On January 22, 2015, in the case of Barrows v. Burwell, No. 3:11-cv-1703, 2015 WL 264727 (2nd Cir., January 22, 2015), the United States Court of Appeals for the Second Circuit ruled that Medicare beneficiaries be granted the opportunity to demonstrate a Constitutionally-protected property interest to challenge their patient status designations as hospital outpatients rather than inpatients.
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Health care providers across the country are still adapting to the unprecedented disclosure of health care information that is associated with the government's effort create a more transparent health care system. As many providers recall, in April, 2014, the Centers for Medicare & Medicaid Services ("CMS"), which administers the Medicare program, publicly released detailed data itemizing and summarizing health care providers' and suppliers' charges and payment, based on National Provider Number ("NPI"). The data was readily available, for full searching and analysis, to any individual or entity that wanted to see how individuals and entities were billing Medicare.
Physicians should be mindful that their claim information will likely continue to be made publically available on a going-forward basis. Unfortunately for the provider community, the future disclosure of CMS' data will continue to allow scrutiny of the provider's claim information, and will continue to permit the public at large, news sources, competitors, and others to shed light on generalized data and allege that such data supports fraud, waste and abuse. Unfortunately, due to the release of such partial data without explanation, it forces physicians to defend their billings, even when such billings are otherwise appropriate. In fact, even CMS' website for disclosing the information notes the associated challenges with the pooled data: "While the Physician and Other Supplier PUF has a wealth of information on payment and utilization for Medicare Part B services, the dataset has a number of limitations. Of particular importance is the fact that the data may not be representative of a physician's entire practice as it only includes information on Medicare fee-for-service beneficiaries. In addition, the data are not intended to indicate the quality of care provided and are not risk-adjusted to account for differences in underlying severity of disease of patient populations."
Although the recent trend toward transparency--and the specific disclosure of data--is viewed with unease by many in the physician community, health care providers nonetheless should recognize that CMS and other private payors have always had this information at their disposal and were able to run internal analytics. The distinction, however, was that such information was not public. Given the future of health care, physicians should operate with the foreknowledge that each claim that they submit potentially is subject to scrutiny; however, in the future, it seems that providers will also be subject to scrutiny in the public arena.
The Government Clarifies that the Provision of Free POCT Cups to Physicians Violates the Stark Law and Anti-Kickback Statute: Ameritox, Ltd. v. Millennium Laboratories, Inc.
The government recently took the unusual step of filing an amicus brief in a civil case involving Stark Law and Anti-Kickback Statute ("AKS") issues. See, Ameritox, Ltd. v. Millennium Laboratories, Inc., Case No. 14-14281 (U.S. Court of Appeals for the 11th Circuit). The amicus brief provides insight into - and clarification of - the government's position on free point-of-care testing cups ("POCT cups") provided to physicians and whether this meets the definition of remuneration under the Stark Law and AKS.
By way of brief background, Ameritox, Ltd. ("Ameritox"), a company that provides physicians with urine drug monitoring and reporting services, filed an action against Millennium Laboratories, Inc. ("Millennium"), under the Lanham Act and various state-law tort theories, alleging that Millennium engaged in unfair competition and tortiously interfered with Ameritox's business relationships by providing POCT cups to physicians in violation of the Stark Law and AKS. POCT cups are specimen collection cups with immunoassay testing strips embedded in the cup. This enables physicians to promptly (at the point-of-care) screen the urine of patients who may be taking illegal drugs or who are prescribing drugs that are subject to abuse or diversion. A jury found in favor of Ameritox, and Millennium appealed. The government submitted an amicus brief opposing Millennium's appeal.
The factual antecedents of this case can be traced to the April 2010 decision by CMS to reduce POCT cup reimbursement to $20 per cup. Following this reimbursement adjustment, Millennium initiated the practice of entering into "cup agreements" with physicians under which Millennium agreed to provide POCT cups to physicians free of charge if the physicians agreed: (i) not to bill any insurer for the urine testing service; and (ii) to return each test cup to Millennium for lab testing of the urine specimen. If the physicians failed to comply with these requirements, then Millennium would charge them for the price of the cups. These arrangements were held to violate the Stark Law and AKS, and the government filed its amicus brief, in significant part, to challenge the arguments being made by Millennium relating to Stark and AKS.
The Stark Law, in sum, prohibits a physician from referring federal health care program beneficiaries for designated health services (such as, clinical laboratory services) to an entity with which the physician or an immediate family member has a direct or indirect financial relationship, unless an exception applies. A financial relationship includes a compensation arrangement involving remuneration between the physician and the entity furnishing the designated health service. Remuneration is broadly defined as including any remuneration, in cash or in kind, that is not specifically excluded from the definition.
At issue in the Millennium case is whether the provision of free POCT cups to physicians falls within the Stark Law's "laboratory supplies" exception to the definition of remuneration. This exception carves out of the definition of remuneration "[t]he provision of items, devices, or supplies that are used solely to (i) collect, transport, process or store specimens for the entity providing the item, device, or supply, or (ii) order or communicate the result of tests or procedures for such entity." The government takes the position that the POCT cups do not fall within this carve-out because, unlike ordinary specimen cups, POCT cups include immunoassay test strips that provide a valuable diagnostic tool for physicians, which is wholly independent from functions necessary for Millennium's purposes.
The carve-out requires that the supplies be used solely for transportation, collection, processing or storage purposes. The government disagrees with Millennium that, in order to meet the carve-out, the laboratory supplies need only be used primarily for transportation, collection, processing or storage purposes. According to the government, the use of the word "primarily" in the 2001 final rule preamble (upon which Millennium relies) cannot trump the use of the word "solely" in the actual text of the statute and regulation. Further, the government relies on the district court's finding that the test strips are not used or required in connection with processing the specimen for Millennium, nor do they communicate the preliminary results for Millennium. Rather, the test strips are used for the physician's own purposes and inure to the benefit of the physician.
Additionally, the government dismisses Millennium's argument that the provision of free POCT cups cannot constitute remuneration because the physicians agreed not to bill for them. In its amicus brief, the government clarifies that a physician agreeing not to bill for the tests has no bearing on whether or not the POCT cups constitute remuneration. Rather, under the Stark Law (and the AKS, see below), billing for a service is not necessary to be considered remuneration (e.g., non-billable gifts, such as cash, and cost-avoiding items and services, such as free drug testing strips, are remuneration).
Finally, the government clarifies that it does not preclude the possibility that items, devices or supplies provided by a laboratory or other entity that fall within the "laboratory supplies" carve-out can confer certain incidental benefits on physicians. The relevant question in this case is not simply whether there is a benefit to a physician, but whether the supply provided performs a function distinct from the functions covered by the carve-out. The POCT cups plainly fail that test because the testing strips are not relevant in any way for Millennium's legitimate collection, transportation, processing or storage of specimens for its own testing.
The government applies a consistent rationale for its arguments on the AKS issues. In general, the AKS prohibits transactions intended to induce or reward referrals for items or services reimbursed by the federal health care program.
First, the government dismisses Millennium's argument that the Office of Inspector General ("OIG") has taken the position that free items and services that are "integrally related" to the offering provider's or supplier's services are not remuneration under the AKS. The government points to a number of OIG advisory opinions in support of its argument that to be "integrally related" to the offering provider's services the free items or services must be capable of being used only as part of the underlying service - without having any independent value outside of the underlying service.
The government provides a number of examples of items or services that have no independent value apart from the underlying services, such as: (i) free computer interfaces used only to transmit laboratory test results (OIG Advisory Op. 12-20); (ii) when a provider of imaging services obtains pre-authorizations from insurers for the requestor's own services (OIG Advisory Op. 10-20); and (iii) when a pharmacy provides community homes with access to a software program that enabled homes to communicate with the pharmacy regarding pharmacy orders (OIG Advisory Op. 12-19). Based on these opinions, the government acknowledges that "some incidental benefits to physicians may be permissible so long as they are directly related to the provider's services and do not extend beyond those services." Similar to its Stark Law argument, the government argues that the free POCT cups fail this test because they confer significant benefits on physicians that extend beyond, and are unrelated to, Millennium's laboratory testing services (which do not depend on POC testing in any way).
Second, the government challenges Millennium's assertion that the free POCT cups do not constitute remuneration if the physicians do not bill for them. In support of its argument, Millennium offers a footnote in the "OIG Special Fraud Alert: Laboratory Payments to Referring Physicians," which states that "fee or below-market point of care urine testing cups to health care providers who use the cups to perform billable in-office testing" might violate the AKS. The government characterizing this footnote as a "fleeting reference to billable services" that is unpersuasive when considering that the Special Fraud Alert, taken as a whole, reaffirms the position that "whenever a laboratory offers or gives to a source of referrals anything of value not paid for at fair market value, the inference may be made that the thing of value is offered to induce the referral of business." With that statement, the government clarifies its position that the fact the physician does not bill for the item or service does not, by itself, negate this inference.
Essentially, if an entity provides a physician with an item that enables the physician to perform a service that would otherwise cost the physician money to perform (i.e., purchasing test strips in order to perform point-of-care testing), then the entity relieves the physician of that burden (i.e., provides a benefit to the physician, and thus meets the broad definition of remuneration). Unless the provision of free items or services satisfies a carve-out to the definition of remuneration, it is prohibited. It is clear that, as the Millennium case shows, one cannot attempt to structure a particular set of facts to meet an otherwise permissible carve-out, but then append other items which clearly fall outside of the exception to the definition of remuneration. As the government succinctly stated, the provision of free POCT cups "is no different from taping a five dollar bill to the inside of an ordinary specimen cup."
On January 20, 2015, the Food and Drug Administration ("FDA") published two draft guidance documents that revealed its way of thinking on the regulation of low risk general wellness products and regulation of medical device accessories.
Broadly speaking, the proposed guidance indicates that the FDA will not regulate low risk products intended only for general wellness. Specifically, the agency divided general wellness products into two categories:
1. Products that do not make any reference to diseases or medical conditions
2. Products that may help of reduce the risk of and products that may help living well with certain chronic diseases or conditions
The agency hopes that its policy will foster further development of low-risk products intended to promote a healthy lifestyle.
As for medical device accessories, the FDA will regulate based on the accessory's individual risks and not based on the risks of its parent device. For example, if a parent device is regulated as a Class III device, but the accessory is low risk, the accessory could be regulated as a Class I.
Public comments and suggestions regarding the draft documents are due within 90 days of publication.
FDA issues and regulations are major evolving issue for telehealth and mHealth providers. Any additional guidance from the FDA is a welcomed development, to the extent that it in any way clarifies the FDA's thinking on regulatory evolving health care delivery technologies.
According to a new report from the Office of Inspector General ("OIG") published on January 13, 2015, the OIG is concerned with the financial incentives created by the current Medicare payment system with regard to hospice beneficiaries in assisted living facilities. For example, hospices received significantly higher Medicare payments for beneficiaries in assisted living facilities than for beneficiaries in other settings - even though the OIG reports that hospice beneficiaries in assisted living facilities often required less complex care. Additionally, the OIG claims that for-profit hospices received significantly higher Medicare payments per beneficiary than non-profit hospices.
In the report, the OIG recommends changes to the current payment system to prevent hospices from targeting beneficiaries in assisted living facilities in order to make a higher profit. The OIG recommends that the Centers for Medicare and Medicaid Services:
1) reform payments to reduce the incentive for hospices to target beneficiaries with certain diagnoses and those likely to have long stays;
2) target certain hospices for review;
3) develop and adopt claims-based measures of quality;
4) make hospice data publicly available for beneficiaries; and
5) provide additional information to hospices to educate them about how they compare to their peers.
The 2015 Home Care Prospective Payment Final Rule (effective January 1, 2015), relaxes the face-to-face encounter regulations as set forth by the Patient Protection and Affordable Care Act ("PPACA").
During an open door forum held on December 16, 2014, CMS announced that it modified documentation requirements "in an effort to simplify the face-to-face encounter regulations, reduce burden for home health agencies ("HHAs") and physicians, and to mitigate instances where physicians and HHAs unintentionally fail to comply with certification requirements."
Specifically, the Final rule reformed the current face-to-face encounter regulations with 3 key changes:
• First, CMS eliminated the current narrative requirement with the exception of when a physician orders home care solely for skilled nursing visits for management and evaluation of the patient's care plan. It is important to note, however, the certifying physician is still required to certify that a face-to-face physician encounter occurred, that the encounter was related to the primary reason for home health services, and the date of encounter must be documented.
• Second, CMS finalized that if an HHA claim is denied, the corresponding physician claim for certifying or re-certifying the beneficiary's eligibility for Medicare-covered home health services is considered non-covered as well because a respective claim for Medicare-covered home health services no longer exists.
• Third, CMS clarified that face-to-face encounters are required for certifications, rather than initial episodes, and that certification will be considered to be anytime a new assessment is completed to initiate care.
Additionally, CMS eliminated the requirement that home health therapy reassessments be performed at the 13th and 19th visits. Effective January 1, 2015, a qualified therapist must performed a reassessment every 30 calendar days. Notably, the Final Rule provides therapists with flexibility with respect to the timing of the assessment.
The full text version of the Final Rule is available here.
On December 18, 2014, a U.S. District Court judge dismissed a lawsuit the American Hospital Association ("AHA") filed against the Department of Health and Human Services ("HHS") seeking HHS to process their administrative appeals in accordance with statutory timelines.
In its order, the Court acknowledged that the Office of Medicare Hearings and Appeals ("OMHA") is "saddled with a workload it cannot possibly manage." In fact, between 2012 and 2013, the backlog of administrative law judge ("ALJ") level appeals quintupled. For example, in 2013, OMHA received 350, 629 appeals and decided only 79, 303 of them.
Despite this fact, Judge Boasberg, ruled: "While the Court sympathizes with Plaintiffs' plight, for the time being the waiting game must go on. HHS's delay in processing their administrative appeals, while far from ideal, is not so egregious to warrant intervention."
In its motion for summary judgment, the AHA argued that over-auditing in the Recovery Audit Contractor ("RAC") program has caused the back up in the appeals process. In response, the Court noted that the agency does not deny that RACs have played a part in increased appeals, but it also attributes the spike to "more Medicare beneficiaries, increased use of covered services, and additional appeals from Medicaid State agencies."
In rendering its decision, the Court discussed the escalation process, which allows that in the event any level of the appeals process gets too far behind, claimants may leapfrog it and move to the next stage. According to the AMA (and as many hospitals would agree), escalation is not a perfect solution to the backlog of appeals. This is because if an appeal is escalated, the ALJ level of review is essentially bypassed. This is extremely problematic according to the AHA who believes "ALJ review is an invaluable step in the appeals process." This is largely due to the fact that it is at the ALJ level where hospitals can provide oral testimony in support of their cases and claimants are able to engage with ALJs and respond to questions in real time. Available data shows that appellants experience the highest rates of success at the ALJ level of appeal.
In the end, the Court noted: "Congress is well aware of the problem, and Congress and the Secretary are the proper agents to solve it. In such situations--where an agency is underfunded and where it is processing Plaintiffs' appeals on a first-come, first-served basis--the Court will not intervene."
The Court's full text version of the order is available here.
The Centers for Medicare and Medicaid Services ("CMS") is charged with the implementation of the Physician Payments Sunshine Act. CMS developed the Open Payments Program to keep track of data on consulting fees, research grants, travel reimbursements and other gifts made by certain manufacturers and organizations to physicians and teaching hospitals. Since the implementation of the Open Payments Program in February 2013, CMS has encouraged and received feedback from the public regarding certain aspects of the reporting requirements set forth in the Open Payments regulations. Based on this feedback, CMS made the following revisions to the regulations as a part of the 2015 Medicare Physician Fee Schedule (see, Final Rule published November 13, 2014):
• Deleted the Continuing Education Exclusion in its entirety because it is redundant with the exclusion for indirect payments where the manufacturer does not know the identity of the recipient during the reporting year or by the end of the second quarter of the following reporting year (see, 42 C.F.R. 403.904(i)(r)). Therefore, if a continuing education payment meets the exclusion in § 403.904(i)(r), it will remain unnecessary to report the payment even in light of the deleted exclusion;
• Made the reporting of the marketed name of a covered drug, device, or biological required, as opposed to optional, even if the marketed name may not be recognizable to the general public;
• Required reporting of stocks, stock options, or any other ownership interest as distinct categories; and
• Removed the definition of "covered device" because it is duplicative.
The revisions were effective as of October 31, 2014 and will be implemented for the 2016 program year, with reporting to CMS in 2017.
On October 31, 2014, the Department of Health and Human Services ("HHS") Office of the Inspector General ("OIG") released its Fiscal Year ("FY") 2015 Work Plan summarizing its new and ongoing investigative, enforcement, and compliance priorities for the upcoming fiscal year.
For FY 2014, the OIG reported recoveries of over $4.9 billion, consisting of nearly $834.7 million in audit receivables and about $4.1 billion in investigative receivables. Additionally, it reported exclusions of 4,017 individuals and entities from participation in Federal healthcare programs; 971 criminal actions against individuals or entities that engaged in crimes against HHS programs; and 533 civil actions, which include false claims and unjust-enrichment lawsuits filed in Federal district court, CMP settlements, and administrative recoveries related to provider self-disclosure matters.
The OIG states that it will continue to focus on emerging payment, eligibility, management, and IT systems security vulnerabilities. Additional areas of focus include: quality and access in Medicare and Medicaid, public health and human services programs, and the appropriateness of Medicare and Medicaid payments.
A complete copy of the Work Plan is available here. Below is a summary of key provisions which provide significant insight on the OIG's objectives for FY 2015:
• New Inpatient Admission Criteria: The OIG continues to focus on inpatient hospital admissions. For FY 2015, it will determine the impact of new inpatient admission criteria on hospital billing, Medicare payments, and beneficiary co-payments. Its review will also determine how billing varied among hospitals in FY 2014. Beginning in FY 2014, new criteria state that physicians should admit Beneficiaries for inpatient care who are expected to require care that crosses at least two midnights (known as "the two-midnight rule"). Beneficiaries whose care is expected to last fewer than two midnights should be treated as outpatients.
• Analysis of Salaries Included in Hospital Cost Reports: OIG will review data from Medicare cost reports and hospitals to identify salary amounts included in the operating costs reported to and reimbursed by Medicare. Additionally, OIG will determine the potential impact on the Medicare Trust Fund if the amount of the employee compensation that could be submitted to Medicare for reimbursement on future costs reports had limits. Employee compensation may be included in allowable provider costs only to the extent that it represents reasonable remuneration for managerial, administrative, professional and other services related to the operation of the facility and furnished in connection with patient care.
• Medicare Oversight of Provider-Based Status: OIG will determine to the extent which provider-based facilities meet CMS's criteria. Provider-based status allows facilities owned and operated by hospitals to bill as hospital outpatient departments. Provider-based status can result in higher Medicare payments for services furnished at provider-based facilities and may increase beneficiaries' co-insurance liabilities.
• Comparison of Provider-Based and Free-Standing Clinics: OIG will review and compare Medicare payments for physician office visits in provider-based clinics and free-standing clinics to determine the difference in payments made to clinics for similar procedures and assess the potential impact on the Medicare program of hospitals' claiming provider-based status for such facilities. Provider-based facilities often receive higher payments for some services than do freestanding clinics. The requirements to be met for a facility to be treated at provider based are at 42 CFR § 413.65(d).
• Critical Access Hospitals--Payment Policy for Swing Beds: OIG will compare reimbursement for swing-bed services at critical access hospitals ("CAHs") to the same level of care obtained at a traditional SNFs to determine whether Medicare could achieve savings through a most cost effective payment methodology.
• Questionable Billing Patterns for Part B Services During Nursing Home Stays: OIG will identify questionable billing patterns associated with nursing homes and Medicare providers for Part B services provided to the nursing home residents during stays not paid under Part A.
Other Provider & Suppliers
• Ambulatory Surgical Centers--Payment System: OIG will review the appropriateness of Medicare's methodology of setting ASC payment rates under the revised payment system. Additionally, it will also determine whether payment disparity exists between the ASC and the hospital outpatient department payment rates for similar surgical procedures provided in both settings
• Anesthesia Services--Payments for Personally Performed Services: OIG will review Medicare Part B claims for personally performed anesthesia services to determine whether they were supported in accordance with Medicare requirements. Additionally, OIG will determine whether Medicare payments for anesthesia services reported on a claim with the "AA" service code modifier met Medicare requirements. Physicians report the appropriate anesthesia modifier code to denote whether the services were personally performed or medically directed.
• Diagnostic Radiology--Medical Necessity of High-Cost Tests: OIG will review Medicare payments for high-cost diagnostic radiology tests to determine whether the tests were medically necessary and to determine the extent to which use has increased for these tests.
• Imaging Services--Payments for Practice Expenses: OIG will review Medicare Part B payments for imaging services to determine whether they reflect the expenses incurred and whether the utilization rates reflect industry practices. For selected imaging services, OIG will focus on practice expense components, including the equipment utilization rate. Practice expenses may include office rent, wages, and equipment.
• Selected Independent Clinical Laboratory Billing Requirements (new): OIG will review Medicare payments to independent clinical laboratories to determine laboratories' compliance with selected billing requirements. The results of the reviews will be used to identify clinical laboratories that routinely submit improper claims and recommend recovery of overpayments where appropriate. Prior OIG audits, investigations and inspections have identified independent clinical laboratory areas at risk for noncompliance with Medicare billing requirements.
• Physicians--Place-of-Service Coding Errors: OIG will review physicians' coding on Medicare Part B claims for services performed in ASCs and hospital outpatient departments to determine whether they properly coded the places of service. Prior OIG reviews determined that physicians did not always correctly code non-facility places of service on Part B claims submitted to and paid by Medicare contractors. Federal regulations provide for different levels of payments to physicians depending on where services are performed.
• Portable X-Ray Equipment--Supplier Compliance with Transportation and Setup Fee Requirements: OIG will review Medicare payments for portable x-ray equipment services to determine whether payments were correct and were supported by documentation. We will also asses the qualifications of the technologists who performed the services. Prior OIG work found that Medicare may have improperly paid portable x-ray suppliers for return trips to nursing facilities (i.e., multiple trips to a facility in 1 day). Medicare generally reimburses for portable x-ray services if the conditions of coverage are met.
Information Technology Security, Protected Health Information, and Data Accuracy
• Controls over Networked Medical Devices at Hospitals: OIG will examine whether CMS oversight of hospitals' security controls over networked medical devices is sufficient to effectively protect associated electronic protected health information ("ePHI") and ensure beneficiary safety. Computerized medical devices, such as dialysis machines, radiology systems, and medication dispensing systems that are integrated with electronic medical records ("EMRs") and the larger health network, pose a growing threat to the security and privacy of personal health information. Such medical devices use hardware, software, and networks to monitor a patient's medical status and transmit and receive related data using wired or wireless communications.
Other Medicaid Services, Equipment, and Supplies
• Billing & Payments, Transportation Services--Compliance with Federal and State Requirements: OIG will review Medicaid payments by States to providers for transportation services to determine the appropriateness of the payments for such services. Federal regulations require States to ensure necessary transportation for Medicaid beneficiaries to and from providers (42 CFR § 431.53). Each state may have different Medicaid coverage criteria, reimbursement rates, rules governing covered services, and beneficiary eligibility for services.
Medicaid Managed Care
• Medicaid Managed Care Entities' Identification of Fraud and Abuse: OIG will determine whether Medicaid MCOs identified and addressed potential fraud and abuse incidents. We will also describe how States oversee MCOs' efforts to identify and address fraud and abuse. A prior OIG report revealed that over a quarter of the MCOs surveyed did not report a single case of suspected fraud and abuse to their State Medicaid agencies in 2009. The report also found that MCOs and States are taking steps to address fraud and abuse in managed care and they remain concerned about their prevalence. All MCOs are required to have processes to detect, correct, and prevent fraud, waste, and abuse. However, the Federal requirements are general in nature (42 CFR § 438.608), and MCOs vary widely in how they deter fraud, waster, and abuse.
• Oversight of Managed Care Entities' Marketing Practices: OIG will review State Medicaid agencies' oversight policies, procedures, and activities to determine the extent to which States monitor Medicaid MCOs' marking practices and compliance with Federal and State contractual marketing requirements. Additionally, OIG will also determine to the extent to which CMS ensures that States comply with Federal requirements involving Medicaid MCO marketing practices. No marketing materials may be distributed by Medicaid MCOs without first obtaining States' approval. (Social Security Act, § 1932(d)(2)). States are permitted to impose additional requirements in contacts with MCOs about marketing activities. (42 CFR § 438.104).
Takeaways from the OIG Work Plan
The OIG Work Plan is a valuable resource to healthcare organizations as it serves as a tool in identifying compliance risk areas. Organizations should consider utilizing the plan as a roadmap drafting their corporate compliance programs--though the Plan should not be the only resource relied upon.
In a letter dated December 4, 2014, the American Hospital Association ("AHA") submitted comments in response to the Office of Medicare Hearings and Appeals ("OMHA") request for information on current and potential initiatives to resolve the current backlog of appeals at the administrative law judge ("ALJ") level.
In its letter, the AHA takes the position that "fundamental reform of the recovery audit contractor ("RAC") process is at the heart of an effective and permanent solution to the appeal backlog problem." According to the AHA, "excessive and inappropriate" RAC denials have forced hospitals to continuously appeal claims resulting in an influx of appeals reaching the ALJ level. Moreover, the AHA highlighted problems with the RAC contingency fee structure which encourages RACs to find overpayments "with impunity." The AHA believes that assessing financial penalties on RACs for inappropriate denials would promote more appropriate and accurate assessments.
Accordingly, the AHA provided additional administrative changes that would enhance audit accuracy and reduce burden on hospitals and the appeals system, including:
• Codifying in regulation CMS's assertion in the preamble of fiscal year 2014 inpatient prospective payment system final rule that the RACs are limited to determining whether an inpatient is medically necessary based on the medical documentation available at the time the admission decision was made.
• Eliminating the application of the one-year filing limit to rebilled Part B claims. The AHA believes that hospitals should be able to submit a subsequent Part B claim for the services provided so long as the Part B claim is submitted within 180 days of a final determination. This would allow hospitals to pursue their appeal rights and receive a final determination on the Part A claim before rebilling under Part B.
• Limiting RAC approval for auditing approved issues (such as inpatient short stays) to a particular defined time period, instead of approving them indefinitely. Additionally, a senior CMS official should be designated to be accountable for the approval of audit issues. After the issue's audit time period has run, RACs must stop auditing the issue. CMS would then analyze the audit results and provide education to its provides in that jurisdiction, if warranted. A RAC would need to seek new approval from CMS to audit for the same issue, but must wait a certain defined time period to allow providers to incorporate education before requesting new approval.
Additionally, the AHA asserted that the lack of critical operational information discourages hospitals from participating in the OMHA established pilot program. Accordingly, the AHA listed the following questions and concerns surrounding the operation of the Statistical Sampling Pilot, including:
• Use of Extrapolation: The OMHA states that a "Medicare contractor" will extrapolate the ALJ's decision on the sample set of claims to the larger universe of claims for which the sample was drawn; however it is not clear which Medicare contractor would perform extrapolation. The AHA strongly opposes CMS's use of RACs to extrapolate the ALJ's decisions, given the significant financial incentives the RACs have to increase hospital claim denials. In addition, the AHA believes that the OMHA does not provide details on how the extrapolation would be conducted and it is unclear whether or how hospitals would be able to challenge the validity of the extrapolation.
• Part B Rebilling: The OMHA states that the ALJ cannot extrapolate the amount that a hospital would receive if it submits denied Part A admissions for rebilling under Part B. Although OMHA does not directly address whether hospitals would have the right to rebill denied Part A admissions that were part of a universe of claims, it seems impossible from a practical perspective that hospitals would be able to do so. Therefore, the AHA believes that the use of statistical sampling for denials of Part A admissions may result in hospitals forgoing their ability to receive any payment for those claims
• Effect of Withdrawing Consent: Hospitals will be able to withdraw consent for participation in a statistical sampling until the ALJ has issued a pre-hearing conference order. However, the AHA believes that once a hospital withdraws consent, it is not clear whether appeals that would have been subject to statistical sampling will remain in queue for a hearing by an ALJ or if they will go to the back of the line.
The AHA notes that although improvements to the Statistical Sampling Pilot program may make the settlement more attractive to hospitals, it nonetheless remains an "inadequate substitute" for a timely ALJ hearing. The AHA believes that it is at the ALJ stage of the Medicare appeals process where hospitals are entitled to "independent and objective" review of their claims and historically, have had the greatest rate of success in overturning inappropriate RAC denials. Accordingly, the AHA emphasized that the focus should remain on ensuring that RAC denials truly represent improper payments which requires "fundamental reform" of the RAC process.
In a letter dated December 3, 2014, the American Medical Association ("AMA") urged the Centers for Medicare and Medicaid Services ("CMS") to resolve the two-year backlog of Medicare and Medicaid appeals. The AMA noted that while it appreciated the recent efforts of the Office of Medicare Hearings and Appeals ("OMHA") to address the issue, the problem does not lie with the OMHA. Rather, the fundamental issue driving the appeals backlog lies within the RAC program.
In fiscal year 2013, more than 60 percent of RAC determinations appealed by physicians were overturned. That same year, the OHMA experienced a 506% increase in appealed RAC claims compared to fiscal year 2012. In light of these statistics, the AMA commented that "this [data] demonstrates that the RAC program must be reformed in order to resolve this backlog."
The AMA also highlighted problems with the RAC contingency fee structure which encourages RACs to find overpayments "with little regard for the accuracy of their findings." Currently, RACs are paid approximately 9.0-12.5 percent for denied claims and must only pay back the contingency fee if a claim is later overturned. According to the AMA, this structure provides little incentive for RACs to ensure that they limit their audits.
Additionally, the AMA pointed out the significant cost of RAC appeals. Based on research conducted by the AMA, the total cost of appeals in fiscal year 2012 was approximately $455,468. The AMA added that physicians spend significant financial resources on compliance efforts to ensure compliance with payment rules and regulations. In fact, the AMA found that physicians spend approximately $1,622 per year on probe audits, internal and external chart reviews, and legal and educational expenses.
Accordingly, the AMA strongly urged CMS to consider the following changes to the RAC program:
• RACs should be subject to financial penalties for inaccurate audit findings and physicians should receive interest when they win on appeal of a RAC audit
• Physicians should be permitted to rebill for recouped claims for a year following recoupment
• CMS should provide an optional appeals settlement to physicians similar to that provided to hospitals for short-term care
• CMS should retain the current medical record request limits and allow medical record reimbursement for physicians
• RAC audits of physicians should be performed by a physician of the same specialty or sub-specialty licensed in the same jurisdiction
In the December 2014 issue of BCBSM's The Record, BCBSM reminds pharmacies that the following documents should be available to BCBSM if contacted for an audit in order to avoid preventable findings which could result in significant financial recoupment:
Prescriptions. Original prescriptions for written and verbal orders must be submitted by the pharmacy printed copies of electronic and faxed prescriptions are permissible. Scans of written and verbal prescriptions will not be accepted. If the claim was submitted with a "compound 2" indicator, the pharmacy must also supply the compound record, including the national drug codes and the quantities used.
Dispensing histories. A printout of the dispensing history of each prescription (i.e., the date of each dispense for the life of the prescription as well as the quantity dispensed) must be produced including any changes in the medication, drug strength or quantity for any dispense. The pharmacy's software should be able to produce such printout. If not, the dispensing history can be written on a photocopy or back of each prescription.
Signature logs. All BCSM and BCN prescription drug programs require a signature from the member, their representative or their caregiver at the time of dispense to verify receipt of their medications. BCBSM/BCN accepts a member's/representative's/caregiver's signature on a manual or electronic log, including signatures from drive-through customers, as proof that the member received the prescription. For prescriptions that pharmacies mail to members, the pharmacy should provide a dated "proof of delivery/receipt" signed by the member/representative/caregiver.
Members' rights notice. BCBSM is required to report to the Centers for Medicare & Medicaid Services whether network pharmacies are compliant with the requirement to give Medicare Part D patients a copy of the Medicare Prescription Drug Coverage and Your Rights Standardized Pharmacy Notice (CMS-10147/OMB 0938-0975) if the prescription cannot be filled. Please have this notice printed to show the auditor.
Record retention. For BCBSM and BCN commercial, a pharmacy must keep prescription records for a minimum of five (5) years from the last date of service. Michigan law requires that every prescription has to be preserved for at least five (5) years. The federally administered Medicare plan requires that prescriptions be retained a minimum of 10 years after the last date of service.
If your pharmacy is contacted by BCBSM for an audit, you should contact an experienced attorney to assist you in order to reduce the likelihood of significant overpayment demands. The earlier the involvement of experienced legal counsel, the better the opportunity for a successful outcome.
House Ways & Means Health Chair Introduces Draft Legislation Impacting RAC Audits and Short-Term Hospital Admissions
On November 19, 2014, the House Ways & Means health subcommittee Chair Kevin Brady (R-TX) introduced draft legislation that would revamp the Medicare payment structure for short-term hospital admissions, aiming to resolve the backlog of appeals and to improve the current Recovery Audit Contractor ("RAC") program.
The draft bill--called the Hospital Improvement for Payment ("HIP") Act of 2014, provides for a new payment model called the Hospital Prospective Payment System ("HPPS") that would apply to short-term stays. Short-term stays are defined under the bill as: (1) stays that are less than 3 days; (2) stays that have a national average length of stay less than 3 days; or (3) stays that are "among the most highly ranked discharges that have been denied for reasons of medical necessity." The Department of Health and Human Services ("HHS") would be permitted to raise the 3-day threshold "if justified."
HHS would also be required to establish a base rate of payment for the new HPPS through the rulemaking process. The base rate would be calculated by blending the base operating rate for short stays and an equivalent base operating rate for overnight hospital outpatient services.
The draft bill also impacts policies associated with the two-midnight rule--a standard that presumes inpatient hospital stays are reasonable and necessary if the stay crosses two or more midnights. Under the new legislation, the 0.2 percent ($200 million per year) reduction that CMS implemented with the two-midnight rule would be repealed.
Representative Brady's bill also sets out to improve the current RAC program by reducing the current statutory look-back period for RAC audits to 3 years. Additionally, the bill would statutorily mandate that a 30-day discussion period would be available to providers and suppliers prior to issuing a full or partial payment denial. Further, in order to prevent duplicative audits, all Medicare contractors who perform pre- and post-payment reviews would be required to enter active audits into the RAC data warehouse.
The legislation also extends the moratorium on RAC audits by six months to September 30, 2015. Previously, Congress restricted RACs from auditing short-stay admissions under the two-midnight rule through the end of March 2015. RACs would also be prohibited from conducting audits on short-term hospital stays until the HPPS is available.
Finally, the legislation aims to address the staggering increase in provider appeals. In fact, there is a current backlog of more than 800,000 claims at third-level appeals which Brady called "a complex problem" requiring a "comprehensive solution." Brady's bill sets out to relieve the backlog by extending a voluntary settlement process where hospitals would be reimbursed at a settlement rate that is "empirically derived through the rulemaking process."
On November 7, 2014, the Professional Services Council ("PSC"), a national trade association of the government technology and professional services industry, filed an amicus brief with the U.S. Court of Appeals for the Federal Circuit to overturn a ruling which would allow Centers for Medicare and Medicaid ("CMS") to modify payment terms for Recovery Auditor ("RAC") contracts.
In August 2014, the U.S. Court of Federal Claims upheld CMS' decision to withhold payments to RACs until the second level of appeal has been exhausted, despite challenges raised by a RAC that the new payment terms were inconsistent with customary commercial practices.
The appeal submitted to the Federal Circuit focuses on the application of the Federal Acquisition Streamlining Act of 1994 ("FASA") and the Federal Acquisition Regulation ("FAR") to the General Services Administration's Federal Supply Schedule ("FSS") program--the program through which CMS contracts RACs.
In its brief, PSC argues that under the FASA and FAR, agencies can only use contract clauses that are "consistent with standard commercial practice." Allowing Federal agencies to add non-commercial terms to orders from the FSS would "unfairly alter the terms of the original FSS Contract bargain and cause contractors to not participate in or leave the FSS program."
PSC agrees with the RAC that if the decision form the Court of Federal Claims is upheld, commercial companies would be discouraged from bidding on federal procurements, undercutting the objectives that FASA originally set out to achieve.
The Health Law Partners, P.C. is proud to announce that various attorneys in the firm contributed healthcare-related articles that were included in the newly-published Fourth Edition of the Legal Manual for New York Physicians, a joint publication of the New York State Bar Association and the Medical Society of the State of New York.
The Manual discusses:
•Day-to-day business and management decisions
•Practice decisions regarding treatment, disease control and legal and ethical obligations
•Professional misconduct and related issues
•Regulatory entities and related requirements
Written and edited by more than 70 experienced practitioners, the Legal Manual for New York Physicians has been called a "must- have resource tool" for physicians, attorneys representing physicians and anyone involved in the medical field. This reference book is designed to provide readers with an understanding of the legal and regulatory requirements that affect the practice of medicine in the State of New York.
Congratulations to Joel M. Greenberg, Jessica Gustafson, Kathryn Hickner-Cruz, Robert Iwrey, and Abby Pendleton!