Health Law Attorney Blog

Recently the OIG released the 7th of 11 videos that cover major health care fraud and abuse laws, the basics of health care compliance programs, and what to do when a compliance issue arises. The videos are from the Health Care Fraud Prevention and Enforcement Action Team (HEAT) Provider Compliance Training initiative.

Compliance Programs, simply stated, are a set of internal policies and procedures written and implemented within a health care provider that comply with the law. Effective compliance programs, (1) Enhance organizational performance, (2) Improve quality of care, and (3) Reduce overall cost. The OIG stresses that Compliance programs are way for providers to be proactive instead of reactive. They allow an organization to identify problems on the front-end and correct them before they become systemic and costly.

Compliance Program Guidances (CPGs) put out by the OIG, provide principles to follow when coming up with an effective compliance program that suits a provider's organizational needs. There are seven basic elements to an effective compliance program:

1.Written policies and procedures: have up-to-date policies and procedures and implement them as the organization grows and changes.

2.Designate a Compliance Professional: have a designated Compliance Officer to monitor changes in the law and keep your policies as up-to-date as possible.

3.Effective Training: educate employees about policies and procedures so they are better able to identify a problem, should the occasion arise.

4.Effective Communication: facilitate a way for employees to communicate with the designated compliance professional, such as an open door policy or comment box, as a way to report misconduct and prevent retaliation.

5.Internal Monitoring: conduct regular audits to identify a potential problem and correct it before it becomes costly.

6.Enforcing Standards: ensure effective enforcement of the compliance program within your organization by holding employees responsible for knowing compliance standards.

7.Response to Issues: promptly respond to issues by looking into the problem and taking steps to resolve it.

The HEAT "Compliance Basics" video gives organizations a better insight into what to put into an effective compliance program to be proactive in identifying problems and/or issues, and to resolve them before they become costly.

Continue reading "OIG Issues "Compliance Program Basics" HEAT Provider Compliance Training Video" »

When a patient presents at an emergency department of a hospital, they are evaluated by a ER physician to determine whether they should be admitted as inpatient or outpatient observation. An inpatient admission occurs when a person is admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. The criteria when evaluating for a patient to be inpatient or outpatient are, but not limited to:

1. The severity of the signs and symptoms exhibited by the patient
2. The medical predictability of something adverse happening to the patient
3. The need for further diagnostic studies to assist in assessing whether the patient should be admitted
4. The availability of diagnostic procedures at the time and location that the patient presents

Sometimes, it may be too difficult to determine an inpatient admission within the first few hours the patient presents with their condition. At which point, the physician and caregivers can elect to utilize observation status. Observation status is used for patients who are presenting with an unknown cause of condition, for further diagnostics or monitoring, or if a patient has a complication from an outpatient procedure, or until the decision is made to admit the patient as inpatient.

Most inpatient admissions usually require a stay of 24-hours or longer, however, there is no specified time frame for a short-stay inpatient admission and inpatient claims are not covered solely on the basis of the length of time that the patient spent as an inpatient. The physician must write an order that describes the reason for the admission.
The change in a patient's status from observation to inpatient is based on the change in clinical status. This change in status must be documented before the patient's discharge and billing submission. Several scenerios may occur:

1. When changing inpatient status to outpatient (observation), services are billed with a condition code 44 on a 13X bill type
2. When changing outpatient status to inpatient, services performed prior to the admission decision are billed as outpatient, while services billed post-inpatient decision are billed as inpatient
3. In the event that an inpatient procedure claim is denied for failure to meet inpatient criteria, and no appeal is planned, the provider may bill professional services using a 12X bill type

"The National Government Services Mobile Medical Review Team, along with other agencies such as the recovery audit contractors (RAC), are currently reviewing inpatient admissions with one day stays with the objective of determining if claims are paid correctly as inpatient admissions (versus observation outpatient claims). Findings are similar throughout the RAC and the Mobile Medical Review Team. Notably, that the majority of one day inpatient stays reviewed do not qualify for inpatient admissions per Medicare guidelines."

According to the CMS IOM Publication 100-08, Medicare Program Integrity Manual, Chapter 6, Section 6.5.2.A:
"Inpatient care rather than outpatient care is required only if the patient's medical condition, safety, or health would otherwise be significantly and directly threatened if care was provided in a less intensive setting."

Providers should clearly document all contributing factors that impacted the decision to admit a patient as an inpatient. Factors such as comorbidities, surgical history, current medical needs (including medications), abnormal vital signs, presenting or persistent symptoms, availability of diagnostic procedures, and the safety of the patient should all be taken into consideration during the provider's decision making period. It is also critical that these decisions be clearly documented in the medical record.

Significantly, although RACs and NGS routinely take the position that "the majority of one day inpatient stays reviewed do not qualify for inpatient admissions per Medicare guidelines," this is not a position supported by Medicare guidelines. In fact, Medicare guidelines expressly indicate that patients expected to need 24 hours or more of care ought to be admitted as an inpatient. Pursuant to the Medicare Benefit Policy Manual, CMS Pub. 100-02, Chapter 1, Section 10, "Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight. The physician or other practitioner responsible for a patient's care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. Physicians should use a 24-hour period as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis... Admissions of particular patients are not covered or noncovered solely on the basis of the length of time the patient actually spends in the hospital..."

Furthermore, it should be noted that hospitals appealing short stay inpatient denials have experienced success. That is, the Administrative Law Judges ("ALJs") that review these types of cases have not agreed that "the majority of one day inpatient stays reviewed do not qualify for inpatient admissions per Medicare guidelines." During the RAC demonstration program, of those claims reviewed, 64.4 percent of appealed claims were decided in the provider's favor. http://www.cms.gov/Recovery-Audit-Program/Downloads/DemoAppealsUpdate61410.pdf

Continue reading "Inpatient Admission v. Outpatient Observation" »

Modern Healthcare reports that two anti-fraud demonstration projects announced in November by CMS were delayed after they drew heavy provider opposition.

The first project would require pre-authorization for scooters and power wheelchairs prescribed to Medicare beneficiaries in any of the seven states with the highest concentration of fraud or billing errors, including, California, Michigan, New York, Illinois, North Carolina, Florida and Texas. According to CMS, the process of preauthorization was developed to ensure that medical conditions warrant the proper medical equipment.

Recovery Audit Contractor (RAC) authority expansion is the second anti-fraud project, which allows RACs to review claims before they are paid. The focus is on the seven states with the highest rates of improper payments (California, Michigan, New York, Illinois, Texas, Florida and Louisiana) and claims with high volumes for short inpatient hospital stays in four other states.

CMS plans to notify providers at least 30 days before the delayed projects begin.

For more information about this topic, please contact Abby Pendleton or Jessica Gustafson at (248) 995-8510 or visit The Health Law Partners at www.thehealthlawpartners.com

On December 30, 2011, CMS issued an informational bulletin CPI-B 12-01 entitled, Affordable Care Act Program integrity Provisions - Guidance to States - Section 6411(a) - Expansion of the Recovery Audit Contractor (RAC) Program to Medicaid ("Bulletin").

By way of brief background, Section 6411(a) of the Patient Protection and Affordable Care Act ("PPACA") expands the RAC Program to Medicaid and requires, in part, that the fees paid to the contractors be made on a contingent basis. 42 CFR §455.510 provides that States determine the contingency fees to be paid to the Medicaid RACs. 42 CFR §455.510(b)(4) delineates the requirements for paying Medicaid RACs, specifically stating the following:

Except as provided in paragraph (5) of this section, the contingency fee may not exceed that of the highest Medicare RAC, as specified by CMS in the Federal Register, unless the State submits, and CMS approves, a waiver of the specified maximum rate. If a State does not obtain a waiver of the specified maximum rate, any amount exceeding the specified maximum rate is not eligible for FFP, either from the collected overpayment amounts, or in the form of any other administrative or medical assistance claimed expenditure.

According to the Bulletin, CMS increased the contingency fee for recovery of improper payments associated with durable medical equipment ("DME") claims. The contingency fee paid to a Medicare RAC is now 17.5% (up 5%) for DME claims. As such, absent a waiver, the Medicaid RAC contingency fees may not exceed 17.5% for DME claims.

Continue reading "DME RAC Contingency Fee Up 5% to 17.5%" »

Hospice provider AseraCare is accused of submitting "false and fraudulent" Medicare claims for payment to the U.S. It has been alleged that the hospice has been claiming charges to the Federal Government for those patients who were not admitted to hospice. Hospice care is provided to Medicare recipients who have a prognosis of six months or less to live and need hospice care.

The complaint stems from a whistleblower lawsuit filed by two former employees in 2009; originally filed by Dawn Richardson and Marsha Brown, named United States ex rel. Richardson and Brown v. Golden Gate National Senior Care LLC dba Golden Living et al., No. 2:09-cv-00627 (N.D. Ala.).

The False Claims Act allows private citizens with knowledge of fraud to file whistleblower suits on behalf of the United States and to share in any recovery. The U.S. is seeking three times the damages and a penalty of $5,500 to $11,000 per claim.

According to the lawsuit, Aseracare, owned by Golden Living, (one of the largest nursing home chains in the U.S.) is based in Fort Smith, Arkansas and runs 65 hospice centers in 19 states, including Alabama, Georgia, and Wisconsin. The federal complaint is part of an effort by the Justice Department of Justice (DOJ) and the Office of the Inspector General (OIG) at the U.S. Department of Health, to crackdown on suspected hospice fraud in the Medicare program.

This case is U.S. v. Golden Gate Ancillary LLC, 09-00627, U.S. District Court, Northern District Court of Alabama (Birmingham).

Continue reading "AseraCare Hospice Sued by U.S. Over Alleged False Claims Act Violations" »

Due to the "significant program integrity problems" presented to the Medicare program by durable medical equipment, prosthetics, orthotics, and supplies ("DMEPOS") suppliers, the Office of Inspector General ("OIG") issued a report, Program Integrity Problems with Newly Enrolled Medicare Equipment Suppliers ("Report"). In its Report, the OIG aimed describes the aim of its investigation was two-fold:

1. Determining the extent to which newly enrolled DMEPOS suppliers had their billing privileges revoked or were placed on prepayment claims review; and


2. Determining the extent to which newly enrolled suppliers omitted from their Medicare applications required information regarding (a) owners or managers or (b) the criminal histories of owners or managers or any adverse legal actions taken against these individuals.

By way of brief background, to participate in Medicare, each DMEPOS supplier must complete a Medicare enrollment application and demonstrate that it meets the standards of participation (42 CFR 424.57 and 42 CFR pt. 424, subpart P). For a complete explanation of the Medicare enrollment process, including how it applies to DMEPOS suppliers, please click here.

In its Report, the OIG revealed the following:

• During their first year in Medicare, 26% of high- and medium-risk suppliers and 2% of low/limited-risk suppliers had their billing privileges revoked or were placed on prepayment claims review;


• 13% of high and medium-risk suppliers and 4% of low/limited-risk suppliers omitted ownership or management information from their Medicare enrollment applications; and


• 4% of high- and medium-risk suppliers omitted information regarding criminal histories or adverse legal actions from their applications.

As such, the OIG issued the following recommendations to CMS:

• Conduct post-enrollment site visits earlier for new DMEPOS suppliers receiving the most money from Medicare;


• Apply investigative techniques and tools to identify any owners or managers of DMEPOS suppliers who are not reported on supplier applications as required; and


• Take appropriate action regarding DMEPOS suppliers that omit information from applications.

CMS agreed with the OIG's recommendations and is "address[ing] potential vulnerabilities." DMEPOS suppliers should remain attentive to, and be mindful of, the increasing scrutiny over DMEPOS enrollment and DMEPOS suppliers' post-enrollment activities.

Continue reading "OIG Issues Report: Program Integrity Problems with Newly Enrolled Medicare Equipment Suppliers" »

In the December 19, 2011 Federal Register, the Centers for Medicare and Medicaid Services ("CMS") issued its proposed rule for the Physician Payments Sunshine Act ("Proposed Rule"), which was promulgated as a result of Section 6002 of the Patient Protection and Affordable Care Act ("PPACA"). Section 6002 requires applicable manufacturers of drugs, devices, biological, or medical supplies to report annually to the Secretary certain payments or other transfers of value to physicians and teaching hospitals. Similarly, applicable manufacturers and group purchasing organizations ("GPOs") must disclose any ownership or investment interest in such entities held by physicians or their immediate family members, as well as information on any payments or other such transfers of value provided to such physicians. Applicable manufacturers must report the required information to CMS by March 31, 2013 and on the 90th day of each subsequent calendar year. CMS, in turn, will publish the reported data on a public website.

According to a CMS fact sheet:

Applicable manufacturers are required to report numerous types of payments to physicians and teaching hospitals. These are outlined in the statute and include categories, such as consulting fees, food and beverages, and research payments. The proposed rule provides special consideration to research payments since collaboration between physicians and teaching hospitals, and manufacturers is essential to the development of new products. Research payments often include payment for all research activities, including patient tests and supplies, and the administration of the study, so the proposed rule outlines procedures to ensure that the nature of these relationships is understood, but there is also sufficient information on the extent of the research relationship. In addition to including information on the nature of these relationships, the statute also protects applicable manufacturer's competitive interests, by allowing CMS to delay publication of certain research payments until the earlier of FDA approval of the product that is the subject of the research or four years after the payment date. CMS is proposing to require manufacturers to report these payments must be reported in the year they were made, but to delay publication until the earlier of FDA approval or four years has passed.

CMS estimates that about 150 drug or biologic manufacturers, 1000 device or medical supply manufacturers, and 420 GPOs will be required to submit information to CMS on an annual basis as a result of this new requirement.

Continue reading "CMS Issues Physician Payments Sunshine Act Proposed Rule" »

In the December 29, 2011 Federal Register, the Office of Inspector General ("OIG") issued a notice of intent to develop regulations wherein it "solicits proposals and recommendations for developing new and modifying existing safe harbor provisions under the Federal anti-kickback statute...." Comments must be delivered no later than February 27, 2012 at 5pm and may be submitted electronically, by regular, express or overnight mail, or by hand courier.

Continue reading "OIG Soliciting Recommendations for AKS Safe Harbors" »

Until October 2009, physicians could lawfully act as service providers to hospitals by furnishing their services "under arrangements" where a physician or group of physicians would provide services, equipment and supplies to a hospital's patients by contracting with the hospital to provide the services. Urologists, for instance, regularly furnished lithotripsy services under arrangements. The relationship was permissible under Stark because the hospital would bill for the services, deeming the hospital the entity furnishing the designated health services ("DHS"), not the physicians. However, in October 2009, new Stark regulations made these relationships impermissible as the regulations declared entities providing under arrangement services (e.g., the urologists) were furnishing DHS.

After the regulations were issued, but before they became effective, the Council for Urological Interests ("Council") filed suit in the US District Court for the District of Columbia, challenging the new regulations. Generally, the Social Security Act provides for judicial review of reimbursement decisions only after administrative remedies have been exhausted. The Supreme Court held in Shalala v. Illinois Council on Long Term Care, Inc. ("Illinois Council") that an exception to this requirement existed where application of the general rule "would not lead to a channeling of review through the agency, but would mean no review at all." The District Court, relying on Illinois Council, held that Council's claims must be channeled through the agency's administrative procedures prior to seeking judicial review. Despite Council's contention that physician groups are not afforded administrative review (as administrative review was limited to "providers" only), the District Court dismissed Council's complaint for lack of subject matter jurisdiction, holding that the hospitals (i.e. providers) could challenge the regulation through the administrative process.

On December 23, 2011, the US Court of Appeals for the District of Columbia Circuit overturned the District Court's decision holding that the channeling requirement under Illinois Council was not a requirement of complete preclusion of judicial review. "Particularly considering the Supreme Court's characterization of section 405(h) [of the Act] as 'a channeling requirement, not a foreclosure provision' we see no 'clear and convincing evidence' in the statute's language or structure indicating that Congress deliberately intended to completely bar non-providers from seeking review of regulations that target them directly" (internal citations omitted).

This ruling is a victory for physicians and physician groups in that the DC Appeals Court has recognized the administrative and judicial limitations imposed upon them to represent their interests and has rectified this bar.

Continue reading "DC Appeals Court Permits Physicians to Challenge Stark Law Regulations" »

The Office of Inspector General ("OIG") recently released a report entitled Questionable Billing Patterns of Portable X-Ray Suppliers ("Report") wherein it identified portable x-ray suppliers with billing patterns associated with inappropriate Medicare payments. As a result of its Report, the OIG made recommendations to the Centers for Medicare and Medicaid Services ("CMS") to account for inefficiencies in its reimbursement of portable x-ray suppliers.

Reimbursement for Portable X-Ray Services
By way of brief background, the conditions of participation for portable x-ray services, at 42 CFR 486.106, provides, in its entirety, the following:

§ 486.106 Condition for coverage: Referral for service and preservation of records.
All portable X-ray services performed for Medicare beneficiaries are ordered by a doctor of medicine or doctor of osteopathy and records are properly preserved.
(a) Standard--referral by a physician. Portable X-ray examinations are performed only on the order of a doctor of medicine or doctor of osteopathy licensed to practice in the State. The supplier's records show that:
(1) The X-ray test was ordered by a licensed doctor of medicine or doctor of osteopathy, and
(2) Such physician's written, signed order specifies the reason an X-ray test is required, the area of the body to be exposed, the number of radiographs to be obtained, and the views needed; it also includes a statement concerning the condition of the patient which indicates why portable X-ray services are necessary.
(b) Standard--records of examinations performed. The supplier makes for each patient a record of the date of the X-ray examination, the name of the patient, a description of the procedures ordered and performed, the referring physician, the operator(s) of the portable X-ray equipment who performed the examination, the physician to whom the radiograph was sent, and the date it was sent.
(c) Standard--preservation of records. Such reports are maintained for a period of at least 2 years, or for the period of time required by State law for such records (as distinguished from requirements as to the radiograph itself), whichever is longer.

Moreover, the Medicare Claims Processing Manual (Pub. 100-4, Ch. 13 Sec. 90) provides that Medicare reimburses portable suppliers separately for up to four (4) components of the portable x-ray services:

1. Transportation Component - Transporting the equipment to the beneficiary's location,
2. Setup Component - Setting up the equipment for use,
3. Technical Component - Administering the test, and
4. Professional Component - Interpreting the results.

According to the Report, "[e]ighty percent of the amount Medicare paid to portable suppliers in 2009 reimbursed them for transporting and setting up the x-ray equipment." When reimbursing for the Transportation Component, Medicare pays for the full Transportation Component once per each trip to a particular location. Therefore, if a supplier is furnishing x-ray services to three beneficiaries at one nursing home, on one trip, it will pay 1/3 of the Transportation Component for each beneficiary (totaling one full Transportation Component). On the other hand, if a supplier furnishes x-ray services to three beneficiaries at one nursing home on three separate trips, on the same day, Medicare will pay for the full Transportation Component for each return trip to a facility on a particular day.

Questionable Billing Patterns
In is evaluation, the OIG developed the following eight (8) characteristics that described questionable billing patterns:

1. Portable services ordered by nonphysicians
2. No recent contact between beneficiary and ordering provider
3. Same-day services in multiple settings
4. Billing for return trips
5. Portable x-rays per beneficiary
6. Beneficiary contact with multiple portable suppliers
7. Beneficiary use of stationary x-ray services
8. Beneficiary durable medical equipment ("DME") utilization

Results
The OIG found the following of the 352 portable x-ray suppliers in its population:

• 20 (5.7%) suppliers met the criteria for identifying questionable billing patterns where the suppliers exceeded thresholds for questionable billing on at least two (2) individual characteristics as well as the threshold on the combined score (describing the suppliers' overall billing patterns)
• Medicare paid portable x-ray suppliers roughly $12.8 million for return trips to nursing facilities
• Medicare paid at least $6.6 million for portable x-ray services that were ordered by nonphysicians and, therefore, not covered

Recommendations
The OIG recommended the following to CMS in connection with its findings:

• Take appropriate action on the 20 portable x-ray suppliers referred by the OIG;
• Establish a process to periodically identify portable x-ray suppliers that merit greater scrutiny and follow up as appropriate;
• Determine what portion of the $12.8 million CMS paid for return trips in 2009 actually reimbursed suppliers for incorrectly billed Transportation Component claims and collect overpayments where appropriate;
• Collect the $6.6 million in overpayments for portable x-ray services rendered in 2009 that were ordered by nonphysicians; and
• Implement procedures to ensure that CMS pays for portable x-ray services only when ordered by a physician and establish appropriate controls.

CMS concurred with the OIG's recommendations and has taken action to address its reimbursement processes as they relate to portable x-ray suppliers. Portable x-ray suppliers should continue to monitor and assess their billing practices and claims submission to ensure compliance with the applicable laws and regulations.

Continue reading "OIG Releases Report: Questionable Billing Patterns of Portable X-Ray Suppliers" »

As we reported in previous blog entries regarding the 2012 Physician Fee Schedule, the Centers for Medicare and Medicaid Services ("CMS") will be expanding its application of the Multiple Procedure Payment Reduction ("MPPR") to the professional component ("PC") of certain diagnostic imaging procedures. Currently, the MPPR only applies to the technical component ("TC") of certain diagnostic imaging services where full payment is made for the service with the highest TC payment and payment is made at 50% for each subsequent service furnished by the same physician to the same patient in the same day. Under the new rule, full payment will be made for each PC and TC service with the highest payment with payment made at 75% for each subsequent PC service furnished by the same physician to the same patient on the same day. CMS will not be applying the imaging PC MPPR provided by group practices at this time.

Continue reading "Professional Component MPPR Will NOT Apply to Group Practices at This Time" »

In its fight against Medicare fraud, HHS announced that it "will direct all Medicare prescription drug plans to use every tool at their disposal to prevent fraud." HHS noted the increasing problem of doctor shopping, the abuse of OxyContin and Percocet, and prescription drug fraud. Importantly, HHS announced that it has asked "prescription drug plans to withhold payment on suspicious claims, including when enrollees use multiple doctors to obtain painkillers and narcotics." HHS notes that in such instances of suspicious claims, while drug plans generally must promptly pay claims, the drug plan should withhold payment to pharmacies until it verifies the claim is valid. In a recent interview, Robert S. Iwrey of The Health Law Partners expressed the following concern: "While I applaud efforts to thwart the submission and payment of fraudulent prescription claims that significantly raise the costs of our health care, I am concerned that those drug plans that are motivated solely by the bottom line may misuse such pronouncement as an opportunity to avoid and/or at least delay payment under the guise of verifying the validity of the claims when they are actually more interested in circumventing the applicable prompt payment rules."

Continue reading "Moving Forward: HHS to Shift its Focus to Prescription Drug Fraud" »

The Office of Inspector General ("OIG") has posted its Health Care Fraud Prevention and Enforcement Action Team ("HEAT") compliance training resources on its website wherein it provides videos and audio podcasts regarding a number of topics, including:

• An overview of the OIG


• Overviews of the healthcare fraud and abuse laws;


• Exclusion from Medicare;


• Compliance programs; and


• The importance of documentation.

In light of increased enforcement and prosecution, healthcare providers are encouraged to utilize these resources to better educate themselves on the myriad laws and regulations governing the practice of their profession.

Continue reading "OIG Posts HEAT Healthcare Provider Compliance Videos and Audio Podcasts" »

In a December 13, 2011 press release, the Department of Health and Human Services ("HHS") announced that the Department of Justice ("DOJ") has recovered over $5.6 billion in total fraud in 2011, an increase of over 167% since 2008. Of this $5.6 billion recovered in 2011, over $2.9 billion (over 51%) recovered was due to healthcare fraud. According to HHS,

This was driven in part by unprecedented cooperation between the Department of Justice and the Department of Health and Human Services to detect and halt fraud earlier. Specifically, the Obama Administration has greatly expanded the use of Medicare Fraud Strike Forces, specialized teams of agents and prosecutors who focus on catching health care fraud. The teams monitor Medicare data in real time and works together to prosecute fraud much more quickly than before. It now often takes months, not years, to bring a case to resolution. At the start of the administration, there were two Strike Force teams. Now, there are Strike Force teams in nine different cities. And they have been effective: in 2008, they brought cases involving $384 million in fraudulent claims. This year, they brought cases involving over $1 billion in fraudulent claims. For every dollar spent on this effort, the administration has recovered seven dollars.

Over the past few years, The Health Law Attorney Blog has emphasized the increase in government scrutiny and HHS has released the numbers to support it. Now, more than ever, healthcare providers and suppliers must be cognizant of the current regulatory landscape and increased enforcement and take proactive measures to enhance their compliance.

Continue reading "Over $2.9 Billion Recovered in Healthcare Fraud in 2011" »

On December 7, 2011, the Office of Inspector General ("OIG") posted a favorable Advisory Opinion 11-18 pertaining to Requestor's online service that would facilitate the exchange of information between healthcare practitioners, providers and suppliers ("Proposed Arrangement"). Requestor, a publicly traded company, currently provides web-based services that help physicians "achieve faster reimbursement from payors, reduce error rates, improve collection rates, improve patient compliance and satisfaction, and more efficiently manage clinical and billing information." To facilitate this goal, Requestor provides three (3) principal services:

1. Billing Service - This service automates and manages the physician practices' billing-related functions and assists with non-billing related, back-office operations (e.g., scheduling appointments, verifying insurance eligibility, reconciling accounts and reporting);

2. EHR Service - This service automates and manages physician offices' medical record-related functions; and

3. Messaging Service - This service automates practice communications with patients and includes patient messaging services, live operator services, and a patient web portal.

Under the Proposed Arrangement, Requestor proposes adding a new service--the Coordination Service--which "is intended both to facilitate the exchange of information between health care practitioners, providers, and suppliers (collectively, 'Health Professionals'), and to help them keep track of patients receiving services from other Health Professionals." In its evaluation of the Proposed Arrangement, the OIG reviewed four (4) sub-arrangements:

1. Making referrals using the Coordination Service;
2. Receiving referrals using the Coordination Service: Trading Partners;
3. Receiving referrals using the Coordination Service: Non-Trading Partners; and
4. Fees Associated with the Coordination Service.

Making Referrals Using the Coordination Service
The Requestor states that because much of the benefit of the Coordination Service rests in the data contained within the EHR Service, only those Health Professionals purchasing the EHR Service could use the Coordination Service to transmit patient information to other Health Professionals when making a referral. As such, the Requestor proposes offering the Coordination Service in combination with the EHR Service (collectively, the "Coordination Service Package"). The Coordination Service Package would reduce the expense and opportunity for error associated with Health Professionals wishing to make referrals ("Ordering Health Professionals") who communicate with other Health Professionals by facilitating the transmission of the following information:

• Sending the demographic, medical record, insurance and billing information of a patient when the patient is seen by other Health Professionals;
• Issuing appropriate referral reminders;
• Tracking communications with other Health Professionals; and
• Exchanging information about orders, order results, and healthcare recommendations.

Ordering Health Professionals would also utilize an electronic database ("Network") to identify Health Professionals to which they may make a referral. The Network would contain contact information (e.g., location, fax, and phone numbers) for physicians, laboratories, pharmacies, durable medical equipment suppliers and imaging providers. The Network would be populated by collecting information from Requestor's existing database of Health Professionals, publicly available Health Professional databases, Requestor's clients, and other Health Professionals that would like to be included. Inclusion in the Network would be free of charge.

Receiving Referrals Using the Coordination Service: Trading Partners
Requestor proposes that Health Professionals interested in receiving referrals through the Coordination Service would enter into Trading Partner Agreements with the Requestor. Those Professionals entering into the Trading Partner Agreements ("Trading Partners") would have the opportunity to customize their Network profiles to include additional information, including subspecialty areas, availability for appointments, and any clinical information required as part of a referral. Trading Partners would also be able to receive comprehensive referrals ("Formatted Orders") electronically from the Ordering Health Professionals. To become a Trading Partner would be free of charge; however, the services provided would be provided for a fee, as described below.

Receiving Referrals Using the Coordination Service: Non-Trading Partners
Being a Trading Partner is not required to receive referrals. However, Health Professionals that are not Trading Partners ("Non-Trading Partners") will not have the opportunity to customize their Network profiles and would not receive Formatted Orders.

Fees Associated with the Coordination Service
Under the Proposed Arrangement, Requestor would charge the Ordering Health Professionals the usual monthly subscription fee for the EHR Service component of the Coordination Service Package at a discounted rate. In addition to the monthly subscription fee, Requestor would charge three (3) types of transaction-based fees for the referrals made and received using the Coordination Service, all fees being set at fair market value, individually and in the aggregate:

1. Transmission Fee - The Transmission Fee is the base fee for transmitting the referral. This fee would be charged each time an Ordering Health Professional makes a referral using the Coordination Service. The party responsible for paying the fee, however, would vary depending on whether the receiving Health Professional is a Trading Partner or a Non-Trading Partner. If the receiving Health Professional is a Trading Partner, the Trading Partner would pay the Transmission Fee. Those Trading Partners that are Requestor's clients would pay a slightly lower fee (≤$1) as Requestor's costs would be lower to transmit information from one client to another within its own system. For receiving Health Professionals that are Non-Trading Partners, the Ordering Health Professional would pay the Transmission Fee.

2. Functionality Fee - The Functionality Fee includes Requestor's services of recording and maintaining the Trading Partner's preferences, attaching the clinical documentation in accordance with those preferences, facilitating the appointment scheduling with the Trading Partner, and providing "report builder" functionality. The Functionality Fee would be assessed each time an Ordering Health Professional uses the Coordination Service to make a referral to a Trading Partner. This fee would always be paid by the Trading Partner and would be a fixed fee.

3. Service Fee - The Service Fee is associated with the referrals made to Trading Partners and the work performed by Requestor to verify benefit eligibility and obtain the referral authorization. The Service Fee would always be paid by the Trading Partner and would vary based on the level of effort required to provide the services.

After evaluating the pertinent facts, in its analysis, the OIG determined that the Proposed Arrangement implicates the federal Anti-kickback Statute ("AKS") and does not fit within a regulatory safe harbor. However, an arrangements failure to fit within a safe harbor does not automatically imply violation of the AKS; instead, the OIG must make a determination, based on the facts, of whether the Proposed Arrangement adequately reduces the risk that the remuneration provided could be an improper payment for referrals or for arranging for referrals of Federal healthcare program business. The OIG concluded that, due to the following factors, the Proposed Arrangement appropriately minimizes the risk of AKS violation:

First - Inclusion in the Network is free of charge (however, payment could be made to obtain specific services) and Requestor would not control or influence the decision as to which Health Professional a referral would be made.

Second - Requestor certified that the Transmission Fee, Functionality Fee and Service Fee would all reflect fair market value of the actual services provided and the Requestor's service would provide value that is unrelated to inducing referrals. Moreover, the fees Requestor would charge are independent of the value of the items or services that are being referred or ultimately provided.

Third - Even though the Requestor would charge a "per-click" Transmission Fee, this fee is reasonable as the fee would be assessed regardless of whether the patient actually receives the items or services from the receiving Health Professional.

Fourth - The Proposed Arrangement's fee structure would unlikely materially influence an Ordering Health Professional's referral decisions for two reasons: the Transmission Fee is low and the aggregate amount of the Transmission Fees that could have been charged to an Ordering Health Professional would be capped to ensure that the Ordering Health Professionals would not pay more for the Coordination Service Package than they would have paid for the EHR Service alone.

Fifth - The Coordination service is intended to facilitate the exchange of information between Health Professionals and is not intended to impede on a patient's or provider's freedom of choice.

Sixth - A Trading Partner's payment of the Transmission Fee, Functionality Fee and Service Fee to the Requestor would not give the Trading Partner access to a referral stream not available to Non-Trading Partners.

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