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Peter Roan is a Health Care Group partner in Crowell & Moring’s Los Angeles office. With over 30 years of experience, Peter concentrates his practice on litigation in the health care and insurance industries. He represents managed care organizations, health benefit plans, Medicare Advantage Organizations, Medicaid managed care plans, insurers, plan administrators, plan sponsors, physician organizations, other health care providers and suppliers, ambulatory surgical, skilled nursing and other health care facilities, and trade associations in various litigation and regulatory matters. Peter’s health care litigation experience includes payer / provider and other disputes and defending class action, bad faith, wrongful death, ERISA, unfair business practices, False Claims Act and RICO cases. Peter represents health care payers that offer or administer group and individual insurance, as well as payer organizations participating in government sponsored health programs including Medicare Advantage, Medicaid, TRICARE and FEHBP. He also represents clients facing regulatory enforcement action both in court and before the agencies, and in peer review proceedings and follow-on litigation.

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

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

On November 2, President Obama signed the Bipartisan Budget Act of 2015. As an offset for near-term increases in federal spending, the new law extends by one year – to 2025 – two-percent sequestration reductions in federal spending for mandatory federal programs including Medicare.  The end result is that Medicare Advantage Organizations (MAOs) can expect their capitated payments from Centers for Medicare and Medicaid Services (“CMS”) to continue to be reduced, and Medicare fee-for-service providers can also expect to have sequestration reductions on their CMS reimbursements until at least 2025.

First established by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), “sequestration” is a process of automatic, largely across-the-board reductions enacted to constrain federal spending. Sequestration in its current form began on March 1, 2013, when President Obama, pursuant to the Budget Control Act of 2011, ordered cuts to federal spending effective April 1, 2013, after Congress and the President failed to reach a budget compromise.

Under the Budget Control Act of 2011, the size of reductions to the Medicare program is limited to two-percent. As required by President Obama’s sequestration executive order, on March 8, 2013, CMS notified providers that a “2 percent reduction in Medicare payment[s]” would apply to “Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013.” In other words, due to sequestration, as of April 1, 2013, CMS reduced the amount it pays to providers for fee-for-service Medicare claims by two-percent.


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On July 8, 2015, CMS issued proposed regulations that would modify the “two-midnight rule” that governs payments by Medicare Part A for short inpatient hospital stays.  The proposed changes are contained in the CY 2016 proposed regulations for the Hospital Outpatient Prospective Payment System (OPPS).  Stakeholders may submit comments on the proposal by August 31, 2015.

Inpatient vs. Outpatient Status

The distinction between inpatient and outpatient classification is important under Medicare.  Medicare reimbursement rates for identical services differ dramatically if the care is provided in an inpatient or outpatient setting.[1]

The admission status also has important implications for the patient.  Under Medicare Part A, a beneficiary admitted as an inpatient is required to pay a one-time deductible for the first sixty days in the hospital.[2]  For outpatient services under Medicare Part B, the beneficiary must make a co-payment for every individual service rendered by the provider.[3]

Background on the Two-Midnight Rule

In 2013, CMS created the “two-midnight rule” to determine whether Medicare Part A payment for inpatient stay is appropriate.  The “two-midnight rule” is based on the physician’s expectation of the patient’s length-of-stay at the time of admission.  It included two medical review policies:

  • Under the “two-midnight benchmark,” CMS considered an inpatient admission to be appropriate when the admitting physician had a reasonable and supportable expectation that a patient would need to receive care at the hospital for a period spanning two-midnights; and
  • Under the “two-midnight presumption,” auditors were directed not to select claims for review if the inpatient stay spanned two-midnights from the time of admission, absent evidence of gaming or abuse.


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The California Department of Insurance (CDI) has issued emergency regulations governing health insurer provider networks that became effective January 30, 2015.  The new regulations, which do not modify existing standards for plans licensed under California’s Knox-Keene Act, impose several requirements on health insurers, including standards for network adequacy, timely access to care, provider directories and