Health Law Update

Health Law Update

Summer Fraud and Abuse Roundup

law iStock_000019998471_LargeNow that the kids are back in school and summer vacations are in the rearview mirror, it’s time to catch up on recent fraud and abuse developments. The federal government was busy this summer negotiating a pair of settlements under the Stark Law and anti-kickback statute, drafting changes to the Self-Referral Disclosure Protocol (SRDP), and issuing an interim final rule incorporating statutory increases to civil money penalties.  This article highlights those recent developments.

Summer Fraud and Abuse Settlements

Lexington Medical Center

On July 20, 2016, Lexington Medical Center (LMC) in South Carolina agreed to pay $17 million and enter into a corporate integrity agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) to settle allegations that its financial relationships with 28 physicians violated the Stark Law and the False Claims Act. LMC is a public hospital district with over 300 employed physicians. The plaintiff, a former LMC neurologist, alleged that LMC acquired physician practices to capture the physicians’ referrals, and in exchange, LMC paid them commercially unreasonable compensation exceeding fair market value. For example, the plaintiff stated his compensation was $250,000 before the acquisition and topped out at $650,000 during his second year of employment by LMC. The plaintiff also reported that LMC held meetings with the employed physicians to discuss declining imaging referrals and terminated him in July 2013 because he refused to send all imaging referrals to LMC. The second amended complaint alleges that LMC’s arrangements with the plaintiff and other physicians violated the Stark Law because the acquisition and employment agreements provided compensation to the physicians in excess of fair market value, took into account the volume or value of referrals, and were not commercially reasonable. Continue Reading

The Proposed Medicaid DSH Rule: Hospitals, States and Associations Declare It Legally Insufficient

Family Medicaid umbrellaThe Centers for Medicare and Medicaid Services (CMS) recently released a proposed rule addressing the treatment of third-party payments when calculating uncompensated care costs for the Medicaid disproportionate share hospital (DSH) formula (Proposed Rule). While CMS maintains the Proposed Rule merely clarifies longstanding policy, industry stakeholders submitting comments prior to the September 14 deadline disagree, saying it would substantively modify the Medicaid DSH formula methodology. The new CMS policy is also the subject of litigation in two federal district courts – New Hampshire and the District of Columbia.

The issue raised by the plaintiffs in both cases involves the 2010 publication of answers to two Frequently Asked Questions (FAQs), #33 and #34. FAQ #33 involves commercial third-party payments. It defines Medicaid-eligible patients with private commercial insurance coverage as “dual eligible,” and requires the inclusion of private third-party payments in the calculation of the hospital-specific limit, when there is no Medicaid claim or payment made on behalf of a Medicaid-eligible patient. FAQ #34 addresses dual-eligible patients and the inclusion of Medicare payments in this same manner. During the DSH audits and the finalization of these audits, CMS has required that any amounts paid during the 2011 cost reporting year be recouped in the 2014 audit. The agency has also threatened to deny federal financial participation to states that fail to enforce the FAQs. Continue Reading

Susan Feigin Harris Named “Lawyer of the Year” in 2017 Best Lawyers in America List

HARRIS_SusanPartner Susan Feigin Harris was named the Health Care Law “Lawyer of the Year” in Houston in the 2017 Best Lawyers in America© list. “Lawyer of the Year” is a designation that reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and practice areas for his or her abilities, professionalism and integrity. Only a single lawyer in each practice area and designated metropolitan area receives this distinction. Additionally, Harris was recognized in Houston in the “Government Relations Practice” and “Health Care Law” categories of the 2017 Best Lawyers in America list.

Obstruction of a Medicare Audit Doesn’t Require Direct Obstruction of a Federal Agent

Businesswoman Looking At Document Through Magnifying Glass

A registered pharmacist, the owner of two Alabama pharmacies, pleaded guilty to obstructing a 2012 federal audit of Medicare claims and agreed to pay a $2.5 million penalty to the government. The submission of the false and misleading documents by the pharmacy owner constituted obstruction of a federal audit of his Medicare claims, even though it was initially conducted by CVS/Caremark Inc., which administered prescription drug claims for Medicare Part D. Consequently, it is important to be aware of the role and authority of all auditors and to avoid submitting false or misleading documentation.

The pharmacies in question operated as both compounding and retail pharmacies. Medicare Part D generally will not reimburse pharmacies for compounded medications made using bulk pharmaceutical powders. Nevertheless, the pharmacies sought Part D reimbursement for compounded medications, primarily topical pain creams, made from bulk ingredients. To avoid claim denials, the “pharmacies, however, used the billing code for the tablet or capsule form of the ingredient[s].”

According to the charges and plea agreement, the owner obstructed a 2012 audit by CVS/Caremark when he caused to be submitted falsified and misleading documents stating that medications in tablet or capsule form had been used as ingredients for the compounded prescriptions by the pharmacies he owned.

The charges resulted from a joint investigation by the FBI, the HHS Office of Inspector General and the FDA’s Office of Criminal Investigation.

Capitol Hill Healthcare Update

Washington DC iStock_000074771283_FullNew Bill Targets Drug Prices

Bipartisan legislation introduced in the Senate last week would require pharmaceutical manufacturers to alert the U.S. Department of Health and Human Services (HHS) before increasing prices more than 10 percent, continuing congressional pressure on the industry over drug pricing. The bill’s authors – including Sen. John McCain, (R-AZ) – say it would bring needed transparency to the industry’s pricing practices. The legislation also would require companies to certify to HHS the drug’s manufacturing, research, and marketing costs, and net profits. The McCain legislation will not become law and likely won’t receive even a committee hearing in Congress this year. Still, it’s another indication of the bipartisan political sensitivity around drug prices; McCain is seeking re-election in November.

House to Vote on Long-Term Care Hospital Payments

The House this week is scheduled to consider legislation that would provide regulatory relief to several categories of long-term care hospitals, including easing the so-called “25 percent rule” that prohibits full reimbursement if 25 percent of a hospital’s annual Medicare patient population comes from only one acute-care hospital. The legislation would temporarily reinstate the 50 percent threshold that was in place before July 1. It would also provide targeted relief from the site-neutral payment policy enacted as part of a 2013 law for four specific long-term hospital groups.

House Bill to Aid Critical Access Hospitals

The House on Monday is scheduled to vote on legislation that would provide regulatory relief for critical access hospitals by temporarily barring HHS from enforcing the physician supervision requirement. Although a rule by the Centers for Medicare and Medicaid Services (CMS) – twice blocked by Congress – requires that outpatient services be provided under the direct supervision of a physician, some rural and critical access hospitals say it reduces beneficiary access to services in areas where the number of physicians is limited. The legislation was introduced by Rep. Lynn Jenkins, (R-KS). Continue Reading

Medicare Advantage Plan Arbitration Clauses Preempted by Medicare Appeals Process

MedicareThe Arizona Supreme Court, in an interesting case involving a Medicare-related coverage dispute between a Medicare Advantage plan administrator, United Behavioral Health (UBH), and two inpatient psychiatric care providers, held that the Medicare administrative appeals process preempts the arbitration language contained in the UBH provider agreements. The court also remanded the case back to the state appeals court to determine whether ERISA similarly preempts arbitration of coverage disputes involving ERISA-regulated plans. The UBH case raises concerns over the availability and use of remedies beyond those set out in Medicare Advantage provider agreements when addressing coverage claims and disputes.

Coverage Pre-Authorization Denial

The dispute in United Behavioral Health v. Maricopa Integrated Health System concerns whether continued inpatient treatment of Medicare Advantage plan and ERISA plan beneficiaries initially hospitalized for mental health treatment was medically necessary, and therefore compensable. UBH refused to authorize the extended inpatient care as medically necessary. Notwithstanding the UBH denial, providers continued the beneficiaries’ inpatient care and made claims for reimbursement, which UBH denied. The providers then sought arbitration pursuant to the arbitration provisions in the provider agreements. UBH filed suit to stay the arbitration proceedings claiming that Congress provided exclusive procedures in the Medicare Act and in ERISA for resolving coverage disputes that preempt arbitration contending that the disputes must be resolved through the Medicare and ERISA administrative processes. Continue Reading

What Does the CMS Notice of Benefit and Payment Parameters Mean for Providers?

health insurance iStock_000028383644_FullThe Centers for Medicare & Medicaid Services (CMS) recently issued its proposed Notice of Benefit and Payment Parameters for 2018 (Proposed Rule) a couple of months earlier than in the past – one of the administration’s many actions aimed at setting the tone going into the election and the coming year. The release of the Proposed Rule comes as many insurers, including Aetna, Cigna, Humana, UnitedHealthcare and smaller qualified health plans (QHPs), announced plans to exit or limit participation in the Exchanges for 2017. With a targeted focus on making the Exchanges operate more efficiently, the Proposed Rule spans 293 pages of dense content with numerous proposals related to the risk adjustment program and accompanying tables and figures. Although central to insurance entities, the Proposed Rule is sure to impact patient access to healthcare services and payment to providers. To that end, CMS is asking providers to weigh in on the Proposed Rule’s policies, some of which may be more relevant than others to patients seen in the office or hospitals.

Network Adequacy

The Proposed Rule addresses network adequacy standards, in particular, by building on the minimum criteria established under 45 CFR § 156.230. In the 2017 Payment Notice, HHS finalized a policy related to “network breadth” by QHPs that will allow consumers to use Healthcare.gov to make network adequacy comparisons with those of other QHPs in the same geographic area. CMS intends to pilot a network breadth indicator in six states for plan year 2017. The results of the pilot will determine if CMS will expand it to more states in 2018. Continue Reading

Capitol Hill Healthcare Update

Washington DC iStock_000074771283_FullUpton Acknowledges ‘Cures’ Stalled

House Energy and Commerce Committee Chairman Fred Upton (R-MI) acknowledged publicly last week what has been widely suspected on Capitol Hill – his “21st Century Cures” medical innovation legislation will not pass Congress before the November elections. Upton had hoped to push through even a scaled-back version. But lack of consensus over how to pay for new National Institutes of Health (NIH) and Cancer Moonshot funding as well as limited legislative time available this month in the Senate conspired to sink Cures before the elections. One senior Republican committee member last week said the House may vote in September on its version of the bill, with the Senate voting after the election. But even that plan may not happen as lawmakers rush to exit Washington and campaign for re-election.

Congress Looks To Avoid Shutdown, Fund Zika Efforts 

The congressional leadership in both parties met with President Obama Monday to try to hammer out an agreement that keeps the government funded beyond the Sept. 30 expiration of the 2016 fiscal year.

A sticking point has been funding to combat the spread of the Zika virus. Lawmakers are expected to agree on a stopgap budget bill that would keep the government open until mid-December, when Congress will reconvene for a post-election lame duck voting session. Continue Reading

Congress is Back in Session – So What Now for Healthcare?

Washington DC iStock_000074771283_FullWith Congress reconvening after a seven-week summer recess, we wanted to provide you with a quick topline of key healthcare issues lawmakers are expected to consider this week.

Zika Funding

The Senate voted September 6 – and as expected – failed to overcome a Democratic filibuster of new funding to combat the Zika virus. Congress earlier this summer failed to approve funding after Senate Democrats twice blocked consideration of legislation that would have provided $1.1 billion. Democrats object to the GOP Zika bill in part because it’s offset by cuts in the Affordable Care Act. Congressional leaders are expected to include Zika funding in a must-pass spending bill later this month to keep the government operating after fiscal 2016 expires on September 30.

21st Century Cures

On September 7, House Energy and Commerce Chairman Fred Upton (R-MI) acknowledged publicly what had been widely suspected on Capitol Hill – his “21st Century Cures” medical innovation legislation will not pass Congress before the November elections. Continue Reading

OCR to Increase Efforts to Investigate Breaches Affecting Fewer Than 500 Individuals

HIPAA document magnifiedThe Department of Health and Human Services Office for Civil Rights (OCR) is the federal agency tasked with investigating data breaches involving protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA).

The mere mention of an OCR investigation can strike fear into the hearts of HIPAA privacy officers and health care executives everywhere. Data breaches have been occurring with disturbingly high frequency in the health care industry. If a covered entity experiences a data breach involving more than 500 affected individuals, a regulatory investigation by the OCR is virtually guaranteed. Read more >>