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Recently, on June 1, the Center for Medicare & Medicaid Services (CMS) published its long anticipated Medicaid managed care proposed rules. This is the first time CMS proposed revisions to the Medicaid managed care regulations since 2002. The proposed rules includes several measures intended by CMS “to modernize the Medicaid managed care regulatory structure in order to facilitate and support delivery system reform initiatives to improve health outcomes and the beneficiary experience, while effectively managing costs.” Among other things, the proposed rule would make a number of changes designed to align Medicaid managed care operating standards with those used in other markets.

For example, the proposed rule includes modifications to the current regulations governing the grievance and appeals systems for Medicaid managed care. The goal is to further align and increase uniformity in the grievance and appeals systems with Medicare Advantage managed care plans and private health insurance and group health plans in order to make the process more consistent across markets. Of particular note, most capitated, risk-bearing forms of Medicaid managed care–whether full or partial risk–would be expected to offer an internal appeals process with specified time frames, with external appeal to the state Medicaid fair hearing process in the event of an adverse determination. The rule would introduce new appeals timeframes, timeframes for plan compliance with favorable beneficiary rulings, and would clarify the right of beneficiaries to introduce new evidence at each stage of appeal.

In addition, the proposed rule would require all states to offer a 60-day time period to request external review through a fair hearing (some states now allow a far shorter time period) and would clarify members’ right to their case file, medical records, and other documents such as the plan documents used to conduct coverage determinations. The expedited appeal time frame would be tightened, as would notice and recordkeeping requirements. Simultaneously, the proposed rule would also require beneficiaries to exhaust internal appeals procedures before seeking a state fair hearing. This is a significant change since some states now allow beneficiaries to bypass the internal process.

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On February 9, 2015, the U.S. Department of Health and Human Services Office of Inspector General (OIG) delivered an advisory opinion finding that a physician or provider previously excluded from participating in Medicare, Medicaid, and all other federal health care programs was permitted to share in federal payments with his former medical practice when the payments were based on services furnished prior to the individual’s exclusion even though payment was received by the practice after the exclusion. The Petitioner sought guidance from the OIG as to whether sharing in these payments with the practice would violate the terms of the Petitioner’s exclusion from federal health care programs and would potentially subject the Petitioner to additional administrative sanctions or other liability.

The Petitioner was a physician who was prohibited from participating in all federal health care programs for 20 years under the terms of a criminal plea and civil False Claims Act settlement (Settlement). The Settlement resolved various allegations of fraud against the Petitioner and required the Petitioner to divest all his ownership in the medical practice. The divestiture was ultimately accomplished through an asset purchase agreement between the Petitioner and specified buyers. The asset purchase agreement was executed shortly after the effective date that Petitioner became an excluded provider under the terms of the Settlement, which prohibited his or her participation in federal health care programs. Under the terms of the purchase agreement, the Petitioner was permitted to share in a portion of the Practice’s returns after the Petitioner divested his or her ownership in the Practice as long as those payments were for services that the Petitioner or Practice provided to patients and billed to federal health care programs before the Petitioner became an excluded provider.

The OIG’s February 9th, 2015, advisory opinion began its analysis by citing federal statutes that prohibit payment by all federal health care programs for items or services furnished: (1) by an excluded provider; or (2) at the medical direction or under the prescription of an excluded person. The effects of becoming an excluded provider was not elaborated upon in the February 9th advisory opinion, however the OIG more fully addressed and explained the effect of provider exclusions in its May 8, 2013, Special Advisory Bulletin titled “Effect of Exclusion from Participation in Federal Health Care Programs.”

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On October 6, 2014, the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) was signed into law. The bill moved swiftly through both houses due to its joint development by the House Ways and Means Committee and the Senate Finance Committee. The Post-Acute Care (PAC) community also voiced strong support for the IMPACT Act.

Currently, PAC payments to Medicare are typically based on the setting of care. This payment system often results in PAC providers supplying comparable services, but receiving dramatically different reimbursement amounts due to their setting of care. Under the IMPACT Act, the US Department of Health and Human Services (HHS) is tasked with promulgating a reporting system for PAC providers, which includes long-term care hospitals, skilled nursing facilities, inpatient rehabilitation facilities, and home health agencies. PAC providers will be required to report standardized data regarding patient care assessment, resource use, and quality measures. This data collection will allow providers and policymakers to analyze and compare the cost, quality, and type of services offered across a range of PAC providers. It is important to note that the IMPACT Act does not apply to critical access hospitals.

Specifically with regards to quality measures, PAC providers will be required to report on the following issues:

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The U.S. Department of Health and Human Services’ Office for Civil Rights (“OCR”) recently announced that it will be initiating Phase 2 of the compliance audits mandated by the Health Information Technology for Economic and Clinical Health Act (HITECH). The first phase of audits was carried out in 2011 and 2012, and targeted covered entities. While Phase 2 will expand the targeted entities to include business associates, it will utilize information gathered during Phase 1 to narrow the scope of audits in order to review the areas of greatest risk to protected health information (PHI).

Following Phase 1, OCR’s findings noted that, generally, the smaller the covered entity, the more compliance issues it had with all 3 Health Insurance Portability and Accountability Act (HIPAA) Standards: privacy, security, and electronic transactions. Furthermore, OCR observed that over 60% of the violations related to security standards. Additionally, nearly 40% of the findings related to privacy standards occurred simply due to lack of knowledge regarding the privacy standards.

Applying this information, OCR will narrow the focus of their compliance audits in Phase 2. The audits will occur between October 2014 and June 2015, and will address:

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Healthcare providers across the State of Michigan are continuing to experience terminations and non-renewals from UnitedHealthcare’s Medicaid, MIChild, and Medicare Advantage plans. As previously discussed on this blog, the network exclusions are part of UnitedHealthcare’s nationwide move to narrow networks. Narrow networks limit the amount of physicians available to plan subscribers, which some argue allow plans to better control costs and thus provide premiums that are competitive in the new insurance marketplaces. The real issue, however, is that the manner in which UnitedHealthcare is effectuating its narrow network eliminates patient choice by forcing patient’s to stay with UnitedHealthcare until their anniversary date, despite the fact that they enrolled in UnitedHealthcare with the intent to be treated by their long-term primary care physicians.

In Michigan, providers receiving Terminations Without Cause and Nonrenewals from UnitedHealthcare are granted a limited appeal right via their Participation Agreements. The appeal process, however, is “limited to a review by a UnitedHealthcare panel to determine whether UnitedHealthcare acted in accordance with the provisions of your Participation Agreement.” Accordingly, although an appeal must be filed in order to protect the provider’s appeal rights, the appeal itself may not be effective and providers must look to alternate methods in order to protect physician and patient rights.

Our firm represents multiple primary care physicians facing without cause exclusions from UnitedHealthcare. As the appeal right provided by UnitedHealthcare is insufficient, our firm has contacted the Michigan Department of Community Health (DCH) as well as representative from the State’s Attorney General office in order protect our clients’ and their patients’ rights and achieve a solution that either provides a meaningful appeal process or reinstates patients’ rights to choice of provider.

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On Tuesday, the Centers for Medicare and Medicaid Services (CMS) ordered its Medicare Administrative Contractors (MACs) to take a second look at all of the claims that the MAC denied under the Probe and Educate review process. These re-reviews are being done to ensure that the MACs’ claim denials, and the education provided to the hospitals up to this point, is consistent with CMS’s recent clarifications regarding the two-midnight rule and physician orders and certification requirements. During the re-reviews, if the MAC determines that its previous decision to deny the claim was improper, the MAC may reverse the denial and issue payment outside of the Medicare appeals process.

While the re-review process is in effect, hospitals should contact their MAC to determine whether a re-review has taken place. Until this confirmation is received, hospitals should not file a redetermination appeal request. CMS announced that it will waive the 120 day timeframe for filing a redetermination appeal for any redetermination requests received before September 30, 2014 for Probe and Educate denials that occurred on or before January 30, 2014. If a hospital has already filed an appeal for a claim denial on or before January 30, 2014, that claim will also be subject to a re-review by the MAC. Upon re-review, if the MAC upholds its original denial decision, that claim will be automatically transferred to a redetermination appeal.

Hospitals should welcome the news for these re-reviews. First, there is the possibility that healthcare providers will be reimbursed for claims that were improperly denied upon initial review. Secondly, the re-review process will be less formalistic, and thus less costly and time-consuming than the normal appeal process.

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On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to the Medicare Prescription Drug Benefit (Part D) Program. The proposed changes, such as the “any willing pharmacy” contracting requirement, could significantly impact how Part D Prescription Drug Plan Sponsors operate and interact with their contractors, beneficiaries, and the government. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014.

The Proposed Rule provides a new interpretation of the non-interference provision in the statute relating to the Department of Health and Human Services (HHS) relationship with drug manufactures, pharmacies, and Sponsors. Since 2004, this statute has been interpreted to extend to negotiations between any of those parties. However, if the Proposed Rule is implemented, the non-interference provision would be interpreted as to apply only to pharmaceutical manufacturer’s negotiations with pharmacies and Sponsors and would not apply to negotiations between Sponsors and pharmacies.

CMS also proposed a dramatic change to its interpretation and application of two statutory provisions: the provision establishing Sponsors’ obligation to contract with “any willing pharmacy,” and the provision allowing Sponsors to create tiered pharmacy networks. Historically, CMS has interpreted these two provisions as requiring Sponsors to include any pharmacy willing to meet the Sponsors’ “standard” terms and conditions in the Sponsor’s pharmacy network. Sponsors were still able to contract with a limited number of “preferred” pharmacies with alternate terms and conditions, such as lower cost-sharing obligations for covered Part D drugs. In the Proposed Rule, CMS suggests Sponsors who have “standard” and “preferred” pharmacies would be required to allow every pharmacy to have the opportunity to contract under the “preferred” terms and conditions, thus eliminating Sponsors’ ability to develop exclusive arrangements with select business partners. Furthermore, any pharmacy offering “preferred” cost-sharing would be required to meet a price “ceiling” established by the Sponsor, which must be less than the lowest price (the “floor price”) the Sponsor has with “standard” cost-sharing pharmacies. CMS also proposed that Sponsors require pharmacies contracting under the preferred terms and conditions to offer lower prices on all drugs in return for the lower cost-sharing.

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On Thursday, December 19, 2013, from 1:00-2:00 pm Eastern Time, the Centers for Medicare & Medicaid Services (CMS) will hold a Special Open Door Forum (ODF) to answer questions from hospitals, practitioners, and other interested parties about the new policies released on August 2, 2013 as part of the Fiscal Year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital (LTCH) Final Rule (CMS-1599-F) and corresponding medical review criteria.

Thursday’s ODF will be the fourth in its series of ODFs regarding physician order and certification, hospital inpatient admission and medical review criteria. The most recent ODF discussed the “probe and educate” reviews to be conducted by the MACs. If you missed any of the prior ODFs, a transcript of each ODF can be found on CMS’ website.

To access the ODF, the participant dial-in number is 1-866-501-5502, and the conference ID number is 16505942. 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

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In November 2013, the Department of Health and Human Services (HHS), Office of Inspector General (OIG) issued a report which called for additional quality measures (QMs) of Medicare nursing home resident hospitalization rates. The application of QMs to nursing home hospitalization rates is intended to resolve identified discrepancies between hospitalization rates for Medicare- and Medicaid-certified nursing homes. In its study, the OIG found that one quarter of Medicare nursing home residents experienced hospitalization in FY 2011, which resulted in $14.3 billion in Medicare spending. Among nursing homes linked to the highest rates of resident hospitalization were:

  1. Nursing homes located in Arkansas, Louisiana, Mississippi, and Oklahoma;
  2. Nursing homes receiving fewer than four stars according to CMS’ Five-Star Quality Rating System;
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The Centers for Medicare and Medicaid Services (CMS) announced during its September 26, 2013 Open Door Forum that, for a period of 90 days, CMS will not permit Recovery Audit Contractors (RAC) to review inpatient admissions of one midnight or less that begin on or after October 1, 2013. This three-month period, from October 1 through December 31, will give hospitals additional time to ensure that the necessary policies and procedures are in place to comply with CMS’s new inpatient status rules. Again, all inpatient admissions of one midnight or less will not be subject to pre-payment or post-payment review by the RACs.

As an effort to provide guidance and education to hospitals about the new inpatient rules, CMS will instruct the Medicare Administrative Contractors (MAC) to review 10 to 25 inpatient hospitals claims, per hospital, spanning less than two midnights after admission with dates of admission between October 1, 2013 and December 31, 2013. These probe reviews will be conducted by the MACs to determine whether the medical necessity of the patient status complied with the 2-midnight benchmark. The probe samples will be utilized by the MACs to evaluate hospitals’ compliance with the new inpatient rule and provide feedback to CMS to determine what additional guidance needs to be developed. If the MAC identifies issues from its review of a hospital’s inpatient admission claims, the MAC will conduct education for that hospital, as well as any additional follow up deemed necessary.

Wachler & Associates will continue to monitor any further developments regarding CMS’s new inpatient admission rule. In the meantime, hospitals should use the additional three-month implementation period to ensure its admission and documentation protocols comply with the new inpatient admission standards and certification and order requirements. If you need assistance in developing an effective compliance program, or need help navigating through the complexities of the new inpatient admission rule, please contact an experienced health care attorney at Wachler & Associates via phone (248-544-0888) or email (

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