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The COVID-19 pandemic has brought seismic changes to the clinical lab industry. High demand for COVID-19 testing services, tremendous amounts of funding, and rapidly changing government regulations have created opportunity for clinical labs, but also new compliance and audit challenges. As the dust settles and government entities and commercial insurers review lab claims for COVID-19 testing over the past two years, these are some of the audit and compliance challenges labs may face.

Early in the pandemic, Congress required commercial insurers to cover certain claims for COVID-19 testing. However, Congress did not provide the insurers with funds to cover the cost of this mandate and some insurers have pushed back against lab claims for COVID-19 testing. Under the federal coverage mandate, insurers are generally required to cover tests that are for the diagnosis of COVID-19 where there is an “individual clinical assessment” by an authorized provider that testing is appropriate. Testing for travel, return to work/school, and general screening purposes is generally not required to be covered, although insurers may choose to cover it. Insurers that chose to cover only what they are legally required to cover may audit labs for providing testing for an uncovered purpose. Testing for travel is sometimes a contentious issue because, depending on the circumstances, it may constitute uncovered general screening, or, in the case of people who were exposed while travelling or who were unable to social distance per CDC guidelines while traveling, may constitute circumstances where testing would be covered.

Further, insurers may audit labs based on the requirement for an “individualized clinical assessment,” including whether the practitioner was authorized, whether the order for testing was within the scope of state law, whether the assessment was conducted by telemedicine or by a questionnaire, and what rules apply where a state does not or did not require an order for COVID-19 testing.

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As telemedicine becomes an increasingly popular method for connecting patients with healthcare providers, many providers are becoming interested in expanding the reach of their telehealth practices across state lines. Although technological advancements have helped providers communicate with patients remotely, state and federal regulations add additional considerations for practicing across multiple states.

Generally, healthcare providers will provide telehealth services to patients located within their own state. Most states allow for telehealth services and will allow state-licensed providers to provide telehealth services within the state in which they are licensed. State licensure requirements become more complex when an out-of-state provider wishes to provide telehealth services to a patient located in another state.

Telehealth services are generally considered to be performed at the patient’s physical location, which usually means that the provider must be licensed in the patient’s home state. Although the COVID-19 pandemic caused several states to temporarily waive some licensing requirements for cross-state telehealth services, many of those waivers has since expired.

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Following a temporary suspension in pre-payment reviews under the Targeted Probe and Educate (TPE) audit program in response to the COVID-19 pandemic, the Centers for Medicare & Medicaid Services (CMS) announced in August 2021 that it would be resuming TPE reviews. Review under the TPE program is intended to be different than other audit reviews because the main goal is intended to be claim accuracy improvement through the use of several rounds of one-on-one education. However, a TPE audit can also have severe consequences for the provider. A provider or supplier navigating a TPE review should take care to comply with the program’s requirements and timelines and should be aware of the potential consequences of a review.

The TPE process is generally initiated when a provider receives an initial Notice of Review letter from their Medicare Administrative Contractor (MAC) which notifies the provider that they have been selected for a TPE review. This initial letter typically does not include any specific records requests, but indicates that the MAC will request records at a later date. The letter may briefly describe the TPE process as involving three rounds of claims review with education after each round. This letter will likely warn that, if a provider/supplier fails to improve the accuracy of its claims after three rounds, the MAC will refer the provider/supplier to CMS for additional action, such as prepayment review, extrapolation of overpayments, referral to a RAC, or other disciplinary action, up to and including revocation of Medicare billing privileges.

After the Notice of Review, the MAC will send Additional Documentation Requests (ADR) for 20-40 claims. These ADRs may be indistinguishable from any other document requests, likely with no indication that they are pursuant to a TPE audit. The ADRs must be responded to within 45 days. After the provider submits the documentation, the MAC is required to provide direct one-one-one education to the provider. The MAC will then issue a letter that outlines its findings. If a high number of claims are denied, the MAC will proceed to a second round of claims review and education. If a high number of claims are again denied, the MAC will proceed to a third round.

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On April 20, 2022, the Department of Justice (DOJ) announced criminal charges against 21 defendants in nine federal districts stemming from their alleged involvement in various healthcare fraud schemes related to the COVID-19 pandemic. The alleged conduct resulted in about $149 million worth of false billings to federal programs and theft from federally-funded pandemic assistance programs. Following a hiatus during the height of the COVID-19 pandemic, Medicare and other audits have resumed in full force with a focus on pandemic-related healthcare activity. The Department of Health and Human Services (HHS) has also announced additional audits of certain healthcare providers that received funding from the Provider Relief Fund (PRF). HHS and the federal government have long promised “significant enforcement” related to COVID-19 healthcare activity, which is a promise that appears to be materializing.

In one instance, a Tennessee provider has been charged with theft of government property in connection with an alleged scheme to unlawfully convert PRF funds. The individual is a former owner and operator of a hospice care center that received PRF funds for which investigators claim it did not qualifiy. As alleged, rather than returning the incorrectly deposited funds, the individual used the name of another, deceased owner of the hospice center in order to falsely attest to the PRF terms and conditions that the funds would be used for pandemic-related expenses. The individual allegedly used the funds to write a check to himself and make a payment on one of his other company’s credit card accounts.

Another case involves a Maryland provider charged with multiple counts of healthcare fraud from an alleged scheme to defraud the United States of more than $1.5 million in claims billed in relation to COVID-19 testing. The individual is an owner of an urgent care facility who allegedly instructed employees to submit claims to Medicare and other insurers for moderate-complexity office visits even though some or all of those visits for COVID-19 testing lasted only a few minutes.

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On March 15, 2022, President Biden signed into law the Consolidated Appropriations Act, otherwise known as the “Omnibus Bill.” Included in the many provisions introduced by the Omnibus Bill is an extension of Medicare coverage of professional consultations, office visits, and office psychiatry services conducted via telemedicine for 151 days following the termination of the COVID-19 public health emergency (PHE).

As part of the government’s response to the COVID-19 pandemic in March 2020, administrative and legislative changes waived the traditional location and technology requirements necessary to qualify for Medicare coverage for the duration of the PHE. In addition to extending these waivers, the Omnibus Bill expands the types of practitioners eligible to provide telehealth services to patients. Prior to the PHE, Medicare covered telehealth services only if offered by physicians, physician assistants, nurse practitioners, clinical nurse specialists, nurse-midwives, clinical psychologists, clinical social workers, registered dieticians, or certified registered nurse anesthetics. The Omnibus Bill adds to the list of qualifying practitioners occupational therapists, physical therapists, speech-language pathologists, and audiologists. Other changes under the Bill include delaying in-person requirements for the provision of mental health services and extending coverage of telehealth services rendered by federally qualified health centers to provide telehealth services for the same 151-day post-PHE time period.

While these changes may be welcomed by many healthcare providers as supplying necessary resources for both telehealth patients and providers, it remains to be seen whether coverage flexibilities established during the PHE will become permanent moving forward. The Omnibus Bill requires the Medicare Payment Advisory Commission to provide Congress with a report by June 15, 2023 on the expansion of telehealth services as a result of the PHE. The Department of Health and Human Services (HHS) Office of Inspector General (OIG) is similarly required to provide Congress with a report by June 15, 2023 on program integrity risks associated with Medicare telehealth services. Additionally, HHS must post quarterly data, beginning on July 1, 2022, on Medicare claims for telemedicine services. Healthcare providers should be cognizant of these developments and take steps to ensure compliance is maintained as these and other legislative and regulatory changes unfold.

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On April 7, 2022, the Centers for Medicare and Medicaid Services (CMS) issued a memorandum stating that several COVID-19 blanket waivers for certain healthcare services will be ending soon. Specifically, CMS will terminate blanket waivers of regulatory requirements that apply to skilled nursing facilities (SNFs), inpatient hospices, intermediate care facilities for individuals with intellectual disabilities (ICF/IIDs), and end stage renal disease (ESRD) facilities.

CMS has expressed concern “about how residents’ health and safety has been impacted by the regulations that have been waived, and the length of time for which they have been waived.” Findings from onsite surveys conducted at the facilities previously mentioned “have revealed significant concerns with resident care that are unrelated to infection control (e.g., abuse, weight-loss, depression, pressure ulcers, etc.).” In response to these findings, CMS is removing certain operational flexibilities which do not directly relate to infectious disease control. The termination of these blanket waivers will not have any effect on other applicable blanket waivers, such as those for hospitals and critical access hospitals (CAHs).

Terminations of blanket waivers will occur in two groups and become effective either 30 days or 60 days from publication of the memorandum. CMS instructs all affected healthcare providers to “take immediate steps so that they may return to compliance with the reinstated requirements” within these timeframes. The specific blanket waivers ending under both timeframes are as follows:

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As a result of the emergence of the COVID-19 pandemic in early 2020, private equity (PE) investment activity saw a significant decline in many industries throughout the remainder of 2020. However, PE investments in healthcare have been viewed by some as a form of safe haven as the U.S. economy began to revitalize in the second half of 2020. While total deal value decreased by 7% from 2019 to 2020, total deal count increased by 10% as more investors looked to add-on existing platforms rather than seeking out new, larger targets of interest. Healthcare providers should be aware of some potential considerations when entering into PE investments or engaging in merger and acquisition activity.

A significant amount of deal activity materialized as a response to the numerous forced shutdowns caused by the pandemic. According to one survey conducted by the Alliance of M&A Advisors, while PE deals in other sectors experienced varying degrees of depressed activity levels through the Summer of 2020, healthcare transactions had the highest successful close rate of any industry (approximately 32%). Reported deal activity returned to 97% of pre-COVID levels by December 2020. Entering 2021, the PE transactions market remained very active, in large part due to PE firms being able to obtain cheap debt financing due to low interest rates. The transition to a new presidential administration and anticipated tax increases also caused many providers to contemplate exits ahead of potential increases in capital gains rates. Some areas worth noting that have garnered particularly strong preference amongst PE investors are behavioral and mental health, home health, and health technology services. While primary care has historically seen less PE activity than other healthcare segments, this seems to be changing as value-based care and capitated payment models become more popular.

Regarding business concerns relative to PE activity, there are many issues that are unique to the healthcare industry and providers should make sure that they have a clear understanding of how deals with PE investors may implicate these considerations. At the most basic level, states with corporate practice of medicine laws may restrict what types of entities or individuals may own or control a medical practice. Also, complex corporate structures and those that involve cross-ownership or ownership of multiple types of providers may implicate federal or state fraud and abuse laws, such as the Stark Law, Anti-Kickback Statute, and EKRA. As a practical consideration, long-time healthcare providers entering ventures with PE entities should ensure they understand how control of operations and the flow of revenues are allocated in the resulting structure. Moreover, the Executive Order issued by President Biden in July 2021 directs law enforcement to “focus in particular on … healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), and the tech sector.” This may well result in heightened scrutiny of PE transaction in the healthcare industry and may also lengthen the timeline for closing deals in order to ensure compliance.

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Healthcare providers who missed a Provider Relief Fund (PRF) reporting deadline may get a second chance. In response to overwhelming industry outcry over its attempts to clawback PRF payments, the Department of Health and Human Services (HHS), through the Health Resources and Services Administration (HRSA), which currently administers the PRF, will being accepting applications from providers who missed a reporting deadline to file a late report. Requests to file a late report must be filed between April 11 and April 22 and must include an “extenuating circumstance” justifying the request.

The PRF is a $178 billion fund created by Congress through the CARES Act and administered to provide financial relief to healthcare providers during the COVID-19 pandemic. HHS has subdivided the PRF into various general and targeted distributions. These distributions were paid to providers in several waves between April 2020 and the present. The first payments under the PRF, in April 2020, were unsolicited and were deposited directly into providers’ bank accounts without prior application or notification. While this infusion of cash was likely a welcome relief at the time, it came with strings attached. The two major requirements for a provider to keep the PRF payment were to only use the funds for specific COVID-related purposes and to file a report with HRSA justifying use of the funds.

The first of these reports were due on September 30, 2021, but that date was later extended into early December 2021. In March 2022, HRSA began sending letters to providers who had not filed reports indicating that they were now required to return the full amount of any PRF funds received within 30 days. After significant outcry from providers, representatives, and industry groups, HRSA has backtracked and will now accept requests to file late reports.

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The Department of Health and Human Services (HHS) has withdrawn its interim final rule requiring arbitrators in the independent dispute resolution (IDR) process under the No Surprises Act (NSA) to select the payment rate closest to the insurers’ median in-network rate (i.e., the Qualified Payment Amount or QPA, discussed further below). HHS’ move represents an official and significant victory for providers.

Under the No Surprises Act (NSA), if a provider and insurance company cannot resolve a disagreement over payment for out-of-network services through negotiation, the parties may proceed to a “baseball-style” arbitration. In this process, a third party chooses one appropriate payment from two suggestions offered by the provider and the insurer, taking into account certain considerations. In a July 2021 interim final rule, promulgated jointly by HHS, the Department of Labor (DOL), and the Treasury Department, the agencies adopted certain elements of the No Surprises Act, including the methodology for establishing the QPA. Essentially, the QPA is the medium rate the insurer would have paid for the service if provided by an in-network provider or facility. Under the September 2021 interim final rule, the agencies established a process in which the arbitrator must select the proposed payment amount closest to the QPA, unless certain conditions are met. In other words, the rule creates a rebuttable presumption that the amount closest to the QPA is the proper amount. Healthcare providers generally viewed this rebuttable presumption unfavorably because it allegedly conflicts with the NSA, which established specific circumstances for consideration in addition to the QPA.

Healthcare providers proceeded to challenge the rule and ultimately on February 23, 2022, a federal judge in Texas agreed with those providers in the case of Texas Medical Association v. US Department of Health and Human Services. The case held that the September 2021 interim final rule does in fact conflict with the plain language of the NSA and that the agencies improperly bypassed notice and comment rulemaking when promulgating the rule. HHS announced withdrawal of the interim final rule in light of the federal court’s decision. While the court held that the NSA requires the arbitrator to consider all of the specified factors when determining the reimbursement rate, without giving weigh to any one factor, HHS has not yet adopted this interpretation. HHS announced that it will be re-issuing guidance, but has not yet provided a specific date.

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During the Federal Bar Association’s annual Qui Tam Conference on February 23, 2022, Gregory E. Demske, Chief Counsel to the Inspector General for the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG), discussed OIG’s role in False Claims Act (FCA) enforcement, as well as enforcement priorities for 2022.

Demske’s remarks provide insight into the role OIG plays in deciding which FCA matters to pursue and the enforcement tools that OIG utilizes in FCA matters, with a focus on the Office’s exclusion authority. In any given year, OIG adds approximately 1,000 to 4,000 people to the List of Excluded Individuals/Entities (LEIE), and many of these exclusions are imposed as the result of convictions or lost licenses. Under OIG’s formal protocol for prioritizing cases for exclusion, the Office’s Fraud Risk Indicator provides guidance regarding how OIG assesses the future risk that the party poses to Federal healthcare programs. On the low end of the spectrum, typically involving self-disclosure cases, OIG generally resolves such cases quickly by providing release from potential exclusion without any further requirements. For cases on the high end of the spectrum, where OIG determines that the party presents a high risk of fraud, OIG may pursue its administrative remedies and exclude the party from participation in Federal healthcare programs. Demske concluded by explaining that in most FCA matters today, OIG will elect not to pursue its own administrative remedies, but rather provide a release from potential exclusion and participate in the monetary settlement process with DOJ.

Also during his remarks, Demske discussed OIG’s enforcement priorities moving forward in 2022. Those priorities are as follows:

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