Kusserow on Compliance: Increased CMS Spotlight on Nursing Facilities

CMS and states visit nursing homes on a regular basis with “survey” or “inspection” teams to determine if the nursing homes are providing the quality of care that is required by Medicare and Medicaid, as well as to identify deficiencies in meeting CMS safety requirements. When deficiencies are identified, they must be corrected, and, if serious ones are not corrected, it may lead to termination from participation in Medicare and Medicaid.

Most facilities correct their problems within a reasonable period. However, some have significantly more problems that the norm with a pattern of serious problems persisting over three or more years. Although some facilities institute enough improvement that they are in substantial compliance on one survey, significant problems often resurface by the time of the next survey. Such facilities are referred to by CMS as a “yo-yo” or “in and out” compliance history. These facilities rarely address underlying systemic problems that are giving rise to repeated cycles of serious deficiencies. To address this problem CMS created the “Special Focus Facility” (SFF) initiative that is a listing of problematic nursing homes that have had a history of serious quality issues and are included in a special program to stimulate improvements in their quality of care.

Those on the SFF list are visited in person by survey teams twice as frequently as other nursing homes (about twice per year). The longer the problems persist, the more stringent the enforcement actions, including imposition of civil monetary penalties (“fines”) or termination from Medicare and Medicaid.  Within about 18 to 24 months after a facility is identified by CMS as an SFF nursing home, CMS expects: (1) improvement & graduation off the SFF; (2) termination from participation in Medicare/Medicaid programs; or (3) extension of time on SFF because of some progress or change of ownership. For more information check the CMS website that posts SFF Nursing Homes in five (5) categories:

  1. newly added to the SFF;
  2. failing to show significant improvement since being posted on the SFF;
  3. showing significant improvement by the most recent survey, and CMS is monitoring;
  4. graduating off the SFF because they not only improved, but they sustained significant improvement for about 12 months (through two standard surveys); and
  5. terminated by CMS from participation in Medicare and Medicaid within, or voluntarily chose not to continue such participation.

To assist in improving Nursing Home quality, CMS began rating all nursing homes using a Five-Star Quality Rating System that can be found at https://www.medicare.gov/NHCompare.


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2019 Strategic Management Services, LLC. Published with permission.

States encouraged to maintain health benefits for temporary census workers

The Acting Director of the Center for Medicaid and CHIP Services (CMCS) encouraged states, to the extent permitted under the law, to exclude temporary income from employment in the 2020 Decennial Census when determining eligibility for public benefit programs. A new bulletin provides guidance on existing flexibility under state plans for modified adjusted gross income (MAGI) based systems and non-MAGI based systems. This includes the option of submitting a state plan amendment (SPA) to CMS (CMCS Bulletin, July 3, 2019).

Census workers and health benefits

The Census provides low-income individuals with an opportunity for employment and skills training. Many of these workers are eligible for Medicaid or in a household with Medicaid or CHIP eligible individuals. One element of successful recruiting efforts by the Census Board is ensuring the continued availability for Medicaid and CHIP coverage for workers and their families. During previous censuses, state Medicaid and CHIP agencies have been encouraged to ensure that temporary census workers and their families do not lose eligibility due to temporary census income. Previously, states were able to disregard temporary census income for all Medicaid and CHIP eligibility groups, but a move to a MAGI-based methodology no longer permits the use of income disregards. The bulletin describes existing authorities that may be used to exclude or minimize the impact from temporary census employment.

Existing State Plan Options

Under section 1902(e)(14)(D) of the Social Security Act, for non-MAGI populations, states may disregard in whole or in part, temporary census income and many states have already elected to disregard temporary census income for multiple eligibility groups in their state plan. States wishing to apply disregards of temporary census income for the first time or wish to add or modify the non-MAGI groups affected must submit an SPA to CMS.

Under MAGI-based methodologies, temporary census income is taxable as employment income and Medicaid and CHIP regulations prohibits the use of income disregards and this prohibition cannot be waived. States may elect under 42 C.F.R. §435.603(h)(3) to use a reasonable method for determining a prorated portion of reasonably predictable changes (RPC) to income as they do for fluctuating income such as from seasonal work or self-employment. States with approved RPC methodology for seasonal work may include temporary census income within its scope such that a new SPA submission would not be necessary. States that do not have an existing state plan authority to implement an RPC methodology may elect to do so through an SPA, although the methodology cannot be limited only to temporary census income.

Parents and Other Caretaker Relatives may retain specific coverage protections due to increased earned income through Transitional Medical Assistance (TMA). TMA is a required eligibility protection that states must apply, even under increased earnings due to temporary census employment. If census employment income triggers a transition to TMA, the Medicaid agency would redetermine the individual’s eligibility when census employment ends.

CMS is offering technical assistance on the options and requirements included in the informational bulletin as well as assistance on submitting the required state plan amendments.

Trader Joe’s enjoys sweet victory, dismissal of honey labeling case

A putative class action involving allegations related to Trader Joe’s Manuka Honey has been dismissed after a California federal district court granted Trader Joe’s motion to dismiss without leave to amend. The consumers alleged that Trader Joe’s mislabeled and falsely advertised its manuka honey as “pure” when it was allegedly adulterated. In dismissing the complaint, the court concluded that plaintiffs could not plead sufficient facts to support their adulteration theory since their theory involved the bee’s mixing of pollen and not the manufacturer intentionally mixing manuka honey with non-manuka honey. Since the consumers admitted they could not plead enough facts to support their adulteration claims, the court also dismissed the breach of warranty and fraud claims. The product labeling is accurate and, therefore, not misleading. Finally, the state law claims are preempted (Moore v. Trader Joe’s Company, June 24, 2019, Westmore, K.).

Trader Joe’s (manufacturer) markets and sells “Trader Joe’s Manuka Honey.” Plaintiffs (consumers) allege that two representations contributed to their alleged injuries. On the front label, the product states “100% New Zealand Manuka Honey” or “New Zealand Manuka Honey. The ingredient statement lists “manuka honey” as the only ingredient. The consumers allege that the product testing they purchased showed that approximately 57 and 62 percent of the pollen in the tested honey was from the manuka flower; the remaining pollen was from other floral sources. The consumers allege that Trader Joe’s sales and marketing violate consumer protection laws because the honey is mislabeled and falsely advertised as pure manuka honey, but it should be labeled as “Manuka-based.” Trader Joe’s filed a motion to dismiss.

Insufficient facts to support adulteration

The court granted the manufacturer’s motion to dismiss without leave to amend because the consumers confirmed they could not plead sufficient facts to support the adulteration theory.

The consumers’ theory of adulteration is that bees visit different floral sources and return to the hive, which lowers the manuka pollen count; their theory was not that the manufacturer purposefully mixed manuka honey with non-manuka honey. The FDA’s industry guidance on honey labeling, which was referenced by both parties, only discusses adulteration with non-honey sources and not mixing high-value honey with less expensive honey. Further, the guidance does not address whether the mixing would constitute adulteration.

The court concluded that to constitute adulteration, the manufacturer would have to purposefully mix manuka and non-manuka honey. In this case, all the involved honey is technically manuka honey with varying pollen counts—there is no adulteration in violation of the FDC Act.

Since the consumers could not demonstrate adulteration, the court also dismissed the breach of warranty claim and fraud claim. The fraud claim is not actionable because it is predicated on adulteration whereby the manufacturer (not bees) purposefully mixed manuka and non-manuka honey; the consumers have no facts to support that theory.

Product labeling is accurate and not misleading

The court concluded that product label is accurate because the consumers cannot allege adulteration, honey is a single ingredient food, and the chief floral source is manuka. Furthermore, since the label is accurate, a reasonable consumer cannot find it misleading. Trader Joe’s product is accurately labeled as 100 percent manuka honey.

FDA considers a benefit-risk assessment for opioid analgesics

The FDA issued a draft guidance for the pharmaceutical industry when providing information in a new drug application (NDA) for opioid analgesic drugs. The FDA assesses risks and benefits of all drugs in the context of their labeled uses when reviewing NDAs. However, because of the widespread abuse of opioids the FDA will also consider the broader public health effect, including the risks related to misuse, abuse, opioid use disorders, accidental exposure, and overdoses for patients and others. The guidance details what data is required for the FDA to complete their benefit-risk analysis after receiving an NDA (Notice, 84 FR 29211, June 21, 2019).

Patient benefits. For the FDA to analyze patient benefits, pharmaceutical companies submitting opioid NDAs should show the efficacy and safety of the drug when used for its proposed indication. The NDA should provide a body of evidence supporting a finding of drug efficacy, what patient population was used and why, and a proposed duration of use for each proposed indication. In addition to efficacy, the companies should show the safety of the drug when used for its proposed use. The NDA should show drug safety by submitting supporting data of drug characteristics that mitigate adverse events associated with opioids, such as respiratory depression, sedation, and constipation. The FDA would also need data supporting any drug characteristics that mitigate risks of opioid use disorder.

Patient risks. In addition to the already known risks of opioids, the FDA will also consider questions about the risks to patients who are prescribed the drug and use it as labeled and directed by their physicians. The NDAs should provide data to support the answers to the following questions:

  • Does the drug have any risks not normally associated with opioid use? How serious are these risks, and can they be mitigated? Are the risks reversible?
  • Does the drug formulation cause any risks such as tablets that swell in the GI tract or stick to mucous membranes? For drugs formulated with abuse-deterrent properties, are there any risks associated with formulation?
  • Does the drug have characteristics that increase or decrease the risks of respiratory depression, sedation, or development of opioid dependence? Can packaging particulars or storage and disposal conditions mitigate the risks?
  • Is there evidence that typical adverse events associated with opioids occur at a higher rate?

Effectiveness and safety. The FDA considers the benefits and risks relative to other available treatment options for the prescribed condition. The comparative data of the drug to other treatment options is valuable, but the FDA notes, it is not required to be found superior to other options, to be approved for an ANDA. The FDA will consider the following questions when determining the effectiveness and safety of drugs in ANDAs:

  • Does efficacy data exist comparing the drug with other opioids or nonopioids for the condition? Does the drug have any advantages compared to other treatment options?
  • Does comparative safety data exist with other treatment options? Are there any safety advantages or disadvantages compared to other options?
  • What is the anticipated benefit-risk balance compared to other treatment options?
  • Does the drug have any other safety advantages over other treatment options?

Public health effects. The FDA proposed in the guidance that it would consider the greater public health effects of new opioids including patients and nonpatients. Nonpatients can be members of patient’s households, visitors to patient’s households and others. The risks are those related to misuse, abuse, opioid use disorder, accidental exposure, and overdose. The FDA will consider the following when analyzing public health effects:

  • Are there characteristics of the drug that increase or decrease risk of accidental exposure to children?
  • Are there characteristics of the drug that increase risk of misuse, abuse, and related adverse outcomes? Can the risks be mitigated?
  • Are there risks with the method of delivery?
  • Are there any potential unintended adverse consequences?
  • Safety of unintended routes of administration such as intravenous, intranasal, or inhalation
  • Discussion of anticipated use-specific subpopulations such as teens or patients with mental health disorders and how to mitigate such risks

Risk management. The FDA determined that there is a risk evaluation and mitigation strategy necessary for all opioid drugs intended for outpatient use to make sure the benefits outweigh the risks. The mitigation strategy requires training for all health care providers involved in the treatment of pain. To meet this requirement drug companies with approved opioid NDAs must provide grants to continuing education providers for development of these training courses. Any NDA must include any risk evaluation and mitigation strategies thought to be necessary to make sure the benefits outweigh the risks of the opioid drug.