Articles Posted in Health Law

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On June 28, 2016, CMS held its second special open-door forum (ODF) regarding the Pre-Claim Review Demonstration for home health services (the “Demonstration”). The Demonstration will take place in six states (Illinois, Florida, Texas, Michigan and Massachusetts), all initiating by January 1, 2017, with the earliest start being August 1, 2016 in Illinois. However, as the initial implementation date approaches, home health agencies (HHAs) continue to express concerns regarding the Demonstration. CMS maintains that this Demonstration will benefit HHAs in the long run, but no matter whether or not they agree, HHAs across the country, particularly those located within the six Demonstration states, are paying close attention to the new developments.

The interest in the Demonstration was made evident by CMS’ statement that there had been 2,600 participants in the first open door forum on the Demonstration, which took place on June 14, 2016. CMS also gave repeated notice regarding its Demonstration FAQ page, which had been updated as recently as four days prior to the second ODF, and may be updated again before the Demonstration begins. Following these preliminary remarks during the second ODF, as well as a rehashing of the Demonstration’s basic tenets, CMS went right to the question and answer period.  The moderators were uncertain about some issues, such as to whether an electronic referral order would fulfill the plan of care requirement—but on other questions CMS was very sure and adamant in their answers.

The main focus of the ODF, due to the continued interest of HHAs, was the plan of care requirement.  During the second ODF, CMS clarified that in order for a pre-claim review request (PCRR) to be approved, HHAs must submit a physician signed and dated plan of care. Several callers commented that this would impose an undue hardship onto HHAs because of the difficulty already associated with physicians signing plans of care. The HHAs explained that requiring signed plans of care prior to submitting their PCRR would be substantially burdensome and had the potential to lead to delayed or unfiled PCRRs.  The HHAs also opined that despite CMS’ insistence that the Demonstration would not alter documentation requirements, demanding signed plans of care so early in the certification period appears to heighten the requirements as set out in the current regulations.  Relevantly, Chapter 7, Section 30.2.4 of the Medicare Benefit Policy Manual states the following: “The plan of care must be signed and dated by a physician […] before the claim […] is submitted for the final percentage payment.” Despite this, CMS held firm to its stance that the Demonstration did nothing to limit coverage and imposed no new requirements, citing that beneficiaries had always needed to be under a physician’s care. And while technically true, there is undoubtedly a new encumbrance upon HHAs’ Medicare reimbursement, as the Demonstration would require that the plan of care is submitted not only prior to the final claim, but also prior to the PCRR.

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On June 14, 2016 between 2 and 3pm EST, CMS had a special open-door forum (ODF) regarding its pre-claim review demonstration for home health services (the “Demonstration”) which will take place in Illinois, Florida, Texas, Michigan and Massachusetts (listed chronologically by implementation date; see our prior blog post on the Demonstration for more information regarding the details of CMS’ pre-claim review process). During the ODF, home health agencies (HHAs) had the opportunity to learn more about the Demonstration and to ask CMS questions regarding pre-claim reviews.  In addition to the questions, some HHAs took the opportunity to raise concerns they had regarding the Demonstration.

CMS started by addressing the basics of the program, specifically that HHAs will be required to submit a pre-claim review request prior to submitting the final bill for payment.  CMS then restated that the Demonstration’s goal is to assure that HHA services are medically necessary and reasonable; to determine this, the Medicare Administrative Contractors (MACs) reviewing the pre-claim review requests will evaluate the submitted documentation to assure that the beneficiary: 1) is confined to home at time of service; 2) is under a physician’s care; 3) receives care pursuant to a plan of care approved by the physician; 4) is in need of skilled services; and 5) has had a face-to-face encounter with his or her certifying physician and the physician’s observations support the certification for home health services.

The statements from the ODF’s participants varied from logistical questions to expressions of concern over the impending Demonstration. On the logistical side, after CMS stated that a unique tracking number (UTN) would be provided once a pre-claim review was approved, participants requested guidance on where to place the UTN on the final bill. CMS explained that an operational guide for the Demonstration would be released within “the next few weeks.” The guide is to include information on what fields to put certain information (including UTNs) into, along with other procedural and administrative guidance for the Demonstration’s roll-out. CMS also answered a question on whether there would be specific forms provided for HHAs to fill out when filing the pre-claim review request: CMS stated that while no document was available yet, one would be made available in the future, and that the forms themselves would generally be furnished by the individual  MACs in each region, rather than CMS itself.

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On June 9, 2016, the Government Accountability Office (GAO) publicly released its report on the Medicare system, highlighting the deficiencies within the Medicare audit and appeals process; a bill currently in the Senate would address many of these problems by reforming CMS’ procedures.

The GAO report, titled “Opportunities Remain to Improve Appeals Process,” focuses on the rising amount of Medicare appeals in recent years and the strain it has put on the system. The increase has been almost unprecedented—between the fiscal years (FYs) 2010 and 2014, the number of ALJ hearings ballooned from 41,733 to 432,534, or a 936% increase. Further, while the statutory time frame for an ALJ hearing to be completed is 90-days, GAO found that in FY 2014 96% of ALJ appeals were not completed within the 90-day limit.

GAO also reported on the insufficiency of data collected by CMS during the Medicare appeals process. The data currently being collected does not report on the reasoning for the appeals, or the amount of money over which the appeals are being made. GAO found this to interfere with the observation and documentation of trends within the appeals system, leading to inconsistencies with Federal regulations. The lack of data has also led to repetitive appeals, with CMS arguing the same issues over and over, with nearly identical appeals remaining separate all the way to the 3rd and 4th levels of appeals.

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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 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 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.

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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.
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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.

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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.