ACCOUNTABLE CARE ORGANIZATION (ACO) EFFORTS RAMP UP:

On February 11, eight Democratic Senators sent a letter to the Department of Justice (DOJ) and the Federal Trade Commission (FTC), asking the two entities to work together on antitrust guidance for the Accountable Care Organizations (ACOs) that will soon be created under the new healthcare law, the Patient Protection and Affordable Care Act (PPACA).

ACOs will facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs – one of the many PPACA delivery system reforms that seeks to better the system through incentives to enhance quality, improve beneficiary outcomes and increase value of care. ACOs that meet soon-to-be-determined quality standards will share in any cost savings that are achieved though the efficient delivery of care.

In their letter to the DOJ and FTC, the Senators noted the considerable expertise that both entities have developed in healthcare antitrust matters, and expressed concern that allowing antitrust jurisdiction for ACOs to be placed solely with the DOJ or FTC “…will not fully harness the aggregate expertise and experience necessary to make ACOs work.”

The next business day, the Centers for Medicare and Medicaid Services (CMS) sent its proposed rule for the establishment of ACOs to the Office of Management and Budget (OMB) for review – the final step before the long-awaited proposed rule will appear in the Federal Register.

Though the proposed rule was originally expected to be issued last month, CMS stated that it still expects to have the program in place by January 1, 2012, while also following “all the notices and processes” of the rulemaking cycle. The rule is expected to be released this week.

HOUSE APPROPRIATIONS EFFORTS:

Given that the Fiscal Year (FY) 2011 appropriations process was not completed before the adjournment of the 111th Congress in December 2010, the federal government has been operating under a Continuing Resolution (CR) that is funded at FY 2010 spending levels. The CR is set to expire on March 4, by which time Congress will have had to enact another short-term CR in order to avoid a government shutdown, or a longer one that will last through September 30 – the end of the current fiscal year.

To that end, House Republican leaders unveiled legislation on February 11 for the remainder of FY 2011 that would trim more than $61 billion from the current budget – an amount that is nearly $100 billion less than the President’s FY 2011 budget request. The bill includes numerous cuts to programs and agencies under the Department of Health and Human Services (HHS), such as: $1.1 billion less than the FY 2010 level for community health centers; $647 million less than FY 2010 for the Centers for Disease Control and Prevention (CDC); the elimination of federal family planning grants; and $56 million less than FY 2010 for CMS contracting reform programs.

After the Rules Committee allowed for the legislation – H.R. 1 – to be brought to the House floor under an open rule that permitted amendments, nearly 600 amendments were filed by Members from both parties. Such amendments ranged from additional cuts to spending increases for key programs, several dozen of which were adopted by the House, including one that would block funding to implement the PPACA. After nearly a week of debate, the House approved H.R. 1 by a vote of 235-189 on February 19.

Following House passage, H.R. 1 moves to the Senate for consideration, where many of the included spending cuts have been met with strong resistance from the Democratic majority in the upper chamber. Congress is not in session this week, leaving little time for the House and Senate to come to an agreement on FY 2011 spending and increasing the likelihood that another stop-gap CR will need to be enacted prior to the upcoming March 4 deadline. But even that process is likely to be difficult, as House Speaker John Boehner (R-OH) has indicated even a short-term CR would need to include spending cuts – a proposition the Senate may not support.

THE PRESIDENT’S FY 2012 BUDGET:

As Congress worked to complete the FY 2011 appropriations process, President Obama released his $3.73 trillion budget for FY 2012 on February 14.

While President’s annual budget traditionally serves as a blueprint as Congress moves forward with its own budget and corresponding appropriations bills, it is a non-binding document and often quite different from what Congress agrees upon. This is particularly true for FY 2012, given that Republicans now control the House of Representatives.

The budget request for HHS is $79.9 billion for FY 2012 – less than the $81.3 billion that the President requested for FY 2011, though slightly higher than HHS’ current FY 2010 funding level under the aforementioned CR.

Within the HHS/CMS budget, the President put forth a two-year fix to the current Medicare physician payment system – a proposal that would stave off reimbursement reductions and cost approximately $62 billion for two years. To offset that price tag, the budget advocates a variety of steps, such as eliminating graduate medical education (GME) payments for children’s hospitals and implementing new Medicare program integrity initiatives.

In addition, the President’s budget includes a proposed expansion of the influence of the Medicare durable medical equipment (DME) competitive bidding program to Medicaid – an effort that the Administration believes will increase efficiency and save money, but that is opposed by the homecare industry on the grounds that its beneficiaries have experienced disruptive service and equipment problems.

Other notable provisions in the FY 2012 budget include: $3.3 billion in funding for community health centers, including $1.2 billion in mandatory funding authorized by the PPACA; $78 million to accelerate health IT and promote electronic health records (EHRs); $333 million for nursing workforce development efforts; and $10 million for the 340B drug pricing program, including expansion efforts authorized by the PPACA.

NEXT STEPS:

As the debate over federal spending heats up in Congress, we continue to follow news from Capitol Hill. In addition, we continue to monitor HHS and other agencies as the implementation of healthcare reform progresses and other related matters arise. We will bring you timely updates as these developments occur.