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Healthcare reform winners & losers

Is Your Name on the List?

Posted in Compliance, Department of Health and Human Services, False Claims Act, Fraud and Abuse, Managed Care, Medicare Advantage, Medicare Part D, Payer/Insurance Reform, Payment Methodologies, Physician Practice

Given the 880,000 names of physicians released by Medicare Wednesday, physicians who treat Medicare patients can expect their names to be on the list.  The list, searchable here, contains the name of the provider, the specialty area, the city, county and state as well as the total payments made to the provider by Medicare for 2012.  Searches can be conducted nationally or by state.  Although released by the government, the list resulted from a lawsuit brought by the Wall Street Journal (WSJ) to gain access to Medicare billing data.  For background, see this WSJ article.  The WSJ article also contains a chart that lists the top fifteen specialties that have resulted in the highest average payments per provider. 

Physician groups have been concerned that the release of data in such a raw and bulk form, without context, will lead to misinterpretations, confusion and unjust accusations of fraud.  Although the full ramifications of the release are impossible to predict at this time, some things seem clear for the immediate future.  Physicians, and systems that employ them, need to be prepared for the questions they are likely to receive from patients and the media.   Physicians and hospitals need take these questions seriously and develop useful answers.  Careless comments are likely to raise even more questions.  In fact, it may be a good practice for physicians and hospitals to search this database just to know what is out there in public.  It may not be just about Facebook anymore. 

In the midterm future, the release is likely to cause increased scrutiny during audits.  After all, a provider who receives payments above the average in a specialty area is likely to receive closer scrutiny from an auditor.  

In the long term, we can expect more investigations under the False Claims Act.  In fact, one of the reasons for releasing the data was to unleash a public scrutiny of providers in order to identify and root out fraud.  Correct or not, more scrutiny is coming.

Florida Proposes Pharmacy Audit Rights Legislation

Posted in Compliance, Fraud and Abuse, Insurance, Managed Care, Medicare Advantage, Medicare Part D, Pharmaceutical

The Florida legislature is currently considering proposed legislation that may affect the way in which managed care organizations, insurers, third-party payors, pharmacy benefit managers and other entities audit pharmacies in Florida.  The Florida House of Representatives, Health Innovation Subcommittee, is reviewing HB 745, which proposes to create a “Pharmacy audit bill of rights.”  The Health Policy Committee of the Florida Senate considered a similar bill, CS/SB 702, titled “Pharmacy audits; rights.”  Both bills set forth specific time periods for providing notice of on-site audits, for conducting on-site audits, and for providing preliminary and final reports.  The bills require payment of pharmacy claims that were retroactively denied for clerical errors if the prescriptions were dispensed correctly unless there is a pattern of errors or allegations of fraudulent billing.  The bills do not apply to audits related to suspected fraudulent activity or fee-for-service claims under the Medicaid program. 

The bills vary dramatically, however, on their enforcement mechanisms.   HB 745 allows for a private cause of action for willful violations of the law, including the potential to recover treble damages and an award of attorneys’ fees.  CS/SB 702 does not provide a private cause of action.  Rather, it requires the Florida Office of Insurance Regulation to investigate complaints of willful violations and deems a violation of the audit rights as an unfair claim settlement practice.

Essential Health Benefits Continue to Be Clarified by State Insurance Departments

Posted in Insurance, Payer/Insurance Reform, PPACA

On February 27, 2014, the D.C. Department of Insurance, Securities, and Banking (DISB) released a bulletin reminding insurers that medically necessary treatment for gender dysphoria, including gender reassignment surgeries, is a mandated benefit in the District of Columbia.  This is not the case in every state and serves as a reminder for health insurance plans required by federal law to offer “essential health benefits” (EHBs) that state law continues to play the primary role in defining that state’s EHBs.

Since 2011 when the U.S. Secretary of Health and Human Services opted to define EHBs under the Patient Protection and Affordable Care Act (PPACA) based on a “benchmark” plan selected for each state, the specific EHBs that insurers must offer in a state have often remained an enigma.  After all, PPACA merely requires the Secretary to define EHBs for ten broad benefit categories:

(1) ambulatory patient services;

(2) emergency services;

(3) hospitalization;

(4) maternity and newborn care;

(5) mental health and substance use disorder services, including behavioral health treatment;

(6) prescription drugs;

(7) rehabilitative and habilitative services and devices;

(8) laboratory services;

(9) preventive and wellness services and chronic disease management; and

(10) pediatric services, including oral and vision care.

The problem is that none of the benchmark plans are EHB compliant.  The reason is that the plans were approved for use in the market before the EHB laws took effect.  So, when federal law refers to the EHB “benchmark” plan, it is not actually referring to the plan that was selected to define EHBs for a state.  Federal law categorizes that plan as simply the “base-benchmark plan.”  Instead, the EHB benchmark plan is a “standardized set” of EHBs that most likely cannot be located in one simple, exhaustive document.

In other words, EHBs are something seemingly more nebulous and ethereal.  One must look to a broad range of sources to discover the EHBs for a given state, including the base-benchmark plan, insurance department bulletins, state law, and the like.

Identifying the overall EHBs for a state is only the first step as the substance of each benefit also varies from state to state.  The recently released DISB memorandum is a strong reminder of this.  While treatment of gender dysphoria is not required to be a standalone benefit, plans must be prepared to cover this treatment under other applicable benefit categories.  A failure to identify these state-specific benefits that may not be expressly listed in existing approved policies can lead to lengthy delays in obtaining state insurance department approval for newly filed policies and can even lead to the need to file amendments or riders to existing polices, as the DISB is requiring.

With the approval of qualified health plans last summer that are being offered in the health insurance exchanges, states made a lot of progress toward defining their EHBs.  Still, as demonstrated by the DISB memorandum, EHBs continue to be clarified.  Both insurers with existing plans in the market and those insurers gearing up to file qualified health plans and off-exchange products for 2015 must be sure to take these developments into account.

CMS Adds to the Growing Guidance on Third Party Premium Payments

Posted in Department of Health and Human Services, Hospitals, Insurance, Payer/Insurance Reform, Payment Methodologies, PPACA

On February 7, 2014, the Centers for Medicare and Medicaid Services (CMS) issued a memorandum that adds to the growing library of federal guidance on the permissibility of and limitations for health care providers and other entities paying the premiums of patients covered by qualified health plans (QHPs) in the health insurance exchanges or marketplaces.  The guidance significantly limits the types of third party premium payment arrangements that CMS would find to be acceptable.

In a memorandum issued on November 4, 2013, CMS first revealed its concern that third party payments of premiums could lead to adverse selection by skewing the insurance risk pool and creating an unlevel field in the exchanges.  It expressly encouraged QHPs issuers “to reject such third party payments.”  CMS suggested that it may “take appropriate action, if necessary.”

In its latest memorandum, CMS clarified that its original guidance does not apply to similar arrangements on behalf of QHP enrollees from Indian tribes, tribal organizations, urban Indian organizations, and state and federal government programs and grantees.  For all other arrangements, CMS established a narrow exception for “private, not-for-profit foundations” if a foundation makes the premium payment on behalf of QHP enrollees who satisfy defined criteria that are based on financial status and do not consider enrollees’ health status.  CMS expects the payments for the premium and any cost sharing payments to cover the entire policy year.

In taking this position, CMS is encouraging QHP issuers to reject the premium payments by hospitals, other health care providers, and any other commercial entities that provide the funds for such payments.  This would include payments to provide either a month or so of coverage while a particular treatment or procedure is provided or even coverage for an entire policy year.

Given that the exchange market laws strictly limit when QHP issuers may terminate an enrollee’s coverage, the most likely method for QHP issuers to reject premiums after the premiums have been accepted is to rescind the enrollee’s coverage.  The exchange market rules permit QHP issuers to rescind coverage where the enrollee (or a person on his or her behalf) has performed an act, practice, or omission that constitutes fraud or made an intentional misrepresentation of material fact “as prohibited by the terms of the plan or coverage.”  QHP issuers would need to include a prohibition on third party premium payments in their policies.  Since QHPs rely on the exchanges for the application and the contract, the most likely document to include such a statement would be the member handbook/evidence of coverage.  Where an enrollee or someone on his or her behalf ignores the prohibition and submits a third party premium payment, the submission may constitute fraud or an intentional misrepresentation of material fact justifying rescission and the return of the premium payment.

It is not clear whether state insurance departments that have regulatory authority over the member handbook/evidence of coverage will support CMS’ position and permit the inclusion of language prohibiting third party payments.  Overly broad prohibitions may raise concerns that QHP issuers will attempt to rescind coverage under unintended circumstances, such as where family provides financial support.  Therefore, any prohibition on third party premium payments should be crafted with precision and to avoid such concerns.

As noted above, CMS’ guidance adds to a growing list of guidance on this topic from the federal government.  On October 30, 2013, the Secretary of Health and Human Services (“HHS”) confirmed that HHS does not view QHPs or the programs related to the exchanges as federal health care programs that would then implicate fraud and abuse laws, such as the federal Anti-Kickback Statute.  On December 2, 2013, the HHS Office of the Inspector General issued an advisory opinion approving a non-profit, tax-exempt charitable organization’s premium support program.  Interestingly, whereas CMS would only approve of an arrangement that does not base support on health status, the OIG-approved arrangement was limited to a population with a specific disease.  Of course, the OIG was concerned with the application of the Anti-Kickback Statute while CMS is concerned with adverse selection.

Despite the additional guidance from CMS, unless CMS engages in new rule making, CMS’ options to prohibit arrangements outside the scope it has approved appear to be limited.  Rather, its guidance appears to be more of a green light for QHP issuers to begin taking steps to reject third party premium payments, including by rescinding enrollees’ coverage.  Already, Blue Cross Blue Shield of Louisiana announced a new policy that effective March 1, 2014 it will no longer accept third party payments for premiums, except in the case of family support.  Diverging from CMS guidance, this policy also applies to Ryan White clients.  Given the CMS policy and actions insurance companies are taking, any hospital, health care provider or other entity considering a third party premium arrangement must ensure that it structures the arrangement to comply with all applicable federal and state requirements and guidance and particular insurer’s policies.

Is CMS Prepared for Evolving Medical Records Technology?

Posted in Compliance, Department of Health and Human Services, Electronic Health Records, Fraud and Abuse, Regulatory Compliance, Technology

Health care fraud accounts for billions of the US health expenditure each year. This week HHS published a study addressing possible deficiencies in CMS’ capability to address fraud vulnerabilities and ensure the integrity of electronic health records (“EHR”) systems which CMS and its contractors use to pay Medicare claims. Concerns about whether CMS’ oversight and fraud detection practices have caught up with rapidly evolving medical records technology, from paper records to EHRs, prompted the Office of Inspector General (“OIG”) to conduct this study. Although the transition from paper to electronic records is projected to increase efficiency and benefit patients, experts have warned that EHRs can make the commission of fraud easier as key fraud identifiers, like the ability to trace authorship and documentation, may be lacking. The study results help exemplify that CMS has work to do if it is to thoroughly combat fraudulent EHR practices. 

EHRs differ from paper medical records in many ways. Aspects of paper records that can be used to demonstrate authenticity, like handwriting styles, are not available when using electronic records. Additionally, features of EHR systems can be used to commit fraud. Documentation practices such as the copy-past function, which conveniently allows the user to “select information from one source and replicate it in another location,” can lead to medical inaccuracies that result in inappropriate charges billed to patients and third-party payors. It can also lead to inflated claims and the creation of fraudulent claims. Another feature called auto-population allows for easier “overdocumentation” where false information is inserted in the record to “create the appearance of support for billing higher level services.”

The study used surveys to question CMS administrative and program integrity contractors, who use medical records to pay Medicare claims, identify inappropriate payment and investigate fraud, about how they have adjusted their fraud identification practices when using EHRs instead of paper records. OIG also reviewed EHR guidance and policies released by CMS and its contractors regarding EHR fraud vulnerabilities.

The study found that very few contractors had altered the way they reviewed EHRs as compared to paper records, and CMS placed no requirement on them to do so. It also found that although such features like audit logs are unique to EHRs and can be used to track modifications and authenticate records, very few contractors utilized them for this purpose. Contractors also responded that they did not have the capability to determine if a provider had copy-pasted or overdocumented. Additionally, the guidance provided by CMS regarding EHR fraud vulnerabilities has been limited. CMS has indicted that record keeping “within an EHR deserves special consideration,” but has provided no additional guidance. 

Based on these results, OIG made several fairly obvious recommendations: (1) to provide specific guidance to CMS contractors on detecting EHR fraud; and (2) to instruct CMS contractors to utilize audit logs to authenticate medical records for claims purposes. CMS has since responded to these recommendations and agreed that guidance and set of best practices for EHR fraud detection are needed, which it will work to provide. CMS also agreed that audit logs could be helpful authentication tools, but disagreed that contractors should be required to use them in every situation. Thus, they may be appropriate in some circumstances, but their use should not be required.

Program integrity is integral to the functioning of the Medicare program and to reducing the cost of health care fraud. This study has helped bring to light deficiencies that CMS will have to quickly address in order keep up with evolving medical records technology.

Squire Sanders lawyers have significant experience advising clients on EHR implementation and compliance issues. For more information on how we can assist you, please contact the Squire Sanders Healthcare Practice Group

Preserving the Attorney-Client Privilege for In-House Counsel

Posted in Governance/Management, Publications

In the December 2013 edition of AHLA Connections, Tom Zeno and Emily Root analyzed the application of the attorney-client privilege to in house counsel and provided five practice tips to maximize the protection of the privilege for in house counsel.  In the article, Emily and Tom explore often overlooked principles of the privilege and illustrate the principles through specific cases such as Vioxx, Halifax, and Shire Pharmaceutical.  The article compares ways in which courts apply the privilege to outside counsel and in house counsel and discusses the nuances required for in house counsel to maintain attorney-client privilege. Tom and Emily offer guidance on practical steps health care organizations can take to preserve the privilege that will result in increased protection for in house counsel and the company.

For further information on this or other matters, please contact Tom Zeno or Emily Root.

CMS Ushers in the New Year with Medicare Part C and Part D Proposed Rules: HHS Hopes to Save $1.3 Billion

Posted in Compliance, Department of Health and Human Services, Insurance, Managed Care, Medicare Advantage, Medicare Part D, Payer/Insurance Reform, Payment Methodologies, PPACA, Regulatory Compliance

On January 10, 2014, CMS will publish the proposed rule titled Medicare Program: Contract Year 2015 and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs (the “Proposed Rule”).  The Proposed Rule propositions extensive reforms to the Medicare Advantage (“Part C”) and Medicare Prescription Drug Benefit Program (“Part D”), partly through regulations implementing provisions of the Affordable Care Act (“ACA”).  CMS states that the intent behind the Proposed Rule is to “(1) clarify program participation requirements; (2) make changes to strengthen beneficiary protections; (3) strengthen [its] ability to identify strong applicants for Part C and Part D program participation and remove consistently poor performers; and (4) make other clarifications and technical changes.”

The Proposed Rule

At a lengthy 678 pages, the Proposed Rule proffers several critical areas for comment and reform.  A summary of certain major provisions of the Proposed Rule is as follows:

  1. The Proposed Rule requires that payers offer no more than two Part D plans in the same service area, giving consumers “meaningful differences” in coverage options, thereby purporting to reduce consumer selection of plans based solely on premium costs, which reduces consumer selection of plans that do not cover their choice medications or pharmacy;
  2. The Proposed Rule excludes providers from Medicare if the government ascertains a pattern of abusive prescribing of Part D drugs, thereby purporting to reduce prescription drug abuse;
  3. The Proposed Rule seeks to exclude doctors who are not enrolled in Medicare from prescribing Part D-reimbursed drugs, with the responsibility of determining a prescriber’s Part D eligibility status falling on the payer;
  4. The Proposed Rule prohibits Part C plans from offering plan options that replace plans CMS previously required the carrier to consolidate or terminate due to low enrollment;
  5. The Proposed Rule would stop mail-order pharmacies from charging copayments at a lower rate than retail pharmacies by requiring one-month mail order-filled supplies to have cost-sharing lower than a comparable one-month supply filled at retail outlets; Continue Reading

CMS and OIG Ring in the New Year with Final Rules on EHR Donations

Posted in Department of Health and Human Services, Electronic Health Records, False Claims Act, Fraud and Abuse, Hospitals, Mergers and Acquisitions, Regulatory Compliance, Technology

On December 27, 2013, the Centers for Medicare and Medicaid Services (“CMS”) and the Office of Inspector General of the Department of Health and Human Services (“OIG”) published final rules (“Final Rules”) regarding the electronic health records (“EHR”) donations Stark Law Exception (42 C.F.R. 411.357(w)) and Anti-Kickback Statute Safe Harbor (“AKS Safe Harbor”) (42 C.F.R. 1001.952(y)). The Final Rules amend rules CMS and OIG promulgated in 2006 (“2006 Rules”).

The Prior Stark Law Exception and AKS Safe Harbor

The Stark Law Exception and AKS Safe Harbor promulgated pursuant to the 2006 Rules were set forth to incentivize the use of EHR technology by diminishing the cost of implementing and operating such technology. The 2006 Rules required that donated EHR contain electronic prescribing technology and for the system to be “interoperable” – used to communicate with other software or systems. In addition, the 2006 Rules prohibited donors from limiting the use of the EHR or conditioning EHR donations on conducting business with the donor, required that donations be set forth in a written agreement, and forbade use of the technology for reasons unrelated to medical practice. The 2006 Rules required EHR donees to pay a percentage (15%) of the cost of items and services provided.

Changes Promulgated in the Final Rules

The Final Rules make five key modifications to the 2006 Stark Law Exception and AKS Safe Harbor:

•  The Final Rules update provisions under which EHR software is deemed interoperable by:
          ◦   providing that the Office of the National Coordinator for Health Information Technology (“ONC”), not the HHS Secretary, be responsible for authorizing the certifying bodies
          ◦   eliminating the 12-month certification requirement and allowing certification according to any then-approved edition of the electronic health record certification criteria of 45 C.F.R. part 170;
•  The Final Rules remove the electronic prescribing capability requirement;
•   The Final Rules extend the sunset provision until December 31, 2021, which corresponds to the final year of the Medicaid Meaningful Use incentive payments;
•  The Final Rules limit the scope of protected donors to exclude laboratory companies
          ◦  effective March 27, 2014; and
•   The Final Rules clarify the condition that prohibits a donor from taking any action to limit or restrict the use, compatibility, or interoperability of the donated items or services.

  Continue Reading

Fourth Circuit Requires Penalties for FCA Violations, Even Where No Government Economic Damage Found

Posted in Compliance, False Claims Act, Fraud and Abuse, Hospitals

Author: Rebecca A. Worthington, Esquire

In a decision sure to generate comment during the new year, the Fourth Circuit ruled in United States ex rel. Bunk v. Gosselin World Wide Moving, No. 12-1369, 2013 U.S. App. LEXIS 25225 (Dec. 19, 2013), that penalties of some amount must be awarded for violations of the civil False Claims Act even though the trial court had determined the government suffered no economic damage.  Even though this case does not involve a health care provider, it is an important case to monitor because of the FCA implications.

Following a trial, the relator sought to have a civil penalty of between $5,500 and $11,000 assessed as to 9,136 invoices.  The lower court (Eastern District of Virginia) determined that the potential award under the FCA would exceed more than $50 million, and would therefore contravene the Excessive Fines Clause of the Eighth Amendment.  The court concluded that it was unauthorized by the FCA to award less than the statutory minimum per claim, and awarded nothing.  The Fourth Circuit found that the lower court’s reasoning did not further the FCA’s primary purpose of making the government whole, and that “an award of nothing at all because the claims were so voluminous provides a perverse incentive for dishonest contractors to generate as many false claims as possible.”

Additionally, the Fourth Circuit disagreed with the lower court’s conclusion that there was insufficient evidence of economic harm to the government; to the contrary, there was “no doubt” that the government suffered significant opportunity costs.   Moreover, the Fourth Circuit noted that for purposes of Excessive Fines Clause analysis, the concept of harm does not need to be limited to the economic realm: “The prevalence of defense contractor scams, as often portrayed in the media, shakes the public’s faith in the government’s competence and may encourage others similarly situated to act in a like fashion.”  The Fourth Circuit instructed lower courts to consider “the award’s deterrent effect on the defendant and on others perhaps contemplating a related course of fraudulent conduct.”  The Fourth Circuit ordered an entry of judgment on behalf of the relator for $24 million, holding that such an amount would not violate the Eighth Amendment.

The Fourth Circuit’s decision is another cautionary tale to everyone submitting claims to the government, including health care providers.  It remains to be seen whether other circuits will follow this decision or whether it will be reviewed by the Supreme Court.  In the meantime, some circuits look to whether economic harm was suffered when awarding damages.  See, e.g., United States v. Anchor Mortg. Corp., 711 F.3d 745 (7th Cir. 2013) (holding that damages must be based on the difference between a contract price and the value of what arrived); United States ex rel. Davis v. District of Columbia, 679 F.3d 832 (D.C. Cir. 2012) (“The government got what it paid for and there are no damages.”).   These decisions may be useful tools for asserting that penalties are inappropriate in the absence of any economic harm.

About the Author:  Rebecca A. Worthington is an associate in the Washington, D.C., office of Squire Sanders.  She practices primarily in the Litigation;  Government Enforcement, Investigations and Global Compliance; and the FCPA/UK Bribery Act and Anticorruption practice groups.

OIG Okays a Premium Assistance Program

Posted in Community Benefit, Compliance, Department of Health and Human Services, Fraud and Abuse

Recently, many stakeholders in the healthcare industry have expressed interest in implementing programs that provide funding to help patients with insurance premium payments.  Until last week, it was unclear whether any type of premium assistance programs would be permissible under federal law.  Finally, in Office of Inspector General (OIG) Advisory Opinion 13-19 posted on December 2, 2013, the government provided some limited guidance on this issue.  The OIG concluded that it would not impose civil monetary penalties or Anti-Kickback Statute administrative sanctions with regard to the requestor foundation’s premium assistance program and the program that covers the cost of disease related services and items not covered by insurance.   

The premium assistance program provides funding in the form of grants for primary and/or secondary insurance premiums generally for the calendar year but in no way covers insurance copayments, deductibles, and coinsurance.  The program is limited to patients with a diagnosis of the rare disease the requestor foundation focuses on and who meet the requirements of the foundation’s financial need policy.  The OIG found that the particular design and administration of the premium assistance program reduces the risk of improper beneficiary inducements and presents a low risk of fraud and abuse for the following reasons:

  • the foundation is an independent charitable organization,
  • no donor exerts any direct or indirect control over the foundation, 
  • patients’ choice of health care providers, suppliers, and insurers is preserved,
  • the foundation does not make referrals,
  • assistance is based on a consistently applied uniform measure of financial need, and
  • donors do not receive data that would allow them to extrapolate correlation between donations and product use.

The OIG noted that donations for a rare disease with a limited number of treatments increases the risk of improper beneficiary inducements but distinguished the premium assistance program at issue because there are many products from multiple manufacturers to treat the rare disease, there is no requirement to receive or seek any particular treatment, and this program expands patients’ freedom of choice.  While this guidance is certainly helpful, it is important to recognize the limitations of this opinion and ensure that any proposed program is reviewed for compliance with fraud and abuse laws.