Wachler & Associates Health Law Blog

Published on: April 15, 2024

MDHHS Awards New Medicaid Health Plan Contracts

Earlier this month, the Michigan Department of Health and Human Services (MDHHS) awarded Comprehensive Health Care Program contracts for Michigan’s Medicaid health plans. Health plans administered under Michigan Medicaid provide access to healthcare services to nearly 2 million Michigan residents. In this recent award of health plan contracts, nine health plans submitted proposals. The awarded Medicaid contracts are expected to go into effect in October 2024 and carry terms of five years, with three, one-year optional extensions.

The Medicaid health plan contracts were awarded based on Michigan’s 10 Prosperity Regions as follows:

Region 1 – Upper Peninsula Prosperity Alliance: Upper Peninsula Health Plan, LLC.

Published on: April 11, 2024

Senators Request Audit of CMS Internal Oversight Processes

by Wachler & Associates, P.C.

On March 12, 2024, several senators wrote a letter to the Government Accountability Office (GAO) Comptroller General, requesting an investigation into the policies and procedures CMS has in place to prevent Medicare fraud, waste, and abuse. The senators noted that in 2022, GAO estimated there were $47 billion in improper Medicare payments with $1.7 billion being reclaimed, representing a 2.8% recovery rate.

The senators’ letter was likely prompted by a recent investigation from the National Association of Accountable Care Organizations (NAACOS), which uncovered an alleged fraudulent urinary catheter scheme. NAACOS discovered that ten medical device companies went from billing 15 patients for catheters to over 500,000 patients for catheters within a period of two years. This alleged scheme has been estimated to cost CMS over $2 billion and has garnered significant media attention. Of particular concern to the senators is the fact that NAACOS publicly commented on this issue prior to any announcements from CMS.

The senators noted that this alleged scheme highlights “critical vulnerabilities” within CMS’ fraud, waste, and abuse policies. To this point, they requested that the fraud prevention measures of the Medicare Fraud Strike Force, a team with representatives from the Department of Health and Human Services (HHS), Office of Inspector General (OIG), and Federal Bureau of Investigation (FBI), should be investigated by GAO in order to identify weaknesses and areas for improvement.

Published on: April 9, 2024

Providers Continue to be Subject to Wound Care Audits

by Wachler & Associates, P.C.

As we noted previously, Medicare providers of wound care services continue to be the target of audits by Medicare contractors. Wound care services typically involve the application of allografts, skin substitutes, and related products to promote healing and support recovery. Due to the generally high reimbursement rates and need for frequent reapplication of these types of products, the Medicare program views such products as a high risk for improper payments or alleged fraud. Providers who utilize these products for wound care services or who are subjected to audit should understand the contours of an audit and be aware of their rights in responding to an audit.

The Medicare Unified Program Integrity Contractors (UPICs), such as the CoventBridge Group or Qlarant, typically perform these audits. UPICs are charged with the primary goal of investigating instances of suspected fraud, waste, and abuse in Medicare or Medicaid claims. Historically, UPICs are quick to allege that a provider has committed fraud and deny claims for any supposed non-compliance with coverage or documentation requirements, regardless of how minor the perceived deficiency. Providers should be cognizant that a UPIC’s allegation of fraud or non-compliance may bring about significant adverse consequences, especially when such allegations are not disputed. These allegations may be addressed by a timely and well-developed appeal of claims denied by the UPIC.

Wound care services involving skin substitutes and similar products subject to audit are generally denied for reasons such as the following:

Published on: March 26, 2024

OIG Continues to Audit PRF Recipients

by Wachler & Associates, P.C.

A recent report by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) may signal even more scrutiny of healthcare providers who received funds from the Provider Relief Fund (PRF). As we have long predicted, while the PRF was intended as a financial lifeline for the country’s healthcare providers during the height of the COVID-19 pandemic, as the pandemic has cooled, it has become a minefield of compliance issues for healthcare providers and fertile ground for government auditors to demand repayments.

The PRF is a $178 billion fund created by Congress through the CARES Act to provide financial relief to healthcare providers during the COVID-19 pandemic. HHS subdivided the PRF into various general and targeted distributions and assigned the Health Resources and Services Administration (HRSA) to administer the PRF. These distributions were paid to providers in several waves between April 2020 and the present. While this infusion of cash was likely a welcome relief at the time, it came with strings attached. Some of these strings included restrictions on which providers were eligible to receive funds, restrictions on how providers could use the funds, and requirements to report on the use of the funds.

The recent OIG investigation looked at PRF payments made to 150 providers during the PRF Phase 2 General Distributions. The Phase 2 General Distributions required providers to apply for payments and submit documentation. HRSA reviewed these applications and calculated the payment amount to make to provider, mostly based on the provider’s patient care revenue as documented in the application. OIG asserted that, for 17 of the 150 providers it reviewed, HRSA had miscalculated amounts due and had overpaid the providers. OIG recommended that HRSA demand these providers return these funds and that HRSA review all other Phase 2 General Distributions for similar errors HRSA may have made.

Published on: March 21, 2024

CMS Expands 36-Month Rule to Hospices

by Wachler & Associates, P.C.

Hospice care has become an area of program integrity focus for the Centers for Medicare & Medicaid Services (CMS). Pursuant to that focus, CMS recently expanded the rules and scrutiny that it applies to hospices, including expanding the 36-month rule to apply to hospices.

The 36-month rule is a rule regarding changes of ownership in certain types of Medicare-enrolled entities. If an entity undergoes a change of majority ownership within three years of its initial enrollment in Medicare or within three years of its most recent change of majority ownership, the Medicare provider agreement generally cannot be transferred to the new owner. The new owner is generally required to enroll in Medicare as a new entity, including undergoing all site surveys, accreditations, and other requirements. In the absence of a new enrollment, the new owner will not be permitted to bill under the entity that it just bought. Purchases outside the 36-month window are generally not subject to this rule. Historically, the 36-month rule applied to home health agencies (HHAs). CMS has now expanded it to apply to hospices as well.

Further, CMS has redesignated some hospices as high-risk providers, subject to additional enrollment requirements. CMS classifies provider types based on the perceived risk that the provider type poses to the Medicare program. Hospices are generally in the “moderate risk” category, requiring a site visit on top of the standard enrollment screenings. However, in the recent rule, CMS designated newly-enrolling hospices and those reporting a new owner (5% or more) as part of the “high risk” category. All owners of newly-enrolled hospices and new owners of existing hospices will be required to submit fingerprints for a criminal background check. Note that a new hospice owner may be subject to “high risk” screening without implicating the 36-month rule depending on the nature of the purchase and how much of the ownership interest is transferred. Sales and purchases of Medicare-enrolled entities may also be subject to “change of ownership” or “change of information” requirements, again depending on the nature and amount of the transfer.

Published on: March 19, 2024

Michigan Medicaid Releases New Telemedicine Policy

by Wachler & Associates, P.C.

The use of telemedicine for patient care exploded during the COVID-19 pandemic. While telemedicine services were generally a limited and niche practice prior to the pandemic, social distancing measures, lock-downs, and fear of spreading the disease combined with a desire for widespread testing for the disease created a tremendous need for the use of telemedicine for the delivery of many kinds of healthcare services.

Government programs, like Medicare and Medicaid, and commercial insurance carriers, which had all long restricted the use of telemedicine, scrambled to change their rules to allow telemedicine services in the face of this need. Many of these changes were made in a temporary manner, to expire at the end of the pandemic, with permanent changes to be determined later. Throughout the pandemic, telemedicine services proved to be safe, effective, and convenient. Therefore, healthcare providers and patients generally concurred that permanent changes to telemedicine policies should allow more widespread use.

The Michigan Medicaid program recently released an important update clarifying its permanent, post-pandemic policies regarding which providers are authorized to render services via telemedicine under the Michigan Medicaid program. First, as a general rule, a healthcare provider must be licensed or otherwise authorized to practice in the state where the patient is located. Usually, this will include a Medicaid patient in Michigan and a provider located outside of Michigan. In this situation, the provider must be licensed in Michigan in order for the services to be reimbursed under Michigan Medicaid. Although not a condition of Michigan Medicaid, the provider should also be mindful of the licensing requirements of the state in which they are located, which may require that the provider be licensed there as well. Under limited circumstances, Michigan Medicaid may also cover telemedicine services provided by providers who are licensed in another state to Michigan Medicaid patients if the patient is in the state where the provider is licensed. In either case, the provider must be enrolled in Michigan Medicaid and also have the ability to refer the patient to another provider of the same type or specialty who can see the patient in-person when necessary.

Published on: March 12, 2024

Providers Receiving Repayment Demands for Provider Relief Fund Payments

by Wachler & Associates, P.C.

In response to the unprecedented challenges created by the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act established the Provider Relief Fund (PRF) as an effort to financially support the nation’s healthcare providers as they grappled with COVID-19. To achieve this goal, the Health Resources & Services Administration (HRSA) was tasked with administering the PRF program, and distributed hundreds of thousands of payments from the program’s $178 billion fund to healthcare providers of all types. However, even though providers may have used the PRF funds for permitted COVID-related purposes, many providers are increasingly being demanded to return the money, and being given little to no notice or information as to why.

In the early days of the COVID-19 pandemic, the first batch of disbursements under the PRF program were unsolicited and were deposited directly into providers’ bank accounts without prior application or notice. Providers had to quickly decide whether to return the funds, or to keep the money and agree to abide by the terms and conditions of the PRF program, despite not knowing at the time precisely what those terms were. Many providers that are being subjected to the current rash of repayment demands received PRF funds during the earliest distribution phases.

The repayment demands themselves and the processes available to dispute such demands present an entirely new set of complications and may often give the impression that a provider is being unfairly targeted for performing valuable healthcare services during a public health emergency. As the administrator of the PRF program, HRSA is supposed to initially notify providers of any alleged non-compliance with the PRF program terms and conditions. Usually, this is due to HRSA’s claim that a provider has not submitted the required reporting before the appropriate deadline or within the late reporting timeframe. Notably, providers are increasingly commenting that they are not receiving any notices regarding compliance with the PRF program or reporting requirements, or further, that they are later discovering such notices were sent to the wrong address.

Published on: February 29, 2024

Michigan State Medical Society Voices Concerns Regarding Corporate Practice of Medicine

by Wachler & Associates, P.C.

Late last year, the Michigan State Medical Society (MSMS) published a letter to the Michigan Attorney General (AG) voicing concerns about the influence of private equity on the practice of medicine and what MSMS referred to as widespread violations on Michigan’s prohibition on the corporate practice of medicine (CPOM). MSMS asked the AG to promptly investigate its concerns.

CPOM refers to the practice of medicine by a corporate entity, rather than an individual practitioner. That is, a corporate entity employs physicians and maintains the control that comes with employment. Many states prohibit the corporate practice of medicine or otherwise regulate what types of entities may employ physicians. The rationale is often a desire that medical decision-making remain with the physician and should not be influenced by a non-physician employer or by profit-driven investors. These regulations are the reasons that physician “employment” is often organized into physician groups or profession corporations.

In Michigan, with a few specific exceptions, entities that provide medical services generally must be organized as professional corporations (PCs) or professional limited liability companies (PLLCs) and must be owned by licensed professionals. A common business model is for a PC or PLLC to contract with an outside management services organization (MSO), which is not physician-owned, but may have financial resources or management expertise that the licensed owners of the PC do not have.

Published on: February 27, 2024

RAC to the Future: AI in Healthcare Audits

by Wachler & Associates, P.C.

Healthcare providers are starting to see the first claims audits based on analysis and determinations made by artificial intelligence (AI). Although the technology is new, many of the issues remain the same. Especially where the companies that develop AI-based audit tools sell these tools and services to commercial insurance companies, AI-driven audits increasingly resemble audits of Medicare providers and suppliers performed by the Recovery Audit Contractors, or RACs.

RACs are Medicare contractors charged by the Centers for Medicare & Medicaid Services (CMS) to identify overpayments and underpayments made to providers and to facilitate return of overpayments to the Medicare Trust Fund. Primarily, RACs accomplish this by conducting audits and issuing repayment demands. RACs are different from other types of Medicare contractors that conduct audits because RACs are paid on a contingency fee. That is, RACs received a percentage of any funds they extract from providers, making them significantly incentivized to deny claims and demand repayment even where there is no clinical or legal basis to do so.

Similarly, because few insurance carriers have developed sophisticated AI tools in house, they often contract outside technology companies to provide the AI audit tools, and often to conduct the audits themselves. These outside contractors are motivated to deny claims and identify alleged overpayments in order to retain the business of the insurance carrier. This motivation is further enhanced where the outside contractor is paid a percentage of the alleged overpayments that their AI tool identifies. Therefore, any provider should carefully scrutinize any such audit findings, much as they would scrutinize the findings of a similarly motivated RAC.

Published on: February 23, 2024

CMS Cautions MA Plans About Use of AI

by Wachler & Associates, P.C.

In the Medicare Advantage (MA) program, overseen by the Centers for Medicare & Medicaid Services (CMS), Medicare Advantage Organizations (MAOs) – typically private insurers – receive monthly payments from CMS. The MAOs then contract with healthcare providers and suppliers to provide services pursuant to multiple MA plans offered by the MAOs. With the rise of artificial intelligence (AI), many providers have expressed concern that MAOs are using AI tools to review claims, make coverage determinations, deny claims, and conduct audits with little to no human oversight.

CMS recently released its 2024 MA Final Rule and a set of accompanying frequently asked questions (FAQs). In these, CMS cautioned MAOs that, while an algorithm or software tool can be used to assist MA plans in making coverage determinations, it remains the responsibility of the MAO to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations by MA organizations are made. CMS emphasized that this included that MAOs make medical necessity determinations based on the circumstances of each specific individual including the patient’s medical history, physician recommendations, and clinical notes; and in line with all fully established Traditional Medicare coverage criteria (including established criteria in applicable Medicare statutes, regulations, National Coverage Determinations (NCDs), or Local Coverage Determinations (LCDs)), or with publicly accessible internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature.

CMS gave several examples of non-compliant use of AI by MAOs, mostly due to a lack of human, clinical oversight of the AI-driven tool and the implementation of its outputs. In an example involving a decision to terminate post-acute care services, CMS noted that an algorithm or software tool can be used to assist providers or MA plans in predicting a potential length of stay, but that prediction alone cannot be used as the basis to terminate post-acute care services. For those services to be terminated in accordance with MA regulations, the patient must no longer meet the level of care requirements needed for the post-acute care at the time the services are being terminated, which can only be determined by re-assessing the individual patient’s condition prior to issuing the notice of termination of services. Additionally, for inpatient admissions, CMS noted that algorithms or AI alone cannot be used as the basis to deny admission or downgrade to an observation stay; the patient’s individual circumstances must be considered against the permissible applicable coverage criteria.