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On February 24, 2014, the Department of Health and Human Services’ (HHS) Office for Civil Rights (“OCR”) announced in the Federal Register that it plans to survey up to 1,200 organizations to identify candidates for audits under the Health Insurance Portability and Accountability Act (HIPAA) Audit Program. In accordance with the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, OCR is required to schedule periodic audits to ensure that covered entities and business associates are in compliance with HIPAA Privacy, Security, and Breach Notification Rules.

According to the notice, the survey will assess covered entities and business associates’ “suitability” (e.g., size, complexity and fitness) for an audit by collecting information from these respondents such as “number of patient visits or insured lives, use of electronic information, revenue, and business locations.” Although the total number of entities to be audited in 2014 is unclear, HHS expects that expanding the audit program to up to 1,200 organizations will provide a more accurate depiction of covered entities and business associates’ compliance with HIPAA. HHS will be accepting comments regarding this pre-audit survey until April 25, 2014.

Since the inception of the HIPAA Privacy and Security Rules in 1996, Wachler & Associates has counseled providers and other covered entities of all sizes in HIPAA compliance. In order to attain compliance, providers should update security policies and procedures, business associate agreements, privacy policies and procedures, and HIPAA privacy notices. In addition, all employees should receive ongoing training in HIPAA compliance. If your entity does not already have these procedures in place, Wachler & Associates can help you implement these important compliance measures. If you have any questions or require assistance developing and implementing a HIPAA compliance plan for your organization, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

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Wachler & Associates partner Andrew Wachler appeared on Fox 2 Detroit this morning to discuss the recent announcement that Beaumont Health System, Botsford Health Care, and Oakwood Healthcare have signed a letter of intent to form a new $3.8 billion nonprofit health system.

In his interview, Mr. Wachler described the advantages this affiliation will provide in improving patient care and accessibility. He indicated that it could allow patients access to each hospitals’ various specializations and also allow the hospitals to share technology and capital resources, which in time has the potential to improve quality of care and reduce costs.

Mr. Wachler also explained that the Affordable Care Act, which includes the concepts of bundled payments and Accountable Care Organizations (ACOs), incentivizes large health systems to manage care efficiently, and may consequently result in a greater focus on wellness and preventive care.

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On Thursday, in a bipartisan effort, two senators unveiled a proposed bill that attempts to clarify the infamous two-midnight rule. Senator Robert Menendez, a Democrat from New Jersey and Senator Deb Fischer, a Republican from Nebraska are co-sponsors of the bill. Titled as Two-Midnight Rule Coordination and Improvement Act of 2014, the bill mirrors a similar one currently working its way through the House of Representatives and has the support of numerous hospital and doctor associations.

Most notably, the bill would require the Secretary of the Department of Health and Human Services to consult with interested stakeholders – such as hospitals, physicians, Medicare administrative contractors, recovery audit contractors, and other parties determined appropriate by the Secretary – to determine the criteria for short inpatient stays. Additionally, the bill would require CMS to develop a payment methodology for the shorter inpatient stays. Although, in developing the payment methodology, the bill does not require consultation with the same stakeholders used in developing the criteria for shorter inpatient stays, the bill strongly encourages CMS to consider the criteria that the stakeholders developed.

Equally important in the bill are the timing provisions relating to the implementation of the criteria for shorter inpatient stays. Most importantly, the proposed bill keeps the current enforcement delay in place. The bill would also provide an additional year long delay in the enforcement of the two-midnight rule if the criteria for shorter inpatient stays are not implemented during the IPPS annual notice and comment rulemaking process for fiscal year 2015. If the criteria are in place during the fiscal year 2015 rulemaking process (i.e., regulations are finalized in 2014), the bill authorizes RACs to begin their work at the time of implementation, but not prior to October, 1, 2014. This measure ensures that hospitals are not subject to audits until the criteria are made final.

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On Tuesday, the Centers for Medicare and Medicaid Services (CMS) ordered its Medicare Administrative Contractors (MACs) to take a second look at all of the claims that the MAC denied under the Probe and Educate review process. These re-reviews are being done to ensure that the MACs’ claim denials, and the education provided to the hospitals up to this point, is consistent with CMS’s recent clarifications regarding the two-midnight rule and physician orders and certification requirements. During the re-reviews, if the MAC determines that its previous decision to deny the claim was improper, the MAC may reverse the denial and issue payment outside of the Medicare appeals process.

While the re-review process is in effect, hospitals should contact their MAC to determine whether a re-review has taken place. Until this confirmation is received, hospitals should not file a redetermination appeal request. CMS announced that it will waive the 120 day timeframe for filing a redetermination appeal for any redetermination requests received before September 30, 2014 for Probe and Educate denials that occurred on or before January 30, 2014. If a hospital has already filed an appeal for a claim denial on or before January 30, 2014, that claim will also be subject to a re-review by the MAC. Upon re-review, if the MAC upholds its original denial decision, that claim will be automatically transferred to a redetermination appeal.

Hospitals should welcome the news for these re-reviews. First, there is the possibility that healthcare providers will be reimbursed for claims that were improperly denied upon initial review. Secondly, the re-review process will be less formalistic, and thus less costly and time-consuming than the normal appeal process.

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On December 18, 2013, Congress enacted legislation extending the Medicare therapy cap until March 31, 2014. The 2014 outpatient therapy cap limits are $1,920 for physical therapy and speech-language pathology services combined, and $1,920 for occupational therapy services. In order to qualify for an exception to the therapy cap limits and continue to receive Medicare reimbursement, therapists must first document the need for medically reasonable and necessary services in the beneficiary’s medical record and, separately, the therapist must indicate on the Medicare claim for services that the outpatient therapy services above the therapy cap are medically reasonable and necessary. Further, starting January 1, 2014, the Medicare outpatient therapy cap limits will also apply to therapy services performed in critical access hospitals.

Providers that meet or exceed the $3,700 threshold in therapy expenditures will be subject to a manual review. The manual review process for 2013 is not expected to change in 2014. Under the manual medical review process, Recovery Audit Contractors (RACs) will conduct either prepayment or postpayment review for claims exceeding $3,700 depending on the state. Currently, only Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri are subject to prepayment review, while the rest of the nation is subject to postpayment review.

A bill that is currently working its way through Congress seeks to permanently repeal the therapy caps. The Medicare Access to Rehabilitation Act has bipartisan support and its sponsors argue that an arbitrary cap on outpatient services without regard to clinical need discriminates against some of the most vulnerable and needy Medicare recipients.

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Recently, the Centers for Medicare and Medicaid Services (CMS) announced that, effective February 22, Recovery Audit Contractors (RACs) may no longer send additional documentation requests (ADRs) to providers for post-payment audits. In addition, February 28 is the last day a Medicare Administrative Contractor (MAC) may send prepayment ADRs for the RAC Prepayment Review Demonstration. According to CMS, this pause in ADRs is being implemented to allow the RACs to complete all outstanding claim reviews by the end of their current contracts. Furthermore, CMS stated that this pause will also allow CMS to continue to refine and improve the RAC program. This announcement was published less than a week after the Office of Medicare Hearings and Appeals (OMHA) Medicare Appellant Forum, which was held to address the current backlog of cases pending at the ALJ level of appeal.

It appears that, as a result of provider input as well as recent legislative participation, CMS is recognizing the challenges to providers of intense RAC scrutiny and withholding of payment without the corresponding appeal rights afforded under the statute. From this notice, we are hopeful that the ADRs will cease virtually immediately from the RACs and that, as of June 1, the MAC will not be able to effectuate offset for initial denials by the RACs. Hopefully, this will provide some needed relief to Medicare providers and give OMHA a chance to reduce its backlog so that, in the future, providers may receive due process in the timely manner that they are entitled to.

Wachler & Associates will continue to keep you updated on CMS’s changes to the RAC program and appeals process. If you need assistance in your defense of a Medicare audit, or have questions pertaining to best practices for appealing to the ALJ, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com

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On January 15, 2014, the Centers for Medicare & Medicaid Services (CMS), issued revisions to their policy manuals, including the Medicare Benefit Policy Manual, that clarify that “Improvement Standards” are not required for determining claims for Medicare coverage involving skilled care, including skilled nursing facilities (SNF), home health (HH), and outpatient therapy (OPT) benefits. The purpose of these revisions is to comply with the January 24, 2013 Jimmo v. Sebelius settlement agreement which required clarification that coverage of skilled nursing and skilled therapy services “…does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.” Citing the agreement’s justification, CMS noted that, no “Improvement Standard” is to be applied in determining Medicare coverage for maintenance claims that require skilled care. Medicare has long recognized that even in situations where no improvement is possible, skilled care may nevertheless be needed for maintenance purposes (i.e., to prevent or slow a decline in condition). The Medicare statute and regulations have never supported the imposition of an “Improvement Standard” rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient’s condition. Thus, such coverage depends not on the beneficiary’s restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves. The manual revisions serve to reflect and articulate this basic principle more clearly.

Included with the manual revisions, CMS took the opportunity to introduce additional guidance for appropriate documentation in facilitating accurate coverage determinations for claims involving skilled care. CMS noted that, “While the presence of appropriate documentation is not, in and of itself, an element of the definition of a ‘skilled’ service, such documentation serves as the means by which a provider would be able to establish and a Medicare contractor would be able to confirm that skilled care is, in fact, needed and received in a given case.”

The manual clarifications fulfill the first step required of CMS in the Jimmo settlement agreement. The agreement also sets forth an educational campaign, in which CMS agreed to disseminate written materials to contractors, adjudicators, providers, and suppliers, and conduct national conference calls with providers and suppliers as well as Medicare contractors, Administrative Law Judges, medical reviewers, and agency staff, to communicate the policy clarifications and answer questions. CMS has also committed to engage in accountability measures to ensure beneficiaries receive the care to which they are entitled. Such measures include review of a random sample of SNF, HH, and OPT coverage decisions to determine overall trends and identify any problems, as well as a review of individual claims determinations that may not have been made in accordance with the principles set forth in the settlement agreement.

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This morning, Andrew Wachler, managing partner of Wachler & Associates, appeared on RACmonitor’s special coverage of the ALJ Appellant Forum taking place today in Washington. Mr. Wachler provided some context for the occasioning of this forum. “When you really look at the event,” Andrew Wachler said, “it starts back in 2005.” This was when the appeal system was changed to align Part A and Part B appeals. The change in legislation provided specialized administrative law judges, in an attempt to curb excessive wait times in the appeals process. The legislation imposed a statutory requirement to issue a response within 90 days of appeal filing. However, Mr. Wachler says, “the brunt of hearing requests have not been acted upon.” In a conversation with Judge Nancy J. Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), Mr. Wachler had previously suggested the establishment of a committee of stakeholders to meet and discuss inefficiencies in the process. Judge Griswold suggested such a forum would occur, and today’s event appears to be just that.

The main question today is whether the forum represents a meaningful attempt at reform and addressing the backlog, or whether it is merely meant to placate the providers. Mr. Wachler remains skeptically optimistic. However, while the forum today will provide some practical tips on navigating the ALJ appeals process, Mr. Wachler does not expect it to solve what he believes is a significant problem – “the holding of provider’s money while we have these delays is unconscionable….people are being put out of business while they wait.”

Mr. Wachler will be appearing again this afternoon on RACmonitor. Information on their special coverage of the ALJ Appellant Forum can be found here. If you have any questions regarding the information provided at the forum, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

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On January 16, 2014 the Federal Trade Commission (FTC) unanimously reaffirmed its broad authority to regulate a healthcare provider’s data security program deemed inadequate by the FTC in protecting consumers from identity theft or misuse of personal information. The FTC held that a provider’s program is inadequate if it fails to provide reasonable and appropriate data security measures. A company’s failure to provide reasonable and appropriate data security measures falls within the purview of Section 5(a) of the FTC Act’s prohibition of “unfair … acts or practices.” Further, the FTC held that HIPAA, HITECH, and other statutes do not restrict the FTC’s authority under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), to challenge data security measures that it has reason to believe are unfair acts or practices.

The impetus for this ruling comes from an August 2013 complaint filed against LabMD, a clinical laboratory, alleging that LabMD failed to employ reasonable and appropriate measures to prevent unauthorized access to consumers’ personal information, constituting an unfair act or practice in violation of Section 5(a) of the Act. LabMD moved to dismiss the FTC’s complaint, arguing that the FTC had no authority to address private companies’ data security programs under the Act, and that by enacting Health Insurance Portability and Accountability Act (“HIPPA”) and other statutes, Congress implicitly restricted the FTC’s authority to enforce the Section 5 of the Act in the field of data security. In denying LabMD’s motion to dismiss, the FTC determined that nothing in the federal statutes reflected a ‘clear and manifest’ intent of Congress to restrict the FTC’s authority over unfair data and security practices. Furthermore, the FTC held that “so long as the requirements of those statues do not conflict with one another, a party cannot plausibly assert that, because it complies with one of these laws, it is free to violate the other.”

As the FTC reasserts its broad authority under the Act, healthcare providers should reexamine their data security programs to ensure that they adequately protect consumers’ personal information in the event of an investigation by the FTC.

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On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to the Medicare Prescription Drug Benefit (Part D) Program. The proposed changes, such as the “any willing pharmacy” contracting requirement, could significantly impact how Part D Prescription Drug Plan Sponsors operate and interact with their contractors, beneficiaries, and the government. Comments on the Proposed Rule are due to CMS by 5 p.m. EST on March 7, 2014.

The Proposed Rule provides a new interpretation of the non-interference provision in the statute relating to the Department of Health and Human Services (HHS) relationship with drug manufactures, pharmacies, and Sponsors. Since 2004, this statute has been interpreted to extend to negotiations between any of those parties. However, if the Proposed Rule is implemented, the non-interference provision would be interpreted as to apply only to pharmaceutical manufacturer’s negotiations with pharmacies and Sponsors and would not apply to negotiations between Sponsors and pharmacies.

CMS also proposed a dramatic change to its interpretation and application of two statutory provisions: the provision establishing Sponsors’ obligation to contract with “any willing pharmacy,” and the provision allowing Sponsors to create tiered pharmacy networks. Historically, CMS has interpreted these two provisions as requiring Sponsors to include any pharmacy willing to meet the Sponsors’ “standard” terms and conditions in the Sponsor’s pharmacy network. Sponsors were still able to contract with a limited number of “preferred” pharmacies with alternate terms and conditions, such as lower cost-sharing obligations for covered Part D drugs. In the Proposed Rule, CMS suggests Sponsors who have “standard” and “preferred” pharmacies would be required to allow every pharmacy to have the opportunity to contract under the “preferred” terms and conditions, thus eliminating Sponsors’ ability to develop exclusive arrangements with select business partners. Furthermore, any pharmacy offering “preferred” cost-sharing would be required to meet a price “ceiling” established by the Sponsor, which must be less than the lowest price (the “floor price”) the Sponsor has with “standard” cost-sharing pharmacies. CMS also proposed that Sponsors require pharmacies contracting under the preferred terms and conditions to offer lower prices on all drugs in return for the lower cost-sharing.

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