On February 13, 2009, the House passed the Conference Report to H.R. 1, the American Recovery and Reinvestment Act of 2009, by a vote of 246 to 183. That evening, the Senate also passed the Conference Report by a vote of 60 to 38. The final economic stimulus package provides a total investment of $787 billion to support infrastructure, schools, state budgets, tax cuts, biomedical research, renewable energy and health care for the unemployed. President Obama signed the bill into law on February 17, 2009, in Denver, Colorado.
This report provides an update on the final stimulus bill, with respect to key sectors and provisions of specific interest to the health and life science sector.
Key provisions:
Comparative Effectiveness (CE) Research
The final stimulus bill retains $1.1 billion in funding for comparative effectiveness research. This is the same level that was proposed in the earlier House and Senate bills. Of that,
- $300 million will be administered by the Agency for Healthcare Research and Quality (AHRQ) to "carry out" CE research;
- $400 million will be administered by the National Institutes of Health (NIH) to "conduct or support" CE research; and
- $400 million will be administered by the Secretary of HHS to "accelerate the development and dissemination" of CE research.
The language of the bill walks a fine line: the word "clinical" was removed from the introductory section, suggesting that a broad array of evidence, including cost-effectiveness, would be the focus of research funded through CE dollars. At the same time, it recognizes that a "one-size-fits-all" approach to research will not be appropriate. The bill is also clear that CE funds are not intended to mandate coverage, reimbursement or other policies for any public or private payer. Instead, the funding should be used to encourage use of clinical registries, clinical data networks and other e-health data to generate outcomes data. Although the amounts provided to each agency are unambiguous, exactly what funds can and will be used for is not identified in the bill. We do know, however, that all three entities are currently engaged around CE research and expect that these efforts will evolve quickly in the coming weeks and months. In particular, NIH has formed a working group to discuss agency-wide priorities for CE research and will be consulting with AHRQ and the Secretary of HHS to set priorities and efficiently disseminate funding to appropriate projects.
The bill requires the Institute of Medicine (IOM) to consider stakeholder input in preparing a Report to Congress by June 30, 2009, on national priorities in comparative effectiveness research. The Secretary of HHS must submit an operating plan on how CE funding will be spent by July 30, 2009. Private entities will be eligible to receive funding to provide data and conduct research that contributes to national CE priorities.
Stakeholders should be actively engaged in the public comment period to set appropriate national priorities for comparative effectiveness research. They should consider whether their access to data or research capabilities position them to conduct comparative effectiveness research. Manufacturers should consider whether current evidence development plans are sufficiently robust to meet emerging comparative effectiveness evidence thresholds.
Stakeholders should also note that comparative effectiveness research is a top priority of Senate Finance Committee Chairman Max Baucus (D-MT). Although his proposed CE legislation is not included in the final stimulus package, he is expected to move those provisions later this year. Stakeholders should assess the implications of enacting multiple laws in this space and consider strategies for ensuring their priorities are included in all CE legislation moving forward.
Research and Infrastructure
The final stimulus bill contains $14 billion for health and life sciences research and infrastructure. These funds will be allocated across the National Science Foundation (NSF), the National Institute of Standards and Technology (NIST) and the National Institutes of Health (NIH) as described below.
NSF: The final stimulus bill includes a total of $3 billion for NSF, including $300 million for the major research instrumentation program, $200 million for academic facilities modernization and $400 million for major research equipment and facilities construction. The House-passed bill also provided $3 billion for NSF.
NIST: The final stimulus bill provides a total of $600 million for NIST, including $220 million for scientific and technical research, and $20 million for HIT activities to create and test standards related to health security and interoperability. The final stimulus bill also includes $180 million for a competitive grant construction program for research science buildings.
NIH: The final stimulus bill includes a total of $10.4 billion for NIH, with $8.2 billion going to the Director, the Institutes and Centers, and the Common Fund to support biomedical research and $500 million for buildings and facilities. The final stimulus bill also includes $1.3 billion for the National Center for Research Resources (NCRR), including $1 billion for the construction and renovation of extramural research facilities and $300 million for the acquisition of shared instrumentation and other capital research equipment. Also included is $400 million for Comparative Effectiveness Research (as described in previous section).
The House-passed bill proposed $1.5 billion for biomedical research, while the Senate proposed $2.7 billion for these activities. During the Senate's consideration of the bill, an amendment by Sen. Arlen Specter (R-PA) was adopted to raise the total NIH allocation to $10 billion. The final stimulus bill retains this overall amount and recommends that funds target research priorities such as “short-term grants that focus on specific scientific challenges; new research that expands the scope of ongoing projects; and research on public and international health priorities.” Although the specific funding mechanisms are not identified in the bill, report language indicates that funds allocated to the Director ($800 million) can be used to "enhance central research support activities, such as equipment for the clinical center or intramural activities, centralized information support systems and other relevant activities as determined by the Director."
NIH Acting Director Raynard Kington, M.D., Ph.D., has indicated that funds transferred to the Director, Institutes and Centers, and the Common Fund are likely to be distributed in three key ways:
- Pending R01 awards: Approximately 14,000 R01 projects have already been reviewed and recommended for funding through the peer-reviewed process, and these projects are likely to be the first in line for stimulus funding. Priority will be given to projects that will have the effect of stimulating the economy through creation of jobs or promise scientific advancement in key priority areas within the allotted timeframe. Consideration will also be given to geographic distribution of awards. Awards will be made for projects in which significant achievements can be completed within two years only; there will be no implied out-year funding.
- Supplements to Existing Grants: Awards may also be made (administratively or competitively) to supplement existing grants to expand research in the original project scope. Awards may also be made in this category for training slots or equipment.
- NIH Challenge Grant Program: NIH is expected to issue a new RFA in the coming weeks or months for Challenge Grant applications. The RFA will identify Agency-wide or Institute or Center priority research themes and categories eligible for funding. Awards are expected to be in the range of $500,000 a year for two years.
Stakeholders with pending R01 awards should also consider whether their project may be scalable to a two-year timeframe. Although NIH will likely make initial awards to already-approved projects, stakeholders should quickly identify potential two-year projects that may be eligible for new R01 and Challenge Grant funds, should the agency issue new RFAs.
In terms of research funding more generally, agencies are expected to place an emphasis on funding projects that directly stimulate the economy through creation of new jobs and are able to attract additional funding and investments after the initial investment. Stakeholders should be aware that funds available through the stimulus bill must be obligated by September 2010 and therefore must be short-term projects that can essentially be completed or significantly advanced in a two-year timeframe. This timeframe may present challenges for certain research projects, such as clinical trials, which may take longer than that timeframe to achieve measurable results.
Prevention and Wellness
The final stimulus bill includes a total of $1 billion for the Prevention and Wellness Fund. This figure is significantly lower than the amount included in the original House bill ($3 billion) but is an improvement over the Senate-passed bill, which did not include funding for a Prevention and Wellness fund.
Within this total, the final stimulus bill includes $50 million to states to reduce health care-associated infections. The House-passed bill proposed $150 million for these activities, while the Senate did not propose similar funding.
The final stimulus bill also includes $650 million for evidence-based clinical and community-based prevention and wellness strategies that deliver specific, measurable health outcomes that address chronic disease rates. The House-passed bill proposed $500 million for these activities, while the Senate did not propose similar funding.
Stakeholders are advised to assess their eligibility for funding under each proposal and consider engaging with the Department to ensure their interests are appropriately available as eligible uses of the funds.
Medical Product Development and Procurement
There is no funding for medical product development or procurement in the final stimulus bill, although both the House and Senate in early versions had substantial sums for these purposes. The House included $430 million for medical product research and development under the Biomedical Advance Rapid Development Authority (BARDA) and $420 million for medical products and activities related to pandemic flu preparedness and response. The Senate proposed $870 million for pandemic flu funding only.
Although the inclusion of substantial funding in early versions of the bill suggests some commitment to BARDA and pandemic flu funding, the failure of Congress to include this funding in the final stimulus bill suggests that stakeholders will need to engage more vigorously if they want to convince Congress of the merits and priority of that funding. Stakeholders should assess whether that engagement now would help determine whether funding is restored in the final FY09 appropriations bill to be considered in March or in upcoming FY10 funding.
Stakeholders should assess their eligibility for funding under HHS’s pandemic flu plan (http://www.hhs.gov/pandemicflu/plan/) as Congress is most likely to target funding to those purposes. Stakeholders should also assess their ability to respond to the Department’s interest in addressing a delay in vaccines during critical need periods and increasing the annual flu vaccine supply. Stakeholders should prepare to work with HHS to ensure eligibility for funding even where it may not be specified in the current plan.
Stakeholders should also be aware that various biodefense authorities related to these provisions are due to be renewed this year, and there will be an additional opportunity to affect the authorities and budgets of these programs at that time.
Training for Health Professionals
The final stimulus bill includes $500 million for health professions training programs. Within this total, $300 million is allocated for National Health Service Corps (NHSC), with 20 percent going toward field operations. The remaining $200 million is for health professions training for primary health care providers – family medicine, internal medicine, pediatricians, dentists and nurses. The House- and Senate-passed bills included $600 million for health professions training programs.
Health Information Technology
The final stimulus bill makes an estimated $21 billion total investment to support the adoption of Health Information Technologies, including an initial $2 billion infusion to support the activities of the Office of the National Coordinator (ONC) of Health IT and proposes an estimated $19 billion in Medicare and Medicaid incentive payments to providers for the adoption of Health IT.
Federal Leadership for the Nationwide Exchange of Health Information
The final stimulus bill codifies the ONC for the first time, sets up a Health Policy Committee and a Health Standards Committee that are both subject to Federal Advisory Committee Act (FACA), and leaves the fate of the work already completed by the American Health Information Community (AHIC) in some doubt. Stakeholders should consider engaging to ensure appropriate planning, beneficial use of authorities, stakeholder participation in the Committees and an appropriate role for "AHIC 2.0" and its standards bodies.
The ONC will have a new Chief Privacy Officer with responsibility over privacy, security and data stewardship matters, as well as coordinating with other public and private entities on HIT matters. There will also be a substantial new role for HIT in data development in a range of areas, including telemedicine, drug safety, biosurveillance, public health research, medical errors, etc. Stakeholders with interests in effective and reasonable privacy and security protections should consider surfacing potential candidates for this office and should actively engage the office with proposals.
Stakeholders should evaluate opportunities to influence policy development and disbursement of funds for health IT, including:
- The ONC must update the Federal HIT Strategic Plan. Stakeholders should evaluate their opportunities under the existing plan and ensure that the new plan is consistent with their objectives. Because the statute would alter the planning roles previously played by the Secretary, ONC and others, stakeholders should assess opportunities and threats and seek to influence new plan development.
- The ONC will be advised by a new Policy Committee and a new Standards Committee. The committees shall serve as a forum for broad stakeholder input, and the makeup will include providers, ancillary health care workers, consumers, purchasers, health plans, technology vendors, researchers and other experts. Stakeholders should consider appropriate engagement with these committees.
- Within 90 days of enactment of the final stimulus package, the Secretary of HHS shall report to Congress (but not necessarily the public or others) an operating plan for the funds. Stakeholders should seek to influence this plan before it goes out and should strive to get access to the plan after it is finalized.
- Accountability for the funds expended will be assessed by the Government Accountability Office (GAO). Stakeholders should consider engagement at the appropriate time with GAO on that assessment.
- For the first time, ONC is provided authority to charge “nominal fees” to providers for use of an electronic health record. Stakeholders should engage to ensure that the fees and circumstances of their being charged, as well as fee waiver options, do not adversely impact the stakeholder.
Privacy and Security of Personal Health Information
The final stimulus bill includes slightly modified privacy and security provisions, and will have a dramatic impact on patients, consumers, providers, plans and others involved in the development and use of health information technology and electronic health records of all types. Stakeholders are encouraged immediately to develop an understanding of their obligations and rights under the new legislation and to consider engaging with the Secretary of HHS and the Federal Trade Commission (FTC) as guidance and regulations are developed to implement the legislation. Some areas of particular focus are set forth below:
The legislation alters critical definitions in the statute in ways that will create new obligations and rights. Some inadvertent disclosures will now be considered a "breach" that triggers statutory obligations. Stakeholders should consider engaging with the Secretary as interim final rules are developed in the next 180 days to implement this provision.
Further, treatment of Personal Health Records (PHRs) is also altered in the statute and breach notification requirements are imposed. Stakeholders may also wish to engage as the FTC develops interim final rules to implement this provision.
Stakeholders who were previously considered business associates and were not subject to many of the security and privacy obligations under HIPAA will now be subject to the same standards and civil and criminal penalties as the providers and plans for whom they work. In addition, certain entities such as health information exchanges (HIEs) and regional health information organizations (RHIOs) are required to have business associate contracts. Stakeholders should consider working with the Secretary to develop the annual safeguards guidance required under the statute.
The Secretary will develop a national education program to educate the public about their privacy rights and the potential uses of their information. Stakeholders may wish to help develop or conduct this program and to interact with the new regional privacy advisors.
Stakeholders may also desire to participate in the development of the Secretary's guidance on what constitutes "minimum necessary" disclosures, particularly as it relates to disclosures necessary to improve patient outcomes and to manage chronic disease.
The statute has increased restrictions on the use of information for sales and marketing and restricts the costs associated with those activities that may be recouped from third parties. Stakeholders may wish to engage as the Secretary develops guidance on what is permitted as costs.
Funding for Infrastructure and Incentives for Adoption of HIT:
The final economic stimulus bill includes $2 billion in appropriations and $19 billion in Medicare and Medicaid incentive payments to providers and hospitals for the adoption and "meaningful use" of a certified EHR system.
Grants and Loans
The final stimulus bill gives some direction for the expenditure of the $2 billion in appropriated funds to "support the activities of" ONC, including providing planning and implementation grants to facilitate the exchange of information among organizations and grants to states to establish loan programs for provider purchase of HIT, enhanced utilization of HIT, personnel training and improving HIT security. Because the bill does not provide separate line item funding for each program, specific funding levels for each program or estimated award size can not yet be determined. Stakeholders interested in this funding should consider engaging with the department to ensure adequate funding levels for particular grant streams.
Each program differs with respect to purpose, funding source, eligible entities and uses and should be assessed in greater detail than can be set forth below. However, following is a rough outline for initial consideration by stakeholders:
- Immediate funding program to strengthen infrastructure and for other HIT activities. Funded through ONC and administered by agencies with relevant expertise (such as HRSA, AHRQ, CMS, CDC and Indian Health Service), grants will be made available for certain health information exchanges (HIEs), federal HHS agencies, providers, community health centers, 340B entities, telemedicine providers, holders of health information and public health departments. Specifically, the Secretary is required to invest $300 million to "support regional or sub-national efforts toward health information exchange."
- HIT implementation assistance. The ONC, and in consultation with NIST and other agencies with experience in IT services, will establish an HIT extension program to assist providers in adopting and using certified EHR technology. In addition, the ONC will support HIT Regional Extension Centers (affiliated with nonprofits) to provide assistance to providers, hospitals, CHCs, entities serving the underserved and small group practices.
- State grants to promote HIT. Funded through ONC, these grants will be made available to states or "state-designated nonprofits" for planning or implementation and other uses to expand electronic health information exchange.
- Competitive grants to states and Indian tribes for loan programs. Funded through ONC, these grants will be made available to states or Indian tribes to establish loans for health care providers to acquire and effectively utilize EHR technology.
- Demonstration program to integrate HIT into clinical education. This demo will enable the Secretary to make competitive awards to health professions or medical schools for curricula development and assistance to other universities for similar purposes.
Stakeholders listed above should consider their eligibility for programs and should consider early engagement with the Department to determine next steps.
Medicare Incentives
Providers: Incentive payments to providers for the adoption of Health IT are capped, and the amount of the annual cap decreases over time. The final stimulus bill proposes an annual limit of $15,000 in the first year of participation and decreases over the next four calendar years to $12,000, then to $8,000, then $4,000, then $2,000. For early adopters (those adopting in 2011 or 2012), the limit in those years is increased to $18,000. The final bill also increases incentive payments by 25 percent for professionals predominantly furnishing services in a rural health professional shortage area.
In terms of penalties imposed on providers who are not meaningful EHR users, the final bill proposes reducing to 99 percent the fee schedule amount paid to such providers in 2015 (or 98 percent for some users), 98 percent in 2016, 97 percent in 2017 and 97 percent or more in each subsequent year. The Secretary is permitted on a case-by-case basis to exempt a professional from the penalty if compliance would present a significant hardship, such as in the case of a rural provider without sufficient Internet access.
Hospitals: Consistent with the House bill, incentive payments for qualified hospitals are calculated as the sum of a base amount ($2 million) added to its discharge related payment, multiplied by its Medicare share. These payments would be reduced over a four-year period. A hospital's discharge related payment amount would equal $200 for each discharge paid under IPPS starting with its 1,150th discharge through its 23,000th discharge. This total amount would be further adjusted by the Medicare share, which would be calculated according to a specified formula that takes into consideration inpatient hospital bed days attributed to Part A payments and inpatient hospital bed days attributed to charity care. The final stimulus bill also includes bonus payments for critical access hospitals (CAHs).
In terms of penalties, current law imposes a 2 percent reduction in market basket (MB) updates for IPPS hospitals that do not submit quality data (beginning in 2007, as required by the Reporting Hospital Quality Data for Annual Payment Update Program). Beginning in 2015, noncompliance will result in a 25 percent reduction in their annual MB update. Beginning in 2015, hospitals that are not meaningful EHR users would be subject to a reduction in their annual MB update for the remaining 3/4 of the update. Acute care hospitals being paid under a state's Medicare waiver would be subject to similar reductions beginning in 2015. The Secretary is permitted on a case-by-case basis to exempt certain hospitals from the penalty if compliance would present in a significant hardship, such as in the case of a rural hospital without sufficient Internet access.
Medicaid Incentives
The final stimulus bill authorizes $40 million for each of fiscal years 2009 through 2015 and $20 million for each succeeding fiscal year through 2019 for incentive payments to eligible providers (non-hospital based physicians, nurse midwives, nurse practitioners, certain pediatricians and physician assistants practicing in rural health clinics and federally-qualified health centers that are led by physician assistants), acute care hospitals, children's hospitals, rural health clinics and federally-qualified health centers. The final bill also authorizes a 100 percent federal match for a portion of payments attributable for certified EHR technology (including support services and maintenance) to eligible Medicaid providers and a 90 percent federal match for payment to the states for administrative expenses related to EHR technology payments.
Providers: The bill makes providers eligible for a payment equal to 85 percent of their net allowable technology costs. The allowable costs for the purchase and initial implementation of EHR technology may not exceed $25,000 or include costs over a period of more than five years. Annual allowable costs not associated with initial implementation or purchase of the EHR technology may not exceed $10,000 per year or be made over a period of more than five years. Aggregate allowable costs for these eligible professionals may not exceed $63,750.
Hospitals: Payments to hospitals would be limited to amounts analogous to those specified for eligible hospitals under the Medicare incentive payments, calculated as a base amount plus an amount related to the total discharges for such a hospital. States may not pay more than 50 percent of the aggregate amount to a hospital in any year and must spread out payments to hospitals over at least three years.
Studies
The final stimulus bill requires the Secretary of HHS, by June 30, 2010, to conduct and complete a study determining whether payment incentives should be made available to health care providers who are receiving minimal or no payment incentives or other funding under this Act. The bill also requires the Secretary, by October 1, 2010, to study and report to Congress on the availability of open source Health IT systems to safety net providers.
Stakeholders should consider engaging the Secretary to ensure appropriate information is considered for the report and that the report reaches the right conclusions.