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

All private health insurers in the individual and small group markets must submit data to the HealthCare.gov Plan Finder, an online portal created to help consumers compare health insurance coverage options. According to a recent OIG report, "Oversight of Private Health Insurance Submissions to the HealthCare.gov Plan Finder," while most private insurers reported data to the Plan Finder, the OIG found inconsistent data displayed for a sample of products and plans. The OIG also identified gaps in CMS’s oversight of compliance with reporting requirements, such as a lack of targeted follow-up with insurers that did not report detailed pricing and benefit information. The OIG recommends that CMS: implement procedures to identify and pursue insurers that do not submit required data; require each private insurer’s Chief Executive Officer or Chief Financial Officer to certify to the completeness of data submitted to the Plan Finder; and take certain other steps to ensure the accuracy of Plan Finder data and the availability of plans identified on Plan Finder.. CMS generally concurred with the recommendations. 

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The OIG has examined the extent to which long-term care hospitals (LTCHs) that are co-located with another hospital-level provider or a skilled nursing facility disclose their co-location status to their Medicare contractor. Because co-located status can impact Medicare payments, co-located LTCHs and satellite facilities must notify their MAC and CMS Regional Office about the provider(s) with which they are co-located within 60 days of their first cost-reporting period. Based on a review of 141 LTCHs that the OIG had previously determined were co-located, the OIG found that only 44 had notified their Medicare contractor of their co-located status. While the report, Co-Located Long-Term Care Hospitals Remain Unidentified, Resulting in Potential Overpayments, does not contain recommendations, the OIG observes that “inaccurate data on LTCHs’ co located status could result in overpayments.” In addition, the OIG noted that it continues to study Medicare payments to LTCHs for interrupted stays. The OIG intends to provide additional information on interrupted stays and make recommendations to CMS in a final report.

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A new OIG report, “Part B Payments for Drugs Infused through Durable Medical Equipment,” calls for changes in the Medicare reimbursement methodology for Part B infusion drugs administered in conjunction with DME in light of potentially inaccurate pricing. By way of background, DME infusion drugs are reimbursed at 95% of the drug’s average wholesale price (AWP) in effect on October 1, 2003, compared to 106% of the average sales price (ASP) for most Part B drugs. Based on a comparison of actual Medicare reimbursement and the amount that would have been paid under the ASP methodology for each DME infusion drug from 2005 to 2011, the OIG found that payment exceeded ASPs by 54%-122% annually. On the other hand, reimbursement for up to one-third of DME infusion drugs were below the ASP, indicating that in some cases Medicare may underpay for these drugs. On the whole, the OIG estimates that Medicare spending on DME infusion drugs would have been cut by 44% ($334 million) between 2005 and 2011 if payment had been based on ASP. The OIG recommends that CMS either (1) seek legislation requiring DME infusion drug payment to be based on ASP, or (2) include DME infusion drugs in the next round of the DMEPOS competitive bidding program. CMS was noncommittal on legislative changes, but said it would include ME infusion drugs in the next round of competitive bidding (CMS has not yet provided other details on future expansion of competitive bidding). 

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A recent OIG report, “Gaps in Oversight of Conflicts of Interest in Medicare Prescription Drug Decisions,” examines how Medicare Part D drug plan pharmacy and therapeutics (P&T) committees ensure that formulary decisions are not biased by conflicts of interest. Based on a survey of P&T committees and a review of their written policies, along with interviews with CMS, the OIG concluded that “both sponsors and CMS conduct limited oversight of P&T committee conflicts of interest, compromising their ability to ensure that financial interests do not influence formulary decisions.” For instance, most sponsors’ P&T committees have limited definitions of conflicts of interest (more than half did not define any financial interests with sponsors or pharmaceutical manufacturers as conflicts of interest), which the OIG believes could prevent them from identifying conflicts. Moreover, many sponsors’ P&T committees rely on their members to determine and manage their own conflicts. CMS also does not adequately oversee compliance with the regulatory requirement that at least two members on each P&T committee be independent and free of conflict relative to the plan sponsor and pharmaceutical manufacturers, according to the OIG. The OIG makes a series of recommendations intended to strengthen conflict-of-interest policies, including recommending that CMS: require P&T committee members to be free of conflict with any pharmacy benefit manager that manages a sponsor’s prescription drug benefit; direct sponsors to ensure that objective processes are used to determine and manage conflicts; and oversee sponsors’ compliance with the requirement that at least two committee members be independent and free of conflict.

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For the 29th time, the OIG has issued a report comparing Medicare Part B drug average sales prices (ASP) and average manufacturer prices (AMP), this report covering all of 2011. The OIG again concludes that the Medicare would realize savings if it exercised its authority to lower reimbursement for Part B drugs when the drugs ASP exceeds its drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. Although CMS has finalized regulations specifying the circumstances under which AMP-based price substitutions could occur, no such substitutions have been made to date. The OIG estimates that if CMS’s price substitution policy had been in effect, Medicare would have saved about $7 million in 2011; this amount would have been doubled if the substitution policy were applied to all codes that exceeded the 5% threshold in one or more quarters of 2011 when complete AMP data were used. CMS concurred with an OIG recommendation to finalize its substitution policy, but it did not support OIG recommendations to expand the substitution policy to include all codes with complete AMP data and certain codes with partial AMP data. CMS also rejected an OIG recommendation to seek a legislative change to require manufacturers of Part B-covered drugs to submit both ASPs and AMPs.

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The OIG has examined CMS efforts to prevent fraud and abuse at community mental health centers (CMHCs), which provide partial hospitalization program services (structured outpatient mental health treatment programs) to qualifying Medicare beneficiaries. The OIG has previously reported that CMHCs may be particularly vulnerable to fraud, waste, and abuse involving PHP services, with approximately half of CMHCs exhibiting questionable billing in 2010. The OIG’s new report is entitled, Vulnerabilities in CMS's and Contractors' Activities to Detect and Deter Fraud in Community Mental Health Centers. The OIG found that most Medicare Administrative Contractor (MAC) and Zone Program Integrity Contractor (ZPIC) activities to detect and deter CMHC fraud in 2010 were actually performed in conjunction with the CMS-led South Florida High-Risk Provider Enrollment Project; other MACs and ZPICs performed minimal activities to detect and deter fraudulent CMHC billing despite having jurisdiction over fraud-prone areas. The OIG also found that Medicare paid noncompliant CMHCs after their revocations were effective and while their revocations were being approved. To address program vulnerabilities, the OIG recommends that CMS: implement additional CMHC fraud mitigation activities in fraud-prone areas; improve tracking of revocations; coordinate activities to deter CMHC fraud in Florida; and follow up on payments made to CMHCs after revocations.

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The OIG recently identified barriers to the effectiveness of the Medicare Drug Integrity Contractor (MEDIC) in performing Medicare Parts C and D benefit integrity activities between April 2010 and March 2011. For instance, the MEDIC reported that it does not have access to centralized Part C data, it lacks access to certain prescription drug event data, and there is no mechanism to recover payments from Part C or Part D plan sponsors when law enforcement agencies do not accept these cases for further action. Moreover, while the MEDIC has benefit integrity responsibility for both Medicare Parts C and D, the OIG determined that Part C investigations and case referrals represented a small percentage of its activities (only 8% of investigations and referrals involved Part C only; the majority were Part D only). The OIG makes a series of recommendations to, among other things: improve the data available to the MEDIC (including information from pharmacies, physicians, and pharmacy benefit managers); expand the ability of the MEDIC to recover payments from Part C and Part D plan sponsors; and require Part C and Part D plan sponsors to refer potential fraud and abuse incidents to the MEDIC. For details, see the full report, MEDIC Benefit Integrity Activities in Medicare Parts C and D.

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The OIG has reviewed the extent to which states have improved collection of third-party liability (TPL) payments in situations where Medicaid beneficiaries have additional sources of health insurance that are responsible for payment. According to the OIG report, Medicaid Third-Party Liability Savings Increased, But Challenges Remain, states reported that TPL savings increased from almost $34 billion in 2001 to more than $72 billion in 2011. Nevertheless, states generally were not able to recover all of third-party obligations, leaving an estimated $4 billion at risk of not being recovered. The OIG recommends that CMS: work with states to address longstanding challenges related to identification of insurance coverage and recovery of payments; address states' challenges with 1-year timely filing limits for Medicare and TRICARE; and strengthen enforcement mechanisms designed to deal with uncooperative third parties. CMS concurred with the recommendations. 
 

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The OIG has discovered that Medicare has paid millions of dollars in benefits for aliens who are not lawfully present in the country and for incarcerated beneficiaries, contrary to program rules. Specifically Medicare made $91.6 million in payments to health care providers for services to approximately 2,600 unlawfully present beneficiaries during calendar years 2009 through 2011 because CMS did not always receive the unlawful presence information promptly. Likewise, because CMS did not always receive incarceration information promptly, Medicare paid $33.6 million for services to approximately 11,600 incarcerated beneficiaries during 2009 through 2011, even though prisons generally are responsible for paying for care (Medicare will make payments for incarcerated patients if state or local law requires the individuals to repay the cost of the services, but providers must submit such claims with an "exception code"). The OIG recommends that CMS ensure that its contractors recoup any improper payments, implement various policies and procedures to detect and recoup future improper payments, and standardize contractor processing of exception codes for incarcerated beneficiaries. Additional details can be found in the complete reports, Medicare Improperly Paid Providers Millions of Dollars for Unlawfully Present Beneficiaries Who Received Services During 2009 Through 2011 and Medicare Improperly Paid Providers Millions of Dollars for Incarcerated Beneficiaries Who Received Services During 2009 Through 2011.

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The OIG is calling on CMS to lower Medicare payment for certain back orthosis products, either by subjecting these products to the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program or by making an inherent reasonableness adjustment. This recommendation stems from the OIG’s findings that Medicare payment amounts far exceeded supplier acquisition costs for lumbar-sacral orthoses billed under L0631. Specifically, between July 2010 and June 2011, the average Medicare-allowed amount for L0631 was $919, compared to the average supplier acquisition cost of $191, resulting in Medicare paying an estimated $37 million more than supplier costs. Moreover, while the code descriptor for L0631 references fitting and adjustment services, the OIG found that for 33% of claims the supplier did not report providing such services, and only 7% of suppliers reported providing any additional services other than general instructions. CMS agreed that Medicare payments for back orthoses billed under HCPCS code L0631 “should be adjusted to more closely reflect the supplier’s acquisition costs for the device and the level of service provided when furnishing the device.” CMS indicated that it would be pursing competitive bidding rather than an inherent reasonableness adjustment, noting that it is working to finalize its classification of HCPCS codes that may be considered to be “off-the-shelf” orthotics and subject to DMEPOS competitive bidding (the preliminary classification list included HCPCS code L0631). 

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The OIG has released a statutorily-mandated report on the extent of supplier solicitation of physicians under the Round 1 rebid of the Medicare DMEPOS competitive bidding program, which began in nine competitive bidding areas on January 1, 2011.  Under competitive bidding rules, a physician can prescribe a specific brand or mode of delivery (e.g., gaseous or liquid oxygen system) if the physician determines it is needed to avoid an adverse beneficiary medical outcome. In such cases, the contract supplier must furnish the item as prescribed, ask the physician to approve an alternative brand, or help the beneficiary find a contract supplier to furnish the prescribed brand (if a physician does not prescribe a specific brand, the supplier may choose a brand within the HCPCS code). Concerns have been raised that suppliers might have a financial motivation to solicit physicians to change a prescribed brand if the supplier does not carry the brand or have it in stock rather than send the patient to a different supplier, even though it would not result in a different Medicare payment amount. For its report, “Limited Supplier Solicitation of Prescribing Physicians under Medicare DMEPOS Competitive Bidding Program,” the OIG surveyed a sample of 294 physicians who prescribed competitive-bid items during the first half of 2011. The OIG found that 58% of the physicians did not prescribe brand-specific products, so had no reason to be solicited by suppliers regarding brand changes. Of the physicians that did prescribe a specific brand or mode of delivery, 69% did not receive any requests for brand changes. Only 33 physicians in the sample reported solicitations (22 of which were for diabetes supplies), and they told OIG that supplier reasons for change requests included the supplier’s belief that a change would better meet patient needs, the supplier not carrying the prescribed brand, and patient requests. The OIG also observed that none of the 37,000 Medicare hotline calls related to the competitive bidding program involved concerns about supplier solicitation of physicians regarding brand or mode of delivery.

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The OIG has examined CMS and Medicare contractor oversight of home health agencies (HHAs) in light of persistent concerns about Medicare fraud, waste, and abuse involving HHAs. In the report, “CMS and Contractor Oversight of Home Health Agencies,” the OIG concludes that the effectiveness of such oversight efforts is mixed. While two Medicare Administrative Contractors (MACs) reviewed by the OIG prevented a total of $275 million in improper payments and referred 14 instances of potential fraud in 2011, four Zone Program Integrity Contractors (ZPICs) did not identify any HHA vulnerabilities. The OIG also found limited instances of CMS inappropriately paying HHAs with suspended or revoked billing privileges. The OIG makes a series of recommendations in this area, including calling on CMS to establish additional contractor performance standards for high-risk providers in fraud-prone areas and to prevent inappropriate payments made to HHAs with suspended or revoked billing privileges. CMS concurred with the OIG recommendations. 

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The OIG has released the most recent in a series of reports comparing Part B drug average sales prices (ASP) and average manufacturer prices (AMP). The latest report (the 28th in the series) compares second quarter 2012 ASPs and AMPs and their impact on Medicare reimbursement for the fourth quarter of 2012. By way of background, the Social Security Act requires the OIG to notify the HHS Secretary if the ASP for a drug exceeds the drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. If that threshold is met, the Secretary may disregard the drug’s ASP and substitute the lesser of the WAMP or 103% of AMP. The 2012 final Medicare physician fee schedule (MPFS) rule specified the circumstances under which AMP-based price substitutions could occur beginning January 2012 (although CMS has not announced any such substitutions to date), and the final 2013 MPFS updated this policy. The new OIG report announces the OIG’s findings that for 29 drug codes exceeded AMPs by at least 5% in the second quarter of 2012, of which 19 had complete AMP data. If reimbursement for these 19 codes had been based on 103% of AMPs in the fourth quarter of 2012, Medicare would have saved an estimated $553,000 in that quarter. According to the OIG’s calculations, under CMS’s adopted policy, reimbursement for 6 of the 19 drugs would have been reduced, saving about $477,000 in that quarter, and the agency suggests that greater savings could be achieved if the price substitution policy was applied to codes with partial AMP data. The OIG also addresses CMS’s prior comments questioning the utility of OIG’s quarterly pricing comparisons, and OIG chastises the agency for its inaction on prior recommendations. Specifically, the OIG acknowledges that while savings identified in any single report “may be modest relative to total expenditures for Part B drugs, significant savings would have accrued had CMS taken action immediately after OIG issued its first pricing comparison.” Moreover, the OIG argues that over the long term, “savings achieved through price substitution could reduce waste and conserve taxpayer funds at a time when increased focus has been placed on rising health care costs and fiscal responsibility.”

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The OIG’s December 2012 Compendium of Unimplemented Recommendations highlights unimplemented OIG recommendations that the OIG believes represent significant opportunities for action in FY 2013. The report includes recommendations made through FY 2011 that were not fully implemented as of December 2012. The OIG’s priority open recommendations, which in the OIG’s view represent the most significant opportunities to positively impact HHS’s programs, include the following:

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A recent OIG report examined the extent to which home and community-based services (HCBS) for beneficiaries residing in assisted living facilities (ALF) furnished under a section 1915(c) waiver comply with federal and state requirements. Based on sample of 150 beneficiaries in the seven states with the highest numbers of beneficiaries receiving HCBS in ALFs (Georgia, Illinois, Minnesota, New Jersey, Oregon, Texas, and Washington) in 2009, the OIG found that ALFs did not always comply with federally-mandated standards. For instance, most beneficiaries in these states (77%) received HCBS under the waiver in ALFs cited for a deficiency with regard to at least one state licensure or certification requirement. The OIG recommends that CMS issue guidance to state Medicaid programs that emphasizes the need to comply with federal requirements for covering HCBS under the 1915(c) waiver. 

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The OIG has released its latest report comparing Part B drug average sales prices (ASP) and average manufacturer prices, this one comparing first quarter 2012 ASPs and AMPs and their impact on Medicare reimbursement for the third quarter of 2012. By way of background, the Social Security Act requires the OIG to notify the HHS Secretary if the ASP for a particular drug exceeds the drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. If that threshold is met, the Secretary is authorized to disregard the drug’s ASP and substitute the lesser of the WAMP or 103% of AMP. CMS’s 2012 Medicare physician fee schedule (MPFS) rule specified the circumstances under which AMP-based price substitutions could occur beginning January 2012 (although CMS has not announced any such substitutions to date), and the final 2013 MPFS updated this policy. According to the recent OIG report, ASPs for 28 drug codes exceeded AMPs by at least 5% in the first quarter of 2012, of which 22 had complete AMP data. If reimbursement for these 22 codes had been based on 103% of AMPs in the third quarter of 2012, Medicare would have saved an estimated $739,000 in that quarter.

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The OIG has released its annual summary of “Top Management Challenges” facing HHS, which reflects “continuing vulnerabilities that OIG has identified for HHS over recent years as well as new and emerging issues that HHS will face in the coming year.” The OIG again highlights challenges associated with implementation of the ACA, along with management concerns in such areas as: preventing and detecting Medicare and Medicaid fraud; ensuring patient safety and quality of care; promoting value in health care; ensuring the effectiveness of Medicare and Medicaid Program Integrity Contractors; grants management; protecting consumers of food, drugs, and medical devices; health information security; and conflicts of interest within HHS programs.
 

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In a recent report, “Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under Medicare Part B,” the OIG suggests that CMS consider seeking legislative authority to implement LCA policies for Part B drugs under certain circumstances. By way of background, between 1995 and 2010, Medicare subjected certain Part B prostate cancer drugs to LCA payment policies, under which reimbursement for a group of “clinically comparable” products were based on that of the least costly drug. Part B drug LCA policies were discontinued in April 2010 due to a court ruling that the use of an LCA policy was not authorized under the Medicare statute. In response to a Congressional request to examine the impact of the LCA policy withdrawal, the OIG examined payment between the beginning of the third quarter of 2010 and the end of the second quarter of 2011 for luteinizing hormone-releasing hormone (LHRH) agonists used to treat prostate cancer. The OIG estimates that if LCA policies for LHRH agonists had not been rescinded, Medicare spending would have been cut by $33.3 million over one year (from $264.6 million to $231.3 million). While the OIG found that utilization patterns shifted in favor of certain costlier products after the LCA policy was withdrawn, overall utilization of LHRH agonists to treat prostate cancer has been decreasing. The OIG concludes that “LCA policies may be a useful tool for conserving taxpayer funds, provided that patients retain access to appropriate care, but are not likely to be restored without legislative action.” 

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The OIG has released what it dubs a “Portfolio Report” entitled “Personal Care Services: Trends, Vulnerabilities, and Recommendations for Improvement.” The report synthesizes the OIG’s previous work on this topic and offers new recommendations to address vulnerabilities associated with personal care services. A related podcast and OIG web site “spotlight” page on Medicaid personal care services also have been posted on the OIG web page. 
 

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The OIG has issued a report entitled “Improvements Are Needed at the Administrative Law Judge Level of Medicare Appeals.” The report discusses the impact of regulatory and organizational changes that went into effect in 2005 that required Medicare administrative law judges (ALJ) to follow new regulations addressing how to apply Medicare policy, when to accept new evidence, and how CMS participates in appeals. According to the OIG, in FY 2010, providers filed the 85% of ALJ appeals, while beneficiaries filed 11% and state Medicaid agencies filed 3%. ALJs reversed Qualified Independent Contractors (QIC) decisions and decided fully in favor of appellants in 56% of appeals, with the rate varying substantially across Medicare program areas and by ALJ. For instance, 62% of Part A ALJ appeals were fully favorable to appellants, compared to 59% for Part B, 18% for Part C, and 19% for Part D. The OIG notes that ALJs differed from QICs in their interpretation of Medicare policies, in their degree of specialization, and in their use of clinical experts. The OIG also found that when CMS participated in appeals, ALJ decisions were less likely to be favorable to appellants. The OIG concludes that there are a number of inconsistencies and inefficiencies in the Medicare appeals process that should be addressed. The report offers several recommendations for CMS and the Office of Medicare Hearings and Appeals (OMHA), including providing coordinated training on Medicare policies to ALJs and QICs; clarifying Medicare policies that are subject to different interpretations; improved guidance on the acceptance of new evidence by ALJs; improved handling of appeals from appellants who are also under fraud investigations; and increased CMS participation in ALJ appeals.
 

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