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

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

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

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

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

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

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

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

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

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

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

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

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

  • The appellant must be a Medicare provider (for the purposes of this pilot, “appellant” is defined as a Medicare provider that has been assigned a National Provider Identifier (NPI) number);
  • A request for hearing must appeal a Medicare Part A Qualified Independent Contractor (QIC) reconsideration decision;
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The Department of Health and Human Services’ Office of Inspector General (“OIG”) recently released OIG Advisory Opinion No. 15-15, in which the OIG determined that an arrangement involving an acute care hospital (“Hospital”), radiology practice and family medicine clinic (“Clinic”) would not generate prohibited remuneration under section 1129B(b) of the Social Security Act, the Federal anti-kickback statute (“AKS”).

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

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

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

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

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

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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.

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

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

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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.