C&M Health Law

C&M Health Law

Analysis, commentary, and the latest developments in health care law and policy

$33 Million Settlement Approved For Systematic and Improper “Bundling” of Chiropractic CPT Codes

Posted in ERISA, Managed Care Lawsuit Watch
Harsh P. ParikhDavid McFarlane

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.

CMS Issues Final Rules on MACRA Quality Payment Program Implementation

Posted in Medicare
Harsh P. ParikhStephanie Willis

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.

New California Law To Target Surprise Bills Impacts Payor Relationships With Non-Contracted Professionals

Posted in Exchanges, Litigation, Managed Care Lawsuit Watch
Harsh P. ParikhPeter Roan

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.

GAO Finds HHS Exceeded Authority in Implementation of Transitional Reinsurance Program

Posted in Exchanges, Health Care Reform & ACA, Uncategorized
Joseph RecordsChristine M. Clements

The Government Accountability Office (GAO), in a letter to members of Congress, found that the implementation of the Transitional Reinsurance Program by the U.S. Department of Health and Human Services (HHS) violates the Affordable Care Act.

The Transitional Reinsurance Program is one of three premium stabilization programs authorized by the Affordable Care Act (ACA), commonly known as the “Three Rs.” These programs were designed to soften the impact of ACA reforms, such as guaranteed availability and the prohibition against preexisting condition limitations, that brought new health risks into the insurance markets.

Section 1341 of the ACA (42 U.S.C. § 18061) directs HHS to establish the Transitional Reinsurance Program and sets forth specific amounts for HHS to collect under the program. The statute states that the Program “shall be designed so that” HHS collects $10 billion for plan years beginning in 2014, $6 billion for 2015, and $4 billion for 2016. For each year, HHS would distribute the reinsurance amounts collected under the Program to health insurance issuers based on the number of “high-risk individuals” covered under the issuer’s commercial lines of business. In addition, the statute calls for $2 billion to be collected by HHS and paid to the Treasury for 2014, another $2 billion for 2015, and $1 billion for 2016, in addition to the costs of administering the Transitional Reinsurance Program.

HHS promulgated regulations and guidance to establish the Transitional Reinsurance Program, initially stating that, in the likely event of a shortfall, it would allocate funds on a pro rata basis to reinsurance claims, the Treasury, and administrative costs. HHS later adjusted its allocation scheme to pay reinsurance claims first and to reserve collected reinsurance amounts in excess of claims to pay reinsurance claims in future years. For example, for 2014, HHS aimed to collect $12.02 billion, but collected only $9.7 billion. It paid reinsurance claims in full, amounting to $7.9 billion, which left approximately $1.7 billion in collections under the Program. HHS remitted no funds to the Treasury, and reserved the $1.7 billion in collections that exceeded claims to be used to pay reinsurance claims in future years.

In April 2016, several members of Congress sent a letter to GAO requesting its opinion on whether HHS had exceeded its authority by declining to make a payment to the Treasury. HHS’ articulated position to GAO was that the statute failed to expressly address how HHS should allocate collected funds in the event of a shortfall, and that the amounts to be paid to the Treasury were described in the statute as “in addition” to reinsurance amounts, so the Secretary had discretion to prioritize future years’ reinsurance payments over contributions to the Treasury. GAO disagreed, concluding that HHS “lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program in the Treasury and instead make deposits to the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341.”

ONC Releases New Guidance on Electronic Health Record Vendor Contracting

Posted in Health IT
Jodi G. DanielAshley N. Southerland

On September 26, 2016, the Office of the National Coordinator for Health Information Technology (ONC) released guidance, entitled EHR Contracts Untangled, to help providers navigate the complexities of electronic health record (EHR) vendor contracting. The guidance breaks down important considerations for selecting EHR systems, and provides strategic pointers – including sample contract language – to help facilitate the contracting process. While the guidance is largely an attempt to level the playing field for providers in the EHR arena, it also has broader applicability to contract negotiations for a variety of other digital health tools.

For the most critical “need-to-know” points from ONC’s new guidance, see our recent client alert.

Blocking Access to Health Information May Violate HIPAA

Posted in Health IT, HIPAA & Privacy
Jodi G. DanielStephanie Willis

The HHS Office of Civil Rights published a new FAQ response (OCR FAQ) detailing the agency’s position that generally information blocking will violate the HIPAA Privacy and Security Rules if it affects a covered entity’s access to its own protected health information (PHI) or its ability to respond to requests for access to PHI from patients. This follows a series of similar policy documents from HHS over the past 18 months that focus on preventing business arrangements or practices that would be defined as information blocking, and thereby, frustrating the goal of interoperability. Specifically, according to the OCR FAQ:

  • An electronic health records (EHR) vendor or cloud provider’s actions to terminate a covered entity’s access to its own electronic PHI (ePHI) (e.g., in a payment dispute) would violate the HIPAA Privacy Rule because those actions would constitute an impermissible use of PHI.
  • An EHR vendor or cloud provider’s refusal to ensure the accessibility and usability of a covered entity’s ePHI upon demand by the covered entity or to return a covered entity’s ePHI upon termination of the agreement, in the form and format that is reasonable in light of the agreement, would violate the HIPAA Security Rule.
  • A business associate may not deny a covered entity access to the PHI the business associate maintains on behalf of the covered entity if necessary to provide individuals with access to their PHI under the HIPAA Privacy Rule.
  • A covered entity that agrees to terms within a business associate agreement (BAA) that would prevent the covered entity from ensuring the availability of its own PHI as required would not be in compliance with the HIPAA Privacy and Security Rules.

OCR has increasingly ramped up its enforcement of violations of the HIPAA Privacy and Security Rules related to noncompliant BAAs, so the new OCR FAQ signals that information blocking provisions could be the source of future enforcement actions.

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Mount Sinai Health System to Pay $2.95 Million in 60-Day Overpayment FCA Settlement

Posted in Fraud, Waste & Abuse, Health Care Reform & ACA, Litigation
Diana HuangBarbara H. Ryland

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.

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

Posted in Exchanges, Fraud, Waste & Abuse, Health Care Reform & ACA, Medicaid, Medicare
A. Xavier BakerTroy A. Barsky

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.

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OCR Announces Major HIPAA Enforcement Initiative

Posted in HIPAA & Privacy
Crowell & Moring

The Department of Health & Human Services Office of Civil Rights (“OCR”) announced on August 18, 2016 that it is stepping up enforcement actions related to small breaches.  Although OCR investigates all reported breaches affecting more than 500 people, this new initiative will increase investigations of breaches affecting fewer than 500 people.  As OCR recognizes, it is often only through investigations following a reported breach that OCR uncovers more widespread HIPAA compliance issues, and it is those additional issues that often lead to monetary settlements or fines. Particularly given this increased enforcement initiative, covered entities and business associates should continue to evaluate and, where appropriate, strengthen their HIPAA compliance efforts.

To read more about the announcement, please click here.

Upcoming Free Healthcare Event: Healthy Data Management Webinar

Posted in Health IT
Crowell & Moring

On Thursday, September 8, 2016 from 1:00 PM to 2:00 PM ET Crowell & Moring’s Elliot Golding will be speaking as part of a 60-minute Bloomberg BNA Webinar on Healthy Data Management: Essential Strategies for Governing PHI, PII, and Highly Sensitive Data during an Acquisition or Divestiture.  The panel discussion will cover the information governance life cycle for health care, life sciences, and pharmaceutical companies, from identification of sensitive data to storing and protecting that data during mergers and divestitures.  The webinar is free and open to all.

Objectives:

  • Data management considerations for companies responsible for maintaining personally identifiable information (PII), protected health information (PHI), and confidential or sensitive data.
  • Unique issues that arise when highly sensitive data is involved during the merger and divestiture transaction process.
  • Strategies to develop effective policies and procedures for data life cycle management.