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The Health and Human Services Department (HHS) and the Department of Justice (DOJ) recovered a record $4.2 billion from healthcare fraud investigations last year, according to their jointly issued Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2012. DOJ and HHS reported that it deposited the $4.2 billion to U.S. Department of Treasury and Centers for Medicare & Medicaid Services (CMS) accounts. On average over the last three years, the federal government has recovered $7.90 for every dollar it spends investigating healthcare fraud and abuse. This is the highest three-year average return on investment in the 16-year history of the Health Care Fraud and Abuse (HCFAC) Program.

The bulk of these recoveries, it appears, are from pharmaceutical and device manufacturers and wholesalers. In July 2012, GlaxoSmithKline paid over $3 billion in a settlement deal to resolve its criminal and civil liability arising from the company’s failure to report certain safety data, its alleged false price reporting practices, and its unlawful promotion of certain prescription drugs. In November 2011, Merck Sharp & Dohme paid $950 million to resolve its criminal and civil liabilities related to its promotion and marketing of the painkiller Vioxx. In April 2012, McKesson Corporation paid $190 million to resolve claims that it violated the FCA by reporting inflated pricing information for a large number of prescription drugs, causing Medicaid to overpay for those drugs.

The DOJ also reported the number of its enforcement actions. In 2012, the DOJ opened 1,131 new criminal and 885 new civil healthcare fraud investigations. The DOJ also reported that 826 criminal defendants were convicted of healthcare fraud-related crimes during the FY 2012. Furthermore, the Office of Inspector General (OIG) excluded 3,131 individuals and entities based on criminal convictions for crimes related to Medicare and Medicaid, patient abuse or neglect, and as a result of licensure revocations.

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Senators Charles Schumer (D- NY) and Sherrod Brown (D – OH) are co-sponsors of the “Improving Access to Medicare Coverage Act of 2013 bill that would count observation stays toward the three-day minimum required for Medicare to cover the costs of follow up care after a serious hospitalization.

In recent years, the Centers for Medicare & Medicaid Services (CMS) has expanded its auditing programs in order to control the cost of Medicare and to prevent fraud and abuse. The auditing program scrutinizes claims for care that was not medically necessary and reasonable. If a Medicare contractor concludes that a beneficiary was allegedly improperly admitted as an inpatient, the contractor will request that the hospital return the identified overpayment. Although hospitals may appeal to challenge a Medicare contractor’s conclusion that an inpatient admission was not medically necessary and reasonable, it is evident that the audits have affected hospitals’ inpatient admission rates. Specifically, the unfortunate consequence of Medicare audit contractors’ aggressiveness is some hospitals may be motivated to place patients in observation status to avoid auditors’ scrutiny and potential financial penalties. An indication that this consequence is being realized is that the number and length of observation stays have skyrocketed. A study by Brown University reports a 34% increase in observation stays from 2007-2009. Currently, in order to receive rehabilitation or in home nursing care after a hospital stay, a Medicare patient must have a three-day inpatient hospital stay. However, hundreds of thousands of seniors are being denied Medicare coverage for therapy each year because they are admitted to the hospital under observation status instead of inpatient status.

Senator Schumer claims that correcting this “observation stay loophole” will save seniors money and will allow hospitals to provide better care for patients. CMS would have to cover the additional cost of follow up services for patients who have had a three-day stay in observation status. In the midst of the national budget debate, it will be interesting to see if the Improving Access to Medicare Coverage Act of 2013 will get any traction in Congress. In 2011 a similar act was introduced in both houses of Congress, but did not go anywhere.

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This Thursday, February 21, 2013, Wachler & Associate’s Founder, Andrew Wachler, will present Medicare Appeals & Reimbursement Impacted by New OIG Report for the RAC University’s Live Webcast. Recently, the Office of Inspector General (OIG) released a report entitled Improvements are Needed at the Amdministrative Law Judge Level of Appeal. Sign up for the webcast to learn what impact the OIG’s findings and recommendations to CMS could have on your Medicare appeal strategy.

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Wachler & Associates partner, Amy K. Fehn, was recently quoted in Home Health Line regarding an agency’s liability for a business associate’s HIPAA violations. She explains that even though business associates are separately liable for HIPAA violations, an agency will also be liable for the business associate’s noncompliance. An agency should notify affected patients of any HIPAA breach caused by a business Associate.

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On January 30, 2013, the Department of Health and Human Services (HHS) announced a proposed rule to provide women with coverage for recommended preventative care, including contraceptives, without charging the beneficiary a co-pay or deductible. A prior proposed rule regarding contraceptive coverage was issued in March 2012, followed by a public comment period. The recently released proposed rule reflects the various feedback and comments submitted by the public to HHS.

In addition to providing women with preventative care, without cost-sharing, the proposed rule also seeks to accommodate religious objections to contraceptive coverage by religious organizations. First, the proposed rules would simplify the criteria defining a “religious employer” so that it follows an Internal Revenue Code definition and primarily includes churches, other houses of worship, and their affiliated organizations. As such, eligible religious organizations, such as religious nonprofit hospitals, may be exempt from providing coverage for contraceptives. In order to be considered an eligible religious organization, the proposed rule requires that an organization must:

  1. Oppose providing coverage for some or all of any contraceptive services required to be covered under Section 2713 of the PHS Act, on account of religious objections;
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The Department of Health and Human Services (HHS) has issued a letter to health care providers to ensure that they are aware of their ability under the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule to take action, consistent with their ethical standards or other legal obligations, to disclose necessary information about a patient to law enforcement, family members of the patient, or other persons, when they believe the patient presents a serious danger to himself or other people.

In the letter, HHS describes the HIPPA Privacy Rule as requiring a careful balance between protecting the patients’ privacy and ensuring the safety of the patient and others. In general, the Privacy Rule requires providers to protect the privacy of the patients’ health information. However, an exception is created when a health care provider believes in good faith that a warning is necessary to prevent or lessen a serious and imminent threat to the health or safety of the patient or others. A provider is presumed to have a good faith belief if his or her belief is based on the provider’s actual knowledge, such as through the provider’s interactions with the patient, or when the provider is relying on a credible representation by a person with apparent knowledge or authority, such as a credible family member of the patient.

If a health care provider does believe in good faith that a warning is necessary to prevent a serious and imminent threat to the health or safety of the patient or others, then the Privacy Rule allows the provider to alert those persons whom the provider believes are reasonably able to prevent or lessen the threat. In alerting such persons, the provider may disclose patient information, including information from mental health records, if necessary. Furthermore, persons “reasonably able to prevent or lessen the threat” may include police officers, the patient’s family members, or even campus security or administration.
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The American Taxpayer Relief Act of 2012, which became law on January 3, 2013, and is more widely known for addressing the fiscal cliff, also included a less publicized provision which changes the lookback period in the “Provider Without Fault” provisions of the Social Security Act from three years to five years. This provision is important for providers who are defending a Medicare audit. This provision previously provided that, absent evidence to the contrary, providers would be deemed to be “without fault” if an overpayment is discovered more than three years after it was paid. Thus, this provision could often be used as a defense in Medicare audits where the claims at issue were discovered more than three years prior to the audit results letter (although the “absent evidence to the contrary” language was sometimes difficult to overcome). The American Taxpayer Relief Act of 2012 in Section 638 amends section 1870 of the Social Security to allow CMS a five year reopening period.

This provision appears to have been included in the Act in response to the Office of Inspector General’s (OIG) assertions that the three year lookback period was an obstacle to overpayment recovery.

Providers should note that other provisions of the “Provider Without Fault” language in section 1870 of the Social Security Act may still present a viable defense to the extent that the provider complied with all pertinent regulations, made full disclosure of all material facts, and on the basis of the information available, had a reasonable basis for assuming that the payment was correct.
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According to the latest figures released by the Centers for Medicare and Medicaid Services (CMS), Recovery Audit Contractors (RACs) corrected a total of $2.4 billion in improper payments in fiscal year (FY) 2012, of which $2.29 billion was attributable to overpayments collected and $109.4 million was from underpayments returned. The amount of total corrections in FY 2012 was an enormous increase from the $939.3 million in total corrections reported in FY 2011. Since October 2009, the RACs have corrected a total of $3.43 billion, of which roughly 92% has been attributable to overpayments collected.

Medical necessity of cardiovascular procedures was reported to be the top issue for overpayments in RAC regions A, B and C. In RAC region D, the top issue for overpayments was found to be minor surgery and other treatments billed as inpatient. The top RAC issues for underpayments were not provided by CMS.

If you need assistance in preparing for, or defending against RAC audits, or implementing a compliance program geared toward identifying and correcting potential risk areas related to RAC audits, please contact an experienced health care attorney at Wachler & Associates attorney at 248-544-0888.

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Recently, CGI Federal, the RAC for Region B, added two new home health issues to its CMS-approved issues list. In the past, RACs have primarily focused their attention on hospitals due to the high bounty they receive for correcting improper claims. However, as displayed in the 2011 RAC statement of work, CMS has directed RACs to begin pursuing other provider types beyond hospitals. The newly approved home health issues for Region B include:

  • No skilled service: To qualify for the home health benefit, a patient must need a skilled service. When a skilled service is needed, dependent services may also be covered. Dependent services are not covered for a patient who no longer needs a skilled service. Claims with no skilled service billed will be reviewed to determine whether the qualifying criteria of having an ongoing skilled service has been met.
  • Skilled nurse length of stay: Late episodes (third and later) receive increased payments, therefore payment incentives exist for extended home health care. Medicare covers skilled nursing services when they are reasonable and necessary. Extended nursing care for observation and assessment may not be covered. Claims for nursing services into the third episode and after will be reviewed to determine if all Medicare coverage criteria is met.

In addition to the new home health issues, CGI Federal also added two new issues targeting physicians in Region B, which include:

  • Incorrect Billing of Diagnosis Codes for Colonoscopy and Sigmoidoscopy: This is an automated review to ensure correct reporting of diagnosis codes for colonoscopy and sigmoidoscopy services.
  • Professional Trastuzumab Off-Label Uses: The purpose for this automated edit is to identify claims for Traztuzumab (Herceptin®) being used for off-label indications

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On November 8, 2012, the Centers for Medicare and Medicaid Services (CMS) released its final rule updating the home health prospective payment system for calendar year 2013. In particular, the final rule provides CMS with new options for surveying and sanctioning home health agencies (HHAs). According to the final rule, HHAs will be subject to a standard survey at least once every 36 months, which will be unannounced and performed by the state agency or an accrediting organization. The standard survey’s objective is to review the HHA’s compliance with a select number of conditions of participation (CoP). In addition to the standard survey, HHAs will be subject to a variety of other surveys, which include:

  • Abbreviated standard survey: similar to the standard survey, but concentrates on a smaller number of CoPs determined to be an area of concern; conducted within two months of a specific concern, receipt of complaints, or change in ownership.
  • Extended survey: used to ensure compliance with additional CoPs that were not surveyed in the standard survey, or to review certain policies and procedures in which the surveyors determined the HHA provided substandard care.
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