Articles Posted in Health Law

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In March of 2018, the Department of Health and Human Services Office of the Inspector General (OIG) issued a report titled “Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply With Medicare Requirements[summary] (the “Report”) identifying millions of dollars of overpayments for outpatient physical therapy services and signaling potential for increased governmental scrutiny to practitioners within the discipline.

The Report revealed that an audit found $367 million in improper payments for outpatient physical therapy services between July 1 and December 31, 2013. The finding was based upon data extrapolation, in which the OIG reviewed 300 sample claims and determined that 184 of the claims (61.33%) did not comply with Medicare requirements for medical necessity, documentation, or coding.

The OIG directly faulted the Centers for Medicare and Medicaid (CMS) for the overpayments, finding that the current controls in place are insufficient to prevent improper payments to providers. The OIG issued three recommendations to CMS in order to prevent future incorrect expenditures:

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On March 22, 2018, the latest development in American Hospital Association (AHA) v. Azar (formerly referred to as AHA v Burwell) emerged as Judge Boasberg issued an order to have the AHA develop strategies to assist the Department of Health and Human Services (HHS) in reducing the Medicare appeals backlog. The request comes in response to a lack of effective action by HHS to reduce the number of backlogged appeals.

Major events in the case include:

  • May 22, 2014: Initial complaint filed by the AHA, alleging that HHS was violating Federal law by failing to process appeals within the legally-mandated timeframes. The problem was and continues to be highlighted at the administrative law judge (ALJ) level of appeals, where wait times for the processing of claims regularly takes years;
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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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On August 11, 2017, a further development came in the Medicare appeals backlog saga, as the D.C. Circuit Court reached a decision on the Department of Health and Human Services’ (HHS’) appeal to the case American Hospital Association (AHA) v Burwell. The decision (“Appeal Decision”) handed down last week was decidedly pro-HHS, and is a setback for the AHA and healthcare providers with appeals pending at the administrative law judge (ALJ) level. The Appeal Decision has the potential to completely undo any progress created by the original December decision.

The Circuit Court came to a 2-1 decision, ordering the District Court to reconsider its mandate that HHS completely eliminate the Medicare appeal backlog by the end of 2020. The Circuit Court based its decision on the idea that the District Court decision had the potential of mandating that HHS violate its legal duty to only pay out legitimate Medicare claims. HHS is required to “protect” the Medicare trust fund, and in the process taxpayer dollars. However, HHS is also required by law to process ALJ appeals within 90 days, a duty which has gone unmet for years and was the basis of the District Court’s decision.

The AHA filed its initial suit in 2014, and after being initially dismissed, the AHA received a favorable decision in December 2016, a decision that is now in jeopardy of being undone. The December decision dictated certain yearly “targets” for HHS and the Center of Medicare and Medicaid Services (CMS) to meet regarding decreases to the number of backlogged appeals at the ALJ level. HHS objected to these benchmarks, and in fact to any mandated reduction, based on several arguments, including that the backlog cannot be eliminated without arbitrary settlements regardless of the actual merits of the claims.

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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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In early June 2017 the Department of Health and Human Services (HHS) issued its second status report on the Medicare appeals backlog. The December 2016 case American Hospital Association v Burwell, in addition to dictating that HHS clear the backlog by 2020, required that HHS release a quarterly status report every 90 days to detail the progress being made toward eliminating the backlog.

The Burwell case was a significant victory for healthcare providers in their attempts to get the Medicare backlog reduced and have administrative law judge (ALJ) appeals processed within the statutory timeframes. In addition to status reports every 90 days and the complete elimination of the backlog by 2020, HHS is also required to observe several intermediary benchmarks: 30% reduction by the end of 2017, 60% by the end of 2018, 90% by the end of 2019, and then ultimately 100% elimination by the end of 2020.

However, despite these court mandated benchmarks, it has become clear to all parties involved that these goals are unlikely to be met without significant developments; HHS itself has maintained since the requirements were instituted that the elimination of the backlog would not be possible. This prediction is supported by the facts: HHS released its first status report in March, with the somber prediction that a backlog of 1,009,768 appeals would be pending by the end of 2021. June’s report saw a slightly improved projection of 950,520 claims remaining by that time, but this projection is still very far from meeting the court order.

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On March 22, 2017, Michigan’s Public Act 379 of 2016 (the Act) will take effect, altering the practice requirements for physician assistants (PAs) within the state. The Act will require PAs to enter into and comply with a written practice agreement with a “participating physician.” The Act will thus affect not only PAs, but also participating physicians and other healthcare entitles.

A “participating physician” is defined as a physician, a physician designated by a group of physicians to represent that group, or a physician designated by a health facility or agency to represent that health facility or agency.

Another important aspect to note about the Act is that it limits the ability of PAs to practice within Michigan, requiring a written agreement which fulfills the statutory requirements. A practice agreement must include:

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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 September 28, 2016, the Centers for Medicare & Medicaid Services (“CMS”) announced that it intends to reopen the hospital inpatient status settlement that was initially released in 2014.  CMS’ announcement means that eligible providers will be able to to settle their inpatient status claims currently pending appeal.  While specific details of the settlement have yet to be released, if the upcoming program has terms similar to CMS’ 2014 68% settlement, it may provide a viable opportunity for eligible providers to resolve their pending appeals without enduring the delay for an administrative law judge (ALJ) hearing due to the appeals backlog.

CMS’ decision to reopen the settlement is the result of the efforts from several actors including the Office of Medicare Hearings and Appeals (OMHA), American Hospital Association, RAC Monitor, Steven Greenspan of Optum Executive Health Resources, and Wachler & Associates, P.C.  Specifically, OMHA participated in communications with CMS and supported the proposal for CMS to reopen the 68% settlement.  In addition, the American Hospital Association’s (“AHA”) lawsuit challenging the excessive appeals backlog that has resulted in delays of over two years past the statutory requirement is likely an important factor in CMS’ decision to reopen the appeals backlog.

Furthermore, the combined efforts of RAC Monitor, Steven Greenspan, and Andrew Wachler of Wachler & Associates, P.C. also likely aided in the reopening.  RAC Monitor provided a platform for Steven Greenspan and Andrew Wachler to present the concept of reopening the appeals settlement to RAC Monitor listeners and RAC Monitor listeners responded in full force.  Through these combined efforts, it is hoped that the reopened appeals settlement will help to clear the appeals backlog of the approximately 200,000 inpatient site of service pending of appeals.  Although this solution will not completely eliminate the backlog, it can assist hospitals that chose not to participate in the original settlement and hopefully help other non-eligible providers move through the appeals process at a slightly more efficient rate.

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On July 12, 2016, Noridian Healthcare Solutions announced a new policy on denial of related claims, termed “Cross Recovery.”  Noridian purports that this policy will help it to fulfill its obligations to the Centers for Medicare and Medicaid Services (CMS) by assuring that all Medicare claims are for medically necessary and reasonable services. Whatever the motivation behind Cross Recovery is, it reawakens the specter of related claim denials for Medicare providers, and is a development which should be watched closely in the coming months.

Noridian’s new program comes in the wake of several previously released CMS transmittals regarding the denial of related claims. Though later rescinded, CMS originally introduced a policy which broadly allowed MACs to deny related claims when issuing an adverse determination of an original claim. After receiving feedback from the provider community regarding concerns about the policy, CMS narrowed the scope of “related claims” power to only Part B surgery claims via Transmittal 541. Transmittal 541 allowed for such Part B surgeon services to be recouped following a denial of a Part A inpatient surgical claim as not reasonable and necessary. However, since the issuing of Transmittal 541, MACs have only very rarely invoked their discretion to deny such Part B surgical claims on Transmittal 541 grounds. Noridian’s new Cross Recovery policy may change this trend, and it is yet to be seen whether other MACs will take the opportunity to expand their own related claim denials.

Noridian’s statement (as linked above) was very brief, but significant. The statement cites section 3.2.3(A.) of CMS’ Internet Only Manual 100-008 Chapter 3, which states in relevant part that “MAC[s] and ZPIC[s] have the discretion to deny other “related” claims submitted before or after the claim in question, subject to CMS approval [.]” Noridian announced that it has received such CMS approval to “Cross Recover” professional claims related to denied institutional facet injection services (CPT codes: 64493— 64495; 64635—64636).