December 2010 Archives

December 30, 2010

OIG Uneasy About Medicaid Ambulatory Transport Services

On December 28,2010, the Office of Inspector General ("OIG") published Advisory Opinion 10-26, wherein the OIG concluded that an ambulance provider offering discounted rates to skilled nursing facilities ("SNFs") could violate the Anti-Kickback Statute ("AKS"). In Advisory Opinion 10-26, Requestor is a nonprofit Medicare and Medicaid certified ambulance supplier providing emergency and non-emergency transportation services, including services for Medicaid-covered residents of skilled nursing facilities ("SNFs") (the "Medicaid Transport Services"). The Requestor operates in a state in which Medicaid bundling recently became a law where Medicaid pays nursing facilities a per resident per day rate for ancillary and support costs, which includes the Medicaid Transport Services. According to the state law, payment to ambulance suppliers for Medicaid Transport Services must be paid by the SNFs, as those services are included in the new bundled rate for the ancillary and support costs.

In Advisory Opinion 10-26, Requestor proposed to offer the SNFs two types of payment plans for the Medicaid Transport Services:

1. Capitated per Resident Rate - This rate would be based on the Medicaid resident days, regardless of whether the Medicaid Transport Services are needed for the resident. The rate would be below the Requestor's total costs of providing the Medicaid Transport Services if all the residents were Medicaid-only residents.

2. Fee-for-Service Rate - The Requestor would contract with the SNFs to pay a fee-for-service basis for the Medicaid Transport Services. This rate, like the Capitated per Resident Rate, would be below cost for Medicaid-only residents, as well.

In evaluating whether the proposed arrangement violated the AKS, the OIG analyzed whether there was an improper nexus between the rates offered for services and the referrals of federal business. Specifically, the OIG considered whether the rate was commercially reasonable in the absence of other, non-discounted business. The OIG concluded that the rate may be commercially unreasonable and that the SNFs may be soliciting improper discounts on business in exchange for referrals for which they bear no risk. Thus, the OIG stated that "prices offered to the SNF that are below the supplier's total costs of providing the services--as in the facts presented here--give rise to an inference that the supplier and the SNF may be 'swapping' the below-cost rates on business for which the SNF bears the business risk in exchange for other profitable non-discounted Federal business, from which the supplier can recoup losses incurred on the below cost-business, potentially through overutilization or abusive billing practices."

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December 20, 2010

Medicare Hospice Cap Challenged by Texas Lawsuit

Last week, a lawsuit was filed in the Northern District of Texas federal court, challenging the validity of the aggregate annual cap for hospice reimbursement.

Medicare provides reimbursement for hospice services rendered on a per beneficiary, per diem basis, subject to an aggregate annual cap. This cap is based upon the product of a per-beneficiary amount and the number of Medicare beneficiaries in a hospice program during a given accounting year. Any provider whose Medicare revenues exceed the cap are subject to demands for repayment of the difference from Medicare.

In the case of Dallas Nursing Home LLC d/b/a Golden Acres v. Kathleen Sebelius, Secretary of United States Department of Health and Human Services, Golden Acres Nursing Home asks the court to rule that "the hospice cap regulation is invalid." In its complaint, Golden Acres Nursing Home alleges that, in calculating the cap, Medicare has failed to follow the Congressional mandate to allocate the cap proportionally across years of care, which subjects hospice providers to improper repayment demands.

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December 19, 2010

Compliance Risks Are Real - OIG Report Reflects That The Government Projects Almost $26 Billion In Recoveries And Savings In FY 2010

When advising clients regarding the legal risks potentially implicated by the health care transactions into which they contemplate entering, we at The Health Law Partners have consistently articulated the mantra that "there is substantially heightened scrutiny in the regulatory arena." It is not uncommon for clients to inquire, upon hearing this, whether the risks are more theoretical or real. The semi-annual report issued by the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") on December 15th (the "Report") provides a clear answer that, by any standards, compliance risks are real and enforcement is increasing. Some highlights of the Report include the following:

• The Government expects recoveries and estimated savings of about $25.9 billion in fiscal year ("FY") 2010. This amount includes $1.1 billion in audit receivables and $3.8 billion in investigative. The remainder is attributable to legislative and other cost‐saving actions that were supported by OIG audits and recommendations.


• In 2010, the OIG excluded 3,340 individuals and entities from participation in federal healthcare programs.

• The agency initiated 647 criminal actions and 378 civil actions for program-related offenses.

• In collaboration with the Department of Justice, the interagency Health Care Fraud Prevention and Enforcement Action Team ("HEAT") efforts have resulted in the filing of charges against 88 individuals or entities, 89 convictions, and $71.3 million in investigative receivables.

As 2010 draws to a close, the Report vindicates our predictions that the trajectory of healthcare enforcement would only continue to increase. The same, in our view, will hold true for 2011, with greater resources deployed to combat health care fraud, thus translating into an even-higher level of regulatory scrutiny in the health care sector. And, while this clearly should not deter providers from entering into transaction where the business metrics are favorable, the Report is a clarion call to ensure that the framework of any deal be structured by legal counsel who can identify, and navigate, the spectrum of healthcare regulatory risks to which the transaction likely will be subject.

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December 17, 2010

December 31: New York's Medicaid Compliance Certification Deadline

The days are counting down to December 31 where certain New York providers and suppliers must certify that they have adopted and implemented "effective compliance programs" to be eligible to receive Medicaid payments (for a more detailed explanation of the requirements under the Medicaid Provider Compliance Programs can be found in our June 26, 2009 entry). The Office of the Medicaid Inspector General (OMIG) has the responsibility of determining that these compliance programs meet the requirements enumerated in the New York Social Services Law §363-d and the corresponding regulations at 18 NYCRR Part 521. Specifically, 18 NYCRR 521.3(b) provides that "upon applying for enrollment in the Medical Assistance Program, and during the month of December each year after, a required provider shall certify to the department, using a form provided by Office of the Medicaid Inspector General on its website, that a compliance program meeting the requirements of this Part is in place." The New York Office of the Medicaid Inspector General (OMIG) has provided the online Certification of Compliance form. While this is the second year in which certifications have been required since the implementation of this new requirement, each required provider must submit a certification form by December 31 of every year.

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December 14, 2010

Red Flags No Longer Applicable to Healthcare Practices

Passed in the House and Senate and awaiting signature by the President, the Red Flag Program Clarification Act of 2010 limits the definition of "creditor" to include only those that use consumer reports, furnish information to consumer reporting agencies or advance funds to a person. Importantly, the definition does not include one who advances funds for expenses incidental to a service. Thus, health care providers and entities are no longer required to comply with the Red Flags Rule mandate of adopting identity theft programs.

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December 10, 2010

President Obama to Sign One-Year Delay of Doctor Pay Cuts

Identical bills passed by both House and Senate. Building upon the fifth 1-month extension patch this year that delayed a steep 23% Medicare provider pay cut, the U.S. House and Representatives (by a vote of 409-2) and the U.S. Senate (unanimously) both passed another pay cut delay. This delay will last through 2011 and the $19.3 billion cost will be paid for with changes in how much money consumers would have to repay if they receive too large a subsidy in the health insurance exchanges after 2014.

According to President Obama, this "doc-fix" is an important step forward to stabilize Medicare and assure seniors access to medical care from doctors they know and trust. The American Medical Association, the AARP and other organizations support the year-long extension, suggesting that many doctors would otherwise have to stop accepting Medicare patients.

Work to be done on permanent SGR reform. The doctor pay cuts are the result of a 1990s budget-balancing law called the Sustained Growth Rate Formula that unsuccessfully tried to keep Medicare spending in line through automatic reductions. Congress repeatedly passed delays of these cuts. In fact, rate cuts have been blocked 10 times in the last eight years and lately, lawmakers have had to act every few months.

The year-long extension passed by lawmakers will give physicians and Congress the time needed to work together to develop payment models and payment reform as alternatives to the Sustained Growth Formula that are intended to create permanent stability in the Medicare program. The anticipated permanent reform will include a new way of paying doctors that rewards quality care instead of sheer numbers of tests and procedures.

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December 9, 2010

False Claims Act Brings in Record Amount for 2010

$2.5 billion in settlements in crackdown against fraud. The federal government has announced the largest settlement amounts in the history of the False Claims Act for fiscal 2010. The $2.5 billion amount received from healthcare False Claims Act cases remarkably does not include hundreds of millions of dollars that the Justice Department has secured from criminal penalties. Of note, for example, is that in addition to a $669 million False Claims Act settlement from Pfizer, there are also $1.3 billion in criminal fines and forfeiture.

Corporate executives targeted. With the help of an advocacy group representing whistle-blowers called Taxpayers Against Fraud, the government has a particular focus on high-level corporate executives whose organizations commit fraud under their watch. A recent criminal indictment of Lauren Stevens, former associate general counsel of GlaxoSmithKline, took place after she was accused of falsifying documents during a recent inquiry. Another executive indictment example is Mark Philip, former president of Stryker Corp., for allegedly encouraging surgeons to use unapproved mixtures of his company's product during surgical procedures.

HHS OIG lays out roadmap for physician compliance. As a measure to help physicians avoid being excluded from participating in the Medicare and Medicaid program due to fraud and abuse, and to ensure legal compliance, the inspector general's office has published a roadmap for physicians that can be found here: http://oig.hhs.gov/fraud/PhysicianEducation/index.asp

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December 8, 2010

Medicaid Prescriptions Hit the Street with Alarming Frequency

From the medicine cabinet to the street. 33 people have been charged so far as Buffalo, NY investigators devote increasingly greater resources toward an emerging class of suppliers in the illicit drug trade: medical patients, including many who rely on Medicaid to fund their prescriptions. Often at no charge, patients visit multiple doctors and are coached by dealers on how to receive the most lucrative prescriptions. For example, Oxycontin, a time-released form of Oxydone, a narcotic pain killer, is a highly sought after drug. If a patient is on Medicaid, the program is billed about $1,060 for a typical 60-pill, 80-mg prescription, along with doctors' fees.

The patient can turn around and sell the bottle for around $1,000 to a dealer, who might fetch as much as $7,200 on the street for it. Clearly this is a profitable business for those who are willing to break the law and defraud the government. The growing underground market for the types of pills often found inside the medicine cabinets of average people has surprised even seasoned DEA officials, who are equating this problem with that of street drugs like heroin or crack. They are now using sophisticated methods to capture the criminals involved, such as wiretaps, surveillance and cross-agency cooperation to follow the narcotic trail from pharmacy to street.

A GAO report last year that examined Medicaid abuse in New York, California, Illinois, North Carolina and Texas concluded that in these states, the cost to Medicaid for the fraudulent acquisition of prescription drugs was $63 million. Across the country, efforts are underway to curtail Medicaid prescription abuse and fraud. For example, in several states, state approval is required before OxyContin prescriptions are filled. In New York, the Office of Medicaid Inspector General restricts recipients to coverage for a single doctor and single pharmacy if suspicious activity is indicated. Nearly 10,000 New York Medicaid recipients are currently on restricted status, though they are not allowed to be dropped from the Medicaid program unless a crime has been proven.

With the onslaught of these recent investigative actions, it is becoming increasingly more important to have proper compliance programs in place protecting practices from patient drug seekers, as well as having narcotics agreements and random drug screening policies and practices in any pain practice.

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December 7, 2010

Kansas Hospice Provider Accused of False Claims

On December 7, 2010, the U.S. District Court for the District of Kansas refused to dismiss False Claims Act (FCA) claims against a hospice provider.

The defendant, Hospice Care of Kansas, Inc. (HCK), which was purchased by defendant Voyager Hospicecare, Inc. in 2004, provides hospice care to Medicare beneficiaries. The suit contends that the defendants submitted Medicare claims for ineligible hospice patients and followed business practices that caused the "admission, retention, and submission of claims to Medicare for patients that were ineligible for the hospice benefit."

In arguing that the complaint fails to state a claim, the defendants argue that a medical opinion regarding whether a patient is terminally ill--meaning they have a life expectancy of less than six months--is a subjective medical opinion that cannot be false. But the court noted that "facts that rely upon clinical medical judgments are not automatically excluded from liability under the FCA."

In refusing to dismiss the complaint, the Court noted that the complaint identifies 27 hospice beneficiaries alleged not to be terminally ill, but for whom defendants submitted Medicare claims. The complaint also sets forth factual details underlying the patients' alleged false certifications, the claims submitted by defendants, and the reimbursements paid by Medicare.

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