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

The HHS Office of Inspector General (OIG) has issued three reports on adverse events in hospitals, defined by the OIG as harm to a patient as a result of medical care. The first report, “Adverse Events in Hospitals: Overview of Key Issues,” identifies a number of areas integral to understanding the landscape of adverse events in hospitals, including the difficulty of measuring the incidence of adverse events, the importance of nonpayment policies for adverse events, barriers to adverse event reporting, legal concerns associated with public disclosure; and slow adoption of adverse event prevention recommendations. A second report, “Adverse Events in Hospitals: State Reporting Systems,” found that 26 states operated adverse event reporting systems as of January 2008. State strategies include legal protections to prevent improper disclosure, monetary penalties for failing to report, and feedback to hospitals about reported events. While specific reportable events and reporting criteria vary, most states use reported data in similar ways to hold individual hospitals accountable for their patient care performance and to promote learning and prevent adverse events. Finally, in “Adverse Events in Hospitals: Case Study of Incidence Among Medicare Beneficiaries in Two Selected Counties,” the OIG found that 13% of hospitalized Medicare beneficiaries in two selected counties experienced one of the four most serious categories of adverse events. The OIG notes that while “the results of this review are not nationally representative, the extent of adverse events and temporary harm found in this case study substantiates concerns about the incidence of adverse events in hospitals and the importance of safety initiatives to reduce occurrences.” The OIG will continue his work in this area.  

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The OIG has issued a report comparing Part B drug average sales prices (ASPs) and average manufacturer prices (AMPs) for 2007. By way of background, under section 1847A(d)(3) of the Social Security Act, the OIG must notify the HHS Secretary if the ASP for a particular drug exceeds the drug's AMP by a threshold of 5%. If that threshold is met, the Secretary is authorized to disregard the ASP for that drug and substitute the lesser of the widely available market price for the drug or 103 percent of the AMP. To date, OIG has issued seven quarterly reports comparing ASPs to AMPs, but CMS has not yet adjusted reimbursement as a result of OIG's findings. In the new report, the OIG identified 71 Medicare Part B drug codes that would have been eligible for price adjustment if a revised payment methodology recently implemented by CMS had been in effect throughout 2007 (other codes may also have been eligible but AMP amounts were not available). The OIG recommends that CMS develop a process to adjust payment amounts based on the results of OIG's pricing comparisons, lower Medicare reimbursement amounts for drugs that meet the 5-percent threshold, and ensure that drug manufacturers are submitting the required AMP data in a timely manner. CMS generally agreed to develop a process for adjusting payment amounts, but did not specifically agree to lower Medicare reimbursement for drugs that meet the 5-percent threshold.

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The OIG has issued a report entitled “Comparing Special Needs Plan Beneficiaries to Other Medicare Advantage Prescription Drug Plan Beneficiaries.” The OIG found that Special Needs Plan (SNP) beneficiaries filled an average of 11% more prescriptions than other Medicare Advantage Prescription Drug Plan (MA-PD) beneficiaries, and the average annual prescription cost per SNP beneficiary was 49% higher compared to that of other MA-PD beneficiaries. On the other hand, SNP and other MA-PD beneficiaries were similarly exposed to potentially inappropriate drug pairs that could lead to adverse drug events. The OIG recommends that CMS take steps to help physicians and pharmacists prevent inappropriate drug pairs. Separately, the Government Accountability Office (GAO) has issued a report entitled "Medicare Part D: Opportunities Exist for Improving Information Sent to Enrollees and Scheduling the Annual Election Period" Sponsors, pharmacists, beneficiary advocates, and counselors GAO interviewed expressed concern that CMS’s model Annual Notice of Change (ANOC) for the 2008 annual election period (AEP) did not effectively communicate drug plan changes to enrollees. In addition, although CMS and plan sponsors made improvements to the enrollment process, CMS data showed that about 15% of beneficiaries who chose to switch plans in the 2008 AEP were not fully enrolled in their new plan by January 1. To improve the AEP, the GAO recommends that CMS review alternative formats to communicate plan changes. Additionally, Congress should consider authorizing the HHS Secretary to amend the AEP schedule to include a processing interval between the end of the AEP and the effective date of new coverage. CMS concurred with the GAO recommendations.

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The HHS Office of Inspector General (OIG) has released the Health Care Fraud and Abuse Control (HCFAC) Program Annual Report for FY 2007.  The HCFAC program is designed to coordinate federal, state and local law enforcement activities focused on health care fraud and abuse. Among other things, the report announces that the federal government won or negotiated approximately $1.8 billion in health care fraud judgments and settlements in FY 2007. Also during that period, U.S. Attorneys' Offices opened 878 new criminal health care fraud investigations, and federal prosecutors had a total of 1,612 health care fraud criminal investigations pending. A total of 560 defendants were convicted for health care fraud-related crimes during the year. With regard to civil cases, the Department of Justice opened 776 new civil health care fraud investigations and had 743 civil health care fraud investigations pending at the end of the fiscal year.

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The OIG has posted its Semiannual Report to Congress for the period of September April 1, 2008 - September 30, 2008. The OIG reported savings and expected recoveries of more than $20.4 billion for all of FY 2008, including $16.72 billion in implemented recommendations, $1.33 billion in audit receivables, and $2.35 billion in investigative receivables. In FY 2008, OIG excluded 3,129 individuals and organizations from participation in federal health care programs. In addition, OIG reported 775 criminal actions brought against individuals or organizations that engaged in crimes against HHS programs and pursued 342 civil actions, which include False Claims Act and unjust enrichment suits, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters. The report also includes a review of major enforcement actions and policy recommendations for the second half of FY 2008.

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The OIG has issued an “early alert memo” on “Payments to Medicare Suppliers and Home Health Agencies Associated With ‘Currently Not Collectible’ Overpayments.” The OIG’s review of a small sample of Texas DMEPOS suppliers with outstanding Medicare debt (e.g., unreturned Medicare overpayments) found that a majority of suppliers were associated with other Medicare suppliers or home health agencies, and that complete ownership/management information was not always provided in public records. According to the OIG, the results suggest that individuals associated with Medicare debt could inappropriately receive Medicare payments by omitting owner/manager information on their enrollment applications and working through other DMEPOS suppliers and HHAs. Because this initial review examined a small number of suppliers using a limited set of issue questions, OIG intends to conduct follow-up work regarding the vulnerabilities raised in this memorandum.

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The HHS Office of Inspector General (OIG) has issued a report entitled "Nationwide Review of the Centers for Medicare & Medicaid Services Health Insurance Portability and Accountability Act of 1996 (HIPAA) Oversight." By way of background, the HIPAA security rule requires health plans, providers, and other covered entities that transmit health information in electronic form to: (1) ensure the integrity and confidentiality of the information, (2) protect against any reasonably anticipated threats or risks to the security or integrity of the information, and (3) protect against unauthorized uses or disclosures of the information. The OIG found that CMS had no effective mechanism to ensure that covered entities adequately implemented the HIPAA security rule or that electronic protected health information was being adequately protected. The OIG recommended that CMS establish policies and procedures for conducting HIPAA security rule compliance reviews of covered entities. While CMS disagreed with the OIG’s findings, the agency agreed to establish policies for conducting compliance reviews.

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The OIG and the Government Accountability Office (GAO) have issued several reports regarding the Medicare Part D drug program. In a report entitled “Medicare Drug Plan Sponsors' Identification of Potential Fraud and Abuse,” the OIG recommends a number of steps to address fraud and abuse. For instance, the OIG calls on CMS to: review variances in potential fraud and abuse among plans; determine if Part D prescription drug plan (PDP) sponsors investigated and corrected potential abuses; and require PDP sponsors to report on their fraud and abuse programs. In a separate report, “Oversight of Prescription Drug Plan Sponsors' Compliance Plans,” the OIG found that CMS conducted only one focused audit and no routine audits of PDP sponsors’ compliance plans in 2007. Further, CMS did not verify sponsor’s responses to a compliance plan self-assessment. CMS agreed with an OIG recommendation that CMS conduct audits to verify that PDP sponsors' compliance plans meet regulatory and manual requirements. Additionally, an OIG report on "Centers for Medicare & Medicaid Services Audits of Medicare Part D Bids" found that one-quarter of all bid audits completed for plan years 2006 and 2007 identified at least one material finding, but CMS has not adjusted PDP sponsors’ bid amounts based on such findings. The OIG recommends that CMS hold plan sponsors more accountable for material findings identified in bid audits, and conduct the required number of financial audits in a timely manner. Finally, the GAO has reported on "Medicare Part D Prescription Drug Coverage: Federal Oversight of Reported Price Concessions Data." The GAO found that CMS has initiated about half of its planned detailed financial audits to examine Part D price concessions data for 2006, with the rest delayed due to financial constraints. The audits are expected to be completed by October 2009. CMS also pointed to variation in defining and reporting price concessions data, such as differences in how sponsors allocate manufacturer rebates between their Part D plans and other business, as likely creating oversight challenges.

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The OIG has issued a report entitled "South Florida Durable Medical Equipment Suppliers: Results of Appeals." The OIG followed up on a previous review that had led to the revocation of Medicare billing privileges for 491 suppliers that failed to meet Medicare supplier standards. The OIG found that nearly half of the revoked suppliers appealed the revocations, and billing privileges were restored for 91% of these suppliers. The OIG found that two-thirds of the suppliers whose billing privileges were reinstated subsequently had their privileges revoked again or inactivated, and some individuals connected to reinstated suppliers have been indicted. The OIG recommended that CMS strengthen the appeal process by developing criteria regarding the types of evidence required for hearing officers to reinstate suppliers' billing privileges; CMS agreed to consider establishing such guidelines.

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On September 30, 2008, the OIG published supplemental compliance program guidance (CPG) for nursing facilities, targeting quality of care, billing issues, and kickback concerns that have arisen since the OIG’s original CPG for nursing facilities issued in 2000. The guidance is designed to help nursing facilities develop effective compliance programs by identifying operational areas that present potential liability risks under several key federal fraud and abuse statutes and regulations. With regard to quality of care, the supplemental CPG addresses staffing, resident care plans, medication management, appropriate use of psychotropic medications, and resident safety. The new CPG also highlights submission of accurate claims, including proper reporting of resident case-mix data, billing for therapy services and restorative and personal care services, and screening for excluded individuals and entities. In addition, the CPG identifies types of business arrangements that could implicate the anti-kickback statute, including those involving free goods and services or discounts; certain contracts with physicians, suppliers, and hospices; and reserve bed payments with hospitals. Other potential risk areas identified in the supplemental CPG include working with beneficiaries to select Medicare Part D plans, physician self-referrals, anti-supplementation rules, and compliance with HIPAA Privacy and Security Rules.  

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The OIG has issued a report entitled "Trends in Nursing Home Deficiencies and Complaints." The study describes the nature and extent of nursing home deficiencies and complaints in 2007 and identifies trends from 2005 to 2007. According to the OIG, in each of the past 3 years, more than 91 percent of nursing homes surveyed were cited for deficiencies, particularly quality of care, resident assessment, and quality of life deficiencies. Additionally, 17 percent of nursing homes surveyed in 2007 were cited for actual harm or immediate jeopardy deficiencies, and 3.6 percent were cited for substandard quality-of-care deficiencies. The number of substantiated complaints decreased slightly (about 3 percent) since 2005.

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On October 1, 2008, the HHS Office of Inspector General (OIG) released its FY 2009 Work Plan, which discusses planned OIG audit, inspection, and investigative initiatives affecting virtually every type of health care provider and supplier.

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The HHS Office of Inspector General (OIG) has releaseda report entitled "Marketing Materials for Medicare Prescription Drug Plans." Among other things, the OIG found that CMS's oversight of marketing materials for stand-alone Medicare prescription drug plans is limited, the agency’s model documents are not consistent with its guidelines, and 85% of marketing materials failed to meet at least one element of CMS's guidelines.

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The OIG has issued a report that examined Medicare Part B drug pricing when a new generic drug enters the market, based upon an examination of Medicare payment for irinotecan, an injectable cancer drug.  The FDA approved the first generic version of irinotecan on February 20, 2008. The OIG looked at the difference between the Medicare payment amount and manufacturer-reported sales prices during March 2008, when the generic version was available for purchase but yet reflected in the Medicare average sales price because of a two-quarter lag in the payment system. The OIG found that the Medicare payment amount for irinotecan was more than double the OIG-calculated average manufacturer sales price. The OIG noted that CMS’s current authority to address such payment disparities is limited, since time is needed for the OIG to collect payment data, and any resulting pricing changes would not take effect until the quarter after OIG provides the data to CMS. The OIG therefore recommends CMS explore alternative options to address pricing discrepancies arising from newly available generic drugs, which may include seeking a legislative change. CMS concurred with the OIG's recommendation.

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A new OIG report raises questions about the effectiveness of CMS’s Comprehensive Error Rate Testing (CERT) program, along with the validity of CMS estimates of improper Medicare payments for durable medical equipment (DME).   Based on the CERT contractor's medical review, CMS had reported that the FY 2006 DME error rate was 7.5 percent, or about $700 million in improper payments. However, the OIG’s independent contractor’s reviews of beneficiaries’ medical records found errors in Medicare DME claims that CERT contractor had not identified and concluded that the estimated error rate for the FY 2006 CERT DME sample was actually 28.9 percent. The OIG attributes these review discrepancies to the CERT contractor’s reliance on clinical inference rather than additional medical records available from health care providers, CMS’s inconsistent policies regarding proof-of-delivery documentation, physicians’ lack of understanding of documentation requirements, and CMS’s lack of procedures for obtaining information on high-risk DME items from beneficiaries. The OIG recommends that CMS: (1) require the CERT contractor to review all available supplier documentation, (2) establish a written policy to address the appropriate use of clinical inference, (3) require the CERT contractor to review all medical records necessary to determine compliance with medical necessity requirements, (4) document oral guidance that conflicts with written policies, (5) instruct its Medicare contractors to provide additional documentation training to physicians, and (6) require the CERT contractor to contact beneficiaries named on high-risk claims to help determine whether the beneficiaries received the items and the items were medically necessary. CMS generally agreed with the OIG’s findings and recommendations. 

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The HHS Office of Inspector General (OIG) has released a report comparing Medicare prescription drug average sales prices (ASPs) and average manufacturer prices (AMPs) for the fourth quarter of 2007. This is the OIG’s first pricing comparison since CMS implemented a revised volume-weighted ASP payment methodology mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007. Using CMS’s revised ASP payment methodology, the OIG identified 12 of 285 drug codes with ASPs that exceeded AMPs by at least 5 percent in the fourth quarter of 2007.  

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The HHS Office of Inspector General (OIG) has released 10 new and revised State False Claims Act review letters.  The letters announce the OIG’s determination regarding whether states comply with section 6031 of the Deficit Reduction Act of 2005, which provides a financial incentive for states to enact false claims acts that establish liability to the state for the submission of false or fraudulent claims to the state's Medicaid program.

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The OIG has issued a report entitled "Review of Medicare Part D Contracting for Contract Year 2006."  The report examines Medicare prescription drug plan (PDP) sponsors’ strategies for contracting with local, community pharmacies to provide Part D prescription drugs to Medicare beneficiaries. The pharmacies and their pharmacy services administrative organizations reported experiencing problems related to PDP sponsors’ network development methods, standard terms and conditions, extended-day supply terms, negotiations, and network requirements and contracting requirements. The OIG provided a number of recommendations related to contracting practices.

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An OIG report entitled “Deficiency History and Recertification of Medicare Home Health Agencies”  found that 15 percent of home health agencies (HHA) repeated the same deficiency citation on three consecutive surveys, most often related to patient plans of care. To improve CMS oversight of HHAs, the OIG recommends that CMS use existing survey data to identify patterns of deficiency citations and at-risk HHAs and implement intermediate sanctions.

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Certain retroactive payment increase provisions in MIPPA result in increased beneficiary copayment amounts for certain items and services furnished from July 1 through July 14, 2009. As a result, beneficiaries who already paid or were billed for cost-sharing amounts based on lower prices temporarily in effect are liable for additional cost-sharing amounts. On July 24, 2008, the OIG issued a policy statement assuring suppliers and providers affected by retroactive rate increases that they will not be subject to OIG administrative sanctions if they waive retroactive beneficiary cost-sharing amounts attributable to those increased payment rates (subject to certain conditions). The policy impacts the following types of items and services: physician fee schedule services; certain DMEPOS in the initial bidding areas; brachytherapy sources and therapeutic radiopharmaceuticals under the outpatient prospective payment system; and ambulance services. Note, however, that suppliers and providers are not required to waive retroactive beneficiary liability, and they may instead choose to bill the beneficiary for the additional copayment obligation. 

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