President Obama signs 21st Century Cures Act, including provisions with significant implications for health plans and health care providers

President Obama on Tuesday, December 13, 2016, signed into law H.R. 34, the 21st Century Cures Act. Although the law focuses largely on the Food and Drug Administration, the National Institutes of Health, and issues of primary interest to life sciences companies, the new law includes provisions with significant implications for health care providers and health plans, especially those offering Medicare Advantage products. The provisions in some cases will affect compliance plans, Medicare payments, and strategic opportunities for organizations, making it imperative that provider and plan leaders take time to review how the 21st Century Cures Act might affect their organization.

Highlights of key provisions affecting health plans and health care providers are provided below.

Provisions affecting health plans

Importantly for health plans, the 21st Century Cures Act includes a provision that delays for three years until plan year 2019 the authority of Centers for Medicare & Medicaid Services (CMS) to terminate Medicare Advantage (MA) contracts based exclusively on plans’ failure to achieve minimum quality ratings (three stars) under the MA STARS rating system. Under the provision, CMS still could terminate MA contracts at any time for the other 10 performance categories considered in the Past Cycle Performance Review.

Beginning in 2019, the law also allows an MA-eligible enrollee within the first three months of any year to change a previous election to receive benefits through the traditional Medicare fee-for-service (FFS) program or an MA plan, and to elect coverage under Part D. This continuous enrollment and disenrollment period for the first three months of any year applies to prescription drug plans (PDPs) only for individuals enrolled in MA plans prior to any change in enrollment. The provision would prohibit unsolicited marketing or marketing materials from being sent to eligible individuals during the continuous enrollment/disenrollment period.

Under the 21st Century Cures Act, individuals with end-stage renal disease (ESRD) will be permitted to enroll in any MA plan for plan years beginning in 2019. The law will provide for changes to the MA benchmark and bid, and adjust the CMS-HCC Risk Adjustment Model. The law also requires the Medicare Payment Advisory Commission (MedPAC) to evaluate the impact of these changes on the overall accuracy of the risk scores under the MA program. The Department of Health and Human Services (HHS) Secretary is required to submit a report to Congress every three years beginning by December 31, 2018, on revisions to the risk adjustment and ESRD risk adjustment models.

The 21st Century Cures Act includes a provision that will exempt small employers (i.e., fewer than 50 full-time equivalent employees) who offer qualified health reimbursement arrangements (HRAs) from penalties related to Affordable Care Act (ACA) requirements for group health plans. To qualify, the HRA would need to supplement existing coverage. Employer contributions will be capped at $4,950 for an individual or $10,000 if the HRA also provides for reimbursement for an employee’s family members. Both figures would be indexed for inflation.

This provision is particularly notable in the post-election environment with much discussion focused on what health care policy alternatives might be put forward if major provisions of the ACA are repealed. Some groups representing large employers have voiced support for a similar approach for employers of all sizes in place of the ACA’s employer mandate. Such a move would facilitate more of a defined contribution approach to employer-sponsored health benefits and could result in more individuals purchasing coverage in the individual market with contributions from employers.

The 21st Century Cures Act also includes new emphasis on enforcement of the mental health parity requirements. Among several provisions focused on mental health parity, one provision directs the departments of HHS, Labor and Treasury to release a compliance program guidance including illustrative examples of compliance and noncompliance with existing mental health parity requirements. The provision also includes language clarifying the authority of HHS, Labor and Treasury to audit health plans found to have violated the mental health parity laws five times.

Another provision requires HHS to hold a public meeting within six months of enactment of the 21st Century Cures Act to develop an action plan for improved federal and state coordination related to the enforcement of mental health parity and addiction equity requirements.

Provisions affecting health care providers

Perhaps most notably, the law expands the grandfather clause of section 603 of the Bipartisan Budget Act of 2015 (BBA ’15) for provider-based hospital outpatient departments (HOPDs) that were under construction as of November 2, 2015, the date of enactment for the BBA ‘15. The site-neutral payment policy enacted in section 603 was included in the BBA ‘15 in an effort to eliminate the incentive for hospitals to acquire physician practices, convert the practices to provider-based departments (PBDs), and receive higher Medicare payments. CMS estimates that the policy will reduce Medicare spending by $500 million in 2017.

Items and services furnished at off-campus PBDs are billed using Healthcare Common Procedure Coding System (HCPCS) codes and paid under Outpatient Prospective Payment System (OPPS). In addition, physician (professional component) services at off-campus PBDs are eligible for payment under the Medicare Physician Fee Schedule (MPFS) facility rate.

Under the new policy, off-campus PBDs that were not billing Medicare for covered services furnished prior to November 2, 2015 (the date of enactment for the Bipartisan Budget Act of 2015) generally will not be eligible for payments under OPPS effective January 1, 2017.

To be included in the expanded grandfather provision included in the 21st Century Cures Act, a health care provider chief executive officer (CEO) or chief operating officer (COO) is required to submit a certification to HHS within 60 days of enactment of the law that the HOPD had a binding written agreement with an outside, unrelated party for the actual construction of the HOPD prior to November 2, 2015. The HHS Secretary is required to audit the accuracy of the attestations.

HOPDs that meet the above requirements will receive the full HOPD payment rate beginning January 1, 2018, instead of the lower physician fee schedule (PFS) or ambulatory surgical center payments required under BBA ’16. HOPDs that submitted a voluntary attestation prior to December 2, 2015, will receive the full payment rate beginning January 1, 2017.

Similarly, the law waives the BBA ‘16’s site-neutral payment policies for new HOPDs for cancer hospitals that are Prospective Payment System exempt (PPS-exempt). The provision includes a payment reduction to the target payment-to-cost ratio that is used to calculate additional payments that PPS-exempt cancer hospitals receive. Cancer HOPDs must attest to HHS that they qualify for the waiver within 60 days of the date of enactment. The HHS secretary is required to audit the accuracy of these attestations.

The 21st Century Cures Act reduces the scheduled update to the Medicare Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2018 to 0.4588 percent. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) had set the IPPS update at 0.5 percent for discharges occurring during FY 2018 through FY 2023.

The law also requires the Secretary of the HHS to translate inpatient codes under the International Classification of Disease (ICD) system to outpatient hospital codes in the HCPCS for 10 surgical procedures. HHS must complete work on the new outpatient codes by December 1, 2018.

US Health Care Regulatory Team:

Anne Phelps
Principal | Deloitte Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

Heather Hagan
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

For information on health plan implications:

Amy Kroll
Principal | Deloitte Advisory
Health Plans Sector Leader
Deloitte & Touche LLP

Tom Delegram
Managing Director | Deloitte Advisory
National Regulatory & Compliance Leader – Health Plans
Deloitte & Touche LLP

For more information on health care provider implications:

Steve Burrill
Principal | Deloitte Advisory
Health Care Provider Sector Leader
Deloitte & Touche LLP

Karolyn Woo-Miles
Principal | Deloitte Advisory
National Regulatory & Compliance Leader – Health Care Providers
Deloitte & Touche LLP

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