Comments to CMS on Promoting Healthcare Choice and Competition


Dated: January 24, 2018

Re: Comments in response to HHS RFI pursuant to Executive Order 13813.
“romoting Healthcare Choice and Competition Across the United States”

Dear Secretary Azar,

Congratulations on your confirmation as Secretary and thank you for your willingness to serve. We look forward to assisting you, as HHS seeks solutions that empower patients and their physicians.

The Association of American Physicians & Surgeons (“AAPS”) is a non-profit membership organization of physicians and surgeons who are mostly in small, independent practices. Founded in 1943, AAPS defends and promotes the practice of private, ethical medicine. AAPS has members in virtually every specialty and State, and AAPS speaks out frequently about issues concerning patients and medical practice. HHS favorably cited a comment by AAPS in connection with the landmark Privacy Rule. 65 FR 82462, 82468 (Dec. 28, 2000). Our legal filings have also been cited favorably by the U.S. Supreme Court and appellate state and federal courts.

Thank you for this opportunity to submit comments in response to the HHS request for information pursuant to Executive Order 13813.

Our comments will focus on how HHS can empower independent physicians and their patients to best achieve the stated goals of “increased competition in healthcare markets by lowering barriers to entry, limiting excessive consolidation, and preventing abuses of market power.”

We will also address the request to identify “barriers to choice and competition and proposed solutions that could facilitate the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people.”

In addition, as requested, we will identify existing State and Federal laws, regulations, guidance, requirements, and policies” which fail to conform to these goals.


Growing evidence demonstrates the advantages of care delivered by physicians in private practice as compared to care rendered in hospital-owned practices.

Past HHS Coordinator for Health IT, Farzad Mostashari, M.D., concludes, “recent evidence suggests that small, physician-owned practices, while providing a greater level of personalization and responsiveness to patient needs, have lower average cost per patient, fewer preventable hospital admissions, and lower readmission rates than larger, independent- and hospital-owned practices.” (Ann Fam Med. 2016 Jan; 14(1): 5–7,

In fact, “A 49% increase in hospital-employed physicians between 2012 and 2015 led to a $3.1 billion jump in Medicare costs related to four specific procedures,” according to an Avalere analysis. (Medscape 11/2017, Nonetheless, the consolidation of physician practices into larger hospital and insurer owned groups continues. The AMA reports: “The proportion of patient care physicians who have an ownership stake in their medical practice dropped below 50% [in 2016], marking the first time that physician practice owners did not comprise the majority since practice arrangement trends have been documented.” (AMA Policy Research Perspectives,

The myriad laws and regulations driving this consolidation of independent physicians into hospital employment are too numerous to mention all of them in our comments. So we will focus our response on targeted changes we believe are simple first steps to correcting decades of overregulation that create anti-competitive barriers. For an overview of broader changes we believe are needed for lasting change, we refer HHS and the administration to two AAPS white papers. One on Repeal and Replacement of the Affordable Care Act, and another on Medical Financing Reform

We encourage HHS to pursue the following changes:

1) End IRS limitations on Health Savings Account use for Direct Primary Care

Direct Primary Care and Health Savings Accounts are innovations that are increasing options for patients in an environment where access to care is too often being curtailed by third-party payers.

However, the clumsy IRS treatment of DPC improperly impedes Health Savings Account holders from utilizing this low-cost, high-quality, practice model.

In a 2014 letter to IRS Commissioner Koskinen, Senators Murray and Cantwell, along with Rep. Jim McDermott asked for changes to correct the outdated regulations:

Section 223(c) of the Internal Revenue Code should be updated to reflect that DPC medical homes are not a type of “health plan” and that periodic fee payments to primary care physicians should be recognized as a “qualified medical expense” under section 213(d) of the Internal Revenue Code.

Commissioner Koskinen declined to make the corrections. We encourage HHS and the Trump Administration to request that the IRS take a fresh look at this problem and enact a regulatory solution while Congress works to pass related legislation to prevent future administrative ambiguity.

It is past time to allow patients to use their HSAs for DPC.

2) Prohibit anti-competitive ABMS arrangements with hospitals and insurers.

The American Board of Medical Specialties, in collaboration with hospitals and insurers, imposes costly and counterproductive “Maintenance of Certification” requirements on physicians. This anti-competitive behavior is blocking patient access to physicians of their choice and driving up costs for patients and taxpayers without any proven benefit. Nationwide these costs are estimated to be $5.7 billion over 10 years and 32.7 million physician-hours.

CMS has a longstanding “Condition for Participation” outlined at 42 CFR 482.12, that instructs Medicare participating hospitals to “Ensure that under no circumstances is the accordance of staff membership or professional privileges in the hospital dependent solely upon certification, fellowship, or membership in a specialty body or society.”

While current CMS interpretive guidance of this regulation, outlined in “Pub. 100-07 State Operations Provider Certification, 2008” essentially renders it unable to prevent improper mandatory Maintenance of Certification mandates, past enforcement was reportedly more protective in this regard.

In light of increased attention by courts, state legislatures, medical societies, the media, and others, we encourage HHS to reexamine and restore the role of 42 CFR 482.12 in curbing, what experts with Federal Trade Commission credentials describe as, “certification requirements that impose costly entry barriers for physicians and the limited quality benefits and information for consumers that result.”

3) Revise and clarify Medicaid rules harming Medicaid patients’ access to independent physicians
ACA Section 6401(b) requires physicians ordering and prescribing for Medicaid patients to be enrolled in Medicaid. This creates barriers for Medicaid patients who wish to self-pay to receive medical care from a Direct Primary Care (or other 3rd party free physician) but wish to use their Medicaid benefits for prescriptions, labs, imaging or other needed diagnostics. This is particularly a problem for Medicaid patients seeking treatment for opioid addiction.

In prior rulemaking, CMS has stated the following: “State Medicaid agencies may implement a streamlined enrollment process for those providers who only order or refer, that is, who do not bill for services, similar to the CMS–855–O process in the Medicare program. ”
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However, some states still claim their hands are tied by CMS, and these states are refusing to allow cash-based physicians the opportunity to enroll solely for the purposes or ordering, referring, and prescribing. Medicaid patients are thereby losing flexibility to choose a doctor of their choice, even if they are willing to pay for the physician out of pocket. Blocking these patients’ ability to work with direct-pay physicians is harmful to these patients and is bad public policy as it increases costs to taxpayers.

We ask HHS to direct CMS to clarify guidance and regulation to encourage and expand the ability of direct-pay practices to serve these patients, who are too often unable to access care within the Medicaid system.
Similarly, certain states hold the position that cash-pay physicians are summarily prohibited from privately contracting with Medicaid patients. We know of no federal regulation or statute prohibiting this and ask CMS to encourage states to allow increased freedom of physician choice for Medicaid patients.

4) Enforce Rules Allowing Physicians Opted-Out of Medicare to Order and Refer
While CMS has issued clear rules allowing physicians opted out of Medicare to order, prescribe and refer for their Medicare patients (42 CFR §424.507 and §423.120), the contractors administering Part B often fail to properly follow these rules. Patients of Medicare opted-out physicians are frequently finding that Medicare contractors are rejecting claims for services ordered by their doctor. We ask CMS to hold the contractors accountable for following the rules and processing claims for these patients’ care.

5) Remove Onerous Mandate on Patients of Physicians Opted Out of Medicare

We ask that 42 CFR § 405.415(h) and (o) be revised to better comply with the administrative simplification directives of the Trump administration and statutes as revised by MACRA. In fact, if HHS is looking for a regulation to revoke in accordance with the Executive Order on “Reducing Regulation and Controlling Regulator Costs” which requires the elimination of 2 regulations for every new regulation, 42 § 405.415(o) is a great regulation to consider for deletion.
The MACRA law reduces regulatory burdens on physicians opted out of Medicare, however corresponding regulations on private contracts between opted out physicians and their patients were not properly revised in past rulemaking. It is no longer proper, or statutorily justified, for a contract between a patient and opted out physicians to be required to be tied to a 2-year period. The private contract could be valid for an indefinite period, as long as the physician remains opted out, and if mutually agreed upon by both the patient and physician.
The elimination of 42 CFR § 405.415(h) and (o) would advance the goal of “reducing barriers to choice and competition and increasing the availability of high-quality care at affordable prices.”

6) Unassigned Claims should not count towards MACRA low-volume threshold limit

MACRA, in a manner that is anti-competitive, disproportionately benefits large practices while harming physicians in solo and small group practice. We offer a solution to help begin levelling the playing field until MACRA can be repealed in full.

Physicians having non-participation (“non-Par”) status with Medicare, and their patients, should be exempt from the MACRA MIPS penalties. Patients of non-Par physicians are reimbursed directly from Medicare, meaning the penalties could seemingly be levied against the patient and not the physician. We’ve seen little if any guidance from CMS on how such penalties will impact this cohort. Clarification would be appreciated, but the ideal solution is an exemption. Tying the low volume threshold to assigned claims is one potential path for exempting physicians with non-Par status and their patients, i.e. claims filed on an unassigned basis would not count towards the threshold limits. Such a change would also begin to address the adverse incentives caused by the existing sweeping threshold limits.

According to statute — P.L. 114–010 Section 101(c) — the Secretary “shall” create a low-volume threshold. The statue outlines options the Secretary “may” use to set the threshold and we believe it can be interpreted by HHS in a manner that does not constrain the Secretary from defining the thresholds as applying only to assigned claims and not to unassigned claims. However, if it is determined that a statutory change is needed, we encourage CMS to pursue and support the appropriate modification.

7) Consider a Pilot Program to Study the Benefits of Disenrollment from Medicare

Disenrollment from Medicare has many potential benefits to the program. Under disenrollment, a physician is neither enrolled in Medicare nor opted-out of Medicare, and some of his patients might submit a Form CMS-1490S for reimbursement on covered medical services for which the patient has paid. See

This disenrollment option is analogous to the option of homeschooling rather than sending children to public schools. Initially homeschooling was opposed by the government, but over time it has proven to save taxpayer money while also giving greater flexibility to citizens. Disenrollment would also save the Medicare program as the government would pay nothing or relatively little in connection with the services provided. There would be no greater expense to the government in paying on CMS-1490S claims with respect to a disenrolled physician than there would be on a physician who is enrolled in Medicare, and there would be fewer claims to process. Because patients pay at the time of service whenever they see a disenrolled physician, there is less of a risk of overutilization of Medicare services compared with when patients see participating Medicare physicians, surgeons, and other medical professionals. Since the checks go to enrollees rather than to providers, the opportunity for multi-million dollar fraud schemes that bill Medicare for fictitious patients or services would vanish.

The disenrolled option has the potential to save the government billions of dollars annually, while also providing greater flexibility to patients and physicians. A pilot program to welcome and study this option is recommended. This would require only making the option known in the Medicare manuals provided to physicians and patients, and monitoring the CMS1490S forms filed. Such forms would also provide information about the true free-market price of services, i.e. the price agreed to willingly by the buyer and seller.

Citizens should also be permitted to disenroll from Medicare Part A without forgoing the Social Security payments that they have earned. Medicare is, after all, said to be a voluntary program. As the Trustees point out, it is significantly underfunded, yet it is using funds taken from low-income workers and other taxpayers to pay for medical services to retired persons many of whom are willing and able to pay their own costs. This one change, which would be an immediate benefit to the Treasury, would also open the potential for a true insurance market for the over-65 population, as opposed to supplements tied to Medicare. Citizens who choose this option would be relieving the burden on Medicare while adding funds to the medical system, increasing the availability of medical resources .

8) Protection against laws limiting patient access to out-of-network physicians.

Falsely promoted as a fix for “surprise medical bills,” state legislation, like AB 72 enacted in California, authorize insurers and managed care plans to impose price controls on their competitors: out-of-network physicians. This puts additional pressure on independent physicians to shut their doors. Patients are having a hard enough time as it is finding doctors and these misguided laws will only exacerbate the physician shortage.

In addition, many out-of-network physicians depend on their ability to bill market rates for their services to insured patients in order to be able to offer charity or undercompensated care to underserved minority patients. Underserved minority patients depend on the continued availability of medical care from these out-of-network physicians. If out-of-network physicians are forced out of business or into insurance networks that render it infeasible to provide substantial amounts of care to underserved, uninsured, predominantly minority patients, such patients will have decreased availability of medical care.

Suggestions have been made to enforce similarly designed price controls on patients in the ACA marketplace. Regulatory bans on out-of-network billing, “fail to harness market forces that encourage price competition and quality improvements,” reports Richman, et al. (Am J Manag Care. 2017;23(4):e100-e105)

We strongly discourage HHS from considering imposing even more anti-competitive overregulation of market pricing and ask the Administration to investigate policies that will empower true market forces, not impede them.

9) Other Suggestions to Improve Competition and Lower Costs

As we mentioned in our opening comments, there are too many problems limiting competition and decreasing choice that need attention for us to mention them all in our response to this request for information. Here are just a few more solutions to areas of concern that we hope HHS will consider addressing in the immediate future:
● enact site-neutral payments,
● lift restrictions on physicians-owned hospitals,
● allow more freedom for medical professionals and patients to contract on mutually agreeable terms outside of restraints of third-party control,
● encourage transparency of contracted rates between third-party-payers and facilities
● encourage transparency of contracts between PBMs, pharmacies, manufacturers, and payers,
● waive CLIA requirements for physicians’ in-office laboratories,
● encourage the repeal of “certificate-of-need” laws.


Thank you for considering our foregoing comments. CMS must use all possible discretion authorized under law to free as many physicians as possible, and their patients, from harmful over-regulation and anti-competitive actions. Implementation of the above suggestions would advance the goals of reducing barriers to choice and competition and increasing the availability of high-quality care at affordable prices for the American people.

Respectfully submitted,

Andrew L. Schlafly, Esq.
General Counsel, Ass’n of American Physicians & Surgeons

Jane M. Orient, M.D.
Executive Director, Ass’n of American Physicians & Surgeons

Jeremy J. Snavely
Director of Regulatory Affairs, Ass’n of American Physicians & Surgeons