June 2010 Archives

June 30, 2010

California Physicians Challenge Opt-Out of Physician Supervision Requirement

Last year, Governor Arnold Schwarzenegger requested exemption from the federal supervision requirement of nurse anesthetists. After unsuccessfully seeking a rescission of the opt-out, on June 3, 2010, the California Society of Anesthesiologists (CSA) and California Medical Association (CMA) filed a lawsuit against the governor.

Medicare required a physician to supervise a nurse anesthetist until 2001, when CMS amended the supervision requirement to authorize a governor to "opt-out" of such requirement if the following conditions are met: (1) a governor must consult with the medical and nursing boards regarding issues related to access and quality of anesthesia services in the state; (2) the opt-out must be consistent with state law; and (3) the governor must conclude that an opt-out is in the best interest of the state citizens.

CSA and CMA contend that the governor failed to meet these requirements prior to opting out, by failing to consult the Medical Board of California regarding the administration of anesthesia by nurse anesthetists and by violating California law.

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June 29, 2010

OIG Identifies Inpatient Rehabilitation Facility (IRF) Overpayments

The Office of Inspector General ("OIG") today published a report regarding overpayments identified made to inpatient rehabilitation facilities ("IRFs") from 2004 through 2007. According to the report, of the claims reviewed by the OIG, the vast majority (i.e., 213 out of 220) of transfers from an IRF to another facility were improperly coded as discharges. The reimbursement to an IRF that discharges a patient surpasses the reimbursement to an IRF if it transfers a patient to another facility. Accordingly, the OIG predicted that if its findings were extrapolated to non-reviewed claims, it is possible the Centers for Medicare and Medicaid Services ("CMS") made $34 million in overpayments with respect to this issue. The OIG recommended that CMS review all claims in the sample frame and recover any overpaid amounts.

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June 29, 2010

A Renewed Focus on Compliance: Health Care Reform Measures, Increase Audit Scrutiny and More Reasons Why Compliance Matters!

It looks like the days of "voluntary" compliance programs for the health care industry are coming to an end. Specifically, Section 6401(a)(7) of the Patient Protection and Affordable Care Act ("PPACA" or the "health care reform bill") included provisions mandating compliance programs as part of the Medicare enrollment process.

According to the health care reform bill, providers or suppliers within particular industries or categories, as yet unspecified, must have a compliance program in place as a condition of enrollment. Regulations will be issued which will specify the required elements of compliance, timelines and other details regarding implementation. Until the regulations are actually adopted, we will not know whether and when individual physicians will need to demonstrate that they or their group has a compliance program in place and what that compliance program must look like.

The concept of mandatory compliance is not new. For example, last year, New York providers, including physicians that meet certain financial thresholds with regard to Medicaid billing activity became subject to mandatory compliance obligations as a result of the New York Office of Medicaid Inspector General regulations. The New York regulations closely resemble the compliance program elements recommended by the Office of Inspector General ("OIG") in its voluntary compliance guidance documents. It will not be surprising if the new federal regulations also closely mirror the compliance program guidance of the OIG.

Although the implementing regulations under the health care reform bill have yet to be issued, we are encouraging physicians and other health care entities to undertake a renewed focus on compliance activities. For those smaller health care providers who never formally implemented compliance, the time has come to make compliance a top priority. We say this not necessarily because of the health care reform provisions mentioned in this article but based on what we as health care attorneys have seen and experienced with health care providers who have been subject to the increased health care enforcement environment and the ramping up of audit activity. Specifically, we have been involved in defending numerous Medicare audits as a result of the Medicare Recovery Audit Contractor Program (RACs), Medicare Program Safeguard Contractor/Zone Program Integrity Contractor audits (PSCs or ZPICs), Medicaid audits and other payor audits. We have also seen an increase in investigative activity and the use of other enforcement tools such as prepayment utilization review. In many cases, the government overpayment demands are extremely significant as a result of the use of statistical sampling and extrapolation techniques utilized in the audit process. Furthermore, the health care reform bill strengthens the federal government's ability to enforce the federal fraud and abuse laws, including by clarifying aspects the federal Anti-Kickback Law to the benefit of the federal government, requiring providers to report and return overpayments within tight timeframes, providing for the expansion of the Medicare RACs, and requiring the establishment of a national fraud and abuse data collection program.

Top 3 Compliance Tips

Given this health care environment, we recommend that physician practices begin to focus on compliance. Importantly, physicians can begin to proactively undertake compliance activities now without expending a significant amount of financial resources. For example, at a minimum, we recommend that physicians do the following:

1. Improve Documentation - Evaluate Current Documentation Standards and Increase Documentation: We cannot emphasize enough the importance of taking a critical look at your documentation. It is our experience that documentation issues comprise the main reason for overpayment demands made by Medicare or other payors. While physicians may truly believe that they are documenting enough information to support their services, the reality is that Medicare and other payor auditors expect and demand a much higher level of documentation. Given the increased audit and enforcement activity, physicians are well advised to critically evaluate their documentation standards and make improvements in this area.

2. Review and Stay Apprised of Applicable Medicare Local Coverage Decisions: In order to be in compliance, physicians must understand the playing field including knowing the rules that apply to the services billed by the practice. Physicians are responsible from a legal perspective to know the Medicare rules that apply to the services that they render. It is important that you regularly check the policies posted on the Medicare Carrier website to ensure that you are reporting and documenting services consistent with the published rules. You can access this information at www.WPSMedicare.com.

3. Monitor Billing/Coding Personnel: Physicians should understand that they are legally responsible for the services that are submitted to Medicare and other payors under their NPI numbers regardless of whether or not coding and billing responsibilities are delegated to others including billing companies or internal coders and billers. Thus, physicians must carefully monitor coding and billing performed by others to ensure that the services are being submitted in a compliant manner. In some cases, this may involve hiring experts such as compliance auditors to assist in identifying any areas of risk for the physician.

Continue reading "A Renewed Focus on Compliance: Health Care Reform Measures, Increase Audit Scrutiny and More Reasons Why Compliance Matters! " »

June 28, 2010

Disclosure Requirements for In-Office Ancillary Services Exception to the Prohibition on Physician Self-Referral for Certain Imaging Services

CMS has released their proposed disclosure requirements for In-Office Ancillary Services (IOAS) Exception. Section 1877 of the Act or the physician self-referral law (Stark) prohibits a physician from making referrals for certain "designated health services" (DHS) payable by Medicare to an entity with which he or she has a financial relationship, unless an exception applies. Stark also prohibits the entity from filing claims with Medicare for those DHS rendered as a result of a prohibited referral. However, Stark sets forth the exception that permits a physician in a solo or group practice to order and provide DHS in the office of the physician or group practice, provided that certain specific criteria are met.

Section 6003 of the Patient Protection and Affordable Care Act (PPACA) amends Stark by creating a new disclosure requirement, with respect to referrals for magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), and any other DHS specified under Stark, which requires that the physician inform a patient in writing at the time of the referral that the patient may obtain the service from a person other than the referring physician or someone in the physician's group practice and provide the patient with a list of suppliers who furnish the service in the area in which the patient resides.

CMS is proposing to implement section 6003 of the PPACA by amending §411.355(b) to add new paragraph (b)(7). This new proposed provision, would expand the disclosure requirement to other radiology and imaging services under the DHS category specified in Stark. CMS is currently soliciting comments regarding which other radiology and imaging services that fall under Stark should be included in the disclosure requirement.

Additionally, CMS is proposing that the disclosure notice under §411.355(b)(7), should be written in a sufficient manner to be more reasonably understood by all patients. It is mandatory that the notice indicate to the patient that the services may be obtained from a person other than the referring physician or his or her group practice and should include a list of other suppliers who provide the service being referred. Additionally, in order for the disclosure requirement to be satisfied, CMS proposes that a record of the patient's signature on the disclosure notification must be maintained as an element of the patient's medical record.

Section 6003(a) of the PPACA specifies that the referring physician must provide a written list of "suppliers as defined in section 1861(d). Section 1861(d) of the Act defines supplier as "a physician or other practitioner, a facility, or other entity that furnishes items or services under this title." CMS is proposing that only suppliers be included on the written list. However, CMS is not proposing to permit or require the list to include "providers of services", which is defined in section 1861(u) of the Act to include hospitals and critical access hospitals, among other facilities.

Additionally, Section 6003(a) of the PPACA also requires that the alternate suppliers specified in the notice provided to the patient must provide the relevant services "in the area in which [the patient] resides." CMS is therefore proposing that the suppliers included in this notice should be located within a 25-mile radius of the physician's office location at the time of the referral.

In order to help the patient make an informed decision regarding the physician referral, CMS proposes that the written list include no fewer than 10 suppliers. An exception to this rule is made if there are fewer than 10 other suppliers in the proposed 25-mile-radius. When this occurs, the physician is no longer required to provide a list of alternative suppliers, though, the physician is still required to disclose to his or her patients that the patients may receive the imaging services from another supplier.

With regard to the information on the list, CMS would like to make it mandatory that the physician provide certain information about the listed suppliers, including the name, address, phone number, and distance from the physician's office location at the time of the referral. However, CMS is not requiring the disclosure requirement for MRI, CT, or PET services furnished on an emergency or time-sensitive basis.

It is important to note that these provisions are not final. CMS is soliciting comments by physicians on all IOAS proposals listed. The new disclosure requirement of section 6003 must be promulgated by regulation. Therefore, CMS is proposing that the new disclosure requirement shall apply only to services furnished on or after the effective date of the final regulation. CMS is proposing that the effective date will be January 1, 2011.

Continue reading "Disclosure Requirements for In-Office Ancillary Services Exception to the Prohibition on Physician Self-Referral for Certain Imaging Services" »

June 28, 2010

CMS has Released the Proposed Physician Fee Schedule

CMS has released the proposed physician fee schedule and other Medicare Part B payment policies to ensure their payment systems reflect the changes in medical practice and relative value services. This update also addresses certain provisions of both the Affordable Care Act and Medicare Improvements for Patients and Providers Act of 2008. Additionally, the proposed rule discusses payments under the Ambulance Fee Schedule, Clinical Laboratory Fee Schedule, payments to ESRD facilities, and payments for Part B drugs. Finally, the proposed rule includes a discussion regarding the Chiropractic Services Demonstration program, the Competitive Bidding Program for Durable Medical Equipment and Provider and Supplier Enrollment Issues associated with Air Ambulances.

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June 24, 2010

MEDPAC Report on In-Office Ancillary Services

The Medicare Payment Advisory Council (MEDPAC) recently delivered its 2010 report to Congress. The report entitled "Report to the Congress: Aligning Incentives in Medicare," addressed the in-office ancillary services (IOAS) exception to the Stark Law, which allows physicians to provide most DHS services to patients in their own offices under certain conditions.

In recent years, many physicians have expanded their practices to provide diagnostic imaging, clinical laboratory testing, physical therapy, and radiation therapy. The IOAS exception has enabled physicians to make rapid diagnoses and initiate treatment during a patient's office visit. This has helped improve care coordination, encourage patients to comply with their physicians treatment recommendations and enhance patients' convenience.

Continue reading "MEDPAC Report on In-Office Ancillary Services" »

June 24, 2010

CMS Issues The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the Three-Year Demonstration Program

On June 14, 2010, CMS published a report entitled, "The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the 3-Year Demonstration Program." This report contains statistics through March 9, 2010 and includes updated appeals data.

The new report reveals a much lower number of appeals than had previously been reflected. Specifically, the new report states that providers chose to appeal 12.7 percent of the RAC determinations made in the demonstration program (76,073 claims appealed). Previously, CMS reported that 22.5 percent of the RAC determinations made in the demonstration program were appealed (118,051 claims appealed). According to CMS, this number decreased for several reasons:

• First, the previous method of totaling claims counted claims appealed to multiple levels of appeal at each stage of appeal. The revised figure counts each appealed claim once, regardless of whether the claim was appealed through multiple stages of appeal.

• In addition, duplicate claims were identified and removed.

• Appeals withdrawn by the provider were removed from the total.

• Finally, claims reversed by the claims processing contractor when additional documentation was submitted were removed from the total.

From the provider's perspective, it is unclear why claims reversed when additional documentation was submitted to the claims processing contractor were removed from the total. These claims constitute denials made during the RAC demonstration program that were overturned on appeal. The failure to include these claims paints a picture that the RAC was more accurate in its claim denials than it actually was.

Even with the omission of this first-level appeals data, the numbers still reflect that when providers chose to appeal claims, they oftentimes were successful. For example, of the 76,073 claims appealed, according to CMS's calculations, 48,993 claims were overturned on appeal, constituting an overall appeals success rate of 64.4 percent.

Notably, despite the fact that the RAC demonstration concluded in 2008, there still may be claims decided favorably that are not included in these statistics. The Administrative Law Judges were overwhelmed by the volume of appeals they received. As recently as April 2010, our office alone received dozens of favorable decisions arising from RAC denials made during the demonstration program, which would not have been included in the most-recent CMS data.

Continue reading "CMS Issues The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the Three-Year Demonstration Program" »

June 23, 2010

The FDA Plans to Alter its Rules to Help Facilitate Innovation in Medical Device Development

The U.S. Food and Drug Administration (the "FDA") has announced in a press release that the agency and other regulatory representatives will participate in a one day workshop entitled "Indentifying Unmet Public Health Needs and Facilitating Innovation in Medical Device Development." Dr. Jeffrey E. Shuren, director of the Food and Drug Administration's Center for Devices and Radiological Health, announced that the goal of the agency will be to overhaul its procedures to speed innovation while protecting patient safety.

This workshop comes after complaints about poor communication and delays in reviewing and approving new medical devices by medical device executives and other industry profession. Specifically, after taking years to develop necessary medical devices that will help prevent, diagnose, treat, and monitor serious and life-threatening diseases, these devices undergo a protracted regulatory review process before entering the market place. It then takes yet additional time for these devices to be adopted into clinical practice and for patients to realize the benefits.

The initiatives expected to be discussed for revamping the FDA's approval process for medical devices, including changes to the development of clinical trials will be released to the public in the coming weeks. Any new procedures could take effect later this year.

Continue reading "The FDA Plans to Alter its Rules to Help Facilitate Innovation in Medical Device Development " »

June 22, 2010

System Changes Necessary to Implement the Patient Protection and Affordable Care Act (PPACA) Section 6404- Maximum Period for Submission of Medicare Claims Reduced to Not More than 12 Months

Wisconsin Physician Services (an existing Medicare Carrier and Medicare Administrative Contractor) issued a reminder today on its website for providers concerning the new deadlines for Medicare claims submission. The CMS Medlearn matters article dated May 7, 2010 and effective January 1, 2010 on the subject provides specific details relative to the topic.

For example, Section 6404 of the PPACA has amended the timely requirements to reduce the maximum time period of submissions of all Medicare Fee-For-Service (FFS) claims to one calendar year after the date of service. Additionally Section 6404 mandates that all claims for services furnished prior to January 1, 2010 must be filled with the appropriate Medicare claims processing contractor no later than December 31, 2010.

Section 6404 will impact all physicians, providers, and suppliers submitting claims to Medicare contractors for services to Medicare beneficiaries. Currently, Medicare contractors are adjusting their relevant system edits to ensure that claims with dates of service prior to October 1, 2009 will be subject to a pre-PPACA timely filling rules and associated edits.

While section 6404 does authorize CMS to make specific exceptions to the timely filing requirement, currently, the only exception is found in the filing regulations at 42 CFR section 424.44(b)(1), for "error or misrepresentation" of an employee, Medicare contractor, or agent of the Department that was performing Medicare functions.

Continue reading "System Changes Necessary to Implement the Patient Protection and Affordable Care Act (PPACA) Section 6404- Maximum Period for Submission of Medicare Claims Reduced to Not More than 12 Months" »

June 22, 2010

Texas Pain Management Physician Arrested Based on Federal Health Care Fraud Indictment

According to a press release of the Department of Justice dated June 14, 2010, a Texas management physician, Dr Anthony Francis Valdez, was arrested and stands charged with carrying out an estimated $41 million fraudulent health care benefit program billing scheme. Valdez is the owner of the Institute of Pain Management with clinics in El Paso and San Antonio.

The 99-count indictment alleges that beginning in 2001 and continuing to 2009, Valdez caused fraudulent claims to be submitted to Medicare, Medicaid, TRICARE and the Texas Workers' Compensation Commission (TWCC). If convicted, Dr. Valdez faces up to 20 years for each count of wire fraud, mail fraud and unlawful distribution of a controlled substance, 10 years for health care fraud and 5 years for making false statements, all of which would be served in federal prison.

The area of pain management continues to be the subject of increased scrutiny. Pain physicians are well advised to pay careful attention to compliance as we predict an increase in Medicare, RAC and other payor audits of this specialty

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June 22, 2010

Oklahoma Court Invalidates HHS Regulation for Calculating Hospice Provider Cap

On June 7, 2010, the U.S. District Court for the Western District of Oklahoma held that a Department of Health and Human Services (HHS) regulation, 42 C.F.R. § 418.309(b), implementing a statutory cap on Medicare payments for hospice care was invalid and must be set aside (Compassionate Care Hospice v. Sebelius, No. CIV-09-28-C (W.D. Okla. June 7, 2010).

The court found that the regulation conflicted with the congressional directive for calculating the annual provider cap and thus, enjoined HHS from enforcing overpayment determinations against plaintiff, Compassionate Care Hospice, calculated by using the invalid regulation, from further applying the regulation to calculate plaintiff's payment cap, and remanded to the Provider Reimbursement Review Board for a determination of plaintiff's overpayment liability, if any, as calculated under the statutory terms as opposed to the regulation.

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June 21, 2010

Detroit and Wayne County Leaders Seek $20 million for Health Centers

Detroit and Wayne County leaders are attempting to convince federal authorities to provide $20 million over the next five years to build at least 10 more community health centers. Although Detroit and Wayne County rank among of the nation's highest poverty and unemployment rates, the area has only 24 federally funded health centers or federally qualified health centers ("FCQAs").

Doctors and other regional leaders in Detroit and Wayne County requested that the Health Resources and Services Administration ascribe greater weight to factors such as poverty and unemployment, as well as the lower than average primary care providers per capita ratio in determining the next round of grants expected later this year.

Detroit received $7.98 million in 2006 to build and operate clinics, ranking 19th among large cities. To the extent that poverty-related factors represent a more significant determinant, it is expected that the Detroit and Wayne County's share of future grants will expand.

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June 20, 2010

Senate Unanimously Passes "Doc Fix"

On June 19, 2010, the Senate unanimously passed legislation, known as the "doc fix", sparing doctors a 21% cut in Medicare payments until November 30, 2010. However, moments after the Senate acted, Medicare announced it would begin processing claims it has already received for June at the lower rate, which will force medical providers who bill under Medicare's physician fee schedule to resubmit their claims if they want to be made whole.

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June 18, 2010

Temporary Certification Program for EHR Technology Announced

A final rule establishing the temporary certification program for electronic health record ("EHR") technology was released today by the Office of the National Coordinator for Health Information Technology ("ONC"). As explained by the HHS press release and in a previous HLP blog about the proposed rule, the HITECH Act of 2009 established incentives for providers for using EHR, but specified that the technology they use must be certified EHR technology. The new final rule sets out the certification program, which will help ensure that the EHR technology providers are using is safe and effective--and fits the "meaningful use" criteria that allows them to qualify for the incentives. Details about the certification program at the Health IT website of HHS.

For more information, contact Robert S. Iwrey, Esq. at (248) 996-8510.

June 18, 2010

OIG Advisory Opinion on Freestanding Radiation Oncology Center and Free Services to Cancer Patients

OIG has posted an advisory opinion No. 10-08 concerning two affiliated corporate entities that both operate a freestanding radiation oncology center and intend to provide to their Medicare cancer patients the services of a dietitian and social worker at no additional charge as part of their patient's treatment.

The proposed arrangement would not generate prohibited remuneration under the anti-kickback statute because the dietitian and social worker services will be provided in the freestanding radiation oncology center setting, therefore the expenses for the services are included in the Medicare payment for the radiation oncology services. Consequently, the costs of the services would be reimbursed by Medicare and because the Requestors would not waive otherwise applicable cost-sharing obligations, the Requestors would not be providing free goods or services to Medicare beneficiaries under the proposed arrangement.

Accordingly, OIG has concluded that the proposed arrangement would not generate prohibited remuneration. Therefore, OIG will not impose administrative sanctions under sections 1128(b)(7), 1128A(a)(7) or 1128A(a)(5) of the Social Security Act.


Continue reading "OIG Advisory Opinion on Freestanding Radiation Oncology Center and Free Services to Cancer Patients" »

June 18, 2010

ASA Asks OIG to Prohibit Anesthesia "Company Model"

By letter dated June 16, 2010, the American Society of Anesthesiologists ("ASA") continued its efforts to request that the OIG intervene to issue a Special Advisory Bulletin prohibiting what is called the anesthesia "company model." The ASA originally made the request to the OIG in March of 2009; however, to date, the OIG has not responded. Given that the company model has been gaining traction among ambulatory surgery center ("ASC") owners, the ASA renewed its request and also attached an article published in March of 2010 specifically discussing the risks and concerns presented by the company model. The anesthesia company model involves the creation of a separate anesthesia company by the same or similar owners of the ASC. The establishment of this company essentially allows the owners of the ASC to share in the profits earned through the provision of anesthesia services at the ASC. The anesthesia company employs the anesthesia providers and bills for the professional anesthesia services. The same anesthesiologists who once held a professional service contract to provide anesthesia at the ASC and bill for those services are now required to be employed by the anesthesia company in order to continue to provide anesthesia services for facility patients. The ASA asserts that the company model is designed to incentivize over-utilization for anesthesia services since the owners of the ASC also own the anesthesia company and have a stake in the profits generated from anesthesia billing. The ASA notes that this problem leads to increases in the cost of care and may subject patients to unnecessary services. Moreover, the ASA takes the position that the company model results in anesthesia providers essentially being required to pay remuneration to the facility for the ability to provide anesthesia at the facility. Conversely, ASC owners respond that they have structured these arrangements to comply with the Anti-Kickback Statute.

As ASC owners continue to evaluate ways in which to increase revenues, it is unlikely that the company model and similar arrangements will go away anytime soon. ASC owners and anesthesiologists will clearly be monitoring the OIG actions as this issue heats up around the country. For more information on this topic, feel free to contact Abby Pendleton, Esq. or Carey F. Kalmowitz, Esq. of The Health Law Partners at (248) 996-8510 or (212) 734-0128.

June 15, 2010

WPS Conducting a Widespread Service-Specific Prepayment Probe

Attention physicians, according to the WPS website, they are conducting a widespread Service-Specific Prepayment Probe on CPT code 99213, using samples obtained from Wisconsin, Illinois, Michigan and Minnesota for all specialties. This probe arises after a Medical Review analysis of claims in the May 2009 sample period revealed 217 CERT errors.

This specific probe will involve a random sample of 100 claims submitted from a cross-section of all providers and suppliers who bill the particular service. The medical records will then be requested for the sample and reviewed.

Similar to other audit situations, an Additional Documentation Request (ADR) Letter will be sent requesting medical records for services of CPT code 99213 billed on claims for the probe. WPS will utilize the information in the medical records to evaluate all services on the claims identified in the ADR request. Once an ADR letter is received, the providers have 30 days to submit the requested documentation. Failure to do so in a timely fashion may result in denial or reduction of services. Keep in mind that it will be important to submit all relevant documentation. This upcoming audit activity should be no surprise to the physician community as we continue to see an increase in all type of audits.

The HLP recommends that physicians take a careful look at their documentation practices as compliance continues to take on critical importance in this health care environment.

Continue reading "WPS Conducting a Widespread Service-Specific Prepayment Probe " »

June 14, 2010

New York Hospital Associations Predict Healthcare Spending Cuts May Harm Providers

The New York State Legislature has approved about $775 million in spending cuts for healthcare as part of a budget "extender" package on June 7, 2010. The legislation, in addition to requiring the State to save $300 million in Medicaid fraud costs, also presents considerable financial challenges for healthcare providers in the state. Facilities across the state stand to lose millions of dollars not only in state funding, but in federal matching funds as well.

The Greater New York Hospital Association (GNYHA) projects that hospitals in the State may lose approximately $250 million in federal matching subsidies as a result of the cuts, with some facilities estimated to lose more than ten million dollars. GNYHA President Kenneth E. Raske told the New York Times, "We feel like we have a gun to our head." He worries that the state's healthcare system is "on the precipice of a major disaster."

The Healthcare Association of New York State (HANYS) has produced facility-by-facility estimates of the new cuts' impacts in detailed analyses available on the Association's website. HANYS predicts that the legislation's impacts on state hospitals will total over $256 million. The Association notes that the June 7 action is the latest in several recent cuts for New York's health care providers, totaling more than $5 billion in reduced spending over the last two years. Daniel Sisto, President of HANYS, warns that "any additional cuts and taxes will translate directly into more layoffs, loss of critical health care services, and the closure of health care institutions."
The New York Legislature is still attempting to close the gaps in the state budget, now two months overdue, in order to prevent a government shutdown.

Continue reading "New York Hospital Associations Predict Healthcare Spending Cuts May Harm Providers" »

June 13, 2010

Congress Exhorted To Avert Medicare Pay Cuts

In President Obama's weekly national address on Saturday, Mr. Obama called for Congress to quickly take action to ensure that a planned 21 percent decline in Medicare reimbursement for physicians, which is set to take effect this week, is averted. Proposals to address this draconian cut for doctors who see Medicare patients have been stalled in the Senate. The concern, articulated by the President and echoed by countless others in the debate, is that if the reduction goes into effect, it would "undoubtedly force some doctors to stop seeing Medicare patients altogether." The cut arises from a formula adopted by Congress in the late 1990s to slow the growth of Medicare spending, but these cuts have been deferred each year since 2003. Democrats have announced that they are proposing another temporary fix. The physician provider community will be intensively focused on developments with legislative efforts this week.

Continue reading "Congress Exhorted To Avert Medicare Pay Cuts" »

June 12, 2010

New IRS Tax Credit Benefits Small Employers

In Notice 2010-44, the Internal Revenue Service (IRS) outlined the tax credit for employee health insurance expenses available to certain small businesses under Section 45R of the Internal Revenue Code. Effective for taxable years beginning in 2010, the 45R credit is available to an employer when (1) the employer has fewer than twenty-five full-time equivalent employees (FTEs) for the taxable year, (2) the average employee wage for the year is less than $50,000 per FTE, and (3) the employer maintains a "qualifying arrangement" as defined in the Notice.

The notice explains that eligibility requires (1) identifying which people are employees for the purposes of the section, (2) calculating total hours of service for each employee, (3) determining the total number of FTEs, (4) calculating the average annual wages paid per FTE, and finally (5) determine the premiums paid that are taken into account for 45R purposes.


The first step involves determining which people count as "employees." For the purposes of section 45R, partners in a business and some types of owners do not count as "employees," and neither do the family members and dependents of these partners and owners. Further, Section 45R does not take seasonal employees into account as employees unless they work on more than 120 days during the taxable year.

The next step is to calculate total hours of service for each employee. These hours include not only work, but also holidays and periods of illness, incapacity or disability, layoff, jury duty, military duty, and leaves of absence. The employer may calculate hours by any of three methods: (1) the actual total number of hours for which payment is made or due, (2) a days-worked equivalency, which counts each workday as eight hours, or (3) a weeks-worked equivalency, which counts each workweek as forty hours. The employer then totals all employees' hours of service (not exceeding 2,080 hours for any single employee) and divides the total number of hours by 2,080 in order to determine the number of FTEs. This calculation permits some employers with 25 or more employees to qualify for the 45R credit, by counting two half-time employees (paid or owed wages for 1,040 hours each) as a single full-time employee, for example. Then, the total amount of wages paid to employees is divided by the number of FTEs in order to determine average annual wages for the year.

Finally, the employer must pay premiums under a "qualifying arrangement," which is an arrangement under which the employer pays a certain uniform percentage of premiums (not less than fifty percent) for each employee enrolled in health insurance coverage offered by the employer. Limited-scope coverage, such as vision or dental plans, may also qualify.

The maximum credit is 35% of an eligible employer's premium payments. The amount phases out if the number of FTEs is greater than 10 or if average annual wages exceed $25,000. The amount of the credit is further adjusted if the employee receives a state credit or subsidy for health insurance.

The IRS also outlines transition relief for taxable years beginning in 2010. "[A]n employer that pays an amount equal to at least 50 percent of the premium for single (employee-only) coverage for each employee enrolled in coverage offered to employees by the employer will be deemed to satisfy the uniformity requirement for a qualifying arrangement, even if the employer does not pay the same percentage of the premium for each such employee."

The 45R credit is claimed on the employer's annual income tax return.

Continue reading "New IRS Tax Credit Benefits Small Employers" »

June 10, 2010

CMS Identifies Inpatient Rehabilitation Facility (IRF) Overpayments

On June 9, 2010, the Office of Inspector General (OIG) published a report regarding inpatient rehabilitation facility (IRF) payments made in 2006 and 2007. According to this report, over half of the claims reviewed (i.e., 113 out of 200 claims) resulted in overpayments, because the providers failed to submit patient assessment instruments within the requisite time frame (27 calendar days). The OIG indicated that if the results of the study were projected, it is possible that the Centers for Medicare and Medicaid Services ("CMS") overpaid approximately $20 million. The OIG recommended that the non-sampled claims immediately be reopened and reviewed and overpayments collected.

Continue reading "CMS Identifies Inpatient Rehabilitation Facility (IRF) Overpayments" »

June 10, 2010

CMS Clarifies Rules Governing Physician Supervision Of Services Provided To Hospital Outpatients

On May 28, the Centers for Medicare and Medicaid Services (CMS) issued Transmittal 128, which clarifies CMS policies regarding physician supervision of diagnostic and therapeutic services provided to hospital outpatients. The transmittal, effective on July 1, 2010, updates the Hospital Outpatient Prospective Payment System (OPPS).

In the transmittal, CMS specifies that "[d]irect supervision is the minimum standard for supervision of all Medicare hospital outpatient therapeutic services," and that direct supervision requires that the supervisory physician must be "immediately available to furnish assistance and direction" for the duration of a given procedure. This supervisory physician must possess "the knowledge, skills, ability, and privileges" to perform a given service or procedure, and "while physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives only require physician supervision included in any collaboration or supervision requirements particular to that type of practitioner when they personally perform a diagnostic test, these practitioners are not permitted to function as supervisory 'physicians' for the purposes of other hospital staff performing diagnostic tests."

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June 8, 2010

CMS Publishes Proposed Rule on Privileging of Telemedicine Professionals

On May 26, 2010, CMS published a proposed rule revising the Medicare Conditions of Participation (CoPs) to give hospitals and critical access hospitals (CAHs) more flexibility in credentialing and privileging telemedicine physicians and practitioners (while not prohibiting hospitals from continuing to use traditional credentialing and privileging process if they please).

The proposed CAH CoP requirements closely resemble the proposed hospital CoPs, but also include language permitting the originating site's governing body to grant privileges to telemedicine professionals based upon the recommendations of the originating site's medical staff, so long as the following requirements are met:

• The distant-site hospital is a Medicare-participating hospital
• The telemedicine professional is privileged at the distant-site hospital, and the originating hospital has a list of the privileges
• The telemedicine professional holds a license issued or recognized by the state in which the originating hospital is located
• The originating hospital has evidence of its internal review of the telemedicine professionals' performance
• For non-CAH hospitals, the originating site's governing body ensures that services are provided pursuant to a written agreement between the originating and distant sites, and that according to such agreement, the distant-site is responsible for ensuring that the services provided meet the existing CoP requirements under 42 CFR §§ 482.12(a)(1) through (a)(7).
• For CAHs, the originating site's governing body ensures that services are provided pursuant to a written agreement between the originating and distant-sites, and the agreement states that the distant-site is responsible for ensuring that the services provided meet the requirements set forth under 42 CFR §§ 485.616(c)(1)(i) through (c)(1)(vii).

The proposed rule's 60-day comment period ends on July 26, 2010, after which it is likely that it will be quickly finalized.

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June 3, 2010

Physician Organizations Challenge Constitutionality of the Health Reform Law

Today, the Texas Spine & Joint Hospital and Physicians Hospitals of America jointly filed suit in U.S. Federal Court, Eastern District of Texas, challenging the constitutionality of Section 6001 of the Patient Protection and Affordable Health Care Act.

Section 6001 prohibits physician-owned Medicare hospitals from expanding after March 23, 2010, and bans any new physician-owned Medicare hospitals that are not certified as Medicare providers prior to December 31, 2010. Due to Section 6001's limited application (i.e., it applies only to hospitals owned by physicians), the Texas Spine & Joint Hospital and Physicians Hospitals of America allege that the section is exclusionary and unconstitutional.

Accompanying the lawsuit is a motion for a preliminary injunction that would allow Texas Spine & Joint Hospital to proceed with its plan to expand its facility.

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June 1, 2010

CMS Issues Guidance On ACOs

At this juncture, healthcare providers, to a greater or lesser extent, have begun to acquire at least a basic understanding of the recent federal health reform legislation, commonly known as the Patient Protection and Affordable Care Act (PPACA). At the same time, many in the provider community are looking beyond the contours of the PPACA, in its current iteration, and are developing strategies to prepare for its future implications. One of the approaches eliciting significant interest, especially among aggregations of physicians such as physician organizations (or POs ), is establishing or participating in a Medicare Accountable Care Organization (ACO), as such term is used in PPACA, due to the potential financial benefits for which ACOs likely will be eligible.

By way of a general overview, under PPACA, ACOs comprise groups of healthcare providers who will enter a written agreement with Medicare to be accountable for a certain number of Medicare fee-for-service beneficiaries (at least 5,000) in exchange for certain Medicare payment incentives under the ACO Shared Savings Program. Such financial benefits will be based upon the achievement of certain defined quality and efficiency benchmarks. PPACA mandates that the Secretary of the Department of Health and Human Services establish the Medicare Shared Savings Program (the Program) for ACOs no later than January 1, 2012. Thus, although the specific elements of the Program have not been promulgated, proactive POs, as well as other provider entities (such as physician-hospital organizations), can begin to structure their operational frameworks in a manner reasonably calculated to enable them to take advantage of participation in Program.

As a signal that progress on the ACO front can be expected, just ahead of the Memorial Day Holiday weekend, the Centers for Medicare & Medicaid Services published constructive guidance regarding ACOs and the related financial incentives that will be available. Such CMS guidance can be found in these Preliminary Questions & Answers.

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