On Nov. 29, 2018, Deputy Attorney General Rod J. Rosenstein announced several amendments to policies on individual accountability set forth in the 2015 Yates Memo. As a result, companies facing FCA actions—especially defendants in health care cases—should consider following three strategy tips:  (1) Establish clear benchmarks for cooperation.  (2) Advocate for individual releases.  And (3) Emphasize that litigation costs outweigh the potential recovery in appropriate cases.

To learn more please read this Bloomberg BNA article written by Partner William S.W. Chang and Associate Spencer Churchill.

 

In its recent notice of proposed rulemaking setting policy for Medicare Advantage (MA) and the Prescription Drug Program (PDP) for calendar year 2020, CMS announced that it would establish extrapolation as a method to be used in risk adjustment validation (RADV) audits, and further, that it would not make any adjustments to account for errors in Medicare fee for service data in determining recovery amounts.

CMS uses a risk adjustment process to modify MA plan payments to better reflect the relative risk of each plan’s enrollees. Payments to each MA plan are adjusted based on risk scores that reflect enrollees’ health status (categorized into Hierarchical Condition Categories (HCCs)) and demographic characteristics derived from member claims data. To counteract incentives that a plan might have to over-report enrollee diagnoses, CMS emphasizes that all diagnoses submitted to enhance risk must be documented in a medical record, and uses RADV audits to ensure that medical record documentation exists, and thus, that payments to MAOs accurately reflect the level of risk assumed. Continue Reading CMS Announces and Solicits Comments on Expanded RADV Audit Methodology

On November 1, 2018, the Centers for Medicare & Medicaid Services (“CMS”) filed the pre-publication version of the CY 2019 Physician Fee Schedule Final Rule (“2019 PFS Final Rule”). Within this massive publication, CMS finalized two regulatory changes affecting the exceptions at 42 CFR § 411.357 to the Physician Self-Referral Law (also known as the “Stark Law”) for compensation arrangements. The 2019 PFS Final Rule reconciles the regulations with the statutory changes made to the Stark Law enacted by the Bipartisan Budget Act of 2018 (“2018 BBA”) with respect to (1) how arrangements may fulfill the “writing” requirement under the compensation exception and (2) how arrangements that initially proceed without a signed agreement may still meet the signature requirement of an applicable exception. Parties to financial arrangements in effect on or after February 9, 2018 that implicate the Stark Law may rely upon these new modifications.

The Stark Law generally prohibits a physician from making a referral of designated health services (“DHS”) to an entity with which he or she (or an immediate family member) has a financial relationship. Section 411.357 details several excepted compensation arrangements carved out from the “financial relationship” definition for the purposes of the Stark Law. These exceptions include arrangements for the rental of office space and equipment, bona fide employment relationships, group practice arrangements with hospitals, certain fair-market-value compensation arrangements, among others. Continue Reading 2019 Physician Fee Schedule Rule Modifies Stark Regulations to Reflect Statutory Changes

On October 3rd, the United States Senate passed a bipartisan opioids package with a sweeping vote of 98 to 1, after the U.S. House of Representatives passed the final version of the bill with a vote of 393 to 8. One of its components, the “Fighting the Opioid Epidemic with Sunshine Act,” expands the scope of reporting requirements under the Physician Payment Sunshine Act (known as the “Sunshine Act”), which will have immense implications for the pharmaceutical and medical device and supply industries.

Enacted at section 6002 of the Affordable Care Act in 2010 to increase transparency around the financial relationships between health care providers and drug manufacturers, the Sunshine Act requires “applicable group purchasing organizations” and “applicable manufacturers,” including pharmaceutical and medical device or supply companies with operations in the United States, to track and report payments and transfers of value that they make to “covered recipients,” currently defined to include physicians and teaching hospitals. These transfers of value include items such as consulting fees, honoraria for speaking events, and research grants.

The opioids legislation package expands the definition of “covered recipients” to include other types of health care professionals: physician assistants, nurse practitioners, clinical nurse specialists, registered nurse anesthetists, and certified nurse midwives. The new legislation additionally sunsets a prohibition in the Sunshine Act that prevents the inclusion of the National Provider Identifier on the CMS Open Payments website.

Given the Administration’s focus on the opioid crisis, identified as a “national emergency,” the expansion of the Sunshine Act reflects the reality that prescriptions of opioids and other drugs to individuals may come from health professionals who are not physicians. State “sunshine laws” that imposed reporting requirements on payments to these professionals have existed for a number of years, but the changes passed in the opioids package would make this standard the baseline for reporting covered payments nationwide. By the time these changes would be effective on January 1, 2022, applicable group purchasing organizations and manufacturers will need to update their Sunshine Act compliance and monitoring activities to account for the greatly enlarged scope of individual health care professionals to whom they may be providing direct or indirect transfers of value.

The expansion of the Sunshine Act’s covered recipient definition was introduced in the Senate version of the opioids package, and remained in the overall legislation despite vigorous opposition. To become law, the bill requires the signature of President Trump.

Federal agencies are signaling closer oversight of Medicaid managed care organizations (“MCOs”). On August 21, 2018, the U.S. Comptroller General Gene Dodaro and Centers for Medicare and Medicaid Services (“CMS”) Administrator Seema Verma testified to the Senate Homeland Security and Governmental Affairs Committee about combating Medicaid fraud and urged additional oversight of Medicaid MCOs and a larger restructuring of the Medicaid program. This testimony follows other steps taken by the Governmental Accountability Office (“GAO”) and CMS earlier this year to encourage increased scrutiny of Medicaid managed care programs. Continue Reading GAO and CMS Seek Increased Scrutiny on Medicaid Managed Care Organizations

The Health Care Group’s newest partners, William S.W. Chang and Laura M. Kidd Cordova, along with Counsel Stephanie D. Willis, have authored an Alert about the 21st Health Care Fraud and Abuse Control Program (HCFAC) annual report released last Friday.  The HCFAC report is a joint effort of the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) that describes the expenditures, results, and enforcement actions of the previous fiscal year.  The authors note that compared to FY 2016, other than expanded efforts to combat the opioid crisis, enforcement remained more or less consistent with prior trends.  In monetary terms, HCFAC spending slightly increased, while overall monetary recovery and returns on investment in fraud prevention efforts significantly decreased.  Interestingly, however, the proportion of overall recoveries resulting from HHS auditing activities considerably increased.

Read the rest of the Alert’s analysis of the HCFAC report and register for our webinar next Tuesday, April 17th.  During the webinar, listeners will hear Will and Stephanie, who were attorneys employed by DOJ and the HHS Office of the Inspector General (HHS-OIG), respectively, give their insights about the significance of the report for health care companies and the health care industry.

 

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.

First 100 Days LogoOn Tuesday, April 18, 2017, our Health Care Group will hold a webinar on the health care policy and transition challenges still at play as the Trump Administration nears the end of its 100 days in power.  During the webinar, participants will hear important insights and predictions on what a Trump-led Executive Branch will mean for health care industry stakeholders from:

  • Partner Xavier Baker, whose practice focuses on the regulatory and compliance aspects of commercial insurers’ participation in Medicare Advantage, Medicaid managed care, and the health insurance exchanges;
  • Counsel Gary Baldwin, the former deputy director of Plan and Provider Relations at the California Department of Managed Health Care (DMHC), with expertise in state insurance regulatory issues for commercial plans;
  • Partner Laura Cordova, the former assistant chief in the Fraud Section of the Criminal Division at the U.S. Department of Justice, who focuses primarily on counseling health care companies and executives in criminal, civil and administrative enforcement actions, which may still increase under a Trump administration; and
  • Counsel Stephanie Willis, who counsels health care entities in licensure and regulatory matters related to participation in health care reform incentive programs such as the Medicare Shared Savings Program and Meaningful Use.

Register for the webinar here.

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.

On December 14, 2016, CMS issued an interim final rule with comment period to amend Medicare’s dialysis facility conditions for coverage to require certain disclosures to patients and health insurance issuers to address widespread concerns over inappropriate steerage of dialysis patients to individual market plans. After issuing an RFI about “inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans” by third parties in August 2016, CMS decided to focus on dialysis providers given the “overwhelming majority of comments [received in response to the RFI] focused on patients with [end-stage renal disease (ESRD)]” and “the high costs and absolute necessity of transplantation or dialysis” for people with ESRD.

CMS explained that reimbursement rates for dialysis and other ESRD treatment are “tens or even hundreds of thousands of dollars more per patient when patients enroll in individual market coverage rather than public coverage.” As such, providers have strong incentives to steer patients to private coverage and pay a few thousand dollars in premiums on their behalf. But doing so places patients at substantial health and financial risk. As CMS noted, third-party payment of premiums to enroll a patient in individual market coverage may interfere with transplant readiness, expose the patient to substantial financial harm for services beyond dialysis, and may result in mid-year coverage disruption.

To address these concerns, the interim final rule requires Medicare-certified dialysis facilities to disclose the array of costs and coverage options available to a patient, including the availability of Medicaid, Medicare ESRD coverage, and individual market plans, and to ensure that health insurance issuers are aware of and willing to accept a third-party’s payment of premiums on behalf of the patient. As summarized by the CMS Fact Sheet, providers must:

  • Make up-front disclosures to patients regarding their health insurance coverage options, including information about available individual market plans, Medicaid or Children’s Health Insurance Program (CHIP) coverage, and available options and costs of Medicare ESRD coverage.
  • Provide a summary of short- and long-term cost estimates of various health coverage options for patients and information on enrollment periods for those health coverage options.
  • Inform issuers of the individual market plans for which they make payments of premiums for individual market plans.
  • Receive assurance from the issuer that it will accept these payment of premiums for individual market plans for the duration of the plan year, or else not make such payments.

The interim final rule does not preclude providers from making charitable donations that support access to health care. CMS also noted that it remains concerned about third-party payment of premiums for persons who are eligible for public coverage, such as Medicaid or Medicare, and is considering whether to issue a blanket prohibition on third-party payment of premiums for such persons. CMS has solicited comments on this and alternative approaches, such as whether to allow third-party payments upon a showing that it was in the individual patient’s best interest. The comment period for the interim final rule closes on January 11, 2017 and the rule is effective on January 13, 2017.