Wachler & Associates Health Law Blog

Published on: November 17, 2011

CMS Announces RAC Pre-Payment Review Demonstration Program

The Centers for Medicare & Medicaid Services announced a Recovery Audit Contractor (“RAC”) Pre-Payment Review Demonstration Program on November 15, 2011. The announcement of this program is a major shift in the RAC program because previously RACs were only allowed to conduct post-payment reviews of providers. Although the program is a demonstration and will only affect providers in 11 states, it confirms that CMS policy has shifted from the “pay and chase” model to a more aggressive, proactive and preventative model.

The Pre-Payment Review Demonstration Program (“Demonstration Program”) will be conducted for three years from January 1, 2012 to December 31, 2014. It will be implemented in 11 states. Seven of the states were chosen because of “a high level of fraudulent claims and providers” (MI, FL, CA, TX, NY, LA and IL) and the remaining four states were chosen because of high claims volumes of short inpatient hospital stays (PA, OH, NC and MO). The Demonstration Program will build on the RACs’ existing infrastructure to review claims and will initially focus on inpatient hospital claims, specifically short stays. CMS will choose more specific claim types of reviews as the Demonstration Program continues and RACs will review the claims selected.

The Pre-Payment Review RAC Demonstration Program reflects the ongoing difficulty to balance Medicare program integrity and the detrimental effect a pre-payment review has on Medicare providers. Pre-payment review is an aggressive method for contractors to audit providers and proactively prevent improper payments. However, pre-payment review threatens providers because it significantly impacts cash flow and there are no substantive criteria or procedures in place to determine placement on or removal from pre-payment review. With the harsh impacts of pre-payment review on providers, we also have concerns about RAC auditors being financially incentivized through a contingency fee to place providers on pre-payment review.

Published on: November 16, 2011

CMS Announces Part A to Part B Rebilling Demonstration Program

by Wachler & Associates, P.C.

Yesterday, the Centers for Medicare & Medicaid Services (“CMS”) announced the Part A to Part B Rebilling Demonstration Program (“Demonstration Program”). The Demonstration Program will allow a select number of hospitals to receive 90 percent reimbursement of the Part B payment for Part A inpatient short stay claims that are denied on the basis that an inpatient claim was not medically necessary and reasonable because the services were not provided in the appropriate care setting.

Wachler & Associates, P.C. has been instrumental in the effort to obtain Part B reimbursement for hospitals with Part A claims denied as not medically necessary and reasonable. Along with the American Hospital Association (“AHA”) and other industry leaders, Wachler & Associates has met with CMS three times since 2009 to realize Part B reimbursement for hospitals. From the CMS announcement on November 15, it appears that the persistence has resulted in a Demonstration Program that achieves some, but not all, of the industry’s goals.

The Demonstration Program will be conducted for 3 years, beginning on January 1, 2012 and ending on December 31, 2014. Up to 380 hospitals will be chosen to participate in the Demonstration Program and will be accepted on a first-come, first-served basis. In addition, there will be a maximum amount for small, medium and large facilities.

Published on: November 10, 2011

Recent RAC Activity

by Wachler & Associates, P.C.

DCS Healthcare, RAC for Region A, recently added four new issues for providers in Maryland and 16 new issues for providers in all Region A states to its CMS-approved issues list. Listed below are 6 examples of approved issues. Please visit DCS Healthcare’s website to view the remaining issues.

Musculoskeletal disorders MS-DRGs: 542-566. Medicare pays for inpatient hospital services that are medically necessary for the setting billed. Medical documentation will be reviewed to determine that services were medically necessary. MS-DRG: 542-566 (Maryland)
Infections MS-DRG: 094-096;177-179;488-489;539-41;602-603;689-690;856-858;862-9;871-872;977. Medicare pays for inpatient hospital services that are medically necessary for the setting billed. Medical documentation will be reviewed to determine that services were medically necessary. (Maryland)

Published on: November 8, 2011

Physician Payment Sunshine Act Rules Delayed

by Wachler & Associates, P.C.

HHS this week announced that it would again delay publishing rules implementing the Physician Payments Sunshine Act (“PPSA”), established in last year’s Patient Protection and Affordable Care Act (“PPACA” or “health reform”). PPSA requires drug and medical device manufacturers to publicly report gifts and payments made to physicians and teaching hospitals. While the law requires public disclosure on an annual basis, it does not limit financial relationships between drug and device manufacturers and physicians.

The penalties for non-compliance with this law are fines up to $10,000 per occurrence, not to exceed $150,000 per year, and for each knowing failure to report, the fines are increased to up to $100,000 per occurrence and $1 million aggregate per year.

Beginning January 1, 2012 all drug and device manufacturers must record all gifts and payments to physicians and teaching hospitals. Manufactures must report this information to HHS by March 31, 2013, for HHS publication beginning September 30, 2013.

Published on: October 26, 2011

Recent RAC Updates

by Wachler & Associates, P.C.

CGI Federal, RAC for region B, has recently added a new issue to its CMS-approved issue list for providers in all region B states.

Pharmacy Supply Dispensing Fee. Medicare pays pharmacy supply/dispensing fees for immunosuppressive, oral anti-cancer, chemotherapeutic, and oral anti-emetic drugs as well as drugs used as part of an anti-cancer chemotherapeutic regimen when they are submitted on the same claim as the drug being billed. A claim submitted with a pharmacy supply/dispensing fee in the absence of any of the previously mentioned drugs represents an overpayment and will be denied as not medically reasonable and necessary.

Connolly Healthcare, RAC for region C, added two new issues to its CMS-approved issue list for suppliers that bill CIGNA Government Services.

Published on: October 26, 2011

CMS Announces the Creation of Its Advance Payment Model

by Wachler & Associates, P.C.

On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule for Accountable Care Organizations (ACO) participation in the Medicare Shared Savings Program. With this rule, in response to concerns related to start up costs associated with ACOs, CMS has also announced the creation of its Advance Payment Model, which is scheduled to commence in 2012. The Advance Payment Model was created to assist participants in the Share Savings Program that may not have the necessary funds to become and ACO (e.g. physician-owned hospitals and rural providers). These participants would be advanced future payments, which would later be recouped from future shared savings. However, if the ACO fails to complete the full agreement period or earned shared savings then it will be required to return the advance payment. An ACO would receive future payments in three ways: (1) an upfront, fixed payment, (2) an upfront, variable payment, and (3) a variable monthly payment.

The Advance Payment Model may be available to two types of organizations participating in the Shared Savings Program: (1) ACOs that do not include any inpatient facilities AND have less than $50 million in total annual revenue; and (2) ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals AND have less than $80 million in total annual revenue. ACOs that are co-owned by a health plan will not be eligible to participate. Participants of Pioneer ACOs will also be ineligible. CMS expects to select approximately 50 ACOs that meet the above eligibility requirements to receive funding.

The Advance Payment Model will only be available for ACOs beginning participation in the Medicare Shared Savings Program in either April 2012 or July 2012.

Published on: October 24, 2011

20 Notable Aspects of the Final ACO Rule

by Wachler & Associates, P.C.

On October 20, 2011, CMS released the much awaited final rule for implementation of the Medicare Shared Savings Program for providers and suppliers participating in Accountable Care Organizations (ACOs). The following are 20 notable aspects of the final rule:

•1. While the proposed rule would have required all ACOs to share risk of loss in the final year of the three year participation period, the final rule created an alternative for a “shared savings only” track (one-sided model) that will not require any sharing of losses. The final rule also retains the proposed two-sided model that will allow ACOs to share in an increased portion of savings, so long as the ACO also agrees to share in any losses to the program.

•2. The final rule will allow ACOs beginning in April 1, 2012 or July 1, 2012 to have a longer first performance year (21 months or 18 months respectively) and an option to receive an interim payment calculation following the first 12 months of participation. One-sided ACOs receiving an interim payment will be required to demonstrate a self-executing repayment mechanism similar to that which the two-sided ACOs must demonstrate.

Published on: October 20, 2011

CMS Releases Final Rule for Accountable Care Organizations

by Wachler & Associates, P.C.

Today, the Centers for Medicare and Medicaid Services (CMS) released its final rule for Medicare’s Accountable Care Organizations (ACO). The program is designed to encourage health care providers to coordinate care in order to achieve cost-savings and improve the quality of care for Medicare patients. Due to substantial criticism from the health care industry, CMS made a number of significant modifications to the proposed rules that were released in March. According to CMS, these modifications include:

Greater flexibility in eligibility to participate in the Shared Savings Program
Multiple start dates in 2012

Published on: October 20, 2011

OIG Releases Unfavorable Advisory Opinion Regarding an Arrangement Between a Physician-Invested Entity and a Pathology Laboratory

by Wachler & Associates, P.C.

On October 3, 2011, the Department of Health and Human Services Office of Inspector General (OIG) issued an unfavorable advisory opinion regarding a proposed arrangement under which physicians would invest in a company that would provide pathology laboratory management services to a third party.

Under the proposed arrangement, a physician who owns and manages a limited liability company (“Requestor”) would enter into a management contract with a pathology laboratory (“Path Lab”), whereby the Requestor would provide the Path Lab with various clinical laboratory services for a fixed number of hours each year. The Requestor would also provide utilities, furniture, fixture, the exclusive use of laboratory space and equipment, and marketing and billing services. In return, the Path Lab would pay a usage fee to the Requestor that would be calculated based on a percentage of the lab’s income which would be fixed in advanced for a 12-month term.

The Requestor’s owner/manager would offer an opportunity for physicians to invest in the Requestor. The new physician investors are anticipated to have little or no background experience in the clinical laboratory services field. According to the Requestor, the value of the investment interest that would be held by physician investors in a position to generate business for the Requestor through referral of laboratory specimens to the Path Lab would exceed 40 percent. Additionally, the Requestor anticipates that the business generated through referrals by physician investors would equate to substantially more than 40 percent of the Requestor’s gross revenue related to the furnishing of health care items and services. Finally, the Requestor has certified that each of the physician investors would have the option of referring specimens to the Path Lab but referrals are not implicitly or explicitly a condition of the arrangement.

Published on: October 19, 2011

US District Court Denies an Ambulance Services’ Request for Preliminary Injunction Against a Medicare PSC

by Wachler & Associates, P.C.

On October 7, 2011, the United States District Court of New Jersey, made a ruling denying an ambulance services’ request for a preliminary injunction against a Medicare program safeguard contractor (PSC). National Ambulance Services, Inc. (“Nationwide”) sought a preliminary injunction to restrain SafeGuard Services, LLC (“Safeguard”) from continuing its pre-payment audit of the ambulance service Part B claims for non-emergency ambulance transportation to patients. On January 13, 2011, the Centers for Medicare and Medicaid Services (CMS) had notified Nationwide that the PSC for its district would conduct a pre-payment process to ensure that all payments to Nationwide were consistent with Medicare policies. Subsequently, Safeguard conducted a pre-payment audit and recommended that 92.1% of Nationwide’s claims should be denied Medicare reimbursement. At the time of the request for preliminary injunction, Nationwide had only appealed a portion of the total claims to an Administrative Law Judge and none of the claims had reached the Medicare Appeals Counsel level of appeal.

The district court began its analysis by holding that it does not have the authority to make a ruling that involves the interpretation of the Medicare statute in regards to the evidentiary standard for coverage. Judicial review over matters arising under the Medicare statute was not available to the plaintiff until all available administrative remedies were exhausted. The court stated that without a final judgment of the Medicare Appeals Council, the plaintiff had not exhausted its administrative remedies, and consequently, the court lacked the authority to review any claims arising under the Medicare statute.

The court next moved to the issue of awarding Nationwide a preliminary injunction. In order to issue this type of emergency relief, the court stated it must consider the following four factors: (1) the likelihood that Nationwide would succeed on the merits; (2) the extent to which Nationwide will suffer irreparable harm without injunctive relief; (3) the extent to which SafeGuard will suffer irreparable harm if the injunction is issued; and (4) the public interest in the matter.