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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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Recently, the Centers for Medicare and Medicaid Services (CMS) announced that it has decided to extend the Inpatient Hospital Prepayment “Probe and Educate” reviews. The probe reviews, which were previously extended to March 31, 2014, have now been extended for dates of admission through September 30, 2014. During the probe reviews, Medicare Administrative Contractors (MACs) will continue to review and deny claims found not to be in compliance with the 2-midnight rule. These reviews will continue to be conducted on a prepayment basis, and the MACs will continue to provide education to hospitals throughout the “probe and educate” review process. During the probe review process, other Medicare contractors, including Recovery Audit Contractors (RACs), will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission between October 1, 2013 and October 1, 2014.

In an effort to provide updated information and additional clarification, CMS will host a follow-up Special Open Door Forum (ODF) on February 4, 2014 from 1:00 p.m. – 2:00 p.m. Much like the previous ODFs, interested parties will have an opportunity to ask questions regarding inpatient hospital admission, medical review criteria, physician orders and physician certification. You can participate in the ODF via conference call: Participant Dial-In Number: 877-251-0301; Conference ID: 47736519.

If you have any questions regarding the “probe and educate” reviews, physician orders and certification requirements, the 2-midnight rule, or medical review criteria, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

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On January 14, 2014, the Centers for Medicare & Medicaid Services (CMS) modified their policy regarding the disclosure of physician payment information under the Freedom of Information Act (FOIA). Effective March 18, 2014, CMS will now evaluate requests for individual physician payment information on a case-by-case basis.

CMS Principal Deputy Administrator, Jonathon Blum, cites the agency’s commitment to greater transparency and the benefits numerous stakeholders have identified that would result from an increase in the availability of information as reasons for the change in policy. Some benefits CMS hopes the policy will lead to include:

• Provider collaboration on improved care management and lower costs in the delivery of health care;

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The Department of Health and Human Services (HHS), Office of Inspector General (OIG) recently released an advisory opinion that highlights long-standing OIG guidance as to how industry stakeholders can contribute to independent, bona fide charitable assistance programs. In this case, the patient assistance program (“Requestor”) provides grants to patients suffering from a specific disease for insurance premiums and other expenses not covered by insurance. The Requestor is a supporting organization of a nonprofit charitable foundation (“Foundation”) that exists solely to support the disease.

The Requestor’s main source of funding is the Foundation. However, all funds received from the Foundation are ultimately donations by pharmaceutical manufactures of the drugs used to treat the disease. The Requestor thus sought an advisory opinion to determine if such an arrangement would be grounds for civil monetary penalties under section 1128A(a)(5) of the Social Security Act (“Act”), covering improper beneficiary inducements, or other provisions of the Act as those sections relate to the Federal anti-kickback statute.

In the advisory opinion, AO No. 13-19, the OIG reiterates long-standing OIG guidance that industry stakeholders may contribute to the health care safety net for financially needy patients, including beneficiaries of Federal health care programs, by contributing to independent, bona fide charitable assistance programs. The OIG also states that such programs should not exert influence over donors, and donors should not have links to the charity that could directly or indirectly influence the charity’s operations or subsidy programs. Further, such programs cannot function as a conduit for payments from donors to patients, impermissibly influence beneficiary choices, or engage in practices that effectively subsidize a donor’s particular product.

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The Office of the Inspector General (OIG) recently released a study detailing problems associated with overpayments to clinicians who provide Medicare Part B services. The study specifically focused on what the OIG referred to as “high cumulative payment” clinicians, who are clinicians receiving total annual payments of more than $3 million for Part B services during CY 2009. The OIG recognizes that this subset of providers poses a greater risk for improper payment or fraud in the Medicare system and will seek to implement new programs and policies to detect those problems.

The study found that from 2008 to 2011, both the number of Medicare Part B clinicians generating high cumulative payments, as well as the total amount of those payments, increased almost 78%. Most importantly, the study identified 303 clinicians who supplied more than $3 million in Part B services in 2009. Medicare administrative contractors (MACs) and Zone Program Integrity Contractors (ZPICs) further identified 104 specific individuals of the 303 (34%) for improper payments reviews. By the end of 2011, MACs and ZPICs reviewed 80 of the 104 clinicians and identified $34 million in over payments. Repercussions for these clinicians included suspended licenses and mandatory prepayment reviews, and even two indictments. The OIG recommends that CMS establish a cumulative payment threshold above which a clinician’s claims would be selected for review as well as implementing a procedure for timely identification and review of clinicians’ claims that exceed the cumulative payment threshold.

The OIG views the results of this investigation into high cumulative payment clinicians as a more useful method of identifying potentially improper payments. As a result of this study, clinicians who are reimbursed through Medicare Part B should ensure that their billing practices are in compliance with Medicare documentation and reimbursement rules, as well as determine whether their utilization rates differ significantly from their peers.

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On Wednesday, February 12, at 10:00 am EST, the U.S. Department of Health & Human Services, Office of Medicare Hearings and Appeals (OMHA) will hold a Medicare Appellant Forum in the Cohen Auditorium of the Wilbur J. Cohen building at 330 Independence Ave. SW, Washington DC, 20024. The purpose of the forum will be to:

  • Inform OMHA appellants on the status of OMHA operations;
  • Discuss a number of initiatives designed to mitigate the growing backlog of OMHA-level appeals; and
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