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On January 16, 2014 the Federal Trade Commission (FTC) unanimously reaffirmed its broad authority to regulate a healthcare provider’s data security program deemed inadequate by the FTC in protecting consumers from identity theft or misuse of personal information. The FTC held that a provider’s program is inadequate if it fails to provide reasonable and appropriate data security measures. A company’s failure to provide reasonable and appropriate data security measures falls within the purview of Section 5(a) of the FTC Act’s prohibition of “unfair … acts or practices.” Further, the FTC held that HIPAA, HITECH, and other statutes do not restrict the FTC’s authority under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), to challenge data security measures that it has reason to believe are unfair acts or practices.

The impetus for this ruling comes from an August 2013 complaint filed against LabMD, a clinical laboratory, alleging that LabMD failed to employ reasonable and appropriate measures to prevent unauthorized access to consumers’ personal information, constituting an unfair act or practice in violation of Section 5(a) of the Act. LabMD moved to dismiss the FTC’s complaint, arguing that the FTC had no authority to address private companies’ data security programs under the Act, and that by enacting Health Insurance Portability and Accountability Act (“HIPPA”) and other statutes, Congress implicitly restricted the FTC’s authority to enforce the Section 5 of the Act in the field of data security. In denying LabMD’s motion to dismiss, the FTC determined that nothing in the federal statutes reflected a ‘clear and manifest’ intent of Congress to restrict the FTC’s authority over unfair data and security practices. Furthermore, the FTC held that “so long as the requirements of those statues do not conflict with one another, a party cannot plausibly assert that, because it complies with one of these laws, it is free to violate the other.”

As the FTC reasserts its broad authority under the Act, healthcare providers should reexamine their data security programs to ensure that they adequately protect consumers’ personal information in the event of an investigation by the FTC.

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On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to the Medicare Prescription Drug Benefit (Part D) Program. The proposed changes, such as the “any willing pharmacy” contracting requirement, could significantly impact how Part D Prescription Drug Plan Sponsors operate and interact with their contractors, beneficiaries, and the government. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014.

The Proposed Rule provides a new interpretation of the non-interference provision in the statute relating to the Department of Health and Human Services (HHS) relationship with drug manufactures, pharmacies, and Sponsors. Since 2004, this statute has been interpreted to extend to negotiations between any of those parties. However, if the Proposed Rule is implemented, the non-interference provision would be interpreted as to apply only to pharmaceutical manufacturer’s negotiations with pharmacies and Sponsors and would not apply to negotiations between Sponsors and pharmacies.

CMS also proposed a dramatic change to its interpretation and application of two statutory provisions: the provision establishing Sponsors’ obligation to contract with “any willing pharmacy,” and the provision allowing Sponsors to create tiered pharmacy networks. Historically, CMS has interpreted these two provisions as requiring Sponsors to include any pharmacy willing to meet the Sponsors’ “standard” terms and conditions in the Sponsor’s pharmacy network. Sponsors were still able to contract with a limited number of “preferred” pharmacies with alternate terms and conditions, such as lower cost-sharing obligations for covered Part D drugs. In the Proposed Rule, CMS suggests Sponsors who have “standard” and “preferred” pharmacies would be required to allow every pharmacy to have the opportunity to contract under the “preferred” terms and conditions, thus eliminating Sponsors’ ability to develop exclusive arrangements with select business partners. Furthermore, any pharmacy offering “preferred” cost-sharing would be required to meet a price “ceiling” established by the Sponsor, which must be less than the lowest price (the “floor price”) the Sponsor has with “standard” cost-sharing pharmacies. CMS also proposed that Sponsors require pharmacies contracting under the preferred terms and conditions to offer lower prices on all drugs in return for the lower cost-sharing.

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Recently, the Centers for Medicare and Medicaid Services (CMS) announced that it has decided to extend the Inpatient Hospital Prepayment “Probe and Educate” reviews. The probe reviews, which were previously extended to March 31, 2014, have now been extended for dates of admission through September 30, 2014. During the probe reviews, Medicare Administrative Contractors (MACs) will continue to review and deny claims found not to be in compliance with the 2-midnight rule. These reviews will continue to be conducted on a prepayment basis, and the MACs will continue to provide education to hospitals throughout the “probe and educate” review process. During the probe review process, other Medicare contractors, including Recovery Audit Contractors (RACs), will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission between October 1, 2013 and October 1, 2014.

In an effort to provide updated information and additional clarification, CMS will host a follow-up Special Open Door Forum (ODF) on February 4, 2014 from 1:00 p.m. – 2:00 p.m. Much like the previous ODFs, interested parties will have an opportunity to ask questions regarding inpatient hospital admission, medical review criteria, physician orders and physician certification. You can participate in the ODF via conference call: Participant Dial-In Number: 877-251-0301; Conference ID: 47736519.

If you have any questions regarding the “probe and educate” reviews, physician orders and certification requirements, the 2-midnight rule, or medical review criteria, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

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On January 14, 2014, the Centers for Medicare & Medicaid Services (CMS) modified their policy regarding the disclosure of physician payment information under the Freedom of Information Act (FOIA). Effective March 18, 2014, CMS will now evaluate requests for individual physician payment information on a case-by-case basis.

CMS Principal Deputy Administrator, Jonathon Blum, cites the agency’s commitment to greater transparency and the benefits numerous stakeholders have identified that would result from an increase in the availability of information as reasons for the change in policy. Some benefits CMS hopes the policy will lead to include:

• Provider collaboration on improved care management and lower costs in the delivery of health care;

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The Department of Health and Human Services (HHS), Office of Inspector General (OIG) recently released an advisory opinion that highlights long-standing OIG guidance as to how industry stakeholders can contribute to independent, bona fide charitable assistance programs. In this case, the patient assistance program (“Requestor”) provides grants to patients suffering from a specific disease for insurance premiums and other expenses not covered by insurance. The Requestor is a supporting organization of a nonprofit charitable foundation (“Foundation”) that exists solely to support the disease.

The Requestor’s main source of funding is the Foundation. However, all funds received from the Foundation are ultimately donations by pharmaceutical manufactures of the drugs used to treat the disease. The Requestor thus sought an advisory opinion to determine if such an arrangement would be grounds for civil monetary penalties under section 1128A(a)(5) of the Social Security Act (“Act”), covering improper beneficiary inducements, or other provisions of the Act as those sections relate to the Federal anti-kickback statute.

In the advisory opinion, AO No. 13-19, the OIG reiterates long-standing OIG guidance that industry stakeholders may contribute to the health care safety net for financially needy patients, including beneficiaries of Federal health care programs, by contributing to independent, bona fide charitable assistance programs. The OIG also states that such programs should not exert influence over donors, and donors should not have links to the charity that could directly or indirectly influence the charity’s operations or subsidy programs. Further, such programs cannot function as a conduit for payments from donors to patients, impermissibly influence beneficiary choices, or engage in practices that effectively subsidize a donor’s particular product.

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The Office of the Inspector General (OIG) recently released a study detailing problems associated with overpayments to clinicians who provide Medicare Part B services. The study specifically focused on what the OIG referred to as “high cumulative payment” clinicians, who are clinicians receiving total annual payments of more than $3 million for Part B services during CY 2009. The OIG recognizes that this subset of providers poses a greater risk for improper payment or fraud in the Medicare system and will seek to implement new programs and policies to detect those problems.

The study found that from 2008 to 2011, both the number of Medicare Part B clinicians generating high cumulative payments, as well as the total amount of those payments, increased almost 78%. Most importantly, the study identified 303 clinicians who supplied more than $3 million in Part B services in 2009. Medicare administrative contractors (MACs) and Zone Program Integrity Contractors (ZPICs) further identified 104 specific individuals of the 303 (34%) for improper payments reviews. By the end of 2011, MACs and ZPICs reviewed 80 of the 104 clinicians and identified $34 million in over payments. Repercussions for these clinicians included suspended licenses and mandatory prepayment reviews, and even two indictments. The OIG recommends that CMS establish a cumulative payment threshold above which a clinician’s claims would be selected for review as well as implementing a procedure for timely identification and review of clinicians’ claims that exceed the cumulative payment threshold.

The OIG views the results of this investigation into high cumulative payment clinicians as a more useful method of identifying potentially improper payments. As a result of this study, clinicians who are reimbursed through Medicare Part B should ensure that their billing practices are in compliance with Medicare documentation and reimbursement rules, as well as determine whether their utilization rates differ significantly from their peers.

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On Wednesday, February 12, at 10:00 am EST, the U.S. Department of Health & Human Services, Office of Medicare Hearings and Appeals (OMHA) will hold a Medicare Appellant Forum in the Cohen Auditorium of the Wilbur J. Cohen building at 330 Independence Ave. SW, Washington DC, 20024. The purpose of the forum will be to:

  • Inform OMHA appellants on the status of OMHA operations;
  • Discuss a number of initiatives designed to mitigate the growing backlog of OMHA-level appeals; and
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On Thursday, December 19, 2013, from 1:00-2:00 pm Eastern Time, the Centers for Medicare & Medicaid Services (CMS) will hold a Special Open Door Forum (ODF) to answer questions from hospitals, practitioners, and other interested parties about the new policies released on August 2, 2013 as part of the Fiscal Year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital (LTCH) Final Rule (CMS-1599-F) and corresponding medical review criteria.

Thursday’s ODF will be the fourth in its series of ODFs regarding physician order and certification, hospital inpatient admission and medical review criteria. The most recent ODF discussed the “probe and educate” reviews to be conducted by the MACs. If you missed any of the prior ODFs, a transcript of each ODF can be found on CMS’ website.

To access the ODF, the participant dial-in number is 1-866-501-5502, and the conference ID number is 16505942. For more information, please visit the ODF website. If you have any questions regarding the final rule or questions about the Medicare appeals process, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

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The Centers for Medicare & Medicaid Services (“CMS”) recently released a favorable advisory opinion, CMS AO-2013-03, that interprets the “whole hospital” exception to the physician self-referral prohibition commonly known as the Stark Law. CMS determined that the proposed arrangement, which adds a new observation unit and 14 observation beds to a physician-owned hospital, complies with the “whole hospital” exception’s restriction on facility expansions.

In general, the Stark Law prohibits the referral of Medicare patients for designated health services (“DHS”) to an entity in which the referring physician has a financial relationship. The law also prohibits the entity that furnishes DHS as a result of a prohibited referral from billing Medicare, the beneficiary, or any other entity.

The Stark Law contains several exceptions to which the self-referral prohibition does not apply, including the “whole hospital” exception under Section 1877(d)(3). The “whole hospital” exception allows referring physicians to have physician ownership or investment interests in a hospital provided that the referring physician is authorized to perform services at the hospital and the ownership or investment interest is in the hospital itself.

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In November 2013, the Department of Health and Human Services (HHS), Office of Inspector General (OIG) issued a report which called for additional quality measures (QMs) of Medicare nursing home resident hospitalization rates. The application of QMs to nursing home hospitalization rates is intended to resolve identified discrepancies between hospitalization rates for Medicare- and Medicaid-certified nursing homes. In its study, the OIG found that one quarter of Medicare nursing home residents experienced hospitalization in FY 2011, which resulted in $14.3 billion in Medicare spending. Among nursing homes linked to the highest rates of resident hospitalization were:

  1. Nursing homes located in Arkansas, Louisiana, Mississippi, and Oklahoma;
  2. Nursing homes receiving fewer than four stars according to CMS’ Five-Star Quality Rating System;
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