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February 26, 2014

Medicare Therapy Cap Exception Extended

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

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

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

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

February 18, 2014

CMS Revises Medicare Policy Manuals Clarifying that Improvement Standards are Not Required for Coverage

On January 15, 2014, the Centers for Medicare & Medicaid Services (CMS), issued revisions to their policy manuals, including the Medicare Benefit Policy Manual, that clarify that "Improvement Standards" are not required for determining claims for Medicare coverage involving skilled care, including skilled nursing facilities (SNF), home health (HH), and outpatient therapy (OPT) benefits. The purpose of these revisions is to comply with the January 24, 2013 Jimmo v. Sebelius settlement agreement which required clarification that coverage of skilled nursing and skilled therapy services "...does not turn on the presence or absence of a beneficiary's potential for improvement, but rather on the beneficiary's need for skilled care." Citing the agreement's justification, CMS noted that, no "Improvement Standard" is to be applied in determining Medicare coverage for maintenance claims that require skilled care. Medicare has long recognized that even in situations where no improvement is possible, skilled care may nevertheless be needed for maintenance purposes (i.e., to prevent or slow a decline in condition). The Medicare statute and regulations have never supported the imposition of an "Improvement Standard" rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient's condition. Thus, such coverage depends not on the beneficiary's restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves. The manual revisions serve to reflect and articulate this basic principle more clearly.

Included with the manual revisions, CMS took the opportunity to introduce additional guidance for appropriate documentation in facilitating accurate coverage determinations for claims involving skilled care. CMS noted that, "While the presence of appropriate documentation is not, in and of itself, an element of the definition of a 'skilled' service, such documentation serves as the means by which a provider would be able to establish and a Medicare contractor would be able to confirm that skilled care is, in fact, needed and received in a given case."

The manual clarifications fulfill the first step required of CMS in the Jimmo settlement agreement. The agreement also sets forth an educational campaign, in which CMS agreed to disseminate written materials to contractors, adjudicators, providers, and suppliers, and conduct national conference calls with providers and suppliers as well as Medicare contractors, Administrative Law Judges, medical reviewers, and agency staff, to communicate the policy clarifications and answer questions. CMS has also committed to engage in accountability measures to ensure beneficiaries receive the care to which they are entitled. Such measures include review of a random sample of SNF, HH, and OPT coverage decisions to determine overall trends and identify any problems, as well as a review of individual claims determinations that may not have been made in accordance with the principles set forth in the settlement agreement.

If you have any questions regarding the revised manuals, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or

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

January 17, 2014

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

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

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

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

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

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

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

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

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

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

January 13, 2014

OMHA Announces Appellant Forum for February 12 to Discuss Increasing Efficiency in the ALJ Hearing Program

On Wednesday, February 12, at 10:00 am EST, the U.S. Department of Health & Human Services, Office of Medicare Hearings and Appeals (OMHA) will hold a Medicare Appellant Forum in the Cohen Auditorium of the Wilbur J. Cohen building at 330 Independence Ave. SW, Washington DC, 20024. The purpose of the forum will be to:

  • Inform OMHA appellants on the status of OMHA operations;
  • Discuss a number of initiatives designed to mitigate the growing backlog of OMHA-level appeals; and
  • Suggest measures that appellants can take to make the administrative appeals process work more efficiently.

OMHA administers the nationwide Administrative Law Judge (ALJ) hearing program for Medicare claim and entitlement appeals under the Social Security Act. From 2010 to 2013, OMHA's claims and entitlement workload has drastically increased to 184% of previous years. Despite this increase, the resources to adjudicate the new slew of appeals have remained relatively constant, and were recently reduced during budgetary sequestration. The OMHA reports that their backlog of pending appeals has grown from 92,000 claims for services and entitlement to 460,000 claims in just under two years, and that the rate of new appeals is increasing. While the OMHA's Central Operations Division averaged around 1,250 claims per week in January 2012, the OMHA recently reported a rate of receipt of over 15,000 claims per week.

The OMHA has responded to this increase by taking measures to mitigate its workload increase and by pursuing additional opportunities to increase its efficiency. On July 15, 2013, OMHA temporarily suspended the assignment of most new requests for an ALJ hearing in order to adjudicate nearly 357,000 claims for Medicare services and entitlements already assigned to 65 Administrative Law Judges.

The February 12 Appellant Forum will address such efficiency measures, and solicit input and suggestions from the appellant community on reducing the existing appeals backlog and improving the OMHA's processes.

Attendees must register online by 5:00 pm EST on Tuesday, January 28, and capacity will be limited to the first 400 registrants. OMHA is exploring the possibility of broadcasting the forum online as a webinar. Instructions for registering for the forum and additional event announcements can be found on OMHA's website.

Andrew Wachler, managing partner of Wachler & Associates PC, will be among the attendees of the February 12th forum. If you have any questions regarding the information provided at the forum, or if you have a question you would like addressed, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or

December 13, 2013

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

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

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

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

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

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

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

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

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

November 18, 2013

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

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

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

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

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

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

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

November 11, 2013

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

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

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

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

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

October 21, 2013

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

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

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

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

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

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

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

October 3, 2013

Judge Orders Tuomey to Pay $237 Million for Stark and False Claims Act Violations

On September 30, 2013, Federal Judge Margaret Seymour of the United States District Court for the District of South Carolina ordered South Carolina's Tuomey Healthcare System to pay $276.8 million for violating both Stark law and False Claims Act (FCA) provisions; however, this ordered amount was subsequently reduced by $39 million to correct a clerical error. The payment order came after a May 8, 2013 jury verdict in which the jury found that Tuomey had submitted 21,730 Medicare claims which stemmed from illegal compensation arrangements with physicians to induce patient referrals to the hospital. Tuomey has already filed a motion announcing its intent to appeal to the 4th Circuit Court of Appeals.

The Stark law prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she has a financial relationship (ownership, investment or compensation). As this case demonstrates, the penalties for violating the Stark law - denial of payment, civil monetary penalty (CMP) of $15,000 per service, and $100,000 CMP for each arrangement or scheme - are severe and can also lead to even more extreme penalties under the FCA. What many providers may not know is that although the requisite intent must exist under the FCA, the Stark law is a strict liability statute that does not take into account the intent of the providers involved. As such, providers should evaluate potential business arrangements, or reevaluate current business arrangements, to ensure such arrangement is not in violation of the Stark law. Moreover, when an arrangement potentially implicates the Stark law, providers should also be sure to analyze the arrangement under the Anti-Kickback statute and other applicable fraud and abuse laws.

If you would like assistance in analyzing a potential or existing business arrangement under the Stark law, including a detailed opinion of whether your arrangement qualifies as an exception to Stark, or if you have any other questions relating to the Stark law, Anti-Kickback statute, False Claims Act or other fraud and abuse laws, please contact an experienced health care attorney via phone at 248-544-0888 or via email at

September 30, 2013

CMS Releases Comparative Billing Reports for Spinal Orthotics and Ordering Providers

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

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

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

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

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

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

September 25, 2013

Home Health Care Business Operator Sentenced to Prison for $11M Medicare Fraud Scheme

Earlier this month, U.S. District Judge Denise Page Hood of the Eastern District of Michigan sentenced 53-year-old Michigan resident Muhammad Shahab to 50 months in prison and three years of supervised release for perpetrating almost $11 million in Medicare fraud between August 2007 and October 2009. Shahab and his co-defendants were also ordered to pay over $10.8 million in restitution to the Medicare Program.

The Department of Justice Press Release reported that Shahab, who had helped finance and establish two Detroit-area home health agencies, pled guilty to one count of health care fraud back in February 2010. Plea documents revealed that Shahab "admitted that while operating or being associated with both health agencies, he and his co-conspirators billed Medicare for home health visits that never occurred." Shahab, the leader of the fraud scheme, admitted that he and his co-conspirators falsely used the Medicare numbers and signatures of Medicare beneficiaries who were not homebound or needed physical therapy service on medical documentations. Shahab and his co-conspirators offered cash kickbacks and other inducements to these Medicare beneficiaries in exchange for their participation.

In addition, through kickback payments to physicians and other individuals associated with physicians, Shahab obtained physician referrals for medically unnecessary home health services. Shahab confessed to billing and receiving payments from Medicare for medically unnecessary services and services never rendered.

This case was brought as part of the Medicare Fraud Strike Force, a joint initiative between the Department of Justice and the Department of Health and Human Services (HHS) designed to fight Medicare fraud.

Nationally coordinated takedowns have charged hundreds of individuals in connection with Medicare fraud and have uncovered billions of dollars in fraudulent billing. Health care providers must ensure that they have the necessary compliance plans and policies in place to detect and prevent potentially fraudulent or abusive practices. For assistance in creating a proactive compliance plan, or if you have other healthcare related questions, please contact an experienced healthcare attorney at 248-544-0888.

September 18, 2013

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

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

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

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

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

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

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

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

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

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

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

August 7, 2013

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

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

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

Payment of Medicare Part B Inpatient Services

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

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

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

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

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

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

What is the Next Move for Hospitals?

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

July 31, 2013

The Medicare Appeals Process Is Overburdened

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

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

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

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

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

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

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

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

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