Photo of Roma Sharma

Roma Sharma is an associate in Crowell & Moring’s Washington, D.C. office and a member of the firm’s Health Care Group. Roma primarily works with health care clients seeking to comply with regulations for state and federal health care programs, health care anti-fraud and abuse laws, and licensing laws.

Roma’s work incorporates her Master of Public Health degree in Health Policy as well as her past experiences as an extern at the Office of the General Counsel at the American Medical Association and as an intern at the Illinois Office of the Attorney General, Health Care Bureau.

*Admitted in Illinois only

 

On November 28, 2016, the U.S. Department of Health and Human Services Office of the Inspector General (OIG) issued an unfavorable advisory opinion (No. 16-12) that addresses the permissibility, under the federal Anti-Kickback Statute (AKS), of a laboratory’s proposal to label test tubes and collect specimen containers at no cost to, and for the benefit of, dialysis facilities. The OIG found that the arrangement may violate the AKS, potentially subjecting the laboratory to civil monetary penalties and exclusion from Medicare.

The laboratory in question provides testing services to dialysis patients pursuant to service contracts with dialysis facilities. Testing services provided by the laboratory are reimbursed by Medicare. Under the proposed arrangement, the laboratory would provide some of the dialysis facilities with free labeling services; the laboratory would label test tubes and specimen collection containers that would later be used by those dialysis facilities when sending specimens to the laboratory for testing. These labeling services would be provided to the dialysis facilities at no cost.

The OIG analyzed the applicability of the personal services and management contracts AKS safe harbor and found that the safe harbor would not apply. The safe harbor requires that the compensation paid for services be consistent with fair market value in an arms-length transaction. In the proposed arrangement, however, the dialysis facilities would not pay any compensation to the laboratory for the labeling services despite the value of those services to the dialysis facilities. As a result, the OIG determined that the proposed arrangement is inconsistent with fair market value, rendering the safe harbor inapplicable.

Under a factual analysis, the OIG found that the laboratory’s provision of services to dialysis facilities at no cost would be a tangible benefit to the dialysis facilities. The advisory opinion states that from such arrangements, an inference arises that the service is offered to induce the referral of business. In addition, an inference arises that the free labeling services would be intended to influence the dialysis facilities’ selection of a laboratory – an inference supported by the representation by the laboratory that the labeling services would be offered when necessary to retain or obtain business from dialysis facilities.

Interestingly, the same laboratory sought an advisory opinion of a factually identical arrangement in 2008 (No. 08-06) at a time when Medicare employed a composite rate reimbursement system for laboratory testing services. At that time, the OIG issued an unfavorable advisory opinion of the arrangement. Medicare now employs a bundled payment system in which all laboratory tests related to end-stage renal disease (ESRD) are reimbursed as part of the ESRD prospective payment system bundle (ESRD PPS). Reviewing the arrangement under the ESRD PPS, the 2016 advisory opinion found that OIG’s previous analysis of the arrangement applies, particularly since physicians are currently able to order separate laboratory tests unrelated to a patient’s ESRD. Due to this fact, the labeling services may constitute prohibited remuneration intended to induce or reward referrals for services reimbursed by Medicare. The arrangement viewed under both the composite rate reimbursement system and the ESRD PPS raise AKS concerns.

The AKS risk may be lessened in circumstances where laboratories bill for fewer separately reimbursable tests; however, the offering of such free services remains a concern. This advisory opinion highlights challenges laboratories may face in providing free services to entities with which they contract. As payment models shift toward bundled payments and value-based care, it remains important for providers to consider fraud and abuse risks that may arise.

The Medicaid Managed Care Final Rule aims to align Medicaid regulations with those of other health coverage programs, modernizing the post-Affordable Care Act healthcare landscape. Among other goals, the Final Rule seeks to bolster the transparency, accountability, and integrity of Medicaid managed care by imposing and clarifying requirements meant to reduce fraud, waste, and abuse. The rule finalizes a number of changes that address two types of program integrity risks: fraud committed by Medicaid managed care plans and fraud by network providers. It also tightens standards for managed care organization (MCO) submission of certified data, information, and documentation used for program integrity oversight by state and federal agencies.

First, the Final Rule places new responsibilities on both states and managed care plans. State Medicaid programs will now be required to screen and enroll all network providers that order, refer, or furnish services to beneficiaries under the state plan unless a network provider is otherwise enrolled with the state to provide services to fee-for-service (FFS) Medicaid beneficiaries.[1] This requirement, which will take effect in July 2018, may delay the growth of provider networks; to address this concern the Final Rule allows programs to execute network provider agreements pending the outcome of the screening process of up to 120 days. However, upon notification from the state that a provider’s enrollment has been denied or terminated, or the expiration of the 120 day period without enrollment, the plan must terminate the network provider immediately and notify affected enrollees. In addition, the Final Rule requires states to periodically, but no less frequently than once every 3 years, audit patient encounter data and financial reports for accuracy, truthfulness, and completeness. States must also post on their website or otherwise publicize a range of programmatic data, including the results of past audits and information related to entity contracts.[2]

Second, beginning July 2017, managed care plans will also have to submit and certify a range of data—including data related to rate setting, compliance with Medical Loss Ratio (MLR) standards, accessibility of services, and recoveries of overpayments—to their respective states. In order to comply with this requirement, the Final Rules permits the executive leadership of an MCO to delegate the certification to an employee who reports directly to the plan’s CEO or CFO.[3]

Continue Reading Medicaid Managed Care Final Rule: Prevention of Fraud, Waste, and Abuse

On June 23, Crowell & Moring and Accenture co-hosted the Fostering Innovative Digital Health Strategies Conference in Crowell’s D.C. office. The conference provided a broad analysis of the business and legal issues that must be addressed as health care organizations and technology companies consider innovative strategies to use digital health technologies. The conference covered several topics including trends in the health care economy’s Internet of Things, setting up digital health platforms, legislative activity related to telehealth, and the use of digital health technology to support new payment models.

The fifth session of the conference, “New Payment Models and New Sources of Data for Care Coordination and Quality Improvement” featured John Brennan (Partner, Crowell & Moring), Dr. Elizabeth Raitz-Cowboy (Southeast Medical Director, Aetna Life Insurance Company), Barbara Ryland (Senior Counsel, Crowell & Moring), and Soph Sophocles (Associate General Counsel, Biogen).

The discussion addressed changes and themes in the wake of digital health technology and growing use of data. Key takeaways from the session:

Continue Reading New Payment Models and Data: Changes and Themes to Watch

On January 28, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would change the methodology used to evaluate and adjust the performance of Medicare Shared Savings Program (MSSP) Accountable Care Organizations (ACOs). The proposed rule is intended to improve long-term incentives for ACOs and create a path for long-term sustainability.

ACO performance is currently measured using a multi-step process that evaluates an ACO’s effectiveness in lowering expenditures for a group of assigned beneficiaries against a benchmark established based on an ACO’s historical costs. At the beginning of the ACO’s three-year agreement period, CMS sets an average per capita historical benchmark. CMS adjusts the historical benchmark on an annual basis based on projected growth in national per capita expenditures for Medicare Parts A and B services under the fee-for-service (FFS) program.

Continue Reading CMS Proposes New ACO Performance Measures

On January 11, 2016, the Centers for Medicare & Medicaid Services (CMS) announced that 100 new Accountable Care Organizations (ACO) began participating in the Medicare Shared Savings Program (MSSP). CMS also announced that 21 new providers and hospitals have signed up to participate in other ACO-focused shared savings programs, including the Pioneer ACO Model, Next Generation ACO Model, and Comprehensive ESRD Care Model.  According to the latest figures:

  • the 477 participants in these CMS programs are now located in 49 states and the District of Columbia and will serve nearly 8.9 million Medicare beneficiaries;
  • there will be 434 ACOs participating in the MSSP in 2016, serving more than 7.7 million beneficiaries; and
  • approximately 15,000 more physicians are now participating in the MSSP through ACOs.

Notably, 64 of the ACOs across all of these programs are in a two-sided risk-bearing track. This means that, in addition to being eligible to receive shared savings, these ACOs have put themselves on the hook to repay the government for any losses incurred if their cost-control measures are unsuccessful.  The move toward two-sided risk signals progress towards the Administration’s goals to move 50% of traditional Medicare fee-for-service payments into alternative payment models that pay for quality of care rather than quantity of care by 2018.

Recent financial and performance results released by CMS demonstrate the ACOs’ success in controlling spending and improving quality. In fact, the agency paid out performance payments of more than $341 million in 2014 to reward the program participants’ achievement of these goals. As the success of the program continues, we can expect growing participation in ACO initiatives and increased pressure from CMS to move providers toward value-based payment models.

On September 15, 2015, the U.S. Department of Justice (DOJ) announced the settlement of a qui tam action in the amount of $69.5 million with North Broward Hospital District (NBHD). The amount is a small fraction of the $442 million in treble damages to the Medicare and Medicaid programs alleged in the Third Amended Complaint. The settlement resolves allegations that NBHD violated the False Claims Act and the Stark Law by engaging in improper financial relationships with referring physicians. This settlement is an example of a troubling trend in which the DOJ imposes its views of the fair market value (FMV) and commercial reasonableness of employment compensation arrangements upon hospitals and providers. As the DOJ continues to successfully challenge physician compensation by analyzing the monetary impact of such compensation on hospitals’ profits and losses, hospitals are increasingly hamstrung in their ability to rely on FMV opinions to set physician compensation.

NBHD is a special taxing district of the state of Florida that operates hospitals and other health care facilities in the Broward County, Florida region. NBHD was named in a whistleblower suit originally filed in 2010 by Dr. Reilly, an orthopedic surgeon who held staff privileges to practice medicine at Imperial Point Medical Center, a hospital within the NBHD system. The Third Amended Complaint alleged that nine employed cardiologists and orthopedic surgeons were provided compensation packages in excess of FMV, in a system that illegally compensates physicians for the volume or value of their referrals to NBHD. It alleged that from 2004 to present, the overcompensation of the orthopedic surgeons generated net operating losses of over $40 million – an amount offset by referral profits monitored by NBHD in purported “secretive Contribution Margin Reports.”

Continue Reading South Florida Hospital System Settles Stark Allegations for $69.5 Million

The federal government has spent billions to promote adoption and “meaningful use” of health information technology (HIT). There is growing government interest in ensuring that HIT is used to support patient care, but doing so requires electronic exchange of information. Congress, the Department of Health and Human Services (HHS), and States have taken action to identify and prevent “information blocking”—interference with the exchange or use of electronic health information—by health care providers, hospitals, technology developers, and service providers. And there likely will be more guidance, statutory and regulatory changes, and enforcement by federal agencies and states in the coming year.

Congress Requests Information and Takes Action

On December 21, 2014, Congress raised concerns about health information blocking, claiming that such activities “frustrate Congressional intent” under the Health Information Technology for Economic and Clinical Health (HITECH) Act, “devalue taxpayer investments,” and make HIT “less valuable and more burdensome” to hospitals and health care providers. Congress urged the Office of the National Coordinator for Health Information Technology (ONC) at HHS to certify only HIT that does not block health information exchange. Congress also requested ONC publish a detailed report on the scope of health information blocking and a strategy to address it, within 90 days.

Continue Reading Health Information Blocking Leads to New Requirements and May Lead to Enforcement Actions

On June 17, 2015, the Health Resources and Services Administration (HRSA) published a Proposed Rule revising regulations governing the 340B Drug Pricing Program (340B Program) found in 42 C.F.R. Part 10. The Proposed Rule applies to all drug manufacturers that are required to make their drugs available to covered entities under the 340B Program. Notably, it sets forth the calculation of the ceiling price and application of civil monetary penalties. The Proposed Rule does not address concerns that have been expressed by manufacturers about the recent expansion of entities able to be covered entities and the expansion of pharmacy outlets serving those patients. These revisions may indicate HRSA’s interest in more stringent compliance by manufacturers of drugs that are eligible for 340B Program pricing. Comments to the Proposed Rule are due August 17, 2015.

340B CEILING PRICE

The Proposed Rule provides that a manufacturer must calculate the ceiling price for all of its covered outpatient drugs on a quarterly basis. The ceiling price is calculated by subtracting the unit rebate amount (URA) from the average manufacturer price (AMP) for the smallest unit of measure and will be calculated using six decimal places. The number is then multiplied by the drug’s package size and case package.

PENNY PRICING AND DISTRIBUTION

To address the situation where the URA equals the AMP, resulting in a $0.00 per unit of measure 340B ceiling price, HRSA proposes that a manufacturer charge $0.01 per unit of measure for a drug with a ceiling price below $0.01. For those 340B drugs whose calculated price is less than $0.01, the effective ceiling price will be $0.01 per unit of measure. Prices for 340B products must be based on the immediately preceding calendar quarter pricing data.

Continue Reading HRSA Proposes Rule on 340b Ceiling Pricing, Removes Orphan Drug Regulations and Sets Forth Civil Monetary Penalties