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On July 28th, 2016, the Department of Justice released a report stating that the Lexington County Health Services District will pay $17 million for violations of the Physician Self-Referral Law (the Stark Law) and the False Claims Act.

The Department alleged that Lexington Medical Center (“LMC”) violated the Stark Law (which prohibits physicians from referring Medicare beneficiaries to an entity in which the physicians have a financial relationship for designated health services) by providing financial incentives to  28 physicians in exchange for referrals. The physicians were purportedly provided compensation in excess of fair market value, with the volume or value of referrals taken into account. The False Claims Act (which, in pertinent part, imposes penalties on healthcare providers for submitting false claims to a government program) lawsuit was filed by whistleblower Dr. David Hammett, a former employee who claims he was fired for not providing enough referrals to LMC.

This False Claims Act case is one of many since 2009, through which the government has, in total, recovered more than $18.3 billion from healthcare agencies. The countless violations of the Stark Law alleged by the government in recent years have called into question the complexity and breadth of the law.

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Attorney General Eric T. Schneiderman and United States Attorney Preet Bharara announced a $2.95 million fraud settlement with three hospitals in the Mount Sinai Health System resulting from Medicaid overpayments.

A whistleblower alleged that Mount Sinai Beth Israel, Mount Sinai St. Luke’s, and Mount Sinai Roosevelt knowingly retained over $844,000 in Medicaid overpayments beyond the 60-day repayment window, a violation of False Claims Acts (on both the state and federal levels). The hospitals’ former partnership group, Continuum Health Partners, Inc., experienced a software error in 2009, which sent hundreds of erroneous claims to Medicaid by 2011. These overpayments were not fully reimbursed to Medicaid for nearly two years. A $2.95 million fraud settlement was determined in a qui tam lawsuit, United States and the State of New York, ex rel. Robert P. Kane v. Healthfirst, Inc., et al.

The settlement could signal the beginning of a wave of similar lawsuits, with hospitals worried due to the FCA’s extensive statute of limitations of 10 years, to which an additional 6 years may be added due to a Centers for Medicare and Medicaid Services rule finalized in February of this year.

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On July 25th, The Centers for Medicare and Medicaid Services (CMS) released a new proposed rule which could materially change the Medicare payment model for hospitals in 98 randomly selected metropolitan statistical areas.

The proposed rule contemplates the creation of new bundled payment models for cardiac care, in addition to the extension of the existing bundled payment model for hip replacements to other hip surgeries. Additionally, CMS developed a new model to encourage the implementation of cardiac rehabilitation in hospitals. The final major component of the regulation is the Quality Payment Program, which introduces payment incentive opportunities for physicians who participate appreciably in bundled payment models. The aforementioned new episode payment models (EPMs) are serve to pay for the entirety of the course of treatment for a Medicare beneficiary, as opposed to remitting separate payments to providers and suppliers for the items and services furnished.

The proposed rule is a part of CMS’s initiative to ensure that quality of care is prioritized over quantity of patients.  CMS maintains that “bundled payments support better care coordination and ultimately better outcomes for patients.” Public comments can be submitted after the proposed rule is published on the Federal Register on August 2nd.

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All healthcare organizations should maintain an emphasis on compliance not on an episodic basis (e.g., in response to an enforcement-related development). Rather, an institutional commitment to compliance should be an integral part of an organization’s culture, with appropriate resources and leadership support.

In connection, it is instructive to revisit the principles of the DOJ’s ‘Yates Memo”. In September 2015, the Department of Justice (DOJ) released the “Yates Memo”, which enumerates steps the DOJ will take “to strengthen our pursuit of individual corporate wrongdoing.”

Six “key steps” outlined thereunder are as follows:

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On June 27th, 2016, a proposed rule was published in the Federal Register that could adversely affect home healthcare agencies.

The Centers for Medicare & Medicaid Services (CMS) proposed significant reductions in Medicare reimbursements for home healthcare agencies. Such reductions would take effect in  2017, totaling $180 million, or about a 1% cut in funding. These cutbacks would be harmonious with the Affordable Care Act (ACA), stemming from overpayments for home health services dating back to 2000. There were similar diminutions in 2015 (totaling $60 million) and 2016 (totaling $260 million).

It is clear that home healthcare agencies will encounter heightened financial challenges as a result of these reductions. The tight margins for HHAs has translated into a decline in the number of agencies that opt to sign up for Medicare. In 2014, about 11,800 home healthcare agencies were signed up with Medicare, while this year, there were only about 11,400. Public comments on this proposed rule will be accepted until 5:00pm on August 26th, 2016.

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On July 28th, 2016, researchers from Harvard, in conjunction with researchers from several hospitals, published a study in the BMJ which found that the implementation of new electronic health records (EHRs) systems does not have material repercussions on patient care in hospitals.

The study observed 17 hospitals implementing new EHRs, along with a control group of 399 hospitals in the same hospital referral region. Researchers looked at 6-month periods both before and after this implementation, and found that 30-day mortality and adverse safety event rates did not vary significantly. There was an unadjusted decrease in 30-day readmission rates, from 19.9% to 19.0%, however, the researchers confirmed that “there was no significant change in any outcome between pre-implementation and post-implementation periods.”

Despite increasing alarm over patients’ safety  after hospital-wide transitions to EHR systems, it appears that hospitals are able to overcome any disruptions associated with the transition, with no overall negative effect on short-term inpatient mortality, adverse safety events, or higher rates of hospital readmissions.

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On July 29, 2016, the Centers for Medicare & Medicaid Services (“CMS”) announced that it is expanding statewide (and extending for an additional six (6) months), the temporary enrollment moratoria on new Medicare Part B home health agencies (“HHAs”) in Florida, Texas, Illinois, and Michigan.  The statewide expansion also applies to Medicaid and Children’s Health Insurance Program (“CHIP”).

The expansion and extension also apply to non-emergency ground ambulance suppliers in New Jersey, Pennsylvania, and Texas.  CMS is also lifting the temporary moratoria on all Medicare Part B, Medicaid, and CHIP emergency ground ambulance suppliers.  These changes are effective as of July 29, 2016.

CMS also announced the Provider Enrollment Moratoria Access Waiver Demonstration (“PEWD”).  Under PEWD, CMS can allow exceptions to enroll providers and suppliers in the moratoria areas if access to care issues are identified and for the development and improvement of methods of investigating and prosecuting fraud in Medicare, Medicaid, and CHIP.

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The United States Department of Health and Human Services has new actions planned to address the opioid crisis. The buprenorphine rule has been finalized, which allows physicians who have waivers to prescribe buprenorphine products (e.g., Suboxone) for up to 100 patients for 1 year or more to obtain a waiver to treat up to 275 patients. Also, per Centers for Medicare & Medicaid Services (CMS) many doctors have reported feeling financial pressure to overprescribe opioids since Medicare payments to hospitals are tied to scores on the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, therefore CMS is recommending that the pain management questions on the HCAHPS be eliminated. Lastly, Indian Health Service is mandating that its opioid pharmacists and prescribers check their state prescription drug monitoring program database before dispensing or prescribing any opioids. In an effort to improve and expand prescriber education and training programs, HHS will also be conducting over a dozen studies on pain treatment and opioid misuse.

To learn more about the latest actions by HHS see the HHS July 6, 2016 news release.

Robert S. Iwrey, Esq., a founding partner of The Health Law Partners, P.C., practices in all areas of healthcare law and devotes a substantial portion of his practice assisting clients in pharmacy legal matters including compliance, third party payor audits, government investigations, state licensing and DEA registrations. For more information regarding this article or pharmacy legal matters, please contact Robert S. Iwrey, Esq. at (248) 996-8510 or (212) 734-0128 or riwrey@thehlp.com.

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New rules published on June 30th, 2016 in the Federal Register could dramatically change the regulatory enforcement landscape for healthcare providers, with fraud penalties nearly doubling under the False Claims Act and the Anti-Kickback Act.

The False Claims Act (which in pertinent part imposes penalties on healthcare providers for submitting false claims to a government program) has had a penalty range of $5,500 to $11,000 per claim since 1996, but such penalties will increase to a range of $10,781 to $21,563 per claim. Penalties for violations of the Anti-Kickback Act (which prohibits physicians from referring Medicare beneficiaries to an entity in which they have a financial relationship for designated health services) will correlatively be substantially enhanced, from $11,000 per violation to $21,563 per violation.

The basis for these adjustments is the Federal Civil Monetary Penalties Inflation Adjustment Act of 1990, which requires that civil monetary penalties be adjusted regularly in order to account for inflation. These changes are set to take effect on August 1st, 2016. Public comments on the changes can be submitted to the Justice Department until August 29th, 2016.

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On Thursday, the U.S. Supreme Court issued a decision that recognizes implied certification as a viable theory under which to pursue False Claims Act cases against healthcare providers. Implied certification can impose liability if a contractor has engaged in a lie by omission, for instance, failing to disclose its noncompliance.

In the case, Universal Health Services v. Escobar, the court ruled that companies are subject to False Claims Act liability and the implied certification theory, but only if: (1) claims from healthcare providers request payment and make “specific representations about the goods or services provided” and (2) an organization’s failure to disclose noncompliance with “material” requirements would equate to “misleading half-truths.”

This case could result in a significant increase in False Claims Act cases being pursued against healthcare providers.

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