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Teaching Hospital Update - May 11–15, 2009


Email Alert

By Reesa Benkoff*

May 15, 2009

Medicare Hospital Fund Will Be Insolvent by 2017, Two Years Earlier Than Expected, Trustees Say

According to a Medicare trustees report issued Tuesday, the trust fund that Medicare uses to pay for beneficiaries' hospital care will be insolvent by 2017, as the program since last year has been paying out more than it collects in taxes and interest, in part due to the worsening economy. This estimated insolvency date is two years earlier than that predicted by the trustees last year. Medicare would have to deposit $13.4 trillion—
$1 trillion higher than last year's estimate—into an interest-earning account today in order for the hospital fund to pay its scheduled benefits over the next seventy-five years, according to MedPAC. MedPAC said the program's total unfunded obligation, which includes doctor and prescription drug benefits, is $37.8 trillion. These calculations include a 21% payment cut for providers scheduled to take effect this year. However, Congress typically has eliminated this reduction.

"The financial outlook for the hospital insurance trust fund is significantly less favorable than projected in last year's annual report," the trustees said, adding, "Actual payroll tax income in 2008 and projected future amounts are significantly lower than previously projected, due to lower levels of average wages and fewer covered workers." Since the recession began, 5.7 million workers have lost their jobs, according to the Washington Times. The trustees estimated that in coming years, Medicare spending will rise faster than workers' earnings or the economy as a whole. According to CQ HealthBeat, "'Exhaustion' of the hospital fund does not mean it would run out of money," but that it would be unable to pay full reimbursements for hospital benefits by 2017. The fund likely would pay eighty-one cents per dollar claimed by hospitals. According to the report, the trust fund "would be brought into actuarial balance over the next 75 years by changes equivalent to an immediate 134% increase in the payroll tax . . . or an immediate 53% reduction in program outlays, or some combination of the two."

Trustees say that while the financial standing of Social Security decreased more sharply than Medicare last year, the health program remains at greater risk of insolvency. This report would traditionally start a process known as the "Medicare trigger," which requires the president and Congress to develop legislation to extend Medicare's fiscal viability, but the House earlier this year approved rules that Democratic leaders said eliminated this requirement.

In any event, the Medicare programs that cover outpatient care and pharmaceuticals—which are funded by premiums and taxes—are not at risk of insolvency; although, costs for beneficiaries are expected to rise along with overall healthcare spending, according to CQ Today. If Social Security recipients receive no cost-of-living increase next year or in 2011, as predicted by the trustees, about one-quarter of Medicare beneficiaries—including new beneficiaries and those whose incomes are higher than $85,000 for individuals or $170,000 for couples—would have higher Part B premiums. The beneficiaries would see monthly premiums for the outpatient benefit—typically deducted from Social Security checks—increase from $96.40 to about $104 in 2010 and $120 in 2011. Three-quarters of Medicare beneficiaries would see no premium increases, but the remaining beneficiaries would have to pay more to keep the Part B trust fund at the same level.

Kaiser Daily Health Policy Report, Medicare Hospital Fund Will Be Insolvent by 2017, Two Years Earlier Than Expected, Trustees Say, Henry J. Kaiser Fam. Fdn. (May 13, 2009).

Stryker Receives Subpoena, FDA Warning Letter

Device maker Stryker Corp. has been hit with two new investigations, according to documents the company filed with the Securities and Exchange Commission (SEC). On May 5, Stryker received a U.S. Food and Drug Administration (FDA) warning letter related to compliance issues for a craniomaxillofacial implant product previously sold through its Portage, MI, distribution facilities. The device maker is in the process of responding to the FDA's letter, according to the SEC filing.

Stryker also received a subpoena on May 7 from the New Jersey attorney general's office requesting documents related to financial interest and compensation of doctors participating in certain clinical trials of the company's products. The subpoena came two days after the New Jersey attorney general's office announced it had reached a voluntary compliance agreement with spinal device maker Synthes over its compensation of physicians participating in clinical trials. The office then indicated that it planned to send subpoenas to five other medical device makers requesting information on similar business practices. Names of the companies have not been released, but Stryker indicated in its filing that other device makers had received similar subpoenas.

Stryker spokesman Patrick Anderson said the company would not comment on the FDA warning letter or the New Jersey attorney general subpoena beyond what was supplied in Monday's SEC filing.

Shawn Rhea, Stryker Receives Subpoena, FDA Warning Letter, Modern Healthcare's Daily Dose (May 12, 2009) (note: registration is required to view this content).

HHS Secretary Sebelius Appoints Key Staffers to New HHS Office of Health Reform

Department of Health and Human Services (HHS) Secretary Kathleen Sebelius on Monday named nine key staff members to the newly established HHS Office of Health Reform. The creation of the new office was included in an executive order that President Obama signed last month that also established the White House Office of Health Reform. In a statement, Sebelius said, "The HHS Office of Health Reform and the White House Office of Health Reform will work in tandem to advance legislation and take immediate actions to cut costs, assure quality and affordable health care for all Americans, and guarantee Americans can choose their doctor and their health plan."

The nine new staff members of Office of Health Reform include:
(1) Jeanne Lambrew, a senior health official in the White House Office of Management and Budget during the Clinton Administration, will be director of the new office; (2) Michael Hash, a former deputy administrator of the Health Care Financing Administration, which is now known as the Centers for Medicare & Medicaid Services (CMS), and former staffer on the House Energy and Commerce Committee, will be a senior adviser; (3) Neera Tanden, a domestic policy director in Obama's presidential campaign, will serve as a senior adviser; (4) Linda Douglass, a former ABC News correspondent and spokesperson for Obama's campaign, will be director of communications; (5) Meena Seshamani, a health economist and resident physician in Otolaryngology-Head and Neck Surgery at Johns Hopkins University, will be director of policy analysis; (6) Caya Lewis, a former deputy staff director for health in the Senate Health, Education, Labor and Pensions Committee, will be an adviser on prevention and public health issues and coordinate how the new office interacts with other key players in the healthcare system; (7) Karen Richardson, a former policy director at the Democratic National Committee, will be outreach coordinator; (8) Jennifer Cannistra, former Pennsylvania state director for the Obama campaign, will serve as a policy analyst and director of special projects; and (9) Michael Halle, a member of the Obama inaugural committee, will serve as a special assistant.

Kaiser Daily Health Policy Report, HHS Secretary Sebelius Appoints Key Staffers to New HHS Office of Health Reform, Henry J. Kaiser Fam. Fdn. (May 12, 2009).

Lawmakers Considering Changing Tax Rules to Allow Employers to Encourage Wellness and Prevention Among Workers

A plan being developed by Senator Tom Harkin (D-IA) would give tax credits to employers offering wellness programs, such as periodic screenings for health problems and counseling, to encourage workers to adopt healthier lifestyles. Lawmakers also are considering making it easier for employers to use financial rewards or penalties to promote healthy behavior among employees. Under current law, employers can only offer incentives for workers to improve their health that are no more than 20% of the cost of their health coverage.

Critics say that rules holding people financially responsible for their health status and lifestyle could be unfair and that firms should not be intruding on the private lives of their workers. A National Institutes of Health study in the current issue of Health Affairs states that unhealthy behavior by some workers can affect other employees by raising the cost of covering the group. The researchers wrote, "The core ethical justification for penalty programs is that employees should be held responsible for voluntary actions that cause harm to others," but should not be held to standards that are "unreasonably difficult or medically inadvisable."

Although some members of the Senate Finance Committee are "touting" the panel's public roundtables on health reform "as a signal of a new bipartisan, open approach to lawmaking," other members, as well as aides and lobbyists, "question if the sessions are anything more than window dressing before members retreat behind closed doors to write a bill." The last of the meetings is scheduled for Tuesday and will focus on how to pay for health reform. An aide to Committee Chairman Max Baucus
(D-MT), who is spearheading the talks, said the meetings "satisfy the chairman's commitment to transparency while allowing for frank discussions among members and stakeholders." Harkin said Baucus is "opening the doors, he's doing [reform] in a bipartisan fashion." Senator Olympia Snowe (R-ME) said the discussions focus on contentious issues early in the process of creating reform legislation and give groups a chance to be heard.

Healthcare industry representatives who have participated in the talks say the panel cannot give significant consideration to the multitude of proposals presented to it during the meetings, which include more than seventy participants.

Kaiser Daily Health Policy Report, Lawmakers Considering Changing Tax Rules To Allow Employers To Encourage Wellness, Prevention Among Workers, Henry J. Kaiser Fam. Fdn. (May 11, 2009).

Medicare Finalizes Denial of Virtual Colonoscopy Coverage

Computed tomography (CT) colonography for colorectal cancer screening will not be covered under Medicare, CMS confirmed. The agency issued a final decision memo on May 12 that reiterates the coverage denial proposed in February in draft form. "The evidence is inadequate to conclude that CT colonography is an appropriate colorectal cancer screening test under § 1861(pp)(1) of the Social Security Act," according to the final CMS memo.

Although the thirty-day comment period following publication of the draft memo brought many requests to allow at least some coverage for the procedure, CMS stuck to its conclusion that there is not enough evidence to support the procedure in the Medicare population. Agency analysts cited evidence from numerous studies that found CT colonography less sensitive for smaller lesions. One of the studies included in the agency's review found that the positive predictive value of CT colonography was only 25%, although the authors concluded that its accuracy was acceptable for screening purposes. Moreover, positive findings with the virtual procedure must be confirmed—and polypectomy performed—with an optical colonoscopy. As a result, costs of CT colonography scans with positive findings are markedly higher than screenings conducted with ordinary colonoscopy. The agency also noted that many studies of CT colonography included only small numbers of Medicare-age patients or excluded them altogether.

Professional associations representing gastroenterologists and endoscopists, who conduct most standard colonoscopy-based screenings, generally opposed Medicare coverage of CT colonography. In a statement, the American Gastroenterology Association said, "the limitations of CT colonography cannot be ignored and must be taken under advisement in the development of a coverage policy . . . .Concerns related to test sensitivity, specificity, reporting, training and technology requirements, radiation exposure, and appropriate surveillance intervals are well documented." On the other hand, the American Cancer Society condemned the CMS decision, saying that randomized trials "clearly show CT colonography is as effective as optical colonoscopy" in cancer screening. However, according to the final decision memo, "The impact of adding screening CT colonography on overall [colorectal cancer] screening rates is important but has not been adequately addressed with well designed studies in general, and has not been specifically reported for individuals 65 years of age [and older]."

Access the final decision memo.

John Gever, Medicare Finalizes Denial of Virtual Colonoscopy Coverage, MedPage Today (May 13, 2009).

National HIT Coordinator Expects EHR Sharing Across State Lines by 2011

Doctors' offices and hospitals will be able to send and receive electronic health records (EHRs) across state lines by 2011, the national coordinator for health information technology said May 8 during a telephone press conference hosted HHS. National Coordinator David Blumenthal told the briefing that the systems over which disparate medical facilities will share EHRs—health information exchanges (HIEs)—will serve all medical providers in yet-to-be-determined regions based on geographic and community cohesiveness.

Some of those regions will straddle state borders, Blumenthal said, meaning that those HIEs would transmit medical records between doctors in different states. The interstate sharing of EHRs by unaffiliated providers has so far been hobbled by differing state privacy and data security laws as well as incompatible licensing of medical professionals. Efforts to harmonize state laws and regulations have been under way since 2005 under the auspices of the Office of the National Coordinator for Health Information Technology, without achieving the hoped-for success. Asked by the Bureau of National Affairs (BNA) about the prospects for overcoming those statutory barriers, Blumenthal expressed confidence that the problem will be solved before long. The major Medicare and Medicaid payment incentives for providers who share EHRs as of 2011 will change states' and providers' points of view, he predicted. That will result in the harmonization of state laws necessary for cross-border sharing of EHRs to commence in 2011, Blumenthal added.

National HIT Coordinator Expects EHR Sharing Across State Lines by 2011, BNA'S HEALTH L. REP. (May 14, 2009) (note: registration is required to view this content).

Recent Study Links Late-Stage Cancer to City Living

Confounding the common epidemiological wisdom, urban dwellers had a higher risk of four common, late-stage cancer diagnoses than their rural counterparts in a new population-based analysis. Residents of the most urbanized areas had the highest risk of breast, colorectal, lung, and prostate cancer, Sara McLafferty, PhD, and Fahui Wang, PhD, of the University of Illinois Urbana-Champaign, reported online in Cancer.

Cancer risk decreased with increasingly rural residency except for a slight upturn in the most isolated communities.

"We observe a reversal of the commonly held view that risks are highest for rural residents," the authors concluded. "The concentration of health disadvantage in highly urbanized places emphasizes the need for more extensive urban-based cancer screening and education programs, especially programs targeted to the most vulnerable urban populations and neighborhoods."

The authors identified several variables that could account for some of the variability. However, some findings had no obvious explanations. For example, residents of large towns in rural areas consistently had lower cancer risks. Data on urban-rural cancer disparities have been mixed. Authorities in the field generally supported the notion that residents of rural areas had a greater risk of late-stage diagnosis because of reduced access to screening services. The authors continued the assessment in an analysis that focused on the rural-urban gradient of late-stage cancer risk in Illinois for 1998 through 2002. Using data from the State of Illinois Cancer Registry, they limited the analysis to four major types of cancer: breast, colorectal, lung, and prostate. For the study period, the authors determined that late-stage diagnosis accounted for 36.9% of breast cancers, 62.9% of colorectal cancers, 79.7% of lung cancers, and 15.6% of prostate cancers. Analysis of late-stage cancer diagnosis by the five geographic areas revealed a "clear and remarkably consistent rural-urban gradient in late-stage risk," the authors said. "Risk is highest in Chicago, decreases in the less urbanized zones, and reaches a nadir in other metropolitan areas and large towns."

The risk increased somewhat among patients living in the areas classified as rural, resulting in a reverse-J gradient along the urban-rural continuum. The gradient held up for all four types of cancer. The gradients were steepest for breast, colon, and lung cancer—all of which had the lowest odds ratios in large towns and the highest ratios in Chicago. As compared with Chicago, the odds ratio for large towns ranged between 0.71 and 0.79 for those three cancers. Age and racial/ethnic variation accounted for some of the disparities. However, some of the disparities persisted in multivariate analysis that accounted for the differences. As an example, the authors noted that "all other factors being equal, patients who live outside the Chicago area are 25% to 35% less likely than their Chicago-area counterparts to present with late-stage lung cancer."

Charles Bankhead, Late-Stage Cancer: Big City, Big Risk, MedPage Today (May 12, 2009).

*We would like to thank Reesa Benkoff, Esquire (Hall Render Killian Heath & Lyman PLLC, Troy, MI) for writing this email alert.

AHLA Teaching Hospital Updates are intended to provide quick summaries of cutting-edge issues of interest to teaching hospitals and their counsel. Additional information and more in-depth coverage on these topics may be available from AHLA Health Lawyers Weekly and appropriate AHLA Practice Groups.

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