Articles Posted in WAPC News

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On December 14, 2021, the Department of Health and Human Services (HHS), through the Health Resources and Services Administration (HRSA), announced the release of an approximately $9 billion distribution in Provider Relief Fund (PRF) Phase 4 payments to healthcare providers who have experienced lost revenues and expenses due to the COVID-19 pandemic. This distribution is part of a previously announced $25.5 billion funding for healthcare providers affected by the COVID-19 pandemic, which also included an allocation of $8.5 billion from the American Rescue Plan (ARP) for providers who provide services to rural Medicaid, Children’s Health Insurance Program (CHIP), or Medicare beneficiaries. According to HHS’ state-by-state breakdown of the Phase 4 payments, these new payments have been received by more than 69,000 providers in all 50 states, Washington D.C., and eight territories. The average payment under this new distribution is $58,000 for small providers, $289,000 for medium providers, and $1.7 million for large providers.

PRF Phase 4 payments are based on providers’ lost revenue and expenditures between July 1, 2020 and March 31, 2021, in conformity with the requirements of the Coronavirus Response and Relief Supplemental Appropriations Act of 2020 (CRRSAA). PRF Phase 4 is intended to reimburse smaller providers for their lost revenues and pandemic-related expenses at a higher rate compared to larger providers. This characteristic stems from the Biden Administration’s ongoing policy focus on social equity, as smaller providers tend to operate on thinner margins and often serve vulnerable or isolated communities when compared to larger providers. Because Medicaid, CHIP, and Medicare patients tend to be lower income and have greater and more complex medical needs, HRSA is distributing 25% of PRF Phase 4 funding as bonus payments for providers who serve these individuals. HRSA will price these bonus payments at the generally higher Medicare rates in an attempt to promote equity amongst providers serving low-income children, pregnant women, people with disabilities, and seniors. Similar to the ARP Rural payments announced in November 2021, HRSA is using Medicare reimbursement rates to calculate these Phase 4 payments in an effort to mitigate disparities due to varying Medicaid reimbursement rates.

HHS has also updated the Terms and Conditions for Phase 4 and ARP Rural payments to require that PRF payments are being properly used in response to the financial impact of COVID-19. Recipients who receive greater than $10,000 are required to notify HHS of any merger or acquisition activity with another healthcare provider. Providers who report a merger or acquisition may be more likely to be audited.

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In a recent advisory opinion, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) opined that employment of an anesthesia provider may be low risk under the Federal Anti-Kickback Statute (AKS) under certain circumstances. This opinion, Advisory Opinion 21-15, may represent a softening of OIG’s position on anesthesia providers.

OIG’s position on anesthesia providers is largely found in a 2012 advisory opinion, Advisory Opinion 12-06, concerning two proposals by an anesthesia provider (Requestor) for structuring its relationship with several ambulatory surgery centers (ASCs). Under the first proposal, the Requestor would remain the ASCs’ sole provider of anesthesia services but would also pay the ASCs a per-patient fee, exclusive of federal healthcare beneficiaries, in exchange for management services (e.g., pre-operative nursing assessments, procuring office space, and transferring billing documentation). OIG rejected this proposal, finding that the carve-out for federal healthcare beneficiaries would not save the per-patient management fee from constituting improper remuneration under AKS. Specifically, by collecting both a management fee from the Requestor and a facility fee from payors, OIG concluded that the ASCs would be receiving double payments for the same services and therefore would be unduly influenced to keep the Requestor as their exclusive provider of anesthesia services to all patients.

Under the second proposal, the ASCs’ physician-owners would form wholly owned subsidiaries for the purpose of providing anesthesia services to ASC patients. The subsidiaries would bill for and furnish all anesthesia-related services (e.g., recruiting personnel and assisting in structuring employment or independent contractor relationships with anesthesia personnel, ordering supplies, quality assurance, and providing logistics). The subsidiaries would pay the Requestor a negotiated rate for its services and retain any profits, presumably for distribution to the non-anesthesiologist physician-owners. OIG rejected this proposal as well, concluding that no AKS safe harbor would protect the distribution of profits from the subsidiaries to their physician-owners because such profits would be a function of the Requestor’s anesthesia services revenue resulting from the physician-owners’ referrals. In particular, OIG found the ASC safe harbor inapplicable because it protects only returns on investments in Medicare-certified ASCs, or entities operated exclusively for the purpose of providing “surgical” services, and anesthesia services are nonsurgical in nature. Additionally, while noting that payments by the subsidiaries to the Requestor, employees, or independent contractors could be protected under the personal services, employee, and/or management contract safe harbors, OIG nevertheless indicated that none of these safe harbors would protect the distributions of profits from the subsidiaries to their physician-owners, since a likely purpose of such distributions would be to generate referrals for anesthesia services.

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This is the second installment in a two-part series regarding the No Surprises Act, which establishes new requirements that will apply to certain healthcare providers and facilities, and providers of air ambulance services. These requirements generally apply to items and services provided to individuals enrolled in group health plans, group or individual health insurance coverage, and Federal Employees Health Benefit plans. Please see our previous post for more information on these requirements.

Below is an overview of the remaining provider and facility requirements that will become effective on January 1, 2022:

  • No balance billing for air ambulance services by non-participating air ambulance providers: Providers of air ambulance services will generally be prohibited from billing or holding liable beneficiaries, enrollees, or participants in group health plans or group or individual health insurance coverage who received covered air ambulance services from a non-participating air ambulance provider for a payment amount greater than the in-network cost-sharing requirement for such services.
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Effective January 1, 2022 under the No Surprises Act, healthcare providers, facilities, and providers of air ambulance services will be subject to new requirements that generally apply to items and services provided to individuals enrolled in group health plans, group or individual health insurance coverage, and Federal Employees Health Benefit plans. The good faith estimate requirement and the requirements related to the patient-provider dispute resolution process also generally apply to the uninsured. These requirements generally do not apply to beneficiaries or enrollees in federal programs such as Medicare, Medicaid, Indian Health Services, Veterans Affairs Health Care, or TRICARE.

Below is an overview of some of the provider and facility requirements that will become effective on January 1, 2022. Stay tuned next week for further information.

  • No balance billing for out-of-network emergency services: Non-participating providers and emergency facilities will generally be forbidden from billing or holding liable beneficiaries, enrollees, or participants in group health plans or group or individual health insurance coverage who receive emergency services at a hospital or an independent freestanding emergency department for a payment amount greater than the in-network cost-sharing requirement for such services. There are exceptions for certain post-stabilization services if the notice and consent requirements are satisfied. However, the exception is not available for services furnished as a result of unforeseen, urgent medical needs that arise at the time an item or service is furnished, regardless of whether the notice and consent criteria are satisfied and regardless of whether they are emergency or non-emergency services.
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On November 5, 2021, the Centers for Medicare and Medicaid Services (CMS) released an interim final rule with comment period to require COVID-19 vaccination for staff of certain healthcare providers. The rule applies only to certain providers, but is expansive in scope where it is applicable. Under the rule, affected staff must receive their first vaccine dose by December 6, 2021 and be fully vaccinated by January 4, 2022.

The CMS vaccine requirement does not apply to all Medicare-enrolled providers and suppliers. CMS issued the mandate under its authority to set Conditions of Participation for certain providers. Therefore, only these specific, Medicare-certified provider types are directly subject to the requirement:

  • Ambulatory Surgical Centers (ASCs)
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In a recent court filing, the Department of Health and Human Services (HHS) reported that it has cleared approximately 79% of the Medicare appeals backlog. HHS is currently under court order to clear a backlog of hundreds of thousands of Medicare claims appeals pending before the Office of Medicare Hearings and Appeals (OMHA).

Generally, a Medicare claim denial or overpayment demand may be appealed through five successive levels of appeals. First, Redetermination by a Medicare Administrative Contractor (MAC), often the same MAC that denied the claims initially. Second, Reconsideration by a Qualified Independent Contractor (QIC). Third, appeal to an Administrative Law Judge (ALJ) employed by the Office of Medicare Hearings and Appeals (OMHA), a subdivision of HHS, where the provider may be entitled to a hearing. Fourth, review by the Medicare Appeals Counsel, also within HHS. Fifth and finally, appeal to a federal district court.

The entire appeals process can take years and create difficulties for healthcare providers or suppliers. The least efficient part of the process has long been the wait, sometimes for three to five years, for an available ALJ to hear the appeal, at which point in the appeals process the only review of a contractor’s decisions has been by other contractors. This left providers in the difficult position of having significant overpayment demands based on incorrect decisions by contractors but having to wait years for independent review of their cases. This long wait also violated the regulations that govern the appeals process, which generally entitle a provider to an ALJ hearing within 90 days of the provider’s request for a hearing. At the height of the backlog, over 400,000 cases were pending at OMHA.

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The Department of Health and Human Services (HHS) recently announced the annual expansion of the Settlement Conference Facilitation (SCF) program. SCF is an alternate dispute resolution mechanism used to resolve Medicare claims appeals. However, because SCF is meant to help reduce the appeal backlog, only appeals filed before a certain date are eligible.  With the latest expansion, appeals involving requests for Administrative Law Judge (ALJ) hearing or Medicare Appeal Council review filed on or before June 30, 2021 are now eligible for SCF.

Generally, a Medicare claim denial or overpayment demand may be appealed through five successive levels of appeals. First, Redetermination by a Medicare Administrative Contractor (MAC), often the same MAC that denied the claims initially. Second, Reconsideration by a Qualified Independent Contractor (QIC). Third, appeal to an Administrative Law Judge (ALJ) employed by the Office of Medicare Hearings and Appeals (OMHA), a subdivision of HHS, where the provider may be entitled to a hearing. Fourth, review by the Medicare Appeals Counsel, also within HHS. Fifth and finally, appeal to a federal district court.

The entire appeals process can take years and create difficulties for healthcare providers or suppliers. The least efficient part of the process has long been the wait for an available ALJ to hear the appeal, which can take three to five years, at which point the only prior review of a contractor’s decisions has been done by other contractors. This has left providers in the difficult position of having significant overpayment demands based on incorrect decisions by contractors but having to wait years for independent review of their cases. In response to this, HHS is now under court order to reduce this backlog of cases.

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On September 10, 2021, the U.S. Department of Health and Human Services (HHS) announced that it would make $25.5 billion in new funding available for healthcare providers affected by the COVID-19 pandemic. This funding includes allocations of $8.5 billion in funding from the American Rescue Plan (ARP) for providers who provide services to rural Medicaid, Children’s Health Insurance Program (CHIP), or Medicare patients, as well as an additional $17 billion in Provider Relief Fund (PRF) Phase 4 funding for a broad range of providers who can document expenses and lost revenue associated with the COVID-19 pandemic.

PRF Phase 4 payments are based on providers’ lost revenue and expenditures between July 1, 2020 and March 31, 2021, in conformity with the requirements of the Coronavirus Response and Relief Supplemental Appropriations Act of 2020 (CRRSAA). PRF Phase 4 is intended to reimburse smaller providers for their lost revenues and pandemic-related expenses at a higher rate compared to larger providers. This characteristic stems from the Biden Administration’s ongoing commitment to social equity, as smaller providers tend to operate on thinner margins and often serve vulnerable or isolated communities when compared to larger providers. Because Medicaid, CHIP, and Medicare patients tend to be lower income and have greater and more complex medical needs, PRF Phase 4 will also include bonus payments for providers who serve these individuals. HRSA will price these bonus payments at the generally higher Medicare rates to ensure equity amongst providers serving low-income children, pregnant women, people with disabilities, and seniors. In parallel, HRSA will make ARP payments to providers based on the amount of Medicaid, CHIP, and/or Medicare services they provide to patients who live in rural areas as defined by the HHS Federal Office of Rural Health Policy. For both programs, HRSA will use existing Medicaid, CHIP, and Medicare claims data to calculate payments.

In order to streamline the application process, providers will apply for both the PRF and ARP programs in a single application. To help ensure that provider relief funds are used for patient care, PRF recipients will be required to notify the HHS Secretary of any merger with, or acquisition of, another healthcare provider during the period in which they can use the payments. Providers who report a merger or acquisition may be more likely to be audited to confirm their funds were used for pandemic-related expenses. The application portal will open on September 29, 2021. Moreover, HHS is also releasing detailed information about the methodology utilized to calculate PRF Phase 3 payments in order to promote transparency in the PRF program. Providers who believe their PRF Phase 3 payment was not calculated correctly according to this methodology will now have an opportunity to request a reconsideration. Specific details on the PRF Phase 3 reconsideration process have yet to be announced.

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Demonstrating its commitment to audit Provider Relief Fund (PRF) recipients, the Department of Health and Human Services (HHS) has hired several outside contractors to provide audit or program integrity services relating to the PRF. The PRF is a $175 billion fund created by Congress through the CARES Act and administered by HHS (and its sub-agency the Health Resources and Services Administration or HRSA) to provide financial relief to healthcare providers during the COVID-19 pandemic. HHS has subdivided the PRF into various general and targeted distributions. These distributions were paid to providers in several waves between April 2020 and the present.

Publicly available contracts provide a glimpse into HHS’s actions regarding the PRF. Over the last year, HHS has contracted with KPMG to provide “program integrity support,” Kearney & Company to provide “PRF Audit support services,” and Creative Solutions Consulting to provide “audit and financial review services.” Combined, HHS has committed approximately $5.5 million to these contracts. Reports indicate HHS has hired PricewaterhouseCoopers and Grant Thornton, as well.

Although HHS’s retention of contractors is nothing new, these agreements signal to providers that HHS is not taking PRF reporting lightly. Providers who received and retained payments through the PRF are required to file reports justifying their use of the funds and documenting their compliance with the terms and conditions of the payments. Providers must report information on healthcare-related expenses attributable to coronavirus, lost revenue attributable to coronavirus, other pandemic assistance received, and administrative data. Providers who received more than $500,000 in aggregate payments are required to report some data elements in greater detail, including specific information regarding operations, personnel, supplies, equipment, facilities, and several other categories. Thus, some providers will be required to report significant amounts of financial information in considerable detail.

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The Biden Administration is planning to rescind the “Most Favored Nation” rule, which would have employed a model that required Medicare to pay no more for certain drugs than the price paid for those drugs by other developed nations. On September 13, 2020, former President Trump signed an executive order directing HHS to test payment models for Medicare Parts B and D in which Medicare would pay for certain drugs up to the “most favored nation” price, defined as “the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.” On November 20, 2020, CMS issued an interim final rule to implement the executive order. However, on December 23, 2020, a federal court temporarily blocked the policy from taking effect on January 1, 2021 because the rule did not adhere to the notice and comment procedures required by the federal Administrative Procedure Act (APA).

In comments to the interim final rule, many hospitals and providers expressed opposition to the Most Favored Nation rule, claiming that the rule would impose unjustified expenses and place the entire burden of lowering drug prices on hospitals and providers rather than drug manufacturers or Medicare. Since the rule relies on price controls to lower drug spending, the rule was also opposed by drug manufacturers and fiscal conservatives who argued it would stifle innovation and access to new cures. If finalized, the rule would have created the CMS Innovation Center’s first nationwide mandatory experiment, which would represent a significant departure from the agency’s historical preference of testing new payment models among smaller subsets of healthcare organizations. Hospitals argued CMS does not have the power to execute such a large experiment, claiming the model “is not a test at all” and amounts to “the adoption of a nationwide policy for the highest expenditure drugs,” according to the Federation of American Hospitals (FAH). FAH also noted that the 50 drugs included in the model make up about 80% of the Medicare spending for Part B drugs. CMS left open the possibility for a future rule similar to the most favored rule, explaining that its decision to not move forward with the rule does not preclude the agency from pursuing a similar policy at a later date.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.

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