Health Law

Published on: April 1, 2025

What Do Changes at HHS Mean for Medicare Appeals and Compliance?

Multiple changes have been announced or proposed at the federal Department of Health and Human Services (“HHS”), which will likely impact healthcare providers engaged in Medicare audit appeals and regulatory compliance activities. Although, in some ways, these changes may simply be a return to the status quo experience 5 to 10 years ago.

HHS has announced that that it will further reduce its head count and rearrange some of its many divisions. Specifically, it will cut another 10,000 full-time employees in addition to the approximately 10,000 employees that have left the department since January. The bulk of the new cuts will be to the FDA, CDC, and NIH. The Centers for Medicare and Medicaid Services (“CMS”), which oversees the Medicare program and the many Medicare contractors, is expected to lose about 300 employees. While the reduction at CMS may be small relative to other divisions, the loss of experienced decision-makers is being keenly felt as established agency norms, contacts, and priorities can no longer be relied upon. For CMS to change is not necessarily a bad thing in the long term, but it in the short term, it creates significant uncertainty among providers.

Several divisions relating to Medicare appeals and compliance are also being rearranged. The Health Resources and Services Administration (“HRSA”) is being combined with several other divisions into the new Administration for a Healthy America (“AHA”). HRSA has administered – often poorly – the Provider Relief Fund (“PRF”) and the many provider disputes related thereto. It is not clear whether this change will reinvigorate HRSA’s handling of PRF disputes, but given the policy statements of the new AHA, PRF disputes do not appear to be a priority. Further, two divisions closely related to Medicare appeals, the Office of Medicare Hearings and Appeals (“OMHA”) and the Departmental Review Board (“DAB”), will both be reassigned under a new assistant secretary of enforcement. OMHA and DAB already work together closely, so providers in the various Medicare appeals processes are unlikely to experience significant disruption from this change.

Published on: March 10, 2025

The Evolution from Medicare Audits to FCA Claims: What Healthcare Providers Need to Know in 2025

by Wachler & Associates, P.C.

Healthcare providers are no strangers to Medicare audits and the havoc they can impose, but with careful billing, attention to detail, and adequate documentation, it is possible to turn the tide. However, a recent trend indicates that these audits are being examined much more closely and are quickly morphing into something far more serious—an investigation under the False Claims Act (FCA).

The Medicare audit process typically involves a review of healthcare claims, medical records, billing codes, and supporting documentation. When alleged discrepancies are found—such as improper coding, overbilling, or inaccurate claims—providers may face repayment demands and other related consequences, usually contained within the administrative Medicare framework and not escalated to a matter under the FCA… Until now.

What is the False Claims Act (FCA)?

Published on: February 17, 2025

Independent Physician Practices: Sell Out or Go Cash-Pay?

by Wachler & Associates, P.C.

As the burden placed on physician practices by government regulation and insurance company practices grows ever larger, many small practices find their existing practice model growing less and less viable. The combination of low reimbursement from government programs, endless regulatory and compliance requirements, billing and coding disputes, prior authorizations, risk of arbitrary enforcement actions, and the like take physicians away from their patients and render small practices unable to survive as a business. Two of the most common solutions for physicians are to sell out to a large entity or to convert the practice to all alternative payment structure, such as a cash-pay model. However, both of these options carry their own legal and practical considerations.

The sale of a practice generally involves issues regarding the nature of the transaction and what if any relationship the selling physician will have with the practice going forward. Many states only allow the sale of a practice to another physician. The compensation paid must also comply with various federal and state fraud, waste, and abuse laws, especially where the selling physician stays on as an employee or contractor. Where the sale of the practice is to a private equity company, or involves a management services organization (MSO), special attention should be given to the terms of the agreement and the nature of the compensation. Physicians should also be aware of local rules and ethical obligations regarding the transfer of patients and their medical records.

An alternative payment structure refers to what payors a practice accepts and can take many possible forms. Some practices may be best served by not taking Medicare and Medicaid, but still accepting Medicare Advantage plans, Medicaid MCOs, and commercial insurance. Some practices may want to forgo all government payors and accept only commercial insurance. Some niche practices may be best served by forgoing all third-party payors and accepting only cash payments directly from patients. Choosing not to accept payment from government programs can significantly reduce the regulatory, compliance, and administrative burden, but physicians should be aware that providers who treat Medicare beneficiaries are generally required to officially “Opt-out” of Medicare before charging patients directly for services that would otherwise be covered by Medicare. There may also be state laws or other rules that affect a “cash-pay” practice, but they are generally far less onerous than the burden placed on practices by Medicare and other government-funded programs.

Published on: February 12, 2025

Is it a Change of Ownership or Change of Information?

by Wachler & Associates, P.C.

Healthcare providers and suppliers enrolled in Medicare are subject to a length list of regulatory and compliance requirements, among which is a duty to report information about a corporate provider’s ownership to the Centers for Medicare & Medicaid Services (CMS). A frequently misunderstood distinction in these reporting requirements is the difference between a “change of ownership” and a “change of information.”

Simply put, “change of ownership” has a specific regulatory definition which does not match up with the common understanding of the term. In the case of a partnership, the removal, addition, or substitution of a partner, unless the partners expressly agree otherwise, as permitted by applicable state law, generally constitutes a “change of ownership.” The lease of all or part of a provider facility generally constitutes a “change of ownership” of the leased portion. Transfer of title and property of an unincorporated sole proprietorship to another party also generally constitutes a “change of ownership.”

However, the most common and important part of the definition of “change of ownership” relates to corporations. The merger of a provider corporation into another corporation, or the consolidation of two or more corporations, resulting in the creation of a new corporation generally constitutes a “change of ownership.” On the other hand, transfer of corporate stock or the merger of another corporation into the provider corporation generally does not constitute a “change of ownership.”

Published on: February 10, 2025

36-Month Rule for Hospices

by Wachler & Associates, P.C.

Hospice care has long been an area of program integrity focus for the Centers for Medicare & Medicaid Services (CMS) and hospice providers are subject to greater scrutiny and regulation than other provider types. This scrutiny is generally rooted in concerns relating to both fraudulent business practices and patient care. One of the most salient examples regarding hospice ownership is the 36-Month Rule.

The 36-Month Rule generally becomes relevant when a Medicare-enrolled hospice is bought, sold, or otherwise changes ownership and limits how frequently the ownership interest in the hospice can be transferred. If a Medicare-enrolled hospice undergoes a change of majority ownership within three years of its initial enrollment in Medicare or within three years of its most recent change of majority ownership, the Medicare provider agreement generally cannot be transferred to the new owner. The new owner is generally required to enroll in Medicare as a new entity, including undergoing all site surveys, accreditations, and other requirements. In the absence of a new enrollment, the new owner will generally not be permitted to bill under the entity that it just bought. Purchases outside the 36-month window are generally not subject to this rule. Historically, the 36-month rule applied to home health agencies (HHAs). CMS expanded it to apply to hospices as well in early 2024.

Further, CMS has designated some hospices as high-risk providers, subject to additional enrollment requirements. CMS classifies provider types based on the perceived risk that the provider type poses to the Medicare program. Hospices are generally in the “moderate risk” category, requiring a site visit on top of the standard enrollment screenings. However, both newly-enrolling hospices and hospices reporting a new owner (5% or more) are designated as part of the “high risk” category. All owners of newly-enrolled hospices and new owners of existing hospices will be required to submit fingerprints for a criminal background check. Note that a new hospice owner may be subject to “high risk” screening without implicating the 36-Month Rule depending on the nature and of the purchases and how much of the ownership interest is transferred. Sales and purchases of Medicare-enrolled entities may also be subject to “change of ownership” or “change of information” requirements, again depending on the nature and amount of the transfer.

Published on: January 8, 2025

Congress Issues Short-Term Extension of Telemedicine Flexibilities

by Wachler & Associates, P.C.

Congress recently passed a limited extension of certain flexibilities relating to Medicare coverage of telemedicine. While the current extension is a stop-gap measure that expires March 31, 2025, it may signal Congressional acknowledgement of the importance of these flexibilities to healthcare providers and patients across the country and an intent to eventually make them permanent.

Prior to the COVID-19 Public Health Emergency (PHE), Medicare coverage of services provided by telemedicine was very limited. Two of the most important limitations related to the “originating site” of the telemedicine service, that is, where the patient is while receiving the service via telemedicine. Specifically, Medicare would only cover telemedicine services where the originating site (1) was located in specified rural area and (2) was a specified clinical setting, such as a physician’s office or other facility. These rules generally precluded the use of telemedicine in urban or suburban areas and precluded nearly all patients from receiving telemedicine services in their homes.

During the COVID-19 PHE, the Centers for Medicare & Medicaid Services (CMS) waived these requirements and allowed telemedicine services in more settings, including in patients’ homes and in more than just rural areas. When the PHE ended, so too did CMS’ authority to continue these regulatory flexibilities. However, by that point, telemedicine services had become widespread and providers and patients acknowledged that it had a valuable role to play in the delivery of healthcare services. Therefore, Congress by statute extended these flexibilities past the end of the PHE, but included an expiration date of December 31, 2024.

Published on: December 9, 2024

Can We Settle This Audit Overpayment?

by Wachler & Associates, P.C.

When a healthcare provider’s claims are reviewed or audited by a payor or insurance plan, the payor often asserts various deficiencies in the provider’s claims or documentation. The payor then alleges that the provider has received an overpayment for those claims and demands the provider pay it back. Appealing claims audit determinations can be a costly and tedious endeavor, leading a provider to wonder: Can we negotiate and settle this, like we would most other commercial disputes? The answer generally depends on who the payor is.

Medicare overpayments, in general, are unlikely to be subject to settlement. While there is statutory authority for federal agencies, such as Health and Human Services (HHS) and Treasury, to settle debts allegedly owed to the federal government, they are authorized to do so only in a few narrow circumstances and are generally very hesitant to actually do so. The Centers for Medicare & Medicaid Services (CMS) are particularly resistant to settling overpayments in most cases. Providers are generally left to choose between appealing the overpayment on the merits or applying for an Extended Repayment Schedule (ERS), under which CMS may agree to a payment plan, but generally will not reduce the amount owed. Simply ignoring or paying back a Medicare overpayment without contesting the findings is generally not advisable as it can be construed as an admission of non-compliance that can be used against the provider later.

Medicaid overpayments are also unlikely to be subject to settlement. Even where a state Medicaid agency acknowledges that an overpayment demand will bankrupt the provider and the Medicaid program is unlikely to ever collect, the agency may nonetheless be restricted from settling by the “federal share.” The federal share is the 50% to 80% of Medicaid reimbursement that is funded by the federal government. Because it is the federal government’s money, the federal government generally requires the state Medicaid program to repay the full amount of the “federal share” to the federal government for denied claims, regardless of the state’s desire to settle. That is, a state Medicaid program generally will not settle, even if it wants to, because it has to repay the full “federal share” whether it collects the full amount from the provider or not.

Published on: December 5, 2024

Guide to a Medicare Claims Appeal ALJ Hearing

by Wachler & Associates, P.C.

The most complex step in the Medicare claims appeals process is generally the third step, a hearing before an Administrative Law Judge (“ALJ”). The ALJ hearing represents both the first time in the claims appeal process that the case is reviewed by a party other than a Medicare contractor and the first time that the provider can offer testimony during a live hearing. An ALJ hearing presents many important strategic considerations for the appealing provider, including before, during, and after the hearing itself.

Before the hearing, the provider must appeal through the first two steps of the Medicare claims appeals process, Redetermination and Reconsideration. Both of these steps involve claim review by a Medicare contractor and are conducted exclusively by written submissions and correspondence. A provider that is dissatisfied with a Reconsideration Decision has a right to request ALJ review of that decision. However, a provider should usually attempt to submit all evidence, especially medical records, prior to the Reconsideration Decision. A provider who waits to submit new evidence until the ALJ level generally must prove why they did not submit it earlier, or else may be barred from submitting new evidence. The formal Request for ALJ also must meet certain regulatory requirements to be effective, especially where the provider is appealing a statistically extrapolated overpayment.

During the hearing and leading up to it, an ALJ hearing is much like a miniature trial. Witnesses must be selected and prepared, evidence organized, important issues briefed, and strategy formulated. Depending on the nature of the case, a provider may have the treating physician testify, or an outside clinical expert may testify in support of the claims. If there is a statistical extrapolation, it may be appropriate to retain an expert statistician to testify regarding any errors in the extrapolation. CMS or its contractors may appear as an opposing party or may submit materials to the ALJ, and may or may not follow the regulatory requirements for doing so. The ALJs themselves are not employed by CMS, but are employed by the Office of Medicare Hearings and Appeal (“OMHA”), another sub-division of HHS.

Published on: December 3, 2024

HHS Continues to Struggle with Skin Substitutes, OIG Increases Scrutiny

by Wachler & Associates, P.C.

The HHS Office of Inspector General (OIG) recently issued several new work plan items aimed at Medicare Part B payments for skin substitutes. Part B reimbursement for skin substitutes products has long been a thorn in the side of Medicare. Medicare is generally required by federal law to reimburse certain skin substitute products covered under Part B using an Average Sales Price (ASP) methodology established by Congress. However, as the use of these products has grown and the pricing has increased exponentially, HHS has looked for ways to address rising costs to the Medicare program.

OIG updated its work plan in November 2024 to include several new initiatives that OIG intends to undertake in the area of skin substitutes and ASP pricing. First, OIG intends to update its prior conclusions regarding ASP pricing. ASP pricing requires manufacturers to report pricing data. In March 2023, OIG issued a report that found that manufacturer noncompliance with new ASP reporting requirements for skin substitutes led to millions in excessive Part B payments. OIG noted that, since then, Part B expenditures for skin substitute products have continued to rise significantly. OIG therefore intends to provide an update on these manufacturer reporting issues, as well as highlight billing trends and identify potential solutions to any challenges in using the ASP methodology for skin substitutes.

Second, OIG intends to investigate alternative pricing under ASP. The ASP methodology established by Congress mandates that OIG compare ASPs with average manufacturer prices (AMPs) and the widely available market price, if any. If OIG finds that the ASP exceeded the AMP by 5 percent in the two previous quarters or in three of the previous four quarters, then HHS may substitute the reimbursement amount with a lower calculated rate. OIG intends to perform this comparison for various time periods and believes that it may offer recommendations for Medicare to achieve additional savings.

Published on: November 25, 2024

HRSA and HHS Refuse to Budge on PRF Repayment Demands

by Wachler & Associates, P.C.

Shortly after the COVID-19 Public Health Emergency (PHE) began, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which established the Provider Relief Fund (PRF). The goal of the PRF program was to provide financial support to healthcare providers across the nation in response to the unprecedented challenges presented by the PHE. Despite this noble goal, the federal agencies responsible for carrying out the PRF program have focused their efforts recently on clawing back PRF payments made to providers who the agencies assert did not strictly comply with the Program’s reporting requirements, among others. These PRF repayment demands seek to collect money distributed to providers that was intended to promote patient safety and preserve access to healthcare services. In many instances, providers relied on these funds to simply keep the lights on and stay in business. Now, the government’s demands for return of these monies again threatens the stability of many providers who received PRF funds, and providers are consistently left with little to no information as to why or how these repayment demands are being made in the first place.

Originally tasked with administering the $178 billion authorized under the PRF program, the Health Resources & Services Administration (HRSA), a subagency of the Department of Health and Human Services (HHS) distributed hundreds of thousands of PRF payments to providers of all types over the last several years. Notably, not all providers that received PRF funds needed to request those funds in order to receive payment, or affirmatively agreed to be bound by a set of associated terms and conditions. Recipients of the first batch of disbursements in Period 1 typically received the funds as an automatic deposit, with no notice or solicitation, and with no specific request for the funds required. If Period 1 recipients retained the PRF funds for 90 days or longer, then those providers were deemed to have accepted the PRF program’s terms and conditions, even if providers never read the terms or signed anything and despite the fact that HRSA would not publish the full details of the terms and conditions until months later. Providers who received PRF disbursements in Period 2 or later generally submitted a specific application to receive the funds, along with an attestation agreeing to comply with the terms and conditions.

Regardless of the Period in which a provider may have received funds, one of the most critical requirements attached to the receipt of PRF disbursements was the requirement to submit a report to HRSA on the use of the funds. As the terms and conditions would come to explain, failure to timely submit the necessary reporting would be considered grounds for recoupment of the funds. If a provider did not submit the report on time, HRSA should have notified the provider of its perceived non-compliance with the PRF terms and conditions, and allowed 60 days for the provider to submit the report or otherwise come back into compliance to justify retention of the funds.