Recently in Compliance Category

April 14, 2014

OIG Finds Limited Compliance with Face-to-Face Home Health Requirements

In a report released on Thursday, April 10, the Office of the Inspector General ("OIG") found that, thus far, there has been limited compliance with the face-to-face documentation requirement for home health providers. As a result, the OIG determined that Medicare paid $2 billion to home health providers that should not have been paid. In an effort to increase compliance with the face-to-face requirement, the OIG has outlined specific recommendations that CMS could implement which would impact home health providers. The OIG's findings and recommendations should serve as an alert to home health providers to carefully review their compliance with face-to-face encounter documentation requirements.

The Patient Protection and Affordable Care Act ("ACA") included language that established the face-to-face encounter requirement. Although initially scheduled to be effective January 1, 2011, the Centers for Medicare and Medicaid Services (CMS) delayed implementation until April 1, 2011.

The face-to-face encounter documentation requirement provides that for initial certification periods only, a home health agency must obtain documentation from the certifying physician that the physician had a face-to-face encounter with the patient. The face-to-face documentation must be signed and dated by the physician. It must include the date the encounter occurred, and include a brief narrative that describes why the patient is homebound and why the skilled services are medically necessary to treat the patient's illness or injury. A home health agency's reimbursement for the home health services for an initial certification period is dependent upon the certifying physician's proper documentation of the face-to-face encounter.

The study conducted by the OIG examined Part A home health claims from January 1, 2011 through December 31, 2012 in an effort to determine the extent to which certifying physicians documented face-to-face encounters with beneficiaries. Based on the study, the OIG concluded that compliance with the face-to-face requirement has been limited and inconsistent. Specifically, the OIG concluded that mandated documentation did not meet Medicare requirements for 32% of home health claims that required face-to-face encounters which, according to the OIG, resulted in $2 billion in payments that should not have been made. The OIG further noted that face-to-face documentation was missing in 10% of claims, which totaled $605 million in payments that should not have been made. Lastly, the OIG found that of the face-to-face documents that were submitted, 25% of the documents were missing one of the required elements, usually the signature of the certifying physician.

The OIG also noted that physicians inconsistently completed the narrative content portion of the face-to-face documentation and that CMS oversight over the face-to-face documentation requirement was minimal because CMS does not have a specific program to oversee compliance with the requirement.

In an effort to increase compliance with the face-to-face documentation requirement, the OIG recommended the following policies be implemented:

  • CMS should consider requiring the use of a standardized form that includes all elements required for face-to-face documentation to serve as a default. The OIG notes that this should not be an onerous mandate.
  • CMS should develop a strategy that encompasses formal training and outreach to providers about the importance of compliance with face-to-face documentation.
  • Lastly, the OIG recommends that CMS work with the payment contractors to develop new review procedures to ensure compliance with the requirement of face-to-face documentation. The OIG notes that this is especially important given CMS's plans to implement the face-to-face requirement for durable medical equipment.

The OIG's report and recommendations reaffirm our experience that Medicare contractors are focusing more intently on home health agencies' compliance with the face-to-face encounter documentation requirements. Although compliance is dependent upon the certifying physician's documentation, it is vital that home health agencies review records for initial certification periods for face-to-face encounter documentation that meets the requirements. Specifically, home health agencies should review the narrative portion of the face-to-face encounter documentation to confirm that it sufficiently describes the beneficiary's homebound status and the reasons supporting the medical necessity of the skilled services. The brief narrative section of the face-to-face encounter documentation is the most subjective component to the documentation requirement and, therefore, many contractors deny payment for entire episodes of care based on the fact that the brief narratives are insufficient. In order to try to prevent these initial denials and/or have success challenging the denials during the Medicare appeals process, it is very important that the face-to-face encounter's brief narrative meets the stated objectives.

Wachler & Associates will continue to monitor any further developments regarding the face-to-face documentation requirement. If you have any compliance questions pertaining to the face-to-face encounter or other home health audit risk areas, or need assistance in defending claim denials during any stage of the Medicare appeals process, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at

February 26, 2014

Medicare Therapy Cap Exception Extended

On December 18, 2013, Congress enacted legislation extending the Medicare therapy cap until March 31, 2014. The 2014 outpatient therapy cap limits are $1,920 for physical therapy and speech-language pathology services combined, and $1,920 for occupational therapy services. In order to qualify for an exception to the therapy cap limits and continue to receive Medicare reimbursement, therapists must first document the need for medically reasonable and necessary services in the beneficiary's medical record and, separately, the therapist must indicate on the Medicare claim for services that the outpatient therapy services above the therapy cap are medically reasonable and necessary. Further, starting January 1, 2014, the Medicare outpatient therapy cap limits will also apply to therapy services performed in critical access hospitals.

Providers that meet or exceed the $3,700 threshold in therapy expenditures will be subject to a manual review. The manual review process for 2013 is not expected to change in 2014. Under the manual medical review process, Recovery Audit Contractors (RACs) will conduct either prepayment or postpayment review for claims exceeding $3,700 depending on the state. Currently, only Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri are subject to prepayment review, while the rest of the nation is subject to postpayment review.

A bill that is currently working its way through Congress seeks to permanently repeal the therapy caps. The Medicare Access to Rehabilitation Act has bipartisan support and its sponsors argue that an arbitrary cap on outpatient services without regard to clinical need discriminates against some of the most vulnerable and needy Medicare recipients.

Wachler & Associates will continue to monitor the situation and provide guidance on developments in Medicare therapy cap policy. If you or your health care entity need help developing compliance plans or reviewing and refining existing audit defense strategies, please contact an experienced healthcare attorney at 248-544-0888 or at If you would like to subscribe to the Wachler & Associates Health Law Blog, please add your email address and click subscribe in the window on the top right of this page.

January 17, 2014

OIG Approves Industry Stakeholders' Contributions to a Patient Assistance Program under the Anti-Kickback Statute

The Department of Health and Human Services (HHS), Office of Inspector General (OIG) recently released an advisory opinion that highlights long-standing OIG guidance as to how industry stakeholders can contribute to independent, bona fide charitable assistance programs. In this case, the patient assistance program ("Requestor") provides grants to patients suffering from a specific disease for insurance premiums and other expenses not covered by insurance. The Requestor is a supporting organization of a nonprofit charitable foundation ("Foundation") that exists solely to support the disease.

The Requestor's main source of funding is the Foundation. However, all funds received from the Foundation are ultimately donations by pharmaceutical manufactures of the drugs used to treat the disease. The Requestor thus sought an advisory opinion to determine if such an arrangement would be grounds for civil monetary penalties under section 1128A(a)(5) of the Social Security Act ("Act"), covering improper beneficiary inducements, or other provisions of the Act as those sections relate to the Federal anti-kickback statute.

In the advisory opinion, AO No. 13-19, the OIG reiterates long-standing OIG guidance that industry stakeholders may contribute to the health care safety net for financially needy patients, including beneficiaries of Federal health care programs, by contributing to independent, bona fide charitable assistance programs. The OIG also states that such programs should not exert influence over donors, and donors should not have links to the charity that could directly or indirectly influence the charity's operations or subsidy programs. Further, such programs cannot function as a conduit for payments from donors to patients, impermissibly influence beneficiary choices, or engage in practices that effectively subsidize a donor's particular product.

In this arrangement, the OIG acknowledges that earmarking donations for a rare disease with a low number of treatment options increases the risk that the charity could serve as an improper inducement to patients that use the donor's products. However, in approving the arrangement, the OIG highlighted several factors that sufficiently decrease the risk of improper beneficiary inducement.

The OIG's decision was based on the following facts:

  1. The Requestor does not refer patients to any donor or to any provider, supplier, product, or plan and multiple products from more than one manufacturer are available to treat the disease;
  2. The Requestor does not provide assistance for copayments or deductibles, but instead pays insurance premiums and certain expenses not covered by insurance, and therefore not influencing how patients ultimately choose a provider or services;
  3. No donor or affiliate exerts direct or indirect control over the Requestor, and thus the Requestor has absolute and independent discretion over the use of donor contributions;
  4. Awards of assistance are truly independent from donors due to objective, verifiable, and uniform measure of financial need that is applied in a consistent manner and used to determine eligibility for the program;
  5. Awards of assistance are made without regard to any donor's interest or the patient's choice of providers, suppliers, products, and insurance plans, or whether to receive any services at all; and
  6. Donors do not receive any data that would allow them to correlate their donations with the amount or frequency of the use of their products or services.

Based on these factors, the OIG concluded that the arrangement does not constitute grounds for civil monetary penalties under section 1128A(a)(5)'s prohibition on beneficiary inducement. The OIG also found that, although prohibited remunerations could exist if the intent to induce or reward referrals of Federal health care business were present, the OIG will not impose sanctions under the Federal anti-kickback statute.

This advisory opinion demonstrates that proper safeguards that may be used to allow donors to contribute to healthcare charitable assistance programs that may ultimately result in increased utilization of their products or services.

Wachler & Associates has over 30 years of experience structuring healthcare arrangements to fit within federal and state regulations. If you or your healthcare entity have any questions regarding beneficiary inducements or the Federal anti-kickback statute, or wish to have your arrangement reviewed by our anti-kickback lawyers, please contact our health law attorneys at 248-544-0888.

January 14, 2014

OIG Releases Report Regarding Clinicians Associated with High Cumulative Part B Payments

The Office of the Inspector General (OIG) recently released a study detailing problems associated with overpayments to clinicians who provide Medicare Part B services. The study specifically focused on what the OIG referred to as "high cumulative payment" clinicians, who are clinicians receiving total annual payments of more than $3 million for Part B services during CY 2009. The OIG recognizes that this subset of providers poses a greater risk for improper payment or fraud in the Medicare system and will seek to implement new programs and policies to detect those problems.

The study found that from 2008 to 2011, both the number of Medicare Part B clinicians generating high cumulative payments, as well as the total amount of those payments, increased almost 78%. Most importantly, the study identified 303 clinicians who supplied more than $3 million in Part B services in 2009. Medicare administrative contractors (MACs) and Zone Program Integrity Contractors (ZPICs) further identified 104 specific individuals of the 303 (34%) for improper payments reviews. By the end of 2011, MACs and ZPICs reviewed 80 of the 104 clinicians and identified $34 million in over payments. Repercussions for these clinicians included suspended licenses and mandatory prepayment reviews, and even two indictments. The OIG recommends that CMS establish a cumulative payment threshold above which a clinician's claims would be selected for review as well as implementing a procedure for timely identification and review of clinicians' claims that exceed the cumulative payment threshold.

The OIG views the results of this investigation into high cumulative payment clinicians as a more useful method of identifying potentially improper payments. As a result of this study, clinicians who are reimbursed through Medicare Part B should ensure that their billing practices are in compliance with Medicare documentation and reimbursement rules, as well as determine whether their utilization rates differ significantly from their peers.

If you need assistance determining how this study may affect your practice, or if you have any other health care law questions, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or at

December 13, 2013

CMS Advisory Opinion Approves Proposed Hospital Expansion under Stark Law's Whole Hospital Exception

The Centers for Medicare & Medicaid Services ("CMS") recently released a favorable advisory opinion, CMS AO-2013-03, that interprets the "whole hospital" exception to the physician self-referral prohibition commonly known as the Stark Law. CMS determined that the proposed arrangement, which adds a new observation unit and 14 observation beds to a physician-owned hospital, complies with the "whole hospital" exception's restriction on facility expansions.

In general, the Stark Law prohibits the referral of Medicare patients for designated health services ("DHS") to an entity in which the referring physician has a financial relationship. The law also prohibits the entity that furnishes DHS as a result of a prohibited referral from billing Medicare, the beneficiary, or any other entity.

The Stark Law contains several exceptions to which the self-referral prohibition does not apply, including the "whole hospital" exception under Section 1877(d)(3). The "whole hospital" exception allows referring physicians to have physician ownership or investment interests in a hospital provided that the referring physician is authorized to perform services at the hospital and the ownership or investment interest is in the hospital itself.

The Patient Protection and Affordable Care Act ("ACA") adds an additional restriction to the "whole hospital" exception. Section 6001(a)(3) limits the expansion of such hospitals' facility capacity by requiring that "the number of operating rooms, procedure rooms, and beds for which the hospital is licensed at any time on or after [March 23, 2010] is no greater than the number of operating rooms, procedure rooms, and beds for which the hospital is licensed as of such date."

The preamble to the final rule implementing this section, however, clarified that the term "for which the hospital is licensed" only referred to beds, and that the prohibition applied to operating and procedure rooms whether licensed or not. Thus, physician-owned hospitals that rely on the "whole hospital" exception to the Stark Law are prohibited from increasing the number of operating rooms, procedure rooms, or licensed beds in that hospital.

In the Advisory Opinion, the hospital certified that the new beds would not be used as operating rooms or procedure rooms. Most importantly, the State in which the hospital is located does not require observation beds to be licensed by the State.

CMS acknowledged the preamble discussed above, and pointed to the fact that the Hospital will not pay any "license fees" or change its current number of licensed beds under the State's regulatory scheme. Accordingly, CMS concluded that the addition of the observation unit and 14 observation beds will not result in any new "licensed" beds, and that the proposed arrangement does not violate the Stark Law and ACA restriction against facility expansion.

In this case, state specific licensing laws affected CMS's analysis of the "whole hospital" exception. The Advisory Opinion demonstrates the widespread risks inherent in any arrangement that involves physicians who have financial relationships with entities to which they refer DHS. Wachler & Associates has represented healthcare providers and suppliers in Stark Law matters since the law's inception. We pride ourselves on staying up to date with Stark Law regulations, interpretations, and advisory opinions. If you or your healthcare entity have any questions regarding the Stark Law or Anti-Kickback Statute, or wish to have your arrangement reviewed by our Stark Law attorneys, please contact our health care lawyers at 248-544-0888 or

November 25, 2013

CMS Releases Update on Medicare Claim Denials for Incarcerated Beneficiaries

On November 20, 2013, CMS released an update regarding the Medicare denials for claims submitted by providers and suppliers for beneficiaries who were allegedly incarcerated during the dates of service. The large volume of denials, which occurred during this past summer, were incorrect as CMS acknowledged that the systems that track whether a beneficiary is ineligible for Medicare services due to incarceration were incorrectly updated. Medicare providers and suppliers nationwide were impacted by this error as Medicare Administrative Contractors (MACs) automatically denied and in many cases recouped alleged improper claims for services provided to incarcerated beneficiaries. Although CMS acknowledged the errors in late July 2013, it is not until now that Medicare providers and suppliers have received concrete information that addresses how the errors will be fixed and how correct claims will be paid appropriately. CMS is now making strides to refund improper collections and to implement fundamental changes to its claims processing systems. Medicare Administrative Contractors (MACs) will be responsible for reprocessing claims denied in error. Please see our earlier blog posts regarding CMS's efforts to recoup reimbursement for services provided to incarcerated beneficiaries here.

According to a FAQ Sheet available on CMS's website, CMS anticipates that incorrectly denied or cancelled claims associated with allegedly incarcerated beneficiaries from June through August of 2013 will be refunded to suppliers via an automated process by the beginning of December. Medicare provider claims denied due to the incorrect information regarding incarcerated beneficiaries between June through August of 2013 will also be reprocessed by the MACs. According to the FAQ bulletin, CMS expects the reprocessing to be completed by the end of December.

Suppliers and providers should be aware that repayments "may not exactly match the original payment that was made for the claims." Factors such as CMS business processes, outstanding payments, or changes in a beneficiary's paid deductible amounts may be reflected in the final claim repayment amounts remunerated to the affected providers.

In addition to the information regarding the reprocessing of the claims, CMS stated in the FAQ that MACs are to disregard appeal filing deadlines for any claims that remain denied after the reprocessing. Providers can now wait for claims denials or overpayments related to incarcerated beneficiaries to be reprocessed by CMS, and can file appeals for denied claims regardless of previous appeal filing deadlines.

Wachler & Associates will continue to keep you updated on CMS's efforts to reprocess incarcerated beneficiary claim denials. If you or your health care entity have any questions regarding CMS's reprocessing efforts, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or

November 18, 2013

"Probe and Educate" Hospital Inpatient Audits Extended an Additional 3 Months

On November 12, 2013, CMS held a third open door forum (ODF) discussing the Fiscal Year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital (LTCH) Final Rule (CMS-1599-F). As of November 4, 2013, the patient status probe review period that was previously applicable through December 31, 2013 has been extended through March 31, 2014. CMS has issued helpful guidance on questions and answers relating to patient status reviews, selecting hospital claims for patient status reviews, and reviewing hospital claims for patient status.

These "probe and educate" reviews will be conducted on a prepayment basis to assess whether hospitals are in compliance with the admission order requirements and 2-midnight benchmark. Because these reviews will be conducted on a prepayment basis, the MACs will deny any claims not meeting these three requirements. The initial sample probe reviews will consist of 10-25 claims per hospital with dates of admission from October 1 through December 31, 2013.

MAC review of the inpatient hospital claims will provide outreach and education about the inpatient rule and will help ensure that hospitals understand and comply with the Medicare requirements. Upon completion of the 10-25 claim reviews, if the MACs do not find any issues with the particular hospital's claim documentation then further probes will not be conducted for that hospital (unless there are significant changes in billing patterns for admissions).

If issues are found for a claim, the MAC will send a detailed denial letter to the provider explaining why the claim was denied. If there are moderate to significant concerns with a claim, the letter will include an offer for the MAC to call the individual provider to discuss the reasons for why the non-compliant claim was denied, to answer questions, and to provide providers with education and reference materials.

If the MACs identify an individual provider as having "moderate/significant" or "major" concerns during the initial review, then they will do a second probe review of 10-25 claims with dates of admission between January 1 and March 31, 2014. At the end of this six month period, if hospitals continue to have major issues then the MACs may select an additional 100-250 claims for review.

If you have any questions regarding the "probe and educate" reviews or compliance with the Final Rule, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or

November 11, 2013

Open Door Forum on Final IPPS Rule Tomorrow at 1:00

Tomorrow from 1:00-2:00 pm Eastern Time, the Centers for Medicare & Medicaid Services (CMS) will hold a third open door forum (ODF) to discuss the Fiscal Year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital (LTCH) Final Rule (CMS-1599-F).

On August 2, 2013, CMS issued the FY 2014 IPPS/LTCH Final Rule (final rule) which finalized proposals related to patient status during short-stay hospital cases, including the new standards for inpatient admission and the medical review criteria for payment of hospital short-stay inpatient services under Medicare Part A. On September 5, 2013, CMS issued sub-regulatory guidance regarding the final rule's requirements for hospital inpatient admission order and certification, which are conditions of payment under Medicare Part A. This sub-regulatory guidance was issued in part as a result of the significant confusion surrounding CMS's requirements for inpatient admission orders and physician certifications of inpatient services. CMS also posted subregulatory instructions and frequently asked questions, relating to the claim selection process and preliminary review guidelines, for conducting patient status reviews of claims with dates of admission beginning in October 2013.

Questions on the two midnight provision for admission and medical review may be sent to CMS before the ODF begins via email to Questions on Part B inpatient billing and clarifications regarding physician order and certification can be sent to

To access the ODF, the participant dial-in number is 1-866-501-5502, and the conference ID number is 98515298. For more information, please visit the ODF website. If you have any questions regarding the final rule or questions about the Medicare appeals process, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or

October 31, 2013

CMS Reaches Four Settlements Under the Stark Self-Referral Disclosure Protocol in August and September

The Centers for Medicare & Medicaid Services (CMS) recently announced four settlements via the Voluntary Self-Referral Disclosure Protocol (SRDP) under the federal Stark Law. CMS reached three Stark law settlements in August 2013 and on additional settlement in September 2013, totaling approximately $178,000.

On August 19, 2013, CMS settled Stark law violations by a Louisiana physician group practice. Under the SRDP, the Louisiana practice disclosed that it violated the Stark Law because two of its physician arrangements failed to satisfy the requirements of the in-office ancillary services exception to the Stark Law. The violations were settled for $13,572.

On August 20, 2013, CMS reached a settlement with a non-profit community hospital located in Minnesota which disclosed that its arrangement with a physician group practice for the rental of office space and performance of support services failed to satisfy the requirements of the applicable exception under the Stark Law. The Minnesota hospital's violations were settled for $9,570.

On August 29, 2013, CMS settled two Stark law violations by a California acute-psychiatric hospital. The California hospital disclosed under the SRDP that it violated the physician self-referral law because its arrangements with two physicians to provide psychiatric services did not satisfy the requirements of any applicable Stark law exception. The violations were settled for $67,750.

Lastly, on September 10, 2013, CMS reached a settlement with an acute care hospital located in North Carolina which disclosed Stark law violations due to the following three arrangements: (1) its arrangement with a physician to provide medical director services; (2) its arrangement with a physician group to provide medical coding and consulting services; and (3) its arrangement with a physician and a physician group practice for the lease of office space, as none of the above arrangements met the requirements of any applicable Stark law exception. CMS and the North Carolina hospital settled these violations for $87,110.

CMS maintains a list of these settlements as well as other select Stark law violations resolved under the SRDP online. Wachler & Associates attorneys have regularly counseled hospitals and other providers in navigating the Stark Law since 1995. The high amount of settlements throughout 2013 may indicate that CMS is directing increased attention towards hospitals resolving Stark law violations under the SRDP. For more information on the Stark Law, or for assistance with Stark compliance measures for your healthcare entity, please call an experienced healthcare attorney at 248-544-0888.

October 21, 2013

OIG Report on "Questionable" Billing for Polysomnography Services May Lead to Closer Scrutiny of Sleep Laboratories

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently issued a report addressing increased Medicare spending on polysomnography services. The OIG initiated this study in response to growing concerns of Medicare prescriber fraud.

A polysomnography is a type of sleep study that diagnoses sleep disorders such as sleep apnea. The claims submitted by sleep centers that conduct these studies have been under serious scrutiny by fraud investigators in recent years. In January 2013, American Sleep Medicine LLC, a sleep testing center operator based in Florida, agreed to pay $15.3 million to resolve allegations of false polysomnography claims submitted to Medicare, TRICARE, and the Railroad Retirement Medicare Program in violation of the False Claims Act (FCA).

According to the OIG's report, Medicare spending for polysomnography services rose 39 percent between the years 2005 and 2011. The OIG analyzed Medicare claims from hospital outpatient departments, as well as non-hospital providers such as independent diagnostic testing facilities and physician-owned sleep laboratories, starting in 2011. The OIG found that almost $17 million in Medicare claims for polysomnography services were inappropriate, meaning the claims did not meet one or more of three requirements for Medicare reimbursement, including claims that had inappropriate diagnosis codes, were same-day duplicate claims or were submitted with an invalid NPI. In addition, the report stated that out of 6,339 providers of polysomnography services, 180 providers exhibited patterns of questionable billing. "Questionable billing" patterns included providers that billed an unusually high percentage of: (1) same-day duplicate claims, beneficiaries who had polysomnography claims from one or more other providers in 2011, (3) diagnostic polysomnography claims with a titration claim for the same beneficiary on the following day, or (4) claims in which there was no visit note from the ordering provider in the preceding year.

The OIG made four recommendations to the Centers for Medicare & Medicaid Services (CMS):

  1. Implement claims processing edits or improve existing edits to prevent inappropriate payments;
  2. Recover payments for claims that did not meet Medicare requirements;
  3. Consider using measures of questionable billing from this study to identify providers for further investigations; and
  4. Take appropriate action regarding providers that exhibit patterns of questionable billing.

According to the report, CMS concurred with each of the four recommendations. As a result of CMS' concurrence, sleep study providers should expect greater scrutiny of polysomnography service claims in near future (e.g., increased CMS audit activity). As such, sleep study providers should review their current billing practices and compliance policies to ensure such practices and policies are in accordance with Medicare requirements. If you need assistance in implementing an effective compliance plan, or defending against an Medicare, Medicaid or third party payor audit, please contact an experienced healthcare attorney at 248-544-0888 or

September 30, 2013

CMS Releases Comparative Billing Reports for Spinal Orthotics and Ordering Providers

The Centers for Medicare and Medicaid Services (CMS) recently released a national provider Comparative Billing Report (CBR) focused on spinal orthotics and ordering providers. This CBR was conducted in response to an Office of Inspector General (OIG) report on inappropriate Medicare payments for orthotics. The Medicare Durable Medical Equipment (DME) data obtained for this report span from dates of service beginning January 1, 2012 through December 31, 2012. The final data was retrieved on August 15, 2013 from the Integrated Data Repository (IDR).

Under contract by CMS, Safeguard Services LLC is the authorized producer of all CBRs. Safeguard sends CBRs to about 5,000 ordering providers to help providers prevent improper billings. This CBR provides comparative data to orthotic providers across the nation to compare orthotics providers in terms of coding and billing practice, as well as utilization patterns. The sample spinal orthotics CBR may be useful to review if your entity did not receive one from Safeguard.

The following Healthcare Common Procedure Coding System (HCPCS) codes were analyzed in this CBR:

• L0630: Sagittal control with posterior panel
• L0631: Sagittal control with anterior and posterior panels
• L0633: Sagittal-coronal control with posterior and lateral panels
• L0637: Sagittal-coronal control with anterior, posterior, and lateral panels

According to a FAQ page on the Safeguard website, the code L0631 was chosen because data analysis shows that Medicare claims and total allowances for L0631 have more than doubled from 2008 to 2011. L0630 is a comparable device to L0631, but is less costly, as well as less complex. Although Safeguard advises that CBRs are "not intended to be punitive or sent as an indication of fraud," based upon our experience, providers receiving CBRs may be prospective audit targets since their utilization of codes may exceed their peers. This report indicates that CMS is interested in encouraging providers to order devices that are consistent with a patient's medical needs, rather than overly complex or costly devices.

If you are a recipient of a spinal orthotics CBR, or are among the other provider types that have been identified to receive CBRs, Wachler & Associates can help you in evaluating your CBR analysis and in developing an appropriate compliance plan. Please contact an experienced health care attorney via phone at 248-544-0888 or via email at

September 23, 2013

Compliance with HIPAA HITECH Rule Effective Today

After months of delay, compliance with the Health Insurance Portability and Accountability Act (HIPAA) Health Information Technology for Economic and Clinical Health (HITECH) Omnibus Final Rule goes into effect today. HIPAA Privacy and Security Rules are implemented by the Health and Human Services (HHS) Office for Civil Rights.

The Omnibus Final Rule was announced by HHS on January 17, 2013. According to the HHS press release, the Final Rule "expand[s] many of the requirements to business associates of [health care providers, health plans, and other entities that process insurance claims] that receive protected health information, such as contractors and subcontractors...Penalties are increased for noncompliance based on the level of negligence with a maximum penalty of $1.5 million per violation."
The Final Rule's safe harbor period, which ended today, gave covered entities and business associates 180 days to comply with stricter modifications which will be enforced by heavy fines. Time is of the essence for covered entities and business associates to take proper measures to comply with the new rules. It is imperative that entities review their relationships with covered entities, as the Final Rule expanded the definition of a "business associate" and entities that previously were not business associates, may be considered business associates with the implementation of the Final Rule. If an entity is a business associate with a covered entity, then certain obligations come into play, including the requirement that the business associate and covered entity enter into a business associate agreement that meets the requirements set forth in the Final Rule.
Since the inception of the HIPAA Privacy and Security Rules in 1996, Wachler & Associates has counseled providers and other covered entities of all sizes in HIPAA compliance. In order to attain compliance, providers should update security policies and procedures, business associate agreements, privacy policies and procedures, and HIPAA privacy notices. If your entity does not already have these procedures in place, Wachler & Associates can help you implement these important compliance measures. If you have any questions or require assistance implementing HIPAA policies and procedures for your organization, please contact an experienced healthcare attorney at 248-544-0888.

September 18, 2013

OIG Releases Report on RACs and the Actions Taken by CMS to Address Improper Payments, Fraud Referrals, and Performance

In August 2013, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a study addressing problems and vulnerabilities in Recovery Audit Contractor (RAC) activities, as well as their oversight by Centers for Medicare & Medicaid Services (CMS). RACs are tasked with identifying improper payments and are paid on a contingency fee basis according to their findings. RACs are also obligated to refer potential fraud to CMS.

The report addresses RACs' efforts at identifying improper payments and potential fraud for the fiscal years (FYs) 2010-2011 and emphasizes the importance of effective CMS oversight over the RACs. The OIG set out to discover and report on four main objectives, including the extent to which:

1. RACs identified improper payments for services billed to the Medicare program;
2. CMS addressed vulnerabilities with corrective actions;
3. RACs referred potential fraud to CMS and CMS took action on those fraud referrals; and
4. CMS assessed RACs' performance responsibilities

First, the OIG revealed that for FY 2010 and 2011, RACs identified improper payments for 50% of the total claims reviewed, resulting in $1.3 billion in improper payments. According to the latest figures released by CMS, but not included in this study, RACs corrected a total of $2.4 billion in improper payments in FY 2012. According to the OIG report, in FY 2010 and 2011, almost half of the identified improper claims were overturned on appeal by providers; however, only 6% of the identified overpayments were actually appealed by providers. Of all of the recovered or returned improper payments, 88% were from inpatient hospitals.

The OIG also reported that although CMS actively addressed most of the vulnerabilities it observed, CMS did not take action to address all of the vulnerabilities that resulted in millions of dollars of improper payments. In addition, the OIG found that CMS did not evaluate the effectiveness of CMS's corrective actions in addressing the vulnerabilities, which directly contradicts CMS's stated policy to do so.

During the period of study, CMS received six referrals of potential fraud from RACs, but as of November 2012 CMS did not proactively respond in addressing the potential issues. Furthermore, in CMS's duty to evaluate RACs' performance on their contract requirements, the OIG found that CMS's performance evaluations did not contain proper metrics.

In addition to postings its findings, the OIG released four main recommendations for CMS. The OIG recommended that CMS:

1. Assess and address vulnerabilities pending corrective action, as well as evaluate the effectiveness of CMS's currently enacted corrective actions;
2. Certify that RACs are referring every case of potential fraud to CMS, and provide necessary training to RACs to assist contractors in identifying potential fraud;
3. Act timely on RAC referrals of potential fraud; and
4. Improve the performance evaluation metrics CMS utilizes for RAC performance.

CMS concurred with the first, second and fourth recommendations. Although CMS did not specifically address the third recommendation, it stated that it reviewed the six RAC referrals. Four of the six referrals were forwarded to ZPICs to determine if the providers have conducted potential Medicare fraud.

Over the recent years, health care providers have witnessed a steady increase in auditing activity by RACs and other CMS contractors. Wachler & Associates healthcare attorneys regularly defend Medicare, Medicaid, and third party payor audits. For further information on how to successfully defend an audit or implement effective compliance policies to minimize the risk of future overpayment demands, please call an experienced healthcare attorney at 248-544-0888 to schedule a meeting to discuss your concerns.

August 7, 2013

CMS Issues Much Anticipated Final Rules on Payment of Medicare Part B Inpatient Services and Payment of Hospital Inpatient Services under Medicare Part A

On August 2, 2013, the Centers for Medicare & Medicaid Services ("CMS") released its much-anticipated final rules, CMS-1455-F and CMS-1599-F, finalizing two previously issued proposals that addressed payment policies related to patient status in short-stay hospital cases: (1) payment of Medicare Part B inpatient services; and (2) admission and medical review criteria for payment of hospital inpatient services under Medicare Part A. The effective date of the final rule is October 1, 2013.

Notwithstanding these final rules, CMS stated that hospitals will be permitted to follow the Part B billing timeframes established in CMS-1455R Ruling regarding appeals and the submission of Part B claims after the effective date of the final rule, provided (1) the Part A inpatient claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claim has a date of admission before October 1, 2013, and is denied after September 30, 2013, on the grounds that the medical care was reasonable and necessary, but the inpatient admission was not.

Payment of Medicare Part B Inpatient Services

First, CMS finalized its March 13, 2013 Proposed Rule CMS-1455-P. This rule states that when a Medicare Part A claim for hospital inpatient services is denied because the inpatient admission was determined to be not medically reasonable and necessary, the hospital may be paid for the Part B services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B. CMS excluded observation services, outpatient diabetes self-management training (DSMT), and hospital outpatient visits from payment as Part B inpatient services when the inpatient admission is determined to be not reasonable and necessary for Part A payment and the hospital rebills Part B. CMS reiterated that hospitals may not be reimbursed for services specifically required for outpatient status.

However, CMS stated that claims for Part B services must still be filed within 1 year from the date of service. Despite receiving over 300 comments requesting that CMS create an exception to the 1-calendar year time limit to file claims, CMS declined to do so, stating that the final "2-midnights" presumption and benchmark, discussed below, would offer more clarity to aid hospitals in billing Part A claims.

Admission and Medical Review Criteria for Payment of Hospital Inpatient Services Under Medicare Part A

CMS also finalized its ruling revising and clarifying the definition of an appropriate hospital inpatient admission which must be met by providers to receive payment under Medicare Part A. As of October 1, 2013, treatment will be generally deemed appropriate for inpatient hospital admission and payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital as an inpatient based upon that expectation. CMS stated that it was finalizing two distinct, though related, medical review policies: a 2-midnight presumption and a 2-midnight benchmark.

Under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed to be appropriate for Part A payment. CMS stated that these admissions will not be the focus of medical review efforts absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. However, CMS also noted that review contractors will still assess claims where the beneficiary plan of care after admission crosses 2 midnights: (1) to ensure the services provided were medically necessary; (2)to ensure that the stay at the hospital was medically necessary; (3) to validate provider coding and documentation as reflective of the medical evidence; (4) when the CERT Contractor is directed to do so under the Improper Payments Elimination and Recovery Improvement Act of 2012; or (5) If directed by CMS or other authoritative governmental entity (including but not limited to the HHS Office of Inspector General and Government Accountability Office).

Under the 2-midnight benchmark, if the physician admits the beneficiary as an inpatient but the beneficiary is in the hospital for less than 2 midnights after the order is written, CMS and its medical review contractors will not presume that the inpatient hospital status was reasonable and necessary for payment purposes. In reviewing the medical record for Part A reimbursement for inpatient stays lasting less than 2 midnights to determine whether payment under Part A is appropriate, Medicare review contractors will (1) evaluate the physician order for inpatient admission to the hospital, along with the other required elements of the physician certification, (2) review the medical documentation supporting the expectation that care would span at least 2 midnights, and (3) evaluate the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care. CMS added that, upon medical review, the time spent as an outpatient will be counted toward meeting the 2-midnight benchmark that the physician is expected to apply to determine the appropriateness of the decision to admit. In other words, even though the inpatient admission only lasted 1-Medicare utilization day, medical reviewers will consider the fact that the beneficiary received services in the hospital for greater than 2-midnights following the onset of care when making the determination of whether the inpatient stay was reasonable and necessary. However, CMS noted that inpatient-only procedures currently performed as inpatient 1-day procedures will continue to be provided as inpatient 1-day procedures. Therefore, this rule will not result in any change in status or reimbursement.

What is the Next Move for Hospitals?

Wachler & Associates will continue to review the final rule and monitor any further developments as October 1, 2013 approaches. Prior to the effective date of October 1, 2013, hospitals should consider investing in compliance efforts such as regulation analysis, training, and policy revision to ensure compliance with this final rule. For dates of service after October 1, 2013, the clinical and legal arguments on appeal will require revised analysis and templates to address the new criteria. If you need help developing a compliance plan or reviewing and refining your existing audit defense strategies in light of the final rule, please contact an experienced healthcare attorney at 248-544-0888.

July 31, 2013

The Medicare Appeals Process Is Overburdened

Healthcare and healthcare law professionals across the country are noticing that as Medicare audit numbers are climbing, so too is the length of the Medicare appeals process. Once a provider or healthcare entity receives a denial from a Medicare contractor, the Medicare appeals process consists of five stages:

• Redetermination, which is filed with a Medicare Administrative Contractor (MAC)
• Reconsideration, which is filed with a Qualified Independent Contractor (QIC)
• An Administrative Law Judge (ALJ) hearing
• Medicare Appeals Council Review
• Federal District Court Review

Much of the increase in the length of the appeals process is currently coming from the ALJ level. ALJs are supposed to issue a decision within 90 days of receipt of the hearing request. If the ALJ cannot issue a decision within this timeframe, the ALJ should notify the appellant of their right to escalate the case to the Medicare Appeals Council. However, current ALJ workloads are so high that the healthcare law industry is seeing delays of 18-24 months at the ALJ level. This could be viewed as a breach of procedural due process, since providers' rights are taken away for unduly long delays before receiving a final decision from an ALJ. In addition, when a provider does receive a favorable decision, that provider may face additional delays waiting for the MAC to issue the reimbursement.

In general, delays during the Medicare appeals process have negative impacts on providers who are left in appeal process limbo. One such negative impact is that providers will either have the denied payment recouped, or if the provider files to prevent recoupment, then interest begins accruing on the overpayment after 31 days. According to American Hospital Association's (AHA) RACtrac, 75 percent of all appealed claims are still sitting in the appeals process. The roughly two year delay at the ALJ level is particularly damaging for providers for a couple of reasons. First, providers that experience delays at the ALJ level of appeal are particularly burdened because in overpayment cases it is not possible to prevent recoupment after an unfavorable reconsideration decision. Therefore, where recoupment occurs after an unfavorable reconsideration decision, a provider may still have to wait an unreasonable period of time before a final decision is rendered. Furthermore, since providers often have more success at the ALJ level than at the lower levels of appeal, a provider may have to wait a considerable period of time before receiving reimbursement after a favorable ALJ decision. According to an Office of Inspector General (OIG) report released in November 2012, 61 percent of appealed cases for both part A and part B providers that make it to the ALJ level are overturned. This is a very high percentage of the total 72 percent success rate in the appeal process reported by hospitals to RACtrac.
What has caused this delay?

In 2005 the Department of Health and Human Services (HHS) established the Office of Medicare Hearings and Appeals (OMHA). This created a group of ALJs dedicated to adjudicating Medicare appeals. New regulations were introduced that required ALJs to "give substantial deference" to local coverage determinations and CMS program guidance. At a conference in March, Nancy Griswold, the Chief Administrative Law Judge for OMHA, reported that OMHA requested additional funding in the President's Budget for FY 2013, but that they have not yet received any additional funding. Furthermore, according to the OIG, case files are not standardized and are not fully electronic. This combination of being understaffed and not standardized has led to the ALJs working at low efficiency.

In addition, MACs and RACs have continued to audit providers aggressively and issue a high volume of unfavorable claim determinations. RACs are paid on a contingency fee, so they are incentivized to recover as much as possible, which they do by issuing more denials. As a result of more audits and more denials, healthcare providers, beneficiaries, and state Medicaid programs increase their number of appeals. At the same conference in March 2013, Nancy Griswold reported that in FY 2012 there was a 119% increase in appeals compared to FY 2011. In FY 2013, there was a 147% increase in appeals compared to FY 2012.

Healthcare law professionals are seriously concerned that, due to the high volume of audits and subsequent payment denials, MACs, RACs, and QICs may not have the staff to thoroughly review all of the records submitted. As a result, few cases receive favorable decisions in the first two levels of appeal. Thus, providers that meet the amount in controversy requirement appeal to the ALJ level. This results in ALJs considering a large percentage of the cases appealed by providers. According to the OIG, this adds up to tens of thousands of cases each year.

The Centers for Medicare & Medicaid Services (CMS) Administrator's Ruling CMS-1455-R has also had an effect on the ALJs. The Administrator's Ruling denies the ALJ jurisdiction to order payment of part B outpatient/observation services when a claim for Part A inpatient admission is found not medically necessary and reasonable. Prior to the Administrator's Ruling, a large volume of Part A inpatient admission claims were remanded by ALJs to the QIC level. The ALJ cases that were remanded to the QIC must be returned to the ALJ and adjudicated under the new scope of review defined by the Administrator's Ruling. Therefore, the Administrator's Ruling has added additional cases to the ALJ's workload. The proposed rule, if adopted in its current form, will permanently prevent ALJs from requiring Part B payment for Part A appeals.

In conclusion, the ALJs are overburdened as a result of increased audits and understaffing, which is detrimental to providers. Furthermore, the recently issued Administrator's Ruling and proposed rule limit the ALJs' broad jurisdiction, which also has a negative impact on providers. As a result, providers should do their part to limit their risk of audits and increase their success of appeals by improving compliance. If you or your healthcare entity needs assistance in developing an effective compliance plan, please contact our experienced healthcare attorneys at 248-544-0888.