Health Law & Policy Matters

Health Care Attorneys | Mintz Levin Law Firm

Health Care Providers Among Those at Risk from “Backoff” Malware

Posted in Privacy & Security/HIPAA/HITECH

If your health care organization swipes credit cards, such as for the collection of copayments, parking fees, or even gifts in a gift shop, you should read this important update regarding “Backoff” Malware, which includes practical steps for protecting your credit card data.   “Backoff” Malware is responsible for more than 1,000 breaches of credit card information, including the Target mega breach.  Check out the Mintz Levin Privacy and Security Matters blog for more information on this and other privacy and security issues.

ML Strategies Posts Weekly Health Care Update on August 25, 2014

Posted in Health Care Reform, Payors & PBMs, Pharma & Medical Devices, Pharmacies

ML Strategies has posted its weekly Health Care Update.  This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.  Highlights this week include the Obama Administration’s release of updated contraception coverage rules.

On August 22nd, the Obama Administration proposed to extend a religious exemption to providing contraception coverage to closely held for-profit corporations. As we noted in an earlier update, the interim final rule, a result of the Supreme Court’s recent decision involving Wheaton College and Hobby Lobby, allows eligible organizations to notify the Department of Health and Human Services (HHS) of an objection to contraception coverage. In turn, HHS and the Department of Labor will work with insurers and third-party administrators. Under the rule, female employees may still receive contraception, but without cost sharing.

Closely held for-profit entities will be defined in two ways: 1) the entity could not be publicly traded, and ownership of the entity would be limited to a certain number of owners; or 2) the entity could not be publicly traded, and a minimum percentage of ownership would be concentrated among a certain number of owners. A Centers for Medicare & Medicaid Services (CMS) fact sheet on the changes can be found here.

CMS is taking comments on the proposal, including solicitation feedback on how to define “closely held,” alternative approaches to the rule, and on documentation, and disclosure of for-profits. Comments will be open for 60 days.

Click here to read this week’s full Health Care Update.

Another Court Weighs in on Rule 9(b)’s Requirements Under the False Claims Act

Posted in Fraud & Abuse, Hospitals & Health Systems

Written by: Thomas S. Crane, Brian P. Dunphy, and Laurence J. Freedman

A federal district court recently dismissed a qui tam relator’s complaint in a declined case against the Hospital for Special Surgery (“Hospital”), its former CEO, and an outside billing company alleging that they violated the federal False Claims Act (FCA) and the New York FCA resulting from alleged violations of the Anti-Kickback Statute (AKS) and the Stark Law.  Relator, Corporate Compliance Associates (CCA), asserted nine claims apparently based in part on information obtained from the Hospital’s former Chief Compliance Officer and former Associate Vice President of Physician Services.  CCA alleged, among other things, that the Hospital sought to induce patient referrals to the hospital by purportedly paying kickbacks to its contract physicians in the form of (1) compensation arrangements that included salary payments tied to referral volumes, and (2) payments for allegedly sham administrative and teaching responsibilities.  The court’s wide-ranging and thorough decision to dismiss is notable for at least two reasons, as discussed below. Continue Reading

Prescription Drugs: Refocusing the False Claims Act Microscope on the Rest of the Transaction

Posted in Fraud & Abuse, Payors & PBMs, Pharma & Medical Devices, Pharmacies, State & Federal Audits, Investigations & Litigation

Written by:  Tara E. Swenson

Over the last decade, it has often felt as though the pharmaceutical industry has been the government’s and whistleblowers’ main, and at times only, target for False Claims Act (“FCA”) investigations.  While manufacturers are likely not out from underneath the microscope, it seems as though the lens may have shifted slightly to focus on the rest of the prescription drug transaction.  As a result of this refocusing, parties that regularly contract with manufacturers, including Medicare Part D plan sponsors, pharmacy benefit managers (“PBMs”), and pharmacies, have been increasingly confronted with various forms of investigations arising under the FCA, Medicare Part D regulations, and complicated state Medicaid regulations. 

Applying the FCA to conduct under the Medicare Part D program can be an inviting option for the government and whistleblowers.  The Part D program consumes an enormous amount of tax-payer and beneficiary money and each party in a Part D transaction must comply with voluminous regulations that touch on every part of a pharmacy transaction, from a plan sponsor submitting a bid, to a pharmacy collecting the accurate co-payment for a given prescription, ending with the plan sponsor ultimately reporting to and reconciling with CMS all remuneration the plan sponsor received from any party that effectively reduced drug costs.  The complexity of the program and the various certifications that plan sponsors must submit to CMS create many opportunities for things to go wrong.  In the fall of 2012, RxAmerica L.L.C. settled an FCA case alleging that, in the second and third years of the Part D program, the plan sponsor had submitted inaccurate drug prices to CMS’ Plan Finder which resulted in beneficiaries enrolling in the plan based on significantly lower drug prices than they ultimately received.  Even companies that are very familiar with the Part D rules and federal fraud and abuse laws can find themselves the subject of an investigation if all levels of employees are not properly trained.  For example, Walgreens settled a FCA suit in 2012 for close to $8 million when its retail employees regularly accepted Walgreens’ promotional gift cards from federal health program beneficiaries even though the gift cards expressly stated that they were not valid for such individuals.    

Many of the Part D regulations are very complicated and proving that payment was contingent, either expressly or implicitly, upon compliance with a given regulation can be very challenging.  As a result, whistleblowers relying on so-called false certifications are generally having trouble establishing that violations of technical Part D rules resulted in actual false claims being submitted to the government.  A good example of this was provided by the recently dismissed Fox Rx, Inc. case.   

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OIG Finds Risk of Abuse in Specialty Pharmacy’s Per-Fill Fee Proposal

Posted in Fraud & Abuse, Payors & PBMs, Pharma & Medical Devices, Pharmacies

Written by: Rachel Irving Pitts

In an Advisory Opinion posted August 15, 2014, the Office of Inspector General (“OIG”) concluded that a proposed arrangement by a specialty pharmacy (“Requestor”) might generate prohibited remuneration under the Federal anti-kickback statute and would pose a risk of fraud and abuse

Specialty pharmacies dispense drugs that retail pharmacies typically do not – sometimes because the manufacturer limits the pharmacy network authorized to dispense the specialty drugs, or because managed care companies limit how they reimburse for dispensing, or because the retail pharmacy cannot manage the specialty drugs’ specific handling and inventory management requirements.  As a result, when a patient presents a specialty drug prescription to a non-specialty-drug-dispensing-pharmacy (a “Local Pharmacy”), the Requestor proposed to pay the Local Pharmacy a fee for certain “Support Services” the Local Pharmacy would provide when referring the patient and transferring the prescription to Requestor. The OIG did not look favorably on the Requestor’s proposed arrangement.

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CMS Re-Opens Open Payments System

Posted in Fraud & Abuse, Health Care Reform, Hospitals & Health Systems, Pharma & Medical Devices, Physicians

Written by Kate Stewart

As my colleague Brian Dunphy previously reported, CMS temporarily closed the Open Payments system earlier this month. Open Payments is the online system through which pharmaceutical and device manufacturers covered by the Sunshine Act report payments and transfers of value made to physicians and teaching hospitals. On Friday, August 15, CMS notified users and the Open Payments systems had re-opened.

CMS noted that the errors that led to the temporary shutdown were related to data errors that linked physicians with the same first and last name and intermingled their data in the reporting system. Though the initial CMS email announcing the re-opening of the Open Payments system did not address the volume of records flagged as incorrect during the shutdown, a CMS spokesperson noted that one-third of records submitted to Open Payments were being returned to manufacturers due to errors. Payments flagged as incorrect by CMS have been removed from the current data set and will not be published in this cycle of payment data.

Despite the temporary shutdown, CMS still plans to launch the Open Payments data publicly on September 30, 2014. Physicians and teaching hospitals now have until September 8, 2014 to review and dispute data reported about them. The correction period for disputed data, originally slated to end on September 11, 2014, will now run until September 23, 2014.

Acute Care Hospitals Settle FCA Lawsuits for $98 Million

Posted in Fraud & Abuse, Hospitals & Health Systems, State & Federal Audits, Investigations & Litigation

Written by Brian Dunphy and Larry Freedman

Community Health Systems, Inc. (CHS) and Community Health Systems Professional Services Corporation, together a national owner and operator of acute care hospitals, and 119 of their hospitals, agreed to pay $98 million to settle seven False Claims Act (FCA) lawsuits filed by qui tam relators around the country.  The settlement resolves allegations that:

  1. CHS hospitals, for certain emergency department admissions, billed for inpatient services that were not medically necessary instead of billing for outpatient or observation services,
  2. Laredo Medical Center (a CHS hospital) inappropriately billed certain scheduled hemodialysis and cardiac services as inpatient procedures instead of outpatient procedures, and
  3. Laredo Medical Center violated the Stark Law by having an improper financial relationship with the Cardiac Rehabilitation Unit medical director and submitting claims to Medicare for services referrred to the hospital by its medical director. 

CHS also entered into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services, Office of Inspector General (OIG), which requires CHS to undertake significant compliance efforts. Continue Reading

Federal Court Rejects Relator’s Swapping Allegations in False Claims Act Case

Posted in Clinical Laboratories, Fraud & Abuse, Hospitals & Health Systems, Long-term Care/Skilled Nursing Facilities, Physicians, State & Federal Audits, Investigations & Litigation

This week a federal district court in Ohio ruled in favor of Mobilex USA (Mobilex), the country’s largest mobile medical imaging company, on a motion for summary judgment in a False Claims Act (FCA) suit filed by a former employee, Kevin P. McDonough.  McDonough accused Mobilex of underpricing imaging services supplied to Medicare Part A beneficiaries so that it could obtain more lucrative Medicare Part B business.  Mobilex bills nursing homes directly, based on negotiated contracted rates, for Medicare Part A services because the nursing homes receive a per diem payment that covers most services, including mobile imaging, furnished to Medicare Part A beneficiaries.  The contracted rates typically are less than what Mobilex receives when it bills Medicare directly for Part B services.  McDonough alleged that this scheme of underpricing one service to secure additional business – commonly referred to as “swapping” – violated the Anti-Kickback Statute (AKS), which in turn led to violations of the FCA. Continue Reading

Continuing a Growing Trend, Telemedicine Efforts Move Forward

Posted in Clinical Laboratories, Telemedicine

Written by:  Carrie A. Roll and Ellen L. Janos

Last week, the American Telemedicine Association (ATA) approved its new telepathology guidelines, which provide updated guidance on specific applications, practices, benefits, limitations, and regulatory issues that may arise in the practice of telepathology. The guidelines apply to all types of telepathology configurations, regardless of the hardware device utilized, including static (store-and-forward), dynamic (synchronous), and hybrid static-dynamic implementations. Leading the effort in the development of the new guidelines was Liron Pantanowitz, MD, Associate Professor of Pathology and Biomedical Informatics, University of Pittsburgh Medical Center, Department of Pathology. The University of Pittsburgh Medical Center (UPMC) has also established “AnywhereCare,” a patient portal system that provides Pennsylvania residents access to UPMC experts for 24/7 consultation and diagnosis of common ailments.

OIG Approves Manufacturer’s Direct-to-Patient Discount Sales Program

Posted in Fraud & Abuse, Payors & PBMs, Pharma & Medical Devices, Pharmacies

Written by:  Carrie A. Roll and Theresa C. Carnegie

The Office of Inspector General (“OIG”) recently posted an Advisory Opinion approving a pharmaceutical manufacturer’s direct-to-patient product sales program. While this Advisory Opinion cannot be relied upon by anyone other than the requestor, it potentially opens the door for manufacturers to develop similar direct-to-patient discount arrangements for brand name drugs facing generic competition.


Under the arrangement, the pharmaceutical manufacturer sells one of its brand name drugs (for which there is a generic equivalent) at a discount to any patient who has a valid prescription for the product. The discounted sales price for a 30-day supply of the drug product is much lower than the manufacturer’s wholesale acquisition cost (“WAC”). The patient may be uninsured, have commercial insurance, or be insured by a federal health care program – including Medicare or Medicaid. The patient pays for the drug out-of-pocket and no insurer – governmental or non-governmental – is charged for the cost of the drug. Additionally, Part D patients cannot include the amounts they pay for the product under the arrangement in any submission for true-out-of-pocket expense (“TrOOP”) calculations under a prescription drug plan.

According to the manufacturer, the arrangement operates entirely outside of all federal health care programs. The pharmacy under contract with the manufacturer to dispense the product under this arrangement is prohibited from filing any claim for payment under any federal health care program or any commercial prescription drug insurance plan. All patients must be processed as cash-paying customers. The pharmacy collects the cash payment and sends the full amount of the cash payment to the manufacturer. In turn, the pharmacy is paid a flat fee for its services. The manufacturer does not directly advertise the program to the patients. Patients hear of the arrangement from their health care professionals and the manufacturer’s website.

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