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July 10, 2014

HHS Unveils Statistical Sampling Pilot Program for ALJ Hearings on Medicare Audit Appeals

Last week, the Office of Medicare Hearings and Appeals (OMHA) announced the Statistical Sampling Pilot Program (Pilot Program). The Pilot Program offers Medicare providers an alternative route, along with the Settlement Conference Facilitation Pilot, to reach a final determination for claims pending at the administrative law judge (ALJ) hearing level without enduring the 2-3 year delay for hearing. Although the Pilot Program offers a time-saving and perhaps more efficient option for Medicare providers, engaging in the Pilot Program also comes with risks as Medicare providers may "put all of their eggs in one basket" and rely on a single ALJ to issue a decision that affects a large volume of claims. In some cases, the provider may know the identity of the ALJ prior to agreeing to statistical sampling, but in other cases the provider will not.

The Pilot Program is available to Medicare providers that have requested an ALJ hearing following a Medicare Qualified Independent Contractor (QIC) reconsideration decision. At this time, the ALJ hearing requests must either be assigned to an ALJ or must have been filed between April 1, 2013 and June 30, 2013 and it must meet all jurisdictional requirements, including that it was filed timely. In order to be eligible for the Pilot Program, the Medicare provider must have a minimum of eligible 250 claims and the claims must be one of the following: (1) pre-payment claim denials; (2) post-payment non-RAC claim denials; or (3) post-payment RAC claim denials from one RAC. In addition, claims that are assigned to different ALJs or were requested in different consolidation groups may be incorporated into the request for statistical sampling.

A Medicare provider that meets the eligibility requirements for the Pilot Program may request statistical sampling by submitting a "Request for Statistical Sampling" form that is available on OMHA's website. The provider must also submit a spreadsheet, a template is also available on OMHA's website, that provides detailed information about the claims requested to be included in the statistical extrapolation.

After a request is submitted, if granted, a consent template will be sent to the Medicare provider. The consent template will request the Medicare provider to consent in writing to statistical sampling. After written consent is obtained, a pre-hearing conference will be held to confirm the consent, establish the universe of claims from which the sample will be taken and agree to other matters related to the hearing. Following the pre-hearing conference, the ALJ will issue an order and if no objections are received within 10 days of receipt of the order, the order will become binding. Once the pre-hearing conference order becomes binding, consent for the statistical sampling may not be withdrawn.

After the pre-hearing conference order becomes binding, OMHA will combine the universe of claim appeals agreed to in the pre-hearing conference under a single ALJ appeal number. The appeal will be assigned to the next ALJ on the rotation unless all of the appeals had been assigned to an ALJ prior to the statistical sampling request. The random statistical sampling will be compiled by a trained and experienced statistical expert who will develop appropriate sampling methodology in accordance with Medicare guidance. At the hearing, the ALJ will review the sample units and make a decision regarding those units. It is important to note that either CMS or a CMS contractor may participate in the hearing. The decisions on the sample units will be extrapolated to the universe of claims at issue.

The Pilot Program offers an opportunity to eligible Medicare providers with large volumes of claims to seek an alternative, and perhaps more efficient, avenue to final resolution of the claims. The new program is a welcomed creative development to solving the backlog of appeals waiting for assignment for ALJ hearing. However, Medicare providers should carefully consider before engaging in the process and fully understand the implications of agreeing to statistical sampling. Wachler & Associates will continue to provide updates on the developing Pilot Program. For more information on ALJ appeal strategies and the Pilot Program, please contact an experienced health care attorney at 248-544-0888 or wapc@wachler.com.

July 9, 2014

HHS Launches Pilot Program for Providers to Settle Medicare Overpayment Demands with CMS

Recently, the Department of Health and Human Services (HHS) announced its new pilot program - Settlement Conference Facilitation (SCF) Pilot - to provide an alternative dispute resolution process for settling appealed Medicare claims denials. Through the SCF program, providers have the opportunity to discuss with the Centers for Medicare and Medicaid Services (CMS) the potential of a mutually agreeable resolution to the claims appealed to an Administrative Law Judge (ALJ) hearing. According to HHS, the settlement conference facilitator, who is an employee of the Office of Medicare Hearings and Appeals (OMHA), will use mediation principles to assist the appellant and CMS in reaching a mutual settlement agreement. If a settlement is reached between the appellant and CMS, the facilitator will draft the settlement document to be signed at the settlement conference by both parties. Once a binding settlement agreement has been executed, any pending ALJ hearing requests for the claims covered by the settlement agreement will be dismissed and no further appeal rights will be attached to those claims. On the other hand, if the parties are unable to reach a settlement agreement and the facilitator believes further efforts to reach an agreement will be unsuccessful, the SCF process will be concluded and the appealed claims will return to the ALJ level of appeal in the order the hearing request was originally received by OMHA.

Initially, HHS is limiting eligibility for the SCF pilot program to claims by Medicare Part B providers who have filed requests for ALJ hearing in 2013 and are not currently assigned to an ALJ. For those eligible providers, the request for SCF must include all of the provider's pending ALJ appeals for the same item or service (i.e., all claims for the same item or service in which ALJ hearing requests were submitted in 2013). Appellants must include all appeals included in the applicable ALJ hearing requests, and may not request an SCF for some claims and proceed to the ALJ hearing for the remaining claims. Additional SCF eligibility requirements include that at least 20 claims must be at issue or, if fewer than 20 claims are at issue, at least $10,000 must be in controversy. Also, the amount of each individual claim must be less than $100,000. For claims subject to statistical sampling, the extrapolated overpayment amount at issue must be less than $100,000; however, HHS states that it will continue to explore expanding the SCF pilot program for larger extrapolated overpayment cases.

Although the SCF process is only available for a limited group of claims at this time, those providers whose appeals are currently ineligible (e.g., Part A providers) for the SCF pilot program may nonetheless view these developments as a silver lining as countless appealed claims are currently awaiting ALJ hearings to be scheduled - claims in which CMS has likely recouped all of the alleged overpayment amount. With the substantial volume of claims currently backlogged at OMHA causing two to three year delays before the appealed claims are finally adjudicated, appellants may soon be provided a forum to reach mutually agreeable resolutions with CMS and receive the timely payment in which the provider is entitled.

If you or your entity have questions related to the SCF pilot program, or would like assistance from experienced health care attorneys in representing you or your entity in the SCF process, please contact Wachler & Associates at 248-544-0888 or wapc@wachler.com.

July 7, 2014

CMS Affirms Physicians May Bill Certain Pharmacy Services as "Incident To" But Highlights Recent Regulatory Amendments Regarding Compliance with State Law

In a March 25, 2014 letter to the American Academy of Family Physicians (AAFP), CMS Administrator Marilyn Tavenner responded to an inquiry from the AAFP asking whether, if all of the "incident to" rules are met, may a physician bill Medicare for a Part B covered service provided by a pharmacist in the physician's practice.

In its January 2014 letter, AFFP noted the "increasing emphasis on team-based care in family medicine" particularly in the context of a "patient-centered medical home." Due to such changes, AAFP advised CMS that family medicine practices were employing pharmacists as part of the patient care team. Pursuant to the plan of care developed by the physician, these pharmacists were having and documenting direct, face-to-face encounters with patients where they reviewed "applicable patient history and medications" and counseled patients on the "risks and benefits of pharmaceutical treatment options" and "instructions for improving pharmaceutical treatment compliance and outcomes." The AAFP took the position with CMS that such encounters would meet the definition of an established patient evaluation and management services ("E/M service") and would be billed as an E/M service if the physician had provided the service. The AAFP also reviewed applicable Medicare rules on "incident to" billing, specifically section 60 of chapter 15 of the Medicare Benefit Policy Manual and stated that it "found nothing in Section 60 that would exclude pharmacists from this definition." Accordingly, AAFP requested confirmation that a physician who met all of the "incident to" rules would be permitted to bill Medicare for a Part B covered service provided by a pharmacist in the practice.

In her response, Administrator Tavenner stated that CMS agreed with AAFP's position that if all the requirements of the "incident to" statute and regulations were met, a physician may be reimbursed under Medicare Part B for services provided by pharmacists in the practice as "incident to" services.

Administrator Tavenner offered further guidance on this issue by directing AFFP's attention to the regulations at 42 CFR 410.26, which contained two new provisions as a result of CMS rulemaking for the calendar year 2014 physician fee schedule (PFS). Specifically, a phrase was added to the definition of "auxiliary personnel" in 42 CFR 410.26(a)(1), which requires that auxiliary personnel must "meet[] any applicable requirements to provide the services, including licensure, imposed by the State in which the services are being furnished" and a new section was added, 42 CFR 410.26(b)(7), which provides that, "[s]ervices and supplies must be furnished in accordance with applicable State law." Administrator Tavenner also referred AAFP to the CY 2014 PFS final rule and comments, found at 78 Fed. Reg. 74410, for more information. In light of these new provisions, she advised the AAFP to consider "applicable state laws" in addition to the other "incident to" requirements when considering when it is appropriate to bill for services "incident to" the physician's services.

As a result of this guidance from CMS and recent regulatory amendments, physicians and other providers wishing to bill under the "incident to" rules must carefully review not only the "incident to" rules themselves but also consider closely whether the "incident to" services are being furnished in compliance with applicable state laws such as licensure requirements for auxiliary personnel.

Wachler & Associates regularly counsels providers regarding the rules and regulations involving Medicare reimbursement, including "incident to" billing. If you have questions about "incident to" billing, or how these recent developments may impact your practice, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com. 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.

July 3, 2014

CMS Proposes to Eliminate the Narrative Requirement for Documented Face-to-Face Encounters for Home Health Agencies

In a recently released proposed rule, the Centers for Medicare & Medicaid Services (CMS) proposes to eliminate the narrative requirement from the home health face-to-face encounter documentation requirement. Under the Patient Protection and Affordable Care Act (ACA) and implementing regulations, the certifying physician must document that the physician himself or herself or an allowed nonphysician practitioner conducted a face-to-face encounter with the beneficiary no more than 90 days prior to the home health start of care date or within 30 days of the start of home health care. As part of the home health certification requirements, the documented face-to-face encounter must include a brief narrative of why the clinical findings of the encounter support that the patient is homebound and in need of intermittent skilled nursing services or therapy services.

According to CMS, the narrative requirement was adopted in an effort to achieve greater physician accountability in certifying a patient's eligibility to receive home health care as well as establishing the patient's plan of care. However, as CMS noted in the proposed rule, the home health industry is experiencing numerous problems meeting the narrative requirement. Accordingly, since the effective implementation of the face-to-face encounter requirement in April 2011, many home health agencies have seen an increased number of claims denied by Medicare audit contractors due to inadequate narratives supporting the services. In its proposed rule, CMS acknowledges some of the challenges faced by home health agencies in meeting the face-to-face narrative requirement, including:

• A perceived lack established standards for compliance that can be understood and applied by physicians and home health agencies;
• Frustration in the industry of having to rely on physicians to satisfy the face-to-face requirement without incentives to encourage physician compliance;
• Concerns that the narrative requirement is redundant when detailed evidence to support the need for homebound status and medical necessity is available in clinical records; and
• The narrative requirement was not explicitly codified in the Affordable Care Act.


In agreeing with the industry's complaints, CMS now proposes to eliminate the narrative requirement for the documented face-to-face encounter. However, CMS noted that there should be sufficient evidence in the patient's medical record to demonstrate that the patient meets Medicare eligibility criteria for home health services. Also, CMS reaffirms in its proposed rule that the certifying physician would still be required to certify that a face-to-face encounter occurred no more than 90 days prior to the start of care date for home health services or within 30 days of the start of the home health services, and that the face-to-face encounter was related to the primary reason the patient requires home health services.

Finally, in situations where skilled nursing visits for management and evaluation of the patient's plan of care are ordered by the physician, the proposed rule provides that the physician must still include a brief narrative that describes the clinical justification for the management and evaluation service as part of the certification/recertification process.

If finalized in its current form, the provisions in the proposed rule would eliminate the brief narrative requirement for documented face-to-face encounters. However, home health providers should implement the necessary compliance protocols to ensure the medical documentation contains sufficient information to support the patient's need for home health services. Failure to meet this standard or any of the other certification requirements could result in an increased risk of claims being denied by Medicare audit contractors. If you or your entity has any questions related to the face-to-face encounter or certification/recertification requirements, or need assistance in defending against or proactively preparing for a Medicare audit, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

June 26, 2014

Michigan Supreme Court Issues Ruling on Michigan's Generic Drug Substitution Statute


On June 11, 2014, the Michigan Supreme Court issued its decision in Michigan ex rel. Gurganus v. CVS Caremark Corp., and ruled that Michigan law requires a pharmacist to pass on the difference in cost between the wholesale cost of a brand-name drug and the wholesale cost of a generic drug to the purchaser when a generic drug is substituted for a brand-name drug (and only then). The case involved two consolidated class actions and a qui tam action against multiple pharmacies alleging that the pharmacies violated MCL 333.17755(2) by failing to pass on the savings to customers when substituting brand-name drugs with generic drugs. The plaintiffs further alleged that the defendant pharmacies necessarily violated the Health Care False Claim Act (HCFCA), MCL 752.1001 et seq, and the Medicaid False Claims Act (MFCA), MCL 400.601 et seq., by violating MCL 333.17755(2) and then submitting claims for reimbursement to the state.

The trial court granted summary disposition to the defendants because it found that the plaintiffs failed to state a claim upon which relief could be granted. The trial court noted that the plaintiffs did not plead with specificity any transactions involving the defendants that purportedly violated MCL 333.17755(2). The plaintiffs relied on a small set of cost data from a single out-of-state pharmacy during a brief time period to support their allegations of systematic fraudulent activity in Michigan by the defendants. The Court of Appeals reversed the trial court's decision, finding that the plaintiffs' general allegations were sufficient to avoid summary disposition. The Court of Appeals then reached several issues related to whether the HCFCA and MFCA created private rights of action. The panel also held that MCL 333.17755(2) applied to all transactions in which a generic drug is dispensed - not just to transactions in which a generic drug is substituted for its brand-name equivalent.

In a unanimous decision (with one Justice concurring only in the result), the Michigan Supreme Court reversed the Court of Appeals and reinstated the trial court's ruling. The Court reversed the Court of Appeals' construction of MCL 333.17755(2) and its holding that the plaintiffs' pleadings were sufficient to survive summary disposition. It vacated the remainder of the Court of Appeals' decision as unnecessary to the resolution of the case.

The Supreme Court's ruling is significant for pharmacies and pharmacists in the state of Michigan.

The Court clarified that MCL 333.17755(2) "is clear: when a generic drug is substituted for a brand-name drug (and only then), the pharmacist must pass on the monetary difference between the wholesale cost of the brand-name drug and the wholesale cost of the generic drug." It rejected the plaintiff's argument that the statute applied more broadly to situations where there is no substitution and the prescription is for the generic drug and the generic drug is dispensed.

The Court also clarified what "savings in cost" means under subsection (2) of the statute. The relevant portion of subsection (2) states that a "pharmacist shall pass on the savings in cost to the purchaser" in a substitution transaction. MCL § 333.17755(2) defines "savings in cost" as "the difference between the wholesale cost to the 2 drug products." Based on this language, the Court held that the amount that a pharmacist must pass on to a purchaser or third-party payor is the difference between the costs of the two drugs (i.e., the brand-name wholesale cost minus the generic wholesale cost). Thus, the Court noted that subsection (2) provides a maximum allowable profit regardless of whether the pharmacist dispenses a generic drug or a brand-name drug (i.e., the pharmacist cannot make more from dispensing a generic drug than he could from a brand-name drug).

The Court's opinion is also worth noting as it relates to the pleading standards facing parties who may be alleging that a pharmacy violated MCL 333.17755(2). Because the plaintiffs' claims were based on alleged fraudulent activity, the heightened pleading standard for fraud claims applied. The Court noted that the plaintiffs relied on wholesale drug cost data from a single Kroger pharmacy in West Virginia to support their allegations of fraud. It held that the connection the plaintiffs tried to draw between this data and sales in Michigan was "simply too tenuous and conclusory to state a claim for relief." Given its interpretation of MCL 333.17755(2), the Court also noted that the plaintiffs "fail[ed] to particularly allege a single improper substitution transaction" to which that provision would potentially apply.

Wachler & Associates continually monitors significant developments in healthcare law both in Michigan and nationally. If you have any questions as it pertains to this case or state or Federal False Claims Act implications regarding your practice, please contact an experienced health care attorney at 248-544-0888 or at wapc@wachler.com.

June 25, 2014

Federation of State Medical Boards Adopts Model Policy for the Appropriate Use of Telemedicine Technologies

Technological advancements that allow for quicker and more secure electronic communication have encouraged telemedicine. The Federation of State Medical Boards (FSMB) defines telemedicine as "the practice of medicine using electronic communications, information technology or other means between a licensee in one location, and a patient in another location, with or without an intervening healthcare provider." Telemedicine technologies allow for easier access to health care in rural areas, as well as nearly immediate contact with specialists for individuals involved in an emergency situation. However, widespread usage of telemedicine is still developing and most states have yet to take the appropriate legislative initiative to enact guidelines for state medical boards and health providers to follow when implementing telemedicine systems. As a result, the Federation of State Medical Boards (FSMB), acknowledging the benefits that telemedicine offers, decided to step in.

On April 26, FSMB adopted a Model Policy for the Appropriate Use of Telemedicine Technologies in the Practice of Medicine (Model Policy). The Model Policy comes as a result of the collaborative efforts of the FSMB-appointed State Medical Boards' Appropriate Regulation of Telemedicine (SMART) Workgroup. The SMART Workgroup, made up of state medical board representatives and telemedicine experts, was tasked with creating uniform guidelines for state medical boards and health providers after:

  • Conducting a comprehensive literature review of telemedicine services and proposed and/or recommended standards of care;
  • Identifying and evaluating existing telemedicine standards of care developed and implemented by state medical boards;
  • Revising the FSMB's 2002 policy.
In the absence of state legislation, the Model Policy offers a uniform approach to guide state medical boards and health providers in several essential areas.

First, the SMART Workgroup emphasized that the physician-patient relationship is integral in maintaining the integrity of medical care. The Model Policy notes that, before giving any medical advice, physicians utilizing telemedicine should first:

  • Fully verify and authenticate the location and, to the extent possible, the requesting patient;
  • Disclose and validate the provider's identity and applicable credential(s); and
  • Obtain appropriate consents from requesting patients after disclosures regarding the delivery models and treatment methods or limitations, including any special informed consents regarding the use of telemedicine technologies.
In addition, the Model Policy notes that an appropriate physician-patient relationship has not been established when the physician's identity is unknown to the patient. Furthermore, a patient must not be randomly assigned to a physician, but rather have a choice, whenever appropriate. So long as the standard of care is met, the physician-patient relationship can be established using telemedicine technologies.

Second, in order to avoid legal complications related to licensure issues, the Model Policy mandates that a physician must be licensed by the medical board of the state where the patient is physically located at the time he or she is receiving medical services. The SMART Workgroup also noted that physicians who wish to provide telemedicine services online must be licensed in all jurisdictions where patients receive care. As of the publication of this blog 10 states offer special purpose licenses, which allow for health professionals to have the option of obtaining a limited license for the delivery of specific health services under particular circumstances in addition to holding a full license in the state where they primarily practice. Reciprocity legislation and special purpose licenses could mitigate telemedicine boundaries created by licensure constraints.

Third, with regards to applicable scope of practice, FSMB stressed that treatment and consultation recommendations made using telemedicine technologies must be held to the same scope of practice as those in traditional, in-person settings. Furthermore, under the Model Policy physicians cannot issue prescriptions based solely on a questionnaire. In fact, prior to any treatment, the Model Policy requires that the treating physician performs a documented medical evaluation and collects the patient's relevant clinical history.

Fourth, the Model Policy states that patients should be provided easy access to follow-up care or information from the physician who conducted the consultation, or the physician's designee. In addition to follow-up services, physicians utilizing telemedicine technologies are required to provide an emergency plan to patients when there are indications that a referral to an acute care facility or emergency room is necessary. The emergency plan must also detail a formal, written protocol appropriate to the services being rendered.

Lastly, the SMART Workgroup requires that physicians should meet or exceed all applicable federal and state legal requirements of protected health information (PHI) privacy, including compliance with the Health Insurance Portability and Accountability Act (HIPAA). The Model Policy mandates that sufficient privacy and security measures must be in place and documented to assure confidentiality and integrity of PHI. All transmissions of PHI must be secured with passwords, encrypted electronic prescriptions, or other reliable techniques.

Telemedicine will continue to be integrated into health care services in the coming years. The FSMB Model Policy serves as a helpful guide in the absence of state regulations. However, any provider interested in telemedicine should contact a Wachler & Associates attorney. Wachler & Associates will continue to keep you updated on breaking telemedicine legislation and other health care news. For more information on telemedicine or how to utilize telemedicine technologies in your practice, please contact an experienced health care attorney at 248-544-0888 or email at wapc@wachler.com.

June 20, 2014

HHS Releases Annual Reports on HIPAA Compliance and Information Breaches

Recently, the Department of Health and Human Services Office for Civil Rights (OCR), released its annual report on breaches of protected health information (PHI). Under the Breach Notification Rule, covered entities are required to issue notifications following breaches of unsecured PHI. Examples of covered entities include health care providers and health plans, such as HMOs. Covered entities must notify affected individuals of a breach without unreasonable delay and no later than 60 calendar days following discovery of the breach. Notification to the individuals affected by the breach must include:

  • Covered entity's contact information for individuals to ask questions and learn additional information;
  • A brief description of the breach, including the date of the breach and discovery of the breach, if known;
  • A description of the types of unsecured PHI involved in the breach;
  • Any steps individuals should take to protect themselves from potential harm resulting from the breach; and
  • A brief description of what the covered entity is doing to investigate the breach, mitigate harm to individuals, and to protect against future breaches.
In addition, for breaches implicating fewer than 500 individuals, covered entities must submit a report to OCR no later than 60 days after the end of the calendar year in which the breach was discovered. Breaches involving 500 or more individuals require the covered entity to provide notice to OCR at the same time the affected individuals are notified. Covered entities must notify OCR by filling out and electronically submitting a form available on OCR's website.

In its annual report to Congress on breaches of unsecured PHI, OCR reported 236 breaches of PHI which affected over 500 people in 2011 and 222 in 2012. The 236 breaches in 2011 affected in total 11,415,185 individuals, while 3,273,735 were affected in 2012. Per department policy, OCR conducted investigations of each breach that affected over 500 individuals.

Following their investigations, OCR found that the primary reason for breaches affecting over 500 people in 2011 and 2012 was theft of portable electronics or paper containing PHI. The second leading cause of breaches was unauthorized access of records containing PHI. For example, in 2011 the largest breach occurred because of a loss of backup tapes, affecting 4.9 million people. Similarly, in 2012, 116,506 individuals were affected when an unencrypted laptop containing PHI was stolen.

In addition to its report on PHI breaches, OCR released a report regarding complaints alleging Health Insurance Portability and Accountability Act (HIPAA) violations. In this second report, OCR noted that it received 77,190 such complaints. OCR stated that by the end of the 2012 calendar year, it resolved approximately 91% of the complaints. Among those resolved, OCR noted that 42,793 of the allegations did not warrant enforcement of the HIPAA Rules. With that said, of all the investigated complaints between 2003 and 2012, OCR resolved 18,559 of them by providing technical assistance to resolve compliance problems and requiring covered entities to take corrective action. However, in 8,907 complaints, OCR found no HIPAA violations.

Since the enactment of the HIPAA Privacy and Security Rules, Wachler & Associates has counseled covered entities in HIPAA compliance. To ensure they are compliant, covered entities and business associates should update security policies and procedures and provide ongoing employee HIPAA compliance training. Wachler & Associates can assist you in implementing these protections. If you have any questions or require assistance developing and implementing a compliance plan for your entity, please contact an experienced healthcare attorney at 248-544-0888.

June 13, 2014

Physicians Nationwide Face Terminations as Insurance Plans Move to Narrow Networks

In the past year, thousands of health care providers across the country have been excluded without cause from their insurance plan's provider networks. The proliferation of narrow networks - defined as health insurance plans that limit the doctors and hospitals available to their subscribers - has caused a backlash amongst providers, who claim the insurers' terminations will squeeze beneficiaries on access to care, and disrupt longstanding patient-physician relationship, emergency department care, and referral networks.

Although the Affordable Care Act did not create narrow networks, the reform law accelerated the trend by limiting insurer's ability to continually lower benefits and exclude unhealthy individuals. Without other ways to compete, controlling providers and limiting choice is the insurers' best way to lower premiums and thus compete on the exchanges. Insurers claim that narrow networks control costs and allow for higher quality, better coordinated care.

In most cases, however, patients choose insurance plans based on the plan's access to a specific provider network. Patients subscribe and re-subscribe to one-year commitments with the primary intent to access their long-term primary care physicians or other regularly seen providers. Patients often build relationships with these providers over several years, even decades. Now, without notice or the ability to switch their plan, the patients' physician is suddenly out-of-network and cost-prohibitive.

For physicians, a termination from a single insurance provider can be career threatening. Physicians receiving terminations and non-renewals lose critical access to patient groups and are excluded from the referral networks they developed throughout their career.

Providers across the country are reporting terminations, often without cause, from Medicaid, Medicare Advantage, and private insurance plans. Medicaid Managed Care and Medicare Advantage plans often cover the most vulnerable patient populations. These patients will suffer from losing their primary care physicians and often lack the ability to effectively manage their own healthcare. In some states, Attorney Generals and provider groups are challenging the insurance providers in Court, and asking state agencies to take action.

Our firm currently represents physicians challenging terminations via their insurance plans' appeal processes. However, as the appeal processes are often limited to determining if the insurance provider followed the termination or nonrenewal procedures in their provider agreements, we have reached out to state regulators and healthcare agencies to seek assistance in protecting provider and patient rights. The insurance plans' ability to move to a narrow network is not the issue. Instead, the real issue is that in the narrowing of networks, patients must have right to keep their primary care provider in the plan or otherwise be allowed to disenroll and transfer plans to continue to see their primary care physician. Medicare and Medicaid authorities, including the states' contracts with the plans, recognize patients' right to provider choice. Those rights are enhanced with regard to primary care physicians. Provider terminations sever long standing physician-patient relationship and may lead to lower quality, less personalized care. Further, with the increase in enrollment under the Affordable Care Act, the large volume of terminations will significantly reduce access to care, a primary objective of government-provided health care.

We are challenging whether the insurance providers, specifically those operating Medicaid Managed Care and Medicare Advantage plans, are breaching the requirements of the Social Security Act and other Medicare and Medicaid laws. Further, we believe providers and patients have extensive rights emanating out of contracts between states and the insurance plan. Our position is that all laws, regulations, codes, and policies regarding the insurance providers' operation of Medicaid and Medicare Advantage plans serve to define the relationship between the state, the plan, the provider, and Medicare and Medicaid beneficiaries. Insurance companies terminating plans also may have breached common law contract principles by the manner in which they induce patients via providers that the plan has already determined to terminate.

Please let our firm know if you have received a network termination or nonrenewal, and seek assistance in challenging the action via an appeal to the insurance plan or other action. Wachler & Associates has over 25 years of experience representing healthcare providers across the country. Our firm has successfully challenged insurance company actions countless times, often obtaining extremely beneficial resolutions for our clients. Further, our attorneys' industry relationships allow us to connect with state representatives and other healthcare groups to together and efficiently challenge these improper methods of termination.

If you would like to speak to one of our experienced health care attorneys, please contact us via our website or call our offices at 248-544-0888. Our attorneys are currently challenging network terminations and will be happy to assist in your appeal.


May 30, 2014

Insurance Rule in the Affordable Care Act Worries Doctors

A Centers for Medicare and Medicaid Services (CMS) rule implemented in October of 2012, as the result of the Affordable Care Act, has some doctors very nervous. The rule, commonly dubbed the "grace period rule", provides that individuals who purchased a government subsidized health insurance plan from the marketplace will have their medical bills covered for 30 days by their insurer if the patient falls behind on their payments for premiums. However, the rule provides that for the following 60 days, insurers may place a "stay" or even ultimately deny payments to the treating physician if the patient does not pay his or her premium. Under the rule, even if insurers cover claims during the last 60 days of the grace period, they may seek to recoup those funds if the insurance coverage is ultimately canceled. Prior to the rule's implementation, insurers generally cancel a policy if a member falls behind more than 30 days and the insurer is usually on the hook for bills incurred before that cancellation.

The rule makes it so that physicians would have to seek payment for services rendered directly from the patient, which can be a long and uncertain process. The rule could impact solo physicians and small physicians groups, in addition to specialists, on a much greater scale due to their inability to absorb the costs of lost payments. For specialists, the high costs of their services could have an extremely negative impact on their bottom lines if they end up having to absorb the costs of lost payments for services rendered.

The American Medical Association (AMA) has publicly expressed concerns about the rule, fearing that it "could pose a significant financial risk for medical practices" and would leave doctors on the hook for unpaid patient bills after the insurer cancels the patient's policy. The AMA has also urged the Obama administration to provide further guidance on how and when insurers must notify physicians on when their patients fall behind on premiums. The state of Washington, for example, passed a "prompt notification" law earlier in May. The Washington law would require insurance companies to provide information about whether a member is in the 90 day grace period, if a doctor or hospital requests such information. Other states are debating whether to pass legislation substantially similar to Washington's "prompt notification" law.

However, there are some who worry that this push for "prompt notification" laws will lead to doctors refusing to treat patients when they know there is a chance that they would not be reimbursed. The AMA notes that physicians are contractually and ethically bound to continue caring for their patients.

Wachler & Associates will continue to keep you updated on the Affordable Care Act and other important health care news. For more information on health care reform, or how this rule could potentially impact your practice, please contact an experienced health care attorney at 248-544-0888 or via email at wapc@wachler.com.

May 19, 2014

OIG Proposes Significant Changes to Provider Exclusion Authority

Last week, the Office of the Inspector General (OIG) released a Proposed Rule that changes its provider exclusion authority and significantly alters certain provider exclusion procedures and the substantive bases for exclusion from a Federal healthcare program. The Proposed Rule was released in conjunction with another Proposed Rule on the same date regarding Civil Monetary Penalties (CMPs). Comments regarding the rules are due on July 8.

§ 1128 of the Social Security Act grants the OIG authority to exclude certain individuals and entities from participation in Federal healthcare programs. If the OIG determines that an individual or entity has engaged in certain prohibited conduct, it must ban such a person or entity from participation in Federal healthcare programs for a statutorily mandated five year minimum period. However, many bases for exclusion are merely "permissive", where the OIG retains discretion in deciding whether to exclude an individual or entity.

The Proposed Rule provides the OIG with three new bases upon which they may permissively exclude a provider or entity: the failure of ordering, referring, or prescribing providers to furnish payment information under Section 1128(b)(11); knowingly making, or causing to be made, false statements, omissions, or misstatements of material fact on a federal health care program application under Section 1128(b)(16); or convictions in connection with obstruction of a healthcare audit under Section 1128(b)(2).

The Proposed Rule also provides the OIG with the power to issue testimonial subpoenas during exclusion investigations - a power that the OIG previously lacked. The Proposed Rule would give any member of the OIG staff the power to compel testimony of witnesses and production of evidence as it relates to an exclusion action. For certain permissive exclusions that do not require a conviction, this expanded authority will give the OIG the ability to more effectively investigate alleged improper conduct.

Finally, in the Proposed Rule, the OIG takes the position that there is no statute of limitations for its actions pursuant to § 1128(b)(7) (false claims). Usually, governmental actions under the False Claims Act are subject to a 10 year statute of limitations period that begins on the date of the occurrence. Under the Proposed Rule, OIG provider exclusion actions arising from False Claims Act proceedings could go beyond 10 years. However, the OIG also recognizes that the age of the claim will be one factor in weighing the trustworthiness of the individual or entity.

The OIG also has issued a number of modifications to exclusion proceedings:

  • The OIG has adjusted its aggravating and mitigating factors for higher dollar amounts of government losses;
  • The OIG seeks to provide an alternate mechanism for providers who have been excluded on the basis of actions against their licenses - one of the more common bases for exclusion - to regain the right to participate in Federal healthcare programs if they have obtained another license from a different board;
  • The OIG seeks to expand the rights of parties to make an oral argument prior to the imposition of an exclusion under Section 1128(b)(16);
  • Lastly, the OIG seeks to streamline many of its definitions under the exclusion regulations in an effort to reduce confusion.

Wachler & Associates' health law attorneys will continue to monitor any further developments regarding the Proposed Rule and all other federal and state regulations. If you have any questions about how your entity will be impacted by the final rule or any other regulation, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

March 21, 2014

Fox 2 Detroit Interviews Wachler & Associates' Andrew Wachler regarding Beaumont, Botsford, Oakwood Merger

Wachler & Associates partner Andrew Wachler appeared on Fox 2 Detroit this morning to discuss the recent announcement that Beaumont Health System, Botsford Health Care, and Oakwood Healthcare have signed a letter of intent to form a new $3.8 billion nonprofit health system.

In his interview, Mr. Wachler described the advantages this affiliation will provide in improving patient care and accessibility. He indicated that it could allow patients access to each hospitals' various specializations and also allow the hospitals to share technology and capital resources, which in time has the potential to improve quality of care and reduce costs.

Mr. Wachler also explained that the Affordable Care Act, which includes the concepts of bundled payments and Accountable Care Organizations (ACOs), incentivizes large health systems to manage care efficiently, and may consequently result in a greater focus on wellness and preventive care.

To learn more about this story, please visit Fox 2 Detroit's website. Mr. Wachler originally appeared on the 11:00am news segment. Fox 2 will air a more comprehensive version of the story at 5pm.

January 23, 2014

CMS to Make Physician Payment Information Available on Case-by-Case Basis

On January 14, 2014, the Centers for Medicare & Medicaid Services (CMS) modified their policy regarding the disclosure of physician payment information under the Freedom of Information Act (FOIA). Effective March 18, 2014, CMS will now evaluate requests for individual physician payment information on a case-by-case basis.

CMS Principal Deputy Administrator, Jonathon Blum, cites the agency's commitment to greater transparency and the benefits numerous stakeholders have identified that would result from an increase in the availability of information as reasons for the change in policy. Some benefits CMS hopes the policy will lead to include:

• Provider collaboration on improved care management and lower costs in the delivery of health care;
• Increased ability of consumers to gain broader and more reliable measures of provider quality and performance; and
• Increased ability for journalists, as well as the public at large, to identify waste, fraud, and abusive practices.

The impetus for the change in policy came in May 2013 after a federal judge in Florida vacated a 1979 injunction that prohibited the Department of Health and Human Services from disclosing certain Medicare claims data for physicians. After a balancing of the interests, the judge determined that the public interest superseded physician privacy. The Court found the law had significantly changed since the issuance of the 1979 injunction, namely that under the Privacy Act, the scope of available injunctive relief had been more narrowly construed.

Blum, acknowledging concerns over the integrity of the data, notes that CMS is committed to protecting physician privacy in addition to ensuring the accuracy of data released, as well as developing measures to protect the data from misuse. The agency considered 130 comments from over 300 organizations in coming to its decision. However, at this time, CMS has not provided any guidelines or criteria on how the agency will determine whether or not to release individual physician data.

Wachler & Associates will continue to monitor any further developments and provide guidance related to the new policy as the implementation date of March 18, 2014 is quickly approaching. If you or your health care entity has any questions relating to the new policy or any other health care law questions, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

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.

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 wapc@wachler.com.

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 wapc@wachler.com.