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Last week, the House and Senate passed the “Red Flag Program Clarification Act of 2010.”  The Act limits the definition of “creditor” to a person who obtains or uses consumer reports in connection with a credit transaction, furnishes information to consumer reporting agencies in connection with credit transactions, or advances funds based on the recipients’ obligation to repay.  The bill excludes from the definition persons, such as health care providers, who “advance funds” by providing services before receiving payment.  Relevant government agencies, however, are permitted to designate creditors that will be subject to the Rule.  The Agencies will designate based upon the determination that the person manages accounts that are subject to a reasonably foreseeable risk of identity theft.  These designations must be made through agency rule making. 

The enforcement of the Red Flags rule has been delayed several times, with the most recent delay expiring on January 2011.  The FTC previously determined that health care providers met the definition of “creditor.”  While the Clarification Act’s revised definition would not include most health care providers, the FTC could still designate health care providers as “creditors” through the rule making process based on the risk of medical identity theft concerns previously voiced by the FTC. 

For more information on the Red Flags rule, please visit www.wachler.com or contact a Wachler & Associates attorney at 248-544-0888. 

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The United States Justice Department reported that in 2009 it collected $3 billion from pursuing health care fraud and other false claims against the federal government.  More than 80% of the recoveries were from healthcare fraud, including qui tam actions under the False Claims Act.  Bloomberg News reported that Tony West, Assistant Attorney General in charge of the Justice Department’s civil division, stated that the Justice Department would hold those who violate the federal False Claims Act accountable, whether they are a corporation or individual.  The $3 billion recovery in 2009, the second largest in history, is evidence of the aggressive nature with which the DOJ is pursuing False Claims Act violations. 

False Claims Act violations can give rise from submission of claims for services not rendered, submission of claims for services that were not medically necessary or were improperly coded and billed.  Further, as a result of the health care reform legislation, False Claims liability can attach to the retention of a known overpayment that is not refunded within 60 days of identification.  For more on the False Claims Act, or for assistance with health care regulatory or billing matters, please visit www.wachler.com or contact a Wachler & Associates attorney at 248-544-0888. 

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The proposed purchase of the Detroit Medical Center by Vanguard Health Systems Inc. has been conditionally approved by the Attorney General of Michigan Mike Cox.  This sale would bring a purported $1.5 billion in funding for the center.  The deal is tentatively set to take place on December 31, 2010 but there are still many issues that need to be worked out for the transaction to be completed.  One of the major issues still needing resolution before the final deal is the transferring of Medicare and Medicaid billing procedures from the nonprofit DMC to the for profit Vanguard.

For information on compliance issues associated with health care transactions please contact a Wachler & Associates attorney at 248-544-0888.

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As the focus on health care fraud continues within the federal government, Department of Health and Human Services Kathleen Sebelius and Attorney General Eric Holder recently participated in the third regional health care fraud prevention summit in Brooklyn, New York.  The stated purpose of the summit was to bring together interested parties to discuss innovative ways to curtail fraud perpetrated on the U.S. health care system.  In addition to Attorney General Holder and Secretary Sebelius, who spoke of new ways to battle fraud, there were educational panels to indentify best practices in the industry.

At the summit, the Office of the Inspector General introduced A Roadmap for News Physicians: Avoiding Medicare and Medicaid Fraud Abuse which is a tool to help explain to medical students the laws that apply to physicians and how they may comply with them.  This manual is the OIG’s way of educating doctors at the beginning of their careers in order to help prevent mistakes in billing and compliance issues.

This summit was part of President Obama’s series of summits that will be held across the country in order to educate practitioners, recognize innovative solutions, and help lower the cost of healthcare by mitigating fraud on the system.  Upcoming summits will be held in Detroit, Boston, Philadelphia and Las Vegas.

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The United States Supreme Court refused to hear a legal challenge to the healthcare reform law, the Patient Protection and Affordable Care Act (PPACA).  The Court declined without comment to hear the case originally filed in federal court in California by Steve Baldwin and the Pacific Justice Institute.  The plaintiffs challenged the constitutionality of the mandate that every American purchase health insurance by 2014.  Because a federal appeals court in California is still considering its decision, it would have been highly unusual for the Supreme Court to hear the challenge at this time. 

The California challenge to PPACA is only one of multiple challenges in courts around the country.  For instance, in Michigan a legal challenge was brought by the Thomas More Law Center.  In addition, there is another lawsuit filed by several states, the National Federation of Independent Business and two individuals. 

For more information on healthcare reform and its impact on providers, please visit www.wachler.com or contact a Wachler & Associates attorney 248-544-0888.

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The device manufacturer, ELA Medical, Inc. agreed to pay the United States $9,178,000 to settle allegations that it violated the False Claims Act by giving kickbacks to cardiologists in exchange for the cardiologists ordering and causing hospitals to order ELA’s cardiac devices.  The settlement resolves a qui tam action from 2006 that was filed by a former ELA employee.  According to the allegations the cardiologists were given gifts, meals and entertainment, tickets to sporting events, travel to medical conferences, travel to Costa Rica, fishing and boating trips and payment of travel expenses for the physicians’ spouses.  In addition to the settlement payment, ELA agreed to pay $485,000 to the relator’s attorneys and ELA also agreed to enter into a Corporate Integrity Agreement with the Officer of Inspector General of the U.S. Department of Health and Human Services (OIG).  The relator’s share of the settlement amount is approximately $1.9 million.

There is also a second qui tam action pending against ELA.  The relator in that action alleges that ELA paid kickbacks to cardiologists by paying excessive compensation for training services.  The parties in the second qui tam action have reported that they are engaged in settlement discussions and that the case has been administratively closed due to those discussions. 

For more information on the False Claims Act and Anti-Kickback Statute, please visit www.wachler.com or contact a Wachler & Associates attorney at 248-544-0888.

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The Centers for Medicare and Medicaid Services (CMS) published a proposed rule on November 5 regarding RAC activities for Medicaid programs.  Section 6411 of the Patient Protection and Affordable Care Act (PPACA) requires states to contract with one or more Medicaid RACs by December 31, 2010.  By that date, states are also required to submit to CMS a State Plan Amendment (SPA) which documents the initiation of the Medicaid RAC program.  The proposed rule stated April 1, 2011 as a goal for Medicaid RAC implementation.

The proposed rule addresses four main points including contingency fees, reporting, appeals and coordination of audit efforts.  Comments are requested on the current methodologies for determining the maximum contingency fees allowed under the Medicaid RAC program.  According to the proposed rule, no state will pay a contingency fee higher than the maximum allowed under the Medicare RAC program, unless it provides ample justification for an exception based on the existing state law.  States must also provide incentives for the identification of underpayments to the Medicaid payments.

In addition, under the proposed rule states will report to the federal government only the net amount of collected overpayments after contingency fees that were paid to the contractor have been subtracted from the total.  Each state will be required to refund the federal share of the net overpayment amount to the federal government.  States will also have to issue reports describing the effectiveness of their Medicaid RAC programs.

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Cardiac Pacemaker Implantations and Cardiac Defibrillator Implantations were two of the most targeted services from an overpayment standpoint during the RAC demonstration period.  This makes them potential prime targets for the permanent RACs in the future.  As such, sufficient documentation of the need for services provided at the inpatient level of care are paramount when providing these services, due to increased scrutiny they will undoubtedly receive from the permanent RACs once approved.  CMS recently noted the high probability of overpayment in connection with these claims in an MLN Matters article.

To date, neither pacemaker implants nor defibrillator implants have been approved for medical necessity reviews by the RACs.  But the potential for recoupment suggests these procedures will be approved for medical necessity review in the future.  Currently, the permanent RACs are reviewing percutaneous cardiovascular procedures and other vascular procedures for medical necessity in all four regions.

Providers need to be prepared to show the medical necessity of the inpatient stay for cardiac implantations in the medical record.  If you would like additional information regarding preparing for RAC reviews or would like to have your current procedures reviewed for compliance, please contact a Wachler & Associates attorney at 248-544-0888.

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The U.S. Justice Department filed a lawsuit against Blue Cross Blue Shield of Michigan (BCBSM) on Monday, October 18.  The Justice Department alleges that BCBSM violated antitrust laws by using its strong presence in the market to increase prices for its competitors, which resulted in Michigan residents paying higher health care and health insurance costs.  Specifically, the Justice Department says that BCBSM required hospitals to charge competitors more.  The Detroit Free Press reported that the Michigan attorney general’s office stated, “the investigation showed that Blue Cross increased its payouts to many hospitals to guarantee the hospitals would in turn charge all other insurers up to 40 percent more, pricing them out of the market and raising prices on all Michigan consumers.” 

The Detroit Free Press reported that BCBSM adamantly refuted the allegations.  BCBSM stated that the lawsuit was without merit and that its responsibility in contracting with hospitals is to negotiate on behalf of its members and costumers, not to negotiate against other health care insurers.

For more information on Michigan health care news, please visit the Michigan Healthcare News section on the Wachler Blog. 

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In September the Joint Commission announced that it will begin to accredit patient-centered medical home models for physicians by July 2011.  A medical home model is a method to deliver care that is based on the ability to demonstrate evidence-based protocols, self-management education and care coordination with specialists and other facilities.  The Joint Commission’s final standards will be available in March 2011 and on-site surveys will begin in July 2011. 

The American Medical Association supports patient-centered medical homes, but stated to American Medical News that it will continue to work with the Joint Commission to ensure that proposed accreditation standards will focus on patient safety and access to physician care.  Currently, some of these practices follow the standards published by a Washington D.C.-based organization, National Committee for Quality Assurance (NCQA).  NCQA argues that more accreditation or recognition bodies will complicate the accrediting landscape and will cause confusion among providers.

For more information on patient centered medical homes or other health care reform concepts, please contact a Wachler & Associates attorney at 248-544-0888.

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