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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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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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 May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (the Act). Although the Act targets economic stimulus fraud in particular, it also expands the scope of the federal False Claims Act (FCA). The amendments to the FCA will expand the scope of FCA liability, provide for new investigative tools, and make it easier for private plaintiffs (known as qui tam relators) to file FCA lawsuits on behalf of the government. In particular, the FCA has been expanded to impose liability for the the knowing and improper retention of "overpayments."

The amendments to the FCA are located in Section 4.

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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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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 Department of Justice announced changes to its corporate charging guidelines for federal prosecutors.  The new guidance revises the Department's Principles of Federal Prosecution of Business Organizations, which governs how federal prosecutors investigate, charge, and prosecute corporate crime.  The changes address issues concerning the attorney-client privilege and cooperation credit. 

First, the revised guidelines state that credit for cooperation will not depend on the corporation's waiver of the attorney-client privilege or attorney work product protection.  Rather, credit will depend on a corporation's timely disclosure of relevant facts.  Corporations that timely disclose relevant facts may receive due credit for cooperation, regardless of whether they waive attorney-client privilege or work product protection in the process.

Second, prosecutors are instructed not to consider a corporation's advancement of attorneys' fees to employees when evaluating cooperativeness.  In addition, the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. 

The revised guidelines are located here.

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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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Recent confirmation of the premise that labeling a document "peer review" does not automatically invoke the peer review privilege came via the Ohio 12th District Court of Appeals, which affirmed a trial court decision ordering the production of hospital EKG discrepancy reports.

Per hospital procedures, cardiologists overread emergency room physician EKG readings.  A discrepancy report was completed whenever the cardiologist's interpretation differed from the emergency room physician.  The defendants argued that the discrepancy reports were peer review documents and non-discoverable, based on Ohio Revised Code Section 2305.253, Incident or risk management report not admissible or discoverable; and Ohio Revised Code Section 2305.252, Confidentiality of proceedings and records within scope of peer review committee of health care entity.

Critical to the Court's finding that the trial court did not abuse its discretion in ordering production of the reports was evidence in the record that the reports were used for patient care.  The Court also cited a lack of evidence that the reports were actually examined by a peer review committee at the hospital.  And, the Court noted that the reports were not "incident or risk management reports" since the purpose of the forms is not to record a patient injury occurring at the hospital.

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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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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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