On August 24, 2016, Judge Edgardo Ramos of the Southern District of New York approved a settlement in which Mount Sinai Health System (Mount Sinai) will pay $2.95 million to New York and the federal government to resolve allegations that it violated the False Claims Act (FCA) by withholding Medicare and Medicaid overpayments in contravention of the 60-day overpayments provision of the Affordable Care Act (ACA).  The provision creates FCA liability for healthcare providers that identify overpayments but fail to return them within 60 days, and the Mount Sinai settlement is the first one that specifically resolves allegations of violations of the provision.

The settlement stems from the qui tam action Kane v. Healthfirst, Inc., No. 1:11-cv-02325-ER, in which it was alleged that employee Robert Kane alerted Continuum Health Partners, Inc. (now a part of Mount Sinai) to hundreds of potential overpayments, and, instead of pursuing the refund of overpayments, Continuum fired Kane and delayed further inquiry.  Last year, as we discussed in a previous post, Judge Ramos denied Mount Sinai’s motion to dismiss and provided first-of-its-kind guidance on what it means to “identify” an overpayment and start the 60-day clock created by the ACA.  He opined that a provider has identified an overpayment if it has been “put on notice” that a certain claim may have been overpaid.  In February of this year, CMS released its final 60-day overpayment rule, largely adopting the same interpretation of “knowledge” and “identified” that Judge Ramos used.

Although the Kane court did not hold that the “mere existence” of an obligation under the ACA established an FCA violation, the 60-day period in the statute clearly carries a heightened risk of potential liability for providers that fail to carry out compliance activities or undertake an investigation once they have been given credible evidence of the existence of overpayments.  The settlement further signals to providers the importance of taking any allegation related to overpayments seriously, and to take swift action in order to be ready for the start of the 60-day clock deadline for returning any overpayments.

On August 18, 2016, CMS issued a request for information on “inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans” by third parties. CMS voiced concern over “anecdotal reports” that Medicaid or Medicare eligibles received premium and cost-sharing assistance from third parties so they could enroll in Marketplace plans, enabling providers to receive higher reimbursement rates. In November 2013, CMS had issued guidance discouraging third-party payment of premiums because it has the propensity to “skew the insurance risk pool and create an unlevel field in the Marketplaces.” Almost three years later, it appears that CMS has determined that more decisive action may be necessary.

In July, UnitedHealthcare filed suit against American Renal Associates LLC in the United States District Court for the Southern District of Florida (complaint), alleging ARA violated Florida’s deceptive and unfair trade practices act, fraud, unjust enrichment, conspiracy, and other causes of action. The suit alleges that ARA coordinated with the American Kidney Foundation to pay premiums of low-income enrollees to switch from government health care programs to private insurance coverage. The suit alleges that by steering enrollees from Medicaid and Medicare to private insurance, ARA was able to increase billing from about $300 to $4,000 for the same services. The complaint also alleges that ARA did not collect copayments or deductibles from the enrollees after covering their premiums for private insurance and so committed negligent misrepresentation and tortious interference with a contract by misrepresenting the charges of claims submitted to UnitedHealthcare.

Continue Reading CMS Renews Focus on Third-Party Payment of Insurance Premiums Steering Medicaid & Medicare Eligibles into Marketplace Plans

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

Barsky

Yesterday, our colleague Troy A. Barsky testified before the U.S. Senate Finance Committee led by Chairman Orrin Hatch (R-Utah) and provided recommendations for modernizing the Stark Law to regulate self-referrals without impeding the care coordination and value-based payment models promoted by health care reform legislation. Other witnesses before the Committee included Dr. Ronald A. Paulus, president and chief executive officer of Mission Health; and Peter Mancino, deputy general counsel of The Johns Hopkins Health System Corporation.

During his oral testimony, Barsky raised the following points and recommendations to the Senate Finance Committee:

  • That the Stark Law is affecting the health care industry because it has moved beyond the bounds of its original intent;
  • Because of the changing nature of the health care system, the Stark Law should be reformed to facilitate new alternative payment models; and
  • What Congress can do to reform the law while still protecting patients and the Medicare program, such as removing the compensation-based prohibitions in the Stark Law and granting the Centers of Medicare & Medicaid Services more authority to issue broad waivers for a wider variety of innovative health care and payment systems to limit the piecemeal waiver approach developing under the Affordable Care Act.

In addition, Barsky urged that reform of the Stark Law should focus on “[m]aking bright line rules that providers can follow and expanding CMS’s authority to provide guidance through advisory opinions will greatly assist provider.” Other options for reform also included implementing a lower penalty scheme for technical violations of the Stark Law, and lowering CMS’s heightened standard of “no program or patient abuse” for promulgating new regulatory exceptions to the general prohibition” against self-referrals.

The Committee members in attendance, representing both the Republican and Democratic Parties, largely responded positively to comments shared by all of the witnesses during the hearing and Chairman Hatch said that the Committee would move reform proposals forward in the remainder of the year.

Barsky’s full written testimony can be found here. His comments are also featured in Bloomberg BNA, Inside Health Policy, Law360, and MedTech Insight (subscriptions required).

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 Tuesday July 12, 2016, the Senate Finance Committee (“Committee”) will hold a hearing on “Examining the Stark Law: Current Issues and Opportunities.” Crowell & Moring Partner Troy Barsky will be testifying before the Committee as a Stark Law subject matter authority.

In advance of this hearing, the Committee released last week the white paper “Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models.”  Amid growing support for Stark law reform, the white paper deems the Stark law, as currently drafted, both an impediment to implementing health care reform, e.g., the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and of limited value given shifts from fee-for-service to alternative payment models that reward quality health care rather than the volume of services.

The white paper focuses predominantly on modifications to the Stark law that would remove obstacles to implementing health care reform. After a roundtable held in December, 2015, that was co-moderated by Troy Barsky, the Committee had solicited and received a range of stakeholder comments that proposed various Stark law reform solutions: repeal the law in its entirety; repeal the compensation arrangement prohibitions; implement new exceptions and modify existing exceptions; implement new or expand existing waivers; and expand CMS’s regulatory authority pertaining to waivers, exceptions, and advisory opinions. These comments are catalogued and discussed throughout the white paper. The white paper also examined the need to distinguish between technical, e.g. documentation requirements, and substantive violations of the Stark law.  Commenters generally agreed that a separate set of sanctions should apply to technical violations and that such violations should not give rise to False Claims Act exposure.

Continue Reading In Advance of Senate Finance Committee Hearing on Stark Law Next Week, the Committee Releases Stark Law White Paper

On June 27, 2016, the Department of Health and Human Services Office of Inspector General (“OIG”) issued a favorable Advisory Opinion, No. 16-07, relating to a savings card program under which individuals who have prescription drug coverage under Medicare Part D receive discounts on a drug that is statutorily excluded from Part D coverage.

According to the Advisory Opinion, the Requestor markets and distributes a prescription drug that has been approved by the U.S. Food and Drug Administration for the treatment of erectile dysfunction (the “Drug”). While the Drug is covered by many private insurance plans and some Federal health care programs, including state Medicaid programs and TRICARE, the Drug is statutorily excluded from coverage under Medicare Part D.

Under the arrangement, the Requestor offers and provides coupons, in the form of a savings card, which Medicare Part D beneficiaries (“Beneficiaries”) may use to receive discounts on the purchase of the Drug. Specifically, Beneficiaries may receive reductions on out-of-pocket costs greater than $15, up to a maximum benefit of $75 per prescription, on up to 12 prescriptions for the Drug, when they present their savings card and Drug prescriptions to their pharmacist.

Continue Reading OIG Issues a Favorable Opinion Regarding a Drug Savings Card Program

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.

On May 6, 2016, CMS published the Medicaid managed care final rule in the Federal Register. The Final Rule overhauls Medicaid managed care for the first time in 14 years and tracks many of the industry-wide developments that followed enactment of the ACA. Given the breadth of the rule, Crowell & Moring is covering it in a series of client alerts and blog posts. Part I covers the Final Rule’s medical loss ratio and actuarial soundness provisions. Part II addresses CMS’s novel approach to using Medicaid funds to provide coverage for inpatient stays at institution for mental diseases. Part III covers network adequacy. Stay tuned for future updates.


8/5/16: Please click here for newly released updates.

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