On April 8th I will be presenting in a Health Care Compliance Association webinar entitled “Hot Topics in Laboratory Compliance.” My co-presenter is Rob Rossi, Senior Vice President and Chief Compliance Officer, Calloway Laboratories. Rob is a seasoned laboratory industry veteran who also has served as General Counsel of a pathology laboratory and who has spent time in state government. Together we will offer legal guidance while taking into account the operational and business challenges laboratories face in today’s health care enforcement environment. Laboratories seem to be in the spotlight lately, as evidenced by the HHS OIG’s issuance of last year’s Special Fraud Alert on payments by laboratories to referring physicians and Advisory Opinion 15-04 addressing a proposed business arrangement between a laboratory and its physician practice clients. If you are interested in learning more about these issues, there is still plenty of time to register.
On March 19, 2015, the Department of Justice (DOJ) and Department of Health and Human Services (HHS) issued their annual Health Care Fraud and Abuse Control (HCFAC) Program report highlighting that the HCFAC Program obtained $3.3 billion in health care fraud judgments and settlements in FY 2014. Of this amount, the Medicare Trust Fund received $1.9 million and private relators received $369 million. The report also noted that more than $27.8 billion has been returned to the Medicare Trust Fund since the 1997 implementation of the HCFAC Program – a joint DOJ/HHS effort to combat health care fraud.
In FY 2014, the DOJ opened 782 new civil health care fraud investigations and had 957 civil health care fraud matters pending at the end of the fiscal year. During the same period, the DOJ opened 924 new criminal health care fraud investigations and filed criminal charges in 496 cases involving 805 defendants. The joint report highlights certain cases and recoveries against medical device companies, pharmaceutical manufacturers, hospitals, physicians, managed care organizations, pharmacies, and other providers.
The DOJ and HHS emphasized that under the Affordable Care Act the administration continues to implement programs that move away from “pay and chase” efforts to target fraud toward preventing health care fraud and abuse in the first place. Additionally, the administration is investigating health care fraud cases through real-time data analysis in lieu of a prolonged subpoena and account analysis, which results in a significant reduction of time between fraud identification, arrest, and prosecution.
On March 20, 2015, the Center for Medicare and Medicaid Services (“CMS“) and the Office of the National Coordinator for Health Information Technology (“ONC“) each released their much-anticipated proposed rules for Stage 3 of the Meaningful Use program and the 2015 Certification Criteria for EHR Vendors, respectively.
The proposed rules are born out of the Health Information Technology for Economic and Clinical Growth (HITECH) Act. A primary objective of the HITECH Act is to encourage sophisticated use of electronic health records (“EHRs”). To accomplish this, the Act adopts a two-pronged approach. One prong establishes a Meaningful Use program that seeks to spur the use of certified EHRs by eligible professionals, hospitals and critical access hospitals (“CAHs”) by using carrots and sticks; meaningful users of certified EHR technology are eligible to receive incentive payments under the EHR Incentive Program while non-meaningful users may be subject to a reduction in their reimbursement. The other prong of the HITECH Act establishes technical requirements for those certified EHRs utilized in the Meaningful Use program.
The Meaningful Use program has adopted an incremental approach to achieving its goals by breaking them up into consecutive stages. CMS’s proposed rule, which can be found here, addresses Stage 3 of the Meaningful Use program. In the proposed rule, CMS responds to criticism from the health care industry over the rigidity of the Meaningful Use program’s previous two stages by, for example, providing greater flexibility in terms of reporting requirements. The proposed rule also provides some flexibility in terms of timing: whereas providers were originally required to be compliant with Stage 3 in 2017, the proposed rule makes compliance with Stage 3 optional until 2018, at which point all providers must be compliant with Stage 3.
New York’s Emergency Medical Services and Surprise Bills law went into effect yesterday, which means consumers who receive out of network (OON) emergency services will no longer have to pay more than their usual in-network obligations, regardless of the network status of the treating physician, and any disputed portions of the bill must be settled by the physician and the health plan.
Consumers will be protected from surprise bills, and not be responsible for more than their in-network copayment, coinsurance or deductible, if they sign an assignment of benefits form to permit their provider to seek payment from the consumer’s health plan and send the form to the plan with a copy of the bill that they believe constitutes a surprise bill. Once the health plan pays the provider an amount that it determines is reasonable, the provider can dispute that amount through the independent dispute resolution (IDR) process. The IDR entity will make a determination within 30 days of receipt of the dispute.
The law not only protects consumers against large bills from OON physicians for services rendered in an emergency room, but also from bills received from OON providers in cases where a patient has been referred to the OON provider by a participating physician without the required consent. In regulations issued by the Department of Financial Services (DFS) on December 31, 2014 and adopted yesterday (http://dfs.ny.gov/insurance/r_prop/rp200t.pdf), DFS made several key clarifications, including defining the term “health care provider” to include home health agencies and clinical laboratories. DFS also clarified that a surprise bill that results from a referral without the required patient consent includes instances in which a “participating physician sends a specimen taken from the patient in the participating physician’s office to a non-participating laboratory or pathologist.” The consent necessary to avoid a surprise bill is “explicit written consent of the insured acknowledging that the participating physician is referring the insured to a non-participating referred health care provider and that the referral may result in costs not covered by the health care plan.”
Last week, in anticipation of the law’s enactment, DFS issued guidance to (i) insured and uninsured consumers in order to assist them in understanding when they have received a surprise bill and how to protect against responsibility for such bill, and (ii) providers so that they understand not only the meaning of “surprise bill” but their notice and hold harmless responsibilities, and when and how to proceed with the IDR process.
While there are other important aspects of the law that patients, providers and plans should be aware of, including disclosure obligations relating to plan and hospital affiliations and pricing (summarized in more detail in our prior blog post), the cornerstone of the law is protecting consumers from the financial devastation that can come from receiving a bill for out of network services. Time will tell whether all of the other players in the healthcare space view the law as the equitable solution it is intended to be.
A divided Supreme Court ruled by a 5-4 margin on March 31st that providers may not sue in federal court over the adequacy of state Medicaid rates. The decision in Armstrong v. Exceptional Child Ctr., Inc. has important implications well beyond the narrow group of providers of “habilitation” services for the mentally retarded in the state of Idaho.
A group of Idaho Medicaid providers, led by Exceptional Child Center, Inc., brought suit in Federal District Court seeking to overturn state Medicaid reimbursement levels on the grounds that the payment amounts were so low that they ran afoul of the federal Medicaid requirement that rates must be “sufficient to enlist enough providers so that care and services are available under the plan. . . to the general population in the geographic area.” 42 U. S. C. §1396a(a)(30)(A) (“§30(a)”). Importantly, this federal Medicaid provision governs all provider payment rates, not just providers of habilitation care. Both the District Court and the Ninth Circuit Court of Appeals found in favor of the providers with the appeals court finding that the Constitution’s Supremacy Clause (Art. VI, cl. 2) conferred an implied right of action for providers to seek injunctive relief under an §30(a).
In a majority/plurality opinion written by Justice Scalia, who was joined by the conservative wing of the Court (Justices Roberts, Alito, and Thomas) and also joined in a concurring opinion (in part) by Justice Breyer, the court ruled that neither the Supremacy Clause nor §30(a) created a private right of action.
In his concurring opinion, Justice Breyer based his reasoning on “several characteristics of federal statute,” one of which is the Administrative Procedures Act. In other cases, as well as here, Justice Breyer has invoked administrative law principles, such as agency decisions held to an “arbitrary, capricious, and abuse of discretion” standard as well as deference afforded under Chevron U. S. A. Inc. v. Natural Resources Defense Council – all of which typically lead to results unfavorable to providers. Breyer found that in these types of rate setting cases “administrative agencies are far better suited to this task than judges.” Breyer added:
“The consequence, I fear, would be increased litigation, inconsistent results, and disorderly administration of highly complex federal programs that demand public consultation, administrative guidance and coherence for their success.”
Although the dissent, led by Justice Sotomayor (and joined by Justices Kennedy, Ginsburg and Kagan), obliquely conceded (in an introductory clause to a single sentence) that the Supremacy Clause does not grant such a private right of action, they argued that §30(a) impliedly grants such equitable relief in this case at the discretion of the courts, but not as a matter of right.
Last week I attended the American Health Lawyers Association Institute on Medicare and Medicaid Payment Issues in Baltimore, Maryland. Taking a comprehensive approach to reimbursement issues, the program offered a variety of sessions ranging from Medicare and Medicaid program fundamentals to areas of highly-specific technical expertise. Conference faculty included speakers from all parts of the health care regulatory system, including two of my colleagues, Thomas S. Crane and Ellyn Sternfield.
Many of the sessions focused on government regulation and enforcement initiatives and trends related to Medicare and Medicaid reimbursement. Throughout the entire meeting, three themes emerged that are of particular interest:
- Data, Data, Data!
Speakers focused on the government’s use of data-driven analysis to identify and predict areas of potential fraud. This discussion confirmed our predictions that the increasing availability of health care claims and payment data and availability of Medicare billing data may lead to increased government and private health care scrutiny, enforcement, and litigation. Government speakers emphasized the use of a multitude of data sources to identify outliers and investigate potential fraud or abuse.
ML Strategies has posted its weekly Health Care Update. This week’s Health Care Update focuses on the latest Congressional developments on the repeal of the Medicare Sustainable Growth Rate (“SGR”), commonly known as the “Doc-Fix” and the Children’s Health Insurance Program (“CHIP”) reauthorization. In a rare showing of bipartisanship, the House passed the SRG replacement and CHIP reauthorization bill, only to have it face contention in the Senate. The Senate was unable to pass this bill before their Easter break. With the Senate planning to take up this legislation when they return in two weeks, the Centers for Medicare & Medicaid Services (“CMS”) indicated that it will hold Medicare claims for up to 10 business days.
Click here to read this week’s Update.
A small regional hospital’s antitrust suit alleging illegal exclusive dealing and attempted monopolization against its largest competitor will move forward following a district court’s denial of the defendant hospital’s motion for judgment on the pleadings. Methodist Health Svcs. Corp. v. OFS Healthcare System, d/b/a Saint Francis Med. Ctr., No. 1:13-cv-01054 (C.D. Ill. Mar. 25, 2015). The complaint alleges that defendant is a “must have” for health insurers, and that defendant leverages that status to prevent health insurers from contracting with plaintiff and other competing hospitals. Saint Francis filed a motion for judgment on the pleadings, arguing that the complaint failed to plead, and cannot adequately plead, plausible relevant product markets or substantial foreclosure in those markets. The court disagreed.
In “Hospital Wins First Round Against Largest Rival” Mintz Levin antitrust attorneys explain the importance of this case, noting that it has the potential to create important precedent and guidance regarding the use of exclusive contracts, particularly when employed by parties with market power. The case also serves as an important reminder that private antitrust litigation can often spark the interest of federal antitrust enforcers, as was the case in the FTC’s seminal St. Luke’s matter. Beyond private litigants, the potential competitive harm from exclusive dealing has been and continues to be scrutinized by the federal antitrust enforcers.
Yesterday the Office of Inspector General for the Department of Health and Human Services (the “OIG”) issued Advisory Opinion 15-04 (“Advisory Opinion”) in which it found that an exclusive arrangement between a laboratory and a physician practice could potentially generate prohibited remuneration under the Anti-Kickback Statute and also subject the laboratory to certain administrative sanctions. Notably, the OIG also concluded that the proposed arrangement could constitute grounds for permissive exclusion under the federal prohibition against charging the Medicare and Medicaid programs “substantially in excess” of usual charges.
The Proposed Arrangement
The Requestor – a multi-regional medical laboratory – proposed entering into exclusive agreements with physician practices whereby the laboratory would provide all required laboratory services (unless the patient chose a different laboratory) to the physician practices. According to the Requestor, some physician clients want this type of arrangement because they prefer to work with a single laboratory for ease of communication and consistency in the reporting of test results. However, some commercial insurance plans require their enrollees to use a particular laboratory and do not pay for out-of-network laboratory services (“Exclusive Plans”). The Requestor certified that approximately 70 percent of its physician practice clients had indicated that between 10 percent and 40 percent of their patients are enrolled in Exclusive Plans. As part of the proposed arrangement, the Requestor would not bill the patient, the physician practice, the Exclusive Plan, or any secondary insurer for services furnished to patients enrolled in Exclusive Plans. Nearly all other patients – whether covered by a federal health care program or a commercial insurance plan – would be billed in accordance with fee schedules or contracted rates.
Under the written agreement between the parties, each physician would be required to represent that neither the physician nor the practice would receive any financial benefit from the Requestor’s provision of free laboratory services to patients covered by Exclusive Plans, including any financial benefit received through an incentive program that would pay a bonus or impose a penalty based upon the utilization (or lack thereof) of laboratory services. The Requestor certified that it would not provide any items, services, or financial benefits, other than a limited-use electronic health records interface for submitting orders to and receiving results from the Requestor. Physician practices would be eligible to enter into the proposed arrangement only if they did not draw the samples and thus did not bill for the blood draw or the testing.
The OIG’s Analysis
The OIG found that the proposed arrangement could generate remuneration under the Anti-Kickback Statute. The OIG pointed to two facts that, taken together, supported its conclusion that the proposed arrangement would “reduc[e] administrative and possibly financial burdens associated with using multiple laboratories.” First, the OIG claimed that physician practices would gain certain efficiencies because they would receive test results with consistent reference ranges (which might not be the case if they used multiple laboratories). Second, although a physician practice typically does not pay for the EHR interface itself, the OIG believed that the proposed arrangement would relieve physician practices from having to pay monthly maintenance fees charged in connection with any EHR interface that it currently maintained with one or more other laboratories. The OIG thus concluded that it could not rule out with sufficient confidence the possibility that the Requestor would be offering remuneration to induce the referral of federal health care program beneficiaries. The OIG also noted that the Requestor had failed to provide any evidence of quality or safety improvements that would justify the proposed arrangement, or of any safeguards that would make the remuneration low risk under the Anti-Kickback Statute. In fact, the OIG noted that the Proposed Arrangement could be construed as causing the inappropriate steering of patients, including federal health care program beneficiaries.
In a footnote, the OIG acknowledged that any remuneration offered to patients through the proposed arrangement presents a low risk of fraud and abuse under the Anti-Kickback Statute due to the lack of connection to services payable by a federal health care program.
Finally, the OIG concluded that the proposed arrangement may justify use of the OIG’s permissive exclusion authority under Section 1128(b)(6)(A) of the Social Security Act, which is often referred to as the “substantially in excess” provision. This statute authorizes permissive exclusion authority for the OIG in cases where a provider or supplier charges the Medicare and Medicaid programs amounts that are “substantially in excess of” their “usual charges to other payors for the same items or services.” Although the OIG has stated previously that providing discounted or free services to uninsured or underinsured patients does not implicate the statute, it noted that the proposed arrangement involved the provision of free services to insured patients. The OIG thus found that the proposed arrangement could potentially cause more than half of the laboratory’s non-Medicare and non-Medicaid patients to receive free services while Medicare and Medicaid would be charged at the regular rate.
Notably, the OIG has only opined on this permissive exclusionary authority on only a handful of occasions, and the most recent was in 2013. The last time the OIG concluded that an arrangement could trigger exclusion under this section was in Advisory Opinion 99-13, which concerned client billing arrangements between laboratories and their physician clients. The OIG later issued clarifying letters on April 20, 2000 and April 26, 2000. The OIG has tried and failed on multiple occasions to implement regulations interpreting the substantially in excess provision. Its last attempt was on September 15, 2003, but it withdrew the proposed rule in 2007.
The reasoning applied in this negative OIG advisory opinion is difficult to comprehend. The OIG’s conclusion that the proposed arrangement would amount to remuneration apparently is based only on the fact that the physician practices would receive intangible, non-quantified benefits from consistent reference ranges and an untested presumption that the physician practices had other interfaces that resulted in charges for monthly maintenance fees, which may or may not be the case. We note that the OIG has long been critical of the relationships between laboratories and physician practices, as evidenced most recently by a June 2014 Special Fraud Alert addressing payments by laboratories to physicians.
This week, two of Mintz Levin’s health law attorneys will speak at the American Health Lawyers Association Institute on Medicare and Medicaid Payment Issues in Baltimore, Maryland.
Ellyn Sternfield from our DC office will be speaking about the 340B Drug Pricing Program, a topic she covers often on this blog. Ellyn will be joined by Barbara S. Williams to discuss the 340B Program, and their presentation promises to be informative. They will give an overview of 340B Program requirements, 340B compliance and audit issues (including lessons learned), the aftermath of PhRMA and HHS litigation, expectations from HRSA, and a look at advocacy efforts.
Thomas S. Crane from our Boston and DC offices will discuss overpayments and Stark self-disclosures – topics he writes and speaks on frequently – on a panel with Lisa Ohrin Wilson from CMS and Robert L. Roth. Their session will cover requirements and logistics to disclose and repay overpayments, along with updates on final and proposed regulations, distinctions between OIG and self-referral disclosures, and self-referral disclosure protocol hot topics.
Ellyn and Tom will each bring decades of experience and insight to these discussions. If you are in Baltimore for the AHLA Institute this week, take the opportunity to see them both.
- The 340B Program: Overview, Compliance, and What to Expect in the Year Ahead
- Speakers: Ellyn Sternfield & Barbara S. Williams
- Wednesday, March 25 at 3:30pm & Thursday, March 26 at 11:15am
- Hot Topics in Overpayments and Stark Self-Disclosures
- Speakers: Thomas S. Crane, Lisa Ohrin Wilson & Robert L. Roth
- Thursday, March 26 at 10:00am and 1:45pm