April 17, 2014

AHA Files Lawsuit Contesting the Two-Midnight Rule

With the "doc-fix" bill extending the enforcement delay of the two-midnight rule to March 31, 2015, the American Hospital Association (AHA) has decided to use that time challenging the new inpatient admission rules. Earlier this week, AHA filed a lawsuit in the United States District Court for the District of Columbia challenging the "arbitrary standards and documentations requirements" of the new inpatient admission rules which "deprive hospitals of Medicare reimbursement to which they are entitled."

Specifically, AHA is challenging the definition of "inpatient" under the two-midnight rule, alleging that CMS's "inpatient" definition requiring a patient to spend two nights in the hospital is arbitrary and capricious because it bears no resemblance to the actual definition of "inpatient" and CMS has made no attempt to explain is reasoning for adopting such a meaning. Additionally, AHA is challenging the Final Rule's application of the one year time limit to file a Part B claim when a Part A inpatient claim is denied as not being medically necessary and reasonable. Recovery audit contractors (RACs) typically conduct post-payment reviews of inpatient hospital admissions with dates of admission in which the one year rebilling deadline has already elapsed. Finally, AHA asserts that CMS's new requirement that all short-stay inpatient admissions include a physician order for admission as a condition of Part A payment is unlawful. Through its lawsuit, AHA seeks for the court to vacate and set aside the two-midnight rule, the one year time limit, and the physician order policy.

Wachler & Associates will continue to monitor the current AHAL lawsuit, as well as any further developments regarding CMS's new inpatient admission policies. If you have any questions pertaining to the two-midnight rule or the physician certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 14, 2014

OIG Finds Limited Compliance with Face-to-Face Home Health Requirements

In a report released on Thursday, April 10, the Office of the Inspector General ("OIG") found that, thus far, there has been limited compliance with the face-to-face documentation requirement for home health providers. As a result, the OIG determined that Medicare paid $2 billion to home health providers that should not have been paid. In an effort to increase compliance with the face-to-face requirement, the OIG has outlined specific recommendations that CMS could implement which would impact home health providers. The OIG's findings and recommendations should serve as an alert to home health providers to carefully review their compliance with face-to-face encounter documentation requirements.

The Patient Protection and Affordable Care Act ("ACA") included language that established the face-to-face encounter requirement. Although initially scheduled to be effective January 1, 2011, the Centers for Medicare and Medicaid Services (CMS) delayed implementation until April 1, 2011.

The face-to-face encounter documentation requirement provides that for initial certification periods only, a home health agency must obtain documentation from the certifying physician that the physician had a face-to-face encounter with the patient. The face-to-face documentation must be signed and dated by the physician. It must include the date the encounter occurred, and include a brief narrative that describes why the patient is homebound and why the skilled services are medically necessary to treat the patient's illness or injury. A home health agency's reimbursement for the home health services for an initial certification period is dependent upon the certifying physician's proper documentation of the face-to-face encounter.

The study conducted by the OIG examined Part A home health claims from January 1, 2011 through December 31, 2012 in an effort to determine the extent to which certifying physicians documented face-to-face encounters with beneficiaries. Based on the study, the OIG concluded that compliance with the face-to-face requirement has been limited and inconsistent. Specifically, the OIG concluded that mandated documentation did not meet Medicare requirements for 32% of home health claims that required face-to-face encounters which, according to the OIG, resulted in $2 billion in payments that should not have been made. The OIG further noted that face-to-face documentation was missing in 10% of claims, which totaled $605 million in payments that should not have been made. Lastly, the OIG found that of the face-to-face documents that were submitted, 25% of the documents were missing one of the required elements, usually the signature of the certifying physician.

The OIG also noted that physicians inconsistently completed the narrative content portion of the face-to-face documentation and that CMS oversight over the face-to-face documentation requirement was minimal because CMS does not have a specific program to oversee compliance with the requirement.

In an effort to increase compliance with the face-to-face documentation requirement, the OIG recommended the following policies be implemented:

  • CMS should consider requiring the use of a standardized form that includes all elements required for face-to-face documentation to serve as a default. The OIG notes that this should not be an onerous mandate.
  • CMS should develop a strategy that encompasses formal training and outreach to providers about the importance of compliance with face-to-face documentation.
  • Lastly, the OIG recommends that CMS work with the payment contractors to develop new review procedures to ensure compliance with the requirement of face-to-face documentation. The OIG notes that this is especially important given CMS's plans to implement the face-to-face requirement for durable medical equipment.

The OIG's report and recommendations reaffirm our experience that Medicare contractors are focusing more intently on home health agencies' compliance with the face-to-face encounter documentation requirements. Although compliance is dependent upon the certifying physician's documentation, it is vital that home health agencies review records for initial certification periods for face-to-face encounter documentation that meets the requirements. Specifically, home health agencies should review the narrative portion of the face-to-face encounter documentation to confirm that it sufficiently describes the beneficiary's homebound status and the reasons supporting the medical necessity of the skilled services. The brief narrative section of the face-to-face encounter documentation is the most subjective component to the documentation requirement and, therefore, many contractors deny payment for entire episodes of care based on the fact that the brief narratives are insufficient. In order to try to prevent these initial denials and/or have success challenging the denials during the Medicare appeals process, it is very important that the face-to-face encounter's brief narrative meets the stated objectives.

Wachler & Associates will continue to monitor any further developments regarding the face-to-face documentation requirement. If you have any compliance questions pertaining to the face-to-face encounter or other home health audit risk areas, or need assistance in defending claim denials during any stage of the Medicare appeals process, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 8, 2014

Moody's Report: Two-Midnight Rule to Weaken Hospital Profitability

On Wednesday, March 12, Moody's Investor Services released a report predicting that Medicare's new inpatient admissions policy, the "Two-Midnight rule", will negatively affect hospitals' bottom lines. The Two-Midnight rule instructs physicians and hospitals to use a two-midnight benchmark and order admission for patients expected to require hospital care crossing at least two midnights.

The Moody's report stated that "on average, the [Two-Midnight] rule could cause revenue reduction averaging $3,000 to $4,000 per case." The report suggests that these reduced reimbursement rates will be especially devastating since the cost of treating patients will remain the same. The report also suggests that the Two-Midnight rule will expedite the already increasing trend of more outpatient observation stays, which will put more pressure on hospital revenues. The impetus for this increasing trend of outpatient care observation stays has been the frequent challenges by RACs to the medical necessity requirement of short-stay admissions.

The report also concludes that under the Two-Midnight rule, hospitals with shorter lengths of stay will be most affected. The hospitals that are expected to be most affected are classified as 'low acuity' community hospitals. While these types of hospitals tend to have a larger number of cases resulting in shorter hospital stays, these stays typically still consume a large of amount of resources, such as diagnostic testing.

The report also concludes that smaller hospitals with less integrated medical staffs and less resources can expect to struggle in adapting to the new rule. The decision to hospitalize a beneficiary is a complex medical decision made by the physician in consideration of various risk factors, including the beneficiary's age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical decision of whether length of stay for medically necessary hospitalization is expected to surpass two-midnights and the physician should explain in detail in a beneficiary's medical records why the expectation of the need for care spanning at least two-midnights was appropriate in the context of that beneficiary's acute condition. Patients that are expected to be in the hospital for more than two-midnights, but are subsequently discharged early will qualify for inpatient reimbursement so long as the admitting physician properly documents that the admission was initially warranted. Smaller hospitals that are already stretched thin on physicians and support staff may find it much more difficult to satisfy these documentation requirements.

CMS, however, does not agree with the conclusions of the Moody's report. In its 2014 Hospital Inpatient Prospective Payment System (IPPS) Final Rule, CMS estimated that there will be about $220 million in additional expenditures from the net increase in hospital inpatient encounters.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 4, 2014

Two-Midnight Rule Enforcement Delay Extended to March 31, 2015

On April 1, 2014, President Barack Obama signed into law a bill (H.R. 4302) extending the enforcement delay of the two-midnight rule. Under the newly adopted law, Recovery Audit Contractors (RACs) will not conduct patient status reviews of inpatient hospital admissions on a post-payment basis until March 31, 2015. The two-midnight rule, which took effect October 1, 2013, provides that inpatient hospital admissions are generally appropriate when the physician expects the beneficiary will require medically necessary hospital services for 2 or more midnights. Since taking effect, hospitals' inpatient admission claims under the two-midnight rule have been free from review by the RACs.

Prior to the extended enforcement delay to March 31, 2015, the enforcement of the two-midnight rule was previously delayed by CMS to March 31, 2014, and again to September 30, 2014. Also extended to March 31, 2015 under the new law is the Medicare Administrative Contactors' (MACs) ability to conduct "Probe and Educate" reviews of a limited set - 10-25 claims depending on the size of the hospital - of inpatient admission claims for each hospital, which are conducted on a prepayment basis. When conducting "Probe and Educate" reviews, CMS has instructed the MACs to review hospital's compliance with the admission order requirements, the certification requirements, and the two-midnight benchmark.

Until March 31, 2015, hospital inpatient admissions under the two-midnight rule will be subjected only to a limited number of prepayment claim reviews by the MACs. Thus, for inpatient claims with dates of admission October 1, 2013 through March 31, 2015, the RACs will not conduct prepayment reviews, and both the RACs and the MACs will not conduct post-payment reviews.

The delay in the two-midnight enforcement does not mean hospitals should delay in implementing their revised admission policies to comply with the new inpatient admission rules. Failure to comply with the two-midnight rule, as well as the inpatient certification and order requirements, could result in the MACs conducting further "Probe and Educate" prepayment reviews with an increased claim volume (100-250 claims depending on the size of the hospital). Furthermore, the extended enforcement delay will not shield hospitals from CMS contractors where there is evidence of systematic gaming, fraud, abuse, or delays in the provision of care in an attempt to qualify for the two-midnight presumption.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or the inpatient certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 1, 2014

HHS to Conduct Pre-Audit HIPAA Surveys

On February 24, 2014, the Department of Health and Human Services' (HHS) Office for Civil Rights ("OCR") announced in the Federal Register that it plans to survey up to 1,200 organizations to identify candidates for audits under the Health Insurance Portability and Accountability Act (HIPAA) Audit Program. In accordance with the Health Information Technology for Economic and Clinical Health ("HITECH") Act, OCR is required to schedule periodic audits to ensure that covered entities and business associates are in compliance with HIPAA Privacy, Security, and Breach Notification Rules.

According to the notice, the survey will assess covered entities and business associates' "suitability" (e.g., size, complexity and fitness) for an audit by collecting information from these respondents such as "number of patient visits or insured lives, use of electronic information, revenue, and business locations." Although the total number of entities to be audited in 2014 is unclear, HHS expects that expanding the audit program to up to 1,200 organizations will provide a more accurate depiction of covered entities and business associates' compliance with HIPAA. HHS will be accepting comments regarding this pre-audit survey until April 25, 2014.

Since the inception of the HIPAA Privacy and Security Rules in 1996, Wachler & Associates has counseled providers and other covered entities of all sizes in HIPAA compliance. In order to attain compliance, providers should update security policies and procedures, business associate agreements, privacy policies and procedures, and HIPAA privacy notices. In addition, all employees should receive ongoing training in HIPAA compliance. If your entity does not already have these procedures in place, Wachler & Associates can help you implement these important compliance measures. If you have any questions or require assistance developing and implementing a HIPAA compliance plan for your organization, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

March 21, 2014

Fox 2 Detroit Interviews Wachler & Associates' Andrew Wachler regarding Beaumont, Botsford, Oakwood Merger

Wachler & Associates partner Andrew Wachler appeared on Fox 2 Detroit this morning to discuss the recent announcement that Beaumont Health System, Botsford Health Care, and Oakwood Healthcare have signed a letter of intent to form a new $3.8 billion nonprofit health system.

In his interview, Mr. Wachler described the advantages this affiliation will provide in improving patient care and accessibility. He indicated that it could allow patients access to each hospitals' various specializations and also allow the hospitals to share technology and capital resources, which in time has the potential to improve quality of care and reduce costs.

Mr. Wachler also explained that the Affordable Care Act, which includes the concepts of bundled payments and Accountable Care Organizations (ACOs), incentivizes large health systems to manage care efficiently, and may consequently result in a greater focus on wellness and preventive care.

To learn more about this story, please visit Fox 2 Detroit's website. Mr. Wachler originally appeared on the 11:00am news segment. Fox 2 will air a more comprehensive version of the story at 5pm.

March 11, 2014

Legislation Unveiled to Clarify Two-Midnight Rule

On Thursday, in a bipartisan effort, two senators unveiled a proposed bill that attempts to clarify the infamous two-midnight rule. Senator Robert Menendez, a Democrat from New Jersey and Senator Deb Fischer, a Republican from Nebraska are co-sponsors of the bill. Titled as Two-Midnight Rule Coordination and Improvement Act of 2014, the bill mirrors a similar one currently working its way through the House of Representatives and has the support of numerous hospital and doctor associations.

Most notably, the bill would require the Secretary of the Department of Health and Human Services to consult with interested stakeholders - such as hospitals, physicians, Medicare administrative contractors, recovery audit contractors, and other parties determined appropriate by the Secretary - to determine the criteria for short inpatient stays. Additionally, the bill would require CMS to develop a payment methodology for the shorter inpatient stays. Although, in developing the payment methodology, the bill does not require consultation with the same stakeholders used in developing the criteria for shorter inpatient stays, the bill strongly encourages CMS to consider the criteria that the stakeholders developed.

Equally important in the bill are the timing provisions relating to the implementation of the criteria for shorter inpatient stays. Most importantly, the proposed bill keeps the current enforcement delay in place. The bill would also provide an additional year long delay in the enforcement of the two-midnight rule if the criteria for shorter inpatient stays are not implemented during the IPPS annual notice and comment rulemaking process for fiscal year 2015. If the criteria are in place during the fiscal year 2015 rulemaking process (i.e., regulations are finalized in 2014), the bill authorizes RACs to begin their work at the time of implementation, but not prior to October, 1, 2014. This measure ensures that hospitals are not subject to audits until the criteria are made final.

The proposed bill should come as welcome news to hospitals and other affected providers who have been perplexed by the complexities of the ill-devised two-midnight rule. These complexities have resulted in delays of the rule's enforcement on several occasions. Menendez and Fischer hope that the bill provides doctors with the flexibility and ability to provide patients with the care their medical conditions require. Both Senators noted that in its current form the two-midnight rule fails to recognize that a hospital stay for less than two nights is medically necessary and the most prudent approach.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

February 28, 2014

Medicare to Re-Review Denials under the 2-Midnight Rule

On Tuesday, the Centers for Medicare and Medicaid Services (CMS) ordered its Medicare Administrative Contractors (MACs) to take a second look at all of the claims that the MAC denied under the Probe and Educate review process. These re-reviews are being done to ensure that the MACs' claim denials, and the education provided to the hospitals up to this point, is consistent with CMS's recent clarifications regarding the two-midnight rule and physician orders and certification requirements. During the re-reviews, if the MAC determines that its previous decision to deny the claim was improper, the MAC may reverse the denial and issue payment outside of the Medicare appeals process.

While the re-review process is in effect, hospitals should contact their MAC to determine whether a re-review has taken place. Until this confirmation is received, hospitals should not file a redetermination appeal request. CMS announced that it will waive the 120 day timeframe for filing a redetermination appeal for any redetermination requests received before September 30, 2014 for Probe and Educate denials that occurred on or before January 30, 2014. If a hospital has already filed an appeal for a claim denial on or before January 30, 2014, that claim will also be subject to a re-review by the MAC. Upon re-review, if the MAC upholds its original denial decision, that claim will be automatically transferred to a redetermination appeal.

Hospitals should welcome the news for these re-reviews. First, there is the possibility that healthcare providers will be reimbursed for claims that were improperly denied upon initial review. Secondly, the re-review process will be less formalistic, and thus less costly and time-consuming than the normal appeal process.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. In the meantime, hospitals should continue to ensure its admission and documentation protocols comply with the new inpatient admission criteria and certification and order requirements. If you have any questions pertaining to the 2-midnight rule or certification and order requirements, or if you think that your entity may have had some of its claims under the two-midnight rule improperly denied, please contact an experienced health care attorney at Wachler & Associates via phone 248-544-0888 or wapc@wachler.com.

February 26, 2014

Medicare Therapy Cap Exception Extended

On December 18, 2013, Congress enacted legislation extending the Medicare therapy cap until March 31, 2014. The 2014 outpatient therapy cap limits are $1,920 for physical therapy and speech-language pathology services combined, and $1,920 for occupational therapy services. In order to qualify for an exception to the therapy cap limits and continue to receive Medicare reimbursement, therapists must first document the need for medically reasonable and necessary services in the beneficiary's medical record and, separately, the therapist must indicate on the Medicare claim for services that the outpatient therapy services above the therapy cap are medically reasonable and necessary. Further, starting January 1, 2014, the Medicare outpatient therapy cap limits will also apply to therapy services performed in critical access hospitals.

Providers that meet or exceed the $3,700 threshold in therapy expenditures will be subject to a manual review. The manual review process for 2013 is not expected to change in 2014. Under the manual medical review process, Recovery Audit Contractors (RACs) will conduct either prepayment or postpayment review for claims exceeding $3,700 depending on the state. Currently, only Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri are subject to prepayment review, while the rest of the nation is subject to postpayment review.

A bill that is currently working its way through Congress seeks to permanently repeal the therapy caps. The Medicare Access to Rehabilitation Act has bipartisan support and its sponsors argue that an arbitrary cap on outpatient services without regard to clinical need discriminates against some of the most vulnerable and needy Medicare recipients.

Wachler & Associates will continue to monitor the situation and provide guidance on developments in Medicare therapy cap policy. If you or your health care entity need help developing compliance plans or reviewing and refining existing audit defense strategies, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com. If you would like to subscribe to the Wachler & Associates Health Law Blog, please add your email address and click subscribe in the window on the top right of this page.

February 20, 2014

RACs to Stop Requesting Medical Records from Providers

Recently, the Centers for Medicare and Medicaid Services (CMS) announced that, effective February 22, Recovery Audit Contractors (RACs) may no longer send additional documentation requests (ADRs) to providers for post-payment audits. In addition, February 28 is the last day a Medicare Administrative Contractor (MAC) may send prepayment ADRs for the RAC Prepayment Review Demonstration. According to CMS, this pause in ADRs is being implemented to allow the RACs to complete all outstanding claim reviews by the end of their current contracts. Furthermore, CMS stated that this pause will also allow CMS to continue to refine and improve the RAC program. This announcement was published less than a week after the Office of Medicare Hearings and Appeals (OMHA) Medicare Appellant Forum, which was held to address the current backlog of cases pending at the ALJ level of appeal.

It appears that, as a result of provider input as well as recent legislative participation, CMS is recognizing the challenges to providers of intense RAC scrutiny and withholding of payment without the corresponding appeal rights afforded under the statute. From this notice, we are hopeful that the ADRs will cease virtually immediately from the RACs and that, as of June 1, the MAC will not be able to effectuate offset for initial denials by the RACs. Hopefully, this will provide some needed relief to Medicare providers and give OMHA a chance to reduce its backlog so that, in the future, providers may receive due process in the timely manner that they are entitled to.

Wachler & Associates will continue to keep you updated on CMS's changes to the RAC program and appeals process. If you need assistance in your defense of a Medicare audit, or have questions pertaining to best practices for appealing to the ALJ, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com

February 18, 2014

CMS Revises Medicare Policy Manuals Clarifying that Improvement Standards are Not Required for Coverage

On January 15, 2014, the Centers for Medicare & Medicaid Services (CMS), issued revisions to their policy manuals, including the Medicare Benefit Policy Manual, that clarify that "Improvement Standards" are not required for determining claims for Medicare coverage involving skilled care, including skilled nursing facilities (SNF), home health (HH), and outpatient therapy (OPT) benefits. The purpose of these revisions is to comply with the January 24, 2013 Jimmo v. Sebelius settlement agreement which required clarification that coverage of skilled nursing and skilled therapy services "...does not turn on the presence or absence of a beneficiary's potential for improvement, but rather on the beneficiary's need for skilled care." Citing the agreement's justification, CMS noted that, no "Improvement Standard" is to be applied in determining Medicare coverage for maintenance claims that require skilled care. Medicare has long recognized that even in situations where no improvement is possible, skilled care may nevertheless be needed for maintenance purposes (i.e., to prevent or slow a decline in condition). The Medicare statute and regulations have never supported the imposition of an "Improvement Standard" rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient's condition. Thus, such coverage depends not on the beneficiary's restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves. The manual revisions serve to reflect and articulate this basic principle more clearly.

Included with the manual revisions, CMS took the opportunity to introduce additional guidance for appropriate documentation in facilitating accurate coverage determinations for claims involving skilled care. CMS noted that, "While the presence of appropriate documentation is not, in and of itself, an element of the definition of a 'skilled' service, such documentation serves as the means by which a provider would be able to establish and a Medicare contractor would be able to confirm that skilled care is, in fact, needed and received in a given case."

The manual clarifications fulfill the first step required of CMS in the Jimmo settlement agreement. The agreement also sets forth an educational campaign, in which CMS agreed to disseminate written materials to contractors, adjudicators, providers, and suppliers, and conduct national conference calls with providers and suppliers as well as Medicare contractors, Administrative Law Judges, medical reviewers, and agency staff, to communicate the policy clarifications and answer questions. CMS has also committed to engage in accountability measures to ensure beneficiaries receive the care to which they are entitled. Such measures include review of a random sample of SNF, HH, and OPT coverage decisions to determine overall trends and identify any problems, as well as a review of individual claims determinations that may not have been made in accordance with the principles set forth in the settlement agreement.

If you have any questions regarding the revised manuals, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

February 12, 2014

Andrew Wachler on Pre-coverage of the February 12, 2014 OMHA Medicare Appellant Forum

This morning, Andrew Wachler, managing partner of Wachler & Associates, appeared on RACmonitor's special coverage of the ALJ Appellant Forum taking place today in Washington. Mr. Wachler provided some context for the occasioning of this forum. "When you really look at the event," Andrew Wachler said, "it starts back in 2005." This was when the appeal system was changed to align Part A and Part B appeals. The change in legislation provided specialized administrative law judges, in an attempt to curb excessive wait times in the appeals process. The legislation imposed a statutory requirement to issue a response within 90 days of appeal filing. However, Mr. Wachler says, "the brunt of hearing requests have not been acted upon." In a conversation with Judge Nancy J. Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), Mr. Wachler had previously suggested the establishment of a committee of stakeholders to meet and discuss inefficiencies in the process. Judge Griswold suggested such a forum would occur, and today's event appears to be just that.

The main question today is whether the forum represents a meaningful attempt at reform and addressing the backlog, or whether it is merely meant to placate the providers. Mr. Wachler remains skeptically optimistic. However, while the forum today will provide some practical tips on navigating the ALJ appeals process, Mr. Wachler does not expect it to solve what he believes is a significant problem - "the holding of provider's money while we have these delays is unconscionable....people are being put out of business while they wait."

Mr. Wachler will be appearing again this afternoon on RACmonitor. Information on their special coverage of the ALJ Appellant Forum can be found here. If you have any questions regarding the information provided at the forum, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

February 11, 2014

FTC Reaffirms its Broad Authority in Regulating Private Healthcare Providers' Inadequate Data Security Programs

On January 16, 2014 the Federal Trade Commission (FTC) unanimously reaffirmed its broad authority to regulate a healthcare provider's data security program deemed inadequate by the FTC in protecting consumers from identity theft or misuse of personal information. The FTC held that a provider's program is inadequate if it fails to provide reasonable and appropriate data security measures. A company's failure to provide reasonable and appropriate data security measures falls within the purview of Section 5(a) of the FTC Act's prohibition of "unfair ... acts or practices." Further, the FTC held that HIPAA, HITECH, and other statutes do not restrict the FTC's authority under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), to challenge data security measures that it has reason to believe are unfair acts or practices.

The impetus for this ruling comes from an August 2013 complaint filed against LabMD, a clinical laboratory, alleging that LabMD failed to employ reasonable and appropriate measures to prevent unauthorized access to consumers' personal information, constituting an unfair act or practice in violation of Section 5(a) of the Act. LabMD moved to dismiss the FTC's complaint, arguing that the FTC had no authority to address private companies' data security programs under the Act, and that by enacting Health Insurance Portability and Accountability Act ("HIPPA") and other statutes, Congress implicitly restricted the FTC's authority to enforce the Section 5 of the Act in the field of data security. In denying LabMD's motion to dismiss, the FTC determined that nothing in the federal statutes reflected a 'clear and manifest' intent of Congress to restrict the FTC's authority over unfair data and security practices. Furthermore, the FTC held that "so long as the requirements of those statues do not conflict with one another, a party cannot plausibly assert that, because it complies with one of these laws, it is free to violate the other."

As the FTC reasserts its broad authority under the Act, healthcare providers should reexamine their data security programs to ensure that they adequately protect consumers' personal information in the event of an investigation by the FTC.

Since the inception of the HIPAA Privacy and Security Rules in 1996, Wachler & Associates has counseled providers and other covered entities of all sizes in HIPAA compliance. In order to attain compliance, providers should update security policies and procedures, business associate agreements, privacy policies and procedures, and HIPAA privacy notices. If your entity does not already have these procedures in place, Wachler & Associates can help you implement these important compliance measures. In addition, all employees should receive ongoing training in HIPAA compliance. If you have any questions or require assistance implementing a compliance plan for your organization, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

February 5, 2014

CMS Releases Proposed Rule Regarding Changes to the Medicare Part D Program for 2015

On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to the Medicare Prescription Drug Benefit (Part D) Program. The proposed changes, such as the "any willing pharmacy" contracting requirement, could significantly impact how Part D Prescription Drug Plan Sponsors operate and interact with their contractors, beneficiaries, and the government. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014.

The Proposed Rule provides a new interpretation of the non-interference provision in the statute relating to the Department of Health and Human Services (HHS) relationship with drug manufactures, pharmacies, and Sponsors. Since 2004, this statute has been interpreted to extend to negotiations between any of those parties. However, if the Proposed Rule is implemented, the non-interference provision would be interpreted as to apply only to pharmaceutical manufacturer's negotiations with pharmacies and Sponsors and would not apply to negotiations between Sponsors and pharmacies.

CMS also proposed a dramatic change to its interpretation and application of two statutory provisions: the provision establishing Sponsors' obligation to contract with "any willing pharmacy," and the provision allowing Sponsors to create tiered pharmacy networks. Historically, CMS has interpreted these two provisions as requiring Sponsors to include any pharmacy willing to meet the Sponsors' "standard" terms and conditions in the Sponsor's pharmacy network. Sponsors were still able to contract with a limited number of "preferred" pharmacies with alternate terms and conditions, such as lower cost-sharing obligations for covered Part D drugs. In the Proposed Rule, CMS suggests Sponsors who have "standard" and "preferred" pharmacies would be required to allow every pharmacy to have the opportunity to contract under the "preferred" terms and conditions, thus eliminating Sponsors' ability to develop exclusive arrangements with select business partners. Furthermore, any pharmacy offering "preferred" cost-sharing would be required to meet a price "ceiling" established by the Sponsor, which must be less than the lowest price (the "floor price") the Sponsor has with "standard" cost-sharing pharmacies. CMS also proposed that Sponsors require pharmacies contracting under the preferred terms and conditions to offer lower prices on all drugs in return for the lower cost-sharing.

CMS also proposed to create new criteria for determining categories of Part D drugs Protected Classes as required by Affordable Care Act (ACA) § 3307, as well as reduce the number of Protected Classes from six to four by CY 2015. CMS adopted two criteria to identify those Part D drug classes and categories that require protections beyond those offered by the Part D Program: 1) hospitalization, incapacity or death likely will result if access to a drug does not occur within seven days of the prescription being presented for dispensing; and 2) more specific CMS formulary requirements would not be sufficient to ensure access to drugs necessary to treat the disease or condition.

According to CMS proposes that anticonvulsants, antiretrovirals, and antineoplastics would meet both of the Protected Classes criteria, and so Sponsors' formularies must include all Part D drugs in these three classes. Furthermore, even though antipsychotics did not meet both of CMS's proposed criteria, CMS proposes to use its exception authority to create an exception to extend Protected Class status to antipsychotics for CY 2015. Conversely under the Proposed Rule, immunosuppressant and antidepressant drugs, both classes of which have been Protected Class designees since 2006, would not qualify for Protected Class status. This means Sponsors would not be required to include on their formularies every Part D drug in these classes, which has the potential to affect drug manufacturers, Plan Sponsors, Pharmacy Benefit Management Companies, pharmacies, and beneficiaries.

Other CMS proposals include a proposal to prohibit pharmacies that are affiliated with a Sponsor from waiving cost-sharing obligations under the plan benefit package, proposals for changes to mail order pharmacies, and a proposal to adopt more strict standards for new applicants to sponsor Part D Plans.

The Proposed Rule reflects several significant changes to prescription drug benefit administration especially with regard to the relationships between Sponsors, pharmacies, and CMS. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014. If you have questions regarding the Proposed Rule, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com

February 3, 2014

CMS to Further Extend "Probe and Educate" Reviews to September 30, 2014

Recently, the Centers for Medicare and Medicaid Services (CMS) announced that it has decided to extend the Inpatient Hospital Prepayment "Probe and Educate" reviews. The probe reviews, which were previously extended to March 31, 2014, have now been extended for dates of admission through September 30, 2014. During the probe reviews, Medicare Administrative Contractors (MACs) will continue to review and deny claims found not to be in compliance with the 2-midnight rule. These reviews will continue to be conducted on a prepayment basis, and the MACs will continue to provide education to hospitals throughout the "probe and educate" review process. During the probe review process, other Medicare contractors, including Recovery Audit Contractors (RACs), will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission between October 1, 2013 and October 1, 2014.

In an effort to provide updated information and additional clarification, CMS will host a follow-up Special Open Door Forum (ODF) on February 4, 2014 from 1:00 p.m. - 2:00 p.m. Much like the previous ODFs, interested parties will have an opportunity to ask questions regarding inpatient hospital admission, medical review criteria, physician orders and physician certification. You can participate in the ODF via conference call: Participant Dial-In Number: 877-251-0301; Conference ID: 47736519.

If you have any questions regarding the "probe and educate" reviews, physician orders and certification requirements, the 2-midnight rule, or medical review criteria, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.