Rolling back regulatory relief will be tricky for HHS

HHS has given states, providers and payers extraordinary leeway to respond to the COVID-19 outbreak. But unwinding flexibilities—some of which have been long sought after by key industry stakeholders—will prove challenging, confusing and time-consuming.

How and when the new regulatory flexibilities will end depends on what powers HHS used to establish them. For instance, far-reaching Section 1135 waivers of Medicare requirements will, depending on the waiver type, end with the president's national emergency, HHS' public health emergency or within a time frame established in the waiver, said Sandra DiVarco, partner at McDermott Will & Emery.

Congress tied many provisions of its relief packages to HHS' emergency declaration, so stakeholders will need to pay close attention to legislative language to understand how they're affected, said Tom Leary, vice president of government relations for the Healthcare Information and Management Systems Society.

"It is possible that HHS and CMS will take action to pull back on certain relief measures once the COVID-19 pandemic begins to subside," DiVarco said. Gradually phasing out changes like temporary Stark Law relief could ease the transition back to normal life because hospitals wouldn't have to worry about falling out of compliance.

The CMS will likely give hospitals and other providers time to wind down arrangements stemming from temporary relief measures like the so-called Hospitals Without Walls initiative, which allows for easier transfer of patients to nonacute settings and lets physician-owned hospitals boost bed capacity.

In addition to the regulatory relief and flexibilities afforded by the emergency declarations, HHS is taking advantage of its conventional rulemaking and enforcement powers to help the industry respond to the pandemic. For example, the Office for Civil Rights temporarily eased HIPAA requirements so providers could deliver telehealth services to their patients using non-public-facing smartphone apps like FaceTime or Skype.

"Ordinarily, that would be a big problem, but the agency has said they will choose not to enforce those HIPAA requirements in order to serve the broader public health goals," said Nick Diamond, a consultant with Avalere Health.

That can be difficult for providers because the federal government is essentially turning a blind eye to compliance issues that it could decide to enforce again with little notice. Still, discretionary enforcement could be an essential lifeline for payers and providers struggling to cope amid the pandemic.

For instance, many people are now delaying care or using fewer medical services. So health plans might have wildly fluctuating medical-loss ratios throughout the year, falling below the Affordable Care Act's 80% threshold during the outbreak and climbing to well over 100% by next winter as patients "come back with a tidal wave," said former CMS Administrator Tom Scully, now a general partner at Welsh, Carson, Anderson & Stowe.

The CMS could force noncompliant insurers to pay rebates to consumers, but that wouldn't make sense if those plans are likely to incur massive losses soon after.

Yet unwinding the agency's various relief efforts could cause headaches because they operate according to different circumstances, timelines and requirements, said Phil Kim, a partner at Haynes and Boone.

It's a problem that the CMS and industry will have to deal with after the crisis peaks because providers, states and the federal government simply can't address the issues now. "In none of the conversations I've had with (the CMS) have I heard anyone say, 'This is the way that we're going to do it,' " said Dr. Janis Orlowski, chief healthcare officer for the Association of American Medical Colleges.

Still, HHS is unlikely to reverse course on issues like telehealth expansion or an increased emphasis on midlevel providers practicing at the top of their license. Both have trended upward in recent years, and the pandemic has only accelerated demand for more flexibility.

"I wouldn't be surprised if there are some fundamental changes that take place after this experience," said Chip Kahn, CEO of the Federation of American Hospitals.

The CMS will also have to adjust Medicare's reimbursement rules, likely through the usual rulemaking process, to enable fee-for-service providers to get paid for expanded telehealth services under the physician fee schedule and other vehicles. The agency would also have to change the conditions of participation that prevent providers from operating at their top of license, including easing physician supervision and signature requirements.

Congress might have to act, too. It's likely to pass a fourth relief package to address the pandemic, but the package will probably be more targeted than earlier bills, said John Kelliher, managing director for Berkeley Research Group. And Congress could revisit the issue in an end-of-year legislative package.

"The real test is going to be when the emergency is over," said Bill Horton, partner at Jones Walker. "What have we learned?"