SZD Health Law Scan : Health Care Lawyers & Attorneys : Schottenstein Zox & Dunn Law Firm : Strategic Planning, Managed Care, Insurance : Columbus, Cleveland, Cincinnati, Central Ohio

According to a recently released report from Centers for Medicare & Medicaid Services (CMS), providers won 64.4 percent of appealed claims during the three-year Recovery Audit Contractors (RAC) demonstration project. Providers appealed 76,000 claims and received favorable decisions on 49,000.

Providers can win a RAC appeal. Preparedness is the first step to surviving a RAC audit. Providers must be prepared to respond to RAC demand letters and requests for medical records. Because RAC audits are generally unannounced, the appropriate time to prepare for an audit is now. Providers should consider the following to prepare for an audit:

• Not responding is not an option. Providers have a narrow window in which to respond to an audit. Providers have 45 days to respond to a RAC request for medical records. If a provider fails to respond, RACs are authorized to render an overpayment determination on the underlying claims. Failure to timely respond could also result in the loss of valuable appeal rights.
• Designate someone as the contact person for all audits. Providers should designate appropriate personnel to respond to all audit requests. RACs are required to communicate with providers by email, telephone, letters and in-person. Accordingly, administrative personnel must be available to process correspondence and respond to the RAC's various requests. Training personnel and cultivating a working relationship with the regional RAC may mollify interactions and aid in the timeliness of communications.
• Collect relevant documents and records. Providers should ensure that the records they produce to the auditor are complete. This will help show the appropriateness of the treatment, billing and reimbursement. The relevant records include not only medical records, but billing information as well.
• Contact legal counsel. Providers are well served to engage legal counsel to help navigate RAC audits and appeals. Lawyers can help train employees on the details of RACs, including an overview of the regulatory history, "hot button" issues RACs are likely to focus upon, and how to respond appropriately.
• Investigate the claims at issue. Providers should undertake a careful review of the materials investigated during an audit. RACs are sometimes perceived as overly aggressive in identifying overpayments largely because they are paid on a contingency fee basis. Staying abreast of the scope of the audit may reveal issues that are ripe for appeal.
• Keep a written record of all contact with auditors and a set of all documents sent to auditors. Because the audit findings can be appealed, providers should retain a copy of all documents provided to the RAC. Providers should also memorialize the date, time and a brief description of all communications during the audit. Keeping accurate records will protect providers if a problem arises regarding the conduct of the audit. It will also help the provider appeal an adverse audit finding.
• Become familiar with the appeals process. RAC denials are subject to the Medicare Part A and Part B appeals process with two differences. First, providers are given 15 days from the date they receive an improper payment letter from a RAC to rebut the RAC's findings, although providers are not required to go through this rebuttal process before filing an appeal. Second, a provider appealing a RAC determination must file an appeal to its fiscal intermediary within 30 days of the date that the provider receives the fiscal intermediary's notice indicating the amount of overpayment identified by the RAC. Given the number of appeals decided in the provider’s favor, the importance of audit preparation and understanding your appellate rights cannot be understated.

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Presenters:
Stephen Kleinman, Schottenstein Zox and Dunn, Partner, Health Care Practice Group
Robert Cochran, Schottenstein Zox and Dunn, Of Counsel, Health Care Practice Group

The Patient Protection and Affordable Care Act (PPAC) is anticipated to expand insurance coverage to 32 million people. As a result, the specific legislative changes discussed in this podcast will impact millions of Americans and the way health insurance companies do business. Listen as Steve and Bob discuss these changes.

This podcast is part of the Law Firm Alliance – 2010 Health Care Reform podcast series, which can be accessed in its entirety by clicking here.

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The Patient Protection and Affordable Care Act (H.R. 3590), signed into law on March 23, 2010, contains new fraud and abuse provisions. Some of the key fraud and abuse provisions include:

• Requires all providers to implement compliance programs. The U.S. Department of Health and Human Services (HHS) will develop core elements for inclusion in a compliance program.
• Requires providers to report and return overpayments within 60 days of identifying the overpayment (or the date any corresponding cost report is due). Providers must state in writing the reason for the overpayment. Clarifies that an overpayment retained after the deadline for reporting and returning the overpayment is an “obligation” for purposes of the False Claims Act (FCA). Under the FCA, any provider who knowingly retains an overpayment can face civil prosecution.

Continue Reading...

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The Centers for Medicare and Medicaid (CMS) released its annual report on national health spending. According to the CMS press release, 2008 had the "the slowest rate of growth since [CMS] started officially tracking expenditures in 1960." The rate slowed to 4.4 percent down from 6.0 percent in 2007.

However, despite the decelerated growth, health spending's share of the gross domestic product increased from 15.9 percent in 2007 to 16.2 percent in 2008.

CMS also reports the following statistics:

• Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared to 5.9 percent in 2007, the slowest rate of increase since 1998. 
• Physician and clinical services’ spending increased 5.0 percent in 2008, a deceleration from 5.8 percent in 2007. 
• Retail prescription drug spending growth also decelerated to 3.2 percent in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns.
• Spending growth for both nursing home and home health services decelerated in 2008.   For nursing homes, spending grew 4.6 percent in 2008 compared to 5.8 percent in 2007. 
• Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5 percent in 2008, the same rate as in 2007. 
• Health care spending by private sources of funds grew only 2.6 percent in 2008 compared to 5.6 percent in 2007. 
• Private health insurance premiums grew 3.1 percent in 2008, a deceleration from 4.4 percent in 2007.

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On November 19, 2009, the House of Representatives passed the Medicare Physician Payment Reform Act of 2009 ("H.R. 3961"). The bill reforms the Medicare physician payment formula, called the Sustainable Growth Rate ("SGR"). Under the current formula, Medicare payment rates for physicians' services will be cut by about 21 percent in 2010 and additional cuts would occur annually.

The Congressional Budget Office ("CBO") summarized H.R. 3961's changes to the SGR as follows:

• The update for 2010 would be the percentage increase in the Medicare economic index (MEI), which is 1.2 percent, as specified in the final rule.
• Beginning in 2011, there would be separate target growth rates and conversion factor updates for two categories of service: evaluation, management, and preventive services, and all other services.
• The new SGR formula would take into account spending for each category of service since 2009 or—beginning in 2014—for the past five years. (The current SGR formula takes into account spending since 1996.)
• Finally, only physician services, and not other services provided incident to the physician visit (such as laboratory services), would be counted in each category.

As noted above, consistent with the Centers for Medicare and Medicaid final rule for the 2010 physician fee schedule (publication date: November 25, 2009), H.R. 3961 amends 42 U.S.C. 1395w–4(d)(4)(A) to eliminate the discretion of the Secretary of the Department of Health and Human Services to include physician-administered drugs within the definition of "physicians' services" for the purposes of SGR calculations. Physicians' services are currently defined to include:

"other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

Under the proposed definition, such services would be defined to include only:

"other items and services for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services), but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

The CBO estimated that H.R. 3961 would increase physician payments over the next 10 years by about $195 billion.

H.R. 3961 was received in the Senate on November 20, 2009.

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On November 18, 2009, the Senate released a draft health insurance reform bill, entitled the "Patient Protection and Affordable Care Act."  Like the House bill, the Senate's bill proposes to establish Exchanges, or marketplaces for individuals to shop for insurance when insurance is not available through their employers. The bill contains a public option (referred to in the Senate's bill as the "community health insurance option") but differs from the House bill in that it permits states to "opt out" or prohibit that state's Exchange from offering a community health insurance option.  This bill will expand Medicaid coverage for those people earning less than 133% of the federal poverty line and will provide subsidies for the purchase of health insurance for people earning less than 400% of the FPL.

The Senate's bill stops short of the House's proposed ban on public health insurance options providing coverage of abortion services but it does prohibit the use of federal funds for abortion services.

To pay for some of the costs of the bill, the bill proposes an excise tax on high cost employer-sponsored health coverage (i.e., plans worth $8,500 for individuals and $23,000 for families).  The bill also proposes a tax on elective cosmetic surgeries and an increased hospital insurance tax on high-income taxpayers that would increase the Medicare deduction from 1.45% to 1.95% for incomes over $200,000 for individuals and $250,000 for couples.

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The American Hospital Association released a helpful Recovery Audit Contractor Program Update dated October 5, 2009. There is a password required.

The report is also available on the Ohio Hospital Asssociation website as well.

A few highlights:

• To date, CMS has approved only automated audits, which rely on software analysis to find technical errors such as coding errors.
• CMS has delayed approval of complex audits, including medical necessity reviews, in order to finalize processes and policies related to requesting and auditing medical records.
• DRG and coding validations are likely to begin in November 2009 at the earliest, with medical necessity reviews delayed until 2010.AHA has made available to all hospitals a free claim-level Excel tool to assist in tracking RAC audits.

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The Senate Finance Committee has approved its health care reform legislation, entitled "America's Healthy Future Act." This legislation will now have to be merged with the version approved by the Senate Committee on Health, Education, Labor and Pensions (the "HELP Committee").

The two bills share many common concepts, such as penalties for individuals who fail to obtain health insurance, expansion of Medicare and requirements for insurance plans that, for example, include prohibitions on exclusions for pre-existing conditions.

However, the Finance Committee's version differs from the HELP Committee's in some significant ways. First, the Finance Committee's version does not establish a government-run health insurance plan, commonly referred to as a "public option," that would compete in the health insurance exchanges with private health insurance plans. Second, it does not mandate employers to provide health insurance. Third, it proposes different methods for financing the cost of the legislation. For example, the Finance Committee's version proposes assessing fees on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).

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The White Collar Crime Prof Blog is posting information from the National Association of Criminal Defense Lawyer's Annual Defending the White Collar Case Seminar. A keynote address was given by Lanny A. Breuer, Assistant Attorney General, Criminal Division, Department of Justice. 

Breuer had the following to say about health care fraud:

"On the topic of health care fraud, which he called 'particularly severe,' Breuer said that much of the $800 billion dollars per annum that the government spends on Medicare and Medicaid is lost to 'waste, fraud and abuse,' which he estimated at a minimum of 3% of those expenditures. In this context, interagency efforts are being pursued in what he characterized as an 'innovative, data driven approach.' For example, pointing to multiple recent indictments in Detroit, Mich., he said that government investigation is driven by data such as information about which geographic areas have higher Medicare billing. He promised that such enforcement action will be spreading to new cities, explaining that government data shows that Medicare billings go down after the strike force goes into cities. "

The White Collar Crime Prof Blog is edited by Ellen S. Podgor, Professor of Law, Stetson University College of Law. The Breuer post was written by Guest Blogger Ivan J. Dominguez, Assistant Director of Public Affairs & Communications, National Association of Criminal Defense Lawyers. 

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The Office of Inspector General ("OIG"), Department of Health & Human Services, released its Work Plan for fiscal year 2010.  The Work Plan describes the work the OIG plans to initiate or continue in the coming year. 

A copy of the Plan is here oig.hhs.gov/publications/workplan.asp

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CGI Technologies and Solutions, Inc. is the RAC contractor for Region B, which includes Ohio.  Provider outreach started in September and, according to CGI's website, will be done by the end of September.  CGI is already operational in Indiana, Michigan, and Minnesota, so expect RAC audits to start in Ohio before the end of the year.  CGI's RAC website is located at racb.cgi.com/Default.aspx

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Senate Finance Committee Chairman Max Baucus has been reported as circulating to members of the committee a document entitled "Framework for Comprehensive Health Reform."

The Framework represents "many of the policies" discussed by the committee but is "not a final product . . . and does not include everything that might be in the [Chairman's Mark]." It most notably does not include a public insurance option. Rather, it proposes a Consumer Operated and Orientated Plan (CO-OP) program to create nonprofit, member-run health insurance companies that service individuals in one or more states.

Also, it does not propose an employer mandate. However, as discussed below, while there is no employer mandate, certain employers may be fined for not providing health insurance coverage.

Some other highlights of the document include:

• Penalizing US citizens and legal residents who fail to obtain health insurance coverage up to $3,800 per year.
• Fining employers with more than 50 full-time employees (30 hours and above) that do not offer health insurance coverage to their employees up to $400 annually for each employee who receives a tax credit for health insurance through an exchange.
• Establishing state-based exchanges to assist individuals and small groups to more easily compare health insurance plan benefits and premium costs for four benefit options that would be available.
• Permitting health insurance premiums to vary based on only four factors: tobacco use, age, family composition and geographic differences.
• Prohibiting health insurance plans in the individual market from excluding coverage for pre-existing health conditions or rescinding health coverage.
• Levying an excise tax of 35% on insurance companies and insurance administrators for any health insurance plan that is above $8,000 for singles and $21,000 for family plans.
• Assessing fees that would be generally allocated by market share on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).
• Permitting states to form "health care choice compacts" between two or more states to allow the purchase of non-group health insurance across state lines.
• Expanding Medicaid coverage to include individuals who are not currently eligible (e.g., non-elderly individuals (childless adults) at or below 133% of poverty).
• Reducing a state's allotment for Medicaid Disproportionate Share Hospital Payments by 50% once the number of uninsured individuals in the state is reduced by 50%.

 

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The Settlement Agreement and Corporate Integrity Agreement ("CIA") between the government and Pfizer are available.

The Settlement Agreement is available at http://op.bna.com/hl.nsf/r?Open=jthn-7vhqr9 .

The CIA is available at http://www.oig.hhs.gov/fraud/cia/agreements/pfizer_inc.pdf.

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In a combination of civil and criminal settlements, Pfizer, Inc. and its subsidiary Pharmacia & Upjohn Company, Inc. (collectively “Pfizer”) agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice (“DOJ”). The settlement with Pfizer arises out of civil and criminal allegations relating to Pfizer’s allegedly illegal promotion of certain drugs, most notably Bextra.

Pharmacia & Upjohn Company, Inc. agreed to plead guilty to a felony violation of the Food, Drug, and Cosmetic Act for misbranding Bextra with the intent to defraud or mislead. Bextra is an anti-inflammatory drug that Pfizer pulled from the market in 2005. Under the provisions of the Food, Drug and Cosmetic Act, a company must specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called “off-label” uses – i.e., any use not specified in an application and approved by FDA. Pfizer promoted the sale of Bextra for several uses and dosages that the FDA specifically declined to approve due to safety concerns. The company will pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the United States for any matter according to DOJ.

In addition, Pfizer agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs – Bextra; Geodon, an anti-psychotic drug, Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug – and caused false claims to be submitted to government health care programs for uses that were not medically accepted indications and therefore not covered by those programs. The civil settlement also resolves allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these, as well as, other drugs. 

Pfizer also agree to enter into an expansive corporate integrity agreement with the Office of Inspector General and the Department of Health & Human Services.

 

The DOJ press release is here: www.usdoj.gov/opa/pr/2009/September/09-aag-900.html

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The Settlement Agreement between the Department of Justice and Covenant Medical Center of Waterloo, Iowa is now available. On August 25, 2009, DOJ announced Covenant agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act. The government accused Covenant of submitting false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The government alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above market value, to five employed physicians. According to the government, these physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

In the Settlement Agreement, the government claimed Covenant paid compensation to five physician employees that exceeded the fair market value of the services provided by those physicians.  Covenant denied the allegations of wrongful conduct and claimed the compensation paid was consistent with the fair market value of the services provided by the physicians.  The Settlement Agreement did not have any other details concerning the compensation. 

The Settlement Agreement is here www.szdhealthlawscan.com/uploads/file/Settlement Agreement (H1627730).PDF

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On August 25, 2009, the Department of Justice announced Covenant Medical Center in Waterloo, Iowa agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act. The settlement resolves allegations that Covenant submitted false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The government alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above market value, to five employed physicians. According to the government, these physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

Covenant issued a press release denying any wrongdoing or illegal conduct. Covenant maintained the physician compensation was consistent with the approved compensation plan, was based on work personally performed by the physicians, and reflected their exceptionally high level or productivity. Covenant said it made a business decision to settle to avoid the uncertainty of litigation, disruption, and high expense associated with protracted litigation with the government. 

 

An article in the Des Moines Register on May 26, 2005 provides some information about the compensation. The paper reported that Covenant paid one orthopedic surgeon more than $2.1 million and a second orthopedic surgeon more than $1 million. A gastroenterologist was paid nearly $2.1 million. These figures were for the budget year ending in June 2003. 

 

DOJ's press release is here www.justice.gov/opa/pr/2009/August/09-civ-849.html

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On June 25, 2009, Daniel Levinson, Inspector General of the U.S. Department of Health and Human Services, testified before the House Energy and Commerce Committee's Subcommittee on Health. During his testimony, he addressed the OIG's ongoing efforts in combating fraud, waste and abuse in Medicare and Medicaid. Additionally, he reiterated the OIG's "Five Principles," which the OIG believes should guide the development of a national health care integrity strategy. The Inspector General had recently announced these same principles before the Senate's Special Committee on Aging.

The Inspector General summarized the Five Principles as follows:

1.      Enrollment - Scrutinize individuals and entities that want to participate as providers and suppliers prior to their enrollment in health care programs.

2.      Payment - Establish payment methodologies that are reasonable and responsive to changes in the marketplace.

3.      Compliance - Assist health care providers and suppliers in adopting practices that promote compliance with program requirements, including quality and safety standards.

4.      Oversight - Vigilantly monitor programs for evidence of fraud, waste, and abuse.

5.      Response - Respond swiftly to detected fraud, impose sufficient punishment to deter others, and promptly remedy program vulnerabilities.

The Inspector General concluded his testimony by tying the OIG's strategy to the broader efforts to reform the U.S. health care system: "In the context of health care reform, it is an especially important time to consider how to best safeguard health care programs from fraud, waste, and abuse to protect beneficiaries and taxpayer dollars." According to the Inspector General, the Five Principles provide the necessary framework to accomplish these goals.

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On March 13, 2009, the U.S. Department of Health and Human Services, Office of Inspector General (the "OIG") posted advisory opinion 09-01 (the "Opinion") which examines possible fraud and abuse implications associated with a proposed free local transportation program for friends and family of residents of a skilled nursing facility. 

At issue in the Opinion was whether the proposed transportation program would constitute grounds for sanctions under the civil monetary penalty law (the "CMP Law") or could violate the Federal Anti-Kickback Statute (the "Kickback Statute").  

Factual Background—Description of Proposed Free Transportation Program

The entity requesting the opinion is a not-for-profit skilled nursing facility (the "Nursing Home"), which is solely owned by a large health system. The Nursing Home proposed to offer a program of complimentary local transportation for friends and families of its residents to its facility (the "Program"). The Nursing Home described its facility as not being easily accessible by public transportation for family and friends living within the Nursing Home's primary historical service area. In fact, the Nursing Home is separated from part of its primary historical service area by a bridge, which requires a $9.00 toll. 

Continue Reading...

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The U.S. Court of Appeals for the Third Circuit recently reversed summary judgment granted by the U.S. District Court for the Middle District of Pennsylvania in favor of a hospital and its anesthesia providers who asserted protection under the "personal services" exemption to Federal Stark Law ("Stark") and the Federal Anti-Kickback Statute ("AKS"). United States ex rel. Kosenske v. Carlisle HMA, Inc., No. 07-4616 (3^rd Cir. 2009). 

The Plaintiff in the Qui Tam action was a member of the anesthesiology group, Blue Mountain Anesthesia Associates, PC ("the Group") which entered into a written contract with Carlisle Hospital and Health Services ("CHHS") for the exclusive right to provide anesthesiology services at the hospital. Pursuant to this exclusive service arrangement, CHHS agreed to provide office space, supplies, equipment and personnel for the Group's use at no charge when the Group was providing anesthesiology services to patients at the hospital. The contract contemplated that the Group would administer pain management services in addition to its more traditional anesthesia-related responsibilities, although, importantly, no pain management services were being provided when the contract was executed in 1992.

 

In 1998, CHHS built a new stand-alone facility containing an outpatient ambulatory surgery center and a pain clinic, located about three miles from the hospital. From the day of its opening, the Group provided pain management services to patients in the pain clinic and, in exchange, was given rent-free space and equipment in the pain clinic and support personnel at no charge. As with the anesthesia services, the Group's member physicians submitted claims to Medicare for the professional services performed during these visits, and CHHS submitted claims for the facility and technical component of the visits. The parties did not amend the 1992 agreement to include this additional facility or new range of responsibility. 

 

CHHS sold the hospital, surgery center, and other assets to Carlisle HMA ("Carlisle") in 2001. In furtherance of the sale, Carlisle and the Group conducted the business relationship as if the agreement with CHHS remained in effect. Both entities continued to submit claims to Medicare for their respective costs.

 

Plaintiff discontinued his practice with the Group and filed suit in 2005 alleging that Carlisle was noncompliant with Stark and the AKS, even though when submitting its claims for facilities costs to Medicare it had certified that it was in compliance. The Third Circuit agreed, making several important holdings:

 

(1)   The office space, medical equipment and personnel provided by Carlisle to the Group at no charge constituted remuneration in-kind and evidenced a financial relationship arrangement under the Stark Law;

 

(2)   No written agreement set forth the pain management relationship because the pain clinic was substantively different from inpatient anesthesia services addressed by the 1992 contract; and

 

(3)   Even if the 1992 contract was construed to apply to the pain management relationship, the agreement did not contemplate the provision of free office space, equipment and staff provided at the pain center. Therefore, the 1992 agreement did not specify the compensation to be paid over the term of the arrangement, as required by the personal services exception.

 

The Court acknowledged that, although arrangements between anesthesiologists and hospitals typically do not raise Stark or AKS concerns because anesthesiologists do not refer patients to the hospital, physicians seeing patients in a pain management clinic may refer patients to the hospital for tests or other procedures. After the Group expanded into providing pain management services, its members developed their own clientele capable of being referred to the hospital; thus, the Group was no longer a simple efficiency, but a referral source with a compensation relationship with the hospital. 

 

Kosenske serves as a reminder of the importance of adequately documenting all relationships between hospitals and physicians and the need to keep such documentation current. This case also highlights that supplying space, equipment and personnel by a hospital to its hospital-based service provider is not per se illegal; rather, the value of the space, equipment and personnel must be factored into an analysis of whether the overall arrangement is consistent with fair market value.

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President Obama wants to cut the deficit in half by 2013.  How the president plans on doing this is still unclear, but stopping Medicare fraud and abuse is expected to be one of his proposals.   He will submit a budget proposal on Thursday with more details.  At this time, however, one thing seems certain - expect to see an increase in fraud and abuse investigations in the future, especially Medicare audits.  Health care providers should review their compliance plans and be prepared for increased government scrutiny.

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Extending its string of positive advisory opinions involving gainsharing arrangements, over the past few months the OIG has issued three new, favorable gainsharing opinions. While the three gainsharing arrangements reviewed by the OIG in the recent opinions bear striking similarities to gainsharing arrangements that received favorable treatment in the past, there are some differences that suggest a broadening of the type of gainsharing arrangements that will receive OIG approval.

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There is still time to signup for Schottenstein Zox & Dunn's Online Seminar "Health Care Basics - How to Respond to a Government Audit or Investigation" being held Wednesday, January 28, 2009 from Noon to 1:00 p.m. (Eastern Time).

The U.S. government continues to aggressively prosecute health care fraud and abuse. According to its most recent Semiannual Report to Congress, the Department of Health and Human Services Office of Inspector General (OIG) recovered $3.68 billion in audit and investigative receivables for the second half of fiscal year 2008. The OIG also excluded 3,129 individuals and organizations from participation in federal health care programs and reported 775 criminal actions and 342 civil actions against individuals or organizations for health care offenses and misconduct. Most civil or criminal enforcement actions begin with a government-directed audit or investigation. Understanding the basic steps to employ when you become involved in an audit or investigation is the first step towards a successful resolution.

Join Kris Dawley and Robert Cochran of Schottenstein Zox & Dunn for an online discussion of how to respond to an audit or investigation and the steps health care providers can take to minimize potential harm to their organization.

There is no fee to attend. However, reservations are necessary.

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Effective December 12, 2008, entities that provide products or services under contracts subject to Federal Acquisition Regulations ("FAR") must make mandatory disclosure of certain overpayments or legal violations.  The new disclosure requirement is the product of recent amendments to FAR to mandate that government contractors make timely disclosure to the government when they have "credible evidence" that a violation of certain federal criminal laws or the civil False Claims Act (FCA) has occurred in connection with a federal contract. 

The new rule has four primary elements:

• First, it requires all contractors (including commercial items contractors and small businesses) to establish and promote awareness of a Code of Conduct.
• Second, it requires all contractors to disclose to the Government any “credible evidence” of (i) certain crimes, (ii) a violation of the civil False Claims Act (FCA), or (iii) a significant overpayment by the Government.
• Third, it provides for suspension or debarment for a contractor’s failure to “timely disclose” those same events if there is "credible evidence" to support a violation – even where the event occurred prior to the effective date of the new rule.
• Fourth, it mandates that large companies with non-commercial items contracts implement a comprehensive “internal control system.”

The new rule is a major change from the previous policy of voluntary disclosure.  Most health care products and services are provided to beneficiaries under arrangements that are not subject to FAR.  However, entities that have contracts with federal agencies should check to determine whether the new disclosure requirements apply to their business. 

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The American Health Lawyers Association recently released the results of its Voluntary Disclosure Survey.  The Survey provides data and observations regarding the experience of healthcare organizations with the government voluntary disclosure process.  There were 195 respondents.  Some of the important findings include:

• 71% of respondents had been involved in a voluntary disclosure to the government.
• 70% of the disclosures involved overpayment or billing/coding errors and 28% involved Kickback or Stark violations
• 70% of the disclosures were made by outside counsel.
• Most of the disclosures were made to OIG, followed by government contractors (e.g., fiscal intermediaries) and U.S. Attoney's Offices.
• Almost half (49%) of the disclosures were resolved within a year of the disclosure.
• 46% of the disclosures were resolved with a full overpayment refund; 12% resulted in a corporate integrity agreement.

The complete survey results are located here.

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Advisory Opinion 08-10, posted by the OIG on August 26, addresses a proposal for a physician group practice to provide space, equipment and personnel to another physician group practice through a block lease, and concludes that there is a "significant risk" that the arrangement would be an improper contractual joint venture that would reward the leasing group for referrals.

The opinion addresses a block lease of space, personnel  and equipment from oncologists to urologists for IMRT, combined with use of contracted radiologists to supervise the procedures.   The urologists bill all payers for the services, including Medicare.  The  OIG's rationale is that of its 2003 contractual joint venture advisory bulletin, but it is notable that in the arrangement discussed in this Advisory Opinion, the blocks of time are fixed, as is the compensation, and there is a one-year term.  Thus, although the OIG refuses to address the question, it appears that all of the components may have been designed to satisfy a safe harbor.  The OIG doesn't address the safe harbor issue because the remuneration it is concerned about is the opportunity for the urologists to make a profit.  The OIG emphasizes that the oncology group is agreeing to provide services it could provide in its own right for less than the available reimbursement. 

 

A key point that may distinguish this from many physician block leases is that the urologists do not participate in performing the IMRT, but contract out substantially all the services, including the professional services.   The opinion states that the urologists contract with individual radiologists (who also provide services to the oncologists) to supervise the IMRT procedures.  Thus, the OIG goes on to note that the urologists commit little financial, capital or human resources. 

 

Like the recent changes to the Stark Law regulations, this opinion provides indication of continually increasing government scrutiny of physician ventures.

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On July 29, 2008, the U.S. Complaint in Intervention was filed in the U.S. District Court for the Southern District of Ohio alleging a kickback scheme among The Christ Hospital and certain cardiology groups.  The complaint  arises out of a qui tam action brought in 2003, in which the government intervened in March.  It alleges that The Christ Hospital allocated reading panel time at the hospital's "Heart Station" diagnostic testing facility among cardiologists based on their relative percentage of referrals and revenues generated from certain coronary arterial bypass graph (CABG) and catheterization procedures. 

No direct payment from the hospital to the cardiologists is alleged.  Rather, the kickback is alleged to arise from the "lucrative assignment" to the Heart Station panel.  This assignment is described as lucrative both because of the reimbursement the cardiologists received for their personal services in providing the test interpretations and because of opportunities the panel time afforded for obtaining new patients. 

The tie between the referrals to the hospital and amount of panel time allocated to the cardiologists is stunningly clear as alleged in the complaint.  Specifically, the hospital is alleged to have allocated panel time in direct proportion to referrals and revenues generated - if a cardiology group generated 70% of the CABG and cath revenues, it was allocated 70% of the panel time.  Worksheets filed as exhibits to the complaint are offered as illustrations of this calculation method.  The complaint asserts that cardiologists who failed to generate sufficient revenues were not given panel time regardless of their qualifications.

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As this writer discussed in more detail in a recent presentation, the law governing hospital programs to align physician incentives to improve quality and reduce costs continues to evolve.  Most recently, the Centers for Medicare and Medicaid Services (“CMS”) proposed a new exception under the Stark Law for “incentive payment” programs to improve quality and “shared savings” programs in the calendar year 2009 Medicare Physician Fee Schedule proposed rule.

CMS acknowledges that the new exception it proposes is narrow, and indicates that while it seeks to provide flexibility, new exceptions must be crafted in a way that avoids any risk of program or patient abuse. CMS specifically notes concerns that the programs not be used to disguise payments for referrals or compromise quality in order to increase profits. As a result, the proposed regulation includes 16 numbered paragraphs with conditions for satisfying the exception, and additional requirements discussed in the preamble without regulatory text.

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In what seems to be becoming a new tradition, CMS's proposed Medicare Physician Fee Schedule ("PFS") for calendar year 2009 revises more than the fee schedule. Among other things (like gainsharing), it proposes further changes to last year's changes to the Anti-Markup Rule. If you have not been following the saga of CMS's changes to the Anti-Markup Rule, hopefully this Health Law Strategist article will help you catch up. 

At this point, the changes from the 2008 PFS are scheduled to be effective as of January 1, 2009. The proposed 2009 PFS presents two alternatives (though CMS reserves the right to choose neither). One option is the obvious one: to let the 2008 changes go into effect as planned, using a site-of-service-based approach, with certain much-needed clarifications.

The second option is a new non-site-based approach where the Anti-Markup Rule would apply if the PC or TC is either purchased from an outside supplier or performed or supervised by a physician who does not "share a practice" with the billing physician or physician organization. A physician does not "share a practice" if he or she is employed or contracted by more than one physician or physician organization. 

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The Department of Justice (DOJ) announced on April 24, 2008 that the parent of Memorial Health University Medical Center agreed to pay over $5 million to settle allegations that it violated the Stark Law in connection with its payment of compensation to physicians employed by its affiliate, Georgia Eye Institute. Memorial also entered into a Certification of Compliance Agreement with the Department of Health and Human Services Office of Inspector General. Memorial denied all allegations, and the settlement agreement specifies that it is not an admission of wrongdoing.

The qui tam complaint filed by Dr. Ryan Boland alleged both overpayment for acquisition of the physician practices and excessive compensation, but the DOJ press release only references the compensation issues. According to the initial complaint, some ophthalmologists were paid as much as $500,000 in compensation, and the relator believed there were emails indicating teaching stipend/indigent care payments were actually disguised payments for surgical referrals. The complaint alleges that the hospital formed a nonprofit ophthalmology practice and after transitioning compensation within the practice to a productivity model, provided the practice with teaching/indigent support payments that were funneled to a small number of the doctors in order to retain them. These doctors allegedly received compensation that was in excess of fair market value and that was not commercially reasonable because it did not take into account which doctors performed the teaching and indigent care services.

This settlement should serve as a reminder to hospitals pursuing physician employment strategies to carefully review their compensation methodologies, including the manner in which compensation is allocated among individual physicians in an affiliated practice. To comply with the Stark Law, employed physicians’ compensation must be consistent with fair market value and may not take into account the volume or value of referrals made by the physician. The arrangement with the employed physicians also must be commercially reasonable.

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The 2008 report to the President from the Corporate Fraud Task Force is now available.

The Report says DOJ has obtained nearly 1,300 corporate fraud convictions since July 2002.  This includes convictions of more than 200 chief executive officers and corporate presidents, more than 120 corporate vice-presidents, and more than 50 chief financial officers.  Some of the significant criminal cases are described in detail in the Report, including the National Century Financial Enterprises, Inc. case.  This case was prosecuted in Columbus, Ohio by the U.S. Attorney for the Southern District of Ohio and the DOJ's Criminal Division.  The Report describes the case as "one of the largest fraud investigations involving a privately held corporation ever conducted by the FBI."

Of course, the Corporate Fraud Task Force prosecutes "significant financial crimes," not  health care fraud offenses.  Thus, the Report's statistics do not include all the convictions of individuals and entities for health care fraud.  Because prosecuting fraud - health care, financial or otherwise -is never unpopular with the voters, expect more of the same in the future.

 

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CMS issued an advisory opinion concluding, based on the facts certified, that physician owners of a diagnostic center located in a micropolitan statistical area may refer patients to the center for designated health services (DHS) without violating the Federal physician self-referral (Stark) regulations because the arrangement would satisfy the "rural provider" exception.  The rural provider exception, which applies only to ownership or investment interests in DHS entities, requires that (a) the DHS is furnished in a rural area; and (b) substantially all of the DHS furnished by the entity (not less than 75%) must be furnished to residents of a rural area.  "Rural area" means an area that is not an urban area.  "Urban area" is defined at 42 C.F.R. 412.62(f)(1)(ii) to include Metropolitan Statistical Areas and New England County Metropolitan Areas (as defined by the Office of Management Budget) or certain specified New England counties.

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Medicaid providers who learn their employees, agents or owners are under investigation for health care fraud can't afford to wait for the criminal process to take its course before mounting a defense.  The indictment  alone of an employee, agent, or owner could be a financial death sentence for the provider.

The Ohio Department of Job and Family Services  ("ODJFS") has always been required to terminate a Medicaid provider agreement if the provider is convicted of certain criminal offenses.  As of September 27, 2007, ODJFS is now required to suspend a provider agreement based only on an indictment for certain offenses.  The statute applies to "noninstitutional providers," which means any person or entity with a Medicaid provider agreement other than a hospital, nursing facility, or intermediate care facility for the mentally retarded.  The indictment can be against the provider, as well as an owner, officer, authorized agent, associate, manager, or even employee of the provider. The suspension continues until the proceedings in the criminal case are completed through conviction, dismissal of the indictment, plea, or finding of not guilty.  In addition to suspending the provider agreement, ODJFS must terminate Medicaid reimbursement to the provider for services rendered.

The statute permits the provider to request a reconsideration of the suspension.  The grounds for requesting reconsideration are limited.  The important ground is whether the provider, owner, or owners can demonstrate that they did not directly or indirectly sanction the action of the authorized agent, associate, manager, or employee that resulted in the indictment.

The statute is particularly troublesome for providers because the indictment of an employee or agent  triggers the suspension.  The provider is then forced to demonstrate to ODJFS that it did not directly or indirectly sanction the illegal conduct. All the while, Medicaid reimbursement has stopped.  In addition, the Medicaid suspension may result in the suspension or termination of other third-party payer agreements.  Unless the suspension is lifted, the provider may be out of business by the time the criminal case concludes.

The statute is Ohio Revised Code Section 5111.031 and the corresponding regulation is Ohio Administrative Code Section 5101:3-1-17.5. 

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According to its Semiannual Report to Congress, the Department of Health and Human Services Office of Inspector General ("OIG") is expected to recover $2.2 billion for the first half of fiscal year 2008.  Also for this period, the OIG reported exclusions of 1,291 individuals and organizations for fraud or abuse of federal health care programs; 293 criminal actions against individuals or organizations; and 142 civil actions such as False Claims Act cases, Civil Monetary Penalties Law settlements, and other administrative recoveries.  The report was issued on June 12, 2008.

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DOJ Press Release -  On May 29, 2008, the U.S. Attorney for the Northern District of Ohio announced the indictment of seven individuals on various offenses in connection with the transportation of Medicaid beneficiaries in vehicles called ambulettes.  The charges include mail fraud, wire fraud, health care fraud, and conspiracy.  According to the press releases, ambulette services contract with the Ohio Medicaid program to transport patients in vehicles known as ambulettes.  An ambulette is a specially equipped van designed for wheelchair passengers.  Medicaid pays ambulette operators for driving Medicaid beneficiaries to and from Medicaid-covered appointments, so long as:  (1) the patient rides in a wheelchair; (2) a medical doctor certifies the need for the wheelchair and ambulette; and (3) the ambulette itself otherwise meets safety specifications.  The defendants are charged with scheming to defraud Medicaid by charging Medicaid for rides of patients who did not use wheelchairs or require the need for wheelchairs.

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