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Since the passage of the Patient Protection and Affordable Care Act (ACA) in 2010, much of the media focus has been on individuals who were previously denied coverage because of preexisting conditions or financial barriers. Now, studies are focusing on the large group of individuals who, prior to the ACA, simply chose not to purchase health insurance. The reports demonstrate that due to the Individual Mandate portion of the ACA, which requires individuals to purchase health insurance, many more individuals are choosing to participate in their employers’ health plans.

The increased participation in employer health plans will inevitably cost employers. Most recently, Wal-Mart announced that a dramatic increase in employees signing up for insurance through the company will cost its stockholders $500 million — up from the company’s previous estimate of $330 million. Although Wal-Mart is experiencing the employer-based insurance shift on a large scale, many employers nationwide are expected to see a jump in participation in their health plans. Recently, the National Business Group on Health announced that large employers should expect to see a 6.5% rise in healthcare costs in 2015.

Although The New England Journal of Medicine and members of the Urban Institute both note a rise in individuals signing up for insurance through their employers, other analysts predict that employers’ costs will be too high, and that the employers will simply “dump” these employees into their state’s health insurance marketplace. Many experts, however, expect that if such dumping were to occur, it would come from small employers who merely cannot afford to offer adequate health plans.

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On August 4, 2014, the United States Department of Justice (DOJ) announced that Community Health Systems (CHS) agreed to pay $98.15 million to settle False Claims Act (FCA) allegations that CHS knowingly billed Medicare, Medicaid and TRICARE for inpatient hospital services that should have been billed as outpatient or observation services. Seven actions were filed against CHS by whistleblowers under the qui tam provisions of the FCA, which allows individuals to file suit on behalf of the government and, in turn, obtain a portion of the recovery. These seven actions were filed in six different jurisdictions and alleged that, between 2005 and 2010, CHS engaged in a corporate scheme to increase admissions of Medicare, Medicaid, and TRICARE beneficiaries even though the admissions were not medically necessary at an inpatient level of care. Rather, the United States alleged that the patients could have been cared for in less costly outpatient or observation settings.

In addition to the $98.15 million settlement payment, CHS agreed to enter into a five-year Corporate Integrity Agreement with the Office of Inspector General (OIG) in which CHS is required to implement significant compliance protocols, including retention of an independent review organization (IRO) to review CHS’s inpatient admission claims. In exchange, CHS will be released from any civil or administrative monetary claims the United States has for the covered conduct under the FCA, Civil Monetary Penalties Law, or Program Fraud Civil Remedies Act.

According to the DOJ, this settlement agreement is the largest FCA recovery in the Middle District of Tennessee. The DOJ touted the Health Care Fraud Prevention and Enforcement Action Team’s (HEAT) coordinated nationwide effort for exposing the FCA noncompliance. Since the establishment of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in 2009, the DOJ has recovered over $20.2 billion in FCA cases, of which $14 billion has come from cases involving fraud against government health care programs.

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The U.S. Department of Health and Human Services’ Office for Civil Rights (“OCR”) recently announced that it will be initiating Phase 2 of the compliance audits mandated by the Health Information Technology for Economic and Clinical Health Act (HITECH). The first phase of audits was carried out in 2011 and 2012, and targeted covered entities. While Phase 2 will expand the targeted entities to include business associates, it will utilize information gathered during Phase 1 to narrow the scope of audits in order to review the areas of greatest risk to protected health information (PHI).

Following Phase 1, OCR’s findings noted that, generally, the smaller the covered entity, the more compliance issues it had with all 3 Health Insurance Portability and Accountability Act (HIPAA) Standards: privacy, security, and electronic transactions. Furthermore, OCR observed that over 60% of the violations related to security standards. Additionally, nearly 40% of the findings related to privacy standards occurred simply due to lack of knowledge regarding the privacy standards.

Applying this information, OCR will narrow the focus of their compliance audits in Phase 2. The audits will occur between October 2014 and June 2015, and will address:

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With the passage of the Food and Drug Administration Safety and Innovation Act (FDASIA) on July 9, 2012, Congress expanded the Food and Drug Administration’s (FDA) authority to safeguard and advance public health. Exercising such authority, on July 31, 2014, the FDA notified Congress of its plan to publish a proposal to expand its oversight of laboratory developed tests (LDTs). LDTs are diagnostic tests, which are designed, manufactured, and used within a single laboratory. Previously, LDTs certified under the Clinical Laboratory Improvement Amendments (CLIA) could exist without FDA oversight. This exception existed because LDTs were primarily used for rare diseases. However, advances in molecular biology allowed laboratories to produce a broader range of LDTs, applicable to more common illnesses. The former exception has been touted by some as fostering laboratory independence, allowing for exponential innovation and accuracy in diagnostics. However, others like Senator Edward Markey (D-Mass.) claim that the newly implemented FDA oversight has been “long-overdue.”

As a result of support from individuals like Senator Markey, more than 11,000 LDTs, housed in 2,000 different laboratories, may fall into the FDA’s expanded regulations. The FDA has cited LDTs for illnesses like Lyme disease and cancer, as justification for the new regulatory framework. By subjecting LDTs to such scrutiny, the FDA’s stated goal is to eliminate faulty tests that produce inaccurate diagnoses and cause patients to seek unnecessary treatment, or delay vital treatment. However, opponents of the new regulation contend that the prior independence allowed laboratories to diagnose and measure disease with far greater accuracy than ever before.

The FDA’s regulatory expansion will take place over nine years and will first be applied to what are deemed the riskiest LDTs. However, some tests will remain excluded from FDA regulations. Such LDTs include those which treat rare diseases and those for which there is no FDA-approved test.

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A bill amending Title XVIII of the Social Security Act will be proposed soon, marking the culmination of bipartisan efforts in the House of Representatives. Representatives Glenn Thompson (R-Penn.) and Mike Thompson (D-Calif.) are prepared to announce a new telehealth bill, titled the Medicare Telehealth Parity Act of 2014, which would reduce the Social Security Act’s current limitations on reimbursable telemedicine technologies.

Currently, the Social Security Act only permits reimbursement for telemedicine uses in rural health professional shortage areas (HPSAs) and non-Metropolitan Statistical Areas (MSAs). Not only are these qualifications limiting, they are also difficult to discern. For example, in the 2000s, the Health Resource and Service Administration (HRSA) eliminated the “rural HPSA” category from its designations, resulting in confusion regarding the correct application of the term. The forthcoming bill seeks to slowly resolve these reimbursement complications through a cost-effective, four-year plan:

  • Within six months of the bill’s passage, it would mandate that Medicare provide coverage for telemedicine in urban areas with a population of 50,000 or less. Additionally, the six month period would be used to increase care sites to include retail clinics.
  • Two years following the bill’s passage, Medicare coverage would expand to urban areas with a population of 100,000 or less. Furthermore, the bill would include home telehealth to the list of care sites, while expanding reimbursable services to encompass physical and speech therapy.
  • Lastly, after four years have passed, the bill would make telemedicine reimbursable across the United States.

In addition to the four-year plan, the bill seeks to officially add remote patient monitoring (RPM) to the Social Security Act’s list of reimbursable services. The bill defines RPM as “the remote monitoring, evaluation, and management of an individual with a covered chronic health condition . . ., insofar as such monitoring, evaluation, and management is with respect to such condition, through the utilization of a system of technology that allows a remote interface to collect and transmit clinical data between the individual and the responsible physician . . . or supplier.” By offering government reimbursement for RPM services, thereby expanding RPM use, the bill hopes to increase Medicare savings over time.

Also, the Representatives’ bill would task the Secretary of Health and Human Services (HHS) with developing standards for remote patient monitoring. Finally, the United States comptroller would be directed to conduct a study within two years of the bill’s passage, to determine the efficacy and estimated Medicare savings from the expansion of telemedicine applications.

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In a report released on July 9, 2014, the Senate Special Committee on Aging criticized the Centers for Medicare and Medicaid Services (CMS) for the increase in improper payments in the Medicare program, despite the increasing amount of audit activity and the resulting burden on Medicare providers.

The report noted that despite an increase in the number of contractors conducting pre and post-payment audits and in audits themselves, there has not been a reduction in the total rate of improper payments made to providers. In 2013, the rate jumped to 10.1%, from 8.5% in 2012. This was the highest rate in the last five years, despite significant efforts to combat improper payments.

The report also found numerous inefficiencies in the Recovery Audit Contractor (RAC) program and with other contractors more generally. For instance, the report noted that often times different audit contractors audit the same provider for claims that have been previously reviewed. This results in duplicative document requests that burden providers. The report recognized that providers often times providers must respond to documentation requests from contractors with their own unique timelines and specifications for proper documentation submission. The inconsistencies among contractors lead to significant confusion and, in some cases, denial of properly billed claims. Also noted was a problem well-recognized by the provider community, the withholding of Medicare funds during the later stages of the appeals process, despite the often the two, three even four year delay before providers receive an administrative law judge (ALJ) hearing decision. According to the report, one large hospital system has over $200 million withheld until its matters are adjudicated. The report recognized that for many providers, the ALJ level of appeal is successful. As an example, the report noted that for another health system, there was a 97% success rate for appeals at the ALJ level. The withholding of funds, especially when they have been properly billed, presents an enormous burden on all healthcare providers, even potentially forcing smaller providers to close their doors because they are unable to absorb the loss in revenue.

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Last week, the Office of Medicare Hearings and Appeals (OMHA) announced the Statistical Sampling Pilot Program (Pilot Program). The Pilot Program offers Medicare providers an alternative route, along with the Settlement Conference Facilitation Pilot, to reach a final determination for claims pending at the administrative law judge (ALJ) hearing level without enduring the 2-3 year delay for hearing. Although the Pilot Program offers a time-saving and perhaps more efficient option for Medicare providers, engaging in the Pilot Program also comes with risks as Medicare providers may “put all of their eggs in one basket” and rely on a single ALJ to issue a decision that affects a large volume of claims. In some cases, the provider may know the identity of the ALJ prior to agreeing to statistical sampling, but in other cases the provider will not.

The Pilot Program is available to Medicare providers that have requested an ALJ hearing following a Medicare Qualified Independent Contractor (QIC) reconsideration decision. At this time, the ALJ hearing requests must either be assigned to an ALJ or must have been filed between April 1, 2013 and June 30, 2013 and it must meet all jurisdictional requirements, including that it was filed timely. In order to be eligible for the Pilot Program, the Medicare provider must have a minimum of eligible 250 claims and the claims must be one of the following: (1) pre-payment claim denials; (2) post-payment non-RAC claim denials; or (3) post-payment RAC claim denials from one RAC. In addition, claims that are assigned to different ALJs or were requested in different consolidation groups may be incorporated into the request for statistical sampling.

A Medicare provider that meets the eligibility requirements for the Pilot Program may request statistical sampling by submitting a “Request for Statistical Sampling” form that is available on OMHA’s website. The provider must also submit a spreadsheet, a template is also available on OMHA’s website, that provides detailed information about the claims requested to be included in the statistical extrapolation.

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Recently, the Department of Health and Human Services (HHS) announced its new pilot program – Settlement Conference Facilitation (SCF) Pilot – to provide an alternative dispute resolution process for settling appealed Medicare claims denials. Through the SCF program, providers have the opportunity to discuss with the Centers for Medicare and Medicaid Services (CMS) the potential of a mutually agreeable resolution to the claims appealed to an Administrative Law Judge (ALJ) hearing. According to HHS, the settlement conference facilitator, who is an employee of the Office of Medicare Hearings and Appeals (OMHA), will use mediation principles to assist the appellant and CMS in reaching a mutual settlement agreement. If a settlement is reached between the appellant and CMS, the facilitator will draft the settlement document to be signed at the settlement conference by both parties. Once a binding settlement agreement has been executed, any pending ALJ hearing requests for the claims covered by the settlement agreement will be dismissed and no further appeal rights will be attached to those claims. On the other hand, if the parties are unable to reach a settlement agreement and the facilitator believes further efforts to reach an agreement will be unsuccessful, the SCF process will be concluded and the appealed claims will return to the ALJ level of appeal in the order the hearing request was originally received by OMHA.

Initially, HHS is limiting eligibility for the SCF pilot program to claims by Medicare Part B providers who have filed requests for ALJ hearing in 2013 and are not currently assigned to an ALJ. For those eligible providers, the request for SCF must include all of the provider’s pending ALJ appeals for the same item or service (i.e., all claims for the same item or service in which ALJ hearing requests were submitted in 2013). Appellants must include all appeals included in the applicable ALJ hearing requests, and may not request an SCF for some claims and proceed to the ALJ hearing for the remaining claims. Additional SCF eligibility requirements include that at least 20 claims must be at issue or, if fewer than 20 claims are at issue, at least $10,000 must be in controversy. Also, the amount of each individual claim must be less than $100,000. For claims subject to statistical sampling, the extrapolated overpayment amount at issue must be less than $100,000; however, HHS states that it will continue to explore expanding the SCF pilot program for larger extrapolated overpayment cases.

Although the SCF process is only available for a limited group of claims at this time, those providers whose appeals are currently ineligible (e.g., Part A providers) for the SCF pilot program may nonetheless view these developments as a silver lining as countless appealed claims are currently awaiting ALJ hearings to be scheduled – claims in which CMS has likely recouped all of the alleged overpayment amount. With the substantial volume of claims currently backlogged at OMHA causing two to three year delays before the appealed claims are finally adjudicated, appellants may soon be provided a forum to reach mutually agreeable resolutions with CMS and receive the timely payment in which the provider is entitled.

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On June 26, 2014, Michigan Governor Rick Snyder signed into law SB 690, allowing a physical therapist or physical therapist assistant to treat a patient without a physician’s referral. Pursuant to the new law, which goes into effect January 1, 2015, physical therapist may now treat self-referring patients without a prescription from a physician under the following circumstances: (1) for up to 21 days or 10 treatments, whichever comes first; or (2) the patient is seeking physical therapy services to prevent injury or promote fitness. With the signing of SB 690, all 50 states, as well as the District of Columbia, now provide for some kind of direct access to physical therapists.

Under the new law, when a physical therapist is treating a patient without a prescription from a physician, the physical therapist must refer the patient to a physician if the physical therapist has reasonable cause to believe that symptoms or conditions are present that require services beyond the physical therapist’s scope of practice. In addition, the law provides that the physical therapist must consult with a physician if the patient does not show reasonable response to treatment in a time period consistent with the standards of practice. The new law also provides that the physical therapist must determine that the patient’s condition requires physical therapy before delegating physical therapy interventions to a physical therapist assistant.

According to the House Committee’s summary of Senate Bill, these rule changes “do not create an open door to [physical therapy] services; a patient would need to obtain a prescription if more than 10 visits or three weeks of treatment were needed.” Moreover, as provided in concurrently adopted Senate Bills (SB691-SB694), an insurer would not be mandated to provide coverage for treatment that was not provided pursuant to a prescription from a physician.

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In a March 25, 2014 letter to the American Academy of Family Physicians (AAFP), CMS Administrator Marilyn Tavenner responded to an inquiry from the AAFP asking whether, if all of the “incident to” rules are met, may a physician bill Medicare for a Part B covered service provided by a pharmacist in the physician’s practice.

In its January 2014 letter, AFFP noted the “increasing emphasis on team-based care in family medicine” particularly in the context of a “patient-centered medical home.” Due to such changes, AAFP advised CMS that family medicine practices were employing pharmacists as part of the patient care team. Pursuant to the plan of care developed by the physician, these pharmacists were having and documenting direct, face-to-face encounters with patients where they reviewed “applicable patient history and medications” and counseled patients on the “risks and benefits of pharmaceutical treatment options” and “instructions for improving pharmaceutical treatment compliance and outcomes.” The AAFP took the position with CMS that such encounters would meet the definition of an established patient evaluation and management services (“E/M service”) and would be billed as an E/M service if the physician had provided the service. The AAFP also reviewed applicable Medicare rules on “incident to” billing, specifically section 60 of chapter 15 of the Medicare Benefit Policy Manual and stated that it “found nothing in Section 60 that would exclude pharmacists from this definition.” Accordingly, AAFP requested confirmation that a physician who met all of the “incident to” rules would be permitted to bill Medicare for a Part B covered service provided by a pharmacist in the practice.

In her response, Administrator Tavenner stated that CMS agreed with AAFP’s position that if all the requirements of the “incident to” statute and regulations were met, a physician may be reimbursed under Medicare Part B for services provided by pharmacists in the practice as “incident to” services.

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