Today the HHS OIG issued a Special Fraud Alert highlighting its concerns regarding two trends involving transfers of value from laboratories to physicians that the OIG believes “present a substantial risk of fraud and abuse under the anti-kickback statute.” Specifically, the OIG details risks involved with certain compensation paid by laboratories to referring physicians and physician group practices for (1) blood specimen collection, processing, and packaging, and (2) submitting patient data to a registry or database. The Special Fraud Alert reiterates the OIG’s “longstanding concerns” when payments from laboratories to physicians exceed the fair market value of the physicians’ services or reflect the volume or value of referrals of federal health care program business. Reed Smith is preparing an analysis of the Alert.
The OIG issued a report today entitled “Inconsistencies in States’ Reporting of the Federal Share of Medicaid Drug Rebates.” States are eligible for higher federal financial participation (FFP) rates for certain Medical Assistance services, such as those related to family planning, Indian Health Services, and breast and cervical cancer care. Based on prior work, the OIG was concerned that states may not always use the higher FFP rates when refunding to the federal government its share of drug rebates that drug manufacturers paid to the states, which could result in a loss of federal share. The new OIG report assesses whether states reported drug rebates at the applicable FFP rates for the period July 1, 2011 through June 30, 2012. According to the OIG, while states claimed drug expenditures at higher FFP rates, they did not consistently report the federal share of drug rebates at those higher FFP rates for one or more quarters during the review period. The OIG also found that states used different methodologies to determine the federal share of drug rebates, which could be attributed to a lack of specific national CMS guidance instructing states to report drug rebates at the FFP rates at which drugs were originally reimbursed or that identifies acceptable methods to determine the federal share of drug rebates. The OIG recommended that CMS issue guidance that clearly instructs states to report drug rebates at the applicable FFP rates and identify acceptable methods to determine the federal share of drug rebates; CMS concurred.
OIG Reports Assess Impact of Mail-Order Competitive Bidding on Diabetes Test Strips Market Concentration
The OIG has issued two reports on Medicare market share of mail-order diabetes test strips – one examining the market share before the start of Medicare mail-order competitive bidding in July 1, 2013 and a second report examining the three-month period after competitive bidding went into effect. By way of background, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) prohibited CMS from awarding competitive bidding program contracts for mail order diabetes test strips to suppliers that do not demonstrate that their bid covers at least 50%, by volume, of all types of mail order diabetes test strips. MIPPA also requires the OIG to complete a study to determine market shares of diabetes test strips in the competitive bidding program.Continue Reading...
The OIG has released an ACA-mandated report assessing the extent to which formularies used by Medicare Part D drug plans include drugs commonly used by full-benefit dual-eligible individuals(i.e., individuals eligible for both Medicare and Medicaid and who receive full Medicaid benefits and assistance with Medicare premiums and cost-sharing). The report, which covered the 3,309 Part D plans operating in 2014, determined that on average, Part D plan formularies include 96% of the 195 commonly-used drugs identified by the OIG. In addition, 64% of the commonly-used drugs are included by all Part D plan formularies. The OIG observes that these results are largely unchanged from the 2013 report. Formularies applied utilization management tools to 28% of the unique drugs reviewed in 2014, also the same as in 2013.
The OIG has issued a report entitled “Vulnerabilities in Medicare’s Interrupted-Stay Policy for Long-Term Care Hospitals.” By way of background, the Medicare long-term care hospital (LTCH) interrupted-stay policy generally treats time spent at an LTCH before and after an interruption as a single stay, rather than considering the second portion of the LTCH stay to be a readmission with a separate payment. However, LTCHs receive payment for a second stay if a beneficiary returns home, receives services from multiple facilities before returning to the LTCH, or is discharged to an inpatient prospective payment system (IPPS) hospital, inpatient rehabilitation facility (IRF), or skilled nursing facility (SNF) and then readmitted to the LTCH after the applicable “fixed-day threshold” – a specified number of days that varies by the type of intervening facility. The OIG identified several vulnerabilities in the LTCH interrupted-stay policy, including inappropriate payments, financial incentives to delay readmissions, and potential overpayments to co-located LTCHs. The OIG estimates that in 2010 and 2011, Medicare inappropriately paid $4.3 million to LTCHs and “intervening facilities” (facilities that treated the patients during the interruptions in the LTCH stay) for interrupted stays, and potentially millions of dollars more for inappropriate readmissions. The OIG points out that the readmissions may be appropriate, but the OIG raises concerns regarding “whether financial incentives, rather than beneficiaries’ medical conditions, may have influenced some LTCHs’ readmission decisions.” The OIG recommends a series of steps to address identified vulnerabilities, including CMS analyses, enforcement, and recoupment of identified overpayments. Previously, in the May 15, 2014 proposed Medicare IPPS/LTCH PPS update for FY 2015, CMS proposed to expand the interrupted stay policy by adopting the same 30-day standard as the fixed-day threshold for a discharge to and readmission from an IPPS hospital, IRF or SNF.
In a recent report, “Average Manufacturer Price Determinations by Selected Drug Manufacturers Generally Were Consistent With Federal Requirements,” the OIG has determined that the methodologies used by 20 selected (unnamed) drug manufacturers to determine average manufacturer price (AMP) for drugs reimbursed by Medicaid generally were consistent with federal requirements. In particular, the manufacturers consistently included transactions from retail community pharmacies rather than the more broadly-defined retail pharmacy class of trade. The OIG did note that manufacturers treated authorized generic sales to a secondary manufacturer differently, and suggested that CMS clarify this policy. The OIG also recommended that CMS permit a presumptive-inclusion methodology for wholesaler sales, since manufacturers would not have been able to calculate the AMP for a number of drugs without this methodology. Finally, the OIG recommended that CMS expand the use of a 12-month rolling average to estimate and remove indirect sales related to ineligible customers (in addition to using this for average for manufacturer price concessions).
On May 21, 2014, the OIG issued its “Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs” (SSAB) to address recently observed risks stemming from the conduct of Independent Charity Patient Assistance Programs (PAPs). The SSAB, which expands on previous OIG guidance from 2002 and 2005, specifically focuses on PAPs’ definitions of disease funds and the identification of eligible recipients, as well as the conduct of donors with relation to Independent Charity PAPs. A Reed Smith Client Alert analyzing the bulletin is available here.
The OIG has issued a report, requested by Congress, that identifies state background check requirements for home health agencies (HHAs) and describes the types of criminal convictions that disqualify individuals for employment by HHAs under such state policies. OIG observes that the data might be useful to CMS as it administers the Nationwide Background Check Program, and it may help states that are considering establishing or enhancing background check requirements for HHA employees. A second OIG report in the works will determine the extent to which HHAs employed individuals with criminal convictions as of January 1, 2014 and identify the procedures that HHAs use to perform background checks on prospective and/or current employees.
The OIG has issued its spring Semiannual Report to Congress, which summarizes major OIG activities during the period of October 2013 through March 2014. The OIG highlights “ramped up” oversight of Affordable Care Act implementation efforts, particularly with regard to eligibility systems, payment accuracy, contractor oversight, and data security associated with the Health Insurance Marketplaces. Other core areas for the OIG during this time included ensuring the appropriate use of prescription drugs by Medicare and Medicaid beneficiaries, CMS oversight of Medicare contractors, and grants oversight and management. With regard to enforcement activities during the first half of FY 2014, the OIG reported 465 criminal actions against individuals or entities that engaged in crimes against HHS programs, along with 266 civil actions (including false claims and unjust-enrichment lawsuits, civil monetary penalties settlements, and administrative recoveries related to provider self-disclosure matters), and exclusions of 1,720 individuals and entities from participation in federal health care programs. The OIG also expects recoveries of more than $3.1 billion in the first half of FY 2014 (about $295 million in audit receivables and $2.83 billion in investigative receivables.
According to a recent OIG report, CMS made $26.2 million in payments to Medicare Advantage (MA) organizations for approximately 1,600 unlawfully present beneficiaries from 2010 through 2012, even though federal health care benefits are not allowable for individuals who are not lawfully present in the United States. The OIG attributes to inappropriate payments to CMS’s failure to notify the MA organizations of the unlawful-presence information in its data systems; as a result, MA organizations could not prevent unlawfully present beneficiaries from enrolling or disenroll beneficiaries whose unlawful-presence status changed after they had enrolled. The OIG recommends that CMS recoup these payments and implement policies and procedures (consistent with policies under the fee-for-service program) to notify MA organizations of unlawful-presence information.
The HHS OIG has examined Medicare Part B payments for compounded drugs and Medicare Administrative Contractors' (MAC) procedures for reviewing and processing claims for compounded drugs, in light of safety concerns involving a 2012 meningitis outbreak and increased scrutiny of compounded drugs. According to the OIG, neither CMS nor MACs tracked the number of Part B claims or payment amounts for compounded drugs, nor do Part B claims contain information that can be used to systematically identify claims for compounded drugs. The OIG observes that the current “inability to track claims for compounded drugs and identify the compounding pharmacies limits the ability of CMS and MACs to take steps that could stop payments for compounded drugs produced in violation of the [Federal Food, Drug, and Cosmetic] Act. The OIG therefore recommends that CMS (1) establish a method to identify Medicare Part B claims for compounded drugs, (2) explore the possibility of requiring providers to identify on Part B claims the pharmacy that produced the compounded drug, and (3) consider conducting descriptive analyses of Part B claims for compounded drugs.
The OIG recently reviewed the extent of physician compliance with an ACA requirement that physicians or certain clinicians who certify beneficiaries as eligible for Medicare home health services document that face-to-face encounters with those beneficiaries occurred according to program requirements. Based on a sample of 644 face-to-face encounter documents between April 1, 2011 (when CMS began requiring full compliance with the ACA requirement) and December 31, 2012, the OIG concluded that documentation did not meet Medicare requirements for 32% of home health claims that required face-to-face encounters, which the OIG estimates resulted in $2 billion in inappropriate payments. The OIG also found inconsistent physician completion of the narrative portion of the face to face documentation. The OIG characterizes CMS oversight of the face-to-face requirement as “minimal.” In light of these findings, the OIG recommends that CMS: (1) consider requiring a standardized form for the face-to-face documentation; (2) develop a specific strategy to communicate directly with physicians about this requirement, and (3) enhance oversight. CMS concurred with these recommendations.
The OIG’s “Medicaid Integrity Program Report for Fiscal Year 2013,” released earlier this month, provides details on funding for the OIG's Medicaid program integrity efforts, summarizes significant OIG Medicaid-related reviews and investigations, highlights Medicaid Fraud Control Unit activities, and notes Medicaid-related projects included in the OIG’s Work Plan for FY 2014.
In a recent report, the HHS Office of Inspector General (OIG) recommended that CMS limit Medicare hospital outpatient prospective payment system (OPPS) payments for procedures that can be safely performed in an ambulatory surgical center (ASC), given that ASC payments are typically lower than the corresponding OPPS payments. According to the OIG, Medicare would save as much as $15 billion for CYs 2012 through 2017 if CMS reduces OPPS rates to ASC payment levels for ASC-approved procedures performed on beneficiaries with low-risk or no-risk medical profiles (which the Agency for Healthcare Research and Quality estimates represents 68% of hospital patients 65 and older); beneficiaries would realize additional out-of-pocket savings. The OIG observes that its proposal would require legislative changes to current budget neutrality rules to prevent resulting savings from being redistributed in the form of higher payments for other procedures. Under the OIG proposal, outpatient departments would continue to receive the standard OPPS payment rate for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary’s individual clinical needs.
CMS disagreed with the OIG’s recommendations, which are not binding on the agency. CMS noted that because most ASC rates are based on OPPS rates, the OIG’s recommendations may raise “circularity” concerns with the respect to the rate calculation process. Moreover, CMS observes that the OIG suggests no specific clinical criteria to distinguish patients that can be adequately treated in an ASC relative to the hospital outpatient setting, which would be needed to act on these recommendations. The OIG stands by its recommendations, however, and urges CMS to take the necessary steps to implement them.
The OIG prepared its report, “Medicare and Beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgical Center Payment Rates," in response to a congressional request.
On April 8, 2014, the OIG and GAO each issued reports focusing on different aspects of the “Round 1 Rebid” of the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program. By way of background, under DMEPOS competitive bidding, only suppliers that are winning bidders, meet licensing and other standards, and enter into a contract with CMS may furnish selected categories of DMEPOS to Medicare beneficiaries in competitive bidding areas (CBAs), with very limited exceptions. Contract suppliers are paid based on the median of the winning suppliers’ bids in the CBA, rather than the DMEPOS fee schedule amount. The Round 1 Rebid was in effect for a 3-year period, from 2011 through 2013, involving nine DME product categories in nine CBAs. CMS subsequently “recompeted” contracts in the Round 1 areas (including additional products), with three-year contracts effective January 1, 2014. CMS also established a second round of bidding covering 100 CBAs, along with a national mail-order diabetic testing supplies competitive bidding program; those three-year contracts went into effect July 1, 2013.
The OIG report assesses CMS compliance with DMEPOS bidding rules in the Round 1 Rebid. The OIG concluded that CMS generally followed its competitive bidding program rules when it selected suppliers and computed single payment amounts for the Round 1 Rebid – although a number of CMS errors were identified. Specifically, the OIG conducted a review based on a random sample of 100 of the 3,011 established DMEPOS single payment amounts in the Round 1 Rebid Program and the selection process for 266 winning suppliers associated with the sampled payment amounts. The OIG determined that CMS followed all applicable requirements for 255 of the 266 winning suppliers, but nine winning suppliers did not meet financial documentation requirements, and CMS incorrectly used two suppliers in one single payment computation. While the OIG characterizes the overall effect on Medicare payments to suppliers as “immaterial,” the OIG estimates that CMS paid suppliers $34,000 less than they would have received without any errors (less than 0.1 percent of the $113 million paid under the Round 1 Rebid Program during the first 6 months of 2011). The OIG recommends that CMS: (1) follow its established program procedures and applicable federal requirements consistently in evaluating the financial documents of all suppliers, and (2) ensure that all bids of winning suppliers are included in the calculation of single payment amounts before offering contracts. CMS concurred with the recommendations, and pointed out that it has enhanced the financial review process to ensure that all reviewers are accountants or certified public accountants. Looking ahead, the OIG will be conducting a similar analysis for Round 2 of competitive bidding; this analysis may include an analysis of CMS’s procedures for ensuring supplier compliance with applicable state licensure requirements (depending on the results of an ongoing limited scope review).
The GAO issued a broader review focusing on data from the second year of the Round 1 Rebid contracts, covering the Round 1 Rebid’s effects on Medicare beneficiaries, contract suppliers, and non-contract suppliers. Among other things, the GAO observed that:
- The number of beneficiaries furnished DME items included in the competitive bidding program generally decreased more in CBAs than in demographically similar “comparator” areas. CMS suggests that such declines may be attributable to reduced inappropriate usage of DME and do not necessarily reflect beneficiary access issues. In fact, CMS stated in comments on the report that its “sophisticated real-time claims monitoring system has continuously found that beneficiary access to all necessary and appropriate competitive bid items has been preserved since the program began” – a conclusion generally disputed by industry.
- A small number of contract suppliers generally had a large proportion of the market share in the nine competitive bidding areas.
- The total number of DME suppliers and Medicare allowed charges decreased more in CBAs than in the comparator areas. For instance, the number of suppliers with Medicare allowed charge amounts of $2,500 or more per quarter decreased an average of 27% in the CBAs compared to 5% in the comparator areas.
- The number of grandfathered suppliers had so diminished that CMS was no longer monitoring them after the second quarter of 2012.
- The program did not appear to have adversely affected beneficiary access to covered items, although additional monitoring would be needed to monitor the impact of the national mail-order diabetic testing supplies program and Round 2.
The OIG has released its “Compendium of Priority Recommendations,” which lists 25 priority issues for which the OIG has open recommendation and that, if implemented, would best protect the integrity of HHS programs. The 25 top priorities are as follows:
- Medicare Policies and Payments: address wasteful Medicare policies and payment rates for clinical laboratories, hospitals, and hospices; improve controls to address improper Medicare billings by community mental health centers, home health agencies, and skilled nursing facilities; detect and recover improper Medicare payments for services to incarcerated, unlawfully present, or deceased individuals; maximize recovery of Medicare overpayments; improve monitoring and reconciliation of Medicare hospital outlier payments; ensure that Medicare Advantage Organizations are implementing programs to prevent and detect waste, fraud, and abuse; and improve controls to address questionable billing and prescribing practices for Part D prescription drugs.
- Medicare Quality of Care and Safety Issues: address adverse events in hospital settings; improve care planning and discharge planning for beneficiaries in nursing home settings; address harm to patients, questionable resident hospitalizations, and inappropriate drug use in nursing homes; improve nursing home emergency preparedness and response; and ensure hospice compliance with Medicare conditions of participation.
- Medicaid Program Policies and Payments: ensure that state claims and practices do not inappropriately inflate federal reimbursements; ensure that states prevent, detect, and recover improper payments and return the federal share of recoveries to the federal government; assist states to better align Medicaid drug reimbursements with pharmacy acquisition costs; ensure that Medicaid Information Systems are fully functional; and address Medicaid managed care fraud and abuse concerns.
- Medicaid Quality of Care and Safety Issues: ensure that Medicaid home- and community-based care service providers comply with quality and safety requirements; and ensure that States improve utilization of preventive screening services for eligible children.
- Oversight of Food Safety: improve oversight of dietary supplements; and improve oversight of food inspections and traceability.
- HHS Grants and Contracts: improve oversight of grantee compliance, quality assurance, and conflicts of interest; and improve oversight of Medicare contractor performance and conflicts of interest.
- HHS Financial Stewardship: reduce improper payments and fraud; and correct deficiencies found in financial statement audits.
Note that some of these recommendations would require additional authority or other legislative change.
The OIG has issued a report examining questionable Medicare billing for electrodiagnostic tests, which are used to evaluate patients who may have nerve damage and which the OIG has identified as an area vulnerable to fraud, waste, and abuse. According to the OIG, 4,901 physicians had questionable billing for Medicare electrodiagnostic tests in 2011, based on seven measures of questionable billing developed by the OIG (e.g., physicians with an unusually high percentage of electrodiagnostic test claims using modifier 59 or 25, physicians with an unusually high average number of miles between the physicians’ and beneficiaries’ locations, and physicians with an unusually high average number of electrodiagnostic test claims for the same beneficiary on the same day). These questionable claims totaled $139 million in 2011, with physicians in the New York, Los Angeles, and Houston areas having the highest total questionable billing. In response to these findings, the OIG recommend that CMS: increase its monitoring of billing for electrodiagnostic tests; provide additional guidance and education to physicians regarding electrodiagnostic tests, and take appropriate action regarding physicians identified as having inappropriate or questionable billing.
The OIG estimates that CMS made $7.5 million in incorrect Medicare payments to hospitals in 2010 and 2011 for outpatient clinic visits, in part because of errors in identifying patients as “new” versus “established.” According to the OIG, hospitals attributed the incorrect payments to clerical errors, staff not fully understanding Medicare billing requirements, reliance on codes selected by the physician, or billing systems that could not identify established patients. The OIG recommends that CMS work with the Medicare administrative contractors (MACs) to recover incorrect payments; provide additional guidance to hospitals on billing clinic visits for new or established patients; and instruct hospitals on the need for stronger compliance controls.
The OIG recently offered recommendations to CMS on how to update Medicare payments to end stage renal disease (ESRD) facilities for drugs used by dialysis patients. Based on a review of ESRD drug prices in the first quarter of 2012, the OIG concluded that independent dialysis facilities can purchase ESRD drugs for less than the levels provided in the ESRD base rate (9% below, in the aggregate), but average acquisition costs for hospital based dialysis facilities exceeded the reimbursement amounts (5% above, in the aggregate). Thus the OIG cautioned that any reductions to the ESRD base rate could potentially harm hospital-based dialysis facilities. While dialysis facilities’ average acquisition costs for the majority of drugs under review have decreased over the last 3 years, the average costs for epoetin alfa (which represented more than three-quarters of drug costs in responding facilities) have increased by at least 17%. The OIG also determined that the concluded that the Producer Price Index (PPI) for Prescription Drugs was not an accurate predictor of cost changes for most drugs under review. In addition to rebasing the ESRD base rate to reflect current trends in drug acquisition costs (as is required by law), the OIG recommends that CMS (1) distinguish payments in the ESRD base rate between independent and hospital-based dialysis facilities, and (2) consider updating the ESRD payment bundle using a factor that takes into account drug acquisition costs.
The OIG has issued a report, “Comparing Average Sales Prices and Average Manufacturer Prices for Medicare Part B Drugs: An Overview of 2012,” which assesses CMS’s use of its authority to lower reimbursement for Medicare Part B drugs when a drug’s average sales prices (ASP) exceeds its average manufacturer prices (AMP) or widely available market price (WAMP) by a threshold, currently set at 5%. In April 2013, CMS began exercising its payment substitution authority, which currently applies only to certain codes with complete AMP data, and when the ASP for the code exceeds the 5% threshold in two consecutive quarters. The OIG estimates that CMS has generated more than $800,000 in savings under this policy, but the agency could achieve greater savings by expanding the circumstances under which it exercises its substitution authority to include drug codes with complete AMP data in a single quarter and drug codes with partial AMP data. CMS did not concur with these recommendations.