April 22, 2016

Chicago-Area Doctor Convicted of Violating Federal Anti-Kickback Statute

In March, a federal jury convicted a Chicago-area physician on ten counts related to violations of the federal anti-kickback statute (AKS). According to a release by the United States Department of Justice (DOJ), Dr. Venkateswara Kuchipudi is the tenth defendant convicted as a result of a multi-year investigation into Sacred Heart Hospital on Chicago's West Side. The investigation was executed by the Medicare Fraud Strike Force, a part of the Health Care Fraud Prevention & Enforcement Team (HEAT), and resulted in closure of the hospital.

The AKS prohibits healthcare providers from providing or receiving any form of remuneration in return for the referral of Medicare, Medicaid or other federal healthcare program business. The AKS is a criminal statute and interpreted broadly, and a violation of the AKS has significant implications on health care providers and suppliers. Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to 5 years, or both, and a conviction will also lead to exclusion from Federal health care programs, including Medicare and Medicaid.

According to the DOJ, Dr. Kuchipudi provided extensive referrals to Sacred Heart Hospital. The trial also revealed that Dr. Kuchipudi engaged in a scheme to ensure that his nursing home patients were transported to Sacred Heart Hospital for treatment even when there were better hospitals closer to the nursing homes at which Dr. Kuchipudi had privileges. In return, Sacred Heart Hospital provided physician assistants and nurse practitioners to Dr. Kuchipudi in the hospital and in Chicago-area nursing homes where Dr. Kuchipudi's patients resided. The physician assistants and nurse practitioners were paid by the hospital, however Dr. Kuchipudi billed Medicare and Medicaid for their services as if he employed them himself.

Under the AKS, prohibited remuneration includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. Pursuant to Office of Inspector General (OIG) guidance, whenever a health care provider offers or gives to a source of referrals anything of value not paid for at fair market value, the inference may be made that the thing of value is offered to induce referrals. Accordingly, providing free labor to a referring physician that relieves the physician of costs otherwise incurred by that physician constitutes remuneration under the AKS.

The conviction marks another victory for the Medicare Fraud Strike Force and HEAT, which is a joint initiative between the DOJ and the U.S. Department of Health and Human Resources aimed at preventing fraud and enforcing Medicare law across the country.

Wachler & Associates
represents healthcare providers and suppliers nationwide in a variety of health law matters, including compliance with the federal Anti-Kickback Statute (AKS), the federal Stark law, and False Claims Act. Our attorneys also advise health care entities to remain compliant with state fraud and abuse laws governing relationships between healthcare providers and referral sources. If you or your health care entity have any questions regarding compliance with the AKS, Stark law or other healthcare laws pertaining to Medicare or Medicaid, or healthcare regulatory compliance in general, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

April 18, 2016

CMS Releases Final Rule on Reporting and Returning Medicare Overpayments

On February 12, 2016, the Centers for Medicare and Medicaid Services (CMS) released its long-awaited Final Rule regarding the reporting and returning of Medicare overpayments. The Final Rule requires providers and suppliers receiving funds under the Medicare program to report and return overpayments by the later of (1) 60 days after the date on which the overpayment was "identified" or (2) the date any corresponding cost report is due, if applicable.

The first major provision contained in the Final Rule concerns the definition of "identified" for purposes of starting the 60-day clock for reporting and returning the overpayment. As set forth in the Final Rule, a person has identified an overpayment when the person has or should have, through reasonable diligence, determined that the person has received an overpayment and quantified overpayment amount. According to CMS, the 60-day time period to report and return begins whether either the reasonable diligence is completed, or on the day the person received creditable information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment. Furthermore, absent extraordinary circumstances, CMS chose a six-month period as the benchmark for completing timely investigations, which would give providers a total of eight month to resolve its overpayment issues (six months for timely investigation and two months for reporting and returning).

The second major provision contained in the Final Rule is in regards to the applicable lookback period for reporting and returning identified overpayments. In its 2012 proposed rule, CMS proposed a 10-year lookback period, which many in the provider community found to be overly burdensome. However, CMS reduced its proposed 10-year look back period in the Final Rule to a 6-year lookback period. The 6-year lookback is measured from the date the person identifies the overpayment.

Additional requirements and comments provided by CMS in its final rule include:

  • The Final Rule applies only to overpayments under Medicare Parts A and B. However, CMS notes that section 1128J(d) of the Social Security Act requires providers that identify overpayments received from Medicare or Medicaid to report and return those overpayments to the appropriate payor.
  • CMS will allow providers to utilize additional methods for reporting and returning overpayments beyond the voluntary refund process, which may include the use of claims adjustments, credit balances, requesting a voluntary offset, or another appropriate process.
  • CMS declined to adopt a minimum monetary threshold in its Final Rule.
  • CMS declined commenters' proposal that providers should be allowed to offset identified overpayments with any identified underpayments when determining the repayment amount. CMS stated underpayments are outside the scope of the Final Rule and that providers can seek to address underpayments under existing reopening policies.

It is important for providers to understand the requirements set forth in the Final Rule and incorporate the necessary policies into their compliance plans regarding the reporting and returning of identified overpayments. Failure to report and return any identified overpayment within 60 days could expose providers to liability under the federal False Claims Act. If you or your entity have any questions regarding the Final Rule, or have any other questions related to Medicare overpayments, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

March 1, 2016

HHS Modifies HIPAA to Allow for Easier Firearm Background Checks

In January, the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) published a final rule, which modifies HIPAA privacy rules to allow for easier sharing between certain HIPAA covered entities and the National Instant Criminal Background Check System (NICS). Specifically, the final rule allows certain HIPAA covered entities to share with NICS the identities of individuals prohibited under federal law from legally owning a firearm.

The Gun Control Act of 1968 prohibits categories of individuals from engaging in the shipment, transport, receipt or possession of firearms. The Department of Justice (DOJ) issued regulations applying the prohibition to those that have been involuntarily committed to a mental institution, those found to be incompetent to stand trial or found not guilty by reason of insanity are prohibited from owning a firearm, or otherwise determined by a court, board, commission, or other lawful authority to be a danger to themselves or others or unable to manage their own affairs as a result of marked subnormal intelligence, or mental illness, incompetency, condition, or disease. This prohibition is referred to as the "mental health prohibitor." The January final rule provides that only covered entities which already have lawful authority to render adjudication decisions which subject individuals to the mental health prohibitor may disclose those individuals' identities to the NICS. The final rule does not allow for clinical or medical information to be disclosed; only demographic information about individuals subject to the prohibitor may be disclosed.

In the text and analysis of the Final Rule, the OCR explains the very limited and narrow exception to HIPAA privacy rules as a balance between patient privacy and public safety goals. The Final Rule cited the American Medical Association's (AMA's) support for the Final Rule stating that the AMA "...Code of Ethics supports strong protections for patient privacy and, in most cases, requires physicians to keep patient medical records strictly confidential. If there must be a breach in confidentiality, such as for public health or safety reasons, the disclosures must be as narrow in scope as possible." In addition, OCR cited uniformity as a justification for the Final Rule. OCR explained that some states have not established reporting rules for this type of disclosure to the NICS. Thus, this rule will allow for more uniform reporting standards throughout all fifty states.

Wachler & Associates stays abreast of all HIPAA policies and procedures, as well as new rules regarding HIPAA privacy mandates. Our attorneys counsel HIPAA covered entities and business associates around the country in a variety of HIPAA matters. If you or your healthcare entity have any questions regarding HIPAA Privacy rules, or otherwise need assistance regarding HIPAA compliance, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com.

February 29, 2016

CMS Releases Proposed Rule Changing Benchmarking Methodology for ACOs

Under the Medicare Shared Savings Program, providers and suppliers paid under Medicare Parts A and B who participate in an ACO may be eligible to receive "shared savings payments" if the ACO meets certain cost savings and quality benchmarks. On February 3, 2016, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that in addition to other changes to the Medicare Shared Savings Program, would modify the savings and quality benchmarking methodology through which ACOs' benchmarks are updated and reset at the end of each three year ACO agreement period.

Specifically, CMS proposes the incorporation of regional expenditures when updating and resetting ACO benchmarks. CMS believes that incorporating regional fee for service (FFS) expenditures will more accurately reflect FFS spending in an ACO's region and thereby make benchmark goals more independent of historical benchmarks and encourage greater participation in the ACO program. Additionally, CMS proposes to account for the health status of an ACO's assigned population in relation to FFS beneficiaries in the ACO's region when calculating risk adjustment. Also, CMS seeks to include changes in ACO participant composition as a factor when adjusting ACO benchmarks.

In addition to revising the benchmarking methodology, the proposed rule modifies other key provisions of the Shared Savings Program, such as defining circumstances under which CMS could reopen payment determinations and adding a participation agreement renewal option. There are currently over four hundred ACOs participating in the Shared Savings Program. However, as Wachler & Associates previously posted, less than fifty percent of participating ACOs qualified for shared savings payments in calendar year 2014. The proposed changes are expected to increase overall participation in ACOs and save approximately $120 million for the Shared Savings Program in calendar years 2017 through 2019. The public comment period for this proposed rule will close on March 28, 2016.

Wachler & Associates continues to stay up to date on all developments under Medicare's ACO program. If you or your health care entity have any questions regarding Medicare's ACO program, the proposed rule, other healthcare regulations pertaining to Medicare or Medicaid, or general healthcare regulatory compliance, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

February 25, 2016

OMHA Expands the Settlement Conference Facilitation Pilot to Part A Claim Appeals

The Office of Medicare Hearings and Appeals (OMHA) recently announced its Phase III expansion of the Settlement Conference Facilitation (SCF) pilot program. The SCF pilot was originally launched in July 2014 to provide an alternative dispute resolution process for eligible Medicare providers to settle appealed Medicare claim denials pending at the Administrative Law Judge (ALJ) level of the Medicare appeals process. Under the SCF pilot, Medicare providers have the opportunity to enter into open settlement discussions with the Centers for Medicare & Medicaid Service (CMS) with the goal of coming to a mutually agreed upon resolution for the pending ALJ claims. Initially, the program was limited to Part B claims that met specific eligibility criteria. In October 2015, OMHA implemented Phase II of the SCF pilot, which expanded the eligibility requirements for Part B claims. Recently, OMHA announced that it will open Phase III of the SCF pilot, expanding the program to Part A claim appeals. Much like the previous phases, OMHA has provided eligibility requirements for participating in the SCF pilot, which include:

  • The appellant must be a Medicare provider (for the purposes of this pilot, "appellant" is defined as a Medicare provider that has been assigned a National Provider Identifier (NPI) number);
  • A request for hearing must appeal a Medicare Part A Qualified Independent Contractor (QIC) reconsideration decision;
  • The beneficiary must not have been found liable after the initial determination or participated in the QIC reconsideration;
  • All jurisdictional requirements for a hearing before an ALJ must be met for the request for hearing on all appealed claims;
  • The request for hearing must not be scheduled for an ALJ hearing;
  • The request for hearing must have been filed on or before December 31, 2015;
  • The amount of each individual claim must be $100,000 or less (for the purposes of an extrapolated statistical sample, the overpayment amount extrapolated from the universe of claims must be $100,000 or less);
  • At least 50 claims must be at issue and at least $20,000 must be in controversy;
  • The request must include all of the appellant's pending appeals for the same item or service at issue that meet the SCF criteria. For example, if an appellant has 50 hospice appeals pending that meet the requirements above, the appellant must submit a request for SCF for all 50 hospice appeals.
  • The appellant has not filed for bankruptcy and/or does not expect to file for bankruptcy in the future; and
  • The appellant has received an Office of Medicare Hearings and Appeals Settlement Conference Facilitation Preliminary Notification stating that the appellant may request SCF for the claims identified in the SCF spreadsheet. An appellant may not formally request a settlement conference until receiving this notice, but an appellant can initiate the process by filing its expression of interest.

More information on the SCF pilot can be found on OMHA's website. In addition, OMHA is hosting a Medicare Appellant Forum to provide the appellant community with the current status, program updates, and initiatives regarding appeals at the ALJ level of the Medicare appeals process. The OMHA Appellant Forum will also be providing information pertaining to the SCF Phase III rollout. The OMHA Medicare Appellant Forum will take place on February 25, 2016, at 1:00pm-4:00pm EST. Interested attendees can still register for the event.

Wachler & Associates has already participated in multiple settlement negotiations on behalf of health care providers under the SCF pilot program. We will also be attending the OMHA Medicare Appellant Forum to ensure our experienced attorneys are up-to-date on all matters related to the SCF program and ALJ appeals. If you or your health care entity needs assistance in pursuing the SCF program or appealing Medicare claim denials, or if you have any questions relating to the SCF program, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com.

February 23, 2016

OIG Advisory Opinion Examines Radiology Arrangement Regarding Transcription Fees Paid to Third Party

The Department of Health and Human Services' Office of Inspector General ("OIG") recently released OIG Advisory Opinion No. 15-15, in which the OIG determined that an arrangement involving an acute care hospital ("Hospital"), radiology practice and family medicine clinic ("Clinic") would not generate prohibited remuneration under section 1129B(b) of the Social Security Act, the Federal anti-kickback statute ("AKS").

Under the arrangement, the Clinic refers patients and certain diagnostic tests to the Hospital, and thus the Clinic's physicians are referral sources for the Hospital. The radiology practice contracts with the Hospital to supervise radiology services and provide professional interpretations of all radiologic imaging taken at the Hospital, and members of the radiology practice can influence referrals to the Hospital. The Clinic includes technologists who provide radiologic imaging services for the Clinic's patients, and the Clinic transmits the resulting images to the radiology practice to interpret the images and is thus a referral source for the radiology practice. The radiology practice's radiologists interpret the images and dictate reports, but send the dictated reports to the Hospital and the Hospital's employees transcribe the reports on behalf of the radiologists, who send the final reports back to the Clinic. The radiology practice pays the Hospital a "flat rate per line of transcription" fee that is fair market value for the service, and the Clinic pays no portion of any transcription cost. The Clinic bills third-party payors, including Medicare and Medicaid, for the technical component, and the radiology practice bills these payors for the professional component of the radiology services. The OIG also noted that the Hospital is located in a sparsely populated region, the Clinic is in a rural community in that region, and that the radiology practice is the only radiology practice within a 100-mile radius of the Clinic or Hospital.

Crucial to the OIG's finding, the Centers for Medicare & Medicaid Services' ("CMS") Medicare Claims Processing Manual provides that with regards to the professional component of a radiology service, the interpretation of the diagnostic procedure includes a written report. Further, CMS advised the OIG that transcription costs are considered indirect expenses under the methodology establishing resource-based practice expense relative value units (RVUs), meaning that such costs are not separately identified but are included in both the professional and technical components for each service. As such, CMS' position is that when the technical component and professional component are provided and billed by different entities, the two providers may determine who will pay for transcription costs.

The OIG highlighted that both the Clinic and radiology practice are referral sources for the Hospital, and the Clinic is a referral source for the radiology practice. Under the AKS, when a party in a position to benefit from referrals provides remuneration to a referral source, including the relief of administrative expenses, there is risk that such remuneration is to influence referrals.

First, the OIG determined that no remuneration passed from the Hospital to the Clinic, as the Hospital billed the radiology practice for transcription services, the Hospital is entitled to reimbursement for such services, and it is logical that the Hospital would bill the radiology practice for these services.

Second, since the Clinic would not pay for transcription costs, the OIG determined whether the radiology practice's payment for such costs constituted remuneration from the radiology practice to the Clinic. The OIG stated that if the transcription costs were reimbursed solely under the technical component, the risk of prohibited remuneration under the AKS would be substantial. However, given CMS' position that Medicare's payment for both the technical component and professional component includes reimbursement for indirect expenses, and to the extent these expenses include transcription costs, the parties both receive reimbursement for the same expense and thus the risk of prohibited remuneration between the parties arises when one party bears the costs instead of the other. Despite this risk, the OIG determined that prohibited remuneration would not pass between the radiology practice and Clinic. The OIG's decision was based on the fact that Medicare's Payment Conditions for Radiology Services state with regard to the professional component, "[t]he interpretation of a diagnostic procedure includes a written report." Thus, since the written report is part of the professional component, the radiology practice's payment for transcription of its own reports would not constitute remuneration to the Clinic.

Wachler & Associates represents healthcare providers, suppliers and other individuals nationwide in substantially all areas of health law, including compliance with the AKS, the federal Stark law, and other federal and state laws related to healthcare fraud and abuse. Our firm regularly structures arrangements to comply these laws and other regulatory guidance. If you or your health care entity has any questions related to the AKS, Stark law, or any other authorities governing relationships between healthcare providers and referral sources, or healthcare regulatory compliance in general, please contact an experienced health law attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

February 16, 2016

OCR Releases New HIPAA Guidance for Health App Developers

On February 11, 2016, the Department of Health and Human Services, Office for Civil Rights ("OCR"), released important guidance on its Developer Portal to address the application of the Health Insurance Portability and Accountability Act ("HIPAA") regulations to developers of mobile health apps. Whether a mobile app developer is directly employed by a covered entity (i.e., health plans, health care clearing houses, and most health care providers) or a business associate of a covered entity (or one of the covered entity's contractors), reasonable safeguards must be applied when the developer creates, receives, maintains or transmits protected health information ("PHI") on behalf of a covered entity or other business associate.

The OCR guidance provides "Key Questions" for app developers in determining whether or not they may be a business associate of a covered entity. In addition, the OCR guidance provides several factual scenarios to further assist app developers in determining whether they are considered a business associate. Below are two of the scenarios included in the OCR guidance, one in which the developer would not be considered a business associate and one where the developer would be considered a business associate.

Scenario: Consumer downloads a health app to her smartphone. She populates it with her own information. For example, the consumer inputs blood glucose levels and blood pressure readings she obtained herself using home health equipment.

Business Associate? No. Developer is not creating, receiving, maintaining or transmitting PHI on behalf of a covered entity or another business associate. The consumer is using the developer's app to help her manage and organize her information without any involvement of her health care providers.

Scenario: At direction of her provider, patient downloads a health app to her smart phone. Provider has contracted with app developer for patient management services, including remote patient health counseling, monitoring of patients' food and exercise, patient messaging, EHR integration and application interfaces. Information the patient inputs is automatically incorporated into provider EHR.

Business Associate? Yes, the developer is a business associate of the provider, because it is creating, receiving, maintaining and transmitting PHI on behalf of a covered entity. In this case, the provider contracts with the app developer for patient management services that involve creating, receiving, maintaining and transmitting PHI, and the app is a means for providing those services.

While OCR acknowledges that the scenarios provided in the guidance are fact and circumstance specific, the information contained in the guidance provides a valuable starting point for mobile app developers in determining whether they are subject to HIPAA regulations. If you have additional questions pertaining to HIPAA's application to you or your organization, or otherwise need assistance regarding HIPAA, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com.

December 7, 2015

CMS Proposes Rule Implementing Discharge Planning Requirements

The Centers for Medicare & Medicaid Services ("CMS") recently announced a proposed rule primarily aimed at discharge planning requirements for hospitals and other service providers, including home health agencies (HHAs).

As part of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT), hospitals, other inpatient facilities, and HHAs are required to develop an individual discharge plan for each patient based on a variety of factors, including individual patient needs. The proposed CMS rule would require these facilities and providers to develop discharge plans for patients within 24 hours of either admission or registration, as well as require that those plans be completed before the patient is discharged or transferred to another facility. In addition, providers and facilities would be required to provide discharge instructions to patients, enact a medication reconciliation process, and provide medical records to another facility if the patient is transferred.

As it specifically relates to HHAs, the proposed rule intends to impose several requirements that will affect HHA's processes for discharging or transferring patients. CMS explained that its purpose for the rule is to "...better prepare patients and caregivers to be active participants in self-care" and to "...focus on person-centered care to increase patient-participation in post-discharge care decision making." Examples of the proposals that CMS believes will help them reach these goals include, requiring the physician responsible for the home health plan of care to be involved in the ongoing establishment of the discharge plan, require that the discharge plan address the patient's goals and treatment preferences, require that the evaluation be included in the clinical record and all relevant patient information available to or generated by the HHA to be incorporated into the discharge plan to facilitate its implementation. HHAs and other entities affected by the proposed rule must submit their comments on the proposals by January 4, 2016.

Wachler & Associates will continue to monitor CMS' proposed rule and other developments regarding the IMPACT Act and discharge planning. If you or your health care entity has any questions regarding compliance with the IMPACT ACT or this proposed rule, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. Subscribe to our health law blog to stay updated on the latest CMS news.

October 1, 2015

OMHA to Expand the Settlement Conference Facilitation Pilot

On October 15, 2015, the Office of Medicare Hearings and Appeals (OMHA) will be hosting an open door teleconference to discuss the expansion of its Settlement Conference Facilitation (SCF) Pilot. The pilot program was originally launched in July 2014 to provide an alternative dispute resolution process for eligible Medicare providers to settle appealed Medicare claim denials pending at the Administrative Law Judge (ALJ) level of the Medicare appeals process. Under the SCF pilot program, Medicare providers had the opportunity to enter into open settlement discussions with the Centers for Medicare & Medicaid Service (CMS) with the goal of coming to a mutually agreed upon resolution for the pending ALJ claims. Since the SCF pilot program's inception, the program was limited to providers that met specific eligibility criteria (e.g., the ALJ hearing must have been filed in 2013). However, OMHA appears set to expand the SCF program, which will be discussed in greater detail during the open door teleconference scheduled for October 15th at 1:00pm-2:00pm EST. Any parties interested in participating in the call should fill out the registration form and submit it no later than 5:00pm on October 14, 2015.

Wachler & Associates has already participated in multiple settlement negotiations on behalf of health care providers under the SCF pilot program. We will also be attending the open door teleconference to ensure our experienced attorneys are up-to-date on all matters related to the SCF program. If you or your health care entity needs assistance in pursuing the SCF program or appealing Medicare claim denials, or if you have any questions relating to the SCF program, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com.

September 25, 2015

Florida Hospital District Settles False Claims Act Allegations for $69.5 Million

The U.S. Department of Justice (DOJ) recently announced a $69.5 million settlement with the North Broward Hospital District (the "District") arising out of allegations that the District violated the federal Stark law and False Claims Act by entering into improper financial relationships with employed physicians.

The lawsuit alleged that the District provided compensation to nine employed physicians that exceeded fair market value for the physicians' services, and instead rewarded the physicians for their referrals of patients to the District. The compensation arrangements were alleged to violate the federal Stark law, which prohibits physician referrals of Medicare and Medicaid services to entities with which the physician has a financial relationship, unless an exception applies. Stark exceptions related to physician compensation and employment arrangements require, in addition to other requirements, that the physician's compensation is consistent with fair market value and not determined in a manner that takes into account the volume or value of the physician's referrals. By submitting claims pursuant to referrals that violated the Stark law, the District also submitted claims in violation of the False Claims Act.

The lawsuit against the District was originally filed by a whistleblower pursuant to the qui tam provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and share in the recovery. The whistleblower in this case brought the lawsuit after the District offered to employ him under terms that he believed may violate the Stark law. The DOJ announced that the whistleblower will receive over $12 million for his role in the case. The DOJ also announced that the recovery marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is a partnership between the U.S. Attorney General and U.S. Secretary of Health and Human Resources that has been instrumental in the government's recovery of $16 billion from fraud in the federal health care programs since 2009.

Wachler & Associates represents healthcare providers nationwide in a variety of health law matters, including compliance with the federal Stark law, Anti-Kickback Statute (AKS), and False Claims Act, as well as state laws governing healthcare fraud and abuse. Our attorneys have widespread experience structuring physician compensation arrangements to comply with Stark law exceptions, AKS safe harbors, and other regulatory requirements. If you or your health care entity have any questions related to healthcare fraud and abuse laws, or healthcare regulatory compliance in general, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

September 18, 2015

CMS Releases 2014 ACO Performance Results

Recently, the Centers for Medicare & Medicaid Services (CMS) released its 2014 quality and financial performance results for Medicare Accountable Care Organizations (ACO). According to CMS, overall, 353 ACOs - 20 Pioneer ACOs and 333 Medicare Shared Savings ACOs - generated a net savings of more than $411 million in 2014. In addition, 97 ACOs met their quality standards and savings threshold, qualifying them for shared savings payments of more than $422 million. According to CMS Acting Administrator Andy Slavitt, "These results show that ac countable care organizations as a group are on the path towards transforming how care is provided. . . . Many of these ACOs are demonstrating that they can deliver a higher level of coordinated care that leads to healthier people and smarter spending." According to CMS, some of the quality and financial performance results included:

  • Of the 20 Pioneer ACOs participating in 2014, 15 ACOs generated savings and 5 ACOs generated losses. Of the 15 ACOs that generated savings, 11 ACOs qualified for shared payments of $82 million due to them generating savings outside a minimum savings rate. Of the 5 ACOs that generated losses, 3 ACOs are paying $9 million in shared losses to CMS for generating losses outside a minimum loss rate.
  • Pioneer ACOs generated a total savings of $120 million, which equates to a 24% increase in performance from the $96 million of total savings in 2013. Further, the total model savings per ACO increased from $4.2 million per ACO in 2013 to $6 million per ACO in 2014.
  • Of the 333 Medicare Shared Savings ACOs, 92 ACOs held spending below their targets, qualifying them for their share in the $341 million in program savings as performance payments. An additional 89 ACOs reduced health care costs in comparison to their benchmark, but did not meet the minimum savings threshold necessary to qualify for shared savings.
  • ACOs that entered the Medicare Shared Savings Program in 2012 generated more shared savings than the ACOs that entered the program in 2013 and 2014 - 37% (2012) compared to 27% (2013) and 19% (2014).

Wachler & Associates will continue to stay up to date on all developments under Medicare's ACO programs. If you or your health care entity has any questions regarding Medicare's ACO programs, or any other health law questions, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

July 22, 2015

Office of Civil Rights Announces HIPAA Settlement Stemming from Use of Internet Applications

The U.S. Department of Health and Human Services (HHS), Office of Civil Rights (OCR), recently announced a settlement with St. Elizabeth's Medical Center (SEMC) over violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). SEMC is a tertiary care hospital located in Massachusetts. OCR's investigation began in November 2014, when OCR alleged that SEMC violated HIPAA's Privacy, Security and Breach Notification Rules. As part of the settlement, SEMC agreed to pay $218,400 and adopt a corrective action plan to address the deficiencies in SEMC's HIPAA compliance program.

On July 10, 2015, OCR released an HHS OCR Bulletin containing the allegations against SEMC, the parties' settlement agreement and SEMC's corrective action plan. OCR's investigation stemmed from a complaint against SEMC filed on November 16, 2012. The allegations pertain to SEMC's use of internet-based document sharing programs that contain electronic protected health information (ePHI). OCR found that SEMC used the internet-based applications without analyzing the privacy and security risks, as required by HIPAA. Further, critical to SEMC's liability under HIPAA, OCR alleged that SEMC "failed to timely identify and respond to the known security incident, mitigate the harmful effects of the security incident, and document the security incident and its outcome." The settlement agreement also covers a separate HIPAA breach that occurred in August 2014, when SEMC notified HHS of a breach of unsecured ePHI located on a personal laptop and USB flash drive.

The settlement between OCR and SEMC is predicated on SEMC's continued compliance with the settlement agreement's corrective action plan. As part of the plan, SEMC agreed to perform robust "self-assessment" to determine the SEMC's workforce members' knowledge of and compliance with SEMC policies and procedures regarding: transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; and security incident reporting related to ePHI. The self-assessment includes unannounced site visits to various SEMC departments, randomly selected interviews of SEMC workforce members, and inspection of portable devices that can access ePHI in the departments impacted by the breach. SEMC is also required to provide a report documenting its self-assessment to HHS within 150 days of the settlement.

The corrective action plan provides that if SEMC determines that its HIPAA compliance policies and procedures must be revised pursuant to the plan, or that SEMC's workforce is unfamiliar or not in substantial compliance with the policies and procedures, SEMC must submit any revisions to its policies and procedures for approval by HHS and also adopt "an oversight mechanism reasonably tailored to ensure that all SEMC workforce members follow such policies and procedures, and that ePHI is only used and disclosed as provided for by such policies and procedures." Finally, the corrective action plan requires further training of SEMC workforce members, specific timeframes regarding disclosure of reportable events, and document retention relating to compliance with the settlement agreement for six years.

This settlement demonstrates the importance of HIPAA compliance by covered entities and business associates, and the onerous and costly results that can result from non-compliance. It is critical to have well-drafted HIPAA-compliant policies and procedures that are communicated and enforced within you workforce.

Wachler & Associates drafts and implements HIPAA policies and procedures, as well as BAAs, on behalf of all types of health care providers. Our attorneys counsel HIPAA covered entities and business associates around the country in a variety of HIPAA matters, including investigations of and responses to breaches of PHI and ePHI. If you or your healthcare entity have any questions regarding HIPAA's Privacy, Security or Breach Notification rules, or otherwise need assistance regarding HIPAA, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com.

July 20, 2015

U.S. Court of Appeals for the D.C. Circuit Rules on Stark Law Regulations

In June, the U.S. Court of Appeals for the District of Columbia Circuit ruled on two regulations implemented by the Centers for Medicare and Medicaid Services (CMS) under the federal Stark law (Stark) in 2008. Following a challenge by the Council for Urological Interests (the Council), a urology trade association, the court rejected CMS' prohibition on per-click equipment rental leases but upheld CMS' new interpretation of "entity furnishing designated health services" and thus the prohibition against "under-arrangement" transactions.

Stark prohibits physicians from referring Medicare or Medicaid patients for designated health services to an entity with which the physician has a financial relationship unless an exception applies. An exception to Stark exists for equipment leases. Under CMS' 2008 regulation challenged by the Council, CMS barred per-click rental arrangements based on CMS' analysis that Congress did not intend to protect arrangements where the lessor's amount of income fluctuated based on the amount of patients referred by the lessor to the lessee. CMS claimed to base its determination to bar per-click equipment leases on a 1993 U.S. House of Representatives conference report (Conference Report).

The court reviewed CMS' per-click equipment lease prohibition under the two-step Chevron legal test used to determine whether a court must grant deference to a government agency's interpretation of a statute. First, the court determined that Stark did not forbid CMS from banning per-click leases, as the statute does not expressly permit per-click leases and also allows the Secretary of the U.S. Department of Health and Human Services (the Secretary) to impose, by regulation, other requirements as needed to protect against program or patient abuse. However, the court determined that the per-click ban failed under step-two of the Chevron analysis, as the agency's statutory interpretation was not permissible or reasonable in light of Congress's intent. The court's decision focused on the Conference Report cited by CMS. The Conference Report explained, "in reference to the rental-charge clause for the equipment rental exception, '[t]he conferees intended that charges for space and equipment leases may be based on...time-based rates or rates based on units of service furnished, so long as the amount of time-based or units of service rates does not fluctuate during the contract period.'" The court's decision highlighted how the Secretary's interpretation of the Conference Report had changed over time, pointing out that in 2001, the Secretary explained, "given the clearly expressed congressional intent in the legislative history, we are permitting 'per use' payments." The court found that the Conference Report makes clear that unit of service rates are what cannot fluctuate during the contract period, and noted that the Secretary's new interpretation of the Conference Report ignored the word "rates" completely. In rejecting the ban on per-click leases, the court stated that the agency's "jargon is plainly not a reasonable attempt to grapple with the Conference Report; it belongs instead to the cross-your-fingers-and-hope-it-goes-away school of statutory interpretation."

Separately, the court ruled in favor of CMS' new definition of an "entity furnishing designated health services." CMS had previously interpreted entity to only include the entity that billed Medicare for the service, whereas CMS' new interpretation expanded the definition to also include an entity that performs the designated health service whether or not that entity bills Medicare for the service. The new definition expands Stark's prohibition to certain joint ventures, or similar arrangements, where a physician or an entity in which a physician is an owner or investor, leases equipment to a hospital and refers patients to the hospital for procedures performed by the physician using the leased equipment. Whereas the physicians previously only needed to meet the Stark exception related to compensation arrangements, the new rule means that physicians with an ownership or investment interest in a group practice will not be permitted to refer patients to the hospital for these procedures unless an ownership or investment interest exception applies.

The court determined that the terms "provide" and "furnish" are used interchangeably in the statute, and that the Secretary's regulation was a reasonable construction of the statute and thus entitled to deference. The court found that CMS' change to the definition "furthers the purpose of the statute by closing a loophole otherwise available to physician-owned entities that would allow circumvention of the purpose of the Stark Law merely by having the hospital bill Medicare for the services." The court also found that the term "performs" as used in the definition was not impermissibly vague.

Overall, the court's decision impacts healthcare providers and compliance professionals who structure arrangements to be compliant with Stark exceptions. The court upheld CMS' prohibition of under-arrangement transactions that include designated health services. While the court struck down CMS' ban on per-click equipment rental leases, given CMS' clear intention, such leases will continue to be scrutinized by the Office of Inspector General (OIG). Providers should be aware that the per-click rate must always be fair market value for the equipment leased, and may not fluctuate over the term of the contract. In general, equipment rental leases should be consistent with all OIG guidance, including the OIG's guidance under the federal Anti-Kickback Statute (AKS).

Wachler & Associates represents healthcare providers in negotiating and drafting all types of agreements, including equipment rental leases and under-arrangements transactions with hospitals. Our attorneys regularly structure agreements to comply with Stark exceptions, AKS safe harbors, and other OIG guidance regarding Stark and the AKS. If you or your health care entity have any questions regarding equipment rentals or under-arrangement transactions, or other arrangements under Stark and the AKS, please contact an experienced health care attorney at (248) 544-0888 or via email at wapc@wachler.com.

July 16, 2015

U.S. Court of Appeals for the Fourth Circuit Upholds $237 Million Judgment Against Toumey Healthcare System

On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit upheld a $237 million verdict against Toumey Healthcare System ("Toumey) for violations of the federal Stark law ("Stark") and, consequently, the federal False Claims Act. The verdict marks the latest decision in the government's longstanding legal battle against Toumey, a community hospital in South Carolina, and serves as a reminder to healthcare providers of the significant liability that can result from compensation arrangements that fail to comply with Stark's safe harbor requirements.

In this case, the lower court determined that Toumey entered into part-time employment agreements with physicians that violated Stark. The agreements violated Stark's limitations on physician compensation arrangements by varying with, or taking into account, the volume or value of the physicians' referrals to the hospital. Under the False Claims Act, claims submitted for payment arising out of referrals prohibited by Stark constitute false claims, and subject providers to treble damages. In this case, the jury found that Toumey knowingly submitted 21,730 false claims, which amounted to $39.3 million in Medicare payments. The court awarded treble damages as well as other penalties.

The Fourth Circuit's decision analyzed Toumey's argument that since Toumey relied upon the advice of lawyers in determining that the compensation arrangements were permissible under Stark, Toumey could not have knowingly violated the False Claims Act. In rejecting this argument, the Fourth Circuit highlighted the fact that Toumey consulted with multiple attorneys, one of which raised serious concerns about the compensation arrangements, and that Toumey effectively lawyer-shopped for legal opinions that approved the employment contracts. Accordingly, the case should provide notice to providers to proceed with caution if they are contemplating obtaining multiple legal opinions in order to determine that an arrangement is compliant with health care fraud and abuse laws because of how the opinions may be scrutinized in hindsight.

The Court also upheld the lower court's award of damages and other penalties. The Court determined that the damages properly took into account all referrals by the physicians to the hospital, not just those referrals addressed by the impermissible compensation arrangements, and also that the $237 million verdict did not violate the Excessive Fines Clause of the Eight Amendment or the Due Process Clause of the Fifth Amendment. Further, in a technical discussion of how the compensation arrangements violated Stark, the Court cited testimony that compensation arrangements that pay a physician an amount greater than the physician's collections demonstrates that the arrangements are not fair market value and instead evidences that the hospital intends to reward the physician for the physician's referrals to the hospital. Toumey argued that the compensation arrangement did not, on its face, vary with the volume or value of referrals. The Court, however, agreed with the government, finding that under Stark, aggregate compensation cannot vary with the volume or value of referrals, or otherwise take into account the volume or value of referrals. In addition to the payments being above fair market value, the physician's referrals for personally performed services included a facility fee payable to the hospital and, as such, the productivity bonus in the compensation arrangement varied based on the amount of referrals to the hospital.

In general, the Toumey case highlights the complexity in analyzing physician compensation arrangement under Stark, and demonstrates the amount of liability that can attach to impermissible financial arrangements between physicians and health care entities to which the physicians' refer patients. Wachler & Associates continues to stay up to date on all legal developments under Stark, as well as state laws governing physician referrals. Our attorneys regularly analyze physician compensation arrangements and other contracts under Stark and other healthcare fraud and abuse laws. If you or your health care entity have any questions regarding Stark, physician compensation arrangements, or other healthcare laws governing the relationships between healthcare providers, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog to stay up to date on all developments in healthcare regulatory compliance by adding your email at the top right of this page.

July 9, 2015

Proposed Rule Shifts Medicaid Managed Care Enrollment Function to States

On June 1, 2015, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule revising the Medicaid managed care regulations. One of the key components of the proposed rule is the revision to the states' responsibilities relating to the screening and enrollment of network providers of managed care organizations (MCOs), prepaid inpatient health plans (PIHPs) and prepaid ambulatory health plans (PAHPs).

Specifically, the proposed rule provides that the state must enroll all network providers of MCOs, PIHPs and PAHPS (collectively, managed care entities (MCEs)) that are not already enrolled with the state to provide services to Medicaid fee-for-service (FFS) beneficiaries. The provisions would apply to all providers that order, refer or render health services in the context of Medicaid managed care to ensure these providers are appropriately screened and enrolled. As stated by CMS, the requirements contained in the proposed rule are to "ensure that there are no 'safe havens' for providers who, though unable to enroll in Medicaid FFS programs, shift participation from managed care plan to manage care plan to avoid detection."

While the screening and enrollment of network providers is currently a role performed by the MCE, CMS believes transferring this function to the state will eliminate the need for each MCE to perform duplicative screening activities. However, the proposed rule would not prevent the MCEs from carrying out their own provider screening beyond those performed by the state. In addition, the proposed system would enable states to apply the risk classification protocols to all providers that furnish services to managed care or Medicaid FFS beneficiaries, in which screened providers would be categorized as "limited," "moderate" or "high" risk, permitting site visits for moderate and high risk providers.

Even though the proposed rule would shift the screening and enrollment of network providers to the state, the rule would not require the network provider to also render services to Medicaid FFS beneficiaries. Finally, the proposed rule leaves unchanged the MCEs' duty to not discriminate against those providers that serve high-risk populations or specialize in conditions that require costly treatment.

Wachler & Associates will continue to monitor CMS' proposed rule and other developments in Medicaid managed care. If you or your health care entity have any questions regarding the Medicare, Medicaid, or managed care plan enrollment process, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. Subscribe to our health law blog to stay updated on the latest CMS news.