May 2011 Archives

May 31, 2011

Company Agrees to Settle Medicare Fraud Claim for $650,000

A sleep medicine and durable medical equipment company, Areté Sleep LLC, Areté Sleep Therapy LLC, and Areté Holdings LLC will pay a $650,000 settlement pursuant to federal authorities discovering the company to have submitted false claims to Medicare over a seven year span.

According to federal prosecutors, the false claims were for diagnostic tests performed by unlicensed/uncertified technicians. These licenses/certifications are required by Medicare rules and regulations. Areté filed for Chapter 11 bankruptcy in early 2011 and has agreed to pay the settlement with the proceeds from its asset sales.

If you have any questions or concerns regarding compliance with Medicare rules and regulations, or if you have questions regarding compliance issues associated with billing for sleep studies and related DME, please contact a Wachler and Associates attorney at 248-544-0888.

May 27, 2011

Recent ACO Updates

ACO Start-Up Costs

According to a study conducted by the American Hospital Association, the costs associated with starting an accountable care organization (ACO) range from $5.3 million to $12 million. The study was based on a review of the start up costs of four ACOs currently in existence. Additionally, it was discovered that the yearly operating costs in connection with the ACOs were equal to the start up costs, if not more.

The study highlighted several costs that were associated with starting an ACO. One of these costs was incurred by hiring staff to coordinate the ACO's activities, such as risk management professionals and workers hired to develop and manage a communication network between providers. Another start up cost incurred was that included in recruiting physicians, which ranged from $100,000 to $450,000 per physician. Next, the study found that ACOs spent nearly $3 million a year developing post-acute care networks (i.e. nursing homes, rehab services, and hospice care). Equally expensive were the costs associated with the implementation of EHRs, which cost up to $2.9 million along with an additional $2.5 million for starting up an HIE, plus annual operating costs.

CMS recently announced that it is considering an initiative that would advance a portion of the projected shared savings to ACOs to help with start up costs:

Senators Demand Revision of ACO Regulations

On Tuesday, May 24, seven Senators wrote a letter to Health and Human Services (HHS) demanding that the proposed accountable care organization (ACO) regulations be rewritten. These regulations were created by the Obama administration in an attempt to drive providers to deliver better care while reducing a large volume of unnecessary costs.

This request was sparked by a vast number health care institutions who declared that the regulations which serve to reward them for the quality rather than quantity of care are unfeasible. One major problem that was alluded to was that the proposed regulations require strict quality improvements without offering the appropriate funds for health care facilities to change their current practices. Regulators announced that the proposed ACO regulations are open for public comment and, if deemed to be necessary, can be revised.

For assistance with interpreting the ACO Shared Savings program regulations, or for assistance with creating an infrastructure conducive to ACO participation, please contact a Wachler & Associates attorney at 248-544-0888

May 27, 2011

Recent RAC Updates

Over $365 Million in Improper Payments Identified By RACs Since October 2009

CMS recently reported that RACs have identified $312.2 million in overpayments from October 2009 through March 2011. During the same period, $52.6 million in underpayments were identified. While these figures are well below the over $1 billion in improper payments identified during the demonstration program, they are expected to increase. RACs are currently reviewing large numbers of DRGs in coding and medical necessity reviews and it is anticipated that these will result in identification of more improperly billed claims. The first quarter of 2011 accounted for $184.6 million in identified improper payments and these trends can be expected to continue for the foreseeable future.

CMS also released the top approved issue for each RAC region. The top issue for RAC Region A is Ventilator Support of 96+ hours; the top issue for RAC Region B is Extensive Operating Room Procedure Unrelated to Principal Diagnosis; the top issue for RAC Region C is Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Provided During an Inpatient Stay; and the top issue for RAC Region D is Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Provided During an Inpatient Stay.

RAC Audit of Hematology Oncology Providers' Infusion Claims Deemed Improper

Medicare carriers and Medicare Administrative Contractors (MACs) have different coverage policies for billing procedures involving infusions when the drugs infused were not billed to Medicare. The lack of a "J-code" for the infused drug does not guarantee that the procedure was billed improperly. Recoupment of an overpayment is improper if it is based solely on the lack of a J-code for the infusion procedure. Recently, a RAC and the physician regulatory issues team (PRIT) discussed this matter and determined that the proposed recoupment was improper and the recoupment was subsequently rescinded.

New RAC Issues Posted by DCS Healthcare, CGI and HealthDataInsights

DCS Healthcare, the RAC for Region A, has added 23 new medical necessity claims to its CMS approved list. The new approved issues include:

  • MS-DRG 329 major small and large bowel procedures with MCC;
  • MS-DRG 234 coronary bypass with cardiac catheterization without MCC;
  • MS-DRG 438 disorders of pancreas except malignancy with MCC.

These new issues are in effect for providers located in Pennsylvania, Washington D.C., New Jersey, Delaware, New York, Connecticut, Vermont, Maine, Massachusetts, New Hampshire, and Rhode Island.

CGI, the RAC for Region B, has added Diabetes; MS-DRGs 637-639 (DRGs 294-295) to its CMS approved list of issues. DCS Healthcare is the RAC for providers located in Indiana, Michigan, Minnesota, Illinois, Kentucky, Ohio and Wisconsin.

HealthDataInsights has added multiple issues to its CMS approved list. These issues include:

  • Medical Necessity Claims
    • DRG - 810 Acute inpatient hospitalization - major hematology immunological diagnosis;
    • DRG 934 - Acute inpatient hospitalization - full thickness burn without skin graft or inhalation injury;
    • DRG 541 - Acute inpatient hospitalization - osteomyelitis without CC/MCC
  • Part B Claims
    • Add on codes with denied primary code-by clinical laboratory;
    • Add on codes with denied primary code for professional services;
    • Add on codes paid without required primary code by ambulatory surgery center (ASC).
  • Part A inpatient claims
    • Source of admission code for acute inpatient psychiatric facility (IPF)

HealthDateInsights is the Region D RAC contractor which includes providers located in Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam American Samoa and Northern Marianas.




If you are the subject of a RAC audit, or are concerned about your current compliance program and procedure, please contact a Wachler & Associates attorney at 248-544-0888.

May 26, 2011

OIG Reports that CMS has made Duplicate Payments to Home Health Services

On May 16, the Office of the Inspector General for the Department of Health and Human Services released the report from its audit of physician therapy services provided during home health episodes. The report outlines the OIG's findings that the Centers for Medicare and Medicaid Services (CMS) made duplicate payments for the same home health services. Specifically, the payments for the same services were made to the physician under Medicare Part B and then to the home health agency under the Medicare home health prospective payment system (HH PPS). The OIG recommended that CMS eliminate duplicate payments by adjusting the HH PPS rate to exclude physician-provided therapy services or by making physician therapy services subject to the consolidated billing requirement. CMS has agreed with the OIG's recommendations and has indicated that it will take action to address the recommendation.

For more information on proper billing practices for home health services, please visit or contact a Wachler & Associates attorney at 248-544-0888.

May 26, 2011

Bill Passed Limiting Medical Malpractice Liability

As of April 20, 2011, a statement, writing, or action by a health care professional to an individual, or an individual's family, that expresses sympathetic feelings towards that individual's pain or death cannot be used against the professional in an action for medical malpractice. However, this bill does not apply to additional statements of fault or other culpable conduct. Click here to view the full version of the Act. If you have any questions or concerns about the legal effects of your actions, please contact a Wachler attorney at 248-544-0888.

May 25, 2011

All Four RAC Regions Have Recently Added Additional Issues Approved for Review in RAC Audits

DCS Healthcare: The Region A RAC added three new medical necessity claims to its approved issues list. These claims are:

  • Peripheral/cranial nerve and other nervous system procedures with MCC (MS-DRG 040);
  • ECMO or tracheostomy with MV 96+ hrs or PDX except face, mouth and neck with major O.R. (MS-DRG 003);
  • Skin graft and/or for skin olcer or cellulitis without CC/MCC

Providers located in Pennsylvania, Washington D.C., New Jersey, Delaware, New York, Connecticut, Vermont, Maine, Massachusetts, New Hampshire, Rhode Island are affected by these new approved issues.

CGI: RAC Region B has added three new medical necessity issues, four new DRG validation issues and four issues involving durable medical equipment (DME). The new approved issues include:

  • Medical necessity issues:
    • Acute inpatient hospitalization - surgical cardiovascular procedures MS-DRG: 246-254, and 263 - 265;
    • Acute inpatient hospitalization - diseases and disorders of the digestive system MS-DRGs 347 through 358 and 368 through 395;
    • Acute inpatient hospitalization - conditions of the circulatory systems MS-DRG: 286-293, 299-305, and 308-316.
  • DRG validation issues:
    • Burns: MS-DRGs 927-929 and 933-935 MDC 22;
    • Dental and oral diseases: MS-DRGs 157-159.
  • DME issues:
    • DME home glucose testing supplies;
    • DME water circulating heat pad with pump.

RAC Region B includes providers in Indiana, Michigan, Minnesota, Illinois, Kentucky, Ohio and Wisconsin.

Connolly Healthcare: Thirty new issues have been added to the approved issues list for RAC Region C providers. Examples of the new approved issues include:

  • DRG validation issues:
    • Hypertensive encephalopathies MS-DRGs 078 and 079;
    • Cranial and peripheral nerve disorders MS-DRG 074;
    • Radiotherapy.
  • DME issues:
    • Infusion supplies (A4221) - excessive units;
    • Ankle foot orthotic (AFO) and knee ankle foot orthotic (KAFO) custom fabricated versus prefabricated codes.

These new issues are applicable to providers in RAC Region C, which includes Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, North Carolina, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, Puerto Rico and the U.S. Virgin Islands.

HealthDataInsights: The Region D RAC has posted nineteen new issues for medical necessity reviews. These claims include:

  • Acute inpatient hospitalization - nutritional and miscellaneous metabolic disorders without MCC (DRG 641);
  • Acute inpatient hospitalization - minor skin disorders without MCC (DRG 607);
  • Acute inpatient hospitalization - poisoning and toxic effects of drugs without MCC (DRG 918);
  • Nutritional and miscellaneous metabolic disorders with MCC (DRG 640).

HealthDateInsights is the Region D RAC contractor which includes providers located in Alaska, Arizona, California, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, Wyoming, Guam American Samoa and Northern Marianas.

If you have any questions about the application of these approved new issues or any questions regarding RAC or Medicare audits, please contact a Wachler & Associates attorney at 248-544-0888.

May 25, 2011

CMS Issues Relaxed Telemedicine Rules

The Centers for Medicare and Medicaid issued a new rule that will make it easier for hospitals to use telemedicine when treating patients. The final rule, which takes effect sixty days following its publication, removes unnecessary burdens for hospitals and critical access hospitals (CAHs) to use telemedicine to serve patients in a timelier manner. These benefits will also reach rural hospitals and CAHs with limited access to primary care physicians and specialists.

Currently, any hospital or CAH that receives telemedicine services must undertake an extensive credentialing and privileging process for each physician or practitioner who will provide the telemedicine services to the patients. CMS concluded that its current requirements were often duplicative and unnecessarily burdensome, particularly for small hospitals and CAHs. It recognized that small hospitals and CAHs do not have access to a medical staff with the requisite clinical expertise to evaluate and privilege the various specialty physicians that could provide the hospital with telemedicine services. However, through the final rule, CMS will now permit hospitals and CAHs to implement a streamlined credentialing and privileging process for these telemedicine providers. Specifically, a hospital or CAH that provides telemedicine services to patients through an agreement with another hospital or telemedicine entity may rely on the information from that other entity when making credentialing and privileging decisions about the providers at the other site who will supply the medical services through telemedicine.

For any questions regarding compliance issues related to telemedicine services, please contact a Wachler & Associates attorney at 248-544-0888.

May 24, 2011

Survey Highlights Key Problems for EHR Switch

Over $30 billion has been set aside by the government to use for incentive payments in an effort to get health care professionals to switch to electronic records. One reason for the push towards electronic records is the ability exchange patient information between systems. As a way to efficiently capture this benefit, government-funded regional health information organizations (RHIOs) were established. These organizations sign up doctors and hospitals in a specific area and coordinate the transfer of electronic patient records between health care providers. However, a recent survey published in Annals of Internal Medicine shows that RHIOs' future looks to be uncertain as their financial viability appears to be a cause for concern.

The study surveyed 197 RHIOs, of which 165 returned the surveys. It was shown that only 75 of the RHIOs were currently operational, covering a mere 14% of hospitals and 3% of ambulatory practices in the United States. Moreover, only 13 of those RHIOs are able to conduct the necessary exchange of information that enable doctors to partake in receiving payments of the $30 billion that the government set aside in an effort to promote the electronic switch. Finally, only 67% of the currently operational RHIOs were found to be financially viable. The results of this study creates a concern of whether RHIOs can indeed be effective in assisting hospitals and physicians with the type of electronic information sharing that was intended to advance the quality of care for patients.

If you need help understanding the meaningful use requirements or assistance with negotiating EHR contracts, please contact a Wachler and Associates attorney at 248-544-0888.

May 24, 2011

EHR Incentive Payments Begin This Week

The ONC announced last Wednesday that the Medicare electronic health record (EHR) incentive payments will begin disbursement this week. The payments will be made to providers who have met all of the program conditions, including the meaningful use requirements.

Eligible participants can expect to receive a payment based on 75% of their total Medicare allowed charges. These allowed charges must be submitted no later than two months after the end of 2011. The maximum allowed charges used for the 2011 program are $24,000, meaning that the incentive payment will not exceed $18,000. However, the eligible participant must meet the $24,000 in total Medicare charges before any payments will be made to that participant. Finally, payments can be expected to be paid in the same manner as that participant receives other Medicare services (electronic funds or paper check).

If you need help understanding the meaningful use requirements or assistance with negotiating EHR contracts, please contact a Wachler and Associates attorney at 248-544-0888.

May 23, 2011

OIG Issues Unfavorable Opinion on Proposed Joint Venture

The Office of the Inspector General (OIG) issued an unfavorable advisory opinion with respect to a joint venture between a pharmacy and long term care facilities.

The proposed arrangement would include a long term care pharmacy incorporated in the requestor's market area. The owners of the long term care pharmacy would include an employee of the requestor and one or more long term care facility owners. The requestor provides services to long term care facilities and the employee is a pharmacist for the requestor and also serves as a consultant to long term care facilities.

Under the proposed arrangement, the long term care facilities and the employee would receive shares in this new company based on capital contributions and services provided. The newly incorporated pharmacy would enter into a contract with the requestor where it would pay the requestor a management fee for providing office space, day to day management of operations, inventory storage and billing services. The new corporation would not have any employees. Some of the products and services delivered to customers by the new corporation would be covered and reimbursed by federal healthcare programs.

The OIG highlighted certain elements that make this arraignment susceptible to Anti-Kickback violations. These elements include the fact that the long term care facility owners would be starting a business that was based on referrals from the long term care facilities and their income would be proportionate to the volume of referrals they provided; the long term care owners would have minimal financial risk because they controlled the amount of work being referred; requestor can provide all the services that the newly created company could provide and is in a position to do so; the management fee that the new company would pay to the requestor is contingent on the amount of referrals from the long term care facilities; and the requestor and the long term care facilities would share in the economic benefit of this new company.

The OIG concluded that this business arraignment could be a way to reward the long term care facility for providing referrals.

If you have any questions or concerns about any current or proposed business arrangements or Anti-Kickback related issues, please contact a Wachler & Associates Attorney at 248-544-0888 to discuss these issues.

May 23, 2011

Physicians Using EHRs Increased by 9%

The percentage of physicians in the United States using electronic health records (EHR) has increased by nine percent (20% to 29%) over the past twelve months. The push towards electronic records has been firmly supported by the current and previous presidential administrations. The Obama Administration aims to have at least 50 percent of Americans using EHRs by 2014 in an attempt to reduce health care costs and medical errors.

This month, the United States government will begin distributing incentive payments to hospitals and doctors who opt to use EHRs. These incentive plans could pay out as much as $31.3 billion. If health care providers meet government standards for the EHRs, they may be eligible to receive up to $44,000 over six years through Medicare and up to an additional $63,750 over five years from Medicaid. Additionally, the federal government plans to reduce Medicare reimbursements to health care providers who fail to make the electronic switch by 2015.

If you need help understanding the meaningful use requirements, HIPAA security or assistance with negotiation of EHR contracts, please contact a Wachler and Associates attorney at 248-544-0888.

May 17, 2011

Physician Convicted of Medicare Fraud for Violating the Anti-Kickback Statute

On May 4, 2011, the Seventh Circuit Court was faced with the issue of whether a doctor's actions violated the anti-kickback statute (United States of America v. Borrasi). Dr. Roland Borrasi was convicted of Medicare fraud after he accepted payments in the form of a salary from a psychiatric hospital in exchange for referring patients to the facility. Over a time period of three years, Borrasi and four other physicians were paid a sum of $647,204 for referring hundreds of patients to the hospital.

In an effort to conceal these bribes, the physicians were placed on the hospital's payroll, given false titles and job descriptions, and asked to submit false time sheets. Through testimonial evidence, the court found that the physicians were not expected to perform any duties listed in their job description. Moreover, the bribed physicians attended very few meetings, were rarely seen at the facility, and were not expected to perform any of their administrative duties. The facts of the case led the jury to find Borrasi guilty of Medicare-related bribery in violation of 42 U.S.C. § 1320a-7(b)(1).

On appeal, the Seventh Circuit denied Borrasi's argument for interpreting the statute. Borrasi argued the court to adopt a "primary motivation" rule, where a defendant shall be found not guilty if the primary motivation behind the payments was to compensate for bona fide services provided. Instead, the court held that if part of the payment compensated past referrals or induced future referrals, that portion of the payment violates the statute. Therefore, so long as some amount of the payments made to Borrasi and the other physicians were made not pursuant to a bona fide employment relationship, then the statute has been violated.

Borrasi also argued that his sentencing should have been reduced because the district court did not properly calculate the value of the bribes. The court had given him credit for $150,000 for the services he had performed, but Borrasi argued that he deserved a larger credit. However, the Seventh Circuit upheld the district court's quantitative findings because there was little evidence to show that this credit should have been valued higher. Moreover, there was other evidence that displayed Borrasi's services to the hospital as being virtually nonexistent.

This case is a clear demonstration of the importance of ensuring that compensation arrangements with referral sources are bona fide and that services are actually provided, rather than just set forth on paper. If you have any questions regarding compliance with the anti-kickback statute or any other compliance issues, please contact a Wachler & Associates attorney at 248-544-0888.

May 17, 2011

32 Employees Dismissed for Violating HIPAA

Two hospitals in Anoka County have fired 32 employees for accessing the medical records of patients without permission or a legitimate reason to do so. The employees accessed the medical records of certain patients that were hospitalized due to a massive drug overdose stemming from a party; the overdoses were considered a high-profile case. The HIPAA privacy regulations require hospitals to apply a "minimum necessary" rule, i.e., employees are only permitted to access information that they have a need to know in order to perform their job duties. The HIPAA Security Rule also requires hospitals and other covered entities to have the capability to audit employees' access. The HIPAA Privacy Rule also requires hospitals and other covered entities to have appropriate disciplinary policies in place when violations of the rule are found. For questions regarding HIPAA compliance or for assistance with developing a HIPAA Privacy or Security compliance program, please contact a Wachler & Associates attorney at 248-544-0888.

May 17, 2011

RAC Recovered $237.8 Million in Six-Month Period

Recovery Audit Contractors (RAC) recovered $237.8 million in the six-month period that ended in March. This amount is already three times more than the amount of money recovered in the previous year. According to recent estimates, CMS alleges that the total sum of Medicare improper payments exceeds $47 billion annually. If you have been audited by a RAC, ZPIC, MAC, carrier or other Medicare contractor and need assistance with the defense of the audit, please contact a Wachler & Associates attorney at 248-544-0888.

May 17, 2011

U.S. Attorneys Warn States About Potential Prosecution for Medical Marijuana Use

U.S. attorneys have issued letters to state officials addressing the illegality of medical marijuana. The letters were sent to several states (Washington, California, Colorado, Montana, and Rhode Island) warning them that everyone from licensed growers to regulators could be subjected to civil and criminal prosecution. These warnings have cause Washington and New Jersey to reassess their medical marijuana laws. Even though medical marijuana is still illegal under federal law, over a dozen states have enacted laws that make the substance legal within the state.

In 2009, Justice Department officials stated, "prosecutors should not focus federal resources on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." Although public policy indicated that compliance with state law would not lead to federal prosecutions, the possibility of such action was not completely out of the question. These recent letters appear to institute a more aggressive policy, which is causing states to reevaluate laws and other issues regarding medical marijuana.

Gov. Chris Gregoire, governor of Washington and chair of the National Governors Association, intends to work with other governors in an attempt to change federal law to classify medical marijuana as a Schedule 2 substance, categorizing it with morphine or oxycodone. All in all, these federal letters have caused states to take a step back from the progress they have currently made with medical marijuana and are now becoming more hesitant to enact new laws do to the stronger possibility of federal prosecution, which is something the Obama administration originally claimed would not be an issue.

If you are a provider with questions regarding participation in the certification of patients for medical marijuana usage and compliance with state or federal law, including compliance with the Michigan Medical Marihuana Act or the Michigan Medical Marihuana Program, please contact at Wachler and Associates attorney at 248-544-0888.

May 16, 2011

Face to Face Checklist for Power Wheelchairs

The Centers for Medicare & Medicaid Services (CMS) recently published a checklist for physicians and treating practitioners to follow in order to help them comply with documentation requirements for the face-to-face examination that must occur prior to the physician ordering a Power Mobility Device (PMD) for a Medicare beneficiary. The checklist contains the information that is essential for Medicare in determining whether payment should be made for a PMD. However, it is vital to note that the checklist is merely a guide and does not replace the underlying medical records. The following is the checklist offered by CMS:

  • Signs/Symptoms that limit ambulation;
  • Diagnoses that are responsible for these signs/symptoms;
  • Medications or other treatment for these signs/symptoms;
  • Progression of ambulation difficulty over time;
  • Other diagnoses that may relate to ambulatory problems;
  • How far the patient can ambulate without stopping and with what assistive device (such as a cane or walker);
  • Pace of ambulation;
  • History of falls, including frequency, circumstances leading to falls, what ambulatory assistance (cane, walker, wheelchair) is currently used and why it is not sufficient;
  • What has changed in the patient's condition that now requires the use of a power mobility device;
  • Reason for inability to use manual wheelchair (such as assessment of upper body strength);
  • Why does the patient need a power wheelchair rather than each level of mobility assistive equipment (a cane, walker, optimally configured wheelchair, scooter)? What are the reasons that the patient should not or could not use a cane, walker, optimally configured wheelchair or scooter in the home to satisfy their needs?; and
  • Description of the home, including the ability to perform activities of daily living in the home, as well as the ability to utilize the PMD in the home.

The medical records should include sufficient information to support PMD coverage. These records are often discovered during the audit process to lack the necessary information for payment. If you have any questions regarding compliance with PMD criteria, or other DME compliance issues, please contact a Wachler & Associates attorney at 248-544-0888 or