Health Law

Published on: October 25, 2012

Medicare Audit Improvement Act of 2012 Proposes to More Heavily Regulate Audit Contractors

Representatives Sam Graves (R-MO), Todd Akin (R-MO), Billy Long (R-MO), and Adam Schiff (D-CA) introduced a bill to Congress on October 16, 2012 which proposes to reduce the Medicare contractor audit burden on hospitals. The bill, called the Medicare Audit Improvement Act of 2012 (Act), proposes changes to the ways contractors may conduct audits and imposes additional requirements on contractors.

Medicare Audit Improvement Act of 2012.pdf

Among the requirements introduced in the Act are limits to the amount of additional documentation a Medicare contractor may request for complex pre-payment audits and complex post-payment audits. The Act would limit the additional documentation requests for hospitals’ Part A claims to the lesser of 2 percent of those claims for the year, or 500 additional documentation requests during any 45 day period.

The Act also proposes penalties for contractors that fail to maintain compliance with Medicare program requirements. Specifically, the Act calls for financial penalties when a contractor fails to complete an audit determination within the applicable timeframes, and when a contractor fails to provide communication in a timely manner regarding claim denials and appeals. Further, the Act proposes to impose financial penalties for appeals which are overturned. When a party successfully appeals a claim denial, the Act would require the contractor to pay a monetary penalty to the party that prevailed in the appeal. This aspect of the Act is notable given the number of claim denials, particularly in the area of short-stay inpatient admissions, that are overturned at the ALJ level of appeal.

Medical necessity audits are also addressed by the Act. Under the Act, pre-payment and post-payment medical necessity audits would only be allowed if it addresses a widespread payment error rate. A widespread payment error rate is defined in the Act as a 40 percent payment error rate as determined by a significant sampling of claims submitted, adjusted to take into account claim denials overturned on appeal. Also, the Act calls for a restoration of due process rights under the AB Rebilling Demonstration Program. This mean that the Centers for Medicare and Medicaid Services (CMS) could not require providers in the demonstration project to waive their right to the appeals process for inpatient claim denials which, under the demonstration, could then be re-billed under Medicare Part B for 90 percent of the Part B payment.

Contractors would also be required to publish performance data under the Act. Contractors would be required to publish data each year on:

• the aggregate number of audits conducted,

• the aggregate number of denials for each audit type,

• denial rates,

• the aggregate number of appeals filed by providers,

• the aggregate rate of appeals, and

• the appeal outcomes at each stage of appeal.

Additionally, publication of performance evaluations of contractors performed by independent entities, including error rates, would be required.
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Published on: September 20, 2012

Ninth Circuit Decides RAC Reopening is Not Subject to Appeal

by Wachler & Associates, P.C.

On September 11, 2012 the United States Court of Appeals for the Ninth Circuit held that a Recovery Audit Contractor’s (RAC’s) initial decision to reopen a claim is not subject to judicial review. The case, Palomar Medical Center v. Sebelius, involved Palomar Medical Center arguing that a RAC has to establish good cause for an initial reopening decision. The Court of Appeals affirmed the ruling of the United States District Court for the Southern District of California, which held that the issue of good cause for reopening a claim cannot be raised after the audit’s conclusion and the revision of a paid claim.

Palomar v Sebelius.pdf

In 2007, the RAC notified Palomar that a claim from 2005 totaling $7,992.92 was under review and that records were requested to support medical necessity. Subsequently, after it submitted the requested documentation, Palomar was notified that an overpayment had been identified and the overpayment must be repaid. The overpayment was affirmed at the redetermination and reconsideration levels. Palomar then requested a hearing with an Administrative Law Judge (ALJ).

The ALJ affirmed that the services were not medically necessary, but found that the RAC did not make a showing of good cause for the late reopening. Finally, the Medicare Appeals Council (MAC) decided that:

1. Neither the ALJ nor the MAC had jurisdiction to assess whether good cause existed for reopening because the RAC’s decision to reopen was not subject to the administrative appeals process, and
2. The services were not medically reasonable and necessary.

Palomar appealed to the District Court and then the Court of Appeals on the issue of reviewability of the reopening, but not on the issue of medical necessity of the services.

The Court of Appeals for the Ninth Circuit held that because Congress established the RAC program, and expressly stated that reopenings were allowed under regulations promulgated by the Secretary, the regulations would control. Since the regulations explicitly state that there may be no appeal of a reopening decision because reopening decisions are final, the question of good cause to reopen a claim cannot be litigated after a RAC has revised a claim determination.

Although the court determined that the issue of good cause for reopening is not appealable, the court conceded that it was not an easy question to answer because of two competing principles: (1) Congress wanted an effective recovery audit program to reduce Medicare payments with resulting benefits for Medicare beneficiaries and taxpayers, under procedures set by the Secretary and (2) the provider has a legitimate interest in finality of determinations on its revenue for medical services. Despite the competing principles, the court ultimately concluded that to allow a provider to challenge the good cause for reopening during the appeals process could lead to the waste of resources and administrative inefficiency if the good cause was later rejected during the appeals process.
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Published on: September 4, 2012

DOJ Contacts Hospitals About Improperly Billed Heart Implants

by Wachler & Associates, P.C.

The Department of Justice (DOJ) reportedly set an email to hospitals nationwide on August 30, 2012 instructing them to examine implantable defibrillator surgeries covered by Medicare to determine if they were improperly billed to Medicare. The email, as reported by modernhealthcare.com, included a “resolution model” with instructions for hospitals to self-audit, and estimate monetary penalties under the False Claims Act.

The DOJ has been conducting an investigation into improperly billed implantable defibrillator surgeries for more than two years, and the resolution model sent to hospitals is the first attempt by the DOJ to come to a settlement resolution for these instances.

The investigation centers around a National Coverage Determination (NCD) set by the Centers for Medicare and Medicaid Services (CMS) which establishes the instances in which an implantable defibrillator is covered by Medicare.
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Published on: July 3, 2012

CMS Accepting ACO Advance Payment Model Applications

by Wachler & Associates, P.C.

The Centers for Medicare and Medicaid Services (CMS) will begin accepting applications on August 1, 2012 for Advance Payment Model Accountable Care Organizations (ACOs). Organizations applying for the Advance Payment Model would begin participation January 1, 2013.

Organizations participating in the Advance Payment Model would receive an advance payment on the shared savings they are expected to earn. Participating ACOs earn three types of payments:

• Upfront, fixed payment.

• Upfront, variable payment based on the number of its preliminarily prospectively assigned beneficiaries.

• A monthly payment of varying amount based on the size of the ACO, also based on the number of its preliminarily prospectively assigned beneficiaries.

The Advanced Payment ACO model is designed to test whether providing an advance on shared savings (as detailed above) will increase health organization participation in the Shared Savings Program, and to determine whether those advance payments can lead to better ACO care for beneficiaries and more savings for the Medicare program.

The Advanced Payment Model is available to participants in the Shared Savings Program, and allows organizations to receive advance payments that will be repaid from thee future shared savings they earn.

More information on Accountable Care Organizations and eligibility for the Shared Savings Program can be found here.
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Published on: June 29, 2012

Congressional Committee Requests GAO Study of CMS Contractor Redundancies

by Wachler & Associates, P.C.

Members of the United States House Energy and Commerce Committee sent a request on June 26, 2012 to the Government Accountability Office (GAO) requesting a study of redundancy in Centers for Medicare and Medicaid Services (CMS) contractor audits. The request included four specific questions that, at a minimum, the committee wants studied:

1. What process does CMS use to determine whether the contractors’ audit criteria and methodologies are valid, clear, and consistent?

2. How does CMS coordinate among these contractors to ensure that their interactions with providers are not duplicative? Is there any evidence of providers being subjected to multiple overlapping audits on the same topic? If so, how frequently does this occur? Is there any justification for a single provider being audited by multiple contractors at the same time?

3. What are the reasons for requesting that similar information be submitted to multiple contractors? Are there steps CMS is taking to limit duplicative audits, while still ensuring contractors have the tools necessary to pursue program integrity efforts?

4. Does CMS have a strategic plan to coordinate and oversee all of its audit activities and, if so, how is that plan implemented and overseen?

The request asks that all Centers for Medicare and Medicaid Services contractors be studied, including Medicare Administrative Contractors (MACs), Recovery Audit Contractors (RACs), Zone Program Integrity Contractors (ZPICs), Program Safeguard Contractors (PSCs), and Comprehensive Error Rate Testing Review contractors (CERTs).

The request asks that the GAO, “undertake a study that focuses on coordination among contractor efforts and CMS efforts to oversee these contractors to ensure that they are working efficiently and effectively while guaranteeing that beneficiaries are receiving care to which they are entitled.”
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Published on: June 22, 2012

Medicare Fraud Task Force Targets Psychotherapy Providers

by Wachler & Associates, P.C.

The United States Department of Justice (“DOJ”) announced yesterday that a Detroit-area resident, Louisa Thompson, plead guilty on June 20, 2012, to one count of criminal conspiracy to commit health care fraud in the Eastern District of Michigan federal court.

The Health Care Fraud Prevention and Enforcement Action Team (HEAT) task force, a DOJ and U.S. Department of Health and Human Services (HHS) multi-agency joint venture, headed the investigation of Ms. Thompson. The HEAT task force, which is an initiative of the federal Medicare Fraud Strike Force, uses data analysis and community policing to detect health care fraud perpetrators who steal billions of dollars from the federal government.

The task force discovered that since 2006, Ms. Thompson had billed Medicare for psychotherapy services through two companies, TGW Medical Inc. and Caldwell Thompson Manor Inc., despite these services having never been performed, or performed by unlicensed staff. Ms. Thompson has yet to be sentenced in the case, and faces up to 10 years imprisonment and a $250,000 fine.

Based on recent Medicare Fraud Task Force activity, it appears the HEAT task force is targeting psychological and psychotherapy service providers aggressively, both for criminal prosecution as well as for civil actions to recover money that Medicare and Medicaid has paid. The government’s most-used tool in civil health care cases is the False Claims Act.

The False Claims Act (FCA) was drafted in1893 and was originally intended to prohibit and prevent fraudulent claims against the government during the Civil War. Its purpose was to force government contractors to deliver promised materials, hold them accountable if they did not, and deter fraudulent activity. Under the FCA a qui tam relator (whistleblower) could bring suit on behalf of the United States, and be rewarded with a percentage of the government’s recovery.

In the late-1980s the federal government began using the FCA to pursue fraud in the federal health care programs. In recent years the government has relied on the FCA to combat fraud and abuse in the healthcare arena for conduct that did not reach the standards for criminal prosecution. The penalties for violation of the FCA can be up to $11,000 per false claim as well as three times the damage to the government.
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Published on: June 14, 2012

CMS Extends Notice of Intent to Apply Deadline for ACO Participation in the Shared Savings Program

by Wachler & Associates, P.C.

The Centers for Medicare and Medicaid Services (CMS) has extended the deadline for submitting a Notice of Intent to Apply to June 29, 2012 for Accountable Care Organizations (ACO) interested in participating in the Shared Savings Program beginning January 1, 2013. CMS will be accepting applications for the January 2013 start date from August 1 through September 9, 2012.

ACOs that do not file the Notice of Intent to Apply prior to the June 29 deadline will be unable to participate in the Shared Savings Program for the January 2013 start date. Furthermore, the Notice of Intent to Apply is not binding, which means that an ACO may submit its Notice and subsequently decide not to apply for the Program.
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Published on: June 5, 2012

State AG HIPAA Training Materials Available Online

by Wachler & Associates, P.C.

The Office of Civil Rights (OCR) announced yesterday that its Health Insurance Portability and Accountability Act (HIPAA) Enforcement Training tools would be available to the general public today, June 5, 2012.

Since 2009, as part of the Health Information Technology for Clinical and Economic Health (HITECH) Act, State Attorneys General (SAGs) were given the authority to bring civil suit for HIPAA violations on behalf of the aggrieved patients. To assist SAGs, the OCR developed a wide range of HIPAA Privacy and Security Rules compliance, enforcement, and training tools.

Included in the materials are computer-based modules, and videos and slides from in-person training sessions covering the following topics:

General Introduction to the HIPAA Privacy and Security Rules
Analysis of the impact of the HITECH Act on the HIPAA Privacy and Security Rules
Investigative techniques for identifying and prosecuting potential violations
A review of HIPAA and State Law
OCR’s role in enforcing the HIPAA Privacy and Security Rules
SAG roles and responsibilities under HIPAA and the HITECH Act
Resources for SAG in pursuing alleged HIPAA violations
HIPAA Enforcement Support and Results

These materials may be a helpful training tool for health care providers and privacy officers. The materials highlight to whom, what, where, when, and how HIPAA Rules will be enforced and provide basic summaries of the HIPAA Privacy and Security Rule requirements.
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Published on: February 6, 2012

CMS Announces New Start Date for Prior Authorization of PMDs and Recovery Audit Prepayment Review Demonstration Programs

by Wachler & Associates, P.C.

The Centers for Medicare and Medicaid Services (CMS) has announced that the Prior Authorization of Power Mobility Devices (PMDs) and the Recovery Audit Prepayment Review Demonstration Programs are expected to move forward on or after June 1, 2012. On December 30, 2011, the two demonstrations were delayed from their initial January 1, 2012 start date. Although CMS initially announced the demonstration programs in November 2011, CMS decided to delay the programs’ implementations after receiving considerable feedback from the provider communities affected by the programs.

In its most recent announcement, CMS stated that the demonstrations programs will begin once they receive Paperwork Reduction Act (PRA) Office of Management and Budget control numbers.

The Prior Authorization of PMDs demonstration program will be initiated in California, Illinois, Michigan, New York, North Carolina, Florida, and Texas. These are all states with high populations of fraud- and error- prone providers. The demonstration will implement a prior authorization process for scooters and power wheelchairs.

As a result of comments CMS received from providers and suppliers, significant modifications have been made to the Prior Authorization of PMDs demonstration program. Most importantly for suppliers, the 100% pre-payment review phase has been removed. Many interested parties had raised the concern that suppliers would be adversely financially impacted by the 100% pre-payment review phase, thus CMS eliminated it and the demonstration will begin immediately with the prior authorization phase. There was also concern regarding the inconsistency of suppliers in some states experiencing 100% pre-payment review, while suppliers in other states were required to receive prior authorizations. The pre-payment review phase was planned to last from between three to nine months for each state, so while one state might only be in that phase for three months, another state might be for nine. As a result, all demonstration states will start prior authorization at approximately the same time instead of the staggered start times as originally planned.

CMS also received many concerns about the ordering physician possibly not being in the best position to submit the prior authorization request. Under the modified demonstration, the physician/treating practitioner or supplier, on behalf of the physician/treating practitioner, may perform the administrative function of submitting the prior authorization request.

The Pre-Payment Review Demonstration Program did not receive any significant changes and will be implemented as proposed in November.

Published on: December 23, 2011

Ten Highlights from the Proposed Physician Payment Sunshine Act Rule

by Wachler & Associates, P.C.

In the December 19, 2011 Federal Register, CMS published a Proposed Rule to implement the “Physician Payment Sunshine Act” portion of Patient Protection and Affordable Care Act (PPACA), or health care reform, which requires drug, medical device, biological and medical supply manufacturers to track and report payments made to physicians and teaching hospitals. The Proposed Rule clarifies several components of the Physician Payment Sunshine Act, including the following:

1. Applicable manufacturers must report the required information to CMS in an electronic format by March 31, 2013 and on the 90^th day of each calendar year thereafter.

2. The Physician Payment Sunshine Act will apply to any manufacturer whose products are sold or distributed in the United States regardless of where they are manufactured.