Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

This post was written by Scot T. Hasselman and Susan A. Edwards.

The Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) issued an updated “Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs ” (Updated Bulletin) on May 8, 2013, answering certain questions the OIG has received from providers and suppliers regarding exclusions and addressing other issues related to exclusions. The Updated Bulletin follows on a Special Advisory Bulletin regarding the same topic published by the OIG in September 1999. Since the OIG issued the 1999 Special Advisory Bulletin, Congress has enacted various statutory provisions that have strengthened the OIG’s authority to exclude individuals from federal health care programs and impose civil monetary penalties (CMPs) related to exclusion. The OIG states that in the development of the Updated Bulletin, it also relied on comments it received in response to a 2010 solicitation of comments on this topic.

The Updated Bulletin reflects a continuation of the OIG’s expansive view of the scope of the federal exclusion authorities, particularly relating to the prohibition against employing or contracting with excluded individuals and entities. The bulletin explains the statutory background of the exclusion and CMP authorities; describes the effect of exclusion; emphasizes the implications of violations of exclusion by an excluded individual and the implications for violating the prohibition against employment or contracting with an excluded individual for the furnishing of items or services paid for by a federal health care program; explains the scope of what conduct involving excluded individuals may lead to overpayment liability and CMPs; and provides guidance to providers and suppliers regarding how to screen for excluded individuals.

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This post was written by Scot T. Hasselman and Susan A. Edwards.

The Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) has issued a revised version of its Provider Self-Disclosure Protocol (Updated SDP), dated April 17, 2013, which established a process for health care providers to voluntarily identify, disclose, and resolve instances of potential fraud involving federal health care programs.  Specifically, this protocol is intended to address:  (1) conduct involving potential false billings; (2) conduct regarding excluded persons; (3) conduct involving potential violations of the Anti-Kickback Statute (AKS); and (4) conduct involving potential violations of the AKS and the Stark Law.

The Updated SDP provides guidance on how to investigate the conduct described above, quantify damages, and report such conduct to OIG to resolve the provider’s liability under OIG’s civil monetary penalty authorities.  The document supersedes the previous OIG Provider Self-Disclosure Protocol issued in 1998 and three previous “Open Letters to Health Care Providers.”  The OIG notes that over the past 15 years, it has resolved over 800 disclosures, resulting in recoveries of more than $280 million to federal health care programs.  The Updated SDP reflects the OIG’s experience with the protocol since 1988, along with feedback it received from the public in response to a June 18, 2012 comment solicitation.  

A summary of the Updated SDP, highlighting notable statements and requirements, is available in our Client Alert.

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The OIG has called on CMS to expand its use of surety bonds for Medicare DMEPOS suppliers, in a report entitled “Surety Bonds Remain an Underutilized Tool to Protect Medicare from Supplier Overpayments.”  Although CMS has required suppliers to obtain a minimum of $50,000 in surety bond coverage per location since 2009, the OIG found that CMS did not have accurate surety bond information for all Medicare suppliers as of 2011, and bonds in effect do not enable the agency to recoup all overpayments. As of August 2011, 1,429 suppliers owed $70 million to Medicare, but $20 million of this amount was owed by 312 suppliers without bonds. Out of the $50 million owed by bonded suppliers, the OIG estimates that $42 million will likely remain uncollected because the overpayment exceeds the $50,000 bond amount. The OIG recommends that CMS: improve oversight of supplier data to ensure accurate reporting; immediately begin recovering outstanding overpayments from suppliers’ surety bonds; consider using ACA authority to require increased surety bond amounts for suppliers receiving high levels of Medicare payments; and specify that collection of debts through surety bonds is based on dates of service. CMS concurred with the OIG recommendations, noting in its response to the report that as of July 2012, it has collected $263,000 in overpayments from sureties, and additional recoveries are expected. CMS also stated that it considering linking DMEPOS surety bond amounts to the volume of a supplier’s billing. CMS also is considering requiring home health agencies and certain other provider and supplier types to obtain and maintain surety bonds as a condition of enrollment. 

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The OIG has released its Medicaid Integrity Program Report for FY 2012, which provides information on the OIG's Medicaid program integrity funding, summarizes significant OIG Medicaid-related reviews and investigations, and highlights Medicaid-related projects included in the OIG’s Work Plan for FY 2013.

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The OIG has updated its 2006 guidelines on how it determines whether a state false claims act law meets certain federal standards. By way of background, to encourage improved state efforts to fight Medicaid fraud, the Deficit Reduction Act (DRA) enables states that adopt state false claims acts to retain a greater portion of Medicaid overpayments. Specifically, the DRA decreases the federal government’s share of any Medicaid overpayment by 10 percentage points for any state that enacts a false claim act that meets standards established by HHS, effective January 1, 2007. To qualify, the state law must: (1) establish liability to the state for false or fraudulent claims described in the federal False Claims Act (FCA), with respect to Medicaid expenditures; (2) contain provisions that are at least as effective in rewarding and facilitating qui tam actions as those in the federal FCA; (3) contain a requirement for filing an action under seal for 60 days with review by the state Attorney General; and (4) contain a civil penalty that is not less than the amount authorized by the federal FCA. In August 2006, the OIG released guidelines on how it will determine whether a state law meets the DRA's requirements.  The new guidelines to reflect subsequent amendments to the FCA that modified the bases for FCA liability, expanded the rights of qui tam relators, and added an express requirement that civil penalties include adjustments under the Federal Civil Penalties Inflation Adjustment Act of 1990.  The guidelines also provide more specificity regarding the OIG’s standards based on the OIG’s experience in reviewing state laws to date. Notably, the new guidelines provide more prescriptive requirements for state laws pertaining to “Rewarding and Facilitating Qui Tam Actions,” with the OIG now expecting state laws to include 14 rather than 8 elements in this area.  The new guidelines are effective March 15, 2013.

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On March 26, 2013, the HHS Office of Inspector General (OIG) released a Special Fraud Alert highlighting the risks associated with PODs -- physician-owned entities that sell (or arrange for the sale of) implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers. Building on previous OIG and Congressional scrutiny of PODs, the Special Fraud Alert details specific attributes and practices of PODs that the OIG believes “produce substantial fraud and abuse risk and pose dangers to patient safety.”  A Reed Smith analysis of the Alert is available on our Life Sciences Legal Update blog.

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The OIG has issued a report, “Skilled Nursing Facilities Often Fail to Meet Care Planning and Discharge Planning Requirements,” assessing SNF compliance with federal requirements to develop a care plan for each Medicare beneficiary, provide services in accordance with the individual’s care plan, and establish a discharge plan for each beneficiary. Based on an extremely small sample of only 190 SNF stays in 2009 – which OIG projects to more than 1.1 million stays – the OIG estimates that 37% of SNFs did not develop care plans that met federal requirements or did not provide services in accordance with care plans. In addition, the OIG estimates that SNFs did not meet discharge planning requirements in 31% of stays. The report also reviews examples of what it considers poor quality of care in the SNF setting, including a few cases involving wound care, medication management, and therapy. In response to these findings, the OIG recommends that CMS, among other things: strengthen care planning and discharge planning regulations; provide more detailed guidance to SNFs; improve surveyor efforts to identify and hold accountable SNFs that do not meet care and discharge planning requirements; and link payments to meeting quality-of-care requirements (such as by incorporating quality measures for care planning and discharge planning in its SNF Value-Based Purchasing program). CMS concurred with the OIG’s recommendations and discussed the status of its efforts in this area. Related OIG information is posted here. 

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On February 11, 2013, the Obama Administration announced that anti-fraud efforts under the Health Care Fraud and Abuse Control Program (HCFAC) recovered a record-breaking amount of $4.2 billion in FY 2012. More specifically, in 2012 the Justice Department opened 1,131 new criminal health care fraud investigations involving 2,148 potential defendants, and a total of 826 defendants were convicted of health care fraud-related crimes. The DOJ also opened 885 new civil investigations, obtained settlements and judgments of more than $3 billion in FY 2012 under the False Claims Act, and collected nearly $1.5 billion in fines and forfeitures under the Federal Food, Drug and Cosmetic Act. Obama Administration officials emphasized that efforts to reduce fraud will continue to expand with new tools and resources provided by the ACA, including enhanced screening and enrollment requirements (which have eliminated nearly 150,000 ineligible providers from the Medicare rolls), increased data sharing across the government, expanded overpayment recovery efforts, and greater oversight regarding private insurance.

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On December 28, 2012, the OIG published a notice soliciting recommendations for developing new and modifying existing safe harbor provisions under the federal anti-kickback statute, as well as developing new OIG Special Fraud Alerts. Comments will be accepted until February 26, 2013. 

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The Medicare electronic health record (EHR) incentive program is vulnerable to paying incentives to professionals and hospitals that do not fully meet meaningful use requirements due to gaps in CMS oversight, according to a recent OIG report. Based on a review of CMS’s oversight of self-reported meaningful use of certified EHR technology in 2011, the OIG found that CMS did not have strong prepayment or postpayment safeguards. The OIG also noted that CMS cannot use EHR reports to verify all self-reported meaningful use information because the Office of the National Coordinator for Health Information Technology (ONC) does not require certified EHR technology to be capable of producing reports for all measures. As a result of these findings, the OIG recommends that CMS: (1) obtain and review supporting documentation from selected professionals and hospitals prior to payment to verify self-reported information (although CMS argued that this would increase the burden on providers); and (2) issue more detailed guidance on documentation requirements (CMS agreed). The report also contained recommendations for ONC, including recommendations that the agency: (1) require that certified EHR technology be capable of producing reports for yes/no meaningful use measures where possible; and (2) improve the certification process for EHR technology to ensure accurate EHR reports (ONC concurred with both recommendations). For more information, see the full report, “Early Assessment Finds That CMS Faces Obstacles in Overseeing the Medicare EHR Incentive Program."

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On November 27, 2012, the HHS Office of Inspector General (OIG) released its fall Semiannual Report to Congress, which summarizes significant OIG enforcement, investigation, and audit activities for the period of April 1 – September 30, 2012, along with summary information for all of FY 2012. Most notably, the OIG reports approximately $6.9 billion in expected audit and investigative recoveries for FY 2012, consisting of $923.8 million in audit receivables and $6 billion in investigative receivables (of which $1.7 billion represents non-HHS investigative receivables, such as OIG’s work in states’ shares of Medicaid restitution). In addition, the OIG identifies approximately $8.5 billion in FY 2012 savings that result from legislative, regulatory, or administrative actions that were supported by the OIG’s recommendations (such as payment reforms for Part B drugs and biologicals adopted under the Modernization Act of 2003 and a variety of Medicare payment reductions impacting home health agencies, DME suppliers, and clinical laboratory services, among many others). In addition, for FY 2012 the OIG reports: exclusions of 3,131 individuals and entities from participation in federal health care programs; 778 criminal actions against individuals or entities that engaged in crimes against HHS programs; and 367 civil actions (including false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties settlements, and administrative recoveries related to provider self-disclosure matters). The report also highlights significant OIG accomplishments for this period, including various Medicare and Medicaid program reviews and Medicare Fraud Strike Force efforts that resulted in the filing of charges against 305 individuals or entities, 181 convictions, and $151 million in investigative receivables.

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A recent OIG report – “Supplier Billing for Diabetes Test Strips and Inappropriate Supplier Activities in Competitive Bidding Areas” -- assesses how suppliers have changed their delivery and billing practices for DTS in areas where the Medicare DMEPOS competitive bidding program for mail-order DTS was implemented in 2011. By way of background, Round 1 of the DMEPOS competitive bidding program, currently underway in nine competitive bidding areas (CBAs), applies to mail-order DTS and certain other specific items of DME. For purposes of Round 1 only, the term “mail-order” is defined as ordered remotely and delivered by common carrier; in contrast, DTS delivered to a beneficiary’s home by a local store front supplier using its own vehicles and W2 employees is not considered mail order under Round 1, and therefore is not subject to competitive bidding. The net effect if this bifurcation is that beneficiaries residing in one of the Round 1 CBAs must purchase mail-order DTS from a winning contract supplier, but may purchase non-mail order DTS from any enrolled Medicare supplier. Significantly, the mail-order DTS contract prices under Round 1 average less than half of the Medicare fee schedule amount, and the OIG observes that this price disparity provides suppliers with “a financial incentive to bill for non-mail order DTS,” even though beneficiaries in turn will be responsible for higher copayments for non-mail order DTS. According to the OIG report, claims for non-mail order DTS increased by 33% in 2011 compared to 2010, while claims for mail-order DTS fell by 71%. The OIG also states that sampled beneficiaries sometimes reported receiving less expensive mail-order DTS – notwithstanding that Medicare claims records reflected billing for non-mail order items (although the OIG warns that self-reported data from beneficiaries were not independently verified, and beneficiaries’ ability to recall events over a span of 2 years could affect the data). The OIG observed that suppliers’ inappropriate waiver of beneficiaries’ copayments did not appear to contribute to the increase in non-mail order DTS claims, but almost a quarter of the sample of beneficiaries interviewed by the OIG reported supplier activities such as routine waver of copayments or shipments of unsolicited DTS that the OIG determined to be inappropriate. The report does not contain any recommendations. Note that a national mail order (NMO) program for diabetic supplies is scheduled to go into effect July 1, 2013, and will apply nationally to DTS that are delivered via any method (i.e., common carrier or supplier delivery).

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This post was written by Scot Hasselman and Debra McCurdy.

An OIG report released November 13, 2012 estimates that one-fourth of Medicare SNF claims in 2009 were in error, resulting in more than $1 billion in inappropriate payments. Note that the OIG’s findings were based on a medical record review of a random sample of only 245 SNF stays and 499 claims, which the OIG projected to the 6.4 million claims in the population. Based on this limited sample, the OIG found that 20.3% of SNF claims were upcoded, with about half of these claims involved SNFs billing for ultrahigh therapy resource utilization groups (RUGs) instead of lower levels of therapy or nontherapy RUGs. In addition, 2.5% of claims were downcoded and 2.1% did not meet coverage requirements because the beneficiaries were not eligible for SNF care. The OIG concludes that while “CMS has made several significant changes to SNF payments for FYs 2011 and 2012…more needs to be done to reduce inappropriate payments to SNFs.” The OIG therefore recommends that CMS: (1) increase and expand reviews of SNF claims; (2) use its Fraud Prevention System to identify SNFs that are billing for higher paying RUGs; (3) monitor compliance with new therapy assessments (including through Medicare Administrative Contractor (MAC) and Recovery Audit Contractor (RAC) analysis and review); (4) change the methodology for determining how much therapy is needed; (5) improve the accuracy of MDS items, and (6) follow up on the SNFs that billed in error. CMS concurred with the recommendations, set forth in the report entitled “Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009.”

The OIG report follows an earlier report published in December of 2010. That report, entitled, “Questionable Billing by Skilled Nursing Facilities,” has been discredited as an overwhelming majority of the disallowed claims underlying the report were overturned on appeal; OIG ignored the judicial dispensation of these claims in makings its allegations. The report is the latest in a series of federal effort to narrow the scope of coverage for beneficiaries in SNFs, which is interesting in light of the recent CMS settlement regarding the “Improvement Standard” in a case entitled Jimmo v. Sebelius. In Jimmo, the plaintiff alleged that HHS had adopted an “unlawful and clandestine standard” (known as the “Improvement Standard”) to determine whether Medicare beneficiaries are entitled to coverage. HHS/CMS recently settled this matter and agreed to revise the appropriate Medicare manuals, and to engage in a nationwide education campaign to inform providers and Medicare contractors of maintenance coverage standards. As in Jimmo, we believe that the federal government has adopted a clandestine policy to restrict Medicare coverage in SNFs, which is being implemented via the OIG, MAC and RAC audits, and Zone Program Integrity Contractor and Department of Justice investigations.

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The OIG has issued a report on Medicaid pharmacy reimbursement that compares FUL amounts based on published prices to FUL amounts based on AMP and pharmacy acquisition costs. According to the OIG, FUL amounts based on published prices (from the fourth-quarter 2011 Redbook file) were more than four times greater than sampled pharmacy acquisition costs. Moreover, FUL amounts based on AMPs were 61 percent lower than FUL amounts based on published prices, at the median, but still exceeded sampled pharmacy acquisition costs by 43 percent in the aggregate. Notably, however, the study was subject to a number of limitations, including use of AMP-based FULs that have not been published by CMS (data for November 2010 was used, whereas CMS began releasing draft FULs in September 2011). While CMS has been issuing draft AMP-based FUL amounts for review and comment, the OIG recommends that CMS complete implementation of AMP-based FUL amounts, in conformance with the ACA. CMS concurred, and stated that it plans to implement FUL amounts based on AMPs “in the near future.”

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The HHS Office of Inspector General (OIG) has released its FY 2013 Work Plan, which outlines audit, inspection, and investigative initiatives that the OIG intends to conduct in the coming year. The OIG plans activities in a wide range of areas, including reviews of Medicare fee-for-service reimbursement and program integrity policies involving virtually all types of providers and suppliers (with a heavy concentration of reviews involving hospitals and medical equipment suppliers). The OIG also will focus attention on Medicare Advantage and Medicare Part D prescription drug plan policies, including payment policy and plan oversight reviews. Numerous Medicaid reports also are on the books, including investigations involving Medicaid prescription drug pricing and rebate policies, various provider and supplier payment issues, and state management of their Medicaid programs. The Work Plan also includes numerous reviews involving other HHS agencies, such as reviews targeting Food and Drug Administration (FDA) and National Institutes of Health programs. The Work Plan also includes a description of the OIG’s legal and investigative activities related to Medicare and Medicaid.

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A new OIG study provides baseline information for an ACA-mandated report on the extent to which nurse aides with substantiated findings of abuse, neglect, and/or misappropriation had previous criminal convictions that could have been detected through background checks. Based on a review of state records, the OIG found that 19% of nurse aides who received a substantiated finding of abuse, neglect, and/or misappropriation of property during 2010 had at least one conviction in their criminal history records prior to their substantiated finding (the majority of which was for crimes against property, including, burglary, shoplifting, and writing bad checks). The OIG calculates that nurse aides with substantiated findings of abuse or neglect were 3.2 times more likely to have a conviction of crime against persons than nurse aides with substantiated findings of misappropriation, who in turn were 1.6 times more likely to have a conviction of crime against property than nurse aides with substantiated findings of abuse or neglect. The report, “Criminal Convictions for Nurse Aides with Substantiated Findings of Abuse, Neglect, and Misappropriation,” is available here. 

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The OIG has released two reports focusing on dietary supplements, one examining labeling claims and the other reviewing the FDA’s ability to identify and contact manufacturers in a public health emergency. In the first report, “Dietary Supplements: Structure/Function Claims Fail to Meet Federal Requirements,” the OIG analyzed structure/function claims for a sample of 127 dietary supplements marketed for weight loss or immune system support. The OIG concluded that substantiation documents for the sampled supplements generally were inconsistent with FDA guidance on competent and reliable scientific evidence. Among other findings, 20% of the supplements included prohibited disease claims on their labels and 7% lacked the required disclaimer. The OIG recommends that FDA seek explicit statutory authority to review substantiation for structure/function claims to determine whether they are truthful and not misleading. The OIG also recommend that FDA make improvements to the notification system for these claims and expand market surveillance to enforce the use of disclaimers for structure/function claims and to detect disease claims. In the second report, “Dietary Supplements: Companies May Be Difficult To Locate in an Emergency,” the OIG assessed the FDA’s ability to identify and contact manufacturers in a food emergency, again based on a sample of 127 weight loss and immune support dietary supplements. Out of a subset of 79 companies that the OIG interviewed and were required to register with the FDA, only 72% registered as required, and almost three-quarters of those registrations failed to provide complete and accurate information. In addition, 20% of dietary supplement labels in the sample did not provide the required contact information. The OIG recommends that FDA: (1) improve the accuracy of registry information; (2) seek authority to impose civil monetary penalties on companies that do not comply with registration requirements, and (3) educate industry about registration and labeling requirements. 

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The OIG held an August 7, 2012 OIG “roundtable” meeting with representatives of companies that have entered into corporate integrity agreements (CIA) since 2009 to solicit feedback on compliance “best practices” and companies’ efforts to implement CIA requirements. The 32 companies represented included hospitals, ambulance companies, medical device manufacturers, physician practices, laboratories, home health agencies, and skilled nursing facilities. The roundtable featured discussions of the following topics: the definitions of “covered persons” and “relevant covered persons”; CIA code of conduct, compliance policies and procedures, and training and education requirements; the role of the compliance officer and board of directors; internal auditing and audit plans; claims review requirements; and arrangements review requirements. The OIG states that it will consider the group’s feedback when deciding the terms of future CIAs.

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According to a recent OIG report, Medicare Part D inappropriately paid $25 million for Schedule II drugs billed as refills in 2009, since federal law prohibits the refilling of Schedule II controlled substances. The OIG found a high incidence of invalid prescribers for Schedule II refills. The OIG speculates that some of these refills may reflect inaccurate billing, however, such as long-term-care pharmacies incorrectly billing these drugs as refills when they actually were partial fills. Because 194 out of 270 Part D sponsors paid for at least one Schedule II drug billed as a refill, the OIG concludes that “many sponsors do not have adequate controls to prevent these refills.” Based on these finding, the OIG recommends that CMS: (1) issue guidance to plan sponsors to prevent billing of Schedule II refills and to ensure accurate billing of partial fills; (2) exclude Schedule II refills when calculating payments to sponsors; (3) monitor sponsors to ensure that they validate prescriber numbers for Schedule II drugs; and (4) follow up on sponsors, pharmacies, and prescribers with high numbers of refills.

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A recent OIG report, “Surety Bonds Remain an Unused Tool to Protect Medicare from Home Health Overpayments,” faults CMS for not implementing its January 1998 final rule requiring every home health agency (HHA) participating in Medicare to obtain a surety bond in the amount of $50,000 or 15% of annual Medicare payments to the HHA, whichever is greater. As of the end of February 2012, 2,004 HHAs owed CMS a total of approximately $408 million out of $590 million in overpayments CMS identified between 2007 and 2011. According to the OIG’s calculations, CMS could have recovered at least $39 million if this amount if the agency had required each HHA to obtain a $50,000 surety bond. By not implementing this requirement after almost 15 years, the OIG charges CMS placing “Medicare at risk of losing millions of dollars in overpayments.” The OIG therefore recommend that CMS implement the HHA surety bond requirement, and consider increasing the surety bond amounts for HHAs with high overall Medicare payment amounts. CMS agreed that implementing a surety bond requirement for HHAs may help reduce potential program vulnerabilities, and stated that it is currently evaluating its options in implementing this requirement.

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