The Department of Health and Human Services, Office of the Inspector General (OIG), modified its Work Plan to announce that the agency will be conducting a nationwide audit of hospitals that participated in the Medicare Electronic Health Records (EHR) Incentive Program (also known as the Meaningful Use Program).  The OIG review is focusing on hospitals that received Medicare EHR incentive payments between January 1, 2011 and December 31, 2016.

The OIG’s modification to its Work Plan follows last month’s report that CMS improperly paid an estimated $729 million in Medicare EHR incentives. In our prior client alert, we flagged these findings as a potential area for significant overpayment recovery actions and noted that such actions could pose risks for incentive payment recipients. Read our entire client alert on the OIG’s nationwide audit on hospitals that participated in the EHR Incentive Program Here.

A recent California Supreme Court decision has significant implications for any agreement attempting to waive a substantive statutory remedy in California. In McGill v. Citibank, the Court held that an arbitration provision that provides for a waiver of the right to seek public injunctive relief is contrary to California public policy and unenforceable.  The Court also held that California law prohibiting such waivers is not preempted by the Federal Arbitration Act (FAA).  Crowell & Moring’s Product Liability & Torts and Litigation Groups provided a thorough analysis of the McGill decision in an alert posted on April 10, 2017.

Overview

Plaintiff Sharon McGill filed a class action against Citibank under California consumer protection laws, including the Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA) and false advertising law.  Among other remedies, McGill sought public injunctive relief that would prohibit Citibank from continuing to engage in its allegedly illegal and deceptive practices.  Citibank petitioned to compel McGill to arbitrate her claims on an individual basis, pursuant to the terms and conditions of their agreement.

The trial court ordered McGill to arbitrate all claims other than those for injunctive relief.  The Court of Appeal reversed, concluding that the FAA preempted California’s Broughton-Cruz rule,[1] which prohibits agreements to arbitrate claims for public injunctive relief under the UCL, CLRA, or the false advertising law.

The Supreme Court of California held that the Broughton-Cruz rule was not applicable.  Rather, the panel’s decision centered on the application of the California Civil Code § 3513, which states that “a law established for a public reason cannot be contravened by a private agreement.”   The Court held that McGill’s statutory right to seek certain injunctive relief cannot be waived through an arbitration provision.

Implications for Health Care Plans

The Supreme Court’s opinion has several implications for health plans that use binding arbitration to resolve disputes with enrollees. The Court’s opinion only carves out from the requirement of binding arbitration only those claims that seek injunctive relief on behalf of the general public and does not impact the arbitrability of claims seeking other forms of relief  including other remedies under the UCL, CLRA, and the false advertising law.  For instance, the decision does not preclude parties from agreeing to arbitrate claims that seek compensatory, monetary and punitive damages, or claims that seek injunctive relief in form of restitution.  But, the McGill opinion stands for the proposition that waivers of the right to seek public injunctive relief in any contract are void under California Civil Code § 3513, including those waivers in health plan contracts with enrollees.

 

 


[1] The Broughton-Cruz rule, named after two decisions in the California Supreme Court – Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (1999) and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 1157 (2003).

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule  to stabilize the individual and small group markets to entice issuers to continue participation in the exchanges in 2018 despite continued uncertainty surrounding repeal and replacement proposals for the Affordable Care Act (ACA). The proposed rule, published today, would make the following changes to the individual and small group markets:

  • Open Enrollment: The proposed rule would shorten the Open Enrollment period from November 1, 2017 – January 31, 2018 to November 1, 2017 – December 15, 2017. This would align open enrollment for exchanges with both the employer market (including the Federal Employees Health Benefits Program) and Medicare Advantage open enrollment periods. CMS hopes that the modifications in enrollment period will mitigate adverse selection by requiring individuals to enroll in plans before the benefit year begins and pay premiums day 1 of the benefit year rather than allowing individuals who learn they will need services in late December and January to enroll at that time.
  • Special Enrollment Period: In response to perceived abuses of special enrollment periods (SEPs)—which allow individuals to enroll outside of the open enrollment period when there is a special circumstance (e.g., new family member)—the proposed rule would require verification of an individual’s SEP eligibility 100% of the time beginning in June 2017. Currently, eligibility for an SEP is verified only 50% of the time. Under pre-enrollment verification for new customers, consumers would submit their information and select a plan but their enrollment would be “pended” until completion of the verification. Consumers would have 30 days to submit information to verify their eligibility. The start date of the coverage would be (as it is today) the date of plan selection, but it wouldn’t be effective until the “pend” had been lifted following verification. The rule is limited to pre-enrollment verification of eligibility to individuals newly enroll through SEPs in marketplaces using the HealthCare.gov platform. The proposed rule would also limit certain individuals’ ability to switch to different levels of coverage during an SEP. The SEP provisions of the proposed rule may offer the most significant relief of all the proposed changes. Continue Reading HHS Proposes New Regulations Aimed At Stabilizing the Individual Market

On January 20, 2017, hours after being sworn in as the 45th president of the United States, President Donald Trump issued Executive Order 13765 that aims to “minimize the unwarranted economic and regulatory burdens” of the Affordable Care Act (ACA) while its repeal is “pending.” 

The one-page Executive Order declares that it is the policy of the Trump Administration to seek a “prompt repeal” of the ACA and directs that the executive branch “take all actions consistent with law to minimize the unwarranted economic and regulatory burdens” of the ACA.  The Executive Order also mandates that all federal agencies, including the Department of Health and Human Services (HHS), “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of” any provision of the ACA that imposes a financial or regulatory burden on any stakeholder including patients, physicians, hospitals and other providers, as well as insurers, medical device manufacturers, and pharmaceutical companies.  Federal agencies are also required to “exercise all authority and discretion available to them to provide greater flexibility to States.”  The Executive Order further instructs agencies “to create a more free and open healthcare market” consistent with ACA replacement proposals to permit the sale of health insurance products across state lines. 

By signing the Executive Order, President Trump signals that his Administration will prioritize changes to federal health care policy in order to lessen the economic impact of the ACA.  The Executive Order could be a signal for HHS to expand hardship waivers to permit individuals to avoid the ACA’s tax penalties for individuals who fail to maintain coverage.  HHS also may provide greater flexibility to states for the administration of Medicaid programs, including by more readily granting waivers under section 1115 of the Social Security Act, 42 U.S.C. § 1315.

The practical impact of the Executive Order remains unclear and is limited to agency discretion for now.  The Executive Order does not diminish the authority of federal agencies established by the ACA and requires agencies to implement the Order’s mandates in a manner consistent with current law.  Thus, HHS and other agencies must continue to comply with the requirements of prior legislation while exercising their discretion to minimize the financial burdens of the ACA.  In addition, the Executive Order does not provide a mechanism for private parties to enforce the Trump Administration’s new policy and states that it “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against” the federal government.  The Executive Order appears to give lawmakers the ability to proceed more deliberately and the spotlight will now be on Congress to agree on a plan to repeal and replace the ACA. 

In what appears to be one of the largest class action settlement in the history of ERISA litigation in New Jersey, a federal judge approved $33 million settlement, including $11 million in attorneys’ fees, between Horizon Healthcare Services, Inc. (“Horizon”) and plaintiff chiropractors.

The underlying lawsuit stemmed from allegations that Horizon made “across-the-board” denials of certain types of claims that were submitted by chiropractic physicians.  Plaintiff’s complaint followed an October 7, 2009 cease and desist order by the New Jersey Department of Banking and Insurance.  In a subsequent class action complaint filed in New Jersey federal court against Horizon, plaintiff asserted that the Horizon Blue Cross Blue Shield of New Jersey improperly and systematically bundled various Current Procedural Terminology (“CPT”) codes that contracted and non-contracted chiropractic physicians billed to Horizon.  Plaintiff claimed that Horizon summarily denied reimbursement for non-CMT (chiropratic maniupulative therapy) services and unilaterally determined that the non-CMT services were bundled with Horizon’s payment for CMT services.  Thus, Plaintiff asserted that Horizon failed to determine whether the non-CMT billed services were separate and distinct from the CMT services.  On behalf of the all chiropractic physicians that submitted claims under ERISA plans that Horizon administers, Plaintiff’s complaint sought benefits due to the chiropractor physicians from plan member’s assignment under 29 U.S.C. § 1132(a)(1)(B), and also alleged that Horizon’s conduct constituted a failure to provide full and fair review pursuant to ERISA, 29 U.S.C. § 1133.  The remaining counts for non-ERISA plans alleged violation of New Jersey law, breach of contract and breach of covenant of good faith and fair dealings.  On or about June 1, 2015, the federal court certified two classes, including an ERISA class.

On October 13, 2016, Judge William Martini approved the settlement agreement and granted the Plaintiff’s Motion for Award of Attorneys’ Fees.   The court agreed to require Horizon to deposit $33 million for the settlement fund and awarded $11 million of the settlement fund as attorneys’ fees to class counsel.  Among other things, the Court noted that Plaintiff’s counsel conducted significant research and discovery, including review of 200,000 pages of documents, number of depositions and analyzed claims data for more than 19 million records.

This case highlights the significant exposure under ERISA that may result from improper billings and reimbursements for health plan administrators, insurers and providers.

On November 2, 2016, the final rule with comment period (the “Final Rule”) implementing provisions of the Medicare Access and CHIP Reauthorization Act (MACRA) relating to the new Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) will be published in the Federal Register.  The Center for Medicare and Medicaid Services (CMS) also launched a new website with tools and updates to help MIPS-eligible clinicians learn and prepare for participation in MIPS and APMs.

As we describe in our client alert titled “CMS Releases Final Rules on MACRA Quality Payment Program Implementation for 2017-Onward,” the Final Rule makes several significant changes to the MIPS and APM tracks of the “Quality Payment Program” as they were proposed in the notice of proposed rulemaking.  We previously summarized the proposed rule in two previous alerts MACRA and MIPS: The Basics and Beyond and Medicare Quality Payment Program: Alternative Payment Models (APMs).  When compared to the proposed rule, the Final Rule increases flexibility for eligible clinicians or groups to participate in MIPS by creating several “choose-your-own-pace” options that would allow them to avoid negative payment adjustments.  The Final Rule also includes more value-based payment models that qualify as Advanced APMs.

Given the significant changes, the agency has published the Final Rule with a 60-day comment period for certain provisions that will end on December 19, 2016.

California recently enacted Assembly Bill 72 (“AB 72”) to target surprise medical bills from out-of-network professionals.  The new law applies to commercial plans licensed by the Department of Managed Health Care and the Department of Insurance.  AB 72 sets reimbursement rates for out-of-network professionals at in-network facilities at either the average contracted rate, or 125 percent of the Medicare Fee-for-Service reimbursement for the same or similar services.  The constitutionality of these provisions has been challenged in federal court by the Association of American Physicians and Surgeons.  AB 72 also implements a new dispute resolution process to resolve reimbursement disputes between commercial health plans/insurers and non-contracting health professionals that provide services at a contracted facility.  Read the full client alert titled “New California Law to Curb Surprise Medical Bills Will Impact Relationships Between Health Plans and Non-Contracted Professionals,” here.

In a unanimous decision last week that impacts healthcare providers, vendors and health plans that receive Medicare and Medicaid reimbursements or contract with federal health care programs, the United States Supreme Court in Universal Health Services v. United States ex rel. Escobar held that a defendant may be liable under the implied certification theory under the False Claims Act (FCA) and clarified on how the materiality requirement of the FCA should be enforced.  Our colleagues from the Government Contracts Group analyzed the Court’s opinion, the legal and factual context in which it arose, and its likely effect on contractors and stakeholders in a “Feature Comment” published in The Government Contractor.

The high court resolves the conflict as to the validity and scope of the so-called implied certification theory.  The eight-member panel determined that there may be FCA exposure where a claim for payment makes specific representations about goods or services provided, and the defendant fails to disclose noncompliance with a material statutory, regulatory, or contractual requirements that makes those representations “misleading half-truths.”

At the same time, the Court also rejected the First Circuit’s expansive view that any violation is deemed to be material if the defendant knows that the government would merely be entitled to refuse payment were it aware of the violation.  The Court made clear that the question of whether violation of a law, regulation, or contractual provision is material to the government’s decision to pay will be analyzed according to common law tort and contract principles.  The question is not whether the Government could refuse payment based on the violation at issue, but something more – whether the government was objectively likely to do so or the defendant knew that the government would refuse payment.

The Office of the Inspector General of the Department of Health and Human Services (OIG) last week replaced a 20-year old policy statement, and issued guidance on the criteria the agency will use to evaluate whether to exclude certain individuals and entities from billing or “participation in” Federal health programs under its permissive exclusion authority. The new guidelines supersede and replace the OIG’s December 24, 1997 policy statement and set forth “non-binding” criteria that the OIG may consider in exercising this authority under circumstances involving fraud, kickbacks and other prohibited conduct. The newly-memorialized policy is yet another effort by the agency to encourage healthcare providers to implement robust compliance mechanisms that can timely identify and voluntarily self-disclose to the government any unlawful conduct.

Under Sections 1128(b)(1)-(b)(15) of the Social Security Act (the “Act”), the Secretary, by delegation to the OIG, has discretion to exclude individuals and entities based on a number of grounds. This so-called “permissive exclusion” authority grants significant discretion to the OIG.  The new policy provides guidelines for permissive exclusions that are based on Section 1128(b)(7) of the Act, which permits the OIG to exclude persons from participation in any Federal health care program if the OIG determines that the individual or the entity has engages in fraud, kickbacks and other prohibited activities.

Continue Reading OIG Updates Policy on Permissive Exclusions Based On Fraud and Kickbacks

Last month, the Center for Medicare & Medicaid Services (CMS) issued a memorandum announcing a change pertaining to the effect of intermediate sanctions on the calculation of Star Ratings for Medicare Advantage organizations (MAOs) and Part D sponsors.  This is a significant change for plans.

The Star Rating program has continued to evolve since being introduced by CMS in 2006, and is a part of CMS’s efforts to define, measure, and reward quality health care and member services. The ratings incorporate data from Healthcare Effectiveness Data and Information Set quality measures, Consumer Assessment of Healthcare Providers and Systems surveys, the Medicare Health Outcomes Survey, and CMS administrative data.

Beginning in 2012, quality/Star Ratings directly affected the monthly payment amount MAOs receive from CMS. First, CMS is required to make quality bonus payments (QBPs) to MAOs that achieve at least 4 stars in a 5-star quality rating system. In addition, the percentage share of savings that MAOs must provide to enrollees as the beneficiary rebate is tied to the level of an MAO’s QBP rating.

Continue Reading CMS Suspends Automatic Reduction of Star Ratings for Plans and Sponsors Subject To Intermediate Sanction