November 2012 Archives

November 27, 2012


The Office of Inspector General ("OIG") has refused to grant a request that Boarded Sleep Physicians be permitted to dispense PAP therapy directly to their own Medicare patients.

The OIG's Semiannual Report to Congress for the period April 1, 2012 - September 30, 2012 (the "Report") issued on November 27, 2012, contains the following description of the proposal and its response. Basically, the OIG believes that physician dispensing of PAP is subject to abuse generally, even in the cases involving only certified sleep physicians. As such, the OIG refused to promulgate a safe harbor under the Anti-Kickback law applicable to all sleep doctors.

In addition, the OIG noted that it is not the appropriate agency to grant any exceptions or waivers under the Stark law. The OIG is authorized to consider safe harbors to the Anti-Kickback law. But the OIG is powerless to establish an exception to the Stark law even if it wanted to.

.The Report's treatment of the request is set out in full below:

Public Proposals for New and Modified Safe Harbors

In response to the 2011 annual solicitation, OIG received the following proposals related to safe harbors:

Proposal: New safe harbor protecting remuneration associated with the distribution of durable medical equipment by physicians who have been certified by the American Board of Sleep Medicine to Medicare patients for use in the treatment of obstructive sleep apnea and a corresponding waiver of the application of the physician self-referral law.

OIG Response: OIG is not adopting the suggestion to promulgate a new safe harbor. The arrangements described are subject to abuse and should be evaluated on a case-by-case basis, such as under the advisory opinion process. Development of a physician self-referral law regulatory exception or waiver is beyond OIG's scope of authority.


November 27, 2012

OIG Releases Semi-Annual Report on Recovery Audits and Investigations

Washington, DC - The Department of Health & Human Services (HHS) Office of Inspector General (OIG) today announced expected recoveries of about $6.9 billion from audits and investigations in its semi-annual report to Congress. The report focuses on OIG accomplishments for the second half of FY 2012 (April 1, 2012 - September 30, 2012) and for FY 2012 in total.

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November 27, 2012

Government Announces Changes to Medicare Premiums and Deductibles for 2013

The U.S. Department of Health and Human Services recently announced that Medicare Part B premiums (i.e., for physician services, outpatient hospital and durable medical equipment) will rise in 2013 by 5%--to $104.90 a month. The deductible for Part B services will increase from $140 in 2012 to $147 in 2013.

Part A premiums (i.e., for inpatient hospitals, skilled nursing facilities, and home healthcare) will fall by $10 to $441 per month in 2013. Part A deductibles that Medicare beneficiaries pay when they are admitted to a hospital will rise next year to $1,184, an increase of $28 from the 2012 deductible level of $1,156.

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November 27, 2012

Converting to Concierge Medicine: Considerations to Ponder Before Making the Transition

More and more physicians are changing from their traditional office-based medical practices to other models of practice that offer them a better quality of life and/or more stable income. One such model is concierge medicine (also known as boutique or retainer medicine). In this model, the physician limits his patient roster to a set number of individuals and charges each such individual an annual retainer fee. This allows the physician to enhance his annual income, which in turn enables him to spend more time treating a lesser number of patients. Presumably, this gives the doctor a better quality of life while giving the patient the opportunity to spend more quality time with his physician. Concierge medicine is not for everyone. Those interested in pursuing such a new course of action should consider a number of factors, such as:

--establishing the right fee structure;
--determining which services are included and which are not;
--deciding about whether to accept insurance;
--notifying patients about the transition;
--contracting with participating patients; and
--complying with applicable Federal and State laws.

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November 26, 2012

Abby Pendleton, Esq. and Jessica Gustafson, Esq. Featured in "Putting Practices on the RAC"

Abby Pendleton, Esq. and Jessica Gustafson, Esq. of the HLP were quoted in the November 12, 2012 issue of Physician's Money Digest in an article titled "Putting Practices on the RAC". Pendleton and Gustafson were interviewed based on their experience in defending health care provider audits around the country and their significant involvement in the Medicare RAC program. To read the article click here.

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November 21, 2012

CMS Revises DME Face-to-Face Requirements

On November 1, 2012, the Centers for Medicare and Medicaid Services ("CMS") released a final Durable Medical Equipment ("DME") face-to-face policy. As a pre-condition to payment, the rule requires that a beneficiary receive a face-to-face encounter with a Physician, Physician Assistant ("PA"), Nurse Practitioner ("NP"), or Clinical Nurse Specialist ("CNP") within six months prior to a DME order. The encounter must then be documented in the medical record and communicated to the DME provider with the order.

The final rule makes the following key changes:

• Delays implementation of the DME policy until July 1, 2013 and clarifying that the rule will only apply to DME orders made after the implementation date.

• Expands the timeframe between the face-to-face encounter and order of DME to six months, although it eliminates the option of having the face-to-face encounter occur within thirty days following the order.

• Clarifies that Physician Assistants, Nurse Practitioners, and Clinical Nurse Specialists may complete the face-to-face encounter, but the encounter must be documented by a physician.

• Clarifies that orders may be made verbally for items that do not require a written order before dispensing, but the supplier must have a written order and face-to-face documentation before submitting for payment.

• Clarifies that DME orders for beneficiaries discharging from a hospital do not require a separate face-to-face encounter post-hospitalization.

• Written orders do not require "necessary and proper usage instructions" or the diagnosis, although related diagnoses must be in the Beneficiary's medical chart and usage instructions provided to the Beneficiary and/or the Beneficiary's Caregiver.

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November 20, 2012

"Fast-Track Certification" for Medicare-only ACOs in New York State

In accordance with New York State's recently enacted accountable care organization ("ACO") law (Article 29-E of the New York Public Health Law), the New York State Department of Health ("DOH") will begin to process applications for Medicare-only ACOs to obtain certification under the new statute. The so-called "fast-track certification" under the statute will grant protection for ACO operations under several New York laws, including those pertaining to fee-splitting; corporate practice of a profession; practitioner self-referrals (New York Stark law); anti-trust and restraint of trade. However, under fast-track certification, such protection will only extend to the ACO's coordination of care for Medicare beneficiaries. ACO activities related to others (i.e., members of commercial insurance health plans) will not be eligible for the legal immunities that flow from the fast-track certification. This more broadly applied protection will not be available until the DOH has promulgated the ACO regulations.

It is expected that the New York State Department of Health soon will issue a letter instructing potential Medicare-only ACO applicants to submit documentation to the DOH's Hospital Review and Planning Council. It is expected that the DOH will review the following items as part of the application process:

1) The ACO's CMS letter of approval
2) The ACO's signed agreement with CMS
3) The ACO's application to CMS for ACO status
4) The ACO's formation documents

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November 20, 2012

Detroit-Area Nurse gets 30-month Prison Sentence for Signing False Medical Documentation for HHA

On November 19, 2012, Anthony Parkman, RN, was sentenced to serve 30 months in prison followed by 3 years of supervised release and ordered to pay approximately $451,000 in restitution after pleading guilty to one count of conspiracy to commit health care fraud. Nurse Parkman was paid to sign medical documentation for alleged patients of 4 HHAs: Physicians Choice Home Health Care LLC, First Care Home Health Care LLC, Quantum Home Care Inc and Moonlite Home Care Inc for skilled nursing services that were never rendered for the purpose of seeking reimbursement from Medicare. Parkman was paid approximately $150 for each falsified file that he signed. From approximately December 2008 through September 2011, Medicare paid approximately $451,000 to these 4 HHAs for fraudulent skilled nursing claims based on Nurse Parkman's falsified files.

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November 16, 2012

OIG Cites Shortcomings in Medicare Appeal ALJ Hearings

On November 14, the Office of Inspector General ("OIG") of the Department of Health and Human Services ("HHS") issued a report stemming from a review of the Administrative Law Judge ("ALJ") level of the Medicare appeals system. The study analyzed all ALJ appeals decided in fiscal year 2010 from a multitude of perspectives, including interviews of ALJ staff and Qualified Independent Contractors ("QICs"), charged with administering the second level of appeal.

The report compiled ten recommendations for changes to enhance the ALJ level of appeal. OMHA and CMS responded to each of these recommendations. The report and agency comments are available here. This table is a summary of the recommendations in the left hand column and a summary of the agencies' response on the right.

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November 16, 2012


Last week, AARP, along with five other consumer and professional organizations, sent a letter to leaders in Congress, urging them to protect access to health care for people with Medicare by addressing the flawed Medicare physician payment formula. Without congressional action, a 27.5 percent cut in payments to physicians treating Medicare beneficiaries will take effect on January 1, 2013. Here is a copy of the letter that was sent:

"Dear Chairman Baucus, Ranking Member Hatch, Chairman Upton, Ranking Member Waxman, Chairman Camp, and Ranking Member Levin:

"The undersigned organizations, representing health care providers, clinicians, and Medicare beneficiaries, write to urge Congress to avert looming payment cuts to the providers who millions of older adults and people with disabilities rely on for care. The Medicare physician payment formula is long overdue for reform in order to ensure stable access to health care for people with Medicare. We need to move away from the current payment formula that year after year relies on congressional action to postpone scheduled payment cuts, including a drastic 26.5 percent cut scheduled to take effect beginning January 1, 2013.

"Congress has long recognized that the Sustainable Growth Rate (SGR) is a poor method for establishing payment rates for health care providers paid under the Medicare physician fee schedule. In each of the last ten years it has voted to override the cuts mandated under the formula. These stop-gap measures have served to increase the size of future cuts, the cost of long-term reform, and the insecurity among people with Medicare about their ability to maintain access to their doctors. We urge you to pass the longest possible SGR fix this year, in order to allow for the development of a long-term and sustainable solution. New payment methods are needed that maintain access and encourage the delivery of high-quality care.

"Addressing the current flawed payment formula is a necessary and far-sighted course of action. Congress has an opportunity to repeal the SGR -- the first step toward enacting a better payment system -- by redirecting money from the Overseas Contingency Operations (OCO) fund the Pentagon says will never be spent. Each of the organizations signing onto this letter supports the use of OCO in the final package.

"As we address this problem, we must also be sure to keep the Medicare program affordable for beneficiaries, especially given that today the typical older person relies on less than $22,000 a year and spends over 15 percent of his/her income on health care. Therefore, we must avoid imposing any additional costs of SGR reform on beneficiaries. We also urge a continued focus on improving the quality of care for older adults and the disabled, including access to primary care services and care coordination, which are key to achieving the goals of better care, better health, and lower costs.

"The annual legislative struggle to avert Medicare physician payment cuts has gone on far too long. It is crucial to ensure that people in Medicare can maintain relationships with the doctors and providers who treat them. Our organizations are ready to work with you to help all members of Congress to address this issue, which is vitally important to the older adults and people with disabilities across the nation."

In addition to AARP, the letter was signed by the American Academy of Family Physicians, the American College of Physicians, the American Geriatrics Society, the Center for Medicare Advocacy, Inc. and the Medicare Rights Center.


November 16, 2012

OIG Approves Hospital's Per Diem Payment for Emergency Room On-Call Coverage By Physician Specialists

In Advisory Opinion 12-15, issued October 23, the Office of Inspector General ("OIG") approved a Hospital's plan to pay specialists on a per diem basis to provide on-call coverage in its Emergency Department ("ED"). Requestor, a tax-exempt, charitable, not-for profit hospital had struggled to fill shortages in its ED for on-call coverage. To meet the ED's needs, the Requestor sought year-long agreements with specialists to provide scheduled on-call coverage, who the receive compensation on a per diem basis. The arrangement only included specialists that could provide unrestricted coverage and other arrangements were made for specialties that required constant on-site coverage.

Under the arrangement, during each on-call shift, participating providers are required to provide one or more of the following:

• Over the phone consultation,

• In person consultation at the hospital, or

• Follow-up care with at least one follow-up visit that the patient will schedule.

To ensure that the per diem rates were Fair Market Value ("FMV") and did not consider volume or value of referrals, the Requestor sought input from an independent consultant that compared the per diem rates to national survey data and its own proprietary data. Furthermore, Requestor certified that scheduling was divided equitably based on Requestor's methodology, with every effort made to divide calls within a specialty evenly across the 365 days of the year.

The OIG approved the arrangement, noting that it was unlikely to result in fraud and it would, therefore, not impose sanctions on the Hospital for the arrangement under the Anti-Kickback Statute ("AKS"). In reaching its decision, the OIG examined whether the per diem was reasonable and at FMV as well as whether the compensation was based on an arm's length transaction that does not consider past or future referrals or other business between the two parties.

The arrangement did not "fit squarely" into the personal services and management contracts safe harbor, 42 C.F.R. § 1001.952(d), because of the physicians varying payments and schedules; however, the Requestor's arrangement presented a low risk of fraud and abuse because the Hospital had sufficient safeguards in place to ensure payments were equitable that scheduling was not based on the number of referrals for "Federal health care program business."

Significant factors in the Advisory Opinion's conclusion included:

• The Requestor certified that the per diem payments were for quantifiable services, which included services for uninsured patients.

• The Requestor certified that it allocated funds for each participating specialty and recalculated the per diem basis annually using an independent consultant to ensure per diem rates remained FMV. In addition, per diem payments were distributed uniformly within a specialty and were not based on the number of referrals or business generated by an individual provider.

• The Participating Physicians provide actual services that begin in the ED are at risk of furnishing additional services to the patients for no additional payment.

• The Participating Providers document their services in the patient's records, providing transparency and accountability.

• The arrangement is not designed to provide complete compensation and while a Participating Provider may receive the per diem and bill separately for the furnished services, due to the percentage of uncompensated care provided in the ED, the participating physicians will likely provide a significant amount of care where the only compensation is the per diem.

• The Requestor offers the opportunity to participate in the arrangement to all specialists on staff who are required by bylaws to take unrestricted call.

• Scheduling is based on the Requestor's by-laws and is uniform across all providers in specialty.

• The arrangement is structured so that the Requestor absorbs all costs of the arrangement and none accrue to the federal health care programs.

Advisory Opinion 12-15 makes clear that the OIG recognizes that hospitals face shortages of specialists for on-call coverage and highlights its belief that parties can structure arrangements for on-call compensation that pose minimal risk under the AKS (and possibly even meet the requirements of the personal services safe harbor). However, hospitals must ensure that the compensation arrangement is structured with sufficient safe-guards to ensure it is not misused to disguise payments for referrals.

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November 12, 2012

Compounding Pharmacies Likely to Face Heightened Scrutiny and Increased Regulation

Compounding pharmacies have seen increased government investigations in recent years, and are likely to face heightened scrutiny from state and/or federal authorities in the near future. Coupled with heightened scrutiny of health care providers in general, compounding pharmacies should carefully review their operations for compliance with law.

Incidents involving providers of compounded medications, most notably the recent meningitis outbreak in Massachusetts, in which contaminated drug products from one compounder were linked to 257 meningitis infections in 16 states, have spurred new legislative initiatives that may result in increased regulation of these businesses. In the wake of the meningitis outbreak, the Massachusetts Department of Public Health has already issued new regulations to provide for more oversight of compounding pharmacies.

Additionally, Senator Ed Markey, a Democrat from Massachusetts, has introduced legislation last week on Capitol Hill to give the FDA broader oversight of compounding pharmacies:

Under the existing regulatory model, both the U.S. Food and Drug Administration ("FDA") and the boards of pharmacy in individual states regulate compounding pharmacies, but the scope of the authority of these entities is not clearly defined. It is clear, however, that the FDA's oversight of compounding pharmacies is more limited than its oversight of traditional pharmaceutical manufacturers. Unlike the traditional drug manufacturers, compounding pharmacies are exempt from the standard drug approval process and requirements dictated by the Food, Drug and Cosmetic Act. However, compounding pharmacies can potentially cross this regulatory threshold when they engage in activities, such as producing large quantities of particular compounded drugs on a commercial scale. These activities can trigger FDA oversight, which materially enhances the measures necessary for a compounding pharmacy to comply with federal law. Additional confusion in the oversight of compounding pharmacies arises when a compounding pharmacy's operations extend beyond the bounds of a single state, thereby implicating the individual laws for each state in which it engages in operations. Therefore, the exact nature of a compounding pharmacy's legal exposure is tied to the geographic range of its commercial activities.

Compounding pharmacies may find themselves subject to new requirements in order to continue to provide compounded pharmaceutical products. It is possible that in the future compounding pharmacies may have to undergo some type of accreditation or licensing process in order to continue their operations. Currently, the Pharmacy Compounding Accreditation Board ("PCAB") accredits compounding pharmacies on a voluntary basis.

Although the regulatory effect of any future legislation is as yet unknown, it is clear that compounding pharmacies are under more scrutiny than ever. Therefore, it is imperative that pharmacies ensure that they are cognizant of and complying with applicable federal and state laws. Such entities would be well advised to seek counsel to review their operations and to ensure compliance with all relevant regulations.

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November 5, 2012

Hospitals Brace for Audits of Short-Stay Admissions

Abby Pendleton, Esq. of The HLP was quoted in "Hospitals Brace for Audits of Short-Stay Admissions", published November 5, 2012 in Crain's Detroit Business on-line regarding RAC audit activity. In particular, the story discussed the new Medicare RAC pre-payment program and its impact on short-stay hospital admissions. Pendleton was interviewed for the Crain's story and provided her insight into the new demonstration program and its impact on certain short inpatient hospital stays including that "this is a really hot issue because there is a fundamental disagreement between how reviewers are reviewing and the standards providers are given to follow... providers are not given black-and-white guidance."

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November 2, 2012

Imaging Self-Referrals Could Raise Costs, Hurt Patients, GAO Report Says

On October 31, 2012, the United States Government Accountability Office (GAO) released a study detailing the results of a six-year analysis they had conducted regarding self-referral practices of physicians and group practices that own/lease/operate magnetic resonance imaging (MRI) and computed tomography (CT) services.

Self-referrals for MRI/CT services are often excepted from the reach of the Federal Stark Law through the "In-Office Ancillary Services Exception". The "In-Office Ancillary Services Exception" was already amended by the Protection and Affordable Care Act (PPACA) in a manner that made it more burdensome physicians to utilize the exception for self-referring advanced imaging services. Unsurprisingly, the report's findings are primarily negative for physicians who utilize the "In-Office Ancillary Services Exception" to self-refer for MRI/CT services. Also unsurprising is that the lawmakers who originally requested the report are already using it to argue that the practice of self-referrals should be curbed or stopped. Note that the release of this study comes shortly after the release of the OIG's Fiscal Year 2013 Work Plan, which also scrutinizes Part B imaging services, as well as the medical necessity of certain diagnostic radiology services (of which we are writing about further in our blog and other publications).
The report was requested by Senate Finance Committee Chair Max Baucus (D-Mont.), Sen. Chuck Grassley (R-Iowa) and Reps. Henry Waxman (D-Calif.), Pete Stark (D-Calif.) and Sander Levin (D-Mich.). The GAO found that between 2004 and 2010, the utilization/number of self-referred and non-self-referred MRI and CT imaging services both increased. The non-self-referred services increased over this period by 12%. The self-referred services, however, increased by more than 80%, with a corresponding increase in expenditures. Further, the GAO's analysis shows that providers' referrals of MRI and CT services substantially increased the year after they began to self-refer, and that self-referring practitioners utilized imaging services at approximately twice the rate as providers who did not self-refer. The GAO attributes the difference in referral practices to financial incentives for self-referring providers, as opposed to an evolution in practice standard of care, heightened patient-care service, rapid diagnoses, improved care coordination, or convenient access for patients.

The GAO also notes that, in addition to direct costs associated with increased usage of MRI/CT services, there may be additional indirect costs associated with the increased usage. In particular, the GAO believes that increased usage of imaging services may reveal abnormalities that have no clinical relevance or result in unnecessary surgeries. The GAO strongly implies that it believes that the increase in MRI/CT services was unnecessary, though in a footnote they note that an increased use of advanced imaging may also partially offset some of the direct imaging costs if increased usage leads to the early detection of disease which results in less-invasive and less-costly treatments.

The GAO sent draft versions of its report to CMS/HHS for comment and discussion. The GAO makes three recommendations, two of which CMS preliminarily disagreed with:

1. HHS/CMS did not concur with the following GAO recommendations:
a. The GAO would like CMS to insert a self-referral flag on its Medicare Part B claims form and require providers to indicate whether the advanced imaging services for which a provider bills Medicare are self-referred or not; and
b. The GAO would like CMS to implement a payment reduction for self-referred advanced imaging services.

2. HHS/CMS concurred with the following GAO recommendation, stating that it would further evaluate options for implementing it:
a. The GAO would like CMS to implement an approach or mechanism to ensure the appropriateness/medical necessity of advanced imaging services referred by self-referring providers.

The GAO, at some length, details its disagreement with CMS as to the first two recommendations, and lays out a case for why CMS should implement all three recommendations. The GAO is now sending copies of its finalized report to the Secretary of HHS, interested congressional committees, and others.

Note that the release of this GAO study comes shortly after the release of the OIG's Fiscal Year 2013 Work Plan, which scrutinizes Part B imaging services, as well as the medical necessity of certain diagnostic radiology services (of which we are writing about further in our blog and other publications).

Providers should stay alert for further legal developments related to self-referral of imaging services, and should review their structures to ensure compliance with the Stark Law. The GAO's report can be accessed at:

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November 1, 2012

AHA, Hospitals Sue HHS Over RAC Payment Denials

The American Hospital Association ("AHA") and four hospitals (collectively, the "Plaintiffs") have filed a lawsuit against the Department of Health and Human Services ("HHS"), alleging that the Centers for Medicare and Medicaid Services ("CMS", a sub-agency of HHS), through its Medicare RAC Program, has inappropriately refused to pay for Medicare Part B services that it acknowledges were reasonably and medically necessary. The lawsuit, filed earlier today, notes that hospitals have lost hundreds of millions of dollars in reimbursement for necessary care provided to Medicare beneficiaries.

RAC Audits, and particularly CMS' decision to deny payment altogether when it deems that inpatient criteria has not been met (even while conceding that outpatient observation services were reasonable and necessary), have been a source of great uncertainty for hospital patient care and financial planning ever since the RAC Demonstration Project was implemented in 2005. The lawsuit cites four cases - one from each hospital involved in the lawsuit - where CMS did not dispute that outpatient payment was appropriate, yet continued to deny all reimbursement through several levels of appeal. Despite at least four decisions by the Medicare Department Appeals Board Medicare Appeals Council ("MAC") - the final agency decision-maker - holding that payment for Part B services was appropriate, CMS continues to deny Part B payment after a denial of reimbursement for Part A-billed services, citing as its Payment Denial Policy (Medicare Benefit Policy Manual ("BPM") Chapter 6 § 10) as its only justification. Notably, that provision of the BPM was promulgated without notice and rulemaking, and with no accompanying explanation.

The lawsuit alleges that CMS' Payment Denial Policy violates the Medicare Act and is arbitrary and capricious. Additionally, the suit alleges that CMS' failure to follow precedent and failure to undergo notice and comment rulemaking are arbitrary and capricious actions by the agency. Finally, the claim alleges that the Policy is invalid because it was not promulgated as a regulation, even though it establishes a substantive legal standard governing the scope of Part B benefits and payment.

As RAC payment audits and denials continue to plague healthcare providers across the United States, providers continue to turn to legal counsel for assistance in defending these payment audits and appealing improperly denied reimbursement for medically necessary services. Indeed, in the majority of cases nationwide the appealing hospital is ultimately successful in overturning the RAC payment denial.

Since the inception of the RAC Demonstration Program and implementation of the permanent RAC Program, the attorneys of The Health Law Partners, P.C. have provided legal counsel to numerous hospitals, inpatient rehabilitation facilities, physicians, and other providers faced with RAC payment audits and denials.

View Complaint Here.

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