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 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

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 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 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

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

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 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 Subscribe to our health law blog to stay updated on the latest CMS news.

July 7, 2015

New York Attorney General Settlement Provides Guidance for Medical Practice Management Companies

In June, the New York Attorney General announced a widespread settlement with Aspen Dental Management, Inc. ("Aspen Dental") based on the Attorney General's finding that the dental practice management company engaged in the unauthorized practice of dentistry and illegal fee splitting under New York law.

The Attorney General's investigation evidences enforcement of the corporate practice of medicine doctrine, which exists in many states and prohibits corporations owned by non-professionals from employing or otherwise contracting with physicians to practice medicine and charging for professional services, except in limited circumstances. In New York, like many states, the corporate practice of medicine doctrine emanates from prior court decisions, laws regulating professional corporations, and laws restricting the division of fees generated from professional services. The prohibition on the corporate practice of medicine is grounded in public policy concerns based on the principle that when a lay corporation holds a financial interest in a physician's profits, the entity has a direct interest in and ability to control medical decision-making and impact the quality of care provided to patients.

The Attorney General's announcement highlights the regulatory challenges faced by medical practice management companies that receive percentage of revenue compensation. In this case, Aspen Dental provided business support and administrative services to several independently owned dental practices. The Attorney General, however, determined that Aspen Dental held an impermissible level of control over the clinics, which included sharing in the clinics' profits, marketing the clinics under the Aspen Dental trade name, incentivizing or otherwise pressuring clinic staff to increase sales of dental services or products, implementing revenue-oriented scheduling systems, and the hiring and oversight of clinical staff. Additionally, the Attorney General cited Aspen Dental's control over the practice's bank accounts and implementation of non-competition and non-solicitation agreements that effectively prohibited the practices from competing with any other dental practice affiliated with Aspen Dental.

As part of the settlement agreement, Aspen Dental will pay a $450,000 civil penalty. Aspen Dental will also cease exercising control over the practices' professional decision making and not communicate directly with the clinics' staff regarding dental care, sales of services or products to patients, or the amount of revenue generated from the services or products. The company also will not employ clinical staff, nor place any limitations on the practices owners' practice of dentistry. Most importantly, Aspen Dental will no longer share in professional fees generated from the practice of dentistry by the clinics.

The settlement agreement provides guidance to medical practice management companies whom, in addition to providing business and administrative services, market medical practices and receive compensation based on a percentage of revenue. Physicians and management companies should always structure management agreements to comply with state fee splitting laws, the corporate practice of medicine doctrine, and other regulatory guidelines. For example, compensation of management companies should always be set at fair market value for commercially reasonable management and administrative services. Further, management companies should refrain from influencing professional decision-making in any way, and agreements with physician practices should reflect that all professional aspects of the practice remain the sole discretion of the practice. As state laws regarding fee splitting vary by state, a thorough analysis of each state's laws should be performed prior to engaging in any agreement where a non-professional shares in fees generated from professional medical services. Finally, medical practice management companies' marketing of medical practices may impact a fee splitting analysis under state law, and also raises additional concerns under federal and state anti-kickback laws.

Wachler & Associates represents medical practice management companies, as well as physician practices that contract with management companies. Our attorneys have experience structuring management agreements to comply with all federal and state laws, including fee splitting laws and the corporate practice of medicine doctrine, while at the same time furthering each client's business objectives. If you or your healthcare entity needs assistance in structuring a compliant medical practice management agreement, or if you would like more information regarding the New York Attorney General's settlement with Aspen Dental, please contact an experience healthcare attorney at 248-544-0888.

Our health law firm will continue to stay up-to-date on legal developments impacting physician practices and medical practice management companies. Please subscribe to our health law blog if you would like updates regarding the latest news in healthcare compliance.

June 30, 2015

CMS Proposes Revisions to Medicaid Managed Care Rules

Recently, on June 1, the Center for Medicare & Medicaid Services (CMS) published its long anticipated Medicaid managed care proposed rules. This is the first time CMS proposed revisions to the Medicaid managed care regulations since 2002. The proposed rules includes several measures intended by CMS "to modernize the Medicaid managed care regulatory structure in order to facilitate and support delivery system reform initiatives to improve health outcomes and the beneficiary experience, while effectively managing costs." Among other things, the proposed rule would make a number of changes designed to align Medicaid managed care operating standards with those used in other markets.

For example, the proposed rule includes modifications to the current regulations governing the grievance and appeals systems for Medicaid managed care. The goal is to further align and increase uniformity in the grievance and appeals systems with Medicare Advantage managed care plans and private health insurance and group health plans in order to make the process more consistent across markets. Of particular note, most capitated, risk-bearing forms of Medicaid managed care--whether full or partial risk--would be expected to offer an internal appeals process with specified time frames, with external appeal to the state Medicaid fair hearing process in the event of an adverse determination. The rule would introduce new appeals timeframes, timeframes for plan compliance with favorable beneficiary rulings, and would clarify the right of beneficiaries to introduce new evidence at each stage of appeal.

In addition, the proposed rule would require all states to offer a 60-day time period to request external review through a fair hearing (some states now allow a far shorter time period) and would clarify members' right to their case file, medical records, and other documents such as the plan documents used to conduct coverage determinations. The expedited appeal time frame would be tightened, as would notice and recordkeeping requirements. Simultaneously, the proposed rule would also require beneficiaries to exhaust internal appeals procedures before seeking a state fair hearing. This is a significant change since some states now allow beneficiaries to bypass the internal process.

Wachler & Associates represents healthcare providers and suppliers in a variety of healthcare law matters, including Medicaid audits and appeals. We will continue to monitor the Medicare & Medicaid Services (CMS) Proposed Rule and other developments in Medicaid. If you or your healthcare entity have any questions regarding Medicaid audits or appeals, please contact an experienced healthcare attorney at 248-544-0888 or via email at Subscribe to our health law blog to stay updated on the latest CMS news.

May 20, 2015

Bill Introduced to Reform the RAC Program

Recently, United States Representative Sam Graves introduced the bill HR 2156, otherwise known as the Medicare Audit Improvement Act of 2015. Currently pending, the Medicare Audit Improvement Act addresses the aggressive nature of recovery audit contractors ("RACs"). Since the beginning of the RAC program, contractors have been paid on a contingency fee basis, thus incentivizing them to find improper payments.

The Medicare Audit Improvement Act is intended to curb such practices. The bill would eliminate the contingency fee for RACs and replace it with a flat fee rate--similar to other Medicare integrity contractors. Additionally, the bill would reduce a RAC's payment at the end of each fiscal year if the RAC had a high overturn rate resulting from the Medicare appeals process. The bill defines a "high overturn rate" as 10% or more in a contract year. Under these circumstances, the RAC's payment would not only be reduced, but would also have increasing levels of reduction. The Center for Medicare and Medicaid Services ("CMS") would be required to calculate the fee reduction for each RAC within six months at the end of each contract year. CMS would have the discretion to determine how to apply the reduction to a RAC's fees--either a per-claim reduction or a reduction in the overall fee paid.

The Medicare Audit Improvement Act also includes a measure that would create a statutory exception for the timely filing requirements for Part B rebilling. Currently, hospitals are permitted to rebill denied Part A inpatient stay claims as Part B outpatient claims, but are required to do so within one year of the date of service ("DOS"). The exception would allow these denied Part A claims to be rebilled under Part B within 180 days after a final determination by the contractor or 180 days following the exhaustion of the provider's appeal rights.

Lastly, the Medicare Audit Improvement Act would implement statutory language that limits a RAC's scope of review for inpatient hospital claims to only the information that the admitting physician had at the time the admission decision was made. Historically, RACs often rely on information gathered after the admission decision to argue that the admission was not medically necessary (e.g., RACs will cite the fact that there were no complications during the hospital stay).

Wachler & Associates will continue to monitor the Medicare Audit Improvement Act as it moves through the legislative process. Subscribe to our health law blog to stay updated on the latest RAC news. Wachler & Associates regularly defends providers against audit claim denials, and counsels entities on the best practices for proactively preparing for an audit. If you or your entity needs assistance in appealing Medicare claim denials, please contact an experienced healthcare attorney at 248-544-0888 or email at

May 19, 2015

Senate Finance Committee Examines Medicare Appeals Backlog

On April 28, 2015, the U.S. Senate Finance Committee held a hearing to address the rising Medicare appeals claims backlog. At the hearing, Nancy Griswold, Chief Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA), blamed the backlog on a lack of funding and an unprecedented amount of appeals. ALJ Griswold stated that the average processing time for each claim has soared to 550 days, more than quadrupling over the past five years. There are currently over 500,000 Medicare appeals pending review.

While appeals continue to stack up, OMHA's budget was increased from $69 million to $82.3 million over the past fiscal year (FY). Additionally, OMHA's staff has expanded from 492 employees to 514 employees for the same FY. However, ALJ Griswold claimed that this boost in resources is still not enough. In FY 2013, OMHA received 700,000 claims, which represents an astonishing increase from the 60,000 claims received just two years prior. Despite the staggering amount of claims, only 60 officers are assigned to handle cases.

Although Senate Finance Committee Chairman Orrin Hatch acknowledged the importance of preventing improper Medicare payments, he emphasized the seriousness of the backlog is due to the "insurmountable increase in appeals." Senator Hatch also noted that 60 percent of appeals are found in favor of defendants, and questioned how initial decisions are being made and whether providers are facing undue burdens.

At the hearing, ALJ Griswold urged senators to support President Obama's proposed budget, which would increase OMHA's budget by approximately $300 million. OMHA reported that the funding would be allocated towards doubling the office's capacity to process cases. In the alternative, ALJ Griswold suggested a refundable filing fee to prevent providers from filing claims just to "game the system." In support of ALJ Griswold, Sandy Coston, CEO of Medicare administrative contractor Diversified Service Options, suggested that CMS could reform the initial level of appeals in order to streamline access to subsequent appeals levels. Although Senator Hatch did not offer any endorsements, he continued to express the seriousness of the backlog in appeals and its detrimental effect on the Medicare system.

Wachler & Associates continues to monitor the OMHA appeal backlog, and our attorneys have attended two OMHA Medicare Appellant Forums hosted by OMHA and CMS in Washington D.C. Although we support the various initiatives and pilot programs presented by OMHA, we agree with ALJ Griswold that a significant increase in OMHA resources is needed to address the appeal backlog.

Despite the appeal backlog and processing time, Medicare providers and suppliers must continue to appeal Medicare contractors' overpayment determinations and preserve their appeal rights. Wachler & Associates represents healthcare providers and suppliers in a variety of healthcare matters, including appeals of Medicare overpayment determinations at all levels of review. If you or your healthcare entity have any questions regarding the Senate hearing, or seek help in defending an overpayment demand by a recovery audit contractor (RAC), please contact an experienced healthcare attorney at 248-544-0888 or via email at To remain up-to-date on healthcare regulatory developments, please subscribe to our blog by adding your email address in the window on the top right of this page.

April 28, 2015

Proposed Stage 3 Meaningful Use Rules

On Friday March 20, 2015, the Centers for Medicare & Medicaid Services ("CMS") announced the release of the new Stage 3 meaningful use proposed rules. Concurrently, the Office of the National Coordinator for Health Information Technology ("ONC") released its new EHR certification requirements, which are linked to its previously released interoperability roadmap. CMS says that the new rules "will give providers additional flexibility, make the program simpler, and drive interoperability among electronic health records, and increase the focus on patient outcomes to improve care."

With the announcement of the new rules came the release of the two proposals: one outlining the Stage 3 meaningful use requirements for hospitals and providers and one outlining the new EHR certification requirements. The proposed Stage 3 meaningful use rule is intended to specify the meaningful use criteria that eligible professionals, eligible hospitals, and critical access hospitals must meet in order to qualify for Medicare and Medicaid EHR incentive payments and avoid downward adjustments under Medicare for Stage 3 of the EHR incentive program. According to the summary of the proposed rule, it would continue to encourage submission of clinical quality measure ("CQM") data for all providers where feasible in 2017, propose to require the electronic submission of CQMs where feasible in 2018, and establish requirements to transition the program to a single stage for meaningful use. Also, the Stage 3 proposed rule, according to CMS, would change the EHR reporting period so that all providers would report under a full calendar year timeline with a limited exception under the Medicaid EHR Incentive Program for providers demonstrating meaningful use for the first time.

In the proposed rule regarding EHR certification requirements, CMS introduces a new edition of certification criteria, proposes a new 2015 Edition Base EHR definition, and proposes to modify the ONC Health IT Certification Program "to make it open and accessible to more types of health IT and health IT that supports various care and practice settings." It would also establish the capabilities and specify the related standards and implementation specifications that Certified EHR Technology ("CEHRT") would need to include to, at a minimum, support the achievement of meaningful use by eligible professionals, eligible hospitals, and critical access hospitals under the Medicare and Medicaid EHR Incentive Programs when such edition is required for use under these programs.

The Department of Health & Human Services ("HHS") Secretary, Sylvia Burwell, stated that, "[t]he steps we are taking today will help to create more transparency on cost and quality information, bring electronic health information to inform care and decision making, and support population health."

CMS will make additional changes to the meaningful use rules in 2015 that will include instituting a shorter reporting period: moving from the current one year period down to ninety days. Patrick Conway, the acting principal deputy administrator and chief medical officer at CMS, confirmed this notion, stating that, "in an effort to make reporting easier for health care providers, we will be proposing a new meaningful use reporting deadline soon."
CMS is seeking comments on the proposed Stage 3 meaningful use rules and on the new EHR certification requirements until May 29, 2015.

Wachler & Associates will continue to monitor CMS rule making and guidance related to EHR meaningful use criteria, as well as other breaking healthcare news. Subscribe to our health law blog to stay up to date on the latest CMS rule making and guidance. If you need help understanding the meaningful use requirements or assistance with negotiating EHR contracts, please contact an experienced healthcare attorney at 248-544-0888 or email at

April 20, 2015

OIG Advisory Opinion Clarifies that Excluded Providers May Receive Payments for Services Performed and Billed by Practice Prior to Exclusion

On February 9, 2015, the U.S. Department of Health and Human Services Office of Inspector General (OIG) delivered an advisory opinion finding that a physician or provider previously excluded from participating in Medicare, Medicaid, and all other federal health care programs was permitted to share in federal payments with his former medical practice when the payments were based on services furnished prior to the individual's exclusion even though payment was received by the practice after the exclusion. The Petitioner sought guidance from the OIG as to whether sharing in these payments with the practice would violate the terms of the Petitioner's exclusion from federal health care programs and would potentially subject the Petitioner to additional administrative sanctions or other liability.

The Petitioner was a physician who was prohibited from participating in all federal health care programs for 20 years under the terms of a criminal plea and civil False Claims Act settlement (Settlement). The Settlement resolved various allegations of fraud against the Petitioner and required the Petitioner to divest all his ownership in the medical practice. The divestiture was ultimately accomplished through an asset purchase agreement between the Petitioner and specified buyers. The asset purchase agreement was executed shortly after the effective date that Petitioner became an excluded provider under the terms of the Settlement, which prohibited his or her participation in federal health care programs. Under the terms of the purchase agreement, the Petitioner was permitted to share in a portion of the Practice's returns after the Petitioner divested his or her ownership in the Practice as long as those payments were for services that the Petitioner or Practice provided to patients and billed to federal health care programs before the Petitioner became an excluded provider.

The OIG's February 9th, 2015, advisory opinion began its analysis by citing federal statutes that prohibit payment by all federal health care programs for items or services furnished: (1) by an excluded provider; or (2) at the medical direction or under the prescription of an excluded person. The effects of becoming an excluded provider was not elaborated upon in the February 9th advisory opinion, however the OIG more fully addressed and explained the effect of provider exclusions in its May 8, 2013, Special Advisory Bulletin titled "Effect of Exclusion from Participation in Federal Health Care Programs."

The February 9, 2015 advisory opinion warns that an excluded provider may be subject to civil monetary penalties for every claim that the excluded provider submits, or that he or she causes to be submitted, during the period that the provider is excluded from the federal health care programs. The advisory opinion provides further clarification by explicitly stating that the prohibition on payments applies only to services or items provided by, or under the prescription of or at the medical direction of, an excluded provider on or after the date of exclusion. In sum, as the Petitioner sought to receive payments from the practice for services both furnished and billed before the effective date of exclusion, the OIG concluded that receiving those payments would not be grounds for imposition of civil monetary penalties or any other administrative liability.

April 17, 2015

FDA Gives Finalized Guidance on Medical Device Data Systems, Mobile Apps, and Medical Image Storage and Communications Devices

The Food and Drug Administration (FDA) issued non-binding guidance on February 9, 2015 finalizing its position on regulatory compliance of medical device data systems (MDDS), medical image storage and communications devices and mobile medical applications. In its recently issued guidance, the FDA explained that it will not enforce compliance with the regulatory controls that apply to MDDS, medical image storage devices and medical image communications devices because the devices pose a low risk to the patients and play an important role in the advancement of digital health care. Under FDA regulations, MDDS is defined as hardware or software that electronically transfers or stores medical device data, electronically converts medical device data from one format to another, or electronically displays medical device data. A medical image storage device stores and retrieves medical images and a medical image communication device electronically transfers medical image data between medical devices.

As a result of the FDA's position, manufacturers of MDDS or medical storage and communication devices will not have to register with the FDA, submit to pre-market review or post-market reporting, and can avoid quality system regulation, thereby saving manufacturers time and money. The FDA further stated that it will not enforce compliance with pre-market notification for MDDS, or medical image storage and communication devices that would have otherwise required such notification under the regulations.

Additionally, on February 9, 2015 the FDA issued non-binding guidance specific to mobile apps. The issued guidance contains three appendices that explain and provide examples of apps that are within FDA enforcement, outside of FDA enforcement, and those over which the FDA abstains from enforcing the regulations. The first appendix gives examples of apps that are not "devices" under FDA regulations; the second appendix gives examples of apps that may meet the definition of "device," but but regulations will not be enforced as the apps are considered low risk to patients and users; and the third appendix gives examples of what the FDA considers "mobile medical apps" over which the FDA does intend to enforce its regulations. The FDA defined "mobile medical apps" as apps that meet the definition of a "device" and are intended to be used as an accessory to a regulated device or are intended to transform a mobile platform into a device. In its guidance on mobile apps, the FDA stated many mobile devices do not fall under its definition of a "device" in 21 USC § 321(h) and are therefore not regulated by the FDA. The FDA did, however, strongly recommend that manufacturers of mobile apps that may qualify as a "device" follow the FDA's Quality System regulation in developing and designing apps. Lastly, while the FDA acknowledged that many current mobile apps do not constitute "devices" under FDA regulations, or are simply not regulated by the FDA, current and new mobile medical devices are subject to FDA enforcement.

In sum, the dually issued FDA guidance on MDDS, medical image storage and communication devices, and mobile apps in large part constitutes an abstention on behalf of the FDA, perhaps signalizing the FDA's recognition that strict enforcement of FDA regulations on MDDS, medical image storage and communication devices, and mobile apps will unduly burden manufacturers, slow the development of digital health care and fail to provide any greater protection to the public. However, mobile medical apps are subject to FDA regulation and enforcement and developers are encouraged to engage in open dialogue with the FDA to discuss potential regulatory requirements.

If you have any questions relating to MDDS, medical image storage and communication devices, or mobile application compliance with FDA regulations or any other compliance issues, please contact a Wachler & Associates attorney at 248-544-0888 or at For further updates on FDA regulatory requirements and other healthcare news, please subscribe to Wachler & Associates' health law blog by adding your email address and clicking "Subscribe" in the window on the top right of this page.