CMS proposes to scale back scope of bundled payment model for joint replacement, cancel other mandatory bundled payment models

The Centers for Medicare and Medicaid Services (CMS) on Thursday, August 17, 2017, published a proposed rule that would reduce the number of geographic areas where hospitals and clinicians would be required to participate in the Comprehensive Care for Joint Replacement (CJR) bundled payment model focused on knee and hip replacements, and cancel cardiac and other orthopedic bundled payment models that are scheduled to begin on January 1, 2018.

As a member of Congress and in his confirmation hearings as Secretary of the Department of Health and Human Services (HHS), Secretary Tom Price raised concerns about regulations issued by the Obama Administration to test the orthopedic and cardiac bundles payment models in so many geographic areas on a mandatory basis.

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5 insights on how robotics can drive financial services compliance modernization

Using innovation to lead, navigate risks and opportunities, and disrupt the status quo

Robotic process automation (RPA) is quickly transforming middle- and back-office operations in financial services institutions. Robots (bots) that are at the heart of RPA have been used in the past to mimic rules-based, process oriented human execution activities (e.g., document gathering, data retrieval, calculations), thereby automating workflow and decision-making for a variety of processes, including loan origination and collections. Recently, however, RPA has been implemented more widely across institutions to help drive efficiency and effectiveness. And the benefits are already apparent. By embracing complexity and leveraging this technology in new ways, financial services companies are accelerating their corporate performance (see Benefits of RPA).

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A new ratings framework aligned to regulatory reform priorities

On August 3, 2017, the Federal Reserve Board (Fed) released a notice of proposed rulemaking that would establish a new rating system for large financial institutions (LFIs). Specifically, the new rating system would apply to bank holding companies (BHCs) and non-insurance, non-commercial savings and loan holding companies (SLHCs) with more than $50 billion in total assets, as well as intermediate holding companies (IHCs) of foreign banking organizations.

The proposal includes a new rating scale under which component ratings would be assigned for:

  1. Capital planning and positions,
  2. Liquidity risk management and positions, and
  3. Governance and controls.

In essence, the Fed is revamping its rating system for LFIs to catch up with the Fed’s post-crisis heightened supervisory expectations and approach to LFI supervision.  The Fed proposes to assign initial ratings under the new rating system during 2018.

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A new age for governance

On August 3, 2017, the Federal Reserve Board (Fed) proposed guidance that would significantly revise its expectations for boards of directors by laying out its view of the five key attributes that describe an effective board.  The proposal would also set in motion efforts to better delineate the roles, responsibilities, and accountabilities among senior management and the board by rescinding or revising past guidance and rules.  The proposed guidance on board effectiveness would apply to US bank holding companies (BHCs), savings and loan holding companies (SLHCs), and nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) as systemically important.  The proposed guidance would not apply to intermediate holding companies (IHCs) of foreign banking organizations or state member banks, but the Fed noted that it anticipates proposing guidance on board effectiveness for IHCs at a later date, and requested feedback on how the guidance should be adapted to apply to IHCs and state member banks. The proposed guidance would also be used as part of the Fed’s supervisory assessment of board effectiveness outlined in a companion proposal on a new rating system for large financial institutions (LFIs).1

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OCC requests comment on possible revisions to Volcker Rule

In the weeks following the 2016 Presidential election, members of the incoming Administration clearly expressed their views that certain aspects of Dodd-Frank, including the Volcker Rule, are overly complex.  Specifically, then-Treasury Secretary-nominee Steven Mnuchin argued that the “number one problem with the Volcker Rule is that it’s too complicated and people don’t know how to interpret it.”1

On June 12, 2017, the Treasury Department took a significant step on financial regulatory issues by releasing its first report pursuant to President Trump’s executive order setting forth “Core Principles” for regulating the US financial system.  Among other things, the report argues that the Volcker Rule requires “substantial amendment” and that its implementation has “hindered market-making functions necessary to ensure a healthy level of market liquidity.”2  Accordingly, the report proposes several changes—some of which could be implemented by the regulatory agencies and some of which would require Congressional action to amend the underlying statute—designed to “reduce the scope and complexity” of the rule.3

On August 2, 2017, the Office of the Comptroller of the Currency (OCC) issued a notice and request for comment4 on whether certain aspects of the regulation implementing the Volcker Rule should be revised to “better accomplish the purposes of the statute” while decreasing the compliance burden on banking entities and fostering economic growth.

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What’s next after Senate defeat of latest ACA repeal effort?

The Senate early in the morning of Friday, July 28, 2017, voted 49-51 to defeat the Health Care Freedom Act, which would have repealed targeted provisions of the Affordable Care Act (ACA). Three Republican Senators joined all Democrats in voting against the legislation, prompting Senate Majority Leader Mitch McConnell (R-KY) to pull the bill from the Senate schedule. Leader McConnell and Speaker of the House Paul Ryan (R-WI) have not indicated how they will proceed on legislation related to the ACA.

The House adjourned for its August recess from Friday, July 28, 2017, through Tuesday, September 5, 2017. Leader McConnell has said the Senate will adjourn Friday, August 8, 2017, through Tuesday, September 5, 2017.

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FRB, FDIC Release Public Sections of 2017 Resolution Plans of Eight US G-SIBs

On July 5, 2017, the Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC) released the public sections of the 2017 resolution plans submitted by all eight US global systemically important banks (G-SIBs).1 The 2017 public sections are substantially longer than the 2015 public sections submitted in connection with the firms’ last full submissions—863 pages in 2017 compared to 520 pages in 2015—and contain significant new details about the G-SIBs’ completed and forthcoming enhancements to resolution planning capabilities to address regulatory concerns.

The 2017 plans were submitted after the FRB and FDIC (collectively, the “Agencies”) jointly determined that the 2015 plans submitted by five of the eight G-SIBs were “not credible or would not facilitate an order resolution under the Bankruptcy Code.”2 (After the firms submitted remediation plans, the Agencies jointly determined that the firms had adequately remediated the identified deficiencies.) The 2017 public sections make clear that the G-SIBs have benefitted from the Agencies’ increased transparency across the key resolution planning capabilities, as the institutions have demonstrated significant improvements in each of these areas.

Although the Agencies have not yet reviewed either the confidential or public portion of the 2017 plans, the findings related to the 2015 plans illustrate the heightened expectations with respect to resolution planning. If the Agencies determine that a plan is “not credible” and the firm does not remediate an identified deficiency, they may impose more stringent capital, leverage, or liquidity requirements, or restrictions on the firm’s growth, activities, or operations until it submits a plan that remediates the deficiency.

The next full plan submissions for all eight US G-SIBs are due by July 1, 2018.

For a more detailed analysis of the public sections, please click here.

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A renewed focus on the future of the 340B program

On Thursday, July 13, 2017, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that updates the payment rates and policy changes in the Hospital Outpatient Prospective Payment System (OPPS). In the provisions, CMS proposes to change the payment rate for certain Medicare Part B drugs purchased by hospitals through the 340B program.

The proposed changes include adjusting the applicable payment rate for drugs acquired under the 340B program from average sales prices (ASP) plus 6 percent to ASP minus 22.5 percent. This potentially represents a significant reduction to how much Medicare pays 340B hospitals for Part B drugs under OPPS.

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The Buy American Act: New focus on government contract compliance

On April 18, 2017, President Trump issued an Executive Order1 requiring that every government agency “…scrupulously monitor, enforce, and comply with Buy American Laws… and minimize the use of waivers, consistent with applicable law.”

Government agency surveillance of contractor Buy American Act compliance in recent years appears to have been inconsistent2.  Allegations of Buy American Act violations over the last several years appear to be more frequently the result of competitive bid protests of awardee compliance or qui tam (i.e., whistle blower) allegations of non-compliance than agency or prime contractor compliance surveillance activities3.

However, that could change with the President’s Executive Order and increased contracting agency focus on Buy American Act compliance.  This leaves contractors vulnerable if they do not have effective compliance programs in place to ensure their articles, materials, and supplies comply with their contractual obligations.  Findings of non-compliance could lead to a number of compensatory and punitive penalties.

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CMS proposes changes to MACRA Quality Payment Program for 2018

The Center for Medicare and Medicaid Services (CMS) on June 30, 2017, published a proposed rule outlining changes for the 2018 performance year of the Quality Payment Program (QPP) under the Medicare Access and CHIP Reauthorization Act (MACRA). MACRA’s QPP includes the incentive payments for advanced alternative payment models (A-APMs) and the Merit-based Incentive Payment System (MIPS). Performance in 2018 will determine payment adjustments to clinicians that will be applied to their Medicare Part B payments in 2020.

The first performance year began January 1, 2017, for Part B payment adjustments in 2019.

MACRA repealed the sustainable growth rate (SGR) formula for updates to the Medicare Part B Physician Fee Schedule and sets payment updates for all years in the future. Through the QPP, the law is intended to link Medicare payment updates to quality and performance and drive the health care payment system across all payers away from fee-for-service reimbursement models.

Select key provisions of the proposed rule are highlighted below.

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