Wachler & Associates Health Law Blog

Published on: March 6, 2023

New Rural Emergency Hospital Provider Type Offers Potential Solution for Struggling Rural Hospitals

Under the Consolidated Appropriations Act (CAA), a new Medicare provider type, the rural emergency hospital (REH), has been created with the goal of preserving access to outpatient hospital services in rural communities. Rural providers already face numerous financial and operational challenges, and the high number of recent closures of rural hospitals has only compounded the health disparities in rural communities. The introduction of this new provider type offers a targeted solution for small rural providers that cannot continue to operate a full-service hospital.

Under the new classification, an REH is a Medicare-enrolled provider that must furnish emergency department services and observation care. REHs may also provide other outpatient services, but may not provide inpatient services, except for certain skilled nursing facility services. Currently, for outpatient services, an REH’s annual per patient average length of stay cannot exceed 24 hours. Additionally, REHs benefit from two basic payment policies: a monthly facility payment of $272,866 per month in 2023 and payment at 105% of the Outpatient Prospective Payment System (OPPS) rate for services that qualify as REH services.

To enroll as an REH, eligible providers must submit a Form CMS-855A change of information application, rather than an initial enrollment application. This process avoids the gap in payment that typically accompanies initial enrollment and helps ease the burden that would otherwise fall on prospective REHs. The provider must also submit an action plan for initiating REH services, including a transition plan that lists the services the provider will retain, modify, add, and discontinue. The action plan must also include a description of the services the REH elects to provide, in addition to the required emergency department services and observation care, and a description of how it will use the facility payment. An eligible provider may only become an REH by converting from a critical access hospital (CAH) or rural hospital. Only providers that were a CAH or rural hospital with 50 beds or less on the enactment date of the CAA (December 27, 2020) are eligible to convert to an REH.

Published on: February 27, 2023

Michigan Updates Corporate Practice of Medicine Laws

by Wachler & Associates, P.C.

Michigan’s reworked Corporate Practice of Medicine laws now allow for multidisciplinary practices amongst physicians (licensed MDs and DOs), podiatrists, and chiropractors. Prior to 2022, Michigan’s Corporate Practice of Medicine laws prohibited chiropractors from forming professional corporations with physicians and podiatrists. Now, chiropractors are generally permitted to form professional corporations with physicians and podiatrists without violating Michigan’s Corporate Practice of Medicine laws.

Corporate Practice of Medicine occurs when a corporate entity practices medicine, as opposed to an individual practitioner. In this arrangement, the corporate entity employs physicians, and the physician provides the medical services. Since corporate entities generally exercise some level of control over how their employees perform their roles and many states believe that medical decision making should solely be done by physicians and not be influenced by non-physician employers, many states prohibit or regulate the corporate practice of medicine. These prohibitions and regulations are one of the reasons that physicians form physician groups or professional corporations.

While each state has its own approach to regulating the corporate practice of medicine, there are three general approaches. First, some states do not regulate the corporate practice of medicine or otherwise restrict physicians’ ability to be employed by entities controlled by non-physicians. Second, some states fully prohibit the corporate practice of medicine. These states allow only physicians to form and be shareholders in professional corporations, associations, or professional limited liability companies (PLLCs), and do not permit non-physicians to employ physicians. Finally, other states fall somewhere in the middle. Several states allow non-physicians to own a portion of a professional corporation that practice medicine, but limit this to a minority (49%) interest or other non-controlling interest. Other exceptions exist as well. Some states impose less strict or even no restrictions on non-profit corporations’ practice of medicine. For example, Texas has a general prohibition on the corporate practice of medicine but has a specific exception for Non-profit corporations.

Published on: February 23, 2023

HHS Issues Medicare Advantage RADV Final Rule

by Wachler & Associates, P.C.

In January 2023, the U.S. Department of Health and Human Services (HHS) through the Centers for Medicare & Medicaid Services (CMS) issued a final rule implementing policies for the Medicare Advantage (MA) Risk Adjustment Data Validation (RADV) program. The RADV program is CMS’s primary audit and oversight tool of MA program payments. Under the RADV program, CMS identifies improper risk adjustment payments made to Medicare Advantage Organizations (MAOs) in situations where medical diagnoses submitted for payment allegedly were not supported in the beneficiary’s medical record. The RADV final rule is oriented to ensure that Medicare recipients have access to the benefits and services they need, including under MA plans, while protecting the fiscal administration of the Medicare program by aligning CMS’s oversight of traditional Medicare and MA programs.

Under the final rule, CMS will not extrapolate audit findings for payment years 2011 through 2017, and will collect only non-extrapolated overpayments for those plan years. This is a notable departure from previous rulemaking, which proposed to apply extrapolation beginning in payment year 2011. Audit extrapolations will begin with the plan year 2018 RADV audit using any extrapolation technique that is statistically valid. CMS has indicated that the audits will center on plans identified as highest risk for improper payments. CMS also stated its intention that, while they are not required to do so, CMS will continue to disclose their extrapolation methodology to MAOs in order to provide MAOs with information sufficient to understand the means by which CMS extrapolated the RADV payment error.

The final rule also solidifies the proposed policy that CMS will not apply a fee for service (FFS) adjuster in RADV audits. The final rule explains that the requirement for actuarial evidence in MA payments applies to how CMS risk-adjusts the payments it makes to MAOs, and not to the obligation to return overpayments for unsupported diagnosis codes, including overpayments identified during a RADV audit. Additionally, CMS has expressed that it does not believe that it is reasonable to interpret the relevant provisions in the Social Security Act as requiring a reduction in payments to MAOs by a statutorily set minimum adjustment in the coding pattern adjustment, while at the same time prohibiting CMS from paying at those reduced rates by mandating a FFS adjuster for RADV audits. In light of these recently finalized policies, MAOs should take steps to ensure compliance with the Medicare program in order to be fully prepared for increased audits of MA plans.

Published on: January 30, 2023

Top Healthcare Law Issues in 2023

by Wachler & Associates, P.C.

As the COVID-19 public health emergency (PHE) gets extended yet again and while the healthcare industry continues to grapple with the numerous changes and developments over the past several years, providers should gear up for an uncertain landscape in 2023. Between the massive influx of providers implementing telehealth services and the countless unprecedented changes and reforms within the healthcare industry as a whole, the PHE has continued to be a constant, underlying source of uncertainty for providers when it comes to compliance and government imposition. There are several focus areas that healthcare providers in 2023 should approach with caution and this blog will briefly discuss some of those areas.

The COVID-19 pandemic ushered in a nationwide shift in how providers deliver healthcare services, as services delivered via telehealth became more widely utilized and more readily covered by governmental and commercial payors. However, some of the fundamental regulatory flexibilities and policy waivers that made this shift possible are temporary, which creates an unpredictable environment for providers in 2023. To make matters more complex, telehealth services have been an area of increased scrutiny by enforcement agencies and appear to remain a focus of future enforcement action. Moreover, the increased prevalence of telehealth services raises data privacy concerns generally, but in particular for providers subject to HIPAA. When the PHE does inevitably come to an end, so too will some of the flexibilities that allow HIPAA-covered providers to accessibly provide telehealth services without greater data privacy controls. Providers should take the opportunity to analyze possible changes to their data privacy practices to ensure compliance following the end of the PHE.

Over the course of the past several years, providers have seen heightened levels of government enforcement activity related to alleged fraud and abuse within the healthcare industry, and it does not appear to be slowing down any time soon. In 2021 alone, the Department of Justice (DOJ) generated $5.6 billion in False Claims Act (FCA) settlements and judgments. As several of the Department’s stated priorities have not changed since February 2022, providers can expect to see continued enforcement action in areas such as opioid abuse, Medicare managed care (Part C), and audits looking for allegedly medically unnecessary services. Furthermore, a series of memoranda issued by current and past attorneys general seem to sway back and forth concerning the limitations on the uses of sub-regulatory guidance in FCA cases, adding even greater uncertainty to future fraud and abuse enforcement activity.

Published on: January 26, 2023

UPIC Audits on the Rise

by Wachler & Associates, P.C.

Healthcare providers have seen a disturbing rise in audits by Medicare Unified Program Integrity Contractors (UPICs). The stated purpose for the UPICs is to investigate instances of suspected fraud, waste, and abuse in Medicare or Medicaid claims. However, UPICs are often over-zealous in alleging fraud where there is none, thereby causing devastating consequences for Medicare providers.

Like the Medicare Administrative Contractors (MACs), Recovery Audit Contractors (RACs), and the now-defunct Zone Program Integrity Contractors (ZPICs), UPICs are government contractors that have been tasked by the Centers for Medicare & Medicaid Services (CMS) to review claims submitted by Medicare providers and identify alleged overpayment to providers. Currently, the companies that hold contracts to act as UPICs are CoventBridge Inc., Qlarant Integrity Solutions, LLC, and SafeGuard Services. However, UPIC investigations are different from other types of Medicare audits because the UPICs are meant to specifically seek out fraud and a UPIC investigation is more likely to lead to collateral consequences, such as a suspension of Medicare payments or a revocation of Medicare billing privileges.

A UPIC investigation often follows the same trajectory. First, the UPIC will conduct a series of probe audits of the provider. These may seem inconsequential because they involve only a few claims or a small dollar value at issue. Second, the UPIC will deny nearly every claim it reviews and indicate that it has found a “credible allegation of fraud.” Third, the UPIC will lead CMS to suspend the provider’s Medicare payments. Around the same time as the Notice of Suspension, the UPIC will request additional medical records, usually for significantly more claims than before. Fourth, and usually several months later, the UPIC will issue another set of audit findings. This final audit will often include a statistical extrapolation and demand a significant repayment, often in the hundreds of thousands or millions of dollars. In some cases, the UPIC can also lead CMS to revoke the provider’s Medicare billing privileges.

Published on: January 23, 2023

COVID-19 Telehealth Integrity Report Issued by Pandemic Response Accountability Committee (PRAC)

by Wachler & Associates, P.C.

In December 2022, the Pandemic Response Accountability Committee (PRAC) Health Care Subgroup released its report focusing on telehealth fraud, waste, and abuse risks associated with select healthcare programs across six federal agencies during the first year of the COVID-19 pandemic.

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) conducted this report by leading a group of OIGs from each of the six federal agencies involved. Including the HHS OIG, those six federal agencies are the Department of Defense (DoD), the Office of Personal Management (OPM), the Department of Veterans Affairs (VA), the Department of Labor (DOL), and the Department of Justice (DOJ). The report summarizes potential program integrity risks identified by the six participating OIGs. Specifically, the report aims to inform stakeholders how expanded use of telehealth during the COVID-19 pandemic helped individuals access healthcare during uncertain times, while also raising awareness about the critical importance of safeguarding expanded telehealth services against fraud, waste, and abuse.

Among the key findings across federal healthcare programs, the OIGs identified:

Published on: January 19, 2023

OIG Advisory Opinion Approves Arrangement Involving NP Services Provided by Hospital

by Wachler & Associates, P.C.

Recently, in Advisory Opinion 22-20, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) approved an acute care hospital’s arrangement in which its employed nurse practitioners (NPs) perform certain services that the patients’ primary care physicians traditionally perform. This opinion may present opportunities for providers because it represents a departure from OIG’s typical approach to arrangements involving remuneration from a hospital to a referring physician and demonstrates OIG’s emphasis on healthcare providers offering quality care to federal healthcare program beneficiaries. However, it must be noted that this opinion’s efficacy is limited only to the federal Anti-Kickback Statute. Other laws, such as the federal physician self-referral law or Stark Law, may pose significant risk factors to similar arrangements. Also, Advisory Opinions are only binding on OIG in regarding the specific arrangements review, but they can be a source of guidance regarding other arrangements.

Under the proposed arrangement, the Requestor is an acute care hospital that provides inpatient and outpatient hospital-based services and which seeks to use its employed NPs to perform various tasks for the patients, who are inpatients or in observation status in two designated medical units and who are admitted by physicians that participate in the Requestor’s program. Participating physicians are predominantly primary care physicians, although the hospital makes the services available for all physicians who regularly admit patients to the designated medical units. The hospital does not take into account a physician’s volume or value of referrals in considering the physician for participation.

The arrangement is limited to two general care units and does not extend to surgical or specialty care units. Under the arrangement, the NPs perform various tasks in communication and collaboration with the physicians that the physicians would normally perform. Such tasks include initiating plans of care, educating patients and families, and arranging for follow-up laboratory or imaging studies, among others. The patients seen by the NPs are under active evaluation and require ongoing medical attention, thus the arrangement allows them to be diagnosed and treated more quickly. The treating physicians remain ultimately responsible for the patients’ care and must still round on their patients daily. The physicians also cannot bill for the NPs’ services. The hospital neither makes payments to the treating physicians under the arrangement nor separately bills any payor for the NPs’ services.

Published on: December 19, 2022

Medicare Telehealth Updates in 2023 Physician Fee Schedule

by Wachler & Associates, P.C.

Recently, the Centers for Medicare & Medicaid Services (CMS) published its Final Rule implementing changes to the Medicare Physician Fee Schedule for CY 2023. In addition to recent clinical laboratory updates, the Final Rule also includes certain changes regarding billing and reimbursement for telehealth services and gives providers guidance on transitioning away from the flexibilities that arose out of the COVID-19 public health emergency (PHE).

In determining whether new telehealth services may be included on the list of Medicare-covered codes, CMS assigns each potential addition to one of three defined categories. Category 1 services are those similar to professional consultation, office visits, and office psychiatry services already on the approved telehealth list. Category 2 services, which are not similar to services already on the approved telehealth list, are assessed by CMS to determine whether there is evidence of clinical benefit to patients when the service is provided via telehealth. Category 3 encompasses services added on a temporary basis during the PHE that would facilitate continued access to medically necessary services during the pandemic, but for which there is insufficient evidence to evaluate the services for permanent addition under Category 1 or Category 2 criteria.

In the Final Rule, CMS made the following changes with respect to the approved Medicare Telehealth Services List:

Published on: December 13, 2022

Extrapolation in Medicare Advantage Audits Causes Controversy

by Wachler & Associates, P.C.

Medicare Advantage (MA) plans are learning what Medicare providers have long known about the flawed way in which Medicare uses statistical extrapolation in its audits. The Centers for Medicare & Medicaid Services (CMS) has indicated that, for the first time, it intends to apply statistical extrapolations to overpayments and other payment errors by MA plans, which were uncovered in recently released federal audits. CMS conducted 90 audits of MA plans examining billings for approximately 18,000 patients from 2011 through 2013 that resulted in a finding of about $12 million in net overpayments associated with the plans. CMS now intends to extrapolate the results of those audits across the entire membership of each plan – likely millions of patients – and recoup from the plans an estimated $650 million of total overpayments, which CMS has indicated it intends to recoup even though no action has been taken since the audits were conducted.

These circumstances and the issues that the MA plans are pointing out with Medicare’s extrapolation methodology may sound familiar to any Medicare provider that has been subjected to an extrapolated Medicare audit. CMS, its contractors, and other federal agencies, such as the Department of Health and Human Services (HHS) Office of Inspector General (OIG), have used statistical extrapolation against Medicare providers for decades, while strong opposition from the insurance industry has kept it from being applied to audits of MA plans. However, the recent growth of MA plans and the recent release of some CMS audit results have led CMS to begin to apply it to MA plans.

While statistical extrapolation can be a valid and useful auditing tool where the auditor carefully employs sound statistical principles and valid methodologies, Medicare extrapolations are often sloppy, imprecise, and difficult to challenge. As MA plans are now learning, Medicare extrapolations (especially those conducted by contractors) often include errors that skew the results, overestimate the alleged overpayment, or would render the extrapolation outright invalid in an academic or accounting setting, including: over-sampling high-value claims, double-counting claims, using a sample that does not represent the universe to which it is extrapolated, combining dozens of unrelated services or codes into a single sample frame or universe, ignoring information in favor of the provider, failure to use stratification or cluster sampling where the data set used demands it for precision, unacceptably low levels of precision, and demands for astronomical and business-shattering overpayments after having actually reviewed only a small number of claims. Moreover, HHS’s reviewers – who are charged with reviewing these audits for accuracy – will often bend over backwards to explain why an error-riddled extrapolation was appropriate, while the agency has built a fortress of regulations, caselaw, and manual provisions that make it very difficult to challenge even the most flawed extrapolations.

Published on: December 7, 2022

Clinical Laboratory Updates in 2023 Physician Fee Schedule

by Wachler & Associates, P.C.

On November 2, 2022, the Centers for Medicare & Medicaid Services (CMS) published its Final Rule implementing changes to the Medicare Physician Fee Schedule for CY 2023. Included within this Final Rule are important changes for clinical laboratories that will take effect on January 1, 2023.

There are two notable changes affecting clinical labs included in the Final Rule. First, CMS is implementing congressionally mandated changes to the Protecting Access to Medicare Act (PAMA) reporting regulations, which updates reporting timelines and limits the phase-in of laboratory test payment reductions. Laboratories should take steps to have their 2019 data accessible and prepare to report before the March 31, 2023 deadline. Second, CMS is issuing regulations to both codify and modify policies on billing Medicare for specimen collection fees and travel allowances. The changes also increase specimen collection payment rates that had previously remained unchanged for years. Specifically, as it relates to specimen collection, the changes may affect codes 36415, G0471, P9612, and P9615, but do not appear to relate to codes G2023 and G2024. As the regulations relate to travel allowances, the changes may affect codes P9603 and P9604.

Following the implementation of PAMA in 2014, Medicare has set the clinical laboratory fee schedule (CLFS) rates based on data reported by applicable laboratories on the payment rates they receive from commercial payors. The initial reporting period occurred in early 2017 based on data from 2016. However, the second reporting period was delayed due to the COVID-19 public health emergency, which was intended for early 2020. Thus, CMS is revising the definitions of “data collection period” and “data reporting period” to specify that for the data reporting period of January 1, 2023 through March 31, 2023, the data collection period is January 1, 2019 through June 30, 2019. Moreover, CMS clarified that data reporting is required every three years beginning January 2023. As a result, CLFS payment rates for CY 2024 through CY 2026 will be based on data collected in the first half of 2019 and reported in early 2023.