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

On December 17, 2008, the HHS Office of Inspector General (OIG) published its annual solicitation of proposals and recommendations for new or revised safe harbor provisions under the federal anti-kickback statute, and new OIG special fraud alerts. The comment deadline is February 17, 2009. A status report on the comments the OIG received in response to last year's solicitation is set forth in Appendix D to the OIG’s Semiannual Report for the period of April 1, 2008 through September 30, 2008. 

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

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

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

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On November 17, 2008, CMS reported that the improper payment rate for the Medicare, Medicaid and SCHIP programs fell from 3.9% in FY 2007 to 3.6% percent in FY 2008. For the Medicare fee-for-service program, most improper payments were due to claims for services that were medically unnecessary or incorrectly coded, while the vast majority of Medicaid and SCHIP errors are due to inadequate documentation. CMS also reported the Medicare Advantage improper payment rate for the first time; that rate was 10.6% in 2006, primarily reflecting health plan errors in documenting members’ diagnoses. CMS also is developing methodologies to report the Medicare Part D error rate in the future.

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The U.S. Department of Justice recently announced that the federal government had secured $1.34 billion in settlements and judgments in federal fraud and abuse cases in FY 2008, with almost 78% were associated with False Claims Act whistleblower suits. Health care fraud accounted for the bulk of the settlements and judgments, totaling $1.12 billion. The largest recoveries were associated with pharmaceutical companies, including cases involving "off-label" marketing, kickbacks, marketing drug “spreads,” and knowingly failing to report a company’s true "best price" for a drug to reduce Medicaid rebates. 

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On November 12, 2008, Senate Finance Committee Chairman Max Baucus released a white paper entitled "Call to Action: Health Reform 2009." The document details Senator Baucus’ goals for health care reform in the broad areas of coverage, quality, and cost. Highlights of the lengthy plan include the following.  

• Ensuring Health Coverage for All Americans. The Baucus plan seeks universal health insurance coverage by supplementing the current employer-based system with a nationwide insurance pool called the Health Insurance Exchange. Premium subsidies would be available to qualifying families and small businesses. While the Exchange is being created, individuals aged 55 to 64 could buy in to Medicare, and access would be expanded to Medicaid and the State Children’s Health Insurance Program (CHIP). Once affordable health insurance options are available, all individuals would be required to have insurance coverage. 
• Improving Value by Reforming the Health Care Delivery System. Among other things, the plan calls for strengthening the role of primary care and chronic care management; refocusing payment incentives toward quality and value; and encouraging providers in different settings to collaborate in a way that improves quality and saves money (e.g., gainsharing). As part of the payment reforms, Baucus calls for overhaul of the Medicare physician fee schedule formula, greater surveillance of high-growth services, expanded use of pay-for-performance methodologies, and global payments for services provided to a patient during hospitalization and post-discharge. The Baucus plan also seeks to improve the health care infrastructure by supporting comparative effectiveness research through a new Health Care Comparative Effectiveness Research Institute and by promoting the adoption of health information technology. 
• Financing a More Efficient Health Care System. The Baucus plan seeks to prevent Medicare fraud, waste, and abuse through: more stringent enrollment criteria; enactment of payment methodologies that discourage waste (such as the DMEPOS competitive bidding program); encouraging provider and supplier compliance; vigilant government oversight of government health programs; and strong punishment for program abuses. The plan also seeks to increase transparency in the health system by mandating disclosure of gifts and other transfers of value made by drug and device companies to physicians and other health care professionals; increasing scrutiny of physician self-referrals (including a focus on physician-owned hospitals); and requiring public reporting and disclosure of health care price and quality information. With regard to private plans in Medicare, the Baucus plan also would address overpayments to Medicare Advantage (MA) plans, promote performance measures for Part D prescription drug plans and the application of pay-for-performance principles to these plans, and extend Medicaid price discounts to the drugs used by the dual-eligible population in the Part D program. In addition, the plan addresses long-term care reforms, including policies to continue to shift care from institutional settings to home and community settings, malpractice reform, and reforms of the tax code designed to make incentives more efficient, distribute benefits more fairly, and promote smarter consumer spending of health care dollars.

Health care reform promises to be a high-profile issue for the new Congress and the incoming Obama Administration. The broad scope of the Baucus white paper suggests that Congress intends to focus beyond access to insurance or the immediate problem of fixing the Medicare physician fee schedule and examine fundamental policy questions concerning how to promote quality and value throughout the health system at a time of limited federal resources.

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On October 28, 2008, CMS informed state health officials of CMS policy regarding the refunding of the federal share of Medicaid overpayments, damages, fines, penalties, and any other component of a legal judgment or settlement when a state recovers pursuant to legal action under its state False Claims Act (FCA). CMS notes that many states have enacted their own FCA statutes modeled on the Federal False Claims Act, and numerous questions have arisen regarding Medicaid overpayment identification, investigation, and refunds of the federal share when that overpayment is attributable to fraud and abuse. Additionally, the letter explains what amounts must be returned to the federal government on any recovery, the proper accounting of the relator’s share and litigation expenses, and the time frame for refunding the federal share of any state FCA recovery.

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

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

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CMS is hosting two special open door forums on the Recovery Audit Contractor (RAC) program, through which the RACs will review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid a contingency fee based on overpayments and underpayments they find. The first forum, scheduled for November 12, 2008, is designed for Part A providers, while the second forum on November 13 is targeted at Part B providers. 

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The HHS Office of Inspector General (OIG) has issued a report entitled “Medicaid-Funded Personal Care Services in Excess of 24 Hours per Day.” Based on a sampling of cases in five states, the OIG found 871 instances in which states paid claims for Medicaid reimbursement for personal care services (such as assistance with activities of daily living) in excess of 24 hours per day, and many other cases in which services totaled close to 24 hours a day. The OIG suggested that CMS inform states regarding vulnerabilities in this area, including problems associated with allowing providers to submit such claims in date ranges that include days on which no services were provided.

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On October 6, 2008, CMS announced expanded efforts to combat Medicare DMEPOS and home health fraud and abuse, including targeted reviews of home health agencies (HHAs) in Florida and greater scrutiny of DMEPOS suppliers in Florida, California, Texas, Illinois, Michigan, North Carolina, and New York. In particular, CMS will be reviewing DMEPOS items with high expenditures and high growth rates, such as oxygen supplies and equipment, power mobility devices/power wheelchairs, and diabetic test strips. Targeted steps will include:

• Closer reviews of new DMEPOS suppliers’ applications, including background checks to ensure that owners and managers have not been suspended by Medicare;
• Unannounced site visits of suppliers and HHAs;
• Extensive pre- and post-payment review of claims submitted by suppliers, HHAs, and ordering or referring physicians;
• Validation of claims submitted by physicians with high-volumes of orders for certain items or services, and verification of the relationship between such physicians and the beneficiaries for whom they ordered these services; and
• Interviews with high-risk beneficiaries to ensure they are appropriately receiving ordered items and services.

In addition, CMS has announced that it has awarded contracts to four permanent Recovery Audit Contractors (RACs) to review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid on a contingency fee basis on both the overpayments and underpayments they find. The nationwide RAC program follows a three-year demonstration program in six states that collected over $900 million in overpayments and returned nearly $38 million in underpayments. Finally, CMS is consolidating the Medicare’s program safeguard contractors (PSCs) and the Medicare Drug Integrity Contractors (MEDICs) with new Zone Program Integrity Contractors (ZPICs), which eventually will be responsible for ensuring the integrity of all Medicare-related claims. 

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CMS has released most of its “Medically Unlikely Edits” (MUE), which are used by Medicare contractors when processing claims to ensure that providers and suppliers do not report excessive services.   An MUE for a HCPCS/CPT code is the maximum units of service under most circumstances that a provider would report for a code for a single beneficiary on a single date of service; claims with more than the MUE edit amount will be denied (unless a modifier is used to used to report medically necessary units of service in excess of an MUE value).   The MUE currently contains edits for about 9,700 HCPCS/CPT codes, although CMS is not publishing all active MUEs since it could diminish the effectiveness of MUE edits that are designed to detect and deter questionable payments rather than billing errors. CMS will update the list quarterly. 

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

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

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A new Government Accountability Office (GAO) report reviews the impact of a Deficit Reduction Act of 2005 (DRA) provision capping Medicare fees for certain imaging services covered by the physician fee schedule at the rate for these services under Medicare’s hospital outpatient prospective payment system (OPPS). The GAO found that the OPPS cap reduced the fee for the performance of about one in four physician imaging tests overall in 2007, and fees for advanced tests were more likely than other imaging tests to be paid at the OPPS rate. Moreover, the GAO found that from 2000 through 2006 both expenditures for and utilization of Medicare physician imaging services increased, but in 2007 expenditures declined while per-beneficiary utilization continued to rise.  

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

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CMS published a final rule September 26, 2008 setting forth the criteria for terminating a provider or supplier from non-random prepayment complex medical review, as mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The rule is effective January 1, 2009.

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The Department of Justice (DOJ) has revised its Principles of Federal Prosecution of Business Organizations, which govern how federal prosecutors investigate, charge, and prosecute corporate crimes, including health care fraud. A number of the revisions address the area of cooperation credit, including providing that credit for cooperation will not depend on a corporation’s waiver of attorney-client privilege or work product protection, but rather on the disclosure of relevant facts. The guidelines also instruct prosecutors not to consider a corporation’s advancement of attorneys’ fees to employees when evaluating cooperativeness, and specify that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. Moreover, prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation. 

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

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

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The Government Accountability Office (GAO) has issued a report entitled "Medicare: Covert Testing Exposes Weaknesses in the Durable Medical Equipment Supplier Screening Process."  The GAO set up two fictitious durable medical equipment (DME) companies using undercover names and bank accounts, and the fictitious companies eventually were approved for Medicare billing privileges despite having no clients and no inventory. CMS acknowledged that the covert tests illustrate gaps in oversight that still require improvement, and agency reiterated its intention to strengthen the entire supplier enrollment process.

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On July 16, 2008, the House Judiciary Committee approved H.R. 4854,  the "False Claims Act Correction Act of 2007.” In addition to making technical amendments, the legislation addresses several judicial decisions that the bill’s sponsors believe have weakened the False Claims Act. During Committee markup, the panel amended the bill to drop a provision authorizing government employees to bring qui tam actions.

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On July 17, 2008, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) finalized its March 26, 2008 interim final rule revising the process for advisory opinion requestors to submit payments for advisory opinion costs. The text of the rule, which is effective July 17, 2008, is posted here.

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

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CMS has announced that the recovery audit contractors (RACs) demonstration program corrected over $1 billion of Medicare improper payments from 2005 through March 27, 2008. Approximately 96% of the improper payments ($992.7 million) were overpayments collected from providers (with 85% of the overpayments collected from inpatient hospitals), while the remaining 4% were underpayments repaid to providers. 

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On June 24, 2008, the House Energy and Commerce Committee held a hearing on H.R. 3014, the "Health Equity and Accountability Act of 2007," to improve the health of minority individuals.  Also on June 24, the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security held a hearing on "Online Pharmacies and the Problem of Internet Drug Abuse", and the Senate Committee on Health, Education, Labor, and Pensions held a hearing on the “Emergence of the Superbug:  Antimicrobial Resistance in the U.S.”  On July 9, the Senate Homeland Security and Governmental Affairs Investigations Subcommittee held a hearing on "Medicare Vulnerabilities:  Payments for Claims Tied to Deceased Doctors," focusing on fraud, waste, and abuse in the Medicare program in connection with the payment of claims containing the physician identification numbers of doctors who had died at least one year before the prescription was filled. On July 15, the House Ways and Means Health Subcommittee has scheduled a hearing on "Instability of Health Coverage in America."  On July 16, the House Budget Committee will hold a hearing entitled "Getting Better Value in Health Care". In addition, on July 17, the Senate Judiciary Committee will vote on S.2838, the "Fairness in Nursing Home Arbitration Act." 

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The Office of Inspector General (OIG) of the Department of Health and Human Services has released the FY 2007 State Medicaid Fraud Control Unit (MFCU) Annual Report. In FY 2007, MFCUs recovered more than $1.1 billion in court-ordered restitution, fines, civil settlements, and penalties. They also obtained 1,205 convictions and there were 607 successful civil actions. Moreover, they were responsible for 805 OIG exclusions from participation in federal health care programs. The report is posted here.

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On June 12, 2008, the HHS Office of Inspector General (OIG) released its “Semiannual Report to Congress” for the first half of fiscal year 2008. The OIG announced expected recoveries of $2.2 billion resulting from efforts to reduce fraud, waste, and abuse in HHS programs, including $1.1 billion in audit-related recoveries and another $1.1 billion in investigative-related recoveries. Also for this period, OIG reported exclusions of 1,291 individuals and organizations for fraud or abuse involving federal health care programs; 293 criminal actions against individuals or organizations that engaged in crimes against HHS programs; and 142 civil actions, which include False Claims Act and unjust enrichment suits filed in district court, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters.

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