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CCH Health NetNews

November 2016

In This Issue

Welcome to Health News Update

On the Front Lines

Focus remains on Medicare, Medicaid payments in 2017 OIG Work Plan


No primary engagement in inpatient services? No hospital classification

DAB finds no reason to overturn lengthy exclusions


Court refuses to relitigate Medicare under-reimbursement claims

CMS updates its Medicare and Medicaid drug spending dashboards


AMA Coding Guidance: September 2016 CPT® Assistant


Will the ACA be repealed under President-elect Trump?

Illinois insurer has to wait for $72M in risk corridor payments

Life Sciences

Participation in, and compliance with, the Voluntary Qualified Importer Program

FDA amends gas container manufacturing and labeling under pressure of safety concerns

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On the Front Lines

Focus remains on Medicare, Medicaid payments in 2017 OIG Work Plan

By Patricia K. Ruiz, J.D.

Medicare and Medicaid payments remain high on the list of the Office of Inspector General (OIG) priorities in its 2017 Work Plan. The Work Plan summarizes new and ongoing reviews and activities that the OIG plans to pursue with respect to HHS programs and operations during the current fiscal year.

In evaluating potential projects to undertake, the OIG considers factors such as mandatory requirements for OIG reviews as set forth in laws, regulations, or other directives; requests made or concerns raised by Congress, HHS management, or the Office of Management and Budget (OMB); top management and performance challenges facing HHS; work performed by other oversight organizations; management’s actions to implement OIG recommendations from previous reviews; and potential for positive impact.

Medicare Part A and Part B. The OIG has completed 15 of the activities related to Medicare Part A and Part B identified in its previous work plan, including a nationwide analysis of common characteristics in OIG home health fraud cases and improper Medicare payment for unlawfully present beneficiaries. For 2017, the OIG has added 24 new activities including review of inpatient psychiatric facility outlier payments, skilled nursing facility reimbursement, financial interests reported under the open payments program, and drug waste of single-use vial drugs, among other activities.

Medicare Part C and Part D. The OIG completed two activities related to Medicare Part C and Part D included in the previous work plan—one related to high Part D spending on opioids and another on coverage of drugs commonly used by dual eligibles. It added five new activities for the 2017 work plan, including reviews of Part C and Part D payments for service dates after the date of the beneficiary’s death and Part D rebates related to drugs dispensed by 340B pharmacies.

Medicaid. With respect to Medicaid, the OIG completed six activities listed in its 2016 Work Plan, involving reviews of state reporting of Medicaid collections, vulnerabilities related to provider enrollment and ownership disclosure, and implementation of Medicaid enhanced provider enrollment screenings. The OIG added nine activities to its 2017 work plan, including reviews of states’ managed care organization Medicaid drug claims, fraud in Medicaid personal care services, and the treatment of health care-acquired conditions in managed care organizations.

Health insurance exchanges. The OIG completed two activities related to health insurance exchanges from the previous work plan, including reviews of the consumer operated and oriented plan loan program and state-based marketplace information system security controls. No new activities were added for the 2017 work plan.

Electronic health records. The OIG completed two activities from its previous work plan related to electronic health records—one review of Medicaid incentive payments for adopting electronic health records and another related to hospital electronic health record contingency plans. OIG Work Plan, November 10, 2016

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No primary engagement in inpatient services? No hospital classification

By Sarah E. Baumann, J.D.

The oldest continually operating eye-care facility in the United States did not meet the definition of a hospital for Medicare participation purposes because it was not "primarily engaged" in the provision of inpatient services. Wills Eye Hospital, a former ambulatory surgical center (ASC) that added four inpatient beds, did not qualify as a hospital because the bulk of its services were outpatient and it appeared to operate as an ASC. The Departmental Appeals Board (DAB) affirmed summary judgment for CMS, finding that Wills failed to show that it was qualified as a hospital and CMS lawfully took a case-by-case approach to making a classification and reaching its decision (Wills Eye Hospital, Docket No. A-16-78, Decision No. CR2743, October 25, 2016).

Application. Wills operated as an ASC beginning in 2002. In 2006, it sold its inpatient ophthalmology program to another hospital because developing technologies had "greatly reduced trauma to the eye and lessened recovery times" of its patients. However, it later sought reclassification as a hospital because the other hospital could not support the specialized attention that the complex services required. Wills renovated its facility to meet Life Safety Code requirements, added four inpatient beds, surrendered its state ASC license and obtained a state hospital license, asked CMS to terminate its ASC status, and applied for Medicare enrollment as a hospital.

Denial. Although the state licensing agency determined that Wills met hospital conditions of participation (CoP) requirements and recommended certification, CMS determined that Wills did not meet the statutory definition under Social Security Act section 1861(e)(1) (SSA) because it was not "primarily engaged in providing inpatient services." SSA section 1861(e)(1) defines a hospital, in relevant part, as an institution that "is primarily engaged in providing . . . to inpatients (A) diagnostic services and therapeutic services for medical diagnosis, treatment, and care of injured, disabled, or sick persons, or (B) rehabilitation services for the rehabilitation of injured, disabled, or sick persons." In its decision, CMS noted that Wills provided a greater volume of outpatient than inpatient services, specifically stating that even if each of the facility’s inpatient hospital beds "were filled seven days per week with a different patient, that would constitute 1460 patients, or about 17 percent," of the estimated "8400 out-patient surgeries" that Wills performed annually. Wills first appealed to an administrative law judge (ALJ), who entered summary judgment for CMS, and then appealed to the DAB.

Appeal. Wills argued that CMS misinterpreted the statute and utilized a comparative volume test in reaching its decision that was not based in statute or regulations without notice-and-comment rulemaking. It also argued that the agency’s decision was arbitrary and capricious, estimating that the standards it used to evaluate Wills, if applied to other providers, would result in "37 percent to over 80 percent" of Medicare-participating hospitals not being enrolled.

Wills argued that the word "primarily" in the context of 1861(e)(1) meant "originally," rather than referring to a comparative amount, and that it also referred to the type of services provided, rather than their classification as inpatient or outpatient. The DAB disagreed, finding that Wills’ interpretation was "not sustainable," whereas CMS’ interpretation was reasonable, permissible, and entitled to deference.

The DAB concluded that Medicare hospitals must primarily provide the specified types of services to inpatients, but did not find that that "primary engagement is conclusively determined by any single numerical test." As required by the Deficit Reduction Act of 2005, CMS studied issues surrounding the definition of ASCs versus certain types of hospitals. In a report, it made Congress aware that it planned to address such classification issues on a case-by-case basis, rather than be setting a numerical standard, and Congress did not object. In the case at hand, the DAB determined that CMS did not apply a numerical test. Instead, it noted that the CMS regional official responsible for the decision began to look closely at Wills’ application when he realized that there was an excessive number of personnel—112.5 full-time equivalent employees, including 45.2 registered nurses—for four inpatient beds in a facility that operated for years as an ASC. In addressing the state agency’s concerns that similar hospitals had been classified as hospitals, the CMS official noted that many of those hospitals had since been reclassified, and that the application raised a question of law independent of other decisions. The DAB was thus satisfied that CMS’ decision was reasonable, appropriate, and not based on a numerical test.

In response to Will’s vehement arguments that the services it provided were so complex as to require reimbursement at a higher level, the DAB echoed the ALJ’s concerns that "[m]edical practices may have outpaced the statute," but that the only avenues for change were via legislation and policy. At present, "the existing law does not . . . distinguish between hospitals and ASCs based on the quality of care they provide." As a result, the DAB affirmed summary judgment for CMS.

DAB finds no reason to overturn lengthy exclusions

By Kayla R. Bryant, J.D.

The Departmental Appeals Board (DAB) affirmed two exclusions over the minimum five-year period due to aggravating factors. These exclusions were based on convictions of criminal offenses relating to the provision of health care services (see ALJs uphold exclusions, saying convictions crossed the line, September 7, 2016).

Thirteen-year exclusion. A provider excluded from program participation following a criminal conviction may not present a collateral attack on the underlying convictions. The Departmental Appeals Board (DAB) upheld a 13-year exclusion imposed on an individual who had pleaded guilty to several charges, including fraud, unlawful practice of medicine, and criminal sexual conduct, noting that providers may not challenge the conviction on an administrative appeal.

The HHS Inspector General (IG) excluded the provider for a period of 13 years based on the sentence of incarceration for a period of three to 15 years for the underlying convictions, which the administrative law judge (ALJ) upheld. The ALJ found, and the DAB agreed, that the evidence of the underlying convictions was undisputed. Before the DAB, the provider argued that he was falsely charged and pleaded guilty only because he was threatened with a life sentence otherwise, and that the charges filed were part of a larger conspiracy against him. The board found these arguments to be an inappropriate collateral attack on the underlying conviction (42 C.F.R. Sec. 1001.2007(d)), and that the ALJ’s decision to uphold the exclusion period was reasonable in light of the aggravating factor of a lengthy period of incarceration (42 C.F.R. sec. 1001.102). Acquaye v. The Inspector General, Docket No. A-16-125, Decision No. 2745, October 31, 2016

Ten-year exclusion. A physician convicted of fraud after accepting bribes for referrals to a Medicare-approved laboratory was reasonably excluded from program participation for a period of ten years. The Departmental Appeals Board (DAB) found that the aggravating factors of (1) the underlying crime was committed over a period of more than one year; (2) the sentence imposed included incarceration; and (3) other adverse action by an agency or board based on the same set of circumstances justified the length of the exclusion imposed by the HHS Inspector General (IG) and upheld by the administrative law judge (42 C.F.R. Sec. 1001.102(b)). Calabrese v. The Inspector General, Docket No. A-16-126, Decision No. 2744, October 27, 2016

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Court refuses to relitigate Medicare under-reimbursement claims

By Robert B. Barnett Jr., J.D.

In a suit by the owner of 186 hospitals against the HHS Secretary for allegedly under-reimbursing the hospitals for fiscal years (FY) 2004-2006 by setting the fixed-loss thresholds for Medicare outlier reimbursements too high, all claims involving FYs 2005 and 2006 were dismissed as having been litigated in an earlier identical lawsuit, the U.S. District Court for the District of Columbia ruled. The only remaining issue to be litigated, therefore, is whether the Secretary, when she explained the outlier-threshold determination for FY 2004 as required by the Court of Appeals in the earlier lawsuit, adequately addressed the deficiencies the court identified.

Case History. In 2011, District Hospital Partners (DHP), the owners and operators of 186 hospitals providing services under Medicare, sued the HHS Secretary, claiming that the agency violated Medicare’s Inpatient Prospective Payment System (IPPS) rules. In essence, DHP charged that HHS set the fixed-loss thresholds too high, which resulted in an underpayment to the hospitals for FYs 2004-2006. The court granted summary judgment to HHS (see Secretary’s calculation of fixed loss threshold reasonable, January 7, 2014). On appeal, the D.C. Circuit affirmed the trial court as to FYs 2005 and 2006, but reversed as to FY 2004, ruling that the promulgation of the 2004 outlier threshold violated the Administrative Procedure Act (see Further explanation of the 2004 Medicare outlier threshold calculation ordered, May 20, 2015).

The D.C. Circuit in its reversal ordered HHS to provide additional information on the 2004 rulemaking. HHS published an explanation of the deficiencies the Court of Appeals identified. DHP moved for a new briefing schedule, but the trial court denied the motion, ruling that it had not retained jurisdiction. At that point, in 2016, DHP filed a new lawsuit against HHS, again arguing that the agency’s determination of the outlier thresholds for FYs 2004-2006 was arbitrary and capricious. HHS moved to dismiss the complaint in part, contending that the claims asserted in the new lawsuit as to FYs 2005 and 2006 were barred by issue preclusion and claim preclusion.

Issue and claim preclusion. Both the parties and the subject matter in the 2011 lawsuit and the 2016 lawsuit were identical, and the suit was decided on its merits by a court of competent jurisdiction. As a result, the court said, the doctrine of claim preclusion barred DHP from raising any new claims or arguments that could have been raised in the earlier litigation but were not. The doctrine of issue preclusion, on the other hand, barred the court from revisiting any issues that were decided in the previous lawsuit. DHP, therefore, was foreclosed from challenging any outlier determinations for 2005 and 2006, as well as from making any new arguments on the FY 2004 determinations.

The appellate court had ordered HHS to provide additional explanations on two matters related to the 2004 outlier determinations. In response, the agency reexamined its calculations and chose not to recalculate the 2004 outlier threshold. As a result, the only issued remaining for this court to determine is whether the response adequately addressed the deficiencies the D.C. Circuit identified in reversing in part the trial court’s granting of summary judgment to HHS.

The court, therefore, granted HHS’ motion to dismiss DHP’s complaint as it applied to FYs 2005 and 2006. District Hospital Partners, L.P. v. Burwell, No. 16-528 (ESH), November 18, 2016

CMS updates its Medicare and Medicaid drug spending dashboards

By Harold Bishop, J.D.

As part of its effort to provide additional information on, and increase transparency in the cost of prescription drugs, CMS has updated both its Medicare and Medicaid drug spending dashboards to include information from 2015. According to a CMS press release, the medications presented as part of the 2015 Medicare Drug Spending Dashboard represents a very large proportion of Medicare spending, including 34 percent of all Part D spending and 69 percent of Part B drug spending, which was similar to the 2014 drug dashboard. A second, contemporaneous CMS press release notes that the medications presented as part of the 2015 Medicaid Drug Spending Dashboard represent approximately 41 percent of Medicaid covered outpatient drug spending in 2017.

Total program spending. For total program spending, the Medicare dashboard shows five drugs with the highest Part D and Part B drug spending, respectively, in 2015 compared to their spending in 2014. For example, the dashboard shows that Lantus (insulin) was a top-five drug in terms of costs in Medicare Part D between 2014 and 2015, as was Havroni, a new drug to treat Hepatitis C.

The Medicaid dashboard also shows the trend in total drug spending for the five drugs with the highest aggregate drug spending in 2015. Of the top five, Harvoni and Abilify (aripiprazole, a brand name anti-psychotic drug) had total drug spending greater than $2 billion in 2015, with annual total program spending for Abilify greater than $1.7 billion for each of the past five years. Also, spending for Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug) was $1.4 billion and spending for Vyvanse (lisdexamfetamine dimesylate, a brand name attention deficit hyperactivity disorder drug) and Humira/Humira pen (adalimumab, a brand name drug used for rheumatoid arthritis) was approximately $800 million each.

Highest total spending (Part D). The Medicare dashboard shows that the five Part D drugs with highest total spending in 2015 were:

  • Spiriva (tiotropium bromide, a brand name chronic obstructive pulmonary disease treatment);
  • Advair Diskus (fluticasone/salmeterol, a brand name asthma and chronic obstructive pulmonary disease treatment);
  • Crestor (rosuvastatin calcium, a brand name cholesterol drug)
  • Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug); and
  • Harvoni (ledipasvir/sofosbuvir; a brand name Hepatitis C virus treatment).

Advair Diskus and Crestor were also among the top five drugs with the highest Part D spending in 2014, but Spiriva, Lantus, and Harvoni were not. Harvoni was introduced in October 2014 and in 2015 had just over $7 billion in spending. Sovaldi (sofosbuvir), another drug for treating Hepatitis C, had the highest spending in 2014, but was not among the top five drugs in 2015, with $1.3 billion in spending.

Highest total spending (Part B). The Medicare dashboard shows the top five Part B drugs with highest total spending were:

  • Lucentis (ranibizumab, a brand name drug for wet age-related macular degeneration);
  • Remicade (infliximab, a brand name rheumatoid arthritis drug);
  • Neulasta (pegfilgrastim, a brand name white blood cell stimulator for use with cancer treatments);
  • Rituxan (rituximab, a brand name cancer treatment); and
  • Eylea (aflibercept, a brand name drug for wet age-related macular degeneration).

These were the same five drugs with the highest Part B spending in 2014. Each of these drugs contributed more than $1 billion in spending for the Medicare Part B program.

Unit cost. The Medicare dashboard lists the top five drugs with the largest increases in average cost per unit from 2014 to 2015 in the Part B and D programs. Glumetza (metformin HCl, a diabetes treatment) had the largest increase in cost per unit at over 380 percent and had total spending increases from $34.3 million to $153 million. All five of these Part D drugs had increases in cost per unit of more than 100 percent. Among Part B drugs, mitomycin (a generic chemotherapy agent), had the largest increase in average Part B cost per unit at 163 percent and had total spending increases from $5.9 million to $15.8 million. The other four Part B drugs had smaller, but still significant increases, approximately 25 to 40 percent.

The Medicaid dashboard shows the top five drugs with the largest increases in average cost per unit from 2014 to 2015. Ativan (lorazepam, a brand name drug used for anxiety) had the largest increase in cost per unit at 1,264 percent and a spending increase from $1.7 million to $5.3 million. All five of the drugs had increases in cost per unit of more than 400 percent.

High cost per prescription fill. The Medicaid dashboard shows the top five drugs selected for high costs per prescription fill (i.e., greater than or equal to $1,000) in 2015. Advate (antihemophilic factor [recombinant], a brand name hemophilia treatment) had an average cost per fill of $20,828 and was associated with total program spending of $354 million. In comparison, Prezista (darunavir ethanolate, a brand name HIV antiviral) had an average cost per fill of $1,259 and total program spending of $335 million. NovoSeven RT (coagulation factor VIIa [recombinant], a brand name hemophilia treatment) had the highest average cost per fill at $67,098 and $298 million in program spending.

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AMA Coding Guidance: September 2016 CPT® Assistant

By Jeff Erickson

Coding Laser Treatment for Inflammatory Skin Disease (Psoriasis)

This article addresses the appropriate codes (96920-96922) to report psoriasis treatments using a laser light source, as well as other treatment scenarios. The laser treatment is usually employed for psoriasis that covers less than 10 percent of the body surface area (BSA). The specific individual treatment dose (in J/cm2) is individualized per patient and dependent on psoriasis plaque thickness, as well as the fairness or darkness of a patient’s skin. Dosages are adjusted based on a patient’s response to therapy and side effects, such as skin burning. Treatments are typically performed 2 to 3 times per week, with 48 hours or more between treatments. Although the total number of treatments will vary for a given patient, usually 10 to 12 treatments are required per treated psoriasis lesion site. This article includes five coding examples. In summary, it is not appropriate to report CPT® codes 96920-96922 for procedures that do not involve a laser-light source used to treat psoriasis. If no appropriate code exists, then the unlisted code 96999, Unlisted special dermatological service or procedure, should be reported, instead.

Diagnostic Radiology for Spinal Conditions and Scoliosis Evaluation

This article discusses the revision of code 72080, the deletion of codes 72069 and 72090, and the addition of new codes 72081-72084, which are used to report the radiological examination of spinal conditions and scoliosis evaluation. For 2016, CPT® code 72080 was revised to specify a radiologic examination of the junction between the thoracic spine and the lumbar spine, specifically the thoracolumbar junction, with a minimum of two views. Four new codes (72081-72084) were added to specify the number of views performed for radiological examination of spinal conditions and scoliosis evaluation. Code 72081 is reported for a radiologic examination of the entire thoracic and lumbar spine, including the skull and the cervical and sacral spine, if performed, in a single view. Code 72082 is reported when the examination is performed using two to three views. Code 72083 is reported for four to five views, and code 72084 is reported for a minimum of six views. Two obsolete codes (72069, 72090) were deleted to simplify and specify the reporting of scoliosis studies, which is now reported using the newly created codes, 72081-72084. Several new parenthetical notes were also added to further instruct users on the appropriate code(s) to report. The article concludes with clinical examples and descriptions of procedures.

Repair of Retinal Detachment

Codes 67101, 67105, 67107, 67108, and 67113 in the Eye and Ocular Adnexa subsection of the CPT® set for the treatment of retinal detachment were revised to replace the phrase “with or without” with “including . . . when performed” to maintain the current CPT® convention for consistent terminology. Code 67112 was deleted due to infrequent reporting. This procedure became obsolete; therefore, a more specific code (e.g., 67107, 67108, 67110, 67113) should be reported to accurately describe the reoperation procedure. Codes 67101 and 67105 include the phrase “one or more sessions” in their descriptors. When this phrase appears in a code descriptor in the Eye and Ocular Adnexa subsection, the code is reported once for the defined treatment period, regardless of the number of sessions necessary to complete the treatment with those techniques. The code would not be reported for each session the patient presented if the procedure was performed during the defined treatment period. The defined treatment period is determined by the physician, and varies depending on the patient, diagnosis, and often, the area to be treated. “One or more sessions” is defined in the CPT® guidelines preceding codes 67141 and 67145. The appending of appropriate modifiers is also discussed, and a Coding Tip is provided at the end of the article.

Special Otorhinolaryngologic Services

The introductory language for the Medicine/Special Otorhinolaryngologic Services subsection of the CPT® 2016 code set includes editorial revisions to more accurately describe speech, language, swallowing, and voice-related evaluation and treatment procedures and services for codes 92502-92526. Because the changes are editorial in nature, the intended use for the codes within this section has not changed; the codes still accurately reflect the appropriate intent for reporting these services. This article addresses the revisions to the guidelines in this subsection and follows with a Coding Tip.

Coding Update: Films vs Images

Historically, CPT® codes for radiography services in the gastrointestinal (GI) tract (74240 -74251) referred to views that were collected in analog (i.e., film format). Therefore, the GI tract radiology code descriptors included the term “film(s)” to reflect previously used technology. For the CPT® 2016 code set, the descriptors for codes 74240, 74241, 74245, 74246, 74247, 74250, and 74251 were revised to replace the term “films” with the term “images” to reflect current technology, e.g., code 74240.

In addition, the more current term “images” replaces the term “films” where appropriate throughout the Radiology section, including section guidelines and parenthetical notes. For some procedures, however, films may be used for information capture and review; therefore, the term “film” has not been completely eliminated from all procedures, e.g., 77051 and 77052.

Frequently Asked Questions

An article by the CPT® Editorial Panel answers questions posed to the panel regarding the subjects of Surgery: Digestive System, Eye and Ocular System; Radiology: Diagnostic Radiology (Diagnostic Imaging), Diagnostic Ultrasound, Radiation Oncology; Pathology and Laboratory: Molecular Pathology; and Medicine: Central Nervous System Assessments/Tests, Physical Medicine and Rehabilitation. The responses answer multiple questions including:

  • Is it appropriate to report code 44500, Introduction of long gastrointestinal tube (e.g., Miller-Abbott) (separate procedure), when the feeding tube lies within the duodenum and projects over the ligament of Treitz?
  • How do you determine when to use the complete vs limited ultrasound codes 76881 and 76882?
  • Instrument-assisted soft tissue mobilization (IASTM) uses a hard-edged instrument made of metal, plastic, or ceramic to add shearing stress to soft tissue, in order to enhance the body’s healing response. Is it appropriate to report CPT® code 97140 for this service?

To view these articles via Coding Comply, search from the Search Code Sets tab in Coding Comply for any of the codes listed above, view the Related Documents by clicking on the paper icon next to the code, then select the article. To view these articles in The Coding Suite, go to the CPT® Assistant Archives folder and in the Search field within this folder and enter “September 2016.”

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OSHA finalizes ACA whistleblower and retaliation rule

By Kathryn S. Beard, J.D.

On January 20, 2017, Donald J. Trump (R) will be sworn in as the president of the United States; the Republican Party will retain its majority in both the House of Representatives and Senate, but will fall short of the 60-member Senate majority required to break a filibuster. President-elect Trump campaigned on the promise to repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), President Obama’s signature health care reform law.

Trump’s plan. In a position paper, Trump laid out his plan for health care, which will include:

    1. complete repeal of the ACA;

    2. permitting the sale of health insurance across state lines;

    3. allowing individuals to fully deduct health insurance premium payments from tax returns;

    4. enabling all Americans to make tax-free contributions to health savings accounts (HSAs);

    5. requiring price transparency from all health care providers;

    6. changing the Medicaid structure from a federal-state partnership to a block-grant system;

    7. removing barriers to free-market entry for drug providers; and

    8. reforming mental health programs and institutions.

The plan also calls for obtaining health care savings by enforcing immigration laws and increasing the employment rate to decrease enrollment in the Children’s Health Insurance Program (CHIP). Most of these proposals are similar to House Speaker Paul Ryan’s (R-Wis) plan for replacing the ACA.

Without a supermajority in the Senate, the Trump Administration could potentially face a filibuster on its health care plans; that obstacle, however, may be overcome by use of the reconciliation process. Earlier this year, H.R. 3762—a bill repealing the ACA’s coverage subsidies, tax credits, Medicaid expansion provisions, individual and employer mandate penalties, and the medical device and health insurance taxes—made it to Obama’s desk before being vetoed.

Effects of Trump plan on uninsurance rate and federal spending. Under the ACA, the uninsurance rate in the U.S. has dropped to 8.6 percent, the lowest level on record. The Congressional Budget Office (CBO) estimated that 22 million people would lose health insurance if H.R. 3762 became law. In a different report, the CBO found that repealing the ACA would first increase the federal deficit, but later begin to reduce the deficit while leaving individuals with higher premium costs. Similarly, Ryan’s "A Better Way" plan is estimated to reduce overall insurance coverage from ACA projections while decreasing the deficit.

The nonpartisan Committee for a Responsible Federal Budget analyzed Trump’s plan and determined that if it were implemented, the uninsurance rate would double; it also found that the Medicaid block-grant proposal lacked sufficient detail to estimate whether it would maintain current spending levels or save hundreds of billions of dollars.

Illinois insurer has to wait for $72M in risk corridor payments

By Bryant Storm, J.D.

HHS’ three-year, budget-neutral approach to the risk corridor program is reasonable according to the U.S. Court of Federal Claims. The court held that it must defer to HHS’ interpretation of Section 1342 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) because the agency’s decision to administer the ACA’s risk corridors in a budget neutral manner over the three-year life of the program, rather than annually, was reasonable in light of ambiguity and the lack of an appropriation for the program. Accordingly, the court dismissed the claims of Land of Lincoln Mutual Health Insurance Company (Lincoln) asserting that HHS was not obligated to pay the entirety of risk corridor payments owed to qualifying health plans (QHPs) on an annual basis.

Risk corridor. To mitigate the uncertainty surrounding health reform, under 42 U.S.C. § 18062, the ACA developed a temporary risk corridor program for calendar years (CYs) 2014, 2015, and 2016, where issuers of qualifying health plans (QHPs) participating in exchanges pay money to or receive money from HHS depending upon the issuer’s ratio of premiums received to claimed costs. The program was designed to even out losses and gains of QHPs.

Lincoln. Lincoln sold QHPs on the Illinois marketplace in 2014 and 2015 and incurred losses in those years making Lincoln eligible to receive payments under the risk corridor program. HHS paid Lincoln 12.6 percent of the amount the insurer was due for 2014 and nothing for 2015. Because the overall risk corridor payments owed by HHS exceed the fees received by HHS under the program, HHS stated that it would operate in a budget neutral manner and only make payments from available fees. Lincoln filed a complaint asserting a statutory and regulatory entitlement to the outstanding 2014 and 2015 payments, totaling $72,859,053. Lincoln also requested expedited disposition of the case, noting, without the funds, it would lack the funds to survive and the health insurance it was providing to the citizens of Illinois would have to be canceled.

Section 1342. While Lincoln asserted that Section 1342 requires full annual payment under the risk corridor program, the government contended that payments are not due until the end of the program, depending on the availability of funds. Additionally, Lincoln asserted that the statute requires "payments out" to participants in the risk corridor program, even if those payments exceed the "payments in" under the program.

Reasonable. The court held HHS’ approach to the law was not unreasonable, in light of the fact that the statute and regulations were ambiguous as to HHS’ payment obligations under the risk corridor program. The court also noted because HHS acknowledged its obligation to eventually pay QHPs the amounts owed and because no annual appropriation was provided for the program, it was reasonable for the agency to operate the program in a budget neutral manner over a three-year period. The court also held that Lincoln failed to establish the existence of an express or implied contract mandating the risk corridor payments. Land of Lincoln Mutual Health Insurance Company v. U.S., No. 16-744C, November 10, 2016

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Life Sciences

Participation in, and compliance with, the Voluntary Qualified Importer Program

By Harold Bishop, J.D.

A guidance describing the FDA’s Voluntary Qualified Importer Program (VQIP), which provides for expedited review and importation of food offered for importation is available from the agency. The guidance describes the eligibility criteria for, and benefits of, participation in VQIP. It also provides information on submitting an application for VQIP participation, obtaining a facility certification for the foreign supplier of a food imported under VQIP, the VQIP user fee, conditions that might result in the revocation of VQIP eligibility, and criteria for reinstatement of eligibility.

Background. Section 302 of the FDA Food Safety Modernization Act (FSMA) (P. L. 111–353) amended the federal Food, Drug, and Cosmetic Act (FDC Act) by adding section 806, the Voluntary Qualified Importer Program (21 U.S.C. §384b). Section 806(a)(1) of the FDC Act (21 U.S.C. §384b(a)(1)) directs the FDA to establish a voluntary program for the expedited review and importation of food, and to establish a process for the issuance of a facility certification to accompany food offered for importation by importers participating in VQIP. Section 806(a)(2) of the FDC Act (21 U.S.C. §384b(a)(2)) directs the FDA to issue a guidance document related to participation in, revocation of such participation in, reinstatement in, and compliance with VQIP.

On June 5, 2015 (80 FR 32136), the FDA made available the draft version of the guidance for comment by August 19, 2015. Based on comments received on the draft guidance, the FDA modified the final guidance by:

  • clarifying that, during the VQIP fiscal year, a VQIP importer may add additional food from a foreign supplier from which the importer already imports food under VQIP;
  • clarifying that VQIP applicants will not be required to upload food labels for foods included in the VQIP application, but the FDA may request a copy of food labels for the foods included in the application to determine if there are labeling violations relating to the risk of the food during a VQIP inspection or audit examinations;
  • providing examples of how to ensure that the Foreign Supplier Verification Program (FSVP) or the Hazard Analysis and Critical Control Point (HACCP) importer of the food (when it is not the VQIP applicant) is in compliance with the applicable FSVP or HACCP regulations; and
  • revising the three-year import history eligibility criteria to provide for use of shared importation history of previous or parent companies.

The VQIP begins on January 1, 2018, which is the first date FDA will begin accepting applications to participate in VQIP for the fiscal year 2019 beginning October 1, 2018. The FDA anticipates approving approximately 200 applications for the first year of the program. Notice, 81 FR 79502, November 14, 2016

FDA amends gas container manufacturing and labeling under pressure of safety concerns

By Bryant Storm, J.D.

Portable cryogenic medical gas containers must meet new manufacturing, labeling, naming, and color requirements under an FDA Final rule amending the current good manufacturing practice (CGMP) and labeling regulations regarding medical gases. The new requirements are designed to increase the likelihood that the contents of gas containers can be accurately identified and to reduce the risk of the incorrect gas being connected to a gas supply system or container. The Final rule also places oxygen and nitrogen on a list to conditionally exempt those gasses from certain labeling requirements. Additionally, the Final rule removes cyclopropane and ethylene from that list. The rule is effective January 17, 2017.

Proposed rule. The publication of the Final rule follows a 2006 Proposed rule (71 FR 18039), which was issued in response to a number of incidents where medical gas containers holding a gas other than oxygen were accidently connected to a health care facility’s oxygen supply system. In those situations, the misidentification of the gas led to serious injuries and deaths. The issuance of the Proposed rule was motivated by the FDA’s concern over reports of serious injuries related to the contamination of high-pressure medical gas cylinders with the residue of industrial cleaning solvents, which, the FDA indicated, was likely a result of inadequate cleaning when the cylinders were converted from industrial to medical use.

Gas containers. If cryogenic medical gas containers are manufactured without permanent gas use outlet connections, under the Final rule, they must have gas-specific use outlet connections that cannot be readily removed or replaced except by the manufacturer. The new labeling requirements mandate that portable cryogenic medical gas containers bear a 360 degree wraparound label identifying the contents of the container, and high-pressure. Additionally, medical gas cylinders are required to be colored on the shoulder of the container in the FDA-designated color or colors associated with the gas or gases held in the container. The labeling requirements are designed to ensure the contents of medical gas containers are identified accurately in order to reduce the likelihood of the wrong gas being connected to the wrong container. Final rule, 81 FR 81685, November 18, 2016

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