The HLP is proud to announce that two of its attorneys, Robert S. Iwrey and Alan G. Gilchrist, were recently named as 2016 Top Lawyers in Health Care Law by Detroit's premier business journal, DBusiness. DBusiness conducted a peer review survey polling 19,000 attorneys in Wayne, Oakland, Macomb, Washtenaw and Livingston Counties in Michigan and 39 health care attorneys were given the award of 2016 Top Lawyer based on the nominations received. Both Mr. Iwrey and Mr. Gilchrist have received such recognition multiple times over the years.
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On December 9, 2015, Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) introduced Senate Bill 2368, the Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015. The purpose and goal of AFIRM is to improve the Medicare audit and appeals process by reducing the burden on providers and implement reforms to the Medicare audit and appeals process.
In fiscal year 2014, the Centers for Medicare & Medicaid Services (CMS), conducted audits of more than one billion claims in an effort to curb approximately $60 billion in improper Medicare payments. This many audits has resulted in a corresponding number of appeals leading to a backlog of nearly one million claims causing a near two year backlog.
Among the many ways that AFIRM seeks to resolve this backlog are the following:
Increase the amount in controversy limits for review by an administrative law judge (ALJ) to $1,500 or more. For cases not meeting this threshold, a Medicare Magistrate program allows senior attorneys with expertise in Medicare law and related policies to adjudicate cases in the same way as ALJs. This is intended to allow ALJs to maintain their focus on complex cases (AFIRM § 1-3).
Establish a process whereby an ALJ can certify an appeal for expedited access to judicial review (AFIRM § 5).
Establish a voluntary alternate dispute resolution process allowing multiple claims with similar issues of law or fact to be settled together where they are submitted by the same individual or entity (AFIRM § 6).
Permit an adjudicator, with the consent of the appellant, to use statistical sampling and extrapolation in reaching a decision (AFIRM § 6).
Establish a process whereby the Office of Medicare Hearings and Appeals and the Departmental Appeals Board of the Department of Health and Human Services (HHS) can refer cases to law enforcement where there is a credible suspicion of fraudulent activity (AFIRM § 7).
Publish on the internet appeal information that includes at least the following (AFIRM § 9):
o the percentage of appeals that received fully favorable, partially favorable, and unfavorable decisions;
o the percentage of appeals that received fully favorable, partially favorable, and unfavorable decisions for each ALJ;
o for each type of service, the percentage of appeals that received fully favorable, partially favorable, and unfavorable decisions; and
o the average length of time that has passed between the initial request for review and a final decision.
Establish alternative resolution dispute processes permitting an individual or entity entitled to a redetermination by a Medicare administrative contractor, or a reconsideration by a qualified independent contractor, to enter into an alternative dispute resolution with CMS (AFIRM § 9).
Authorize the Secretary to designate a point of contact to oversee and undertake at least the following (AFIRM § 10):
o Develop a strategy for claim review determinations that identifies and reduces claim errors that have the largest impact on improper payment rates and are likely to negatively affect quality of care, in addition to reducing unnecessary burdens on providers of services and suppliers;
o Develop methods to ensure review contractors do not unnecessarily conduct duplicate reviews of individual claims;
o Work with review contractors to develop a uniform, consistent, and transparent review process to reduce the burden on providers of services and suppliers;
o Develop qualification standards for review contractors requiring prepayment and post-payment reviews of claims to be conducted or approved by medical doctors with knowledge of relevant Medicare laws, regulations, and program instruction;
o Verify that decisions by review contractors are consistent with Medicare laws, regulations, and program instruction; and
o Determine whether additional punitive actions against ineffective review contractors could be taken and what, if any, financial incentives or disincentives could be used to promote accuracy of a review contractor's reviews.
Appoint a Medicare Reviews and Appeals Ombudsman who will (AFIRM § 11):
o identify, investigate and assist in the resolution of complaints and inquiries related to the Medicare audits and appeals process;
o identify trends in complaints and inquiries to provide recommendations for improvements to the claims review and appeals system;
o design a system to measure and evaluate reviewer responsiveness to addressing inquiries from providers of services and suppliers; and
o publish appeal data.
Establish a compliance incentive program to increase the accuracy of providers of services and suppliers in addition to encouraging consistency with review guidelines, regulations and program instructions for review contractors (AFIRM § 13).
Jessica Gustafson and Abby Pendleton, founding partners of The Health Law Partners, P.C., practice in all areas of healthcare law devoting a substantial portion of their practice on Recovery Audit Contracts and Medicare audit appeals. For more information, please contact Abby Pendleton, Esq. or Jessica Gustafson, Esq., or visit The HLP website.
In the last few weeks, we have seen a flurry of activity in Zone Program Integrity Contractor ("ZPIC") audits for the Centers of Medicare and Medicaid Services ("CMS"). Recently, many providers - and home health agencies, in particular - have received ZPIC audit notifications from NCI, Inc. ("NCI") In April 2015, CMS awarded NCI the ZPIC contract for Zone 3, which covers Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio and Wisconsin. NCI is charged with performing program integrity investigations, making coverage and coding determinations, implementing administrative actions, coordinating fraud and abuse mitigation activities, developing a list of entities requiring monitoring, and assisting in the investigation and prosecution of fraud and abuse cases.
Home health agencies are under major scrutiny, and it appears that NCI has turned its attention to combating fraud and abuse in the home health arena. Any providers and suppliers who have received a ZPIC audit notification should contact an experienced healthcare attorney to assist you with the process. The Health Law Partners are experienced in working with providers and suppliers through the ZPIC audit process. For more information, please contact Adrienne Dresevic, Esq., at email@example.com or (248) 996-8510.
Florida Compounding Pharmacy Settles False Claims Act Allegations Involving Telemedicine Prescriptions for $8 Million
On July 15, 2015, the U.S. Attorney's Office for the Middle District of Florida announced that it settled False Claims Act allegations against Blanding Health Mart Pharmacy for more than $8 million. Blanding Health Mart Pharmacy is a compounding pharmacy based in Jacksonville, Florida. The settlement stems from allegations that the pharmacy "knowingly billed the government for improper and medically unnecessary compounding pain prescriptions" that were "written by physicians that had never actually seen the patients [i.e., telemedicine prescriptions]." It appears that the allegations involved TRICARE beneficiaries.
This settlement comes on the heels of increased regulatory scrutiny in the compounding pharmacy arena. In fact, U.S. Attorney A. Lee Bentley, III, said that pharmacies that have abused the TRICARE program have been the focus of his office since the beginning of the year. Special Agent in Charge John F. Khin stated that "[f]raud and abuse by pharmacies and medical providers which bill for compounded pain prescriptions is a significant threat to the [Department of Defense] health care system. TRICARE beneficiaries must be made aware that any medications that are not individually prescribed or dispensed by a bona fide treating physician for a specific medical condition can be ineffective or unsafe." The office's press release is available here.
Compounding pharmacies should carefully review any telemedicine prescriptions they receive. In particular, compounding pharmacies should review, or consult healthcare legal counsel with regard to, the laws of the state in which the patient resides and in which the physician practices. Many states have laws that require that an existing physician-patient relationship exist prior to prescribing via telemedicine. Some states have "face-to-face" requirements for prescribing certain medications. Pharmacies may also want to consider requesting an attestation from the prescribing physician that states all appropriate standards of care and state law have been met and complied with in writing the prescription. If there is any doubt, pharmacies should not fill the prescription and should contact healthcare legal counsel.
Lastly, pharmacies should also consider how the prescription ended up in their hands. For example, what is the relationship between the pharmacy and the physician? Was the prescription sent as the result of marketing directed at the physician or patient? Depending on the answers to these questions, the analysis may become more complex
On July 29, 2015 the Centers for Medicare & Medicaid Services ("CMS") announced that it is extending the temporary moratoria on the enrollment of new home health agencies, subunits, and branch locations ("HHA") and part B ambulance suppliers for an additional six months.
Section 6401(a) of the Affordable Care Act added section 1866(j)(7) to the Social Security Act (the "Act") to provide the Secretary with authority to impose a temporary moratorium on the enrollment of new Medicare, Medicaid, or CHIP providers and suppliers if the Secretary determines a moratorium is necessary to prevent or combat fraud, waste, or abuse under these programs.
Based on this authority CMS initially imposed a moratoria on the enrollment of new HHA and part B ambulance suppliers in a notice issued on July 31, 2013 (78 FR 46339). This was subsequently extended and expanded in a notice issued on February 4, 2014 (79 FR 6475). Additional extensions of the moratoria by notices issued on August 1, 2014 (79 FR 44702) and February 2, 2015 (80 FR 5551).
The initial July 31, 2013 moratoria applied to HHAs in Miami-Dade County, Florida and Cook County, Illinois, as well as surrounding counties, and part B ambulance suppliers in Harris County, Texas and surrounding counties. The February 4, 2014 notice expanded the HHA moratoria to Broward County, Florida; Dallas County, Texas; Harris County, Texas; and Wayne County, Michigan and surrounding counties. The moratoria on the enrollment of part B ambulance suppliers was also expanded in the February 4, 2014 notice to Philadelphia, Pennsylvania and surrounding counties.
In deciding to impose and extend the moratoria, CMS considered "qualitative and quantitative factors suggesting a high risk of fraud, waste, or abuse" within these geographic locations. CMS relied on law enforcement experience with "ongoing and emerging fraud trends and activities through civil, criminal, and administrative investigations and prosecutions." CMS also consulted with HHS-OIG regarding the extension of the moratoria. Prior to imposing the moratoria, CMS reviewed Medicare data and found no concerns related to beneficiaries accessing HHAs or ambulance suppliers within these geographic locations. State Medicaid agencies and other CMS state partners determined that the moratoria would not create issues related to access to care for Medicaid or Children's Health Insurance Program ("CHIP") beneficiaries.
CMS will determine whether to extend or lift the moratorium before extending the moratorium further. If the moratoria is extended or lifted, CMS will publish notice in the Federal Register. Once a moratorium is lifted, the providers or suppliers types that were unable to enroll because of the moratorium will be designated to CMS' high screening level for 6 months from the date the moratorium is lifted.
The attorneys at The Health Law Partners have a significant amount of experience counseling home health agencies, ambulance suppliers and other medical providers throughout the United States on moratoria and enrollment issues, as well as how to maintain compliance with applicable regulations once enrollment screening begins.
The government does not like Physician-Owned Hospitals ("POH"). The government also does not like Physician-Owned Distributors ("POD"). The Centers for Medicare and Medicaid Services ("CMS") and the Office of Inspector General ("OIG") have taken several steps recently to crack down on what it views as abusive PODs and POHs. In a brand new memorandum report, the OIG reviewed twelve physician owned hospitals to determine the overlap between POHs and PODs of spinal devices. This study was completed as a follow up to the 2013 Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use report. CMS expressed interest in the ownership overlap following discussion related to the 2013 report.
The OIG used publicly available information and information from CMS's Provider Enrollment Chain and Ownership System ("PECOS") to determine whether a physician had an ownership interest in both a hospital and a POD that sold spinal devices to the same hospital. The OIG found one physician who had an ownership interest in both a hospital and a POD selling spinal devices to the same hospital. The OIG admits to the possibility of more overlapping ownership than the one instance found, but they state that none were found using the methods applied here.
The limited information available to determine common ownership between hospitals and PODS purportedly raises concerns of transparency among Medicare providers and vendors who sell implantable devices to providers. The government wants transparency to make sure providers do not violate referral and billing prohibitions under the Physician Self-Referral Law (Stark). Transparency also contributes to ensuring providers comply with OIG exclusions and the Anti-Kickback Statute. The OIG states that transparency can also implicate patient safety and quality of care because ownership can impact the clinical decision making of a physician.
Surgical implants, such as the spinal devices manufactured by the PODS in this report, are most commonly physician preference items. Physician preference items are items where the choice of brand and type of device are determined, or strongly influenced, by the physician rather than the hospital where the surgery takes place.
In a March 26, 2013 Special Fraud Alert, the OIG, citing physicians as the gatekeeper as to the brand and type of device, stated that there is a "strong potential for improper inducements between and among the physician investors, entities, device vendors, and device purchasers." This issue was cited in the 2011 Congressional report titled,Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight which stated that "[t]he very nature of PODs seem to create financial incentives for physician investors to use those devices that give them the greatest financial return and that, in the process, patient treatment decisions may be based on personal financial gain."
In conclusion, the OIG believes that there is limited transparency as to the ownership of PODs and, to a lesser extent, hospitals. The OIG believes that CMS's Physician Payments Sunshine Act ("Sunshine Act") (42 CFR §§ 403.900 - 403.914) will increase the availability of information to permit the identification of POD owners. The Sunshine Act requires manufacturers and group purchasing organizations to report ownership and investment interests held by physicians to CMS.
The attorneys at The Health Law Partners have a significant amount of experience counseling physicians, hospitals and medical device manufacturers throughout the United States on the Physician Self-Referral Law, the Anti-Kickback Statute, and the Sunshine Act, among many other state and federal regulations applicable to the field of health care law. We have the experience and knowledge to ensure compliance with these sophisticated health care regulations so as to remedy any issues that may come from the common ownership examined in this OIG report.
In June, the Office of Inspector General ("OIG") issued two new reports on Medicare Part D titled: Ensuring the Integrity of Medicare Part D (available here) and Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D (available here).
In the Ensuring the Integrity of Medicare Part D report, the OIG outlines the progress it has made in addressing - and the work still needed to protect against - fraud in the Medicare Part D program. According to the OIG, Part D fraud relates to two main issues: "1) the need to more effectively collect and analyze program data to proactively identify and resolve program vulnerabilities, and prevent fraud, waste, and abuse before it occurs; and (2) the need to more fully implement robust oversight to ensure appropriate payments, prevent fraud, and protect beneficiaries." The OIG recommends that CMS take the following steps to combat fraud and abuse:
(1) require plan sponsors to report all potential fraud and abuse to CMS and/or the MEDIC;
(2) require plan sponsors to report data on the inquiries and corrective actions they take in response to fraud and abuse;
(3) expand drug utilization review programs to include additional drugs susceptible to fraud, waste, and abuse;
(4) implement an edit to reject prescriptions written by excluded providers;
(5) exclude Schedule II drug refills when calculating final payments to plan sponsors at the end of each year;
(6) seek authority to restrict certain beneficiaries to a limited number of pharmacies or prescribers;
(7) develop and implement a mechanism to recover payments from plan sponsors when law enforcement agencies do not accept case referrals;
(8) determine the effectiveness of plan sponsors' fraud and abuse detection programs; and
(9) ensure that plan sponsors' compliance plans address all regulatory requirements and CMS guidance.
In the Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D report, the OIG addresses drug abuse in the Part D Program, including controlled substance abuse and the diversion of non-controlled substances for illegal purposes. The OIG analyzed prescription drug event records from 2006-2014. The study found that:
• Since 2006, Medicare spending for commonly abused opioids has grown faster than spending for all Part D drugs;
• Pharmacies with questionable billing raise concerns about pharmacy-related fraud schemes; and
• Geographic hotspots for certain non-controlled drugs point to possible fraud and abuse.
The OIG recommends that the Centers for Medicare and Medicaid continue "to conduct investigations of pharmacies with questionable billing when warranted and to monitor pharmacy billing" and to fully implement OIG's previous recommendations."
The publication of these two reports highlights the government's continued scrutiny on pharmacies and prescribing physicians. Pharmacies and physicians should ensure that they have effective compliance programs in place to internally combat fraud and abuse.
On July 8, 2015, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule containing major provisions relating to the Physician Self-Referral Law (i.e., the Stark Law) and its exceptions. CMS states that the purpose of the Stark proposals is: "to accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance," as well as to "expand access to needed health care services." CMS also states that it realizes that "additional clarification" of Stark would help.
Below is a brief summary of the proposals affecting the Stark Law:
a) Proposes new Stark exception for recruitment assistance and retention payments from hospitals, federally-qualified health centers (FQHCs), and rural hospital clinics (RHCs to physicians to assist them in employing non-physician practitioners (NPPs) in the geographical area served by the hospital, FQHC, or RHC providing the remuneration.
• The exception would not apply to remuneration flowing to a group practice or other type of physician practice (i.e., physician organizations). But, the exception would protect physicians from being considered to be "standing in the shoes of the physician organization" when determining a direct compensation arrangement.
• The exception would only apply where the NPP is a bona fide employee of the physician (or physician's practice).
• The exception would only apply to NPP services that are primary care services (i.e., family practice, internal medicine, pediatrics, geriatrics, and OB-GYN).
• Additional proposals seek to limit or "cap" the remuneration allowed under this exception.
b) Proposes adding a definition of the geographical area served by FQHs and RHCs under 42 CFR 411.357(e).
c) Proposes to standardize the various terms (e.g., "based on" or "without regard to") used for the principle of "takes into account" referrals to clarify that there are not different volume or value of referral standards in the Stark exceptions.
d) Proposes revisions to clarify that the policy stated in the Stark Phase III regulations regarding retention payments in underserved areas (42 CFR 411.357(t)) is correct and remains CMS's policy.
e) Proposes revisions to clarify that the Stark exceptions requiring that a lease or arrangement be set out in writing do not require a single formal contract. Rather, "a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, may satisfy the writing requirement." Additionally, the proposed rule clarifies that the one-year term requirement is satisfied "as long as the arrangement clearly establishes a business relationship that will last for at least 1 year."
f) Proposes to extend the "holdover" arrangements permitted by 42 CFR 411.357(a), (b) and (d) from six months to indefinitely (or, alternatively, a longer but definite period), provided that the holdover continues on the same terms and conditions and that it meets the fair market value requirements. Additionally, CMS proposes to revise the fair market value compensation exception "to permit renewals of arrangements of any length of time, including arrangements for 1 year or greater."
g) Proposes to revise the definition of remuneration to clarify that if one of the six statutory exceptions to remuneration applies, then the term "used solely" does not mean that the exception does not apply if the item, device or supply is used for more than one of the six statutorily allowed purposes.
h) CMS clarifies that employees or independent contractors do not "stand in the shoes" of their physician organization's arrangements "unless they voluntarily stand in the shoes of the physician organization as permitted under 42 CFR 411.354(c)(1)(iii) or (c)(2)(iv)(B). Additionally, CMS proposes to remove the phrase "stands in the shoes" from the definition of "locum tenens physician."
i) Proposes to expand the exception for ownership of publicly traded securities to include protection for "trading on an electronic stock market or OTC quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent."
j) Proposes a new exception for timeshare leasing "that would protect timeshare arrangements that meet certain criteria," including, but not limited to, that "the arrangement is between a hospital or physician organization (licensor) and a physician (licensee) for the use of the licensor's premises, equipment, personnel, items, supplies, or services...used predominantly to furnish evaluation and management services." This exception would not apply to independent diagnostic testing facilities or clinical laboratories.
k) CMS provides further guidance to physician-owned hospitals on the disclosure of its ownership interests, including that social media websites are not considered to be public websites for the hospital.
l) CMS also solicits comments on the affect that the Stark Law may have on Accountable Care Organizations.
In addition to the above-noted Stark provisions, the proposed rule contains a number of other proposals, including provisions on appropriate use criteria for advanced imaging services, telehealth, self-referral disclosure protocol, and more. More information on these provisions will be coming soon.
On April 20, 2015, the Department of Health and Human Services' Office of Inspector General, in partnership with the American Health Lawyers Association and the Association of Healthcare Internal Auditors, published Practical Guidance for Health Care Governing Boards on Compliance Oversight, which describes the OIG's expectations of the compliance oversight role healthcare governing boards (e.g., Board of Directors of a hospital) should play in a healthcare organization. For a summary of this guidance, please visit: http://www.americanbar.org/publications/aba_health_esource/2014-2015/June/oig.html
Proposed Legislation Would change Michigan CRNA Supervision Requirements and Increase Access to Anesthesia Care
On May 7, 2015, Michigan Senator Mike Kowall (R-White Lake) introduced legislation that would allow hospitals more flexibility in determining the best anesthesia delivery model for their patient's needs. While certified registered nurse anesthetists ("CRNAs") provide the anesthesia care during most patient procedures - staying with the patient throughout the entire procedure - Michigan law still requires physician supervision of CRNAs. However, Michigan law does not even require the supervising physician to be an anesthesiologist or surgeon.
The proposed legislation would change this model and increase access to anesthesia care for Michigan patients in medically underserved rural and urban areas, while also containing anesthesia-related costs statewide. Under S.B. 320, Michigan hospitals could choose to keep the current physician-supervision model or move to a model that allows CRNAs to practice without mandatory physician supervision. If enacted, Michigan would join 40 other states that do not require physician supervision for CRNAs to administer anesthesia. The bill is currently in the Michigan Senate awaiting testimony before the Senate Health Policy Committee. More information on S.B. 320 may be found on the Michigan Legislature's website, available here.
On May 9 and May 12, 2014, the United States Department of Health and Human Services ("HHS") published two proposed rules that would significantly expand the authority of the Office of Inspector General ("OIG") to exclude providers from participation in federal health care payor programs and impose civil monetary penalties. The proposed rules are authorized pursuant to the Affordable Care Act of 2010 ("ACA") as the ACA expanded the authority of OIG to protect federal health care programs from fraud and abuse.
The May 9, 2014 proposed rule would expand the OIG's current powers to include permissive exclusion where an individual or entity is convicted of an offense that involves obstruction of an audit. Currently, the OIG's exclusion authority only extends to convictions for obstructing an investigation into any criminal offense described under the mandatory exclusion authorities and certain permissive exclusion authorities.
In addition, the May 9, 2014 proposed rule would expand the OIG's permissive exclusion authority regarding the failure to provide certain payment information. The OIG currently has authority to exclude only entities and individuals who directly provide services and fail to provide required payment information for those services. The proposed rule would expand this authority to include not only the individual or entity directly providing the services, but also any individual or entity ordering, referring, or certifying the need for such services.
The May 9, 2014 proposed rule also adds new exclusion authority for instances where an individual or entity knowingly makes, or causes to be made, a false statement, omission, or misrepresentation of a material fact in any application or contract to participate as a provider in a federal health care program.
HHS also proposes to remove the six-year statute of limitations for exclusions. This means that, under the proposed rule, an individual or entity could be subject to exclusion for actions that occurred at any time, including several years after any alleged wrongdoing has ended or been corrected.
Under the May 14, 2014 proposed rule, the OIG would be granted expanded authority to impose civil monetary penalties on providers and suppliers of federal healthcare. The proposed rule would allow a $10,000 per day penalty on providers and suppliers who fail to timely report and return an identified overpayment. The proposed rule also seeks to add a $15,000 per day penalty for failing to grant timely access to records. False statements, omissions, or misrepresentations of a material fact in any application, bid, or contract to participate or enroll as a provider under a federal health care program would be punishable with a fine up to $50,000 under the proposed rule.
Moreover, the May 14, 2014 proposed rule would also expand existing monetary penalties for arranging or contracting for the provision of services with an excluded individual or entity. A penalty of up to $10,000 is possible under the proposed rule for each separately billable item or service provided, furnished, ordered, or prescribed by an excluded individual, plus an assessment of not more than three times the amount billed for the item or service. If an item or service is not separately billable, the OIG will determine the penalty based on the number of days the excluded person was employed or contracted, and the person's total compensation.
The May 9, 2014 proposed rule can be viewed here. The May 12, 2014 proposed rule can be viewed here. Both proposed rules are open to public comment. The deadline for public comments for the May 9, 2014 proposed rule is July 8, 2014. The deadline for the May 12 2014 proposed rule is July 11, 2014. Public comments can be submitted online at http://www.regulations.gov.
On May 19, 2014, Centers for Medicare and Medicaid Services ("CMS") announced that it is considering new ways to define and pay for hospital short-stays. In October 2013, CMS implemented the "Two-Midnight Rule" with the goal of bringing clarity to billing for Part A inpatient hospital admissions. However, the Rule has been faced with ongoing criticism and significant pushback from hospitals.
The Two-Midnight Rule was intended to provide clear guidelines regarding when hospitals should bill for inpatient versus outpatient services, such as observation. The rule provides that at the time of admission, the admitting physician must document an expectation that a patient receive 2 midnights or more of hospital care. The medical record must contain sufficient information to support this expectation as a condition of payment. Dr. Ann Sheehy testified at the House Health Subcommittee May 20, 2014 that the rule "does not distinguish between clinical populations because it is a time based policy with no basis in sound clinical judgment."
The distinction between inpatient and outpatient hospital services can significantly impact how much Medicare pays a hospital for the services it provides to beneficiaries. In fact, Medicare has historically paid nearly 3 times more for a short inpatient stay than an observation stay on average. The House Health Subcommittee heard testimony from HHS Regional Inspector General Jodi Nudelman that differing payment rates have resulted in some hospitals admitting short-stay inpatients more than others. In fact, she testified that some hospitals attribute over 70% of their inpatient stays to short stay admissions while others admit short-stay inpatients less than 10% of the time.
Growing confusion surrounding the rule and potential unintended consequences have made it clear that the Two Midnight Rule must be carefully reevaluated. Now CMS is considering new alternatives and is seeking comments on an alternate pay system. According to CMS Deputy Administrator, Sean Cavanaugh, one potential alternative could be modeled after the per-day payment system that is already used for patients who transfer from one hospital to another during an episode of care. Additionally, CMS is soliciting comments on whether reimbursement rates for specific inpatient services should be capped at the outpatient rate for the equivalent service.
The Program for Evaluating Payment Patterns Electronic Report ("PEPPER") is an electronic data report under contract with the Centers for Medicare & Medicaid Services ("CMS") that helps guide hospital's auditing and monitoring services.
In 2014, PEPPER published new target areas for Short-Term Acute Care hospitals that were identified as prone to improper Medicare payments. Significantly, 6 new target areas related to patient "status" were established (i.e., to determine whether a beneficiary was appropriately admitted as an "inpatient"). Of note, while 4 of these target areas focus on hospital stays that did not cross 2 midnights, two of the target areas focus on 2 day hospital stays. Thus, it is clear that even if a hospital stay crosses 2 midnights, hospitals will be called upon to establish that the hospitalization itself was medically necessary.
Although the Recovery Auditors (i.e., "RACs") presently are prohibited from conducting patient status reviews, Medicare Administrative Contractors ("MACs") have been tasked to conduct "Probe and Educate" medical reviews, for the purposes of determining whether CMS' new 2 midnight rule was satisfied.
90 Individuals Charged with $260 Million False Medicare Billings in National Takedown by Medicare Fraud Strike Force
On Tuesday, May 13, 2014, the Department of Justice ("DOJ") and Department of Health and Human Services ("DHHS") held a joint news conference to announce that the Medicare Fraud Strike Force had conducted a nationwide takedown of 90 individuals involving approximately $260 million in fraudulent Medicare billings. The nationwide takedown marked the seventh such takedown in Medicare Fraud Strike Force history. Since the Strike Force's inception in March 2007, operations in nine locations have charged nearly 1,900 defendants and include allegations of falsely Medicare billings of almost $6 billion. Additionally, CMS, working in conjunction with the DHHS Office of Inspector General, has suspended the enrollments of high-risk providers in five Strike force locations and has removed over 17,000 providers from the Medicare program since 2011.
The Medicare Fraud Strike Force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing. Almost 400 law enforcement agents from the FBI, HHS-OIG, multiple Medicaid Fraud Control Units and other federal, state and local law enforcement agencies participated in the takedown.
The recent takedown involved six locations, including Miami, Tampa, Houston, Detroit, Los Angeles, and New York. The charges included allegations that the defendants committed various health care fraud-related crimes, including conspiracy to commit health care fraud, violations of the anti-kickback statute and money laundering. The charges are based on a variety of alleged fraud schemes involving various medical treatments and services, including home health care, mental health services, psychotherapy, physical and occupational therapy, durable medical equipment and pharmacy fraud. Of the 90 individuals charged, 27 were health care professionals, including 16 physicians.
In December of 2013, the Centers for Medicare & Medicaid Services (CMS) issued a Request for Quotes for new Recovery Auditor (RAC) contracts. The new contracts include significant changes to payment terms. Whereas the current contracts allow payment to RACs after the first level of appeal has been exhausted (120 days), the new contracts do not allow payment until after the second level of appeal has been exhausted (120 - over 400 days).
In opposition of the modification on payment terms, CGI Federal, Inc., the Region B Recovery Auditor, submitted pre-award protests to the federal Government Accountability Office (GAO) asking for a change to the new payment terms. The GAO denied the protests on April 23, 2014.
On May 1, 2014, CGI elevated its case to the Court of Federal Claims. The suit requested the Court to order an injunction against the US Department of Health and Human Services' (HHS) implementation of the new RAC contracts and remove the delay in compensation. GCI argues that the new payment terms are inconsistent with customary commercial practices and unfairly restrict competition for the contract, rendering it "commercially impracticable" for CGI to submit a quote.
The first hearing is scheduled for June 6, 2014. The judge will grant an injunction if he or she determines that irreparable harm would be done if the contracts are awarded. If the judge does not grant injunctive relief, CGI may still proceed with its case. The A/B contract awards were expected in May or June, but could be delayed as a result of the suit.