October 2011 Archives

October 31, 2011

DAB Upholds CMS' Revocation of Provider's Enrollment for Failure to Timely Report Change in Practice Location


On October 4, 2011 in Izgel Medical Services, PLLC v. CMS, the Department of Health and Human Services Departmental Appeals Board ("DAB") held that the Centers for Medicare and Medicaid Services ("CMS") "was authorized to revoke the Medicare provider enrollment of Petitioner, Izgel Medical Services, PLLC" for its failure to timely report to CMS a change in its practice location. 42 CFR 424.516(d)(1)(iii) requires that physician practitioner organizations report changes in practice location within 30 days.

In the case at hand, Petitioner failed to notify CMS of its change in practice location. CMS was alerted to this fact when a National Government Services, Inc. ("NGS")--the Medicare Administrative Contractor for New York--went to the premises for purposes of an inspection and discovered that Petitioner was not located there. Petitioner stated that it submitted the change of practice location, but was not able to provide any proof of such submission or application. Moreover, Petitioner argued that even if its submission was unsuccessful, it cured the failed filing by filing a Medicare enrollment application (which was submitted months later along with a request for reconsideration for the revocation of Petitioner's Medicare enrollment) that reported the address change. The DAB disagreed, stating the following:

As for the March 25, 2010 application, I note initially that CMS is under no obligation to accept it. The regulation requires that Petitioner report a change of its practice address within 30 days from the date that it makes the change. 42 C.F.R. § 424.516(d)(1)(iii). Petitioner may not cure its failure to file the required report by filing one, months after the fact, in the guise of seeking reconsideration of CMS's determination.

Reconsideration affords a party the opportunity to provide evidence that it had done what it was required to do. For example, Petitioner might have provided a copy of its purported November 9 application, assuming the application actually had been filed, to show on reconsideration that it had done what the regulation required. But, reconsideration does not afford a party the opportunity to comply with obligations that it had failed to comply with initially. Thus, filing an application untimely as part of reconsideration does not cure the failure to file the application timely.


Therefore, the DAB affirmed CMS' decision to revoke Petitioner's Medicare provider enrollment.

Given CMS' aggressive approach to provider enrollment matters, all providers and suppliers must remain attentive to the reporting and notification requirements. Failure to comply could, as seen in this case, result in revocation of that provider or supplier's enrollment. For a detailed article co-authored by Adrienne Dresevic of the HLP on Medicare enrollment and the various initiatives, please click here.

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October 26, 2011

CPAP Supplier Agrees to Pay $578,820 for Failure to Use Licensed Respiratory Therapists for PAP Set-Up's


Premier Home Care, a Durable Medical Equipment company operating in Indiana and Kentucky, agreed to pay a $578,820 settlement with the United States Department of Justice and the State of Indiana in a Whistleblower action alleging violations of the False Claims Act.

In 2008, a former employee filed suit against Premier under seal alleging that the company was not using licensed respiratory therapists to set up patients with CPAP and BiPAP. Indiana law is broad enough to include CPAP set-up's in the definition of "respiratory care." Only persons licensed as respiratory therapists in the state of Indiana are permitted to perform respiratory care services under Indiana law.

A joint investigation by the Office of the Inspector General of the US Department of Health and Human Services, the Department of Justice and the Indiana Attorney General's office ensued. The complaint alleged that Premier violated the False Claims Act by certifying to Medicare that it was in compliance with Indiana's respiratory therapy law when it used unlicensed personnel to set-up CPAP and BiPAP.

The False Claims Act allows for civil recoveries of up to three times the amount of actual damages, and allows whistleblowers to collect up to 25% of the award. Premier agreed to settle its suit for $578,820 to the United States and $21,180 to the State of Indiana, an amount representing more than twice the estimated damages to the Medicare and Medicaid programs.

You can access the Department of Justice's Press Release story at: http://www.justice.gov/usao/ins/press_releases/Pressrelease11/Premier.20111019.pdf.

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October 20, 2011

BREAKING NEWS: Final Accountable Care Organization ("ACO") Regulations Released

The long-awaited final regulations for the Medicare Shared Savings Program ("MSSP") were released today. The MSSP was implemented by Section 3022 of the Patient Protection and Affordable Care Act and is the program in which ACOs may participate to receive shared savings.

In addition to the release of the Final Rule on October 20, the Office of Inspector General ("OIG") also released its interim final rule entitled Final Waivers in Connection with the Shared Savings Program; the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") jointly released the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program; and the Internal Revenue Service ("IRS") issued a fact sheet entitled Tax-Exempt Organizations Participating in the Medicare Shared Savings Program Through Accountable Care Organizations.

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October 18, 2011

OIG Takes an Unfavorable View of Proposed Pathology Laboratory/Physician Owned LLC Management Services Contract

In the Office of Inspector General ("OIG") Advisory Opinion 11-15, dated October 11, 2011, the OIG analyzes an arrangement in which Requestor is a Delaware Limited Liability Company owned and managed by a physician (the "Owner/Manager") which would enter into a management contract with an existing or to be formed Medicare-certified clinical anatomic pathology laboratory (the "Path Lab"). The OIG opined that the proposed arrangement could lead to prohibited remuneration under the anti-kickback statute.

The proposed arrangement would work as follows: The Requestor and the Path Lab would enter into a management contract, which would be for a term of at least 3 years. The Requestor would furnish the Path Lab the complete array of clinical laboratory pathology services for a fixed maximum number of hours each year, as well as utilities, furniture, fixtures, and the exclusive use of laboratory space and equipment. The Requestor would also provide the Path Lab marketing and billing services, and essential non-physician staff. In turn, the Path Lab would pay the Requestor a usage fee that would be calculated based on a percentage of the Path Lab's income, fixed in advance for a term of 12 months, which generally would correspond to the volume of the Path Lab's use of the Requestor's services, personnel, and equipment. The Path Lab's income could include payments from Federal health care programs for laboratory services provided to program beneficiaries.

The Owner/Manager would offer the opportunity to invest in the Requestor to additional physicians. The Requestor certified that the value of the investment interests in the Requestor that would be held by physician investors in a position to generate business for the Requestor through referrals of laboratory specimens to the Path Lab would exceed 40 percent. The Requestor further anticipates that substantially more than 40 percent of the Requestor's gross revenue related to the furnishing of health care items and services would derive from business generated by its physician investors through referrals of laboratory specimens to the Path Lab. The Requestor certified that each of the New Physician Investors would have the option of referring specimens to the Path Lab but that there would be no implicit or explicit agreement or condition that a New Physician Investor make referrals to, or use the services of, the Requestor or the Path Lab.

The OIG found that the proposed arrangement could violate the anti-kickback statute, which makes it a criminal offense to knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursed by a Federal health care program.

The OIG began by noting the similarities between the proposed arrangement and other joint venture arrangements which have been the subject of OIG guidance. In the past, the OIG has warned about arrangements in which a health care provider expands into clinical diagnostic laboratory services by contracting with an existing provider of laboratory services to operate a newly formed laboratory subsidiary on essentially a turn-key basis. The OIG viewed the proposed arrangement as the converse of the above-described arrangement. Instead of contracting with a provider to obtain laboratory services for which a physician-owned entity would bill Federal health care programs, the Requestor would contract to provide such services to an entity that would, in turn, bill Federal health care programs. Under both types of arrangements, however, the income of the physician-owned entity would vary with the volume or value of referrals from physician investors, which would make the anti-kickback statute relevant.

The Proposed Arrangement was therefore evaluated for compliance with any applicable safe harbor of the anti-kickback statute and for the potential for abuse. The OIG found that the following harbors were potentially applicable: the small entity investment safe harbor and the safe harbors for space rental, equipment rental, and for personal services and management contracts.

The OIG found that the small entity investment safe harbor could not be satisfied because more than 40% of the Requestor would be held by investors who would be in a position to generate business for the Requestor through referrals and more than 40% of the Requestor's gross revenue relating to furnishing health care items and services would come from laboratory business generated by its physician investors. The OIG further found that the safe harbors for space rental, equipment rental and for personal services and management contracts could not be satisfied because the usage fees paid to the Requestor would not be set in advance, but would rather be calculated based on a percentage of the Path Lab's income.

Finding that no safe harbor would apply to the proposed arrangement, the OIG then analyzed whether the proposed arrangement would pose more than a minimal risk of fraud and abuse. For the combination of the following reasons, the OIG concluded that the Proposed Arrangement would pose more than a minimal risk of fraud and abuse:
First, the fee structure of the proposed arrangement would effectively link the Requestor's investors' profit distributions to the laboratory business they send the Path Lab, posing considerable risks of overutilization of laboratory services, distorted medical decision-making, and increased costs to Federal health care programs;
Second, the more than 40 percent of the Requestor's investment interests would be held by physician investors in a position to generate business for the Path Lab in the form of referrals of laboratory specimens and substantially more than 40 percent of Requestor's gross revenue would come from business generated from the investors, which further increases the risks of overutilization, distorted medical decision-making, and increased program costs; and
Third, the Proposed Arrangement appears to have no business purpose other than to permit the physician investors to profit from the business they generate for the Path Lab in the form of their laboratory specimen referrals.

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October 18, 2011

Hospice Provider Charged with Defrauding Medicare for More Than $14 Million


In an indictment unsealed on October 12, Matthew Kolodesh (a/k/a "Matvei Kolodech") was charged with a laundry list of crimes, including 1 count of conspiracy to commit healthcare fraud, 21 counts of healthcare fraud, 2 counts of mail fraud and 11 counts of money laundering of monetary instruments over $10,000. Kolodesh set up, controlled and operated Home Care Hospice, Inc. wherein he allegedly "authorized the submission of claims to Medicare totaling approximately $14.3 million, which claims defendant Kolodesh and A.P. knew were false and fraudulent." "A.P." is the name given in the indictment to Kolodesh's business partner.

The government alleges, in part, that in committing healthcare fraud Kolodesh paid for referrals, paid for certifications of hospice eligibility, authorized fabrication of patient records and supporting documentation, created phony schedules of continuous care visits to patients who were not qualified for continuous care or were never provided continuous care, falsified records submitted in connection with a Medicare audit and siphoned funds from Home Care Hospice that were "fraudulently obtained Medicare payments" to unjustly enrich himself and his family.

According to the Department of Justice press release, "if convicted of all charges, Kolodesh faces a statutory maximum sentence of 370 years in prison. The government will also seek restitution to Medicare in the amount of $14.3 million and proceeds from the money laundering."

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October 18, 2011

OIG Views Favorably Ophthalmologist-Optometrist Co-Management Arrangement Relative to Cataract Surgery

In the Office of Inspector General ("OIG") Advisory Opinion 11-14, dated October 7, 2011, the OIG analyzes an arrangement in which Requestor is an opthalmic physician group practice that provides cataract surgeries and also employs optometrists. By way of brief background, generally, patients receiving cataract surgery may elect to have either a conventional intraocular lens ("Conventional IOL") or a premium intraocular lens ("Premium IOL") (Premium IOLs have the ability to correct preexisting refractive problems whereas Conventional IOLs do not). Medicare covers Conventional IOLs when reasonable and necessary, but only partially covers the professional and facility fees associated with Premium IOLs as Premium IOLs are significantly more expensive. When billing Medicare, cataract surgery is a global surgical procedure in which the physician is reimbursed one global fee covering the pre-operative care, the surgery and the post-operative care for the ninety (90) days following the surgery. If a physician transfers the patient to another healthcare professional during the "global surgical period," the healthcare provider must use either modifier -54 (surgical care only) or -55 (post-operative management only).

Under the Proposed Arrangement, the ophthalmologists providing Premium IOLs will offer patients the opportunity to return to their optometrists for post-surgical care. However, under this co-management arrangement, the optometrists would likely charge separately for its services that are not covered by Medicare. Requestor seeks an advisory opinion on whether this Proposed Arrangement is permissible under the Social Security Act. Specifically, the OIG framed the issue and took a position as follows:

The Requestor has posed a very narrow question: whether the Proposed Arrangement, pursuant to which the Requestor would co-manage a Medicare beneficiary with an optometrist who would charge the beneficiary for the additional testing and services related to the Premium IOLs, would constitute remuneration to a referral source in the form of an opportunity to earn a fee. The Requestor has not asked whether the opportunity to earn a fee through the co-management of Medicare beneficiaries may be prohibited remuneration under the anti-kickback statute when the optometrist charges no fee in excess of the Medicare fee schedule, and we express no opinion on that separate question. Rather, the Requestor has asked us whether the opportunity for the optometrist to earn a fee for services not covered by the Medicare program in connection with post-operative management of Premium IOL patients may constitute prohibited remuneration. Under the facts present in the Proposed Arrangement, we conclude that it would not.

The OIG's favorable position rests on the following elements of the Proposed Arrangement:


  1. There would be no written or unwritten agreements to co-manage patients between Requestor and the optometrists. Rather, the Requestor would explain that the patients may return to their optometrists.

  2. Requestor would inform those patients electing to receive Premium IOL that the optometrist may charge them separately for his/her services related to the Premium IOL. This, essentially, reduces the likelihood that the patient would return to the optometrist.

  3. The increased costs associated with the Premium IOLs are not covered by Medicare. Additionally, Requestor has certified that it complies with all applicable Medicare billing and coding requirements.

  4. Upon patient request and upon signing an informed consent form, Requestor will transfer patients back to the referring optometrists.


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October 14, 2011

Hospice Face-to-Face Encounter Requirements Clarified

By way of Transmittal No. 2316 issued on October 7, 2011, CMS clarified the claims processing procedures for hospice services when a required face-to-face encounter does not timely occur. This clarification creates additional administrative burdens to hospice providers when the required face-to-face encounter does not timely occur. Note that the implementation date of the clarified procedures is January 9, 2012.

Pursuant to 42 C.F.R. § 418.20, to be eligible for the Medicare hospice benefit, a beneficiary must have Medicare Part A and must be certified as terminally ill. A Medicare hospice certification is comprised of numerous elements, including a physician's prognosis, a physician's narrative, and clinical information or other documentation supporting the diagnosis. Additionally, as of January 1, 2011, a hospice physician or nurse practitioner must have a face-to-face encounter with each patient prior to the start of the 180th-day recertification and each subsequent recertification in order to determine the beneficiary's continued eligibility for the hospice benefit. The face-to-face encounter must occur prior to, but no more than 30 calendar days prior to, the third benefit period recertification.

Pursuant to Transmittal No. 2316, "If the required face-to-face encounter is not timely, the hospice would be unable to recertify the patient as being terminally ill, and the patient would cease to be eligible for the Medicare hospice benefit. In such instances, the hospice must discharge the patient from the Medicare hospice benefit because he or she is not considered terminally ill for Medicare purposes... The hospice can re-admit the patient to the Medicare hospice benefit once the required encounter occurs, provided the patient continues to meet all of the eligibility requirements and the patient (or representative) files an election statement in accordance with CMS regulations."

Note that this position is a departure from CMS' previous stance on the procedural requirements for processing hospice claims when hospice certification requirements are not satisfied and increases the administrative burden to hospices. Pursuant to the Medicare Benefit Policy Manual (CMS Pub. 100-02), Chapter 9, Section 20.1, if a certification of the beneficiary's prognosis of six months or less is not obtained within the timeframes established by the regulations, "no payment is made for the days prior to the certification. Instead, payment begins with the day of certification." CMS policy does not require that a patient be discharged and re-admitted in this instance; rather, CMS policy simply requires that the dates of service prior to the certification not be billed.

Also of note, Transmittal No. 2316 further states, "Where the only reason the patient ceases to be eligible for the Medicare hospice benefit is the hospice's failure to meet the face-to-face requirement, we would expect the hospice to continue to care for the patient at its own expense until the required encounter occurs."

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October 4, 2011

CMS' FY 2010 Report to Congress On the RAC Program

The Centers for Medicare and Medicaid Services ("CMS"), as required by Section 6411 of the Patient Protection and Affordable Care Act ("PPACA"), must annually report to Congress "concerning the effectiveness of the Recovery Audit Contractor program under Medicaid and Medicare and shall include such reports recommendations for expanding or improving the program." In its FY 2010 Report to Congress Regarding the Recovery Audit Contractor ("RAC") Program ("Report"), the Recovery Auditors identified and corrected combined overpayments and underpayments totaling $92.3 million--82% of which were overpayments and 18% of which were underpayments. CMS provided a breakdown of amounts corrected by region and Recovery Auditor:

Table 1.bmp

Most notably in the Report are the audit statistics in which CMS stated, "[h]ealth care providers have appealed 8,449 claims to date, which constitutes 5 percent of all claims collected in FY 2010. Of those, 2,902 claims--2.4 percent of all collected claims--were ruled in the providers' favor, for a total overturned amount of $2.6 million." Based on these figures, over 34 percent of the appealed claims already have been ruled in the providers' favor. It should also be noted that the appeals process can take up to two (2) years. The reported data represents appeals results to date of the claims originating and appealed in FY 2010.

CMS provides the following table elaborating on the FY 2010 RAC appeals statistics:

Table 2.bmp

CMS also identifies "issue codes" or "major findings," which are vulnerabilities tracked and identified through the RAC program. CMS states it posts its major findings to "allow providers to understand where improper payments are occurring so they can develop additional corrective actions."

Table 3b.bmp

Finally, the Report also contains a number of other helpful appendices including tables breaking down improper payments by state; region/Recovery Auditor; and Medicare Part A, B, and DME claims.


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