McDermottPlus Check-Up: July 14, 2023 - McDermott+Consulting

McDermottPlus Check-Up: July 14, 2023


The House and Senate returned from recess, beginning a three-week sprint toward the August break. The House Education and the Workforce Committee held a markup of a bipartisan healthcare package of four bills. The House Energy and Commerce Health Subcommittee held a markup of 17 healthcare bills. FY 2024 appropriations work continued in both chambers. On the regulatory front, the Centers for Medicare & Medicaid Services (CMS) released the Outpatient Prospective Payment System (OPPS) and Physician Fee Schedule (PFS) proposed rules.


House Education and the Workforce Committee Holds Markup of Bipartisan Healthcare Package. The July 12 markup included four bills under the committee’s jurisdiction related to the Employee Retirement Income Security Act of 1974, to increase cost transparency for employers and patients, increase oversight of pharmacy benefit managers (PBMs), lower premiums, reduce healthcare spending and increase competition by removing incentives for provider consolidation:

  • H.R. 4509, the Transparency in Billing Act, would require accurate billing practices by hospitals, ensuring that group health plans pay for appropriately billed services.
    • The bill advanced by a vote of 39–0.
  • H.R. 4507, the Transparency in Coverage Act, would codify the Transparency in Coverage final rule, which would provide consumers with price transparency for medical services and prescription drugs, and bring light to PBM practices.
    • The bill advanced by a vote of 38–1.
  • H.R. 4527, the Health DATA Act, would ensure that health plan fiduciaries are not contractually restricted from receiving cost or quality of care information about their plan, including by adding PBMs to the list of groups that can be liable for violating gag clause provisions.
    • The bill advanced by a vote of 38–1.
  • H.R. 4508, the Hidden Fee Disclosure Act, would strengthen requirements that PBMs and Third-Party Administrators disclose compensation to plan fiduciaries.
    • The bill advanced by a vote of 39–1.

Almost every House and Senate committee with healthcare jurisdiction has now considered bipartisan PBM reform and healthcare transparency and consolidation reforms. This week, the Senate Finance Committee released a draft bill that would require increased disclosures by PBMs about their business practices. The Senate Finance Committee also announced a markup on July 26 to consider a package of PBM legislation.

House Energy and Commerce Health Subcommittee Holds Markup of 17 Healthcare Bills. The Health Subcommittee advanced 17 bills on July 13. The wide-ranging list of bills included efforts to reauthorize the Pandemic and All-Hazards Preparedness Act (PAHPA), a bill to continue a pandemic-era telehealth benefit, and efforts to reauthorize programs related to maternal health and children’s hospital graduate medical education (CHGME). Many of these efforts that typically enjoy bipartisan cooperation, such as PAHPA and CHGME, faced significant party-line debate and were advanced largely along party lines.

Opening statements from Chair Rodgers (R-WA) and Ranking Member Pallone (D-NJ) can be found here and here, respectively. The text, amendments and vote outcomes for each bill can be found here, and more detailed summaries can be found in the markup memo. Outcomes on the most prominent bills include the following:

  • H.R. 4421, the Preparing for All Hazards and Pathogens Reauthorization Act, would reauthorize current programs to support public health security and all-hazards response, including the strategic national stockpile, biomedical advanced research and development authority, and public health emergency medical countermeasures enterprise.
    • This bill advanced along party lines by a vote of 17–11.
  • H.R. 824, the Telehealth Benefit Expansion for Workers Act of 2023, would increase employers’ ability to offer stand-alone coverage of telehealth-only services to employees.
    • This bill advanced along party lines by a vote of 16–11. Rep. Craig (D-MN) was the only Democrat who voted in favor of the bill.
  • H.R. 4420, the Preparedness and Response Reauthorization Act, would reauthorize certain programs related to the Centers for Disease Control and Prevention, and includes provisions aimed at supporting the distribution of medical countermeasures, control of biological agents and mosquito-borne diseases, and epidemiological monitoring.
    • This bill advanced along party lines by a vote of 16–12.
  • H.R. 3887, the CHGME Support Reauthorization Act, would reauthorize payments to children’s hospitals that operate graduate medical education programs for FYs 2024 through 2028. The legislation includes a prohibition on payments to children’s hospitals that furnish specified procedures or drugs for minors.
    • This bill advanced along party lines by a vote of 15–12.
  • H.R. 4531, the Support for Patients and Communities Reauthorization Act, would reauthorize and make changes to key programs to combat opioid addiction.
    • This bill advanced by voice vote with no opposition.

The full Energy and Commerce Committee is likely to consider at least some of these bills as early as next week.

Appropriations Work Continues in House and Senate. The Appropriations Committees in both the House and Senate continued to advance their 12 annual appropriations bills for FY 2024. The House Appropriations Committee held a markup of the Labor, Health and Human Services, Education, and Related Agencies (Labor-HHS) bill on July 14 at the subcommittee level. The bill would provide $147 billion for programs under the jurisdiction of the subcommittee, which is $60.3 billion (29%) below the FY 2023 enacted level and $73 billion below the President’s budget request. The Senate’s Labor-HHS bill is expected later this month. Differing funding levels and policy priorities will further complicate Congress’ ability to finalize FY 2024 appropriations bills before the end of the fiscal year.


CMS Releases PFS Proposed Rule. On July 13, CMS released the proposed rule CY 2024 Revisions to Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment Policies, which includes changes related to Medicare physician payment and the Quality Payment Program (QPP). The proposed CY 2024 physician conversion factor (CF) is $32.7476. This represents a decrease of 3.36% from the final CY 2023 physician CF of $33.8872. The proposed CF update is primarily based on three factors: a statutory 0% update scheduled for the PFS in CY 2024, a negative 2.17% budget neutrality adjustment, and a funding patch passed by Congress at the end of CY 2022 through the Consolidated Appropriations Act, 2023, which partially mitigated a cut to the CY 2023 CF and offset part of the reduction to the CY 2024 CF.

With respect to other spending increases, CMS proposes not only to phase in the third year of a clinical labor pricing update, but also to maintain its previous policy to add G2211, an add-on code for complexity. As background, CMS finalized this new add-on code in the CY 2021 PFS final rule, but it carried large budget-neutrality implications because CMS estimated G2211 would be billed with 90% of all office visit claims. This was expected to redistribute about $3.3 billion and cause an overall 3% cut to the CF for 2021. In December 2020, Congress passed the Consolidated Appropriations Act, 2021, which delayed G2211 until 2024. Now, CMS has proposed to reinstitute G2211. However, CMS has significantly revised its utilization assumptions. CMS now estimates that G2211 will be billed with 38% of all office visit claims initially, but estimates that when the code is fully adopted after several years, G2211 will be billed with 54% of all office visit claims. Despite these proposed revised utilization assumptions, G2211 would continue to drive a significant payment reduction to the PFS overall for CY 2024. CMS notes that approximately 90% of the -2.17% budget neutrality adjustment to the CF for CY 2024 is attributable to G2211, with all other proposed valuation changes making up the other 10%.

Comments on the proposed rule are due by September 11. Our team is reviewing the proposed rule and will publish a comprehensive summary.

CMS Releases OPPS Proposed Rule. On July 13, CMS released the proposed rule CY 2024 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System, which includes proposals related to Medicare hospital outpatient and ambulatory surgical center payment. For CY 2024, CMS proposes to increase payment rates under the OPPS and the Ambulatory Surgical Center (ASC) Payment Systems by a factor of 2.8%. This increase is based on a hospital market basket percentage increase of 3.0% reduced by a productivity adjustment of a 0.2 percentage point. In continuation of an existing policy, hospitals and ASCs that fail to meet their respective quality reporting program requirements would be subject to a 2% reduction in the CY 2024 fee schedule increase factor.

Comments on the proposed rule are due by September 11. A fact sheet from CMS can be found here. Our team is reviewing the proposed rule and will publish a comprehensive summary.

CMS Releases 340B Remedy Proposed Rule. On July 7, CMS released the proposed rule Hospital Outpatient Prospective Payment System: Remedy for 340B-Acquired Drugs Purchased in Cost Years 2018-2022, to address how the agency will restore payments to hospitals affected by a prior CMS policy to reduce Medicare payments on 340B drugs to certain hospitals paid under the OPPS. This rule is responsive to the Supreme Court of the United States opinion finding that the 2018 payment cuts were not consistent with CMS authority.

CMS estimates that 1,649 340B hospitals were paid at the lower 340B payment for drugs under OPPS from CY 2018 through September 27, 2022. The agency proposes to refund hospitals that had payments reduced with a one-time lump sum payment intended to account for the difference between what was paid to the hospitals and what should have been paid had the cut not been implemented. CMS estimates that total payments will be $9 billion. The agency will not apply interest to these remedy payments.

Because CMS implemented the cuts in a budget-neutral manner that increased rates on all other OPPS items and services, CMS estimates that hospitals were paid $7.8 billion more for non-drug items and services from CY 2018 through September 27, 2022. Accordingly, CMS proposes to offset the $7.8 billion by adjusting the OPPS conversion factor by -0.5% starting in CY 2025. The rule proposes to continue making this adjustment until the full $7.8 billion is recouped, which CMS estimates will take 16 years.

CMS aims to make the lump sum payments by the end of CY 2023 or the beginning of CY 2024, after this rule has been finalized and instructions have been given to Medicare Administrative Contractors, which will then administer the payments. Comments on the proposed rule are due September 5.

Read our team’s full analysis of the proposed rule here.


Federal Government Appeals No Surprises Act (NSA) Decision. On July 12, the US Department of Justice (DOJ) appealed the Texas Medical Association (TMA) II decision related to implementing the NSA. The DOJ filed an appellate brief to the US Court of Appeals for the Fifth Circuit, asking the court to overturn the decision of the US District Court for the Eastern District of Texas that ruled in favor of providers.

TMA II addressed whether the certified independent dispute resolution (IDR) entity (i.e., the arbitrator) had to prioritize the qualifying payment amount (QPA) in the federal IDR process. The final rule required that certified IDR entities consider the QPA first, and then consider other factors listed in the statute only if the other factors were deemed to be credible and not already accounted for in the QPA. Plaintiffs successfully argued that the statute does not prioritize the QPA in this manner and does not qualify the additional factors that the certified IDR entity must consider by requiring an examination of whether these factors were already embedded in the QPA. The US District Court for the Eastern District of Texas vacated those provisions of the August 2022 final rule nationwide.

In challenging the district court’s decision, the DOJ argues that the plaintiffs lack standing to challenge provisions of the August 2022 final rule. The DOJ believes that the final rule is consistent with the departments’ authority and “properly effectuate[s] Congress’s directive to issue regulations establishing a single arbitration process.” The DOJ also argues that the final rule reasonably instructs arbitrators to consider the QPA first and to avoid giving weight to information that is not credible, not relevant or duplicative. The DOJ believes that the district court’s contrary reasoning was mistaken and that the court relied on an unduly narrow view of the rulemaking authority expressly granted by Congress. Therefore, the DOJ believes that the rule should not have been vacated, and at the very least, should only be vacated for parties in the lawsuit.

We are closely monitoring the progress of this litigation and its potential impact on NSA implementation. The DOJ has not appealed any other NSA lawsuits, including TMA I. In TMA I, the same plaintiffs argued successfully to the US District Court for the Eastern District of Texas that the departments had not adhered to the statute when they required certified IDR entities to make the QPA the presumptive payment amount during arbitration. The departments had established this policy in the second NSA interim final rule released in October 2021, and the district court vacated that provision of the interim final rule nationwide.


  • The US Department of Health and Human Services (HHS) through the Office for Civil Rights and the Assistant Secretary for Financial Resources announced proposed rulemaking to affirm civil rights and equal opportunity in HHS-funded programs and services. The proposed rule, if finalized, would protect LGBTQ+ people from discrimination in important health and human services programs by clarifying and reaffirming the prohibition on discrimination on the basis of sexual orientation and gender identity in certain statutes. Read the HHS press release here.
  • The White House released a national response plan to address the emerging threat of fentanyl combined with xylazine. The plan includes both short- and longer-term action steps to provide immediate relief to communities across the nation, and to support the large-scale efforts necessary to eradicate this threat. Read the White House fact sheet here.
  • The US Food and Drug Administration approved the Opill (norgestrel) tablet for nonprescription use to prevent pregnancy. Opill is the first daily oral contraceptive approved in the United States for use without a prescription. Approval of this progestin-only oral contraceptive pill provides an option for consumers to purchase oral contraceptive medicine without a prescription at drug stores, convenience stores and grocery stores, as well as online. Nonprescription availability of Opill may reduce barriers to access by allowing individuals to obtain an oral contraceptive without the need to first see a healthcare provider.
  • The US Government Accountability Office (GAO) released a report including recommendations for federal agencies to better prepare for public health emergencies. The report includes key findings on public health preparedness as well as improper payments and fraud. GAO made 386 recommendations to executive branch agencies and presented 19 matters for congressional consideration to strengthen the transparency and accountability of the federal response to the pandemic. The GAO fact sheet can be found here.


The House and Senate are both scheduled to be in session next week. Healthcare activity is planned at the committee level, including a House Energy and Commerce Health Subcommittee hearing on innovation in Medicare, likely a full Energy and Commerce Committee markup of the bills advanced by the Health Subcommittee this week, and a Senate HELP Committee markup on its version of the PAHPA reauthorization bill. Looking a bit further ahead, the Senate Finance Committee has announced a markup of PBM legislation on July 26.

For more information, contact Debra CurtisKristen O’Brien, Priya Rathakrishnan or Erica Stocker.

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