process that Congress hadn’t approved. The agency admitted that it didn’t have the “statistically sound” survey data on what hospitals were actually paying for the drugs — the first method Congress had laid out — so instead it used an estimate of average purchase costs compiled by the Medicare Payment Advisory Commission, an agency that advises Congress.

The problem with the government’s approach, the hospitals argued, was that Congress had said the CMS could either use survey data on purchase costs or the average sales price of the drugs, but not a hybrid of the two. Congress had given the CMS authority to “adjust” rates, but cutting the reimbursement rate by nearly 30% was more than just an adjustment, the hospitals said.

US District Judge Rudolph Contreras in Washington, DC, sided with the hospitals. In a December 2018 opinion, he wrote that the rate cut’s “magnitude and its wide applicability inexorably lead to the conclusion” that the agency had “fundamentally altered” what Congress had spelled out.

The judge stopped short of blocking the rule and ordering the government to reimburse hospitals for the difference between the previous rate and the CMS’s new, lower rate, however, writing that it was “likely to be highly disruptive.” He noted that the payment system had to stay budget neutral, which meant the money would need to come from another source, a “quagmire that may be impossible to navigate” given how much money the government paid out of Medicare each year. He asked for more briefing on what the agency should do to fix the problem, but that issue was put on hold as the administration took the case to the DC Circuit.

A three-judge DC Circuit panel heard arguments on Nov. 8 and has yet to release a decision. In the meantime, hospitals have continued to file lawsuits as their claims for reimbursement at the previous, higher rate are rejected; earlier this month, a hospital system in Jacksonville, Florida, which is part of the University of Florida, filed a new suit in federal court in Washington. And the CMS is going ahead with its survey over the objections from hospitals.

“The pandemic amplifies the significance of this policy, but the fact remains that there were winners and losers with the policy and it’s always going to be a zero-sum game,” Cleary said. “If the court rules against the agency and the agency is forced to walk back the policy, that stands to negatively impact thousands of hospitals.”

Wiley, of American University, told BuzzFeed News that even before the pandemic, the fight over the 340B program highlighted how hospitals and drugmakers were “actively throwing each other under the bus” in the broader debate about who was to blame for the high cost of prescription drugs and what the federal government should do about it.

“Which stakeholders voters perceive to be the heroes of the pandemic response could affect health reform and reimbursement politics for years to come,” she wrote.

 

 

 

MedPAC: 340B hospitals spent more on lung, prostate cancer drugs compared to other facilities

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Hospitals in the 340B drug discount program spent more on drugs for prostate and lung cancers compared to facilities not in the program, a new analysis found.

But the preliminary analysis from the Medicare Payment Advisory Commission (MedPAC) couldn’t find that the controversial program incentivizes hospitals to pursue higher-priced drugs. The analysis, released Friday as part of MedPAC’s monthly meeting, was requested by Congress on the program, which has faced major cuts by the Trump administration.

Some lawmakers have argued that 340B, which offers safety-net hospitals discounts on drugs, has not worked as intended and led to hospitals specifically choosing higher-priced drugs to get a big discount.

So MedPAC looked at the spending from 2013 to 2017 of 340B and non-340B hospitals as well as physicians’ offices for five types of cancers: breast, colorectal, prostate, lung and leukemia and lymphoma.

MedPAC’s analysis found that 340B hospitals spent between 2% and 5% higher on average on cancer drugs than non-340B hospitals. But there were mixed results when 340B hospitals were compared to physicians’ offices, with 340B facilities spending 1% lower to 7% higher than physicians’ offices on cancer drugs.

The reason 340B hospitals spent more on cancer drugs than hospitals not in the program was linked to two types of cancer: lung and prostate.

For lung cancer, a possible reason for the higher spending is that a larger share of patients in 340B hospitals received new immuno-oncology therapies that are more expensive, MedPAC said. Prostate cancer also had higher drug prices per unit for both drugs in Medicare Part B, which reimburses for physician-administered drugs, and Part D.

However, MedPAC staff cautioned they couldn’t conclude 340B is incentivizing the spikes in spending.

The reason is “we lack access to the discount data,” said MedPAC staffer Shinobu Suzuki at the commission’s meeting Friday in Washington, D.C.

MedPAC also didn’t find that gaining 340B status led to a spike in average cancer drug spending, suggesting that 340B discounts “may not have had any effects on them,” the report said.

The analysis also found that the higher cancer spending would likely have a small, if any, impact on cost sharing for Medicare patients depending on the type of cancer and supplemental coverage.

The study will be finalized and likely included in MedPAC’s March report to Congress. It comes with some caveats, including a small sample size and that it did not examine the impact of a 22.5% cut to 340B payments that went into effect in 2018.

The hospital industry has been fighting the Trump administration in court over the cuts, which the industry claims are unlawful.

Despite the caveats, MedPAC’s findings could play a major part in lawmaker deliberations on the program, which some Republicans claim has gotten too big and led to hospitals bilking the federal government.

The pharmaceutical industry has also led an extensive campaign to shed more light on the program. 340B requires pharmaceutical companies to provide discounts to safety-net hospitals in exchange for participating in Medicaid.

The Government Accountability Office has also called for greater oversight of 340B.

340B industry group 340B Health praised the findings.

“The thoughtful analysis MedPAC presented today sheds important light on the role 340B hospitals play in treating people living with cancer,” said Maureen Testoni, 340B Health president, in a statement.

 

SUPREME COURT TAKES UP $12B DISPUTE OVER ACA RISK CORRIDOR PAYMENTS

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U.S. Supreme Court

The justices agreed to hear arguments over whether Congress can pass riders that withhold funds in contravention of the relevant law’s intent without actually repealing the relevant law.

KEY TAKEAWAYS

The health plans argue the ACA’s mandate to issue risk corridor payments could not be repealed through an appropriations rider.

The approximately $12 billion in payments at issue in this dispute are for three benefit years: 2014-2016.

The U.S. Supreme Court agreed Monday to take up three consolidated cases from health plans challenging Congress’ refusal to authorize $12 billion in risk-mitigation payments under the Affordable Care Act.

The cases—which were brought by Maine Community Health Options, Moda Health Plan Inc., and Land of Lincoln Mutual Health Insurance Co.—argue that the ACA’s risk corridor program obligated Health and Human Services to make payments that the law intended “to induce insurer participation in the health insurance exchanges by mitigating some of the uncertainty associated with insuring formerly uninsured customers.”

Following the 2014 midterm election, lawmakers on Capitol Hill enacted an appropriations law for fiscal year 2015 that “would potentially allot money to HHS to cover” any such payments for the 2014 benefit year, but the law included a rider that required HHS to maintain the budget neutrality of the risk corridor program, the health plans said in their petition.

Because the amounts collected under the risk corridor program for 2014 “came nowhere close to what the government owed to insurers,” the government paid out only 12.6% of the total owed for the year, prorating the funds it owed to each insurer, the health plans wrote.

Similar riders were included in appropriations bills for fiscal years 2016 and 2017. But HHS used the funds it collected from benefit years 2015 and 2016 to further pay what it owed from the 2014 benefit year, making no payments for the 2015 and 2016 benefit years, the health plans wrote. (The program ended after three years.)

The health plans proposed two questions in the petition for a writ of certiorari for the justices to consider, but the justices agreed to hear argument only on the first: “Given the ‘cardinal rule’ disfavoring implied repeals—which applies with ‘especial force’ to appropriations acts and requires that repeal not be found unless the later enactment is ‘irreconcilable’ with the former—can an appropriations rider whose text bars the agency’s use of certain funds to pay a statutory obligation, but does not repeal or amend the statutory obligation, and is thus not inconsistent with it, nonetheless be held to impliedly repeal the obligation by elevating the perceived ‘intent’ of the rider (drawn from unilluminating legislative history) above its text, and the text of the underlying statute?”

In its response to the health plans’ petition, the U.S. government argued that a Government Accountability Office report identified only two possible sources of funding for the risk corridor payments: (1) the funds collected by HHS under the program itself, and (2) any lump-sum appropriation to manage certain Centers for Medicare & Medicaid Services programs. By enacting the appropriations laws as it did, Congress said that only the first funding source would be allowed, the response states.

America’s Health Insurance Plans (AHIP) President and CEO Matt Eyles said in a statement that insurers need stability from the government.

“Millions of Americans rely on the individual and small group markets for their coverage and care. Health insurance providers are committed to serving these patients and consumers, working with the federal government to deliver affordable coverage and access to quality care,” Eyles said. “The Supreme Court’s decision to hear this case recognizes how important it is for American businesses, including health insurance providers, to be able to rely on the federal government as a fair and reliable partner. Strong, stable and predictable partnerships between the private and the public sector are an essential part of our nation’s economy, and our industry looks forward to having this matter heard before the Court.”

The justices allotted one hour for oral argument on the dispute.