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President Obama Signs 21st Century Cures Act Into Law

On December 13, 2016, President Barack Obama signed H.R. 34, the 21st Century Cures Act (the Act), into law. This sweeping healthcare law addresses the discovery, development and delivery of new drugs and medical treatments; it also includes substantial mental health reforms and assorted Medicare- and Medicaid-related provisions.

The law is a product of the bipartisan 21st Century Cures Initiative, spearheaded by US House of Representatives Committee on Energy and Commerce Chairman Fred Upton (R-MI) and Representative Diana DeGette (D-CO). The Initiative held various events and authored policy papers on topics such as innovating public health agencies, incorporating patient perspectives into the regulatory process, and improving medicine and medical product regulation. The House passed a first version of the bill in July 2015.

On the other side of the Capitol, US Senate Committee on Health, Education, Labor and Pensions (HELP) Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) worked diligently on medical innovation legislation this past year, holding hearings and favorably reporting several pieces of legislation. The majority of these bills, however, did not reach the Senate floor.

Prior to the November elections, Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Paul Ryan (R-WI) signaled their commitment to passing this legislation during the lame duck session, and the Act is a product of post-election bipartisan and bicameral negotiations.

The Act, which totals over 300 pages, includes many provisions of interest to healthcare providers. Highlights regarding care delivery and Medicare reimbursement include:

  • EHR Interoperability: The Act addresses interoperability of electronic health records (EHRs) by creating a model framework to securely exchange health information between networks. The Act seeks to promote the exchange of information between patient registries and EHR systems and allows the US Department of Health and Human Services (HHS) Office of the Inspector General (OIG) to investigate information blocking claims and penalize practices interfering with the lawful sharing of medical information. (Secs. 4003-4005)

  • Telehealth: The Centers for Medicare & Medicaid Services (CMS) and the Medicare Payment Advisory Commission (MedPAC) are required to inform Congress on the current use and limitations of telehealth services in the US. The provision underscores the need for a long-term solution for coverage of telehealth services and stresses the importance of covering telehealth services for Medicare beneficiaries as if the services were received in an in-person office setting. (Sec. 4012)

  • Hospital Readmissions: CMS is required to implement a transitional risk adjustment methodology, based on a hospital’s proportion of dual-eligible beneficiary patients, when assessing hospital readmission penalties. (Sec. 15002)

  • Payment Updates: The annual reimbursement update of the Inpatient Prospective Payment System is reduced from an increase of 0.5% to 0.4588% in FY 2018. (Sec. 15005)

  • Long-Term Care Hospitals: Under rules that went into effect in July 2016, Long-Term Care Hospitals (LTCHs) receive a lower reimbursement rate if more than 25% of their total annual Medicare patient population came from a single inpatient acute care hospital. This legislation reinstates the previous 50% threshold through October 2017. (Sec. 15006)
    Certain nonprofit LTCHs specializing in the treatment of spinal cord and acquired brain injuries are exempted from the lower site-neutral reimbursement rate for FY 2018 and FY 2019. LTCHs treating specific types of severe wounds are also exempted from the lower site-neutral rate in FY 2018. (Secs. 15009-15010)

  • Hospital Outpatient Departments: Section 603 of the Bipartisan Budget Act of 2015 (BBA) effectively reduced Medicare compensation paid to new off-campus hospital outpatient departments (HOPDs) beginning January 1, 2017, by eliminating HOPD eligibility for compensation under Medicare’s Hospital Outpatient Prospective Payment System (OPPS). Notably, the BBA contained no exception for HOPDs under development at the time of its passage. The Act corrects this by providing that HOPDs that (i) are the subject of a binding written agreement for construction, with an outside related party effective prior to November 2, 2015; and (ii) submit a provider-based attestation within 60 days of the Act’s enactment, will be considered “Grandfathered” HOPDs, and will be eligible for compensation under the OPPS. The Act also contains certain exceptions for cancer hospitals. (Sec. 16001-16002)

  • Critical Access Hospitals: The Act exempts Medicare providers for calendar year 2016 from enforcing the supervision requirements, originally finalized by CMS in 2008, for services and supplies provided in critical access hospitals. It also directs MedPAC to report to Congress within one year on whether the supervision exemption has impacted access to care for Medicare beneficiaries. (Sec. 16004)

The Act includes cost offsets, determined after months of negotiations. The offsets include: a drawdown of the strategic petroleum reserve; reductions in funding available from the Affordable Care Act, including the Prevention and Public Health Fund and funding available to territories; limitations of federal Medicaid reimbursement to states for durable medical equipment, prosthetics, orthotics and supplies to Medicare reimbursement rates; elimination of federal Medicaid matching funds for prescription drugs used for cosmetic purposes or hair growth, unless medically necessary; increased oversight of termination of Medicaid providers; and measures to reduce Medicare spending, including provisions focusing on payments for infusion drugs and home infusion drug services, and contracting and fraud penalties. (Secs. 5001-5012)

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Beth Goldstein, Health care Attorney Squire Patton Boggs
Associate

Beth Goldstein draws from a multifaceted background in health law and policy to counsel clients on legislative, regulatory, and legal matters relating to the health care sector.

Beth formed a deep understanding of Congress by serving for four years on the legislative staff of a committee in the U.S. House of Representatives, where she assisted the chairman in shepherding legislation through all stages of the legislative process, including a presidential veto override. Beth worked with outside stakeholders and across chambers to build strategic...

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Meg Gilley, Public Policy Advisor, Squire Patton Boggs Law firm
Public Policy Advisor

Meg has substantial healthcare experience and comes to the firm from the American College of Surgeons (ACS), where she served as a Congressional Lobbyist. At ACS, she advocated on behalf of the nearly 80,000 Members of the College and worked closely with the Senate Committees on Finance and HELP, with an issue area focus on Medicare payment, health information technology, health insurance and hospital delivery systems. 

Meg also brings a strong state government affairs background through her work with the Georgia Hospital Association and Georgia Regents University and Health System. While living in Atlanta, she obtained a Master of Public Health and successfully defended her thesis on lessons Georgia could learn from successful state and local government strategies to reduce childhood obesity rates. 

Meg previously worked in the office of US Congressman Jack Kingston (R-Georgia) who joined Squire Patton Boggs in February 2015. In this role, she advised him on numerous healthcare issues, and was also the Congressman’s advisor in his role as Ranking Member on the Agriculture Subcommittee of Appropriations. In this position, she counseled him on matters related to food safety and inspection, FDA regulation, country of origin and food labeling, and food and nutrition programs.

A native of Savannah, GA, Meg holds a Master of Public Health from Georgia State University and a Bachelor of Political Science from the University of Georgia.

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Public Policy Advisor

Katie Novaria comes to the firm with nearly a decade of experience on Capitol Hill.

She most recently served as a Professional Staff Member for the House Energy and Commerce Committee’s Subcommittee on Health. During her time on the Committee, Katie provided policy counsel on a portfolio of issues for Committee Members, while managing stakeholder engagement in the legislative process. She collaborated with House and Senate staff in writing more than 20 pieces of health legislation including the 21st Century Cures Act, SGR Repeal and Medical...

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Robert Nauman, Health Care, Lawyer, Squire Patton Boggs
Principal

Robert has extensive experience counselling healthcare clients, including hospitals and health systems, physicians, physician groups, ambulatory surgery centers, insurers, health plans and management companies, in a variety of regulatory and transactional matters.

Robert’s areas of expertise include healthcare fraud and abuse laws, Medicare reimbursement issues, provider alignment strategies, provider enrollment, accreditation and licensure, Accountable Care Organizations, provider acquisitions and affiliations, healthcare antitrust matters,...

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