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CMS Surreptitiously Proposes to Amend the Two-Midnight Rule Before the Fourth of July Weekend

Posted in Hospitals, Medicare Reimbursement

Like an episode of The West Wing, CMS followed the venerable tradition of announcing “bad news” before the start of a long holiday weekend.  Last Monday, we predicted that the Medicare Payment Advisory Commission’s (MedPAC) June Report would be the final straw to pressure CMS to amend its controversial Two-Midnight Rule.

Two days later, on July 1st, CMS succumbed to that pressure by proposing changes to the Rule in the CY 2016 OPPS proposed rule.[i]  CMS proposed to allow hospitals, “on a case-by-case basis,” to receive Part A reimbursement for patients whose stay is expected to last less than two midnights.  The following factors would be considered in determining whether a patient stay of less than two midnights qualified for Part A reimbursement:

  1. The severity of the signs and symptoms exhibited by the patient;
  2. The medical predictability of something adverse happening to the patient; and
  3. The need for diagnostic studies that are typically outpatient services.

CMS also proposed that Quality Improvement Organization (QIO) contractors, rather than Medicare Administrative Contractors (MACs) or Recovery Audit Contractors (RACs), conduct reviews of short inpatient stays.  QIOs would refer claim denials to MACs for payment adjustments.  Provider appeals of denied claims would be covered under the provisions of 42 U.S.C. § 1395ff.  In addition, providers with a high failure rate would be referred to RACs for further claims auditing.

Despite these proposed changes to the Rule, CMS declined to reconsider its 0.2% reduction to the IPPS standardized amount that it instituted during the FY 2014 IPPS rulemaking to offset the effects of the Rule.  Specifically, CMS estimated that as a result of the new policy, 40,000 net new patient encounters of more than two midnights would shift from being reimbursed on an outpatient basis to an inpatient basis.  Put another way, CMS somehow calculated that increasing the minimum expected inpatient stay from one to two midnights would also increase the number of inpatients.  Several hospitals and trade associations are challenging CMS’s “fuzzy math” in federal court; as a result, we recommend that all providers preserve their appeal rights by protesting, at a minimum, the 0.2% reduction to the standardized amount in their cost reports.  We also recommend that providers protest any reimbursement amounts lost as a result of complying with the Rule.  A refresher on the cost report appeals process for both self-disallowance and late NPRs is available hereAs we discussed last week, it’s not too late to challenge the 0.2% reduction for FY 2014, and doing so now on a cost report can be viewed as a cost-effective call option to challenge the Rule after pending cases have been resolved.

Lastly, if you are interested in submitting comments on the proposed changes to the Two-Midnight Rule, CMS will accept comments until 5 p.m. EST on August 31, 2015.  The Final Rule is expected to be issued around November 1st.

[i] The Fact Sheet for the Rule available is available here.

Context is King: Analysis of the US Supreme Court Decision in King v. Burwell

Posted in ACA

Our public policy and healthcare teams recently published a piece analyzing the King v. Burwell decision and its implications. See Context is King:  Analysis of the US Supreme Court Decision in King v. Burwell.

 In this piece, we discuss (1) the highlights of the decision’s rationale; and (2) immediate implications of the decision. There are, however, implications of the decision that will not be immediately apparent. If you would like to remain informed of our continuing analysis and publications regarding this issue, please subscribe here.

Capital Thinking: Health Care Legislative Update

Posted in Uncategorized

House to Consider 21st Century Cures Act

Majority Leader Kevin McCarthy (R-CA) has announced that the House of Representatives will consider H.R. 6, the 21st Century Cures Act, this week. The House Committee on Rules will meet to consider the rules for the debate on Wednesday, July 8. Amendments to the legislation are to be filed by Tuesday, July 7.

This legislation that was released in advance of the Committee on Rules consideration includes changes to the regulatory authority of the Food and Drug Administration, as well as provisions focused on health information technology, research, telemedicine, drug manufacturing and development, and young scientists.

While the legislation would increase funding for the National Institutes of Health by approximately $8.75 billion over the next five years, this figure falls short of the $10 billion that the House Committee on Energy and Commerce approved in May. Three Democratic supporters of the legislation – House Committee on Energy and Commerce Ranking Member Frank Pallone (D-NJ), Rep. Diana DeGette (D-CO), and Rep. Gene Green (D-TX) – have expressed their disappointment with this decrease in funding and vowed to find additional means to fill the “funding hole.”

This new version of the legislation includes a Sense of Congress which states that the HIPAA regulation should not be used to prevent proper data sharing. Additionally, new electronic health record interoperability language would require the Department of Health and Human Services to provide rules for interoperability standards and implementation specifications. It would also abolish the Standards Committee and restrict the role of the Office of National Coordinator Policy Committee.

Policymakers have wrestled with how to pay for the bill’s large price tag and some of the offsets have been controversial. A Congressional Budget Office estimate from July 2 states that the legislation would cut federal spending by about $470 million through 2025. The legislation includes the following offsets: drawing down the Strategic Petroleum Reserve; limiting Medicaid payments for durable medical equipment to Medicare rates; changing payments for Part B drugs administered through durable medical equipment and for X-ray imaging; excluding authorized generics from calculation of average manufacturer price; and establishing programs aimed at preventing prescription drug abuse under Medicare Parts C and D. Unlike the previous version of the bill, the current version would not delay certain Medicare prescription drug plan prepayments. America’s Health Insurance Plans (AHIP) had come out against the Medicare Part D offset, and the Advanced Medical Technology Association (AdvaMed) has expressed concerns on the durable medical equipment offset.

The bill currently has 230 bipartisan cosponsors.

This Week’s Hearings:

  • Tuesday, July 7: The Senate Committee on Health, Education, Labor, and Pensions (HELP) Subcommittee on Primary Health and Retirement Security will hold a hearing titled “Small Business Health Care Challenges and Opportunities.”
  • Wednesday, July 8: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Medicaid at 50: Strengthening and Sustaining the Program.”
  • Wednesday, July 8: The House Committee on Rules will meet to determine the rules for debate of H.R. 6, the 21st Century Cures Act.
  • Wednesday, July 8: The Senate Committee on Homeland Security and Governmental Affairs will hold a hearing titled “Stopping an Avian Influenza Threat to Animal and Public Health.”

The Hits Keep On Coming for CMS – MedPAC Supports Rescission of the Two- Midnight Rule

Posted in Hospitals, Medicare Reimbursement

The Medicare Payment Advisory Commission (MedPAC), recently issued its June Report to Congress.  Echoing the comments of the healthcare community, MedPAC recommended that CMS rescind its Two-Midnight Rule.

As a reminder, CMS implemented the Two-Midnight Rule in the FY 2014 IPPS Rulemaking. There are three main elements to the Rule:

  1. Amended the definition of “inpatient” to mean an admitted patient who is expected to require a minimum stay spanning two midnights.
  2. Implemented a new policy on when a hospital can request – and receive – payment if a patient is improperly classified under the Rule as an inpatient, versus an outpatient.
  3. Implemented a requirement that there be a written physician order for every inpatient admission.

Not surprisingly, the Two-Midnight Rule has been controversial, and its enforcement has been delayed by both CMS and Congress.  Multiple pending cases are also challenging aspects of the Two-Midnight Rule.  As a result, MedPAC’s recommendation may be the final straw to pressure CMS to rescind the Rule.

Even if CMS rescinds the Two- Midnight Rule, providers should, at a minimum, remember to protest the 0.2% reduction to the standardized amount that CMS instituted in FY 2014 to finance the implementation of the Rule.  (In addition to the 0.2% reduction, providers can also protest the reimbursement amount lost as a result of complying with the Rule.)  A refresher on the cost report appeals process for both self-disallowance and late NPRs is available here.

It’s not too late to challenge the 0.2% reduction for FY 2014!

Largest National Health Care Fraud Take-Down in History Focuses on Medicare Part D

Posted in AKS, Civil Monetary Penalties Law, False Claims Act, Fraud and Abuse, Medicare Part D

On the heels of its announcement that it is “hiring additional lawyers to look into taking more administrative actions against” physicians, the Office of Inspector General (OIG) recently filed 75 indictments and 14 complaints against various parties.  See the Fact Sheet.  The OIG’s “national sweep” yielded prosecution of $712 million in false billings and led to charges against 46 doctors and 197 others.  Most prosecutions were for egregious violations —billing for medically unnecessary and often never provided items or services.

This operation was unique in that it focused on Medicare Part D prescription drugs.  This is no surprise since spending for Part D has more than doubled since 2006, from $51.3 billion to $121.1 billion.  See HHS OIG Data Brief, June 2015.  Part of this increase is attributed to prescription drug abuse. Accordingly, prescription drug fraud schemes were one-third of the investigations.

Capital Thinking: Health Care Legislative Update

Posted in Uncategorized

House to Continue Consideration of IPAB Repeal

Majority Leader Kevin McCarthy (R-CA) has announced that the House of Representatives will complete consideration of H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015, this week. This bill repeals the sections of the ACA that establish the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. The Congressional Budget Office (CBO) has estimated that the repeal would cost $7.1 billion from FY 2016 to FY 2025. The House Committee on Rules adopted an amendment, offered by Rep. Joe Pitts (R-PA), which offsets the repeal costs with funds from the ACA’s prevention and public health fund. The House began considering the bill last week but a vote was postponed. It currently has 235 bipartisan cosponsors.

Appropriations Committees Mark Up Health Legislation

Following Subcommittee action last week, the House Committee on Appropriations has announced it will hold a markup of the FY 2016 Labor, Health and Human Services, and Education bill on Wednesday, June 24. The draft legislation includes $153 billion in discretionary funding ($14.6 billion below the President’s budget request), with $71.3 billion for the Department of Health and Human Services (HHS) ($3.9 billion below the President’s budget request). The bill includes over $6 billion in funds for the Health Resources and Services Administration (HRSA) ($413 million below the President’s budget request), including $265 million for the Children’s Hospital Graduate Medical Education Program. Additionally, the bill provides the Centers for Disease Control and Prevention (CDC) $7 billion (equal to the President’s budget request), including $1.56 billion for Public Health Preparedness and Response; $31.2 billion for the National Institutes of Health (NIH) to increase several research initiatives ($100 million above the President’s budget request); and $3.3 billion for the Centers for Medicare and Medicaid Services (CMS) ($919 million below the President’s budget request). The bill does not include additional funding to implement the ACA. It prohibits funds from going to the “Center for Consumer Information and Insurance Oversight” and “Navigators” programs.

The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on its appropriations language on Tuesday, June 23. The legislation has yet to be released.

Chairman Upton Expected To Release Manager’s Amendment for 21st Century Cures Act

After announcing that the House floor will not consider the 21st Century Cures Act this month, Committee on Energy and Commerce Chairman Fred Upton (R-MI) stated that he plans to file a manager’s amendment for the bill this coming week. Lawmakers have been in discussions over the bill’s offsets, which have remained controversial since the Committee advanced the legislation last month. Offsets currently include delaying certain Medicare Part D plan prepayments, drawing down the Strategic Petroleum Reserve, limiting federal Medicaid reimbursement to states for durable medical equipment to Medicare payment rates, and limiting federal payment for X-ray imaging services that use film.  America’s Health Insurance Plans (AHIP) has come out against the Medicare Part D offset, which is expected to lower Medicare spending by about $5 billion to $7 billion. The Advanced Medical Technology Association (AdvaMed) has expressed concerns on the durable medical equipment offset, which is expected to save $2.8 billion.

Chairman Upton expects the Committee on Ways and Means to waive jurisdiction and agree to his manager’s amendment. He predicted a floor vote would occur in early July.

Stakeholder Comments Due for Senate Finance Committee’s Chronic Care Working Group

In May, the Senate Committee on Finance Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) announced the formation of a chronic care working group, to be co-chaired by Sens. Johnny Isakson (R-GA) and Mark Warner (D-VA). The committee’s working group has requested stakeholder input on strategies to improve outcomes for Medicare patients with chronic conditions, including the use of telehealth and remote monitoring technology. The deadline to respond to the committee’s working group is this Monday, June 22.

This Week’s Hearings:

  • Tuesday, June 23: The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act, 2016.
  • Wednesday, June 24: The House Committee on Ways and Means Subcommittee on Oversight will hold a hearing titled “Rising Health Insurance Premiums Under Obamacare.”
  • Wednesday, June 24: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining the Administration’s Approval of Medicaid Demonstration Projects.”
  • Wednesday, June 24: The House Committee on Appropriations will hold a markup on the FY 2016 Labor, Health and Human Services, and Education bill.
  • Wednesday, June 24: The Senate Committee on Veterans’ Affairs will hold a hearing titled “Pending Health Care and Benefits Legislation.”
  • Thursday, June 25: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining Public Health Legislation: H.R. 2820, H.R. 1344, and H.R. 1462.” H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act, provides federal support for cord blood donation and research so as to increase patient access to transplant. H.R. 1344, the Early Hearing Detection and Intervention Act of 2015, reauthorizes a program for early detection, diagnosis, and treatment regarding deaf and hard-of-hearing newborns, infants, and young children. H.R. 1462, the Protecting Our Infants Act of 2015, develops recommendations and improves prevention, treatment, and data on prenatal opioid abuse and neonatal abstinence syndrome.

OIG Puts Muscle Behind Its Alert

Posted in AKS, Anti-kickback Statute, Compliance, Department of Health and Human Services, False Claims Act, Fraud and Abuse, Hospitals, OIG, Physician Practice, Regulatory Compliance, Uncategorized

Only two days after releasing its latest fraud alert, a deputy director from HHS’s Office of Inspector General announced that the OIG will be hiring additional attorneys to look into taking more administrative actions against physicians in their individual capacity. This announcement emphasizes that the OIG means serious business – not only is the OIG shifting its focus to the physicians themselves, but it is hiring a team of attorneys as further enforcement. In a related development, the Department of Justice recently reached a record settlement with a skilled nursing facility for paying physicians as medical directors under false contracts. This confirms that while the OIG is broadening its enforcement to individual physicians, the entities are not off the hook.

According to the Deputy Administrator and Director with CMS’s Center for Program Integrity, waste accounts for 30% of overall healthcare costs. It is increasingly clear that HHS intends to significantly reduce that percentage by now focusing on individual physicians rather than only going after the organizations that pay them.

Last week, we wrote about the OIG advising physicians to ensure their compensation arrangements reflect fair market value for bona fide services the physicians actually provide. In particular, the OIG mentioned medical directorships, which put physicians in a key position to generate business for the entity.

For those who missed our previous blog post, we noted that physicians should be careful to ensure their medical director agreements – in fact, any financial arrangement, such as office staff arrangements, contain fair market value compensation for services they actually provide. Moreover, it important for all physicians to begin building evidentiary support (e.g., documenting time spent performing tasks under the agreement) in case the agreement is challenged. Documentation will be important in order to show that compensation was in fact based on the services provided rather than for a physician’s past or future referrals.

Capital Thinking: Health Care Legislative Update

Posted in Uncategorized

House to Vote on Medical Device Excise Tax and IPAB Repeals

In the House of Representatives, Majority Leader Kevin McCarthy (R-CA) has announced that several health care bills will be considered on the floor this week.

Two of these bills dismantle portions of the Affordable Care Act (ACA). H.R. 160, the Protect Medical Innovation Act of 2015, repeals the excise tax on medical device manufacturers and importers. It has 282 bipartisan cosponsors. H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015, repeals the sections of the ACA that establish the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. It has 235 bipartisan cosponsors. Prior to any floor action, the House Committee on Rules will meet on Monday, June 15, to consider these pieces of legislation.

Several Medicare Advantage bills will be considered under suspension of the rules: H.R. 2505, the Medicare Advantage Coverage Transparency Act of 2015, as amended; H.R. 2507, the Increasing Regulatory Fairness Act of 2015, as amended; H.R. 2582, the Seniors’ Health Care Plan Protection Act of 2015, as amended; and H.R. 2570, the Strengthening Medicare Advantage through Innovation and Transparency for Seniors Act of 2015, as amended.

This Week’s Hearings:

  • Monday, June 15: The House Committee on Rules will meet to consider H.R. 160, the Protect Medical Innovation Act of 2015, and H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015.
  • Tuesday, June 16: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining H.R. 2646, the Helping Families in Mental Health Crisis Act.”
  • Tuesday, June 16: The House Committee on Science, Space, and Technology Subcommittee on Research and Technology will hold a hearing titled “The Science and Ethics of Genetically Engineered Human DNA.”
  • Tuesday, June 16: The Senate Committee on Health, Education, Labor, and Pensions (HELP) will hold a hearing titled “Achieving the Promise of Health Information Technology: What Can Providers and the U.S. Department of Health and Human Services Do to Improve the Electronic Health Record User Experience?”
  • Wednesday, June 17: The House Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a markup of the FY 2016 Labor, Health and Human Services, and Education Appropriations bill.
  • Thursday, June 18: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “A National Framework for the Review and Labeling of Biotechnology in Food.”

Oh, the Places You’ll Go! – International Healthcare Opportunities: Meeting the Need for Senior Care Facilities in China

Posted in Hospitals, International Healthcare, Managed Care, Uncategorized

The World Economic Forum has identified that today’s global infrastructure demand is estimated at approximately US$ 4 trillion in annual expenditures, with a gap – or missed opportunity – of at least US$ 1 trillion every year.  Despite existing supply of private capital, much more is needed to fill this gap.  This demand for infrastructure includes soft infrastructure such as healthcare facilities.  Thus, in recent years, more and more US healthcare providers are looking for international partnerships or investment opportunities to take advantage of the unique demands abroad.  One such area is building senior care facilities in China.

 

On May 25, a tragic fire broke out at a well-known privately owned nursing home in the central province of Henan, China.  Thirty-eight people were killed and six other were injured.  It is believed that poor construction and a lack of safety measures were to blame for the fire.  This tragedy highlights the urgent need for safe senior care facilities in China.  According to population data from the United Nations, adults age 60 and older are projected to represent 19.8% of China’s population by 2025.  While this figure is lower than the projected 24.8% for the U.S., China’s one-child policy and the fact that working adults gravitate towards coastal urban centers mean that many seniors in China are living alone, without help for the need care.

 

At the same time, there is a great lack of quality senior care facilities.  Thus, there is significant demand for American senior living companies with expertise in providing both housing and healthcare related services to serve the aging boom in China.

 

The Chinese government recognizes such a demand and has recently issued circulars and regulations with the goal of encouraging foreign investors in the area of for-profit senior care.  The first of which, dated November 24, 2014, the Ministry of Commerce (MOFCOM) and the Ministry of Civil Affairs (MCA), jointly issued a Circular on Various Issues on Foreign Investment in For-profit Senior Care Facilities:

  • It clarifies the approval and registration process for foreign investment in for-profit senior care business, specifying that such facilities are subject to approval by MOFCOM, licensing by MCA, and registration with the State Administration of Industry and Commerce. There are also additional permitting requirements at the municipal level thereafter.
  • It lists documentation requirements for application and set the time limit for MOFCOM approval (20 days upon acceptance of application).
  • It encourages franchising and expansion by foreign for-profit senior care facilities.
  • It provides the same preferential treatment currently granted to domestic private senior care facilities. However, it did not specify whether any tax benefit may be available to foreign owned facilities.

 

Then in February of 2015, the MCA offered additional opinions and regulations to further set the framework for private investment in senior care facilities.  Of note are two points below:

  • It expressly permits public private partnerships (PPP) to further encourage private investment to take part in conversion of public institutions and enterprises. PPP can be a valuable vehicle for sharing risk with the host government in a foreign country.
  • For-profit private senior facilities will be able to set their own prices, though it’s not clear if a PPP facility will be subject to government intervention.

 

These regulations and circulars are only available in Chinese, but Squire Patton Boggs is happy to provide translations, as well as assistance to anyone interested in exploring the Chinese senior care market.

 

One example of a recent American entrant into the China market is the recently announced development and management partnership between Greystone Communities, a Texas based senior living company, with CITIC Guoan Investment Co., Ltc. (“CITIC GAI”), a real estate development finance investment firm based in Beijing.  In this partnership, announced on May 31, 2015, Greystone would provide management, planning and operations management consulting for CITIC GAI’s portfolio of senior care projects in China.

OIG Warns Physicians Regarding Noncompliant Agreements

Posted in Fraud and Abuse, OIG, Physician Practice

Tuesday, the OIG released a fraud alert advising physicians to ensure their compensation arrangements, such as medical director agreements, reflect fair market value for bona fide services the physicians actually provide, or they could potentially face liability under the Anti-Kickback Statute.  As part of the fraud alert, the OIG encouraged physicians “to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.”

To underscore the seriousness of the issue, the OIG highlighted the fact that it has recently reached settlements with 12 individual physicians regarding questionable medical directorship and office staff arrangements.  Compliance issues under these agreements included compensation the reflected the volume or value of referrals, compensation that was not fair market value for services performed, and payment for services that were not actually performed.  In one case, the OIG noted that the arrangement called for the affiliated health care entity to pay the salaries of the physicians’ front office staff, providing physicians an improper benefit by relieving them of that burden.

This latest fraud alert comes on the heels of similar alerts released in 2013 and 2014, putting physicians on notice that they too can be the focus of enforcement activity.  This appears to represent a shift by the OIG, which previously concentrated its enforcement efforts on larger entities, like hospitals and health care systems, rather than individual physicians.

In light of the OIG’s warning, physicians should be careful to ensure their medical director agreements and similar arrangements contain fair market value compensation for services they actually provide, and the services provided under the agreement should not overlap with obligations under other agreements.  Documenting time spent performing tasks under the agreement (such as through timesheets) is also a good way to build evidentiary support in case the agreement is challenged. Agreements that seem “too good to be true” should be viewed with suspicion.