Will Physician Payment Sunshine Act Data Usher in a New Era of False Claims Act Litigation?

This post was authored by Scot Hasselman, Elizabeth Carder-Thompson, Katie Pawlitz and Jillian Riley.

While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.

Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators’ attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.

The U.S. government recovered $3.8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013.2 Fiscal 2014 looks to be a record-breaking year, with ever-increasing civil settlements by major pharmaceutical companies.3

As the reporting deadlines approach, it is worth considering an interesting, and largely unknown, potential implication of the public availability of these data: How will it affect future FCA litigation? The publically available Sunshine Act data could become relevant to FCA litigation in a variety of ways; two in particular are discussed below.

Anti-Kickback Statute Violations

The data could give rise to suspicions of violations of the federal Anti-kickback Statute (AKS). The AKS makes it a criminal offense to knowingly and willfully offer or pay remuneration to induce the referral of, or arrange for the provisions of, federal health care program business.4 In other words, the law prohibits any person or entity from giving, receiving – or offering to give or receive – anything of value in return for or to induce referrals for businesses covered by Medicare, Medicaid, or any other federally funded health care program. Violators of the AKS face imprisonment, criminal, and civil fines, as well as exclusion from federal health care programs.5

It is easy to see how publishing information regarding payments from pharmaceutical and medical device manufacturers to physicians and teaching hospitals could implicate the AKS, and by extension, the FCA. The Patient Protection and Affordable Care Act (ACA) made explicit that violations of the AKS are also violations of the FCA.6 Any payment from a pharmaceutical or medical device manufacturer to a physician who prescribes a product manufactured by the company providing the payment could be viewed as potentially inappropriate remuneration intended to influence prescribing behavior.

Off-Label Promotion

Publically available information reported as a result of the Sunshine Act may also have off-label promotion implications. Notably, reports to CMS must include the name of the drug or the type of device that forms the basis of the payment.7 Tying the payment to a particular drug or type of device could raise suspicions of off-label promotion. A pharmaceutical or medical device manufacturer that promotes its products for uses for which the product has not yet been approved by the United States Food and Drug Administration (FDA), i.e., off-label uses, is at risk of FCA liability. A false claim can arise when a manufacturer promotes a product for off-label, non-covered uses (that is, for a use that both has not been approved by FDA and is not covered by the federal health care programs). Payments going to physicians who specialize in an area that is outside the scope of a pharmaceutical or medical device’s approved indication could necessarily raise suspicions that the manufacturer is promoting the product for unapproved uses.

Potential Limits

Besides the risk of government identifying potential issues for further investigation and prosecution as a result of reported Sunshine Act data, private parties may also mine the publically available data. One substantial impediment to relators’ attorneys using Physician Sunshine Payment data in FCA litigation is the limitation that publicly available data cannot form the basis of a whistleblower claim.8 This is known as the public disclosure bar, although the effectiveness of this defense has been diminished with recent FCA amendments.

That said, the Sunshine Act data, even if not the basis of a claim, could nonetheless impact the litigation in many ways. For example, it could provide additional evidence for the government to review in reaching its decision whether to intervene in a qui tam action. Both OIG and DOJ could review the data before it is publicly available to assist in the determination that a given matter warrants intervention. Additionally, the publicly available data – beyond providing flavor in support of an FCA claim and assisting with meeting the heightened pleading standard associated with fraud allegations9 – could be a potential mine for plaintiff attorneys to locate areas of focus. Relators’ attorneys will no doubt track the data to ascertain potential problem drugs or companies about which they can then dedicate efforts to uncovering fraud and abuse in the federal health care system.

Going Forward

It remains to be seen how all of these risks will play out going forward. Courts will have to decide how these new data will fit into FCA litigation. OIG and DOJ will have to determine how much to rely on the new information. And relators’ attorneys will need to make decisions about how many resources to dedicate to mining the Sunshine Act data.

One potential consequence that we are already starting to see occur is that pharmaceutical and medical device manufacturers may halt or limit payments to physicians, and/or that physicians themselves will be reluctant to accept such payments, e.g., for research, for expenses associated with training on a device, and the like. Companies may decide to do so for a variety of reasons, including avoiding the administrative burdens associated with tracking and reporting such payments for purposes of the Sunshine Act, fear of FCA litigation, or for public relations reasons. Many physicians simply do not want their names publicized. It remains to be seen how these trends will evolve.
 

1 42 C.F.R. § 403.908(a).
2 DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html. 3 See, e.g., DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/November/13-ag-1170.html.
4 42 U.S.C. § 1320a-7.
5 Id.
6 42 U.S.C. § 1320a-7b(g). Note that manufacturers may submit “assumptions documents” as part of Sunshine reporting. Although CMS stated in the preamble to the Sunshine regulations its belief that the contents of such documents “should not be made public,” it acknowledged that it could provide access to the documents during an audit or investigation by other HHS divisions, the Office of Inspector General, or the Department of Justice.
7 42 C.F.R. 403.94(c)(8).
8 31 U.S.C. § 3730(e)(4).
9 Fed. R. Civ. P. Rule 9(b).

HHS OIG Identifies "Top 25" Priorities

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.  

RACs Correct $2.4 Billion in Medicare Claims in FY 2012

CMS has released data on Recovery Audit Contractor (RAC) operations fiscal year 2012. Key findings included the following:

  • In FY 2012, Medicare fee-for-service (FFS) RACs collectively identified and corrected 1,272,297 claims for improper payments, which resulted in $2.4 billion in improper payments being corrected ($2.3 billion in overpayments/$109.4 million in underpayments). Subtracting fees, costs, and first level appeals, the Medicare FFS Recovery Audit Program returned over $1.9 billion to the Medicare trust funds.
  • The Part D RAC’s initial review focused on identifying improper payments for prescriptions written by excluded prescribers or filled by excluded pharmacies beginning with contract year 2007. Recoupment of approximately $2 million in overpayments began in the first quarter of FY 2013 for those plans identified in the Part D RAC's initial audit review. The Part D RAC is continuing its review of excluded providers and pharmacies for contract years 2008 and 2009. In addition, CMS posted a notice on April 4, 2013, seeking potential contractors to perform Part C RAC activities.
  • As of September 30, 2012, 36 states had implemented Medicaid RAC programs, and other states are in various stages of preparation. For FY 2012, the states have recovered a total federal and state share combined amount of $95.64 million. CMS expects recoveries to increase as more states have fully operational State Medicaid RAC programs.

As previously reported, CMS has “paused” its RAC audits in preparation for the procurement of new RAC contracts and to “allow CMS to continue to refine and improve the Medicare Recovery Audit Program.”

OIG Report: Questionable Billing for Medicare Electrodiagnostic Tests

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. 

March Congressional Health Policy Hearings

Congressional panels continue to hold hearings to address various health policy issues, including the following:

OIG Issues Annual Report on Medicaid Fraud Control Unit (MFCU) Activities

The OIG has released its Medicaid Fraud Control Units Fiscal Year 2013 Annual Report, which highlights achievements from the investigations and prosecutions conducted by the 50 MFCUs along with related OIG oversight activities. In FY 2013, MFCUs nationwide reported a total of 1,341 criminal convictions in cases involving Medicaid fraud and patient abuse and neglect, and nearly $1 billion in criminal recoveries. Criminal convictions involved a variety of provider types, most notably home health agencies. MFCUs also obtained 879 civil settlements and judgments in FY 2013. Civil recoveries totaled over $1.5 billion, with cases involving a variety of provider types, particularly pharmaceutical companies. More than 1,000 Medicaid providers convicted in MFCU cases were excluded from federal health care programs by the OIG in FY 2013. The OIG notes that a lack of fraud referrals to MFCUs from Medicaid managed care organizations (MCOs) presents challenges, and MCFU officials expressed concern that some MCOs may not have incentive to refer providers suspected of fraud. The OIG also determined that ACA provider payment suspension rules require more coordination between MFCUs and State Medicaid agencies.

OIG Highlights Diabetic Test Strip Cost, Compliance Concerns

On March 18, 2014, the OIG issued a report entitled “State Medicaid Agencies Can Significantly Reduce Medicaid Costs for Diabetic Test Strips.” The OIG highlighted examples of states that have saved millions of dollars through the use of rebates on blood glucose test strips. The OIG also estimated potential savings for state Medicaid agencies if they adopt competitive bidding for these supplies, or if they obtained pricing comparable to pricing under Medicare’s national mail-order competition for diabetic supplies. The OIG recommends that CMS work with state Medicaid agencies to determine whether the use of manufacturer rebates and lower provider reimbursement rates could achieve net savings for the purchase of blood glucose test strips. The OIG also has created a “spotlight” page to highlight fraud and waste associated with diabetes test strips, noting previous OIG action in this area, including special fraud alerts, enforcement actions, and inspection reports.

DME MACs Warn Doctors About DMEPOS Supplier "Marketing Schemes"

The four Durable Medical Equipment (DME) Medicare Administrative Contractor (DME MAC) medical directors have issued a joint open letter to physicians warning about “various marketing schemes” perpetrated by DME suppliers. Such methods cited by the DME MACs in a March 5, 2014 “Dear Physician” letter include unsolicited orders for medical equipment or supplies; advertisements that Medicare will provide the doctor with payment for patient referrals; or pre-completed medical necessity forms with instructions to just “Sign and Date Here.” The DME MACs note that doctors “are under no obligation to support or justify these supplier solicitations,” or to sign orders for items not initiated by the doctor or that were provided by the supplier without prior consultation. The letter suggests that physicians review the patient’s medical record before signing orders, and view with skepticism unsolicited orders for patients no longer in their care or who have not been seen in a long period of time. Physicians should document in the patient’s medical record the medical justification for any DME ordered. The letter also asks doctors to report suspected abuse to the OIG, which we note has long-standing concerns about DMEPOS supplier marketing practices. Particularly in light of tightened CMS requirements related to physician documentation of DMEPOS orders, the DME MACs’ open letter provides another reminder for suppliers to review their policies and practices in this area.

D.C. District Court Rules Internal Compliance Investigations Are Not Privileged

On March 6, 2014, the U.S. District Court for the District of Columbia ruled that documents related to internal investigations of possible violations of corporate codes of conduct are not protected from disclosure under either the attorney-client privilege or attorney work product doctrine. The court instead concluded that the company’s investigations were conducted pursuant to “regulatory law and corporate policy,” rather than for the purpose of obtaining legal advice. As discussed in a recent Reed Smith client alert, the ruling serves as timely reminder for health care companies to review internal procedures relating to internal corporate compliance program or code of conduct investigations to maximize the likelihood that appropriate privileges will be honored. For details and analysis, read the full Reed Smith alert.

Obama Administration Proposes FY 2015 Budget with Medicare, Medicaid Savings Provisions

On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):

Major Medicare Provider Payment Provisions

The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.

  • Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
  • Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
  • Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($720 million).
  • Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
  • Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
  • Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated conditions), saving $2.4 billion.
  • Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
  • Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
  • Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
  • Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 billion).
  • Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point, which would make it easier to trigger ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
  • The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.

Prescription Drug Provisions

  • Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner. This proposal is estimated to result in $6.8 billion in savings.
  • Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
  • Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
  • Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
  • Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 billion).
  • Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts, exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
  • Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
  • Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. In addition, the budget would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase penalties for reporting false information for the calculation of Medicaid rebates.
  • Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into “pay for delay” agreements ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).

Major Program Integrity/Efficiency Provisions

  • Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (HHS) program integrity efforts.
  • Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($60 million in savings).
  • Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
  • Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
  • Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary effective for calendar year 2016 ($6 billion).
  • Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
  • Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
  • Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).

Other Medicare & Medicaid Provisions

  • Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
  • Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter.
  • Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
  • Base Medicaid rates for DME on Medicare rates ($3.1 billion).
  • Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).

Obama Administration Cites Record-Breaking Health Fraud Recoveries under Joint DOJ-HHS Program

According to the latest Health Care Fraud and Abuse Control Program (HCFAC) Annual Report, federal health care fraud prevention and enforcement efforts resulted in the recovery of a record $4.3 billion in FY 2013, up from $4.2 billion in FY 2012. In announcing detailed enforcement achievements, the Administration cites new ACA authorities – including enhanced provider screening requirements, limited enrollment moratoria, and authority to suspend Medicare payments during pending investigations -- that have improved the government’s ability to clamp down on health care fraud. The report also notes the successes of coordinated Department of Justice (DOJ) and HHS efforts such as the Health Care Fraud Prevention & Enforcement Action Team (HEAT) and interagency Medicare Fraud Strike Force teams.

CMS Extends and Expands Moratoria on Enrollment of Home Health Agency, Ambulance Suppliers in Designated Areas

Citing significant potential for fraud and abuse, CMS has announced that it is temporarily suspending new home health agency (HHA) and ground ambulance enrollment in Medicare, Medicaid, and the Children’s Health Insurance Program in several geographic areas, and it is extending the current enrollment moratoria for these provider types in separate areas. Specifically, effective January 30, 2014, CMS is establishing a 6-month moratorium on HHA enrollment in the following metropolitan areas: Fort Lauderdale, Detroit, Dallas and Houston. CMS also is temporarily suspending enrollment of new ground ambulance suppliers in the Greater Philadelphia area. In addition, CMS is extending for six-months a current enrollment moratoria (announced in July 2013) impacting HHAs in Chicago and Miami and ground ambulance suppliers in Houston. Note that CMS may lift the moratoria earlier or extend them for another six months through issuance of a Federal Register notice.

While existing providers and suppliers can continue to deliver and bill for services in moratoria areas, no new applications for the designated provider types will be approved, unless the provider’s enrollment application has already been approved, but not yet entered into PECOS or the State Provider/Supplier Enrollment System at the time the moratorium is imposed. According to CMS, the initial moratoria that began in July 2013 resulted in the denial of the enrollment applications of 231 HHAs and 7 ambulance companies in the geographic areas affected by the moratoria. A CMS notice explains the rationale for the imposition and extension of the moratoria.

DOJ Announces Additional Health Care Fraud Recovery Statistics

The Department of Justice (DOJ) has announced that it collected at least $8 billion in civil and criminal actions in FY 2013, including approximately $3.2 billion related to civil health care fraud cases and $450 million in criminal fines associated with health care fraud.  In addition, the DOJ/HHS Medicare Fraud Strike Force had a record number of health care prosecutions in FY 2013, with 137 cases filed), 345 individuals charged, 234 guilty pleas secured, and 46 jury trial convictions in connection with health care fraud cases. The Strike Force, which was launched in 2007, is now operating in the following nine cities: Baton Rouge, LA; Brooklyn, NY; Chicago, IL; Dallas and Houston, TX; Detroit, MI; Los Angeles, CA; and Miami and Tampa, FL.  The DOJ announced previously that it had recovered $3.8 billion in settlements and judgments in civil False Claims Act cases in FY 2013, including health care fraud recoveries totaling approximately $2.6 billion.

OIG Releases FY 2014 Work Plan

The OIG has posted its FY 2014 Work Plan, which lists the various audit, inspection, and investigative initiatives that the OIG intends to conduct in the coming year. The OIG plans reviews of reimbursement and program integrity policies throughout the Medicare and Medicaid programs, with a particular focus on Medicare inpatient hospital care and Medicare and Medicaid prescription drug policies. The Work Plan also includes numerous reviews involving other HHS agencies, including the Centers for Disease Control and Prevention, the Food and Drug Administration, and the National Institutes of Health. In addition, the Work Plan includes a description of the OIG’s legal and investigative activities related to Medicare and Medicaid.

Omnibus Government Spending Signed to Fund HHS, Other Departments

President Obama has signed into law the Consolidated Appropriations Act of 2014, which provides $1.012 trillion in discretionary funding for the operations of the federal government through September 30, 2014. In addition to setting overall funding levels for HHS agencies, the law specifies funding for numerous HHS policies and initiatives, such as additional funding for program integrity effort involving the 340B drug pricing program and research on the impact of health information technology on patient safety, and reduced funding for the IPAB and certain other ACA activities. The agreement also includes directives for HHS to improve fraud and abuse efforts, including using the latest technology to ensure only valid beneficiaries and valid providers receive benefits (although on the other hand, the agreement raises concerns that the Recovery Audit Contractor program includes incentives “to take overly aggressive actions”). In addition, the agreement highlights more Congressional interest in more narrow HHS policies, such as objections to the criteria CMS uses to package drug costs under the hospital outpatient prospective payment system, and concerns that rural patients maintain access to needed health services if CMS proceeds with a proposal to remove critical access hospital status from certain facilities.

OIG Finds Medicare Contractors Lax on Medicare Vulnerabilities Associated with EHR Use

The OIG has issued a report entitled “CMS and Its Contractors Have Adopted Few Program Integrity Practices to Address Vulnerabilities in EHRs,” which concluded that few Medicare contractors were reviewing EHRs differently from paper medical records, and not all contractors reported being able to determine whether a provider had copied language or over-documented in a medical record. The OIG recommends that CMS provide guidance to its contractors on detecting fraud associated with EHRs, including specific guidance addressing EHR documentation and electronic signatures in EHRs. The OIG also suggested that CMS should direct its contractors to use providers’ audit logs, which distinguish EHRs from paper medical records and could be valuable to CMS’s contractors when reviewing medical records.

CMS Proposes Updates to Medicare Advantage/Part D Policies for 2015

On January 6, 2014, CMS released a proposed rule that would revise the Medicare Advantage (MA) and Part D prescription drug program regulations to implement various statutory requirements, strengthen beneficiary protections, improve program efficiencies and payment accuracy; and clarify program requirements. CMS estimates that the proposed rule would reduce Medicare spending by $1.3 billion between 2015 and 2019. The sweeping proposed rule is summarized after the jump. 

Among many other things, the proposed rule would:

  • Revise the definition of “negotiated prices” to require that all price concessions from pharmacies are reflected in these prices. Under the proposed rule, negotiated prices would mean prices for covered Part D drugs that: (1) the Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the amount such network entity will receive, in total, for a particular drug; and (2) are inclusive of all price concessions and any other fees charged to network pharmacies; and (3) include any dispensing fees; but (4) exclude additional contingent amounts, such as incentive fees, only if these amounts increase prices and cannot be predicted in advance; and (5) may not be rebated back to the Part D sponsor (or other intermediary contracting organization) in whole or in part.
  • Modify CMS’s interpretation of the Affordable Care Act’s (ACA) “drug categories or classes of clinical concern” requirement. Instead of mandating coverage of all drug products in a particular class on all Part D formularies, CMS generally would limit protected classes to those meeting criteria established under the regulation. The proposed criteria generally would result in formulary inclusion of all drugs within the antineoplastic, anticonvulsant, and antiretroviral drug classes (subject to proposed exceptions), but the rule would not require all drugs from the antidepressant and immunosuppressant drug classes to be included on all Part D formularies. While antipsychotics would not meet the criteria, CMS proposes that they remain protected at least through 2015 to ensure that CMS has “not overlooked a need for any transitional consideration.”
  • Modify rules for “preferred pharmacies” within Part D plans’ pharmacy networks, so as to allow Part D sponsors to reduce copayments or coinsurance at such pharmacies only if they offer consistently lower negotiated prices than are available from other pharmacies in the pharmacy network.
  • Modify the “any willing pharmacy” requirement to require plan sponsors to contract with any willing pharmacy able to meet one set of the terms and conditions offered by that plan for that type of pharmacy. CMS also would require that, in establishing its contracted pharmacy network, a Part D sponsor must offer and publicly post standard terms and conditions for network participation for each type of pharmacy in the network, and (1) may not require a pharmacy to accept insurance risk as a condition of participation in the PDP sponsor's contracted pharmacy network, and (2) must offer payment terms for every level of cost sharing offered under its plans (consistent with CMS limitations on the number and type of cost sharing levels) and for every type of similarly-situated pharmacy.
  • Limit prescription drug plans sponsors to offering no more than two Part D plans in the same service area.
  • Implement an ACA requirement that MA plans and Part D sponsors report and return identified Medicare overpayments.
  • Address prescription drug abuse by, among other things, authorizing CMS to revoke a physician’s or eligible professional’s Medicare enrollment if he or she has a pattern of prescribing Part D drugs that is abusive and represents a threat to beneficiary health and safety or otherwise fails to meet Medicare requirements, or if the prescriber’s Drug Enforcement Administration (DEA) certificate of registration or state license is suspended or revoked. The rule also would require that prescribers of Part D drugs enroll in Medicare as a condition of coverage for their prescriptions.
  • Establish U.S. citizenship and lawful presence as an eligibility requirement for enrollment in MA and Part D plans.

The official version of the rule will be published on January 10, 2014. CMS will accept comments on the proposed rule until March 7, 2014.

CMS Steps Up Efforts Aimed at "Recalcitrant" Medicare Providers and Suppliers

CMS is formalizing its process for dealing with “recalcitrant” Medicare providers and suppliers who are abusing the program and not changing inappropriate behavior even after extensive education. CMS notes that the current practice of placing these providers and suppliers on prepayment review for years utilizes resources that could be better used for other types of oversight activity. CMS therefore is working with the OIG to take advantage of other sanctions, including CMPs and exclusion, that could be used in such circumstances. CMS encourages Medicare Administrative Contractors (MACs) to refer recalcitrant provider cases to CMS if certain criteria are met. New Medicare Program Integrity Manual provisions set forth the detailed process and criteria for such referrals and the data that MACs must submit to justify such cases (although different mitigating or aggravating circumstances may need to be applied). CMS notes that MACs should “not include providers who are demonstrating improvement, however slight, as a result of education.” CMS also cautions in an educational article that “[a]ny provider referred as a potential recalcitrant provider case should be an “outlier,” meaning a provider who has been the least receptive to changing and has a significant history of non-compliance.”

DOJ Touts $3.8 Billion in FY 2013 False Claims Act Recoveries

The Department of Justice (DOJ) recently announced that it recovered $3.8 billion in settlements and judgments in civil False Claims Act cases in fiscal year (FY) 2013, including health care fraud recoveries totaling approximately $2.6 billion. The DOJ notes that about $1.8 billion in recoveries involved alleged false claims for drugs and medical devices under federally insured health programs (with an additional $443 million recovered for state Medicaid programs). The Department also reports that in FY 2013, a record 752 qui tam/whistleblower suits were filed and $2.9 billion was recovered in such suits (with whistleblowers recovering $345 million).

OIG Identifies Top HHS Management Challenges

The OIG has issued its latest list of top management and performance challenges facing HHS, reflecting “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.”  This year’s list includes the following challenges: (1) Overseeing the Health Insurance Marketplaces; (2) Transitioning to Value-Based Payments for Heath Care; (3) Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid; (4) Protecting the Integrity of an Expanding Medicaid Program; (5) Fighting Fraud and Waste in Medicare Parts A & B; (6) Preventing Improper Payments and Fraud in Medicare Advantage; (7) Ensuring Quality of Care in Nursing Facilities and Home and Community-Based Settings; (8) Effectively Using Data and Technology to Protect Program Integrity; (9) Protecting HHS Grants and Contract Funds from Fraud, Waste, and Abuse; and (10) Ensuring the Safety of Food, Drugs, and Medical Devices.

Older Entries

January 7, 2014 — OIG Issues Fall 2013 Semiannual Report

January 7, 2014 — OIG Calls for Greater Scrutiny of Clinicians with High Cumulative Medicare Payments

January 7, 2014 — GAO Examines Effectiveness of ZPIC Program Integrity Efforts

September 16, 2013 — OIG Seeks Improvements to RAC Program, Enhanced CMS Efforts to Stop Improper Medicare Payments

September 16, 2013 — GAO Examines Self-Referral of Anatomic Pathology, IMRT Services

August 15, 2013 — China Life Sciences Regulatory Crackdown Spreads to Medical Device Sector

July 29, 2013 — CMS Announces First Temporary Moratoria on HHA, Ambulance Supplier Enrollment in High-Risk Areas under ACA Authority

July 29, 2013 — OIG Self-Disclosure Protocol Submissions

June 28, 2013 — CMS Delays DME Face-to-Face Requirement until Oct. 1, 2013

June 27, 2013 — CMS Redesigns Medicare Summary Notices

June 11, 2013 — OIG Final Rule on Data Mining by State Medicaid Fraud Control Units

June 11, 2013 — OIG Issues Semiannual Report for First Half of FY 2013

June 11, 2013 — OIG Identifies Vulnerabilities with Part B Claims with "G" Modifiers

June 11, 2013 — OIG Highlights Inaccuracy in Medicare Enrollment Databases

May 14, 2013 — Updated OIG Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs

May 13, 2013 — OIG Publishes Updated Provider Self-Disclosure Protocol

April 25, 2013 — Proposed Rule Would Reward Medicare Fraud Tipsters up to $9.9 Million, Revise Medicare Provider Enrollment Regulations

April 16, 2013 — OIG Calls Medicare Supplier Surety Bonds "Underutilized" CMS Tool

April 15, 2013 — OIG Releases FY 2012 Medicaid Integrity Report

April 10, 2013 — Obama Administration's Proposed FY 2014 Budget Includes $401 Billion in Health Program Savings

March 27, 2013 — OIG Special Fraud Alert Deems Physician-Owned Distributors (PODs) As "Inherently Suspect" Under Anti-Kickback Statute

March 12, 2013 — Congressional Hearings

February 18, 2013 — CMS Releases FY 2011 RAC Report, RAC "Myths" Document

February 18, 2013 — Finance Committee Compilation of Public Recommendations to Address Health Care Fraud and Abuse

February 18, 2013 — FY 2012 Health Care Fraud and Abuse Control Program Report

January 30, 2013 — OIG Continues to Fault Efforts to Prevent Medicare Fraud in Community Mental Health Centers

January 30, 2013 — OIG Calls for Improvements to Medicare Parts C & D Benefit Integrity Activities

January 14, 2013 — Obama Administration's Regulatory Agenda Points to Busy 2013 for HHS

January 14, 2013 — OIG Assesses Medicare Oversight of Home Health Agencies

December 19, 2012 — Justice Department Reports Nearly $5 Billion in False Claims Act Recoveries for FY 2012

December 19, 2012 — GAO Calls for Improvements in Use of Medicare Prepayment Edits

December 19, 2012 — GAO Reviews Effectiveness of Medicaid Program Integrity Efforts

December 17, 2012 — OIG Releases 2012 Compendium of Unimplemented Recommendations

November 29, 2012 — CMS Announces 8.5% Medicare Error Rate in 2012; Majority of Medicare DME Claims in Error.

November 29, 2012 — OIG Outlines Top HHS Management Challenges

November 29, 2012 — OIG "Portfolio Report" on Personal Care Services

November 29, 2012 — GAO Assesses CMS Fraud Prevention System Implementation

November 28, 2012 — OIG Reports Almost $7 Billion in Audit/Investigation Recoveries for FY 2012

November 14, 2012 — OIG Examines Inappropriate Medicare Payments to SNFs

November 12, 2012 — Affordable Care Act and the Post-Election Implications for Radiology

October 16, 2012 — GAO Spotlights Top Provider Types for Criminal/Civil Health Fraud

October 16, 2012 — OIG Issues FY 2013 Work Plan

October 15, 2012 — OIG Compliance Roundtable: "The Next Generation of Corporate Integrity Agreements"

October 15, 2012 — OIG Faults CMS Failure to Implement HHA Surety Bond Rule

October 11, 2012 — OIG to Host "Outlook 2013" Webcast (Oct. 24)

September 28, 2012 — Hospitals Return Fire After Administration Warns Hospitals Against Gaming Payments through Electronic Health Records

September 27, 2012 — Congressional Health Policy Hearings

September 27, 2012 — OIG Finds Lax CMS Healthcare Integrity and Protection Data Bank Reporting

September 5, 2012 — OIG Identifies Questionable Community Mental Health Center Billing

September 5, 2012 — OIG Offers Web Course on Safeguarding Medical Identity.

August 31, 2012 — U.S. District Court Decides Whistleblower Cannot Rely on Stolen Patient Records

August 20, 2012 — Fifth Circuit Upholds Ability of Government Employee Fraud Investigators to Bring Qui Tam False Claims Actions

August 17, 2012 — CMS Recovery Audit Prepayment Review Demonstration to Launch Aug. 27, 2012 (Covering One Initial MS-DRG)

August 17, 2012 — Sept. 1, 2012 Start Date for Power Mobility Device Demonstration

August 17, 2012 — CMS Posts "Provider Compliance Interactive Map"

August 17, 2012 — OIG Reports on Questionable Medicare HHA Billing

August 8, 2012 — Putting Contractors on Notice: The New Public-Private Partnership Joins DOJ, HHS, and Private Sector Partners to Combat Health Care Fraud

August 4, 2012 — CMS Announces August 27, 2012 Start Date for Recovery Audit Prepayment Review Demonstration; Provider Call Scheduled for Aug. 9

July 31, 2012 — Obama Administration Public-Private Partnership Targets Health Care Fraud Prevention

July 19, 2012 — OIG Highlights Potential ZPIC Conflicts of Interest

June 26, 2012 — CMS Officially Announces Potential Inherent Reasonableness Payment Adjustment for Medicare Retail Diabetic Testing Supplies; Meeting Set for July 23

June 18, 2012 — OIG Considering Revisions to Provider Self-Disclosure Protocol

June 18, 2012 — June Congressional Health Policy Hearings

June 18, 2012 — Medicare Payments for Outpatient Services Before/During Inpatient Stay

June 18, 2012 — OIG Revises State Medicaid Fraud Control Unit (MFCU) Performance Standards

June 13, 2012 — CMS Call on Prior Authorization for Power Mobility Devices (PMD) Demonstration (June 28)

May 31, 2012 — OIG Releases Spring 2012 Semiannual Report

May 31, 2012 — OIG Reports on Obstacles to Collecting Medicare Overpayments

May 31, 2012 — New "CMS Provider Screening Innovator Challenge" Launched

May 14, 2012 — Three OIG Reports Review Medicare E/M Services

May 14, 2012 — Finance Committee Members Seek Public Input on Medicare/Medicaid Fraud

May 14, 2012 — Congressional Health Policy Hearings

May 14, 2012 — GAO Reviews Medicare Provider/Supplier Screening Efforts

May 14, 2012 — GAO Report on Impact of Fraud and Abuse Laws on Medicare Financial Incentive Programs

May 11, 2012 — OIG Examines Retail Pharmacy Billing for Part D Drugs

April 23, 2012 — April Congressional Health Policy Hearings and Markups

April 23, 2012 — OIG Concludes Modifier Failed to Block Inappropriate DME Claims

April 23, 2012 — OIG Finds Limited Benefit of Medicare-Medicaid Data Match Program

April 23, 2012 — OIG Issues FY 2011 Medicaid Integrity Program Report

April 23, 2012 — OIG Reviews Questionable Medicare Billing for IDTF Services

April 2, 2012 — OIG Examines Medicaid Payments for Therapy Services

April 2, 2012 — OIG Release Report from Pharmaceutical Compliance Roundtable

April 2, 2012 — MACPAC Report to Congress on Medicaid, CHIP Policy

March 29, 2012 — Congressional Health Policy Hearings

March 14, 2012 — CMS Releases Redesigned Medicare Benefit Statements

March 14, 2012 — CMS Launches Medicare Advantage (MA) Audit Initiative

March 14, 2012 — 340B Enforcement Activities.

March 14, 2012 — OIG Report on Excluded Providers in Medicaid Managed Care Plans

March 14, 2012 — OIG Reports Examine Home Health Agency (HHA) Issues

March 14, 2012 — OIG Issues Fraud Alert for People with Diabetes

March 14, 2012 — OIG Compliance Toolkit for Health Care Boards

March 12, 2012 — CMS Finalizes Revisions to Medicare DMEPOS Supplier Standards

February 29, 2012 — False Claims Act Developments: 2nd Circuit to Consider Whether In-House Lawyer can be a Qui Tam Relator

February 28, 2012 — CMS Proposed Rule on Reporting and Returning of Medicare Overpayments Under the ACA

February 28, 2012 — Maximum Medicaid RAC Contingency Fees for DME Overpayments

February 28, 2012 — OIG Examines MA Organizations' Identification of Potential Fraud & Abuse

February 28, 2012 — FY 2011 Health Care Fraud and Abuse Control Program Report

February 14, 2012 — President Obama Proposes FY 2013 Budget

February 13, 2012 — OIG Cautions Physicians on Reassigning Medicare Billing Rights

February 13, 2012 — CMS Announces New Start Date for Recovery Audit Prepayment Review, Power Mobility Device Demonstrations