Articles Posted in Fraud & Abuse

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The Centers for Medicare and Medicaid Services (“CMS”) expanded its Targeted Probe and Educate (“TPE”) program on October 1, 2017. The goal of the TPE program is to help providers be more cognizant of their billing practices so that they may provide improved services in the future.

TPE review is a process where providers who have high denial rates or unusual billing practices compared to other providers in their field are reviewed. Simple claim errors are typically why providers have high denial rates. Some examples of these errors include: missing a physician signature, encounter notes not fully supporting eligibility, documentation not meeting medical necessity, or missing/incomplete certifications or recertification.

When a provider is chosen for the program, they receive a letter from their Medicare Administrative Contractor (MAC). The TPE process involves an initial review, or “probe,” of 20-40 claims. If it is determined that the provider is non-compliant, a targeted, one-on-one education session will be offered to address errors found in the claims reviewed. Conversely, providers who are found to be compliant will not be reviewed again for at least one year. After the education session, providers have 45 days to make changes and improve. Those providers who continue to have high error rates after the first round must then proceed with a second round of reviewed claims and education. If high error rates continue, a third round will commence. After three rounds of TPE, if the provider continues to be non-compliant, they will be referred to CMS for further action. A provider can be removed from the review process at any point if they sufficiently demonstrate a significant reduction in their error rates.

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During a hearing on July 17, 2018, Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan announced that HHS is interested in reforming the Stark law and the Anti-Kickback Statute (AKS). As value-based care is becoming more prominent in the healthcare system, coordinated care between providers is a necessity; but the Stark law and AKS are considered an impediment to coordinated care. Hargan contends that since the Stark law was created in a fee-for-service context, it “may unduly limit ways that physicians and healthcare providers can coordinate patient care [in a value-based system].”

HHS’s push for reform comes out of the “Regulatory Sprint to Coordinated Care,” which is an initiative launched by CMS that seeks to remove barriers to coordinated care while still upholding laws and rules that keep patients safe. According to Hargan, HHS is working on creating administrative rules to address these barriers.

Aside from the regulatory hurdles that the Stark law imposes on coordinated care, HHS is also concerned about the strict liability aspect of the Stark law. Strict liability imposes civil liability with monetary penalties onto the provider, regardless of the intent underlying the Stark law violation arises from an accident. HHS believes that strict liability turns providers away from entering into coordinated care arrangements, because the complexity of the Stark law may cause providers to violate it unintentionally and become liable. A suggested change from HHS is to define “noncompliance” in a clearer manner, which would allow providers to feel more at ease with participating in coordinated care.

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On May 24, 2018, the U.S. Department of Justice announced a $23.85 million settlement with Pfizer, Inc., to settle anti-kickback claims against the company. The settlement arose after an investigation led by U.S. Attorney Andrew Lelling, which looked into the drug industry’s support of patient assistance charities. Pfizer is now among a group of multiple drug companies (Celgene Corp., Aegerion Pharmaceuticals, and Jazz Pharmaceuticals) who have settled with the Department of Justice for their use of patient assistance charities. Pfizer also signed a five-year monitoring agreement with the Department of Health and Human Services Office of Inspector General, and is required to implement measures to ensure that its arrangements with patient assistance charities are in compliance with the law

Pfizer was allegedly using an “independent” charity to pay illegal kickbacks to Medicare patients, covering out of pocket costs for prescription drugs. Pfizer made donations to Patient Access Network Foundation (PAN), a copay assistance nonprofit organization, and used a specialty pharmacy, Advanced Care Scripts, to direct Medicare patients taking its drugs toward the foundation to cover their copays.

The scheme centered around three drugs, two for kidney cancer (Sutent and Inyalta), and one for arrhythmia (Tikosyn). Pfizer was allegedly aware that PAN used their donations to cover the copays of patients taking these drugs. In fact, PAN and the pharmacy would notify Pfizer when patients using these drugs got the copay assistance. Price increases of the drugs were concealed from patients but left Medicare with a higher bill.

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On December 22, 2017, the U.S. Department of Justice (DOJ) announced a $32.3 million settlement (the Settlement) with Kmart Corporation, to settle False Claim Act (FCA) allegations against the company. The Settlement was based upon allegations that Kmart’s in-store pharmacies misled government payers by knowingly failing to report discounted prices and representing its drug prices as being higher than what was offered to the general public. Per the Settlement, Kmart does not admit to any wrongdoing.

The Settlement arises from a whistleblower suit filed in 2008. The suit alleged that Kmart failed to report discounted drug prices to Medicare Part D, Medicaid, and TRICARE. To determine reimbursement rates for medications, the government generally relies on a pharmacy’s “usual and customary prices” charged to consumers. According to the allegations, Kmart offered discounts to certain cash-paying customers but did not disclose those discounted prices when reporting its pricing to the government. Kmart argued that the special discount prices offered to a limited consumer base did not constitute “usual and customary” costs, but this argument was rejected in favor of increased transparency by pharmacies.

The Settlement sends a message to pharmacies regarding the importance of transparency, and that even prices offered only to a limited number of patients should be reported to the government. According to Acting Assistant Attorney General Chad Readler of the DOJ, “This settlement should put pharmacies on notice that there will be consequences if they attempt to improperly increase payments from taxpayer-funded health programs by masking the true prices that they charge the general public for the same drugs.” The whistleblower who brought the original suit will receive $9.3 million of the $32.3 million settlement, potentially sending a strong message to prospective whistleblowers as well.

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In July 2017, the Department of Health and Human Services Office of Inspector General (OIG) revealed its plans to review the $14.6 billion in incentive payments the Centers of Medicare and Medicaid Services (CMS) made to hospitals between January 1, 2011 and December 31, 2016, pursuant to Medicare’s electronic health record (EHR) technology program. The OIG plans to review these payments in order to identify errors and inaccuracies which may have resulted in overpayments to hospitals

This announcement comes less than a month after the June report from the OIG, titled “Medicare Paid Hundreds of Millions in Electronic Health Record Incentive Payments That Did Not Comply with Federal Requirements” (the “Report”) (an official OIG summary is available here). The Report was based upon a review of EHR Incentive Program payments made to 100 professionals, which found 14 improper payments in the amount of $291,222. Extrapolating these results, the OIG estimated a total of $729.4 million in improper payments to the over 250,000 EHR incentive eligible providers in the CMS system. According to the OIG, the $729 million figure is roughly 12% of the total payments made in connection with the EHR incentive program. A majority of the 14 improper payments discovered during the OIG’s review were based on providers failing to maintain accurate and detailed records—an issue which often arises with Medicare overpayments.

The OIG completed its report by making several recommendations to CMS:

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On February 8, 2017, the Department of Justice’s (DOJ’s) fraud section released new guidance for healthcare entities titled “Evaluation of Corporate Compliance Programs.” The new guidelines do not change any of the existing regulations, but rather provide corporate healthcare entities with added insight into how the DOJ assesses compliance violations.

The guidance mainly focuses on updated “Filip Factors,” which are the criteria under which the DOJ evaluates fraud. When a corporate healthcare entity comes under investigation for fraud under laws such as the False Claims Act (FCA), the DOJ has used the Filip Factors to evaluate the next steps to take, including whether to bring charges. Traditionally, characteristics such as whether the corporation has a suitable compliance program in place have been looked at closely when determining the severity of sanctions, and the new guidance continues with that trend.

The new guidance separates its factors into eleven different categories, and provides many example inquiries for each:

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On February 12, 2016, the Centers for Medicare and Medicaid Services (CMS) released its long-awaited Final Rule regarding the reporting and returning of Medicare overpayments. The Final Rule requires providers and suppliers receiving funds under the Medicare program to report and return overpayments by the later of (1) 60 days after the date on which the overpayment was “identified” or (2) the date any corresponding cost report is due, if applicable.

The first major provision contained in the Final Rule concerns the definition of “identified” for purposes of starting the 60-day clock for reporting and returning the overpayment. As set forth in the Final Rule, a person has identified an overpayment when the person has or should have, through reasonable diligence, determined that the person has received an overpayment and quantified overpayment amount. According to CMS, the 60-day time period to report and return begins whether either the reasonable diligence is completed, or on the day the person received creditable information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment. Furthermore, absent extraordinary circumstances, CMS chose a six-month period as the benchmark for completing timely investigations, which would give providers a total of eight month to resolve its overpayment issues (six months for timely investigation and two months for reporting and returning).

The second major provision contained in the Final Rule is in regards to the applicable lookback period for reporting and returning identified overpayments. In its 2012 proposed rule, CMS proposed a 10-year lookback period, which many in the provider community found to be overly burdensome. However, CMS reduced its proposed 10-year look back period in the Final Rule to a 6-year lookback period. The 6-year lookback is measured from the date the person identifies the overpayment.

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The Department of Health and Human Services’ Office of Inspector General (“OIG”) recently released OIG Advisory Opinion No. 15-15, in which the OIG determined that an arrangement involving an acute care hospital (“Hospital”), radiology practice and family medicine clinic (“Clinic”) would not generate prohibited remuneration under section 1129B(b) of the Social Security Act, the Federal anti-kickback statute (“AKS”).

Under the arrangement, the Clinic refers patients and certain diagnostic tests to the Hospital, and thus the Clinic’s physicians are referral sources for the Hospital. The radiology practice contracts with the Hospital to supervise radiology services and provide professional interpretations of all radiologic imaging taken at the Hospital, and members of the radiology practice can influence referrals to the Hospital. The Clinic includes technologists who provide radiologic imaging services for the Clinic’s patients, and the Clinic transmits the resulting images to the radiology practice to interpret the images and is thus a referral source for the radiology practice. The radiology practice’s radiologists interpret the images and dictate reports, but send the dictated reports to the Hospital and the Hospital’s employees transcribe the reports on behalf of the radiologists, who send the final reports back to the Clinic. The radiology practice pays the Hospital a “flat rate per line of transcription” fee that is fair market value for the service, and the Clinic pays no portion of any transcription cost. The Clinic bills third-party payors, including Medicare and Medicaid, for the technical component, and the radiology practice bills these payors for the professional component of the radiology services. The OIG also noted that the Hospital is located in a sparsely populated region, the Clinic is in a rural community in that region, and that the radiology practice is the only radiology practice within a 100-mile radius of the Clinic or Hospital.

Crucial to the OIG’s finding, the Centers for Medicare & Medicaid Services’ (“CMS”) Medicare Claims Processing Manual provides that with regards to the professional component of a radiology service, the interpretation of the diagnostic procedure includes a written report. Further, CMS advised the OIG that transcription costs are considered indirect expenses under the methodology establishing resource-based practice expense relative value units (RVUs), meaning that such costs are not separately identified but are included in both the professional and technical components for each service. As such, CMS’ position is that when the technical component and professional component are provided and billed by different entities, the two providers may determine who will pay for transcription costs.

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The U.S. Department of Justice (DOJ) recently announced a $69.5 million settlement with the North Broward Hospital District (the “District”) arising out of allegations that the District violated the federal Stark law and False Claims Act by entering into improper financial relationships with employed physicians.

The lawsuit alleged that the District provided compensation to nine employed physicians that exceeded fair market value for the physicians’ services, and instead rewarded the physicians for their referrals of patients to the District. The compensation arrangements were alleged to violate the federal Stark law, which prohibits physician referrals of Medicare and Medicaid services to entities with which the physician has a financial relationship, unless an exception applies. Stark exceptions related to physician compensation and employment arrangements require, in addition to other requirements, that the physician’s compensation is consistent with fair market value and not determined in a manner that takes into account the volume or value of the physician’s referrals. By submitting claims pursuant to referrals that violated the Stark law, the District also submitted claims in violation of the False Claims Act.

The lawsuit against the District was originally filed by a whistleblower pursuant to the qui tam provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and share in the recovery. The whistleblower in this case brought the lawsuit after the District offered to employ him under terms that he believed may violate the Stark law. The DOJ announced that the whistleblower will receive over $12 million for his role in the case. The DOJ also announced that the recovery marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is a partnership between the U.S. Attorney General and U.S. Secretary of Health and Human Resources that has been instrumental in the government’s recovery of $16 billion from fraud in the federal health care programs since 2009.

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On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit upheld a $237 million verdict against Toumey Healthcare System (“Toumey) for violations of the federal Stark law (“Stark”) and, consequently, the federal False Claims Act. The verdict marks the latest decision in the government’s longstanding legal battle against Toumey, a community hospital in South Carolina, and serves as a reminder to healthcare providers of the significant liability that can result from compensation arrangements that fail to comply with Stark’s safe harbor requirements.

In this case, the lower court determined that Toumey entered into part-time employment agreements with physicians that violated Stark. The agreements violated Stark’s limitations on physician compensation arrangements by varying with, or taking into account, the volume or value of the physicians’ referrals to the hospital. Under the False Claims Act, claims submitted for payment arising out of referrals prohibited by Stark constitute false claims, and subject providers to treble damages. In this case, the jury found that Toumey knowingly submitted 21,730 false claims, which amounted to $39.3 million in Medicare payments. The court awarded treble damages as well as other penalties.

The Fourth Circuit’s decision analyzed Toumey’s argument that since Toumey relied upon the advice of lawyers in determining that the compensation arrangements were permissible under Stark, Toumey could not have knowingly violated the False Claims Act. In rejecting this argument, the Fourth Circuit highlighted the fact that Toumey consulted with multiple attorneys, one of which raised serious concerns about the compensation arrangements, and that Toumey effectively lawyer-shopped for legal opinions that approved the employment contracts. Accordingly, the case should provide notice to providers to proceed with caution if they are contemplating obtaining multiple legal opinions in order to determine that an arrangement is compliant with health care fraud and abuse laws because of how the opinions may be scrutinized in hindsight.

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