Articles Posted in Compliance

On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule for Accountable Care Organizations (ACO) participation in the Medicare Shared Savings Program. With this rule, in response to concerns related to start up costs associated with ACOs, CMS has also announced the creation of its Advance Payment Model, which is scheduled to commence in 2012. The Advance Payment Model was created to assist participants in the Share Savings Program that may not have the necessary funds to become and ACO (e.g. physician-owned hospitals and rural providers). These participants would be advanced future payments, which would later be recouped from future shared savings. However, if the ACO fails to complete the full agreement period or earned shared savings then it will be required to return the advance payment. An ACO would receive future payments in three ways: (1) an upfront, fixed payment, (2) an upfront, variable payment, and (3) a variable monthly payment.

The Advance Payment Model may be available to two types of organizations participating in the Shared Savings Program: (1) ACOs that do not include any inpatient facilities AND have less than $50 million in total annual revenue; and (2) ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals AND have less than $80 million in total annual revenue. ACOs that are co-owned by a health plan will not be eligible to participate. Participants of Pioneer ACOs will also be ineligible. CMS expects to select approximately 50 ACOs that meet the above eligibility requirements to receive funding.

The Advance Payment Model will only be available for ACOs beginning participation in the Medicare Shared Savings Program in either April 2012 or July 2012.

Today, the Centers for Medicare and Medicaid Services (CMS) released its final rule for Medicare’s Accountable Care Organizations (ACO). The program is designed to encourage health care providers to coordinate care in order to achieve cost-savings and improve the quality of care for Medicare patients. Due to substantial criticism from the health care industry, CMS made a number of significant modifications to the proposed rules that were released in March. According to CMS, these modifications include:

• Greater flexibility in eligibility to participate in the Shared Savings Program
• Multiple start dates in 2012

On October 3, 2011, the Department of Health and Human Services Office of Inspector General (OIG) issued an unfavorable advisory opinion regarding a proposed arrangement under which physicians would invest in a company that would provide pathology laboratory management services to a third party.

Under the proposed arrangement, a physician who owns and manages a limited liability company (“Requestor”) would enter into a management contract with a pathology laboratory (“Path Lab”), whereby the Requestor would provide the Path Lab with various clinical laboratory services for a fixed number of hours each year. The Requestor would also provide utilities, furniture, fixture, the exclusive use of laboratory space and equipment, and marketing and billing services. In return, the Path Lab would pay a usage fee to the Requestor that would be calculated based on a percentage of the lab’s income which would be fixed in advanced for a 12-month term.

The Requestor’s owner/manager would offer an opportunity for physicians to invest in the Requestor. The new physician investors are anticipated to have little or no background experience in the clinical laboratory services field. According to the Requestor, the value of the investment interest that would be held by physician investors in a position to generate business for the Requestor through referral of laboratory specimens to the Path Lab would exceed 40 percent. Additionally, the Requestor anticipates that the business generated through referrals by physician investors would equate to substantially more than 40 percent of the Requestor’s gross revenue related to the furnishing of health care items and services. Finally, the Requestor has certified that each of the physician investors would have the option of referring specimens to the Path Lab but referrals are not implicitly or explicitly a condition of the arrangement.

On August 29, 2011, the U.S Department of Health and Human Services, Office of Inspector General (OIG) issued a favorable advisory opinion regarding a health system’s proposal to enter into arrangements to provide neuro emergency clinical protocols and immediate consultations with stroke neurologists via telemedicine technology to certain community hospitals.

The Requestor is an operating division of a not-for-profit corporation with a mission of increasing access to quality neuroscience care by providing access to the nationally ranked neuroscience care available through its flagship program. Under the proposed arrangement, Requestor would provide the following services to community hospitals in its service area free of charge: (1) neuro emergency telemedicine technology, (2) neuro emergency clinical consultations, (3) acceptance of neuro emergency transfers, and (4) neuro emergency clinical protocols, training and medical education. The Requestor would enter into a written agreement with the participating community hospitals, which would establish all of the services that each party would provide under the agreement. In recognition of Requestor’s investment of time and capital in the proposed arrangement, the participating hospital would be required to agree not to participate in any other neuro emergency telemedicine service without prior approval of Requestor for the length of the agreement (anticipated at 2 years). The exclusivity requirement would not (1) restrict a participating hospital’s emergency or attending physician from consulting with any stroke specialist of his or her choice, (2) require either party or its physicians to refer patients to the other party, or (3) restrict the freedom of a patient or physician to request a transfer to a stroke center other than Requestor’s.

Due to the agreement creating the potential for Requestor and the participating hospital to refer federal healthcare business to one another, OIG acknowledged that the proposed arrangement could possibly implicate the Anti-Kickback Statute. However, OIG concluded that it would not subject Requestor to administrative sanctions under the Anti-Kickback Statute for the following reasons:

In May and June 2010, the Office of Inspector General (OIG) performed unannounced site visits at independent diagnostic testing facilities (IDTF) in the Miami and Los Angeles areas. During these visits, OIG discovered that IDTFs in both areas did not comply with certain Medicare standards. For instance, several of the facilities were found to not have a physical facility at the location on file with CMS, as well as other facilities not being open during business hours. Noncompliance with these Medicare standards could lead to the revocation of the IDTF’s Medicare billing privileges along with a number of other administrative actions.

IDTF services have been determined to be vulnerable to fraud and abuse. In 1997, OIG conducted site visits where it discovered that twenty percent of IDTFs were not at the filed CMS location. Additionally, OIG estimated that $71.5 million in improper Medicare payments were disbursed to IDTFs in 2001.

During the unannounced site visits, OIG found that 27 of the 92 Miami-area IDTFs and 46 of the 132 Los Angeles-area IDTFs failed to comply with certain Medicare standards. As a result of these findings, OIG made a number of recommendations to CMS including that CMS periodically conduct announced site visits to IDTFs, take actions against noncompliant IDTFs identified by the OIG site visits, and to immediately stop payments to IDTFs whose billing privileges are being revoked. The OIG also recommended that CMS impose a moratorium on the enrollment of IDTFs in the Los Angeles area. There was no similar recommendation for IDTFs in the Miami area because of the existing special enrollment project that screens new enrollees.

On July 28, 2011, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) issued an unfavorable advisory opinion regarding two proposals by a supplier of medical supplies, equipment and related services (Supplier) seeking to enter into a contract with a county-operated skilled nursing facility (SNF) to provide such items and services.

Supplier provides medical supplies and equipment to SNFs along with providing related services (e.g. emergency delivery of medical supplies, inventory control and customized packaging). Supplier bills Medicare directly for supplies and equipment covered by Medicare Part B (covered items). For items not covered by Medicare (non-covered items), Supplier bills the SNFs directly and includes a markup which covers the costs of related services, overhead and profit. Supplier acknowledged that the amount paid by Medicare Part B for the covered items is enough to cover the costs related to the services provided to the SNF in connection with the non-covered items.

The SNF solicited bids from suppliers to be the exclusive supplier of covered items and related services to the SNF. The SNF also required all bids to include pricing for the non-covered items and related services. The SNF proposed to purchase the non-covered items at its option. Supplier was one of the bidders and the OIG analyzed two proposed arrangements that Supplier sought to use in the bidding process.