Trump Administration releases broad plan to address drug prices

On May 11, 2018, the President released the American Patients First Trump Administration Blueprint to lower drug prices and reduce out of pocket costs. The Blueprint includes a number of policy proposals focused on the way drugs are priced both in the US and globally, some of which may be achieved through regulatory changes, while others may require legislation or international trade negotiations.

Many of the ideas covered in the Blueprint echo previous policies described both in the Council of Economic Advisors (CEA) report entitled, “Reforming Biopharmaceutical Pricing at Home and Abroad,” as well as items found in the President’s Fiscal Year 2019 budget.

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Regulatory reporting programs: Human capital imperative

Notwithstanding the importance of a sustainable governance structure and high-quality data, perhaps the most critical element of an effective regulatory reporting program is proper investment in human capital.

Unfortunately, in many cases, firms have underinvested, both in number and types of resourcing, in the human capital component of their reporting programs. This could be a result of senior management viewing the regulatory reporting organization as a “back office” function, where skills needed are limited to basic financial accounting knowledge with an operations orientation.  Traditionally, staff in a regulatory reporting function that was part of corporate finance were long tenured and knew legacy processes well.  Conversely, staff in the business lines, who were responsible for providing data to corporate finance, had little knowledge of reporting requirements or the impact of this data.  This approach worked as long as the data concepts were not complex, data requirements were static, and the processes supporting the report preparation process were not subject to frequent change.

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Review of retail sales practices at Canada’s big six banks

Canadian banks and foreign operations of federally regulated banks in Canada are subject to federal consumer protection legislation overseen by the Financial Consumer Agency of Canada (FCAC). The FCAC completed a review of retail sales practices at Canada’s big six banks. The summary findings were released on Tuesday March 20, 2018. The review called for stronger governance and oversight but did not find widespread “mis-selling”. The FCAC review resulted in five key findings:

  1. Retail banking culture is predominantly focused on selling products and services, increasing the risk that consumers’ interests are not always given the appropriate priority.
  2. Performance management programs—including financial and non-financial incentives, sales targets and scorecards—may increase the risk of mis-selling and breaching market conduct obligations.
  3. Certain products, business practices and distribution channels present higher sales practices risk.
  4. Governance frameworks do not manage sales practices risk effectively.
  5. Controls to mitigate the risks associated with sales practices are underdeveloped.

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CMS issues request for information on Direct Primary Care

On April 23, 2018, the Centers for Medicare and Medicaid Services (CMS) released a Request for Information (RFI) seeking input on opportunities to create Direct Primary Care (DPC) arrangements between traditional fee-for-service Medicare, Medicaid, and Medicare Advantage (MA) plans and primary care or multi-specialty group practices. In addition to potential roles for DPC in CMS programs, CMS also requested comment on how DPC can be a part of current Accountable Care Organization (ACO) initiatives like the Medicare Shared Savings Program.

The RFI also refers to Direct Primary Care as “Direct Provider Contracting.”

Comments are due on May 25, 2018.

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Technology and data governance: Investing in a way that pays back

Financial institutions are increasingly seeing the need for an increased focus on investments in technology and data governance that can provide standard-yet-granular and high-quality data to support financial stability, and help with monitoring their safety and soundness. The right kind of data must also be easily accessible and malleable enough to be re-purposed as needed, and provide actionable insights and analysis. Beyond regulatory compliance, executives understand that their firms stand to reap other business benefits that can provide competitive advantages.  This was echoed in a recent survey where CFOs were asked:

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CMS makes changes to electronic health records, price transparency in Inpatient Prospective Payment proposed rule

On April 24, 2018, the Centers for Medicare and Medicaid Services (CMS) released the proposed rule for the Hospital Inpatient Prospective Payment Systems (IPPS) for Acute Care Hospitals and Long Term Care Hospital Prospective Payment System (LTCH PPS) and Proposed Policy Changes and Fiscal Year 2019 Rates. The proposed rule would make updates to the payment rates for Medicare Part A services under the Inpatient Prospective Payment System, as well as rates for LTCHs paid under Medicare.

Under the proposed rule, the net increase of IPPS payments will be 3.4 percent, due in part to a 21.93 percent upward adjustment to disproportionate share hospital (DSH) payments for uncompensated care. CMS projects that LTCH PPS payments would decrease by approximately 0.1 percent in FY 2019, reflecting the continued phase-in of a dual payment rate system, which was recently extended through FY 2019 by the Bipartisan Budget Act of 2018.

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Stepping off the curb: A better governance structure and effective operating models for regulatory reporting

Regulatory reporting operating model – A new paradigm

Heightened regulatory expectations for regulatory reporting requires institutions to focus on preparing high-quality reports. One key element of this focus should be a governance structure that enforces accountability, measures data quality, mitigates reporting and operational risks, and allocates resources to address data and financial reporting challenges.

An “optimized” regulatory operating model involves managing and measuring regulatory reporting risk as a firm-wide activity. As such, the regulatory reporting operating model should follow a centralized framework, where corporate finance, risk, and business line executives create an equal partnership. Current regulatory expectations reflect that the historical operating models, such as projects with little accountability at the business line, are too often ineffective.  That is, the historical model cannot support the demand for high quality, fit-for-purpose data at a granular level with ever increasing complexity.

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CMS releases ACA plans’ final Notice of Benefit and Payment Parameters for 2019

On April 9, 2018, the Centers for Medicare and Medicaid Services (CMS) released the final version of the annual Notice of Benefit and Payment Parameters (NBPP) for 2019. The NBPP provides the ground rules for the individual and small group health insurance markets for 2019, and is the main body of federal regulation for Exchange plans established by the Affordable Care Act.

Of particular note are provisions granting states additional flexibility to the definition of Essential Health Benefits (EHBs), and other new authorities for states regarding the certification of Qualified Health Plans (QHPs) for network adequacy. CMS stated that, “issuer exits and increasing premiums have threatened the stability of the individual and small group Exchanges” may best be addressed through greater state control over their insurance markets and to support innovative insurance models.

The NBPP is scheduled to be published in the Federal Register on April 17, 2018.

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CMS provides greater payment rate increase for Medicare Advantage, Part D plans for 2019

The Centers for Medicare and Medicaid Services (CMS) on April 2, 2018, released the final version of the 2019 Medicare Advantage (MA) Capitation Rates, combined with the MA and Part D Payment Policies and the Part D Call Letter. CMS followed up with the release of the final rule, Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the Program for All-inclusive Care for the Elderly (PACE) on Friday, April 6, 2018.

The final rule is scheduled for publication in the Federal Register on April 16, 2018.

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CMS leaders report to Congress on MACRA implementation

On Wednesday, March 21, the House Ways and Means Committee held a hearing on the implementation of the Medicare Access and CHIP Reauthorization Act’s physician payment policies. The committee heard testimony from Demetrios Kouzoukas, Principal Deputy Administrator, and Dr. Kate Goodrich, the Chief Medical Officer for the Centers for Medicare and Medicaid Services (CMS).

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