Proposed Changes to the Anti-Kickback Statute, Stark Law and Civil Monetary Penalties Law Address Value-Based Healthcare Environment

On October 9, the Department of Health and Human Services (HHS) released proposed rules (the Proposed Rules) aiming to update the Anti-Kickback Statute (the AKS), Stark Law and Civil Monetary Penalties Law (CMPL) to address today’s value-based and coordinated healthcare environment. The proposals reflect a recognition on HHS’s part that the healthcare landscape of today is significantly different from when these laws were adopted. Overall, HHS’s Proposed Rules appear directed at ensuring that the AKS, the Stark Law and the CMPL will not stand as an impediment to the shift toward value-based care and increased coordination of patient care among providers and across care settings. Consequently, the Proposed Rules introduce new exceptions and safe harbors, as well as re-evaluate certain existing provisions.  You can read our summary of the Proposed Rules major provisions here.

Court Sides with Hospitals on CMS Site Neutral Payment Rule for Hospital Outpatient Departments

In a ruling on September 17, 2019 by Judge Rosemary M. Collyer, the U.S. District Court for the District of Columbia vacated portions of a 2018 Centers for Medicare & Medicaid Services (CMS) rule that reduced Medicare payments for clinic-visit services at off-campus hospital outpatient departments (HOPDs).

By rulemaking, on January 1, 2019, CMS instituted a “site neutral” payment policy by equalizing Medicare Part B payment rates under both the Outpatient Prospective Payment System (OPPS) and Physician Fee Schedule services delivered at off-campus HOPDs.[1] CMS established a two-year transition period to reach site neutrality. In Calendar Year (CY) 2019, CMS began paying outpatient departments 70 percent of the full OPPS rate, which equated to half of the planned 60 percent overall reduction.[2] In the CY 2020 OPPS proposed rule, which is not yet finalized, CMS intends to reduce rates to 40 percent of full the OPPS rates.[3] Hospitals that provide those services opposed the CY 2019 proposed rule, which received almost 3,000 comments, arguing that the CMS rule “is contrary to both the Medicare statutory scheme and the policy decision reached by Congress under Section 603 of the Bipartisan Budget Act of 2015.”[4] Continue Reading

Kentucky Appellate Court Affirms Dismissal of Enrollee Claims Against MCOs

The Kentucky Court of Appeals recently affirmed dismissal of numerous lawsuits filed by Medicaid enrollees against Managed Care Organizations (“MCOs”) and the Commonwealth’s Cabinet for Health and Family Services (the “Cabinet”).   Appalachian Reg’l Healthcare, Inc. v. Commonwealth, No. 2015-CA-001670-MR, 2019 Ky. App. Unpub. LEXIS 629 (Ct. App. Aug. 30, 2019).  Applying recent Kentucky Supreme Court authority, the Appellate Court ruled that the enrollees lacked constitutional standing to sue.  Id. (citing Cabinet for Health & Family Servs. v. Sexton, 566 S.W.3d 185, 188 (Ky. 2018)).

In Appalachian Reg’l, hospitals provided services to several Medicaid enrollees.  The enrollee’s MCO denied the hospitals’ claims for payment, deeming the services medically unnecessary.  Notably, the hospitals did not send bills to the enrollees; Medicaid laws prohibit hospitals from holding enrollees liable for the costs of medical care. 

The enrollees, through the hospitals, requested a state fair hearing from the Cabinet.  The Cabinet dismissed these proceedings.  The enrollees then filed suit.  Like the Cabinet, the trial court dismissed the litigation.  Both the Cabinet and the trial court held that the enrollees lacked standing to challenge the MCO’s decision to deny the claims.

The Kentucky Court of Appeals affirmed.  Applying Sexton, the Court held that the enrollees had not suffered an “injury” because they lacked liability for payment.  The Court also rejected the argument that state Medicaid statutes confer standing to sue.  The Court recognized that “deprivation of a procedural right without some concrete interest that is affected by that deprivation—a procedural right in facuo—is insufficient to create . . . standing.”  Id. (internal quotation marks and citation omitted).  The Court thus concluded that the “injuries proffered at various times” were merely “conjectural or hypothetical.”

Sexton and Appalachian Reg’l resolve some disagreement among lower courts.  The cases also provide further certainty to MCOs by confirming that hospitals cannot use enrollees to seek reimbursement for healthcare services in litigation.  Appalachian Reg’l is also a cautionary tale for hospitals to weigh their options carefully, before proceeding with costly litigation, only to have lawsuits dismissed.

 

Is it Legal to Maximize Value of Secondary Diagnosis Codes?

By selecting a more severe Secondary Diagnosis Code for a patient, a physician may increase the reimbursement due from Medicare. If a hospital intentionally changes codes across its patient population, the increased revenue can be substantial. Is that legal? A federal district court in Texas faced this question when a relator filed suit under the False Claims Act.

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HHS Abandons Proposal to Reform Drug Manufacturer Rebate System

On Thursday, July 11, 2019, the White House administration reversed course on the Department of Health and Human Services’ (HHS) recent proposal to reform drug manufacturer rebate system. As we previously reported, HHS’s February 6, 2019 proposed rule sought to modify the Anti-Kickback Statute safe harbor protection with the aim of lowering prescription pharmaceutical product prices and out-of-pocket costs for consumers (primarily Medicare Part D and Medicaid Managed Care Plan members). With the proposed rule, HHS hoped to encourage medication manufacturers to pass discounts directly to consumers and develop a transparent framework for the prescription drug product market.

The public comment period for the proposed rule closed at midnight on April 8, 2019, with over 25,000 comments received. The pharmaceutical industry welcomed the proposed rule. Pharmaceutical Research and Manufacturers of America (PhRMA) informed HHS in April that it considers the proposed reform of the rebate system to be urgent. On the other hand, payers, pharmacy benefit manager and providers have opposed the proposal, collectively warning that the elimination of the safe harbors could lead to higher costs for patients.

According to several reports, the administration’s decision to back away from the proposed rule is based on the prospects of bipartisan legislation aimed at reducing drug costs, as well a concern that the proposed rule would have imposed increased drug costs on seniors. In a May 2019 report, the Congressional Budget Office estimated that the proposed rule would increase federal spending by about $177 billion from 2020 to 2029, with increases in Medicare Part D plan premiums.   HHS officially withdrew notice of its pending final rule on July 10, 2019.

DOJ Challenges Charitable Copay Subsidies

Medical CostsThe Department of Justice intervened in a False Claims Act lawsuit involving “so-called charitable patient assistance funds” used for prescription drug copays. The DOJ wants to make “clear that the Department will hold accountable drug companies that pay illegal kickbacks to facilitate increased drug prices.”  See a report at the Anticorruption blog here.

Healthcare Employers: Exercise Caution When Enforcing Mandatory Vaccination Policies

Healthcare employers should consider a recent trend when determining what safety requirements to impose on their employees. Recent settlements between healthcare providers and the Equal Employment Opportunity Commission show that even employers in the healthcare industry must consider accommodating their employees’ religious beliefs when enforcing mandatory vaccination policies.

On June 25, 2019, the EEOC announced that a Michigan hospital had agreed to compensate a medical transcriptionist $74,418 to settle claims arising from the hospital’s alleged failure to reasonably accommodate her sincerely held religious beliefs. The EEOC filed suit, stating that the hospital violated Title VII of the Civil Rights Act—which requires that employers reasonably accommodate employees’ sincerely held religious beliefs, unless that would cause an “undue hardship.” Specifically, the hospital rescinded a job offer to an applicant after she refused an influenza vaccine based on her religious beliefs against inoculation. The hospital’s policy allowed employees to wear masks in lieu of receiving the vaccines, but only if they had disabilities that prevented them from receiving flu vaccines. The hospital refused to extend this same accommodation to the job applicant. The fact that the hospital provided this accommodation for disabilities made it more difficult for the hospital to deny this accommodation when requested for a sincerely held religious belief. Continue Reading

Three weeks to go until Oral Arguments in Texas v. United States

There are now only three weeks before the Fifth Circuit Court of Appeals is scheduled to hear oral arguments in Texas v. United States, the latest legal front in the ongoing battle over the future of the Patient Protection and Affordable Care Act (ACA).

Texas v. United States is a lawsuit focusing on the indispensability of the individual mandate, which required most Americans to maintain “minimum essential” health insurance coverage, to the rest of the signature Obama-era healthcare law. Continue Reading

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