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Late last year, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a significant Advisory Opinion regarding a proposed joint venture (JV) between a therapy services provider and an owner of various long-term care (LTC) facilities. OIG concluded that it viewed the Proposed Arrangement as presenting a significant risk of fraud and abuse and potentially designed to permit the therapy services provider to pay the LTC owner a share of the profits derived from referrals for therapy services made by the LTC owner’s facilities. The opinion reiterates OIG’s longstanding concern that joint ventures formed between healthcare providers or suppliers and referral sources can present risk under the Anti-Kickback Statute (AKS).

Under the Proposed Arrangement, a therapy services provider would form a JV with an owner of LTC facilities where the JV would provide therapy services to the LTC facilities. The JV would contract out the bulk of operations (all clinical and non-clinical employees, space, and equipment) to the therapy services provider in exchange for a fair market value fee. The LTC owner would hold a 40% interest in the JV and the therapy services provider would hold the remaining 60% interest. The LTC owner’s investment in the JV would be based, at least in part, on the JV’s expected business from the LTC owner’s facilities. The LTC owner’s facilities were not required to contract with the JV or otherwise make or direct referrals to the JV, although the therapy services provider certified that it expected the LTC owner’s facilities to do so, and during the initial phases of the JV all of the JV’s revenues would be generated by services provided to the LTC owner’s facilities.

OIG concluded that the Proposed Arrangement would not satisfy any AKS safe harbors, including the small entity investment safe harbor, because the Arrangement likely violates the investor test, the revenue test, and the investment offer test. Moreover, OIG referred to its landmark 2003 Special Advisory Bulletin on Contractual Joint Ventures, which includes a detailed list of characteristics that OIG considers suspect when present under a contractual JV. Since the JV described in the Proposed Arrangement included several of these previously outlined suspect characteristics, OIG further determined that the proposed JV presents significant risk of fraud and abuse. This Advisory Opinion serves as a useful reminder of the regulatory framework applicable to joint ventures between healthcare providers and entities in a position to refer or generate business for the joint venture. Providers considering joint ventures should ensure that they are structured to comply with AKS and OIG guidance.

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On January 10, 2022, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (DOT) (collectively, the Departments) jointly issued FAQs regarding the implementation of required insurance coverage for at-home COVID-19 tests under the Families First Coronavirus Response Act (FFCRA). Pursuant to the new guidance, insurance plans and issuers must provide coverage over the counter (OTC) COVID-19 tests without cost-sharing requirements, prior authorization, individualized clinical assessment, or other medical management requirements with respect tests purchased on or after January 15, 2022 and during the public health emergency. This new requirement is in addition to the existing requirement that insurers cover COVID-19 testing where there is an individualized clinical assessment by an authorized provider.

With respect to OTC COVID-19 tests obtained without a healthcare provider’s involvement, plans and issuers must provide coverage for the cost of the test at no expense to the participant, beneficiary, or enrollee, unless the conditions of a safe harbor discussed below are met. While plans or issuers are encouraged to reimburse sellers of OTC tests directly, they are not required to do so. Some plans or issuers may require beneficiaries to provide upfront payment and then submit a claim for reimbursement after the fact.

If a plan or issuer provides direct coverage of OTC COVID-19 tests, it generally may not limit coverage to only tests provided through preferred pharmacies or other retailers. However, under a safe harbor, the Departments have indicated they will not take enforcement action related to OTC test coverage against a plan or issuer that provides coverage for such tests by arranging for direct coverage through both its primary pharmacy network and a direct-to-consumer shipping program, and otherwise limits reimbursement for OTC tests from non-preferred pharmacies or other retailers to no less than the actual price, or $12 per test, whichever is lower. Under this safe harbor, plans and issuer may not impose any prior authorization or other medical management requirements on beneficiaries and may not require any upfront out of pocket payments by beneficiaries. Additionally, under this safe harbor, the direct-to-consumer shipping program may be provided through one or more in-network provider(s) or another entity designated by the plan or issuer.

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The Department of Health and Human Services (HHS) Office of Inspector General (OIG) included several new items in its work plan update in January 2021. The OIG work plan outlines the projects that OIG plans to implement over the foreseeable future. Such projects typically include OIG audits and evaluations. Below are the highlights from the work plan update that providers and suppliers should take notice of.

First, OIG will perform a nationwide audit to determine whether hospitals that received Provider Relief Fund (PRF) payments and attested to the associated terms and conditions complied with the balance billing requirement for COVID – 19 inpatients. Under the PRF terms and conditions, hospitals are eligible for PRF distribution payments if they attest to specific requirements, including a requirement that providers, such as hospitals, must not pursue the collection of out-of-pocket payments from presumptive or actual COVID – 19 patients in excess of what the patients otherwise would have been required to pay if the care had been provided by in-network providers. OIG plans to assess how bills were calculated for out-of-network patients admitted for COVID-19 treatment, review supporting documentation for compliance, and assess procedural controls and monitoring to ensure compliance with the balance billing requirement.

Second, OIG will perform a nationwide review of Medicare beneficiary hospice eligibility. OIG indicated that a number of recent compliance audits have identified findings related to beneficiary eligibility. In its review, OIG plans to focus on those hospice beneficiaries that haven’t had an inpatient hospital stay or an emergency room visit in certain periods prior to their start of hospice care.

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On December 14, 2021, the Department of Health and Human Services (HHS), through the Health Resources and Services Administration (HRSA), announced the release of an approximately $9 billion distribution in Provider Relief Fund (PRF) Phase 4 payments to healthcare providers who have experienced lost revenues and expenses due to the COVID-19 pandemic. This distribution is part of a previously announced $25.5 billion funding for healthcare providers affected by the COVID-19 pandemic, which also included an allocation of $8.5 billion from the American Rescue Plan (ARP) for providers who provide services to rural Medicaid, Children’s Health Insurance Program (CHIP), or Medicare beneficiaries. According to HHS’ state-by-state breakdown of the Phase 4 payments, these new payments have been received by more than 69,000 providers in all 50 states, Washington D.C., and eight territories. The average payment under this new distribution is $58,000 for small providers, $289,000 for medium providers, and $1.7 million for large providers.

PRF Phase 4 payments are based on providers’ lost revenue and expenditures between July 1, 2020 and March 31, 2021, in conformity with the requirements of the Coronavirus Response and Relief Supplemental Appropriations Act of 2020 (CRRSAA). PRF Phase 4 is intended to reimburse smaller providers for their lost revenues and pandemic-related expenses at a higher rate compared to larger providers. This characteristic stems from the Biden Administration’s ongoing policy focus on social equity, as smaller providers tend to operate on thinner margins and often serve vulnerable or isolated communities when compared to larger providers. Because Medicaid, CHIP, and Medicare patients tend to be lower income and have greater and more complex medical needs, HRSA is distributing 25% of PRF Phase 4 funding as bonus payments for providers who serve these individuals. HRSA will price these bonus payments at the generally higher Medicare rates in an attempt to promote equity amongst providers serving low-income children, pregnant women, people with disabilities, and seniors. Similar to the ARP Rural payments announced in November 2021, HRSA is using Medicare reimbursement rates to calculate these Phase 4 payments in an effort to mitigate disparities due to varying Medicaid reimbursement rates.

HHS has also updated the Terms and Conditions for Phase 4 and ARP Rural payments to require that PRF payments are being properly used in response to the financial impact of COVID-19. Recipients who receive greater than $10,000 are required to notify HHS of any merger or acquisition activity with another healthcare provider. Providers who report a merger or acquisition may be more likely to be audited.

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Medicare audits often include a statistical extrapolation to estimate the full extent of an alleged overpayment. Medicare contractors are authorized to review the merits of only a small “sample” of submitted claims and extrapolate the results of that review to a large “universe” of claims to estimate the overpayment amount. This practice can lead contractors to allege overpayments of hundreds of thousands or millions of dollars despite only reviewing and denying a small handful of claims. Medicare contractors generally have broad authority to use a wide array of statistical methods when extrapolating the overpayment amount, which can lead to grossly overestimated overpayment determinations.

When conducting the statistical sampling and extrapolation, the contractor will select the period for review and establish the universe and sample frame. The sample frame is the large group of claims from which the sample is randomly selected, and the universe is the group of claims over which the results of the review are projected. The sample frame and universe may or may not be identical. The universe and sample frame may be defined by specific codes, dates of services, beneficiaries, or some combination thereof. From here, the contractor will select a random sample from the sample frame,  review the claims within the designated sample, and extrapolate the results of the review of the sample to all claims in the established universe.

A statistical extrapolation is subject to appeal, similar to any Medicare overpayment determination. However, there are several issues unique to appealing a statistically extrapolated overpayment. First, it adds increased importance to appealing the denial of each claim in the sample. While an individual claim may not represent significant monetary value on its own, it may represent tens of thousands of dollars after it has been statistically projected over a large universe. Second, there are special procedural rules for appealing an extrapolation. For example, providers are generally prevented from arguing before an Administrative Law Judge (ALJ) that the extrapolation was flawed unless they included specific language in their request for ALJ review.

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Late last year, the Centers for Medicare & Medicaid Services (CMS) released new guidance for hospital co-location. Co-location occurs when two Medicare certified hospitals or a Medicare certified hospital and another healthcare entity are located on the same campus or in the same building and share space, staff, or services. Hospitals, especially in rural areas, may co-locate to achieve greater efficiencies and improve patient care.

All co-located hospitals must demonstrate independent compliance with the hospital Conditions of Participation. Specifically, each hospital’s space, contracted services, staffing and emergency services must independently comply with the hospital Conditions of Participation. Where hospitals share space, patient record confidentiality and infection prevention and control are particular areas of concern. Where hospitals contract for services, it is important to note that these services are provided under the oversight of the hospital’s governing body and would be treated as any other service provided directly by the hospital. Where hospitals share staff, each must independently meet the Conditions of Participation, including adequate staff training, education, and oversight. Lastly, a co-locating entity that does not provide emergency services may generally transfer emergency patients to the entity with which it co-locates, such as a rehab hospital that co-locates with an acute care hospital. However, in this scenario, the non-emergency provider must have policies and procedures in place to address potential emergency scenarios typical of the patient population for which it routinely cares and ensure staffing that would enable it to provide safe and adequate initial treatment of an emergency prior to transfer.

CMS also provided new guidance for survey procedures for co-located hospitals. In general, survey procedures for co-located hospitals are the same as for any other hospital, as each must independently comply with the Conditions of Participation. However, where a survey of one co-located entity identifies an alleged deficiency, it may be imputed to the other co-located entity and may lead to a survey of or complaint against the other co-located entity. For example, where two hospitals share a storage room and a leaky pipe drips water onto and damages the supplies of one hospital, CMS indicated that this may lead to a complaint against the other hospital because the deficiency was found in the shared space.

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In a recent advisory opinion, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) opined that employment of an anesthesia provider may be low risk under the Federal Anti-Kickback Statute (AKS) under certain circumstances. This opinion, Advisory Opinion 21-15, may represent a softening of OIG’s position on anesthesia providers.

OIG’s position on anesthesia providers is largely found in a 2012 advisory opinion, Advisory Opinion 12-06, concerning two proposals by an anesthesia provider (Requestor) for structuring its relationship with several ambulatory surgery centers (ASCs). Under the first proposal, the Requestor would remain the ASCs’ sole provider of anesthesia services but would also pay the ASCs a per-patient fee, exclusive of federal healthcare beneficiaries, in exchange for management services (e.g., pre-operative nursing assessments, procuring office space, and transferring billing documentation). OIG rejected this proposal, finding that the carve-out for federal healthcare beneficiaries would not save the per-patient management fee from constituting improper remuneration under AKS. Specifically, by collecting both a management fee from the Requestor and a facility fee from payors, OIG concluded that the ASCs would be receiving double payments for the same services and therefore would be unduly influenced to keep the Requestor as their exclusive provider of anesthesia services to all patients.

Under the second proposal, the ASCs’ physician-owners would form wholly owned subsidiaries for the purpose of providing anesthesia services to ASC patients. The subsidiaries would bill for and furnish all anesthesia-related services (e.g., recruiting personnel and assisting in structuring employment or independent contractor relationships with anesthesia personnel, ordering supplies, quality assurance, and providing logistics). The subsidiaries would pay the Requestor a negotiated rate for its services and retain any profits, presumably for distribution to the non-anesthesiologist physician-owners. OIG rejected this proposal as well, concluding that no AKS safe harbor would protect the distribution of profits from the subsidiaries to their physician-owners because such profits would be a function of the Requestor’s anesthesia services revenue resulting from the physician-owners’ referrals. In particular, OIG found the ASC safe harbor inapplicable because it protects only returns on investments in Medicare-certified ASCs, or entities operated exclusively for the purpose of providing “surgical” services, and anesthesia services are nonsurgical in nature. Additionally, while noting that payments by the subsidiaries to the Requestor, employees, or independent contractors could be protected under the personal services, employee, and/or management contract safe harbors, OIG nevertheless indicated that none of these safe harbors would protect the distributions of profits from the subsidiaries to their physician-owners, since a likely purpose of such distributions would be to generate referrals for anesthesia services.

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This is the second installment in a two-part series regarding the No Surprises Act, which establishes new requirements that will apply to certain healthcare providers and facilities, and providers of air ambulance services. These requirements generally apply to items and services provided to individuals enrolled in group health plans, group or individual health insurance coverage, and Federal Employees Health Benefit plans. Please see our previous post for more information on these requirements.

Below is an overview of the remaining provider and facility requirements that will become effective on January 1, 2022:

  • No balance billing for air ambulance services by non-participating air ambulance providers: Providers of air ambulance services will generally be prohibited from billing or holding liable beneficiaries, enrollees, or participants in group health plans or group or individual health insurance coverage who received covered air ambulance services from a non-participating air ambulance provider for a payment amount greater than the in-network cost-sharing requirement for such services.
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Effective January 1, 2022 under the No Surprises Act, healthcare providers, facilities, and providers of air ambulance services will be subject to new requirements that generally apply to items and services provided to individuals enrolled in group health plans, group or individual health insurance coverage, and Federal Employees Health Benefit plans. The good faith estimate requirement and the requirements related to the patient-provider dispute resolution process also generally apply to the uninsured. These requirements generally do not apply to beneficiaries or enrollees in federal programs such as Medicare, Medicaid, Indian Health Services, Veterans Affairs Health Care, or TRICARE.

Below is an overview of some of the provider and facility requirements that will become effective on January 1, 2022. Stay tuned next week for further information.

  • No balance billing for out-of-network emergency services: Non-participating providers and emergency facilities will generally be forbidden from billing or holding liable beneficiaries, enrollees, or participants in group health plans or group or individual health insurance coverage who receive emergency services at a hospital or an independent freestanding emergency department for a payment amount greater than the in-network cost-sharing requirement for such services. There are exceptions for certain post-stabilization services if the notice and consent requirements are satisfied. However, the exception is not available for services furnished as a result of unforeseen, urgent medical needs that arise at the time an item or service is furnished, regardless of whether the notice and consent criteria are satisfied and regardless of whether they are emergency or non-emergency services.
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The Biden Administration recently announced plans to require commercial insurers to cover over-the-counter and at-home COVID-19 tests. Commercial insurers are currently required to cover in vitro diagnostic (IVD) products that test for COVID-19. Most often, this has taken the form of clinical laboratory testing wherein the lab or other provider submits a claim to the insurer for reimbursement. However, many providers have encountered pushback from insurers, usually based on the unclear criteria of the current mandate. More guidance is due to be released on January 15, 2022.

Currently, commercial insurers are required by the Families First Coronavirus Response Act (FFCRA) and the CARES Act to cover, without cost-sharing requirements, IVD products for the detection of SARS–CoV–2 or the diagnosis of the virus that causes COVID–19 that are approved by the Food and Drug Administration or otherwise authorized. The implementation of this coverage mandate is governed by guidance jointly released by the Departments of Health and Human Services (HHS), Labor (DOL), and Transportation (DOT).

In general, this guidance requires that the test be covered where it is medically appropriate for the individual, as determined by the individual’s attending healthcare provider in an “individualized clinical assessment,” consulting CDC guidelines as appropriate and in accordance with accepted standards of current medical practice. The provider need not be the patient’s attending provider as long as they are authorized and acting within the scope of their license. The insurer is then required to cover the test without prior authorization, the presence of symptoms, or other medical management criteria. Where the patient seeks a test from a licensed or authorized provider, insurers are generally required to assume that the test reflects an “individualized clinical assessment” and cover the test. On the other hand, under the mandate, insurers are not required to cover testing for back to work/school purposes or for general screening. Testing for travel-relating purposes may be covered under the mandate, depending on the circumstances, but is often a matter of contentious debate that thus far has not been resolved by federal guidance.

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