Recently in Health Law Category

February 29, 2016

CMS Releases Proposed Rule Changing Benchmarking Methodology for ACOs

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.

Wachler & Associates continues to stay up to date on all developments under Medicare's ACO program. If you or your health care entity have any questions regarding Medicare's ACO program, the proposed rule, other healthcare regulations pertaining to Medicare or Medicaid, or general healthcare regulatory compliance, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

February 23, 2016

OIG Advisory Opinion Examines Radiology Arrangement Regarding Transcription Fees Paid to Third Party

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.

The OIG highlighted that both the Clinic and radiology practice are referral sources for the Hospital, and the Clinic is a referral source for the radiology practice. Under the AKS, when a party in a position to benefit from referrals provides remuneration to a referral source, including the relief of administrative expenses, there is risk that such remuneration is to influence referrals.

First, the OIG determined that no remuneration passed from the Hospital to the Clinic, as the Hospital billed the radiology practice for transcription services, the Hospital is entitled to reimbursement for such services, and it is logical that the Hospital would bill the radiology practice for these services.

Second, since the Clinic would not pay for transcription costs, the OIG determined whether the radiology practice's payment for such costs constituted remuneration from the radiology practice to the Clinic. The OIG stated that if the transcription costs were reimbursed solely under the technical component, the risk of prohibited remuneration under the AKS would be substantial. However, given CMS' position that Medicare's payment for both the technical component and professional component includes reimbursement for indirect expenses, and to the extent these expenses include transcription costs, the parties both receive reimbursement for the same expense and thus the risk of prohibited remuneration between the parties arises when one party bears the costs instead of the other. Despite this risk, the OIG determined that prohibited remuneration would not pass between the radiology practice and Clinic. The OIG's decision was based on the fact that Medicare's Payment Conditions for Radiology Services state with regard to the professional component, "[t]he interpretation of a diagnostic procedure includes a written report." Thus, since the written report is part of the professional component, the radiology practice's payment for transcription of its own reports would not constitute remuneration to the Clinic.

Wachler & Associates represents healthcare providers, suppliers and other individuals nationwide in substantially all areas of health law, including compliance with the AKS, the federal Stark law, and other federal and state laws related to healthcare fraud and abuse. Our firm regularly structures arrangements to comply these laws and other regulatory guidance. If you or your health care entity has any questions related to the AKS, Stark law, or any other authorities governing relationships between healthcare providers and referral sources, or healthcare regulatory compliance in general, please contact an experienced health law attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

February 16, 2016

OCR Releases New HIPAA Guidance for Health App Developers

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.

Business Associate? No. Developer is not creating, receiving, maintaining or transmitting PHI on behalf of a covered entity or another business associate. The consumer is using the developer's app to help her manage and organize her information without any involvement of her health care providers.

Scenario: At direction of her provider, patient downloads a health app to her smart phone. Provider has contracted with app developer for patient management services, including remote patient health counseling, monitoring of patients' food and exercise, patient messaging, EHR integration and application interfaces. Information the patient inputs is automatically incorporated into provider EHR.

Business Associate? Yes, the developer is a business associate of the provider, because it is creating, receiving, maintaining and transmitting PHI on behalf of a covered entity. In this case, the provider contracts with the app developer for patient management services that involve creating, receiving, maintaining and transmitting PHI, and the app is a means for providing those services.

While OCR acknowledges that the scenarios provided in the guidance are fact and circumstance specific, the information contained in the guidance provides a valuable starting point for mobile app developers in determining whether they are subject to HIPAA regulations. If you have additional questions pertaining to HIPAA's application to you or your organization, or otherwise need assistance regarding HIPAA, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com.

September 25, 2015

Florida Hospital District Settles False Claims Act Allegations for $69.5 Million

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.

Wachler & Associates represents healthcare providers nationwide in a variety of health law matters, including compliance with the federal Stark law, Anti-Kickback Statute (AKS), and False Claims Act, as well as state laws governing healthcare fraud and abuse. Our attorneys have widespread experience structuring physician compensation arrangements to comply with Stark law exceptions, AKS safe harbors, and other regulatory requirements. If you or your health care entity have any questions related to healthcare fraud and abuse laws, or healthcare regulatory compliance in general, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

September 18, 2015

CMS Releases 2014 ACO Performance Results

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.
  • Of the 333 Medicare Shared Savings ACOs, 92 ACOs held spending below their targets, qualifying them for their share in the $341 million in program savings as performance payments. An additional 89 ACOs reduced health care costs in comparison to their benchmark, but did not meet the minimum savings threshold necessary to qualify for shared savings.
  • ACOs that entered the Medicare Shared Savings Program in 2012 generated more shared savings than the ACOs that entered the program in 2013 and 2014 - 37% (2012) compared to 27% (2013) and 19% (2014).

Wachler & Associates will continue to stay up to date on all developments under Medicare's ACO programs. If you or your health care entity has any questions regarding Medicare's ACO programs, or any other health law questions, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com. You may also subscribe to our health law blog by adding your email at the top right of this page.

July 16, 2015

U.S. Court of Appeals for the Fourth Circuit Upholds $237 Million Judgment Against Toumey Healthcare System

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.

The Court also upheld the lower court's award of damages and other penalties. The Court determined that the damages properly took into account all referrals by the physicians to the hospital, not just those referrals addressed by the impermissible compensation arrangements, and also that the $237 million verdict did not violate the Excessive Fines Clause of the Eight Amendment or the Due Process Clause of the Fifth Amendment. Further, in a technical discussion of how the compensation arrangements violated Stark, the Court cited testimony that compensation arrangements that pay a physician an amount greater than the physician's collections demonstrates that the arrangements are not fair market value and instead evidences that the hospital intends to reward the physician for the physician's referrals to the hospital. Toumey argued that the compensation arrangement did not, on its face, vary with the volume or value of referrals. The Court, however, agreed with the government, finding that under Stark, aggregate compensation cannot vary with the volume or value of referrals, or otherwise take into account the volume or value of referrals. In addition to the payments being above fair market value, the physician's referrals for personally performed services included a facility fee payable to the hospital and, as such, the productivity bonus in the compensation arrangement varied based on the amount of referrals to the hospital.

In general, the Toumey case highlights the complexity in analyzing physician compensation arrangement under Stark, and demonstrates the amount of liability that can attach to impermissible financial arrangements between physicians and health care entities to which the physicians' refer patients. Wachler & Associates continues to stay up to date on all legal developments under Stark, as well as state laws governing physician referrals. Our attorneys regularly analyze physician compensation arrangements and other contracts under Stark and other healthcare fraud and abuse laws. If you or your health care entity have any questions regarding Stark, physician compensation arrangements, or other healthcare laws governing the relationships between healthcare providers, please contact an experienced healthcare attorney at (248) 544-0888 or via email at wapc@wachler.com. You may also subscribe to our health law blog to stay up to date on all developments in healthcare regulatory compliance by adding your email at the top right of this page.

July 9, 2015

Proposed Rule Shifts Medicaid Managed Care Enrollment Function to States

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.

Even though the proposed rule would shift the screening and enrollment of network providers to the state, the rule would not require the network provider to also render services to Medicaid FFS beneficiaries. Finally, the proposed rule leaves unchanged the MCEs' duty to not discriminate against those providers that serve high-risk populations or specialize in conditions that require costly treatment.

Wachler & Associates will continue to monitor CMS' proposed rule and other developments in Medicaid managed care. If you or your health care entity have any questions regarding the Medicare, Medicaid, or managed care plan enrollment process, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. Subscribe to our health law blog to stay updated on the latest CMS news.

May 19, 2015

Senate Finance Committee Examines Medicare Appeals Backlog

On April 28, 2015, the U.S. Senate Finance Committee held a hearing to address the rising Medicare appeals claims backlog. At the hearing, Nancy Griswold, Chief Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA), blamed the backlog on a lack of funding and an unprecedented amount of appeals. ALJ Griswold stated that the average processing time for each claim has soared to 550 days, more than quadrupling over the past five years. There are currently over 500,000 Medicare appeals pending review.

While appeals continue to stack up, OMHA's budget was increased from $69 million to $82.3 million over the past fiscal year (FY). Additionally, OMHA's staff has expanded from 492 employees to 514 employees for the same FY. However, ALJ Griswold claimed that this boost in resources is still not enough. In FY 2013, OMHA received 700,000 claims, which represents an astonishing increase from the 60,000 claims received just two years prior. Despite the staggering amount of claims, only 60 officers are assigned to handle cases.

Although Senate Finance Committee Chairman Orrin Hatch acknowledged the importance of preventing improper Medicare payments, he emphasized the seriousness of the backlog is due to the "insurmountable increase in appeals." Senator Hatch also noted that 60 percent of appeals are found in favor of defendants, and questioned how initial decisions are being made and whether providers are facing undue burdens.

At the hearing, ALJ Griswold urged senators to support President Obama's proposed budget, which would increase OMHA's budget by approximately $300 million. OMHA reported that the funding would be allocated towards doubling the office's capacity to process cases. In the alternative, ALJ Griswold suggested a refundable filing fee to prevent providers from filing claims just to "game the system." In support of ALJ Griswold, Sandy Coston, CEO of Medicare administrative contractor Diversified Service Options, suggested that CMS could reform the initial level of appeals in order to streamline access to subsequent appeals levels. Although Senator Hatch did not offer any endorsements, he continued to express the seriousness of the backlog in appeals and its detrimental effect on the Medicare system.

Wachler & Associates continues to monitor the OMHA appeal backlog, and our attorneys have attended two OMHA Medicare Appellant Forums hosted by OMHA and CMS in Washington D.C. Although we support the various initiatives and pilot programs presented by OMHA, we agree with ALJ Griswold that a significant increase in OMHA resources is needed to address the appeal backlog.

Despite the appeal backlog and processing time, Medicare providers and suppliers must continue to appeal Medicare contractors' overpayment determinations and preserve their appeal rights. Wachler & Associates represents healthcare providers and suppliers in a variety of healthcare matters, including appeals of Medicare overpayment determinations at all levels of review. If you or your healthcare entity have any questions regarding the Senate hearing, or seek help in defending an overpayment demand by a recovery audit contractor (RAC), please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. To remain up-to-date on healthcare regulatory developments, please subscribe to our blog by adding your email address in the window on the top right of this page.

April 28, 2015

Proposed Stage 3 Meaningful Use Rules

On Friday March 20, 2015, the Centers for Medicare & Medicaid Services ("CMS") announced the release of the new Stage 3 meaningful use proposed rules. Concurrently, the Office of the National Coordinator for Health Information Technology ("ONC") released its new EHR certification requirements, which are linked to its previously released interoperability roadmap. CMS says that the new rules "will give providers additional flexibility, make the program simpler, and drive interoperability among electronic health records, and increase the focus on patient outcomes to improve care."

With the announcement of the new rules came the release of the two proposals: one outlining the Stage 3 meaningful use requirements for hospitals and providers and one outlining the new EHR certification requirements. The proposed Stage 3 meaningful use rule is intended to specify the meaningful use criteria that eligible professionals, eligible hospitals, and critical access hospitals must meet in order to qualify for Medicare and Medicaid EHR incentive payments and avoid downward adjustments under Medicare for Stage 3 of the EHR incentive program. According to the summary of the proposed rule, it would continue to encourage submission of clinical quality measure ("CQM") data for all providers where feasible in 2017, propose to require the electronic submission of CQMs where feasible in 2018, and establish requirements to transition the program to a single stage for meaningful use. Also, the Stage 3 proposed rule, according to CMS, would change the EHR reporting period so that all providers would report under a full calendar year timeline with a limited exception under the Medicaid EHR Incentive Program for providers demonstrating meaningful use for the first time.

In the proposed rule regarding EHR certification requirements, CMS introduces a new edition of certification criteria, proposes a new 2015 Edition Base EHR definition, and proposes to modify the ONC Health IT Certification Program "to make it open and accessible to more types of health IT and health IT that supports various care and practice settings." It would also establish the capabilities and specify the related standards and implementation specifications that Certified EHR Technology ("CEHRT") would need to include to, at a minimum, support the achievement of meaningful use by eligible professionals, eligible hospitals, and critical access hospitals under the Medicare and Medicaid EHR Incentive Programs when such edition is required for use under these programs.

The Department of Health & Human Services ("HHS") Secretary, Sylvia Burwell, stated that, "[t]he steps we are taking today will help to create more transparency on cost and quality information, bring electronic health information to inform care and decision making, and support population health."

CMS will make additional changes to the meaningful use rules in 2015 that will include instituting a shorter reporting period: moving from the current one year period down to ninety days. Patrick Conway, the acting principal deputy administrator and chief medical officer at CMS, confirmed this notion, stating that, "in an effort to make reporting easier for health care providers, we will be proposing a new meaningful use reporting deadline soon."
CMS is seeking comments on the proposed Stage 3 meaningful use rules and on the new EHR certification requirements until May 29, 2015.

Wachler & Associates will continue to monitor CMS rule making and guidance related to EHR meaningful use criteria, as well as other breaking healthcare news. Subscribe to our health law blog to stay up to date on the latest CMS rule making and guidance. If you need help understanding the meaningful use requirements or assistance with negotiating EHR contracts, please contact an experienced healthcare attorney at 248-544-0888 or email at wapc@wachler.com.

April 17, 2015

FDA Gives Finalized Guidance on Medical Device Data Systems, Mobile Apps, and Medical Image Storage and Communications Devices

The Food and Drug Administration (FDA) issued non-binding guidance on February 9, 2015 finalizing its position on regulatory compliance of medical device data systems (MDDS), medical image storage and communications devices and mobile medical applications. In its recently issued guidance, the FDA explained that it will not enforce compliance with the regulatory controls that apply to MDDS, medical image storage devices and medical image communications devices because the devices pose a low risk to the patients and play an important role in the advancement of digital health care. Under FDA regulations, MDDS is defined as hardware or software that electronically transfers or stores medical device data, electronically converts medical device data from one format to another, or electronically displays medical device data. A medical image storage device stores and retrieves medical images and a medical image communication device electronically transfers medical image data between medical devices.

As a result of the FDA's position, manufacturers of MDDS or medical storage and communication devices will not have to register with the FDA, submit to pre-market review or post-market reporting, and can avoid quality system regulation, thereby saving manufacturers time and money. The FDA further stated that it will not enforce compliance with pre-market notification for MDDS, or medical image storage and communication devices that would have otherwise required such notification under the regulations.

Additionally, on February 9, 2015 the FDA issued non-binding guidance specific to mobile apps. The issued guidance contains three appendices that explain and provide examples of apps that are within FDA enforcement, outside of FDA enforcement, and those over which the FDA abstains from enforcing the regulations. The first appendix gives examples of apps that are not "devices" under FDA regulations; the second appendix gives examples of apps that may meet the definition of "device," but but regulations will not be enforced as the apps are considered low risk to patients and users; and the third appendix gives examples of what the FDA considers "mobile medical apps" over which the FDA does intend to enforce its regulations. The FDA defined "mobile medical apps" as apps that meet the definition of a "device" and are intended to be used as an accessory to a regulated device or are intended to transform a mobile platform into a device. In its guidance on mobile apps, the FDA stated many mobile devices do not fall under its definition of a "device" in 21 USC § 321(h) and are therefore not regulated by the FDA. The FDA did, however, strongly recommend that manufacturers of mobile apps that may qualify as a "device" follow the FDA's Quality System regulation in developing and designing apps. Lastly, while the FDA acknowledged that many current mobile apps do not constitute "devices" under FDA regulations, or are simply not regulated by the FDA, current and new mobile medical devices are subject to FDA enforcement.

In sum, the dually issued FDA guidance on MDDS, medical image storage and communication devices, and mobile apps in large part constitutes an abstention on behalf of the FDA, perhaps signalizing the FDA's recognition that strict enforcement of FDA regulations on MDDS, medical image storage and communication devices, and mobile apps will unduly burden manufacturers, slow the development of digital health care and fail to provide any greater protection to the public. However, mobile medical apps are subject to FDA regulation and enforcement and developers are encouraged to engage in open dialogue with the FDA to discuss potential regulatory requirements.

If you have any questions relating to MDDS, medical image storage and communication devices, or mobile application compliance with FDA regulations or any other compliance issues, please contact a Wachler & Associates attorney at 248-544-0888 or at wapc@wachler.com. For further updates on FDA regulatory requirements and other healthcare news, please subscribe to Wachler & Associates' health law blog by adding your email address and clicking "Subscribe" in the window on the top right of this page.

April 3, 2015

CMS Offers Clarification to HHA Contradictory Guidance

On March 18, 2015, Wachler & Associates attorneys, Andrew Wachler and Jessica Forster, highlighted contradictory guidance released by the Centers for Medicare and Medicaid Services ("CMS") relating to home health agencies ("HHAs") face-to-face encounter documentation. When the calendar year ("CY") 2015 Home Health Final Rule ("Final Rule") went into effect on January 1, 2015, new rules for HHAs face-to-face encounter documentation were implemented. Most prominently, the revised Final Rule eliminated the brief narrative requirement in almost all cases for home health face-to-face encounter documentation. Although the brief narrative requirement was removed, CMS mandated that the certifying physician's medical record include all required elements for the physician certification. Additionally, CMS stated in the Final Rule that a HHA may communicate with and provide information to the certifying physician about the patient's homebound status and need for skilled care and the certifying physician could incorporate the information into his or her medical record for the patient.

In two separate CMS conference calls, representatives provided contradictory information with regards to physician documentation responsibilities. The first conference call held by CMS properly reinforced the Final Rule's statement that HHAs could provide information to the certifying physician that the physician could incorporate into his or her medical record (a) if the physician signed/dated the documentation and (b) if the physician's own entries corroborated the information from the HHA. The Final Rule and the first conference call both said that this information from the HHA would be considered by medical reviewers to determine if the certification requirements were met. It was only during the second conference call, on March 11, that CMS contradicted prior guidance by stating that the physician's own documentation must meet the certification requirements and that medical reviewers were advised of this instruction. The CMS representative reiterated that even if a certifying physician signs and dates a HHA's documentation that does not mean that the documentation becomes part of the physician's medical record. Wachler & Associates reached out to CMS for clarification.

On March 23, 2015, CMS clarified the contradiction. In its reply, CMS stated that the patient's medical record must support the certification of eligibility and documentation in the patient's medical record shall be used as a basis for certification of home health eligibility. Importantly, CMS also noted that reviewers will consider HHA documentation if it is incorporated into the patient's medical record and signed off by the certifying physician.

Wachler & Associates will continue to monitor and provide timely updates on important HHA developments. Interested parties should listen to the next CMS Special Open Door Forum, which is scheduled for April 28, 2015 at 1:30pm ET. If you have any questions regarding the Final Rule, or HHAs in general, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com.

February 17, 2015

CMS Modifies Manual Medical Review Process for Outpatient Therapy Claims Above Cap

The Protecting Access to Medicare Act of 2014 extended the process for exceptions to Medicare's outpatient therapy caps through March 2015. Exceptions to Medicare's outpatient therapy caps are allowed for medically necessary and reasonably therapy services. However, claims above $3,700 for physical therapy and speech language pathology services combined, and above $3,700 for occupational therapy services, are subject to manual medical review by recovery audit contractors (RACs). The caps are calculated per beneficiary, per year. While manual medical reviews of outpatient therapy claims above the cap were put on hold last year, existing RACs received approval on January 16, 2015 to resume sending additional documentation requests (ADRs) to Part B providers.

However, CMS recently introduced a new post-payment review system that requires RACs to review outpatient therapy claims using a new manual medical review process. RACs will now be required to review claims using a tiered approach to ADRs. The process allows for 100% review of provider claims above the $3,700 therapy caps ("eligible claims"), but prevents the RACs from requesting large and potentially unmanageable amounts of records at one time.

Beginning in January 2015, the new manual medical review process permits RACs to review 100% of a provider's eligible claims using a 5-step approach to ADRs. A RAC's first ADR may only review one claim, but additional ADRs may request records for an increasing percentage of claims. The second ADR may review up to 10% of eligible claims, the third ADR may review up to 25% of eligible claims, and the fourth ADR may review up to 50% of eligible claims. Finally, a RAC's fifth ADR to a particular provider may review 100% of the provider's total eligible claims. Please note that the new tiered approach retains the RAC's cycle of 45 days between ADRs.

The new manual review process meets the congressional mandate of a 100% review rate for outpatient therapy claims above the outpatient therapy cap. However, CMS believes the new manual review process will meet the congressional mandate in a more equitable manner. For now, the review process is limited to claims reviewed by existing RACs for claims made from March 1, 2014 to December 31, 2014. CMS has not yet finalized the process for claims made in 2015. The manual medical review process is also limited to claims made by Part B outpatient therapy providers, including but not limited to therapists' private offices, offices of physicians, Part B skilled nursing facilities (SNFs), home health agencies (HHAs), and hospital outpatient departments.

Wachler & Associates represents all types of therapy providers in a variety of matters, including responding to ADRs and appealing Medicare overpayment demands. If you or your healthcare entity has any questions regarding Medicare's new manual medical review process for therapy claims above the outpatient therapy cap, or seek help in defending an overpayment demand by a RAC, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. To stay up to date on healthcare regulatory developments, subscribe to our blog by adding your email address in the window on the top right of this page.

February 6, 2015

Pharmaceutical Company Pays $39 million to Settle Anti-Kickback and False Claims Allegations

On January 9, 2015, the Federal Bureau of Investigations and Department of Justice, along with several state Medicaid programs, announced that Daiichi Sankyo Inc. ("Daiichi"), a U.S. subsidiary of a Japanese pharmaceutical company, agreed to pay $39 million to settle alleged violations of the Anti-Kickback Statute and False Claims Act ("FCA").

In March 2010, a qui tam lawsuit was filed in the U.S. District Court for the District of Massachusetts. The allegation contained in the lawsuit related to speaker programs that Daiichi hosted between January 2004 and March 2011. The qui tam plaintiff, a former Daiichi sales representative, asserted that Daiichi inappropriately compensated physicians that participated in the speaker programs. The six primary allegations included:

  • The program honoraria recipient only spoke to member of his or her own staff in his or her own office;
  • Physicians took turns accepting speaker honoraria for duplicative discussions;
  • The audience include the honoraria's spouse;
  • The honoraria recipient did not speak at all because the event was previously canceled;
  • The program dinners exceeded Daiichi's internal cost limitation of $140 per person; and
  • Drugs that were promoted at the programs (Azor, Benicar, Tribenzor, and Welchol) were used for off-label purposes.
The Government contended that the meals, honoraria, and other remuneration paid to participating physicians amounted to illegal kickbacks that ultimately induced the physicians to prescribe the drugs for off-label use. Furthermore, this resulted in pharmacies unknowingly submitting false prescription drug claims because prescriptions for off-label uses are typically not eligible for reimbursement.

In addition to paying $39 million, Diiachi agreed to enter into a corporate integrity agreement that obligates it to implement dramatic internal reforms over the next five years. Specifically, the corporate integrity agreement mandates that Diiachi enact compliance programs to prevent similar improper practices from reoccurring. For the qui tam plaintiff's services, the former employee will receive $6.1 million of the Government's recovery.

Wachler & Associates regularly counsels providers regarding the FCA, Anti-Kickback Statute, and other federal and state fraud and abuse laws and assists in developing compliance programs to address these laws. If you or your healthcare entity have any questions regarding the FCA, Anti-Kickback Statute, and/or other federal and state fraud and abuse laws, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com.


January 29, 2015

HHS Sets Timelines for Focus of Reimbursement to Shift from Quantity to Quality

On January 26, 2015, the U.S. Department of Health and Human Services ("HHS"), for the first time ever, announced a timeline and corresponding goals to shift the basis of Medicare reimbursement away from the quantity of care provided towards the quality furnished to beneficiaries. With the passage of the Patient Protection and Affordable Care Act ("ACA") in 2010, Congress created several new payment models, including Accountable Care Organizations ("ACOs"), primary care medical homes, and new models of payment bundling for care. These models all share the commonality that they incentivize physicians to coordinate care for their beneficiaries, maintain quality, and control costs. With the proliferation of these models that focus on quality over quantity, HHS was compelled to reform the Medicare reimbursement process.

Specifically, HHS announced its goal of tying 30 percent of fee-for-service Medicare payments to quality output through alternative payment models, like ACOs or bundled payment arrangements, by the end of 2016. Furthermore, HHS plans on increasing that amount to 50 percent by the end of 2018. If this goal is met, half of all payments to physicians and hospitals will be made through alternative payment models by 2018. Additionally, HHS set a timeline for tying 85 percent of fee-for-service, or traditional, Medicare payments to quality output by 2016 through the Hospital Value Based Purchasing and Hospital Readmissions Reduction Programs. This number is also set to increase to 90% by 2018.

To accomplish this, HHS has created the Health Care Payment Learning and Action Network ("the Network"). The Network is an organization made up of health care stakeholders including private payers, consumers, providers, employers, and state Medicaid programs. The Network, which will hold its first meeting in March 2015, plans to expand alternative payment models nationwide into all areas of health care. HHS hopes that the intensity exhibited by the Network will even surpass its initial goals for program expansion.

In a separate announcement, the President of the American Medical Association, Robert Wah, MD, stated that the HHS timeline "aligns with the [AMA's] commitment to work toward innovative care delivery reform."

In 2011, Medicare essentially made zero payments to providers through alternative payment models. However, today the use of alternative payment models has increased to about 20 percent of all Medicare payments. HHS has already noted significant savings from the use of alternative payment models--reporting a $417 million savings to Medicare as a result of ACO programs. Moreover hospital readmissions have been reduced by eight percent, which is 150,000 fewer readmissions from January 2012 to December 2013.

If you or your healthcare entity have any questions regarding the implementation of new alternative payment models, please contact an experienced healthcare attorney by phone at 248-544-0888 or via email at wapc@wachler.com. Wachler & Associates will continue to keep you updated on HHS and Medicare news. If you are interested, please subscribe to Wachler & Associates' health law blog by adding your email address and clicking "Subscribe" in the window on the top right of this page.

January 28, 2015

CMS Announces New RAC Contract for DME, Home Health and Hospice Claims

On December 30, 2014, the Centers for Medicare & Medicaid Services (CMS) announced that they had awarded the Region 5 Recovery Audit Contract (RAC) to Connolly, LLC. CMS contracts with RACs to identify and correct improper payments. Connolly, which has been the RAC for Region C, was awarded the Region 5 contract which covers claims for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), home healthcare and hospice providers. With the awarding of the new RAC contract focused on DME, home health and hospice providers, these provider types can expect increased scrutiny of their Medicare claims.

CMS also outlined a number of "improvements" to the RAC program that will take effect with each new RAC contract awarded, beginning with the Region 5 contract awarded on December 30, 2014.

One of the "improvements" brought by the new RAC program is that the CMS has reduced the RAC look-back period to 6 months from the date of service for patient status reviews where hospitals submitted the claim within 3 months of the date of service. Previously, the look-back period for RACs was from 3 years and hospitals had to submit a claim within one year from the date of service in order to comply with the timely filing rules, leaving hospitals with the inability to rebill denials from patient status reviews. Another improvement is that the CMS has established new Additional Documentation Request (ADR) limits based on a provider's compliance with Medicare rules. Specifically, the ADR limits will align with providers' denial rates (i.e., providers with low denial rates will have lower ADR limits), and ADR limits will be adjusted as a providers' denial rates decrease.

With the new RAC contract awarded, DME, home health and hospice providers should be prepared for increased audit activity from the new RAC. If you are currently undergoing an audit and need assistance defending claims denials, or have any questions about how to proactively prepare for an audit or mitigate audit risk, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com. To continue to stay updated on healthcare news, please subscribe to the Wachler & Associates health law blog by adding your email address and clicking 'Subscribe' in the window on the top right of this page.