Bill introduced to postpone Stage 3 of meaningful use

Saying that “physicians, hospitals and healthcare providers are challenged in meeting CMS’ onerous requirements” of the electronic health records (EHR) Incentive Programs, Representative Renee Ellmers (R-NC) introduced the Further Flexibility in HIT Reporting and Advancing Interoperability (Flex-IT 2) Act. Ellmers says that the bill, designated H.R. 3309, will address concerns with CMS’ proposed rules for Meaningful Use Stage 3 for the Medicare and Medicaid EHR Incentive Programs.

Meaningful use

Under the EHR incentive programs, providers receive incentive rewards for demonstrating the adoption of “meaningful use” of specified health information technology (HIT). The programs have three stages, each building on earlier stages; it is currently Stage 2. Ellmers said, “Only 19 percent of providers have met Stage 2 attestation requirements,” and questioned CMS’ release of proposed regulations for Stage 3 (Proposed rule, 80 FR 16732, March 30, 2015; see Stage 3 of Electronic Health Record Incentive Program proposed, Health Law Daily, March 30, 2015).

Flex-IT 2

According to Ellmers, the bill has five major components.

  1. Delay Stage 3 Rulemaking until (a) at least 2017; or (b) merit-based incentive payment system (MIPS) final rules are released; or (c) at least 75 percent of doctors and hospitals are successful in meeting Stage 2 requirements.
  2. Harmonize reporting requirements for meaningful use, the physician quality reporting system, and the hospital inpatient quality reporting program to remove duplicative measurements and streamline requirements from CMS.
  3. Institute a 90-day reporting period for each year, regardless of stage or program experience.
  4. Encourage interoperability among EHR systems.
  5. Expand hardship exemptions, because, Ellmers says, “they are very narrowly defined under current regulations.”

Industry response

The American Medical Association (AMA) issued a statement to declare its “strong support” for Flex-IT 2, saying the Act responds “to the depths of doctors’ dissatisfaction with the federal government’s Meaningful Use program.” AMA President Steven J. Stack, M.D., said, “Under Rep. Ellmers’ leadership, federal regulations would be revised to provide greater flexibility for physicians to meet the Meaningful Use requirements and ensure that Stage 3 of the program is developed in step with other efforts to modernize our nation’s health care system.”

Oncologists: astronomical cancer drug costs need to come back to earth

With the average price of new cancer drugs having steadily increased to more than $100,000 per year, a group of 118 oncologists released a commentary in the Mayo Clinic’s Proceedings, calling on patients, family members, and health care professionals to join a patient-based grassroots movement advocating against skyrocketing prices for cancer drugs.  The physicians, who state that they are “engaging in contemporary methods to address a contemporary crisis,” are encouraging individuals to join internet and social media campaigns on sites such as and Facebook to express their support for cancer drug cost control.

Cancer’s costs

According to the physicians, it is estimated that one in three individuals will be affected by cancer in his or her lifetime. Along with threats to physical health, a diagnosis of cancer can also pose serious threats to financial health.  A study in the Journal of Economic Perspectives that examined the cost of cancer drugs found that the average price has increased by 10 percent, or $8500, each year for the past 15 years. A Kaiser Family Foundation study concluded that the out-of-pocket burden on patients is increasing as well,  rising to 20 to 30 percent of the total drug cost. With the average annual gross household income in the U.S. being around $52,000, under such estimates, a patient who needs just one cancer drug costing $120,000 a year, will have to foot a bill as high as $25,000 to $30,0000. The physicians argue that such patients face a terrible choice of foregoing potentially life-saving treatments or paying for household essentials such as food and housing. This difficult choice may be more commonly faced by senior citizens, who are more likely to face cancer and have restricted incomes. Pointing to estimates that 10 to 20 percent of all cancer patients forego prescribed treatments due to the costs, the physicians argue that this cost conundrum is “a structural disincentive for compliance with some of the most effective and transformative drugs in the history of cancer treatment.”

 Drug price negotiation

The physicians point to the 2003 Medicare Prescription Drug, Improvement, and Modernization Act prohibition of a Medicare negotiating drug prices as responsible for making drug companies the sole decision makers in setting cancer drug prices. As we recently reported, a study has suggested that Medicare Part D could be savings billions if it had price negotiating power. The physicians see no relief in sight as drug companies keep raising the prices of medications. As a result, the physicians question whether cancer drug prices are based on a reasonable expectation of investment return, or, rather, based on what the market can bear.

New drugs

The physicians point out that 900 new drugs are under development, including many for the treatment of rare cancers, which is a rate of development faster than ever seen in the past. However, they argue, the current pricing system makes drugs unaffordable for many patients.


The group made several recommendations for improving the cancer drug pricing system:

(1) A post-approval review process should be established that proposes fair prices for the treatments that are based on the “value to patients and health care”;

(2) Medicare should be allowed to negotiate drug prices;

(3) Allow the Patient-Centered Outcomes Research Institute (PCORI), created by Section 6301 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), and similar organizations to consider the prices of new treatments in assessing their value;

(4) Individuals should be permitted to import cancer drugs for personal use;

(5) Legislation should be passed that prevents drug companies from delaying generic drug access;

(6) The patent system should be reformed to make unnecessarily prolonged product exclusivity more difficult; and

(7) Organizations that represent cancer specialists and patients should be encouraged to consider the overall value of drugs and treatments when formulating guidelines for treatment.

The group is hoping that, with proper support, pharmaceutical companies will focus on the problem and elected representatives can advocate for their “most important constituents among the stakeholders in cancer—American cancer patients.”

Kusserow on Compliance: OIG Advisory Opinion finds arrangement is “low-risk” under Anti-Kickback statute

The Office of Inspector General (OIG) released an Advisory Opinion on an arrangement in which a hospital would “lease non-physician employees” and “provide operation and management services to a related psychiatric hospital for an amount equal to the hospital’s fully loaded costs” (proposed arrangement). The OIG found that the proposed arrangement was low-risk under the Anti-Kickback Statute (AKS) and, therefore, the OIG would not impose sanctions in this circumstance.


A non-profit health system (the system), along with a foundation, a tax-exempt charitable organization, are the sole members of the center, a non-profit psychiatric hospital. The system and the center (the requestors) are parties to a Master Services Agreement and an Employee Lease Agreement (“existing arrangement”), whereby the system leases non-clinician bona fide employees to the center for an amount equal to the system’s fully loaded costs (i.e., salary plus benefits and overhead expense) plus a two percent administrative fee; the system also provides certain operational and management services to the center in exchange for a fee equal to the system’s fully loaded costs to furnish those services plus a two percent administrative fee. Under the proposed arrangement, everything would be the same, except that the center would pay only the system’s fully loaded costs. The concern was that the system and the center are possible sources of referrals to each other. Medicare reimburses the center under the inpatient psychiatric facility prospective payment system, and the center and certain components of the system file cost reports with CMS.

The requestors certified that the services of the leased employees and the operational and management services cannot be obtained elsewhere at an aggregate cost lower than the cost under the proposed arrangement; and the purpose of both the existing and proposed arrangements has been to integrate the center into the system and to achieve cost efficiencies by eliminating duplicative administrative positions and functions. It is anticipated that the proposed arrangement would decrease the center’s labor and operational costs, which ultimately may result in reduced costs to federal health care programs.

The remuneration that the center would pay to the system during the term of the proposed arrangement would not vary based on the volume or value of referrals or other business generated between the parties. The aggregate compensation cannot be set in advance, however, because the system’s costs and the center’s personnel, operational, and management needs may change during the term. The fully loaded costs charged to the center for the leased employees and services (without the administrative fees) may be below fair market value in an arms-length transaction. The requestors asserted that, because the center and the system are related organizations, payments by the center in excess of the fully loaded costs incurred by the system are not allowable costs to the center. The requestors certified that they would accurately reflect all costs under the proposed arrangement within their respective cost reports and would otherwise comply with applicable cost reporting rules and regulations.


The OIG noted that proposed arrangement cannot meet the requirements of the personal services and management contracts safe harbor, because the compensation may be less than fair market value, and it cannot be set in advance. However, the agency examined the totality of the facts and circumstances of the proposed arrangement and concluded that it has a low risk of fraud and abuse and would therefore not be subject of enforcement action, for the following reasons:

  • The proposed arrangement is supported by applicable Medicare cost reporting rules for related parties. As such, payments to the system in excess of the system’s costs for employees and services would not be allowable costs for the center.
  • The proposed arrangement would achieve cost efficiencies between two related entities that are part of an integrated health system and a reduction in the center’s labor and operational costs. While these cost savings are not directly passed through to federal health care programs, they are included in cost reports for use, along with other data, to update reimbursement amounts under Medicare’s inpatient psychiatric facility prospective payment system. Moreover, cost savings that are not derived from stinting on patient care or other abuses are generally beneficial to a health care system as a whole, which indirectly benefits federal health care programs.
  • The OIG recognized that, inasmuch as the requestors are related parties, they may have existing incentives to refer to each other, however, there is no evidence suggesting that the proposed arrangement would increase these incentives, or that any purpose is to induce referrals.

These facts, combined with the absence of other indicia of remuneration to induce referrals, led the OIG to conclude that the proposed arrangement is sufficiently low-risk under the AKS.

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 © 2015 Strategic Management Services, LLC. Published with permission.


Rural hospitals flounder under heavy regulatory restrictions, ask for help

Critical access hospital (CAH) leaders from the Midwest are encouraging Congress to protect access to health care in rural communities. The leaders traveled from Kansas and Nebraska to request that the House Ways and Means Health Subcomittee support legislation to relieve CAHs from burdensome rules and conditions of payment that drain the resources of these hospitals. The hospital representatives pointed to several pieces of pending legislation that would either temporarily or permanently relieve these burdens.


The leaders pointed to two particular issues that make hospital operation difficult in rural areas. CAHs are subject to a condition of payment that requires physician certification that a beneficiary may be expected to be transferred or discharged within 96 hours. They are also required to have a physician or approved non-physician practitioners (NPP) particular routine outpatient services. This includes procedures such as applying a splint to a finger or administering nebulizer treatments. The physician or NPP must be immediately available for providing assistance and direction as the procedure is being performed.

According to Shannon Sorensen, CEO of Ainsworth, Nebraska’s Brown County Hospital, CAHs do not have manpower or resources available to meet these regulations. Carrie Saia, CEO of Holton Community Hospital in Kansas, stated that these regulations make it difficult for CAHs to budget and plan for the future. These hospitals are usually located in poor, rural areas with high dependence on Medicare and Medicaid. Those with a CAH designation and no more than 25 beds receive Medicare reimbursements for actual costs as opposed to a prospective payment system.


The Critical Access Hospital Relief Act, H.R. 169/S. 258, would remove the 96-hour certification requirement. The Protecting Access to Rural Therapy Services Act (PARTS Act), H.R. 1611/S. 257, would no longer require hospitals to have a physician directly present during outpatient therapeutic services, with exceptions for complex procedures. Other pending legislation, H.R. 2878/S. 1261 would continue a stay on the direct supervision requirement for the rest of the year for these hospitals, and the industry supports it as a stopgap measure. These bills are currently in the committee stage. The American Hospital Association (AHA) issued a statement on July 28 supporting the removal of these requirements. The AHA supports several pieces of proposed legislation that would assist rural hospitals in maintaining access to care.