Wachler & Associates Health Law Blog

Published on: April 11, 2018

Court Orders AHA to Provide Strategies for Eliminating Medicare Appeals Backlog

On March 22, 2018, the latest development in American Hospital Association (AHA) v. Azar (formerly referred to as AHA v Burwell) emerged as Judge Boasberg issued an order to have the AHA develop strategies to assist the Department of Health and Human Services (HHS) in reducing the Medicare appeals backlog. The request comes in response to a lack of effective action by HHS to reduce the number of backlogged appeals.

Major events in the case include:

May 22, 2014: Initial complaint filed by the AHA, alleging that HHS was violating Federal law by failing to process appeals within the legally-mandated timeframes. The problem was and continues to be highlighted at the administrative law judge (ALJ) level of appeals, where wait times for the processing of claims regularly takes years;

Published on: January 22, 2018

DOJ and Kmart Reach $32.3 Million Settlement to Pharmacy False Claims Suit

by Wachler & Associates, P.C.

On December 22, 2017, the U.S. Department of Justice (DOJ) announced a $32.3 million settlement (the Settlement) with Kmart Corporation, to settle False Claim Act (FCA) allegations against the company. The Settlement was based upon allegations that Kmart’s in-store pharmacies misled government payers by knowingly failing to report discounted prices and representing its drug prices as being higher than what was offered to the general public. Per the Settlement, Kmart does not admit to any wrongdoing.

The Settlement arises from a whistleblower suit filed in 2008. The suit alleged that Kmart failed to report discounted drug prices to Medicare Part D, Medicaid, and TRICARE. To determine reimbursement rates for medications, the government generally relies on a pharmacy’s “usual and customary prices” charged to consumers. According to the allegations, Kmart offered discounts to certain cash-paying customers but did not disclose those discounted prices when reporting its pricing to the government. Kmart argued that the special discount prices offered to a limited consumer base did not constitute “usual and customary” costs, but this argument was rejected in favor of increased transparency by pharmacies.

The Settlement sends a message to pharmacies regarding the importance of transparency, and that even prices offered only to a limited number of patients should be reported to the government. According to Acting Assistant Attorney General Chad Readler of the DOJ, “This settlement should put pharmacies on notice that there will be consequences if they attempt to improperly increase payments from taxpayer-funded health programs by masking the true prices that they charge the general public for the same drugs.” The whistleblower who brought the original suit will receive $9.3 million of the $32.3 million settlement, potentially sending a strong message to prospective whistleblowers as well.

Published on: November 13, 2017

HHS OCR Issues Guidance on Mobile Devices and Compliance with HIPAA

by Wachler & Associates, P.C.

In October 2017, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) issued Health Insurance Portability and Accountability Act (HIPAA) guidance regarding the use of mobile devices in the healthcare field. The guidance recognizes the risks of mobile device use while also acknowledging the central role such devices play in many businesses.

The first risk noted by the OCR is of mobile devices being lost or stolen. Since devices used to create or access protected health information (PHI) may be taken off-site, the risk of being lost or stolen is much greater. Regardless of the nature of the device, if it has unsecured PHI, a breach of that PHI could trigger breach notification obligations for covered entities and business associates.

The other risks raised by the OCR are those involving unsecure Wi-Fi and cloud storage applications, as well as the danger of having a mobile device infected with viruses or malware through email, websites or the downloading of apps. Entities that handle PHI must institute security protocols to assure that hackers cannot gain control of PHI and other private information through these methods.

Published on: August 18, 2017

AHA v Burwell Questioned by DC Circuit Court

by Wachler & Associates, P.C.

On August 11, 2017, a further development came in the Medicare appeals backlog saga, as the D.C. Circuit Court reached a decision on the Department of Health and Human Services’ (HHS’) appeal to the case American Hospital Association (AHA) v Burwell. The decision (“Appeal Decision”) handed down last week was decidedly pro-HHS, and is a setback for the AHA and healthcare providers with appeals pending at the administrative law judge (ALJ) level. The Appeal Decision has the potential to completely undo any progress created by the original December decision.

The Circuit Court came to a 2-1 decision, ordering the District Court to reconsider its mandate that HHS completely eliminate the Medicare appeal backlog by the end of 2020. The Circuit Court based its decision on the idea that the District Court decision had the potential of mandating that HHS violate its legal duty to only pay out legitimate Medicare claims. HHS is required to “protect” the Medicare trust fund, and in the process taxpayer dollars. However, HHS is also required by law to process ALJ appeals within 90 days, a duty which has gone unmet for years and was the basis of the District Court’s decision.

The AHA filed its initial suit in 2014, and after being initially dismissed, the AHA received a favorable decision in December 2016, a decision that is now in jeopardy of being undone. The December decision dictated certain yearly “targets” for HHS and the Center of Medicare and Medicaid Services (CMS) to meet regarding decreases to the number of backlogged appeals at the ALJ level. HHS objected to these benchmarks, and in fact to any mandated reduction, based on several arguments, including that the backlog cannot be eliminated without arbitrary settlements regardless of the actual merits of the claims.

Published on: July 31, 2017

OIG Reveals Plans to Scrutinize EHR Incentive Payments

by Wachler & Associates, P.C.

In July 2017, the Department of Health and Human Services Office of Inspector General (OIG) revealed its plans to review the $14.6 billion in incentive payments the Centers of Medicare and Medicaid Services (CMS) made to hospitals between January 1, 2011 and December 31, 2016, pursuant to Medicare’s electronic health record (EHR) technology program. The OIG plans to review these payments in order to identify errors and inaccuracies which may have resulted in overpayments to hospitals

This announcement comes less than a month after the June report from the OIG, titled “Medicare Paid Hundreds of Millions in Electronic Health Record Incentive Payments That Did Not Comply with Federal Requirements” (the “Report”) (an official OIG summary is available here). The Report was based upon a review of EHR Incentive Program payments made to 100 professionals, which found 14 improper payments in the amount of $291,222. Extrapolating these results, the OIG estimated a total of $729.4 million in improper payments to the over 250,000 EHR incentive eligible providers in the CMS system. According to the OIG, the $729 million figure is roughly 12% of the total payments made in connection with the EHR incentive program. A majority of the 14 improper payments discovered during the OIG’s review were based on providers failing to maintain accurate and detailed records—an issue which often arises with Medicare overpayments.

The OIG completed its report by making several recommendations to CMS:

Published on: June 12, 2017

HHS’ 2nd Update on Appeals Backlog Shows Little Progress

by Wachler & Associates, P.C.

In early June 2017 the Department of Health and Human Services (HHS) issued its second status report on the Medicare appeals backlog. The December 2016 case American Hospital Association v Burwell, in addition to dictating that HHS clear the backlog by 2020, required that HHS release a quarterly status report every 90 days to detail the progress being made toward eliminating the backlog.

The Burwell case was a significant victory for healthcare providers in their attempts to get the Medicare backlog reduced and have administrative law judge (ALJ) appeals processed within the statutory timeframes. In addition to status reports every 90 days and the complete elimination of the backlog by 2020, HHS is also required to observe several intermediary benchmarks: 30% reduction by the end of 2017, 60% by the end of 2018, 90% by the end of 2019, and then ultimately 100% elimination by the end of 2020.

However, despite these court mandated benchmarks, it has become clear to all parties involved that these goals are unlikely to be met without significant developments; HHS itself has maintained since the requirements were instituted that the elimination of the backlog would not be possible. This prediction is supported by the facts: HHS released its first status report in March, with the somber prediction that a backlog of 1,009,768 appeals would be pending by the end of 2021. June’s report saw a slightly improved projection of 950,520 claims remaining by that time, but this projection is still very far from meeting the court order.

Published on: April 27, 2017

Lack of Business Associate Agreement Leads to $31k HIPAA Penalty

by Wachler & Associates, P.C.

On April 20, 2017, the Department of Health and Human Services, Office for Civil Rights (HHS OCR) announced that it had reached a settlement with the Center for Children’s Digestive Health (the Center) regarding the Center’s (alleged) violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Center is a small health system specializing in pediatric care with seven clinics, all located in Illinois.

The settlement was for $31,000, and included the Center agreeing to a Corrective Action Plan (CAP). The Center’s HIPAA violation stemmed from an arrangement between the Center and one of its business associates, FileFax, Inc. The two companies began their relationship in 2003, with FileFax storing records containing protected health information (PHI) for the Center. However, through a HHS compliance review in 2015, it was discovered that there was no signed Business Associate Agreement between the parties prior to October 2015.

A Business Associate Agreement is required whenever a HIPAA-covered entity forms a relationship with a business entity, pursuant to which PHI will be transmitted. The terms of the Business Associate Agreement must include information on how the PHI will be used by the business associate, how the PHI will be safeguarded and protected, and other such details.

Published on: March 16, 2017

New Michigan Law Alters Practice Requirements for PAs

by Wachler & Associates, P.C.

On March 22, 2017, Michigan’s Public Act 379 of 2016 (the Act) will take effect, altering the practice requirements for physician assistants (PAs) within the state. The Act will require PAs to enter into and comply with a written practice agreement with a “participating physician.” The Act will thus affect not only PAs, but also participating physicians and other healthcare entitles.

A “participating physician” is defined as a physician, a physician designated by a group of physicians to represent that group, or a physician designated by a health facility or agency to represent that health facility or agency.

Another important aspect to note about the Act is that it limits the ability of PAs to practice within Michigan, requiring a written agreement which fulfills the statutory requirements. A practice agreement must include:

Published on: March 9, 2017

DOJ Provides Guidance for Corporate Compliance Programs in New Publication

by Wachler & Associates, P.C.

On February 8, 2017, the Department of Justice’s (DOJ’s) fraud section released new guidance for healthcare entities titled “Evaluation of Corporate Compliance Programs.” The new guidelines do not change any of the existing regulations, but rather provide corporate healthcare entities with added insight into how the DOJ assesses compliance violations.

The guidance mainly focuses on updated “Filip Factors,” which are the criteria under which the DOJ evaluates fraud. When a corporate healthcare entity comes under investigation for fraud under laws such as the False Claims Act (FCA), the DOJ has used the Filip Factors to evaluate the next steps to take, including whether to bring charges. Traditionally, characteristics such as whether the corporation has a suitable compliance program in place have been looked at closely when determining the severity of sanctions, and the new guidance continues with that trend.

The new guidance separates its factors into eleven different categories, and provides many example inquiries for each:

Published on: December 14, 2016

Settlement Opportunity Available for Eligible Hospitals with Medicare Patient Status Denials

by Wachler & Associates, P.C.

The Centers for Medicare and Medicaid Services (CMS) released the details of its Medicare hospital patient-status appeals settlement (“the 2016 Settlement”), following CMS’ initial announcement of the reopening on September 28th.

The 2016 Settlement comes as the successor of CMS’ 2014 68% settlement (the 68% Settlement), where eligible hospitals were able to settle their Medicare inpatient-status appeals for 68% of the net payable amount. The 68% Settlement successfully settled 346,000 claims with 2,022 hospitals. Since then, providers and other industry advocates (including Andrew Wachler of Wachler & Associates) have been pressuring CMS to offer another comparable settlement, and CMS responded positively with the 2016 Settlement.

The 2016 Settlement has comparable terms to the 68% Settlement, but there is one major difference: the 2016 Settlement only reimburses hospitals for 66% of the net payable amount on pending eligible claims. 2% is no minor adjustment on such a large scale, and will lead to millions of dollars less being paid out to providers. To scale, if the 68% Settlement had been for only 66%, the payout would have been roughly $1.42 billion rather than $1.47 billion. Still, with the Medicare appeals backlog as substantial as ever, many hospitals welcome the opportunity for an expedient and largely favorable resolution to their pending patient-status appeals. This is especially true considering the uncertainty of whether there will be other settlements offered in the future.