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Healthcare reform winners & losers

President’s Budget Proposes Limits on Physician Self-Referral for Certain Services

By Robert Nauman on Posted in Fraud and Abuse, Physician Practice

On April 10, 2013, President Obama released his proposed federal budget for fiscal year 2014.  Buried within the budget is a proposal to limit physician self-referrals for certain ancillary services.  Specifically, the budget proposes to encourage what it calls “more appropriate” use of ancillary services by limiting those providers who may self-refer for radiation therapy, therapy services and advanced imaging services to those providers who meet certain “accountability standards”. The budget does not define what these “accountability standards” may be, but if this provision is adopted, standards would likely be developed by CMS.

 Through the use of the In-Office Ancillary Services Exception, many physician practices have successfully developed radiation therapy and advance imaging services, and, in many cases, such services have been very profitable.  Because of this profitability, use of the In-Office Ancillary Services Exception for radiation therapy, outpatient therapy and advance imaging services has, from time-to-time, come under scrutiny.  For example, in a 2010 report  MEDPAC proposed excluding outpatient therapy and radiation therapy services from the In-Office Ancillary Services Exception on the basis that such services are not truly connected with a related office visit and were imposing a significant burden on Medicare finances.  The budget proposal also comes on the heels of the Affordable Care Act’s amendment to the In-Office Ancillary Services Exception, which now requires physicians that rely on the Exception for radiology and other advanced imaging services to provide certain disclosures to patients.

This is not the first time such limitations have been proposed, and it remains to be seen whether the proposed provisions contained in the budget will be adopted.  Furthermore, even if adopted, the scope of the restrictions will likely depend on how CMS interprets the applicable “accountability standards.”  Nevertheless, radiation therapy, outpatient therapy and advanced imaging services have become important components of many physician practices, and physicians should be prepared to respond in the event the proposed limitations are adopted.

FDA Shows Plans to Enforce Food Facility Registration by Issuing Draft Compliance Guidance

By Andrew Jack on Posted in FDA

The U.S. Food and Drug Administration (“FDA”) recently announced the availability of draft Compliance Policy Guide Sec. 100.250 Food Facility Registration—Human and Animal Food (the “Draft CPG”).  The Draft CPG is intended to provide FDA staff with guidance on issues related to food facility registration, including the requirement that certain food facilities register with FDA, the requirement that registered facilities biennially renew their registrations with FDA, and the authority of FDA to suspend a food facility’s registration.

The Food, Drug & Cosmetic Act (the “Act”), as amended by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, requires the owner, operator, or agent in charge of a domestic or foreign food facility that manufactures, processes, packs, or stores foods intended for marketing and sale in the United States to register with FDA.  FDA relies on facility registration for purposes of identifying food manufacturers, packers, handlers and distributors for inspection purposes.  Registration also allows FDA to quickly identify the source of a food product in the event of potential or actual contamination, food-related bioterrorism, or outbreaks of food-borne illness, and take appropriate action when necessary to prevent the spread of such contamination or outbreak.  A facility must be registered prior to the start of manufacturing, processing, packing, or storing.  Registration can be completed electronically—and quickly—via FDA’s website, or by mailing or faxing FDA Form 3537 to FDA.  There is no fee for registering a food facility with FDA.  Electronic registration is strongly encouraged by FDA.

The recently published Draft CPG is important for those involved in the U.S. food industry because it outlines FDA’s proposed regulatory approach for enforcing food facility registration and describes FDA’s current thinking on registration, renewal, and suspension.  First, FDA will enforce the registration requirements, and for regulatory compliance purposes, FDA will consider a facility to be in violation of such registration requirements if (1) it has failed to register; (2) the facility’s registration is incomplete; or (3) the facility’s registration is expired by failing to renew the registration. 

For foreign food facilities shipping food products into the United States, such as manufacturers in China, Japan or France, FDA intends to use its “prior notice” requirements to ensure compliance with facility registration.  Under the Act, a foreign food company is required to provide FDA with prior notice of a shipment no less than four hours before the product arrives at the port of arrival (by air) and no less than eight hours before the product arrives at the port of arrival (by water).  Prior notice may be submitted via FDA’s Prior Notice System Interface up to fifteen days before the anticipated date of arrival.  Upon arrival in the United States, FDA inspectors review incoming shipments for regulatory compliance, including proper facility registration and food labeling requirements.  If FDA determines that a foreign food facility is not registered, FDA will hold the food being imported at the port of entry.

Second, the Draft CPG states that FDA intends to closely monitor the biennial facility registration renewal requirement.  If a registered food facility fails to renew such registration during the mandated time period (i.e., from October 1st through December 31st of each even-numbered year), FDA will consider the registration expired and will take appropriate regulatory enforcement action.

Finally, FDA has the authority to suspend a facility’s registration if it obtains evidence that the facility has a reasonable probability of causing serious adverse health consequences or death to humans or animals, and the facility either created, caused, or was otherwise responsible for such reasonable probability or knew or had reason to know of such reasonable probability and packed, received, or held food regardless of such knowledge.  If a domestic facility that is subject to suspension introduces food into interstate or intrastate commerce, FDA may pursue enforcement action, including administration detention, seizure, injunction, mandatory recall, prosecution, or a combination thereof.

FDA is accepting public comments on the Draft CGP through May 6, 2013.  You may submit comments electronically or via the mail to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.

Squire Sanders attorneys have experience in advising both domestic and foreign food facilities on the facility registration requirements, completing facility registration applications, and assisting in the drafting and submission of comments to proposed FDA guidance.  Please contact the author of this blog post or your principal Squire Sanders attorney for more information.

Certification for Electronic Health Record Products Revoked

By John Wyand on Posted in Electronic Health Records, Regulatory Compliance, Uncategorized

Following the revocation of two previously certified electronic health record products to be used as part of the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs, Farzad Mostashari, M.D., the national coordinator for health information technology, announced that the products do not meet standards and providers cannot use these products to meet the requirements of the Medicare and Medicaid EHR Incentive programs. 

According to a U.S. Department of Health and Human Services news release, EHRMagic-Ambulatory and EHRMagic-Inpatient, both developed by EHRMagic Inc. of Santa Fe Springs, Calif., no longer meet the EHR certification requirements.  The EHRs must be certified by a certification body authorized by the Office of the National Coordinator for Health IT (ONC) before regaining certification. 

“We and our certification bodies take complaints and our follow-up seriously.  By revoking the certification of these EHR products, we are making sure that certified electronic health record products meet the requirements to protect patients and providers,” said Dr. Mostashari.  “Because EHRMagic was unable to show that their EHR products met ONC’s certification requirements, their EHRs will no longer be certified under the ONC HIT Certification Program.”

Is CMS Having Second Thoughts About Preferred Pharmacy Networks?

By David Kopans on Posted in Pharmaceutical, Regulatory Compliance

In January of 2005, the Centers for Medicare and Medicaid Services (“CMS”) finalized its regulation permitting Medicare Part D plans to establish networks of “preferred” and “non-preferred pharmacies,” meaning that the plans may offer lower cost-sharing to enrolled Medicare beneficiaries who receive items or services from a preferred pharmacy.  70 Fed. Reg. 4194 (Jan. 28, 2005).  This rule was highly contested by pharmacies and their associations leading up to the final rule and has remained so, spawning a couple of legal challenges in 2011 and 2012.  These legal challenges argued that a preferred pharmacy network is inconsistent with another rule that requires a Part D plan to permit any pharmacy to participate in its network if the pharmacy is willing to agree to the plan’s standard terms and conditions.  This other rule is commonly referred to as the “Any Willing Pharmacy Requirement.”

 Until CMS issued its annual Final Call Letter on April 1, 2013, CMS had not appeared interested in challenging preferred pharmacy network arrangements.  In the case of the Any Willing Pharmacy Requirement, CMS stated in Chapter 5 of its Prescription Drug Benefit (“PDB”) Manual that whether a Part D sponsor has permitted a pharmacy an opportunity to participate in its network, or whether a pharmacy can meet or has met contract terms in compliance with the law and CMS’ regulations at 42 CFR 423.120(a)(8)(i) are fact-specific questions that are generally best left between the parties.

 CMS has stated elsewhere, “Ultimately, however, it is at Part D plans’ discretion how they will establish pharmacy networks – including …the establishment of preferred pharmacies provided they meet our pharmacy access standards, non-discrimination provisions and other applicable requirements under Part D.”  70 Fed. Reg. at 4250.  CMS explained its preference not to interfere with “private negotiations between Part D plans and pharmacies” as being consistent with Congressional intent.  Id.  This preference has seemed unshakeable, particularly as CMS has been able to shake off the legal challenges to the preferred pharmacy rule.

However, as announced in the Final Call Letter, CMS warned, “We have begun to scrutinize Part D drug costs in PDPs [i.e., Prescription Drug Plans] with preferred networks, and comparing these to costs in the non-preferred networks, as well as to costs in PDPs without preferred networks.”  CMS further revealed that it has begun contacting plan sponsors identified in its analysis to validate its findings that suggest certain preferred pharmacy network arrangements are improperly increasing costs to Medicare.

This review by CMS alone is not much of a surprise.  Even at the time CMS published the final preferred pharmacy rule, CMS was adamant in the rule that “such tiered cost-sharing arrangements [must] in no way increase [CMS’] payments to Part D sponsors.  70 Fed. Reg. at 4254.  CMS has been equally adamant in the PDB Manual.  So, it is no surprise that CMS would at some point review whether preferred pharmacy networks have been designed in such a way as to increase costs to the Medicare Program.

What is a bit more surprising is another statement by CMS in its Final Call Letter.  In response to complaints from pharmacies regarding barriers to participation in preferred networks, CMS stated, “We strongly believe that including any pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor’s preferred network is the best way to encourage price competition and lower costs in the Part D program.”  CMS concluded that “mandating this policy is beyond the scope of this call letter.”  Therefore, rather than reaffirm its long-standing position that Congressional intent supports its policy of non-interference in the establishment of preferred pharmacy networks, CMS appears to be suggesting that it is considering means other than its annual call letter guidance to lower barriers for pharmacies to participate in preferred pharmacy networks.

While CMS is silent on when or if it intends to mandate such a policy, it appears to be attacking one of the primary means by which plans have avoided increasing costs to CMS, through “post point-of-sale per claim administrative fees.”  As described by CMS, these fees are “levied by Part D sponsors or their intermediaries on pharmacies” by charging a pharmacy $1.00 per claim to participate in the sponsor’s preferred pharmacy network or chargeback of the dispensing fee.  CMS confirmed that current law permits this practice which allows plans to exclude these fees from their reported negotiated prices with pharmacies.  However, in CMS’ view, these arrangements are inconsistent with the intent of the regulations and result in the reported prices being overstated.  CMS believes that “notice and comment rulemaking would be necessary in order to require sponsors to consider these fees as part of the negotiated price” and will consider “revising the definition of negotiated price” so as to require the inclusion of these fees in the reporting of such prices.

If CMS revises the preferred pharmacy rule to lower participation barriers for all pharmacies while eliminating the post point-of-sale per claim administrative fees that make many preferred pharmacy network arrangements feasible, CMS would appear to be undermining its own long-standing support for preferred pharmacy networks and its policy of non-interference in the private contract negotiations between plans and their network pharmacies.

Sixth Circuit Overturns $11.1 Million Judgment Against MedQuest for FCA Violations

By India Brim on Posted in 6th Circuit, False Claims Act, Fraud and Abuse, Regulatory Compliance

On April 1, 2013, the United States Court of Appeals for the Sixth Circuit overturned the $11.1 million judgment against MedQuest for its submission of claims to Medicare for tests in diagnostic testing facilities that were not supervised by approved physicians.  The whistleblower action was initiated by a former MedQuest employee, alleging that MedQuest, a leading diagnostic testing firm, and three of its independent diagnostic testing facilities (IDTFs) – the Charlotte Center, the Cool Springs Center and the Harding Center – submitted claims to Medicare for tests that were performed without the required level of physician supervision or were performed by physicians who lacked the required proficiency and certification to perform the tests.  Additionally, the government alleged that from January 2004 to July 2005, MedQuest submitted claims to Medicare using the physician billing number of the former owner of the Charlotte IDTF.  The U.S. District Court for the Middle District of Tennessee held that the claims submitted by MedQuest for diagnostic tests that were performed without the appropriate level of supervision or without the supervision of an approved Medicare physician, constituted an appropriate basis for an award of penalties under the False Claims Act.  The U.S. District Court ultimately awarded $11.1 million in treble damages and civil penalties to the Government.

On appeal, the Sixth Circuit overturned the District Court’s ruling stating that MedQuest’s use of non-approved supervising physicians for contrast procedures did not constitute an adequate basis for False Claims Act (“FCA”) liability.  The Court noted that MedQuest’s use of a billing number belonging to a physician’s practice also did not trigger the excessive fines under the FCA.  Despite dismissing the Government’s FCA claims, the Sixth Circuit had little sympathy for MedQuest and encouraged the Government to seek administrative remedies against MedQuest with the Centers for Medicare and Medicaid Services, such as suspension and expulsion from the Medicare program.

Proposed Rules Issued Extending Protections of Electronic Health Record Donations

By John Wyand on Posted in Accountable Care Organizations, Department of Health and Human Services, Electronic Health Records, Fraud and Abuse, Hospitals, Physician Practice, Regulatory Compliance

Proposed Rules Issued Extending Protections of Electronic Health Record Donations

On April 10, 2013, the Department of Health and Human Services (DHHS), Office of Inspector General (OIG) and the DHHS, Centers for Medicare & Medicaid Services (CMS) each issued a proposed rule relating to the donation of interoperable electronic health records software or information technology and training services (EHR).  The rules propose to:

  • Extend by three years the protections of the Stark law exception (42 C.F.R. § 411.357(w)) and the Anti-Kickback safe harbor (42 C.F.R. § 1001.952(y)) to December 31, 2016 (the “sunset” provisions);
  • Eliminate the requirements that a donated EHR include electronic prescribing capability; and
  • Update the provisions that qualify an EHR for protection under the exception and safe harbor (the “deeming” provisions).

In addition to the proposed rules, the OIG and CMS are requesting public comment on other changes the agencies are considering, including:

  • Limiting the scope of protected donors;
  • Adding or modifying conditions to limit the risk of data and referral lock-in; and
  • Clarifying the items and services that fall within the scope of the exception and safe harbor.

Comments must be received no later than 5:00 p.m. on June 10, 2013 and may be submitted as follows:

OIG Proposed Rule:Medicare and State Health Care Programs: Fraud and Abuse; Electronic Health Records Safe Harbor under the Anti-Kickback Statute CMS Proposed Rule:Medicare Program; Physicians’ Referrals to Health Care Entities With Which They Have Financial Relationships: Exception for Certain Electronic Health Records Arrangements
1. Electronically to regulations.gov. 1. Electronically to regulations.gov.
2. By regular, express, or overnight mail: Patrice Drew
Office of Inspector General
Department of Health and Human Services
Attention: OIG-404-P, Room 5541C
Cohen Building
330 Independence Avenue, SW
Washington, DC 20201		 2. By regular mail: Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1454-P
P.O. Box 8013
Baltimore, MD 21244-8013
3. By hand or courier to: Patrice Drew
Office of Inspector General
Department of Health and Human Services
Cohen Building, Room 5541C
330 Independence Avenue, SW
Washington, DC 20201		 3. By express or overnight mail: Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1454-P
Mail Stop C4-26-05
7500 Security Boulevard
Baltimore, MD 21244-1850.4. By hand or courier.For delivery in Washington, DC:

Centers for Medicare & Medicaid Services
Department of Health and Human Services
Room 445-G
Hubert H. Humphrey Building
200 Independence Avenue, SW.
Washington, DC 20201

(Leave comments in the CMS drop slots in the main lobby.)

For delivery in Baltimore, MD:

Centers for Medicare & Medicaid Services
Department of Health and Human Services
7500 Security Boulevard
Baltimore, MD 21244-1850.

 

CMS Reverses Course; Estimates 3.3% Increase in Payments to Medicare Advantage Plans for 2014

By Kevin A. McGill on Posted in Medicare Advantage

On April 1, the Centers for Medicare & Medicaid (CMS) backtracked on planned cuts of 2.2% to Medicare Advantage (MA) plan payments for 2014 that were announced in February, and, instead, raised its final estimate of the combined effect of the National MA Growth Percentage and Medicare Fee-for-Service Growth Percentage to an increase of 3.3%. As part of the rate announcement, CMS reversed its historical practice of assuming Congress will not later enact the “doc fix” to the physician payment rates generated by the Sustainable Growth Rate formula, which it has enacted annually since 2003. This change, made in large part due to comments received by CMS over the years, results in an estimate of what CMS believes will occur based on current law and recent legislative practices rather than what CMS believes would occur to the physician fee schedule for the upcoming year under current law only. As part of the rate announcement, CMS assumes a zero percent change in the physician fee schedule for 2014 as it believes Congress will again implement the doc fix later this year and override the scheduled 27% reduction in the Medicare physician fee schedule.

The revised growth estimate comes after pressure from members of Congress of both parties and a significant lobbying effort by MA organizations, which were facing an estimated reduction in revenue of 6.9% to 7.8% for 2014 based on the planned cuts and other payment policy changes included in PPACA, according to an Oliver Wyman report, and seniors who were facing an increase in MA plan premiums and/or reduced benefits of $50 to $90 per month to account for the lost plan revenue according to the report.

Also, as part of the rate announcement, CMS reduced the deductible, initial coverage limit and out-of-pocket threshold for the defined standard prescription drug (Part D) plan for 2014 relative to 2013 levels, thereby adjusting downward a beneficiary’s entrance into and exit from the prescription drug coverage gap, or “donut hole.” A comparison of the 2013 and 2014 rates is included below:

Part D Benefit Parameters

2013

2014
Defined Standard Benefit

 

 
Deductible

$325

$310
Initial Coverage Limit

$2,970

$2,850
Out-of-Pocket Threshold

$4,750

$4,550

Source: Press Release dated April 1, 2013 Regarding Rate Announcement and Final Call Letter.

OIG Issues Special Fraud Alert: Physician-Owned Distributorships (PODs)

By John Wyand on Posted in Department of Health and Human Services, Fraud and Abuse, Physician Practice

OIG Issues Special Fraud Alert: Physician-Owned Distributorships (PODs)

On March 26, 2013 the Department of Health and Human Services, Office of Inspector General (OIG) issued a Special Fraud Alert: Physician-Owned Entities (Alert).  The Alert focuses on the specific attributes and practices of “physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers.” Such entities are commonly referred to as “physician-owned distributorships (“PODs”).  The OIG believes that such arrangements may produce substantial risk of fraud and abuse and pose patient safety dangers.

The Alert echoed past guidance documents regarding physician investments in entities to which they refer and the “the strong potential for improper inducements between and among the physician investors, the entities, device vendors, and device purchasers,” noting that such arrangements “should be closely scrutinized under the fraud and abuse laws.”

The Alert identifies “questionable features” regarding the structure of PODs, including selection of investors who are in a position to generate significant business for the entity, requiring investors who no longer practice in the service area to sell their ownership interests, and distribution of returns on investment substantially in excess of the risk involved.  The OIG believes that PODs exhibiting any of these features potentially raise four major concerns typically associated with kickbacks: “corruption of medical judgment, overutilization, increased costs to the Federal health care programs and beneficiaries, and unfair competition.”

The OIG goes on to express its belief that “PODs are inherently suspect under the anti-kickback statute” and provides a list of “suspect characteristics.”  The Alert emphasizes that the list of suspect characteristics “is not intended to serve as a blueprint for how to structure a lawful POD, as an arrangement may not exhibit any of the suspect characteristics and yet still be found to be unlawful.”

One Health System’s State Tax-Exempt Status Today; Your Federal Tax Exempt Status Tomorrow?

By David Kopans on Posted in Hospitals, Tax

On Wednesday, March 20, 2013, armed with a publicly circulated legal opinion and a complaint  filed in the Court of Common Pleas of Allegheny County, the City of Pittsburgh initiated its challenge to the payroll tax exemption claimed by the University of Pittsburgh Medical Center (“UPMC”), which claims the exemption on the basis of its status as an “institution of purely public charity,” or “IPPC,” under Pennsylvania law.  At stake for the parties are millions of dollars of payroll taxes that Pittsburgh argues UPMC has improperly failed to pay because UPMC does not actually qualify as an IPPC.  The case presents potential precedential or, at least, influential case law characterizing many of the common features of health systems today as non-charitable.

 The legal opinion’s description of UPMC’s alleged offenses is at times colorful, such as its reporting of a “rumor” that UPMC’s Italian operations were established as a “pleasant post-retirement assignment” for its founder.  At other times, the opinion appears to rush to shocking conclusions, such as when it accuses UPMC of a “well-documented” record of closing facilities as part of a “patient-dumping” practice while admitting in a footnote that “we [i.e., the law firm] are still learning the details.”

 The laundry list of UPMC’s alleged offenses enumerated in the legal opinion (although not necessarily in the complaint) is long, including:

  • In the last two fiscal years, generating excess revenues totaling almost $1 billion and amassing reserves in excess of $3 billion.
  • Expanding business operations that include investment partnerships and more than 50 taxable corporations.
  • Not offering charitable services through many of its 400 doctors’ offices and outpatient sites.
  • Closing facilities in locations with relatively high numbers of Medicare-eligible, Medicaid-eligible or uninsured patients and opening or expanding facilities where there are proportionately more privately-insured patients.
  • Supporting its insurance business through capital contributions.
  • Engaging in business or financial activities abroad to provide “junkets for favored executives and staff.”
  • Paying more than 20 officers, directors and key employees compensation in excess of $1 million, with the CEO receiving significantly more, as well as a lavish office space, private chef and dining room, private chauffeur and private jet.
  • Verifying patients’ insurance coverage before providing medical services.
  • Turning over unpaid accounts to a collection agency or a law firm for further collections and legal action against its patients.
  • Limiting its charity care to emergency services, services for life threatening conditions, and medically necessary services.
  • Further limiting “full” charity care to patients whose annual income is less than two times the poverty level.
  • Donating only a small fraction (alleged to range somewhere between 3.9% to less than 1%) of its net patient revenue to charity care.

The above list is, of course, presented from the point of view of UPMC’s legal adversaries and its bias and accuracy have not yet been challenged by a response from UPMC.  Nevertheless, the legal opinion and the lawsuit raise a significant and serious question: Have health systems developed such a level of diversity and sophistication in their business operations that they can no longer legitimately claim that they are charitable organizations deserving of tax-exempt status?

After all, keeping in mind the biased origin of the above list and perhaps with the exception of the personal chef, are other non-profit health systems so different from UPMC?  They commonly have for-profit subsidiaries.  Increasingly they are forming and capitalizing their own insurance companies to serve the population within their service area.  With decreasing revenues from federal and state programs, such as Medicare and Medicaid, some health systems, if not many, are taking a closer look at unpaid accounts and pursuing collections more vigorously than in the past.  Other than in the case of an emergency or at a specifically designed free clinic, perhaps no health system provides care prior to determining a person’s insurance coverage or qualification for reduced pricing or free care.  Many health systems have also begun expanding operations abroad.  Do these activities suggest such a pecuniary motive as to render health systems non-charitable, or is Pittsburgh and its legal counsel misunderstanding and oversimplifying the nature of these activities?

Propelled by federal health care reform under the Patient Protection and Affordable Care Act , we live in an era of “accountable care.”  We expect our health systems to do more than treat people when they become sick.  We expect them to be accountable for a patient’s health by coordinating and managing all aspects of the patient’s care to improve the patient’s health and keep the patient healthy.  Given this expectation, it may be time to expand our concept of what constitutes charitable care beyond the narrow view expressed in the legal opinion to include direct patient care provided at reduced or no cost as well as those business operations that support or enable health systems to provide not only free or affordable care but also accountable care.

However, health systems cannot manage the entire spectrum of a patient’s care without financial and clinical integration with a sufficient number of types of health care providers.  Therefore, health systems are acquiring other providers that impact the patients served by the health systems, including physician practices that are not themselves nonprofit entities.  Through this control, however, a health system can improve the quality of health care by dictating industry-best standards and protocols with which its physicians and other health care providers must comply.

Likewise, the ownership of one or more health insurance companies offers a health system the opportunity to design benefit structures that are in line with the health system’s overall strategy of improving and maintaining patient health.  These benefit structures may include an emphasis on wellness programs (e.g., gym memberships, smoking cessation programs and nurse hotlines) and provider payment arrangements that emphasize quality incentives and cost maintenance.

This trend toward accountable care comes with a high price tag.  Acquiring hospitals, physician practices and other providers is expensive.  Even more so, forming a health insurer requires significant capital to meet a state’s capital and surplus, net worth and risk-based capital requirements.  If a health system is successful, any of these investments may provide a stream of revenue; however, even more so, they are valuable tools in caring for and managing the health of patients.

When the Pennsylvania court reviews the status of UPMC’s tax-exemption under Pennsylvania law, it will be analyzing UPMC under the criteria defining an IPPC, criteria which were developed nearly thirty years ago in 1985.  Even though the Pennsylvania Supreme Court reaffirmed  these criteria just last year, that case involved a religious summer camp, not a health system.  Given that Pittsburgh’s lawsuit is in its early stages with the only arguments having been presented by Pittsburgh and its legal counsel, it will be interesting to watch as this case develops.

Whether UPMC has crossed a line that justifies the loss of its state tax-exempt status is a decision that the Pennsylvania court has been asked to make.  Hopefully, the court will not make its decision based on a view of UPMC’s operations through the lenses of 1985 but on a full understanding of this era of accountable care.  Otherwise, a case like this one could have problematic repercussions, which undermine efforts to support accountable care, on subsequent decisions around the country not only under state law but also potentially federal law.

Article Shines Spotlight on Pharma Payments to Physicians

By Robert Nauman on Posted in Fraud and Abuse, Pharmaceutical, Physician Practice

An article published today in the Columbus Dispatch shines a spotlight on physicians receiving payments from pharmaceutical companies for speaking and consulting engagements.  The article identifies several central Ohio physicians who have received hundreds of thousands of dollars in fees from drug companies from 2009 through 2012.  The Dispatch’s analysis, taken from data gathered by Propublica , a nonprofit investigative reporting organization, concludes that at least 18 central Ohio doctors have received more than $100,000 from pharmaceutical companies over the period, with the highest receiving almost $650,000 over the 4-year period.

While the article does not specifically allege or identify any illegality or wrongdoing, it openly raises the question of whether such payments amount to a conflict of interest for the physicians.  In their defense, many of the physicians interviewed for the story explain that the fees they receive from drug companies for speaking and consultation do not influence their patient care decisions or views as to a specific drug.  One physician also noted that his involvement in these activities helps him stay on the cutting edge of his profession.

In today’s heightened enforcement environment, this kind of attention should put physicians and other providers on notice that they may be called upon to defend remunerative relationships with drug companies and other suppliers.  Interest and concern over pharma payments to physicians is sure to increase as drug companies will be required, starting August 1, 2013, to disclose payments to physicians starting as part of the health care reform law.  Information collected through these disclosures is expected to be released publicly by the end of September 2014.  This article seems to be an early warning shot to physicians and providers over what may be coming.