Hall Render attorneys Alyssa James, Erin Drummy and Joe Wolfe discuss the upcoming end of the declared federal public health emergency (PHE) on May 11, 2023, and its impact on Stark Law blanket waivers and physician arrangements. The blanket waivers were initially issued in March 2020 to help hospitals and health systems with physician contracting and compensation models, staffing issues, and scaling up response to the public health emergency. The blanket waivers provided flexibility to health care providers in ensuring compliance with the Stark Law while addressing the needs of patients for COVID-19 related purposes. The waivers were used to stabilize physician compensation, secure necessary space and equipment, and provide additional items or services to referring physicians. The podcast discusses ways hospitals and health care systems, physician groups and other providers used the waivers over the past three years, and it provides recommendations and considerations to ensure Stark compliance post-PHE.

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Attorney, Hall Render
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Attorney, Hall Render
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Alyssa James: Hello and welcome to Hall Render’s Practical Solutions Podcast in Healthcare regulatory update. I’m your host Alyssa James, and I’m a shareholder with Hall Render, the largest healthcare focused law firm in the country. Today, we’re here to discuss the upcoming end of the declared federal Public Health Emergency (PHE) that ends on May 11th, 2023, and the impact that it will have on the Stark Law Blanket Waivers and physician arrangements that have relied on those Waivers. So let’s dive right in. Joe, can you briefly tell us about what the end of the PHE and related Blanket Waivers means for healthcare organizations and providers?

Joe Wolfe: Thanks, Alyssa. It’s nice to be able to talk through this now that the Public Health Emergency is coming to an end. The Waivers were initially issued back in March of 2020. They were always set to expire at the end of the declared Public Health Emergency, and they were really helpful for hospitals and health systems and other providers back then. If you recall, there were lots of challenging times around physician contracting, physician compensation models and staffing issues back then. There was a lot of scaling up in response to the public health emergency. So the Waivers were issued again back in March of 2020. They were set up so they could be relied upon for financial arrangements that relate to a COVID-19 purpose and  our arrangements we were analyzing under the Waivers were physician services arrangements where we were pulling together emergency coverage and maybe you weren’t able to get in line the documentation to support fair market value.

One of the Waivers included payments to physicians above or below fair market value for personally performed services. For example, there were some Waiver concepts around space and equipment rentals and rental charges for equipment or office space above and below FMV at that time, there was some Waiver of the medical staff incidental benefits occurrence cap around non-monetary compensation, some discussion of loans. If you recall, the Waiver document back then gave a number of examples. I think there were around 20 of them of specific arrangements that could fall within the scope of these Waivers. It gave healthcare providers some flexibility to look to the Waivers, rely upon them if they needed to, and then they needed to document their use of those safeguards contemporaneously. As we even thought about it back then, it was always a novel concept. We didn’t know how long they were going to stay in place, but they also had remained untested.

We encouraged our clients that if they’re going to rely on those Waivers to get something in the record, definitely before the public health emergency came to an end. So fast-forward to now, the Waivers, it was recently announced that they’re going to end on May 11th, so coming up very soon. So that’s a little background in the Waivers. I saw clients mostly relying on them for the stabilization of physician compensation plans, saw them use them in some coverage situations where maybe there was a hospital-based coverage arrangement where the financial model didn’t work as anticipated. I also saw it used in the lease context, especially where physicians were leasing space from a healthcare entity and needed to build in some flexibility in that area. So that’s a little bit of background on the Waivers.

Alyssa James: Thanks, Joe. Now that we have that background and lay of the land – Erin, can you share some ways that you’ve seen clients use the Waivers and have worked with clients to utilize the Waivers over the past three years that they’ve been available?

Erin Drummy: Sure. So at the time that the pandemic was beginning and certainly at the height of the pandemic with the lockdowns and the restrictions on elective procedures, I was actually serving as general counsel for a large national physician group. We, like many other healthcare providers, were experiencing revenue challenges associated with the restraints on elective procedures. Even thereafter, patients were not particularly excited about leaving their home and coming to the doctor’s office for routine elective or preventative services. So one of the early uses of the Waivers that I personally was involved with and am aware of other providers utilizing as well, is seeking rental abatements from landlords and hospital/health system landlords where Stark was implicated.  I think there were a number of providers that were seeking these types of abatements or rental relief and rental reduction to ensure that they could continue to operate even in light of these revenue challenges.

We also saw a desire by hospitals and health systems to provide telehealth equipment to physicians and physician practices at no charge or at a reduced charge. Again, looking to secure services for patients who are reluctant or unable to leave their home to seek medical services. Many hospital and health system clients reached out to ask for advice related to providing items for additional medical staff incidental benefits and other non-monetary items to their referring physicians. Sometimes these were items or services directly related to PPE, things of that nature. Other times it was comfort. Additional meals or having some additional amenities for providers who were spending many, many hours in the hospitals taking care of patients.

One of the other Waiver uses that we’re aware of pertains to the physician owned hospitals. As you likely know, the Stark Law places restrictions on the total number of beds, operating rooms, and procedure rooms that a physician-owned hospital can have, and it can’t expand beyond that number without an exception granted by CMS. But during the public health emergency, there was a Blanket Waiver that permitted a temporary expansion of beds to meet inpatient hospital needs. Then finally, I would note that in the physician group side, the in-office ancillary services exception, there was a Waiver that permitted some additional flexibility around the location requirements for that exception. We’re aware of clients who were looking to provide items or services via mail or in other locations that may or may not have met the location requirements for same building or centralized building under the in-office exception.

Alyssa James: Thanks, Erin. I know a lot of clients that I worked with, particularly early on in the pandemic, seemed to center around either decreases in services due to surgery cancellations and elective surgery terminations and things like that, but wanting to make physicians whole from a RVU and compensation standpoint as well as instances where, depending on the specialty, you also had physicians doing a lot of extra work and extra hours that depending on their compensation model in their original arrangement, they may or may not have gotten adequate credit for.

So many were wanting to increase compensation for that work and having the Waivers to rely on for situations where maybe that additional compensation could have exceeded fair market value, or even just having the comfort of the Waiver without having to go out and seek a new opinion at times when things were moving so quickly. I know a lot of clients were really appreciative of that flexibility and having those opportunities. So along those lines, Joe, can you tell us a little bit more about what you think providers and healthcare organizations that have utilized any of these Blanket Waivers in the past should be doing now to prepare for the termination of the Public Health Emergency and how they can pivot or evaluate any changes they need to make to their arrangements?

Joe Wolfe: Sure, Alyssa. I think first of all, it’s important to think, and Erin and Alyssa, you already described some situations where you went through the regulatory analysis back then, and if we all go back in time, I don’t think it was a free for all back then. There were situations that healthcare organizations were encountering and they were doing the analysis and they were deciding whether they needed to rely on the Waiver. So I think it’s important to know that this isn’t starting. Right now, getting a sense of what occurred isn’t maybe as heavy a lift as we might think because there already is going to be a record back there in time when you made that decision. A lot of strong analysis was developed back as the pandemic unfolded. As healthcare organizations think about winding down and reassessing again, understanding that what occurred in the past is important to go back and start to think about and review that internal documentation to analyze the timing, what actions were taken, how the disbursements of compensation were handled.

It’s likely you relied on an existing exception or safe harbor. Maybe you didn’t even need to look to the Waivers. Maybe you were able to get comfortable looking to Stark or the Anti-kickback Statute. Maybe that’s already reflected in the record. If you go back, you also may have the luxury now of saying, “Look, it also fit in line with the Waivers as well.” If you did rely on a Waiver, I think it’s important to have in the record how that aligned with the COVID-19 purpose. There were six of them identified in the guidance. Ideally, you’d want your arrangement and what actions you took to fit within one of the defined Waivers or one of the actual examples that the government gave. Of course, many won’t, but I think to the extent your documentation reflects that the actions you took were framed and aligned with those Waiver concepts, the better off you’re going to be.

Then you want to make sure you’ve developed some separate documentation that described the COVID-19 purpose and the scope of the arrangement. There wasn’t one way to do it back then. Like I said, maybe you have something in the record that you can point to. Maybe you developed an amendment and that amendment captures this. Maybe there’s a log. I’ve heard of organizations that developed a COVID log that just identifies in sequence, the actions they took. But outlining what actions you took over time, I think is important. Now that the Public Health Emergency is coming to an end, you still have time to develop that documentation.

You should be thinking about what to do with existing arrangements where you’re still relying on the Waiver. Does it make sense to wind that down? Does it make sense to pivot into some other rationale or regulatory analysis to support staying in that arrangement? You just want to be clear with everyone on the team, your legal team and your compliance team, just where is your defensibility sitting with where you were and if you’re going to stay in that arrangement going forward, what defensibility are you going to rely on? Those are just some thoughts, Alyssa.

Alyssa James: Great. Thanks, Joe. Erin, what have you seen or thought through with respect to … I know there were blanket Waivers that applied specifically to physician owned hospitals and their ability to temporarily expand their number of beds or their footprint in response to the pandemic. What are folks doing in that space to make sure they get back in compliance with the moratorium on expansion, absent the Waivers?

Erin Drummy: Sure. So I think this one, this is an important one because the risk is significant. As I noted, the exception for ownership in a physician hospital requires that the hospital not have expanded its number of beds beyond a certain threshold. So if during the pandemic, the hospital was relying on the Waivers to do so, to convert beds from observation rooms to inpatient beds or otherwise. It will be very important to have those beds switched back and taken off your license if that’s required. It will vary a bit state-to-state in terms of what the process is, but we certainly want to make sure that’s done prior to the end of the PHE so that there’s no violation, which could potentially implicate all of the referrals by your physician owners. So I think this is an important one, and given that it may take some interaction with the state to adjust the license, I think this is one that we would recommend folks get moving on.

There are, in addition to the unwind provisions that Joe mentioned, there are some individual Waiver abilities or flexibilities. CMS has provided a process by which providers can request a Waiver under an ongoing Waiver post PHE. So that may be something for providers to consider if there is something that’s not a easily able to be unwound or if there’s some other justification for something that might satisfy CMSs requirements to permit an ongoing Waiver. That may be something else that parties want to consider. Specific to physician-owned hospitals, there is an exception process that CMS has for those entities. Again, that may be an avenue to consider, but given the timing, I think it’s important to start thinking about, can we convert these beds back to observation status or are there other things that we can do to get ourselves back to pre-pandemic bed counts in order not to violate Stark?

Alyssa James: Absolutely.  That approval process from CMS for possible expansion of physician owned hospitals can be lengthy. So certainly not something that’s going to be in place before the end of the PHE, but something that folks could look to pursue on a parallel track while temporarily, at least for the time being, reducing those numbers back down. So Erin and Joe, what can providers do now if they’re not ready to revert certain arrangements back to their pre Waiver status? I know we’ve touched on this a little bit already, but are there any new or creative options available that provide some flexibility for certain types of arrangements and instances where maybe providers have modified or entered into new arrangements with physicians that they don’t want to end just because the PHE is terminating?

Erin Drummy: Well, one potential option there, Alyssa, relates to a new exception. Hall Render worked with Congress to get a new exception to Stark passed for physician wellness programs. It’s a fairly broad exception that’s available to entities with a formal medical staff. They’re able to offer certain mental health or behavioral health improvements or maintenance programs to physicians in a geographic area that are designed to improve, maintain or prevent mental health issues, including suicide prevention, substance abuse disorders, and things of that nature. I think during the course of the pandemic, we’ve heard a lot about burnout by healthcare providers. I think these mental health concerns can be ongoing. Just because the Public Health Eemergency is ending, these concerns are not. So this is one area where CMS has established a process for a provider to establish via policy, a bona fide program to help prevent and avoid and treat these issues that are being encountered by their medical staff.

This has to be substantive. There’s got to be an evidence-based basis for the program. It’s got to be administered by a qualified healthcare professional. The board needs to approve this. So there are some structural and procedural requirements in order to put one of these programs in place, but that may be an area where providers could consider codifying or formalizing some of the things that they’ve been doing during the pandemic with under the protection of the other blanket Waivers with this new exception. The new exception is available for programs that went into effect beginning at the end of December of 2022. So again, it’s a fairly new program.

Joe Wolfe: Yeah. I would add that I think that’s a great example Erin just gave. Also, there’s some other new opportunities under some recent rule changes. Via the Stark overhaul, the government gave us a new exception for limited remuneration arrangements. Arrangements  at or below $5,000 would not be a Stark violation if you have a services arrangement, even if the remuneration is not documented as long as that services arrangement met the “big three.” Meaning that it does not exceed fair market value, is commercially reasonable and doesn’t take into account the volume or value of referrals. So this is a really helpful exception if we do have situations like we had during the pandemic where you need to ramp up coverage very quickly for emergency situation, and as long as that doesn’t exceed $5,700 under inflation now, that’s going to be a protected arrangement. So that’s an area where I think healthcare organizations could put in place some type of a policy or an expectation that if they do get in an emergency situation, they could look to this limited remuneration exception to help protect that.

As I mentioned earlier, just an offshoot of that. I mentioned earlier some of the exceptions or the Waivers that were issued got into arrangements being above or below fair market value for professional services. I think the government was trying to say, “Look, you could have an emergency situation here where you have to get coverage in place quickly, and maybe that’s going to push the limits of fair market value.” The government also came out in the most recent rule making and said, “With respect to fair market value, that extenuating circumstances are relevant for determining fair market value.”

I do think that some of that commentary that the government came out with around the rule change would play right into the pandemic. If you have an emergency coverage situation, you do have to pay higher rates to get that coverage in place. I think you’ll have some protection potentially under the fair market value standard as well. So those are just the limited remuneration exception and the greater flexibility around fair market value, which I think are two areas that will be helpful if they have to revert to arrangements to pre Waiver status, Alyssa.

Alyssa James: Oh, I think those are both really good call-outs of some new flexibilities that came about while we were in the midst of the pandemic. So things that didn’t necessarily exist, or options that didn’t exist pre-pandemic that hopefully continue some of that flexibility that providers have had during the PHE. Another framework that I think could be useful for some providers is the establishment or expansion of value-based enterprises/value-based arrangements where they can partner with physicians and other organizations to effectuate some of those value-based purposes. But I think a lot of the COVID related arrangements or expansions of arrangements for COVID purposes are things that could very easily dovetail into that value-based framework on a go forward basis. Those exceptions under Stark and Safe Harbors under AKS give providers a lot of flexibility they may not have with some of the other Stark Law exceptions.

So there’s a lot of resources on the Hall Render website about value-based arrangements so that anyone who’s interested in those can look to set those up with or without a lot of downside financial risk to the physicians. There are some monitoring and things like that that are required that may take a little bit to get in place and to effectuate, but I think all of those options discuss the wellness exception, limited remuneration and value-based exceptions hopefully will give providers continued flexibility even after the Waivers are no longer available. Joe, Erin, any final thoughts for our audience today with respect to the end of the PHE and its impact on these blanket Waivers?

Joe Wolfe: I just think doing the analysis sooner rather than later is going to be important. So conduct an audit, it’s likely your compliance team may be made up of people that weren’t even part of the team at the beginning of the pandemic. So do that audit. Contemporaneous documentation is the best situation to be in. But I think even having documentation now before the public health emergency is over is critical because you’re not going to want to be developing a record down the road when you have some type of an enforcement type action. So doing it now, it’s the right time to unpack this while you still have the opportunity. But we wish all … We know that everyone had the best of intentions during the public health emergency and they had to move quickly and now as an opportunity in the next few weeks to get these audits in place and to get the documentation solidified.

Erin Drummy: I would echo Joe’s comment around the timing. These things always take longer than you might think they would in terms of getting an updated fair market value in place and getting documentation signed if there’s an arrangement that’s not documented in compliance with a Stark Law that needs to be post pandemic. So I think thinking about identifying those arrangements and getting all of the I’s dotted and T’s crossed in terms of the supporting documentation amendments agreements in place so that you’re well suited to have an arrangement that fully complies with the law as of May 11th.

Alyssa James: I think those are all really good takeaways for the audience. Thank you all for joining us today. If you’d like to learn more about the Stark Law Blanket Waiver termination or other fraud and abuse and compliance issues more generally, please visit our website at hallrender.com or feel free to reach out to Erin Drummy, Joe Wolfe, or myself, Alyssa James or your regular Hall Render attorney. Please remember that the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thanks.

On this episode, John and Andrew discuss the latest legislative and regulatory news from Washington and conduct a “political draft” of events they believe will take place in 2023.

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Hall Render
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John Williams: Hello again, everybody. Welcome to another episode of Inside Baseball, a look at healthcare, politics, and policy in Washington, part of Hall Render’s Practical Solutions podcast series. I am John Williams, managing partner of Hall Render’s Washington, D.C., office. As always, I am joined by my colleague and D.C. cohort, Andrew Coats. Andrew, how are you?

Andrew Coats: Doing good. How we doing?

John Williams: We’re doing all right. We’re doing all right. Not sure what I can say about Congress in that regard. I mean, they’re continuing to do what I can only refer to as a slow roll into the first session of the 118th.

Andrew Coats: One of the slower starts to a Congress that I can remember.

John Williams: Yeah, it has been. It has been really slow. And speaking of slow, I’m going to touch base on some of that stuff real quick, but we have something rather exciting in store for the podcast later. You want to tell everybody about it?

Andrew Coats: So everyone… Not everyone, but a lot of people do fantasy sports, and you draft players that you think will have a good year in whatever league. We’re going to do a fantasy draft for D.C., and by this I mean there’s going to be a healthcare focus, but also just we’re going to draft items that we think you’re going to be reading about or hearing about in 2023. How we score this, I don’t know. There’s no first-based way, but I think it’s a fun way to kind of hit on some of the big issues that we’re going to be hearing about this year. And we’ll look back at the end of the year and see who had the better team.

John Williams: Or at least a way to fill up this podcast since there’s not too much to talk about, at least as far as Capitol Hill is concerned. And I’ll sort of do some housekeeping on that side real quick before we dive into the draft. When I say it’s slow, I mean slow as in the Senate has passed one bill that makes technical corrections to the Controlled Substances Act and nothing else. They’re really moving slowly over there. I mean, they’re doing confirmations for judges and executive-branch positions, but nothing really on the legislative front. The House has passed 28 bills. Only three of them are even related to healthcare. And those three deal with either ending the vaccine mandate or the public health emergency, so not much legislative productivity.

The Senate HELP committee did hold a hearing on workforce shortages. It was the first HELP hearing for the new chairman, Bernie Sanders, and ranking member, Bill Cassidy. That may result in some legislation down the road, but really nothing for now. On the administrative executive-branch side of things, I do want to note for everybody that the DEA released a long-awaited proposed rule on prescribing controlled substances via telehealth. That does not seem to have made anyone very happy. They did it after 6:00 PM via a press release, which is essentially an agency’s way of hoping nobody’s going to notice for a few days. Normally, that stuff goes to the Office of Information and Regulatory Affairs, which then publishes it in the Federal Register. Everybody gets notice that it’s at OIRA. We got nothing but a press release. It has reached the Federal Register and been published.

So the gist there is that they’re not adopting what has been in place during the pandemic as far as the prescription of controlled substances via telemedicine. During the pandemic, DEA-registered practitioners could issue prescriptions for controlled substances without conducting an in-person medical evaluation if they met certain conditions. Under these new rules, there is some flexibility, in that telemedicine prescriptions would be authorized when a qualifying telemedicine referral has been made by another practitioner. So there is that flexibility that didn’t exist before. But under the new rule, when you don’t have a prior in-person exam or a qualified referral that I just mentioned, prescriptions are limited to 30 days, a 30-day supply. You have to search the state Prescription Drug Monitoring Program. The prescriber must be licensed in the originating and the distant site location. So wherever the doc is, he’s got to be licensed. And whatever state the patient’s in, the doc has to be licensed.

No Schedule II drugs or opioids can be prescribed except subject to the 30-day supply limit up above, unless you’re talking about buprenorphine, which is for opioid-use disorder. And they’re giving everybody a six-month grace period to comply. So there’s more on that on Hall Render’s website under our resources tab if you would like more information on that proposed rule.

Andrew Coats: Real quick on just the workforce shortages HELP hearing, I tracked that. I thought it was interesting. I wanted to see kind of how Bernie and Cassidy would get along in their first meeting. But it was, I think, just worth noting, Bernie talked about kind of legislation that was needed regarding workforce shortages this year from the Senate. And he mentioned expanding the GME program, which actually I think that’s finance committee. He mentioned that as a must-do and expanding the Teaching Health Center Program as well as nursing shortages and emergency medical services.

John Williams: That’ll be interesting because there were 200 new GME slots in the omnibus last December. A hundred of those went to psychiatry. So it’ll just be interesting because some people will argue, well, we already did that in December, but-

Andrew Coats: Right.

John Williams: It’s certainly something that… I agree with you. It’s certainly something that needs to be addressed. I had a chance to talk to Bill Cassidy a couple of weekends ago, and we touched on this, and he also noted that that’s something he’s looking forward to working with Chairman Sanders on.

Andrew Coats: Right. And Cassidy did mention the government doesn’t have to do everything, and he talked about how they need to address physician burnout, which he thinks is partly due to overregulation by the government. So there’s certainly differences there between the two of them, but also some areas that they can work on.

John Williams: Exactly. Okay. So with those housekeeping items out of the way, we thought we’d have a little fun in the prognostication department. Andrew, do you want to tee this up?

Andrew Coats: Yeah, absolutely. We put together about eight different items, and between the two of us, we’re going to draft those items, which we think will be newsworthy this year. John, I think we did a coin flip beforehand, and you won the toss. So you get the first pick of our 2023 Fantasy D.C. things draft.

John Williams: Very good. Well, I will go first and not defer, and my first selection is Ron DeSantis is running for President. I know, surprising. But he will not announce until after Memorial Day. So I’m walking out on a really big limb with that one. I know. He’s got a book that’s come out this week, apparently doing very well, at least as far as Amazon’s concerned. He’s been making visits to other states. He’s doing all the things that you’re supposed to do when you’re preparing to run for President. So, DeSantis running for President, but not announcing until after Memorial Day.

Andrew Coats: Why do you think after Memorial Day? Any reasoning behind that?

John Williams: Well, because he’s really in no rush. It doesn’t, at least, seem like it. The legislative session in Tallahassee is, I think, getting close to finishing up. And I know that he’s going to want to… Or at least he plans to highlight a lot of the legislative accomplishments he will have had in that session of the general assembly down there. So I think he’s waiting until that’s wrapped up. And frankly, I don’t know if there’s anything in it for him to announce sooner rather than later, unless Trump-

Andrew Coats: I agree. When you have a national kind of name and platform that he does… I mean, I guess you could say the local politics of Iowa and New Hampshire, you want to get up there and start locking down votes and donors. But he has such a big platform. It’s not like Nikki Haley to John Sununu, someone who’s not known that needs to get out in front and get people to recognize them.

John Williams: Well, and somebody else had an article, I think it was maybe The Washington Post, talked about this weekend summit he had down in Miami a couple of weekends ago, where he had all these big-dollar donors in the Republican Party fly down there and spend the weekend meeting with him and his political team, and a lot of people down there at that event who have previously supported Trump. So he’s courting the donors. He’s releasing the book. He’s making the visits. I found it interesting that he’s… Instead of going to Iowa or New Hampshire, he’s been to New York and Illinois. So a little bit out-of-the-box strategy there early, where most people running for President, their first trips are usually to Iowa or New Hampshire or some early primary state. So yeah, so running for President, not announcing until after Memorial Day.

Andrew Coats: Little history note. You know who announced really early, and this has always been kind of the case study of why you announce early, was Jimmy Carter announced a month after the ’74 midterms. His famous kind of stump speech on that was he told his mom he’s running for President, and she always said, “President of what?” But that’s always been regarded as why you get in. But of course, Carter wasn’t really known then, right? So he had to get out there and get up and get to those states early on.

John Williams: Did not know that. Did not know that.

Andrew Coats: A little Jimmy Carter history for you.

John Williams: There you go. All right, your turn.

Andrew Coats: All right. So I’m looking across the board here, and with my first pick, I’m going to take Kevin McCarthy’s 2023 playbook. I think be prepared to read a lot of, if you’re a Politico or Bloomberg reader, a lot of headlines mentioning McCarthy’s playbook. And of course, this is true with all Speakers of the House, right? We’re all eyes on Kevin McCarthy. But it raises a good point. What are McCarthy’s top goals for this year? And I think we’re starting to see that slowly trickle out. But like any Speaker of the House, probably your number-one job is maintaining the majority, right? That’s how you’re ultimately going to be measured, is if your party stays in power after the next election. So his main job, it’s a little bit under the radar, but it’s flying around the country with his most vulnerable members, a lot of the freshman members who are… That’s the easiest time to beat an incumbent, is their first term before their name gets known. So to get out there and travel and raise money with them.

Oversight is going to be huge in this Congress. I mean, this Congress is shaping up to be a massive oversight Congress, and I don’t just mean from your former committee, government reform, but it seems like all the committees are dipping their toe in the oversight water. And the plan just seems to be investigate everything right now and tie up the White House with having to respond to these investigations and hearings and subpoenas and kind of control the message, as opposed to the White House getting to dictate what the messages are.

So, we’re already seeing the big ones that are all over cable news, the handling of COVID, the Twitter censoring, the train derailment in Ohio. Those are the big ones that the administration wants to avoid, but then you have the more kind of in-the-weeds investigations going on. So waste, fraud, and abuse of authority in federal agencies, federal regulations and the burdens they create on Americans, everything down to even like hospital CEO compensation is going to be a big item this year for a number of the different House committees. So we’re starting to see that play out already.

John Williams: Yeah, you mentioned my former committee, Oversight. Well, it used to be called Government Reform and Oversight, and now I think it’s just called Oversight and Reform. Its chairman, Jamie Comer of Kentucky, I know earlier this year mentioned that how hospitals spent their provider relief fund monies is something that they were going to look at. So I think that fits… I think you’re right. That fits within that more niche area of oversight so that they’re not just looking at Hunter Biden’s laptop. They’re actually going to look at what they view as more substantive policy-related oversight and how those agencies… The same thing with PPP. They’re going to look at the PPP loan stuff. So yeah, I think you’re right.

And McCarthy overall with what, a four-vote, a five-vote majority, yeah, that playbook’s going to come in handy because it just takes one person getting sick. I mean, you see it in the Senate right now with Senator Fetterman of Pennsylvania having had a stroke and now unfortunately suffering from depression and being admitted to the hospital. The reality is it puts the Democrats in the Senate down a vote, and nobody’s sure when he’s going to be coming back. So that significantly changes the voting dynamics there. And McCarthy’s got the same problem really in the House with his narrow majority.

Andrew Coats: I certainly hope the best for Senator Fetterman.

John Williams: Yep.

Andrew Coats: Never like to see that, but it’s going to bring Kamala Harris back up to the Hill quite a bit to break ties in the Senate with the closer margin. And to your point on McCarthy kind of holding his party in line, he has to maintain the fringe element of the House, these members who grab a lot of headlines. I think we saw a certain member from Georgia calling for a national divorce last week. And let’s be honest. Every Congress has these members, and this goes back to the days when we were on the Hill, right?

John Williams: Right.

Andrew Coats: But the problem is or McCarthy’s problem is he really called in a favor to get the gavel with this group.

John Williams: Made a lot of promises. Yep.

Andrew Coats: Yep. I liken it to… One of my favorite movies is Goodfellas, and that scene when the restaurant owner goes to Paulie and asks to partner with him in running his restaurant, and there’s that moment when Paulie looks at him and says, “Yeah, that’s not even a fair deal.” It’s kind of similar to the Speaker vote, where I think one of the House members, maybe it was Chip Roy, I’m not sure which one, said they finally agreed to McCarthy, to vote for McCarthy as Speaker when they couldn’t think of anything else to ask for. So…

John Williams: That’s true.

Andrew Coats: How will the far right treat this Congress? Will it be similar to the restaurant in Goodfellas, which essentially burned down, right? I think that’s going to be interesting and see how McCarthy deals with that. And then he also has the debt-ceiling fight coming, whether that gets raised or lifted. I think that comes to a head as early as July and September at the latest. So you’re going to have this stare-down between the White House and McCarthy. Republicans never win on these.

John Williams: No. Well, you’re going to have a stare-down between McCarthy and the people in the caucus that you’re talking about.

Andrew Coats: Right.

John Williams: You’re going to have that stare-down first before he even gets to negotiate with Schumer or the White House.

Andrew Coats: Exactly. So be prepared to read a lot about extraordinary measures and the federal government on the brink between now and then. In the past, it’s always worked its way out. It’s worked itself out somehow, but that’s certainly going to be in the news. That’s kind of an overview of his playbook, so I shift back to you with your second pick.

John Williams: Well, my second pick in our draft is the highly entertaining DSH cuts fix.

Andrew Coats: Ooh.

John Williams: Yeah. Disproportionate share hospitals. If everyone will recall, there’s about $8 billion in ACA-related DSH cuts that have been postponed ever since the ACA passed. Folks will remember that part of the structure of the ACA is that because everyone was going to do Medicaid expansion in the states, that states didn’t need as much Medicaid funding. So there’s $8 billion in Medicaid cuts that can be made. Well, we all know how that worked out in states that chose not to expand Medicaid. So in order to prevent these cuts from taking place, Congress has passed legislation sort of kicking that can down the road for so many years at a time, and the last postponement expires at the end of this fiscal year, so September 30th. And the cuts will then start again on October 1st if Congress doesn’t do anything.

It is my pick that Congress will pass legislation to postpone the DSH cuts again. That will be obviously a healthcare bill, which means that, given the political dynamics and the makeup on the Hill and divided government, it might be the only healthcare-related bill that passes this year. And if that’s the case, then we may see more items in that bill than just the DSH cuts fix. But that is my second pick for our draft, is the DSH cuts fix.

Andrew Coats: Yeah. I like that pick because, as you mentioned, there’s not a lot of healthcare vehicles moving this year, and that’s going to be the one that everyone kind of tries to get a hook into. So we’ll see if Congress keeps that clean or what it does with it. But there certainly will be a lot of news items, and that will be mentioned in no shortage of meetings up on the Hill this coming year. With my second pick, and I really like this pick. I feel like I’m getting a good value pick here. I’m going to go with Biden getting challenged in a primary. And we haven’t seen… It’s been a long time. We haven’t seen a sitting president get challenged since the pre-internet days. But if President Biden does get challenged, and I’m talking about a major candidate, not-

John Williams: So not Marianne Williamson, because she’s already announced that she’s challenging him. So you’re saying that Marianne Williamson is not a serious candidate?

Andrew Coats: I guess I am.

John Williams: Not that I disagree with you, but…

Andrew Coats: But if a bigger name… Think back when Eugene McCarthy challenged Johnson, someone of that ilk.

John Williams: Oh, yeah. Well, you mentioned Carter, right? I mean Ted Kennedy, right?

Andrew Coats: Oh, in 1980.

John Williams: Yeah.

Andrew Coats: He challenged Carter, and that really weakened him. And I think Kennedy, he was clearly… He wasn’t going to win that primary, but he wouldn’t pull out of the race.

John Williams: No. He went all the way to the convention and gave that famous speech. Yeah.

Andrew Coats: Exactly. And the final moment… Back when this was just you had the major networks showing the convention. The final moment of that convention was Carter’s acceptance speech and Kennedy up on the stage, and they didn’t join… They didn’t do the political kind of hands of unity.

John Williams: Right, right.

Andrew Coats: So that’s another example. Ford got challenged by Reagan in ’76.

John Williams: Indeed. Sure did. Does the challenge against Biden come from the progressive Bernie Sanders/AOC wing, or does it come from, I guess, the more moderate wing?

Andrew Coats: You’re right. You’d think it would be the progressive wing. But at the same time, President Biden has been a fairly progressive president in the policies he’s pushing and the White House are pushing. And I would think… If I’m in the White House advising President Biden and he wants to run again, I’d be saying, “You may want to start shifting to the center here sooner than later and start running on some issues that can grab more moderate voters.” So I don’t know where that challenger would come from, but I do know if you’re the White House, you certainly want to do what you can to sort of weaken potential challengers that would be a threat.

John Williams: Well, and I think they’ve done that systematically by the way that they’ve changed up the primary system so that they’re not going to Iowa. They’re not going to do that. They’re going to go to the states where Biden is strongest, right? South Carolina. Right out of the gate, they’re going to go to states where they know he’s not at risk of losing.

Andrew Coats: Yeah, no, I completely agree with that. And I think you look back at when there were a lot of challenges to sitting presidents, and that was what? The late ’60s, ’70s, Watergate, Vietnam, just a general sense of government overreach. And we’re in a very similar… There’s different reasons, but there’s a lot of anti-Washington sentiment right now. So I think this is something we could see. And if it were to happen, I think it’s bad news obviously for President Biden and national Democrats in 2024.

John Williams: Very good. Well, I guess we’re what, to my third pick?

Andrew Coats: Third pick.

John Williams: All right. Well, and my third pick in our fantasy, I guess, draft or whatever we’re calling this, I am going to tee up the ever… Oh, I don’t even know what the right word for it is. It’s certainly not entertaining, but it is interesting, I think, is a workplace violence regulation. The administration… And every administration does this. They put out a regulatory agenda at least twice a year, and it lists all of the regulations that are either in the process of being finished or mid-draft or whatever. But it also lists the regulations that are in the pre-writing phase. So this agenda is what we look to to get a sense of what might be coming up on the regulatory front coming out of HHS. And this one actually is not an HHS rule. It is a Department of Labor rule called the Prevention of Workplace Violence in Healthcare and Social Assistance.

It’s in the pre-rule stage. It’s being handled by OSHA. So it is a DOL, again, a DOL rule. OSHA published a request for information way back in 2016, where they solicited information mostly from healthcare employers, workers, other healthcare subject-matter experts on the impact of violence and prevention strategies and anything else along those lines that would be useful to the agency, to OSHA. There was a broad coalition of labor unions, the nurses’ unions, that petitioned OSHA to do something, to set some sort of standard along those lines. OSHA recognized the need to do that. Of course, 2016, 2017, we’re talking about when we had a change of administration, right? So that went on the back burner during the Trump years, and now it looks like it’s come back.

The House of Representatives during the last Congress when Democrats were in the majority, they did pass a workplace violence rule that was never taken up by the Senate. That rule would’ve given OSHA a significant amount of regulatory authority in this area. For that reason, it was strongly opposed by the American Hospital Association, the Chamber of Commerce, other business groups, I guess, if you will, and a lot of healthcare or hospital-related groups opposed it too. So this may be the administration’s attempt to jumpstart that again. So sometime this year, I think we are going to see a proposed rule on workplace violence come out of OSHA.

Andrew Coats: Yeah, it’s interesting the timing with Marty Walsh just leaving DOL as secretary and taking another position. So we’ll see what the new labor secretary that they… if they can get the nominee in confirmed, if it has to wait for them to kind of go through the confirmation process, which could be controversial from the sounds of it. So that’s definitely going to be in the news and something to watch. It’s a good third-round pick.

John Williams: Thank you.

Andrew Coats: With my third pick, I’m going to go with a subject you hear a bit about, and it’s really kind of ratcheted back up in the news of late, and that’s congressional earmarks. Now, recall in what, two years ago, the Democrats ended a 10-year moratorium on federal earmarks. And earmarks are, they’re basically small grants to projects in congressional districts or states. And by small, I mean in the $100,000 to $4 million range. The thinking is you attach these projects to annual spending bills to ensure bipartisan buy-in, so bills are passing with not just party-line votes.

John Williams: Yeah, let’s call it greasing the wheel, right? That’s greasing the legislative process. Let’s just call it what it is.

Andrew Coats: Yeah. The optics have never been good really for either party here, but particularly for Republicans. The bridge to nowhere, right? Google earmarks, and you come up… One of the first hits is the Heritage Report that calls into question… This is recent. This is 2022. 1.6 million for the equitable growth of the shellfish industry in Rhode Island, or 4.2 million for sheep experiment station infrastructure improvements in Idaho, and 3 million for the Mahatma Gandhi Museum in Houston.

So we’re starting to see these get brought back up again and bandied about in the news. But at the same time, the members that bring these up know that if it’s Congress not giving out the grants, then it’s going to be unelected bureaucrats and the agencies doing it. So it’s an interesting kind of dichotomy here. I think one of the wow moments, and we often will send each other texts or headlines, was late last year, and I forget if you sent it to me or I sent it to you. But it was House Republicans voting to keep earmarks in place for this Congress and by a big margin. It was over a hundred votes. So I’m playing a little bit of a long game here, but I’m predicting by fall, you’re going to continue to see earmark bashing in the Congress, especially in the House.

John Williams: Well, yeah, yeah, earmark bashing in the House. And we just learned in the last 24 hours that there are certain types of earmarks that House Republicans are just not going to do. And the House Appropriations Committee has announced that there are certain accounts, they refer to them… you can think of them as agencies, in general, that they’re not going to do earmarks for this year. And one of those is the Labor HHS appropriations bill. They’re not going to do earmarks. So whether it’s… Take a pick of an agency under HHS, whether it’s SAMHSA or-

Andrew Coats: HRSA.

John Williams: … CMS or HRSA or whoever it, HRSA and SAMHSA being good examples of agencies that have been responsible for distributing earmarks that were approved by Congress in the past. Well, House Republicans said last night that “We’re not doing them. We’re not going to do Labor HHS earmarks.” So hospitals, health systems, a lot of folks in the healthcare space that were hoping to get the House of Representatives to… or their congressperson to put in an earmark request for them are going to be out of luck this year. So yeah, you’re right. The bashing is going to continue.

Andrew Coats: What’s interesting is under that Heritage Report, the next link was a Brookings Report. Now, Heritage being the conservative think tank, Brookings being the more liberal. They talked about that while Democrats sought more earmarks in 2021, 2022, the Republicans actually asked for more money. So I think they eliminated the defense account. They eliminated, as you mentioned, the HHS account. By doing that, that may be a way of controlling the spending that comes out.

John Williams: Yep, yep. I think you’re right.

Andrew Coats: All right. Last pick.

John Williams: Okay. For my last pick in our political draft, I’m actually going to go with the relationship between Bernie Sanders and Bill Cassidy will be more amicable than folks might have anticipated. The interesting thing about that committee is that if Republicans would’ve gone by seniority, then Rand Paul would’ve been next in line to be the highest-ranking Republican instead of Bill Cassidy. And the idea of Rand Paul and Bernie Sanders being responsible for running a committee together would’ve been just the height of political theater. That would’ve been must-watch TV as far as political geeks like me are concerned. But there would’ve been areas too where they would’ve worked together, I think. They would’ve both enjoyed bashing drug companies together.

But I do think that Cassidy and Sanders are going to work better together than people think. And I have a little bit of insight on this, in that I was able to talk to Dr. Bill Cassidy about this a couple weekends ago and asked him about his relationship with Sanders, and he said that he gets along with Sanders pretty well. There’s not a lot of animosity there. There are going to be certainly things that they don’t agree upon. Dr. Bill, being a doctor, certainly wants to decrease the regulatory burden on physicians so they can spend more time practicing instead of doing paperwork and complying with regulations. I’m not sure there’s a regulation Bernie ever saw that he didn’t like.

But there is other areas where I think there is room to work together. We talked about workforce shortage being one of those earlier, but also in behavioral health. Behavioral health is a huge issue for Bill Cassidy for personal family reasons, and I know that’s also been one that’s been a big issue for Bernie Sanders as well. And Cassidy is a member of what’s known in the Senate as the Gang of Eight. It’s these eight Republicans that have a history of working across the aisle on bipartisan legislation to get bipartisan legislation through the Senate. So I think you’re going to see a better working relationship between Cassidy and Sanders than I think a lot of people had anticipated.

Andrew Coats: Yeah, I agree. And both these members are not afraid to jump in the water on any healthcare-related issue. So there’s going to be no shortage of headlines and news coming out of that committee and action coming out of the HELP committee on healthcare.

John Williams: Indeed.

Andrew Coats: All right.

John Williams: All right. Last one.

Andrew Coats: The last one. And with every fantasy draft, you need a good sleeper, and I think there’s no better sleeper than what I’m going to take in the fourth and final pick: nonpartisan advisory commissions and panels. And by this I’m talking about MedPAC and MACPAC. Now, who is MedPAC? MedPAC is the Medicare Payment Advisory Commission, which was created by Congress in 1997. It advises Congress on issues impacting Medicare, particularly Medicare reimbursement. For over a decade now, John, you and I, we’ve written newsletters and D.C. updates, and for the large part, this decade has been filled with a lot of healthcare news, whether it’s passage of the ACA, the attempts to repeal the ACA, COVID, all the massive spending to deal with COVID. There’s been no shortage of news. But one constant is always, in the healthcare world, there’s always reports coming out of MedPAC and MACPAC. MACPAC is kind of the sister to MedPAC in that it deals with Medicaid.

These are important, these reports that come out, and they come out… They meet monthly or bimonthly, and they have annual and semi-annual reports. They’re important, and it’s really how healthcare policy is made. John, you and I have both been congressional staffers, and you don’t just learn things by sitting inside of Longworth and Rayburn and Cannon. You have to read these reports and find out what nonpartisan experts are advising Congress on in regards to Medicare payment. And I think in the first year without major healthcare policy news coming out of D.C., get ready to hear a lot more about these MedPAC reports. They’re highly technical. They’re in the weeds. Hence, the sleeper nature of my pick. But it’s a very much underrated facet of healthcare policy.

John Williams: You’re right. It is certainly in the weeds over there. They’ve got some pretty deep policy expertise. People that get appointed at MACPAC or MedPAC, they’re typically from outside of Washington. These commission members are hospital CEOs or physicians or people who work in their day jobs in healthcare, and they’re certainly subject-matter experts. And then you’ve got the staff at these commissions who are also really good subject-matter experts on this stuff. So yeah, I think you’re right. I think they’re going to get a lot more attention just because there’s not going to be a ton happening on the Hill, so people are going to be focused… At least folks in the D.C. healthcare media who need stuff to write about are going to be looking to these commissions a lot more.

The interesting part I’ve always found is that… Take MedPAC, for example. They make all these recommendations to Congress on what Congress should do on Medicare policy, and that’s what they’re charged with doing. That’s what Congress asked them to do. That’s why they exist. Yet, you see all these recommendations that they make to Congress all the time that Congress doesn’t pay attention to. I mean, they pay attention to some of them, but a lot of them they don’t, but…

Andrew Coats: Yeah.

John Williams: I think we’ll just have to wait and see what they come up with that’s new, but I think they’re definitely going to get some more attention. You’re right. Well-

Andrew Coats: So that does it.

John Williams: Yeah, I guess we’ll have to see how it all plays out, as always. And however it all plays out, we’ll be there to tell you about it here on Inside Baseball. So thank you for joining us on this edition. As always, if you’d like to receive more information about what Andrew and I do or how we provide federal advocacy services to our clients, please visit our website at hallrender.com or reach out to me at [email protected] or Andrew at [email protected]. And one last disclaimer: Please remember, the views expressed in this podcast are those of me and Andrew only and do not constitute legal advice. So long, everybody.

On this episode, John and Andrew preview what to expect on the health care front as lawmakers begin the 118th Congress.

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John Williams: Hello again, everybody, and welcome to another episode of Inside Baseball, a look at healthcare politics and policy in Washington, part of Hall Render’s Practical Solutions podcast series. I’m John Williams, managing partner of Hall Render’s Washington, DC office. As always, I’m joined by my colleague and DC cohort, partner in crime, whatever you want to call him, Andrew Coats. Andrew, how are you?

Andrew Coats: Good. Happy new Congress.

John Williams: Happy new Congress. Happy New Year.

Andrew Coats: First recess week of the year.

John Williams: Right? Yeah, absolutely. It is a brand-new day, if you will, on Capitol Hill, with a whole lot of new things to look forward to. This is our first podcast of the new year and end of the 118th Congress, which is already off to a very interesting start. If you’re watching the news at all, then you know the speaker’s election was quite the high drama. I thought that C-SPAN’s coverage was absolutely amazing, for all of you listening to this that are political geeks like Andrew and I. And actually spent the time watching C-SPAN instead of the national news shows.

It was fascinating because normally the party that’s in control of the House controls the C-SPAN feed and controls the C-SPAN cameras, but because of a technicality, neither party was actually in control of the House for that period. The clerk of the House was in control, and so C-SPAN got to control their own cameras and because of that, I think America got a really amazing view of how the House floor works. And I, for one, wish they would do an awful lot more of that. But I think for obvious reasons and optics they don’t, and I know Republicans are already in control of those cameras again.

Andrew Coats: Thank you, John. And more people watched C-SPAN and that drama over the speaker vote than probably any other House proceeding short of maybe an impeachment vote.

John Williams: Exactly. I was going to say, probably not since the last Trump impeachment has anybody watched that much C-SPAN. No question. No question. Well, for this episode, I think we’re going to look at the political power dynamics of the 118th Congress and then talk a little bit about what you might expect on the healthcare front. Andrew’s going to walk you through the new power dynamics in the Senate, which aren’t really that new, I guess. Talk a little bit about the healthcare committees of jurisdiction over there, and then I’m going to do the same thing over in the House with the House Republican majority, the new House Republican majority, and what we might be able to expect from them since they are in the majority. Andrew, you ready?

Andrew Coats: Let’s do it.

John Williams: Take it away, my man.

Andrew Coats: All right. Yeah, so let’s talk about the Senate and what has changed and what hasn’t. There’s not a lot of drama compared to what’s going on with the House. The Senate is still going to be the Senate. They’re swearing in new members and basically are out now, but you’re still going to need 60 votes unless there’s a reconciliation vote, and there’s not going to be in this Congress. What we do see that’s different is that a lot of the Republican deal makers who had big roles on the A committees as far as healthcare goes are now gone. Senator Blunt, key appropriator, Labor, HHS Committee, ranking member, he’s gone, he retired. Senator Burr, ranking member on the Health Committee, from North Carolina, retired. Senator Portman, key member on Senate Finance from Ohio, retired. Senator Toomey, another Finance member, Pennsylvania, retired.

These are all members that McConnell kind of leaned on and they did a lot of the deal making and worked closely with Democrats. They’re gone now. And because of that, you have a much different Republican Senate caucus than you did last Congress. And we’ve already seen McConnell face a leadership election challenge from Senator Rick Scott in Florida. It’s the first time there’s really been a group that’s publicly opposed to McConnell, who has for the bulk of his time in leadership, really enjoyed unified support from within the caucus. So he’s going to face a little bit of headwinds this year from within, and that will be something new to watch. Now, Senate is out this week. They come back the week of January 23rd.

You’re going to see the committee appointments and the committees get filled out, so new members get appointed to committees. And then the Senate will be off and running from there. The two big sort of Senate A committees that we keep an eye on, one is the Health Committee, the other is the Senate Finance Committee. The Health Committee is where we see the big change. Gone are Senator Burr, which I’ve mentioned. He retired. Senator Murray is no longer going to be chairwoman. You’re going to have Bernie Sanders in charge of the Health Committee and you’re going to have Dr. Cassidy from the Republican side as ranking member.

John Williams: Yeah, you’ve got Mr. Medicare for all on the one side and then you’ve got a former physician on the other. That will be interesting.

Andrew Coats: Two members that they’ll never shy away from healthcare issues. Say what you will, both take a very much interest in healthcare, diametrically opposed guys. So not as much in last Congress, but in recent years the Health Committee has always worked well together. And when you meet with their committee staff, you’re usually joined by Republican and Democrat staffers who would sit in on that meeting. We’ll see if they go back to this format under Sanders. I don’t know, and this is such an unknown to so many people of how this will play out that it’s going to be interesting to see how well these two work together and how well the committee works together in the [inaudible 00:06:36]

John Williams: That’s really a good point. Cassidy is… I don’t know the gang of whatever number it is now, but you do have this group of Republicans that have worked across the aisle to pass legislation to get to the 60 votes, and Cassidy has traditionally been one of those. Todd Young from Indiana has been part of that from time to time. Mitt Romney from Utah has been part of that. You’ve had this group that has been willing to work across the aisle to get stuff done, and Cassidy’s been a part of that.

Now, how far he’s going to go to what Bernie Sanders’ traditional views of healthcare are, who really knows? Cassidy’s got a real soft spot on behavioral health, which could be an area where they work together. Although there was a lot of money for behavioral health in the omnibus that passed last month. I do think it’s going to be fascinating to watch, but I think it’s possible that there could be some areas where they actually work together. But I think to your point as well, seeing how the staff works together is going to be fascinating too, and that’s something that people like us will keep an eye out for.

Andrew Coats: And then the other big A committee in the Senate is the Senate Finance Committee. And here you have basically the same roster intact, Senator Wyden from Oregon as chairman and Crapo from Idaho as ranking member. Again, if you only listen or watch MSNBC or Fox News, you’d probably be surprised to learn that the Finance Committee, like most committees in the Senate, attempts to work in a bipartisan manner. And if we’re up there with a client or you have a proposed bill that a client wants to have introduced, you’re going to need to have buy-in from both Republicans and Democrats on that committee to make it really a serious legislative effort. So again, I think we’re going to see that bipartisanship on the Senate Finance Committee.

John Williams: Hate to interrupt you, I’m sorry, but there’s a fascinating development. And maybe you were going to get to this and I apologize if you were, but is this retirement of Debbie Stabenow from Michigan. You talk about somebody that’s worked across the aisle over the years, on healthcare issues especially. And not only that, but somebody that was in line to be the next chairperson of that committee, and then just up and decided not to run for reelection in ’24. So some changing dynamics there too.

Andrew Coats: One of the interesting nuggets that Senate Democrats now have is subpoena power. Last year, with a 50/50 split, they did not have the subpoena power that the Senate normally enjoys. So I would expect a number of industry leaders being hauled up before the Senate. And then in the House you’re going to see this back and forth, because the House can kind of respond in kind. So if you see the House do something on document leak from President Biden, you see the Senate respond with something regarding Trump.

Or the Senate does something on climate change, why are you killing the environment? You may see the House respond with something on tech, and why is the company so woke? So you’re going to see this kind of ping pong match going back and forth. But I think it puts a lot of the Fortune 500 CEOs and big industry leaders and trade associations on their toes and be ready to be hauled up before Capitol Hill at a moment’s notice.

John Williams: Yeah, and I think you’re absolutely right. I think what we’ve always seen in the past is that when you have divided government like that and you’ve got one party controlling one body, one party controlling the other one, the chances of getting legislation passed is really remote. And so what does everybody spend their time doing? They spend their time on oversight, and to your point, having subpoena power to do oversight. So yeah, I think you’re absolutely right. I think you’re going to see a ton of oversight from both parties, but coming from different angles, depending on whether or not it’s the Senate you’re talking about or the House.

Andrew Coats: But end of the day, Senate is still going to be fairly status quo from what we saw over the past two years. Where the big change, and where I think a lot of the interest has been, at least in this opening couple weeks, has been the House.

John Williams: Yeah, you think?

Andrew Coats: You want to talk about the power struggle on what the speaker vote and all the implications of that mean for this Congress?

John Williams: Yeah. I mean, as I said, it was high drama for political geeks like us. And in case you weren’t watching the speaker’s vote because you had a lot better things to do, it took 15 votes, or 15 ballots, for Kevin McCarthy to finally win. The 14th ballot was especially intense because everybody went into that vote believing that Kevin had finally gotten enough votes to get across the finish line and win the speakership. But it turns out that he didn’t because a handful of Republicans changed their minds at the very last minute. Literally, as the vote was starting, they changed their minds. And there was this really intense 25-minute standoff on the House floor that was caught on television, not just C-SPAN, but CNN, Fox, everybody was showing it. And they eventually proceeded to a 15th ballot where Kevin, again, finally secured enough votes to become the speaker.

And there’s really two schools of thought regarding how all this played out and what it means. I tend to agree with those who say that this episode is really a display of how the process should work. Although it was truly a close view of how the sausage gets made in Washington, the legislative process, which includes picking leadership can be very, very messy. And in this case it was on display for the whole world to see. But there are many Republicans that really wanted to move away from this top-down leadership-driven approach to legislating that has become the norm for both parties over the last 20 to 30 years. And this was their opportunity to try to do that. The other school of thought, which I also agree with, is that this episode is merely an example of the dysfunction that we’re all in store for on the Republican side this year.

When you look at the vote itself, there was really two factions at work here. First you had this Chip Roy, Byron Donalds camp, if you will, of about 20 Republicans who wanted rules changes and greater representation of conservatives on committees. They basically wanted to go back to the Schoolhouse Rock, I’m just a bill method of doing things, where bills went through committee and they get marked up and they go to the floor and they can be amended on the floor and all of that. So those are legitimate political and policy concerns and I think that that is the right arena in which to have that debate, as messy as it was and as public as it was. The other faction was just for Republicans, really, led by Matt Gaetz of Florida. And I’m not really sure what their endgame was other than to draw attention to themselves in order to raise money off of social media, which I know some of them were doing the entire time this process was going on.

What their legitimate policy concerns were, I’m not really sure to this point. But in the end, Kevin got the votes he needed to become speaker. What does that mean for the future? Republicans have a very small majority here. And that means that the smallest group of Republicans can bring everything to a complete standstill. So it’s going to be really hard for Republicans to pass any meaningful legislation through the Congress. They got the votes to get it through the House, but getting 60 votes in the Senate, which means getting Democrats to go along, is going to be incredibly difficult, if not impossible. So despite their promises to stop the IRS from hiring these 87,000 new employees and their promises to use the power of the purse to lower government spending, there’s no bill to do those kinds of things that can get 60 votes in the Senate, much less get Biden to sign it.

So Republicans seem to be sticking with this time-tested tradition that they have of overpromising and under-delivering. And look, both sides do it. I’m not just picking on Republicans here. But just think of the ACA repeal debacle if you want to see what I’m talking about. And if you really want to see what we’re in for, I think, over the next two years, all you really have to do is think back to that period of 2010 to 2016 when Obama was president and John Boehner was speaker, and we just went from fiscal cliff to fiscal cliff from continuing resolution to continuing resolution and government shut-down threats and whatnot.

And I think hopefully, and I say this, hopefully, Republicans learned their lesson on government shutdowns. But I’m not really sure because you still have a significant number of Republicans in the House who weren’t around the last time Republicans shut the government down. So they don’t really understand what the political cost is for doing that. But hopefully McCarthy can keep everybody on board and they don’t run the train off the rails.

Andrew Coats: We knew that this was going to be a tough slate for McCarthy. We knew this would be a tough Congress. We talked about it in our post-election recap. I think anyone who follows politics closely knew he had a tough schedule ahead.

John Williams: You know what? [inaudible 00:16:31] but I think you’re absolutely right. We knew that after the election. But before the election, all the predictions, ours included, was like, oh, Republicans are going to get anywhere from 12 to 40 seats in the House. And ended up being four or five. And so I think that’s part of what McCarthy had to deal with, was that he went in to the midterm election thinking that he wasn’t going to need Chip Roy, he wasn’t going to need Byron Donalds or Matt Gaetz or Lauren Boebert. And that call-

Andrew Coats: The speaker vote was so dramatic and so many people watched it. Now it’s not just the kind of inside baseball, shameless plug, folks that know this, but your Uber driver knows it’s going to be tough for McCarthy. Your kid’s basketball coach knows it’s going to be tough for McCarthy. Everyone knows how tough it’s going to be this year for McCarthy. And in a way, that may help lower the expectations for Republicans and for leadership. Because [inaudible 00:17:32], as you mentioned, when a new party takes over the House, there’s always that January, February period where just the sky is the limit. And we’re going to impose term limits, we’re going to repeal the ACA, we’re pass climate change. Of course, he’s coming at this from the opposite end here. So any sort of movement he gets is going to be seen as a positive, and kind of unexpected.

John Williams: Right. I mean, so tough to the point that nobody else wanted the job, all right? For the people that were watching it, you kept see them nominating Republicans, nominating Jim Jordan to be speaker, even though he didn’t want the job and he was backing McCarthy. That’s how hard it was to become speaker, third in line for the presidency of the United States, that nobody else in the Republican Party wanted the job and the Republican House guys wanted the job other than Kevin McCarthy. So yeah, I mean…

Andrew Coats: For the Democrats, can you ever remember a change in power in the House where the minority party comes in with more momentum than House Democrats right now?

John Williams: No.

Andrew Coats: Usually the party that lost has this month of recrimination, and you’re reading these 10,000 word think pieces about who’s to blame for losing the House. But that really hasn’t been the case. Partly, they have new leadership for the first time in a long time. They’re kind of enjoying that honeymoon period.

John Williams: Well, and the enthusiasm that goes with it, right? I mean, they’re excited about having this new young crop of leaders on the Democratic side. And they’ve got some good ones. I mean, Pete Aguilar has got a great record and Hakeem Jeffries does too. I mean, they’re qualified to do the job. But yeah, they certainly… You talk about over-promising and underdelivering. I mean, they outperformed their expectations, which always gives you momentum when you’re going into a new job. But speaking of new jobs in the House, we’re going to have new leadership of committees. And in the House there’s two committees that have jurisdiction over healthcare, Ways and Means, and Energy and Commerce. And if a person wants to be a chairman of a committee in the House, they literally have to run a campaign for it. And this is some serious inside baseball stuff.

The steering committee inside the Republican caucus… And don’t ask me how many people serve on it because I can’t remember, they are really who determines who becomes chairman of these committees. And so you have to run these campaigns in front of the steering committee to win enough votes to become a chairman. And different people on the committee, which includes Kevin McCarthy and Steve Scalise, they have a different number of votes. I think the last time I checked, the speaker has seven votes on the steering committee, so the greatest amount of influence. So these folks literally have to run these campaigns for these chairmanships. And that includes raising a significant amount of money for your colleagues, and in this case doing that for the National Republican Campaign Committee.

So if you look at Ways and Means, of the two healthcare committees, it was really the only one that had a race for its chairmanship, and that was between Vern Buchanan of Florida and Jason Smith of Missouri. And Vern has more seniority on that committee, a committee where seniority is fairly important. On the Democratic side of things in the House, seniority is still the most important thing. It hasn’t been the most important thing for Republicans since about 1994 when Newt Gingrich picked Bob Livingston over John Myers from Indiana for the House Appropriations Committee chairmanship, but it still plays some factor. And Vern, you talk about money, Vern raised more money for the NRCC than Jason did, although not by much. I think Vern raised like 4.1 million and Jason raised 3.8 or something like that. So he raised slightly less money, but Jason is much closer personally to Kevin McCarthy even though Vern and Kevin came into Congress in the same class together.

I think ultimately it came down to the fact that Jason is viewed as more conservative than Vern, and more importantly for that, making Jason chair of the Ways and Means Committee was another bargaining chip that Kevin could use in his negotiations with conservatives to win the vote for speaker. It was a bargaining chip, and he could say to them, “Okay, I know you like Jason better than you like Vern because he’s more conservative, so I promise I’ll make Jason chairman of Ways and Means instead of Vern if you’ll vote for me.” There’s been reports that there was a very heated conversation between Vern and Kevin on the floor after that, where Vern told him that “You screwed me,” which is not exactly the word he used.

So high drama there. Ways and Means does have a health subcommittee and I think Vern’s consolation prize is that he gets the Health Subcommittee gavel. He was already the highest ranking Republican on that subcommittee, and so he’ll now become the chairman of that subcommittee. He made a lot of noise during the whole process that if he didn’t get the gavel for Ways and Means, the full committee gavel, that he was going to retire from Congress, and now that looks like it’s probably not going to happen. So he’s going to stay and serve in that role.

On the Democratic side, Lloyd Doggett from Texas has been serving as the chairman of that subcommittee, and he’ll just assume the highest ranking Democratic spot on that subcommittee. As we sit here today, we know that Republicans will have 25 seats on the full Ways and Means Committee and Democrats will have 18, which is fewer than they have now. That’s the way the process works. Whichever party controls the Chamber gets more seats on the committee than the other one does. No word yet on which Democrats are going to lose their seats on that committee. But we do know that there’s going to be about 10 new Republicans on that committee because of other vacancies and whatnot.

The other committee in the House that has jurisdiction over healthcare, Energy and Commerce, nowhere near the type of changes that we’re seeing in Ways and Means, in fact barely any changes at all, quite frankly. At the full committee level, Cathy McMorris Rodgers is moving from the ranking Republican spot to the chair. Frank Pallone of New Jersey is moving from the chair to the highest ranking Democrat spot on that full committee. At the Health Subcommittee level, Brett Guthrie’s taking the gavel as chairman and Anna Eshoo is moving from the chair to the highest ranking Democrat on that committee.

Andrew Coats: I think on E&C, that’s a committee you could look at and say you could see legislation moving out of that committee. Last year with Pallone and CMR, you saw that they moved a privacy bill, they moved the FDA user-fee bills and worked in, from what we could tell, a bipartisan fashion. I pinpoint that committee as one where I’d looked at, predicted to see legislation getting moved.

John Williams: Yeah, absolutely. And it will be interesting because 29 Republicans on that committee, 23 Democrats. No word yet on who’s going to get that seat and who’s going to lose it on the Democratic side. But to your point, there are issues that have been bipartisan that come out of this committee. And one of those issues could be the issue of healthcare monopolies and antitrust. And that leads us into what we might expect, as far as a healthcare agenda is concerned, from House Republicans. And obviously focusing on House Republicans because Democrats control the Senate. And they really haven’t put out necessarily a blueprint yet, which House Republicans did last year when they created this Healthy Future Task Force that outlined their priorities if they were given control of the chamber.

And they divided issues into taskforce subcommittees that had titles like the Affordability Subcommittee and the Modernization Subcommittee, Security Subcommittee or the Doctor-Patient Relationship Subcommittee. And each of these subcommittees put out white papers, and then the items in those white papers read like a greatest hits compilation of past Republican proposals like encouraging more portable health coverage or making health savings accounts more accessible and promoting association health plans. However, there were some things in there that I won’t say are necessarily new, especially for people who deal with healthcare at the state level and state houses, but are fairly new in Washington and could be pretty concerning, especially for hospitals and health systems.

And these include things like reforming the inpatient only list or pursuing site-neutral payment reform, repealing the moratorium opposition on hospitals. Those were all things that were included as recommendations from the Healthy Future Task Force. From what we have been told by the leadership staff, Republicans are considering using a collection of bills that were introduced in the last Congress as a blueprint of sorts for their agenda, a comprehensive healthcare package, if you will. And those bills had titles like the Addressing Anti-Competitive Contracting Clauses Act or the Consumer Choice of Care Act or the Transparency of Hospital Billing Act.

So you can look at the titles of those and get an idea of where Republicans might be going with their healthcare agenda in the House. Another area that we think is going to be a significant focus for the House, and this goes back to the point we were making earlier about oversight and subpoena power, is that House Republicans are going to spend some time focused on exactly how it is that hospitals and other healthcare entities used the monies that they received from the Provider Relief Fund. Many of you listening to this podcast probably read the Wall Street Journal article that ran last month, or I think it was even a series that they’ve been running on this stuff. But at least one article from last month that claimed that billions of dollars in Provider Relief Fund monies went to hospitals that didn’t need it, and/or who used it to either improve their bottom line or bonus up their executives or used it for some purpose that Congress did not intend Provider Relief Fund monies to go to.

We’re even getting word that Representative James Comer of Kentucky, who’s the incoming chairman of the House Oversight Committee, which I guess, ironically for me, is the committee that I worked on when I was on the Hill in the nineties, is going to hold hearings that not only focus on how hospitals spent their Provider Relief Fund dollars, but is also going to hold hearings on how hospitals spend their 340B dollars, hold hearings on hospital not-for-profit status and how the FTC, Federal Trade Commission, conducts oversight of their consolidation activities, the merger and acquisition activities in the healthcare space. And it’s that issue of competition and antitrust enforcement that I think might have the best chance of legislative success. And you talk about the things that Republicans and Democrats can work together on, and you look at Energy and Commerce, and it’s got jurisdiction over this issue.

On the one hand, you’ve got this new strain of populism that’s running through the Republican Party that isn’t necessarily as pro-business as it has been in previous years. And on the other hand, you’ve got Democrats in the Senate, like Elizabeth Warren or Bernie Sanders, who might be willing to go along with Republican legislation that cracks down on what they view as monopoly forces in the healthcare marketplace. So trying to read these tea leaves here, I think antitrust and monopoly, or what are viewed as monopoly issues in healthcare, is areas that we might see folks on the Hill working together on. But it’s early and we’ll just have to see how it all plays out.

Andrew Coats: Stepping back from a 10,000-foot view, you have 117th Congress, you have a new presidential administration, you have big ideas, and you had big bills coming out. American Rescue Plan, Build Back Better. These are hundreds of billions of dollars that were poured into these bills. Those days are gone. 118th Congress is going to look a lot different. It’s going to be much more micro-driven, less coming from the White House, more coming out of the congressional office buildings and the policy staff on these committees. And at end of the day, if the bills they’re going to move, they’re going to need to be broad bipartisan support, and fairly not controversial because of that. And then I think you have to pay for it too. I think that’s going to come back into focus as well. And we got away from that a little bit, and I think that’s going to be back in vogue again.

John Williams: Yeah. Looking in the healthcare space and looking down the road, there isn’t a lot of must-pass legislation that needs to get done this year, except for the $8 billion in ACA-related dish cuts, Medicaid dish cuts that are set to kick in on October 1st, right at the end of this fiscal year. Those have been postponed over the years and they’re going to kick back in unless Congress does something about it. And from everything that we’ve heard on the Hill, they are going to do something about that, probably postpone it again. I doubt they’ll eliminate it. They’re probably postpone it again, but that provides a vehicle then to do other things in healthcare. And to your point, if they postpone it, they’re going to have to figure out how to pay for it.

And if they have to figure out how to pay for it, one of the areas that has always been talked about is this site neutral payment reform for hospital outpatient departments that are receiving on-campus hospital rates instead of physician office rates. And those were banned, then there was a exception for mid-builds. But there was a large group that were grandfathered in. And so in order to pay for this dish cut legislation, they could very well go back and use the monies from site neutral payment reform to help cover the cost of that legislation. So that’s something that was on Republican agenda to do, and I’m sure Democrats would go along with something like that in return for postponing these dish cuts. But I guess we’ll just have to wait and see how it all plays out.

Andrew Coats: It’s hard to see a big healthcare vehicle moving as a standalone. You have to think it’s going to be attached to some sort of either raising the debt ceiling, supplemental funding, year-end appropriations type bill. Maybe I’m wrong, but you kind of see it moving through those type of bigger vehicles.

John Williams: No, no, I agree with you. Well, however it all plays out, we’ll be here to tell you about it on Inside Baseball. So thank you for joining us for this edition. As always, if you would like more information about what Andrew and I do or how we provide federal advocacy services to our clients, please visit our website at hallrender.com or reach out to me at [email protected] or Andrew at [email protected]. And one last disclaimer because we are lawyers, please remember that the news expressed on this podcast are those of the participants only and do not constitute legal advice. So long, everybody. Thanks for joining us.

On this episode, John and Andrew discuss the results of the recent mid-term congressional elections.

Hall Render
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Hall Render
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John Williams: Hello again, everybody. Welcome to another episode of Inside Baseball — A Look at Health Care Politics and Policy in Washington, part of Hall Render’s Practical Solutions Podcast series. I’m John Williams, managing partner of Hall Render’s Washington, DC office. And as always, I’m joined by my colleague and DC cohort, Andrew Coats. Andrew, how are you today?

Andrew Coats: Doing good. We got Monday, but it’s a short week Monday. So all things are good.

John Williams: Yeah. Probably doing better than our picks for the election the other week, right?

Andrew Coats: Yeah, that was a rough night.

John Williams: Yeah. As you all can tell, this is our post-election podcast where we’re going to look at the results of the midterms and quite frankly, just how wrong we were in our predictions during our last podcast. In our defense, I will say that just about everyone appears to have been wrong in their predictions. House Republicans had, I think it was two election night parties scheduled or hosted in Washington, DC on election night and the House Democrats had none planned. So I think it’s safe to say that both sides really got it wrong. I think what we’ll do is, Andrew, I’ll kick it off with a look at the House results and let you take the Senator. That work?

Andrew Coats: Sounds great.

John Williams: All right. Well, as a refresher on the last podcast, we recommended that folks look to the House races in Upstate New York, the Rio Grande Valley of Texas, and the 2nd, 7th and 10th districts of Virginia, for indicators on how the night might go. I think while both Democrats held their own in the Rio Grande Valley and Republicans won pretty big in Upstate New York, the three House races that we identified in Virginia were really the best predictors of how things ended up. For those who listened to the last podcast, you’ll recall that we said Republicans winning the second district of Virginia would mean that they are meeting expectations that evening because that is what is known as an R+2 district. The Cook Political Report does what they call a Partisan Voter Index, and they rank things by Republicans +2, Democrats +2, D+2, R+2, as we refer to it, to show how a certain district leans one way or the other.

So winning Virginia seven meant that they were exceeding expectations. That’s a D+1 district. And then winning Virginia 10 would’ve meant that there really was a red wave going on because it is a D+6 district. In the end, they met expectations by winning Virginia 2. They barely lost Virginia 7. That was a long night on Virginia 7. And they really didn’t come that close in Virginia 10. So while the Republicans did end up winning the House of Representative, that’s beneficially called, they have reached the mark of 218 seats, which is what’s necessary in order to control the process in the House of Representatives.

It certainly wasn’t anywhere close to the 12 to 25 seat margin that most people expected, and it was nowhere near the 30 to 60 seat margin that some members of the Republican House leadership in Washington were predicting a few days before the election. So they were way off on that.

Again, if you pay attention to this stuff in the news, you know that Republicans have reached that 218 number. There’s still a number of races left to call officially. So we don’t know what kind of margin Republicans are necessarily going to have in the House of Representatives, but I do think it’s safe to say that we’ll almost certainly be either at or below the margin that House Democrats have had for almost the last two years, which is right at six seats. So going to be a very narrow majority for Republicans. It’s going to make it very difficult for the Republican leadership to control the members of their caucus, which is what always happens. Nancy Pelosi had a difficult time keeping either moderate Democrats on board or the progressive wing on board at times, although she did a phenomenal job of navigating that.

And Kevin McCarthy’s going to have that same problem between the very conservative members of his caucus and the moderate members of his caucus who are both going to have incredible amounts of leverage come January when the new session of Congress kicks off. Andrew, you want to walk us through the Senate?

Andrew Coats: Yeah, absolutely. But I’ll just quickly add, I think McCarthy’s inheriting basically the same margin that Pelosi did. And to Pelosi’s credit, when there was a big vote there, she got her party in line. And it will be very interesting to see if McCarthy has that same touch and is able to keep the party in line on the big votes when he really needs all of his caucus to come in for them to fulfill.

John Williams: Yeah, and before you jump into the senate real quick, I think it’s probably worth hitting right now just because again, if you pay attention to this stuff in the news, you’ll know that Nancy Pelosi announced last week that she will not be running for the speakership again. And the same with Steny Hoyer, who was the number two Democrat in the House, and Jim Clyburn, who was the number three, is going to stick around in a leadership position. But it will not be as the number three Democrat in the House. So yeah, to your point, Pelosi was very adept at her job, but we are going to have new Democratic leadership.

Andrew Coats: That’s a lot of experience. That’s over 100 years of experience that they are losing with Pelosi and Clyburn.

John Williams: What was the statistic that I saw that if you add up the age of Pelosi, Hoyer and Clyburn, you come out with a number that’s actually higher than the age of the country itself.

Andrew Coats: Right.

John Williams: Yeah, that is institutional knowledge right there. But I know from talking to a lot of Democratic members of the House, some of whom are anxious to get into a leadership position, that this is something that the Democratic caucus has wanted for quite some time. But I know what will not be changing is over on the Senate side, so I’ll let you take us into that.

Andrew Coats: Yeah. The Senate, I think I had predicted a one to three Republican pickup in the Senate. And if you looked at polling, that was kind of in line with what the polls were saying, a lot of the polls were saying. But it turns out it’s going to be at best, a zero gain and we’re still waiting on Georgia, obviously. They have the runoff between Warnock and Walker the first Tuesday in December. So we’ll see if Republicans win that, then it would be back to a 50/50 split, with Democrats getting the tiebreaker from the White House. This was built up, this kind of election cycle, to be Republican route, and it wasn’t even close. I think Republicans, where they really got hammered was on the expectations game. You looked at where the GDP was, you looked at the inflation, you looked at the stock market, all those were trending in the wrong direction for the party in power.

And people thinking what we saw in Florida where Republicans had a lot of stuff would be nearer than the rest of the country. It just wasn’t. And I think, you can look at the Dobbs decision, I think obviously in the Western states that played a much bigger role than was anticipated. I think initially, when the Supreme Court’s decision came down, people were thinking this would really hurt Republicans. And that kind of thought process died out as we got close to an election day. But once election day came, it was clear that Colorado, Washington, Nevada, Arizona, you saw a lot of voters come out as a protest against the Supreme Court decision. And I think you just saw some polling firms massively whiff on some of their predictions, which obviously, it’s a tricky business. But there’ll be less credibility there next election cycle for some of these firms that we’re predicting are plus large margins.

But at the end of the day, the senate’s going to be very tight. It’s like the rest of the country, it’s like the House. Razor thin margin for the Democrats. It’s even like the governor’s races, which I think now are 26-24 in favor of Republicans. So across the country, you see these really thin margins. In looking at the elections, the red state stayed red and basically, the blue states stayed blue. Of the 28 incumbents on the ballot, all of them stayed… So for red, if the red state went for Trump in ’20, Republicans were 17 for 17 in those states. If the state went for Biden in ’20, Democrats in the Senate were 15 out of 16. The only outlier being Wisconsin, where Senator Johnson won in a very close margin.

So historically speaking, this is something I saw somewhere, and it was one of those stats I wish I picked up before the election, and it made a lot of sense after. For whatever reason, the Senate has a trend of staying under control of the party in the White House in the first president’s midterm. Out of the last nine midterms for the first midterm of the president’s term, the party in power has held the Senate.

So Biden’s going to do so in ’22. Trump did this in ’18, where they picked up two to hold the Senate. Obama lost seats in ’10, but still held the Senate. Democrats still held the Senate. W. Bush picked up four seats in 2002, held onto the Senate. Reagan in ’82 held onto the Senate. Carter lost seats in ’78, but Democrats still held the Senate. Johnson lost three seats in ’66, Democrats still held the Senate. Kennedy picked up seats in ’62, Democrats still held the Senate. The one outlier was ’94. And Clinton, that was a huge red Republican year. Democrats lost eight seats and they lost the Senate. So eight of the last nine elections, the Senate has stayed in whoever’s in White House’s party in their control.

John Williams: Yeah, you’re right. And to that point, the other thing was, this was a bad map for Republicans to get to start off with. They were having to defend way more seats than Democrats had to in this cycle, in the Senate. And so, you heard me a year and a half ago saying that I didn’t think that the Republicans were going to win the Senate because I didn’t think that they had a map that was in their favor. Now, I also bought into the momentum argument in the last month and I was predicting, yeah, Republicans going to pick up two, one, whatever. I bought into that as well because it was the same thing that everybody was saying. But yeah, the Republicans had a bad map and history, to your point, actually played out the way that history was expected.

Andrew Coats: Republicans did themselves probably no favors by kind of electing in the primaries, a lot of untested candidates who had never run for office before. And when you’re running for Senate in a statewide race and you’ve never run for political office before, that’s a very large mountain climb. You are making thousands of decisions in that process. And when you have no experience to fall back on, that’s a very tough go. And I think, you look at the Trump factor, for President Trump, he remains a fourth and primaries. And a lot of his decisions kind of kept a Trump favored candidate allowed them to win the primary. But thus far, we’ve seen Trump’s candidates really struggle in general elections. And that came true last Tuesday.

John Williams: Yeah. A couple things. One, on the election side of it, one of the interesting things that I’ve been watching is this issue with the congressional generic ballot versus the popular vote. The generic congressional ballot basically looks at just sort of an overall number of, would you prefer a Republican Congress or a Democratic Congress? And it sort of tracks with the popular vote. And I think that the final generic congressional ballot was right at about four to four and a half percent in favor of Republicans. It’s fascinating that the popular vote, Republicans are winning the popular vote in the midterms and they’re doing it by about four to four and a half percent. So actually, the results will end up actually tracking the congressional ballot, I think pretty much spot on, which is kind of interesting in itself.

To go back to a point that you made about the split and the issue with the Warnock/Walker race and whether it means a 50/50 split or a 51 49 split, it’s important, and this is serious Inside Baseball stuff, this is the title of our podcast. One of the impacts that that’s going to have, whether it’s 50/50 or 51/49, is just beyond Vice President Harris breaking ties in a 50/50 Senate. In a 50/50 Senate, you have equal representation on committees and that plays into a lot of inside baseball stuff with discharge petitions and a whole host of other procedural moves that if it’s a 51/49 split, then you don’t have the power sharing dynamics that go along with a 50/50 Senate.

And so you will have more Democrats on committees than you will, than Republicans. And this also plays into things like how many people you need to have a quorum, how many in order to hold votes and how many absences do you have? And if a senator gets sick. And what that does is you’ve got a one vote safety cushion now if you get 51/49 versus whether you have 50/50. So there is some importance to what’s going to happen with the outcome of that Georgia runoff that goes just beyond who’s going to control the Senate.

Andrew Coats: That’s why the people of Georgia are going to continue to see Senate ads for the next month leading up to election just about every cycle.

John Williams: Well, Congress’s business is not completely finished. Yeah, we’ve had the election now and there’s some things left to play out in terms of margins in Georgia. But from a legislative perspective, Congress does have unfinished business to deal with before the end of the year. Law makers returned last week to kick off what is known as the lame-duck session of Congress, which is that period that runs between the election and when Congress officially ends its work for the year. And in this case, would be the complete end of the 117th Congress. I know that the most pressing issue right now on Congress’s plate is funding the federal government for the rest of fiscal year 2023. And I say for the rest, because the government has been funded and operating under what we call a continuing resolution, or a CR, that runs from the end of fiscal year 2022, so September 30th of this year, until December the 16th of this year.

So Congress is going to address all of the outstanding issues that it intends, and I use that word intentionally, to address through an omnibus bill, which is one of these massive 2,000 plus page bills that covers a whole variety of different issues including healthcare. So the first thing that they’re going to put into this omnibus bill is going to be how they’re going to fund the federal government for the remainder of FY 2023. And we expect it to last that long. I don’t think they’re going to come up with anything shorter than a full fiscal year’s worth of funding in that bill.

We had heard rumors that they were going to possibly put the debt ceiling in the omnibus in order to take that off the table so it can’t become a political hot potato next year. But it looks like that’s not going to make it into the omnibus. But there are a lot of healthcare issues that need to still be addressed. And the omnibus is going to be the vehicle as we call it, by which their Congress is going to try to address that at the end of the year. There’s a whole bunch of stuff flying around. Andrew, jump in here. What are you hearing as far as healthcare issues that might make it into the omnibus?

Andrew Coats: Yeah, well, as you noted, first off, time is running short. Today is the Monday before Thanksgiving. Congress will be out this week and they return next week and that will give them three weeks to come up with a end of the year omnibus before they turn the lights out for this Congress. And three weeks moves very quickly. So you’re going to see measures they get past and eventually signed into the law are going to be measures that have full bipartisan support and there’s not a lot of disagreement on. And some of the items that need to get done from a healthcare perspective during lame-duck include extension of the statutory 4% sequester cut that would impact Medicare starting on January 1, 2023. We’re going to see extension of the Medicare Dependent Hospital program, the low volume hospital adjustment and ground ambulance add on payment. Another item likely to be added is language to avert a fourth round of Medicare cuts to lab services that’s also set to take effect on January 1st, 2023.

And last on a list, if you’re making it, that’s likely to be included is reauthorization of the user fees for the FDA programs. But without the policy riders, if you recall, the House has passed its own FDA user fee agreement. The Senate has passed an agreement through the help committee. There are a number of policy riders that need to be cleared. We’ll see which ones make it and which ones do not.

There’s also a number of items that could go, that could be included in omnibus package. I’d say the first on that list, it’s provision to avert the looming 4.5% pay cut to Medicare physicians that kick in January 1, 2023. You look at telehealth, extension of the pandemic related telehealth waivers from 151 days to two years after the PhD ends could also be included, as well as the provision that extends a high deductible health plan’s ability to pay for telehealth services. And then, there’s a number of other provisions that could get included. John, I know one that you’ve been working on deals with the Stark Law. Do you want to touch on that?

John Williams: Yeah, so just to jump back real quick, I know that Larry Bucshon, Republican from Indiana and Ami Bera from California, Democrat, have introduced legislation to deal with that four and a half percent physician pay cut. They introduced that in the last month or so, and I know they were working really hard to get that included into the omnibus as well. It’d be interesting to see whether or not the 4% overall PAYGO cut makes it or they both make it. Not everything’s going to make it, right? So they’re going to have to pick and choose because all this stuff is going to have to be paid for somehow and we’ll have to see how that plays out. But yeah, to your point, the other thing that we’re hearing could make it into the omnibus is mental health legislation. There is a House passed bill, called Restoring Hope for Mental Health and Wellbeing Act of 2022. That did pass the House, as I said, with bipartisan support. That could end up going in to the omnibus bill.

There’s a number of bills introduced in the Senate to deal with mental health. That also could be included in the omnibus. One of those is Protecting Our Physicians Act, which is something that Hall Render proposed to lawmakers that would create a new exception to the Stark Law for physician wellness programs. So that’s something that we’re monitoring pretty closely and hopeful that could be included. There’s a number of other things too, I think, that are… Look, the omnibus is what we refer to as a Christmas tree in Washington. Everybody wants to get their ornament hung on the Christmas tree before Christmas is over. And what you try to avoid is hanging too many ornaments on it such that the Christmas tree collapses. But a lot of folks are going to be trying to get their issue, their bill included, especially now that we’re going to have a situation where we’re going to have a change of power in the House.

So a lot of Democrats are going to be looking to use the lame-duck as a chance to get their bills through, knowing that they’re probably not going to have a very good chance come next year. So other things that we hear are being included in the negotiations, but we think stand a long shot of being included is Cures 2.0. That’s one that Diana DeGette and Fred Upton have been working on.

There is a provision that would correct the definition of Medicaid shortfall for purposes of calculating the limit on dish payments. That is important to a number of states around the country. Not quite certain that’s going to make it. There’s talk of including a cap on insulin that’s been discussed a lot over the last two years. Not sure that makes it. I know the administration is asking for more COVID-19 funding more money for Monkey Pox, that’s probably not going to make it. I know that some folks are calling for more money to go into the provider relief fund. I don’t see that happening.

Interestingly, there’s also a piece of legislation that would reform prior authorization in the Medicare Advantage space. There’s a bill that passed the House earlier this year with overwhelming bipartisan support. However, it did so before there was a cost estimate to the federal government for passing the bill or turning the bill into law. And it’s like 16 billion over 10 years. So don’t expect that to make the final cut now, now that there’s a price tag on it because the bipartisan support completely dropped off for that. Anything else I’m missing, Andrew? Anything else? Pretty comprehensive list there.

Andrew Coats: Yeah, it’s a pretty comprehensive list. I’m sure there are other things.

John Williams: There’s always stuff. There’s going to be stuff that we were thinking about that’s going to pop up. From a timing perspective, what do you think? I don’t think there’s going to be any appetite to get anything done until the runoff’s over in Georgia on the 6th. Considering this week’s Thanksgiving, they come back next week, you’re almost at the 6th anyway, right?

Andrew Coats: I think that’s right. I think, you see next week members come back in town and that’s where they’re going to be going to the chairman of the committees and leadership saying, “This is my priority and I want to see this moved.” Committees will take it from there and kind of build the pecking list.

John Williams: Yep. Well, hopefully our forecast on what gets included in the omni is better than our forecast for the elections. The elections were… But I think with that, we’ll wrap up this edition of Inside Baseball. Thank you for joining us. We’ll be back next month to do a rundown of what happened during the lame-duck session, talk a little bit about what to expect in the 118th Congress, which kicks off the first week of January. As always, if you’d like more information about what Andrew and I do, or how we provide federal advocacy services to our clients, please visit our website at hallrender.com. Or, you can reach out to me at [email protected], or Andrew at [email protected]. And as always, one last disclaimer, please remember the views expressed in this podcast are those of the participants only and certainly do not constitute legal advice. So long everybody.

Hall Render
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Hall Render
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John Williams: Hello again, everybody, and welcome to another episode of Inside Baseball, a look at healthcare politics and policy in Washington. Part of Hall Render’s Practical Solutions podcast here is I am John Williams, managing partner of Hall Render’s Washington, DC office. As always, I am joined by my colleague in DC cohort Andrew Coats. Andrew, how are you today?

Andrew Coats: Doing great, John, and looking forward to this podcast as we get to talk elections, and wild predictions.

John Williams: This is our second podcast and I think it’s probably the one we look forward to doing most because we get to talk about what you and I geek out on immensely, and that is on elections. I said in our last podcast, and I say this all the time, that President Obama famously said that you can’t separate policy from politics. And it’s one of the truest statements that I’ve ever heard.

Well, this pre-election podcast is going to be one of the more political podcasts that we do because there is nothing more political than a campaign, but the outcome of these campaigns are going to determine the future of healthcare policy on Capitol Hill. So, it’s important I think that we take a close look at how these campaigns might play out. Just as an agenda setter, I’m going to talk about how things might play out for elections in the House of Representatives. Andrew’s going to do the same thing for the Senate. Quick disclaimer, our analysis is not intended to be partisan in any way. It’s merely the results of the reality on the ground as we are now one week from election day. So, Andrew, you ready?

Andrew Coats: I’m ready. Let’s do it.

John Williams: All right. Well, unlike the Senate, members of the House of Representatives are up for reelection every two years. So, technically 435 members of the House of Representatives minus the vacancies, are going to go before the voters this coming Tuesday and, again, I say technically because we’ve got some open seats for folks who’ve either retired or resigned. And we’ve got some situations where you’ve got open seats, where you have people who are up for reelection, two people up for election that have never run for Congress before. Currently, Democrats hold a 222 to 212 majority over Republicans with one still a vacant seat that will be filled on Tuesday. So, Republicans in the house, they need a net gain of five seats to win the majority.

As of today, November 1st, 2022, one week before the election, I cannot find a reputable pollster or pundit that doesn’t have Republicans with a greater than 80% chance of winning in the house, and when I say reputable, I mean those that are not obviously playing for one team or the other. So, independent analysis right now, or if you even look at the betting platforms in Vegas, they’ve got Republicans winning the house by better than 80% chance. So, in fact, I think most folks who follow campaigns closely are at this point in the game trying to determine just how big of a majority Republicans are going to have come January and I think the range right now that I’m hearing most is somewhere between 12 in 25 seats. So, that would be, I think, if it’s 12 Republicans, it’s a bad night. If it’s 25 for Republicans, it’s a really good night-

Andrew Coats: And, John, I feel like it’s inching up even north of 25 depending on what articles you’re reading, even from independent analysis.

John Williams: Absolutely true. I mean, 25 seats, it could be north of 25. What’s interesting is that you in elections passed right in… Take for example, 2012 Obama’s first midterm or ’94 Clinton’s first midterm. In those elections, you had massive swings. I think Obama… That election Democrats lost 60 seats in the house, and I think the Gingrich won in ’94, there was more than 40. There’s just not that many seats that are considered to be in play anymore. So, you really aren’t going to see that kind of a swing but yeah, to your point, I think you’re right. I mean it could be north of 25 seats and I’ve heard a number of people say that. The source that I look to most these days at how these things break down or how they might break down on a race-by-race basis is real clear politics.

They make a forecast for the House and Senate, governor’s race. There’s a whole bunch of different races, but they do it using an average of the most reputable polls available. According to the most recent RCP numbers, out of the 435 seats in the House of Representatives, there are 113 seats in play. Everybody else is considered to be safe. Of that 113 number, 33 are considered to be complete toss-ups that could go either way. However, when you look at the rest of the races that are broken down by what are referred to as leans and likely, so this race leans Republican or that race is likely democratic. If you look at the leans and likelies, there are 50 seats that RCP has as either leans Republican or likely Republican. By contrast, there are 12 liens Democratic, 18 likely democratic. So, Republicans have a 50 to 30 or 20 seat advantage in the liens and likelies, and that is incredibly significant.

I think what’s really fascinating for political nerds like me is to see where parties have been putting their resources in the final two weeks of the election. I mean, there’s an old saying in campaign politics that if you want to figure out which party is more bullish on its prospects, you simply follow the money. In other words, on which races are the parties spending money in the final days? Republicans just bought $23 million worth of television ads in eight Democratic districts that President Biden won by double digits, and that includes a significant race that I’ll talk about in a minute. Look, you only do that if you’re competent, you’re going to win everywhere else that you’re already expected to win.

Andrew Coats: What states are we talking about here? Where is that money going?

John Williams: Mostly New York and Sean Patrick Maloney, and I’ll get to him in a minute, but that’s an area where they’re really getting pretty bullish-

Andrew Coats:  And not just the rural areas in New York, this is more suburban.

John Williams: Oh, absolutely. Yeah. I mean, Republicans are feeling bullish that they can play in places that they haven’t considered playing in 10 years or more. By contrast, Democrats are starting to take money away from vulnerable incumbents in Republican leaning districts or districts where Trump won and they’re spending that to shore up other incumbents who are in districts that President Biden actually won handily. And to your point, you’re seeing that, again, in the New York, New Jersey area where you’ve got an incumbent democratic incumbent in New Jersey, in a suburban district, where they’ve totally pulled all the money out of that race and send it elsewhere to show up another incumbent because they think that person has a better chance at winning. I could sit here all day and analyze the 113 races that RCP has that are in play and we don’t have enough time for that. I’m sure it would be incredibly boring.

Andrew Coats: You don’t think people would want to listen to us.

John Williams: Yeah. Other than you and me, and a few others campaign geeks. I don’t think. As much as I’d love to ramble on for the next hour about all 113 races, I just wanted to give folks a couple of regions and a couple of races to watch on election night because it’s really hard to monitor a whole bunch of them and we just talked about it. First, look at the results coming out of upstate New York. There are currently four Democratic incumbent seats in the RCP tossup category. There’s even one in the liens Republican category with RCP and if you want to talk about following the money. One of the races that Democrats have had to put money into that they never expected to is that of incumbent Sean Patrick Maloney, and Maloney is the chairman of the Democratic Congressional Campaign Committee, which we refer to as the D-trip.

That is the entity that is responsible for getting Democrats reelected in the House of Representatives. Republicans have the NRCC, National Republican Campaign Committee, Democrats have the DCCC. If Sean Patrick Maloney loses, it will be the first time that a chairman of a campaign arm in either party has lost a reelection campaign since 1980 and they are having to reallocate significant monies to try to shore up Sean Patrick Maloney. So, that is a region to watch and a race to watch. Another region, excuse me, to watch I think is Southwest Texas, which is long been a democratic stronghold. Polling nationwide has shown Republicans making inroads with Hispanic voters. They aren’t right to a majority yet, but they’re making very significant inroads much more so than they have in previous elections. Nowhere does that appear to be more evident than in the Rio Grande Valley of Texas.

And I think the race to watch there is in Texas District 28 between the Democratic incumbent Henry Cuellar and the Republican challenger, Cassy Garcia. Cuellar is one of the longest serving members of the House of Representatives. Henry is viewed as the most conservative Democrat, is pro-life, not many of those left in the Democratic party in the house. If he loses that race, it’s going to signal to, at least to me, that Republicans are not just going to have a good night, but that they are also continuing to make in route with Hispanic voters, which is something to look at for future races as well. Also, so the polls in New York don’t close until 9:00 PM Eastern time. The polls in Texas close at 7:00 PM Central time. So, we’re going to know the outcome of those races probably much sooner than what we would know in New York. New York still wants to watch and important to watch, but I think that Rio Grande Valley of Texas, we’re going to know sooner and also ones that I think are going to be bellwethers.

Lastly, a race that I’ve been telling folks to watch for months and months and months now is the first district of Indiana, where first term democratic incumbent, Frank Mrvan is facing off against the Republican challenger, Jennifer-Ruth Green, who is a Black female former Air Force pilot. Republicans have not won the first district of Indiana in almost 100 years. If Republicans win that race, or even if Frank just ekes out a narrow win, that’s a bellwether. Either one of those results means that Republicans are going to have a good night nationwide and if Jennifer-Ruth Green wins that race, then I think it’s going to be an exceptionally good night for Republicans.

Andrew Coats: Yeah, it’s crazy to think that Indiana won is even on in play for years. That was Republican senate candidates wouldn’t even go up to the first district because it was such a strong democratic held. So, for that to be in play for house Republican candidate speaks to sort of the tie up here.

John Williams: Absolutely, I mean we’re talking about Gary, we’re talking about Maryville, we’re talking about Crown Point. We’re talking about areas that have been heavily union for decades and decades and decades, but many of those districts are transitioning. You look at Ohio and what a lot of the former union strongholds and what’s happened there and how they’ve become Republican over the years and I mean, just talk about the first.

Lastly, the majority of this district is on Central time because of its proximity to Chicago. So, Gary Merrillville, Crown Point, I think those areas are all central time, but I think there are parts of that district which are on Eastern time with the rest of Indiana. So, we may see results start to trickle out of those precincts and those areas of the district before the polls close and the rest at seven o’clock. And you always got to be careful about looking at stuff really early on when there’s 2% reporting, or somebody’s winning by a thousand votes, but it’s only 2% reporting. So, you got to be careful with that, but I do think that the first district of Indiana is a significant bellwether to watch on election night. So, that’s-

Andrew Coats: You’re on your couch next Tuesday. You’re following on Twitter. You have cable news on watching election results. Are there any races you see coming in thinking, “All right, this will be a big night for Republicans,” or “Oh, maybe this isn’t as big a night as we thought.” Are there any races you’re watching?

John Williams: Well, I’ll ask you that question. I mean, as a Virginia resident. You’re familiar with Virginia politics and I know that there’s some democratic incumbents in Virginia-

Andrew Coats: Yeah. Virginia’s another state, Indiana polls close early. The two seats you keep hearing about are the second and the seventh district in Virginia. So, yeah, two seats you want to watch in Virginia are the second and seventh districts. These are seats that Democrats won by 52% and 51% in 2020, a better year for Democrats and the second district. This is the Virginia Beach area, so you have a strong military presence. This is Luria’s seat, she won by 52% in ’20, that’s going to be a really difficult seat for Democrats to hang onto.

And then, the seventh district is Spanberger’s seat. She represents the area, the wealthy suburbs west of Richmond, all the way up about a hundred miles north, almost to the border of Southern Fairfax County. This one, Spanberger won barely by 51% in ’20. Keep an eye on these two seats and keep an eye on the margins. If it’s really close, again, Democrats may do okay, but if Republicans winning by 53%, 54%, 55%. It could be a really difficult night for Democrats nationwide.

John Williams: Yeah. And I think you talk about margins, I think that’s really important. One, you’re absolutely right, you got to look at polls that close early, states that have polls that close early, so you can start getting those numbers, but I think you’re right about margins too. And what a lot of people don’t understand about campaign results is you look at a race and you say, “Okay, that was 52-48 results.” Well, in campaign politics, that’s thousands and thousands and thousands of votes. So, you can look at it and say, “Oh, well, I mean it was 4%, it was a 3% margin. That wasn’t that big.” But in raw vote numbers it was huge, and it’s considered to be a significant victory, especially the way that the electorate is divided these days. So, yeah, no really good ones to watch in Virginia with early returns. You want to lead us off into the Senate, Andrew?

Andrew Coats: I will but before we get to that, do you have any prediction or are you steering clear predictions for the house?

John Williams: No, I mean, I’m making predictions. I think it’s going to be closer to the 25 number. I’m not sure I’m buying that it’s going over 25 in terms of pickups for Republicans. But I do think, again, if you follow the money and that shows you who has the momentum, and if Republicans are not spending any money to shore up their incumbents. Then they’re free to go on offense and it’s clear that Republicans are playing offense here and Republicans are playing defense. And when you see that, to me, it means that you’re going to end up at the higher end of that 12 to 25 range.

Andrew Coats: And then, if it’s north of 25 and it’s just a bloodbath for Democrats. Could you see a change in Democrat leadership coming?

John Williams: Oh, man, I’m not sure we got enough time for that one, that’s a whole separate podcast. Conventional wisdom would say yes, conventional wisdom would say that if you lose a majority by that kind of a margin, that the leadership should be changed. However, Democrats in Washington have had… Let’s just call it what it is. I mean leadership issues. I personally know many younger members of the Democratic caucus in the house in Washington who very much want to move up the leadership ladder and they’ve not been able to do so because the current leadership structure of Nancy Pelosi, and Clyburn, and Steny Hoyer continue to run.

It’s fascinating because one of the things I admire most about Nancy Pelosi is her ability to wield power because power is just about everything in Washington and there’s few people in the history of the speakership that has wheeled power more significantly than she has. She also comes from a school of thought that you just don’t give up power, you make somebody take it from you. And so, it’s going to be fascinating to watch to see, even if it’s a bloodbath, whether or not she still says, “You got to come take it from me.” So, yeah, we’ll have a whole separate podcast on that one after the election.

Andrew Coats: Right. Absolutely. So, let’s dig into the Senate here. One of the most well-worn election phrases that gets trotted out every two years. This is the most important election of our lifetime. Now, not to throw cold water on our preview here, but if you live outside the Beltway. This is really as far as the Senate goes, just another midterm election. Assuming that the Republicans flipped the house, and as Sean mentioned, I think they’re going to. Senate leadership’s going to remain the same. You’re going to still have Schumer, and Durbin, and Republican leadership’s going to remain the same in Senate as well. You’re going to have McConnell on there and neither going to be close to getting 60 seats in the Senate. So, again, given the house flips Republicans, you’re not going to see inflation reduction acts, appeal of ACA, massive types of legislative packages getting moved next Congress.

Now, for folks inside the Beltway. Next Tuesday means everything, jobs depend on it and it that’s how Washington operates for the next two years. So, right now the Senate is currently split at 50/50 with Democrats having the tie break and therefore the majority. And Republicans have a brutal map to defend this year. I go to former Senator Fred Thompson, he was senator from Tennessee. He was the district attorney in law and order. I think he was captain on one of the subs in hunt for red October. He had a saying that said, everyone in the Senate has one of two things going for him. He either had a rich daddy or they had great timing and Senate Republicans in this cycle have had great timing.

If you go back six years prior to now, it was 2016, that was a big year for Republicans. The Trump wave that came in, six years prior to that was 2010, that was the tea party wave, and even six years prior to that was 2004, and that was when Bush won reelection. So, because of that, Republicans are defending a lot of seats and conversely, there just aren’t a lot of seats where they have a chance to realistically flip from Democrats. The best three chances states are, I think if you look at the polls, Nevada is probably the best chance for Republicans to flip a state, polling and I go to real clear politics as well is consistently shown Adam Laxalt ahead of the incumbent there, Catherine Cortez Masto and I think a lot of people have considered that it’s going to be a Republican flip.

The second best state would probably be Georgia, just because it’s such a red state and this is presumably going to be a good year for Republicans. You have Herschel Walker, obviously, the Georgia football star who’s popular there amongst Republicans and folks see that probably as a good pickup opportunity.

John Williams: Well, the other thing I think too, just to jump in real quick on Georgia is to watch is the governor’s race between Kemp and Stacey Abrams and just what kind of coattails Kemp has. If you look at those numbers right now, Kemp has stretched it out to a double-digit lead over Abrams. And so, the question become there, and I don’t want to jump ahead too far on Pennsylvania with you, but I think or other states, you got to look at what kind of coattails some of these people at the top of the ticket. Because what people may not understand is that the governor runs at the top of the ticket. So, when you go to vote and you look at it from the top to the bottom of the ballot, the governor’s at the top.

And so, they talk about what kind of coattails do you have for down ballot races? And so, yeah, that’ll be fascinating to watch, to see whether or not Kemp is able to give Walker a little push across the finish line on his own coattails or drag, I guess, across the finish line.

Andrew Coats: Another top of the ticket type of deal is Arizona and for a long time Kelly was presumably ahead in the polls and it been written off as Democrats are going to hold onto that fairly easily but that has really tightened.

John Williams: Well, and it’s really tightened and the other thing that we’re down to the last week where things happen is this morning the Libertarian candidate in that Arizona Senate race dropped out and endorsed Blake Masters, the Republican. And in a race where the margin is so narrow right now, and any swing like that, any development that has such an impact, because the impact only has to be very small. So, that could push Masters across the finish line with that development.

Andrew Coats: So, Nevada, Georgia, Arizona are the three states where Republicans are seen to have a realistic chance of flipping. There’s three other races that are worth watching on next Tuesday, Colorado, New Hampshire, and Washington. Now, they’ve been more reliable blue states the last couple of cycles, and you have fairly strong incumbents there, but I think if you see a wave type of election. One of these states could get swept up in the wave and turn red. I know in Washington, which is about as deep blue as state as you get. You have a very strong candidate there, Tiffany Smiley, who’s done a great job raising money and really forced Democrats to put money into that state and defend it. Colorado, Michael Bennet’s there and you have another strong Republican candidate running and then New Hampshire polls content.

John Williams: Yeah. New Hampshire, that’s a fascinating one to watch because you’ve got a situation where I think Republicans pulled money out of that because their candidate is a little too on the fringes. Let’s just say, but that’s closed in recent days, in New Hampshire.

Andrew Coats: So, you have those three and those are three potential flip opportunities and then you get into the states where Republicans are defending seats. And a year ago at this time, there was a lot of hand-wringing amongst Republicans over. How much they had to defend, and these seats could all go Democrat, and Democrats could have a big number in the Senate, but it’s really gone down to just a couple states now where it looks like Republicans could potentially lose. The biggest state is going to be Pennsylvania and Steven Law, who heads up the SLF, Senate Leadership Fund. This is the biggest role against Super PAC, who controls all the purse strings and where money goes. He has said if Republicans win Pennsylvania, they’re going to win the majority. And listen, there was the debate last week, there’s the old cliche that you cannot win a Senate seat based on the debate, although you sometimes can lose it and that was [inaudible 00:27:15].

John Williams: And that’s happened to Republicans before. Absolutely.

Andrew Coats: At 2012 in Indiana.

John Williams: Right. Missouri, Indiana, yeah. Republicans have a history of losing because of debates.

Andrew Coats: So, we’ll see what happens there In Pennsylvania. In Wisconsin, you have Ron Johnson, it looks like he’s going to hold on there and if not starting to pull away a little bit. In Ohio, you have J.D. Vance looks like he’s going to be able to hold on there. I know a lot of folks were nervous when Portman announced he’s retiring, but I think Vance should win there. Similar situation in North Carolina where he had Richard Burr announced his retirement, and Budd got the Republican nomination and seems like he’s going to be able to win, although that might be closer than some other states.

And then, in Florida, Missouri, you have Rubio in Florida, which I think is closer than some people realize, but Rubio should be able to win there. And then Missouri, that’s just become such a red state that I don’t think there’s any chance, Republicans don’t take that state. John, before we get into predictions, do you have any takes on those states that we just discussed or backing up into the states where Democrats are holding power?

John Williams: Yeah. I think you mentioned the three states of New Hampshire, Colorado, and Washington. I think we’re going to see a surprise. There’s going to be surprised somewhere in the Senate races on election night and not just the close ones that we’re talking about, like Arizona, or Pennsylvania, Georgia. There’s going to be a surprise somewhere. For whatever reason, Republicans are typically, or they’ve been under poll in the last several election cycles, whether Republicans voters are not answering polls or whatever it happens to be. You talk about Trump in ’16. You talk about Trump in ’20, and how off so many of the polls were. I think that Republicans, for whatever reason it is, get undercounted.

And so, I think that in one of those three races, you’re going to see a surprise. I know from talking to people who do what we do, who are employed by a large corporation that’s based in the state of Washington, that works routinely with Patty Murray, the incumbent senator in Washington state, that she’s in trouble and she knows she’s in trouble and she’s running very, very scared right now. And this person thinks that she’s going to lose and this is somebody who’s very familiar with Patty Murray and very familiar with Washington State politics.

Yeah. I mean, my prediction is I do think that the Republicans were going to take the majority back in the Senate. I didn’t think that 28 days ago. I do think it now, and I do think there’s going to be a surprise somewhere along the way with an incumbent that’s going to get beat that we thought might be possible but ends up being a reality.

Andrew Coats: So, I agree. I think Republicans are going to pick up two to three seats and my guess is Nevada and then either Georgia, Arizona, and then I think you could see a shocker in either Colorado or Washington and that would put Senate control with Republicans at either 53-47 or 52-48. That’s my prediction. We’ll know a lot more, obviously, next Tuesday that we’ll probably bleed into Wednesday Thursday, I’d imagine.

John Williams: Yeah. We’re going to have some recounts. I mean, I guess, and could be in a number of states, so I don’t want to say it, but we may not know the results. We’re going to do the results in the control of the house on election night but we’re not going to know it. There’s a chance we’re not going to know it in the Senate. Let’s hope we do. But it’ll give us something to come back and talk about in the next podcast.

Well, Andrew, thank you for that and thank everybody who has joined us today. If you’d like more information about what Andrew and I do, even though we really didn’t even talk at all about that today, which is how we provide federal advocacy service to our clients. Please visit our website at hallrender.com or feel free to reach out to me at [email protected], Andrew at [email protected].

One last disclaimer, please remember that views expressed in this podcast are the participants only and do not constitute legal advice. Surprise considering, we gave no legal advice on this one today. We hope you’ll join us for our next podcast, which we will be out sometime after next Tuesday when we will look at how the results will impact the future of healthcare policy on Capitol Hill. So, so long, everybody.

In this special episode, Hall Render’s John Williams and Andrew Coats provide an update on health care policy developments in Washington, DC, with an inside look at the politics of health care on Capitol Hill, at the White House and within federal agencies like CMS. Williams and Coats not only tell you what is happening, but also give you a look at why it’s happening and where things could be going.

Hall Render
[email protected] 

Hall Render
[email protected] 

John Williams: Hello and welcome to Inside Baseball, a look at healthcare politics and policy in Washington, part of Hall Render’s Practical Solutions Podcast series. I’m John Williams. I’m a shareholder with Hall Render and managing partner of its Washington, DC office. Today I’m joined by my colleague Andrew Coats for the inaugural edition of our podcast. Since this is our first podcast, we’d like to take a little more time to introduce ourselves. Between the two of us we have over 40 years of experience working in Washington, DC. In my case, I first came to Washington in 1996 where I served as Press Secretary for what was then called the House Committee on Government Reform and Oversight. While there, I also served as policy advisor to the chairman on issues such as Medicare, Medicaid and Social Security. Andrew, you want to tell the folks a little bit about yourself?

Andrew Coats: Yeah, thanks John. Wow, the fact that we have over 40 years of DC experience now, but time marches on. I came to the Hill after, in 2000 after college, worked in the Bush administration as a legislative liaison before working on Capitol Hill for a member of Congress handling healthcare issues. After law school, I went to the private side. So I’ve experienced both from administrative congressional standpoint and now in private practice where we’ve been working together with healthcare clients for over a decade now.

John Williams: Thanks, Andrew. So the goal this podcast is to not only provide an update on healthcare policy developments in Washington, but also to give you, our listeners an inside look at the politics of healthcare on Capitol Hill, at the White House and within federal agencies like CMS, FDA or HHS. We plan to keep this at about 15 minutes in the future. However, given that this is our first podcast, we’re probably going to go a little bit further than that.

As President Obama once said, “You can’t separate policy from politics.” So, our goal is to not only tell you what is happening, but to also give you a look at why it’s happening and where things could be going. That last item is really the crystal ball political prediction stuff that we learned from our day in and day out work with lawmakers, congressional staff, and regulators at federal agencies.

Since we are lawyers, I’m obligated to tell you that our predictions are based on the best information we have at the time that we get it, but it’s also based on what happens traditionally on Capitol Hill and in federal agencies year in and year out. So, like the price of gasoline, things in Washington can change very quickly. So, please forgive us if our predictions are wrong from time to time. The general format of this podcast will be to look at healthcare policy developments from a legislative and regulatory perspective. In each edition, one of us will give a legislative update on Capitol Hill and the other will give an update on regulations coming out of or pending before federal agencies, usually with an update on regulations under review by the Office of Management and Budget at the White House. So with that, I will turn it over to Andrew to give you an update on Capitol Hill.

Andrew Coats: Thanks, John. And before we get rolling on the Hill update, I think it’s worth noting that if you’ve been on Capitol Hill in September, Congress has now entered phase three of its reopening plan. And being on the hill this week and last, it felt like we were back in 2019. You had relaxed entry requirements into the House and Senate buildings. Your tours at the Capitol have resumed, so you see tour groups and school groups up there. It felt normal again.

John Williams: And the traffic’s back to being the way it always is, right?

Andrew Coats: The traffic was horrendous this week. Pandemic commutes, which was not enjoyable. But at the same time, things are starting to feel normal again. And with that return to normalcy, there’s a buzz that’s returned that’s been really missing from Congress and in DC since February of 2020. So it’s nice to be back. And we’re now deep into September of a midterm election year and that traditionally means that Congress has one major must pass item on their to-do list and that’s passing the coming year’s spending bill. So for this year, it’s the FY-23 appropriations bill and they need to do that by the end of the fiscal year, September 30th. Now, Congress won’t be able to do that before the November midterms, they almost never do, especially in election year. So my most likely, they will extend current funding FY-22 to mid-December. There’s a framework in place for the CR, which would extend funding to December 16th, that’s a Friday and that’s kind of the target end date right now for Congress.

John Williams: Andrew, let me jump in there real quick because, tell a little bit about what a continuing resolution is, you referenced a CR. What is a CR in general?

Andrew Coats: Yeah, CR just keeps the current years funding going. It keeps it rolling, so you don’t have government agencies shutting down or furloughing employees and essentially shutting down the federal government. So you have a CR, which they’ll assign a certain timeframe and in this instance, they want to get through the November midterms so they can go back to their state and district in October and campaign. And then after the election, sometime, usually around mid-November, they come back and then there’s a three to four week sprint at the end of the year. It’s kind of the end of the year craziness that Congress has, especially at the end of a Congress and that’s to finish up business.

John Williams: And that’s what they traditionally have referred to as a laying duck session, right?

Andrew Coats: Of course. Yep. So with that we have the immediate focus right now of Congress is what policies get attached to the CR [inaudible 00:06:24] resolution framework. And two, the longer term focus is, what gets included in an end of the year Omnibus Bill, which is, that funds the entire government, all the federal agencies and it includes a lot of policy riders, because that’s the last train out of town and it will be for the 117th Congress.

So let’s talk about a short term CR. One of the big items that’s getting a lot of buzz right now is the FDA user fee bill. This comes up every five years. It needs to be passed by Congress by September 30th otherwise FDA has to begin the process of furloughing employees. Now the FDA bill, it’s a time eater for Congress. It takes over a year of negotiation between congress, FDA, industry stakeholders, but it almost always passes before September 30th. And when it does pass, it passes with Republicans and Democrats in lockstep. This year could be different.

Senator Burr, he’s a retiring member from North Carolina. He’s the ranking member on the Senate Hall Committee. He voted against the FDA Bill at the end of the Senate mark up back, during the summer, which is an unusual move. So what we’re looking at because of that is some sort of extension or just passing a clean FDA user fee bill without the policy writers that were added in by the House and Senate in the spring and summer.

Now, today is September 22nd. The Senate Health Committee has been negotiating this since last fall. At some point, the committee’s lack of action is, I like to say, is going to make dad pull the car over on vacation. So someone… And what I mean by that is, someone working under the dome in the Capitol says someone for leadership with either Schumer, McConnell, maybe both, their staff, they’re going to have to come down and override the committee and tell them, “If you’re not going to do this, we’re going to do it.” And that is something committee chairman do not like and committee staff do not like but we’re getting dangerously close to that point if we’re not there already. So, look for the FDA user fee, some sort of extension or clean user fee bill to be included in the CR.

Another item would be additional COVID funding. The administration made a supplemental funding request for 22.4 billion for COVID and Monkeypox funding in early September. This is really high, this becoming a really high bar to reach consensus on in an election year, given President Biden’s comments on 60 Minutes on Sunday that COVID was over. He said, “The pandemic is over.” If you’re the administration, you’re congressional liaisons and administration, it’s hard now to make that case that our country’s not going to function without the billions of dollars in supplemental funding, which is the case they have to make to Congress when they’re asking for this increase in funding.

John Williams: Yeah, I mean, you mentioned that… You’re right. Republicans on the Hill have been hesitant all along to add more money to COVID given the amount of money, in their view that was spent previously. And yeah, you’re right. To your point, I’m not sure that the president’s comments on 60 Minutes that the pandemic is over helped much and I think you quickly saw the Secretary of HHS, the CMS administrator, the CDC administrator walking those comments back pretty quickly. But yeah.

Andrew Coats: Right.

John Williams: It just makes it a heavier lift, right? A much heavier one.

Andrew Coats: No doubt. Now, bigger picture, Biden was at a car show where people were without mask. I think it was fair to say the intent was to show and demonstrate life is returning to normal.

John Williams: Right. Right.

Andrew Coats: But I know providers certainly know, they’re still treating COVID cases, people are still dying from COVID every day. So at the end of the day, the supplemental COVID funding is the potential for the CR or, and/or end of the year omnibus. Another item that could be included into CR is mental and behavioral health care. During the summer, the talks surrounding mental health and behavioral health was all the buzz. It has bipartisan support. Our country was in the wake of a number of high profile shootings. And when you hear members discuss healthcare issues, they’re hearing about, in their district or state, almost everyone mentions behavioral health. Now yesterday, the House Ways and Means committee had a markup, they advanced a package of six bills designed to improve Medicare coverage for mental health services. These bills included amending Medicare…

Andrew Coats: These bills included amending Medicare PPS for psychiatric hospitals and psychiatric units. It included a bill that would bolster coverage of the Medicare outpatient mental health services. It included a bill that would allow coverage of marriage and family therapist services and mental health counselor services under Medicare. It included a bill that would direct HHS to provide outreach and reporting on certain behavioral health integration services offered through Medicare. Another bill would direct the HHS secretary to provide outreach and reporting on opioid use, disorder treatment services furnished by programs under Medicare. And the sixth bill would’ve meant the Social Security Act and establish exceptions for certain physician wellness programs. This package of six bills will most likely presumably get through the House, but the buzz around mental health package in the Senate, they seem to cool a little bit. Regardless, look for these provisions to potentially be included in end of the year omnibus package.

Another big area is telehealth. At some point, the Biden administration’s going to have to declare that public health emergency is over. The administration has said now for quite some time, that they’re going to provide hospital associations 60 days notice before they announce the PHE ends. There’s a line of thinking that sometime around mid-November, after the midterm election, they’re going to announce the PHE will come to an end in January. And with that, when once the PHE ends, a number of different telehealth waivers that have been in place since 2020, will it also come to an end. Congress is going to need to either extend these telehealth waivers or make them permanent, and at end of the year omnibus, it would be the obvious place to do that. John, do you have any thoughts on when they-

John Williams: Yeah, yeah. The telehealth stuff, so Congress addressed the telehealth waiver thing in the last omnibus they did. And what they did was they granted a 151 day extension from the end of the public health emergency. And Andrew noted that we did not get 60 days notice that we were promised from HHS that the PHE was going to expire in October when it is currently set to expire. Everyone is operating under the assumption that it will be renewed in January. Given the President’s comments on 60 Minutes, it’s going to be tough for them to say that we need to continue the public health emergency come January. If it ends in January, then that’s going to trigger the 150 day time period for them to address which waivers they want to make permanent. There is a piece of legislation that passed the House that was sponsored by Liz Cheney that would increase that 150 day window to two years.

I haven’t heard from a lot of people in the Senate, especially Republicans, that they’re too keen on taking that bill up. A lot of that has to do with the politics. There are a lot of Republicans these days who aren’t big fans of Liz Cheney’s. That may be one of the reasons that we end up staying with just the 150 day window for them to figure out what they’re going to do. And as Andrew and I say all the time, Congress operates under the mantra of why do today what you can put off until tomorrow? And so I would expect that whenever the PHE ends Congress is going to take most of the 151 days to figure out which waivers, like permanently eliminating the geographic and originating site restrictions to telehealth, which is really the big one. They’re going to take all that time to figure that out.

Andrew Coats: One of the other items that tend to move in either a CR or omnibus package, it’s called Medicare extenders. And this is a package of Medicare related extenders that tend to be a lot of rural health or behavioral health related provisions that usually enjoy strong bipartisan support. These are bills that can move either on the suspension calendar in the House or on UC in the Senate really without opposition. John, do you want to talk about some of the Medicare extenders that we may see that Congress is currently trying to move and make it thrown into the package next week or at the end of the year?

John Williams: Yeah, absolutely. These extenders are essentially different programs or different payment adjustments that Congress was responsible for renewing so many years and they expire at different times. Those that are set to expire in about eight days at the end of this fiscal year include the Medicare Dependent Hospital program, the low volume hospital adjustment payment, and the rural ambulance add-on payment. Those are three very important rural healthcare programs. And from the folks that we’ve all talked to on The Hill, those will be included in the continuing resolution. We still haven’t seen the language for the continuing resolution yet. As of this morning, we understand that it’s the goal to pass it next week before Congress breaks for the midterm election. We understand that those healthcare policy writers are going to ride with CR, but probably none of the others. And Andrew mentioned a package of healthcare bills that came out of Ways and Means yesterday.

And one of those that Andrew referenced deals with the physician self-referral law, also known the Stark Law. This is something that we at Hall Render had been working on for many, many years. And that bill was actually something that we worked with to have drafted by Congressman Raul Ruiz of California, Larry Bucshon of Indiana, Greg Murphy of North Carolina, and Don Beyer of Virginia. Basically, what it’s intended to do is to create a new exception under the Stark Law for physician wellness programs. Physician burnout has becoming an enormous issue. Healthcare workforce burnout is an enormous issue, and that’s something that we’ve really tried to help address with this. And one of the things that happened earlier was that Congress passed something called the Lorna Breen Act, and what the Lorna Breen Act did, well, let me back up. Lorna Breen was an emergency medicine physician in New York City who unfortunately committed suicide because of stress and burnout. Congress passed this legislation that part of which creates a grant program where hospitals can apply to the government for grants to run wellness programs.

Well, one of the problems there is that the Stark Law doesn’t permit hospitals to spend money remuneration on non-employed physicians unless it meets one of the Stark Law exceptions. And there was no provision in Lorna Breen that addressed the Stark Law. Since 53% of physicians in the country are not employed by a hospital, a hospital couldn’t spend Lorna Breen money on wellness programs for those physicians without violating Stark. We worked with members of Congress to draft this bill to not only correct the issue with Lorna Breen and the Stark Law, but to also create a whole new exception that will allow hospitals to provide wellness program to non-employed physicians without violating Stark. One of the things that we haven’t talked about yet, Andrew, is this idea of a yearend catchall healthcare bill. Andrew’s mentioned the continuing resolution, which is what they’re going to do next week, it looks like, to keep the government running through at least the middle of December.

At which point, they’re going to have to figure out whether or not they’re going to do an omnibus appropriations bill for fiscal year ’23, or they’re going to do another continuing resolution into 2023. From all practical purposes, from everything that we’ve heard, we think it’s likely they will do an omnibus in December. But there are things that won’t be included in the omnibus that lawmakers hope to include in a catchall healthcare bill. What usually happens at the end of a two year session of Congress is that you have all of these bills that members have introduced that haven’t passed, and where you have a dynamic like we do now, where it appears likely that Republicans are going to take control of the House in January, you have a whole bunch of Democrats who really want their pet projects to be passed before they lose control of the process. You very well may see this catchall bill where a whole bunch of different things get included. And that is someplace where you could see all of the bills that Andrew just referenced coming out of Ways and Means yesterday, including that Stark bill. One of the things to add is that just because the House wants to do a year-end catchall bill doesn’t mean that the Senate is going to do a year-end catchall bill too, or even with past it. In fact, I’ve had conversations with Senate staffers over the last couple of weeks where I’ve referenced year-end catchall healthcare bills, and they just essentially rolled their eyes and said that’s all healthcare bills. And they just essentially rolled their eyes and said, “Yeah, the House may do that, but I’m not really sure we’re going to do that over here.” So, that really leaves us… That doesn’t happen. And there’s a lot of pieces of legislation out there.

For example, the SAVE Act, which is a bill sponsored by Larry Bucshon of Indiana, that would essentially mirror the current law, where it’s a felony to attack an airline flight crew member. We would apply that to healthcare workers in the healthcare setting. That’s a policy thing that could be included in some sort of your catch-all bill. Our Stark Law bill would go on something like that.

There are other avenues as well. So you really come down to this year-end thing of a year-end catch-all policy bill. But Andrew mentioned, you got to fund the government. And the interesting thing here is that policy bills like a year-end catch-all, if they have provisions in them that require money from the federal government, then lawmakers are going to have to find offsets to pay for those.

And so, that’s where it really becomes difficult, is if you got to bill that costs anything… And for example, our Stark Law bill doesn’t cost anything, the SAVE Act doesn’t cost anything. But one of the other issues that we haven’t really talked about yet that Congress has to address before the end of the year is the 4% Medicare sequester cut.

And this is something that providers are facing because the American Rescue Plan wasn’t fully paid for, and the statutory pay as you go rules require subsequent cuts if a piece of legislation like that isn’t fully paid for. So we’re looking at a 4% sequester cut in January. And so, that just provides added pressure for lawmakers to do an omnibus instead of a continuing resolution come December. And from everybody that we’ve talked to on the hill, they’re well aware of it and know that they have to address it.

Andrew Coats: So, that’s a big picture of some of the items that Congress is going to be dealing with next couple months. It’s not an exhaustive list. There may be others. But from a healthcare perspective, it’s a pretty good snapshot of what they’re focusing on. John, do you have any thoughts on the regulatory front, some of the big bright letter… Stop that. John, do you have any… Let me start again. John, do you have any thoughts on the regulatory front, some of the things that may be coming down the pipeline?

John Williams: Yeah, absolutely. Things have been somewhat quiet from a regulatory perspective over the last several weeks. As many of you listen to this know, CMS must issue payment rules each year, which either cover a fiscal year or a calendar year. The fiscal year payment rules, like IPPS, LTAC, inpatient rehabilitation facility and inpatient psychiatric facility payment rules, those have all been finalized already, so I’m not going to spend any time discussing those, other than to note that there really wasn’t too much controversy surrounding those.

As for the calendar year 2023 payment rules, so the OPPS, Ambulatory Surgery Center rule, the physician fee schedule, those rules have not been finalized yet. The comment period for those ended earlier this month, so we’re expecting those to be finalized and released sometime in late October or early November. From a content perspective, CMS is proposing to increase payment rates under the OPPS and ASC by 2.7%, which is about a $7.2 billion increase for OPPS and $130 million increase for ASC over what was in ’22.

What many folks are watching for in the OPPS is how CMS intends to deal with the fact that the Supreme Court overturned the almost 30% cut to 340B discounts done under the Trump administration. CMS has to figure out what they’re referring to as unscrambling that egg. The OPPS proposed rule said that they didn’t have the time to address that in the proposed rule, but that the final rule would have some sort of formula by which 340B entities that were subject to those cuts are going to get that money back, whether it’s a one time payment or prospectively an increase in discount down the road, which I think is what’s more likely to happen because it would be really too hard to figure it out any other way. So, that’s something to keep an eye on.

As for the physician fee schedule, CMS is proposing at 4.42% reduction in that, and that reduction is driven really by the expiration of many of the increases that Congress made during the pandemic, the most recent one being in the last appropriations package that passed in December of last year, which had they not acted, would’ve been around 9.75%. While we love Larry Bucshon, and we’re not just… This isn’t the plug Larry Bucshon show, Larry and Congressman Ami Bera have introduced the Supporting Medicare Providers Act of 2022, which would reverse this 4.42% reduction.

And here’s something that they’re either trying to get into the omnibus or most likely going to try to get into the omnibus, because if they put it in catch-all bill, they’re going to have to figure out how to pay for that. And by putting it in the omnibus, what they do is they just bury it in there with all this other spending in a great big package. So lawmakers have different reasons for voting for a great big bill like that, and while they may not like certain provisions in it, they end up voting for it anyway because they like most of the other provisions in it. So, that’s tactically how they’re going to try to position that bill.

Lastly, the White House Office of Management and Budget is responsible for reviewing all rules and regulations before they’re made public. So we’re always checking the OMB dashboard to see which rules have arrived for review. The dashboard doesn’t provide too much information on a substance of many of these rules, but we are able to get an idea of what they’re about from either their title, their history, or things that we pick up around town.

A couple of those worth mentioning include a HRSA proposed rule on 340B alternative dispute resolution process. This is something that’s been in the works for a long, long time. It’s been pending at OMB for well over a year. We really don’t have any idea when it’s going to be released, but it’s one that we’re tracking really closely. Another is titled Rescission of the Regulation entitled Protecting Statutory Conscience Rights in Healthcare Delegations of Authority. Quite a mouthful.

That was the Trump era regulation that was intended to, I’m going to get this right here, quote, “Provide protections in healthcare for individuals and entities on the basis of religious beliefs or moral convictions.” So this is the Biden administration reversing the Trump era regulation that deals with religious beliefs and moral convictions, which was quite controversial at the time that was passed anyway.

Lastly, the DEA has a regulation pending that’s titled Special Registration to Engage in the Practice of Telemedicine, which we expect will deal with the electronic prescription of drugs via telemedicine. Not too much more on that one, but one we are also tracking. And that’s been pending for a while too, and really no idea when that’s going to be coming out. So that is the regulatory overview, the Capitol Hill overview. Andrew, anything you want to add as we wrap this one up?

Andrew Coats: No, although I’d give us a shameless plug for our next podcast, which will take place sometime in October, and we’ll have a lot of good hot takes on the upcoming election, maybe some predictions, and what that may mean for Congress when they come back in November and December.

John Williams: Exactly. That’s always the fun one to do right? Where we get to talk about campaign politics and how that will shake out on Capitol Hill. Because if we go too far down that road and ruin the content, but there are going to be a lot of changes, especially in the House as to who is in charge of the committees with jurisdiction over healthcare. So it’s always fun to take a look at how that works. So thank you Andrew. And thank you to everyone who has joined us today on Inside Baseball, a look at healthcare, politics, and policy in Washington.

If you’d like more information about what Andrew and I do, or how we provide federal advocacy services to our clients, please visit our website at hallrender.com, or you can reach out to me at [email protected], or Andrew at [email protected]. One last disclaimer, please remember that the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thanks for joining us, everybody. Have a great rest of your day.

In this most recent episode of Hall Render’s  “Health Regulatory Update,” Joe Wolfe discusses health care real estate trends and compliance issues with Libby Park and Addison Bradford from Hall Render’s real estate service line.

Attorney, Hall Render
Health Regulatory Practice Group Leader

Attorney, Hall Render

Attorney, Hall Render

Joe Wolfe: Hello, and welcome to Hall Render’s Practical Solutions Podcast and Health care Regulatory Update. I’m your host Joe Wolfe, and I’m a shareholder with Hall Render. We’re the largest health care focused law firm in the country. And today we’re here to discuss fraud and compliance issues tied to health care real estate. And I have with me my colleagues Libby Park and Addison Bradford from Hall Render’s health care real estate service line. Before we dig into the content, Libby and Addison, can you introduce yourselves?

Libby Park: I’m happy to be here with you and Addison today. My name is Libby Park and I’m an attorney practicing in Hall Render’s Denver office. I’m a member of our health transactions team, and I work primarily on transactional matters relating to real estate and land use for our health care clients across the United States. Thanks so much, Joe.

Addison Bradford: Yeah, thanks for having us, Joe. My name is Addison Bradford and I’m here in our Indianapolis office. And most of what Libby said applies to me, I am within our health transactions group, specifically within our real estate service line. And Libby and I, and the rest of the folks on our team, help work on a wide variety of real estate arrangements, most of which involve at least some level of a compliance aspect.

Joe Wolfe: Great. Thanks, Libby, and thanks, Addison. And then I’ll just add, in my practice, I focus on fraud and abuse, Stark and anti-kickback compliance and physician arrangements. And my practice delves into real estate as well. And I think as we start to frame up this discussion, we all can agree that health care real estate is already a complex area in health law. And then when we layer on top of that other issues and more complexity like licensure and reimbursement and tax exemption, bond financing, and then Stark and Kickback on top of that, it gets even more complex.

And as all of us that are working in this space and working with clients nationwide know, it’s there has been even more complexity over the last few years as we’ve seen the pandemic and real estate issues unfold related to that. Obviously, many health care organizations had leasing arrangements in place with physicians. Space challenges have played out over the last few years. And now we’re having a discussion here today to talk about some of that complexity, but we’re going to do that in hopefully a very straightforward way in just 15 minutes. So I’m going to pose a few questions to Libby and Addison. And we’ll start off with Libby. Libby, first, when we talk about real estate in health care, what do we mean? What are the types of entities and players we’re talking about? And why does real estate matter in the health care space from your perspective?

Libby Park: Thanks, Joe. That’s a great question. And I think your initial introduction to health care real estate more broadly was right on point and a great intro for what we’re kicking off here today. Generally speaking, health care real estate encompasses any real property and land use issue that a health care entity may be dealing with.  Substantively, this can mean a lot of things, like commercial leasing, purchasing and selling real property, medical development of health care campuses and medical office buildings. We also deal with things like tax exemption for real property, zoning compliance, negotiating easements and land use agreements, performing environmental inspections and remediations, and also compliance and licensure issues that are tied to real property.

In terms of the entities that health care real estate affects, this is also very broad. We work with hospitals and health care systems nationwide, as well as individual providers, physicians, dentists, and physical therapists, for example, who are looking to start practices or secure space where they can provide care to patients. Health care entities range from large urban providers to small rural hospitals and health care systems. It really runs the gamut. And even with the increase in telehealth and transition to virtual care that we’ve seen over the past two years during the COVID pandemic, we’re still seeing that there is a need for real property space, and health care providers need these brick and mortar locations to provide care to patients and for administrative uses. That’s a broad overview.

Addison Bradford: If I can add to that, I think one of the challenges when it comes to health care real estate is a lot of the players are not health care entities, especially when it comes to commercial landlords that they might be leasing from, or even developers who don’t have experience within the health care space. One of the challenges we face is educating a lot of those non-health care parties about the regulatory environment in which hospitals, health care providers sit in and how that dictates the terms of the agreements that those parties enter into.

Joe Wolfe: That’s a good thought and great thoughts from both of you. Addison, that’s been my experience as well. You’re asking a landlord, a commercial property developer to step into our health care world with all of these additional levels of regulations and make sure that we’re helping them mitigate risk under this framework that is very different from any other industry. So I appreciate those comments.

I think that’s a good segue to the regulatory piece a bit. And my next question is for Addison. For us who work in this space, we understand that there are some special rules, notably the Stark law and the Anti-Kickback statute that create a framework that we need to follow when we’re contracting, especially with physicians, but in the health care space, especially with an entity or a provider that makes referrals. And in that context, sometimes there’s a need to self-disclose compliance issues as well. So I know Addison, you’ve been close to some recent judgment data and self-disclosure data related to real estate. What, if anything, does that data available related to Stark and Kickback tell us about lease provisions and more generally about other real estate arrangements that may trip parties up in this health care space?

Addison Bradford: Yeah, so we track settlement data that OIG and CMS put out as to the Anti-Kickback Statute and the Stark Law respectively, as well as monitor the settlement and judgment data that the DOJ puts out. And although there are gaps in some of that data, we can see from those settlements and judgments general trends and maybe what the government’s most concerned about and just generally the types of arrangements that are tripping parties up.

I’ll tell you the one trend we generally see is that the real estate compliance issues can often be a sign of bigger compliance issues within the organization outside of real estate. Not too many of the settlements and judgments we see are just related to real estate. It might be physician comp and real estate. It’s a number of other items. So I think it’s interesting is that it could be a sign of something bigger going on with an organization.

But in terms of the real estate specific OIG settlements and judgments we see, a lot of what we see is so called sham real estate arrangements, where it’s a physician or a hospital or some other provider that is leasing space that they don’t intend to use so that the owner of the building is getting that rental revenue, but ultimately they’re not using that space. In other cases, it’s way below fair market value rent. One of the essential elements of fitting within the rental of office space exception under Stark and within the space rental safe harbor is that the rental rate be fair market value. And there are a number of settlements and judgments where that isn’t the case.

And that makes sense to a certain extent. Not everyone that has been subject to these settlements and judgments is presumably acting nefariously, but fair market value isn’t readily known, necessarily. It’s why parties engage appraisers and even brokers to opine on what the fair market value is. So they may say, “Oh, I think this is market,” but especially with the commercial landlord, who’s not dealing with health care might say, “Well, this rate is market, it’s not a big deal.” Then they sell the building to a different provider and the relationship becomes subject to Stark and Anti-Kickback, and they realize, “Oh, it actually wasn’t fair market value.” So given the lease specific nature in that context of Stark and Anti-Kickback, it makes sense that a lot of those settlement and judgments stem from fair market value issues.

Joe Wolfe: Great. Thanks, Addison. And staying in line with the compliance discussion, Libby, I know you assist health care entities with their commercial leasing arrangements. What are the types of lease terms and compliance considerations that they should be considering?

Libby Park: Thanks so much for that question, Joe. You’re exactly right. And a lot of the points that Addison touched on in his response are relevant to commercial leasing arrangements as well, both from compliance language perspective, and also documentation that we need to ensure is included in the file for each leasing arrangement. A commercial lease has both business terms and legal terms. And I’ll touch on both of these sort of buckets of what we want to consider in a commercial leasing arrangement.

First, we’ll touch on business terms, which can vary significantly depending on the negotiating power of the health care client as well as the physical location of the property. Things that health care clients consider when entering into these types of arrangements are the length of the term of the lease. So for example, how many years will the initial term be? Do we want to be in the space for five years or 10 years? Are we going to negotiate subsequent renewal options for this arrangement to lock down the security of this space for additional years? Rent, this is of course a big one, and health care providers want to be able to lock in favorable financial terms for cost savings on rent and also potentially secure tenant improvement allowance to help build out their space.

Other considerations are expansion rights, considering do we want to lease adjacent space in the building if that becomes available, or potentially purchase the space? Assignment provisions, that’s another business term where a health care entity may want to build in the flexibility to assign or transfer the lease without having to obtain landlord consent down the line. The last business term I’ll touch on is an exclusive use provision. And this type of provision in a lease prohibits a landlord from leasing space to a competing entity or another health care entity that’s providing the same type of health care services in the building.

Let’s transition to compliance considerations. Each health care client should assess and flush out if their lease agreement is implicated by Stark and AKS. There are a couple ways that we advise clients to do this. One of these is requesting that the landlord complete a compliance questionnaire or certification. And this essentially is a landlord self-disclosure and agreement documenting if there is physician ownership in the landlord entity. And if the landlord’s an individual, is this individual a physician or an immediate family member of a physician? If the landlord is an entity like a limited liability company, we ask that entity to certify if there’s any physician ownership in the interest of the landlord entity. And depending on what we see in this certification, we can tailor the language of the lease to ensure that the necessary compliance language is included in the lease agreement itself.

I want to touch a little bit on how we document the fair market value of rent in commercial leasing arrangements. As Addison pointed out, this can really be an important piece of ensuring that the lease is compliant. And what we do here is generally connect with a broker or an appraiser, and have a broker opinion of value document that rental rate, as well as any incentives like tenant improvement allowance, are in fact commercially reasonable and consistent with fair market value for the specific location of the premises in the country. And so having that documentation and ensuring that the rental rate is within what is considered commercially reasonable is very important.

Two other items that we ensure are in commercial leasing arrangements are a floor plan that documents with specificity exactly the space that the health care tenant will be using. And then the compliance language that we include are things like representations and warranties from both landlord and tenant that neither is an excluded provider under any of the federal health care programs. We also include specific HIPAA, Stark, and AKS written language that both parties agree to in the commercial lease agreement.

Joe Wolfe: Great. Thanks, Libby. I’ll give a wrap up question in a second, but just as question for Addison. We previewed earlier that the challenges around COVID, now we know there are market challenges out there as well, I think particularly related to inflation. Inflation right now is at its highest in the past 40 years. Addison, how do you anticipate and draft around changing market conditions like this when you’re working on health care real estate arrangements in order to reduce the likelihood of compliance issues in the future years? How do you tackle that?

Addison Bradford: Yeah, the first step is just anticipating what those might be, based off of the particular relationship you’re looking at. So we’ve talked about leasing a lot thus far. So an example, if you have a 20-year lease agreement, well, you need to anticipate that the markets may change a lot more during that time such that the rental rate may… You may need some mechanism to adjust that rental rate to make sure it’s fair market value. It’s like one of the things we’re seeing right now, especially with inflation being what it, is the consumer price index is… I think it is somewhere around 8%. It can vary slightly, but it’s at significantly higher than maybe the one to two percent we’re used to. And many leases escalate the base or the annual rent based on that CPI index. So, in some cases you’re having an 8% increase in the rent.

And that’s really significant, and it can, not to say in every case it’s going to push the rental rate outside of fair market value, but certainly in some cases it will. So it’s anticipating those kinds of items and potentially setting, for example, every five years, redetermined what that fair market value rental rate, building in those provisions to make sure that, yeah, it may be fair market value today, it may be commercially reasonable today, or the relationship more generally may be okay, but in 10 years, some mechanism to address any of those issues.

And then I think that the second thing I’ll note on this is reimbursement costs are, from what I understand, are continuing to go down in some cases. And hospital operating margins are getting slimmer. So I think there will likely be some folks that are looking to cut costs. But I think just from approaching a health care real estate standpoint and predicting the future is to remain and to stay vigilant in negotiating health care real estate arrangements to make sure that they are consistent with the different health care regulatory laws and regulations that apply to them, even in the midst of a difficult market in which many of our clients are operating in.

Joe Wolfe: Great. Thanks, Addison. Just a final question wrapping up, do the two of you have a final thought for those listening in to today’s podcast? Libby, why don’t you go first?

Libby Park: Sure, Joe. I would just like to say, thanks everyone for tuning in. If I can ever help you with any health care real estate-related issues, particularly in this changing environment as we transition from the COVID pandemic, please feel free to reach out to me directly.

Joe Wolfe: Great. And Addison?

Addison Bradford: Yeah. The last piece of advice is I know [inaudible] it seems like we’re always… Or especially in the health care real estate realm when we’re working with a lot of developers, the health care real estate attorneys can seem like impediments to getting the deal done and slow down that process. But I think just the challenge with thinking about the role that attorneys and counsel play in this is realizing that they’re an asset on these deals, because ultimately, if there’s a compliance action that arises out of one of these deals, that might be way more expensive than the X number of dollars it took longer to negotiate or that you’re paying in rent. So I think my caution or challenge folks was to just have that mindset when reaching out to us or in-house folks.

Joe Wolfe: Those are some good thoughts. Again, we are the largest health care focused law firm in the country. And all day we are answering questions in this specific health care space. So to your point, Addison, some of my favorite calls are where a new client says, “Oh, I didn’t know you could just answer these kind of questions on the phone.” We have many situations where we’ve had the question you are asking over and over again in our niche and are able to add value immediately. So those are some good thoughts. Appreciate that.

And I appreciate everyone for listening in. Thanks for joining us today. If you’d like to learn more about fraud and compliance issues in health care real estate, please visit our website at hallrender.com, or reach out to Libby at [email protected], Addison at [email protected], or your regular Hall Render attorney. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thanks, and have a great day.

In this episode of Hall Render’s “Health Regulatory Update,” Joe Wolfe discusses compliance and fraud and abuse issues related to private equity investments with his colleagues Scott Taebel and Erin Drummy. Areas covered include the uptick in activity in the health care private equity landscape, potential compliance and enforcement risk for private equity firms, the importance of focusing on compliance/regulatory due diligence and the importance of going into any new transaction with eyes wide open.

Attorney, Hall Render
Health Regulatory Practice Group Leader

Attorney, Hall Render

Attorney, Hall Render

Joe Wolfe: Hello, and welcome to Hall Render’s Practical Solutions, podcast and healthcare regulatory update. I’m your host Joe Wolfe. I’m an attorney with Hall Render.  We are the largest healthcare focused law firm in the country. And today we’re discussing compliance and fraud and abuse issues related to private equity investments. Today’s podcast comes from Hall Render’s healthcare regulatory practice group, which covers our advocacy compliance fraud and abuse and litigation service lines. I have Scott Taebel and Erin Drummy from our fraud and abuse and compliance service line with me. Scott and Erin can you introduce yourselves?

Scott Taebel: Yeah. Hi Joe. This is Scott and I work in the healthcare regulatory compliance space as you indicated, in particular defending providers who are subject to government enforcement actions and also those who are fortunate enough to discover compliance issues on their own, working with them to internally investigate those questions. And then self-report, if that is necessary.

Erin Drummy: And I’m Erin Drummy, I am also a shareholder in Hall Render’s healthcare regulatory practice group. My practice is focused exclusively in the healthcare space with a particular focus on regulatory matters, the Stark law and fraud and abuse issues. I rejoined the firm about a year ago after spending three years in house with a large global private equity backed physician group.

Joe Wolfe: Great. Thanks. Thanks Scott and Erin. And thanks for being on today. Obviously private equity in healthcare is a huge topic that many not only that are starting to invest in the healthcare space are focusing on, but also those healthcare organizations and physicians that are making investments into models backed by private equity. And so this is a topic that is getting a lot of attention in the industry and I’m really happy that you’re on and allowing our listeners to hear about this. I’m going to go through a few questions for Scott and Erin and get their reactions. First Erin, I have a question for you and it’s sort of a level set here when we’re talking about private equity and healthcare in that landscape. What do we mean and what are the types of entities and players we’re talking about and why are they getting into the healthcare space?

Erin Drummy: Sure. No, it’s a good question. And we’ve certainly seen significant uptick in activity with respect to private equity investment in healthcare in the last few years, compared with the same period in 2020 healthcare deal volumes grew by about 56% in 2021 for private equity investment. And there were nearly 2000 PE healthcare deals that closed in the first nine months of 2021. So we are certainly seeing significant volume and interest here by private equity investors in the healthcare industry. Studies have attributed the growth in private equity interest and investment to reliable revenue streams that are stemming from an aging population. There’s also increased per capita spend on healthcare in the US, which is again attractive to these private equity investors. We’ve seen a lot of interest in eyecare, pain management and dental practices in the past. And those areas do continue to have activity.

Erin Drummy: We’ve also seen interest in orthopedics and oncology, I think in part due to the sizable ancillary revenue streams that are embedded in those practices. Despite some downturn early in the pandemic COVID  has really not slowed things down much here. And we’ve actually seen the evolution of some new opportunities and areas of interest for private equity investment, namely telehealth, behavioral health, home health, and other sorts of support services. I think PE firms have been able to take advantage of what is a very fragmented healthcare system in the United States. And they’re coming in and using this roll up strategy to aggregate small individual provider groups into larger providers, creating economies of scale, operating efficiencies, leverage payers, increasing earnings. And we’re also seeing more recently a huge focus on data. These PE firms are very data driven and with the shift to value based care capitation, and other novel payer arrangements providers really need this data and need to be able to leverage this data and data analytics to manage their patient base and to do well under these payer models.

Erin Drummy: While some have predicted that we may see a decrease or a slowdown in 2022, I think it’s reasonable to expect there to be a continued interest in healthcare for private equity, investment and as such, I think it’s important for providers, whether you’re looking to sell or be purchased or as a private equity investor to have a good understanding of the healthcare regulatory framework and the risks that are out there for these investors and the portfolio companies.

Joe Wolfe: Okay. Thanks. Thanks Erin. And thanks for that overview of the PE landscape. I think the next question is for Scott. Scott, Erin just described what that PE landscape looks like. I know you have extensive experience in the healthcare compliance space, especially related to self-disclosures. And I think at last count you’ve worked on maybe over 150 CMS and OIG self-disclosures. Are there compliance and enforcement risks that come in this PE activity? And are we seeing enforcement or do you anticipate seeing it in the future, for example, around the False Claims Act?

Scott Taebel: Yeah, thanks Joe. We are seeing that trend and we do think there’s considerable potential risk here for PE firms as Erin described, based on the myriad of enforcement authorities that the government has at its disposal. Both from the standpoint of PE firms that may be getting into the healthcare space without full appreciation of what those risks can be. And also with those firms who become more entangled with the healthcare operation, such that they become targets themselves, the FCA case is really abound where the whistle blowers and the government are seeking to try to get at the perceived deep pockets of the PE firm based on their understanding as to what the PE firm knew or how it may have been involved, or even incentivized the behavior at question.

Joe Wolfe: Thanks, Scott. I think I have a question now for both Erin and Scott and Erin, you can take it first. So drawing on both of your experiences, what are some of the key considerations that you think PE and maybe healthcare organizations and physicians that are doing business with PE should be thinking about?

Erin Drummy: Sure. Piggybacking off of what Scott said, we’ve seen this evolution in case law and we’re seeing the private equity investors held accountable for conduct that violates the False Claims Act. I think it’s important for private equity investors and providers to be aware of this and to recognize that this series of cases holding private equity accountable will serve as a roadmap for future cases. I think we can expect there to be additional enforcement in this area and folks that are new to healthcare, or with varying degrees of sophistication in this area, need to recognize this as a particular area of risk. As Scott said, the whistle blowers are looking for a source of funds to secure a settlement or a judgment. And we’ve seen the courts signal a willingness to find the investors liable when they’re deemed to have a sufficient connection to the activity that violates the false claims act.

Erin Drummy: In my experience, private equity firms seek to have an active role in management. They want to bring these efficiencies and expertise to the portfolio companies, as opposed to, kind of sitting back as a passive investor. And therefore with that active role with board seats with involvement in the day to day management, I think it’s important to ensure that there’s a focus on compliance, that there’s a strong compliance program in place at both the portfolio company level, as well as with the private equity investment firm.

Scott Taebel: Yeah. And Joe, I would not only echo what Erin alluded to, but I would also encourage PE firms who are interested in getting into the healthcare industry to do a robust due diligence effort before doing so, making sure that the compliance concerns that we have been discussing here are identified pre-closing. And if after doing that due diligence, the PE firm wants to proceed. We do think that a good way of doing that is to make sure to self-report any activity that comes out through the due diligence is being non-compliant. It would be important. We think in that context to start with a clean slate, keep that activity with the prior ownership and make sure that any self-reports that may be necessary are done before the closing occurs.

Joe Wolfe: Great, Erin and Scott. And as we look to wrap up here do either of you have final thoughts for those listening today’s podcast. Maybe Erin, you could go first.

Erin Drummy: I would just echo Scott’s comments around due diligence. I think this is an important issue. We’ve seen issues that have been identified during diligence, but not addressed and not remediated come up later as the source of liability from a false claims act perspective. So this is really important. It can lead to both the destruction of the business of the portfolio company. The penalties here are significant as well as fines for the investment company. So in order to preserve your investment, I think it’s important for folks to really focus on due diligence and ensure that there’s strong regulatory counsel involved in reviewing documents and agreements, etc., in the due diligence process.

Joe Wolfe: Great. Scott, any final thoughts from you?

Scott Taebel: Yeah, just real quickly, Joe, as we’ve been talking about, I would make sure to go into the activity with both eyes open and while revenue generation is going to be critical and the infusion of capital can be very helpful in these contexts. I think that going forward, the PE firms should not lose sight of the importance of having the compliance function be very active going forward, even if it wasn’t previously. So any of these risks that we’ve identified can be addressed before they escalate into something more significant like a government investigation.

Joe Wolfe: Great. Thanks. And thanks, Scott and thanks, Erin. And thanks to all of you for joining us today. If you’d like to learn more about compliance and fraud and abuse issues related to private equity investment in healthcare, please visit our website at hallrender.com or reach out to Scott at [email protected] or Erin at [email protected] or your regular Hall Render attorney. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice.

In this episode of Hall Render’s  “Health Regulatory Update,” Joe Wolfe interviewed two key leaders of the AAPCP about the organization and trends in provider compensation.  The AAPCP is a nonprofit organization that brings together professional engaged in the administration, alignment, regulatory and strategy processes for organizations managing financial relationships with providers.  AAPCP’s members advise and lead organizations across the country on provider compensation, contracting, planning, recruitment, retention, strategy, and valuation.  The Association is open to individuals in health systems, medical groups, and other health care organizations who work in these areas.  If you are a professional looking for more information about the AAPCP and its upcoming conference in Indianapolis on May 5-6, please check out their website at providercompensation.org.

Attorney, Hall Render
Health Regulatory Practice Group Leader

Email Joe

Legal Counsel, Parkview Health
Board Member, American Association of Provider Compensation Professionals (AAPCP) 

Email Alex

Director of Business Development, Memorial Health System
Board Member, American Association of Provider Compensation Professionals (AAPCP) 

Email Autumn

Joe Wolfe: Hello, and welcome to Hall Render’s Practical Solutions Podcast and healthcare regulatory update. I’m Joe Wolfe, an attorney with Hall Render. We are the largest healthcare focused law firm in the country, and today we’re discussing physician compensation hot topics, and the American Association of Provider Compensation Professionals, or the AAPCP as we’ll use that term throughout the podcast. That’s a new industry trade association that has been very active over the last couple of years. I lead Hall Render’s healthcare regulatory practice group, and that covers our advocacy, compliance, fraud and abuse and litigation service lines. Today with me, I have Alexander Krouse, the Associate General Counsel for Provider Arrangements for Parkview Health in Fort Wayne, Indiana. And also Autumn Warden, the Director of Business Operations & Physician Compensation for Memorial Health System in Marietta, Ohio. Both are physician contracting and compensation experts, and both are heavily involved in the AAPCP. Alex and Autumn, can you please introduce yourselves.

Autumn Warden: My name is Autumn Warden, Director of Business Operations & Physician Compensation here in Marietta, Ohio. I have been in the provider compensation industry for almost six years now. I actually started in provider recruitment for about a year, and at the time there wasn’t significant focus or resources for provider compensation and contracting oversight. I essentially just became a self-starter and learned as much as I could about the industry on my own. Tapped into as many resources as I could, although at the time there was very few, but have really just grown the department within my own organization. I’ve been fortunate to have a lot of support there and have also been able to really grow as an industry expert for my organization internally and have also been able to keep up.

Alexander Krouse: Absolutely. Thanks, Autumn. I’m Alex Krouse, and I work for Parkview Health. I’ve been in charge of provider contracting and compensation for the past six years. For me it was a similar story, at least when I first started here, I was the legal counterpart to our finance team for provider compensation services and that VP of finance left.They said, “Hey, Alex, you’re the only one that knows about this.” So I’ve been doing it for about six years, prior to that, I was in private practice, primarily focused on Stark Law, physician compensation.  That’s the area where I’ve spent my career.

Joe Wolfe: Great. Thanks for those intros. I’m excited about this podcast, not only to get a chance to talk to Alex and Autumn again, but because this is a unique space where the AAPCP sits. It brings together individuals involved in the strategic valuation, legal operational, and financial aspects of provider compensation. For the first time, I think it’s creating a community around those issues to allow for education and skill development and resources that are really necessary for provider professionals in the compensation space to become successful. As I work with healthcare organizations all across the country on provider arrangements and provider compensation strategies, not only on the model side, but also on processes for implementation and documentation of fair market value, I often ask the question, where could our people go to get this training to learn about different approaches to valuation and compensation?

Joe Wolfe: The AAPCP is one place that I look to right away and often recommend. We’re going to learn a bit about the organization and also some trends in compensation. So I have a few questions for Alex and Autumn, and I think I’ll start with you, Alex. Could you give some background on the history of the AAPCP and where the organization is today?

Alexander Krouse: Yeah. Happy to. There’s a long story to it, but knowing this is the podcast I’ll give the abbreviated version. Many of us, Autumn and myself, we’ve known each other probably for three years now or close to it. Others within the association that have been more involved, we’ve been creating this network over the past few years and even some before that. I remember talking with others and we sat there and said, “We’re all in these different associations. It’d be nice if there was a space for the work that we do.” We’ve got accountants, we’ve got operation leaders, we’ve got attorneys like myself, we’ve got those that have worked in HR, worked in recruitment. And so from a skill set and a department standpoint, there’s a lot of variability.

Alexander Krouse: I think after enough people asked that question, we sat down and said, “Hey, let’s start this association that’s more focused on an area, a body of work and a body of knowledge, as opposed to a profession specific.” And so that’s really where it started, very just people like Autumn and myself coming together saying, “Hey, we’ll put in the time to be able to grow this.” We were really actually hoping to more formally launch in early 2020 by getting a group of us together, but because of COVID, we had to cancel that. And then we just slowly grew from there. Most of us have certainly met via video. I’ve not met Autumn in person, but we will at the conference in May here in Indianapolis.

Alexander Krouse: So that’s how it started and it’s continued to build. Where we are today, we have individuals, Joe, such as yourself, myself, and others that are in this association as members, a few hundred individuals. So we’ve grown to that level. There are individuals that work in private practice medical groups, that are in health systems, private equity, law firms, consulting firms, accounting firms, you name it. If you work in provider compensation, we welcome you as a member, that’s the community. As for just healthcare organizations, we have about 110 now at this point, healthcare organizations across the country that are really represented.

Alexander Krouse: Some are in individual county hospitals where that person that’s involved is doing 20 different things. Some of them are organizations with a 100 plus hospitals, about our average healthcare organization, probably about Parkview’s size, probably around two billion with around eight or nine hospitals and 1,000 providers. So a lot of variability in there, but it’s great to have that group together.

Joe Wolfe: Great. Thanks, Alex. Autumn, I’ll direct the second question to you. How has the AAPCP helped you in the work you do for your health system?

Autumn Warden: That’s a great question. To put it briefly, it’s provided resources that are so needed in this environment. Talking about the community that we’ve established, like Alex was saying, it’s not just resources as in getting access to a policy or some guidance around your policy or when you’re doing your commercial reasonableness document and what that should generally look like, it goes beyond that is so needed and just is almost invaluable. It’s being able to call someone like Alex that works at another organization that you’ve established a relationship with through the AAPCP. And you can ask, this is my situation and most of the time they’re going to say, “Oh yeah, I’ve dealt with that before and this is how we handled it. This is what worked, this was what our barriers were.”

Autumn Warden: What’s been so common in the provider compensation industry is, we work with third parties and they’re great.  We have great relationships with them, but most of the time, they’re not within the four walls of your hospital. They’re not sitting in the meetings with these physicians, they’re not managing relationships and managing your provider engagement initiatives as most health systems are really focused on right now. And they’re not toe to toe with your physician leadership and your operations team and your in house counsel. So when you have the community that is involved in operations, or worked closely with finance and physician leaders, and you have that community outside of your health system to help guide you, it really helps this industry propel to the next level.

Autumn Warden: That’s what’s been missing. It’s why we’ve worked so hard and why we will continue to work so hard to grow this association. We have the external experts and resources and will always need them,ut it’s the internal work and all the things that go into doing this job and doing it well, that we are really honing in on. It’s your internal experts and how we can support them.

Joe Wolfe: Well, thanks, Autumn. Alex, you’ve mentioned events, I know you have an upcoming conference in Indianapolis. Could you provide us some information on that?

Alexander Krouse: Yeah. We do have a broad education platform that we’re building. We really are looking at virtual accessibility to training new employees that are working in this area and creating modules. For, if you’ve got somebody that’s new to your staff. We all know that for most of us that are working right now, we’ve all been self-taught pretty much. We’re really trying to create that platform where there’s more formality of, “Hey, if you’re new to this area, here’s the introductory materials that you need to be able to speak the lingo, to think about things, to understand things.” That’ll be certainly taught by faculty across the country. I know Joe, you’re going to be helping out with that as well. We’re looking into developing a credential, certainly people that want to build a career where they have expertise in this area, and even if you’re not directly managing this area.

Alexander Krouse: Let’s say you do move further up in operations or in finance, and you’re the COO of a medical group, quite frankly, you need an in depth understanding of these issues, because really at the end of the day, it’s all about alignment. How do we do that? How do we appropriately do that? What works best? So that’s the broader platform, but a part of that is certainly in person conferences, which is just going to be invaluable to our members. So on May 5th and May 6th, the conference is going to be in downtown Indianapolis. We’re at a hotel venue, a historic venue there, right in the heart of Indy. I used to live there myself, so it’s in a great spot. We have a full first day of not only lecture style, coursework or events, but also opportunities where we’re going to be doing live polling of the audience.

Alexander Krouse: We’re going to be breaking into groups, so we can have more discussions, network and get to know one another. We will have an evening event with a cocktail hour and all of that. And then the next day, we’re going to have a morning where we’re talking about some cutting edge issues and then more group discussion. The one thing that I think is unique about our conference is that for all of our sessions, we have an in-house person that works in a healthcare organization, as well as some external experts. These are individuals from across all sorts of healthcare organizations, consulting firms, law firms. So there’s a lot of diversity of, I think, viewpoint there, which is something that you really don’t see in other conferences that work in this space. So we’re really excited about it and certainly if anybody is interested, you can go to our website, providercompensation.org and get more information.

Joe Wolfe: Thank, Alex. I think this is a question for both Autumn and Alex. What do you think will be the biggest issues in provider compensation in the near future?

Autumn Warden: I believe that the biggest issues in provider compensation in the near future will be the delicate balance between earnings based on fee for service compensation arrangements, and value based arrangements. I say it’s a delicate balance because it really is a balance of what your payer contracts look like and how you are aligning those to your compensation plans. And with the majority of health systems, payer contracts are still primarily fee for service, although there are significant initiatives around value-based initiatives. When your hospital’s reimbursement is dependent upon fee for service, you still have to make that a significant proponent of your compensation design.

Autumn Warden: For my organization specifically, we’re really trying to introduce value-based initiatives, while also maintaining the historical fee for service arrangements. That way if a significant shift starts to become more obvious, then we have the capability to shift the comp model as we need to. But all health systems are doing it differently right now. It’s just going to be interesting to see when and if the shift happens, how far we’ll have to make significant adjustments to our compensation plans.

Joe Wolfe: Great. Thanks Autumn. Alex, your thoughts?

Alexander Krouse: I 100% agree with Autumn, that’s going to be a major change management issue that I think is going to take us longer than a decade. That is going to be a major issue. I think one of the more pressing issues, is I think we’ve come from this historic practice of an overreliance on survey data. I think a lot of organizations have gotten into that. I think with the recent Stark final rule, some of the commentary and that not that surveys are bad, but it’s clearly not, Hey, surveys are everything. So I think organizations have to really rethink how they’re valuing physician services. I think in part that’s because of some of that commentary, I also think in part, because the surveys due to COVID, the physician fee schedule changes, the surveys aren’t going to be very helpful.

Alexander Krouse: I could see somebody making the argument, is it even commercially reasonable to use these surveys to set income levels given some of the anomalies within the data? So I’ll say this, over the next three to five years, organizations are really going to have to think about the way that they’re establishing compensation within their groups, because I think post 2020 for a lot of reasons, not just COVID.

Joe Wolfe: I would echo your thoughts there and I appreciate your answers to my questions. Looking at this year and the near future, we’ve experienced several years of reform now.  We’ve had some technical updates to the Stark and Kickback rules, new guidance and clarifications to fair market value and commercial reasonableness and to the volume and value standard. We have these new value-based exceptions and safe harbors that drive change, but all this reform has been coupled with other market challenges and disruptors, just like the two of you just talked about. The COVID-19 productivity compensation model and staffing disruptions, the Medicare fee schedule issues, disruptions to the market survey data, and I do think we’ll see continued enforcement. It’s a disruptive period of time, but there’s a lot of opportunity to revisit compensation in my mind, like you the two of you are pointing to.

Joe Wolfe: I think healthcare organizations are going to have to engage their key stakeholders, get them to the table, including legal compliance, finance, their contracting personnel, and they really need to look at these changes, where their organization sits and where they want to go looking forward. Are they going to innovate their models? How are they going to operationalize these changes? And compensation is right at the heart of all of it. And so what you’re doing there at the AAPCP and bringing together people in this disruptive period and allowing them to collaborate and to use your platform to pose questions to each other on your website, if they’re members. I applaud you for what you’re doing. So it’s going to be a very interesting, I think Alex, you said we have a decade of this in front of us.

Joe Wolfe: I agree that it’s going to be a long haul, but there’s a lot of work to do and opportunities to engage. So I appreciate the answers to your questions. For our listeners, if you would like to learn more about the AAPCP please reach out to Alex or Autumn. Again, Alex mentioned their website is providercompensation.org. We’ll also make their information available on the podcast platform, so you can email them directly. Thank you for joining us today. We hope that you tune in for future podcasts. Please remember that the views expressed in this podcast are those of the participants only, and do not constitute legal advice. Take care.

Effective at the start of 2021, the Centers for Medicare & Medicaid Services increased the work relative value units (“wRVUs”) allocated to several evaluation & management physician services. In this podcast, our Fraud & Abuse attorneys discuss the Stark and Anti-Kickback impact of these changes on physician compensation plans and identify steps that health care organizations have taken and should take now.

Attorney, Hall Render

Attorney, Hall Render

Attorney, Hall Render

Joe Wolfe: Hello, and welcome to Hall Render’s Practical Solutions Podcast and our health care regulatory update. I’m Joe Wolfe and I’m an attorney with Hall Render. We are the largest healthcare focused law firm in the country. Today we’re discussing the impact of recent Medicare Physician Fee Schedule changes on physician compensation plans. I’m the practice group leader for Hall Render’s health regulatory practice group that covers our advocacy, compliance, fraud and abuse and litigation service lines. My practice also focuses on physician compensation issues, and I’ve been working with health systems nationwide on the very issues we’re going to be talking about today. With me, I have Keith Dugger and Alyssa James. Keith, and Alyssa, could you introduce yourself?

Keith Dugger: Sure, absolutely. Joe, thanks for the introduction. My name’s Keith Dugger and I am a shareholder in Hall Render based in the Dallas, Texas office.  Alyssa and I are co-chairs in the fraud abuse service line. We spend a lot of time focusing on issues that have a fraud or abuse impact on healthcare provider relationships.

Alyssa James: Thanks. I’m Alyssa James, a shareholder here in Hall Render’s Indianapolis office. My practice, similar to Keith’s and Joe’s, focuses primarily on fraud and abuse matters, particularly dealing with the Stark Law, Anti-Kickback Statute, and Civil Monetary Penalty beneficiary inducement issues.

Joe Wolfe: Great. Thanks, Keith and Alyssa. Today in a very short podcast we’re intending to talk briefly about the recent changes to the Medicare Physician Fee Schedule and its impact on physician compensation plans. Framing this up, back in 2021 there were several modifications of the Fee Schedule that included several increases in the wRVUs that were allocated to certain common evaluation and management service codes or E&M codes.  For those healthcare leaders listening in you likely know that E&Ms are typically associated with primary care and other office based visits, but these increases impacted several different specialties.

Joe Wolfe: So we saw an increase in the wRVUs associated with certain E&Ms visits, so a bump up. But then on the other side of this due to budget neutrality rules, there was a reduction in the conversion factor that health care organizations receive in reimbursement for physician services. So these changes have had an impact on physician compensation plans, and that’s what we’re here to talk about today. And so let’s just start off with an initial question to Keith and Alyssa, how are these changes to wRVU calculations and conversion factors within the Fee Schedule affecting physician compensation plans?

Keith Dugger: Yeah, thanks Joe. Appreciate it. And I think generally these changes are potentially affecting both the economic viability of certain arrangements and the ability of these arrangements to come within applicable Stark and Anti-Kickback safe harbors and exceptions. As you mentioned for office based providers who do a lot of E&M codes, there is likely to be an increase in revenue associated with their performance of services, but it’s also going to be coupled with an increase in RVUs. And for those practices that use RVUs as a measure of productivity and compensation, the question is going to be, do the increased number of RVUs result in compensation for a physician that outpaces the increase in revenue from that physician’s services

Joe Wolfe: Thanks, Keith. Alyssa, do you have thoughts as well?

Alyssa James: Yes, I think what Keith has described is exactly right. And I think providers, even though this has been in place for a little over a year now or this shift has been occurring for a while, are still struggling with their physician compensation and what to do about it. Looking at the numbers of how the RVU modifications may impact compensation and looking at that in conjunction with the physician contracts to figure out the best path forward and what the options are.

Joe Wolfe: Great. Thanks. I think what Keith and Alyssa are also hitting on is that all physician arrangements need to align with a Stark exception like Keith described. And those exceptions typically require also that the compensation generated is consistent with fair market value, that the arrangement is commercially reasonable and that the compensation model doesn’t take into account the volume of value of referrals. Those three standards are always applicable. And so this issue with the Fee Schedule, it’s critical for healthcare organizations to have a coherent strategy around how they’re going to align with those three standards, regardless of their ultimate approach. I’m going to move on to question two here. What are the two of you seeing in the marketplace with respect to physician group responses to the fee schedule changes? What are you seeing health care organizations do in their response?

Alyssa James: I think the clients that I’ve been working with primarily have stayed on the 2020 fee schedule for 2021. Now for 2022, some folks are continuing on that 2020 fee schedule. I have worked with a couple of clients that are now moving into the 2021 fee schedule for 2022 as a transition year. And then there are some that even if they hadn’t implemented 2021 last year, they’re deciding to rip the band aid off, so to speak, and implement 2022 now going forward. I think it is something where there’s no one size fits all.

Alyssa James: I think it’s very organization dependent and again, what they are or aren’t permitted to do under their physician contracts. If they have to get the physicians to agree via an amendment, obviously that’s a different hurdle than some compensation models where the RVU calculation and conversion factor can be implemented by the employer without that agreement. I haven’t seen a one size fits all. I think it’s something that folks really grappled with in 2021 and are continuing to do so in 2022. Keith, I don’t know if you’ve had any different experiences down there in Dallas or with the clients that you’re working with.

Keith Dugger: I think the experiences are very similar. When the changes to the fee schedule came out in 2021, I think people were really hesitant. You had those changes coupled with unique market circumstances stemming from the pandemic. And I think people, I think entities were a little hesitant to jump too far into it until they could see the impact that these changes had on revenues and compensation. And I also think it’s one of those things that people, although Medicare had been threatening for a while to make changes. I just don’t think people were necessarily prepared.

Keith Dugger: Some clients were in many respects a little bit backed into the corner because their contract did not provide an easy pathway to modification. And so there was a lot of not frozen, but a lot of hesitancy to move forward until they saw what the market was going to do. And as we’ve seen in 2022, there’s been a further modification to the fee schedule. And so I think people are realizing now, entities are realizing now that they need to start to address this and they’ve got to do it in a way that fits within their corporate goals, their organizational goals, but in a way which allows them to maintain the viability of the arrangement.

Joe Wolfe: Thanks, Alyssa and Keith, my observations have been consistent with yours. This a challenging issue. I think the health care organizations that are reacting in the market need to engage the different stakeholders within their organization. They need to bring together a team to model out potential scenarios and determine what the potential strategies might look like if they’re going to continue to freeze or move on the new fee schedule like Alyssa and Keith mentioned. They are going to have to develop perhaps even specialty specific approaches. Maybe they take the same approach for all their physicians or when they actually engage and do the modeling, they might decide that it makes sense to take a bifurcated approach. It’s going to be dependent on that organization’s ultimate strategy.

Joe Wolfe: Keith mentioned the contractual language. I’ve seen that as well. That’s something that needs to be looked at. It’s really important to proactively assess these different strategies and determine the right way forward for the organization. So again, I’ve had consistent observations like what Keith and Alyssa mentioned. I’ll give each of you, Alyssa and Keith, a last opportunity to share what you’re seeing around the adoption of new productivity based , compensation formulas, your observations from working with clients and maybe what other impacts on compensation might you be seeing in the industry. So just some final thoughts from the two of you on these issues.

Keith Dugger: Yeah, absolutely. Well, I think one of the things that there’s a lot of uncertainty about is how  these RVU changes as well as the pandemic related effects impact their ability to assess fair market value. I think everybody in the industry recognizes that all of that together is going to have a significant impact upon survey data. And so while traditionally organizations might look to, just to throw out an example, MGMA or Sullivan Cotter data to say, Hey, we are fair market value – Our compensation structure is fair market value because it fits within this, “75th percentile of MGMA.”

Keith Dugger: Well, Stark has disabused us from thinking, “Hey, it’s automatically fair market value if it fits within that 75th percentile”. And secondly, the data, because of factors related to the pandemic where physicians  might have received their full compensation without meeting full productivity or historical productivity because of the influx of PPP dollars and other ways that providers were made whole. All of this is going to have an impact on the compensation survey data and thus providers are going to be, I think they’re going to be struggling to find a way to confirm that this is fair market value, or to make the best argument. So I think that there’s going to be a need to involve both attorneys and valuation entities in the process to make sure that you are making best argument possible in case that your compensation structure is ever looked at.

Alyssa James: I think that’s right. And I agree, I think there is uncertainty around fair market value and some of the survey data right now. Because of COVID volumes were down but a lot of employers and organizations kept physician compensation as stable as they could (and they were able to do that under the Stark COVID waivers). But I think the end result is that we’ve got some survey data that maybe isn’t the most reliable. And then when you couple that with these RVU changes and other issues going on in the health care space right now, such as reimbursement changes and things like PPP loans and funding and the CARES Act, that all plays into physician compensation for certain organizations. I think it’s a little bit of an unsteady time or an uncertain time.

Alyssa James: I agree with you, Keith, I think now more than ever, it’s important for folks to be reaching out to their legal counsel, as well as any valuation experts they may be working with.  If historically they’ve done those fair market value assessments internally within the organization, now might be a good time to, at least for some of their higher compensated physicians, to reach out to outside experts and really just get some more stable footing given all of the uncertainty in the market right now.

Joe Wolfe: Thanks, Alyssa, and thanks, Keith. And thanks to everyone for listening in. We’re obviously here to help as health care organizations work through these issues, whether it’s providing education or assisting with some of the modeling and strategy and analysis. We’re more than happy to work with you. Thanks to all of you for joining us today. If you’d like to learn about the changes to the Medicare Physician Fee Schedule and its impact on physician compensation, please visit our website at www.hallrender.com or reach out to me, or Alyssa or Keith by email. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thanks and have a great day.