Wachler & Associates Health Law Blog

Published on: August 5, 2021

CMS FY 2022 Budget Justification Requests Increased Funding for Medical Review

The Centers for Medicare and Medicaid Services’ (CMS) FY 2022 Budget Justification request to Congress indicates a greater focus on audit activities, including a doubling of CMS’ medical review budget, and an effort to decrease the number of claim denials overturned through the Medicare appeals process. While still in the proposal phase, the budget justification provides a glimpse into CMS’ priorities for the coming fiscal year. Specifically, CMS requests $96.7 million to be used as discretionary funding for medical review activities, which represents an increase of $50.5 million above the FY 2021 Enacted level. Medical review activities can be conducted pre-payment or post-payment and concentrate on areas identified through a variety of means, including targeted data analysis, Comprehensive Error Rate Testing (CERT) results, and oversight agency findings that indicate allegedly questionable billing patterns.

CMS contracts with Medicare Administrative Contractors (MACs) to perform analysis of claims data to identify atypical billing patterns and perform claims review, including medical reviews. The FY 2022 request supports ongoing medical review operations, including Targeted Probe and Educate (TPE) reviews, which CMS temporarily suspended for a portion of 2020 in response to the Public Health Emergency (PHE). CMS recently announced in June 2021 that MACs are authorized to begin conducting post-payment medical reviews for dates of service during and after March 2020. CMS states that the FY 2022 Budget Justification “proposes to significantly increase funding to allow MACs to conduct additional review in FY 2022.” MAC medical reviews were previously limited to dates of service prior to March 2020, which means we can expect to see MACs begin audits of claims submitted during the PHE.

The FY 2022 Budget Justification also would allocate $19 million to the Supplemental Medical Review Contactor (SMRC) to conduct SMRC audits, which provide support for a variety of tasks meant to lower the improper payment rates and increase efficiencies of the medical review function of Medicare. SMRC audits were similarly paused for a period of time during 2020 in response to the PHE. In FY 2020, the SMRC reviewed approximately 80,197 claims, whereas CMS expects the SMRC to review 792,800 claims in FY 2022. So, providers may also anticipate increased SMRC medical reviews.

Published on: August 3, 2021

First PRF Reporting Deadline Coming Soon

by Wachler & Associates, P.C.

The first reporting deadline for the Provider Relief Fund (PRF) is less than two months away, the first batch of reports are due September 30, 2021. The PRF is a $175 billion fund created by Congress through the CARES Act and administered by the Department of Health and Human Services (HHS) 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.

In June 2021, HHS released long-awaited updates on the reporting requirements for entities that received payments from the PRF. These reporting requirements divided the payment based on when the provider received the payment and then set deadlines for reporting based on when the provider received the payment. Providers who received payments between April 10, 2020 and June 30, 2020, the first to receive payments, are required to file their reports by September 30, 2021. This time period includes most of the payments made under the Phase 1 General Distribution, some of the payments made under the Phase 2 General Distribution, and some payments made under the Target Distributions. The reporting portal opened on July 1, 2021 and is currently available to these recipients.

Providers who received and retained payments through the PRF are required to file reports justifying their use of the funds. Providers must report information on healthcare-related expenses attributable to coronavirus, lost revenue attributable to coronavirus, other pandemic assistance received, and administrative data. Providers who received more than $500,000 in aggregate payments are required to report some data elements in greater detail, including specific information regarding operations, personnel, supplies, equipment, facilities, and several other categories. Some providers will be required to report significant amounts of financial information in significant detail, which may require time to compile or calculate. Further, HHS continues to update the guidance surrounding PRF reporting. Providers should be aware of the potential complexity of PRF reporting as the deadlines begin to approach.

Published on: July 28, 2021

CMS Proposes to Re-Revise the Stark Law’s Definition of “Indirect Compensation Arrangement”

by Wachler & Associates, P.C.

On July 13, 2021, the Centers for Medicare and Medicaid Services (CMS) released a Proposed Rule that includes amendments to the regulations surrounding the Physician Self-Referral Law, also known as the Stark Law. The Proposed Rule seeks to revise the definition of “indirect compensation arrangement” (ICA) to bring it back in line with the previous definition of ICA as it existed prior to the latest Stark Law rulemaking, “Modernizing and Clarifying the Physician Self-Referral Regulations” (MCR Final Rule), issued on December 2, 2020. Additionally, the Proposed Rule seeks to define the term “unit’ and the phrase “services that are personally performed” for purposes of the ICA definition.

The Stark Law generally prohibits physicians from referring designated health services (DHS) payable by Medicare or Medicaid to an entity with which the physician (or an immediate family member) has a financial relationship unless an exception is met. With the MCR Final Rule, CMS introduced a further definitional requirement to the definition of ICA: that the “individual unit of compensation” received by the physician (or an immediate family member) must either (i) not be fair market value; or (ii) include the physician’s referrals as a variable that impacts compensation. By adding this definitional requirement, the MCR Final Rule effectively further narrowed the regulatory definition of ICA. In the Proposed Rule, CMS states that the MCR Final Rule inadvertently omitted language from the ICA definition which would have ensured that a subset of potentially abusive financial relationships would have continued to satisfy the definition of ICA. Under the Proposed Rule, the ICA definitional requirement added by the MCR Final Rule would be effective only if the compensation received by the physician would be for the physician’s own personally performed services.

In response to providers’ concerns about the scope and practical application of the phrase “individual unit of compensation,” CMS seeks to provide some clarity by defining the phrase in the Proposed Rule. CMS proposes to define an individual unit either in terms of service, where all compensation is based solely on the service provided, or in terms of time, in all other cases, where any one basis of the physician’s compensation is time-based. CMS also proposes to introduce regulatory language to aid in the application of the ICA definition when the physician receives compensation for personally performed services by stating services personally performed by a physician “do not include services that are performed by any person other the physician ….” At this time, it is unclear whether this proposed language would include services performed by an employee, but provided incident to the physician’s personally performed services. The Proposed Rule is open for public comment until September 13, 2021.

Published on: July 26, 2021

CMS Proposes to Keep Medicare Coverage for Some Audio-Only Services

by Wachler & Associates, P.C.

During the COVID-19 public health emergency, the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) waived many of the restrictions that limited Medicare coverage for healthcare services for telemedicine and allowed for much greater use of these services. Among these was the introduction of Medicare coverage for several audio-only services, whereas Medicare coverage had previously only extended to telemedicine services provided by interactive two-way audio/video communication. However, these actions were only temporary and will end when the declaration of a public health emergency ends.

Due to the tremendous value that audio-only telemedicine has provided to the healthcare system, providers, and Medicare beneficiaries, there have been calls for the temporary expansion of telemedicine to be made permanent. While CMS has asserted that large-scale changes to the Medicare program must come from Congress, CMS recently released the proposed 2022 Physician Fee Schedule which, among many other proposals, would retain Medicare coverage for some audio-only services.

Specifically, CMS would permit the use of audio-only communications technology for mental health telehealth services under certain conditions when the services are provided to beneficiaries located in their home. Under the CMS proposal, coverage would be limited to the diagnosis, evaluation, or treatment of mental health disorders in established patients where the originating site is the patient’s home. CMS would retain the requirement that an in-person item or service must be furnished within six months of such a mental health telehealth service. Further, CMS would require that the provider has the technical capability at the time of the service to use an interactive telecommunications system that includes video, but conducts the visit via audio-only because the beneficiary is unable to use, does not wish to use, or does not have access to two-way, audio/video technology. CMS states its goal is to allow audio-only services only where no service would otherwise occur.

Published on: July 22, 2021

OIG Focuses Efforts on Telehealth Audits

by Wachler & Associates, P.C.

The opportunity for expanded use of telehealth services spurred by the COVID-19 pandemic provided many individuals with greater access to healthcare services and allowed providers to furnish patient care in safe environments. However, this expansion has led to potential abuse concerns, prompting the Department of Health and Human Services (HHS) Office of Inspector General (OIG) to issue a statement announcing that OIG is conducting seven different audits, evaluations, and inspections of telehealth services under the Medicare and Medicaid programs.

Because OIG is investigating providers specific to telemedicine, these audits will review remote patient monitoring, virtual check-ins, and e-visits. An OIG report issued in April 2018 concluded that 31% of the sample claims reviewed did not meet the Medicare conditions for payment for telehealth services. That report was prior to the broad expansion of telemedicine from the COVID -19 pandemic. Providers who have billed for telehealth services during the public health emergency (PHE) should be prepared to undergo audits of those claims.

Current OIG telemedicine audit projects include:

Published on: July 20, 2021

Deadlines Approaching to Report Cardiac Device Overpayments

by Wachler & Associates, P.C.

Important deadlines for hospitals to report cardiac medical device-related overpayments are fast approaching. Based on an audit by the Office of Inspector General (OIG), the Centers for Medicare & Medicaid Services (CMS), required hospitals to investigate and report any overpayments from the last six years related to manufacturing credits for replaced cardiac medical device implants. CMS’s deadlines to file these reports begin in August 2021.

Generally, where the manufacturer of a cardiac medical device implant, such as a pacemaker or defibrillator, replaces a recalls or defective device that is still under warranty, it will provide a replacement to the hospital without charge or issue a full or credit to the hospital for the cost of the device. Where the service involves a Medicare beneficiary and a hospital receives a discount or credit that is 50% or more of the cost, Medicare regulations generally require the hospital to report the credit to Medicare and accept reduced payment.

In November 2020, OIG issued a report regarding a review it conducted of 6,558 Medicare claims dated between January 1, 2015 and June 30, 2017. In its review, OIG obtained data on reportable warranty credits from the top three cardiac device manufacturers and compared this data to Medicare billing records to see whether the hospital had reported the credit to Medicare. As a result of its review, OIG alleged that over 900 hospitals had not properly reported manufacturing credits for recalled or defective cardiac medical device implants. OIG alleged that these hospitals had received approximately $33 million in Medicare overpayments and recommended that CMS recover these overpayments.

Published on: July 15, 2021

CMS Proposes to Keep Some Medicare Telehealth Access in 2022 Physician Fee Schedule

by Wachler & Associates, P.C.

Many of the Medicare requirements surrounding telemedicine have been greatly relaxed or waived entirely during the COVID-19 public health emergency. Providers and patients wondered if these changes would end or if some might become permanent. In May 2021, Congress introduced H.R.3447, a bill to amend the Social Security Act to expand accessibility to certain telehealth services under the Medicare program, which was an encouraging sign that at least some of the telemedicine waivers may become permanent. Now, the Centers for Medicaid and Medicare Services (CMS) seeks to preserve telehealth access with the proposed 2022 Medicare Physician Fee Schedule (MPFS). If finalized, the rule would codify some of the recent flexibilities CMS has granted regarding telehealth use for the diagnosis, evaluation, and treatment of mental health disorders.

CMS plans to allow Medicare providers to continue offering certain telehealth services until the end of 2023 while the agency decides whether to add those services to the telehealth list permanently. CMS will permit all Medicare patients to access telehealth services from their homes, as called for in the Consolidated Appropriations Act Congress passed in December 2020. Additionally, the agency seeks to enable Medicare to pay for mental health visits via telehealth services provided through community health centers. CMS plans to allow providers to deliver audio-only behavioral and mental health services, including opioid addiction treatment. The proposed rule would also pay physicians for mental health visits, via interactive telecommunications technology, furnished to rural and vulnerable populations in rural health clinics and federal qualified health centers.

The rule also proposes notable changes to the Quality Payment Program (QPP), including the Merit-based Incentive Payment System (MIPS). Specifically, the agency seeks to make it more difficult for clinicians to earn bonuses under its QPP by raising the eligibility threshold. Furthermore, CMS unveiled its first seven MIPS Value Pathways, including: rheumatology; stroke care and prevention; heart disease; chronic disease management; emergency medicine; anesthesia; and lower-extremity joint repairs. CMS, as part of these initiatives, would evaluate clinicians using measures that are meaningful to their practices and their specialties or are relevant to public health priorities. The proposed fee schedule is open for public comment until September 13, 2021.

Published on: July 13, 2021

President Biden Signs Executive Order Impacting Healthcare Sector

by Wachler & Associates, P.C.

On Friday July 9, President Biden signed an executive order focused on promoting competition in the U.S. economy. The comprehensive executive order contained many provisions relating to the healthcare industry, including directives to the Department of Health and Human Services (HHS) to support price transparency rules issued by the Trump Administration and instructions to the Federal Trade Commission (FTC) to prioritize hospital consolidation in its enforcement efforts. Under the order, the Department of Justice (DOJ) and the FTC are encouraged to “vigorously” enforce antitrust laws, even on past mergers that previous administrations have not challenged. The order includes specific provisions that address competition among hospitals, health insurers, prescription drugmakers, and hearing aid manufacturers.

HHS is directed by the order to support existing hospital price transparency regulations issued by the Trump Administration, which require hospitals to disclose cash prices and rates negotiated with insurers, as well as finish implementing bipartisan federal legislation to address surprise hospital billing. This directive may be spurred by recent reports that hospital compliance with these regulations has been inconsistent. The order further directs the HHS to standardize plan options in the national health insurance marketplace so people can comparison shop more easily.

The FDA is called upon to work with states and tribal programs to safely import cheaper prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003, in an attempt to lower prices for consumers. Provisions in the order similarly call on HHS to increase support for generic and biosimilar drugs and to create a plan within 45 days to address high drug prices and price gouging. The order asks the FTC to ban “pay for delay” and similar agreements by rule, under which brand-name drugmakers pay generic drugmakers to abstain from the market. Moreover, the executive order would also allow hearing aids to be sold over the counter and directs HHS to issue a rule on the matter within 120 days. Hospitals and other healthcare should understand the implications these directives may have as implementation of the executive order unfolds in the coming weeks and months.

Published on: July 8, 2021

HHS Site-Neutral Pay Rule to Remain in Effect

by Wachler & Associates, P.C.

The U.S. Supreme Court recently declined to hear an appeal challenging the Department of Health and Human Services’ (HHS) site-neutral payment policy, allowing the regulation to move forward. Hospitals originally sued to prevent the rule from taking effect, but were ultimately unsuccessful when the U.S. Court of Appeals for the District of Columbia ruled against them in favor of the rule’s legality.

The site-neutral pay rule, specifically Section 603 of the Bipartisan Budget Act of 2015, brings significant changes to Medicare hospital payment policy. The rule extends the concept of site-neutral payment policy by requiring that newly created off-campus hospital outpatient departments no longer be paid under the Outpatient Prospective Payment System (OPPS). Rather, such departments will be paid under an alternative, less remunerative payment system – the Medicare Physician Fee Schedule (MPFS). The goal of the rule is to reduce a perceived disparity in Medicare payments where hospital-affiliated clinics get paid more than physician offices for the same services.

Specifically, the rule amends Section 1833(t) of the Social Security Act, which governs Medicare payments for hospital outpatient department services, by adding a new clause that prospectively excludes from the definition of covered services most items and services furnished by an “off-campus outpatient department of a provider,” which the statute defines as a department of a provider that is not located on the provider’s campus or within a 250-yard radius from a remote location of a hospital. While CMS guidance on the rule is still unfolding, it has provided some insight into its interpretation of the 250-yard measurement. CMS explains that a hospital may measure 250 yards from “any point of the physical facility that serves as the site of services of the remote location to any point in the PBD.”

Published on: July 6, 2021

Responding to a Targeted Probe and Educate Review

by Wachler & Associates, P.C.

A healthcare practice or other provider or supplier receives a letter from their Medicare Administrative Contractor (MAC). The letter notifies the provider that they have been selected for a Targeted Probe and Educate (TPE) review. This initial letter, the Notice of Review, likely 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 including 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.

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. A TPE review can take months or years to resolve and can have devastating impacts on a provider’s business, up to and including revocation of Medicare billing privileges and placement on the CMS Preclusion List.

After the Notice of Review, the MAC will send Additional Documentation Requests (ADR) for 20-40 claims. However, these ADRs may be indistinguishable from any other, with no indication of the added importance of being pursuant to a TPE audit. The ADRs will require a response within 45 days. After the provider submits the documentation, the MAC is required to provide direct one-on-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 review of 20-40 claims and education. If a high number of claims are denied again, the MAC will proceed to a third round.