Wachler & Associates Health Law Blog

Published on: February 25, 2016

OMHA Expands the Settlement Conference Facilitation Pilot to Part A Claim Appeals

The Office of Medicare Hearings and Appeals (OMHA) recently announced its Phase III expansion of the Settlement Conference Facilitation (SCF) pilot program. The SCF pilot was originally launched in July 2014 to provide an alternative dispute resolution process for eligible Medicare providers to settle appealed Medicare claim denials pending at the Administrative Law Judge (ALJ) level of the Medicare appeals process. Under the SCF pilot, Medicare providers have the opportunity to enter into open settlement discussions with the Centers for Medicare & Medicaid Service (CMS) with the goal of coming to a mutually agreed upon resolution for the pending ALJ claims. Initially, the program was limited to Part B claims that met specific eligibility criteria. In October 2015, OMHA implemented Phase II of the SCF pilot, which expanded the eligibility requirements for Part B claims. Recently, OMHA announced that it will open Phase III of the SCF pilot, expanding the program to Part A claim appeals. Much like the previous phases, OMHA has provided eligibility requirements for participating in the SCF pilot, which include:

The appellant must be a Medicare provider (for the purposes of this pilot, “appellant” is defined as a Medicare provider that has been assigned a National Provider Identifier (NPI) number);
A request for hearing must appeal a Medicare Part A Qualified Independent Contractor (QIC) reconsideration decision;

Published on: February 23, 2016

OIG Advisory Opinion Examines Radiology Arrangement Regarding Transcription Fees Paid to Third Party

by Wachler & Associates, P.C.

The Department of Health and Human Services’ Office of Inspector General (“OIG”) recently released OIG Advisory Opinion No. 15-15, in which the OIG determined that an arrangement involving an acute care hospital (“Hospital”), radiology practice and family medicine clinic (“Clinic”) would not generate prohibited remuneration under section 1129B(b) of the Social Security Act, the Federal anti-kickback statute (“AKS”).

Under the arrangement, the Clinic refers patients and certain diagnostic tests to the Hospital, and thus the Clinic’s physicians are referral sources for the Hospital. The radiology practice contracts with the Hospital to supervise radiology services and provide professional interpretations of all radiologic imaging taken at the Hospital, and members of the radiology practice can influence referrals to the Hospital. The Clinic includes technologists who provide radiologic imaging services for the Clinic’s patients, and the Clinic transmits the resulting images to the radiology practice to interpret the images and is thus a referral source for the radiology practice. The radiology practice’s radiologists interpret the images and dictate reports, but send the dictated reports to the Hospital and the Hospital’s employees transcribe the reports on behalf of the radiologists, who send the final reports back to the Clinic. The radiology practice pays the Hospital a “flat rate per line of transcription” fee that is fair market value for the service, and the Clinic pays no portion of any transcription cost. The Clinic bills third-party payors, including Medicare and Medicaid, for the technical component, and the radiology practice bills these payors for the professional component of the radiology services. The OIG also noted that the Hospital is located in a sparsely populated region, the Clinic is in a rural community in that region, and that the radiology practice is the only radiology practice within a 100-mile radius of the Clinic or Hospital.

Crucial to the OIG’s finding, the Centers for Medicare & Medicaid Services’ (“CMS”) Medicare Claims Processing Manual provides that with regards to the professional component of a radiology service, the interpretation of the diagnostic procedure includes a written report. Further, CMS advised the OIG that transcription costs are considered indirect expenses under the methodology establishing resource-based practice expense relative value units (RVUs), meaning that such costs are not separately identified but are included in both the professional and technical components for each service. As such, CMS’ position is that when the technical component and professional component are provided and billed by different entities, the two providers may determine who will pay for transcription costs.

Published on: February 16, 2016

OCR Releases New HIPAA Guidance for Health App Developers

by Wachler & Associates, P.C.

On February 11, 2016, the Department of Health and Human Services, Office for Civil Rights (“OCR”), released important guidance on its Developer Portal to address the application of the Health Insurance Portability and Accountability Act (“HIPAA”) regulations to developers of mobile health apps. Whether a mobile app developer is directly employed by a covered entity (i.e., health plans, health care clearing houses, and most health care providers) or a business associate of a covered entity (or one of the covered entity’s contractors), reasonable safeguards must be applied when the developer creates, receives, maintains or transmits protected health information (“PHI”) on behalf of a covered entity or other business associate.

The OCR guidance provides “Key Questions” for app developers in determining whether or not they may be a business associate of a covered entity. In addition, the OCR guidance provides several factual scenarios to further assist app developers in determining whether they are considered a business associate. Below are two of the scenarios included in the OCR guidance, one in which the developer would not be considered a business associate and one where the developer would be considered a business associate.

Scenario: Consumer downloads a health app to her smartphone. She populates it with her own information. For example, the consumer inputs blood glucose levels and blood pressure readings she obtained herself using home health equipment.

Published on: December 7, 2015

CMS Proposes Rule Implementing Discharge Planning Requirements

by Wachler & Associates, P.C.

The Centers for Medicare & Medicaid Services (“CMS”) recently announced a proposed rule primarily aimed at discharge planning requirements for hospitals and other service providers, including home health agencies (HHAs).

As part of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT), hospitals, other inpatient facilities, and HHAs are required to develop an individual discharge plan for each patient based on a variety of factors, including individual patient needs. The proposed CMS rule would require these facilities and providers to develop discharge plans for patients within 24 hours of either admission or registration, as well as require that those plans be completed before the patient is discharged or transferred to another facility. In addition, providers and facilities would be required to provide discharge instructions to patients, enact a medication reconciliation process, and provide medical records to another facility if the patient is transferred.

As it specifically relates to HHAs, the proposed rule intends to impose several requirements that will affect HHA’s processes for discharging or transferring patients. CMS explained that its purpose for the rule is to “…better prepare patients and caregivers to be active participants in self-care” and to “…focus on person-centered care to increase patient-participation in post-discharge care decision making.” Examples of the proposals that CMS believes will help them reach these goals include, requiring the physician responsible for the home health plan of care to be involved in the ongoing establishment of the discharge plan, require that the discharge plan address the patient’s goals and treatment preferences, require that the evaluation be included in the clinical record and all relevant patient information available to or generated by the HHA to be incorporated into the discharge plan to facilitate its implementation. HHAs and other entities affected by the proposed rule must submit their comments on the proposals by January 4, 2016.

Published on: October 1, 2015

OMHA to Expand the Settlement Conference Facilitation Pilot

by Wachler & Associates, P.C.

On October 15, 2015, the Office of Medicare Hearings and Appeals (OMHA) will be hosting an open door teleconference to discuss the expansion of its Settlement Conference Facilitation (SCF) Pilot. The pilot program was originally launched in July 2014 to provide an alternative dispute resolution process for eligible Medicare providers to settle appealed Medicare claim denials pending at the Administrative Law Judge (ALJ) level of the Medicare appeals process. Under the SCF pilot program, Medicare providers had the opportunity to enter into open settlement discussions with the Centers for Medicare & Medicaid Service (CMS) with the goal of coming to a mutually agreed upon resolution for the pending ALJ claims. Since the SCF pilot program’s inception, the program was limited to providers that met specific eligibility criteria (e.g., the ALJ hearing must have been filed in 2013). However, OMHA appears set to expand the SCF program, which will be discussed in greater detail during the open door teleconference scheduled for October 15th at 1:00pm-2:00pm EST. Any parties interested in participating in the call should fill out the registration form and submit it no later than 5:00pm on October 14, 2015.

Wachler & Associates has already participated in multiple settlement negotiations on behalf of health care providers under the SCF pilot program. We will also be attending the open door teleconference to ensure our experienced attorneys are up-to-date on all matters related to the SCF program. If you or your health care entity needs assistance in pursuing the SCF program or appealing Medicare claim denials, or if you have any questions relating to the SCF program, please contact an experienced healthcare attorney at (248) 544-0888, or via email at wapc@wachler.com.

Published on: September 25, 2015

Florida Hospital District Settles False Claims Act Allegations for $69.5 Million

by Wachler & Associates, P.C.

The U.S. Department of Justice (DOJ) recently announced a $69.5 million settlement with the North Broward Hospital District (the “District”) arising out of allegations that the District violated the federal Stark law and False Claims Act by entering into improper financial relationships with employed physicians.

The lawsuit alleged that the District provided compensation to nine employed physicians that exceeded fair market value for the physicians’ services, and instead rewarded the physicians for their referrals of patients to the District. The compensation arrangements were alleged to violate the federal Stark law, which prohibits physician referrals of Medicare and Medicaid services to entities with which the physician has a financial relationship, unless an exception applies. Stark exceptions related to physician compensation and employment arrangements require, in addition to other requirements, that the physician’s compensation is consistent with fair market value and not determined in a manner that takes into account the volume or value of the physician’s referrals. By submitting claims pursuant to referrals that violated the Stark law, the District also submitted claims in violation of the False Claims Act.

The lawsuit against the District was originally filed by a whistleblower pursuant to the qui tam provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and share in the recovery. The whistleblower in this case brought the lawsuit after the District offered to employ him under terms that he believed may violate the Stark law. The DOJ announced that the whistleblower will receive over $12 million for his role in the case. The DOJ also announced that the recovery marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is a partnership between the U.S. Attorney General and U.S. Secretary of Health and Human Resources that has been instrumental in the government’s recovery of $16 billion from fraud in the federal health care programs since 2009.

Published on: September 18, 2015

CMS Releases 2014 ACO Performance Results

by Wachler & Associates, P.C.

Recently, the Centers for Medicare & Medicaid Services (CMS) released its 2014 quality and financial performance results for Medicare Accountable Care Organizations (ACO). According to CMS, overall, 353 ACOs – 20 Pioneer ACOs and 333 Medicare Shared Savings ACOs – generated a net savings of more than $411 million in 2014. In addition, 97 ACOs met their quality standards and savings threshold, qualifying them for shared savings payments of more than $422 million. According to CMS Acting Administrator Andy Slavitt, “These results show that ac countable care organizations as a group are on the path towards transforming how care is provided. . . . Many of these ACOs are demonstrating that they can deliver a higher level of coordinated care that leads to healthier people and smarter spending.” According to CMS, some of the quality and financial performance results included:

Of the 20 Pioneer ACOs participating in 2014, 15 ACOs generated savings and 5 ACOs generated losses. Of the 15 ACOs that generated savings, 11 ACOs qualified for shared payments of $82 million due to them generating savings outside a minimum savings rate. Of the 5 ACOs that generated losses, 3 ACOs are paying $9 million in shared losses to CMS for generating losses outside a minimum loss rate.
Pioneer ACOs generated a total savings of $120 million, which equates to a 24% increase in performance from the $96 million of total savings in 2013. Further, the total model savings per ACO increased from $4.2 million per ACO in 2013 to $6 million per ACO in 2014.

Published on: July 22, 2015

Office of Civil Rights Announces HIPAA Settlement Stemming from Use of Internet Applications

by Wachler & Associates, P.C.

The U.S. Department of Health and Human Services (HHS), Office of Civil Rights (OCR), recently announced a settlement with St. Elizabeth’s Medical Center (SEMC) over violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). SEMC is a tertiary care hospital located in Massachusetts. OCR’s investigation began in November 2014, when OCR alleged that SEMC violated HIPAA’s Privacy, Security and Breach Notification Rules. As part of the settlement, SEMC agreed to pay $218,400 and adopt a corrective action plan to address the deficiencies in SEMC’s HIPAA compliance program.

On July 10, 2015, OCR released an HHS OCR Bulletin containing the allegations against SEMC, the parties’ settlement agreement and SEMC’s corrective action plan. OCR’s investigation stemmed from a complaint against SEMC filed on November 16, 2012. The allegations pertain to SEMC’s use of internet-based document sharing programs that contain electronic protected health information (ePHI). OCR found that SEMC used the internet-based applications without analyzing the privacy and security risks, as required by HIPAA. Further, critical to SEMC’s liability under HIPAA, OCR alleged that SEMC “failed to timely identify and respond to the known security incident, mitigate the harmful effects of the security incident, and document the security incident and its outcome.” The settlement agreement also covers a separate HIPAA breach that occurred in August 2014, when SEMC notified HHS of a breach of unsecured ePHI located on a personal laptop and USB flash drive.

The settlement between OCR and SEMC is predicated on SEMC’s continued compliance with the settlement agreement’s corrective action plan. As part of the plan, SEMC agreed to perform robust “self-assessment” to determine the SEMC’s workforce members’ knowledge of and compliance with SEMC policies and procedures regarding: transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; and security incident reporting related to ePHI. The self-assessment includes unannounced site visits to various SEMC departments, randomly selected interviews of SEMC workforce members, and inspection of portable devices that can access ePHI in the departments impacted by the breach. SEMC is also required to provide a report documenting its self-assessment to HHS within 150 days of the settlement.

Published on: July 20, 2015

U.S. Court of Appeals for the D.C. Circuit Rules on Stark Law Regulations

by Wachler & Associates, P.C.

In June, the U.S. Court of Appeals for the District of Columbia Circuit ruled on two regulations implemented by the Centers for Medicare and Medicaid Services (CMS) under the federal Stark law (Stark) in 2008. Following a challenge by the Council for Urological Interests (the Council), a urology trade association, the court rejected CMS’ prohibition on per-click equipment rental leases but upheld CMS’ new interpretation of “entity furnishing designated health services” and thus the prohibition against “under-arrangement” transactions.

Stark prohibits physicians from referring Medicare or Medicaid patients for designated health services to an entity with which the physician has a financial relationship unless an exception applies. An exception to Stark exists for equipment leases. Under CMS’ 2008 regulation challenged by the Council, CMS barred per-click rental arrangements based on CMS’ analysis that Congress did not intend to protect arrangements where the lessor’s amount of income fluctuated based on the amount of patients referred by the lessor to the lessee. CMS claimed to base its determination to bar per-click equipment leases on a 1993 U.S. House of Representatives conference report (Conference Report).

The court reviewed CMS’ per-click equipment lease prohibition under the two-step Chevron legal test used to determine whether a court must grant deference to a government agency’s interpretation of a statute. First, the court determined that Stark did not forbid CMS from banning per-click leases, as the statute does not expressly permit per-click leases and also allows the Secretary of the U.S. Department of Health and Human Services (the Secretary) to impose, by regulation, other requirements as needed to protect against program or patient abuse. However, the court determined that the per-click ban failed under step-two of the Chevron analysis, as the agency’s statutory interpretation was not permissible or reasonable in light of Congress’s intent. The court’s decision focused on the Conference Report cited by CMS. The Conference Report explained, “in reference to the rental-charge clause for the equipment rental exception, ‘[t]he conferees intended that charges for space and equipment leases may be based on…time-based rates or rates based on units of service furnished, so long as the amount of time-based or units of service rates does not fluctuate during the contract period.'” The court’s decision highlighted how the Secretary’s interpretation of the Conference Report had changed over time, pointing out that in 2001, the Secretary explained, “given the clearly expressed congressional intent in the legislative history, we are permitting ‘per use’ payments.” The court found that the Conference Report makes clear that unit of service rates are what cannot fluctuate during the contract period, and noted that the Secretary’s new interpretation of the Conference Report ignored the word “rates” completely. In rejecting the ban on per-click leases, the court stated that the agency’s “jargon is plainly not a reasonable attempt to grapple with the Conference Report; it belongs instead to the cross-your-fingers-and-hope-it-goes-away school of statutory interpretation.”

Published on: July 16, 2015

U.S. Court of Appeals for the Fourth Circuit Upholds $237 Million Judgment Against Toumey Healthcare System

by Wachler & Associates, P.C.

On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit upheld a $237 million verdict against Toumey Healthcare System (“Toumey) for violations of the federal Stark law (“Stark”) and, consequently, the federal False Claims Act. The verdict marks the latest decision in the government’s longstanding legal battle against Toumey, a community hospital in South Carolina, and serves as a reminder to healthcare providers of the significant liability that can result from compensation arrangements that fail to comply with Stark’s safe harbor requirements.

In this case, the lower court determined that Toumey entered into part-time employment agreements with physicians that violated Stark. The agreements violated Stark’s limitations on physician compensation arrangements by varying with, or taking into account, the volume or value of the physicians’ referrals to the hospital. Under the False Claims Act, claims submitted for payment arising out of referrals prohibited by Stark constitute false claims, and subject providers to treble damages. In this case, the jury found that Toumey knowingly submitted 21,730 false claims, which amounted to $39.3 million in Medicare payments. The court awarded treble damages as well as other penalties.

The Fourth Circuit’s decision analyzed Toumey’s argument that since Toumey relied upon the advice of lawyers in determining that the compensation arrangements were permissible under Stark, Toumey could not have knowingly violated the False Claims Act. In rejecting this argument, the Fourth Circuit highlighted the fact that Toumey consulted with multiple attorneys, one of which raised serious concerns about the compensation arrangements, and that Toumey effectively lawyer-shopped for legal opinions that approved the employment contracts. Accordingly, the case should provide notice to providers to proceed with caution if they are contemplating obtaining multiple legal opinions in order to determine that an arrangement is compliant with health care fraud and abuse laws because of how the opinions may be scrutinized in hindsight.